<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 23, 1997
REGISTRATION NO. 333-16763
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PREMIER PARKS INC.
(and Certain Subsidiaries Identified in Footnote (1) Below)
(Exact name of Registrant as specified in its charter)
--------------------------
<TABLE>
<S> <C>
DELAWARE 73-6137714
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
------------------------
<TABLE>
<S> <C>
KIERAN E. BURKE
11501 NORTHEAST EXPRESSWAY 11501 NORTHEAST EXPRESSWAY
OKLAHOMA CITY, OKLAHOMA 73131 OKLAHOMA CITY, OKLAHOMA 73131
TEL: (405) 475-2500 TEL: (405) 475-2500
(Address, including zip code, and telephone number, (Name, address, including zip code, and telephone
including area code, of Registrant's principal executive number, including area code, of agent for service)
offices)
</TABLE>
------------------------
COPIES TO:
<TABLE>
<S> <C>
JAMES M. COUGHLIN, ESQ. THOMAS R. BROME, ESQ.
BAER MARKS & UPHAM LLP CRAVATH, SWAINE & MOORE
805 THIRD AVENUE WORLDWIDE PLAZA
NEW YORK, NEW YORK 10022 825 EIGHTH AVENUE
TEL: (212) 702-5819 NEW YORK, NEW YORK 10019
TEL: (212) 474-1000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. / /
If the registrant elects to deliver its latest annual report to
securityholders, or a complete and legible facsimile thereof, pursuant to Item
11(a)(1) of this form, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM OFFERING AGGREGATE OFFERING
SECURITIES TO BE REGISTERED REGISTERED PRICE PER NOTE PRICE
<S> <C> <C> <C>
% Senior Notes due 2007.................. $125,000,000 100% (2) $125,000,000 (2)
<CAPTION>
TITLE OF EACH CLASS OF AMOUNT OF
SECURITIES TO BE REGISTERED REGISTRATION FEE
<S> <C>
% Senior Notes due 2007.................. $37,878.79 (3)
</TABLE>
(1) The following direct and indirect subsidiaries of Premier Parks Inc. are
Co-registrants, each of which is incorporated in the state and has the
I.R.S. Employer Identification Number indicated: Tierco Maryland, Inc., a
Delaware corporation (52-1757356); Tierco Water Park, Inc., an Oklahoma
corporation (73-1376642); Frontier City Properties, Inc., an Oklahoma
corporation (73-1244309); Frontier City Partners Limited Partnership, an
Oklahoma limited partnership (73-1350965); Funtime Parks, Inc., an Ohio
corporation (34-1570042); Funtime, Inc., an Ohio corporation (34-0077495);
Wyandot Lake, Inc., an Ohio corporation (31-1083244); Darien Lake Theme Park
and Camping Resort, Inc., a New York corporation (16-0921892); and D.L.
Holdings, Inc., an Ohio corporation (34-1491790).
(2) Estimated solely for purposes of calculating the registration fee.
(3) Of which $33,334 was previously paid.
----------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED JANUARY 23, 1997
PROSPECTUS
[LOGO]
$125,000,000
PREMIER PARKS INC.
% SENIOR NOTES DUE 2007
--------------------
Interest Payable and
---------------------
Premier Parks Inc. (the "Company") and the Note Guarantors (as defined
herein) are offering (the "Notes Offering") $125 million aggregate principal
amount of the Company's % Senior Notes due 2007 (the "Notes"). Interest on
the Notes will be payable semiannually on and of each year,
commencing , 1997. The Notes will be redeemable, in whole or in part,
at the option of the Company, at any time on or after , 2002, at the
redemption prices set forth herein, plus accrued and unpaid interest, if any, to
the redemption date. In addition, at any time prior to , 2000, the Company
may redeem up to 33 1/3% of the original aggregate principal amount of the Notes
with the proceeds of one or more Public Equity Offerings (as defined herein), at
a redemption price of %, plus accrued and unpaid interest, if any, to the
redemption date; provided, however, that at least 66 2/3% of the original
aggregate principal amount of the Notes must remain outstanding after each such
redemption. The Notes will not be subject to any mandatory sinking fund. In the
event of a Change of Control (as defined herein), each holder of the Notes will
have the right, at such holder's option, to require the Company to offer to
purchase such holder's Notes at a purchase price equal to 101% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date of such
purchase.
The Notes will be senior, unsecured obligations of the Company and will be
effectively subordinated to all existing and future secured indebtedness of the
Company and its subsidiaries to the extent of the value of the assets securing
such indebtedness. The Notes will rank PARI PASSU in right of payment with all
other Senior Indebtedness (as defined herein) of the Company (including the
Existing Notes) and will rank senior in right of payment to any Subordinated
Obligations (as defined herein) of the Company. The Notes will be guaranteed on
a senior, unsecured basis by the Company's principal operating subsidiaries. The
Indenture (as defined herein) permits the Company to incur additional
indebtedness, subject to certain limitations. See "Prospectus Summary--The Notes
Offering" and "Description of the Notes." At September 30, 1996, on a pro forma
basis after giving effect to the Recent Acquisitions (as defined herein), the
financings related thereto, the issuance of the Notes and the use of proceeds
therefrom, the Company would have had outstanding $218.4 million of Senior
Indebtedness (including the Notes), of which $3.4 million would have been
secured indebtedness. As of such date, and after giving such effect, the Company
would have had $115.0 million in undrawn commitments under secured revolving
credit facilities. See "Use of Proceeds" and "Capitalization."
Concurrently with the Notes Offering, the Company is publicly offering (the
"Common Stock Offering," and, together with the Notes Offering, the "Offerings")
in the U.S. and internationally 4,000,000 shares of the Company's Common Stock,
par value $.05 per share (the "Common Stock"). The Company has granted options
to the underwriters of the Common Stock Offering to purchase up to 600,000
additional shares of Common Stock solely to cover over-allotments, if any.
Neither the Notes Offering nor the Common Stock Offering is conditioned upon
completion of the other.
--------------------------
For a discussion of certain risks to be considered in connection with an
investment in the Notes, see "Risk Factors" beginning on Page 16.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public (1) Discounts (2) Company (1)(3)
<S> <C> <C> <C>
Per Note........................................ % % %
Total........................................... $ $ $
</TABLE>
(1) Plus accrued interest, if any, from , 1997.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $520,000.
--------------------------
The Notes offered by this Prospectus are offered by the Underwriters subject
to prior sale, withdrawal, cancellation or modification of the offer without
notice, to delivery to and acceptance by the Underwriters and to certain further
conditions. It is expected that delivery of the Notes will be made in book-entry
form only through the facilities of The Depository Trust Company on or about
, 1997, against payment therefor in immediately available funds.
--------------------------
LEHMAN BROTHERS
CHASE SECURITIES INC.
SMITH BARNEY INC.
FURMAN SELZ
, 1997.
<PAGE>
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Proxy statements, periodic reports and other
information filed by the Company can be inspected and copied at the public
reference facilities of the Commission's principal office at Judiciary Plaza,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and the regional
offices of the Commission at Seven World Trade Center, 13th Floor, New York, New
York 10048 and 500 West Madison Street, 14th Floor, Chicago, Illinois 60661.
Copies of such material can be obtained from the public reference facilities of
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates. In addition, the Commission
maintains a Website (http://www.sec.gov) that also contains such reports, proxy
statements and other information filed by the Company. Such reports, proxy
statements and other information concerning the Company can also be inspected at
the offices of the Nasdaq National Market, Reports Section, 1735 K Street, N.W.,
Washington, D.C. 20006.
The Company and the Note Guarantors have filed with the Commission a
Registration Statement on Form S-2 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act") with respect to the
Notes offered hereby. For purposes hereof, the term "Registration Statement"
means the original Registration Statement and any and all amendments thereto. In
accordance with the rules and regulations of the Commission, this Prospectus
does not contain all of the information set forth in the Registration Statement
and the schedules and exhibits thereto. Each statement made in this Prospectus
concerning a document filed as an exhibit to the Registration Statement is
qualified in its entirety by reference to such exhibit for a complete statement
of its provisions. For further information pertaining to the Company and the
Common Stock, reference is made to such Registration Statement, including the
exhibits and schedules thereto, which may be inspected or obtained as provided
in the foregoing paragraph.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated by reference into this Prospectus and made a part hereof as of
their respective dates:
1. The Company's Annual Report on Form 10-K/A for the year ended
December 31, 1995.
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996.
3. The Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996.
4. The Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996.
5. The Company's Current Report on Form 8-K, dated November 13, as
amended, December 4, as amended, and December 13, 1996,
respectively.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide, without charge, to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the documents incorporated herein by reference (other than
exhibits to such documents, unless such exhibits are specifically incorporated
by reference into such documents). Requests should be directed to: Premier Parks
Inc., 11501 Northeast Expressway, Oklahoma City, Oklahoma 73131, Attention:
Richard A. Kipf, Corporate Secretary (telephone number: (405) 475-2500, Ext.
219).
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements other than statements of historical facts included in this
Prospectus, including, without limitation, the statements under "Prospectus
Summary," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business" and located elsewhere herein regarding
industry prospects and the Company's financial position are forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct. Important factors that could
cause actual results to differ materially from the Company's expectations are
disclosed in this Prospectus, both together with such forward-looking statements
and under "Risk Factors."
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY INFORMATION IS QUALIFIED IN ITS ENTIRETY BY AND SHOULD
BE READ IN CONJUNCTION WITH THE MORE DETAILED INFORMATION AND CONSOLIDATED
FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS
PROSPECTUS. AS USED IN THIS PROSPECTUS, UNLESS THE CONTEXT REQUIRES OTHERWISE,
THE TERMS THE "COMPANY" AND "PREMIER" MEAN PREMIER PARKS INC. AND ITS
CONSOLIDATED SUBSIDIARIES. THE INFORMATION WITH RESPECT TO PREMIER CONTAINED IN
THIS PROSPECTUS, OTHER THAN THE HISTORICAL FINANCIAL DATA, REFLECTS THE
ACQUISITIONS OF ELITCH GARDENS AMUSEMENT PARK ("ELITCH GARDENS") IN DENVER,
COLORADO (THE "DENVER ACQUISITION"), THE GREAT ESCAPE AND SPLASH WATER KINGDOM
("THE GREAT ESCAPE") IN LAKE GEORGE, NEW YORK ("THE GREAT ESCAPE ACQUISITION")
AND TWO WATER PARKS CALLED WATERWORLD/USA IN NORTHERN CALIFORNIA (THE
"CALIFORNIA ACQUISITION"), EACH OF WHICH WAS CONSUMMATED IN THE FOURTH QUARTER
OF 1996, AS WELL AS THE PENDING ACQUISITION (THE "RIVERSIDE ACQUISITION") OF
RIVERSIDE PARK IN SPRINGFIELD, MASSACHUSETTS SCHEDULED TO OCCUR IN EARLY
FEBRUARY 1997 (COLLECTIVELY, THE "RECENT ACQUISITIONS" AND, TOGETHER WITH THE
FUNTIME ACQUISITION AS DEFINED BELOW, THE "ACQUISITIONS").
THE COMPANY
The Company is a leading U.S. theme park company which, after completion of
the Recent Acquisitions, will own and operate eleven regional parks. Based on
1996 attendance of approximately 7.3 million at these parks, the Company is the
fourth largest domestic regional park operator. After giving pro forma effect to
the Recent Acquisitions as if they had occurred on October 1, 1995, the
Company's total revenue and earnings before interest, taxes, depreciation and
amortization ("EBITDA") for the twelve months ended September 30, 1996 would
have been approximately $158.7 million and $44.1 million, respectively. See "--
Recent Transactions" and "-- Summary Historical and Pro Forma Data," including
notes 6 and 16 thereto.
The Company's parks (including Riverside Park) are located in nine
geographically diverse markets with concentrated populations, including (i)
Baltimore/Washington DC; (ii) Buffalo/Rochester; (iii) Cleveland; (iv) Columbus,
Ohio; (v) Oklahoma City; (vi) Denver; (vii) Lake George/Albany; (viii) San
Francisco Bay/Sacramento; and (ix) Springfield, Massachusetts. The Company seeks
to provide its customers with quality family entertainment that is affordably
priced and close to home. In 1996, the six parks owned by the Company prior to
the Recent Acquisitions drew, on average, approximately 88.0% of their patrons
from within a 100-mile radius, with approximately 38.4% of visitors utilizing
group and other pre-sold tickets and approximately 16.5% utilizing season
passes. Each of the Company's parks is individually themed and provides a
complete family-oriented entertainment experience. The Company's theme parks
generally offer a broad selection of state-of-the-art and traditional thrill
rides, water attractions, themed areas, concerts and shows, restaurants, game
venues and merchandise outlets.
Since current management assumed control in 1989, the Company has acquired
nine parks and achieved significant internal growth. In addition, the Company
expects, subject to the satisfaction or waiver of certain conditions, to acquire
Riverside Park in early February 1997. As a result of the Company's operating
strategy, during the three years ended December 31, 1995, the three parks owned
by the Company during that entire period achieved internal growth in attendance,
revenue and EBITDA at compounded annual rates of 12.7%, 17.1% and 41.8%,
respectively. In August 1995, the Company acquired three of its parks through
its acquisition (the "Funtime Acquisition") of Funtime Parks, Inc. ("Funtime").
During the first nine months of 1996, these three parks achieved internal growth
in attendance, revenue and park-level operating cash flow (representing all park
operating revenues and expenses without depreciation and amortization or
allocation of corporate overhead or interest expenses) of 15.1%, 23.1% and
46.0%, respectively, compared to the comparable period of 1995. Furthermore,
after giving pro forma effect to the Recent Acquisitions as if they had occurred
on January 1, 1996, the Company has increased its attendance, revenue and EBITDA
from park operations by 6.7, 9.5 and 16.5 times, respectively, from the nine
months ended September 30, 1992, to the nine months ended September 30, 1996.
3
<PAGE>
The Company believes that each of its parks benefits from limited direct
competition. The combination of limited supply of real estate appropriate for
theme park development, high initial capital investment, long development
lead-time and zoning restrictions provides each of the parks with a significant
degree of protection from competitive new theme park openings. Based on its
knowledge of the development of other theme parks in the United States, the
Company's management estimates that it would cost at least $100 million and
would take a minimum of two years to construct a new regional theme park
comparable to the Company's four largest parks.
The Company's senior and operating management team has extensive experience
in the theme park industry. Premier's three senior executive officers have
approximately 35 years aggregate experience in the industry and its seven
general managers have an aggregate of approximately 140 years experience in the
industry, including over approximately 70 years at Premier's parks. See
"Management."
The Company's strategy for achieving growth includes the following key
elements: (i) pursuing on-going growth opportunities at existing parks; (ii)
expanding existing parks; and (iii) making selective acquisitions.
PURSUING ON-GOING GROWTH OPPORTUNITIES AT EXISTING PARKS
The Company believes there are substantial opportunities for internal growth
at its existing parks. The Company seeks to increase revenue by increasing
attendance and per capita spending, while also maintaining strict control of
operating expenses. The primary elements used to achieve this objective are: (i)
adding rides and attractions and improving overall park quality; (ii) enhancing
marketing, sponsorship and group sales programs; (iii) implementing ticket
pricing strategies to maximize ticket revenues and park utilization; (iv) adding
and enhancing restaurants and merchandise and other revenue outlets; and (v)
adding special events. This approach is designed to exploit the operating
leverage inherent in the theme park business. Once parks achieve certain
critical attendance levels, operating cash flow margins increase because revenue
growth through incremental attendance gains and increased in-park spending is
not offset by a comparable increase in operating expenses, since a large portion
of such expenses is relatively fixed during any given year.
Management believes it has demonstrated the effectiveness of its strategy at
the parks owned prior to the Recent Acquisitions. Since acquiring Adventure
World (a combination theme and water park between Baltimore and Washington,
D.C.) in 1992, the Company has invested over $28.6 million in that park to add
numerous rides and attractions and to improve theming and landscaping. As a
result of these improvements, as well as aggressive and creative marketing and
sales strategies, Adventure World's attendance increased during the four seasons
ended 1996 at a compounded annual rate of 21.2%. Additionally, revenue and
park-level operating cash flow at Adventure World increased from $6.0 million
and $0.3 million, respectively, for the first nine months of 1992, to $15.2
million and $3.9 million, respectively, during the comparable period of 1996.
During the 1996 season, the Company began to apply its growth strategy at
the parks acquired in the Funtime Acquisition. While the Funtime parks generated
substantial and stable cash flows prior to their acquisition by Premier, they
lacked the sustained capital investment and creative marketing required to
realize their full potential. To take advantage of this opportunity, the Company
invested approximately $21.9 million at the Funtime parks prior to the 1996
season to add marketable rides and attractions and make other improvements and
implemented creative marketing and sales programs. As a result of this strategy,
during the first nine months of 1996, the three parks acquired in the Funtime
Acquisition achieved growth in attendance, revenue and park-level operating cash
flow of 15.1%, 23.1% and 46.0%, respectively, compared to the comparable period
of 1995.
Management believes that each of the parks acquired and to be acquired in
the Recent Acquisitions offers opportunities to implement the Company's growth
strategy. Specifically, the following outlines the Company's strategy for these
parks. The Company believes that Elitch Gardens lacks certain marketable rides
and attractions and revenue outlets necessary to achieve its attendance
potential. In that connection,
4
<PAGE>
the Company intends to invest between $20.0 million and $25.0 million at Elitch
Gardens for the 1997 and 1998 seasons to add marketable rides and attractions
(including a "state-of-the-art" steel looping roller coaster and a
"shoot-the-chute" giant splash ride for the 1997 season), to improve landscaping
and theming and to enhance marketing programs. While The Great Escape (a
combination theme and water park) has shown solid performance over the past
several years, the Company believes that it can increase the park's attendance
and operating cash flow through the continued addition of attractions and the
introduction of a more extensive marketing strategy. The Company intends to
invest between $8.0 million and $12.0 million at The Great Escape for the 1997
and 1998 seasons to add additional marketable rides and attractions (including a
wave pool for the 1997 season) and to make other improvements. After
consummation of the Riverside Acquisition, the Company currently expects to
invest between $15.0 million and $20.0 million at Riverside Park for the 1997
and 1998 seasons to add additional marketable rides and attractions (including a
"state-of-the-art" steel looping roller coaster for the 1997 season) and to make
other improvements. Finally, the Company believes that the two water parks
acquired in the California Acquisition (together with a family entertainment
center, "Waterworld") have growth potential, although more limited than the
other recently-acquired parks. The Company intends to add a marketable
attraction to each of the water parks in the next two to three years to achieve
growth in attendance and operating cash flow. See "Business -- Operating
Strategy."
EXPANDING EXISTING PARKS
In addition to pursuing on-going growth opportunities at its parks, the
Company is considering a number of expansions at several of its parks in order
to increase attendance and per capita spending. For example, the Company expects
to expand its Darien Lake theme park and camping resort in western New York by
purchasing additional recreational vehicles (RV's) and may in the future
construct economy motel rooms to supplement the campground. In addition, the
Company may add campgrounds or an amphitheater at Frontier City, its
western-themed park in Oklahoma City. The Company is also considering adding a
more complete complement of "dry" rides to Wyandot Lake, which is currently
primarily a water park. In addition, the Company owns 400 acres adjacent to
Adventure World which are zoned for entertainment, recreational and residential
uses and are available for complementary uses. Additional acreage owned by the
Company and suitable for development exists at several of the Company's other
parks. The Company may use a portion of the proceeds of the Offerings to fund
expansions at its parks. See "Use of Proceeds."
MAKING SELECTIVE ACQUISITIONS
The U.S. regional theme park industry is highly fragmented with over 150
parks owned by over 100 operators. Management believes that, in addition to the
Recent Acquisitions, there are numerous acquisition opportunities that would
expand its business. The Company expects that a portion of the proceeds from the
Offerings will be used for such acquisitions (including the Riverside
Acquisition). The Company's primary target for acquisitions will continue to be
regional parks with attendance between 300,000 and 1.5 million annually.
As the only owner of multiple parks in numerous markets that has been
actively making acquisitions of parks in this range over the last several years,
the Company believes it has a number of competitive advantages in acquiring
parks of this size. Historically, operators of destination or large regional
park chains have not generally sought to acquire parks in the Company's primary
target range and do not have the experience or management structure to readily
operate parks of that size profitably. Additionally, as a multi-park operator
with a track record of successfully acquiring, improving and repositioning
parks, the Company has numerous competitive advantages over single-park
operators in pursuing acquisitions and improving the operating results at
acquired parks. These advantages include the ability to (i) exercise group
purchasing power (for both operating and capital assets); (ii) achieve
administrative economies of scale; (iii) attract greater sponsorship revenue,
support from sponsors with nationally-recognized brands and marketing partners;
(iv) recruit and retain superior management; (v) optimize the use of capital
assets by rotating rides among its parks to provide fresh attractions; and (vi)
access capital markets. See "--
5
<PAGE>
Recent Transactions," "Risk Factors -- Uncertainty of Future Acquisitions;
Potential Effects of Acquisitions; Discretionary Use of Proceeds," "Use of
Proceeds," "Business -- Acquisition Strategy" and -- Recent and Pending
Acquisitions."
THE THEME PARK INDUSTRY
The theme park industry includes destination and regional parks. Destination
parks are designed primarily to attract visitors who travel long distances and
incur significant expense to visit the parks' attractions as part of an extended
stay. Regional theme parks, such as those operated by the Company, are designed
to attract visitors for a full day or a significant number of hours. Management
views regional parks as those that draw the majority of their patrons from
within a 50-mile radius of the park and the great majority of their visitors
from within a 100-mile radius of the park. Management believes that destination
parks are typically more affected by the national economy than are regional
parks.
According to U.S. News & World Report, total North American amusement/theme
park attendance in 1995 was approximately 255 million, compared to 151 million
in 1970. Revenue for 1995 was approximately $5 billion, up from $321 million in
1970. These increases represent compound annual growth rates of 2.1% for
attendance and 11.6% for revenues over the twenty-five year period. According to
Amusement Business, a recognized industry publication, total attendance for the
40 largest parks in North America, which include both destination and regional
parks, was 144.5 million in 1995, compared to 123.4 million in 1991,
representing a compound annual growth rate of 4.0% over this period. The Company
believes that this growth in the industry reflects two trends: (i) demographic
growth in the 5-24 year old age group, which is expected to continue through
2010 and (ii) an increasing emphasis on family-oriented leisure and recreation
activities.
RECENT TRANSACTIONS
THE DENVER ACQUISITION. On October 31, 1996, the Company acquired
substantially all of the assets of Elitch Gardens Company, used in the operation
of Elitch Gardens, for $62.5 million in cash.
THE CALIFORNIA ACQUISITION. On November 19, 1996, the Company acquired
substantially all of the assets of FRE, Inc. (Family Recreational Enterprises,
Inc.) ("FRE") and Concord Entertainment Company, an affiliate of FRE
("Concord"), used in the operation of Waterworld for an aggregate cash purchase
price of approximately $17.3 million.
THE GREAT ESCAPE ACQUISITION. On December 4, 1996, the Company acquired
substantially all of the assets of Storytown USA, Inc. and Fantasy Rides
Corporation (collectively, "Storytown") used in the operation of The Great
Escape for a cash purchase price of $33.0 million.
THE RIVERSIDE ACQUISITION. Pursuant to a stock purchase agreement, the
Company has agreed to acquire all of the capital stock of Stuart Amusement
Company, the owner of Riverside Park and the adjacent multi-use stadium
(collectively, "Riverside"), for approximately $22.2 million, of which $1.0
million is payable in shares of Common Stock, valued at the average market price
thereof for a specified period prior to the closing date (the "Riverside
Stock"), with the balance payable in cash. The outstanding indebtedness and
preferred stock of Stuart Amusement Company will be retired out of the cash
purchase price at closing. The closing of the Riverside Acquisition, which is
scheduled to occur in early February 1997, is subject to the satisfaction or
waiver of certain conditions, including the obtaining of all governmental
approvals for the installation of a steel looping roller coaster for the 1997
season. The Company intends to fund the cash portion of the purchase price from
a portion of the proceeds of the Common Stock Offering. If the Riverside
Acquisition closes before the Common Stock Offering, the Company will issue up
to $22.0 million of its Series A Redeemable Exchangeable Preferred Stock (the
"Exchangeable Preferred Stock") to certain stockholders of the Company or their
affiliates to fund such cash portion. In that event, the Company intends to
redeem the Exchangeable Preferred Stock, at a redemption price equal
6
<PAGE>
to the purchase price thereof, plus accumulated dividends, from a portion of the
proceeds of the Common Stock Offering. See "Business -- Recent and Pending
Acquisitions."
NEW CREDIT FACILITY. In October 1996, the Company entered into a $115.0
million senior secured credit facility (the "New Credit Facility") with a
syndicate of banks to finance certain of the Recent Acquisitions and capital
expenditures at existing and acquired parks and to provide working capital.
Specifically, the New Credit Facility provides for (i) a six-year $30.0 million
revolving credit facility (reducing to $15.0 million on October 31, 2001) for
working capital and general corporate purposes (the "Revolving Credit
Facility"); and (ii) a five-year multiple draw $85.0 million term loan facility
to fund acquisitions and make capital improvements prior to April 30, 1998 (the
"Term Loan Facility"). As of January 21, 1997, the Company will have borrowed
$57.0 million (after giving effect to $8.9 million of borrowings the Company
plans to make in respect of the California Acquisition) under the Term Loan
Facility and had borrowed $15.0 million under the Revolving Credit Facility
(which amount the Company plans to repay from the proceeds of such $8.9 million
Term Loan borrowing and a portion of the proceeds of the Offerings). Borrowings
under the Revolving Credit Facility are secured by substantially all of the
assets of the Company (other than real estate). Borrowings under the Term Loan
Facility are secured on a non-cross-collateralized basis by the assets
(including real estate, if applicable) purchased with the proceeds of such
borrowings, together with guarantees, limited to approximately $17.5 million, by
the Company's principal subsidiaries. See "Description of Indebtedness." Upon
completion of the Notes Offering, the Company intends to repay in full the
borrowings under the New Credit Facility from a portion of the net proceeds
thereof. See "Use of Proceeds." On January , 1997, the Company and the banks
entered into an amendment (the "Amendment") to the New Credit Facility pursuant
to which, effective upon the consummation of the Offerings, the Revolving Credit
Facility will remain in place through December 31, 2001 (without reduction prior
to that date) and following repayment of all borrowings thereunder, the Term
Loan Facility will be converted into an $85.0 million, five-year reducing
revolving credit facility (the "New Facility"). The New Facility will be
available to fund acquisitions and make capital improvements. It will reduce to
$75.0 million principal amount on December 31, 1999 and to $45.0 million on
December 31, 2000. Following the Amendment, borrowings under the New Credit
Facility will be secured by substantially all of the assets of the Company
(other than certain real estate). See "Description of Indebtedness."
PUBLIC OFFERING; PREFERRED STOCK CONVERSION. In June 1996, the Company
completed a public offering of 3,938,750 shares of Common Stock (the "Public
Offering") at a price to the public of $18.00 per share, generating net proceeds
of approximately $65.2 million. In connection with the Public Offering, all of
the Company's outstanding shares of preferred stock (the "Preferred Stock"),
together with all accrued dividends thereon, were converted into an aggregate of
2,560,928 shares of Common Stock (the "Preferred Stock Conversion"). See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity, Capital Commitments and Resources."
7
<PAGE>
THE NOTES OFFERING
<TABLE>
<S> <C>
Securities Offered................ $125,000,000 principal amount of % Senior Notes due
2007.
Interest Payment Dates............ and of each year, commencing , 1997.
Maturity Date..................... , 2007.
Sinking Fund...................... None
Optional Redemption............... The Notes will be redeemable, in whole or in part, at
the option of the Company, at any time on or after
, 2002, at the redemption prices set forth
herein, plus accrued and unpaid interest, if any, to the
redemption date. In addition, at any time prior to
, 2000, the Company may redeem up to 33 1/3% of
the original aggregate principal amount of the Notes
with the proceeds of one or more Public Equity
Offerings, at a redemption price of %, plus accrued
and unpaid interest, if any, to the redemption date;
provided, however, that at least 66 2/3% of the original
aggregate principal amount of the Notes must remain
outstanding after each such redemption. See "Description
of the Notes -- Optional Redemption."
Note Guarantees................... The Notes will be guaranteed on a senior, unsecured
basis (each such guarantee being a "Note Guarantee") by
all of the Company's operating subsidiaries (the "Note
Guarantors"). See "Description of the Notes--Note
Guarantees" and "--Certain Covenants--Future Note
Guarantors."
Ranking........................... The Notes will be senior, unsecured obligations of the
Company and will be effectively subordinated to all
existing and future secured indebtedness of the Company
and its subsidiaries to the extent of the value of the
assets securing such indebtedness. The Notes will rank
PARI PASSU in right of payment with all other Senior
Indebtedness of the Company, including the Company's
$90.0 million aggregate principal amount of 12% Senior
Notes due 2003 (the "Existing Notes"), and will rank
senior in right of payment to any Subordinated
Obligations of the Company. The Company's principal
operating subsidiaries hold substantially all of the
Company's assets, except for those assets acquired in
the Recent Acquisitions. The assets of Riverside, if
acquired, will be held by a subsidiary, which will
become a guarantor of the Notes and the Existing Notes.
Promptly following the consummation of the Notes
Offering, the Company intends to transfer the assets
acquired in the Recent Acquisitions (other than
Riverside) to operating subsidiaries and to cause each
such subsidiary to guarantee payment of the Notes and
the Existing Notes. At September 30, 1996, on a pro
forma basis after giving effect to the Recent
Acquisitions, the financings related thereto, the
issuance of the Notes and the use of proceeds therefrom,
the Company would have had outstanding $218.4 million of
Senior Indebtedness (including the Notes), of which $3.4
million would have been secured indebtedness. As of such
date, and after
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
giving such effect, the Company would have had $115.0
million in undrawn commitments under secured revolving
credit facilities under the Amendment to the New Credit
Facility. See "Description of the Notes -- Ranking" and
"-- Note Guarantees."
Change of Control................. In the event of a Change of Control, each holder of the
Notes will have the right, at such holder's option, to
require the Company to offer to purchase such holder's
Notes at a purchase price equal to 101% of the principal
amount thereof, plus accrued and unpaid interest, if
any, to the date of such purchase. See "Description of
the Notes -- Change of Control."
Certain Covenants................. The Indenture under which the Notes will be issued (the
"Indenture") will limit (i) the incurrence of additional
indebtedness by the Company and its subsidiaries, (ii)
the payment of dividends on, and redemption of, capital
stock of the Company and the redemption of certain
Subordinated Obligations of the Company, (iii) other
restricted payments, (iv) sales of assets and subsidiary
stock, (v) transactions with affiliates, (vi) the
creation of liens, (vii) the sale or issuance of capital
stock of certain subsidiaries and (viii) consolidations,
mergers and transfers of all or substantially all of the
assets of the Company. The Indenture also will prohibit
certain restrictions on distributions from subsidiaries.
However, all of these limitations and prohibitions are
subject to a number of important qualifications and
exceptions. See "Description of the Notes -- Certain
Covenants."
Common Stock Offering............. Concurrently with the Notes Offering, the Company is
publicly offering in the U.S. and internationally
4,000,000 shares of the Company's Common Stock, par
value $.05 per share. The Company has granted options to
the underwriters of the Common Stock Offering to
purchase up to 600,000 additional shares of Common Stock
solely to cover over-allotments, if any. Unless
otherwise indicated or the context otherwise requires,
all references in this Prospectus assume that the
underwriters' over-allotment options are not exercised.
The underwriters intend to reserve approximately 150,000
shares of Common Stock (approximately 4% of the Common
Stock Offering) for sale at the initial public offering
price to principal stockholders of the Company or their
affiliates. Neither the Notes Offering nor the Common
Stock Offering is conditioned upon completion of the
other.
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
Use of Proceeds................... The Company intends to use a substantial portion of the
net proceeds from the Notes Offering to fully repay all
borrowings under the New Credit Facility, with the
balance to be used to fund improvements and expansion of
the Company's existing parks, including the parks
acquired and to be acquired in the Recent Acquisitions;
to acquire and make improvements at additional theme
parks; and for general corporate purposes, including
working capital requirements. The Company plans to use
the net proceeds from the Common Stock Offering, if
completed, to acquire and make improvements at
additional theme parks (including the funding of the
$21.2 million cash portion of the Riverside purchase
price or redemption of the Exchangeable Preferred Stock
if the Riverside Acquisition closes before the Common
Stock Offering); to fund improvements and expansion of
the Company's existing parks, including the parks
acquired and to be acquired in the Recent Acquisitions;
and for general corporate purposes, including working
capital requirements. See "Use of Proceeds."
</TABLE>
10
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA DATA
The tables below contain certain summary historical and pro forma financial
and operating data for the Company and certain summary historical financial and
operating data for Funtime. The historical financial data for 1995 for the
Company includes Funtime from the date of acquisition (August 15, 1995). The pro
forma financial and operating data for the year ended December 31, 1995 give
effect to the Funtime Acquisition, the Denver Acquisition and the California
Acquisition as if they had occurred on January 1, 1995, to The Great Escape
Acquisition as if it had occurred on November 1, 1994 (the first day of The
Great Escape's 1995 fiscal year) and to the Riverside Acquisition as if it had
occurred on October 1, 1994 (the first day of Riverside's 1995 fiscal year). The
pro forma financial and operating data for the nine months ended September 30,
1996 give effect to the Recent Acquisitions as if they had occurred on January
1, 1996. The following summary historical financial and operating data of the
Company as of September 30, 1996, for each of the years in the three-year period
ended December 31, 1995 and the nine months ended September 30, 1995 and 1996
and of Funtime for each of the years in the three-year period ended December 31,
1994, respectively, have been derived from the financial statements of the
Company and Funtime appearing elsewhere in this Prospectus (which in the case of
the unaudited consolidated financial statements, in the opinion of management,
include all adjustments (consisting of only normal recurring adjustments)
necessary for a fair presentation) and should be read in conjunction with those
financial statements (including the notes thereto) and "Management's Discussion
and Analysis of Financial Condition and Results of Operations." Other historical
financial and operating data have been derived from audited consolidated
financial statements which are not included herein.
The Company's business is highly seasonal. Results for the nine-month period
ended September 30, 1996 are not necessarily indicative of results to be
expected for the year ended December 31, 1996. Specifically, the parks do not
generate meaningful revenue during the fourth quarter of the year, but do incur
expenses during that quarter. Accordingly, the Company historically incurs a
loss for the fourth calendar quarter and expects to incur such a loss in the
fourth quarter of 1996.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PRO FORMA(3)
1991 1992(1) 1993 1994 1995(2) 1995
--------- --------- --------- --------- --------- -------------
<CAPTION>
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AND PER VISITOR AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
THE COMPANY
STATEMENT OF OPERATIONS DATA:
Total revenue............................... $ 10,547 $ 17,392 $ 21,860 $ 24,899 $ 41,496 $ 145,407
Gross profit(4)............................. 4,096 4,921 7,787 7,991 13,220 54,354
Income from operations(4)................... 970 487 3,019 2,543 3,948 26,271
Interest expense, net....................... (858) (1,413) (1,438) (2,299) (5,578) (15,718)
Income (loss) from continuing operations.... (118) (1,735) 1,354 102 (1,045 (5) 5,765
Income (loss) from continuing operations per
common share (primary and fully
diluted).................................. $ (.26) $ (2.10) $ .51 $ .04 $ (.40 (5) $ .27(3)
OTHER DATA:
EBITDA(6)................................... $ 2,246 $ 1,938 $ 4,562 $ 4,549 $ 7,706(7) $ 39,222
Net cash provided by operating
activities(8)............................. $ 1,924 $ 1,980 $ 2,699 $ 1,060 $ 10,646(9) $ 31,508
Depreciation and amortization............... $ 1,107 $ 1,442 $ 1,537 $ 1,997 $ 3,866 $ 13,230
Capital expenditures(10).................... $ 4,508 $ 3,956 $ 7,674 $ 10,108 $ 10,732 $ 49,695(11)
Total attendance............................ 828 1,116 1,322 1,408 2,302 12) 7,081
Revenue per visitor......................... $ 12.74 $ 15.58 $ 16.54 $ 17.68 $ 18.03 $ 20.25(13)
Ratio of earnings to fixed charges(14)...... 1.3x (14) 2.1x 1.1x (14) 1.3 x
</TABLE>
(FOOTNOTES BEGIN ON PAGE 13)
11
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------
<S> <C> <C> <C> <C>
HISTORICAL PRO
HISTORICAL COMBINED HISTORICAL FORMA
1995(2) 1995(15) 1996 1996(3)
----------- ----------- ----------- -----------
<CAPTION>
(IN THOUSANDS, EXCEPT FOR PER SHARE AND PER
VISITOR AMOUNTS)
(UNAUDITED)
<S> <C> <C> <C> <C>
THE COMPANY
STATEMENT OF OPERATIONS DATA:
Total revenue...................................... $ 38,771 $ 77,054 $ 89,792 $ 154,607(16)
Gross profit(4).................................... 16,540 29,066 40,611 69,303
Income from operations(4).......................... 9,707 16,241 25,248 41,418
Interest expense, net.............................. (3,101) (6,163) (7,657) (11,121)
Income before extraordinary loss(5)................ $ 3,956 $ 6,074 $ 10,512 $ 17,779
Income before extraordinary loss per common
share(5)
Primary.......................................... $ 1.04 (15) $ 1.24 $ 1.35 (3)
Fully diluted.................................... $ 0.84 (15) $ 1.11 $ 1.35 (3)
OTHER DATA:
EBITDA(6).......................................... $ 11,928 $ 22,607 $ 30,848 $ 52,055 (16)
Net cash provided by operating activities(8)....... $ 13,794 $ 17,855 $ 10,222 $ 29,637 (16)
Depreciation and amortization...................... $ 2,258 $ 6,403 $ 5,599 $ 10,795
Capital expenditures(10)........................... $ 6,501 $ 8,203 $ 29,290 $ 33,273
Total attendance................................... 2,159 (12 3,930 4,302 7,049
Revenue per visitor................................ $ 17.96 $ 19.61 $ 20.87 $ 21.70 (13)
Ratio of earnings to
fixed charges(14)................................ 2.8 x (15) 2.9 x 2.8 x
<CAPTION>
PRO FORMA
RATIOS FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, AS ADJUSTED
1996(16)(17): 1996(18)
-----------
<S> <C> <C> <C> <C>
EBITDA/Cash interest expense....................... 1.9x
Total debt/EBITDA.................................. 5.0x
Net debt/EBITDA.................................... 0.9x
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------------------------------
<S> <C> <C> <C>
PRO PRO FORMA
ACTUAL FORMA(3) AS ADJUSTED(18)
----------- -------------- ---------------
<CAPTION>
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................................... $ 73,766 $ 13,674 $ 177,646
Total assets........................................................ $ 252,114 $ 343,144 $ 511,386
Total long-term debt and capitalized lease obligations (excluding
current maturities)............................................... $ 92,350 $ 149,350 $ 217,350
Total debt.......................................................... $ 93,404 $ 150,404 $ 218,404
Stockholders' equity................................................ $ 121,574 $ 142,174 $ 243,016
</TABLE>
(FOOTNOTES BEGIN ON NEXT PAGE)
12
<PAGE>
- ------------------------
(1) During 1992, the Company purchased Adventure World, as well as the
remaining minority interest in Frontier City. During 1992, the Company also
discontinued substantially all of its non-theme park operations through a
disposition transaction which significantly reduced the Company's assets and
indebtedness, as well as resulted in an extraordinary gain of $18,400,000,
which gain is not reflected in income (loss) from continuing operations. See
"The Company." During 1992, the Company also adopted Financial Accounting
Standards Board Statement No. 109, "Accounting for Income Taxes" ("Statement
109"), resulting in a decrease in net income of $2,300,000 which decrease is
not reflected in income (loss) from continuing operations.
(2) The historical Statement of Operations Data for 1995 and the nine months
ended September 30, 1995 reflect the results of the parks acquired in the
Funtime Acquisition from the date of acquisition, August 15, 1995.
(3) The pro forma financial and operating data for the year ended December 31,
1995 give effect to the Acquisitions, the related financings and the
presumed issuance of the Exchangeable Preferred Stock as if they had
occurred on January 1, 1995 (or on November 1, 1994 in the case of The Great
Escape Acquisition and on October 1, 1994 in the case of the Riverside
Acquisition). The pro forma financial and operating data for the nine months
ended September 30, 1996 give effect to the Recent Acquisitions, the related
financings and the presumed issuance of the Exchangeable Preferred Stock as
if they had occurred on January 1, 1996. The pro forma income per share for
the 1995 and 1996 periods also give effect to the June 1996 Public Offering
and the Preferred Stock Conversion as if they had occurred on January 1 of
such period, as well as the pro forma effect of reducing net income
applicable to Common Stock by the accumulated dividend on the $20.0 million
of Exchangeable Preferred Stock presumed to have been issued to fund the
Riverside Acquisition. The pro forma balance sheet data give effect to the
Recent Acquisitions, the related financings and the presumed issuance of the
Exchangeable Preferred Stock as if they had occurred on September 30, 1996.
See "Selected Historical and Pro Forma Financial and Operating Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity, Capital Commitments and Resources" and Note 3 to
the Company's consolidated financial statements.
If the Riverside Acquisition is not consummated, the summary pro forma
statement of operations and other data for the year ended December 31, 1995
and the nine months ended September 30, 1996 would be as follows:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 SEPTEMBER 30, 1996
-------------------- -------------------
<S> <C> <C>
PRO FORMA PRO FORMA
<CAPTION>
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AND
PER VISITOR AMOUNTS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue....................................................... $ 125,941 $ 135,981(16)
Gross profit(4)..................................................... 48,073 61,731
Income from operations(4)........................................... 24,673 38,064
Interest expense, net............................................... (15,718) (11,121)
Income before extraordinary loss(5)................................. 4,957 15,873
Income before extraordinary loss per common share(5):
Primary and fully diluted......................................... $ 0.44 $ 1.36
OTHER DATA:
EBITDA(6)........................................................... $ 36,216 $ 47,635(16)
Net cash provided by operating activities(8)........................ $ 28,566 $ 24,847(16)
Depreciation and amortization....................................... $ 11,808 $ 9,729
Capital expenditures(10)............................................ $ 49,367 (11 $ 32,582
Total attendance.................................................... 6,213 6,329
Revenue per visitor................................................. $ 19.95 (13 $ 21.23(13)
Ratio of earnings to fixed charges(14).............................. 1.5x 3.3x
</TABLE>
(4) Gross profit is revenue less operating expenses, costs of products sold and
depreciation and amortization. Income from operations is gross profit less
selling, general and administrative expenses.
(5) During 1995, the Company incurred an extraordinary loss of $140,000, net of
income tax benefit, on extinguishment of debt in connection with the Funtime
Acquisition. This extraordinary loss is not included in income (loss) from
continuing operations and income (loss) from continuing operations per
common share for 1995 or for the nine months ended September 30, 1995.
(6) 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's ability to service and/or incur
debt. EBITDA is not required by generally accepted accounting principles
("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's operating performance. This information should be
read in conjunction with the Statements of Cash Flows contained in the
financial statements included elsewhere herein. Equity in loss of
partnership was $176,000, $122,000, $142,000, $83,000, $69,000, $50,000 and
$60,000 during each of the five years ended December 31, 1995 and the nine
months ended September 30, 1995 and 1996, respectively.
(7) EBITDA for the Company during 1995 without giving any effect to the Funtime
Acquisition and the related financings would have been $5,527,000.
(8) During each of the five years ended December 31, 1995 and the nine months
ended September 30, 1995 and 1996, the Company's net cash used in investing
activities was $6,841,000, $5,649,000, $7,698,000, $10,177,000, $74,139,000,
$65,167,000 and $29,328,000, respectively. During those periods, net cash
provided by financing activities was $5,175,000, $8,736,000, $2,106,000,
$7,457,000, $90,914,000, $91,585,000 and $64,085,000, respectively.
(FOOTNOTES CONTINUED ON NEXT PAGE)
13
<PAGE>
(FOOTNOTES CONTINUED FROM PREVIOUS PAGE)
(9) Net cash provided by operating activities during 1995 without giving any
effect to the Funtime Acquisition and the related financings would have been
$6,890,000.
(10) Capital expenditures are presented on a calendar-year basis, rather than on
a project-year basis. When presented on a project-year basis, expenditures
are aggregated based on the amounts incurred for the relevant year's
operating season.
(11) Pro Forma capital expenditures for 1995 include $26,044,000 in property,
plant and equipment expenditures incurred in connection with the
construction of Elitch Gardens and $8,172,000 expended to construct
Waterworld USA/Concord.
(12) Represents attendance at the three parks owned by the Company prior to the
Funtime Acquisition for the entire 1995 period and attendance at the Funtime
parks from and after August 15, 1995.
(13) Pro Forma revenue per visitor does not include revenue of Paradise Island
(a fee-per-attraction entertainment center acquired in the California
Acquisition) of $2,004,000 for the year ended December 31, 1995 or
$1,621,000 for the nine months ended September 30, 1996.
(14) For the purpose of determining the ratio of earnings to fixed charges,
earnings consist of income (loss) before income taxes and fixed charges.
Fixed charges consist of interest expense net of interest income,
amortization of deferred financing costs, preferred stock dividends, and the
portion (approximately one-third) of rental expense that management believes
represents the interest component of rent expense. For the years ended
December 31, 1992 and 1995, the Company's earnings were insufficient to
cover fixed charges by $917,000 and $2,620,000, respectively.
(15) Represents results of operations of Premier for the entire period and the
results of operations for Funtime through August 14, 1995 on a combined
basis. No pro forma adjustments for additional depreciation, interest
expense or income taxes have been made in combining Premier and Funtime
amounts. Income per share and ratio of earnings to fixed charges are not
presented on this basis as amounts are not meaningful.
(16) After giving pro forma effect to the Recent Acquisitions and the related
financings as if they had occurred on October 1, 1995, total revenue, EBITDA
and net cash provided by operating activities for the twelve months ended
September 30, 1996 would have been approximately $158.7 million, $44.1
million and $23.6 million, respectively. If the Riverside Acquisition is not
consummated, pro forma total revenue, EBITDA and net cash provided by
operating activities for that period would have been $139.6 million, $40.9
million and $20.3 million, respectively. See Note 17.
(17) EBITDA as defined in the Indentures is the sum of EBITDA (as defined above)
and historical interest income. For purposes of the ratios shown, EBITDA
excludes interest income. Cash interest expense is interest expense
excluding amortization of debt issuance costs, and net debt constitutes
total debt less cash and cash equivalents. After giving effect to interest
income from cash balances of $177.6 million, including net proceeds from the
Offerings (after giving effect to the use thereof and an assumed interest
rate of 10% on the Notes), assuming an interest rate of 5% on the cash
balances, EBITDA would have been $53.0 million for the pro forma as adjusted
twelve months ended September 30, 1996, EBITDA/cash interest expense would
have been 2.2x and total debt/EBITDA would have been 4.1x.
(18) Adjusted to give effect to the Offerings, assuming no exercise of the
underwriters' over-allotment options in the Common Stock Offering and a
public offering price per share of $31.79 (based on a two week average of
the Common Stock's trading price prior to December 31, 1996), the repayment
of all borrowings under the New Credit Facility from a portion of the
proceeds of the Notes Offering and the redemption of the Exchangeable
Preferred Stock from a portion of the proceeds of the Common Stock Offering.
The pro forma as adjusted ratios for the twelve months ended September 30,
1996 also give effect to the Recent Acquisitions, the related financings and
the presumed issuance of the Exchangeable Preferred Stock as if they had
occurred on October 1, 1995. If the Common Stock Offering is not
consummated, pro forma as adjusted cash and cash equivalents, total assets
and stockholders' equity (in thousands) at that date would have been
$77,404, $411,144 and $142,174, respectively. In addition, in that case, the
pro forma as adjusted ratios of EBITDA/cash interest expense, Total
debt/EBITDA and Net debt/ EBITDA would have been 1.9x, 5.0x and 3.2x,
respectively. If the Riverside Acquisition is not consummated, the pro forma
and pro forma as adjusted balance sheet data at September 30, 1996 (in
thousands) would have been:
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA AS ADJUSTED
----------- -----------
<S> <C> <C>
Cash and cash equivalents........................................................... $ 13,845 $ 197,817
Total assets........................................................................ $ 310,764 $ 499,006
Total long-term debt and capitalized lease obligations (excluding current
maturities)....................................................................... $ 149,350 $ 217,350
Total debt.......................................................................... $ 150,404 $ 218,404
Stockholders' equity................................................................ $ 121,774 $ 242,016
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
<S> <C> <C> <C> <C>
1991 1992 1993 1994
--------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS, EXCEPT PER VISITOR AMOUNTS)
<S> <C> <C> <C> <C>
FUNTIME
STATEMENT OF OPERATIONS DATA:
Total revenue......................................................... $ 48,777 $ 46,852 $ 51,253 $ 50,435
Gross profit.......................................................... 14,979 13,764 16,863 14,636
Income from operations................................................ 6,713 5,100 8,645 6,203
Interest expense, net................................................. (4,150) (3,001) (2,783) (4,792)
Income before cumulative
effect of accounting change(1)...................................... $ 1,003 $ 384 $ 3,540 $ 263
OTHER DATA:
EBITDA(2)............................................................. $ 12,374 $ 11,179 $ 14,000 $ 11,862
Net cash provided by operating activities(3).......................... $ 8,043 $ 6,950 $ 9,180 $ 8,784
Depreciation and amortization......................................... $ 5,681 $ 6,182 $ 5,632 $ 5,956
Capital expenditures.................................................. $ 2,531 $ 2,971 $ 4,395 $ 4,211
Total attendance...................................................... 2,593 2,406 2,575 2,468
Revenue per visitor................................................... $ 18.81 $ 19.47 $ 19.90 $ 20.44
</TABLE>
- ------------------------------
(1) During 1993, Funtime adopted Statement 109, resulting in a decrease in net
income of $3,200,000. This decrease is not included in income before
cumulative effect of accounting change.
(2) See footnote 6 appearing on page 13 for a discussion of EBITDA.
(3) During each of the four years ended December 31, 1994, Funtime's net cash
used in investing activities was $2,687,000, $2,971,000, $5,095,000 and
$6,344,000, respectively. During those periods, net cash used in financing
activities was $5,300,000, $4,133,000, $4,249,000 and $2,454,000,
respectively.
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<PAGE>
RISK FACTORS
Prior to making an investment in the Notes offered hereby, prospective
investors should carefully consider, together with the other matters referred to
in this Prospectus, the following risk factors:
RISKS ASSOCIATED WITH SUBSTANTIAL INDEBTEDNESS
The Company is highly leveraged. Upon completion of the Notes Offering (and
after giving effect to the repayment of all borrowings under the New Credit
Facility with a portion of the net proceeds from the Notes Offering), the
Company will have outstanding (i) $125.0 million principal amount of the Notes;
and (ii) $90.0 million principal amount of the Existing Notes. In addition, the
Company has the ability to borrow up to $30.0 million under a secured revolving
credit facility and, following the consummation of the Notes Offering, will have
the ability to borrow up to $85 million under the New Facility. In addition, the
Company may incur other indebtedness in the future. See "Description of
Indebtedness." This high level of indebtedness will result in significant
interest expense and eventual principal repayment obligations. Following the
Amendment, borrowings under the New Credit Facility will be secured by
substantially all of the Company's assets (other than certain real estate). See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity, Capital Commitments and Resources."
The Company believes that its cash flow from operations, together with the
proceeds from the Offerings and borrowings under the New Credit Facility will be
adequate to fund its currently anticipated requirements for working capital,
capital expenditures and scheduled principal and interest payments. If the
Company is unable to generate sufficient cash flow from operations in the future
to service its debt, it may be required to refinance all or a portion of its
existing debt, sell certain of its assets or obtain additional financing. There
can be no assurance that any such refinancing would be possible or that any
additional financing could be obtained. The financial covenants and other
restrictions contained in the New Credit Facility and the indenture relating to
the Existing Notes (the "Existing Indenture" and together with the Indenture,
the "Indentures") and those that will be contained in the Indenture will require
the Company to satisfy certain financial tests, financial covenants and other
restrictions, including limitations on the Company's ability to borrow
additional funds and to dispose of certain assets. See "Description of
Indebtedness -- New Credit Facility," " -- The Existing Notes" and "Description
of the Notes."
The Company's high degree of leverage could limit its ability to withstand
competitive pressures and adverse economic conditions, to take advantage of
significant business opportunities that may arise or to meet its obligations.
The inability of the Company to service its obligations in respect of the Senior
Notes and other indebtedness or obligations would have a material adverse effect
on the market value and marketability of the Notes.
RANKING OF NOTES
The Notes are not secured and therefore will be effectively subordinated to
borrowings under the New Credit Facility and other secured indebtedness
permitted under the terms of the Indenture, to the extent of the value of the
assets securing such secured indebtedness. The revolving credit indebtedness
under the New Credit Facility is secured by liens on substantially all of the
Company's assets (other than real estate). The Company intends to repay in full
borrowings under the New Credit Facility from a substantial portion of the net
proceeds from the Notes Offering. See "Use of Proceeds." On January , 1997,
the Company and the banks entered into the Amendment to the New Credit Facility
pursuant to which, effective upon the consummation of the Offerings, the
Revolving Credit Facility will remain in place through December 31, 2001
(without reduction prior to that date) and following repayment of all borrowings
thereunder, the Term Loan Facility will be converted into the New Facility. The
New Facility will be available to fund acquisitions and make capital
improvements. It will reduce to $75.0 million principal amount on December 31,
1999 and to $45.0 million on December 31, 2000. Following the Amendment,
borrowings under the
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<PAGE>
New Credit Facility will be secured by substantially all of the assets of the
Company (other than certain real estate). See "Description of Indebtedness."
Subject to certain conditions specified therein, the Existing Indenture permits,
and the Indenture will permit, the Company and its subsidiaries to incur
additional indebtedness, including secured indebtedness, which secured
indebtedness will effectively rank senior to the Notes to the extent of the
value of the assets securing such indebtedness.
The Notes will be guaranteed on a senior, unsecured basis by the Company's
principal operating subsidiaries. The Company's principal operating subsidiaries
hold substantially all of the Company's assets, except for those assets acquired
in the Recent Acquisitions. The assets of Riverside, if acquired, will be held
by a subsidiary, which will become a guarantor of the Notes and the Existing
Notes. Promptly following the consummation of the Notes Offering, the Company
intends to transfer the assets acquired in the Recent Acquisitions (excluding
Riverside) to operating subsidiaries and to cause each such subsidiary to
guarantee payment of the Notes and the Existing Notes. See "Description of
Indebtedness -- New Credit Facility," "-- The Existing Notes" and "Description
of the Notes -- Certain Covenants."
ABILITY TO PAY NOTE OBLIGATIONS DEPENDENT ON FUNDS FROM SUBSIDIARIES
With the exception of the parks acquired in the Recent Acquisitions (other
than the Riverside Acquisition), which are presently owned directly by the
Company, the Company derives all of its operating income from its subsidiaries.
The Company must rely to a large extent upon dividends and other payments from
its subsidiaries to generate the funds necessary to meet its obligations,
including the payment of principal of, premium, if any, and interest on the
Notes. The ability of the Company's subsidiaries to make such payments may be
restricted by, among other things, applicable corporate laws and other laws and
regulations.
UNCERTAINTY OF FUTURE ACQUISITIONS; POTENTIAL EFFECTS OF ACQUISITIONS
Approximately $21.2 million of the net proceeds of the Offerings is expected
to be used to fund the cash portion of the purchase price of the Riverside
Acquisition and a portion of the balance of such proceeds is expected to be used
to fund additional acquisitions and improvements at parks acquired and to be
acquired. There can be no assurance that the Company will consummate the
Riverside Acquisition or will be able to locate and acquire additional
businesses to enable it to so employ that portion of the proceeds. To the extent
any such acquisition would result in the incurrence or assumption of
indebtedness by the Company, such incurrence or assumption must comply with the
limitations on the Company's ability to incur or assume indebtedness under the
New Credit Facility and the Indentures. There can be no assurance that any
proposed acquisition will be permissible under these loan agreements or that
waivers of any such covenants could be obtained. See "-- Restrictive Debt
Covenants" and "Description of Indebtedness."
In certain instances, a consummated acquisition may adversely affect the
Company's financial condition and reported results, at least in the short-term,
depending on many factors, including capital requirements and the accounting
treatment of such acquisitions. There can be no assurance that the Recent
Acquisitions or any future acquisition, if completed successfully, will perform
as expected, will not result in significant unexpected liabilities or will ever
contribute significant revenues or profits to the Company. As the Company
continues to grow, the increasing size of its operations will place additional
demands upon existing management resources, which will require the Company to
effectively redeploy such resources and, at times, to hire new personnel. If the
Company is unable to manage growth effectively, the Company's operating results
could be materially adversely affected.
RESTRICTIVE DEBT COVENANTS
The New Credit Facility contains a number of significant covenants that,
among other things, restrict the ability of the Company to dispose of assets,
incur additional indebtedness, pay cash dividends, create
17
<PAGE>
liens on assets, make investments or acquisitions, engage in mergers or
consolidations, make capital expenditures, engage in certain transactions with
affiliates or redeem or repurchase the Existing Notes or the Notes. In addition,
under the New Credit Facility, the Company is required to comply with specified
financial ratios and tests, including interest expense, fixed charges, debt
service and total debt coverage ratios. See "Description of Indebtedness -- New
Credit Facility." The Existing Indenture contains, and the Indenture will
contain, a series of restrictive covenants. See "Description of Indebtedness --
The Existing Notes" and "Description of the Notes."
The Company is currently in compliance with the covenants and restrictions
contained in the New Credit Facility and the Existing Indenture. However, its
ability to continue to comply with financial tests and ratios in the New Credit
Facility may be affected by events beyond its control, including prevailing
economic, financial, weather and industry conditions. The breach of any such
financial covenant could result in the inability of the Company to borrow under
the New Credit Facility, the termination of the facility (and the repayment of
all amounts outstanding thereunder) or, by virtue of cross default provisions,
the acceleration of the maturity of the Existing Notes and the Notes. See
"Description of Indebtedness."
RISKS OF ACCIDENTS AND DISTURBANCES AT PARKS
Because substantially all of the Company's parks feature "thrill rides,"
attendance at the parks and, consequently, revenues may be adversely affected by
any serious accident or similar occurrence with respect to a ride. The Company's
liability insurance policies provide coverage of up to $25.0 million per loss
occurrence and require the Company to pay the first $50,000 of loss per
occurrence. In addition, in view of the proximity of certain of the Company's
parks to major urban areas and the appeal of the parks to teenagers and young
adults, the Company's parks could experience disturbances that could adversely
affect the image of and attendance levels at its parks. Working together with
local police authorities, the Company has taken certain security-related
precautions designed to prevent disturbances in its parks, but there can be no
assurance that it will be able to prevent any such disturbances.
EFFECTS OF INCLEMENT WEATHER; SEASONAL FLUCTUATIONS OF OPERATING RESULTS
Because the great majority of a theme park's attractions are outdoor
activities, attendance at parks and, accordingly, the Company's revenues are
significantly affected by the weather. Additionally, four of the Company's parks
(including two of the parks acquired in the Recent Acquisitions) are primarily
water parks which, by their nature, are more sensitive to adverse weather than
are theme parks. Unfavorable weekend weather and unusual weather of any kind can
adversely affect park attendance.
The operations of the Company are highly seasonal, with more than 90% of
park attendance occurring in the second and third calendar quarters of each
year. The great majority of the Company's revenue is collected in those quarters
while most expenditures for capital improvements and significant maintenance are
incurred when the parks are closed in the first and fourth quarters.
Accordingly, the Company believes that quarter-to-quarter comparisons of its
results of operations should not be relied upon as an indication of future
performance. Nevertheless, the market price of the Common Stock may fluctuate
significantly in response to variations in the Company's quarterly and annual
results of operations.
HIGHLY COMPETITIVE BUSINESS
The Company's parks compete directly with other theme, water and amusement
parks and indirectly with all other types of recreational facilities and forms
of entertainment within their market areas, including movies, sports attractions
and vacation travel. The Company's family entertainment center competes directly
with all types of recreational facilities and forms of entertainment within its
market area. Accordingly, the Company's business is and will continue to be
subject to factors affecting the recreation and leisure time industries
generally, such as general economic conditions and changes in discretionary
18
<PAGE>
consumer spending habits. Within each park's regional market area, the principal
factors affecting competition include location, price, the uniqueness and
perceived quality of the rides and attractions in a particular park, the
atmosphere and cleanliness of a park and the quality of its food and
entertainment. Certain of the Company's direct competitors have substantially
greater financial resources than the Company.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends upon the continued contributions of its
executive officers and key operating personnel, particularly Kieran E. Burke,
Chairman and Chief Executive Officer and Gary Story, President and Chief
Operating Officer. The Company does not have employment agreements with, or key
man insurance relating to, Messrs. Burke and Story. The loss of services of, or
a material reduction in the amount of time devoted to the Company by, either of
such individuals or certain other key personnel could adversely affect the
business of the Company. See "Management." Under certain circumstances, the loss
of the services of both Messrs. Burke and Story and the failure to replace them
within a specified time period would constitute a default under the New Credit
Facility. See "Description of Indebtedness--New Credit Facility."
CONTROL BY MANAGEMENT AND EXISTING STOCKHOLDERS; CHANGE OF CONTROL
If the Common Stock Offering is completed, the Company's directors,
executive officers and entities affiliated with them will, in the aggregate,
beneficially own approximately 36.6% of the outstanding Common Stock (without
giving effect to shares, if any, purchased by such persons in the Common Stock
Offering). As a result, these stockholders, if they were to act together, would
be able to influence significantly the election of the Company's Board of
Directors and other matters requiring approval by the stockholders of the
Company, including any required stockholder approval of acquisitions and other
significant corporate transactions. See "Principal Stockholders."
A Change of Control could require the Company to repay all indebtedness
under the New Credit Facility. In addition, upon the occurrence of a Change of
Control, the holders of the Senior Notes would be entitled to require the
Company to repurchase the Senior Notes at a purchase price equal to 101% of the
principal amount of such Senior Notes, plus accrued and unpaid interest, if any,
to the date of repurchase. The Company's failure to repurchase the Senior Notes
would result in a default under the Indentures and the New Credit Facility. In
the event of a Change of Control, there can be no assurance that the Company
would have sufficient assets to satisfy its obligations under the New Credit
Facility or the Indentures. See "Description of Indebtedness -- New Credit
Facility," "-- Existing Notes" and "Description of Notes -- Change of Control."
POTENTIAL SUBORDINATION OR VOIDING OF NOTE GUARANTEES BASED ON FRAUDULENT
CONVEYANCE
The Note Guarantees may be subject to review under relevant federal and
state fraudulent conveyance and similar statutes in a bankruptcy or
reorganization case or a lawsuit by or on behalf of creditors of any of the Note
Guarantors. Under these statutes, if a court were to find that obligations (such
as the Note Guarantees) were incurred with the intent of hindering, delaying or
defrauding present or future creditors, that a Note Guarantor received less than
a reasonably equivalent value or fair consideration for those obligations, or a
Note Guarantor contemplated insolvency with a design to prefer one or more
creditors to the exclusion, in whole or in part, of other creditors and, at the
time of the incurrence of the obligations, the obligor either (i) was insolvent
or was rendered insolvent by reason thereof, (ii) was engaged or was about to
engage in a business or transaction for which its remaining unencumbered assets
constituted unreasonably small capital, or (iii) intended to incur or believed
that it was incurring debts beyond its ability to pay such debts as they matured
or became due, such court could void the Note Guarantor's obligations under the
Note Guarantees, subordinate the Note Guarantees to other indebtedness of the
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<PAGE>
Note Guarantor or take other action detrimental to the holders of the Notes. The
Note Guarantees could be subject to the claim that, since the Note Guarantees
were incurred for the benefit of the Company (and only indirectly for the
benefit of the Note Guarantors), the obligations of the Note Guarantors
thereunder were incurred for less than reasonably equivalent value or fair
consideration.
The measure of insolvency for purposes of a fraudulent conveyance or other
similar claim will vary depending upon the law of the jurisdiction being
applied. Generally, however, a company will be considered insolvent at a
particular time if the sum of its debts at that time is greater than the then
fair value of its assets or if the fair salable value of its assets at that time
is less than the amount that would be required to pay its probable liability on
its existing debts as they become absolute and mature. The Company believes
that, after giving effect to the Notes Offering, each of the Company and its
principal operating subsidiaries will be (i) neither insolvent nor rendered
insolvent by the incurrence of indebtedness in connection with the Notes
Offering, (ii) in possession of sufficient capital to run their businesses
effectively, and (iii) incurring debts within their ability to pay as the same
mature or become due.
LACK OF ESTABLISHED MARKET FOR THE NOTES
The Notes are new securities for which there currently is no market. The
Company does not intend to apply for listing of the Notes on any securities
exchange. Although each Underwriter has advised the Company that it presently
intends to make a market in the Notes, none of the Underwriters is obligated to
do so and any such market-making activities may be discontinued at any time
without notice in the sole discretion of each of the Underwriters. Accordingly,
no assurance can be given as to the development or liquidity of any market for
the Notes. The liquidity of, and trading market for, the Notes also may be
adversely affected by general declines in the market for similar securities.
Such a decline may adversely affect such liquidity and trading markets
independent of the financial performance of, and prospects for, the Company.
20
<PAGE>
THE COMPANY
The Company is a leading U.S. theme park company which, after completion of
the Recent Acquisitions, will own and operate eleven regional parks. Based on
1996 attendance of approximately 7.3 million at these parks, the Company is the
fourth largest domestic regional park operator. After giving pro forma effect to
the Recent Acquisitions as if they had occurred on October 1, 1995, the
Company's total revenue and EBITDA for the twelve months ended September 30,
1996 would have been approximately $158.7 million and $44.1 million,
respectively. See "Unaudited Pro Forma Combined Financial Statements" and
"Business -- Recent and Pending Acquisitions."
The Company's parks (including Riverside) are located in nine geographically
diverse markets with concentrated populations:
- ADVENTURE WORLD, a combination theme and water park located three miles
off the Beltway, between Washington, D.C. (15 miles away) and Baltimore,
Maryland (30 miles away), with 1996 attendance of approximately 782,000;
- DARIEN LAKE & CAMPING RESORT, a combination theme and water park with an
adjacent camping resort and 20,000 person amphitheater, located between
Buffalo and Rochester, New York, with 1996 attendance of approximately
1,290,000;
- ELITCH GARDENS, a theme park located in the downtown area of Denver,
Colorado, with 1996 attendance of approximately 894,000;
- FRONTIER CITY, a western themed park in Oklahoma City, Oklahoma, with 1996
attendance of approximately 527,000;
- GEAUGA LAKE, a combination theme and water park located near Cleveland,
Ohio, with 1996 attendance of approximately 1,209,000;
- THE GREAT ESCAPE, a combination theme and water park, located in Lake
George/Albany, New York, with 1996 attendance of approximately 574,000;
- RIVERSIDE, a theme park and adjacent multi-use stadium located in
Springfield, Massachusetts, with combined 1996 attendance of approximately
750,000;
- WATERWORLD USA/SACRAMENTO and PARADISE ISLAND, a water park and a family
entertainment center, both located on the grounds of the California State
Fair, with 1996 water park attendance of approximately 294,000;
- WATERWORLD USA/CONCORD, a water park located in Concord, California, in
the East Bay area of San Francisco, with 1996 attendance of approximately
310,000;
- WHITE WATER BAY, a tropical themed water park located in Oklahoma City,
with 1996 attendance of approximately 314,000; and
- WYANDOT LAKE, a water park, which also includes "dry" rides and other
attractions, located adjacent to the Columbus Zoo in Columbus, Ohio, with
1996 attendance of approximately 396,000.
The Company seeks to provide its customers with quality family entertainment
that is affordably priced and close to home. In 1996, the six parks owned by the
Company prior to the Recent Acquisitions drew, on average, approximately 88.0%
of their patrons from within a 100-mile radius, with approximately 38.4% of
visitors utilizing group and other pre-sold tickets and approximately 16.5%
utilizing season passes. Each of the Company's parks is individually themed and
provides a complete family-oriented entertainment experience. The Company's
theme parks generally offer a broad selection of state-of-the-art and
traditional thrill rides, water attractions, themed areas, concerts and shows,
restaurants, game venues and merchandise outlets.
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<PAGE>
Since current management assumed control in 1989, the Company has acquired
nine parks and achieved significant internal growth. In addition, the Company
expects, subject to the satisfaction or waiver of certain conditions, to acquire
Riverside in early February 1997. As a result of the Company's operating
strategy, during the three years ended December 31, 1995, the three parks owned
by the Company during that entire period achieved internal growth in attendance,
revenue and EBITDA at compounded annual rates of 12.7%, 17.1% and 41.8%,
respectively. In August 1995, the Company acquired three of its parks through
the Funtime Acquisition. During the first nine months of 1996, the three parks
acquired in the Funtime Acquisition achieved internal growth in attendance,
revenue and park-level operating cash flow of 15.1%, 23.1% and 46.0%,
respectively, compared to the comparable period of 1995. Furthermore, after
giving pro forma effect to the Recent Acquisitions as if they had occurred on
January 1, 1996, the Company has increased its attendance, revenue and EBITDA
from park operations by 6.7, 9.5 and 16.5 times, respectively, from the nine
months ended September 30, 1992 to the nine months ended September 30, 1996.
The Company believes that each of its parks benefits from limited direct
competition. The combination of limited supply of real estate appropriate for
theme park development, high initial capital investment, long development
lead-time and zoning restrictions provides each of the parks with a significant
degree of protection from competitive new theme park openings. Based on its
knowledge of the development of other theme parks in the United States, the
Company's management estimates that it would cost at least $100 million and
would take a minimum of two years to construct a new regional theme park
comparable to the Company's four largest parks.
The Company's senior and operating management team has extensive experience
in the theme park industry. Premier's three senior executive officers have
approximately 35 years experience in the industry and its seven general managers
have an aggregate of approximately 140 years experience in the industry,
including approximately 70 years at Premier's parks.
STRATEGY
The Company's strategy for achieving growth includes the following key
elements: (i) pursuing on-going growth opportunities at existing parks; (ii)
expanding existing parks; and (iii) making selective acquisitions.
PURSUING ON-GOING GROWTH OPPORTUNITIES AT EXISTING PARKS
The Company believes there are substantial opportunities for internal growth
at its existing parks. The Company seeks to increase revenue by increasing
attendance and per capita spending, while also maintaining strict control of
operating expenses. The primary elements used to achieve this objective are: (i)
adding rides and attractions and improving overall park quality; (ii) enhancing
marketing, sponsorship and group sales programs; (iii) implementing ticket
pricing strategies to maximize ticket revenues and park utilization; (iv) adding
and enhancing restaurants and merchandise and other revenue outlets; and (v)
adding special events. This approach is designed to exploit the operating
leverage inherent in the theme park business. Once parks achieve certain
critical attendance levels, operating cash flow margins increase because revenue
growth through incremental attendance gains and increased in-park spending is
not offset by a comparable increase in operating expenses, since a large portion
of such expenses is relatively fixed during any given year.
Management believes it has demonstrated the effectiveness of its strategy at
the parks owned prior to the Recent Acquisitions. Since acquiring Adventure
World in 1992, the Company has invested over $28.6 million in that park to add
numerous rides and attractions and to improve theming and landscaping. As a
result of these improvements, as well as aggressive and creative marketing and
sales strategies, Adventure World's attendance increased during the four seasons
ended 1996 at a compounded annual rate of 21.2%. Additionally, revenue and
park-level operating cash flow at Adventure World increased from $6.0 million
22
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and $0.3 million, respectively, for the first nine months of 1992 to $15.2
million and $3.9 million, respectively, during the comparable period of 1996.
During the 1996 season, the Company began to apply its growth strategy at
the parks acquired in the Funtime Acquisition. While the Funtime parks generated
substantial and stable cash flows prior to their acquisition by Premier, they
lacked the sustained capital investment and creative marketing required to
realize their full potential. To take advantage of this opportunity, the Company
invested approximately $21.9 million at the Funtime Parks prior to the 1996
season to add marketable rides and attractions and make other improvements and
implemented creative marketing and sales programs. As a result of this strategy,
during the first nine months of 1996, the three parks acquired in the Funtime
Acquisition achieved growth in attendance, revenue and park-level operating cash
flow of 15.1%, 23.1% and 46.0%, respectively, compared to the comparable period
of 1995.
Management believes that each of the parks acquired and to be acquired in
the Recent Acquisitions offers opportunities to implement the Company's growth
strategy. Specifically, the following outlines the Company's strategy for these
parks. The Company believes that Elitch Gardens lacks certain marketable rides
and attractions and revenue outlets necessary to achieve its attendance
potential. In that connection, the Company intends to invest between $20.0
million and $25.0 million at Elitch Gardens for the 1997 and 1998 seasons to add
marketable rides and attractions (including a "state-of-the-art" steel looping
roller coaster and a "shoot-the-chute" giant splash ride for the 1997 season),
to improve landscaping and theming and to enhance marketing programs. While The
Great Escape has shown solid performance over the past several years, the
Company believes that it can increase the park's attendance and operating cash
flow through the continued addition of attractions and the introduction of a
more extensive marketing strategy. The Company intends to invest between $8.0
million and $12.0 million at The Great Escape for the 1997 and 1998 seasons to
add marketable rides and attractions (including a wave pool for the 1997 season)
and to make other improvements. After consummation of the Riverside Acquisition,
the Company currently expects to invest between $15.0 million and $20.0 million
at Riverside for the 1997 and 1998 seasons to add additional marketable rides
and attractions (including a "state-of-the-art" steel looping roller coaster for
the 1997 season) and to make other improvements. Finally, the Company believes
that each of the Waterworld facilities has growth potential, although more
limited than the other recently-acquired parks. The Company intends to add a
marketable attraction to each of the water parks in the next two to three years
to achieve growth in attendance and operating cash flow. See "Business --
Operating Strategy."
EXPANDING EXISTING PARKS
In addition to pursuing on-going growth opportunities at its parks, the
Company is considering a number of expansions at several of its parks in order
to increase attendance and per capita spending. For example, the Company expects
to expand the Darien Lake Campground by purchasing additional recreational
vehicles (RV's) and may in the future construct economy motel rooms to
supplement the campground. In addition, the Company may add campgrounds or an
amphitheater at Frontier City, its western-themed park in Oklahoma City. The
Company is also considering adding a more complete complement of "dry" rides to
Wyandot Lake, which is currently primarily a water park. In addition, the
Company owns 400 acres adjacent to Adventure World which are zoned for
entertainment, recreational and residential uses and are available for
complementary uses. Additional acreage owned by the Company and suitable for
development exists at several of the Company's other parks, including The Great
Escape and Geauga Lake. The Company may use a portion of the proceeds of the
Offerings to fund expansions at its parks. See "Use of Proceeds."
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MAKING SELECTIVE ACQUISITIONS
The U.S. regional theme park industry is highly fragmented with over 150
parks owned by over 100 operators. Management believes that in addition to the
Recent Acquisitions, there are numerous acquisition opportunities that would
expand its business. The Company expects that a portion of the proceeds from the
Offerings will be used for acquisitions (including the Riverside Acquisition).
The Company's primary target for acquisitions will continue to be regional parks
with attendance between 300,000 and 1.5 million annually.
As the only owner of multiple parks in numerous markets that has been
actively making acquisitions of parks in this range over the last several years,
the Company believes it has a number of competitive advantages in acquiring
parks of this size. Historically, operators of destination or large regional
park chains have not generally sought to acquire parks in the Company's primary
target range and do not have the experience or management structure to readily
operate parks of that size profitably. Additionally, as a multi-park operator
with a track record of successfully acquiring, improving and repositioning
parks, the Company has numerous competitive advantages over single-park
operators in pursuing acquisitions and improving the operating results at
acquired parks. These advantages include the ability to (i) exercise group
purchasing power (for both operating and capital assets); (ii) achieve
administrative economies of scale; (iii) attract greater sponsorship revenue and
support from sponsors with nationally-recognized brands; (iv) recruit and retain
superior management; (v) optimize the use of capital assets by rotating rides
among its parks to provide fresh attractions; and (vi) access capital markets.
See "Risk Factors -- Uncertainty of Future Acquisitions; Potential Effects of
Acquisitions; Discretionary Use of Proceeds," "Use of Proceeds," "Business --
Acquisition Strategy" and "-- Recent and Pending Acquisitions."
THE THEME PARK INDUSTRY
The theme park industry includes destination and regional parks. Destination
parks are designed primarily to attract visitors willing to travel long
distances and incur significant expense to visit the parks' attractions as part
of an extended stay. Regional theme parks, such as those operated by the
Company, are designed to attract visitors for a full day or a significant number
of hours. Management views regional parks as those that draw the majority of
their patrons from within a 50-mile radius of the park and the great majority of
their visitors from within a 100-mile radius of the park. Management believes
that destination parks are typically more affected by the national economy than
are regional parks.
According to U.S. News & World Report, total North American amusement/theme
park attendance in 1995 was approximately 255 million, compared to 151 million
in 1970. Revenue for 1995 was approximately $5 billion, up from $321 million in
1970. These increases represent compound annual growth rates of 2.1% for
attendance and 11.6% for revenues over the twenty-five year period. According to
Amusement Business, a recognized industry publication, total attendance for the
40 largest parks in North America, which include both destination and regional
parks, was 144.5 million in 1995, compared to 123.4 million in 1991,
representing a compound annual growth rate of 4.0% over the period. The Company
believes that this growth in the industry reflects two trends: (i) demographic
growth in the 5-24 year old age group, which is expected to continue through
2010; and (ii) an increasing emphasis on family-oriented leisure and recreation
activities.
HISTORY
The Company was incorporated in 1981 as The Tierco Group, Inc., and through
1989 was primarily engaged in the ownership and management of real estate and
mortgage loans. In October 1989, the Company's current senior management assumed
control, and during 1989, management determined to focus Premier's business on
its theme park operations, which at that point consisted of a 50% interest in
Frontier City. In 1991, the Company acquired White Water Bay and increased its
ownership in Frontier City to in excess of 50%. In 1992, the Company acquired
Adventure World and the remaining minority
24
<PAGE>
interest in Frontier City and disposed of substantially all of its real estate
operations. In 1994, the Company changed its name to Premier Parks Inc. On
August 15, 1995, the Company completed the Funtime Acquisition. On June 4, 1996,
the Company completed the Public Offering which raised $65.2 million of net
proceeds. On October 31, 1996, the Company completed the Denver Acquisition, on
November 19, 1996, the Company completed the California Acquisition and on
December 4, 1996, the Company completed The Great Escape Acquisition. Subject to
the satisfaction or waiver of certain conditions, the Company expects to acquire
Riverside in early February 1997.
The Company's principal executive offices are located at 11501 Northeast
Expressway, Oklahoma City, Oklahoma 73131, (405) 475-2500 and at 122 East 42nd
Street, New York, New York 10168, (212) 599-4690.
25
<PAGE>
USE OF PROCEEDS
The net proceeds from the Notes Offering, after deducting estimated
underwriting discounts and commissions and expenses payable by the Company, will
be approximately $120.7 million. The Company intends to use a substantial
portion of the net proceeds from the Notes Offering to fully repay all
borrowings under the New Credit Facility (which aggregated approximately $63.1
million as of January 21, 1997) with the balance used to fund improvements and
expansion of the Company's existing parks, including the parks acquired and to
be acquired in the Recent Acquisitions; to acquire and make improvements at
additional theme parks; and for general corporate purposes, including working
capital requirements. Although the Company has had discussions with respect to
several additional acquisition opportunities, no agreement or understanding with
respect to any specific acquisition has been reached. There can be no assurance
that any such additional acquisitions will be made. The Company expects to incur
approximately $61 million of capital expenditures in 1997, a substantial portion
of which are expected to be funded with a portion of the net proceeds of the
Notes Offering, either directly or through the refinancing of borrowings under
the New Credit Facility. See "Risk Factors -- Uncertainty of Future
Acquisitions; Potential Effects of Acquisitions" and "Business -- Acquisition
Strategy."
The net proceeds from the Common Stock Offering (assuming a public offering
price of $31.79 per share based on a two week average of the Common Stock's
trading price prior to December 31, 1996 and after deducting estimated
underwriting discounts and offering expenses), if completed, would be
approximately $120.2 million (or approximately $138.4 million if the
underwriters' over-allotment options are exercised in full). The Company intends
to use the net proceeds of the Common Stock Offering to acquire and make
improvements at additional theme parks (including the funding of the $21.2
million cash portion of the Riverside Acquisition purchase price); to fund
improvements and expansion of the Company's existing parks, including the parks
acquired and to be acquired in the Recent Acquisitions; and for general
corporate purposes, including working capital requirements. If the Riverside
Acquisition is consummated before the Common Stock Offering, the Company intends
to fund the cash portion of the purchase price of the Riverside Acquisition from
the proceeds of the Exchangeable Preferred Stock and to use a portion of the net
proceeds of the Common Stock Offering to redeem the Exchangeable Preferred
Stock. See "Business -- Recent and Pending Acquisitions."
Because the Company does not have any agreement or understanding with
respect to any future acquisitions, other than Riverside, it is unable to
estimate the portion of the net proceeds of the Offerings to be used to fund
acquisition opportunities and improvements at acquired parks and the portion to
be used to expand or make improvements at existing parks. In addition, although
the Company presently intends to fund planned capital expenditures for the 1997
season from existing cash, cash generated from operations, borrowings under the
New Credit Facility, and a portion of the net proceeds from the Notes Offering,
the Company may use a portion of the net proceeds of the Common Stock Offering
to fund capital expenditures for the 1997 season or may accelerate its capital
expenditure program. Although the Company does not presently intend to do so, it
may use a portion of the proceeds of the Common Stock Offering to redeem a
portion of the Existing Notes. Under the Existing Indenture, the Company is
permitted to redeem up to an aggregate of $30.0 million principal amount of the
Existing Notes from proceeds of one or more equity offerings at a redemption
price of 110% of principal amount, plus accrued interest. See "Description of
Indebtedness -- The Existing Notes."
Borrowings under the Term Loan Facility were incurred to finance a portion
of the purchase price of the Recent Acquisitions and borrowings under the
Revolving Credit Facility were incurred for working capital purposes. Borrowings
under the New Credit Facility can also be used to make capital expenditures at
the Company's parks. On January 21, 1997, borrowings under the Revolving Credit
Facility and the Term Loan Facility bore interest at 8.175% and 7.5625%,
respectively.
26
<PAGE>
Pending their ultimate use, the net proceeds from the Offerings will be
invested in short-term, investment grade, interest bearing securities,
certificates of deposit or direct or guaranteed obligations of the United
States.
27
<PAGE>
CAPITALIZATION
The following table sets forth as of September 30, 1996, (i) the actual
capitalization of the Company; (ii) the pro forma capitalization of the Company
after giving effect to the Recent Acquisitions and the related financings; and
(iii) the pro forma capitalization of the Company as adjusted to give effect to
the Offerings (assuming that the underwriters' over-allotment options to
purchase up to 600,000 additional shares in the Common Stock Offering are not
exercised). This table should be read in conjunction with the consolidated
financial statements of the Company, "Unaudited Pro Forma Combined Financial
Statements" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
---------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED(1)
---------- ----------- --------------
<S> <C> <C> <C>
(IN THOUSANDS)
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C>
Cash and cash equivalents............................................. $ 73,766 $ 13,674 $ 177,646(2)
---------- ----------- --------------
---------- ----------- --------------
Short-term debt(3).................................................... $ 1,054 $ 1,054 $ 1,054
---------- ----------- --------------
---------- ----------- --------------
Long-term debt (excluding current maturities):
Term Loan Facility.................................................. $ -- $ 57,000(4) $ --
Existing Notes...................................................... 90,000 90,000 90,000
Notes............................................................... -- -- 125,000
Other............................................................... 2,350 2,350 2,350
---------- ----------- --------------
Total long-term debt................................................ 92,350 149,350 217,350
---------- ----------- --------------
Stockholders' equity.................................................. 121,574 142,174(5) 243,016(5)
---------- ----------- --------------
Total capitalization............................................ $ 213,924 $ 291,524 $ 460,366
---------- ----------- --------------
---------- ----------- --------------
</TABLE>
- ------------------------
(1) Pro forma as adjusted reflects the pro forma capitalization of the Company
as adjusted to give effect to the Offerings, assuming no exercise of the
underwriters' over-allotment options to purchase up to 600,000 additional
shares in the Common Stock Offering and a public offering price per share of
$31.79 (based on a two-week average of the Common Stock's trading price
prior to December 31, 1996), the repayment of all borrowings under the New
Credit Facility from a portion of the proceeds of the Notes Offering and the
redemption of the Exchangeable Preferred Stock from a portion of the
proceeds of the Common Stock Offering. If the Common Stock Offering is not
consummated, pro forma as adjusted cash and cash equivalents, stockholders'
equity and total capitalization (in thousands) would have been $53,154,
$142,174 and $334,524, respectively. If the Riverside Acquisition is not
consummated, pro forma and pro forma as adjusted capitalization of the
Company at September 30, 1996 (in thousands) would have been:
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA AS ADJUSTED
----------- --------------
<S> <C> <C>
Cash and cash equivalents........................................................ $ 13,845 $ 197,817
Notes............................................................................ $ -- $ 125,000
Total long-term debt (excluding current maturities).............................. $ 149,350 $ 217,350
Stockholders' equity............................................................. $ 121,774 $ 242,016
Total capitalization....................................................... $ 271,124 $ 459,366
</TABLE>
(2) Pro forma as adjusted cash and cash equivalents do not give effect to
anticipated off-season cash requirements prior to the 1997 season,
anticipated capital improvements to the Company's existing and acquired
parks prior to that season nor the operating cash flow expected to be
generated during that season.
(3) Represents current portion of long-term debt. At January 21, 1997, the
Company had $15.0 million outstanding under the Revolving Credit Facility,
none of which was outstanding at September 30, 1996. This amount will remain
outstanding until the borrowing referred to in note (4) below is made and
until the Notes Offering or the Common Stock Offering is consummated.
(4) Includes $8.9 million under the Term Loan Facility which the Company
intends to borrow in respect of the California Acquisition within 180 days
following the date of such acquisition.
(5) Pro forma stockholders' equity includes the $20.0 million of Exchangeable
Preferred Stock presumed to have been issued to fund the Riverside
Acquisition. Since such stock, if issued, will be redeemed from the proceeds
of the Common Stock Offering, the pro forma as adjusted stockholders' equity
does not include the Exchangeable Preferred Stock.
28
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA
The following selected historical financial and operating data, except for
attendance and revenue per visitor data, of (i) the Company for each of the
years in the three-year period ended December 31, 1995 and the nine months ended
September 30, 1995 and 1996; (ii) Funtime for each of the years in the three-
year period ended December 31, 1994 and the six-month periods ended July 3, 1994
and July 2, 1995; (iii) Elitch Gardens Company for the period from May 31, 1994
(date of inception) through December 31, 1994, the year ended December 31, 1995
and the nine months ended September 30, 1995 and 1996; (iv) The Great Escape for
the two years ended October 31, 1995 and the eleven months ended September 30,
1995 and 1996; (v) FRE and Concord (the owners of Waterworld) (on a combined
basis) for the three years (one year, in the case of Concord) ended December 31,
1995 and the nine months ended September 30, 1995 and 1996; and (vi) Stuart
Amusement Company (the owner of Riverside) for each of the years in the
three-year period ended Sepember 30, 1996 are derived from the financial
statements (audited in the case of all annual periods) of those entities
appearing elsewhere in this Prospectus. The selected historical financial data
of the Company for fiscal years 1991 and 1992 and of Funtime for fiscal year
1991 have been derived from audited financial statements which are not included
herein. The historical financial data for the year ended December 31, 1995 for
the Company includes the activity of Funtime from August 15, 1995, the date of
the Funtime Acquisition. The historical financial data for all interim periods
have been derived from unaudited financial statements of those entities included
elsewhere herein which, in the opinion of their respective management, include
all adjustments (consisting of only normal recurring adjustments) necessary for
a fair presentation.
The following selected pro forma financial and operating data of the Company
for the year ended December 31, 1995 and the nine months ended September 30,
1996 are derived from the Unaudited Pro Forma Combined Financial Statements
appearing elsewhere in this Prospectus. The pro forma financial and operating
data are for informational purposes only, have been prepared based on estimates
and assumptions deemed by the Company to be appropriate and do not purport to be
indicative of the financial position or results of operations which would
actually have been attained if the Acquisitions had occurred or which may be
achieved in the future.
The Company's business is highly seasonal. Results for the nine-month
periods ended September 30, 1996 are not necessarily indicative of results to be
expected for the year ended December 31, 1996. Specifically, the parks do not
generate meaningful revenue during the fourth quarter of the year, but do incur
expenses during that quarter. Accordingly, the Company historically incurs a
loss for the fourth calendar quarter and expects to incur such a loss in the
fourth quarter of 1996.
29
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
1995
1991 1992(1) 1993 1994 1995(2) PRO FORMA(3)
--------- --------- --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AND PER VISITOR AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
THE COMPANY
STATEMENT OF OPERATIONS DATA:
Revenue:
Theme park admissions............................. $ 6,849 $ 10,186 $ 12,874 $ 13,936 $ 21,863 $ 73,409
Theme park food, merchandise, and other........... 3,698 7,206 8,986 10,963 19,633 71,998
--------- --------- --------- --------- --------- ------------
Total....................................... 10,547 17,392 21,860 24,899 41,496 145,407
--------- --------- --------- --------- --------- ------------
Operating costs and expenses:
Operating expenses................................ 4,327 9,293 10,401 12,358 19,775 59,419
Selling, general and administrative............... 3,126 4,434 4,768 5,448 9,272 28,083
Cost of products sold............................. 1,017 1,736 2,135 2,553 4,635 18,404
Depreciation and amortization..................... 1,107 1,442 1,537 1,997 3,866 13,230
--------- --------- --------- --------- --------- ------------
Total....................................... 9,577 16,905 18,841 22,356 37,548 119,136
--------- --------- --------- --------- --------- ------------
Income from operations............................ 970 487 3,019 2,543 3,948 26,271
Other income (expense):
Interest expense, net............................. (858) (1,413) (1,438) (2,299) (5,578) (15,718)
Minority interest in earnings..................... (223) (270) -- -- -- --
Other income (expense)............................ (7) (113) (136) (74) (177) (348)
--------- --------- --------- --------- --------- ------------
Total....................................... (1,088) (1,796) (1,574) (2,373) (5,755) (16,066)
--------- --------- --------- --------- --------- ------------
Income (loss) from continuing operations before
income taxes.................................... (118) (1,309) 1,445 170 (1,807) 10,205
Income tax expense (benefit)...................... -- 426 91 68 (762) 4,440
--------- --------- --------- --------- --------- ------------
Income (loss) from continuing operations.......... $ (118) $ (1,735) $ 1,354 $ 102 $ (1,045 (4) $ 5,765
--------- --------- --------- --------- --------- ------------
--------- --------- --------- --------- --------- ------------
Income (loss) from continuing operations per
common share (primary and fully diluted)........ $ (.26) $ (2.10) $ .51 $ .04 $ (.40 (4) $ .27(3)
--------- --------- --------- --------- --------- ------------
--------- --------- --------- --------- --------- ------------
OTHER DATA:
EBITDA(5)......................................... $ 2,246 $ 1,938 $ 4,562 $ 4,549 $ 7,706(6) $ 39,222
Net cash provided by operating activities(7)...... $ 1,924 $ 1,980 $ 2,699 $ 1,060 $ 10,646(8) $ 31,508
Capital expenditures(9)........................... $ 4,508 $ 3,956 $ 7,674 $ 10,108 $ 10,732 $ 49,695(10)
Total attendance.................................. 828 1,116 1,322 1,408 2,302 11) 7,081
Revenue per visitor............................... $ 12.74 $ 15.58 $ 16.54 $ 17.68 $ 18.03 $ 20.25(12)
Ratio of earnings to fixed charges(13)............ 1.3x (13) 2.1x 1.1x (13) 1.3x
</TABLE>
(FOOTNOTES BEGIN ON PAGE 32)
30
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------
<S> <C> <C> <C> <C>
HISTORICAL
HISTORICAL COMBINED HISTORICAL PRO FORMA
1995(14) 1995(15) 1996 1996(3)
----------- ----------- ----------- -----------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AND PER VISITOR
AMOUNTS)
(UNAUDITED)
<S> <C> <C> <C> <C>
THE COMPANY
STATEMENT OF OPERATIONS DATA:
Revenue:
Theme park admissions............................................. $ 20,263 $ 36,138 $ 38,970 $ 73,032
Theme park food, merchandise, and other........................... 18,508 40,916 50,822 81,575
----------- ----------- ----------- -----------
Total....................................................... 38,771 77,054 89,792 154,607(16)
Operating costs and expenses:
Operating expenses................................................ 15,640 32,216 32,897 54,376
Selling, general and administrative............................... 6,833 12,825 15,363 27,885
Cost of products sold............................................. 4,333 9,369 10,685 20,133
Depreciation and amortization..................................... 2,258 6,403 5,599 10,795
----------- ----------- ----------- -----------
Total....................................................... 29,064 60,813 64,544 113,189
----------- ----------- ----------- -----------
Income from operations............................................ 9,707 16,241 25,248 41,418
Other income (expense):
Interest expense, net............................................. (3,101) (6,163) (7,657) (11,121)
Other income (expense)............................................ (87) (87) (59) (218)
----------- ----------- ----------- -----------
Total....................................................... (3,188) (6,250) (7,716) (11,339)
----------- ----------- ----------- -----------
Income before extraordinary loss and income
taxes (4)....................................................... 6,519 9,991 17,532 30,079
Income tax expense................................................ 2,563 3,917 7,020 12,300
----------- ----------- ----------- -----------
Income before extraordinary loss (4).............................. $ 3,956 $ 6,074 $ 10,512 $ 17,779
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Income before extraordinary loss per common share(4)..............
Primary..................................................... $ 1.04 (15) $ 1.24 $ 1.35 (3)
Fully-diluted............................................... $ 0.84 (15) $ 1.11 $ 1.35 (3)
OTHER DATA:
EBITDA(5)......................................................... $ 11,928 $ 22,607 $ 30,848 $ 52,055 (16)
Net cash provided by operating activities(7)...................... $ 13,794 $ 17,855 $ 10,222 $ 29,637 (16)
Capital expenditures(9)........................................... $ 6,501 $ 8,203 $ 29,290 $ 33,273
Total attendance.................................................. 2,159 11) 3,930 4,302 7,049
Revenue per visitor............................................... $ 17.96 $ 19.61 $ 20.87 $ 21.70 (12)
Ratio of earnings to fixed charges(13)............................ 2.8x (15) 2.9x 2.8x
<CAPTION>
PRO FORMA
RATIOS FOR THE TWELVE MONTHS ENDED AS ADJUSTED
SEPTEMBER 30, 1996:(16)(17) 1996(18)
-----------
<S> <C> <C> <C> <C>
EBITDA/Cash interest expense...................................... 1.9x
Total debt/EBITDA................................................. 5.0x
Net debt/EBITDA................................................... 0.9x
</TABLE>
(FOOTNOTES BEGIN ON NEXT PAGE)
31
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, 1996
----------------------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PRO FORMA AS
1991 1992 1993 1994 1995 ACTUAL PRO FORMA(3) ADJUSTED(18)
--------- --------- --------- --------- --------- ----------- ------------- ------------
<CAPTION>
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(IN)THOUSANDS
BALANCE SHEET DATA:
Cash and cash
equivalents......... $ 853 $ 5,919 $ 3,026 $ 1,366 $ 28,787 $ 73,766 $ 13,674 $ 177,646
Total assets.......... $ 74,555 $ 30,615 $ 36,708 $ 45,539 $ 173,318 $ 252,114 $ 343,144 $ 511,386
Total long-term debt
and capitalized
lease obligations
(excluding current
maturities)......... $ 49,615 $ 7,619 $ 18,649 $ 22,216 $ 93,213 $ 92,350 $ 149,350 $ 217,350
Total debt............ $ 74,913 $ 15,627 $ 20,821 $ 24,108 $ 94,278 $ 93,404 $ 150,404 $ 218,404
Stockholders' equity
(deficit)........... $ (15,558) $ 11,838 $ 13,192 $ 18,134 $ 45,911 $ 121,574 $ 142,174 $ 243,016
</TABLE>
- ------------------------
(1) During 1992, the Company purchased Adventure World, as well as the
remaining minority interest in Frontier City. During 1992, the Company also
discontinued substantially all of its non-theme park operations through a
disposition transaction which significantly reduced the Company's assets and
indebtedness, as well as resulted in an extraordinary gain of $18,400,000,
which gain is not reflected in income (loss) from continuing operations. See
"The Company." During 1992, the Company also adopted Financial Accounting
Standards Board Statement No. 109, "Accounting for Income Taxes" ("Statement
109"), resulting in a decrease in net income of $2,300,000 which decrease is
not reflected in income (loss) from continuing operations.
(2) The historical Statement of Operations Data for 1995 reflects the results
of the parks acquired in the Funtime Acquisition from the date of
acquisition, August 15, 1995.
(3) The pro forma financial and operating data for the year ended December 31,
1995 give effect to the Acquisitions, the related financings and the
presumed issuance of the Exchangeable Preferred Stock as if they had
occurred on January 1, 1995 (or on November 1, 1994 in the case of The Great
Escape Acquisition and on October 1, 1994 in the case of the Riverside
Acquisition). The pro forma financial and operating data for the nine months
ended September 30, 1996 give effect to the Recent Acquisitions, the related
financings and the presumed issuance of the Exchangeable Preferred Stock as
if they had occurred on January 1, 1996. The pro forma income per share for
the 1995 and 1996 periods also give effect to the June 1996 Public Offering
and the Preferred Stock Conversion as if they had occurred on January 1 of
such period, as well as the pro forma effect of reducing net income
applicable to Common Stock by the accumulated dividend on the $20.0 million
of Exchangeable Preferred Stock presumed to have been issued to fund the
Riverside Acquisition. The pro forma balance sheet data give effect to the
Recent Acquisitions, the related financings and the presumed issuance of the
Exchangeable Preferred Stock as if they had occurred on September 30, 1996.
If the Riverside Acquisition is not consummated, the selected pro forma
statement of operations and other data for the year ended December 31, 1995
and the nine months ended September 30, 1996 would be as follows:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 SEPTEMBER 30, 1996
-------------------- -------------------
<S> <C> <C>
PRO FORMA PRO FORMA
<CAPTION>
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AND
PER VISITOR AMOUNTS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
REVENUE:
Theme park admissions........................................ $ 66,082 $ 65,767
Theme park food, merchandise and other....................... 59,859 70,214
-------- --------
Total................................................ 125,941 135,981(16)
Operating costs and expense:
Operating expenses........................................... 50,983 47,514
Selling, general and administrative.......................... 23,400 23,667
Costs of products sold....................................... 15,077 17,007
Depreciation and amortization................................ 11,808 9,729
-------- --------
Total................................................ 101,268 97,917
-------- --------
Income from operations....................................... 24,673 38,064
Other income (expense):
Interest expense, net...................................... (15,718) (11,121)
Other income (expense)..................................... (334) (218)
-------- --------
Total................................................ (16,052) (11,339)
-------- --------
</TABLE>
(FOOTNOTES CONTINUED ON NEXT PAGE)
32
<PAGE>
(FOOTNOTES CONTINUED FROM PREVIOUS PAGE)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 SEPTEMBER 30, 1996
-------------------- -------------------
PRO FORMA PRO FORMA
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AND
PER VISITOR AMOUNTS)
<S> <C> <C>
Income before extraordinary loss and income taxes............ 8,621 26,725
Income tax expense........................................... 3,664 10,852
-------- --------
Income before extraordinary loss(4).......................... $ 4,957 $ 15,873
-------- --------
-------- --------
Income before extraordinary loss per common share:(4)
Primary and fully diluted............................ $ 0.44 $ 1.36
-------- --------
-------- --------
Ratio of earnings to fixed charges(13)....................... 1.5x 3.3x
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 SEPTEMBER 30, 1996
----------------- -------------------
<S> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AND
PER VISITOR AMOUNTS)
<S> <C> <C>
OTHER DATA:
EBITDA(5)...................................................... $ 36,216 $ 47,635(16)
Net cash provided by operating activities(7)................... $ 28,566 $ 24,847(16)
Capital expenditures(9)........................................ $ 49,367(10) $ 32,582
Total attendance............................................... 6,213 6,329
Revenue per visitor............................................ $ 19.95(12) $ 21.23(12)
</TABLE>
(4) During 1995, the Company incurred an extraordinary loss of $140,000, net of
income tax benefit, on extinguishment of debt in connection with the Funtime
Acquisition. This extraordinary loss is not included in income (loss) from
continuing operations and income (loss) from continuing operations per
common share for 1995 or for the nine months ended September 30, 1995.
(5) 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's ability to service and/or incur
debt. EBITDA is not required by generally accepted accounting principles
("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's operating performance. This information should be
read in conjunction with the Statements of Cash Flows contained in the
financial statements included elsewhere herein. Equity in loss of
partnership was $176,000, $122,000, $142,000, $83,000, $69,000, $50,000 and
$60,000 during each of the five years ended December 31, 1995 and the nine
months ended September 30, 1995 and 1996, respectively.
(6) EBITDA for the Company during 1995, without giving any effect to the
Funtime Acquisition and the related financings would have been $5,527,000.
(7) During each of the five years ended December 31, 1995 and the nine months
ended September 30, 1995 and 1996, the Company's net cash used in investing
activities was $6,841,000, $5,649,000, $7,698,000, $10,177,000, $74,139,000,
$65,167,000 and $29,328,000, respectively. During those periods, net cash
provided by financing activities was $5,175,000, $8,736,000, $2,106,000,
$7,457,000, $90,914,000, $91,585,000 and $64,085,000, respectively.
(8) Net cash provided by operating activities during 1995, without giving any
effect to the Funtime Acquisition and the related financings, would have
been $6,890,000.
(9) Capital expenditures are presented on a calendar-year basis, rather than on
a project-year basis. When presented on a project-year basis, expenditures
are aggregated based on the amounts incurred for the relevant year's
operating season.
(10) Pro Forma capital expenditures for 1995 include $26,044,000 in property,
plant and equipment expenditures incurred in connection with the
construction of Elitch Gardens and $8,172,000 expended to construct
Waterworld USA/Concord.
(11) Represents attendance at the three parks owned by the Company prior to the
Funtime Acquisition for the entire 1995 period and attendance at the Funtime
parks from and after August 15, 1995.
(12) Pro Forma revenue per visitor does not include revenue of Paradise Island
(a fee-per-attraction entertainment center acquired in the California
Acquisition) of $2,004,000 for the year ended December 31, 1995 or
$1,621,000 for the nine months ended September 30, 1996.
(13) For the purpose of determining the ratio of earnings to fixed charges,
earnings consist of income (loss) before income taxes and fixed charges.
Fixed charges consist of interest expense net of interest income,
amortization of deferred financing costs, preferred stock dividends, and the
portion (approximately one-third) of rental expense that management believes
represents the interest component of rent expense. For the years ended
December 31, 1992 and 1995, the Company's earnings were insufficient to
cover fixed charges by $917,000 and $2,620,000, respectively.
(14) Results of the Company for the nine months ended September 30, 1995 include
results of operations of Funtime from and after August 15, 1995.
(15) Represents results of operations of Premier for the entire period and
results of operations of Funtime through August 14, 1995, on a combined
basis. No pro forma adjustments for additional depreciation, interest
expense or income taxes have been made in combining Premier and Funtime
amounts. Income per share and ratio of earnings to fixed charges are not
presented on this basis as amounts are not meaningful.
(16) After giving pro forma effect to the Recent Acquisitions and the related
financings as if they had occurred on October 1, 1995, total revenue, EBITDA
and net cash provided by operating activities for the twelve months ended
September 30, 1996 would have been approximately $158.7 million, $44.1
million and $23.6 million, respectively. If the Riverside Acquisition is not
consummated, pro forma total revenue, EBITDA and net cash provided by
operating activities for this period would have been $139.6 million, $40.9
million and $20.3 million, respectively. See Note 17.
(FOOTNOTES CONTINUED ON NEXT PAGE)
33
<PAGE>
(FOOTNOTES CONTINUED FROM PREVIOUS PAGE)
(17) EBITDA as defined in the Indentures is the sum of EBITDA (as defined above)
and historical interest income. For purposes of the ratios shown, EBITDA
excludes interest income. Cash interest expense is interest expense
excluding amortization of debt issuance costs, and net debt constitutes
total debt less cash and cash equivalents. After giving effect to interest
income from cash balances of $177.6 million, including net proceeds from the
Offerings (after giving effect to the use thereof and an assumed interest
rate of 10% on the Notes) assuming an interest rate of 5% on the cash
balances, EBITDA would have been $53.0 million for the pro forma as adjusted
twelve months ended September 30, 1996, EBITDA/cash interest expense would
have been 2.2x and total debt/EBITDA would have been 4.1x.
(18) Adjusted to give effect to the Offerings, assuming no exercise of the
underwriters' over-allotment options in the Common Stock Offering and a
public offering price per share of $31.79 (based on a two week average of
the Common Stock's trading price prior to December 31, 1996), the repayment
of all borrowings under the New Credit Facility from a portion of the
proceeds of the Notes Offering and the redemption of the Exchangeable
Preferred Stock from a portion of the proceeds of the Common Stock Offering.
The pro forma as adjusted ratios for the twelve months ended September 30,
1996 also give effect to the Recent Acquisitions, the related financings and
the presumed issuance of the Exchangeable Preferred Stock as if they had
occurred on October 1, 1995. If the Common Stock Offering is not
consummated, pro forma as adjusted cash and cash equivalents, total assets
and stockholders' equity (in thousands) at that date would have been
$77,404, $411,144 and $142,124, respectively. In addition, in that case, the
pro forma as adjusted ratios of EBITDA/cash Interest expense, Total
debt/EBITDA and Net debt/ EBITDA would have been 1.9x, 5.0x and 3.2x,
respectively. If the Riverside Acquisition is not consummated, the pro forma
and pro forma as adjusted balance sheet data at September 30, 1996 (in
thousands) would have been:
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA AS ADJUSTED
----------- -----------
<S> <C> <C>
Cash and cash equivalents........................................................... $ 13,845 $ 197,817
Total assets........................................................................ $ 310,764 $ 499,006
Total long-term debt and capitalized lease obligations (excluding current
maturities)....................................................................... $ 149,350 $ 217,350
Total debt.......................................................................... $ 150,404 $ 218,404
Stockholders' equity................................................................ $ 121,774 $ 242,016
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED(1)
YEAR ENDED DECEMBER 31, ------------------------
------------------------------------------ JULY 3, JULY 2,
1991 1992 1993 1994 1994 1995
--------- --------- --------- --------- ----------- -----------
(UNAUDITED)
------------------------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER VISITOR AMOUNTS)
FUNTIME
STATEMENT OF OPERATIONS DATA:
Revenue:
Theme park admissions......................... $ 20,438 $ 19,352 $ 20,820 $ 20,339 $ 5,851 $ 6,195
Theme park food, merchandise, and other....... 28,339 27,500 30,433 30,096 9,407 8,958
--------- --------- --------- --------- ----------- -----------
Total..................................... 48,777 46,852 51,253 50,435 15,258 15,153
Operating costs and expenses:
Operating expenses............................ 22,229 21,166 22,203 23,208 10,700 10,537
Selling, general and administrative........... 8,266 8,664 8,218 8,433 3,339 3,459
Cost of products sold......................... 5,888 5,740 6,555 6,635 2,053 2,083
Depreciation and amortization................. 5,681 6,182 5,632 5,956 2,978 3,316
--------- --------- --------- --------- ----------- -----------
Total..................................... 42,064 41,752 42,608 44,232 19,070 19,395
--------- --------- --------- --------- ----------- -----------
Income (loss) from operations................. 6,713 5,100 8,645 6,203 (3,812) (4,242)
Other income (expense):
Interest expense, net......................... (4,150) (3,001) (2,783) (4,792) (2,397) (2,741)
Other income (expense)........................ (20) (103) (277) (297) (166) 4
--------- --------- --------- --------- ----------- -----------
Total..................................... (4,170) (3,104) (3,060) (5,089) (2,563) (2,737)
--------- --------- --------- --------- ----------- -----------
Income (loss) before income taxes............. 2,543 1,996 5,585 1,114 (6,375) (6,979)
Income tax expense (benefit).................. 1,540 1,612 2,045 851 (2,486) (2,722)
--------- --------- --------- --------- ----------- -----------
Income (loss) before cumulative effect of
accounting change(2)........................ $ 1,003 $ 384 $ 3,540 $ 263 $ (3,889) $ (4,257)
--------- --------- --------- --------- ----------- -----------
--------- --------- --------- --------- ----------- -----------
OTHER DATA:
EBITDA(3)..................................... $ 12,374 $ 11,179 $ 14,000 $ 11,862 $ (1,000) $ (922)
Net cash provided by (used in) operating
activities(4)............................... $ 8,043 $ 6,950 $ 9,180 $ 8,784 $ (1,791) $ (1,196)
Capital expenditures.......................... $ 2,531 $ 2,971 $ 4,395 $ 4,211 $ 2,927 $ 955
Total attendance.............................. 2,593 2,406 2,575 2,468 809 742
Revenue per visitor........................... $ 18.81 $ 19.47 $ 19.90 $ 20.44 $ 18.86 $ 20.42
</TABLE>
- ------------------------
(1) Represents most recent results of Funtime prior to the date of the Funtime
Acquisition. For information concerning results of Funtime from July 3, 1995
to the date of acquisition, August 15, 1995, see Unaudited Pro Forma
Combined Statement of Operations for the year ended December 31, 1995.
(2) During 1993, Funtime adopted Statement 109, resulting in a decrease in net
income of $3,200,000. This decrease is not included in income (loss) before
cumulative effect of accounting change.
(3) See footnote 5 appearing on page 33 for a discussion of EBITDA.
(4) During each of the four years ended December 31, 1994 and the six months
ended July 3, 1994 and July 2, 1995, Funtime's net cash used in investing
activities was $2,687,000, $2,971,000, $5,095,000, $6,344,000, $2,895,000
and $935,000, respectively. During those periods, net cash provided by (used
in) financing activities was $(5,300,000), $(4,133,000), $(4,249,000),
$(2,454,000), $4,729,000 and $2,066,000, respectively.
35
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
PERIOD ENDED YEAR ENDED ---------------------
DECEMBER 31, 1994 DECEMBER 31, 1995 1995 1996
----------------- ----------------- --------- ----------
<S> <C> <C> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS, EXCEPT PER VISITOR AMOUNTS)
<S> <C> <C> <C> <C>
ELITCH GARDENS(1)
STATEMENT OF OPERATIONS DATA:
Revenue:
Theme park admissions............................... $ -- $ 12,824 $ 12,762 $ 10,631
Theme park food, merchandise and other.............. -- 7,015 6,880 8,875
------- ------- --------- ----------
Total........................................... -- 19,839 19,642 19,506
Operating costs and expenses:
Operating expenses.................................. 300 8,373 7,383 8,108
Selling, general and administrative................. -- 9,289 7,903 6,687
Cost of products sold............................... -- 2,684 2,455 3,287
Depreciation and amortization(2).................... -- 1,550 880 10,291
------- ------- --------- ----------
Total........................................... 300 21,896 18,621 28,373
------- ------- --------- ----------
Income (loss) from operations....................... (300) (2,057) 1,021 (8,867)
Other income (expense):
Interest income (expense), net...................... 35 (2,041) (1,500) (3,193)
Other income (expense).............................. -- (157) (153) (284)
------- ------- --------- ----------
Total........................................... 35 (2,198) (1,653) (3,477)
------- ------- --------- ----------
Loss before income taxes............................ (265) (4,255) (632) (12,344)
Income tax expense (benefit)(3)..................... -- -- -- --
------- ------- --------- ----------
Net loss............................................ $ (265) $ (4,255) $ (632) $ (12,344)
------- ------- --------- ----------
------- ------- --------- ----------
OTHER DATA:
EBITDA(4)........................................... $ (300) $ (664) $ 1,749 $ 1,140
Net cash provided by (used in) operating
activities........................................ $ (39) $ 217 $ 1,194 $ (720)
Capital expenditures................................ $ 36,854(5) $ 26,044(5) $ 23,760(5) $ 590
Total attendance.................................... -- 959 950 849
Revenue per visitor................................. -- $ 20.69 $ 20.68 $ $22.98
</TABLE>
- ------------------------
(1) Represents historical financial and operating data of Elitch Gardens
Company which commenced operations in June 1995. Prior to 1995, a different
park under the name "Elitch Gardens" was operated by the predecessor of the
general partner of Elitch Gardens Company. The results of operations of the
prior park are not comparable to those of Elitch Gardens.
(2) Included in the September 1996 results is an $8,000,000 impairment
provision to reduce the carrying value of Elitch Gardens long-lived assets.
(3) As a partnership, Elitch Gardens Company is not subject to federal and
state income taxes.
(4) See footnote 5 appearing on page 33 for a discussion of EBITDA.
(5) Represents amount spent during that period to complete construction of the
new park.
36
<PAGE>
<TABLE>
<CAPTION>
ELEVEN MONTHS ENDED
YEAR ENDED
OCTOBER 31, SEPTEMBER 30,
-------------------- --------------------
<S> <C> <C> <C> <C>
1994 1995 1995 1996
--------- --------- --------- ---------
<CAPTION>
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER VISITOR AMOUNTS)
<S> <C> <C> <C> <C>
THE GREAT ESCAPE
STATEMENT OF OPERATIONS DATA:
Revenue:
Theme park admissions...................................................... $ 7,740 $ 8,503 $ 8,515 $ 8,938
Theme park food, merchandise and other..................................... 5,581 5,857 5,843 6,132
--------- --------- --------- ---------
Total.................................................................... 13,321 14,360 14,358 15,070
Operating costs and expenses:
Operating expenses......................................................... 4,442 4,702 4,477 4,610
Selling, general and administrative........................................ 1,985 2,001 1,794 2,770(1)
Costs of products sold..................................................... 1,610 1,701 1,715 1,824
Depreciation and amortization.............................................. 849 1,018 951 1,319
--------- --------- --------- ---------
Total.................................................................... 8,886 9,422 8,937 10,523
--------- --------- --------- ---------
Income from operations..................................................... 4,435 4,938 5,421 4,547
Other income (expense):
Interest expense, net...................................................... (960) (964) (829) (821)
Income before income taxes................................................. 3,475 3,974 4,592 3,726
Income tax expense......................................................... 10 34 39 40
--------- --------- --------- ---------
Net income................................................................. $ 3,465 $ 3,940 $ 4,553 $ 3,686
--------- --------- --------- ---------
--------- --------- --------- ---------
OTHER DATA:
EBITDA(2).................................................................. $ 5,284 $ 5,956 $ 6,372 $ 5,866(1)
Net cash provided by operating activities.................................. $ 3,978 $ 5,378 $ 5,695 $ 5,215
Capital expenditures....................................................... $ 2,284 $ 1,645 $ 1,615 $ 298
Total attendance........................................................... 531 557 557 574
Revenue per visitor........................................................ $ 25.09 $ 25.78 $ 25.78 $ 26.25
</TABLE>
- ------------------------
(1) Selling, general and administrative expense in the 1996 period increased
primarily due to increased compensation expense paid to the owner of The
Great Escape during that period.
(2) See footnote 5 on page 33 for a discussion of EBITDA.
37
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
<CAPTION>
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER VISITOR AMOUNTS)
<S> <C> <C> <C> <C> <C>
WATERWORLD(1)
STATEMENT OF OPERATIONS DATA:
Revenue:
Theme park admission...................................... $ 2,661 $ 3,346 $ 7,017 $ 6,758 $ 7,228
Theme park food, merchandise and other.................... 1,894 2,592 4,586 4,227 4,425
--------- --------- --------- --------- ---------
Total................................................... 4,555 5,938 11,603 10,985 11,653
Operating costs and expenses:
Operating expenses........................................ 1,387 2,296 3,558(2) 2,739(2) 3,941
Selling, general and administrative....................... 1,538 1,352 2,328 2,059 2,482
Cost of products sold..................................... 463 631 1,203 1,127 1,223
Depreciation and amortization............................. 521 556 1,018 674 1,075
--------- --------- --------- --------- ---------
Total................................................... 3,909 4,835 8,107 6,599 8,721
--------- --------- --------- --------- ---------
Income (loss) from operations............................. 646 1,103 3,496 4,386 2,932
Other income (expense):
Interest expense, net..................................... (184) (207) (546) (375) (446)
Other income (expense).................................... -- 92 183 183 --
--------- --------- --------- --------- ---------
Total................................................... (184) (115) (363) (192) (446)
--------- --------- --------- --------- ---------
Income (loss) before income taxes......................... 462 988 3,133 4,194 2,486
Income tax expense (benefit)(3)........................... (15) 1 92 92 163
--------- --------- --------- --------- ---------
Net income................................................ $ 477 $ 987 $ 3,041 $ 4,102 $ 2,323
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
OTHER DATA:
EBITDA(4)................................................. $ 1,167 $ 1,751 $ 4,697(2) $ 5,243(2) $ 4,007
Net cash provided by operating activities................. $ 985 $ 1,680 $ 4,019 $ 4,243 $ 3,360
Capital expenditures...................................... $ 2,683 $ 1,551 $ 9,243 $ 8,818 $ 2,406
Total attendance.......................................... 258 280 602 602 604
Revenue per visitor(5).................................... $ 13.71 $ 13.87 $ 15.95 $ 16.03 $ 16.61
</TABLE>
- ------------------------
(1) Represents historical financial and operating data of FRE and Concord (the
owners of Waterworld) on a combined basis. The owners do not have any
significant operations other than Waterworld. Concord commenced operation of
Waterworld USA/Concord in May 1995. Accordingly, the combined financial
statements include the results of operations subsequent to the opening of
that park only for the year ended December 31, 1995 and the nine months
ended September 30, 1995 and 1996.
(2) In 1995, Waterworld USA/Concord's operations benefited from the absence of
substantial operating expenses during the construction period prior to the
May 1995 opening of the facility. During 1996, the corporate structure was
fully staffed during the entire period. Additionally, in 1995, Waterworld
USA/Concord incurred rental expense of $75,000; in 1996, the lease, by its
terms, converted to a percentage of revenue rent structure, resulting in
rental expense of $352,000 in that year.
(3) FRE is an "S" Corporation and Concord is a partnership. Accordingly, taxes
reflect only state taxes of FRE.
(4) See footnote 5 appearing on page 33 for a discussion of EBITDA.
(5) Revenue per visitor does not include revenues of Paradise Island (a
fee-per-attraction entertainment center) of $1,018,000, $2,054,000,
$2,004,000, $1,333,000, and $1,621,000 for the years ended December 31,
1993, 1994, and 1995 and for the nine months ended September 30, 1995 and
1996, respectively.
38
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------
<S> <C> <C> <C>
1994 1995 1996
--------- --------- ---------
<CAPTION>
(IN THOUSANDS, EXCEPT PER
VISITOR AMOUNTS)
<S> <C> <C> <C>
RIVERSIDE(1)
STATEMENT OF OPERATIONS DATA:
Revenue:
Theme park admission.......................................................... $ 7,603 $ 7,327 $ 7,484
Theme park food, merchandise and other........................................ 11,678 12,139 11,362
--------- --------- ---------
Total....................................................................... 19,281 19,466 18,846
Operating costs and expenses:
Operating expenses............................................................ 8,673 8,436 7,515
Selling, general and administrative........................................... 6,614 6,059 6,555
Cost of products sold......................................................... 3,320 3,327 3,212
Depreciation and amortization................................................. 798 785 764
--------- --------- ---------
Total....................................................................... 19,405 18,607 18,046
--------- --------- ---------
Income (loss) from operations................................................. (124) 859 800
Other income (expense):
Interest expense, net......................................................... (383) (413) (342)
Other income (expense)........................................................ 250 (14) (6)
--------- --------- ---------
Total....................................................................... (133) (427) (348)
--------- --------- ---------
Income (loss) before income taxes............................................. (257) 432 452
Income tax expense (benefit).................................................. (85) 182 209
--------- --------- ---------
Net income (loss)............................................................. $ (172) $ 250 $ 243
--------- --------- ---------
--------- --------- ---------
OTHER DATA:
EBITDA(2)..................................................................... $ 924 $ 1,630 $ 1,558
Net cash provided by operating activities..................................... $ 815 $ 1,083 $ 1,586
Capital expenditures.......................................................... $ 466 $ 328 $ 691
Total attendance.............................................................. 862 858 750
Revenue per visitor........................................................... $ 22.37 $ 22.69 $ 25.13
</TABLE>
- ------------------------
(1) Represents historical consolidated financial and operating data of Stuart
Amusement Company, the owner of Riverside. The owner does not have any
significant operations other than Riverside.
(2) See footnote 5 appearing on page 33 for a discussion of EBITDA.
39
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements (the "Pro
Forma Financial Statements") of the Company are based upon and should be read in
conjunction with the historical financial statements of Premier, Funtime, Elitch
Gardens Company, The Great Escape (owned by Storytown), FRE and Concord (the
owners of Waterworld) and Stuart Amusement Company (the owner of Riverside), all
of which are included elsewhere in this Prospectus. The Unaudited Pro Forma
Combined Statement of Operations for the year ended December 31, 1995 gives
effect to (i) the financings relating to the Acquisitions, the presumed issuance
of the Exchangeable Preferred Stock, the Funtime Acquisition, the Denver
Acquisition and the California Acquisition as if they had occurred on January 1,
1995; (ii) The Great Escape Acquisition as if it had occurred on November 1,
1994; and (iii) the Riverside Acquisition as if it had occurred on October 1,
1994. The Unaudited Pro Forma Combined Statement of Operations for the nine
months ended September 30, 1996 gives effect to the Recent Acquisitions, the
related financings and the presumed issuance of the Exchangeable Preferred Stock
as if they had occurred on January 1, 1996.
The Unaudited Pro Forma Combined Balance Sheet is presented as if the Recent
Acquisitions occurred on September 30, 1996. The Acquisitions have been (or in
the case of the Riverside Acquisition, will be) accounted for using the purchase
method of accounting. Allocations of the purchase price have been determined
based upon estimates of fair value.
The Pro Forma Financial Statements are for informational purposes only, have
been prepared based on estimates and assumptions deemed by the Company to be
appropriate and do not purport to be indicative of the financial position or
results of operations which would actually have been attained if the
Acquisitions had occurred as presented in such statements or which may be
achieved in the future.
40
<PAGE>
PREMIER PARKS INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL
FUNTIME(1) FUNTIME(2) HISTORICAL
SIX MONTHS FORTY-THREE COMBINED
HISTORICAL ENDED DAYS ENDED (PREMIER AND HISTORICAL
PREMIER JULY 2, 1995 AUGUST 14, 1995 FUNTIME) ELITCH GARDENS
----------- ------------- ----------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<CAPTION>
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenue:
Theme park admissions............................ $ 21,863 $ 6,195 $ 9,680 $ 37,738 $ 12,824
Theme park food, merchandise and other........... 19,633 8,958 13,450 42,041 7,015
----------- ------------- -------- ------------- ---------------
Total revenue.................................. 41,496 15,153 23,130 79,779 19,839
----------- ------------- -------- ------------- ---------------
Operating costs and expenses:
Operating expenses............................... 19,775 10,537 6,039 36,351 8,373
Selling, general and administrative.............. 9,272 3,459 2,533 15,264 9,289
Costs of products sold........................... 4,635 2,083 2,953 9,671 2,684
Depreciation and amortization.................... 3,866 3,316 829 8,011 1,550
----------- ------------- -------- ------------- ---------------
Total.......................................... 37,548 19,395 12,354 69,297 21,896
----------- ------------- -------- ------------- ---------------
Income (loss) from operations.................... 3,948 (4,242) 10,776 10,482 (2,057)
Other income (expense):
Interest expense, net............................ (5,578) (2,741) (321) (8,640) (2,041)
Other income (expense)........................... (177) 4 (4) (177) (157)
----------- ------------- -------- ------------- ---------------
Total............................................ (5,755) (2,737) (325) (8,817) (2,198)
Income (loss) before income taxes................ (1,807) (6,979) 10,451 1,665 (4,255)
Income tax expense (benefit)..................... (762) (2,722) 4,076 592 --
----------- ------------- -------- ------------- ---------------
Income (loss) before extraordinary loss.......... $ (1,045) $ (4,257) $ 6,375 $ 1,073 $ (4,255)
----------- ------------- -------- ------------- ---------------
----------- ------------- -------- ------------- ---------------
Income (loss) before extraordinary loss
applicable to common stock..................... $ (1,574) $ (4,257) $ 6,375 $ 544 $ (4,255)
----------- ------------- -------- ------------- ---------------
----------- ------------- -------- ------------- ---------------
Income (loss) per common share................... $ (.40) (13) (13) (13) (13)
-----------
-----------
Weighted average shares.......................... 3,938,000 (13) (13) (13) (13)
-----------
-----------
OTHER DATA:
EBITDA(15)....................................... $ 7,706 $ (922 ) $ 11,601 $ 18,385 $ (664 )
----------- ------------- -------- ------------- ---------------
----------- ------------- -------- ------------- ---------------
Net cash provided by (used in) operating
activities..................................... $ 10,646 $ (1,196 ) $ 5,257 $ 14,707 $ 217
----------- ------------- -------- ------------- ---------------
----------- ------------- -------- ------------- ---------------
Ratio of earnings to fixed charges(16)........... (16 )
-----------
-----------
See accompanying notes to unaudited pro forma combined statement of operations.
<CAPTION>
HISTORICAL HISTORICAL HISTORICAL COMBINED
THE GREAT ESCAPE WATERWORLD(3) RIVERSIDE COMPANY(17)
------------------- --------------- ----------- ------------
<S> <C> <C>
(UNAUDITED)
<S> <C> <C>
Revenue:
Theme park admissions............................ $ 8,503 $ 7,017 $ 7,327 $ 73,409
Theme park food, merchandise and other........... 5,857 4,586 12,139 71,638
------ --------------- ----------- ------------
Total revenue.................................. 14,360 11,603 19,466 145,047
------ --------------- ----------- ------------
Operating costs and expenses:
Operating expenses............................... 4,702 3,558 8,436 61,420
Selling, general and administrative.............. 2,001 2,328 6,059 34,941
Costs of products sold........................... 1,701 1,203 3,327 18,586
Depreciation and amortization.................... 1,018 1,018 785 12,382
------ --------------- ----------- ------------
Total.......................................... 9,422 8,107 18,607 127,329
------ --------------- ----------- ------------
Income (loss) from operations.................... 4,938 3,496 859 17,718
Other income (expense):
Interest expense, net............................ (964) (546) (413) (12,604)
Other income (expense)........................... -- 183 (14) (165)
------ --------------- ----------- ------------
Total............................................ (964) (363) (427) (12,769)
Income (loss) before income taxes................ 3,974 3,133 432 4,949
Income tax expense (benefit)..................... 34 92 182 900
------ --------------- ----------- ------------
Income (loss) before extraordinary loss.......... $ 3,940 $ 3,041 $ 250 $ 4,049
------ --------------- ----------- ------------
------ --------------- ----------- ------------
Income (loss) before extraordinary loss
applicable to common stock..................... $ 3,940 $ 3,041 $ (26) $ 3,244
------ --------------- ----------- ------------
------ --------------- ----------- ------------
Income (loss) per common share................... (13) (13) (13) (13)
Weighted average shares.......................... (13) (13) (13) (13)
OTHER DATA:
EBITDA(15)....................................... $ 5,956 $ 4,697 $ 1,630 $ 30,004
------ --------------- ----------- ------------
------ --------------- ----------- ------------
Net cash provided by (used in) operating
activities..................................... $ 5,378 $ 4,019 $ 1,083 $ 25,404
------ --------------- ----------- ------------
------ --------------- ----------- ------------
Ratio of earnings to fixed charges(16)...........
See accompanying notes to unaudited pro forma com
<CAPTION>
PRO FORMA COMPANY
ADJUSTMENTS(17) PRO FORMA(17)
----------------- ---------------
(UNAUDITED) (UNAUDITED)
Revenue:
Theme park admissions............................ $ -- $ 73,409
Theme park food, merchandise and other........... 360(4) 71,998
------- ---------------
Total revenue.................................. 360 145,407
------- ---------------
Operating costs and expenses:
Operating expenses............................... (2,001)(5) 59,419
Selling, general and administrative.............. (6,858)(6) 28,083
Costs of products sold........................... (182)(7) 18,404
Depreciation and amortization.................... 848(8) 13,230
------- ---------------
Total.......................................... (8,193) 119,136
------- ---------------
Income (loss) from operations.................... 8,553 26,271
Other income (expense):
Interest expense, net............................ (3,114)(9) (15,718)
Other income (expense)........................... (183)(10) (348)
------- ---------------
Total............................................ (3,297) (16,066)
Income (loss) before income taxes................ 5,256 10,205
Income tax expense (benefit)..................... 3,540(11) 4,440
------- ---------------
Income (loss) before extraordinary loss.......... $ 1,716 $ 5,765
------- ---------------
------- ---------------
Income (loss) before extraordinary loss
applicable to common stock..................... $ (229)(12) $ 3,015
------- ---------------
------- ---------------
Income (loss) per common share................... $ .27
---------------
---------------
Weighted average shares.......................... 11,262,000 (14)
---------------
---------------
OTHER DATA:
EBITDA(15)....................................... $ 9,218 $ 39,222
------- ---------------
------- ---------------
Net cash provided by (used in) operating
activities..................................... $ 6,104 $ 31,508
------- ---------------
------- ---------------
Ratio of earnings to fixed charges(16)........... 1.3x
---------------
---------------
See accompanying notes to unaudited pro forma com
</TABLE>
41
<PAGE>
PREMIER PARKS INC.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
BASIS OF PRESENTATION
The accompanying unaudited pro forma combined statement of operations for
the year ended December 31, 1995, has been prepared based upon certain pro forma
adjustments to historical financial information of the Company, Funtime, Elitch
Gardens, The Great Escape, Waterworld and Riverside. The Company's acquisitions
of the operating assets of Elitch Gardens, Waterworld and The Great Escape
occurred on October 31, 1996, November 19, 1996 and December 4, 1996,
respectively. The Company's acquisition of the capital stock of Stuart Amusement
Company, the owner of Riverside, is scheduled to occur in early February 1997.
The Company acquired Funtime in August 1995.
The unaudited pro forma combined statement of operations for the year ended
December 31, 1995, has been prepared assuming the Acquisitions, the related
financings and the presumed issuance of the Exchangeable Preferred Stock
occurred January 1, 1995 (November 1, 1994, in the case of The Great Escape and
October 1, 1994, in the case of Riverside). The unaudited pro forma combined
statement of operations should be read in conjunction with the financial
statements of the Company, Funtime, Elitch Gardens, The Great Escape, Waterworld
and Riverside and notes thereto included elsewhere herein.
The pro forma weighted average of shares used to calculate pro forma income
per share is based on the actual weighted average number of shares outstanding
during 1995, adjusted to give effect to shares of Common Stock issued in the
Preferred Stock Conversion in June 1996 and upon conversion of subordinated
notes (August 1995) and adjusted to give effect to the issuance of 3,939,000
shares of Common Stock in June 1996 pursuant to the Public Offering, a portion
of the proceeds of which were utilized to make the acquisitions, as well as
approximately 9,000 shares of Common Stock issued in The Great Escape
Acquisition and 32,000 shares of Riverside Stock issued as partial consideration
for the Riverside Acquisition (assuming a December 20, 1996 issue date).
PRO FORMA ADJUSTMENTS (ALL DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<S> <C> <C> <C>
(1) See Funtime's Consolidated Financial Statements included
herein.
(2) Represents the results of Funtime from the end of the first
six months of 1995 through August 14, 1995, the day prior to
the Funtime Acquisition.
(3) The amounts for Waterworld are the combined amounts of
revenues and expenses of FRE and Concord with elimination of
the 50% interest of Concord owned by FRE.
(4) Other revenue adjustments reflect the following:
</TABLE>
<TABLE>
<S> <C> <C> <C>
Effects of new contractual arrangement for Funtime's
Darien Lake's 20,000 seat amphitheater.................. $ 395
Elimination of operations of Funtime-Famous Recipe
restaurants which the Company closed.................... (360)
Change in concessionaire arrangements at the Funtime
parks................................................... 325
---------
$ 360
---------
---------
</TABLE>
<TABLE>
<S> <C> <C>
(5) Operating expense adjustments reflect the following:
</TABLE>
<TABLE>
<S> <C> <C> <C>
Elimination of operations of Funtime-Famous Recipe
restaurants which the Company closed.................... $ 239
Reduction of Funtime operating expenses related to
insurance and leasing................................... 672
Reduction of Elitch Gardens operating expenses related to
park staffing levels and lease expenses................. 1,090
---------
---------
$ 2,001
---------
---------
</TABLE>
42
<PAGE>
PREMIER PARKS INC.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C> <C>
(6) Selling, general and administrative expense adjustments reflect the
following:
Elimination of duplicative corporate personnel costs and corporate
expense at the Funtime parks.................................... $ 1,175
Elimination of duplicative corporate personnel costs and corporate
expenses at Elitch Gardens as follows:
</TABLE>
<TABLE>
<S> <C> <C> <C>
Corporate and full time personnel costs....................... $ 1,520
Pre-opening marketing costs................................... 847
Insurance and entertainment costs............................. 725
Professional fees............................................. 492
Rental expense................................................ 111
---------
3,695
</TABLE>
<TABLE>
<S> <C> <C> <C>
Elimination of duplicative corporate personnel costs at The Great
Escape.......................................................... 500
Elimination of duplicative corporate personnel costs and corporate
expenses at Waterworld.......................................... 112
---------
Elimination of duplicative corporate personnel costs and corporate
expenses of Riverside as follows:
Corporate and full-time personnel costs........................... $ 560
Insurance expense................................................. 385
Professional fees................................................. 241
Other............................................................. 190
---------
1,376
---------
$ 6,858
---------
---------
</TABLE>
<TABLE>
<S> <C> <C>
(7) Adjustment reflects the elimination of operations of Funtime-Famous Recipe restaurants
which the Company closed.
(8) Adjustment reflects the effects of eliminating historical depreciation ($8,516) of the
acquired parks, the pro forma depreciation of $8,479 on the Funtime property and
equipment and the property and equipment of Elitch Gardens, The Great Escape,
Waterworld and Riverside and the pro forma amortization of $885 on the $22,124 costs in
excess of fair value. Of the total purchase price for the Recent Acquisitions, $103,250
was allocated to depreciable assets and $16,700 was allocated to land. Depreciation is
based on estimated lives of 15 to 25 years. Intangible assets are amortized over 25
years.
(9) Adjustment reflects the increase in interest expense as if the acquisitions of Funtime,
Elitch Gardens, The Great Escape, Waterworld and Riverside and the related financings
had been consummated on January 1, 1995. Approximately $1,848 of secured indebtedness
of Premier was not refinanced with the proceeds of the Existing Notes issued in August
1995. Additionally, as a component of the financing transactions, obligations of $3,259
were recognized as a result of modifications of certain lease agreements resulting in
their reclassification as capital leases. Other than the proceeds of the Term Loan
Facility, the funding of the acquisitions of Elitch Gardens, Waterworld, and The Great
Escape is from the proceeds of the Company's June 1996 Public Offering and cash from
operations. Funding of the Riverside Acquisition is presumed to have been made from the
proceeds of the issuance of the Exchangeable Preferred Stock. Issuance costs
</TABLE>
43
<PAGE>
PREMIER PARKS INC.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
associated with the Existing Notes and the Term Loan Facility are being amortized over
their respective eight and five year terms. The components of the adjustment are as
follows:
</TABLE>
<TABLE>
<S> <C> <C> <C>
Interest expense on the Existing Notes issued in August 1995 --
January 1, 1995 to August 14, 1995.............................. $ 6,750
Interest expense on the Term Loan Facility........................ 4,204
Amortization costs associated with issuance of the Existing
Notes........................................................... 383
Amortization of costs associated with Term Loan Facility.......... 415
Elimination of historical interest expense--Premier............... (1,689)
Elimination of historical interest expense--Funtime............... (3,062)
Elimination of historical interest expense--Elitch Gardens, The
Great Escape, Waterworld and Riverside.......................... (3,964)
Interest relating to reclassified capital leases.................. 77
---------
$ 3,114
---------
---------
</TABLE>
<TABLE>
<S> <C> <C>
After giving effect to the Notes Offering (assuming an interest rate of 10% per annum
on the New Notes) and to the repayment in full of the Term Loan Facility, pro forma
interest expense, net, would be $21,866. For purposes of these adjustments, the
Company has assumed that the New Credit Facility will be amended, rather than
terminated.
(10) Adjustment reflects the elimination of a development fee recognized by one of the
Waterworld parks for developing the other Waterworld park.
(11) Adjustment reflects the application of income taxes at a rate of 40% to the pro forma
adjustments and to the acquired operations that were not previously directly subject
to income taxation and after consideration of permanent differences.
(12) Adjustment reflects the aggregate pro forma adjustments to income (loss) before
extraordinary loss and the elimination of $529 of accumulated, but unpaid, preferred
stock dividends as a result of the Preferred Stock Conversion in June 1996, the
elimination of $276 of preferred stock dividends declared by Riverside and $2,750 of
dividends on $20,000 of Exchangeable Preferred Stock presumed to have been issued to
fund the Riverside Acquisition.
(13) Income (loss) per common share and weighted average share data are not presented for
Funtime, Elitch Gardens, The Great Escape, Waterworld and Riverside as the
information is not meaningful.
(14) The calculation of pro forma weighted average shares outstanding for the
year ended December 31, 1995 is as follows:
</TABLE>
<TABLE>
<S> <C> <C>
Weighted average shares of Common Stock outstanding.................. 3,938,000
Common Stock issued as a result of the conversion of the Company's
subordinated notes, presumed outstanding on January 1, 1995........ 920,000
Preferred Stock Conversion into Common Stock, as if issued and
converted on January 1, 1995....................................... 2,424,000
Common Stock issued in the June 1996 Public Offering, a portion of
the proceeds of which were used to make the Recent Acquisitions.... 3,939,000
Common Stock issued as partial consideration for The Great Escape
Acquisition........................................................ 9,000
Common Stock issued as partial consideration for the Riverside
Acquisition........................................................ 32,000
----------
11,262,000
----------
----------
</TABLE>
44
<PAGE>
PREMIER PARKS INC.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
EBITDA is defined as earnings from continuing operations before interest expense,
(15) 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'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'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.
(16) For the purpose of determining the ratio of earnings to fixed charges, earnings
consist of income (loss) before income taxes and fixed charges. Fixed charges consist
of interest expense net of interest income, amortization of deferred financing costs,
preferred stock dividends, and the portion (approximately one-third) of rental
expense that management believes represents the interest component of rent expense.
For the year ended December 31, 1995, the Company's earnings were insufficient to
cover fixed charges by $2,620,000.
(17) If the Riverside Acquisition is not consummated, Combined Company, Pro Forma
Adjustments and Company Pro Forma would be as follows:
</TABLE>
<TABLE>
<CAPTION>
COMBINED PRO FORMA COMPANY
COMPANY ADJUSTMENTS PRO FORMA
------------- ------------ -----------------
<S> <C> <C> <C>
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<CAPTION>
(IN THOUSANDS, EXCEPT FOR SHARE
AND PER SHARE DATA)
<S> <C> <C> <C>
Revenue:
Theme park admissions........................................................... $ 66,082 $ -- $ 66,082
Theme park food, merchandise and other.......................................... 59,499 360(4) 59,859
------------- ------------ -----------------
Total......................................................................... 125,581 360 125,941
------------- ------------ -----------------
Operating costs and expenses:
Operating expenses.............................................................. 52,984 (2,001)(5) 50,983
Selling, general and administrative............................................. 28,882 (5,482)(6) 23,400
Costs of products sold.......................................................... 15,259 (182)(7) 15,077
Depreciation and amortization................................................... 11,597 211(8) 11,808
------------- ------------ -----------------
Total......................................................................... 108,722 (7,454) 101,268
------------- ------------ -----------------
Income from operations.......................................................... 16,859 7,814 24,673
Other income (expense):
Interest expense, net........................................................... (12,191) (3,527)(9) (15,718)
Other income (expense).......................................................... (151) (183) 10) (334)
------------- ------------ -----------------
Total........................................................................... (12,342) (3,710) (16,052)
Income before income taxes...................................................... 4,517 4,104 8,621
Income tax expense.............................................................. 718 2,946(11) 3,664
------------- ------------ -----------------
Income before extraordinary loss................................................ $ 3,799 $ 1,158 $ 4,957
------------- ------------ -----------------
------------- ------------ -----------------
Income before extraordinary loss applicable to common stock..................... $ 3,270 $ 1,687(12) $ 4,957
------------- ------------ -----------------
------------- ------------ -----------------
Income per common share......................................................... (13) $ 0.44
-----------------
-----------------
Weighted average shares......................................................... (13) 11,230,000(14)
-----------------
-----------------
OTHER DATA:
EBITDA(15)...................................................................... $ 28,374 $ 7,842 $ 36,216
------------- ------------ -----------------
------------- ------------ -----------------
Net cash provided by operating activities....................................... $ 24,321 $ 4,245 $ 28,566
------------- ------------ -----------------
------------- ------------ -----------------
Ratio of earnings to fixed charges(16).......................................... 1.5x
-----------------
-----------------
</TABLE>
45
<PAGE>
PREMIER PARKS INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL COMBINED
PREMIER ELITCH GARDENS THE GREAT ESCAPE WATERWORLD(1) RIVERSIDE COMPANY(15)
----------- --------------- ----------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
REVENUE
Theme park admissions....... $ 38,970 $ 10,631 $ 8,938 $ 7,228 $ 7,265 $ 73,032
Theme park food, merchandise
and other................. 50,822 8,875 6,092 4,425 11,061 81,275
----------- --------------- ------- ------- ----------- --------------
Total revenue........... 89,792 19,506 15,030 11,653 18,326 154,307
----------- --------------- ------- ------- ----------- --------------
Operating costs and
expenses:
Operating expenses.......... 32,897 8,108 4,293 3,941 6,862 56,101
Selling, general and
administrative............ 15,363 6,687 2,593 2,482 5,273 32,398
Costs of products sold...... 10,685 3,287 1,812 1,223 3,126 20,133
Depreciation and
amortization.............. 5,599 10,291 1,079 1,075 583 18,627
----------- --------------- ------- ------- ----------- --------------
Total................... 64,544 28,373 9,777 8,721 15,844 127,259
----------- --------------- ------- ------- ----------- --------------
Income (loss) from
operations................ 25,248 (8,867) 5,253 2,932 2,482 27,048
OTHER INCOME (EXPENSE):
Interest expense, net....... (7,657) (3,193) (711) (446) (274) (12,281)
Other income (expense)...... (59) (284) -- -- -- (343)
----------- --------------- ------- ------- ----------- --------------
Total................... (7,716) (3,477) (711) (446) (274) (12,624)
Income (loss) before income
taxes..................... 17,532 (12,344) 4,542 2,486 2,208 14,424
Income tax expense.......... 7,020 -- 40 163 928 8,151
----------- --------------- ------- ------- ----------- --------------
Net income (loss)........... $ 10,512 $ (12,344) $ 4,502 $ 2,323 $ 1,280 $ 6,273
----------- --------------- ------- ------- ----------- --------------
----------- --------------- ------- ------- ----------- --------------
Net income (loss) applicable
to common stock........... $ 9,909 $ (12,344) $ 4,502 $ 2,323 $ 1,068 $ 5,458
----------- --------------- ------- ------- ----------- --------------
----------- --------------- ------- ------- ----------- --------------
Net income per common
share..................... $ 1.24 (11) (11) (11) (11 ) (11 )
Weighted average shares..... 7,979,000 (11) (11) (11) (11 ) (11 )
-----------
-----------
OTHER DATA:
EBITDA(13).................. $ 30,848 $ 1,140 $ 6,332 $ 4,007 $ 3,065 $ 45,392
----------- --------------- ------- ------- ----------- --------------
----------- --------------- ------- ------- ----------- --------------
Net cash provided by (used
in) operating
activities................ $ 10,222 $ (720 ) $ 5,791 $ 3,360 $ 3,161 $ 21,814
----------- --------------- ------- ------- ----------- --------------
----------- --------------- ------- ------- ----------- --------------
Ratio of earnings to fixed
charges(14)............... 2.9x
-----------
-----------
<CAPTION>
PRO FORMA COMPANY
ADJUSTMENTS(15) PRO FORMA(15)
---------------- ----------------
<S> <C> <C>
REVENUE
Theme park admissions....... $ -- $ 73,032
Theme park food, merchandise
and other................. 300(2) 81,575
-------- ----------------
Total revenue........... 300 154,607
-------- ----------------
Operating costs and
expenses:
Operating expenses.......... (350)(3) 54,376
(1,375)(4)
Selling, general and
administrative............ (4,513)(5) 27,885
Costs of products sold...... -- 20,133
Depreciation and
amortization.............. (7,832)(6) 10,795
-------- ----------------
Total................... (14,070) 113,189
-------- ----------------
Income (loss) from
operations................ 14,370 41,418
OTHER INCOME (EXPENSE):
Interest expense, net....... 1,160(7) (11,121)
Other income (expense)...... 125(8) (218)
-------- ----------------
Total................... 1,285 (11,339)
Income (loss) before income
taxes..................... 15,655 30,079
Income tax expense.......... 4,149(9) 12,300
-------- ----------------
Net income (loss)........... $ 11,506 $ 17,779
-------- ----------------
-------- ----------------
Net income (loss) applicable
to common stock........... $ 10,321 (10 $ 15,779
-------- ----------------
-------- ----------------
Net income per common
share..................... $ 1.35
----------------
----------------
Weighted average shares..... 11,701,000 (12)
----------------
----------------
OTHER DATA:
EBITDA(13).................. $ 6,663 $ 52,055
-------- ----------------
-------- ----------------
Net cash provided by (used
in) operating
activities................ $ 7,823 $ 29,637
-------- ----------------
-------- ----------------
Ratio of earnings to fixed
charges(14)............... 2.8x
----------------
----------------
</TABLE>
See accompanying notes to unaudited pro forma combined statement of operations
46
<PAGE>
PREMIER PARKS INC.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996
BASIS OF PRESENTATION
The accompanying pro forma combined statement of operations for the nine
months ended September 30, 1996 has been prepared based upon certain pro forma
adjustments to historical financial information of the Company, Elitch Gardens,
The Great Escape, Waterworld and Riverside. The Company's acquisitions of the
operating assets of Elitch Gardens, Waterworld and The Great Escape occurred on
October 31, 1996, November 19, 1996 and December 4, 1996, respectively. The
Company's acquisition of the capital stock of Stuart Amusement Company, the
owner of Riverside, is scheduled to occur in early February 1997. The Company
acquired Funtime in 1995.
The unaudited pro forma combined statement of operations for the nine months
ended September 30, 1996 has been prepared assuming the acquisitions of Elitch
Gardens, Waterworld, The Great Escape and Riverside, the related financings and
the presumed issuance of the Exchangable Preferred Stock occurred on January 1,
1996. The operations of Funtime are included in the Company's operations for
1996 since the acquisition of Funtime occurred in 1995. The unaudited pro forma
combined statement of operations should be read in conjunction with the
financial statements of the Company, Elitch Gardens, The Great Escape,
Waterworld and Riverside, and notes thereto included elsewhere herein.
The pro forma weighted average number of common shares used to calculate pro
forma income per share is based on the actual weighted average number of shares
outstanding during the nine months ended September 30, 1996, adjusted to give
effect to shares issued in the Preferred Stock Conversion (June 1996) and the
issuance of 3,939,000 shares in June 1996 pursuant to the Public Offering, a
portion of the proceeds of which were utilized to make the Recent Acquisitions,
as well as approximately 9,000 shares of Common Stock issued in The Great Escape
Acquisition and approximately 32,000 shares of Riverside Stock issued as partial
consideration for the Riverside Acquisition (assuming a December 20, 1996 issue
date).
PRO FORMA ADJUSTMENTS (ALL DOLLAR AMOUNTS IN THOUSANDS)
(1) The amounts for Waterworld are the combined amounts of revenues and
expenses of FRE and Concord with elimination of the 50% interest of
Concord owned by FRE.
(2) Adjustment reflects the change in concessionaire arrangements at
Riverside.
(3) Adjustment reflects the change in food concessionaire arrangements at
Elitch Gardens.
(4) Adjustments reflect the reduction of Elitch Gardens operating expenses
related to park staffing levels ($1,000) and entertainment contracts
($375).
47
<PAGE>
PREMIER PARKS INC.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS (CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1996
(5) Selling, general and administrative expense adjustments reflect the
following:
<TABLE>
<S> <C> <C> <C>
Elimination of duplicative corporate personnel costs and
corporate expenses at Elitch Gardens as follows:
Corporate and full-time personnel costs..................... $ 1,140
Insurance expense........................................... 375
Professional fees........................................... 466
Rental expense.............................................. 89
---------
2,070
</TABLE>
<TABLE>
<S> <C> <C>
Elimination of duplicative corporate personnel expenses at The Great
Escape............................................................... 1,300
Elimination of duplicative corporate personnel costs and corporate
expenses at Waterworld............................................... 88
Elimination of duplicative corporate personnel costs and corporate
expenses at Riverside as follows:
</TABLE>
<TABLE>
<S> <C> <C> <C>
Corporate and full-time personnel costs..................... $ 420
Insurance expense........................................... 289
Professional fees........................................... 180
Other....................................................... 166
---------
1,055
---------
---------
$ 4,513
---------
---------
</TABLE>
(6) Adjustment reflects the effects of eliminating historical depreciation
($5,028) and impairment provision ($8,000) recognized by one of the
acquired parks, the pro forma depreciation of $4,532 on the property
and equipment of Elitch Gardens, The Great Escape, Waterworld and
Riverside and the pro forma amortization of $664 on the $22,124 costs
in excess of fair value. Of the total purchase price for the Recent
Acquisitions, $103,250 was allocated to depreciable assets and $16,700
was allocated to land. Depreciation is based on estimated lives of 15
to 25 years. Intangible assets are amortized over 25 years.
(7) Adjustment reflects the decrease in interest expense as if the
acquisitions of Elitch Gardens, The Great Escape, Waterworld and
Riverside and related borrowings under the Term Loan Facility had been
consummated on January 1, 1996. Other than the proceeds of the Term
Loan Facility, the funding of the acquisitions of Elitch Gardens,
Waterworld and The Great Escape is assumed to be from the proceeds of
the June 1996 Public Offering and cash from operations. Funding of the
Riverside Acquisition is presumed to have been made from the proceeds
of the issuance of the Exchangable Preferred Stock. Issuance costs
associated with the Existing Notes and the Term Loan Facility are
being amortized over the respective eight and five year terms. The
components of the adjustment are as follows:
<TABLE>
<S> <C> <C>
Interest expense on the Term Loan Facility....................................... $ 3,153
Amortization of costs associated with Term Loan Facility......................... 311
Elimination of historical interest expense -- Elitch Gardens, The Great Escape,
Waterworld and Riverside....................................................... (4,624)
---------
$ (1,160)
---------
---------
</TABLE>
After giving effect to the Notes Offering (assuming an interest rate of
10% per annum on the New Notes) and to the repayment in full of the
Term Loan Facility, pro forma interest expense, net, would be $15,732.
48
<PAGE>
PREMIER PARKS INC.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS (CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1996
For purposes of these adjustments, the Company has assumed that the New
Credit Facility will be amended, rather than terminated.
(8) Adjustment reflects the elimination of food service management fee at
Elitch Gardens.
(9) Adjustment reflects the application of income taxes at a rate of 40%
to the pro forma adjustments and to the acquired operations that were
not previously directly subject to income taxation and after
consideration of permanent differences.
(10) Adjustment reflects the aggregate pro forma adjustment to income
(loss) before extraordinary loss and the elimination of $603 of
preferred stock dividends as a result of the Preferred Stock
Conversion, the elimination of $212 of preferred stock dividends
declared by Riverside and $2,000 of dividends on $20,000 of
Exchangeable Preferred Stock presumed to have been issued to fund the
Riverside Acquisition.
(11) Income (loss) per common share and weighted average share data are not
presented for Elitch Gardens, The Great Escape, Waterworld and
Riverside as the information is not meaningful.
(12) The calculation of pro forma weighted average shares outstanding for
the nine months ended September 30, 1996 is as follows:
<TABLE>
<S> <C> <C>
Weighted average shares of Common Stock outstanding........................... 7,979,000
Preferred Stock Conversion, as if issued and converted on January 1, 1996..... 1,619,000
Common Stock issued in the Public Offering, a portion of the proceeds of which
were used to make the Recent Acquisitions, as if issued on January 1,
1996........................................................................ 2,062,000
Common Stock issued as partial consideration for The Great Escape
Acquisition................................................................. 9,000
Common Stock issued as partial consideration for the Riverside Acquisition.... 32,000
---------
11,701,000
---------
---------
</TABLE>
(13) 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'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'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.
(14) For the purpose of determing the ratio of earnings to fixed charges,
earnings consist of income (loss) before income taxes and fixed
charges. Fixed charges consist of interest expense net of interest
income, amortization of deferred financing costs, preferred stock
dividends, and the portion (approximately 1/3) of rental expense that
management believes represents the interest component of rent expense.
49
<PAGE>
PREMIER PARKS INC.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS (CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1996
(15) If the Riverside Acquisition is not consummated, Combined Company, Pro
Forma Adjustments and Company Pro Forma would be as follows:
<TABLE>
<CAPTION>
COMBINED PRO FORMA COMPANY
COMPANY ADJUSTMENTS PRO FORMA
---------- ----------- -------------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT FOR SHARE AND
PER SHARE DATA)
REVENUE
Theme park admissions..................................................... $ 65,767 $ -- $ 65,767
Theme park food, merchandise and other.................................... 70,214 -- 70,214
---------- ----------- -------------
Total................................................................. 135,981 -- 135,981
---------- ----------- -------------
Operating costs and expenses:
(350)(3)
Operating expenses........................................................ 49,239 (1,375)(4) 47,514
Selling, general and administrative....................................... 27,125 (3,458)(5) 23,667
Costs of products sold.................................................... 17,007 -- 17,007
Depreciation and amortization............................................. 18,044 (8,315)(6) 9,729
---------- ----------- -------------
Total................................................................. 111,415 (13,498) 97,917
---------- ----------- -------------
Income from operations.................................................... 24,566 13,498 38,064
OTHER INCOME (EXPENSE):
Interest expense, net..................................................... (12,007) 886(7) (11,121)
Other income (expense).................................................... (343) 125(8) (218)
---------- ----------- -------------
Total................................................................. 12,350 1,011 (11,339)
Income before income taxes................................................ 12,216 14,509 26,725
Income tax expense........................................................ 7,223 3,629(9) 10,852
---------- ----------- -------------
Net income................................................................ $ 4,993 $ 10,880 $ 15,873
---------- ----------- -------------
---------- ----------- -------------
Net income applicable to common stock..................................... $ 4,390 $ 11,483 (10 $ 15,873
---------- ----------- -------------
---------- ----------- -------------
Net income per common share............................................... (11) $ 1.36
-------------
-------------
Weighted average shares................................................... (11) 11,669,000(12)
-------------
-------------
OTHER DATA:
EBITDA(13)................................................................ $ 42,327 $ 5,308 $ 47,635
---------- ----------- -------------
---------- ----------- -------------
Net cash provided by operating
activities.............................................................. $ 18,653 $ 6,194 $ 24,847
---------- ----------- -------------
---------- ----------- -------------
Ratio of earnings to fixed charges(14).................................... 3.3x
-------------
-------------
</TABLE>
50
<PAGE>
PREMIER PARKS INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL
HISTORICAL ELITCH THE GREAT HISTORICAL HISTORICAL COMBINED PRO FORMA
PREMIER GARDENS ESCAPE WATERWORLD(1) RIVERSIDE COMPANY ADJUSTMENTS(4)
----------- ------------- --------------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash and cash
equivalents...... $ 73,766 $ 2,969 $ 569 $ 854 $ 197 $ 78,355 $ (4,392)(2)
(60,289)(3)
Accounts
receivable....... 8,409 969 265 338 983 10,964 (1,572)(2)
Inventories........ 3,460 860 94 143 786 5,343 --
Prepaid expenses... 1,906 128 92 208 356 2,690 --
----------- ------------- ------- ------------- ----------- ----------- -------------
Total current
assets......... 87,541 4,926 1,020 1,543 2,322 97,352 (66,253)
Deferred charges... 4,448 1,629 63 57 193 6,390 (1,942)(2)
2,075(3)
Deposits and
other............ 7,125 -- -- 10 2 7,137 (10)(2)
1,000(3)
----------- ------------- ------- ------------- ----------- ----------- -------------
Other assets... 11,573 1,629 63 67 195 13,527 1,123
Property and
equipment, net... 140,153 57,728 13,996 15,706 6,377 233,960 28,464(3)
Intangible assets,
net.............. 12,847 -- -- -- -- 12,847 22,124(3)
----------- ------------- ------- ------------- ----------- -----------
Total assets... $ 252,114 $ 64,283 $ 15,079 $ 17,316 $ 8,894 357,686 $ (14,542)
----------- ------------- ------- ------------- ----------- ----------- -------------
----------- ------------- ------- ------------- ----------- ----------- -------------
LIABILITIES AND
STOCKHOLDERS'
EQUITY:
Accounts payable
and accrued
expenses......... $ 6,378 $ 3,983 $ 607 $ 997 $ 3,262 $ 15,227 $ (5,587)(2)
1,264(3)
Accrued interest
payable.......... 1,386 2,454 -- -- -- 3,840 (2,454)(2)
Current maturities
of long-term debt
and capital lease
obligations...... 1,054 36,994 1,200 1,621 1,151 42,020 (39,815)(2)
(1,151)(3)
----------- ------------- ------- ------------- ----------- ----------- -------------
Total current
liabilities.... 8,818 43,431 1,807 2,618 4,413 61,087 (47,743)
Long-term debt and
capital lease
obligations...... 92,350 6,465 1,600 5,182 -- 105,597 (13,247)(2)
57,000(3)
Other long-term (3,782)(2)
liabilities...... 3,234 -- 3,782 -- -- 7,016 2,450(3)
Deferred income
taxes............ 26,138 -- -- -- 965 27,103 5,489
Mandatorily
redeemable
preferred
stock............ -- -- -- -- 3,405 3,405 (3,405)(3)
(31,904)(2)
Stockholders'
equity........... 121,574 14,387 7,890 9,516 111 153,478 20,600(3)
----------- ------------- ------- ------------- ----------- ----------- -------------
Total liabilities
and and
stockholders'
equity........... $ 252,114 $ 64,283 $ 15,079 $ 17,316 $ 8,894 $ 357,686 $ (14,542)
----------- ------------- ------- ------------- ----------- ----------- -------------
----------- ------------- ------- ------------- ----------- ----------- -------------
<CAPTION>
COMPANY
PRO
FORMA(4)
-----------
<S> <C>
ASSETS:
Cash and cash
equivalents...... $ 13,674
Accounts
receivable....... 9,392
Inventories........ 5,343
Prepaid expenses... 2,690
-----------
Total current
assets......... 31,099
Deferred charges... 6,523
Deposits and
other............ 8,127
-----------
Other assets... 14,650
Property and
equipment, net... 262,424
Intangible assets,
net.............. 34,971
Total assets... $ 343,144
-----------
-----------
LIABILITIES AND
STOCKHOLDERS'
EQUITY:
Accounts payable
and accrued
expenses......... $ 10,904
Accrued interest
payable.......... 1,386
Current maturities
of long-term debt
and capital lease
obligations...... 1,054
-----------
Total current
liabilities.... 13,344
Long-term debt and
capital lease
obligations...... 149,350
Other long-term
liabilities...... 5,684
Deferred income
taxes............ 32,592
Mandatorily
redeemable
preferred
stock............ --
Stockholders'
equity........... 142,174
-----------
Total liabilities
and and
stockholders'
equity........... $ 343,144
-----------
-----------
</TABLE>
See accompanying notes to unaudited pro forma combined balance sheet
51
<PAGE>
PREMIER PARKS INC.
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 30, 1996
BASIS OF PRESENTATION
The accompanying unaudited pro forma combined balance sheet as of September
30, 1996 has been prepared based on certain pro forma adjustments to historical
financial information of the Company, Elitch Gardens, The Great Escape,
Waterworld, and Riverside. The Company's acquisition of the operating assets of
Elitch Gardens, Waterworld and The Great Escape occurred on October 31, 1996,
November 19, 1996 and December 4, 1996, respectively. The Company's acquisition
of the capital stock of Stuart Amusement Company (the owner of Riverside) is
scheduled to occur in early February 1997.
The unaudited pro forma combined balance sheet as of September 30, 1996 has
been prepared assuming the acquisition of Elitch Gardens, Waterworld, The Great
Escape and Riverside occurred on September 30, 1996. The assets and liabilities
of Funtime are included in the Company's assets and liabilities as of September
30, 1996, since the acquisition of Funtime occurred in 1995. The unaudited pro
forma combined balance sheet should be read in conjunction with the financial
statements of the Company, Elitch Gardens, The Great Escape, Waterworld, and
Riverside and notes thereto included elsewhere herein.
PRO FORMA ADJUSTMENTS (ALL DOLLAR AMOUNTS IN THOUSANDS)
(1) The amounts for Waterworld are the combined amounts of assets, liabilities,
and equity of FRE and Concord with elimination of the 50% interest of
Concord owned by FRE.
(2) Adjustments reflect the elimination of deferred charges ($193) of Riverside
associated with long-term debt of Riverside which will be paid in full at
the closing and the elimination of assets not purchased ($7,723) and
liabilities not assumed ($64,885) by the Company, as follows:
(a) the Company did not acquire the cash ($4,392), accounts receivable
($1,572) or deferred charges ($1,749) or deposits ($10) of Elitch
Gardens, Waterworld or The Great Escape.
(b) the Company did not assume the accounts payable and accrued expenses
($5,587), accrued interest payable ($2,454), current maturities of
long-term debt and capital lease obligations ($39,815), long-term debt
and capital lease obligations ($13,247), or other long-term liabilities
($3,782) of Elitch Gardens, Waterworld or The Great Escape.
(3) Adjustment reflects the purchase for cash of the operating assets of Elitch
Gardens ($62,500), Waterworld ($17,250), and The Great Escape ($33,000), the
purchase from the lessor of certain assets of Elitch Gardens subject to a
capital lease ($496), the purchase of the stock of Riverside ($22,150
purchase price reduced by $1,000 worth of Common Stock to be issued and
$2,132 of current liabilities to be assumed by Premier pursuant to the stock
purchase agreement, both of which will reduce the cash consideration to be
paid to the owners of Riverside), the purchase from the concessionaire of
certain assets used at Riverside ($450) and estimated transaction costs of
$1,900. Part of the cash consideration to be paid for the Riverside Stock
will be used to pay in full the long-term debt of Riverside ($1,151),
redeemable preferred stock of Riverside ($3,405) and accrued dividends
payable on such preferred stock ($236), classified under accounts payable
and accrued expenses. The purchase of The Great Escape also included the
issuance of $200 of Common Stock and recognition of $1,450 of other
long-term liabilities associated with the transaction. The Riverside
acquisition agreement requires the Company to fund certain pre-acquisition
operating expenses of Riverside. A current liability of $1,500 has been
recognized in the pro forma balance sheet. Purchase prices were funded
52
<PAGE>
through existing cash balances of the Company, borrowings of $57,000 under
the Term Loan Facility and $19,400 of net proceeds from the presumed
issuance of the Exchangeable Preferred Stock. Costs associated with the New
Credit Facility approximate $2,075 and have been reflected as deferred
charges. The acquisitions are being accounted for using the purchase method
of accounting. Allocation of the purchase price is based upon estimated fair
values for property and equipment. Fair value of inventory and prepaid
expenses approximate recorded historical amounts. Additionally, a $5,489
increase in deferred tax liabilities is recognized related to the Riverside
Acquisition, since the acquisition is of Riverside's stock rather than its
assets. Purchase price in excess of underlying asset aggregate fair values
($22,124) has been reflected as intangible assets. Pursuant to the Riverside
acquisition agreement, an escrow account of $1,000 will be established. The
escrow account is reflected as a deposit and as an other long-term
liability.
(4) If the Riverside Acquisition is not consummated, Company Combined, Pro Forma
Adjustments and Company Pro Forma would be as follows:
<TABLE>
<CAPTION>
COMPANY PRO FORMA COMPANY
COMBINED ADJUSTMENTS PRO FORMA
----------- ------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS:
Cash and cash equivalents.................................... $ 78,158 $ (4,392)(2) $ 13,845
(59,921)(3)
Accounts receivable.......................................... 9,981 (1,572)(2) 8,409
Inventories.................................................. 4,557 -- 4,557
Prepaid expenses............................................. 2,334 -- 2,334
----------- ------------- -----------
Total current assets................................... 95,030 (65,885) 29,145
Deferred charges............................................. 6,197 (1,749)(2) 6,523
2,075(3)
Deposits and other........................................... 7,135 (10)(2) 7,125
----------- ------------- -----------
Other assets........................................... 13,332 316 13,648
Property and equipment, net.................................. 227,583 14,291(3) 241,874
Intangible assets, net....................................... 12,847 13,250(3) 26,097
----------- ------------- -----------
Total assets........................................... $ 348,792 $ (38,028) $ 310,764
----------- ------------- -----------
----------- ------------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable and accrued expenses........................ $ 11,965 $ (5,587)(2) $ 6,378
Accrued interest payable..................................... 3,840 (2,454)(2) 1,386
Current maturities of long-term debt and capital lease
obligations................................................ 40,869 (39,815)(2) 1,054
----------- ------------- -----------
Total current liabilities.............................. 56,674 (47,856) 8,818
Long-term debt and capital lease obligations................. 105,597 (13,247)(2) 149,350
57,000(3)
Other long-term liabilities.................................. 7,016 (3,782)(2) 4,684
1,450(3)
Deferred income taxes........................................ 26,138 -- 26,138
----------- ------------- -----------
Total liabilities...................................... 195,425 (6,435) 188,990
Stockholders' equity......................................... 153,367 (31,793)(2) 121,774
200(3)
----------- ------------- -----------
Total liabilities and stockholders' equity............. $ 348,792 $ (38,028) $ 310,764
----------- ------------- -----------
----------- ------------- -----------
</TABLE>
53
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's revenue is derived principally from the sale of tickets for
entrance to its parks (approximately 43.4%, 52.7%, 56.0% and 58.9% in the nine
months ended September 30, 1996 and in the years ended December 31, 1995, 1994
and 1993, respectively) and the sale of food, merchandise, games and attractions
inside its parks and other income (approximately 56.6%, 47.3%, 44.0% and 41.1%
in the nine months ended September 30, 1996 and in the years ended December 31,
1995, 1994 and 1993, respectively). The Company's principal costs of operations
include salaries and wages, fringe benefits, advertising, outside services,
maintenance, utilities and insurance. The Company's expenses are relatively
fixed. Costs for full-time employees, maintenance, utilities, advertising and
insurance do not vary significantly with attendance, thereby providing the
Company with a significant degree of operating leverage as attendance increases
and fixed costs per visitor decrease.
The Company believes that significant opportunities exist to acquire
additional theme parks. Although the Company has had discussions with respect to
several additional business acquisitions, no agreement or understanding has been
reached with respect to any specific future acquisition (other than Riverside).
See "Use of Proceeds" and "Business -- Acquisition Strategy." In addition, the
Company intends to continue its on-going expansion of its rides and attractions
and overall improvement of its existing parks (and Riverside) to maintain and
enhance the appeal of its parks. Management believes this strategy has
contributed to increased attendance, lengths of stay, in-park spending and,
therefore, profitability. See "Business -- Operating Strategy."
The following discussion does not include the results of the parks acquired
and to be acquired in the Recent Acquisitions. For financial information
regarding the parks acquired and to be acquired in the Acquisitions, see
"Selected Historical and Pro Forma Financial and Operating Data," "Unaudited Pro
Forma Combined Financial Statements" and the financial statements of the sellers
in the Acquisitions included elsewhere herein.
The Company's business is highly seasonal. Results for the nine-month period
ended September 30, 1996 are not necessarily indicative of results to be
expected for the year ended December 31, 1996. Specifically, the parks do not
generate meaningful revenue during the fourth quarter of the year, but do incur
expenses during that quarter. Accordingly, the Company historically incurs a net
loss for the fourth calendar quarter and expects to incur such a loss in the
fourth quarter of 1996.
54
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
The following table sets forth certain financial information with respect to
the Company and Funtime for the nine months ended September 30, 1995 and 1996:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1995
-----------------------------------------------------------------------------------
HISTORICAL HISTORICAL
FUNTIME(2) FUNTIME(2) HISTORICAL
SIX MONTHS FORTY-THREE NINE MONTHS
ENDED DAYS ENDED ENDED
HISTORICAL JULY 2, AUGUST 14, HISTORICAL PRO FORMA COMPANY SEPTEMBER 30,
PREMIER(1) 1995 1995 COMBINED ADJUSTMENTS(3) PRO FORMA 1996
----------- ----------- -------------- ----------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Theme park admissions..... $ 20,263 $ 6,195 $ 9,680 $ 36,138 $ -- $ 36,138 $ 38,970
Theme park food,
merchandise, and
other................... 18,508 8,958 13,450 40,916 360 41,276 50,822
----------- ----------- ------- ----------- ------ ----------- -------------
Total revenue............. 38,771 15,153 23,130 77,054 360 77,414 89,792
----------- ----------- ------- ----------- ------ ----------- -------------
Expenses:
Operating expenses........ 15,640 10,537 6,039 32,216 (911) 31,305 32,897
Selling, general and
administrative.......... 6,833 3,459 2,533 12,825 (1,175) 11,650 15,363
Costs of products sold.... 4,333 2,083 2,953 9,369 (182) 9,187 10,685
Depreciation and
amortization............ 2,258 3,316 829 6,403 (1,708) 4,695 5,599
----------- ----------- ------- ----------- ------ ----------- -------------
Total cost and expenses... 29,064 19,395 12,354 60,813 (3,976) 56,837 64,544
----------- ----------- ------- ----------- ------ ----------- -------------
Income (loss) from
operations.............. 9,707 (4,242) 10,776 16,241 4,336 20,577 25,248
Interest expense, net..... (3,101) (2,741) (321) (6,163) (2,459) (8,622) (7,657)
Other income (expense).... (87) 4 (4) (87) -- (87) (59)
----------- ----------- ------- ----------- ------ ----------- -------------
Total other income
(expense)............... (3,188) (2,737) (325) (6,250) (2,459) (8,709) (7,716)
----------- ----------- ------- ----------- ------ ----------- -------------
Income before income taxes
and extraordinary
loss.................... 6,519 (6,979) 10,451 9,991 1,877 11,868 17,532
Income taxes.............. 2,563 (2,722) 4,076 3,917 1,050 4,967 7,020
----------- ----------- ------- ----------- ------ ----------- -------------
Income before
extraordinary loss...... $ 3,956 $ (4,257) $ 6,375 $ 6,074 $ 827 $ 6,901 $ 10,512
----------- ----------- ------- ----------- ------ ----------- -------------
----------- ----------- ------- ----------- ------ ----------- -------------
</TABLE>
- ------------------------
(1) Includes results of parks acquired in the Funtime Acquisition from and
after August 15, 1995.
(2) Includes results of parks acquired in the Funtime Acquisition from January
1, 1995 to August 14, 1995.
(3) See footnotes to Unaudited Pro Forma Combined Statement of Operations for
the Year Ended December 31, 1995, as they relate to Funtime, for a
discussion of the pro forma adjustments.
55
<PAGE>
REVENUE. Revenue aggregated $89.8 million in the nine months ended
September 30, 1996 compared to $38.8 million in the first nine months of 1995,
and to revenues (after giving pro forma effect to the Funtime Acquisition, which
occurred on August 15, 1995) of $77.4 million in the first nine months of 1995.
This 16.0% increase over pro forma same period 1995 revenue is attributable to
increased attendance (15.1%) and per capita revenue (6.9%) at the former Funtime
parks and increased sponsorship revenues, as well as increased season pass sales
at several parks, and increased campground revenues at Darien Lake and income
from the new contractual arrangements at the Darien Lake Performance Arts
Center.
OPERATING EXPENSES. Operating expenses increased during the first nine
months of 1996 to $32.9 million from $15.6 million reported in 1995, and from
$31.3 million pro forma operating expenses for the first nine months of 1995.
This 5.1% increase over pro forma operating expenses is mainly due to additional
staffing related to the increased attendance levels and increased pay rates,
offset to some extent by a decrease in equipment rental expense due to the
purchase of equipment that had been leased during 1995. As a percentage of
revenue, operating expenses constituted 36.6% for the 1996 period and 40.4% on a
pro forma basis for the prior-year period.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses were $15.4 million in the first nine months of 1996, compared to $6.8
million reported, and $11.7 million pro forma selling, general and
administrative expenses for the 1995 period. As a percentage of revenues, these
expenses constituted 17.1% for the 1996 period and 15.0% for the prior-year
period (pro forma). This increase over 1995 pro forma expenses relates primarily
to increased advertising and marketing expenses to promote the newly-acquired
parks and the new rides and attractions at all of the parks, increased sales
taxes arising from increased volume generally, increased property taxes and
professional services and additional staff added at the corporate level.
COSTS OF PRODUCTS SOLD. Costs of products sold were $10.7 million for the
first nine months of 1996 compared to $4.3 million reported for the first nine
months of 1995, and $9.2 million pro forma for the 1995 period. Costs of
products sold (as a percentage of in-park revenue) constituted approximately
21.0% for the 1996 period and 22.3% for the 1995 period (pro forma). This $1.5
million or 16.3% increase over pro forma 1995 results is directly related to the
23.1% increase in food, merchandise and other revenues.
DEPRECIATION AND INTEREST EXPENSE. Depreciation expense increased $3.3
million over the reported 1995 period results and $0.9 over pro forma
depreciation and amortization expense for that period. The increase over the pro
forma 1995 period expense is a result of the on-going capital program at the
Company's parks. Interest expense, net, increased $4.6 million as a result of
interest on the Existing Notes.
INCOME TAXES. The Company had a provision for income tax expense of $7.0
million during the first nine months of 1996, compared to a provision for such
expense of $2.6 million during the comparable period of 1995. The effective tax
rate used to calculate the provision was approximately 40% in the 1996 period,
as compared to 39% in the prior-year period. See Note 6 to the Company's
consolidated financial statements.
YEARS ENDED DECEMBER 31, 1995 AND 1994
REVENUE. Revenue aggregated $41.5 million in 1995, a 66.7% increase over
1994 revenue of $24.9 million. A large portion of the increase ($13.5 million)
resulted from the Funtime Acquisition on August 15, 1995. The Company's 1995
results include the results from the Funtime parks from and after that date. The
1995 results of the Company without consideration of the Funtime Acquisition
provided a revenue increase of 12.5% from $24.9 million in 1994 to $28.0 million
in 1995. This increase is primarily attributable to the increased attendance of
14.3% from 1.4 million in 1994 to 1.6 million in 1995 at the three theme parks
owned by the Company prior to the Funtime Acquisition.
56
<PAGE>
OPERATING EXPENSES. Operating expenses increased approximately $7.4
million, or 60.0%, in 1995 over 1994 levels. A large portion of the increase
($6.9 million) is a result of the Funtime Acquisition. The 1995 results of the
Company without consideration of the Funtime Acquisition provided an increase of
3.2% in operating expenses from $12.4 million in 1994 to $12.8 million in 1995.
As a percentage of revenue, operating expenses constituted approximately 47.7%
in 1995 and approximately 49.6% in 1994. Without consideration of the Funtime
Acquisition, operating expenses constituted approximately 45.7% of revenue in
1995.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased from approximately $5.5 million in 1994 to approximately $9.3
million in 1995. These expenses (as a percentage of revenues) constituted
approximately 22.3% and 21.9% during 1995 and 1994, respectively. A large
portion of the increase ($2.6 million) is a result of the Funtime Acquisition.
The Company's selling, general and administrative expenses without consideration
of the Funtime Acquisition increased 21.8% from $5.5 million in 1994 to $6.7
million in 1995 primarily due to a 20.3% increase in marketing and advertising
expenses. Most of the increase was incurred at Adventure World as part of the
advertising campaign design to promote public awareness of the new Mind Eraser
suspended, looping roller coaster, and a lesser portion of this increase was
incurred in connection with the promotion of the new combined season pass
program at Frontier City and White Water Bay.
COSTS OF PRODUCTS SOLD. Costs of products sold increased from $2.6 million
in 1994 to $4.6 million in 1995. A large portion of the increase ($1.7 million)
is a result of the Funtime Acquisition. Cost of products sold (as a percentage
of in-park revenue) constituted approximately 23.6% and 23.3%, during 1995 and
1994, respectively. The Company's costs of products sold without consideration
of the Funtime Acquisition increased 11.5% from $2.6 million in 1994 to $2.9
million in 1995. This increase is a direct result of increased in-park sales at
the parks.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
aggregated approximately $3.9 million in 1995 and approximately $2.0 million in
1994. This 93.6% increase resulted primarily from the Funtime Acquisition. The
Company's depreciation and amortization without consideration of the Funtime
Acquisition increased 25.0% from $2.0 million in 1994 to $2.5 million in 1995,
reflecting the effect of the Company's additional capital improvements.
INCOME TAXES. The Company had an income tax benefit in 1995 of $852,000,
compared to an income tax expense of $68,000 in 1994. The Company's income tax
benefit in 1995 was allocated to loss before income taxes ($762,000) and an
extraordinary loss ($90,000) on extinguishment of debt. The effective income tax
rate for 1995 was 42.2% as compared to approximately 40% in 1994. The Company
anticipates an effective tax rate of between 40% and 42% in the future since the
parks acquired in the Funtime Acquisition are located in higher tax
jurisdictions than the Company's three previous parks and due to the
non-deductibility of the amortization of the goodwill that resulted from the
Funtime Acquisition. See Note 6 to the Company's consolidated financial
statements.
On its December 31, 1995 federal income tax return, the Company reported
carryovers of approximately $13.8 million of net operating losses ("NOLS"), $3.7
million of alternative minimum tax ("AMT") NOLs and $1.9 million of AMT credits
for federal income tax purposes. The regular tax and AMT NOLs and AMT credits
are subject to review and potential disallowance by the Internal Revenue Service
upon audit of the federal income tax returns of the Company and its
subsidiaries. In addition, under Section 382 of the Internal Revenue Code of
1986, as amended, the use of such NOLs and AMT credits is subject to one or more
limitations on the amount of taxable income, or in the case of the AMT credits,
regular tax, that can be offset with such NOLs and AMT credits. Some of such
NOLs also are subject to a limitation as to which of the subsidiaries' income
such NOLs are permitted to offset. Accordingly, no assurance can be given as to
the timing or amount of the availability of such NOLs and AMT credits to the
Company and its subsidiaries.
57
<PAGE>
YEARS ENDED DECEMBER 31, 1994 AND 1993
REVENUE. Revenue aggregated $24.9 million in 1994, a 13.9% increase over
1993 revenue of $21.9 million, resulting from a 30.1% increase in revenue at
Adventure World and a 3.8% increase in revenue at Frontier City, offset in part
by a 7.0% decrease in revenue at White Water Bay.
Attendance at Premier's three parks in 1994 increased approximately 6.5%
compared to 1993 levels primarily as a result of a 19.2% increase at Adventure
World based on Premier's substantial investment in new rides and attractions and
increased marketing (including the engagement of Cal Ripken, Jr. as the park's
official spokesperson), which was offset in part by a 6.1% decrease in
attendance at White Water Bay. The aggregate increase in attendance in 1994 was
augmented by a 1.8% increase in ticket revenue per customer and a 8.4% increase
in per-customer in-park spending in that year. The increased ticket revenue
resulted from increased prices and a reduction in discount levels. The increased
in-park spending in 1994 was primarily attributable to higher price levels,
additional food and other retail outlets at the parks in that year and longer
in-park stays. Of the 1994 revenues, $417,000 represents the excess of insurance
proceeds received by Premier over the net book value of assets destroyed, and
repair costs of assets damaged, by high winds at one of Premier's parks. See
Note 11 to the Company's consolidated financial statements. The Company believes
that the storm and the resulting damage caused a substantial loss of attendance
and revenue at the affected park. The Company estimates that the storm resulted
in an attendance loss of at least 20,000 customers at the park. During 1994,
revenue per visitor at the affected park was approximately $20.36.
OPERATING EXPENSES. Operating expenses increased approximately $2.0
million, or 18.8%, in 1994 over 1993 levels. As a percentage of revenues,
operating expenses constituted approximately 49.6% in 1994 and 47.6% in 1993.
The increase in operating expenses during 1994 was primarily attributable to an
approximate $805,000 increase (representing a 12% increase over 1993 levels) in
salaries and other compensation benefits during that year, an approximate
$406,000 (65%) increase in repair and maintenance expense and a $511,000 (42%)
increase in operating supplies, equipment rentals and other expense. The
increase in personnel cost reflected an increase primarily at Adventure World in
the number of seasonal employees (11%) required to operate additional
attractions as well as longer operating hours and, to a lesser extent, changes
in hourly rates paid to lifeguards and other skilled employees (6%). Salary and
other compensation benefits increased $613,000 at Adventure World in 1994.
Repairs and maintenance increased due largely to a $288,000 increase at
Adventure World arising out of the significant expansion of that park with the
addition of 14 new rides and numerous other improvements during the two years
preceding the 1994 season. Operating supplies, equipment rentals and other
expenses increased due to additional "live" shows presented at the parks,
additional equipment rentals, particularly at Adventure World, increases in
utility costs due to the additional rides and attractions at the parks, and
costs associated with the preparation of group sales brochures.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased from $4.8 million in 1993 to $5.4 million in 1994. Selling,
general and administrative expenses (as a percentage of revenues) constituted
21.9% in 1994 and 21.8% in 1993. The increase in these expenses in 1994 was
almost exclusively the result of a 37% increase in sales and advertising
expense. Of this increase $578,000 represented additional marketing and
advertising expense at Adventure World, which was designed to increase public
awareness of the significant capital improvements made at the parks.
COSTS OF PRODUCTS SOLD. Costs of products sold aggregated approximately
$2.6 million in 1994, as compared to the 1993 level of $2.1 million. Cost of
products sold (as a percentage of in-park revenue) constituted approximately
23.3% and 23.8%, during 1994 and 1993, respectively.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
aggregated $2.0 million in 1994 and $1.5 million in 1993. This 33.3% increase
reflected the effect of Premier's additional capital improvements.
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INCOME TAXES. Premier's provision for income taxes represented
approximately 40% of 1994 income before income taxes compared to 6.3% of 1993
income before income taxes. State and local taxes were the principal reason that
Premier's effective tax rate was higher than the 34% federal corporate rate. See
Note 6 to the Company's consolidated financial statements.
LIQUIDITY, CAPITAL COMMITMENTS AND RESOURCES
The operations of the Company are highly seasonal, with the majority of the
operating season occurring between Memorial Day and Labor Day. Most of the
Company's revenue is collected in the second and third quarters of each year
while most expenditures for capital improvements and major maintenance are
incurred when the parks are closed. See "Risk Factors -- Effects of Inclement
Weather; Seasonal Fluctuations of Operating Results." The Company employs a
substantial number of seasonal employees who are compensated on an hourly basis.
The Company is not subject to federal or certain applicable state minimum wage
rates in respect of its seasonal employees. However, the recent increase of $.90
an hour over two years in the federal minimum wage rate, and any increase in
these state minimum wage rates, may result over time in increased compensation
expense for the Company as it relates to these employees as a result of
competitive factors.
Prior to the 1993 season, the Company began implementing a long-range
capital improvement program for its parks, spending approximately $7.7 million
in 1993, $10.1 million in 1994 and $10.7 million in 1995. This program was
continued and extended to the parks acquired in the Funtime Acquisition, with
the expenditure of approximately $29.3 million for all its then owned parks in
the first nine months of 1996. Also, Premier acquired certain rides and
attractions through leases and borrowings of $2.7 million, $570,000 and $3.3
million in 1993, 1994 and 1995, respectively. No such leases or borrowings were
effected during the first nine months of 1996.
During 1994, the Company generated $1.1 million in net cash from operating
activities. Additionally, financing activities provided approximately $7.5
million in net cash during that year, of which approximately $4.2 million
represented the proceeds of a 1994 private placement of Common Stock and
approximately $3.4 million represented net borrowings. During that year, the
Company used $10.2 million in net cash in connection with investing activities,
substantially all of which represented additions to buildings, rides and
attractions at Premier's parks made in connection with its capital improvement
program. The 1994 capital improvements were funded from cash generated from
operations in 1993, and the proceeds of borrowings. As a result of these
activities, the Company's property and equipment (after depreciation) at
December 31, 1994 increased approximately $8.7 million over the amount at
December 31, 1993, and cash and cash equivalents at 1994 year-end decreased $1.7
million as compared to the December 31, 1993 level. Liabilities at December 31,
1994 aggregated $27.4 million, representing a $3.9 million increase over
December 31, 1993, substantially all of which represented increased borrowings
in 1994.
During 1995, the Company generated approximately $10.6 million in net cash
from operating activities. Additionally, financing activities provided
approximately $90.9 million in net cash during that year, consisting of the net
proceeds of the $90.0 million Existing Note offering and the $20.0 million
convertible preferred stock offering, both of which were consummated in
connection with the Funtime Acquisition, offset in part by the Company's
repayment during 1995 of approximately $17.5 million of indebtedness. During
1995, the Company used $74.1 million in net cash in connection with investing
activities, $63.3 million of which was employed in connection with the Funtime
Acquisition and $10.7 million represented additions to buildings, rides and
attractions at the Company's parks made in connection with its capital
improvement program. The Company acquired Funtime for approximately $60.0
million, excluding the post-closing adjustment of approximately $5.4 million
paid in December 1995, which represented a substantial portion of the operating
cash flow of the Funtime parks for the portion of the 1995 season after the date
of acquisition. As a result of these activities, the Company's property and
equipment (after depreciation) at December 31, 1995 increased approximately
$77.4 million over the
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amount at December 31, 1994, and cash and cash equivalents at December 31, 1995
increased $27.4 million as compared to the December 31, 1994 level. Liabilities
at December 31, 1995 aggregated $127.4 million, representing a $100.0 million
increase over December 31, 1994, most of which ($90.0 million) represented the
Company's indebtedness under the Existing Notes.
During the nine months ended September 30, 1996, the Company generated net
cash of $10.2 million from operating activities. Net cash used in investing
activities in the nine months ended September 30, 1996 totaled $29.3 million,
reflecting amounts spent for capital expenditures. Net cash provided by
financing activities for the nine months ended September 30, 1996 totaled $64.1
million, reflecting the net proceeds from the June 1996 Public Offering, offset,
in part, by scheduled repayments of capitalized lease obligations.
In June 1996, the Company completed the Public Offering in which the Company
sold an aggregate of 3,938,750 shares of Common Stock at a price to the public
of $18.00 per share, resulting in aggregate net proceeds to the Company of
approximately $65.2 million. In connection with the Public Offering, all of the
Company's outstanding Preferred Stock, together with all accrued dividends
thereon, were converted into a total of 2,560,928 shares of Common Stock.
At September 30, 1996, substantially all of the Company's indebtedness was
represented by the Existing Notes, which require annual interest payments of
$10.8 million. Except in the event of a change of control of the Company and
certain other circumstances, no principal payment on the Senior Notes is due
until the maturity dates thereof, August 15, 2003 in the case of the Existing
Notes and , 2007, in the case of the Notes. At January 21, 1997, the
interest rate on the borrowings under the Revolving Credit Facility and the Term
Loan Facility was 8.175% and 7.5625%, respectively, per annum. See "Description
of Indebtedness."
On October 31, 1996, the Company acquired substantially all of the assets
used in the operation of Elitch Gardens for $62.5 million in cash. On November
19, 1996, the Company acquired substantially all of the assets used in the
operation of Waterworld for an aggregate cash consideration of approximately
$17.3 million. On December 4, 1996, the Company acquired substantially all of
the assets of The Great Escape for $33.0 million in cash. The Company funded
these amounts from a portion of the net proceeds received by the Company from
the Public Offering, cash from operations and, in the case of Elitch Gardens and
the Great Escape, borrowings under the Term Loan Facility. In December 1996, the
Company entered into an agreement to acquire all of the capital stock of the
owner of Riverside for approximately $22.2 million, of which $1.0 million is
payable in Common Stock with the balance payable in cash. The Company expects to
fund the cash portion from a portion of the net proceeds of the Common Stock
Offering, or, if the Riverside Acquisition closes before the Common Stock
Offering, proceeds received by the Company from the issuance of up to $22.0
million of Exchangeable Preferred Stock, which the Company expects to redeem
with a portion of the proceeds of the Common Stock Offering. The Riverside
Acquisition is scheduled to close in early February 1997. See "Business --
Recent and Pending Acquisitions."
Revolving credit borrowings under the New Credit Facility, which was entered
into in October 1996, are secured by substantially all of the Company's assets
(other than the real estate). The New Credit Facility has an aggregate
availability of $115.0 million of which (i) up to $30.0 million under the
Revolving Credit Facility may be used for working capital and other general
corporate purposes; (ii) up to $25.0 million ("Facility A") may be used to
finance capital expenditures prior to April 30, 1998; and (iii) up to $60.0
million ("Facility B") may be used to finance certain acquisitions by the
Company (including certain of the Recent Acquisitions), including an amount of
up to $2.0 million which may be used to finance improvements at the parks
acquired, provided that at least 50% of the consideration for any such
acquisition or improvements under Facility A or Facility B must be funded by the
Company. As of January 21, 1997, $15.0 million had been borrowed under the
Revolving Credit Facility (which amount the Company plans to repay from the
proceeds of the $8.9 million Term Loan borrowing described below and a portion
of the proceeds of the Offerings) and approximately $57.0 million (after giving
effect to $8.9 million of borrowings the Company plans to make in respect of the
California Acquisition) will have
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been borrowed under Facility B to fund approximately 50% of the consideration
paid for certain of the Recent Acquisitions. Interest rates per annum under the
New Credit Facility are equal to a base rate equal to the higher of the Federal
Funds Rate plus 1/2% 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 Revolving Credit Facility terminates October 31,
2002 (reducing to $15 million on October 31, 2001). The New Credit Facility and
the Existing Indenture contain restrictive covenants that, among other things,
limit 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 New Credit
Facility requires that the Company comply with certain specified financial
ratios and tests, including ratios of total debt to EBITDA, interest expense to
EBITDA, debt service to EBITDA and fixed charges to EBITDA. See "Description of
Indebtedness."
The Company intends to repay in full borrowings under the New Credit
Facility with a substantial portion of the net proceeds of the Notes Offering.
On January , 1997, the Company and the banks entered into the Amendment to the
New Credit Facility pursuant to which, effective upon the consummation of the
Offerings, the Revolving Credit Facility will remain in place through December
31, 2001 (without reduction prior to that date) and following repayment of all
borrowings thereunder, the Term Loan Facility will be converted into the New
Facility. The New Facility will be available to fund acquisitions and make
capital improvements. It will reduce to $75.0 million principal amount on
December 31, 1999 and $45.0 million on December 31, 2000. Following the
Amendment, borrowings under the New Credit Facility will be secured by
substantially all of the assets of the Company (other than certain real estate).
See "Description of Indebtedness."
The Company intends to use the net proceeds from the Offerings to acquire
and make improvements at additional theme parks (including Riverside); to fund
improvements and expansion of the Company's existing parks, including the parks
acquired and to be acquired in the Recent Acquisitions; and for general
corporate purposes, including working capital requirements.
The Company expects that existing cash, funds generated from operations and
borrowings under the Revolving Credit Facility, together with that portion of
the proceeds of the Notes Offering not used to repay borrowings under the New
Credit Facility, will be adequate to cover its currently anticipated working
capital and debt service requirements as well as to fund planned capital
expenditures for the 1997 season. To the extent not used for acquisition
purposes, such portion of the net proceeds of the Notes Offering and the net
proceeds of the Common Stock Offering may be used to fund expansion of and
improvements at existing parks, including the acceleration of the Company's
capital expenditure program. See "Use of Proceeds."
NEWLY ISSUED ACCOUNTING STANDARDS
The Financial Accounting Standards Board has issued SFAS No. 123,
"Accounting for Stock-Based Compensation" ("Statement No. 123"), which
establishes a fair value based method of accounting for stock-based compensation
plans. Entities are encouraged to adopt all provisions of Statement No. 123 but
are required only to comply with the disclosure requirements of Statement No.
123. Statement No. 123 is effective for financial statements for fiscal years
beginning after December 15, 1995. The adoption of Statement No. 123 did not
have a material effect on the consolidated financial condition or operating
results of the Company, as the Company did not adopt the optional value based
measurement concept related to stock-based compensation contained in Statement
No. 123.
The Financial Accounting Standards Board has also issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" ("Statement No. 121"). Statement No. 121 requires that
long-lived assets and certain intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. The Company periodically re-evaluates the carrying
amounts of its long-lived assets and the related depreciation and amortization
periods as discussed in the notes to the Company's consolidated financial
statements, and the Company's adoption of Statement No. 121 did not have a
material effect on its consolidated financial statements.
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BUSINESS
GENERAL
The Company is a leading U.S. theme park company which, after completion of
the Recent Acquisitions, will own and operate eleven regional parks. Based on
1996 attendance of approximately 7.3 million at these parks, the Company is the
fourth largest domestic regional park operator. After giving pro forma effect to
the Recent Acquisitions as if they had occurred on October 1, 1995, the
Company's total revenue and EBITDA for the twelve months ended September 30,
1996 would have been approximately $158.7 million and $44.1 million,
respectively. See "Unaudited Pro Forma Combined Financial Statements" and " --
Recent and Pending Acquisitions."
The Company's parks are located in nine geographically diverse markets with
concentrated populations:
- Adventure World, a combination theme and water park located three miles
off the Beltway, between Washington, D.C. (15 miles away) and Baltimore,
Maryland (30 miles away);
- Darien Lake & Camping Resort, a combination theme and water park with an
adjacent camping resort and 20,000 person amphitheater, located between
Buffalo and Rochester, New York;
- Elitch Gardens, a theme park located in the downtown area of Denver,
Colorado;
- Frontier City, a western themed park located in Oklahoma City, Oklahoma;
- Geauga Lake, a combination theme and water park located near Cleveland,
Ohio;
- The Great Escape, a combination theme and water park, located in Lake
George/Albany, New York;
- Riverside, a theme park and an adjacent multi-use stadium located in
Springfield, Massachusetts;
- Waterworld USA/Sacramento and Paradise Island, a water park and family
entertainment center, both located on the grounds of the California State
Fair;
- Waterworld USA/Concord, a water park located in Concord, California, in
the East Bay area of San Francisco;
- White Water Bay, a tropical themed water park located in Oklahoma City;
and
- Wyandot Lake, a water park, which also includes "dry" rides and other
attractions, located adjacent to the Columbus Zoo in Columbus, Ohio.
The Company seeks to provide its customers with quality family entertainment
that is affordably priced and close to home. In 1996, the six parks owned by the
Company prior to the Recent Acquisitions, drew, on average, approximately 88.0%
of their patrons from within a 100-mile radius, with approximately 38.4% of
visitors utilizing group and other pre-sold tickets and approximately 16.5%
utilizing season passes. Each of the Company's parks is individually themed and
provides a complete family-oriented entertainment experience. The Company's
theme parks generally offer a broad selection of state-of-the-art and
traditional thrill rides, water attractions, themed areas, concerts and shows,
restaurants, game venues and merchandise outlets.
Since current management assumed control in 1989, the Company has acquired
nine parks and achieved significant internal growth. In addition, the Company
expects, subject to the satisfaction or waiver of certain conditions, to acquire
Riverside in early February 1997. As a result of the Company's operating
strategy, during the three years ended December 31, 1995, the three parks owned
by the Company during that entire period achieved internal growth in attendance,
revenue and EBITDA at compounded annual rates of 12.7%, 17.1% and 41.8%,
respectively. In August 1995, the Company acquired three of its parks through
the Funtime Acquisition. During the first nine months of 1996, the three parks
acquired in the Funtime Acquisition achieved internal growth in attendance,
revenue and park-level operating cash flow of
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15.1%, 23.1% and 46.0%, respectively, compared to the comparable period of 1995.
Furthermore, after giving pro forma effect to the Recent Acquisitions as if they
had occurred on January 1, 1996, the Company has increased its attendance,
revenue and EBITDA from park operations by 6.7, 9.5 and 16.5 times,
respectively, from the nine months ended September 30, 1992 to the nine months
ended September 30, 1996.
The Company believes that each of its parks benefits from limited direct
competition. The combination of limited supply of real estate appropriate for
theme park development, high initial capital investment, long development
lead-time and zoning restrictions provides each of the Company's parks with a
significant degree of protection from competitive new theme park openings. Based
on its knowledge of the development of other theme parks in the United States,
the Company's management estimates that it would cost at least $100 million and
would take a minimum of two years to construct a new regional theme park
comparable to the Company's four largest parks.
The Company's senior and operating management team has extensive experience
in the theme park industry. Premier's three senior executive officers have
approximately 35 years of experience in the industry and its seven general
managers have an aggregate of approximately 140 years experience in the
industry, including approximately 70 years at Premier's parks.
OPERATING STRATEGY
PURSUING ON-GOING GROWTH OPPORTUNITIES AT EXISTING PARKS
The Company believes there are substantial opportunities for internal growth
at its existing parks. The Company's operating strategy is to increase revenue
through attendance and per capita spending gains, while maintaining strict
control of operating expenses. The primary elements of this strategy include (i)
adding rides and attractions and improving overall park quality; (ii) enhancing
marketing, sponsorship and group sales programs; (iii) implementing ticket
pricing strategies to maximize ticket revenues and park utilization; (iv) adding
and enhancing restaurants and merchandise and other revenue outlets; and (v)
adding special events. This approach is designed to exploit the operating
leverage inherent in the theme park business. Once parks achieve certain
critical attendance levels, operating cash flow margins increase because revenue
growth through incremental attendance gains and increased in-park spending is
not offset by a comparable increase in operating expenses, since a large portion
of such expenses is relatively fixed during any given year. Management believes
it has demonstrated the effectiveness of its strategy at the parks owned prior
to the Recent Acquisitions.
FRONTIER CITY -- In 1990 and 1991, an aggregate of approximately $7.0
million was invested in Frontier City to add several major rides, expand and
improve the children's area, significantly increase the size of and theme the
group picnic facilities and construct a 12,000 square foot air-conditioned mall
and main events center. These additions, combined with an aggressive marketing
strategy, resulted in Frontier City's attendance and revenue increasing
approximately 54% and 83%, respectively, from 1989 to 1991.
ADVENTURE WORLD -- Since acquiring Adventure World in January 1992, the
Company has invested over $28.6 million in the park to add numerous rides and
attractions and to improve theming. As a result of these improvements, as well
as aggressive and creative marketing and sales strategies, Adventure World's
attendance increased during the four seasons ended 1996 at a compounded annual
rate of 21.2%. Additionally, revenue and park-level operating cash flow at
Adventure World increased from $6.0 million and $0.3 million, respectively, for
the first nine months of 1992 to $15.2 million and $3.9 million, respectively,
during the comparable period of 1996. As a result of these improvements,
Adventure World was voted the "Most Improved Park" in the country in each of
1992, 1993 and 1994, according to Inside Track Magazine, a recognized industry
periodical.
During the 1996 season, the Company began to apply its growth strategy at
the parks acquired in the Funtime Acquisition. While the Funtime parks generated
substantial and stable cash flows prior to their
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acquisition by Premier, they lacked the sustained capital investment and
creative marketing required to realize their full potential. To take advantage
of this opportunity, the Company invested approximately $21.9 million at the
Funtime parks prior to the 1996 season to add marketable rides and attractions
and make other improvements and implemented creative marketing and sales
programs. As a result of this strategy, during the first nine months of 1996,
the three parks acquried in the Funtime Acquisition achieved growth in
attendance, revenue and park-level operating cash flow of 15.1%, 23.1% and
46.0%, respectively, compared to the comparable period of 1995. Specifically,
these efforts achieved the following results:
DARIEN LAKE -- For the 1996 season, Premier invested approximately $8.6
million, adding an indoor roller coaster, a five-story interactive water
attraction, and a new children's area, themed around the "Popeye" characters.
Further, the Company entered into a long-term contract with a national concert
promoter under which the promoter invested $2.5 million to make improvements at
Darien Lake's 20,000 seat amphitheater and agreed to book at least twenty
nationally-recognized performers per season. Performers at Darien Lake in 1996
included Hootie and the Blowfish, Sting, the Dave Matthews Band and Alanis
Morissette. These arrangements helped drive attendance and financial performance
at Darien Lake. As a result of these investments and creative marketing and
sales initiatives, during the nine-month period ended September 30, 1996, Darien
Lake achieved 22.5% growth in attendance and 29.2% growth in revenue over the
results of the comparable 1995 period.
GEAUGA LAKE -- For the 1996 season, Premier invested $11.3 million at the
park. The major elements of this investment were a forward/backward steel roller
coaster, a giant river rapids ride and a complete renovation of the front
entrance gate and plaza. Premier also instituted creative marketing, enhanced
its beverage sponsorship by entering into a new relationship with Coca-Cola,
which provided for more marketing support, and implemented a joint marketing
program with Sea World, which is located adjacent to Geauga Lake. As a result of
these strategies, during the nine-month period ended September 30, 1996, Geauga
Lake achieved 10.1% growth in attendance and 17.9% growth in revenue over the
results of the comparable 1995 period.
WYANDOT LAKE -- For the 1996 season, Premier invested $2.1 million at
Wyandot Lake, primarily to expand the water park with a five-story interactive
water attraction, and increased the marketing effort significantly, including
entering into a new beverage sponsorship and marketing agreement with Coca-Cola.
As a result of these strategies, during the nine-month period ended September
30, 1996, Wyandot Lake posted 8.0% growth in attendance and 19.7% growth in
revenue over the results of the comparable 1995 period.
Management believes that each of the parks acquired and to be acquired in
the Recent Acquisitions offers opportunities to implement the Company's growth
strategy. Specifically, the following outlines the Company's strategy for these
parks. The Company believes that prior management of Elitch Gardens failed to
provide the appropriate level of marketable rides and attractions and revenue
outlets necessary to achieve its attendance potential. In that connection, the
Company intends to invest between $20.0 and $25.0 million at Elitch Gardens for
the 1997 and 1998 seasons to add marketable rides and attractions (including a
"state-of-the-art" steel looping roller coaster, water park additions and other
rides and attractions), to improve landscaping and theming and to enhance
marketing programs. While The Great Escape has shown solid performance over the
past several years, the Company believes that it can increase the park's
attendance and operating cash flow through the continued addition of attractions
and the introduction of a more extensive marketing strategy. The Company intends
to invest between $8.0 and $12.0 million at The Great Escape for the 1997 and
1998 seasons to add marketable rides and attractions (including a wave pool for
the 1997 season) and to make other improvements. After consummation of the
Riverside Acqusition, the Company currently expects to invest between $15.0
million and $20.0 million at Riverside for the 1997 and 1998 seasons to add
additional marketable rides and attractions (including a "state-of-the-art"
steel looping roller coaster for the 1997 season) and to make other
improvements. The Company believes that the Waterworld facilities have growth
potential, although more limited than the
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other parks. The Company intends to add one major water attraction (costing in
the range of between $1.0 million and $1.5 million) at each of the Waterworld
parks in the next two to three years.
ADDING RIDES AND ATTRACTIONS AND IMPROVING OVERALL PARK QUALITY. The
Company regularly makes investments in the development and implementation of new
rides and attractions at its parks. The Company believes that the introduction
of marketable rides is an important factor in promoting each of the parks in
order to achieve market penetration and encourage longer visits, which lead to
increased attendance and sales of food and merchandise. Once a park reaches an
appropriate level of attractions for its market size, the Company will add new
marketable attractions at that park only every three to four years. In addition,
the Company generally adds theming to acquired parks and continuously enhances
the theming and landscaping of its existing parks in order to provide a complete
family oriented entertainment experience.
ENHANCING MARKETING, SPONSORSHIP AND GROUP SALES PROGRAMS. Premier's parks
have benefitted from professional, creative marketing programs which emphasize
the marketable rides and attractions, breadth of available entertainment and
value provided by each park. The Company's marketing programs have a local
orientation, which the Company believes is a key ingredient to successful
marketing for regional theme parks. For example, Cal Ripken, Jr., the all-star
shortstop for the Baltimore Orioles, serves as official spokesperson for
Adventure World, making numerous appearances in radio and television
commercials, and Olympic gymnast Shannon Miller, an Oklahoma City resident, has
opened rides at White Water Bay. Management implemented similar marketing
programs to promote the capital improvements for the 1996 season at the Funtime
parks and intends to extend this strategy to the parks acquired and to be
acquired in the Recent Acquisitions.
The Company has also successfully attracted well known sponsorship and
promotional partners, such as Pepsi, McDonald's, Coca-Cola, Taco Bell,
Blockbuster, 7-Eleven, Wendy's and various supermarket chains. The Company
believes that its increased number of parks and annual attendance has enabled it
to expand and enhance its sponsorship and promotional programs. In addition,
group sales and pre-sold tickets provide the Company with a consistent and
stable base of attendance, representing over 38.4% of aggregate attendance at
the six owned parks in 1996. Premier increased its group sales and pre-sold
ticket business at the three parks owned prior to the Acquisitions by
approximately 43% from 1992 to the nine months ended September 30, 1996.
IMPLEMENTING TICKET PRICING STRATEGIES TO MAXIMIZE TICKET REVENUES AND PARK
UTILIZATION. Management regularly reviews its ticket price levels and ticket
category mix in order to capitalize on opportunities to implement selective
price increases, both through main gate price increases and the reduction in the
number and types of discounts. Management believes that opportunities exist to
implement marginal ticket price increases without significant reductions in
attendance levels. Such increases have successfully been implemented on a
park-by-park basis in connection with the introduction of major new attractions
or rides. As a result of these measures, the average ticket price per paid
visitor at the three parks owned prior to the Acquisitions increased by 14.8%
from 1992 to the nine months ended September 30, 1996. Average ticket price per
visitor at the Funtime parks increased by 6.0% from the nine months ended
September 30, 1995 to the comparable period of 1996. The Company believes that
through similar measures it will be able to increase the average ticket price
per paid visitor at the parks acquired and to be acquired in the Recent
Acquisitions. In addition, the Company offers discounts on season, multi-visit
and group tickets and also offers discounts on tickets for specific periods, in
order to increase attendance at less popular times such as weekdays and
evenings.
INCREASING AND ENHANCING RESTAURANTS AND MERCHANDISE AND OTHER REVENUE
OUTLETS TO INCREASE LENGTH OF STAY AND IN-PARK SPENDING. The Company also seeks
to increase in-park spending by adding well-themed restaurants, remodeling and
updating existing restaurants and adding new merchandise outlets. The Company
has successfully increased spending on food and beverages by introducing well-
recognized local and national brands, such as Domino's, Friendly's, KFC and
TCBY. Typically, the
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Company operates these revenue outlets and often is the franchisee. Finally, the
Company has taken steps to decrease the waiting time for its most popular
restaurants and merchandise outlets. As a result of these measures, average
in-park spending per visitor at the three parks owned prior to the Acquisitions
increased by 28.6% from 1992 to the nine months ended September 30, 1996. During
the first nine months of 1996, per capita in-park spending at the Funtime parks
increased 6.9% over the comparable period of 1995. The Company believes that
through similar measures it will be able to increase average in-park spending
per visitor at the parks acquired and to be acquired in the Recent Acquisitions.
ADDING SPECIAL EVENTS. The Company has also developed a variety of
off-season special events designed to increase attendance and revenue prior to
Memorial Day and after Labor Day. Examples include Hallowscream, a Halloween
event in which parks are transformed with supernatural theming, scary rides and
haunting shows, and Oktoberfest, in which traditional German food, theming,
music and entertainment are presented at the parks. Over the last several years,
Frontier City has on average drawn approximately 29,500 visitors to its
Oktoberfest event and approximately 30,500 to Hallowscream. In 1996, over 75,000
visitors attended Hallowscream at Adventure World. Management intends to
introduce these types of events at the parks acquired and to be acquired in the
Recent Acquisitions and believes they will have a similar impact on attendance.
EXPANDING EXISTING PARKS
In addition to pursuing on-going growth opportunities at existing parks, the
Company is considering a number of expansions at several of its existing parks.
For example, the Company expects to expand the Darien Lake campgrounds by
purchasing additional recreational vehicles (RV's) and may in the future
construct economy motel rooms to supplement the campgrounds. In addition, the
Company may add campgrounds or an amphitheater at Frontier City. The Company is
also considering adding a more complete complement of "dry" rides to Wyandot
Lake, which is currently primarily a water park. In addition, the Company owns
400 acres adjacent to Adventure World which are zoned for entertainment,
recreational and residential uses and are available for complementary uses.
Additional acreage owned by the Company and suitable for development exists at
several of the Company's other parks, including The Great Escape and Geauga
Lake. The Company may use a portion of the proceeds of the Offerings to fund
expansions at its parks. See "Use of Proceeds."
ACQUISITION STRATEGY
The Company expects to achieve further growth beyond that generated from
internal growth at its current parks through continued selective acquisitions of
additional regional theme parks. Given its decentralized management approach,
the Company has experience in managing assets in diverse locations, and will
therefore not seek acquisitions with any specific geographic focus. In that
connection, the Company may pursue acquisitions of parks located outside of the
United States.
The U.S. regional theme park industry is highly fragmented with over 150
parks owned by over 100 operators. Management believes that in addition to the
Recent Acquisitions, numerous acquisition opportunities exist that would expand
its business. The Company expects that a portion of the proceeds raised in the
Offerings will be used for such further acquisitions. While the Company believes
that it has the capability to manage larger parks, its primary target for
acquisitions has been and will continue to be regional parks with attendance
between 300,000 and 1.5 million annually.
As the only owner of multiple parks in numerous locations that has been
actively making acquisitions of parks in this range over the last several years,
the Company believes it has a number of competitive advantages in acquiring
parks of this size. Historically, operators of destination or large regional
park chains have not generally sought to acquire parks in the Company's primary
target range and do not have the experience or management structure to readily
operate parks of that size profitably. Additionally, as a multi-park operator
with a track record of successfully acquiring, improving and repositioning
parks, the Company has numerous competitive advantages over single-park
operators in pursuing acquisitions and
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improving the operating results at acquired parks. These advantages include the
ability to (i) exercise group purchasing power (for both operating and capital
assets); (ii) achieve administrative economies of scale; (iii) attract greater
sponsorship revenue, support from sponsors with nationally-recognized brands and
marketing partners; (iv) recruit and retain superior management; (v) optimize
the use of capital assets by rotating rides among its parks to provide fresh
attractions; and (vi) access capital markets.
Furthermore, following the consummation of the Offering, the Company
believes it will be better able to make acquisitions where its capital stock
forms all or part of the purchase price. This is particularly important where
the seller has a low tax basis in its assets, which the Company believes is
often the case with its acquisition targets. While the Company expects that many
acquisitions will be made for cash, its ability to use Common Stock for all or
part of the purchase price will provide it with an additional advantage over
single-park operators in making such acquisitions. In most cases, the Company
will seek to acquire outright ownership of parks, as it has with the
Acquisitions. However, transactions may be undertaken in other forms, including
acquisition of less than full ownership, such as participations in park
management, leases or joint venture arrangements. In that connection, the
Company has recently entered into an agreement with a municipal authority of the
City of Vallejo, California relating to the management by the Company of Marine
World/Africa USA, a marine and exotic wildlife park located in Vallejo, 32 miles
northeast of San Francisco. Under the management agreement, the Company will
manage the park for an initial term of up to five years for an annual management
fee of $250,000 plus a percentage of revenues in excess of specified amounts. In
addition, the authority has agreed in principal to grant the Company an option
to lease, on a long-term basis, land adjacent to the park at an exercise price
of $3.0 million, which would be used to fund improvements to the facility. If
the option is not granted, the Company is permitted to terminate the management
agreement.
The Company expects to improve the operations of acquired parks by following
the operating strategy it employs at its current parks. This includes the
addition of marketable rides and attractions and other park improvements,
enhanced and expanded marketing and sales programs and professional management,
as well as the economies of scale available to the Company as a multi-park
operator. The Company expects to continue to acquire parks which have been
undermanaged and have not benefitted from sustained capital expenditures, and to
reposition such parks through the implementation of its operating strategies.
The Company may also acquire better performing parks which require less
additional investment but where cash flow can be improved through economies of
scale and other enhancements.
The Company intends to locate acquisition targets primarily through its own
direct efforts. Management has extensive contacts throughout the industry and is
an active participant in industry associations. Particular attention is given to
cultivating relationships over time with park owners who appear likely to be or
become potential sellers due to factors such as age or family or economic
circumstances. In addition, the Company has developed a reputation as an active
acquiror of regional parks. Through this reputation and general industry
contacts, the Company believes that it becomes aware of most acquisition
opportunities that develop in its area of focus.
RECENT AND PENDING ACQUISITIONS
Consistent with its acquisition strategy, the Company has recently acquired
one park in the Denver Acquisition, two parks and one family entertainment
center in the California Acquisition and one park in The Great Escape
Acquisition. The Riverside Acquisition is scheduled to close in early February
1997 subject to the satisfaction or waiver of certain conditions. Although the
Company has had discussions with respect to several additional business
opportunities, no agreement or understanding with respect to any specific
acquisition has been reached. There can be no assurance that any such additional
acquisitions will be made.
THE DENVER ACQUISITION. On October 31, 1996, the Company acquired
substantially all of the assets of Elitch Gardens Company used in the operation
of Elitch Gardens for $62.5 million in cash. The general partner and a principal
limited partner of Elitch Gardens Company have agreed severally to indemnify the
Company for customary losses in excess of $100,000 in an amount up to $1.0
million each. In connection
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with the Denver Acquisition, each of Elitch Gardens Company, its general partner
and certain of its limited partners, have agreed not to compete with the
Company's business for a period of five years within a defined territory. In
addition, the Company has entered into a five-year non-competition agreement
with the president of Elitch Gardens Company's general partner.
THE CALIFORNIA ACQUISITION. On November 19, 1996, the Company acquired
substantially all of the assets of FRE and Concord used in the operation of
Waterworld for an aggregate cash purchase price of approximately $17.3 million,
of which $862,500 was placed in escrow to fund indemnification claims of the
Company. To the extent such claims exceed such escrow funds, the Company has
indemnification rights against FRE, Concord, the shareholders of FRE and the
members of Concord, not to exceed approximately $4.3 million in the aggregate.
THE GREAT ESCAPE ACQUISITION. On December 4, 1996, the Company acquired
substantially all of the assets of Storytown used in the operation of The Great
Escape for a cash purchase price of $33.0 million. The agreement provides for
customary indemnification to the Company by Storytown and indemnification for
misrepresentations by Charles R. Wood, the sole shareholder of Storytown, in
each case, unlimited as to amount. In connection with The Great Escape
Acquisition, the Company entered into a five-year non-competition agreement and
a five-year consulting agreement with Mr. Wood, providing for an aggregate
consideration of $1.25 million, payable over the term of the consulting
agreement. In addition, at the closing of the transaction, the Company issued
9,091 shares of Common Stock to a charitable organization affiliated with Mr.
Wood.
THE RIVERSIDE ACQUISITION. Pursuant to a stock purchase agreement, the
Company has agreed to acquire all of the capital stock of Stuart Amusement
Company (the owner of Riverside) for approximately $22.2 million, of which $1.0
million is payable by delivery of the Riverside Stock, with the balance payable
in cash. The outstanding indebtedness and preferred stock of Stuart Amusement
Company will be retired out of the cash purchase price at the closing. The
closing of the Riverside Acquisition, which is scheduled to occur in early
February 1997, is subject to the satisfaction or waiver of certain conditions,
including the obtaining of all governmental approvals for the installation of a
steel looping roller coaster for the 1997 season. The Company intends to fund
the cash portion of the purchase price from a portion of the proceeds of the
Common Stock Offering. If the Riverside Acquisition closes before the Common
Stock Offering, the Company will issue up to $22.0 million of its Exchangeable
Preferred Stock to certain stockholders of the Company or their affiliates to
fund such cash portion. In that event, the Company intends to redeem the
Exchangeable Preferred Stock, at a redemption price equal to the purchase price
thereof, plus accumulated dividends, from a portion of the proceeds of the
Common Stock Offering.
At the closing of the Riverside Acquisition, $1.0 million of the purchase
price will be placed in escrow to fund indemnification claims of the Company. To
the extent such claims exceed the escrow funds or, in certain circumstances,
arise after the expiration of the escrow period (18 months) the Company has
indemnification rights against the sellers not to exceed $2.5 million (for all
matters other than one pending litigation) or $10.0 million (for all matters).
See "Business--Legal Proceedings." One of the sellers, Edward J. Carroll, has
agreed not to compete with the Company for five years. In addition to the
purchase price, at the closing, the Company will fund the Net Operating Expenses
(as defined) of Riverside (up to $500,000 per month) for the period subsequent
to November 1, 1996.
THE THEME PARK INDUSTRY
HISTORY
Although there is a long history of traditional amusement parks, primarily
family-owned and consisting of thrill rides and midways, the opening of
Disneyland in 1955 introduced the first modern theme park. Several features of
modern theme parks distinguish them from the traditional amusement park whose
carnival atmosphere and thrill rides offer less to families and adults. Theme
parks are designed around one central or several different themes which are
consistently applied to all areas, including the rides, attractions,
entertainment, food, restaurants and landscape. Modern parks also typically
present a variety
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of free entertainment not found at old-style amusement parks. Theme parks also
offer the visitor numerous and diverse dining establishments in order to expand
length of stay and position the parks as an all-day entertainment center.
Generally, theme parks also plan nighttime entertainment (such as fireworks) and
special events, and keep certain rides open into the night to further extend the
hours of operation. As a result of these differences, theme parks draw
attendance from a wider geographic area and attract a larger number of people
from within a given market. Theme parks also attract more families and group
outings, and the average length of stay and per capita outlay is greater.
DESTINATION PARKS VERSUS REGIONAL PARKS
Destination parks are those designed primarily to attract visitors willing
to travel long distances and incur significant expense to visit the parks'
attractions as part of an extended stay. To accommodate vacationers, many
destination parks also include on-site lodging. Walt Disney World and Universal
Studios are well-known examples of this type of park. Management believes that
destination parks are typically more affected by the national economy than are
regional parks. The Company does not believe that its parks compete directly
with destination parks.
Regional theme parks, such as those operated by the Company, are designed to
attract visitors for a full day or a significant number of hours. Management
views regional theme parks as those that draw the majority of their patrons from
within a 50-mile radius of the park and the great majority of their visitors
from within a 100-mile radius of the park. Visiting a regional theme park is
significantly less expensive than visiting a destination park because of lower
transportation expenses, lower ticket prices and the lack of extended lodging
expenses. The U.S. regional theme park industry is highly fragmented with over
150 parks owned by over 100 operators.
ATTRACTIONS
Regional theme parks attract patrons of all ages. Families and young people
are attracted by the variety of major rides and attractions, children's rides
and various entertainment areas including thematic shows and concerts. Most park
admission policies are "pay-one-price," which entitles a guest to virtually
unlimited free access to all rides, shows and attractions.
Depending on the size of the property, regional theme parks typically have
between 30 and 40 attractions. These rides include roller coasters and water
rides, as well as other attractions such as bumper cars, aerial rides and
children's rides. A park may also have distinct entertainment and show areas
with specific themes such as a Wild West or pirate stunt show. Games, food and
merchandise stands often reflect the theme of the particular area in which they
are located. This enhances the promotional effect of the thematic area. By
offering a variety of rides and themed areas, a park is able to target a wider
age spectrum from the surrounding population.
In addition to thrill rides, many parks offer indoor attractions and outdoor
concerts, ranging from musical skits and bands to full-scale evening concerts by
prominent entertainers. Selected concerts may require an add-on to the
admissions price, but often are part of the regular ticket price, providing
added value to visitors.
Food service offered ranges from full-service restaurants to fast food.
Young people may only be interested in a quick meal between rides while the
family may choose to relax for a picnic. Refreshment stands serve snack foods,
such as hot dogs, cotton candy and soda. In addition, game booths and
merchandise souvenir stands are dispersed throughout a park.
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DESCRIPTION OF PARKS
The following table summarizes certain operating statistics of each of the
Company's parks:
<TABLE>
<CAPTION>
THE
ADVENTURE DARIEN ELITCH FRONTIER GEAUGA GREAT
WORLD LAKE GARDENS CITY LAKE ESCAPE
----------------- ---------- -------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Market.................................... Baltimore/ Buffalo/ Denver Oklahoma Cleveland/ Lake
Washington, D.C. Rochester/ City/ Akron/ George/
Syracuse Tulsa Youngstown/ Albany
Pittsburgh
Population(000)(2)
within 50 miles......................... 6,486 2,153 2,357 1,157 3,990 1,103
within 100 miles........................ 10,862 3,127 3,258 2,397 7,442 3,258
Percentage of 1996 patrons
within 50 miles......................... 88% 56% N/A 66% 63% N/A
within 100 miles........................ 94% 88% N/A 82% 83% N/A
1996 total attendance (000)............... 782 1,290 894 527 1,209 574
1996 operating days....................... 136 107 143 136 132 101
Year opened............................... 1980(3) 1964 1995(4) 1958 1895 1954
Year acquired............................. 1992 1995 1996 1982 1995 1996
Park acres (public)(5).................... 115(6) 144(7) 60 60(8) 116(9) 100(10)
Total rides and attractions(14)........... 47 65 40 32 60 45
Food outlets(14).......................... 31 62 30 26 44 30
Merchandise outlets(14)................... 16 22 33 21 25 18
Game venues(14)........................... 39 41 35 34 38 29
Theater capacity(14)...................... 1,626 20,550 -- 4,500 500 3,350
<CAPTION>
WATERWORLD WATERWORLD
USA/ USA/ WHITE WYANDOT
RIVERSIDE SACRAMENTO(1) CONCORD WATER BAY LAKE
------------- ------------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
Market.................................... Springfield, Sacramento Concord/ Oklahoma Columbus
Massachusetts East Bay City
area,
California
Population(000)(2)
within 50 miles......................... 3,100 2,647 6,719 1,157 1,998
within 100 miles........................ 14,700 9,650 9,977 2,397 6,386
Percentage of 1996 patrons
within 50 miles......................... N/A N/A N/A 87% 82%
within 100 miles........................ N/A N/A N/A 92% 92%
1996 total attendance (000)............... 750 294 310 314 396
1996 operating days....................... 147 113 119 100 126
Year opened............................... N/A 1986 1995 1981 1981
Year acquired............................. 1997 1996 1996 1991 1995
Park acres (public)(5).................... 130 11) 20(12) 24(12) 22 18(13)
Total rides and attractions(14)........... 51 22 7 28 31
Food outlets(14).......................... 20 9 4 7 11
Merchandise outlets(14)................... 16 1 1 3 3
Game venues(14)........................... 32 2 1 1 9
Theater capacity(14)...................... 15,000 -- -- -- 100
</TABLE>
- ------------------------
(1) All information other than attendance, year opened and operating days
include Paradise Island, a family entertainment center adjacent to
Waterworld USA/Sacramento.
(2) Population figures have been obtained from CACI, a marketing firm
specializing in demographics, which derived such information from U.S.
Census data.
(3) Prior to 1980, the park operated as a drive-through wildlife preserve.
(4) A predecessor park with the same name was in operation for over 100 years.
(5) All the facilities (other than Waterworld and Wyandot Lake) are owned by the
Company.
(6) Does not include approximately 400 acres adjacent to Adventure World owned
by the Company and zoned for entertainment, recreational and residential
uses.
(7) Does not include approximately 242 acres of campgrounds and 593 acres of
agricultural, undeveloped and water areas.
(8) Does not include approximately 30 acres owned by the Company which are
available for complementary uses.
(9) Does not include an approximate 55 acre spring-fed lake and 87 acres of
undeveloped land owned by the Company, approximately 30 acres of which are
suitable for further development.
(10) Does not include approximately 235 acres of land, including over 200 acres
of freshwater wetlands and approximately 30 acres available for development.
(11) Does not include 30 acres of undeveloped land, a portion of which is
available for future development.
(12) Both sites are leased on a long-term basis. Amount shown for Concord does
not include approximately five acres available for development.
(13) Does not include approximately 30 acres of parking which Wyandot Lake
shares with the Columbus Zoo. The Company subleases the Wyandot Lake site
from the Columbus Zoo, and the Company is currently discussing with the
Columbus Zoo a lease of an additional five to ten acres of land for the
expansion of Wyandot Lake.
(14) Information provided for 1996 season.
N/A Reflects information concerning acquired parks that is not available to the
Company.
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ADVENTURE WORLD
OVERVIEW. Adventure World is a combination theme and water park located in
Largo, Maryland, approximately 15 miles east of Washington, D.C. and 30 miles
southwest of Baltimore, Maryland. The park's primary market includes Maryland,
northern Virginia, Washington, D.C. and parts of Pennsylvania and Delaware. This
market provides the park with a permanent resident population base of
approximately 6.5 million people within 50 miles and 10.9 million people within
100 miles. According to a copyrighted 1995-96 study published by A.C. Nielsen
Media Research (the "Nielsen Report"), which measures the number of persons in
television households within a given geographic area or designated market area
("DMA"), the Washington, D.C. and Baltimore markets are the number 7 and number
23 DMAs in the United States, respectively. This market also has a substantial
base of businesses, associations, schools and churches for group sales and
outings, as well as a large tourist market. Based upon in-park surveys,
approximately 88% of the visitors to Adventure World in 1996 resided within a
50-mile radius of the park, and 94% resided within a 100-mile radius.
The Company owns a site of 515 acres, with 115 acres currently used for park
operations. The remaining 400 acres, which are fully zoned for entertainment and
recreational uses, provide the Company with ample expansion opportunity, as well
as the potential to develop complementary operations, such as an amphitheater.
During its 1996 season, Adventure World had 33 adult and 14 children's rides, 31
food outlets, 16 merchandise outlets, 39 game venues and 4 theaters. In
addition, picnic grounds are available for family and group outings. Adventure
World also offers a complete water park, including a large wave pool, water
slides, a large activity pool, a "lazy river" ride and a children's play area.
The following is a list of certain of the major attractions at Adventure
World:
<TABLE>
<CAPTION>
ATTRACTION DESCRIPTION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Mind Eraser............................................. Inverted suspended steel looping roller coaster
Tower of Doom........................................... Giant drop ride
Python.................................................. Return loop steel roller coaster
Wild One................................................ Wooden roller coaster
Renegade Rapids......................................... 1,350-foot long rapids ride
Iron Eagle.............................................. 83-foot spinning ride
Shipwreck Falls......................................... Splash water ride
Wild West Stunt Show.................................... Western stunt show
Antique Cars............................................ Gasoline powered cars on guided track
Falling Star............................................ 65-foot rotating platform ride
Carousel................................................ 64-piece major carousel
Balloon Ferris Wheel.................................... 12-balloon rotating wheel
A Day at the Circus..................................... Themed children's area with 14 rides and attractions
Paradise Island WaterPark............................... Water park with 11 rides and attractions
</TABLE>
Adventure World's principal competitors are King's Dominion Park, located in
Doswell, Virginia (near Richmond); Hershey Park, located in Hershey,
Pennsylvania; and Busch Gardens, located in Williamsburg, Virginia. These parks
are located approximately 120, 125 and 175 miles, respectively, from Adventure
World.
HISTORY AND RECENT OPERATING RESULTS. Adventure World was originally
developed in the 1970s as a drive-through wild life preserve. After 1980, the
park was converted by the prior owners into a combination theme and water park,
with an emphasis on the water park component. Prior to the Company's acquisition
of Adventure World in early 1992, the theme park component lacked sufficient
rides and attractions, as well as appropriate theming.
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Employing its strategy of acquiring undermanaged parks and significantly
improving operations and marketable attractions, the Company implemented new
marketing, sales and promotional programs and aggressively expanded the
attractions at the park, adding (i) eleven major new rides through the 1996
season; (ii) an elaborately themed new children's area with 14 new rides and
attractions; (iii) a major new western themed area, including an outdoor show
area and an enclosed saloon/theatre; and (iv) extensive theming and landscaping.
The Company also upgraded and expanded the picnic/festival grounds. This capital
program, entailing a capital investment of approximately $28.6 million through
1996, together with creative marketing and promotional programs, have enabled
the Company to increase Adventure World's attendance during the four seasons
ended 1996, at a compounded annual rate of 21.2%. Additionally, revenue and
park-level operating cash flow increased from $6.0 million and $0.3 million,
respectively, for the first nine months of 1992 to $15.2 million and $3.9
million, respectively, during the comparable period of 1996. As a result of
these achievements, the park was voted the "Most Improved Park" in the United
States according to Inside Track Magazine for each of 1992, 1993 and 1994. In
addition, in 1994 and 1995, the park received the Platinum Award from Ellis &
Associates, leading international water safety consultants, for achieving a
perfect score on safety tests administered by Ellis & Associates.
The following table sets forth certain information with respect to the
operations of Adventure World since its acquisition by the Company in January
1992:
<TABLE>
<CAPTION>
THROUGH
SEPTEMBER 30,
--------------------
1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total revenues (000)............................ $ 6,103 $ 9,785 $ 12,733 $ 15,419 $ 14,306 $ 15,198
Total attendance (000).......................... 363 524 625 726 666 696
Revenues per visitor............................ $ 16.80 $ 18.67 $ 20.36 $ 21.23 $ 21.48 $ 21.84
In-park spending per visitor.................... $ 7.01 $ 7.50 $ 8.36 $ 8.80 $ 9.11 $ 10.19
Number of operating days........................ 116 121 121 130 115 115
Capital expenditures(1) (000)................... $ 931 $ 6,159 $ 9,365 $ 7,136 $ 7,136 $ 4,981
</TABLE>
- ------------------------
(1) Capital expenditures shown above and in the following individual park
tables, except where otherwise indicated, are calculated on a project-year
basis, i.e., amounts shown for each year (or nine-month period), represent
expenditures incurred during and prior to the park's operating season for
that year.
STRATEGY. The Company's strategy is to continue its capital investment and
marketing programs at Adventure World in order to further penetrate the densely
populated Washington, D.C./Baltimore market and to achieve further growth in
attendance, ticket prices and in-park spending per capita. The Company made
capital improvements at Adventure World of approximately $5.0 million for the
1996 season and expects to make between $8.0 and $12.0 million of such
improvements prior to the 1997 season, in each case, to fund the development of
additional rides, attractions and revenue-generating locations, as well as
general park improvements, including the development of a new section at the
park for 1997.
Marketing programs at Adventure World for the 1996 season continued to
utilize Cal Ripken, Jr., the Baltimore Orioles all-star shortstop, as the park's
official spokesperson for radio, television and other advertising. Additionally,
signage for Adventure World was added at Camden Yards, the Baltimore Orioles'
stadium, and promotional events involving the Orioles were conducted. Prior to
the 1996 season, Pepsi agreed to expand its sponsorship of the park, which
resulted in expanded advertising and sponsorship support by Pepsi, including
promotion of the park on millions of Pepsi cans throughout the summer. In
addition, during the 1996 season, McDonald's became a promotional partner of the
park for the first time.
The Company intends to continue to add sales representatives and increase
direct mail programs in order to expand its group sales and pre-sold ticket
business, increase its season pass sales and capitalize on the substantial
tourist market in the Washington, D.C. area, with a particular emphasis on
visiting student
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groups and families. The Company is also considering adding complementary
entertainment attractions at the park, either alone or in conjunction with joint
venture partners. Management also intends to extend weekend operations before
and after the current operating season, to expand special events (such as its
Oktoberfest and Hallowscream events) and to increase its night business through
evening discount programs. Given the size of the Washington, D.C./Baltimore
market and the capital investment and marketing programs planned at Adventure
World, management believes that Adventure World has the potential to reach
annual attendance of at least 1.5 million within the next five to seven years.
DARIEN LAKE & CAMPING RESORT
OVERVIEW. Darien Lake, a combination theme and water park, is the largest
theme park in the State of New York and the 46th largest theme park in the
United States based on 1995 attendance of 1.1 million. Attendance for the 1996
season totaled 1.3 million. Darien Lake is located off Interstate 90 in Darien
Center, New York, approximately 30, 40 and 120 miles from Buffalo, Rochester and
Syracuse, New York, respectively. The park's primary market includes upstate New
York, western and northern Pennsylvania and southern Ontario, Canada. This
market provides the park with a permanent resident population base of
approximately 2.2 million people within 50 miles of the park and 3.1 million
with 100 miles. According to the Nielsen Report, the Buffalo, Rochester and
Syracuse markets are the number 39, number 73 and number 69 DMAs in the United
States, respectively. Based upon in-park surveys, approximately 56% of the
visitors to Darien Lake in 1996 resided within a 50-mile radius of the park, and
88% resided within a 100-mile radius.
The Darien Lake property consists of approximately 1,000 acres, including
144 acres for the theme park, 242 acres of campgrounds, and 593 acres of
agricultural, undeveloped and water areas. During its 1996 season, Darien Lake
had 26 "wet" rides, 19 "dry" rides, 20 children's rides, 41 game venues, 62 food
outlets, 22 merchandise outlets and five arcades. Darien Lake also has a 20,000
seat amphitheater. Following the 1995 season, the Company entered into a
long-term agreement with a national concert promoter described more fully below.
Adjacent to the Darien Lake theme park is a camping resort owned and
operated by the Company with 1,180 developed campsites, including 330
recreational vehicles (RV's) available for daily and weekly rental. In addition,
there are 500 other campsites available for tenting. Darien Lake is one of the
few theme parks in the United States which offers a first class campground
adjacent to the park. The campground is the fifth largest in the United States
and was rated three stars on facilities and five stars on recreation by Woodalls
1995 North American Edition of The Campground Directory. In 1996, approximately
284,000 people used the Darien Lake campgrounds. Since admission to the
campgrounds requires visitors to also purchase admission tickets to the theme
park, the Company believes that substantially all of the camping visitors use
the theme park.
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<PAGE>
The following is a list of certain of the major attractions at Darien Lake:
<TABLE>
<CAPTION>
ATTRACTION DESCRIPTION
- ------------------------------------------ ------------------------------------------------------------------
<S> <C>
The Giant Wheel........................... Second largest North American ferris wheel
The Predator.............................. Wooden roller coaster with 100-foot hill
The Viper................................. Steel looping roller coaster
Nightmare at Phantom Cove................. Indoor roller coaster
Cuda Falls................................ 4-tube slide complex
Performing Arts Center.................... 20,000 seat capacity outdoor amphitheater
Hook's Lagoon............................. A five-story interactive family water attraction
Chance Train.............................. Train ride around lake
Grizzly Run............................... White-water raft ride
Grand Prix................................ Formula K race cars
Thunder Rapids............................ Half-mile long flume ride
Sky Coaster............................... 180 foot hang-gliding attraction
Barracuda Bay............................. Water park with 15 rides
Campground................................ Four-star camping facility
Popeye's Seaport.......................... Themed children's area with 10 rides and attractions
Adventureland............................. Children's area with 12 "dry" rides
</TABLE>
Darien Lake's principal competitor is Wonderland Park located in Toronto,
Canada, approximately 125 miles from Darien Lake. In addition, Darien Lake
competes to a lesser degree with three smaller amusement parks located within 50
miles of the park. Darien Lake is significantly larger with a more diverse
complement of entertainment than any of these three smaller facilities. Unlike
Darien Lake, none of these parks have camping facilities or large concert
venues.
HISTORY AND RECENT OPERATING RESULTS. Darien Lake was opened in 1964. From
1991 to 1995, revenue and attendance at the park averaged approximately $21.6
million and 1.0 million, respectively, as compared to revenue for the first nine
months of 1996 of $29.3 million and attendance of 1.3 million for the 1996
season.
The following table sets forth certain information with respect to the
operations of Darien Lake since 1991:
<TABLE>
<CAPTION>
THROUGH
SEPTEMBER 30,
--------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
Total revenues (000)................. $ 21,602 $ 20,005 $ 21,682 $ 22,202 $ 22,706 $ 22,658 $ 29,280
Total attendance (000)............... 1,103 974 1,010 1,038 1,053 1,053 1,290
Revenues per visitor................. $ 19.58 $ 20.54 $ 21.47 $ 21.39 $ 21.56 $ 21.52 $ 22.70
In-park spending per visitor(1)...... $ 11.81 $ 12.66 $ 13.45 $ 13.62 $ 13.70 $ 13.67 $ 14.23
Number of operating days............. 120 118 109 106 107 107 107
Capital expenditures (project-year
basis) (000)....................... $ 700 $ 1,050 $ 1,157 $ 3,002 $ 300 $ 300 $ 8,573
</TABLE>
- ------------------------
(1) Includes campground revenue.
STRATEGY. When it acquired the park in August 1995, the Company believed
Darien Lake had significant growth potential, some of which was realized during
the 1996 season. Prior to that season, the Company (i) added marketable new
rides and attractions (with particular emphasis on increasing the children's
component of the park and upgrading the water park facilities); (ii) improved
the quality of the park's daily live shows; (iii) upgraded the quality of the
merchandise outlets and restaurants; (iv) improved
74
<PAGE>
the park's theming, signage and landscaping; and (v) implemented more
professional and creative marketing, sales and promotional programs to emphasize
the park's improved product offerings. The Company spent approximately $8.6
million on capital expenditures at Darien Lake prior to the 1996 season and
expects to spend between $9.0 and $12.0 million on such expenditures prior to
the 1997 season to add a "state-of-the-art" steel looping roller coaster, a wave
pool and other attractions and revenue generating locations.
The 1996 marketing program for Darien Lake included the targeting of
potential patrons in outer markets, which the Company believes represent a
significant untapped opportunity. The Company intends to continue to target
these markets in 1997. Darien Lake has also expanded its sponsorship
relationship with Pepsi, which resulted in higher payments by Pepsi to the
Company and increased advertising and sponsorship support by Pepsi. In that
connection, Pepsi agreed to promote the park on cans sold in a number of upstate
New York markets.
Following the 1995 season, the Company entered into a long-term arrangement
with a national concert promoter to realize the cash flow potential of the
Performing Arts Center, a 20,000 seat amphitheater. Pursuant to this agreement,
the promoter funded approximately $2.5 million of capital improvements at the
Center prior to the 1996 season (including a new stage, improved restroom
facilities and a tensile roof over a substantial portion of the permanent
seating area) and agreed to book at the Center at least 20 concerts per season
featuring nationally recognized performers. The promoter is required to pay the
Company a base annual fee plus a fee based on concert attendance and fund all
concert expenses and certain other operating expenses. During the 1996 season,
there were 18 concerts at the center, including performances by Hootie and the
Blowfish, Sting, the Dave Matthews Band and Alanis Morissette. During that
season, the Company received fees of approximately $540,000 under this
agreement. During the 1995 season, the Center generated a loss of approximately
$145,000. To increase revenue at the Darien Lake campgrounds, the Company has,
among other things, added new recreational vehicles for rental. During 1995, a
number of Darien Lake's food and game outlets and certain attractions were
operated by third parties with whom the former owner divided revenues. The
Company has bought out certain of these arrangements in order to secure all of
the revenues from such concessions. Lastly, as with the other acquired parks,
the Company is considering adding special events before, during and after the
season. Given its historical levels of attendance, the size of its market and
the capital investment and marketing programs planned at Darien Lake,
particularily in light of the 1996 season, the Company believes that Darien Lake
has the potential to reach annual attendance of at least 1.5 million within the
next three to five years.
ELITCH GARDENS
OVERVIEW. Elitch Gardens is a theme park located in the downtown area of
Denver, Colorado, next to Mile High Stadium, McNichols Arena and close to Coors
Field. The park's primary market includes the greater Denver area as well as
most of central Colorado. This market provides the park with a permanent
resident population base of approximately 2.4 million people within 50 miles of
the park and approximately 3.3 million people within 100 miles. According to the
Nielsen Report, the Denver area is the number 18 DMA in the United States.
The Company owns a site of approximately 60 acres, all of which are
currently used for park operations. During its 1996 season, Elitch Gardens had
22 adult and 18 children's rides, 30 food outlets, 33 merchandise outlets and 35
game venues. Picnic grounds are also available for family picnics and group
outings.
75
<PAGE>
The following table sets forth certain of the major attractions at Elitch
Gardens:
<TABLE>
<CAPTION>
ATTRACTIONS DESCRIPTION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Launch Loop............................................. Return loop steel roller coaster
Twister II.............................................. Wooden roller coaster
Accelator............................................... Sky coaster
Big Wheel............................................... Giant ferris wheel
River Rapids............................................ River rapids ride
Top Spin................................................ Rotating platform ride
Sea Dragon.............................................. Swinging ship ride
Sky Ride................................................ Sky lift ride
Run Away Train.......................................... High speed metal coaster
</TABLE>
Elitch Gardens has no significant direct competitors.
HISTORY AND RECENT OPERATING RESULTS. A park in Denver under the name of
"Elitch Gardens" has been in continuous operation for over 100 years. During
1994 and 1995, the park was relocated from its smaller location on the north
side of Denver to its current location in downtown Denver, in close proximity to
Coors Field, home of the Colorado Rockies. The park was constructed at a cost of
$100 million (including land and equipment, as well as extensive
infrustructure). The park was reopened in 1995, in which year the park generated
approximately 960,000 in attendance and $20.0 million in revenues. Management
believes that the park, as constructed, did not have sufficient marketable rides
and attractions to achieve its attendance potential. In addition, the park lacks
theming and landscaping, as well as creative marketing. This provides a
significant opportunity for improved performance under the Company's management.
The following table sets forth certain information with respect to the
operations of Elitch Gardens in 1995, the year the park was opened, and the
first nine months of 1996:
<TABLE>
<CAPTION>
THROUGH
SEPTEMBER 30,
--------------------
1995 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Total revenues (000)............................................................. $ 19,839 $ 19,642 $ 19,506
Total attendance (000)........................................................... 959 950 849
Revenues per visitor............................................................. $ 20.69 $ 20.68 $ 22.98
In-park spending per visitor..................................................... $ 7.12 $ 7.33 $ 9.59
Number of operating days......................................................... 109 108 133
Capital expenditures (calendar-year basis) (000)................................. $ 26,044 $ 23,760 $ 590
</TABLE>
STRATEGY. The Company believes it can improve the park's attendance and
operating cash flow through the addition of marketable rides and attractions and
other improvements, as well as the implementation of more professional and
creative marketing, sales and promotional programs, which will emphasize the
park's improved product offering. In that connection, the Company presently
intends to invest between $20.0 and $25.0 million during 1997 and 1998 to add
marketable rides and attractions (including the introduction of water rides) and
to enhance marketing programs. Among the planned additions for the 1997 season
is a "state-of-the-art" steel looping roller coaster and a "shoot-the-chute"
giant splash ride. These additions will result in a more complete entertainment
product. Premier also believes it can improve the park's performance by reducing
operating expenses from historical levels and implementing a more efficient
management structure. Given the size of its market, the location of the park,
the absence of direct competition and the capital investment and marketing
programs planned at Elitch Gardens, the Company believes that Elitch Gardens has
the potential to reach annual attendance of 1.5 million within the next three to
five years.
76
<PAGE>
FRONTIER CITY
OVERVIEW. Frontier City is a western theme park located along Interstate 35
in northeast Oklahoma City, Oklahoma, approximately 100 miles from Tulsa. The
park's market includes nearly all of Oklahoma and certain parts of Texas and
Kansas, with its primary market in Oklahoma City and Tulsa. This market provides
the park with a permanent resident population base of approximately 1.2 million
people within 50 miles of the park and 2.4 million people within 100 miles.
According to the Nielsen Report, the Oklahoma City and Tulsa markets are the
number 43 and number 59 DMAs in the United States, respectively. This market
also has a substantial base of businesses, associations, schools and churches
for group sales and outings. Based upon in-park surveys, approximately 66% of
the visitors to Frontier City in 1996 resided within a 50-mile radius of the
park, and 82% resided within a 100-mile radius.
The Company owns a site of approximately 90 acres, with 60 acres currently
used for park operations. The remaining 30 acres provide the Company with the
potential to develop complementary operations, such as campgrounds or an
amphitheater. During the 1996 season, Frontier City had 22 adult and 10
children's rides, 26 food outlets, 21 merchandise outlets, 34 game venues and
four theaters. In addition, the Company professionally produces eight live shows
daily, such as country music shows, a 50's musical revue and a magic show, and
holds a concert series each summer. Fort Frontier, a 12,000 square foot air-
conditioned mall and main event center, contains numerous food and retail
locations, an entertainment center and a 500-seat western opera house. In the
off-season, the center serves as a banquet facility, accommodating groups of up
to 1,500 people. Picnic grounds are also available for family picnics and group
outings.
The following is a list of certain of the major attractions at Frontier
City:
<TABLE>
<CAPTION>
ATTRACTIONS DESCRIPTION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Silver Bullet........................................... Looping steel roller coaster
Wildcat................................................. Wooden roller coaster
Nightmare............................................... Indoor steel roller coaster
Diamond Back............................................ Backwards looping steel roller coaster
Time Warp............................................... Double looping gondolas
Sky Coaster............................................. 135-foot hang-gliding attraction
Thunder Road............................................ Go-cart track
Renegade Rapids......................................... River rapids ride
Red River Logging Co.................................... Log flume
Prairie Schooner........................................ Swinging ship
Grand Centennial Wheel.................................. Giant ferris wheel
Swingin' Six Guns....................................... Flying swings
O.K. Kiddie Corral...................................... Themed Children's Area with multiple rides and
attractions
</TABLE>
Frontier City's only significant competitor is Six Flags Over Texas located
in Arlington, Texas, approximately 225 miles from Frontier City.
HISTORY AND RECENT OPERATING RESULTS. Frontier City opened in 1958 as a
replica of an 1880s western town and was acquired by the Company in 1982. The
Company began redeveloping the park after the 1989 season with a two-year, $7.0
million capital program to reposition and revitalize the park. In addition to
extensive western theming and landscaping and general upgrading of the physical
plant, capital improvements included the addition of three major rides, the
expansion and improvement of the O.K. Kiddie Corral children's area (including
the addition of three children's rides), the expansion and theming of the group
picnic facilities and the addition of Fort Frontier. The effect of these capital
improvements, combined with an aggressive marketing program, was to increase the
park's attendance and revenue by
77
<PAGE>
approximately 54% and 83%, respectively, from 1989 to 1991. Since 1991, the park
has achieved steady growth in annual revenue to $9.1 million in 1995 and has
maintained annual attendance in the range of approximately 500,000. As a result
of these efforts, Frontier City has received numerous community and industry
awards and was named the 1991 Tourist Attraction of the Year by the State of
Oklahoma Department of Tourism and Recreation.
The following table sets forth certain information with respect to the
operations of Frontier City since 1989, when current management assumed control
of Premier:
<TABLE>
<CAPTION>
THROUGH
SEPTEMBER
30,
---------
1989(1) 1990 1991 1992 1993 1994 1995 1995
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues (000)................ $ 4,140 $ 5,571 $ 7,579 $ 8,289 $ 8,658 $ 8,990 $ 9,070 $ 8,108
Total attendance (000).............. 331 398 508 496 503 506 544 471
Revenues per visitor................ $ 12.53 $ 14.02 $ 14.91 $ 16.73 $ 17.20 $ 17.76 $ 16.67(2) $ 17.21
In-park spending per visitor........ $ 5.01 $ 5.44 $ 5.66 $ 6.70 $ 6.92 $ 7.09 $ 6.32(2) $ 6.42
Number of operating days............ 96 117 117 136 136 137 134 116
Capital expenditures
(project-year basis) (000)........ $ 558 $ 1,588 $ 5,459 $ 904 $ 1,824 $ 2,161 $ 1,537 $ 1,537
<CAPTION>
1996
---------
<S> <C>
Total revenues (000)................ $ 8,283
Total attendance (000).............. 454
Revenues per visitor................ $ 18.24
In-park spending per visitor........ $ 7.30
Number of operating days............ 123
Capital expenditures
(project-year basis) (000)........ $ 561
</TABLE>
- ------------------------
(1) Reflects results prior to the Company's implementation of a $7.0 million
capital improvement program.
(2) The reduction in revenues and in-park spending per visitor in 1995
primarily reflects the effects of the sale of an additional 20,000 season
passes in 1995. Season pass sales generally decrease ticket revenue per
customer since season pass holders tend to visit the parks frequently. In
addition, although these patrons visit the park more often than other
customers, the Company believes that they generally spend less during each
visit.
STRATEGY. Management believes that as a result of its capital improvement
program to date, Frontier City has reached an appropriate level of attractions
for its market size. As a result, with maintenance-level capital expenditures in
the range of $300,000 to $400,000 per year and additions of new marketable
attractions every two or three years, the Company believes that the park should
be able to build upon its performance by achieving moderate attendance growth,
gradually increasing ticket prices and increasing in-park spending, as well as
improving operating margins as revenue increases. Prior to the 1996 season, the
Company added a go-cart track, and plans to add a children's activity area for
the 1997 season.
The Company conducts weekend activities in the off-season at Frontier City,
including special events such as Hallowscream and Oktoberfest. Management will
consider expanding these activities in the future (for example, by adding
Christmas events). The Company may also consider adding a campground and a
concert venue at the park.
Because of the geographic proximity of Frontier City and White Water Bay,
the Company seeks to take advantage of operational efficiencies and other tie-in
benefits at these parks. For example, the two parks are supervised by a single
general manager and are serviced by a single marketing and sales department. In
addition, the Company enhanced its joint marketing program for Frontier City and
White Water Bay with a revised season pass program for 1995 which offers
unlimited use of both facilities for a single price. As a result of this
simplified joint program, season passes sold for 1995 for Frontier City and
White Water Bay exceeded 36,000, as compared to 17,800 for 1994. Even after
price increases in 1996, season pass sales aggregated approximately 35,000
during that season.
78
<PAGE>
GEAUGA LAKE
OVERVIEW. Geauga Lake is a combination theme and water park, and is the
42nd largest theme park in the United States based on 1995 attendance of 1.1
million. Attendance for the 1996 season totaled 1.2 million. Geauga Lake is
located in Aurora, Ohio, 20 miles southeast of Cleveland and approximately 30,
60 and 120 miles, respectively, from Akron and Youngstown, Ohio and Pittsburgh,
Pennsylvania. This market provides the park with a permanent resident population
base of approximately 4.0 million people within 50 miles of the park and 7.4
million within 100 miles. According to the Nielsen Report, the Cleveland/Akron,
Youngstown and Pittsburgh markets are the number 13, number 95 and number 19
DMAs in the United States, respectively. Based upon in-park surveys,
approximately 63% of the visitors to Geauga Lake in 1996 resided within a
50-mile radius of the park, and 83% resided within a 100-mile radius.
The 257-acre property on which Geauga Lake is situated includes a 55-acre
spring-fed lake. The theme park itself presently occupies approximately 116
acres. There are approximately 87 acres of undeveloped land (of which
approximately 30 acres have the potential for further development). During the
1996 season, Geauga Lake featured over 60 "wet" and "dry" attractions, a tidal
wave pool, 38 game venues, 44 food outlets, 25 merchandise outlets, three
theaters and two arcades. Rainbow Island, the park's "dry" area for young
children, features 16 children's rides. Turtle Beach, a 1.4-acre water activity
area designed exclusively for children ages two through twelve, is located
adjacent to Rainbow Island.
The following is a list of certain of the major attractions at Geauga Lake:
<TABLE>
<CAPTION>
ATTRACTION DESCRIPTION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Mind Eraser............................................. Forward and backward roller coaster with five elements
The Double Loop......................................... Steel roller coaster
The Big Dipper.......................................... Wooden roller coaster
Texas Twister........................................... Top spin ride
The Raging Wolf Bobs.................................... 85-foot high wooden roller coaster
Stingray Slides......................................... 70-foot tall water slides
Grizzly Run............................................. River rapids ride
Euro Racers............................................. Grand prix raceway
The Wave................................................ Tsunami tidal wave pool
Neptune Falls........................................... 1,600-foot, four flumed water slide complex
The Rampage............................................. Two high-speed water slides
Turtle Beach............................................ Children's water park
Rainbow Island.......................................... Children's ride area
</TABLE>
Geauga Lake's principal competitors are Cedar Point located in Sandusky,
Ohio and Kennywood, located in Pittsburgh, Pennsylvania. These parks are located
approximately 90 miles and 120 miles, respectively, from Geauga Lake. There are
also three small water parks within a 50-mile radius of Geauga Lake, and Sea
World, a marine park, is on the other side of Geauga Lake. While Sea World does,
to some extent, compete with Geauga Lake for patrons, it is a complementary
attraction, and many patrons visit both facilities.
HISTORY AND RECENT OPERATING RESULTS. Geauga Lake has been in continuous
operation for over 100 years. The park was one of the first theme parks in the
United States to introduce a complete water entertainment complex within a
traditional theme park at no additional charge to visitors. From 1991 to 1995,
revenue and attendance at the park averaged approximately $23.1 million and 1.1
million, respectively, as compared to revenue for the first nine months of 1996
of $27.8 million and attendance of 1.2 million during the 1996 season.
79
<PAGE>
The following table sets forth certain information with respect to the
operations of Geauga Lake since 1991:
<TABLE>
<CAPTION>
THROUGH
SEPTEMBER 30,
--------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenues (000)............................... $ 22,341 $ 22,298 $ 24,097 $ 23,106 $ 23,781 $ 23,615 $ 27,834
Total attendance (000)............................. 1,140 1,107 1,177 1,068 1,075 1,064 1,171
Revenues per visitor............................... $ 19.60 $ 20.14 $ 20.47 $ 21.63 $ 22.12 $ 22.19 $ 23.76
In-park spending per visitor....................... $ 10.68 $ 11.08 $ 11.26 $ 11.88 $ 11.86 $ 11.97 $ 12.82
Number of operating days........................... 115 115 115 116 127 114 117
Capital expenditures
(project-year basis) (000)....................... $ 1,650 $ 1,050 $ 3,050 $ 913 $ 1,805 $ 1,805 $ 11,315
</TABLE>
STRATEGY. When it acquired the park, the Company believed Geauga Lake had
significant growth potential, certain of which was realized during the 1996
season. Prior to that season, the Company (i) added marketable new rides and
attractions; (ii) improved the quality of the park's daily live shows; (iii)
upgraded the quality of the merchandise outlets and restaurants; (iv) improved
the park's theming, signage and landscaping; and (v) implemented more
professional and creative marketing, sales and promotional programs, with an
emphasis on the park's improved product offerings. Among the major new
improvements for 1996 were a forward/backward roller coaster and a river rapids
ride. The Company spent approximately $11.3 million on capital improvements
prior to the 1996 season and expects to spend between $5.0 and $8.0 million on
such expenditures prior to the 1997 season. Planned 1997 improvements include a
free-fall ride and a five-story interactive water attraction.
In conjunction with 1996 improvements, the Company increased its marketing
and sales activities to corporate sponsors as well as to the public. In that
connection, the park has replaced its beverage sponsor with Coca-Cola. This
arrangement resulted in higher beverage sponsorship payments to the park, and
Coca-Cola agreed to an expanded level of advertising and sponsorship support,
including promotion of the park on Coke cans in multiple markets, including
Cleveland and Pittsburgh, for the entire season.
The Company plans to continue to take greater advantage of its location next
to Sea World of Ohio. As a unique destination marine park, Sea World, which is
located directly across Geauga Lake, is able to attract visitors from a much
wider geographical area than Geauga Lake. Historically, the two parks have not
participated in any co-marketing programs. During 1996, the Company and Sea
World conducted joint marketing programs in outer market areas, including
Detroit, involving joint television advertising of combination passes. In
addition, combination tickets were sold at each park. The Company plans to
continue and expand this joint marketing program for the 1997 season. To
increase attendance and revenue prior to Memorial Day and after Labor Day, the
Company expanded off-season special events such as Oktoberfest and Hallowscream.
The Company intends to develop Geauga Lake's 30 acres of unutilized land for
complementary uses. Lastly, as with the other parks acquired in the Funtime
Acquisition, the Company has bought out third-party game concessionaires who had
shared game revenue with the prior owners of the park. Given its historical
levels of attendance, the size of its market and the capital investment and
marketing programs planned at Geauga Lake, the Company believes that Geauga Lake
has the potential to reach annual attendance of at least 1.5 million within the
next three to five years.
80
<PAGE>
THE GREAT ESCAPE
OVERVIEW. The Company acquired The Great Escape on December 4, 1996. The
Great Escape, which opened in 1954, is a combination theme and water park
located off Interstate 87 in the Lake George resort area, 180 miles north of New
York City and 40 miles north of Albany. The park's primary market includes the
Lake George tourist population and the resident upstate New York and western New
England population. Official statistics indicate that the area had a visitor
population of over 7.5 million people in 1995, of which over 3.5 million were
overnight visitors, with an average length of stay of 4.3 days. This market
provides the park with a permanent resident population base of approximately 1.1
million people within 50 miles of the park and 3.3 million people within 100
miles. According to the Nielsen Report, the Albany market is the number 52 DMA
in the United States.
The Great Escape is located on a site of approximately 335 acres, with 100
acres currently used for park operations. Approximately 30 of the undeveloped
acres are suitable for park expansion. During the 1996 season, The Great Escape
had 33 adult and 12 children's rides, 30 food outlets, 18 merchandise outlets,
29 game venues and five theaters. In addition, The Great Escape professionally
produces live shows daily and holds a concert series each summer. Picnic grounds
are also available for family picnics and group outings.
The following is a list of certain of the major attractions at The Great
Escape:
<TABLE>
<CAPTION>
ATTRACTIONS DESCRIPTION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Comet................................................... Wooden roller coaster
Steamin' Demon.......................................... Looping steel roller coaster
Desperado............................................... Log flume ride
Giant Ferris Wheel...................................... Ferris wheel
Raging River............................................ River rapids ride
Banshee Plunge.......................................... Water tube slide
Blue Typhoon............................................ Water tube slide
Twister Falls........................................... Water tube slide
Black Cobra............................................. Wet/dry water slide
</TABLE>
The Great Escape's only significant direct competitor is Riverside, located
in Springfield, Massachusetts, approximately 150 miles from The Great Escape.
The Company is scheduled to acquire Riverside in late January 1997. See
"--Recent and Pending Acquisitions." In addition, there is a smaller water park
located in Lake George.
HISTORY AND RECENT OPERATING RESULTS. In late 1992, Mr. Wood reacquired the
park from International Broadcasting Company ("IBC") (to whom he had previously
sold the facility) out of IBC's bankruptcy proceedings. Since its reacquisition,
a water park component was added to The Great Escape, and the park has shown
steadily improving operating results, including attendance, per capita spending
and operating cash flow.
The following table sets forth certain information with respect to the
operations of The Great Escape since 1994:
<TABLE>
<CAPTION>
ELEVEN MONTHS
YEAR ENDED ENDED
OCTOBER 31, SEPTEMBER 30,
-------------------- --------------------
<S> <C> <C> <C> <C>
1994 1995 1995 1996
--------- --------- --------- ---------
Total revenues (000)............................................ $ 13,321 $ 14,360 $ 14,358 $ 15,070
Total attendance (000).......................................... 531 557 557 574
Revenues per visitor............................................ $ 25.09 $ 25.78 $ 25.78 $ 26.25
In-park spending per visitor.................................... $ 10.35 $ 10.36 $ 10.33 $ 10.46
Number of operating days........................................ 100 100 100 101
Capital expenditures (fiscal-year basis) (000).................. $ 2,284 $ 1,645 $ 1,615 $ 298
</TABLE>
81
<PAGE>
STRATEGY. While The Great Escape has shown solid performance, Premier
believes it can increase attendance and park-level operating cash flow through
the continued addition of attractions and the introduction of a more extensive
marketing strategy. Without upsetting a successful strategy, Premier intends to
selectively extend the park's operating hours beyond the current 6:00 p.m.
closing time and extend the season into October. In addition, Premier sees the
opportunity to increase revenue outlets through the park. In addition to the
park's traditional vacation customer, Premier intends to emphasize group sales,
as well as greater marketing in selected markets such as Albany to help drive
attendance increases. The Company expects to spend between $8.0 and $12.0
million on capital expenditures prior to the 1997 and 1998 seasons, including
the addition of a wave pool and other attractions.
RIVERSIDE
OVERVIEW. Riverside is a combination theme park and motor speedway, located
off Interstate 91 near Springfield, Massachusetts, approximately 95 miles west
of Boston. Riverside's primary market includes Springfield and western
Massachusetts, Hartford and western Connecticut, as well as portions of eastern
Massachusetts and eastern New York. This market provides the park with a
permanent resident population base of approximately 3.1 million people within 50
miles and 14.7 million people within 100 miles. According to the Nielsen Report,
the Springfield market is the number 102 DMA in the United States.
Riverside is comprised of approximately 160 acres, with 118 acres currently
used for park operations, 12 acres for a picnic grove and approximately 30
undeveloped acres. Riverside's Speedway is a multi-use stadium which includes a
one-quarter mile NASCAR-sanctioned short track for automobile racing which can
seat 6,200 for speedway events and 15,000 festival style for concerts. During
the 1996 season, Riverside had 26 adult rides, 25 children's rides, 20 food
outlets, 16 merchandise outlets and 32 game venues.
The following is a list of the major attractions at Riverside:
<TABLE>
<CAPTION>
ATTRACTIONS DESCRIPTION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Cyclone................................................. Wooden roller coaster
Colossus................................................ 150' ferris wheel
Thunderbolt............................................. Wooden roller coaster
Black Widow............................................. Looping steel coaster
Wild River Rapids....................................... Log flume ride
Swiss Sky Ride.......................................... Gondola ride
Carousel................................................ 1909 Antique Illions carousel
Monorail................................................ Elevated monorail
</TABLE>
Riverside's most significant competitor is expected to be Lake Compounce
located in Bristol, Connecticut, approximately 50 miles from Riverside. Lake
Compounce has not been in regular full-service operation for several years.
However, the prior owner of the park recently entered into a joint venture
relationship with an established park operator, and the park has received a
substantial investment of private and public funds. To a lesser extent,
Riverside competes with The Great Escape, the Company's park located in Lake
George, New York.
HISTORY AND RECENT OPERATING RESULTS. The park has been serving the
southern New England market for over 100 years. The park was purchased by Edward
Carroll, Sr. in 1940 and has been operated by his family since that date.
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The following table sets forth certain information (on a September 30 fiscal
year basis) with respect to the operations of Riverside since 1994:
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Total revenues (000)................................................... $ 19,281 $ 19,466 $ 18,846
Total attendance (000)................................................. 862 858 750
Revenue per visitor.................................................... $ 22.37 $ 22.69 $ 25.13
In-park spending per visitor........................................... $ 10.82 $ 10.75 $ 11.65
Number of operating days............................................... 147 147 147
Capital expenditures (fiscal-year basis) (000)......................... $ 466 $ 328 $ 691
</TABLE>
STRATEGY. Since the late 1980s, the park has suffered from limited
available funds for investment and a lack of creative marketing. The Company
believes that, although Riverside is outfitted with a large number of rides and
revenue outlets, it has lacked the investment and marketing needed to drive
attendance. The Company believes that by adding marketable rides and
attractions, such as a suspended looping coaster similar to Adventure World's
Mind Eraser, and by initiating a superior marketing campaign, it can solidify
the park's attendance base and expand into other markets, such as additional
portions of eastern Massachusetts, as well as achieve greater penetration in
Connecticut. In addition, management believes that adding water elements to the
park could substantially increase its appeal. These steps will be particularly
important as significant investments are made to Lake Compounce.
The closing of the Riverside Acquisition is scheduled to occur in early
February 1997 by which time Premier will not be able to make all of its desired
improvements for the 1997 season, although the Company intends to add a
suspended coaster, address deferred maintenance and initiate an aggressive
marketing campaign. Further improvements will be made for the 1998 season. In
addition, although the park has generated revenues of between $18-$20 million
during 1994 through 1996, the park has generated EBITDA margins during these
years of only 4%-8%. The Company believes that opportunities exist to
significantly improve these margins.
WATERWORLD
OVERVIEW. Waterworld consists of two water parks (Waterworld USA/Concord
and Waterworld USA/ Sacramento) and one family entertainment center (Paradise
Island).
Waterworld USA/Concord is located in Concord, California, in the East Bay
area of San Francisco. The park's primary market includes nearly all of the San
Francisco Bay area. This market provides the park with a permanent resident
population base of approximately 6.7 million people within 50 miles of the park
and 10.0 million people within 100 miles. Water parks by their nature tend to
draw patrons from a smaller radius than theme park. According to the Nielsen
Report, the San Francisco Bay market is the number 5 DMA in the United States.
Waterworld USA/Sacramento is located on the grounds of the California State
Fair in Sacramento, California. Also located on the fair grounds is Paradise
Island, the Company's family entertainment center. The facilities' primary
market includes Sacramento and the immediate surrounding area. This market
provides the park with a permanent resident population base of approximately 2.6
million people within 50 miles of the park and 9.7 million people within 100
miles. According to the Nielsen Report, the Sacramento market is the number 21
DMA in the United States.
Both facilities are leased under long-term ground leases. The Concord site
includes approximately 29 acres, with 24 acres currently used for park
operations. The Sacramento facility is located on approximately 20 acres, all of
which is used for the park and the family entertainment center. During the 1996
season, Waterworld had 13 adult and 16 children's rides and attractions, 13 food
outlets, two merchandise outlets and three game venues. The family entertainment
center, which operates year-round, features six thrill rides, laser tag, a rock
climbing wall, batting cage, two miniature golf courses, two go-cart tracks,
arcade
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<PAGE>
games and other attractions. Picnic grounds at both facilities are also
available for family picnics and group outings.
The following is a list of certain of the major attractions at Waterworld:
CONCORD
<TABLE>
<CAPTION>
ATTRACTIONS DESCRIPTION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Breaker Beach........................................... Wave pool
Kaanapali Kooler........................................ 1,200 foot lazy river
Typhoon................................................. Four 250 foot open and closed tube slides
Banzai.................................................. Six body slides
Cliffhanger............................................. Two drop-out slides
Diablo Falls............................................ Two shotgun slides
Wildwater Kingdom....................................... Water activity area
Treasure Island......................................... Children's activity area
</TABLE>
SACRAMENTO
<TABLE>
<CAPTION>
ATTRACTIONS DESCRIPTION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Dew Lagoon.............................................. Wave pool
Calypso Cooler.......................................... 800 foot lazy river
Cannon Ball Falls....................................... Two shotgun slides
Windjammer Pool......................................... Lap pool
Tadpool................................................. Children's pool
Trinidad Falls.......................................... Four 300 foot open and closed tube slides
Cobra................................................... Two 250 foot corkscrew slides
Cliffhanger............................................. Two drop-out slides
The Hurricane........................................... Tube slide
Surf Hill............................................... Children's slide
Treasure Island......................................... Children's activity area
Paradise Island......................................... Family entertainment center
</TABLE>
Concord's only significant direct competitor is Raging Waters located in San
Jose, approximately 100 miles from that facility. Sacramento's only significant
competitor is Sunsplash located in the north east of Sacramento, approximately
40 miles from that facility. Paradise Island's significant direct competitors
are Golfland which is adjacent to Sunsplash, Wooz Family Entertainment Center,
located in Vacaville, 30 miles from Sacramento and Scadia Family Fun Center
located in Fairfield, 45 miles from Sacramento.
HISTORY AND RECENT OPERATING RESULTS. The Concord park opened in May 1995
and was constructed by the former owners at an aggregate cost of approximately
$9.2 million. The Sacramento facility opened in 1986 and Paradise Island opened
during 1993 and was constructed at a cost of $2.6 million.
The following table sets forth certain information with respect to the
operations of Waterworld USA/ Concord since 1995, the year the park opened:
<TABLE>
<CAPTION>
THROUGH SEPTEMBER
30,
--------------------
1995 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Total revenues (000)........................................................................... $ 5,791 $ 5,647 $ 5,827
Total attendance (000)......................................................................... 331 331 310
Revenues per visitor........................................................................... $ 17.50 $ 17.06 $ 18.80
In-park spending per visitor................................................................... $ 6.40 $ 6.28 $ 6.32
Number of operating days....................................................................... 110 108 117
Capital expenditures (calendar-year basis) (000)............................................... $ 7,383 $ 7,265 $ 1,331
</TABLE>
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<PAGE>
The following table sets forth certain information with respect to the
operations of Waterworld USA/ Sacramento since 1993.
<TABLE>
<CAPTION>
THROUGH SEPTEMBER
30,
--------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Total revenues (000)(1).......................................... $ 4,555 $ 5,938 $ 5,812 $ 5,338 $ 5,826
Total attendance (000)........................................... 258 280 271 271 294
Revenues per visitor(2).......................................... $ 13.71 $ 13.87 $ 14.05 $ 14.78 $ 14.30
In-park spending per visitor..................................... $ 5.00 $ 5.02 $ 5.31 $ 5.31 $ 5.22
Number of operating days......................................... 111 106 109 109 112
Capital expenditures (calendar-year basis) (000)................. $ 70 $ 225 $ 281 $ 231 $ 373
</TABLE>
- ------------------------
(1) Excludes fee income from management of Concord.
(2) Revenues per visitor do not include revenue of Paradise Island (a
fee-per-attraction entertainment center) of $1,218,000, $2,054,000,
$2,004,000, $1,333,000, and $1,621,000 for the years ended December 31,
1993, 1994, and 1995 and for the nine months ended September 30, 1995 and
1996, respectively.
STRATEGY. Management believes that the parks have growth potential in
attendance and operating cash flow. Stand-alone water parks are by their nature
less capital intensive than theme parks. The Company plans to add a major water
attraction (costing in the range of between $1.0 million and $1.5 million) at
each of the Waterworld parks in the next two to three years. Thereafter,
management expects that Waterworld will require minimal on-going capital
expenditures of approximately $200,000 to $300,000 per year and the addition of
a new attraction every three or four years.
WHITE WATER BAY
OVERVIEW. White Water Bay is a tropical themed water park located along
Interstate 40 in southwest Oklahoma City, Oklahoma. The park is the 15th largest
water park in the United States based on 1995 attendance of approximately
327,000. The park's primary market includes the greater Oklahoma City
metropolitan area. According to the Nielsen Report, Oklahoma City is the number
43 DMA in the United States. This market provides the park with a permanent
resident population base of approximately 1.2 million people within 50 miles of
the park and 2.4 million people within 100 miles. White Water Bay also attracts
group sales from groups such as churches and other civic organizations. Based
upon in-park surveys, approximately 87% of the visitors to White Water Bay in
1996 resided within a 50-mile radius of the park, and 92% resided within a
100-mile radius.
The Company owns a site of 22 acres, all of which are currently used for
park operations. White Water Bay features a 500,000 gallon wave pool, an eight
story multiple slide ride, a 450,000 gallon activity pool, nine slides, a "lazy
river" ride, a children's activity pool and four volleyball courts. White Water
Bay also has a full service restaurant and two snack stands. Raft and locker
rentals are also available. In addition, the park has picnic grounds for family
and group outings.
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<PAGE>
The following is a list of certain of the major attractions at White Water
Bay:
<TABLE>
<CAPTION>
ATTRACTION DESCRIPTION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
White Water Bay......................................... Wave pool
Castaway Creek.......................................... Lazy river
Acapulco Cliff Dive..................................... Speed slide
Bermuda Triangle........................................ Multiple slide complex
Shipwreck Island........................................ Activity pool
Kid's Cove.............................................. Kiddie pool
Tad Pool................................................ Kiddie pool
Black Beard's Revenge................................... Water slide
The Rapids.............................................. Splash pool ride
Big Kahuna.............................................. White water rafting ride
Swashbuckler Flumes..................................... Slide complex
</TABLE>
There are no other water parks located in Oklahoma City and, therefore, the
Company's primary competition is from other outdoor water activities, such as
local swimming pools.
HISTORY AND RECENT OPERATING RESULTS. White Water Bay was originally opened
in 1981 and was acquired by the Company in 1991. While the park was fairly
well-developed and maintained under its prior ownership, the Company has
expanded the park with the addition of a major white water raft ride, two speed
slides, a full service restaurant and a picnic pavilion. Since the Company's
acquisition of the park in 1991, the park has achieved average annual attendance
of approximately 295,000 and average annual revenues of approximately $3.3
million.
The following table sets forth certain information with respect to the
operations of White Water Bay since 1991:
<TABLE>
<CAPTION>
THROUGH
SEPTEMBER 30,
--------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1991 1992(1) 1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------- --------- ---------
Total revenues (000)....................... $ 3,335 $ 3,001 $ 3,417 $ 3,176 $ 3,475 $ 3,398 $ 3,313
Total attendance (000)..................... 320 257 295 277 327 327 314
Revenues per visitor....................... $ 10.43 $ 11.68 $ 11.60 $ 11.47 $ 10.64(2) $ 10.40 $ 10.55
In-park spending per visitor............... $ 3.02 $ 3.33 $ 3.35 $ 3.15 $ 3.14 $ 3.14 $ 3.55
Number of operating days................... 103 110 102 102 97 97 100
Capital expenditures (project-year basis)
(000).................................... $ 423 $ 202 $ 202 $ 596(3) $ 56 $ 56 $ 12
</TABLE>
- ------------------------
(1) Although each of the Company's parks was adversely affected by inclement
weather in 1992, White Water Bay, as a water park, was particularly affected
by such weather. See "Risk Factors -- Effects of Inclement Weather; Seasonal
Fluctuations of Operating Results."
(2) The reduction in revenues per visitor in 1995 primarily reflects the
effects of the sale of an additional 20,000 season passes in 1995. Season
pass sales generally decrease ticket revenue per customer since season pass
holders tend to visit the parks frequently.
(3) Of such amount, $150,000 was funded by Pepsi in connection with a
sponsorship arrangement.
STRATEGY. Management expects that White Water Bay will require minimal
on-going capital expenditures of up to approximately $75,000 per year and the
addition of a new attraction every three or four years. Through this strategy,
the Company believes that the park should generate a consistent annual
attendance in the range of 280,000 to 320,000. In addition, White Water Bay
expects to continue to benefit from the joint marketing initiatives with
Frontier City described above.
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<PAGE>
WYANDOT LAKE
OVERVIEW. Wyandot Lake, which has 13 water rides, is the 12th largest water
park in the United States based on 1995 attendance of approximately 370,000.
Attendance for the 1996 season totaled 396,000. The park also has 18 "dry"
rides. Wyandot Lake is located just outside of Columbus, Ohio, adjacent to the
Columbus Zoo on property sub-leased from the Columbus Zoo. The park's primary
market includes the Columbus metropolitan area and other central Ohio towns.
This market provides the park with a permanent resident population base of
approximately 2.0 million people within 50 miles of the park and approximately
6.4 million people within 100 miles. The Columbus market, according to the
Nielsen Report, is the number 34 DMA in the United States. Based on in-park
surveys, approximately 82% of the visitors to Wyandot Lake in 1996 resided
within a 50-mile radius of the park, and 92% resided within a 100-mile radius.
The Company leases from the Columbus Zoo the land, the buildings and several
rides which existed on the property at the time the lease was entered into in
1983. The current lease expires in 1998 and the Company has two five-year
renewal options. The land leased by Wyandot Lake consists of approximately 18
acres. The park shares parking facilities with the Columbus Zoo. Wyandot Lake
features a variety of "wet" and "dry" attractions, including a "wet" and "dry"
area for young children.
The following is a list of certain of the major attractions at Wyandot Lake:
<TABLE>
<CAPTION>
ATTRACTION DESCRIPTION
- ------------------------------------------------------------ ---------------------------------------------------
<S> <C>
Christopher's Island Discovery Treehouse.................... Five-story family interactive water attraction
Zuma Falls.................................................. Twin passenger tube slide
Parrot Beach................................................ Kids water attraction
Jet Stream.................................................. Twin passenger tube slide
Canoochee Creek............................................. Adult water attraction
Buccaneer Bay............................................... Children's water attraction
Phantom Tunnel Hydro Tube................................... A 300-foot enclosed water slide
Wild Rage................................................... 70-foot water slide
Star Fish Ferris Wheel...................................... A 52-foot high ferris wheel
The Wild Tide Wave Pool..................................... 30,000 sq. foot tidal wave pool
Sea Dragon Roller Coaster................................... Small wooden roller coaster
Water Coil.................................................. A two-flumed water slide
Uncle Al's Treehouse........................................ Children's playground
</TABLE>
Wyandot Lake's direct competitors are King's Island and The Beach, each
located in Cincinnati, Ohio, and Cedar Point, located in Sandusky, Ohio. These
three parks are each located approximately 100 miles from Wyandot Lake. Although
the Columbus Zoo is located adjacent to the park, it is a complementary
attraction, with many patrons visiting both facilities.
HISTORY AND RECENT OPERATING RESULTS. Wyandot Lake has been in operation
since 1981. From 1991 to 1995, revenue and attendance at the park averaged
approximately $4.4 million and 359,000, respectively. During the first nine
months of 1996, revenue totaled $5.9 million and attendance for 1996 aggregated
396,000. The Company believes that under prior ownership the park suffered from
a lack of capital investment in marketable rides and attractions and creative
marketing. This provides a significant opportunity for improved performance
under the Company's management.
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<PAGE>
The following table sets forth certain information with respect to
operations of Wyandot Lake since 1991:
<TABLE>
<CAPTION>
THROUGH
SEPTEMBER 30,
--------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenues (000)...................... $ 4,000 $ 3,830 $ 4,755 $ 4,597 $ 5,059 $ 4,919 $ 5,889
Total attendance (000).................... 350 324 388 361 370 349 377
Revenues per visitor...................... $ 11.43 $ 11.82 $ 12.26 $ 12.73 $ 13.67 $ 14.10 $ 15.62
In-park spending per visitor.............. $ 5.02 $ 5.20 $ 5.17 $ 5.27 $ 5.26 $ 5.72 $ 6.49
Number of operating days.................. 101 116 111 111 132 108 110
Capital expenditures (project-year basis)
(000)................................... $ 450 $ 610 $ 276 $ 556 $ 155 $ 155 $ 2,056
</TABLE>
- ------------------------
STRATEGY. The Company believes that Wyandot Lake has significant growth
potential. Of its capital expenditure budget for 1996, the Company spent
approximately $2.1 million on Wyandot Lake and the Company is considering
spending up to $1.5 million on this facility for the 1997 season to add a
children's area.
The Company implemented aggressive marketing and sales activities for the
1996 season both to corporate sponsors and to the general public to highlight
these park upgrades. In that connection, Coca-Cola became a sponsor of the park
for 1996, which resulted in higher beverage sponsorship revenue and expanded
promotional and marketing support for the park. The Company also expects Wyandot
Lake to benefit from the $75 million planned expansion of the Columbus Zoo
located adjacent to the park. The Company is currently discussing with the Zoo
the addition of five to ten acres to Wyandot Lake which, if obtained, will
facilitate a significant expansion of the existing park. In an effort to attract
visitors going to the Columbus Zoo, Wyandot Lake participates in joint local
advertising programs with the Columbus Zoo and is implementing other marketing
programs to capitalize on the park's close proximity to the Zoo. As with the
other acquired parks, the Company will seek to add special events.
MARKETING AND PROMOTION
The Company attracts visitors through multi-media marketing and promotional
programs for each of its parks. These programs are tailored to address the
different characteristics of their respective markets and to maximize the impact
of specific park attractions and product introductions. All marketing and
promotional programs are updated or completely revamped each year to address new
developments. Marketing programs are generally initiated at the park level and
supervised by the Company's Vice President for Marketing, with the assistance of
the Company's senior management and national advertising agency. During the
three years ended December 31, 1995 and the nine-months ended September 30,
1996, the Company incurred advertising expense of approximately $2.8 million,
$3.7 million, $5.7 million (including approximately $1.5 million expended with
respect to the parks acquired in the Funtime Acquisition) and $9.0 million,
respectively. During 1993 and 1994, Funtime incurred approximately $5.1 million
and $5.2 million, respectively, in such expense.
The Company believes that the local orientation of its marketing programs is
a key ingredient to successfully promoting its parks. For example, Cal Ripken,
Jr., the all-star shortstop for the Baltimore Orioles, serves as official
spokesperson for Adventure World, making numerous appearances in radio and
television commercials, and Olympic gymnast Shannon Miller, an Oklahoma City
resident, has opened rides at White Water Bay. The Company also develops
partnership relationships with well-known national and regional sponsors to
supplement its advertising efforts and to provide attendance incentives in the
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<PAGE>
form of discounts and/or premiums. Presented below is a selection of some of
Premier's most recognized corporate sponsors and marketing partners:
<TABLE>
<S> <C>
7-Eleven Kodak
Blockbuster Video McDonald's
Coca-Cola Pepsi
Columbus Zoo Safeway Supermarkets
Domino's Sea World of Ohio
Friendly's Sherwin Williams
Giant Eagle Supermarkets Taco Bell
Giant Food Supermarkets TCBY
John Deere TOPS Supermarkets
KFC Wendy's
</TABLE>
The Company has also arranged for popular local radio and television
programs to be filmed or broadcast live from its parks. The Company's Friday
evening teen dances at Frontier City are broadcast as thirty-minute shows with
an MTV-style format by a Fox Television affiliate on Saturday evenings. These
strategies have been well received in local markets, and have been an integral
element of Premier's growth.
Group sales and pre-sold tickets provide the Company with a consistent and
stable base of attendance, representing over 38.4% of aggregate attendance at
the six parks owned prior to the Recent Acquisitions in 1996. Each park has a
group sales and pre-sold ticket manager and a well-trained sales staff dedicated
to selling multiple group sales and pre-sold ticket programs through a variety
of methods, including direct mail, telemarketing and personal sales calls.
Premier has increased its group sales and pre-sold ticket business at the three
parks owned prior to the Funtime Acquisition by approximately 43% from 1992 to
the nine months ended September 30, 1996. During 1996, group sales and pre-sold
tickets at the three parks acquired in the Funtime Acquisition, increased 12%
over 1995 levels. The Company believes that similar opportunities exist at the
parks acquired in the Recent Acquisitions.
The Company has also developed effective programs for marketing season pass
tickets. Season pass sales establish a solid attendance base in advance of the
season, thus reducing exposure to inclement weather. Additionally, season pass
holders often bring paying guests and generate "word-of-mouth" advertising for
the parks. Management believes that incremental attendance from season pass
sales has a positive effect on operating results. The increased in-park spending
which results from season passes is not offset by incremental operating
expenses, since such expenses are relatively fixed during the operating season.
Since its acquisition of Adventure World in 1992, the Company has increased
season passes sold at the park from approximately 2,000 in 1991 to over 25,000
in 1996. In 1995, the Company revised its joint marketing program for Frontier
City and White Water Bay, and season passes sold at these parks increased from
approximately 17,800 in 1994 to approximately 35,000 in 1996. During 1996, 16.5%
of visitors to the Company's six parks utilized season passes.
A significant portion of the Company's attendance is attributable to the
sale of discount admission tickets. The Company offers discounts on season and
multi-visit tickets, tickets for specific dates and tickets to affiliated groups
such as businesses, schools and religious, fraternal and similar organizations.
As with season passes, management believes that incremental attendance from
discount sales activities has a positive effect on operating results. The
increased in-park spending which results from such attendance is not offset by
incremental operating expenses, since such expenses are relatively fixed during
the operating season. In 1996, approximately 75.7% of patrons at the Company's
six parks were admitted at a discount rate and for the nine months ended
September 30, 1996, approximately 55.2% of the Company's revenue was
attributable to in-park spending.
The Company also implements promotional programs as a means of targeting
specific market segments and geographic locations not reached through its group
or retail sales efforts. The promotional programs utilize coupons, sweepstakes,
reward incentives and rebates to attract additional visitors. These
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<PAGE>
programs are implemented through direct mail, telemarketing, direct response
media, sponsorship marketing and targeted multi-media programs. The special
promotional offers are usually for a very limited period of time and offer a
reduced admission price or provide some additional incentive to purchase a
ticket, such as combination tickets with a complementary location.
PARK OPERATIONS
The Company is headquartered in Oklahoma City, Oklahoma and New York, New
York and, following the Riverside Acquisition, will operate in nine
geographically diverse markets: Baltimore/ Washington, D.C., Maryland; Buffalo/
Rochester; Cleveland; Columbus, Ohio; Oklahoma City; Denver; Sacramento and the
San Francisco Bay area; and Lake George/Albany; and Springfield, Massachusetts.
Each park is managed by a general manager who reports to the Company's Chief
Operating Officer and is responsible for all operations and management of the
individual park. Advertising, ticket sales, community relations and hiring and
training of personnel are the responsibility of individual park management in
coordination with corporate support teams. The Company has systems and controls
in place for the daily tracking and monitoring of revenues and expenses
associated with ticket sales and in-park spending.
Each of the Company's parks is managed by a full-time, on-site management
team under the direction of the general manager. Each such management team
includes senior personnel responsible for operations and maintenance, marketing
and promotion, human resources and merchandising. Park management compensation
structures are designed to provide incentives (including stock options and cash
bonuses) for individual park managers to execute the Company's strategy and to
maximize revenues and operating cash flow at each park. The Company's seven
general managers have an aggregate of approximately 140 years experience in the
industry, including approximately 70 years at the Company's parks.
Each of the Company's parks is operated, to the extent practicable, as a
separate operating division of the Company in order to maximize local marketing
opportunities and to provide flexibility in meeting local needs. For example,
local park management recommends local advertising focus, annual operating
schedules and application of available capital.
The Company maintains trained security forces to administer the parks' crowd
control policies and guest screening procedures and to enforce the parks' rules
relating to behavior of guests in the parks. The specific policies and practices
of the security forces are dictated on a park-by-park basis by crowd composition
and operating experience.
The Company's parks are generally open daily from Memorial Day through Labor
Day. In addition, most of the Company's parks are open during weekends prior to
and following their daily seasons, primarily as a site for theme events (such as
Hallowscream and Oktoberfest). Typically, the parks charge a basic daily
admission price, which allows unlimited use of all rides and attractions,
although in certain cases special rides and attractions require the payment of
an additional fee. The Company's family entertainment center is open year-round
and does not charge an admission price.
COMPETITION
The Company's parks compete directly with other theme, water and amusement
parks and indirectly with all other types of recreational facilities and forms
of entertainment within their market areas, including movies, sports attractions
and vacation travel. The Company's family entertainment center competes directly
with all types of recreational facilities and forms of entertainment within its
market. Accordingly, the Company's business is and will continue to be subject
to factors affecting the recreation and leisure time industries generally, such
as general economic conditions and changes in discretionary consumer spending
habits. Within each park's regional market area, the principal factors affecting
competition include location, price, the uniqueness and perceived quality of the
rides and attractions in a particular park, the atmosphere and cleanliness of a
park and the quality of its food and entertainment. The Company believes its
parks feature a sufficient variety of rides and attractions, restaurants and
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<PAGE>
merchandise outlets to enable it to compete effectively. Certain of the
Company's direct competitors have substantially greater financial resources than
the Company.
CAPITAL IMPROVEMENTS
The Company regularly makes capital investments in the development and
implementation of new rides and attractions at its parks. The Company believes
that the introduction of new rides is an important factor in promoting each of
the parks in order to achieve market penetration and encourage longer visits,
which lead to increased attendance and in-park spending. In addition, the
Company generally adds theming to acquired parks and continuously enhances the
theming and landscaping of its existing parks in order to provide a complete
family oriented entertainment experience. Capital expenditures are planned on a
seasonal basis with most expenditures made during the off-season.
The Company's level of capital expenditures are directly related to the
optimum mix of rides and attractions given park attendance and market
penetration. These targeted expenditures are intended to drive significant
attendance growth at the parks and to provide an appropriate complement of
entertainment value, depending on the size of a particular market. As an
individual park begins to reach an appropriate attendance penetration for its
market, management generally plans a new ride or attraction every three to four
years in order to enhance the park's entertainment product.
The Company divides its capital expenditures into three categories: capital
expenditures for marketable attractions which are primarily for new rides and
attractions; retail projects capital expenditures which are associated with
increasing in-park spending; and asset upgrades which are capital expenditures
made to significantly improve, as opposed to maintain, an existing asset.
Expenditures for materials and services associated with maintaining assets, such
as painting and inspecting rides are expensed as incurred and therefore are not
included in capital expenditures.
MAINTENANCE AND INSPECTION
The Company's rides are inspected daily by maintenance personnel during the
operating season. These inspections include safety checks as well as regular
maintenance and are made through both visual inspection of the ride and test
operation. Senior management of the Company and the individual parks evaluate
the risk aspects of each park's operation. Potential risks to employees and
staff as well as to the public are evaluated. Contingency plans for potential
emergency situations have been developed for each facility. During the
off-season, maintenance personnel examine the rides and repair, refurbish and
rebuild them where necessary. This process includes x-raying and magnafluxing (a
further examination for minute cracks and defects) steel portions of certain
rides at high-stress points. The Company has approximately 130 full-time
employees who devote substantially all of their time to maintaining the theme
parks and their rides and attractions.
In addition to the Company's maintenance and inspection procedures, the
Company's liability insurance carrier performs an annual inspection of each park
and all attractions and related maintenance procedures. The result of insurance
inspections are written evaluation and inspection reports, as well as written
suggestions on various aspects of park operations. State inspectors also conduct
annual ride inspections before the beginning of each season. Other portions of
each park are also subject to inspections by local fire marshals and health and
building department officials. Furthermore, the Company uses Ellis & Associates
as water safety consultants at its parks in order to train life guards and audit
safety procedures.
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<PAGE>
SEASONALITY
The operations of the Company are highly seasonal, with more than 90% of
park attendance occurring in the second and third calendar quarters of each year
and the most active period falling between Memorial Day and Labor Day. The great
majority of the Company's revenues are collected in the second and third
quarters of each year while most expenditures for capital improvements and
significant maintenance are incurred when the parks are closed in the first and
fourth quarters. See "Risk Factors -- Effects of Inclement Weather; Seasonal
Fluctuations of Operating Results" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
GOVERNMENT REGULATION
Operations at the parks are subject to certain local, state and federal
governmental regulations including, without limitation, labor, health, safety
and minimum wage regulations applicable to theme park operations, and local and
state regulations applicable to restaurant operations at the park. The Company
believes that it is in substantial compliance with applicable regulatory
standards and, although no assurance can be given, it does not foresee the need
for any significant expenditures in this area in the near future.
ENVIRONMENTAL REGULATION
The Company's operations are subject to increasingly stringent federal,
state and local environmental laws and regulations governing water discharges,
air emissions, soil contamination, wetlands, the maintenance of underground
storage tanks and the disposal of waste and hazardous materials. The Company
believes that it is in substantial compliance with all such laws and
regulations. At Geauga Lake, the Company is conducting groundwater monitoring
around a former on-site landfill under the supervision of the Ohio Environmental
Protection Agency. The Company is awaiting administrative action on its request
for curtailment of the scope and duration of this monitoring, based on the
sampling results to date. The Company does not anticipate that it will be
required to incur any material costs in connection with the monitoring program
or any other post-closure activities.
Elitch Gardens is located on property that was used as a manufactured gas
plant by the Public Service Company of Colorado ("PSC"), a railroad yard for
Burlington Northern Railroad, and an auto shredding operation. Although these
operations were discontinued over 30 years ago, residual contamination related
to those operations remains in the soil and groundwater beneath the property.
Specifically, environmental investigations have documented the presence of trash
fill material, metals, hydrocarbon-contaminated soils and residual coal tars at
the site.
At the time of the construction of the park, Elitch Gardens Company entered
into a consent agreement with the Colorado Department of Health which specifies
the soil and groundwater management and monitoring requirements for the site
(the "Consent Agreement"). The Consent Agreement also contains a limited release
and covenant not to sue by the State of Colorado with respect to then-known
environmental conditions, subject to several conditions and exceptions. In
addition, the United States Environmental Protection Agency has reviewed the
Consent Agreement and stated that its intervention under applicable Federal
environmental statutes would not be warranted, assuming compliance with the
Consent Agreement and barring a change in, or discovery of new information
about, environmental conditions relating to the property.
At the closing of the Denver Acquisition, PSC and Trillium Corporation
(successor-in-interest to Burlington Northern Railroad) consented to the
assignment to Premier by Elitch Gardens Company of its rights under an
allocation agreement (the "Allocation Agreement"). Under the Allocation
Agreement, PSC and Trillium agreed to pay for 25 years, commencing in 1994, all
Contamination Expenses (as defined) with respect to the site, except that
Premier will be responsible, under certain circumstances, for a maximum of
$100,000 of such Contamination Expenses and, in all cases, for the costs of
groundwater
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monitoring (which aggregated approximately $10,000 and $4,000 in 1995 and 1996,
respectively) required under the Consent Agreement. The Company does not
anticipate that it will be required to incur any material costs in connection
with the environmental condition of this site.
EMPLOYEES
The Company employs approximately 430 full-time employees (including
employees of Riverside) and approximately 8,800 seasonal employees during the
operating season. In this regard, the Company competes with other local
employers for qualified student and other candidates on a season-by-season
basis. As part of the seasonal employment program, the Company employs a
significant number of teenagers, which subjects the Company to child labor laws.
The Company is not subject to federal or certain applicable state minimum wage
rates in respect of its seasonal employees. However, the recent increase in the
federal or any applicable state minimum wage rate could result over time in
increased compensation expense for the Company as it relates to these employees
as a result of competitive factors.
None of the employees of the Company are represented by a union or other
collective bargaining unit. The Company has not experienced any strikes or work
stoppages by its employees, and the Company considers its employee relations to
be good.
INSURANCE
The Company maintains insurance of the type and in amounts that it believes
are commercially reasonable and that are available to businesses in its
industry. The Company maintains multi-layered general liability policies that
provide for excess liability coverage of up to $25.0 million per occurrence. By
virtue of self-insured retention limits, the Company is required to pay the
first $50,000 of loss per occurrence. The Company also maintains fire and
extended coverage, workers' compensation, and other forms of insurance typical
to businesses in its industry. The fire and extended coverage policies insure
the Company's real and personal properties (other than land) against physical
damage resulting from a variety of hazards.
LEGAL PROCEEDINGS
The nature of the industry in which the Company operates tends to expose it
to claims by visitors for injuries. Historically, the great majority of these
claims have been minor. While the Company believes that it is adequately insured
against the claims currently pending against it and any potential liability, if
the number of such events resulting in liability significantly increased, or if
the Company becomes subject to damages that cannot by law be insured against,
such as punitive damages, there may be a material adverse effect on its
operations.
In 1995, an action titled ROBERT W. FREEMAN D/B/A ROBERT FREEMAN ASSOCS. V.
RIVERSIDE PARK ENTERPRISES, INC., ET. AL., Civ. No 95-1446 was brought in
Superior Court for Hampden County, Massachusetts against Riverside Park
Enterprises, Inc., Riverside Park Food Services, Inc., Stuart Amusement Company,
Inc., and Edward J. Caroll, Jr., the controlling stockholder of Riverside. The
plaintiff seeks damages of approximately $7.5 million in connection with
management and consulting services he allegedly provided to Riverside from 1985
to 1994. Defendants are vigorously contesting the action, both factually and
legally, and have asserted a counterclaim alleging that the plaintiff has failed
to repay a loan in the amount of $155,000. The stock purchase agreement relating
to the Riverside Acquisition provides that the sellers will, jointly and
severally, indemnify the Company in an amount not to exceed $10.0 million with
respect to certain matters, including any loss arising out of this action.
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MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth certain information with respect to the
directors, executive officers and key employees of the Company or its
subsidiaries.
<TABLE>
<CAPTION>
AGE AT
SEPTEMBER 30,
NAME 1996 POSITION WITH COMPANY
- --------------------------------- ----------------- ---------------------------------------------------------------
<S> <C> <C>
Kieran E. Burke.................. 39 Chairman and Chief Executive Officer; Director
Gary Story....................... 41 President and Chief Operating Officer; Director
James F. Dannhauser.............. 44 Chief Financial Officer; Director
James C. Bouy.................... 54 Vice President, General Manager, Elitch Gardens
Hue W. Eichelberger.............. 38 Vice President, General Manager, Adventure World
Jeffrey A. Lococo................ 40 Vice President, General Manager, Geauga Lake
Richard A. McCurley.............. 37 Vice President, General Manager, Waterworld
Bradley Y. Paul.................. 49 Vice President, General Manager, Darien Lake
Traci E. Blanks.................. 35 Vice President of Marketing
David Thomas..................... 38 Vice President of Entertainment
Richard R. Webb.................. 40 Vice President of Accounting
Richard A. Kipf.................. 62 Vice President of Administration, Corporate Secretary
Paul A. Biddelman................ 50 Director
Michael E. Gellert............... 65 Director
Jack Tyrrell..................... 49 Director
</TABLE>
Kieran E. Burke has served as Chief Executive Officer and a Director of the
Company since October 1989 and Chairman of the Board since June 1994. From 1989
through June 1994, he was President of Premier. Mr. Burke also serves as a
director of Blue Ridge Real Estate Company and Big Boulder Corporation. Mr.
Burke was an investment banker prior to becoming President of Premier. Mr. Burke
is a member of the board of directors of the International Association of
Amusement Parks & Attractions ("IAAPA").
Gary Story has served as President and a Director of the Company since June
1994 and as Chief Operating Officer since January 1992. From January 1992
through June 1994, he also served as Premier's Executive Vice President. Prior
to that time, he had been General Manager of Frontier City for more than five
years. From 1983 through 1984, Mr. Story served as General Manager of Luna Park,
an amusement park in Sydney, Australia, during its redevelopment as a theme park
and from 1981 through 1983 he served as General Manager of Diversiones del
Reino, an amusement park in Mexico City. From 1972 through 1981, Mr. Story
served in various capacities with Six Flags Corporation. Mr. Story is a former
member of the board of directors of IAAPA.
James F. Dannhauser became Chief Financial Officer of the Company in October
1995 and has served as a Director of Premier since December 1992. From 1990
through June 1996, Mr. Dannhauser was a managing director of Lepercq, de
Neuflize & Co. Incorporated, an investment banking firm ("Lepercq"). Mr.
Dannhauser is a member of the board of directors of Lepercq.
James C. Bouy served as Vice President and General Manager of Geauga Lake
since 1994 and became General Manager of Elitch Gardens following the Denver
Acquisition. Prior thereto, from 1992 through 1994, he served as Vice President
and General Manager of Kennywood Park in Pittsburgh, Pennsylvania. From 1985
through 1991, Mr. Bouy was employed by Funtime as Vice President and General
Manager of Darien Lake. Prior thereto, from 1975 through 1981, he was employed
by the Marriott Corporation, where his responsibilities included serving as
Chief Operating Officer for The Great
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American Theme Park in Gurnee, Illinois and The Great American Theme Park in
Santa Clara, California.
Hue W. Eichelberger has served as Vice President and General Manager of
Adventure World since 1992. From 1991 through 1992, he served as Park Manager of
White Water Bay. From 1988 through 1991, he was Associate Director of Corporate
Development at Silver Dollar City, Inc. Prior thereto, Mr. Eichelberger served
as General Manager of White Water (a water park in Grand Prairie, Texas) and
FantaSea (a water park in Wichita, Kansas).
Jeffrey A. Lococo has served as Vice President and General Manager of
Wyandot Lake since 1989 and became the General Manager of Geauga Lake following
the Denver Acquisition. From 1982 through 1989, he served as Director of
Marketing and Sales of Geauga Lake. From 1980 through 1982, Mr. Lococo served as
Regional Sales Manager with Marriott's Great America Theme Park.
Richard A. McCurley has served as Vice President and General Manager of
Frontier City and White Water Bay since 1994 and became General Manager of
Waterworld following the California Acquisition. He joined Premier in 1992 as
Director of Revenue for Frontier City and White Water Bay and, during that year,
transferred to become Director of Revenue for Adventure World. From 1985 through
1992, Mr. McCurley was Food Service Manager and later Food Service Director at
Knotts Berry Farms. Prior to that period, he spent six years with Worlds of Fun,
a major theme park in Kansas City, Missouri, ultimately serving as Director of
Food Services.
Bradley Y. Paul has served as Vice President and General Manager of Darien
Lake since 1991. From 1984 through 1991 he served as Marketing Director of
Darien Lake.
Traci E. Blanks has served as Vice President of Marketing since 1995. From
1992 through 1994, she served as Vice President Marketing for Frontier City and
White Water Bay. From 1986 through 1992, she served as Director of Marketing for
Frontier City, and as such was responsible for all marketing and group sales
programs. From 1986 through 1987, she also served as Manager of Advertising and
Promotions for Frontier City.
David Thomas has served as Vice President of Entertainment since 1993. From
1987 through 1993, he was responsible for the Company's show productions
(including booking national touring acts to appear at the parks) as well as the
staging of numerous festivals including Oktoberfest and Hallowscream. Prior to
1987, he served as President of Silvertree Productions, producing over forty
stage shows, musicals, stunt spectaculars and magic illusion presentations.
Richard R. Webb has served as Vice President of Accounting since 1991. From
1988 through 1991, he was Controller of a subsidiary of the DeBartolo
Corporation which operated a race track in Oklahoma City. Prior to that time,
Mr. Webb spent nine years with Landmark Land Company, Inc., ultimately serving
as Controller.
Richard A. Kipf has served as Corporate Secretary of the Company (or its
predecessors) since 1975 and has served as Vice President of Administration
since 1994.
Paul A. Biddelman has served as a Director of the Company since December
1992. Since April 1992, Mr. Biddelman has been treasurer of Hanseatic
Corporation ("Hanseatic"), a private investment company. From January 1991
through March 1992, Mr. Biddelman was managing director of Clements Taee
Biddelman Incorporated, a financial advisory firm. Mr. Biddelman also serves as
a director of Electronic Retailing Systems International, Inc., Insituform
Technologies, Inc., Celadon Group, Inc., Petroleum Heat and Power Co., Inc. and
Star Gas Corporation (general partner of Star Gas Partners, L.P.).
Michael E. Gellert has served as a Director of the Company since March 1989.
He previously served as a Director of Premier and as a Trustee of Tierco from
1979 until 1986. From June 1989 through June 1994, he also served as the
Chairman of the Board of Premier. Mr. Gellert is a general partner of Windcrest
Partners ("Windcrest"), a New York limited partnership. Windcrest, the principal
business of
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which is private investing, is an affiliate of Premier. Mr. Gellert also serves
as a director of Devon Energy Corp., Humana Inc., Seacor Holdings, Inc., Regal
Cinemas, Inc. and The Putnam Trust Company of Greenwich Advisory Board of The
Bank of New York.
Jack Tyrrell has served as a Director of Premier since December 1992. For
more than five years, Mr. Tyrrell has been a general partner of Lawrence Venture
Partners, a general partnership, the principal business of which is that of
acting as general partner of Lawrence, Tyrrell, Ortale & Smith ("LTOS"), a
private investment limited partnership. Mr. Tyrrell is also a general partner of
LTOS II Partners, a general partnership, the principal business of which is that
of acting as general partner of Lawrence, Tyrrell, Ortale & Smith II, L.P.
("LTOS II"), a private investment limited partnership. Mr. Tyrrell is also a
general partner of Richland Partners, L.P., a limited partnership, the principal
business of which is that of acting as general partner of Richland Ventures,
L.P. ("Richland"), a private investment limited partnership. In addition, Mr.
Tyrrell is a general partner of Richland Partners II, L.P., a limited
partnership, the principal business of which is that of acting as general
partner of Richland Ventures II, L.P. ("Richland II"), a private investment
limited partnership. Mr. Tyrrell also serves as a director of National Health
Investors, Inc. and Regal Cinemas, Inc.
The Company's directors and officers are elected to serve one-year terms.
None of the Company's officers has employment agreements.
STOCK INCENTIVE PLANS
In March 1993, the Company adopted a stock option and incentive plan (the
"1993 Stock Incentive Plan") pursuant to which 250,000 shares of Common Stock
were reserved for issuance from time to time to key employees of the Company and
its subsidiaries. Pursuant to the 1993 Stock Incentive Plan, through December
30, 1996, options to purchase an aggregate of 250,000 shares (excluding options
that terminated by their terms) had been granted, all of which are Incentive
Options (as defined below). Of such options, 125,000 and 60,000 were granted to
Messrs. Burke and Story, respectively, and 215,000 were granted to the Company's
executive officers as a group. The 1993 Stock Incentive Plan provides for the
grant of options ("Options") to purchase Common Stock intended to qualify as
incentive stock options ("Incentive Options") under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), options that do not so qualify
("Non-Qualified Options") and stock appreciation rights ("SARs") in tandem with
Options. An SAR granted in tandem with an Option (a "tandem SAR") permits an
optionee to surrender his Option to the Company for cancellation and receive an
amount (in cash or Common Stock) equal to the excess, if any, of (i) the then
fair market value of the Common Stock subject to the Option; over (ii) the
exercise price of the Option. Of the options granted under the 1993 Stock
Incentive Plan, 68,800 were granted in 1996 at an exercise price of $22.00 per
share, 36,000 were granted in 1994 at an exercise price of $7.50 per share and
145,200 Options were granted in 1993 at an exercise price of $5.00 per share. In
each case, the Compensation Committee of the Board of Directors determined that
the exercise price was equal to the fair market value of the Common Stock on the
date of grant.
In August 1995, the Company adopted a stock option and incentive plan (the
"1995 Stock Incentive Plan") pursuant to which 270,000 shares of Common Stock
were reserved for issuance from time to time to key employees of the Company and
its subsidiaries. Pursuant to the 1995 Stock Incentive Plan, through December
30, 1996, Options to purchase an aggregate of 270,000 shares of Common Stock had
been granted, all of which are Incentive Options. Of such Options, 100,000 and
72,000 were granted to Messrs. Burke and Story, respectively, and 212,000 were
granted to the Company's executive officers as a group. Of the Options granted
under the 1995 Stock Incentive Plan, 248,000 have an exercise price of $8.25 per
share, and 22,000 have an exercise price of $22.00 per share. In each case, the
Compensation Committee of the Board of Directors determined the exercise price
was equal to the fair market value of the Common Stock on the date of grant. The
1995 Stock Incentive Plan provides for the grant of Options to purchase Common
Stock intended to qualify as Incentive Options under Section 422 of the Code,
Non-Qualified Options or SARs. The terms of the 1995 Stock Incentive Plan are
substantially the same as the
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terms of the 1993 Stock Incentive Plan (except for the total number of shares
subject to Options available for grant thereunder.)
In August 1996, the Company adopted a stock option and incentive plan (the
"1996 Stock Incentive Plan," and together with the 1993 Stock Incentive Plan and
the 1995 Stock Incentive Plan, the "Stock Incentive Plans"), pursuant to which
750,000 shares of Common Stock were reserved for issuance from time to time to
key employees of the Company and its subsidiaries. Pursuant to the 1996 Stock
Incentive Plan, through December 30, 1996, Options to purchase an aggregate of
246,700 shares of Common Stock had been granted, all of which are Incentive
Options. Of such Options, 86,200 and 58,000 were granted to Messrs. Burke and
Story, respectively, and 164,200 were granted to the Company's executive
officers as a group. All of the Options granted under the 1996 Stock Incentive
Plan have an exercise price of $22.00 per share, which the Compensation
Committee of the Board of Directors determined to be the fair market value of
the Common Stock on the date of grant. The 1996 Stock Incentive Plan, and the
grant of options thereunder in August 1996, have been approved by the holders of
a majority of the outstanding shares of Common Stock. The 1996 Stock Incentive
Plan provides for the grant of Options to purchase Common Stock intended to
qualify as Incentive Options under Section 422 of the Code, Non-Qualified
Options or SARs. The terms of the 1996 Stock Incentive Plan are substantially
the same as the terms of the 1993 Stock Incentive Plan (except for the total
number of shares subject to Options available for grant thereunder.)
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of September 30, 1996
(except as noted below) as to Common Stock owned by (a) each of the Company's
current directors and named executive officers; (b) all current directors and
officers of the Company as a group; and (c) each person who, to the best of the
Company's knowledge, beneficially owned on that date more than 5% of the
outstanding Common Stock. All share amounts have been rounded to the nearest
whole share. The information presented does not reflect any prospective purchase
of Common Stock in the Common Stock Offering, if completed, by the named
persons.
<TABLE>
<CAPTION>
PERCENTAGE OF CLASS
------------------------------------
AFTER
NUMBER OF SHARES PRIOR TO THE COMMON
NAME AND ADDRESS OF BENEFICIALLY THE COMMON STOCK OFFERING
BENEFICIAL OWNER OWNED STOCK OFFERING (IF COMPLETED)
- --------------------------------------------------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
Kieran E. Burke(1)............................................. 224,301 1.9 1.4
Paul A. Biddelman(2)........................................... 3,020,063 26.6 19.7
James F. Dannhauser(3)......................................... 37,000 * *
Michael E. Gellert(4)(5)....................................... 1,396,560 12.3 9.1
Gary Story(6).................................................. 80,000 * *
Jack Tyrrell(7)................................................ 1,001,336 8.8 6.5
Robert J. Gellert(5)(8)........................................ 1,261,945 11.1 8.2
122 East 42nd Street
New York, New York 10168
Windcrest Partners(5)(9)....................................... 1,136,025 10.0 7.4
122 East 42nd Street
New York, New York 10168
Lawrence, Tyrrell, Ortale & Smith II, L.P.(10)................. 661,940 5.8 4.3
Lawrence, Tyrrell, Ortale & Smith
3100 West End Avenue, Suite 500
Nashville, TN 37203
Hanseatic Corporation(11)...................................... 3,020,063 26.6 19.7
Wolfgang Traber
450 Park Avenue
New York, New York 10152
Janus Capital Corporation(12).................................. 1,257,900 11.1 8.2
Thomas H. Bailey
Janus Venture Fund
100 Fillmore Street, Suite 300
Denver, Colorado 80206-4923
All directors and officers as a group(13) (10 persons)......... 5,774,460 49.5 36.9
</TABLE>
- ------------------------
* Less than one percent.
(1) Includes 47,302 shares of Common Stock and warrants and options to
purchase 176,999 shares of Common Stock for his own account as to which
Mr. Burke has sole voting and investment power.
(2) Represents shares of Common Stock beneficially owned by Hanseatic, of
which Mr. Biddelman is treasurer. See footnote (11) below.
(FOOTNOTES CONTINUED ON NEXT PAGE)
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(3) Includes 11,000 shares of Common Stock and options to purchase 26,000
shares of Common Stock for his own account.
(4) Includes 231,818 shares of Common Stock, as to which Mr. Gellert has sole
voting and investment power. Also includes 1,136,025 shares of Common
Stock beneficially owned by Windcrest which shares voting and investment
power with its general partners, Michael E. Gellert and Robert J.
Gellert. Also includes 28,717 shares of Common Stock beneficially owned
by Michael E. Gellert's daughter who resides in his household. Mr.
Gellert disclaims beneficial ownership of all shares beneficially owned
by his daughter.
(5) Members of the Gellert family and entities controlled by them
beneficially own in the aggregate 1,597,881 shares of Common Stock. Such
shares will represent approximately 10.4% of the Company's outstanding
Common Stock after the Common Stock Offering. See footnotes (4), (8) and
(9).
(6) Represents 80,000 shares of Common Stock issuable upon exercise of stock
options held by Mr. Story, as to which he has sole voting and investment
power.
(7) Includes 200,000 shares of Common Stock beneficially owned by LTOS;
461,940 shares of Common Stock beneficially owned by LTOS II; and 339,240
shares of Common Stock beneficially owned by Richland. Mr. Tyrrell, who
is a general partner of the respective general partners of LTOS, LTOS II
and Richland, disclaims beneficial ownership of all such shares.
(8) Includes 2,514 shares of Common Stock for his own account, as to which he
has sole voting and investment power; 49,597 shares of Common Stock as
agent for 30 other persons and entities with whom he shares voting and
investment power; 2,168 shares of Common Stock as trustee for Michael E.
Gellert's sister with respect to which he shares voting and investment
power with Peter J. Gellert (who holds these shares as agent); 5,558
shares of Common Stock as trustee of irrevocable trusts for the benefit
of Michael E. Gellert's children as to which he has sole voting and
investment power; 1,083 shares of Common Stock as trustee of an
irrevocable trust for the benefit of his brother as to which he has sole
voting and investment power; 1,136,025 shares of Common Stock owned by
Windcrest which shares voting and investment power with its general
partners, Michael E. Gellert and Robert J. Gellert; and 65,000 shares of
Common Stock beneficially owned by Lexfor Corporation of which he is
President and a director, as to which he shares voting and investment
power with the other officers and directors. Michael E. Gellert disclaims
beneficial ownership of the shares of Common Stock owned by the trusts
for the benefit of his children.
(9) Windcrest shares voting and investment power with its general partners,
Michael E. Gellert and Robert J. Gellert.
(10) Includes 200,000 shares of Common Stock beneficially owned by LTOS and
461,940 shares beneficially owned by LTOS II. LTOS and LTOS II may be
deemed to constitute a "group" within the meaning of Section 13(d)(3) of
the Securities Exchange Act. Information has been derived from Amendment
No. 2 to Schedule 13D, dated November 2, 1994.
(11) Represents shares of Common Stock beneficially owned by Hanseatic. Mr.
Traber holds a majority of the shares of capital stock of Hanseatic and
thus may be deemed to beneficially own such Common Stock. Of such shares,
2,588,695 shares of Common Stock are held by Hanseatic Americas LDC, a
Bahamian limited duration company in which the sole managing member is
Hansabel Partners LLC, a Delaware limited liability company in which the
sole managing member is Hanseatic. The remaining shares of Common Stock
are held by Hanseatic for discretionary customer accounts. Information
has been derived from Amendment No. 6 to Schedule 13D, dated June 4,
1996.
(12) Janus Capital Corporation ("Janus Capital") is a registered investment
adviser that furnishes investment advice to certain registered investment
companies, including Janus Venture Fund (the "Fund") and individual and
institutional clients (collectively the "Managed Portfolios"). As a
result, Janus Capital may be deemed to be the benefical owner of the
Common Stock held by such Managed Portfolios. Of the amount shown,
719,400 shares are held by the Fund and the balance are held in other
Managed Portfolios. Mr. Bailey owns 12.2% of Janus Capital and serves as
President and Chairman thereof. As a result, Mr. Bailey may be deemed
beneficial owner of the shares held by the Managed Portfolios.
Information has been obtained from Schedule 13G, dated November 8, 1996.
(13) The share amounts listed include shares of Common Stock that the
following persons have the right to acquire within 60 days from September
30, 1996 (Kieran E. Burke, 176,999 shares (see footnote (1)); James F.
Dannhauser, 26,000 shares (see footnote (3)); Gary Story, 80,000 shares
(see footnote (6)); and all directors and officers as a group, 298,199
shares.
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CERTAIN TRANSACTIONS
In connection with the Funtime Acquisition, the Company paid investment
banking and financial advisory fees in the amount of $800,000 and $475,000 to
Lepercq and Hanseatic, respectively. James F. Dannhauser, a director of the
Company, was a managing director of Lepercq at the time of the Funtime
Acquisition, and Paul A. Biddelman, also a director of the Company, is the
treasurer of Hanseatic. On October 1, 1995, Mr. Dannhauser became Chief
Financial Officer of the Company.
In connection with a private placement by the Company consummated in August
1995, Hanseatic purchased shares of convertible Preferred Stock which were
converted into 1,695,335 shares of Common Stock in connection with the Public
Offering. In addition, pursuant to that placement, Richland, a private
investment limited partnership, the general partner of which is Richland
Partners, L.P., a limited partnership of which Jack Tyrrell, a director of the
Company, is a general partner, and Michael Gellert, a director of the Company,
purchased shares of convertible Preferred Stock which were converted into
256,093 and 121,645 shares of Common Stock, respectively, in connection with the
Public Offering.
In November 1990, the Company entered into an office lease. A portion of the
office space is being used by Windcrest, and the Company and Windcrest have
agreed to allocate 50% of the monthly rental payments to Windcrest. During 1995,
Windcrest paid the Company approximately $68,000 with respect to such office
space.
If the Riverside Acquisition closes prior to the Common Stock Offering, the
Company will fund the cash portion of the purchase price for Riverside from the
proceeds of the issuance of the Exchangeable Preferred Stock, all of which will
be sold to certain principal stockholders of the Company, including Hanseatic,
Jack Tyrrell and Michael Gellert, or their affiliates at a purchase price of
$100.00 per share, less a funding fee of $2.00 per share. The Company has
entered into agreements with each such stockholder pursuant to which the Company
has agreed to pay to each holder a non-refundable commitment fee equal to 1% of
the purchase price of the shares to be purchased by such holder. Lehman Brothers
has agreed, as a condition to the closing of the issuance of the Exchangeable
Preferred Stock, to issue an opinion to the Board of Directors of the Company
that the transaction is fair from a financial point of view to the Company. The
Company intends to redeem the Exchangeable Preferred Stock, if issued, from a
portion of the proceeds of the Common Stock Offering. Although the Company has
agreed to indemnify Lehman Brothers against certain liabilities, including
liabilities under the Securities Act, in connection with such opinion, no
payment is being made to Lehman Brothers for rendering the opinion or otherwise
in connection with the issuance of the Exchangeable Preferred Stock.
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DESCRIPTION OF INDEBTEDNESS
NEW CREDIT FACILITY
Revolving credit borrowings under the New Credit Facility, which was entered
into in October 1996, are secured by substantially all of the Company's assets
(other than real estate). Borrowings under the Term Loan Facility are secured by
the assets acquired with the proceeds thereof, together with guarantees, limited
to approximately $17.5 million, by the Company's principal subsidiaries. The New
Credit Facility has an aggregate availability of $115.0 million of which (i) up
to $30.0 million under the Revolving Credit Facility may be used for working
capital and other general corporate purposes; (ii) up to $25.0 million under
Facility A may be used to finance capital expenditures prior to April 30, 1998;
and (iii) up to $60.0 million under Facility B may be used to finance certain
acquisitions by the Company (including the Recent Acquisitions), including an
amount of up to $2.0 million which may be used to finance improvements at the
parks acquired, provided that at least 50% of the consideration for any such
acquisition or improvements under Facility A or Facility B must be funded by the
Company. As of January 21, 1997 the Company had borrowed $15.0 million under the
Revolving Credit Facility (which amount the Company plans to repay from the
proceeds of the $8.9 million Term Loan borrowing described below and a portion
of the proceeds of the Offerings) and approximately $57.0 million (after giving
effect to $8.9 million of borrowings the Company plans to make in respect of the
California Acquisition) will have been borrowed under Facility B to fund
approximately 50% of the consideration paid for certain of the Recent
Acquisitions. Interest rates per annum under the New Credit Facility are equal
to a base rate equal to the higher of the Federal Funds Rate plus 1/2% or the
prime rate of Citibank, N.A., in each case, plus the Applicable Margin or the
London Interbank Offered Rate plus the Applicable Margin. The Revolving Credit
Facility terminates October 31, 2002 (reducing to $15 million on October 31,
2001) and borrowings under the Term Loan Facility mature October 31, 2001;
however, aggregate principal payments of $7.5 million, $20.0 million and $25.0
million are required under the Term Loan Facility during 1998, 1999 and 2000,
respectively.
The New Credit Facility contains restrictive covenants that, among other
things, limit 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 New Credit
Facility requires that the Company comply with certain specified financial
ratios and tests, including ratios of total debt to EBITDA, interest expense to
EBITDA, debt service to EBITDA and fixed charges to EBITDA.
The Company intends to repay in full borrowings under the New Credit
Facility from a substantial portion of the net proceeds from the Notes Offering.
On January , 1997, the Company and the banks entered into an amendment (the
"Amendment") to the New Credit Facility pursuant to which, effective as of the
consummation of the Offerings, the Revolving Credit Facility will remain in
place through December 31, 2001 (without reduction prior to that date) and
following repayment of all borrowings thereunder, the Term Loan Facility will be
converted into an $85.0 million, five-year reducing revolving credit facility
(the "New Facility"). The New Facility will be available to fund acquisitions
and make capital improvements. It will reduce to $75.0 million principal amount
on December 31, 1999 and $45.0 million on December 31, 2000. Following the
Amendment, borrowings under the New Credit Facility will be secured by
substantially all of the assets of the Company (other than certain real estate).
Defaults under the New Credit Facility include (i) failure to repay
principal when due; (ii) failure to pay interest within three days after due;
(iii) default in the performance of certain obligations of the Company's
principal subsidiaries under the Revolving Credit Security Agreement or any
Equipment Security Agreement (as defined thereunder); (iv) failure to comply
with certain covenants, conditions or agreements under the credit agreement
which, in certain cases, continues for 30 days; (vii) default by the Company or
any of its principal subsidiaries in respect of any indebtedness above specified
levels; (viii) certain events of bankruptcy; (ix) certain judgments against the
Company or any of its principal subsidiaries; (x) the occurrence of a Change in
Control (as defined thereunder); (xi) the assertion of
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certain Environmental Claims (as defined thereunder); and (xii) under certain
circumstances, the failure by Messrs. Burke and Story to serve the Company in
their present positions and the failure to replace them within a specified time
period.
THE EXISTING NOTES
Concurrently with the consummation of the Funtime Acquisition, the Company
issued $90.0 million aggregate principal amount of its 12% Senior Notes due 2003
(the "Existing Notes"). The Existing Notes were issued under the Existing
Indenture. The description set forth below does not purport to be complete and
is qualified in its entirety by reference to the Existing Indenture which is an
exhibit to the Registration Statement of which this Prospectus is a part.
The Existing Notes are senior, unsecured obligations of the Company, limited
to $90.0 million aggregate principal amount and will mature on August 15, 2003.
The Existing Notes bear interest at the rate of 12% per annum, payable
semiannually on August 15 and February 15 of each year and are guaranteed on a
senior, unsecured basis by the Company's principal operating subsidiaries.
The Existing Notes are redeemable, at the Company's option, in whole or in
part, at any time on or after August 15, 1999, at specified redemption prices,
together with accrued and unpaid interest, if any, to the date of redemption. In
addition, at any time prior to August 15, 1998, the Company may redeem up to 33
1/3% of the original aggregate principal amount of the Existing Notes with the
net cash proceeds of one or more public equity offerings by the Company
following which there is a public market for the Common Stock, at a price equal
to 110% of the principal amount to be redeemed, together with all accrued and
unpaid interest, if any, provided that at least 66 2/3% of the original
aggregate principal amount of the Existing Notes remain outstanding immediately
after each such redemption. The Company does not presently intend to redeem any
Existing Notes from the proceeds of the Offering, although it may do so in the
future. See "Use of Proceeds." Upon the occurrence of a Change of Control (as
defined in the Existing Indenture), the Company will be required to make an
offer to repurchase the Existing Notes at a price equal to 101% of the principal
amount thereof, together with accrued and unpaid interest, if any, to the date
of repurchase.
The Existing Indenture contains restrictive covenants that, among other
things, limit the ability of the Company to dispose of assets; incur additional
indebtedness or liens; pay dividends; engage in mergers or consolidations; and
engage in certain transactions with subsidiaries and affiliates.
Defaults under the Existing Indenture include (i) failure to pay interest on
the Existing Notes within 30 days after such payments are due; (ii) failure to
repay principal when due at its maturity date, upon optional redemption, upon
required repurchase, upon acceleration or otherwise; (iii) failure to comply for
30 days after notice with the Company's repurchase obligations upon the
occurrence of a Change of Control and failure to comply for 60 days after notice
with the other covenants contained in the Indenture; (iv) the default by the
Company or any of its principal subsidiaries (the "Note Guarantors") in respect
of any indebtedness above specified levels; (v) certain events of bankruptcy;
(vi) certain judgments against the Company or any Note Guarantor; (vii) any Note
Guarantee (as defined in the Existing Indenture) ceasing to be in full force and
effect (except as contemplated by the terms thereof); and (viii) the denial or
disaffirmation by any Note Guarantor of its obligations under the Existing
Indenture or any Note Guarantee, which continues for 10 days.
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DESCRIPTION OF THE NOTES
GENERAL
The Notes are to be issued under an Indenture, to be dated as of ,
1997 (the "Indenture"), between the Company and The Bank of New York, as Trustee
(the "Trustee").
The following summary of certain provisions of the Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Indenture, including the definitions of
certain terms therein and those terms made a part thereof by the Trust Indenture
Act of 1939, as amended. Capitalized terms used herein and not otherwise defined
have the meanings set forth in the section "Certain Definitions."
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Company in the Borough of Manhattan, The City of New York (which initially shall
be the corporate trust office of the Trustee, at 101 Barclay Street, New York,
New York 10286), except that, at the option of the Company, payment of interest
may be made by check mailed to the address of the Holders as such address
appears in the Note Register.
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple of $1,000. No service charge
will be made for any registration of transfer or exchange of Notes, but the
Company may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.
TERMS OF THE NOTES
The Notes will be senior, unsecured obligations of the Company, limited to
$125.0 million aggregate principal amount, and will mature on , 2007.
Each Note will bear interest at the rate per annum shown on the front cover of
this Prospectus from , 1997, or from the most recent date to which
interest has been paid or provided for, payable semiannually to Holders of
record at the close of business on the or immediately preceding the
interest payment date on and of each year, commencing , 1997.
OPTIONAL REDEMPTION
The Notes will be redeemable, at the Company's option, in whole or in part,
at any time on or after , 2002, and prior to maturity, upon not less than
30 nor more than 60 days' prior notice mailed by first-class mail to each
Holder's registered address, at the following redemption prices (expressed as
percentages of principal amount), plus accrued interest, if any, to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date) if
redeemed during the 12 month period commencing on of the years set forth
below:
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
- --------------------------------------------------------------------------------- -----------
<S> <C>
2002............................................................................. %
2003............................................................................. %
2004............................................................................. %
2005 and thereafter.............................................................. 100.000%
</TABLE>
In addition, at any time and from time to time prior to , 2000, the
Company may redeem in the aggregate up to 33 1/3% of the original aggregate
principal amount of the Notes with the proceeds of one or more Public Equity
Offerings, at a redemption price (expressed as a percentage of principal amount)
of %, plus accrued and unpaid interest, if any, to the redemption date;
PROVIDED, HOWEVER, that at least 66 2/3% of the original aggregate principal
amount of the Notes must remain outstanding after each such redemption.
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SELECTION
In the case of any partial redemption, selection of the Notes for redemption
will be made by the Trustee on a pro rata basis, by lot or by such other method
as the Trustee shall deem to be fair and appropriate, although no Note of $1,000
in original principal amount or less will be redeemed in part. If any Note is to
be redeemed in part only, the notice of redemption relating to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Note.
RANKING
The indebtedness evidenced by the Notes will be senior, unsecured
obligations of the Company and will be effectively subordinated to all existing
and future secured Indebtedness of the Company and its subsidiaries to the
extent of the value of the assets securing such Indebtedness. The Notes will
rank PARI PASSU in right of payment with other Senior Indebtedness of the
Company (including the Existing Notes) and will rank senior in right of payment
to any Subordinated Obligations of the Company. As of September 30, 1996, on a
pro forma basis after giving effect to the Recent Acquisitions, the financings
related thereto, the issuance of the Notes and the use of the proceeds
therefrom, the Company would have had outstanding $218.4 million of Senior
Indebtedness (including the Notes), of which $3.4 million would have been
secured Indebtedness. As of such date, and after giving such effect, the Company
would have had $115.0 million in undrawn commitments under revolving credit
facilities.
NOTE GUARANTEES
Each of the Company's existing principal operating Subsidiaries, Funtime
Parks, Inc., Funtime, Inc., Wyandot Lake, Inc., Darien Lake Theme Park and
Camping Resort, Inc., D.L. Holdings, Inc., Tierco Maryland, Inc., Tierco Water
Park, Inc., Frontier City Properties, Inc. and Frontier City Partners Limited
Partnership (the "Note Guarantors"), and certain future Subsidiaries of the
Company (as described below) as primary obligors and not merely as sureties,
will irrevocably and unconditionally Guarantee on a senior unsecured basis the
performance and payment when due, whether at Stated Maturity, by acceleration or
otherwise, of all obligations of the Company under the Indenture and the Notes,
whether for principal of or interest on the Notes, expenses, indemnification or
otherwise (all such obligations guaranteed by such Note Guarantors being herein
called the "Guaranteed Obligations"). Such Note Guarantors will agree to pay, in
addition to the amount stated above, any and all expenses (including reasonable
counsel fees and expenses) incurred by the Trustee or the Holders in enforcing
any rights under the Note Guarantee. Each Note Guarantor will jointly and
severally guarantee the full amount of the Guaranteed Obligations, provided that
each Note Guarantee will be limited in amount to an amount not to exceed the
maximum amount that can be Guaranteed by the applicable Note Guarantor without
rendering the Note Guarantee, as it relates to such Note Guarantor, voidable
under applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally. After the Issue Date,
the Company will cause each Restricted Subsidiary which Incurs Indebtedness,
including each Restricted Subsidiary which is a guarantor of Indebtedness
Incurred pursuant to clause (b)(1) of the covenant described under "Certain
Covenants--Limitation on Indebtedness," to execute and deliver to the Trustee a
supplemental indenture pursuant to which such Restricted Subsidiary will
Guarantee payment of the Notes. See "Certain Covenants--Future Note Guarantors"
below.
Each Note Guarantee will be a continuing guarantee and shall (a) remain in
full force and effect until payment in full of all the Guaranteed Obligations,
(b) be binding upon such Note Guarantor and (c) inure to the benefit of and be
enforceable by the Trustee, the Holders and their successors, transferees and
assigns.
The Note Guarantors, which are also guarantors of the Existing Notes, hold
substantially all of the Company's assets, except for those assets acquired in
the Recent Acquisitions. The assets of Riverside, if
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acquired, will be held by a subsidiary which will become a guarantor of the
Notes and the Existing Notes. Promptly following the consummation of the Notes
Offering, the Company intends to transfer the assets acquired in the Recent
Acquisitions (excluding Riverside) to operating Subsidiaries and to cause each
such Subsidiary to Guarantee payment of the Notes as described above.
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each Holder will have the right to require the Company to offer to
repurchase all or any part of such Holder's Notes at a purchase price in cash
equal to 101% of the principal amount thereof plus accrued and unpaid interest,
if any, to the date of purchase (subject to the right of Holders of record on
the relevant record date to receive interest due on the relevant interest
payment date):
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than one or more Permitted Holders, is or becomes
the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of
all shares that any such person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the Voting Stock of the Company; PROVIDED
that the Permitted Holders beneficially own (as so defined), directly or
indirectly, in the aggregate a lesser percentage of the Voting Stock of the
Company than such other Person and do not have the right or ability by
voting power, contract or otherwise to elect or designate for election a
majority of the Board of Directors of the Company;
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (together with
any new directors whose election by such Board of Directors or whose
nomination for election by shareholders of the Company was approved by a
vote of a majority of the directors of the Company then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors then in office; or
(iii) the merger or consolidation of the Company with or into another
Person or the merger of another Person with or into the Company, or the sale
of all or substantially all the assets of the Company to another Person (in
each case, other than a Person that is controlled by the Permitted Holders),
and, in the case of any such merger or consolidation, the securities of the
Company that are outstanding immediately prior to such transaction and which
represent 100% of the aggregate voting power of the Voting Stock of the
Company are changed into or exchanged for cash, securities or property,
unless pursuant to such transaction such securities are changed into or
exchanged for, in addition to any other consideration, securities of the
surviving corporation that represent immediately after such transaction, at
least a majority of the aggregate voting power of the Voting Stock of the
surviving corporation.
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Within 30 days following any Change of Control, the Company shall mail a
notice to each Holder with a copy to the Trustee stating: (1) that a Change of
Control has occurred and that such Holder has the right to require the Company
to offer to purchase such Holder's Notes at a purchase price in cash equal to
101% of the principal amount thereof plus accrued and unpaid interest, if any,
to the date of purchase (subject to the right of Holders of record on a record
date to receive interest on the relevant interest payment date); (2) the
circumstances and relevant facts and financial information regarding such Change
of Control, including information with respect to pro forma historical income,
cash flow and capitalization after giving effect to such Change of Control; (3)
the repurchase date (which shall be no earlier than 30 days nor later than 60
days from the date such notice is mailed); and (4) the instructions determined
by the Company, consistent with this covenant, that a Holder must follow in
order to have its Notes purchased.
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to this covenant. To the
extent that the provisions of any securities laws or regulations conflict with
provisions of this covenant, the Company will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations under this paragraph by virtue thereof.
Management has no present intention to engage in a transaction involving a
Change of Control, although it is possible that the Company would decide to do
so in the future. Subject to the limitations discussed below, the Company could,
in the future, enter into certain transactions, including acquisitions,
refinancings or other recapitalizations, that would not constitute a Change in
Control under the Indenture, but that could increase the amount of indebtedness
outstanding at such time or otherwise affect the Company's capital structure or
credit ratings.
The occurrence of the events which would constitute a Change of Control
would require a comparable offer to purchase the Existing Notes and would
constitute a default under the New Credit Facility. Future Senior Indebtedness
of the Company may contain prohibitions of certain events which would constitute
a Change of Control or require such Senior Indebtedness to be repurchased upon a
Change of Control. Moreover, the exercise by the Holders of their right to
require the Company to repurchase the Notes could cause a default under such
Senior Indebtedness, even if the Change of Control itself does not, due to the
financial effect of such repurchase on the Company. Finally, the Company's
ability to pay cash to the Holders upon a repurchase may be limited by the
Company's then existing financial resources. There can be no assurance that
sufficient funds will be available when necessary to make any required
repurchases.
CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
LIMITATION ON INDEBTEDNESS. (a) The Company will not, and will not permit
any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness
(and will not permit any Restricted Subsidiary to Incur Preferred Stock);
PROVIDED, HOWEVER, that the Company and its Restricted Subsidiaries may Incur
Indebtedness if on the date of the Incurrence of such Indebtedness the
Consolidated Coverage Ratio exceeds 2.0:1.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur the following Indebtedness: (1) Indebtedness
Incurred pursuant to a revolving credit facility in an aggregate principal
amount on the date of Incurrence which, when added to all other Indebtedness
Incurred pursuant to this clause (1) and then outstanding, does not exceed $75
million, PROVIDED that the Company must repay all loans outstanding under any
such facility at least once during each fiscal year and may not make drawings
thereunder for 30 consecutive days following the date of such repayment; (2)
Indebtedness (A) of the Company owed to and held by a Wholly Owned Subsidiary or
(B) of any Restricted Subsidiary owed to and held by the Company or any other
Wholly Owned Subsidiary; PROVIDED, HOWEVER, that any subsequent issuance or
transfer of any Capital Stock which results in any such Wholly Owned Subsidiary
ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of such
Indebtedness (other than to another Wholly Owned Subsidiary) will be deemed, in
each case, to constitute the
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Incurrence of such Indebtedness by the issuer thereof; (3) the Senior Notes; (4)
Indebtedness outstanding on the Issue Date (other than Indebtedness described in
clause (1) or (3) of this covenant); (5) Refinancing Indebtedness in respect of
Indebtedness Incurred pursuant to paragraph (a) or pursuant to clause (2), (3),
(4), or this clause (5); (6) Hedging Obligations consisting of interest rate
swaps with respect to Indebtedness permitted to be Incurred by the Company
pursuant to the Indenture; (7) Purchase Money Indebtedness and Capital Lease
Obligations Incurred after the Issue Date which do not exceed at any time
outstanding $15 million; (8) Indebtedness represented by any Note Guarantees and
Guarantees of Indebtedness Incurred pursuant to clause (1) or (3) above; (9)
Indebtedness in respect of performance bonds, letters of credit, surety or
appeal bonds, prior to any drawing thereunder, for or in connection with
pledges, deposits or payments made or given in the ordinary course of business,
and which do not secure any Indebtedness except Indebtedness so secured in an
amount not to exceed $2.5 million outstanding at any time; and (10) Indebtedness
in an aggregate principal amount which, together with all other Indebtedness of
the Company and its Restricted Subsidiaries then outstanding (other than
Indebtedness permitted by clauses (1) through (9) above or paragraph (a)), does
not exceed $5 million.
(c) Notwithstanding the foregoing, neither the Company nor any Restricted
Subsidiary will Incur any Indebtedness pursuant to the foregoing paragraph (b)
if the proceeds thereof are used, directly or indirectly, to Refinance any
Subordinated Obligations unless such Indebtedness will be subordinated to the
Notes to at least the same extent as such Subordinated Obligations.
LIMITATION ON RESTRICTED PAYMENTS. (a) The Company will not, and will not
permit any Restricted Subsidiary, directly or indirectly, to make a Restricted
Payment if at the time the Company or such Restricted Subsidiary makes such
Restricted Payment: (1) a Default will have occurred and be continuing (or would
result therefrom); or (2) the Company is not able to Incur an additional $1.00
of Indebtedness pursuant to paragraph (a) of the covenant described under
"--Limitation on Indebtedness"; or (3) the aggregate amount of such Restricted
Payment and all other Restricted Payments since the Issue Date would exceed the
sum of: (A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the Issue Date to the end of the most
recent fiscal quarter ending at least 45 days prior to the date of such
Restricted Payment (or, in case such Consolidated Net Income shall be a deficit,
minus 100% of such deficit); (B) the aggregate Net Cash Proceeds received by the
Company from the issuance or sale of its Capital Stock (other than Disqualified
Stock) subsequent to the Issue Date (other than an issuance or sale to a
Subsidiary of the Company and other than an issuance or sale to an employee
stock ownership plan or other trust established by the Company or any of its
Subsidiaries for the benefit of their employees to the extent the purchase by
such plan or trust is financed by Indebtedness of such plan or trust and for
which the Company is liable as Guarantor or otherwise); (C) the amount by which
Indebtedness of the Company is reduced on the Company's balance sheet upon the
conversion or exchange (other than by a Subsidiary of the Company) subsequent to
the Issue Date, of any Indebtedness of the Company convertible or exchangeable
for Capital Stock (other than Disqualified Stock) of the Company (less the
amount of any cash, or other property (other than Capital Stock), distributed by
the Company upon such conversion or exchange); and (D) an amount equal to the
sum of (i) the net reduction in Investments in Unrestricted Subsidiaries
resulting from dividends, repayments of loans or advances, or other transfers of
assets, in each case to the Company or any Restricted Subsidiary from
Unrestricted Subsidiaries, and (ii) the portion (proportionate to the Company's
equity interest in such Subsidiary) of the fair market value of the net assets
of an Unrestricted Subsidiary at the time such Unrestricted Subsidiary is
designated a Restricted Subsidiary; PROVIDED, HOWEVER, that the foregoing sum
shall not exceed, in the case of any Unrestricted Subsidiary, the amount of
Investments previously made by the Company or any Restricted Subsidiary in such
Unrestricted Subsidiary, which amount was treated as a Restricted Payment.
(b) The provisions of the foregoing paragraph (a) will not prohibit: (i) any
purchase or redemption of Capital Stock or Subordinated Obligations of the
Company made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Capital Stock of the Company (other than Disqualified Stock
and other than Capital Stock issued or sold to a Subsidiary of the Company or an
employee stock ownership
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plan or similar trust); PROVIDED, HOWEVER, that (A) such purchase or redemption
will be excluded in the calculation of the amount of Restricted Payments and (B)
the Net Cash Proceeds from such sale will be excluded from the calculation of
amounts under clause (3)(B) of paragraph (a) above; (ii) any purchase,
repurchase, redemption, defeasance or other acquisition or retirement for value
of Subordinated Obligations made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Indebtedness of the Company which is permitted
to be Incurred pursuant to the covenant described under "--Limitation on
Indebtedness"; PROVIDED, HOWEVER, that such purchase or redemption will be
excluded in the calculation of the amount of Restricted Payments; (iii)
dividends paid within 60 days after the date of declaration thereof if at such
date of declaration such dividend would have complied with this covenant;
PROVIDED, HOWEVER, that at the time of payment of such dividend, no other
Default shall have occurred and be continuing (or result therefrom); PROVIDED
FURTHER, HOWEVER, that such dividend will be included in the calculation of the
amount of Restricted Payments; or (iv) the repurchase of shares of, or options
to purchase shares of, common stock of the Company or any of its Subsidiaries
from employees, former employees, directors or former directors of the Company
or any of its Subsidiaries (or permitted transferees of such employees, former
employees, directors or former directors), pursuant to the terms of the
agreements (including employment agreements) or plans (or amendments thereto)
approved by the Board of Directors under which such persons purchase or sell or
are granted the option to purchase or sell, shares of such common stock;
PROVIDED, HOWEVER, that the aggregate amount of such repurchases shall not
exceed $2.5 million; PROVIDED FURTHER, HOWEVER, that such repurchases will be
included in the calculation of the amount of Restricted Payments.
LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED SUBSIDIARIES.
The Company will not, and will not permit any Restricted Subsidiary to, create
or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary (i) to
pay dividends or make any other distributions on its Capital Stock or pay any
Indebtedness owed to the Company, (ii) to make any loans or advances to the
Company or (iii) transfer any of its property or assets to the Company, except:
(1) any encumbrance or restriction pursuant to an agreement in effect at or
entered into on the Issue Date, including under a revolving credit facility
pursuant to clause (b)(1) of the covenant described under "--Limitation on
Indebtedness;" (2) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by
such Restricted Subsidiary on or prior to the date on which such Restricted
Subsidiary was acquired by the Company (other than Indebtedness Incurred as
consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a Restricted
Subsidiary or was acquired by the Company) and outstanding on such date; (3) any
encumbrance or restriction pursuant to an agreement effecting a Refinancing of
Indebtedness Incurred pursuant to an agreement referred to in clause (1) or (2)
of this covenant or contained in any amendment to an agreement referred to in
clause (1) or (2) of this covenant; PROVIDED, HOWEVER, that the encumbrances and
restrictions with respect to such Restricted Subsidiary contained in any such
refinancing agreement or amendment are no less favorable to the Noteholders than
encumbrances and restrictions with respect to such Restricted Subsidiary
contained in such agreements; (4) any such encumbrance or restriction consisting
of customary nonsubletting, nontransfer and nonassignment provisions in leases,
licenses or contracts arising or entered into in the ordinary course of
business; (5) in the case of clause (iii) above, restrictions contained in
security agreements or mortgages securing Indebtedness of a Restricted
Subsidiary to the extent such restrictions restrict the transfer of the property
subject to such security agreements or mortgages; (6) any restriction with
respect to a Restricted Subsidiary imposed pursuant to an agreement entered into
for the sale or disposition of all or substantially all the Capital Stock or
assets of such Restricted Subsidiary pending the closing of such sale or
disposition; and (7) encumbrances or restrictions arising or existing by reason
of applicable law.
LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK. (a) The Company will
not, and will not permit any Restricted Subsidiary to, make any Asset
Disposition unless (i) the Company or such Restricted Subsidiary receives
consideration (including by way of relief from, or by any other Person assuming
sole responsibility
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for, any liabilities, contingent or otherwise) at the time of such Asset
Disposition at least equal to the fair market value, as determined in good faith
by the Board of Directors (including as to the value of all non-cash
consideration), of the shares and assets subject to such Asset Disposition, (ii)
at least 75% of the consideration thereof received by the Company or such
Restricted Subsidiary is in the form of cash; PROVIDED, HOWEVER, that a portion
of such cash consideration requirement may be in the form of a promissory note
secured by a lien on the asset subject to such Asset Disposition, PROVIDED that
the aggregate amount of all such promissory notes at any one time outstanding
does not exceed $1 million and (iii) an amount equal to 100% of the Net
Available Cash from such Asset Disposition is applied by the Company (or such
Restricted Subsidiary, as the case may be) (A) FIRST, to the extent the Company
or such Restricted Subsidiary elects (or is required by the terms of any Senior
Indebtedness or Indebtedness (other than Preferred Stock) of a Wholly Owned
Subsidiary), to prepay, repay or purchase Senior Indebtedness or such
Indebtedness (in each case other than Indebtedness owed to the Company or an
Affiliate of the Company) within 180 days after the later of the date of such
Asset Disposition or the receipt of such Net Available Cash; (B) SECOND, to the
extent of the balance of Net Available Cash after application in accordance with
clause (A), to the extent the Company or such Restricted Subsidiary elects, to
reinvest in Additional Assets (including by means of an Investment in Additional
Assets by a Restricted Subsidiary with Net Available Cash received by the
Company or another Restricted Subsidiary) within 365 days from the later of such
Asset Disposition or the receipt of such Net Available Cash; (C) THIRD, to the
extent of the balance of such Net Available Cash after application in accordance
with clauses (A) and (B) exceeds $5 million, to make an Offer to purchase the
Existing Notes pursuant to and subject to the conditions set forth in section
(b) of this covenant and the comparable provisions of the Existing Indenture;
(D) FOURTH, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (A), (B) and (C) exceeds $5 million, to
make an Offer to purchase the Notes pursuant to and subject to the conditions
set forth in section (b) of this covenant; and (E) FIFTH, to the extent of the
balance of such Net Available Cash after application in accordance with clauses
(A), (B), (C) and (D), to (x) acquire Additional Assets (other than Indebtedness
and Capital Stock) or (y) prepay, repay or purchase Indebtedness of the Company
(other than Indebtedness owed to an Affiliate of the Company and other than
Disqualified Stock of the Company) or Indebtedness of any Restricted Subsidiary
(other than Indebtedness owed to the Company or an Affiliate of the Company), in
each case described in this clause (E) within one year from the receipt of such
Net Available Cash or, if the Company has made an Offer pursuant to clause (C)
or (D), six months from the date such Offer is consummated; PROVIDED, HOWEVER,
that in connection with any prepayment, repayment or purchase of Indebtedness
pursuant to clause (A), (C), (D) or (E) above, the Company or such Restricted
Subsidiary will retire such Indebtedness and will cause the related loan
commitment (if any) to be permanently reduced in an amount equal to the
principal amount so prepaid, repaid or purchased; PROVIDED FURTHER that prior to
applying such Net Available Cash in accordance with clause (A), (B), (C), (D) or
(E) above, such Net Available Cash may be invested in Temporary Cash
Investments. The Company and the Restricted Subsidiaries will not be required to
apply any Net Available Cash in accordance with this covenant except to the
extent that the aggregate Net Available Cash from all Asset Dispositions which
are not applied in accordance with this covenant exceeds $500,000.
For the purposes of this covenant, the following will be deemed to be cash:
(x) the assumption of Indebtedness of the Company (other than Disqualified Stock
of the Company) or any Restricted Subsidiary and the release of the Company or
such Restricted Subsidiary from all liability on such Indebtedness in connection
with such Asset Disposition and (y) securities received by the Company or any
Restricted Subsidiary from the transferee that are promptly converted by the
Company or such Restricted Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the purchase of the
Existing Notes or the Notes, as the case may be, pursuant to clause (a)(iii)(C)
or clause (a)(iii)(D) of this covenant, the Company will be required to purchase
the Existing Notes or the Notes, as the case may be, tendered pursuant to an
Offer, commenced within one year after the date of such Asset Disposition, by
the Company for the Existing Notes or the Notes, as the case may be (the
"Offer"), at a purchase price of 100% of their
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principal amount plus accrued interest to the Purchase Date in accordance with
the procedures (including prorationing in the event of oversubscription) set
forth in clause (c) of this covenant. If the aggregate purchase price of the
Existing Notes or the Notes, as the case may be, tendered pursuant to the Offer
is less than the Net Available Cash allotted to the purchase of the Senior
Notes, the Company will apply the remaining Net Available Cash in accordance
with clause (a)(iii)(E) of this covenant. The Company will not be required to
make an Offer for the Existing Notes or the Notes pursuant to this covenant if
the Net Available Cash available therefor (after application of the proceeds as
provided in clauses (A) and (B) of this covenant section (a)(iii)) is less than
$5 million for any Asset Disposition (which lesser amounts will be carried
forward for purposes of determining whether an Offer is required with respect to
the Net Available Cash from any subsequent Asset Disposition).
(c) The Company will comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under this covenant by virtue thereof.
LIMITATION ON AFFILIATE TRANSACTIONS. (a) The Company will not, and will not
permit any Restricted Subsidiary to, enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property,
employee compensation arrangements or the rendering of any service) with any
Affiliate of the Company (an "Affiliate Transaction"), unless the terms thereof
(1) are no less favorable to the Company or such Restricted Subsidiary than
those which could be obtained at the time of such transaction in arm's-length
dealings with a Person who is not such an Affiliate and (2) if such Affiliate
Transaction involves an amount in excess of $500,000, (i) are set forth in
writing and (ii) have been approved by a majority of the members of the Board of
Directors having no personal stake in such Affiliate Transaction. In addition if
such Affiliate Transaction involves an amount in excess of $5 million a fairness
opinion must be provided by a nationally recognized investment banking firm.
(b) The provisions of the foregoing paragraph (a) will not apply to (i) any
Restricted Payment permitted to be paid pursuant to the covenant described under
"--Limitation on Restricted Payments", (ii) any issuance of securities, or other
payments, awards or grants in cash, securities or otherwise pursuant to, or the
funding of, employment or indemnification arrangements, stock options and stock
ownership plans approved by the Board of Directors, (iii) the grant of stock
options or similar rights to employees and directors of the Company pursuant to
plans approved by the Board of Directors, (iv) loans or advances to employees in
the ordinary course of business in accordance with the past practices of the
Company or its Restricted Subsidiaries, but in any event not to exceed $250,000
in the aggregate outstanding at any one time; (v) the payment of reasonable fees
to directors of the Company and its Restricted Subsidiaries who are not
employees of the Company or its Restricted Subsidiaries; and (vi) any Affiliate
Transaction between the Company and a Wholly Owned Subsidiary or between Wholly
Owned Subsidiaries.
LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES. The Company will not sell any shares of Capital Stock of a
Restricted Subsidiary, and will not permit any Restricted Subsidiary, directly
or indirectly, to issue or sell any shares of its Capital Stock except (i) to
the Company or a Wholly Owned Subsidiary or (ii) if, immediately after giving
effect to such issuance or sale, such Restricted Subsidiary would no longer
constitute a Restricted Subsidiary. Notwithstanding the foregoing, the Company
is permitted to sell all the Capital Stock of a Subsidiary as long as the
Company is in compliance with the terms of the covenant described under
"--Limitation on Sales of Assets and Subsidiary Stock."
LIMITATION ON LIENS. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create or permit to exist any
Lien on any of its property or assets (including Capital Stock), whether owned
on the Issue Date or thereafter acquired, securing any obligation other than
Permitted Liens unless contemporaneously therewith effective provision is made
to secure the Notes equally and
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ratably with (or on a senior basis to, in the case of Subordinated Obligations)
such obligation for so long as such obligation is so secured.
LIMITATION ON SALE/LEASEBACK TRANSACTIONS. The Company will not, and will
not permit any Restricted Subsidiary to, enter into any Sale/Leaseback
Transaction with respect to any property unless (i) the Company or such
Subsidiary would be entitled to (A) Incur Indebtedness in an amount equal to the
Attributable Debt with respect to such Sale/Leaseback Transaction pursuant to
the covenant described under "--Limitation on Indebtedness" and (B) create a
Lien on such property securing such Attributable Debt without equally and
ratably securing the Notes pursuant to the covenant described under "--
Limitation on Liens", (ii) the net proceeds received by the Company or any
Restricted Subsidiary in connection with such Sale/Leaseback Transaction are at
least equal to the fair value (as determined by the Board of Directors) of such
property and (iii) the transfer of such property is permitted by, and the
Company applies the proceeds of such transaction in compliance with, the
covenant described under "-- Limitation on Sales of Assets and Subsidiary
Stock."
LIMITATION ON LINES OF BUSINESS. The Company will not, and will not permit
any Restricted Subsidiary to, engage in any business, other than a Related
Business.
FUTURE NOTE GUARANTORS. After the Issue Date, the Company will cause each
Restricted Subsidiary which Incurs Indebtedness, other than Indebtedness owed to
the Company or a Wholly Owned Subsidiary, including each Restricted Subsidiary
which is a guarantor of Indebtedness Incurred pursuant to clause (b)(1) of the
covenant described under "--Limitation on Indebtedness," to execute and deliver
to the Trustee a supplemental indenture pursuant to which such Restricted
Subsidiary will Guarantee payment of the Notes.
MERGER AND CONSOLIDATION. The Company will not consolidate with or merge
with or into, or convey, transfer or lease all or substantially all its assets
to, any Person, unless: (i) the resulting, surviving or transferee Person (the
"Successor Company") shall be a Person organized and existing under the laws of
the United States of America, any State thereof or the District of Columbia and
the Successor Company (if not the Company) will expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of the Company under the Notes
and the Indenture; (ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor Company
or any Subsidiary as a result of such transaction as having been Incurred by
such Successor Company or such Subsidiary at the time of such transaction), no
Default shall have occurred and be continuing; (iii) immediately after giving
effect to such transaction, the Successor Company would be able to Incur an
additional $1.00 of Indebtedness pursuant to paragraph (a) under "--Limitation
on Indebtedness"; (iv) immediately after giving effect to such transaction, the
Successor Company will have Consolidated Net Worth in an amount which is not
less than the Consolidated Net Worth of the Company prior to such transaction;
and (v) the Company will have delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger or
transfer and such supplemental indenture (if any) comply with the Indenture.
The Successor Company will be the successor to the Company and will succeed
to, and be substituted for, and may exercise every right and power of, the
Company under the Indenture, but the predecessor Company in the case of a
conveyance, transfer or lease will not be released from the obligation to pay
the principal of and interest on the Notes.
Notwithstanding the foregoing clauses (ii), (iii) and (iv), any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
properties and assets to the Company or a Wholly Owned Subsidiary.
SEC REPORTS. Notwithstanding that the Company may not be required to remain
or be subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Company will file with the SEC and provide the Trustee and
Noteholders and prospective Noteholders (upon request) with such annual
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reports and such information, documents and other reports specified in Sections
13 and 15(d) of the Exchange Act. The Company will also comply with the other
provisions of TIA Section 314 (a).
DEFAULTS
An Event of Default is defined in the Indenture as (i) a default in the
payment of interest on the Notes when due, continued for 30 days, (ii) a default
in the payment of principal of any Note when due at its Stated Maturity, upon
optional redemption, upon required repurchase, upon declaration or otherwise,
(iii) the failure by the Company to comply with its obligations under "--Certain
Covenants--Merger and Consolidation" above, (iv) the failure by the Company to
comply for 30 days after notice with any of its obligations under the covenants
described above under "--Change of Control" or under the covenants described in
"--Certain Covenants" (in each case, other than a failure to purchase Notes),
(v) the failure by the Company or any Note Guarantor to comply for 60 days after
notice with its other agreements contained in the Indenture, (vi) the failure of
the Company or any Subsidiary to pay any Indebtedness within any applicable
grace period after final maturity or the acceleration of any Indebtedness by the
holders thereof because of a default and the total amount of such Indebtedness
unpaid or accelerated exceeds $5 million and such failure continues for 10 days
after notice (the "cross acceleration provision"), (vii) certain events of
bankruptcy, insolvency or reorganization of the Company or a Restricted
Subsidiary (the "bankruptcy provisions"), (viii) the rendering of any judgment
or decree for the payment of money in excess of $5 million against the Company
or a Subsidiary, which remains outstanding for a period of 60 days following
such judgment and is not discharged, waived or stayed within 10 days after
notice (the "judgment default provision") or (ix) any Note Guarantee (to the
extent issued after the date of the Indenture) shall thereafter cease to be in
full force and effect (except as contemplated by the terms thereof) or any Note
Guarantor shall deny or disaffirm its obligations under the Indenture or any
Note Guarantee and such default continues for 10 days.
The foregoing will constitute Events of Default whatever the reason for any
such Event of Default and whether it is voluntary or involuntary or is effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body.
However, a default under clauses (iv), (v), (vi) and (viii) will not
constitute an Event of Default until the Trustee or the Holders of 25% in
principal amount of the outstanding Notes notify the Company of the default and
the Company does not cure such default within the time specified after receipt
of such notice.
If an Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the outstanding Notes may declare the
principal of and accrued but unpaid interest on all the Notes to be due and
payable. Upon such a declaration, such principal and interest shall be due and
payable immediately. If an Event of Default under the bankruptcy provisions
occurs and is continuing, the principal of and interest on all the Notes will
IPSO FACTO become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any Holders. Under certain
circumstances, the Holders of a majority in principal amount of the outstanding
Notes may rescind any such acceleration with respect to the Notes and its
consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders of the Notes unless
such Holders have offered to the Trustee reasonable indemnity or security
against any loss, liability or expense. Except to enforce the right to receive
payment of principal, premium (if any) or interest when due, no Holder may
pursue any remedy with respect to the Indenture or the Notes unless (i) such
Holder has previously given the Trustee notice that an Event of Default is
continuing, (ii) Holders of at least 25% in principal amount of the outstanding
Notes have requested the Trustee to pursue the remedy, (iii) such Holders have
offered the Trustee reasonable security or indemnity against any loss, liability
or expense, (iv) the Trustee has not complied with such request within 60 days
after the receipt thereof and the offer of
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security or indemnity and (v) the Holders of a majority in principal amount of
the outstanding Notes have not given the Trustee a direction inconsistent with
such request within such 60-day period. Subject to certain restrictions, the
Holders of a majority in principal amount of the outstanding Notes are given the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or of exercising any trust or power conferred on
the Trustee. The Trustee, however, may refuse to follow any direction that
conflicts with law or the Indenture or that the Trustee determines is unduly
prejudicial to the rights of any other Holder or that would involve the Trustee
in personal liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each Holder notice of the Default
within 90 days after it occurs. Except in the case of a Default in the payment
of principal of, premium (if any) or interest on any Note, the Trustee may
withhold notice if and so long as a committee of its trust officers determines
that withholding notice is not opposed to the interest of the Holders. In
addition, the Company is required to deliver to the Trustee, within 120 days
after the end of each fiscal year, a certificate indicating whether the signers
thereof know of any Default that occurred during the previous year. The Company
also is required to deliver to the Trustee, within 30 days after the occurrence
thereof, written notice of any event which would constitute certain Defaults,
their status and what action the Company is taking or proposes to take in
respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the consent
of the Holders of a majority in principal amount of the Notes then outstanding
(including consents obtained in connection with a tender offer or exchange for
the Notes) and any past default or compliance with any provisions may also be
waived with such a consent of the Holders of a majority in principal amount of
the Notes then outstanding. However, without the consent of each Holder of an
outstanding Note, no amendment may, among other things, (i) reduce the amount of
Notes whose Holders must consent to an amendment, (ii) reduce the rate of or
extend the time for payment of interest on any Note, (iii) reduce the principal
of or extend the Stated Maturity of any Note, (iv) reduce the premium payable
upon the redemption of any Note or change the time at which any Note may or
shall be redeemed as described under "--Optional Redemption" above, (v) make any
Note payable in money other than that stated in the Note, (vi) impair the right
of any Holder to receive payment of principal of and interest on such Holder's
Notes on or after the due dates therefor or to institute suit for the
enforcement of any payment on or with respect to such Holder's Notes, (vii)
modify any Note Guarantees in any manner adverse to the Holders or (viii) make
any change in the amendment provisions which require each Holder's consent or in
the waiver provisions.
Without the consent of any Holder, the Company and Trustee may amend the
Indenture to cure any ambiguity, omission, defect or inconsistency, to provide
for the assumption by a successor corporation of the obligations of the Company
under the Indenture, to provide for uncertificated Notes in addition to or in
place of certificated Notes (provided that the uncertificated Notes are issued
in registered form for purposes of Section 163(f) of the Code, or in a manner
such that the uncertificated Notes are described in Section 163(f)(2)(B) of the
Code), to add Guarantees with respect to the Notes, to secure the Notes, to add
to the covenants of the Company for the benefit of the Holders or to surrender
any right or power conferred upon the Company or to make any change that does
not adversely affect the rights of any Holder.
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The consent of the Holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to Holders a notice briefly describing such amendment. However,
the failure to give such notice to all Holders, or any defect therein, will not
impair or affect the validity of the amendment.
TRANSFER
A Noteholder may transfer or exchange Notes in accordance with the
Indenture. Upon any transfer or exchange, the registrar and the Trustee may
require a Noteholder, among other things, to furnish appropriate endorsements
and transfer documents and the Company may require a Noteholder to pay any taxes
required by law or permitted by the Indenture. The Company is not required to
transfer or exchange any Note selected for redemption or to transfer or exchange
any Note for a period of 15 days prior to the mailing of a notice of redemption.
The Notes will be issued in registered form and the registered Holder of a Note
will be treated as the owner of such Note for all purposes.
DEFEASANCE
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under the covenants
described under "--Certain Covenants" (other than the covenants described under
"--Merger and Consolidation"), the operation of the cross acceleration
provision, the bankruptcy provisions with respect to Subsidiaries and the
judgment default provision described under "--Certain Covenants--Defaults" above
and the limitations contained in clauses (iii) and (iv) under "--Merger and
Consolidation" above ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iv), (vi), (vii) (with respect only to
Subsidiaries) or (viii) under "--Defaults" above or because of the failure of
the Company to comply with clause (iii) or (iv) under "--Certain Covenants--
Merger and Consolidation" above.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal, premium (if any) and
interest on the Notes to redemption or maturity, as the case may be, and must
comply with certain other conditions, including delivery to the Trustee of an
Opinion of Counsel to the effect that Holders of the Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of such deposit
and defeasance and will be subject to Federal income tax on the same amount and
in the same manner and at the same times as would have been in the case if such
deposit and defeasance had not occurred (and, in the case of legal defeasance
only, such Opinion of Counsel must be based on a ruling of the Internal Revenue
Service or other change in applicable Federal income tax law).
CONCERNING THE TRUSTEE
The Bank of New York is to be the Trustee under the Indenture and has been
appointed by the Company as Registrar and Paying Agent with regard to the Notes.
The Holders of a majority in principal amount of the outstanding Notes will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the
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Trustee, subject to certain exceptions. The Indenture provides that if an Event
of Default occurs (and is not cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder, unless such Holder will have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or expense
and then only to the extent required by the terms of the Indenture.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock of
a Person that becomes a Restricted Subsidiary as a result of the acquisition of
such Capital Stock by the Company or another Restricted Subsidiary or (iii)
Capital Stock constituting a minority interest in any Person that at such time
is a Restricted Subsidiary; PROVIDED, HOWEVER, that any such Restricted
Subsidiary described in clauses (ii) or (iii) above is primarily engaged in a
Related Business.
"Affiliate" of any specified Person means (i) any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person or (ii) any Person who is a director or
executive officer (a) of such Person, (b) of any Subsidiary of such Person or
(c) of any Person described in clause (i) above. For the purposes of this
definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and controlled" have meanings correlative to the
foregoing. For purposes of the provisions described under "--Certain
Covenants--Limitation on Affiliate Transactions" and "--Certain
Covenants--Limitations on Sales of Assets and Subsidiary Stock" only,
"Affiliate" shall also mean any beneficial owner of shares representing 5% or
more of the total voting power of the Voting Stock (on a fully diluted basis) of
the Company or of rights or warrants to purchase such Voting stock (whether or
not currently exercisable) and any Person who would be an Affiliate of any such
beneficial owner pursuant to the first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other disposition of
shares of Capital Stock of a Restricted Subsidiary (other than directors'
qualifying shares), property or other assets (each referred to for the purposes
of this definition as a "disposition") by the Company or any of its Restricted
Subsidiaries (including any disposition by means of a merger, consolidation or
similar transaction) other than (i) a disposition by a Restricted Subsidiary to
the Company or by the Company or a Restricted Subsidiary to a Wholly Owned
Subsidiary, (ii) a disposition of inventory in the ordinary course of business,
(iii) a disposition of all or substantially all of the assets of the Company
permitted by the covenant described under "--Certain Covenants--Merger and
Consolidation" and (iv) for purposes of the covenant described under "--Certain
Covenants-- Limitation on Sales of Assets and Subsidiary Stock" only, a
disposition that constitutes a Restricted Payment permitted by the covenant
described under "--Certain Covenants-- Limitation on Restricted Payments".
"Asset Value" of any asset, as of the date of determination thereof, means
the greater of the depreciated book value (as of the end of the fiscal quarter
ended immediately prior to such date of determination as to which financial
statements are available) and the appraised value of such asset; provided,
however, that any such appraisal (i) shall not have been made more than two
years prior to such date of determination and (ii) shall have been made by a
qualified, independent and nationally recognized appraiser.
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"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
borne by the Notes, compounded annually) of the total obligations of the lessee
for rental payments during the remaining term of the lease included in such
Sale/Leaseback Transaction (including any period for which such lease has been
extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of numbers of years from the date of determination to the dates
of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means any day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
close.
"Capital Lease Obligation" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or interests
in (however designated) equity of such Person, including any Preferred Stock,
but excluding any debt securities convertible into such equity.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending prior to the date of such determination
as to which financial statements are available to (ii) Consolidated Interest
Expense for such four fiscal quarters; PROVIDED, HOWEVER, that (1) if the
Company or any Restricted Subsidiary has Incurred any Indebtedness since the
beginning of such period that remains outstanding on such date of determination
or if the transaction giving rise to the need to calculate the Consolidated
Coverage Ratio is an Incurrence of Indebtedness, or both, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
effect on a pro forma basis to such Indebtedness as if such Indebtedness had
been Incurred on the first day of such period and the discharge of any other
Indebtedness repaid, repurchased, defeased or otherwise discharged with the
proceeds of such new Indebtedness as if such discharge had occurred on the first
day of such period, (2) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Disposition, the EBITDA for such
period shall be reduced by an amount equal to the EBITDA (if positive) directly
attributable to the assets which are the subject of such Asset Disposition for
such period, or increased by an amount equal to the EBITDA (if negative),
directly attributable thereto for such period and Consolidated Interest Expense
for such period shall be reduced by an amount equal to the Consolidated Interest
Expense directly attributable to any Indebtedness of the Company or any
Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with
respect to the Company and its continuing Restricted Subsidiaries in connection
with such Asset Disposition for such period (or, if the Capital Stock of any
Restricted Subsidiary is sold, the Consolidated Interest Expense for such period
directly attributable to the Indebtedness of such Restricted Subsidiary to the
extent the Company and its continuing Restricted Subsidiaries are no longer
liable for such Indebtedness after such sale), (3) if since the beginning of
such period the Company or any Restricted Subsidiary (by merger or otherwise)
shall have made an Investment in any Restricted Subsidiary (or any Person which
becomes a Restricted Subsidiary) or an acquisition of assets, including any
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acquisition of assets occurring in connection with a transaction causing a
calculation to be made hereunder, which constitutes all or substantially all of
an operating unit of a business, EBITDA and Consolidated Interest Expense for
such period shall be calculated after giving pro forma effect thereto (including
the Incurrence of any Indebtedness) as if such Investment or acquisition
occurred on the first day of such period, (4) if since the beginning of such
period the Company or any Restricted Subsidiary shall have repaid, repurchased,
defeased or otherwise discharged any Indebtedness, pursuant to the terms of the
Indenture, with the Net Cash Proceeds received by the Company from the issuance
or sale of its Capital Stock (other than Disqualified Stock and other than an
issuance or sale to a Subsidiary of the Company and other than an issuance or
sale to an employee stock ownership plan or other trust established by the
Company or any of its Subsidiaries for the benefit of their employees to the
extent the purchase by such plan or trust is financed by Indebtedness of such
plan or trust and for which the Company is liable as Guarantor or otherwise),
EBITDA and Consolidated Interest Expense for such period shall be calculated
after giving effect on a pro forma basis to such discharge of Indebtedness as if
such discharge had occurred on the first day of such period, and (5) if since
the beginning of such period any Person (that subsequently became a Restricted
Subsidiary or was merged with or into the Company or any Restricted Subsidiary
since the beginning of such period) shall have made any Asset Disposition, any
Investment or acquisition of assets that would have required an adjustment
pursuant to clause (2) or (3) above if made by the Company or a Restricted
Subsidiary during such period, EBITDA and Consolidated Interest Expense for such
period shall be calculated after giving pro forma effect thereto as if such
Asset Disposition, Investment or acquisition occurred on the first day of such
period. For purposes of this definition, whenever pro forma effect is to be
given to an acquisition of assets, the amount of income or earnings relating
thereto, and the amount of Consolidated Interest Expense associated with any
Indebtedness Incurred in connection therewith, the pro forma calculations shall
be determined in good faith by a responsible financial or accounting Officer of
the Company. If any Indebtedness bears a floating rate of interest and is being
given pro forma effect, the interest of such Indebtedness shall be calculated as
if the rate in effect on the date of determination had been the applicable rate
for the entire period (taking into account any Interest Rate Agreement
applicable to such Indebtedness if such Interest Rate Agreement has a remaining
term as at the date of determination in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its Consolidated Restricted Subsidiaries, plus, to
the extent not included in such total interest expense, and to the extent
incurred by the Company or its Restricted Subsidiaries, (i) interest expense
attributable to Capital Lease Obligations, (ii) amortization of debt discount,
(iii) capitalized interest, (iv) non-cash interest expenses, (v) commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing, (vi) net costs associated with Hedging
Obligations (including amortization of fees), (vii) Preferred Stock dividends in
respect of all Preferred Stock of Subsidiaries of the Company and Disqualified
Stock of the Company held by Persons other than the Company or a Wholly Owned
Subsidiary, (viii) interest accruing on any Indebtedness of any other Person to
the extent such Indebtedness is Guaranteed by the Company or any Restricted
Subsidiary; PROVIDED that payment of such amounts by the Company or any
Restricted Subsidiary is being made to, or is sought by, the holders of such
Indebtedness pursuant to such Guarantee, and (ix) the cash contributions to any
employee stock ownership plan or similar trust to the extent such contributions
are used by such plan or trust to pay interest or fees to any Person (other than
the Company) in connection with Indebtedness Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income (loss) of
the Company and its Consolidated Subsidiaries; PROVIDED, HOWEVER, that there
shall not be included in such Consolidated Net Income: (i) any net income (loss)
of any Person if such Person is not a Restricted Subsidiary, except that (A)
subject to the limitations contained in clause (iv) below, the Company's equity
in the net income of any such Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually distributed
by such Person during such period to the Company or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution paid
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to a Restricted Subsidiary, to the limitations contained in clause (iii) below)
and (B) the Company's equity in a net loss of any such Person (other than an
Unrestricted Subsidiary) for such period shall be included in determining such
Consolidated Net Income, up to the aggregate amount of cash actually contributed
or advanced to such Person by the Company or its Restricted Subsidiaries during
or with respect to such period; (ii) any net income (loss) of any Person
acquired by the Company or a Subsidiary in a pooling of interests transaction
for any period prior to the date of such acquisition; (iii) any net income of
any Restricted Subsidiary if such Restricted Subsidiary is subject at such time
to restrictions, directly or indirectly, on the payment of dividends or the
making of distributions by such Restricted Subsidiary, directly or indirectly,
to the Company, except that (A) subject to the limitations contained in clause
(iv) below, the Company's equity in the net income of any such Restricted
Subsidiary for such period shall be included in such Consolidated Net Income up
to the aggregate amount of cash that could have been distributed by such
Restricted Subsidiary during such period to the Company or another Restricted
Subsidiary as a dividend or other distribution (subject, in the case of a
dividend or other distribution that could have been made to another Restricted
Subsidiary, to the limitation contained in this clause) and (B) the Company's
equity in a net loss of any such Restricted Subsidiary for such period shall be
included in determining such Consolidated Net Income, (iv) any gain (but not
loss) realized upon the sale or other disposition of any property, plant or
equipment of the Company or its Consolidated Subsidiaries (including pursuant to
any Sale/Leaseback Transaction) which is not sold or otherwise disposed of in
the ordinary course of business and any gain (but not loss) realized upon the
sale or other disposition of any Capital Stock of any Person; (v) extraordinary
gains (but not losses); and (vi) the cumulative effect of a change in accounting
principles. Notwithstanding the foregoing, for the purposes of the covenant
described under "Certain Covenants--Limitation on Restricted Payments" only,
there shall be excluded from Consolidated Net Income any dividends, repayments
of loans or advances or other transfers of assets from Unrestricted Subsidiaries
to the Company or a Restricted Subsidiary to the extent such dividends,
repayments or transfers increase the amount of Restricted Payments permitted
under such covenant pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the balance
sheet of the Company and the Restricted Subsidiaries, determined on a
Consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company ending prior to the taking of any action for the
purpose of which the determination is being made as to which financial
statements are available, as (i) the par or stated value of all outstanding
Capital Stock of the Company plus (ii) paid-in capital or capital surplus
relating to such Capital Stock plus (iii) any retained earnings or earned
surplus less (A) any accumulated deficit and (B) any amounts attributable to
Disqualified Stock.
"Consolidation" means the consolidation of the amounts of each of the
Restricted Subsidiaries with those of the Company in accordance with GAAP
consistently applied; provided, however, that "Consolidation" will not include
consolidation of the accounts of any Unrestricted Subsidiary, but the interest
of the Company or any Restricted Subsidiary in an Unrestricted Subsidiary will
be accounted for as an Investment. The term "Consolidated" has a correlative
meaning.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable or exercisable) or upon the happening of any
event (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in the case of clauses (i), (ii) or (iii) on or prior to
the first anniversary of the Stated Maturity of the Notes.
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"East 79th Street Partnership Agreement" means the Agreement of 229 East
79th Street Associates, dated July 24, 1987, as amended to the Issue Date.
"EBITDA" for any period means the Consolidated Net Income for such period,
plus the following to the extent deducted in calculating such Consolidated Net
Income: (i) all income tax expense of the Company, (ii) Consolidated Interest
Expense, (iii) depreciation expense and (iv) amortization expense, in each case
for such period. Notwithstanding the foregoing, the provision for taxes based on
the income or profits of, and the depreciation and amortization and other
non-cash charges of, a Restricted Subsidiary of the Company shall be added to
Consolidated Net Income to compute EBITDA only to the extent (and in the same
proportion) that the net income of such Subsidiary was included in calculating
Consolidated Net Income and only if a corresponding amount would be permitted at
the date of determination to be dividended to the Company by such Restricted
Subsidiary without prior approval (that has not been obtained), pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Notes" means the 12% Senior Notes due 2003 of the Company issued
under the indenture dated as of August 15, 1995, as amended, between the Company
and United States Trust Company of New York as Trustee.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including, without limitation,
those 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 approved by a significant segment of the
accounting profession. All ratios and computations based on GAAP contained in
the Indenture shall be computed in conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
other Person and any obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness or other obligation of such other Person
(whether arising by virtue of partnership arrangements, or by agreements to
keep-well, to purchase assets, goods, securities or services, to take-or-pay, or
to maintain financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the obligee of such Indebtedness
or other obligation of the payment thereof or to protect such obligee against
loss in respect thereof (in whole or in part); provided, however, that the term
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning. The term "Guarantor" shall mean any Person Guaranteeing
any obligation.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is registered
on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of indebtedness of such Person for borrowed money; (ii) the principal
of and premium (if any) in respect of obligations evidenced by bonds,
debentures, notes or other similar instruments; (iii) all obligations of such
Person in respect of letters of credit or other
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similar instruments (including reimbursement obligations with respect thereto);
(iv) all obligations of such Person to pay the deferred and unpaid purchase
price of property or services (except Trade Payables), which purchase price is
due more than six months after the date of placing such property in service or
taking delivery and title thereto or the completion of such services; (v) all
Capital Lease Obligations of such Person and all Attributable Debt of such
Person; (vi) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or, with
respect to any Subsidiary of the Company, any Preferred Stock (but excluding, in
each case, any accrued dividends); (vii) all Indebtedness of other Persons
secured by a Lien on any asset of such Person, whether or not such Indebtedness
is assumed by such Person; PROVIDED, HOWEVER, that the amount of Indebtedness of
such Person shall be the lesser of (A) the fair market value of such asset at
such date of determination and (B) the amount of such Indebtedness of such other
Persons; (viii) all Indebtedness of other Persons to the extent Guaranteed by
such Person; and (ix) to the extent not otherwise included in this definition,
Hedging Obligations of such Person. The amount of Indebtedness of any Person at
any date shall be the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability, upon the occurrence of
the contingency giving rise to the obligation, of any contingent obligations at
such date.
"Interest Rate Agreement" means with respect to any Person any interest rate
protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance, loan (other
than advances to customers in the ordinary course of business that are recorded
as accounts receivable on the balance sheet of such Person) or other extension
of credit (including by way of Guarantee or similar arrangement) or capital
contribution to (by means of any transfer of cash or other property to others or
any payment for property or services for the account or use of others), or any
purchase or acquisition of Capital Stock, Indebtedness or other similar
instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary", the definition of "Restricted Payment" and the
covenant described under "--Certain Covenants--Limitation on Restricted
Payments", (i) "Investment" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of any Subsidiary of the Company at the time that such Subsidiary is
designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall
be deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary equal to an amount (if positive) equal to (x) the Company's
"Investment" in such Subsidiary at the time of such redesignation less (y) the
portion (proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net assets of such Subsidiary at the time of such
redesignation; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors.
"Issue Date" means the date on which the Notes are originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring person of Indebtedness or other obligations relating
to the properties or assets that are the subject of such Asset Disposition or
received in any other noncash form) therefrom in each case net of (i) all legal,
title and recording tax expenses, commissions and other fees and expenses
incurred, and all Federal, state, provincial, foreign and local taxes required
to be accrued as a liability under GAAP, as a consequence of such Asset
Disposition, (ii) all payments made on any Indebtedness which is secured by any
assets subject to such Asset Disposition, in accordance with the terms of any
Lien upon or other security agreement of any kind with respect to such assets,
or which must by its terms, or in order to obtain
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a necessary consent to such Asset Disposition, or by applicable law be repaid
out of the proceeds from such Asset Disposition, (iii) all distributions and
other payments required to be made to minority interest holders in Subsidiaries
or joint ventures as a result of such Asset Disposition and (iv) appropriate
amounts to be provided by the seller as a reserve, in accordance with GAAP,
against any liabilities associated with the assets disposed of in such Asset
Disposition and retained by the Company or any Restricted Subsidiary after such
Asset Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Note Guarantee" means any Guarantee which may from time to time be executed
and delivered by a Subsidiary of the Company pursuant to the terms of the
Indenture. Each such Note Guarantee will be in the form prescribed in the
Indenture.
"Note Guarantor" means any Subsidiary that has issued a Note Guarantee.
"Officer" means the Chairman of the Board, the Chief Executive Officer, the
President, the Chief Financial Officer, the Chief Operating Officer, any Vice
President, the Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"Permitted Holders" means Hanseatic Corporation, Robert J. Gellert, Michael
E. Gellert, Jack Tyrell, and each of their respective Affiliates.
"Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in (i) a Restricted Subsidiary or a Person which will, upon the
making of such Investment, become a Restricted Subsidiary; provided, however,
that the primary business of such Restricted Subsidiary is a Related Business;
(ii) another Person if as a result of such Investment such other Person is
merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Company or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related Business;
(iii) another Person if the aggregate amount of all Investments in all such
other Persons does not exceed $20.0 million; PROVIDED, HOWEVER, that such
Person's primary business is a Related Business; (iv) promissory notes received
as consideration for an Asset Disposition which are secured by a lien on the
asset subject to such Asset Disposition; PROVIDED that the aggregate amount of
all such promissory notes at any one time outstanding does not exceed $1.0
million; (v) Temporary Cash Investments; (vi) receivables owing to the Company
or any Restricted Subsidiary, if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade terms;
PROVIDED, HOWEVER, that such trade terms may include such concessionary trade
terms as the Company or any such Restricted Subsidiary deems reasonable under
the circumstances; (vii) payroll, travel and similar advances to cover matters
that are expected at the time of such advances ultimately to be treated as
expenses for accounting purposes and that are made in the ordinary course of
business; (viii) loans or advances to employees made in the ordinary course of
business consistent with past practices of the Company or such Restricted
Subsidiary; (ix) stock, obligations or securities received in settlement of
debts created in the ordinary course of business and owing to the Company or any
Restricted Subsidiary or in satisfaction of judgments; and (x) Investments in
the aggregate not to exceed $100,000 in any year pursuant to the East 79th
Street Partnership Agreement.
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"Permitted Liens" means, with respect to any Person, (a) pledges or deposits
by such Person under workmen's compensation laws, unemployment insurance laws or
similar legislation, or good faith deposits in connection with bids, tenders,
contracts (other than for the payment of Indebtedness) or leases to which such
Person is a party, or deposits to secure public or statutory obligations of such
Person or deposits of cash or United States government bonds to secure surety or
appeal bonds to which such Person is a party, or deposits as security for
contested taxes or import duties or for the payment of rent, in each case
Incurred in the ordinary course of business; (b) Liens imposed by law, such as
carriers', warehousemen's and mechanics' Liens, in each case for sums not yet
due or being contested in good faith by appropriate proceedings or other Liens
arising out of judgments or awards against such Person with respect to which
such Person shall then be proceeding with an appeal or other proceedings for
review; (c) Liens for property taxes not yet due or payable or subject to
penalties for non-payment or which are being contested in good faith and by
appropriate proceedings; (d) Liens in favor of issuers of surety bonds or
letters of credit issued pursuant to the request of and for the account of such
Person in the ordinary course of its business; PROVIDED, HOWEVER, that such
letters of credit do not constitute Indebtedness; (e) minor survey exceptions,
minor encumbrances, easements or reservations of, or rights of others for,
licenses, rights of way, sewers, electric lines, telegraph and telephone lines
and other similar purposes, or zoning or other restrictions as to the use of
real properties or Liens incidental to the conduct of the business of such
Person or to the ownership of its properties which were not Incurred in
connection with Indebtedness and which do not in the aggregate materially impair
the use of such properties in the operation of the business of such Person; (f)
Liens securing Purchase Money Indebtedness; PROVIDED, HOWEVER, that (i) the
Indebtedness secured by such Liens is otherwise permitted to be Incurred under
the Indenture, (ii) the principal amount of any Indebtedness secured by any such
Lien does not exceed the cost of assets or property so acquired or constructed
and (iii) the amount of Indebtedness secured by any such Lien is not
subsequently increased; (g) Liens to secure (i) Indebtedness permitted under the
provisions described in clause (b)(1) or (8) under "--Certain
Covenants--Limitation on Indebtedness" and (ii) Senior Indebtedness; provided,
however, that (A) the Indebtedness secured by such Liens is otherwise permitted
to be Incurred under the Indenture, (B) the principal amount of all Indebtedness
secured by any such Lien permitted by this clause (ii) does not exceed 50% of
the Asset Value of the assets encumbered by such Lien at the time of Incurrence
and (C) the principal amount of Indebtedness secured by all such Liens, combined
with the principal amount of all other Indebtedness secured by Permitted Liens
(except for Indebtedness Incurred pursuant to clause (b)(1) of the covenant
described under "--Certain Covenants--Limitation on Indebtedness"), does not
exceed, as of the date of the most recent Incurrence of Indebtedness secured by
a Lien permitted by this clause (ii), 50% of the Asset Value of the assets of
the Company and its Subsidiaries taken as a whole; (h) Liens existing on the
Issue Date; (i) Liens on property or shares of Capital Stock of another Person
at the time such other Person becomes a Subsidiary of such Person; PROVIDED,
HOWEVER, that such Liens are not created, incurred or assumed in connection
with, or in contemplation of, such other Person becoming such a Subsidiary;
PROVIDED FURTHER, HOWEVER, that such Lien may not extend to any other property
owned by such Person or any of its Subsidiaries; (j) Liens on property at the
time such Person or any of its Subsidiaries acquires the property, including any
acquisition by means of a merger or consolidation with or into such Person or a
Subsidiary of such Person; PROVIDED, HOWEVER, that such Liens are not created,
incurred or assumed in connection with, or in contemplation of, such
acquisition; PROVIDED FURTHER, HOWEVER, that the Liens may not extend to any
other property owned by such Person or any of its Subsidiaries; (k) Liens
securing Indebtedness or other obligations of a Subsidiary of such Person owing
to such Person or a wholly owned Subsidiary of such Person; (1) Liens securing
Hedging Obligations so long as the related Indebtedness is, and is permitted to
be under the Indenture, secured by a Lien on the same property securing such
Hedging Obligations; (m) Liens to secure any Refinancing (or successive
Refinancings) as a whole, or in part, of any Indebtedness secured by any Lien
referred to in the foregoing clauses (f), (g), (h), (i) and (j); PROVIDED,
HOWEVER, that (x) such new Lien shall be limited to all or part of the same
property that secured the original Lien (plus improvements on such property) and
(y) the Indebtedness secured by such Lien at such time is not increased to any
amount greater than the sum of (A) the outstanding principal amount or, if
greater, committed amount of the Indebtedness described under
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clauses (f), (g) (h), (i) or (j) at the time the original Lien became a
Permitted Lien and (B) an amount necessary to pay any fees and expenses,
including premiums, related to such refinancing, refunding, extension, renewal
or replacement and (n)(i) mortgages, liens, security interests, restrictions or
encumbrances that have been placed by any developer, landlord or other third
party on property over which the Company or any Restricted Subsidiary of the
Company has easement rights or on any real property leased by the Company and
subordination or similar agreements relating thereto and (ii) any condemnation
or eminent domain proceedings affecting any real property. Notwithstanding the
foregoing, "Permitted Liens" will not include any Lien described in clauses (f),
(i) or (j) above if such Lien applies to any Additional Assets acquired directly
or indirectly from Net Available Cash pursuant to the covenant described under
"Certain Covenants--Limitation on Sale of Assets and Subsidiary Stock."
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time.
"Public Equity Offering" means an underwritten primary public offering of
common stock of the Company with aggregate gross proceeds of at least $15
million pursuant to an effective registration statement (other than a
registration statement on Form S-4, S-8 or any successor or similar forms) under
the Securities Act.
"Public Market" means any time after a Public Equity Offering has been
consummated and the common stock subject thereto has been distributed by means
of an effective registration statement under the Securities Act.
"Purchase Money Indebtedness" means Indebtedness (i) consisting of the
deferred purchase price of property, conditional sale obligations, obligation
under any title retention agreement and other purchase money obligations, in
each case where the maturity of such Indebtedness does not exceed the
anticipated useful life of the asset being financed, and (ii) incurred to
finance the acquisition by the Company or a Restricted Subsidiary of such asset,
including additions and improvements; PROVIDED, HOWEVER, that any Lien arising
in connection with any such Indebtedness shall be limited to the specified asset
being financed or, in the case of real property or fixtures, including additions
and improvements, the real property on which such asset is attached; and
PROVIDED FURTHER, that such Indebtedness is Incurred within 180 days after such
acquisition, addition or improvement by the Company or Restricted Subsidiary of
such asset.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with the Indenture including Indebtedness that
Refinances Refinancing Indebtedness; PROVIDED, HOWEVER, that (i) such
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or
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committed under the Indebtedness being Refinanced; PROVIDED FURTHER, HOWEVER,
that Refinancing Indebtedness shall not include (x) Indebtedness of a Restricted
Subsidiary that Refinances Indebtedness of the Company or (y) Indebtedness of
the Company or a Restricted Subsidiary that Refinances Indebtedness of an
Unrestricted Subsidiary.
"Related Business" means any business related, ancillary or complementary,
to the businesses of the Company and the Restricted Subsidiaries on the Issue
Date.
"Restricted Payment" with respect to any Person means (i) the declaration or
payment of any dividends or any other distributions of any sort in respect of
its Capital Stock (including any payment in connection with any merger or
consolidation involving such Person) or similar payment to the direct or
indirect holders of its Capital Stock (other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) or rights to
acquire its Capital Stock (other than Disqualified Stock) and dividends or
distributions payable solely to the Company or a Restricted Subsidiary, and
other than pro rata dividends or other distributions made by a Subsidiary that
is not a Wholly Owned Subsidiary to minority stockholders (or owners of an
equivalent interest in the case of a Subsidiary that is an entity other than a
corporation)), (ii) the purchase, redemption or other acquisition or retirement
for value of any Capital Stock of the Company or of any Restricted Subsidiary
held by any Person (other than a Wholly Owned Subsidiary), including the
exercise of any option to exchange any Capital Stock (other than into Capital
Stock of the Company that is not Disqualified Stock), (iii) the purchase,
repurchase, redemption, defeasance or other acquisition or retirement for value,
prior to scheduled maturity, scheduled repayment or scheduled sinking fund
payment of any Subordinated Obligations (other than the purchase, repurchase or
other acquisition of Subordinated Obligations purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of acquisition) or (iv) the making
of any Investment, other than a Permitted Investment, in any Unrestricted
Subsidiary or any Affiliate of the Company other than a Wholly Owned Subsidiary
or a Person that will become a Wholly Owned Subsidiary as a result of any such
Investment.
"Restricted Subsidiary" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases it from such Person, other than leases between the Company and a Wholly
Owned Subsidiary or between Wholly Owned Subsidiaries.
"SEC" means the Securities and Exchange Commission.
"Senior Indebtedness" means any Indebtedness which is not by its express
terms subordinated in right of payment to the Notes or any Note Guarantee.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the final payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Notes pursuant to a written agreement to that
effect.
"Subsidiary" means, 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
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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.
"Temporary Cash Investments" means any of the following: (i) any investment
in direct obligations of the United States of America or any agency thereof or
obligations guaranteed by the United States of America or any agency thereof,
(ii) investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States, and which bank or trust company has capital, surplus and
undivided profits aggregating in excess of $250,000,000 (or the foreign currency
equivalent thereof) and has outstanding debt which is rated "A" (or such similar
equivalent rating) or higher by at least one nationally recognized statistical
rating organization (as defined in Rule 436 under the Securities Act), (iii)
repurchase obligations with a term of not more than 30 days for underlying
securities of the types described in clause (i) above entered into with a bank
meeting the qualifications described in clause (ii) above, (iv) investments in
commercial paper, maturing not more than 90 days after the date of acquisition,
issued by a corporation (other than an Affiliate of the Company) organized and
in existence under the laws of the United States of America or any foreign
country recognized by the United States of America with a rating at the time as
of which any investment therein is made of "P-1" (or higher) according to
Moody's Investors Service, Inc. or "A-1" (or higher) according to Standard and
Poor's Corporation, and (v) investments in securities with maturities of six
months or less from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A" by
Standard & Poor's Corporation or "A" by Moody's Investors Service, Inc.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. SectionSection
77aaa-77bbbb) as amended by the Trust Indenture Reform Act of 1990, as it may be
amended from time to time.
"Trade Payables" means, with respect to any Person, any accounts payable or
any Indebtedness or monetary obligation to trade creditors Incurred by such
Person arising in the ordinary course of business in connection with the
acquisition of goods or services.
"Trustee" means the party named as such in the Indenture until a successor
replaces it and, thereafter, means the successor.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns
any Capital Stock or Indebtedness of, or holds any Lien on any property of, the
Company or any other Subsidiary of the Company that is not a Subsidiary of the
Subsidiary to be so designated; PROVIDED, HOWEVER, that either (A) the
Subsidiary to be so designated has total consolidated assets of $1,000 or less
or (B) if such Subsidiary has consolidated assets greater than $1,000, such
designation would be permitted under the covenant entitled "--Certain
Covenants--Limitation on Restricted Payments." The Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED,
HOWEVER, that immediately after giving effect to such designation (x) the
Company could Incur $1.00 of additional Indebtedness under paragraph (a) of the
covenant described under "--Limitation on Indebtedness" and (y) no Default shall
have occurred and be continuing. Any such designation by the Board of Directors
shall be evidenced to the Trustee by promptly filing with the Trustee a copy of
the board resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality
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<PAGE>
thereof) for the payment of which the full faith and credit of the United States
of America is pledged and which are not callable at the issuer's option.
"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of the Company all
the Capital Stock of which (other than directors' qualifying shares) is owned by
the Company or one or more Wholly Owned Subsidiaries.
BOOK-ENTRY; DELIVERY AND FORM
The Notes will initially be issued in the form of one Global Note (the
"Global Note") held in book-entry form. The Global Note will be deposited on the
date of the closing of the sale of the Notes (the "Closing Date") with, or on
behalf of, The Depository Trust Company (the "Depository") and registered in the
name of Cede & Co., as nominee of the Depository, or will remain in the custody
of the Trustee pursuant to the FAST Balance Certificate Agreement between the
Depository and the Trustee.
The Depository has advised the Company that it is (i) a limited purpose
trust company organized under the laws of the State of New York, (ii) a member
of the Federal Reserve System, (iii) a "clearing corporation" within the meaning
of the Uniform Commercial Code, as amended, and (iv) a "Clearing Agency"
registered pursuant to Section 17A of the Exchange Act. The Depository was
created to hold securities for its participants (collectively, the
"Participants") and facilitates the clearance and settlement of securities
transactions between Participants through electronic book-entry changes to the
accounts of its Participants, thereby eliminating the need for physical transfer
and delivery of certificates. The Depository's Participants include securities
brokers and dealers, banks and trust companies, clearing corporations and
certain other organizations. Access to the Depository's system is also available
to other entities such as banks, brokers, dealers and trust companies
(collectively, the "Indirect Participants") that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly.
Persons who are not Participants may beneficially own securities held by or on
behalf of the Depository only through Participants or Indirect Participants.
The Company expects that pursuant to procedures established by the
Depository (i) upon deposit of the Global Note the Depository will credit the
accounts of Participants with an interest in the Global Note and (ii) ownership
of the Notes will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by the Depository (with respect to the
interest of Participants), the Participants and the Indirect Participants. The
laws of some states require that certain persons take physical delivery in
definitive form of securities that they own and that security interests in
negotiable instruments can only be perfected by delivery of certificates
representing the instruments. Consequently, the ability to transfer Notes or to
pledge the Notes as collateral will be limited to such extent.
So long as the Depository or its nominee is the registered owner of a Global
Note, the Depository or such nominee, as the case may be, will be considered the
sole owner or Holder of the Notes represented by the Global Note for all
purposes under the Indenture. Except as provided below, owners of beneficial
interests in a Global Note will not be entitled to have Notes represented by
such Global Note registered in their names, will not receive or be entitled to
receive physical delivery of Certificated Securities, and will not be considered
the owners or Holders thereof under the Indenture for any purpose, including
with respect to the giving of any directions, instruction or approval to the
Trustee thereunder. As a result, the ability of a person having a beneficial
interest in Notes represented by a Global Note to pledge such interest to
persons or entities that do not participate in the Depository's system or to
otherwise take action with respect to such interest, may be affected by the lack
of a physical certificate evidencing such interest.
Accordingly, each Person owning a beneficial interest in a Global Note must
rely on the procedures of the Depository and, if such Person is not a
Participant or an Indirect Participant, on the procedures of the
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<PAGE>
Participant through which such Person owns its interest, to exercise any rights
of a Holder under the Indenture or such Global Note. The Company understands
that under existing industry practice, in the event the Company requests any
action of Holders or a Person that is an owner of a beneficial interest in a
Global Note desires to take any action that the Depository, as the Holder of
such Global Note, is entitled to take, the Depository would authorize the
Participants to take such action and the Participant would authorize Persons
owning through such Participants to take such action or would otherwise act upon
the instruction of such Persons. Neither the Company nor the Trustee will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of Notes by the Depository, or for maintaining,
supervising or reviewing any records of the Depository relating to such Notes.
Payments with respect to the principal of, premium, if any, and interest on
any Notes represented by a Global Note registered in the name of the Depository
or its nominee on the applicable record date will be payable by the Trustee to
or at the direction of the Depository or its nominee in its capacity as the
registered Holder of the Global Note representing such Notes under the
Indenture. Under the terms of the Indenture, the Company and the Trustee may
treat the Persons in whose names the Notes, including the Global Note, are
registered as the owners thereof for the purpose of receiving such payment and
for any and all other purposes whatsoever. Consequently, neither the Company nor
the Trustee has or will have any responsibility or liability for the payment of
such amounts to beneficial owners of Notes (including principal, premium, if
any, and interest), or to immediately credit the accounts of the relevant
Participants with such payment, in amounts proportionate to their respective
holdings in principal amount of beneficial interest in the Global Note as shown
on the records of the Depository. Payments by the Participants and the Indirect
Participants to the beneficial owners of Notes will be governed by standing
instructions and customary practice and will be the responsibility of the
Participants or the Indirect Participants.
CERTIFICATED SECURITIES
If (i) the Company notifies the Trustee in writing that the Depository is no
longer willing or able to act as a depository and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of Notes in
definitive form under the Indenture, then, upon surrender by the Depository of
its Global Note, Certificated Securities will be issued to each person that the
Depository identifies as the beneficial owner of the Notes represented by the
Global Note.
Neither the Company nor the Trustee shall be liable for any delay by the
Depository or any Participant or Indirect Participant in identifying the
beneficial owners of the related Notes and each such person may conclusively
rely on, and shall be protected in relying on, instructions from the Depository
for all purposes (including with respect to the registration and delivery, and
the respective principal amounts, of the Notes to be issued).
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<PAGE>
UNDERWRITING
Under the terms of and subject to the conditions contained in an
underwriting agreement (the "Underwriting Agreement"), among the Company and
each of the Underwriters named below, each of the several Underwriters has
agreed to purchase from the Company, and the Company has agreed to sell to each
Underwriter, the principal amount of Notes set forth opposite the name of such
Underwriter below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
UNDERWRITERS NOTES
- --------------------------------------------------------------------------- -----------------
<S> <C>
Lehman Brothers Inc. ...................................................... $
Chase Securities Inc. .....................................................
Smith Barney Inc. .........................................................
Furman Selz LLC ...........................................................
-----------------
Total.................................................................. $ 125,000,000
-----------------
-----------------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
to purchase the Notes are subject to the approval of certain legal matters by
counsel and to certain other conditions and that if any of the Notes are
purchased by the Underwriters pursuant to the Underwriting Agreement, all of the
Notes agreed to be purchased by the Underwriters pursuant to the Underwriting
Agreement must be so purchased.
The Company has been advised by the Underwriters that they propose to offer
the Notes offered hereby directly to the public initially at the public offering
price set forth on the cover page of this Prospectus and to certain selected
dealers (who may include the Underwriters) at such public offering price less a
selling concession not to exceed % of the principal amount of the Notes. The
selected dealers may reallow a concession not to exceed % of the principal
amount of the Notes. After the initial offering to the public, the offering
price, the concession to selected dealers and the reallowance to other dealers
may be changed by the Underwriters.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments which the Underwriters may be required to make in respect thereof.
The Notes are new securities for which there currently is no market. The
Company does not intend to apply for listing of the Notes on any securities
exchange. Although each Underwriter has advised the Company that it presently
intends to make a market in the Notes, none of the Underwriters is obligated to
do so and any such market-making activities may be discontinued at any time
without notice in the sole discretion of each of the Underwriters. Accordingly,
no assurance can be given as to the development or liquidity of any market for
the Notes, or, if a market does develop, at what prices the Notes will trade. If
the Underwriters cease to act as market makers for the Notes for any reason,
there can be no assurance that another firm or person will make a market in the
Notes.
Under Rule 2710(c)(8) of the Conduct Rules of the National Association of
Securities Dealers, Inc. (the "NASD"), if more than 10% of the net proceeds of a
public offering of debt securities are to be paid to members of the NASD that
are participating in the offering, or affiliated or associated persons, the
yield on the debt securities distributed to the public must be no lower than
that recommended by a "qualified independent underwriter," as defined in Rule
2720 of the Conduct Rules of the NASD. Because Lehman Commercial Paper Inc., the
arranger of, and a lender under, the New Credit Facility and an affiliate of
Lehman Brothers Inc., one of the Underwriters of the Notes Offering, will
receive more than 10% of the net proceeds of the Notes Offering as a result of
the repayment of amounts outstanding under the New Credit Facility, Smith Barney
Inc., another Underwriter of the Notes Offering (the "Independent Underwriter")
will act as a qualified independent underwriter in connection with the Notes
Offering. The Independent Underwriter in its role as qualified independent
underwriter has performed due diligence
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investigations and reviewed and participated in the preparation of this
Prospectus and the Registration Statement of which this Prospectus forms a part.
The Independent Underwriter will not receive any additional fees for serving as
a qualified independent underwriter in connection with the Notes Offering. The
yield on the Notes sold to the public will be no lower than that recommended by
the Independent Underwriter.
Lehman Brothers Inc., Furman Selz LLC and Smith Barney Inc. are underwriters
of the Common Stock Offering and will receive compensation for such services.
Lehman Brothers Inc. acted as the lead manager and Furman Selz LLC acted as
co-manager of the Public Offering and received customary commissions therefor.
LEGAL MATTERS
The validity of the Notes offered hereby and certain legal matters in
connection with the Notes Offering will be passed upon for the Company by Baer
Marks & Upham LLP, New York, New York. Certain legal matters in connection with
the Notes Offering will be passed upon for the Underwriters by Cravath, Swaine &
Moore, New York, New York.
EXPERTS
The consolidated financial statements of the Company as of December 31, 1994
and 1995, and for each of the years in the three-year period ended December 31,
1995, have been included herein in reliance upon the report of KPMG Peat Marwick
LLP, independent certified public accountants, appearing elsewhere herein, and
upon the authority of said firm as experts in accounting and auditing. With
respect to the unaudited interim financial information of the Company as of and
for the nine months ended September 30, 1996, included herein, the independent
certified public accountants have reported that they applied limited procedures
in accordance with professional standards for a review of such information.
However, their separate report included herein states that they did not audit
and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their report on such information should
be restricted in light of the limited nature of the review procedures applied.
The accountants are not subject to the liability provisions of Section 11 of the
Securities Act for their report on the unaudited interim financial information
because that report is not a "report" or a "part" of the registration statement
prepared or certified by the accountants within the meaning of Sections 7 and 11
of the Securities Act.
The consolidated financial statements of Funtime Parks, Inc. at December 31,
1994 and 1993 and for each of the three years in the period ended December 31,
1994, appearing in this Prospectus and Registration Statement have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
The financial statements of Elitch Gardens Company at December 31, 1995 and
1994, and for the year ended December 31, 1995 and the period from May 31, 1994
(date of inception) through December 31, 1994, appearing in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon (which contains an explanatory
paragraph with respect to the Company's ability to continue as a going concern)
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
The financial statements of The Great Escape as of October 31, 1994 and
1995, and for the years then ended, have been included herein in reliance upon
the report of KPMG Peat Marwick LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
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The financial statements of FRE, Inc. (Family Recreational Enterprises,
Inc.) as of December 31, 1993, 1994 and 1995, and for each of the years in the
three-year period ended December 31, 1995, have been included herein and in the
Registration Statement in reliance upon the report of Nelson & Company,
independent auditors, appearing elsewhere herein, and upon the authority of said
firm as experts in accounting and auditing.
The financial statements of Concord Entertainment Company, as of December
31, 1995, and for the year ended December 31, 1995, have been included herein
and in the Registration Statement in reliance upon the report of Nelson &
Company, independent auditors, appearing elsewhere herein, and upon the
authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Stuart Amusement Company as of
September 30, 1995 and 1996, and for each of the years in the three-year period
ended September 30, 1996, have been included herein in reliance upon the report
of KPMG Peat Marwick LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.
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<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Consolidated Financial Statements of Premier Parks Inc..................................................... F-2
Consolidated Financial Statements of Funtime Parks, Inc.................................................... F-23
Financial Statements of Elitch Gardens Company............................................................. F-38
Financial Statements of The Great Escape................................................................... F-52
Financial Statements of FRE, Inc........................................................................... F-61
Financial Statements of Concord Entertainment Company...................................................... F-71
Consolidated Financial Statements of Stuart Amusement Company.............................................. F-81
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
PREMIER PARKS INC.:
We have audited the accompanying consolidated balance sheets of Premier
Parks Inc. and subsidiaries as of December 31, 1994 and 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Premier
Parks Inc. and subsidiaries as of December 31, 1994 and 1995, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Oklahoma City, Oklahoma
February 29, 1996, except as to
note 13 which is as of April 4, 1996
F-2
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Board of Directors and Stockholders
PREMIER PARKS INC.:
We have reviewed the accompanying consolidated balance sheet of Premier
Parks Inc. and subsidiaries as of September 30, 1996, and the related
consolidated statements of operations and cash flows for the nine months ended
September 30, 1996. These consolidated financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Oklahoma City, Oklahoma
December 23, 1996
F-3
<PAGE>
PREMIER PARKS INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
---------------------------- -------------
<S> <C> <C> <C>
1994 1995 1996
------------- ------------- -------------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 1,366,000 $ 28,787,000 $73,766,000
Accounts receivable................................................ 870,000 965,000 8,409,000
Inventories........................................................ 1,018,000 2,904,000 3,460,000
Prepaid expenses................................................... 765,000 2,352,000 1,906,000
------------- ------------- -------------
Total current assets........................................... 4,019,000 35,008,000 87,541,000
------------- ------------- -------------
Other assets:
Deferred charges................................................... 428,000 4,839,000 4,448,000
Deposits and other................................................. 2,520,000 4,229,000 7,125,000
------------- ------------- -------------
Total other assets............................................. 2,948,000 9,068,000 11,573,000
------------- ------------- -------------
Property and equipment, at cost...................................... 44,842,000 125,906,000 155,260,000
Less accumulated depreciation...................................... 6,270,000 9,905,000 15,107,000
------------- ------------- -------------
38,572,000 116,001,000 140,153,000
------------- ------------- -------------
Intangible assets.................................................... -- 13,471,000 13,475,000
Less accumulated amortization...................................... -- 230,000 628,000
------------- ------------- -------------
-- 13,241,000 12,847,000
------------- ------------- -------------
Total assets................................................... $ 45,539,000 $ 173,318,000 $252,114,000
------------- ------------- -------------
------------- ------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses.............................. $ 1,281,000 $ 6,361,000 $ 6,378,000
Accrued interest payable........................................... 102,000 4,158,000 1,386,000
Current portion of long-term debt--unrelated parties............... 1,239,000 56,000 --
Current portion of long-term debt--related parties................. 200,000 -- --
Current portion of capitalized lease obligations................... 453,000 1,009,000 1,054,000
------------- ------------- -------------
Total current liabilities...................................... 3,275,000 11,584,000 8,818,000
------------- ------------- -------------
Long-term debt and capitalized lease obligations:
Capitalized lease obligations...................................... 1,420,000 3,213,000 2,350,000
Long-term debt--unrelated parties:
Senior subordinated notes........................................ 1,240,000 -- --
Senior notes..................................................... 11,901,000 90,000,000 90,000,000
Long-term debt--related parties:
Senior subordinated notes........................................ 5,760,000 -- --
Junior subordinated loan......................................... 1,895,000 -- --
------------- ------------- -------------
Total long-term debt and capitalized lease obligations......... 22,216,000 93,213,000 92,350,000
Other long-term liabilities.......................................... -- 3,465,000 3,234,000
Deferred income taxes................................................ 1,914,000 19,145,000 26,138,000
------------- ------------- -------------
Total liabilities.............................................. 27,405,000 127,407,000 130,540,000
------------- ------------- -------------
Stockholders' equity:
Preferred stock, 500,000 shares authorized at December 31, 1994 and
1995 and September 30, 1996, respectively; no shares issued and
outstanding at December 31, 1994, and September 30, 1996; 200,000
shares Series A, 7% cumulative convertible, $1 par value ($100
redemption value) issued and outstanding at December 31, 1995.... -- 200,000 --
Common stock, $.05 par value, 30,000,000 shares authorized at
December 31, 1994 and 1995 and September 30, 1996, respectively;
3,398,467, 4,883,900 and 11,383,578 shares issued and 3,372,121,
4,857,554 and 11,357,232 shares outstanding as of December 31,
1994 and 1995 and September 30, 1996, respectively............... 170,000 244,000 569,000
Capital in excess of par value..................................... 50,573,000 79,261,000 144,287,000
Accumulated deficit................................................ (31,920,000) (33,105,000) (22,593,000)
------------- ------------- -------------
18,823,000 46,600,000 122,263,000
Less 26,346 common shares of treasury stock, at cost............... 689,000 689,000 689,000
------------- ------------- -------------
Total stockholders' equity..................................... 18,134,000 45,911,000 121,574,000
------------- ------------- -------------
Total liabilities and stockholders' equity..................... $ 45,539,000 $ 173,318,000 $252,114,000
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------- ---------------------------
1993 1994 1995 1995 1996
------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
<CAPTION>
<S> <C> <C> <C> <C> <C>
Revenue:
Theme park admissions...................... $ 12,874,000 $ 13,936,000 $ 21,863,000 $ 20,263,000 $ 38,970,000
Theme park food, merchandise, and other.... 8,986,000 10,963,000 19,633,000 18,508,000 50,822,000
------------ ------------ ------------ ------------- ------------
Total revenue............................ 21,860,000 24,899,000 41,496,000 38,771,000 89,792,000
------------ ------------ ------------ ------------- ------------
Operating costs and expenses:
Operating expenses......................... 10,401,000 12,358,000 19,775,000 15,640,000 32,897,000
Selling, general and administrative........ 4,768,000 5,448,000 9,272,000 6,833,000 15,363,000
Costs of products sold..................... 2,135,000 2,553,000 4,635,000 4,333,000 10,685,000
Depreciation and amortization.............. 1,537,000 1,997,000 3,866,000 2,258,000 5,599,000
------------ ------------ ------------ ------------- ------------
Total operating costs and expenses....... 18,841,000 22,356,000 37,548,000 29,064,000 64,544,000
------------ ------------ ------------ ------------- ------------
Income from operations................... 3,019,000 2,543,000 3,948,000 9,707,000 25,248,000
Other expense:
Interest expense, net...................... (1,438,000) (2,299,000) (5,578,000) (3,101,000) (7,657,000)
Other expense.............................. (136,000) (74,000) (177,000) (87,000) (59,000)
------------ ------------ ------------ ------------- ------------
Total other expense...................... (1,574,000) (2,373,000) (5,755,000) (3,188,000) (7,716,000)
------------ ------------ ------------ ------------- ------------
Income (loss) before income taxes........ 1,445,000 170,000 (1,807,000) 6,519,000 17,532,000
Income tax expense (benefit)................. 91,000 68,000 (762,000) 2,563,000 7,020,000
------------ ------------ ------------ ------------- ------------
Income (loss) before extraordinary
loss................................... 1,354,000 102,000 (1,045,000) 3,956,000 10,512,000
Extraordinary loss on extinguishment of debt,
net of income tax benefit of $90,000....... -- -- (140,000) (140,000) --
------------ ------------ ------------ ------------- ------------
Net income (loss)........................ $ 1,354,000 $ 102,000 $ (1,185,000) $ 3,816,000 $ 10,512,000
------------ ------------ ------------ ------------- ------------
------------ ------------ ------------ ------------- ------------
Net income (loss) applicable to common
stock.................................. $ 1,354,000 $ 102,000 $ (1,714,000) $ 3,640,000 $ 9,909,000
------------ ------------ ------------ ------------- ------------
------------ ------------ ------------ ------------- ------------
Weighted average number of common shares
outstanding--primary....................... 2,655,000 2,810,000 3,938,000 3,622,000 7,979,000
------------ ------------ ------------ ------------- ------------
------------ ------------ ------------ ------------- ------------
Income (loss) per common
share--primary:
Income (loss) before extraordinary loss.... $ .51 $ .04 $ (.40) $ 1.04 $ 1.24
Extraordinary loss......................... -- -- (.04) (.04) --
------------ ------------ ------------ ------------- ------------
Net income (loss)........................ $ .51 $ .04 $ (.44) $ 1.00 $ 1.24
------------ ------------ ------------ ------------- ------------
------------ ------------ ------------ ------------- ------------
Weighted average number of common shares
outstanding--fully diluted................. 2,655,000 2,810,000 3,938,000 5,006,000 9,439,000
------------ ------------ ------------ ------------- ------------
------------ ------------ ------------ ------------- ------------
Income (loss) per common
share--fully diluted:
Income (loss) before extraordinary loss.... $ .51 $ .04 $ (.40) $ .84 $ 1.11
Extraordinary loss......................... -- -- (.04) (.03) --
------------ ------------ ------------ ------------- ------------
Net income (loss)........................ $ .51 $ .04 $ (44) $ .81 $ 1.11
------------ ------------ ------------ ------------- ------------
------------ ------------ ------------ ------------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SERIES A, 7%
CUMULATIVE
CONVERTIBLE
PREFERRED STOCK COMMON STOCK
-------------------- -------------------- CAPITAL IN
SHARES SHARES EXCESS OF ACCUMULATED TREASURY
ISSUED AMOUNT ISSUED AMOUNT PAR VALUE DEFICIT STOCK TOTAL
--------- --------- --------- --------- ----------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1992....... -- $ -- 2,681,565 $ 134,000 $45,769,000 ($33,376,000) $(689,000) $11,838,000
Net income.......................... -- -- -- -- -- 1,354,000 -- 1,354,000
--------- --------- --------- --------- ----------- ------------ --------- -----------
Balances at December 31, 1993....... -- -- 2,681,565 134,000 45,769,000 (32,022,000) (689,000) 13,192,000
Issuance of common stock:
Cash proceeds--net................ -- -- 619,815 31,000 4,154,000 -- -- 4,185,000
Exchange of debt for equity....... -- -- 97,087 5,000 650,000 -- -- 655,000
Net income.......................... -- -- -- -- -- 102,000 -- 102,000
--------- --------- --------- --------- ----------- ------------ --------- -----------
Balances at December 31, 1994....... -- -- 3,398,467 170,000 50,573,000 (31,920,000) (689,000) 18,134,000
Issuance of preferred stock......... 200,000 200,000 -- -- 19,800,000 -- -- 20,000,000
Conversion of debt to equity........ -- -- 1,485,433 74,000 8,888,000 -- -- 8,962,000
Net loss............................ -- -- -- -- -- (1,185,000) -- (1,185,000)
--------- --------- --------- --------- ----------- ------------ --------- -----------
Balances at December 31, 1995....... 200,000 200,000 4,883,900 244,000 79,261,000 (33,105,000) (689,000) 45,911,000
Conversion of preferred stock....... (200,000) (200,000) 2,560,928 128,000 72,000 -- -- --
Issuance of common stock............ -- -- 3,938,750 197,000 64,954,000 -- -- 65,151,000
Net income.......................... -- -- -- -- -- 10,512,000 -- 10,512,000
--------- --------- --------- --------- ----------- ------------ --------- -----------
Balances at September 30, 1996
(Unaudited)....................... -- -- 11,383,578 $ 569,000 $144,287,000 ($22,593,000) $(689,000) $121,574,000
--------- --------- --------- --------- ----------- ------------ --------- -----------
--------- --------- --------- --------- ----------- ------------ --------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------- ------------------------
1993 1994 1995 1995 1996
------------ ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
<CAPTION>
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................... $ 1,354,000 $ 102,000 $ (1,185,000) $ 3,816,000 $10,512,000
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization..................... 1,537,000 1,997,000 3,866,000 2,258,000 5,599,000
Extraordinary loss on early extinguishment of
debt............................................ -- -- 230,000 230,000 --
Amortization of discount on debt and debt issuance
costs........................................... 290,000 94,000 317,000 136,000 523,000
Gain on sale of assets............................ (3,000) (9,000) -- -- --
Decrease in escrow cash accounts.................. 506,000 -- -- -- --
(Increase) decrease in accounts receivable........ (210,000) (496,000) 5,794,000 1,717,000 (7,444,000)
Deferred income taxes (benefit)................... 91,000 24,000 (808,000) 2,471,000 6,993,000
(Increase) decrease in inventories and prepaid
expenses........................................ (339,000) (422,000) (455,000) 861,000 (110,000)
(Increase) decrease in deposits and other assets.. 19,000 (808,000) 1,197,000 1,241,000 (2,858,000)
Increase (decrease) in accounts payable and
accrued expenses................................ (532,000) 511,000 (2,366,000) (250,000) (221,000)
Increase (decrease) in accrued interest payable... (14,000) 67,000 4,056,000 1,314,000 (2,772,000)
------------ ----------- ------------ ----------- -----------
Total adjustments............................. 1,345,000 958,000 11,831,000 9,978,000 (290,000)
------------ ----------- ------------ ----------- -----------
Net cash provided by operating activities........... 2,699,000 1,060,000 10,646,000 13,794,000 10,222,000
------------ ----------- ------------ ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of equipment................. 90,000 14,000 -- -- --
Other investments................................... (114,000) (83,000) (63,000) (49,000) (38,000)
Additions to property and equipment................. (7,674,000) (10,108,000) (10,732,000) (6,501,000) (29,290,000)
Acquisition of Funtime Parks, Inc., net of cash
acquired.......................................... -- -- (63,344,000) (58,617,000) --
------------ ----------- ------------ ----------- -----------
Net cash used in investing activities............... (7,698,000) (10,177,000) (74,139,000) (65,167,000) (29,328,000)
------------ ----------- ------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt................................... (8,252,000) (5,079,000) (17,487,000) (17,060,000) (938,000)
Proceeds from borrowings............................ 10,758,000 8,451,000 93,500,000 93,176,000 --
Net cash proceeds from issuance of preferred stock.. -- -- 20,000,000 20,000,000 --
Net cash proceeds from issuance of common stock..... -- 4,185,000 -- -- 65,151,000
Payments of debt issuance costs..................... (400,000) (100,000) (5,099,000) (4,531,000) (128,000)
------------ ----------- ------------ ----------- -----------
Net cash provided by financing activities........... 2,106,000 7,457,000 90,914,000 91,585,000 64,085,000
------------ ----------- ------------ ----------- -----------
(Decrease) increase in cash and cash equivalents.... (2,893,000) (1,660,000) 27,421,000 40,212,000 44,979,000
Cash and cash equivalents at beginning of period.... 5,919,000 3,026,000 1,366,000 1,366,000 28,787,000
------------ ----------- ------------ ----------- -----------
Cash and cash equivalents at end of period.......... $ 3,026,000 $ 1,366,000 $ 28,787,000 $41,578,000 $73,766,000
------------ ----------- ------------ ----------- -----------
------------ ----------- ------------ ----------- -----------
SUPPLEMENTARY CASH FLOW INFORMATION:
Cash paid for interest.............................. $ 1,433,000 $ 2,178,000 $ 2,018,000 $ 2,018,000 $11,405,000
------------ ----------- ------------ ----------- -----------
------------ ----------- ------------ ----------- -----------
Cash paid for income taxes (refund)................. $ -- $ 38,000 $ (22,000) $ (22,000) $ 27,000
------------ ----------- ------------ ----------- -----------
------------ ----------- ------------ ----------- -----------
</TABLE>
(CONTINUED)
F-7
<PAGE>
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995
AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 (UNAUDITED)
Supplemental disclosure of noncash investing and financing activities:
Year Ended 1993
- The Company purchased certain rides and attractions through capital leases
with obligations totaling $2,745,000.
- In connection with a term loan obtained during the year, $5,824,000 was
used to retire existing notes with the same institution.
Year Ended 1994
- Common stock (97,087 shares) was exchanged for $655,000 of debt.
- The Company entered into two separate note agreements, aggregating
$570,000 for the purchase of property and equipment.
Year Ended 1995 and Nine Months Ended September 30, 1995
- Common stock (1,485,433 shares) was exchanged for $9,095,000 of debt, net
of $133,000 of costs.
- The Company purchased certain rides and attractions through capital leases
with obligations totaling $3,259,000.
Nine Months Ended September 30, 1996
- Preferred stock (200,000 shares) was converted into Common Stock
(2,560,928 shares).
See accompanying notes to consolidated financial statements.
F-8
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
(1) SUMMARY OF SIGNIFICANT POLICIES
DESCRIPTION OF BUSINESS
Premier Parks Inc. (the Company) owns and operates regional themed amusement
and water parks. The Company and its subsidiaries currently own and operate six
parks: Frontier City, a western theme park located in Oklahoma City, Oklahoma;
White Water Bay, a tropical theme water park located in Oklahoma City, Oklahoma;
Adventure World, a combination theme and water park located in Largo, Maryland;
Geauga Lake, a combination theme and water park located near Cleveland, Ohio;
Darien Lake & Camping Resort, a combination theme and water park with an
adjacent camping resort and performing arts center, located between Buffalo and
Rochester, New York; and Wyandot Lake, a water park which also includes "dry
rides" located in Columbus, Ohio.
BASIS OF PRESENTATION
The Company's accounting policies reflect industry practices and conform to
generally accepted accounting principles.
The consolidated financial statements include the accounts of the Company,
its wholly owned subsidiaries, and the limited partnership (Frontier City
Partners Limited Partnership) in which the Company beneficially owns 100% of the
partnership interests. Intercompany transactions and accounts have been
eliminated in consolidation.
In the opinion of management, the accompanying unaudited consolidated
financial statements as of September 30, 1996 and for the nine months ended
September 30, 1995 and 1996, reflect all adjustments (all of which were normal
and recurring) which, in the opinion of management, are necessary for a fair
presentation of the financial position and results of operations for the interim
periods presented. The results of operations for the nine month period ended
September 30, 1996 are not indicative of the results to be expected for the full
year. The Company's business is highly seasonal. The great majority of the
Company's revenue is collected in the second and third quarters while operating
expenses are incurred throughout the year. Accordingly, the Company historically
incurs a net loss for the fourth calendar quarter.
CASH EQUIVALENTS
Cash equivalents of $26,728,000 and $70,367,000 at December 31, 1995 and
September 30, 1996, respectively, consist of short-term highly liquid
investments with an original maturity of three months or less, which are readily
convertible into cash. For purposes of the consolidated statements of cash
flows, the Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost (first in, first out) or market
and consist of products for resale including merchandise and food and
miscellaneous supplies including repair parts for rides.
F-9
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(1) SUMMARY OF SIGNIFICANT POLICIES (CONTINUED)
ADVERTISING COSTS
Production costs of commercials and programming are charged to operations in
the year first aired. The costs of other advertising, promotion, and marketing
programs are charged to operations in the year incurred. The amounts capitalized
at year-end are included in prepaid expenses.
DEFERRED CHARGES
The Company capitalizes all costs related to the issuance of debt with such
costs included in deferred charges in the consolidated balance sheets. The
capitalized debt costs at December 31, 1995 and September 30, 1996 relate to the
senior notes and senior credit facility and the amortization of such costs are
recognized as interest expense under a method approximating the interest method
over the life of the respective debt issue.
DEPRECIATION AND AMORTIZATION
Buildings and improvements are depreciated over their estimated useful lives
of approximately 30 years by use of the straight-line method. Furniture and
equipment are depreciated using the straight-line method over 5-10 years. Rides
and attractions are depreciated using the straight-line method over 5-25 years.
Amortization of property associated with capitalized lease obligations is
included in depreciation expense in the consolidated financial statements.
Maintenance and repairs are charged directly to expense as incurred, while
betterments and renewals are generally capitalized in the property accounts.
When an item is retired or otherwise disposed of, the cost and applicable
accumulated depreciation are removed and the resulting gain or loss is
recognized.
INTANGIBLE ASSETS
Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over the expected
period to be benefited, generally 25 years.
INTEREST EXPENSE RECOGNITION
Interest on notes payable is generally recognized as expense on the basis of
stated interest rates. Notes payable and capitalized lease obligations that do
not have a stated interest rate or that have interest rates considered to be
lower than prevailing market rates (when the obligations were incurred) are
carried at amounts discounted to impute a market rate of interest cost. Total
interest expense incurred was $1,481,000, $2,341,000, $6,074,000, $3,317,000 and
$9,156,000 in 1993, 1994, 1995 and for the nine months ended September 30, 1995
and 1996, respectively. Interest expense in the accompanying consolidated
statements of operations is shown net of interest income.
LONG-LIVED ASSETS
The Company assesses the recoverability of its property and equipment and
intangible assets by determining whether the depreciation of the property and
equipment balance and the amortization of the goodwill balance over its
remaining life can be recovered through undiscounted future operating cash flows
generated from the operations of the long-lived assets. The amount of
impairment, if any, is measured based on projected discounted future operating
cash flows using an appropriate interest rate. The
F-10
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(1) SUMMARY OF SIGNIFICANT POLICIES (CONTINUED)
assessment of the recoverability of long-lived assets will be impacted if
estimated future operating cash flows are not achieved.
INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
INCOME (LOSS) PER SHARE
Income (loss) per share is computed based on income (loss) applicable to
common stock divided by the weighted average number of common shares outstanding
during the period. For the year ended December 31, 1995, no warrants, options,
or potential shares from convertible securities were considered as the effect
would be antidilutive. For the years ended December 31, 1993 and 1994, and the
nine months ended September 30, 1995 warrants and options outstanding have been
excluded from the per share calculations as no active trading market existed for
the Company's common stock during those periods. For the nine months ended
September 30, 1996, the effect of warrants and options were included in the
primary share calculation.
The Company's former senior subordinated notes were converted into common
shares in 1995. For 1993 and 1994, the senior subordinated notes were considered
to be potentially dilutive securities. The weighted average number of common
shares attributable to the conversion feature of the notes was 475,600,
1,120,000 and 700,000 for the years ended December 31, 1993 and 1994 and the
nine months ended September 30, 1995, respectively. The former senior
subordinated notes bore interest and if the notes had been converted, the
interest expense on the notes in 1993 or 1994 would not have been incurred.
After consideration of the increase in income that would have occurred from the
reduction in interest expense, the effect of the convertible notes on income per
share was antidilutive.
The Company issued convertible preferred stock in 1995 which was a
potentially dilutive security. The 2,424,000 common shares that would result
from conversion of the preferred stock (without consideration of accumulated
dividends) were not considered in the 1995 calculation of loss per share, as the
effect would be antidilutive. Accumulated, but unpaid, preferred stock dividends
of $529,000, $176,000, and $603,000 were considered in determining net income
(loss) applicable to common stock in 1995, the nine months ended September 30,
1995 and the nine months ended September 30, 1996, respectively.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-11
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(1) SUMMARY OF SIGNIFICANT POLICIES (CONTINUED)
RECLASSIFICATIONS
Reclassifications have been made to certain amounts reported in 1993 and
1994 to conform with the 1995 presentation.
(2) FAIR VALUE OF FINANCIAL INSTRUMENTS
The recorded amounts for cash and cash equivalents, accounts receivable,
deposits, accounts payable and accrued expenses, and accrued interest payable
approximate fair value because of the short maturity of these financial
instruments. The fair value estimates, methods, and assumptions relating to the
Company's other financial instruments are discussed in note 5.
(3) ACQUISITION OF THEME PARKS
Pursuant to a merger agreement, the Company acquired Funtime Parks, Inc.
(Funtime), a company owning three regional theme parks, for an initial purchase
price of approximately $60,000,000 in cash with an additional amount of
approximately $5,400,000 paid to the former shareholders as a post closing
adjustment related to the operating cash flows of the former Funtime parks after
the acquisition. The acquisition was accounted for as a purchase. The allocation
of the purchase price was determined based upon estimates of fair value as
determined by independent appraisal. As of the acquisition date and after giving
effect to the purchase, $18,030,000 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 Funtime's assets and
liabilities. Approximately $13,500,000 of cost in excess of the fair value of
the net assets acquired was recorded as goodwill. To fund the acquisition, on
August 15, 1995, the Company issued $90,000,000 aggregate principal amount of
12% senior notes due 2003 (the Notes) and $20,000,000 of convertible preferred
stock and converted approximately $9,100,000 of previously existing indebtedness
into Company common stock. Except in the case of a change of control (as defined
in the indenture relating to the Notes) and certain other circumstances, no
principal payment on the Notes is due prior to maturity (August 15, 2003). As
part of the acquisition, $2,500,000 of the purchase price was placed into escrow
as an indemnification fund. Except in limited circumstances, the indemnification
fund represents the sole source of funds for indemnification claims made by the
Company against the former shareholders of Funtime. The escrow is to be released
in February 1997. The indemnification fund is classified in the accompanying
consolidated financial statements as a deposit and as a noncurrent other
liability.
The accompanying 1995 consolidated statement of operations reflects the
results of Funtime from the date of acquisition (August 15, 1995).
F-12
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(3) ACQUISITION OF THEME PARKS (CONTINUED)
The following summarized pro forma results of operations for the years ended
December 31, 1994 and 1995, assumes that the acquisition and related
transactions occurred as of the beginning of 1994 (in thousands):
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
(UNAUDITED)
<CAPTION>
<S> <C> <C>
Revenue:
Theme park admissions................................................................... $ 34,275 $ 37,738
Theme park food, merchandise, and other................................................. 41,319 42,401
---------- ----------
Total revenue....................................................................... 75,594 80,139
---------- ----------
Operating costs and expenses:
Operating expenses...................................................................... 34,832 35,440
Selling, general and administrative..................................................... 12,380 14,089
Costs of products sold.................................................................. 9,188 9,489
Depreciation and amortization........................................................... 5,768 6,303
---------- ----------
Total operating costs and expenses.................................................. 62,168 65,321
---------- ----------
Income from operations.................................................................... 13,426 14,818
---------- ----------
Interest expense, net..................................................................... (11,559) (11,099)
Equity in loss of partnership............................................................. (83) (69)
Other income (expense).................................................................... (27) (108)
---------- ----------
Total other expense................................................................. (11,669) (11,276)
---------- ----------
Income before income taxes and extraordinary loss......................................... 1,757 3,542
Income tax expense........................................................................ 948 1,642
---------- ----------
Income before extraordinary loss.......................................................... $ 809 $ 1,900
---------- ----------
---------- ----------
Income (loss) before extraordinary loss applicable to common stock........................ $ (591) $ 500
---------- ----------
---------- ----------
Income (loss) before extraordinary loss per common share.................................. $ (.10) $ .10
---------- ----------
---------- ----------
</TABLE>
F-13
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(4) PROPERTY AND EQUIPMENT
Property and equipment, at cost, are classified as follows
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------- SEPTEMBER 30,
1994 1995 1996
------------- -------------- --------------
<S> <C> <C> <C>
(UNAUDITED)
Theme parks:
Land........................................................... $ 5,964,000 $ 12,230,000 $ 12,535,000
Buildings and improvements..................................... 15,213,000 54,935,000 67,922,000
Rides and attractions.......................................... 20,179,000 51,653,000 66,144,000
Equipment...................................................... 3,486,000 7,088,000 8,659,000
------------- -------------- --------------
Total theme parks.......................................... 44,842,000 125,906,000 155,260,000
Less accumulated depreciation.................................. 6,270,000 9,905,000 15,107,000
------------- -------------- --------------
$ 38,572,000 $ 116,001,000 $ 140,153,000
------------- -------------- --------------
------------- -------------- --------------
</TABLE>
Included in property and equipment are costs and accumulated depreciation
associated with capital leases as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- SEPTEMBER 30,
1994 1995 1996
------------ ------------ -------------
<S> <C> <C> <C>
(UNAUDITED)
Costs.................................................................. $ 2,745,000 $ 6,005,000 $ 6,069,000
Accumulated depreciation............................................... (165,000) (334,000) (513,000)
------------ ------------ -------------
$ 2,580,000 $ 5,671,000 $ 5,556,000
------------ ------------ -------------
------------ ------------ -------------
</TABLE>
F-14
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(5) LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS
At December 31, 1994 and 1995 and September 30, 1996, debt consists of:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- SEPTEMBER 30,
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
(UNAUDITED)
<CAPTION>
<S> <C> <C> <C>
Capitalized lease obligations:
Capitalized lease obligations expiring 1997 through 2000,
requiring aggregate annual lease payments ranging from
approximately $1,172,000 to $360,000 including implicit interest
at rates ranging from 9.875% to 11% and secured by equipment
with a net book value of approximately $5,671,000 and $5,556,000
as of December 31, 1995 and September 30, 1996, respectively.... $ 1,873,000 $ 4,222,000 $ 3,404,000
Debt to unrelated parties:
Senior notes(a)................................................... -- 90,000,000 90,000,000
Senior subordinated convertible debt maturing in 2000, convertible
into common stock at a conversion price of $6.25, requiring
quarterly interest payments at 9.5% per annum(b)................ 1,240,000 -- --
Term note payable due December 1998, requiring monthly interest
payments at prime plus 1% (9.5% as of December 31, 1994) and
principal payments annually and borrowings under a revolving
line of credit(c)............................................... 12,451,000 -- --
Other debt........................................................ 689,000 56,000 --
------------- ------------- -------------
Total--debt to unrelated parties.................................. 14,380,000 90,056,000 90,000,000
------------- ------------- -------------
Debt to related parties:
Junior subordinated loan payable with interest at 8% per annum
plus accrued interest unpaid(d)................................. 2,095,000 -- --
Senior subordinated convertible debt maturing in 2000, convertible
into common stock at a conversion price of $6.25 requiring
quarterly interest payments at 9.5% per annum (b)............... 5,760,000 -- --
------------- ------------- -------------
Total--debt to related parties.................................... 7,855,000 -- --
------------- ------------- -------------
Total........................................................... $ 24,108,000 $ 94,278,000 $ 93,404,000
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
- ------------------------
(a) The notes are senior unsecured obligations of the Company,with a
$90,000,000 aggregate principal amount, and mature on August 15, 2003. The
notes bear interest at 12% per annum payable semiannually on August 15 and
February 15 of each year, commencing February 15, 1996. The 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 and from time-to-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
notes with the proceeds of one or more public equity offerings at a
redemption price of 110% of the
F-15
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(5) LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS (CONTINUED)
principal amount. These notes are guaranteed by all of the Company's
principal operating subsidiaries.
The indenture under which the notes were issued places limitations on
operations and sales of assets by the Company or its subsidiaries, requires
maintenance of 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 permits the Company, subject to certain limitations, to incur
additional indebtedness, including secured senior indebtedness under its
$20,000,000 senior credit facility described below.
The Company is a holding company with no operations or assets other than its
investment in its wholly-owned direct and indirect subsidiaries and an
investment in a real estate partnership. All of the Company's subsidiaries,
except for one indirect wholly owned subsidiary, Funtime-Famous Recipe,
Inc., are full, unconditional, and joint and several guarantors of the
notes. The assets and operations of Funtime-Famous Recipe, Inc. are
inconsequential to the Company and its consolidated financial position and
results of operations. Condensed financial statement information for the
guarantors is not included herein, as the Company does not believe such
information would be material to the understanding of the Company and its
direct and indirect subsidiaries.
(b) During 1993, the Company consummated a private placement of $7,000,000 of
its 9.5% senior subordinated convertible notes due March 2000. The notes
were funded on July 29, 1993. The notes were convertible into shares of
common stock at the conversion price of $6.25 per share subject to certain
antidilution adjustments. These notes were converted into 1,175,063 common
shares during 1995.
(c) On December 7, 1993, the Company entered into a loan agreement with a
financial institution which provided for a $13,583,000 term loan facility
due December 31, 1997, and a $3,500,000 revolving line of credit that was
due December 31, 1995. The term loan facility was fully funded in 1994. The
revolving line had a zero balance at December 31, 1994. All amounts
outstanding including amounts advanced under the line of credit were repaid
during 1995 in connection with the issuance of the senior notes.
Additionally, the line of credit was cancelled.
(d) On October 30, 1992, in connection with a private placement, the Company
consolidated the outstanding Windcrest Partners loans in the principal
amount of $2,095,000 into a junior subordinated term loan. Under the terms
of this loan agreement, interest was payable monthly at the rate of 8% per
annum until maturity on December 31, 1999. The junior term loan was
exchanged for common stock (310,370 shares) during 1995.
F-16
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(5) LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS (CONTINUED)
Annual maturities of long-term debt and capitalized lease obligations during
the five years subsequent to December 31, 1995, are as follows:
<TABLE>
<CAPTION>
1996........................................................................... $1,065,000
<S> <C>
1997........................................................................... 1,473,000
1998........................................................................... 713,000
1999........................................................................... 360,000
2000 and thereafter............................................................ 90,667,000
----------
$94,278,000
----------
----------
</TABLE>
The Company's $20,000,000 senior credit facility is secured by substantially
all of the Company's assets (other than real estate), including the capital
stock of its subsidiaries. The facility matures in August 1998. At December 31,
1995 and September 30, 1996, no advances were outstanding under the senior
credit facility. Advances under the senior credit facility will bear interest at
a variable rate.
The senior credit facility contains restrictive covenants that, among other
things, limit the ability of the Company and its subsidiaries to dispose of
assets; incur additional indebtedness or liens; pay cash dividends; repurchase
stock; make investments; engage in mergers or consolidations; engage in certain
transactions with subsidiaries and affiliates; and redeem or purchase the senior
notes. In addition, the senior credit facility requires that the Company comply
with certain specified financial ratios and tests, including cash interest
expense coverage, a minimum net worth requirement and a maximum capital
expenditure requirement. See note 14.
The fair value of the Company's long-term debt is estimated by using quoted
bond prices or discounted cash flow analyses based on current borrowing rates
for debt with similar maturities. Under the above assumptions the estimated fair
value of long-term debt and capitalized lease obligations at both December 31,
1995 and September 30, 1996 is approximately $103,000,000.
F-17
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(6) INCOME TAXES
The Company recognized an income tax benefit of $852,000 in 1995. The
benefit of $762,000 was allocated to loss before income taxes and $90,000 to the
extraordinary loss.
Income tax expense (benefit) allocated to operations for 1993, 1994 and 1995
consists of the following:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
---------- ----------- -----------
<S> <C> <C> <C>
1993:
U.S. Federal.......................................... $ -- $ 75,000 $ 75,000
State and local....................................... -- 16,000 16,000
---------- ----------- -----------
$ -- $ 91,000 $ 91,000
---------- ----------- -----------
---------- ----------- -----------
1994:
U.S. Federal.......................................... $ 44,000 $ 15,000 $ 59,000
State and local....................................... -- 9,000 9,000
---------- ----------- -----------
$ 44,000 $ 24,000 $ 68,000
---------- ----------- -----------
---------- ----------- -----------
1995:
U.S. Federal.......................................... $ (44,000) $ (508,000) $ (552,000)
State and local....................................... -- (210,000) (210,000)
---------- ----------- -----------
$ (44,000) $ (718,000) $ (762,000)
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
Recorded income tax expense (benefit) allocated to operations differed from
amounts computed by applying the U.S. federal income tax rate of 34% to pretax
income (loss) approximately as follows:
<TABLE>
<CAPTION>
1993 1994 1995
----------- --------- -----------
<S> <C> <C> <C>
Computed "expected" federal income tax expense (benefit)..................... $ 491,000 $ 58,000 $ (614,000)
Amortization of goodwill..................................................... -- -- 78,000
Other, net................................................................... (6,000) 1,000 (16,000)
Effect of state and local income taxes....................................... 16,000 9,000 (210,000)
Change in the beginning-of-the-year balance of the valuation allowance for
deferred tax assets........................................................ (410,000) -- --
----------- --------- -----------
$ 91,000 $ 68,000 $ (762,000)
----------- --------- -----------
----------- --------- -----------
</TABLE>
Income tax expense for the nine months ended September 30, 1995 and 1996 was
approximately 39% and 40%, respectively, of the periods' income before income
taxes.
Substantially all of the Company's future taxable temporary differences
(deferred tax liabilities) relate to the different financial accounting and tax
depreciation methods and periods for property and equipment. The Company's net
operating loss carryforwards and alternative minimum tax carryforwards
F-18
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(6) INCOME TAXES (CONTINUED)
represent future income tax deductions (deferred tax assets). The tax effects of
these temporary differences as of December 31, 1994 and 1995, are presented
below:
<TABLE>
<CAPTION>
1994 1995
------------ -------------
<S> <C> <C>
Deferred tax assets before valuation allowance....................................... $ 3,161,000 $ 7,860,000
Less valuation allowance............................................................. -- --
------------ -------------
Net deferred tax assets.............................................................. 3,161,000 7,860,000
Deferred tax liabilities............................................................. 5,075,000 27,005,000
------------ -------------
Net deferred tax liability........................................................... $ 1,914,000 $ 19,145,000
------------ -------------
------------ -------------
</TABLE>
The Company's deferred tax liability results from the financial carrying
value for assets acquired in the Funtime acquisition, which was based upon the
fair value at the acquisition date being substantially in excess of Funtime's
tax basis in the assets and from the Company's remaining depreciable assets
being depreciated primarily over a 7-year period for tax reporting purposes and
a longer 20- to 25-year period for financial purposes. The faster tax
depreciation has resulted in tax losses which can be carried forward to offset
future taxable income. Because the Company's assets' financial carrying value
and tax basis difference will primarily reverse before the expiration of the net
operating loss carryforwards and taking into account the Company's projections
of future taxable income over the same period, management believes that it will
more likely than not realize the benefits of these net future deductions.
The Company experienced an ownership change within the meaning of the
Internal Revenue Code Section 382 and the regulations thereunder on October 30,
1992, as a result of the issuance of 2,200,000 shares of common stock. As a
result of the ownership change, net operating loss carryforwards generated
before the ownership change can be deducted in subsequent periods only in
certain limited situations. Accordingly, it is probable that the Company will
not be able to use net operating loss carryforwards generated prior to October
30, 1992. None of the pre-October 30, 1992, net operating loss carryforwards
were considered in computing the Company's available net operating loss
carryforwards and deferred tax liability. Net operating loss carryforwards
generated after October 30, 1992, can be utilized without restriction unless
another ownership change in excess of 50% during any three-year period occurs.
As of December 31, 1995, the Company has approximately $13,681,000 of
unrestricted net operating loss and $4,077,000 of alternative minimum tax
carryforwards available for federal income tax purposes which expire in 2008
through 2010. Additionally, the Company has $1,864,000 of alternative minimum
tax credits which have no expiration date.
(7) PREFERRED STOCK
The Company has authorized 500,000 shares of preferred stock, $1 par value.
During 1995, the Company issued 200,000 shares of Series A 7% cumulative
convertible preferred stock at $100 per share.
All shares of Series A preferred stock rank senior and prior in right to all
of the Company's now or hereafter issued common stock with respect to dividend
payments and distribution of assets upon liquidation or dissolution of the
Company.
Holders of Series A preferred stock are entitled to receive cumulative
dividends at an annual rate of $7 per share. At the Company's election,
dividends are payable in cash and/or in additional Series A
F-19
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(7) PREFERRED STOCK (CONTINUED)
preferred stock. The terms of the Company's senior notes and senior credit
facility limit the Company's ability to pay cash dividends.
At the option of the holder, the Series A preferred stock may be converted
into fully-paid and nonassessable shares of common stock. The number of shares
of common stock deliverable upon conversion of one share of Series A preferred
stock will be determined by dividing $100 by the then applicable conversion
rate. The initial conversion rate was $8.25 and will be adjusted from time to
time in accordance with the provisions of the Series A preferred stock. The
Company has agreed to provide the preferred stockholders certain registration
rights relative to the common stock issued upon conversion of the preferred
stock.
The Company may redeem the Series A preferred stock at any time in whole or
from time to time in part at a redemption price of $100 per share provided that
either certain common stock market price levels are met or that the Company will
have consummated an underwritten public offering of common stock with gross
proceeds of at least $15,000,000. (See note 14).
(8) CAPITAL STOCK
In October 1994, the Company issued 619,815 common shares in a private
placement with existing stockholders for cash. In connection with this
placement, Windcrest Partners also exchanged $655,000 of then existing debt for
97,087 shares of common stock. The Company has agreed to provide the
stockholders certain registration rights in the future.
In August 1995, the Company issued 1,175,063 common shares in full exchange
for the Company's $7,000,000 senior subordinated convertible notes and 310,370
common shares in full exchange for the Company's $2,095,000 junior subordinated
term loan. The Company has agreed to provide the stockholders certain
registration rights in the future.
(9) STOCK OPTIONS AND WARRANTS
In 1993, 1994, 1995, and 1996 certain members of the Company's existing
management were issued seven-year options to purchase 145,200, 36,000, 248,000,
and 337,500 shares of common stock, at an exercise price of $5.00, $7.50, $8.25,
and $22.00 per share, respectively, under the Company's 1993, 1995 and 1996
Stock Option and Incentive Plans. The options granted in 1995 were subject to
the approval of the Company's shareholders at the 1996 annual meeting. The 1996
Plan and options (247,000) granted pursuant to the 1996 Plan are subject to the
approval of shareholders. These options may be exercised on a cumulative basis
with 20% of the total exercisable on date of issuance and with an additional 20%
being available for exercise on each of the succeeding anniversary dates. Any
unexercised portion of the options will automatically and without notice
terminate upon the seventh anniversary of the issuance date or upon termination
of employment. At December 31, 1995 and September 30, 1996, (assuming
shareholder approval of the 1996 plan and the options granted thereunder)
101,520 and 304,460 options, respectively, were exercisable.
In October 1989, the Company's current chairman was issued a ten-year
warrant to purchase 26,346 shares of common stock (currently being held as
treasury stock) at an exercise price of $1.00 per share and a ten-year warrant
to purchase 18,693 shares of common stock at an exercise price of $1.00 per
share.
F-20
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(10) CASUALTY LOSS
On July 27, 1994, high winds damaged the Company's Adventure World location.
The loss was covered by insurance and the total insurance benefits recognized
during 1994 were $748,000, including approximately $348,000 accrued as a
receivable, which was collected subsequent to December 31, 1994. The Company
spent approximately $393,000 in 1994 to replace and repair capital assets which
had been destroyed or damaged. Insurance proceeds in excess of the net book
value of destroyed assets and the repair costs of damaged assets were
approximately $417,000 and are reflected in the 1994 consolidated statement of
operations in theme parks revenue.
(11) COMMITMENTS AND CONTINGENCIES
The Company leases office space under a lease agreement which expires April
30, 2001. The lease requires minimum monthly payments over its term and also
escalation charges for proportionate share of expenses as defined in the lease.
The Company may also terminate the lease during 1996 and pay a termination
penalty. Windcrest Partners, an affiliate of the Company, shares office space
with the Company and has agreed to pay 50% of the rental payments. Rent expense
recognized by the Company (after deduction of amounts paid by Windcrest
Partners) for the years ended December 1993, 1994 and 1995 and for the nine
months ended September 30, 1995 and 1996, aggregated $70,000, $68,000, $68,000,
$51,000 and $46,000, respectively. Future minimum lease payments (exclusive of
amounts to be reimbursed by Windcrest Partners) on operating leases for the
Company's office space and equipment (with initial or remaining lease terms in
excess of one year), are as follows:
<TABLE>
<CAPTION>
<S> <C>
1996.............................................................................. $ 416,000
1997.............................................................................. 336,000
1998.............................................................................. 220,000
1999.............................................................................. 70,000
2000.............................................................................. 70,000
Later years....................................................................... 70,000
</TABLE>
The Company is not a party to, nor is its property subject to, any pending
material legal proceedings.
(12) CERTAIN TRANSACTIONS
In connection with the acquisition of Funtime and the issuance of the
$90,000,000 senior notes, the Company paid investment banking and financial
advisory fees in the amount of $800,000 and $475,000 to Lepercq, de Neuflize &
Co. Incorporated (Lepercq) and Hanseatic Corporation (Hanseatic), respectively.
Two directors of the Company are managing director and treasurer, respectively,
of Lepercq and Hanseatic.
(13) REVERSE STOCK SPLIT
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 reduced 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 the
earliest date presented.
F-21
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(14) SUBSEQUENT EVENTS (UNAUDITED)
On June 3, 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
$65,151,000. Additionally, on June 3, 1996 the Company exchanged 2,560,928
shares of its Common Stock for all 200,000 shares of its previously outstanding
preferred stock.
The Company has acquired the assets of Elitch Gardens, located in Denver,
Colorado, for a purchase price of $62,500,000, the assets of Waterworld/USA
locations in Sacramento and Concord, California for a purchase price of
$17,250,000, The Great Escape, located near Lake George, New York for a purchase
price of $33,000,000 and has reached an agreement to purchase the stock of
Stuart Amusement Company, owner of Riverside Park, located in Springfield,
Massachusetts, for a purchase price of $22,150,000, $1,000,000 of which will be
paid with shares of the Company's Common Stock.
In connection with the acquisitions, in October 1996 the Company entered
into a senior secured credit facility (the "New Credit Facility") with a
syndicate of banks. The New Credit Facility has an aggregate availability of
$115.0 million of which (i) up to $30 million under the revolving credit
facility (the "Revolving Credit Facility") may be used for working capital and
general corporate purposes; (ii) up to $25.0 million ("Facility A") may be used
to finance capital expenditures prior to April 30, 1998; and (iii) up to $60.0
million ("Facility B") may be used to finance certain acquisitions by the
Company (including the acquisitions described in the preceding paragraph),
including an amount of up to $2.0 million which may be used to finance
improvements at the parks acquired, provided that at least 50% of the
consideration for any such acquisition or improvements under Facility A or
Facility B (collectively, the "Term Loan Facility") must be funded by the
Company. Interest rates per annum under the New Credit Facility are equal to a
base rate equal to the higher of the Federal Funds Rate plus 1/2% 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
Revolving Credit Facility terminates October 31, 2002 (reducing to $15.0 million
on October 31, 2001) and borrowing under the Term Loan Facility mature October
31, 2001; however, aggregate principal payments of $7.5 million, $20.0 million
and $25.0 million are required under the Term Loan Facility during 1998, 1999
and 2000, respectively. Revolving credit borrowings under the New Credit
Facility will be secured by substantially all of the Company's assets (other
than real estate). Term Loan borrowings are secured by the assets acquired with
the proceeds thereof, together with guarantees, limited to approximately $17.5
million, by the Company's subsidiaries. The New Credit Facility contains
restrictive covenants that, among other things, limit 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 New Credit Facility requires that the Company
comply with certain specified financial ratios and tests.
F-22
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
FUNTIME PARKS, INC.
Aurora, Ohio
We have audited the accompanying consolidated balance sheets of Funtime Parks,
Inc. and subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of operations, redeemable preferred stock and
stockholders' equity (deficit), and cash flows for each of the three years in
the period ended December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Funtime Parks,
Inc. and subsidiaries at December 31, 1994 and 1993, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1994, in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the financial statements, in 1993 the Company changed
its method of accounting for income taxes.
ERNST & YOUNG LLP
January 25, 1995,
except for Note 13, as to which the date is
August 29, 1995
Akron, Ohio
F-23
<PAGE>
FUNTIME PARKS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- JULY 2,
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
(UNAUDITED)
<CAPTION>
<S> <C> <C> <C>
ASSETS
Current assets:
Cash.................................................................... $ 185,800 $ 171,394 $ 107,016
Trade receivable........................................................ 8,881 6,714 2,454,980
Other receivables....................................................... 196,707 138,546 93,346
Refundable income taxes................................................. 240,000 -- --
Prizes and other supplies............................................... 1,876,825 1,720,528 2,849,395
Other current assets--Note 6............................................ 757,183 590,197 583,297
------------ ------------ ------------
Total current assets................................................ 3,265,396 2,627,379 6,088,034
Deferred charges, less accumulated amortization
(1993--$44,614; 1994--$313,494; July 2, 1995--$559,468)................. 777,929 519,049 276,340
Property and equipment
Land and land improvements.............................................. 18,092,049 19,986,705 19,986,706
Buildings and building improvements..................................... 15,950,066 16,899,094 16,899,094
Equipment............................................................... 39,888,326 43,000,651 43,000,650
Construction in progress................................................ 380,359 118,111 1,072,817
------------ ------------ ------------
74,310,800 80,004,561 80,959,267
Less accumulated depreciation........................................... 30,491,646 35,784,701 39,100,701
------------ ------------ ------------
43,819,154 44,219,860 41,858,566
------------ ------------ ------------
Total assets........................................................ $ 47,862,479 $ 47,366,288 $ 48,222,940
------------ ------------ ------------
------------ ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Revolving line of credit................................................ $ 4,133,192 $ 5,500,351 $ 8,075,979
Accounts payable........................................................ 1,059,004 719,457 3,547,036
Accrued taxes, other than income taxes.................................. 608,029 639,493 920,033
Accrued payroll and related expenses.................................... 227,923 5,132 622,292
Income taxes payable.................................................... 392,048 92,342 43,641
Accrued interest........................................................ 390,711 1,539,017 1,820,486
Other accrued liabilities--Note 6....................................... 2,123,132 2,571,202 4,358,741
Current portion of long-term debt....................................... 3,100,000 20,782,304 20,157,705
------------ ------------ ------------
Total current liabilities................................................. 12,034,039 31,849,298 39,545,913
Non-current obligations:
Long-term debt, less current portion--Note 2............................ 31,796,627 10,528,131 10,643,283
Deferred income taxes--Note 4........................................... 7,356,000 7,205,000 4,483,055
Other long-term liabilities............................................. 556,240 1,483,293 1,487,518
------------ ------------ ------------
39,708,867 19,216,424 16,613,856
Stockholders' equity (deficit)
Common stock--without par value (stated value of $1,000 per share,
authorized 4,000 shares; issued 1,800 shares at December 31, 1993 and
3,013 shares at December 31, 1994 and July 2, 1995, respectively)..... 1,800,000 3,013,043 3,013,043
Retained earnings (deficit)............................................. (5,409,191) (6,278,262) (10,546,965)
------------ ------------ ------------
(3,609,191) (3,265,219) (7,502,614)
Less:
Cost of common stock in treasury........................................ 166,536 329,515 298,207
Value of warrant put option............................................. 104,700 104,700 104,700
------------ ------------ ------------
Total stockholders' equity (deficit)................................ (3,880,427) (3,699,434) (7,936,829)
------------ ------------ ------------
Total liabilities and stockholders' equity (deficit)................ $ 47,862,479 $ 47,366,288 $ 48,222,940
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See accompanying notes.
F-24
<PAGE>
FUNTIME PARKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994, AND THE
SIX MONTHS ENDED JULY 2, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
JULY 2,
1992 1993 1994 1995
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
(UNAUDITED)
<CAPTION>
<S> <C> <C> <C> <C>
Redeemable Preferred Stock:
Series A Senior Preferred Stock:
Balance, beginning of year..................... $ 7,000,000 $ 7,000,000 $ -- $ --
Redeem Preferred Stock in exchange for
subordinated debt............................ -- (7,000,000) -- --
------------- -------------- ------------- --------------
Balance, end of year........................... $ 7,000,000 $ -- $ -- $ --
------------- -------------- ------------- --------------
------------- -------------- ------------- --------------
Series B Senior Preferred Stock:
Balance, beginning of year..................... $ 2,354,940 $ 3,027,780 $ -- $ --
Issuance of 672.84 shares of Series B Senior
Preferred Stock for payment of stock
dividend..................................... 672,840 -- -- --
Issuance of 1,176.82 shares of Series B Senior
Preferred Stock for payment of stock
dividend..................................... -- 1,176,820 -- --
Redeem Preferred Stock in exchange for
subordinated debt............................ -- (4,204,600) -- --
------------- -------------- ------------- --------------
Balance, end of period......................... $ 3,027,780 $ -- $ -- $ --
------------- -------------- ------------- --------------
------------- -------------- ------------- --------------
Series A Junior Preferred Stock:
Balance, beginning of year..................... $ 2,500,000 $ 2,500,000 $ -- $ --
Redeem preferred stock in exchange for
long-term debt............................... -- (2,500,000) -- --
------------- -------------- ------------- --------------
Balance, end of year........................... $ 2,500,000 $ -- $ -- $ --
------------- -------------- ------------- --------------
------------- -------------- ------------- --------------
Series B Junior Preferred Stock:
Balance, beginning of year..................... $ 886,025 $ 1,139,175 $ -- $ --
Issuance of 253.15 shares of Series B Junior
Preferred Stock for payment of stock
dividend..................................... 253,150 -- -- --
Issuance of 442.768 shares Series B Junior
Preferred Stock for payment of stock
dividend..................................... -- 442,768 -- --
Redeem preferred stock in exchange for
long-term debt............................... -- (1,581,943) -- --
------------- -------------- ------------- --------------
Balance, end of year........................... $ 1,139,175 $ -- $ -- --
------------- -------------- ------------- --------------
------------- -------------- ------------- --------------
Total Redeemable Preferred Stock:
Balance, beginning of year..................... $ 12,740,965 $ 13,666,955 $ -- $ --
Issuance of Series B Senior Preferred Stock for
payment of stock dividend.................... 672,840 1,176,820 -- --
Issuance of Series B Junior Preferred Stock for
payment of stock dividend.................... 253,150 442,768 -- --
Redeem Preferred Stock in exchange for
subordinated debt............................ -- (11,204,600) -- --
Redeem Preferred Stock in exchange for long
term debt.................................... -- (4,081,943) -- --
------------- -------------- ------------- --------------
Balance, end of year........................... $ 13,666,955 $ -- $ -- $ --
------------- -------------- ------------- --------------
------------- -------------- ------------- --------------
</TABLE>
F-25
<PAGE>
FUNTIME PARKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994, AND THE
SIX MONTHS ENDED JULY 2, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
JULY 2,
1992 1993 1994 1995
------------- -------------- ------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Stockholder's Equity (Deficit)
Common stock--shares outstanding:
Balance, beginning of year..................... $ 1,800 $ 1,800 $ 1,800 $ 3,013
Exercise G Warrants............................ -- -- 1,213 --
------------- -------------- ------------- --------------
Balance, end of year........................... $ 1,800 $ 1,800 $ 3,013 $ 3,013
------------- -------------- ------------- --------------
------------- -------------- ------------- --------------
Common stock--amount:
Balance, beginning of year..................... $ 1,800,000 $ 1,800,000 $ 1,800,000 $ 3,013,043
Exercise G Warrants............................ -- -- 1,213,043 --
------------- -------------- ------------- --------------
Balance, end of period......................... $ 1,800,000 $ 1,800,000 $ 3,013,043 $ 3,013,043
------------- -------------- ------------- --------------
------------- -------------- ------------- --------------
Treasury Stock:
Balance, beginning of year..................... $ (166,536) $ (166,536) $ (166,536) $ (329,515)
Purchase treasury shares....................... -- -- (207,416) --
Issue treasury shares.......................... -- -- 44,437 31,308
------------- -------------- ------------- --------------
Balance, end of period......................... $ (166,536) $ (166,536) $ (329,515) $ (298,207)
------------- -------------- ------------- --------------
------------- -------------- ------------- --------------
Warrant Put Option:
Balance, beginning of year..................... $ -- $ -- $ (104,700) $ (104,700)
Record value of warrant put option............. -- (104,700) -- --
------------- -------------- ------------- --------------
Balance, end of year........................... $ -- $ (104,700) $ (104,700) $ (104,700)
------------- -------------- ------------- --------------
------------- -------------- ------------- --------------
Accumulated deficit:
Balance, beginning of year..................... $ (2,120,572) $ (3,301,914) $ (5,409,191) $ (6,278,262)
Net income (loss).............................. 383,791 330,902 263,196 (4,257,395)
Dividends Paid................................. (639,143) (809,579) -- --
Issuance of Series B Senior Preferred Stock for
payment of stock dividend.................... (672,840) (1,176,820) -- --
Issuance of Series B Junior Preferred Stock for
payment of stock dividend.................... (253,150) (442,768) -- --
Unamortized discount on subordinated debt, net
of income tax................................ -- 586,288 -- --
Cancel H Warrants.............................. -- (700,000) -- --
Record value of warrant put option............. -- 104,700 -- --
Issue treasury shares.......................... -- -- (12,437) (11,308)
Exercise G Warrants............................ -- -- (1,211,830) --
Discount on subordinated debt, net of tax
reversal..................................... -- -- 92,000 --
------------- -------------- ------------- --------------
Balance, end of period......................... $ (3,301,914) $ (5,409,191) $ (6,278,262) $ (10,546,965)
------------- -------------- ------------- --------------
------------- -------------- ------------- --------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-26
<PAGE>
FUNTIME PARKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, ------------------------
---------------------------------------- JULY 3, JULY 2,
1992 1993 1994 1994 1995
------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Gross operating revenue:
Admissions....................................... $ 19,351,912 $ 20,820,183 $ 20,339,357 $ 5,851,250 $ 6,194,935
Food, merchandise, and other..................... 27,500,479 30,432,656 30,095,314 9,407,089 8,958,332
------------ ------------ ------------ ----------- -----------
46,852,391 51,252,839 50,434,671 15,258,339 15,153,267
Operating expenses:
Operating labor.................................. 11,671,322 12,379,822 12,366,501 5,156,886 5,233,118
Payroll taxes and benefits....................... 1,826,112 1,892,503 1,922,107 826,483 809,300
Supplies and services............................ 1,608,152 1,756,904 1,998,955 943,200 994,110
Utilities........................................ 1,503,466 1,586,050 1,635,735 619,131 609,982
Maintenance and repairs.......................... 2,364,407 2,290,017 2,792,803 2,025,944 1,659,278
Licenses, taxes and rent......................... 1,478,803 1,600,755 1,781,712 704,078 851,011
Professional services............................ 207,393 186,827 132,897 95,183 105,070
Miscellaneous.................................... 507,307 510,787 577,081 328,994 275,346
------------ ------------ ------------ ----------- -----------
Total operating expenses........................... 21,166,962 22,203,665 23,207,791 10,699,899 10,537,215
Selling general, and administrative................ 8,663,536 8,217,796 8,432,771 3,339,518 3,459,003
Cost of sales...................................... 5,739,824 6,554,625 6,634,686 2,053,130 2,083,004
Depreciation....................................... 6,182,228 5,631,903 5,956,481 2,978,240 3,316,000
------------ ------------ ------------ ----------- -----------
Operating Profit................................... 5,099,841 8,644,850 6,202,942 (3,812,448) (4,241,955)
Other expenses:
Interest expense, net............................ 2,770,635 2,736,777 4,518,212 2,262,603 2,495,153
Amortization..................................... 230,388 45,814 272,784 134,440 245,974
Litigation costs................................. 48,129 38,003 261,444 -- --
Other............................................ 54,898 239,663 36,079 166,248 (3,742)
------------ ------------ ------------ ----------- -----------
Total other expenses............................... 3,104,050 3,060,257 5,088,519 2,563,291 2,737,385
------------ ------------ ------------ ----------- -----------
Income (loss) before income taxes and cumulative
effect of change in accounting method............ 1,995,791 5,584,593 1,114,423 (6,375,739) (6,979,340)
Provision for income tax expense (benefit)
Current:
Federal........................................ 700,000 760,000 785,000 -- --
State.......................................... 236,000 389,691 125,227 -- --
Deferred......................................... -- 895,000 (59,000) (2,486,538) (2,721,945)
Charge in lieu of income taxes................... 676,000 -- -- -- --
------------ ------------ ------------ ----------- -----------
1,612,000 2,044,691 851,227 (2,486,538) (2,721,945)
------------ ------------ ------------ ----------- -----------
Income (loss) before cumulative effect of change in
accounting method................................ 383,791 3,539,902 263,196 (3,889,201) (4,257,395)
Cumulative effect as of January 1, 1993 of change
in accounting method............................. -- 3,209,000 -- -- --
------------ ------------ ------------ ----------- -----------
Net income (loss).................................. $ 383,791 $ 330,902 $ 263,196 $(3,889,201) $(4,257,395)
Preferred stock dividend requirements............ 724,359 426,094 -- -- --
------------ ------------ ------------ ----------- -----------
Net income (loss) applicable to common
shareholders................................... $ (340,568) $ (95,192) $ 263,196 $(3,889,201) $(4,257,395)
------------ ------------ ------------ ----------- -----------
------------ ------------ ------------ ----------- -----------
Income (loss) per share:
Income (loss) before cumulative effect of
accounting change (net of preferred stock
dividend requirements)......................... $ (201.52) $ 1,842.49 $ 102.93 $ (1,416.83) $ (1,498.03)
Cumulative effect of accounting change........... -- (1,898.82) -- -- --
------------ ------------ ------------ ----------- -----------
Net income (loss) applicable to common
shareholders................................. $ (201.52) $ (56.33) $ 102.93 $ (1,416.83) $ (1,498.03)
------------ ------------ ------------ ----------- -----------
------------ ------------ ------------ ----------- -----------
Weighted average number of shares outstanding.... 1,690 1,690 2,557 2,745 2,842
------------ ------------ ------------ ----------- -----------
------------ ------------ ------------ ----------- -----------
</TABLE>
See accompanying notes.
F-27
<PAGE>
FUNTIME PARKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, --------------------------
---------------------------------------- JULY 3, JULY 2,
1992 1993 1994 1994 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
OPERATING ACTIVITIES
Net income (loss)................................ $ 383,791 $ 330,902 $ 263,196 $ (3,889,201) $ (4,257,395)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................. 6,412,616 5,707,300 6,464,501 3,112,680 3,561,974
Provision for deferred income taxes............ -- 895,000 (151,000) (2,486,538) (2,721,945)
Change in lieu of income taxes................. 676,000 -- -- -- --
Cumulative effect adjustment................... 47,957 3,209,000 -- -- --
Provision for deferred compensation............ -- 44,499 12,415 -- --
Other long-term liabilities.................... 680 -- 914,638 10,310 4,225
(Gain) Loss on sale of property and equipment.... (151,517) 886 (2,500) -- --
Deferred charges............................... (673,026) (10,000) -- (3,265)
Changes in operating assets and liabilities:
Trade and other receivables.................. (40,106) (26,227) 60,328 (1,913,459) (2,403,066)
Refundable income taxes...................... -- (240,000) 240,000 -- --
Prizes and other supplies.................... 71,399 (677,743) 156,297 (1,175,009) (1,128,867)
Other current assets......................... 181,136 (321,621) 166,986 242,511 6,900
Accounts payable............................. (199,318) 672,033 (339,547) 2,350,266 2,827,579
Accrued taxes, other than income taxes....... (104,778) (62,436) 31,464 394,928 280,540
Accrued payroll and related expenses......... 69,755 (73,577) (222,791) 426,136 617,160
Income taxes payable......................... (374,950) 208,198 (299,706) (348,407) (48,701)
Accrued interest............................. (10,651) 205,957 1,148,306 728,912 281,469
Other accrued liabilities.................... (12,352) (19,425) 351,132 756,235 1,787,539
------------ ------------ ------------ ------------ ------------
Net cash provided by (used in) operating
activities..................................... 6,949,662 9,179,720 8,783,719 (1,790,636) (1,195,853)
INVESTING ACTIVITIES
Purchases of property and equipment.............. (2,970,877) (4,394,647) (4,211,090) (2,926,675) (954,706)
Shareholders settlement.......................... -- -- (2,150,000) -- --
Purchase of stock warrants....................... -- (700,000) -- -- --
Proceeds from sale of property and equipment..... -- -- 2,500 2,500 --
(Purchase) sale of common stock.................. -- -- (77,266) 29,213 20,000
Discount on subordinated debt.................... -- -- 92,000 -- --
------------ ------------ ------------ ------------ ------------
Net cash used in investing activities............ (2,970,877) (5,094,647) (6,343,856) (2,894,962) (934,706)
FINANCING ACTIVITIES
Proceeds from long-term borrowings............... -- 20,521,789 -- 117,618 115, 152
Principal payments on long-term borrowings....... (5,177,780) (23,324,751) (3,821,428) (721,428) (624,599)
Net proceeds from borrowings under a revolving
line-of-credit................................. 1,684,383 (636,384) 1,367,159 5,332,625 2,575,628
Dividends........................................ (639,143) (809,579) -- -- --
------------ ------------ ------------ ------------ ------------
Net cash (used in) provided by financing
activities..................................... (4,132,540) (4,248,925) (2,454,269) 4,728,815 2,066,181
------------ ------------ ------------ ------------ ------------
Net decrease in cash............................. (153,755) (163,852) (14,406)
Cash at beginning of year........................ 503,407 349,652 185,800 185,800 171,394
------------ ------------ ------------ ------------ ------------
Cash at end of year.............................. $ 349,652 $ 185,800 $ 171,394 $ 229,017 $ 107,016
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
See accompanying notes.
F-28
<PAGE>
FUNTIME PARKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND JULY 2, 1995
(INFORMATION AS OF JULY 2, 1995 OR FOR THE SIX MONTHS ENDED
JULY 3, 1994 AND JULY 2, 1995 IS UNAUDITED)
(1) ACCOUNTING POLICIES
BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated
financial statements as of July 2, 1995, and for the six months ended July 3,
1994 and July 2, 1995, reflect all adjustments (all of which were normal and
recurring) which, in the opinion of management, are necessary for fair statement
of the financial position and results of operations for the interim periods
presented.
CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany transactions and
accounts have been eliminated upon consolidation.
NATURE OF OPERATIONS
The Company owns and operates Geauga Lake, Darien Lake and Wyandot Lake
amusement parks in Aurora, Ohio; Darien Center, New York and Columbus, Ohio,
respectively. The Company also owns and operates a Famous Recipe and Mr. Hero
restaurant.
PRIZES AND OTHER SUPPLIES
Prizes and other supplies are valued at cost which approximates market.
DEFERRED CHARGES
Deferred charges include primarily costs associated with obtaining long-term
debt and are amortized on the straight-line method over the term of the related
debt.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. For financial reporting
purposes, depreciation is computed by the straight-line method over the
estimated useful lives of the assets. Accelerated methods are used for income
tax purposes where permitted. Maintenance and repairs are charged to operating
expenses as incurred. Major renewals and betterments are capitalized and
depreciated over their estimated useful lives. The cost of assets retired or
sold and the related accumulated depreciation are removed from the accounts and
any profit or loss on disposition is credited or charged to earnings.
INCOME TAXES
Effective January 1, 1993, the Company adopted the provisions of Statement
of Financial Accounting Standards (SFAS) No. 109 "Accounting for Income Taxes."
Under SFAS No. 109, the liability method is used in accounting for income taxes
and accordingly deferred tax assets and liabilities are determined based on
differences between the financial reporting basis and the tax basis of assets
and liabilities and are measured using the enacted tax rates and laws that will
be in effect when the differences are expected to reverse. Prior to the adoption
of SFAS No. 109, income tax expense was determined using the deferred method.
Deferred tax expense was based on items of income and expense that were reported
in different years in the financial statements and tax returns and were measured
at the tax rate in effect in the year the difference originated.
F-29
<PAGE>
FUNTIME PARKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(1) ACCOUNTING POLICIES (CONTINUED)
As permitted by SFAS No. 109, the Company has elected not to restate the
financial statements of any prior years. The effect of the change has been
presented in the income statement in 1993 as a cumulative effect adjustment.
PER COMMON SHARE AMOUNTS
Per common share amounts are computed after preferred stock dividend
requirements on the basis on the weighted average number of shares of Common
Stock outstanding.
STATEMENT OF CASH FLOWS
For purposes of the statement of cash flows, temporary cash investments are
considered cash equivalents.
RECLASSIFICATION
Certain amounts for 1993 and 1992 have been reclassified to conform to the
1994 presentation.
(2) FINANCING ARRANGEMENTS
The Company entered into a financing agreement on November 12, 1993, amended
October 5, 1994, which provided borrowings of up to $38,103,733. This financing
agreement provided three term loans totaling $24,603,733 and a revolving credit
facility of up to $13,500,000. The financing agreement also contains provisions
which require the maintenance of certain financial ratios and limit additional
indebtedness, dividends and capital expenditures. The financing agreement
terminates on December 31, 1995. The Company believes that it has the ability to
and will refinance its current debt obligation prior to the expiration of the
term loan agreement on December 31, 1995.
The Company also entered into a subordinated debt agreement on November 12,
1993 which provided additional borrowings of $11,204,600.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- JULY 2,
1993 1994 1995
------------- ------------- -------------
<S> <C> <C> <C>
Term loan from a finance company, payable in installments through
November 1, 1995, with a balloon payment due on December 31, 1995,
plus interest payable monthly at a variable rate (10.125% and
7.625% at December 31, 1994 and 1993, respectively)............... $ 24,603,732 $ 20,782,304 $ 20,157,705
Subordinated debt, due December 31, 1997 with interest at 13.5%..... 11,204,600 11,204,600 11,204,600
Unamortized discount on subordinated debt........................... (911,705) (676,469) (561,317)
------------- ------------- -------------
34,896,627 31,310,435 30,800,988
Less current portion................................................ 3,100,000 20,782,304 20,157,705
------------- ------------- -------------
$ 31,796,627 $ 10,528,131 $ 10,643,283
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
F-30
<PAGE>
FUNTIME PARKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(2) FINANCING ARRANGEMENTS (CONTINUED)
The scheduled installments of the term loan are coordinated so that four
payments totaling $775,000 are due monthly from August through November each
year during the term of the financing agreement. In addition, proceeds from the
sale of significant assets or from the exercise of stock purchase warrants must
be applied to the unpaid term loan balances. The Company may have to pay an
additional installment on the term loan each year during April. This installment
is based on a formula in the financing agreement. At December 31, 1995, all
unpaid term loan balances are due.
The subordinated debt includes interest at 7.5% payable semi-annually, plus
interest of 6% which is added to the outstanding principal balance. In 1993,
stock purchase warrants were issued to the subordinated debt holder in
conjunction with the subordinated financing. A portion of the subordinated loan
proceeds has been allocated to these warrants based on a formula which considers
the fair market values of the warrants and the loan proceeds. The portion of the
loan proceeds allocated to the warrants represents an additional interest cost
of the subordinated financing and totaled $911,705, $676,469, and $561,317 at
December 31, 1993, 1994, and July 2, 1995, respectively. This cost will be
recognized during the term of the note based on the interest method of
amortization. Amortization totaling $29,583, $235,236 and $115,152 is included
with 1993, 1994, and the six months ended July 2, 1995 interest expense,
respectively.
Maturities of long-term debt are $20,782,304 in 1995 and $11,204,600 in
1997. The Company may prepay all or portions of long-term debt without penalty.
The revolving credit note is due December 31, 1995. Interest is payable
monthly at the prime rate plus 1.625 percent (10.125% and 7.625% at December 31,
1994 and 1993 respectively). At December 31, 1994 and July 2, 1995, borrowings
of $7,999,649 and $5,424,021, respectively, were available under the revolving
credit note.
The revolving line-of-credit and term loans are secured by substantially all
of the Company's assets. The common stock of the Company's subsidiaries has also
been pledged under the term loan.
The Company paid $2,662,000, $2,455,668, $3,136,114 and $2,214,584 in
interest costs during the years ended December 31, 1992, 1993 and 1994 and the
six months ended July 2, 1995, respectively.
(3) LEASE COMMITMENTS
The Company has an agreement with the Columbus Zoological Park Association
(Zoo) to lease and operate Wyandot Lake amusement park located near Columbus,
Ohio. There are five years remaining on this lease which has two renewable
option periods of four years each. The agreement calls for minimum annual rent
payments of $100,000 plus a percentage of gross receipts in excess of
$2,000,000. Rent expense relating to this agreement totaled $216,000, $287,000,
$282,000 and $71,000 in 1992, 1993 and 1994 and the six months ended July 2,
1995, respectively. Additionally, the Company must incur minimum annual
expenditures of $50,000 to maintain or improve the appearance of the Park.
F-31
<PAGE>
FUNTIME PARKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(3) LEASE COMMITMENTS--(CONTINUED)
Future minimum annual lease payments under noncancelable operating leases
with initial or remaining terms of one year or more as of December 31, 1994,
1993 and 1992 are as follows:
<TABLE>
<CAPTION>
OPERATING
LEASES
----------
<S> <C>
1995.............................................................................. $ 322,000
1996.............................................................................. 286,000
1997.............................................................................. 240,000
1998.............................................................................. 144,000
1999.............................................................................. --
----------
Total minimum lease payments...................................................... $ 992,000
----------
----------
</TABLE>
Total rent expense was approximately $462,000, $466,000 and $518,000 in
1992, 1993, and 1994 respectively. Total rent expense was approximately $216,000
and $221,000 during the six months ended July 3, 1994 and July 2, 1995,
respectively.
(4) INCOME TAXES
The effective income tax rate varied from the statutory federal income tax
rate as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Statutory federal income tax rate.......................................................... 35.0% 35.0% 34.0%
State and local income taxes, net of federal income tax benefit............................ 10.0 5.0 5.0
Depreciation on differences between purchase price and
tax basis of assets...................................................................... 36.1 10.3 39.1
Other, net................................................................................. (4.7) (13.7) 2.7
--- --------- ---
Effective income tax rate.................................................................. 76.4% 36.6% 80.8%
--- --------- ---
--- --------- ---
</TABLE>
F-32
<PAGE>
FUNTIME PARKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(4) INCOME TAXES (CONTINUED)
Significant components of the Company's deferred tax liabilities and assets
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------ JULY 2,
1993 1994 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Deferred tax liabilities:
Accelerated depreciation....................................... $ (10,368,000) $ (9,860,000) $ (9,460,000)
Inventory purchases............................................ (349,000) (292,000) (292,000)
Subordinated debt discount..................................... (355,000) (263,000) (263,000)
Other.......................................................... (309,000) (171,000) (171,000)
-------------- -------------- --------------
(11,381,000) (10,586,000) (10,186,000)
Deferred tax assets:
Net operating loss carryforwards............................... 2,160,000 1,319,000 3,640,945
Tax credits.................................................... 1,554,000 2,224,000 2,224,000
Accrued liabilities............................................ 570,000 338,000 338,000
Deferred compensation.......................................... 158,000 173,000 173,000
Litigation accrual............................................. 195,000 -- --
Deferred revenue............................................... 195,000 195,000 195,000
Other.......................................................... 90,000 163,000 163,000
-------------- -------------- --------------
4,922,000 4,412,000 6,733,945
Valuation allowance.............................................. (897,000) (1,031,000) (1,031,000)
-------------- -------------- --------------
Net deferred tax assets.......................................... 4,025,000 3,381,000 5,702,945
-------------- -------------- --------------
Net deferred taxes............................................... $ (7,356,000) $ (7,205,000) $ (4,483,055)
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
Management believes that the timing of the reversal of its deferred tax
liabilities, principally relating to accelerated depreciation, will more likely
than not be sufficient to recognize fully its deferred tax assets, except for
certain New York net operating loss carryforwards. The valuation allowance
included with net deferred taxes at December 31, 1994 relates primarily to these
assets. The turnaround of the remaining deferred tax assets, primarily net
operating loss and tax credit carryforwards, will occur over an extended period
of time and as a result will be realized for tax purposes over those future
periods and beyond.
The 1994 current federal provision represents Alternative Minimum Tax (AMT)
payable. Regular tax was reduced to a minor amount with a net operating loss
carryforward not available for AMT purposes. AMT income was further increased by
deprecation adjustments required by the AMT system.
The income tax provision for 1992 includes a charge in lieu of income taxes
of $676,000, representing taxes which would have been provided in the absence of
net operating loss carryforwards. The net operating loss carryforwards utilized
in 1992 were generated prior to the Company's purchase of Funtime, Inc. and
Subsidiaries and therefore, were used to reduce the Company's carrying amount of
Funtime, Inc.'s fixed assets.
F-33
<PAGE>
FUNTIME PARKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(4) INCOME TAXES (CONTINUED)
For federal income tax purposes, the Company has net operating loss and
investment tax credit carryforwards that expire as follows:
<TABLE>
<CAPTION>
NET OPERATING INVESTMENT
LOSS TAX CREDIT
CARRYFORWARDS CARRYFORWARDS
------------- -------------
<S> <C> <C>
1995........................................................... $ $ 20,000
1996........................................................... 22,000
1997........................................................... 25,000
1998........................................................... 12,000
2002........................................................... 1,905,000
------------- -------------
$ 1,905,000 $ 79,000
------------- -------------
------------- -------------
</TABLE>
The utilization of the carryforwards expiring prior to 2003 is limited to
the future taxable income or income taxes payable of the respective subsidiary
which generated the loss or credit. Additionally, alternative minimum tax
credits of approximately $2,224,000 are available to offset the Company's
regular tax liability in future years.
The Company made income tax payments of approximately $1,491,000, $1,312,000
and $1,306,000 in 1992, 1993 and 1994, respectively. The Company also received
income tax refunds in 1994 of approximately $257,000.
(5) EMPLOYEE BENEFITS
The Company sponsors a defined contribution pension plan covering all
employees meeting specified age and service requirements. The Company's
contributions under this plan are 100% of the first 2% of each qualified
employee's salary plus an additional matching requirement of 25% of the next 6%
of the employee's contribution. Expense recorded under this plan amounted to
$95,000, $115,000, $114,000 and $59,000 in 1992, 1993, 1994 and the six months
ended July 2, 1995, respectively.
(6) OTHER CURRENT ASSETS AND ACCRUED LIABILITIES
The components of other current assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- JULY 2,
1993 1994 1995
---------- ---------- -----------
<S> <C> <C> <C>
Prepaid maintenance and expenses............................................ $ 652,243 $ 430,459 $ 476,232
Other....................................................................... 104,940 159,738 107,065
---------- ---------- -----------
Total other current assets.................................................. $ 757,183 $ 590,197 $ 583,297
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
The components of other accrued liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1993 1994 JULY 2, 1995
------------ ------------ ------------
<S> <C> <C> <C>
Deferred revenue........................................................ $ 642,967 $ 705,745 $ 2,908,411
Other................................................................... 1,480,165 1,865,457 1,450,330
------------ ------------ ------------
Total other accrued liabilities......................................... $ 2,123,132 $ 2,571,202 $ 4,358,741
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
F-34
<PAGE>
FUNTIME PARKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(7) COMMITMENTS AND CONTINGENCIES
The estimated cost to complete construction in progress as of July 2, 1995
is $-0-.
During 1988, a lawsuit was brought against the former Board of Directors of
Funtime, Inc. by several minority shareholders challenging the adequacy of the
$7 per share price of the 1987 merger of Funtime, Inc. into a subsidiary of the
Company. The plaintiffs were demanding damages and compensation from each
director of Funtime, Inc. as well as attorney fees, expenses and costs. The
Company recorded a reserve totaling $500,000 during 1988 to indemnify the former
Board of Directors of Funtime, Inc. for defense costs and for losses that may be
incurred in connection with this lawsuit. In 1994, $761,000 of litigation costs
were incurred of which $261,000 were charged to operations, the remaining
portion was charged against the reserve. Legal costs incurred in 1993 and 1992
totaled $38,000 and $48,000, respectively. In 1994, the Company agreed to pay
the minority shareholders $2,150,000 which was accounted for as additional
purchase price and reflected as additional property and equipment. The Company
paid $750,000 relating to this settlement in 1994. The remainder of the
settlement is due in two installments of $700,000 in 1995 and 1996.
(8) REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
On April 11, 1994 1,213 warrants were exercised to purchase 1,213 shares of
common stock for $1 per share. At December 31, 1994, 900 warrants were
outstanding which grant the holders the right to purchase 900 shares of the
Company's common stock. The 900 warrants outstanding are comprised of two
agreements. The first warrant agreement, which expires on November 12, 2003,
provides the right to purchase 783 shares of common stock at $894.44 per share,
upon the occurrence of certain events as stated in the warrant agreement. Such
events principally include the Company's default under the financing agreement
dated November 12, 1993, amended October 5, 1994, or action which dilutes the
aggregate ownership of the Company's outstanding common stock held by the
current principal stockholders to less than 50%.
The second warrant agreement, which expires on December 31, 1997, provides
the right to purchase 117 shares of common stock at $1 per share, upon the
occurrence of certain events as stated in the warrant agreement. Such events
principally include the Company's default under the financing agreement dated
November 12, 1993, amended October 5, 1994, or action which dilutes the
aggregate ownership of the Company's outstanding common stock held by the
current principal stockholders to less than 50%. Effective January 1, 1994, the
warrantholder under this agreement has the right to require the Company to
purchase the warrants (put option) at an amount determined by a nationally
recognized investment banking firm. The estimated value of this put option is
included as a component of stockholders' equity at December 31, 1993 and 1994
and July 2, 1995.
At December 31, 1992, redeemable preferred stock included Series A and
Series B senior and junior shares at $.01 par value. These shares were recorded
at a liquidation value of $1,000 per share. All authorized Series A shares were
issued and outstanding. Authorized Series B preferred stock included 7,000
senior and 2,500 junior shares. Issued and outstanding Series B preferred stock
included 3,027.78 senior and 1,139.175 junior shares.
On November 12, 1993, the Company redeemed all junior preferred stock (2,500
shares Series A; and 1,139 shares Series B) held by the lender in exchange for
long-term debt and redeemed all senior preferred stock (7,000 shares Series A;
and 3,027 Series B) in exchange for subordinated debt.
F-35
<PAGE>
FUNTIME PARKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(8) REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (CONTINUED)
A provision of the 1993 financing agreement required the Company to redeem
783 then outstanding warrants, for $700,000.
The transferability of the Company's common stock is restricted in
accordance with the terms of a stockholder agreement. Under this agreement, the
death or termination of employment of a stockholder obligates the stockholder or
their legal representative to offer to sell the shares owned to the Company at a
price established by the agreement.
(9) RELATED PARTY TRANSACTIONS
In January 1993, the Company entered into a three year agreement with an
advertising agency (the "Agency") for whom a director and stockholder of the
Company is also a director. The agreement appoints the Agency as the Company's
principal advertising agency which entitles it to receive compensation for the
reimbursement of costs incurred plus commissions. Agency commissions amounted to
approximately $633,000, $522,000, $518,000 and $150,000 in 1992, 1993, 1994 and
the six months ended July 2, 1995, respectively. Other costs paid to the Agency
in 1995, 1994, 1993 and 1992, represented reimbursement of expenses paid by the
Agency on behalf of the Company. The Agency served as the Company's principal
advertising agency over the past 20 years and it is management's opinion that
this agreement was negotiated at arms-length.
The subordinated debtholder's president serves on the Company's Board of
Directors.
(10) STOCK OPTIONS
Effective April 26, 1988, the Company granted certain key executives options
to purchase 80 shares of the Company's common stock for $1,000 per share. The
options expire on various dates from May 31, 1994 to November 30, 1996 and are
contingent upon continued employment with the Company. During 1994, 32 of these
options were exercised and three expired unexercised. During the second quarter
of 1995 20 of these options were exercised. At December 31, 1994 and July 2,
1995, 45 and 25 of these options remain outstanding, respectively.
(11) PERFORMING ARTS CENTER
Beginning in 1993, the Company participated with an entertainment company in
the construction and operation of a performing arts center (the Center) located
at Darien Lake Park. On October 31, 1994, the Company purchased for $514,000 the
entertainment company's portion of the Center. At December 31, 1994 and July 2,
1995 the Company's investment in property and equipment at the Center
approximated $1,500,000 and $1,800,000 respectively. The Company is seeking a
third-party to share in the revenues and expenses of the Center.
As a part of establishing the Center, the Company entered into a separate
agreement with a food and beverage vendor. The agreement provides the vendor
with the exclusive right to sell food and beverage products to patrons at all
Center sponsored events through May 31, 2003 in exchange for a portion of such
sales. Under the agreement, the Company received a payment of $500,000 in 1993
and $300,000 in 1995 from the vendor. These payments represent an advance of the
Company's future proceeds from the Center which was used during 1993 and 1995 to
fund a portion of the construction costs of the Center. The
F-36
<PAGE>
FUNTIME PARKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(11) PERFORMING ARTS CENTER (CONTINUED)
Company has committed to reimburse the advance at an annual rate of $100,000 for
1993 and 1994 and $75,000 per year thereafter contingent upon the Centers'
ability to generate sufficient profit. At December 31, 1994 and July 2, 1995,
the commitment totaled $300,000, and $563,000 the current portion of which has
been accounted for in other accrued liabilities and the non-current portion has
been accounted for in other long-term liabilities. Either party may terminate
the contract subsequent to October 1, 1998.
(12) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The Company's unaudited results of operations for 1994 and 1993 are set
forth below.
<TABLE>
<CAPTION>
NET INCOME
(LOSS) APPLICABLE NET INCOME
GROSS PROFIT NET INCOME TO COMMON (LOSS) PER
QUARTER ENDED TOTAL REVENUE (LOSS) (LOSS) SHAREHOLDER COMMON SHARE
--------------- ------------- ------------- -------------- ----------------- ------------
<S> <C> <C> <C> <C> <C> <C>
1995........................ April 2 $ 107,707 $ (4,556,368) $ (4,222,504) $ (4,222,504) $ (1,493.11)
July 2 15,045,560 3,773,416 (34,891) (34,891) (12.28)
--------------- ------------- ------------- -------------- ----------------- ------------
1994........................ April 3 136,106 (4,477,124) (3,888,563) (3,888,563) (2,298.21)
July 3 15,122,233 4,004,194 (638) (638) (.23)
October 2 34,557,975 18,417,293 7,854,358 7,854,358 2,677.93
December 31 618,357 (3,308,650) (3,701,961) (3,701,961) (1,302.13)
--------------- ------------- ------------- -------------- ----------------- ------------
1993........................ April 4 180,406 (3,843,931) (6,357,320)* (6,357,320)* (3,761.73)
July 4 15,077,987 4,507,503 622,443 196,349 116.18
October 3 35,246,519 19,844,334 9,415,271 9,415,271 5,571.17
December 31 747,927 (3,645,260) (3,349,492) (3,349,492) (1,981.95)
--------------- ------------- ------------- -------------- ----------------- ------------
</TABLE>
Gross profit (loss) is revenue less operating expenses, cost of sales and
depreciation.
*Includes a $3,509,000 charge for the cumulative effect of a change in
accounting method as described in Note 1.
(13) SUBSEQUENT EVENT
Pursuant to a merger agreement, the Company was acquired by Premier Parks
Inc. for approximately $60 million, subject to certain post-closing adjustments
related to the 1995 operations of the Company's acquired theme parks.
On August 15, 1995 pursuant to the merger with Premier Parks Inc., all
outstanding warrants and options referred to in Notes 8 and 10, were exercised.
If the common shares issued on August 10, 1995, with respect to these warrants
and options had been outstanding for all periods presented, the number of
weighted average shares outstanding and income (loss) per share would have been
as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, ------------------------
------------------------------- JULY 3, JULY 2,
1992 1993 1994 1994 1995
--------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Weighted average number of shares outstanding.......... 3,848 3,848 3,502 3,690 3,767
Income (loss) per common share......................... $ (88.51) $ (24.74) $ 75.16 $ (1,053.98) $ (1,130.18)
</TABLE>
F-37
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Partners
Elitch Gardens Company
Denver, Colorado
We have audited the accompanying balance sheets of Elitch Gardens Company as
of December 31, 1995 and 1994, and the related statements of operations,
partners' capital, and cash flows for the year ended December 31, 1995 and for
the period from May 31, 1994 (date of inception) through December 31, 1994.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Elitch Gardens Company as of
December 31, 1995 and 1994, and the results of its operations and its cash flows
for the year ended December 31, 1995 and for the period from May 31, 1994 (date
of inception) through December 31, 1994, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that
Elitch Gardens Company will continue as a going concern. As more fully described
in Note 1, the Company is in default on a material portion of its debt and
incurred a significant operating loss in 1995, the first year of operations.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern. The financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from the
outcome of this uncertainty.
Ernst & Young LLP
Denver, Colorado
February 16, 1996
F-38
<PAGE>
ELITCH GARDENS COMPANY
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------- SEPTEMBER 30,
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
(UNAUDITED)
-------------
ASSETS
Current assets:
Cash (Note 1)................................................... $ 592,654 $ 3,420,785 $ 2,969,350
Subscriptions receivable........................................ 375,000 -- --
Accounts receivable............................................. 12,500 107,247 969,141
Inventory (Notes 1 and 2)....................................... -- 771,459 860,025
Prepaid expenses................................................ 323,816 235,932 127,805
------------- ------------- -------------
Total current assets.......................................... 1,303,970 4,535,423 4,926,321
Property, plant and equipment, at cost (Notes 1 and 2):
Land............................................................ 5,955,988 11,560,403 11,560,403
Rides........................................................... -- 25,134,006 25,989,043
Buildings....................................................... -- 17,928,837 17,942,657
Equipment....................................................... -- 2,452,546 2,495,859
Furniture and fixtures.......................................... -- 1,309,410 1,711,946
Vehicles........................................................ -- 445,219 445,219
Computers....................................................... -- 238,962 273,709
Construction in progress........................................ 28,819,410 -- --
------------- ------------- -------------
Property, plant and equipment, at cost.......................... 34,775,398 59,069,383 60,418,836
Less accumulated depreciation................................... -- (1,158,489) (2,690,986)
------------- ------------- -------------
Property, plant and equipment, net.................................. 34,775,398 57,910,894 57,727,850
Cash reserves (Note 1).............................................. -- 2,158,998 --
Other assets (Notes 1 and 2):
Capitalized loan costs.......................................... 4,160,123 5,695,113 5,695,113
Organization costs.............................................. 2,346,356 2,613,545 2,613,545
Goodwill and other intangibles.................................. 2,224,489 2,470,056 2,470,056
------------- ------------- -------------
8,730,968 10,778,714 10,778,714
Less accumulated amortization................................... -- (391,216) (1,149,583)
Less asset impairment reserve (Notes 1 and 2)................... -- -- (8,000,000)
------------- ------------- -------------
Total other assets.................................................. 8,730,968 10,387,498 1,629,131
------------- ------------- -------------
Total assets........................................................ $ 44,810,336 $ 74,992,813 $64,283,302
------------- ------------- -------------
------------- ------------- -------------
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable................................................ $ -- $ 252,780 $ 1,105,972
Accrued interest................................................ -- 1,391,078 2,454,100
Other accrued liabilities....................................... -- 1,647,629 2,147,272
Deferred income (Note 1)........................................ 157,355 823,186 244,979
Payable to general partner (Note 7)............................. 405,000 148,129 485,159
Current portion of capital lease obligations (Note 7)........... -- -- 407,000
Current portion of long-term debt, including debt in default
(Note 4)...................................................... -- 37,300,000 36,587,000
------------- ------------- -------------
Total current liabilities..................................... 562,355 41,562,802 43,431,482
Liabilities incurred in connection with construction of park
facilities expected to be refinanced:
Construction loan payable (Note 5).............................. 6,878,984 -- --
Construction loan payable to related party (Note 4)............. 5,000,000 -- --
Construction accounts payable (Note 5).......................... 4,857,532 -- --
------------- ------------- -------------
16,736,516 -- --
Capital lease obligation, net of current portion (Note 7)........... -- -- 65,344
Long-term debt, net of current portion (Note 4)..................... 5,276,600 6,700,000 6,400,000
Partners' capital................................................... 22,234,865 26,730,011 14,386,476
------------- ------------- -------------
Total liabilities and partners' capital....................... $ 44,810,336 $ 74,992,813 $64,283,302
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See accompanying notes.
F-39
<PAGE>
ELITCH GARDENS COMPANY
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
PERIOD ENDED YEAR ENDED SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, -----------------------------
1994 1995 1995 1996
------------ ------------- ------------- --------------
<S> <C> <C> <C> <C>
(UNAUDITED)
Theme park admissions............................... $ -- $ 12,824,158 $ 12,762,275 $ 10,631,177
Theme park food, merchandise and other revenue...... -- 7,014,550 6,879,941 8,875,175
------------ ------------- ------------- --------------
Total revenue....................................... -- 19,838,708 19,642,216 19,506,352
Cost of goods sold.................................. -- 2,683,571 2,454,583 3,287,419
------------ ------------- ------------- --------------
Gross profit........................................ -- 17,155,137 17,187,633 16,218,933
Other operating expenses:
Salaries, payroll taxes and related benefits...... -- 7,123,028 6,195,501 6,899,070
Advertising, promotions and pre-opening marketing
costs........................................... -- 3,243,940 3,130,378 1,846,167
Consulting and other professional services........ -- 1,261,660 1,000,741 740,035
State, local and other taxes...................... -- 1,126,409 876,900 1,119,315
Repairs and maintenance........................... -- 1,073,273 709,411 849,727
Supplies and printing............................. -- 838,732 824,356 431,965
Insurance......................................... -- 959,995 750,364 950,175
Equipment rental, utilities, and telephone........ -- 916,336 682,192 701,477
Depreciation and amortization..................... -- 1,549,705 879,809 2,291,017
Ogden operating expenses.......................... -- -- -- 262,121
Outside entertainment services.................... -- 581,403 581,403 634,676
Other operating expenses.......................... -- 537,419 534,911 359,984
General and administrative expenses allocated from
general partner................................. 300,000 -- -- --
------------ ------------- ------------- --------------
Total other operating expenses...................... 300,000 19,211,900 16,165,966 17,085,729
------------ ------------- ------------- --------------
Income (loss) before other revenue (expenses)....... (300,000) (2,056,763) 1,021,667 (866,796)
Other revenue (expenses):
Interest expense and loan fees.................... -- (2,209,343) (1,566,350) (3,288,152)
Management fee.................................... -- (171,551) (167,852) (284,453)
Interest income................................... 34,865 167,783 65,780 95,866
Miscellaneous income.............................. -- 15,020 14,529 --
Asset impairment (Note 1)......................... -- -- -- (8,000,000)
------------ ------------- ------------- --------------
Other revenue (expenses), net....................... 34,865 (2,198,091) (1,653,893) (11,476,739)
------------ ------------- ------------- --------------
Net loss............................................ $ (265,135) $ (4,254,854) $ (632,226) $ (12,343,535)
------------ ------------- ------------- --------------
------------ ------------- ------------- --------------
</TABLE>
See accompanying notes.
F-40
<PAGE>
ELITCH GARDENS COMPANY
STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
------------- ------------- --------------
<S> <C> <C> <C>
Cash contributions................................................. $ 1,508,200 $ 8,125,000 $ 9,633,200
Other contributions................................................ 7,491,800 5,375,000 12,866,800
Transfer of units.................................................. (1,000,000) 1,000,000 --
Net loss........................................................... (94,270) (170,865) (265,135)
------------- ------------- --------------
Balance at December 31, 1994....................................... 7,905,730 14,329,135 22,234,865
Cash contributions................................................. -- 8,750,000 8,750,000
Net loss........................................................... (1,085,618) (3,169,236) (4,254,854)
------------- ------------- --------------
Balance at December 31, 1995....................................... 6,820,112 19,909,899 26,730,011
Net loss (unaudited)............................................... (3,159,945) (9,183,590) (12,343,535)
------------- ------------- --------------
Balance at September 30, 1996 (unaudited).......................... $ 3,660,167 $ 10,726,309 $ 14,386,476
------------- ------------- --------------
------------- ------------- --------------
</TABLE>
See accompanying notes.
F-41
<PAGE>
ELITCH GARDENS COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
PERIOD ENDED YEAR ENDED SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, ------------------------------
1994 1995 1995 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
(UNAUDITED)
Operating Activities:
Net loss....................................... $ (265,135) $ (4,254,854) $ (632,226) $ (12,343,535)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization................ -- 1,549,705 879,809 2,291,017
Asset impairment............................. -- -- -- 8,000,000
Changes in operating assets and liabilities:
Accounts receivable........................ (12,500) (94,747) (1,768,441) (861,894)
Inventory.................................. -- (771,459) (998,060) (88,566)
Prepaid expenses........................... (323,816) 87,884 20,200 108,127
Accounts payable........................... -- 252,780 2,110,283 853,192
Accrued interest........................... -- 1,391,078 933,910 1,063,022
Other accrued liabilities.................. -- 1,647,629 845,215 499,643
Deferred income............................ 157,355 665,831 47,609 (578,207)
Payable to general partner................. 405,000 (256,871) (244,042) 337,030
-------------- -------------- -------------- --------------
Net cash provided by (used in) operating
activities..................................... (39,096) 216,976 1,194,257 (720,171)
Investing Activities:
Purchases of property, plant and equipment..... (36,854,286) (26,044,469) (23,760,102) (589,606)
Organization costs and other intangibles....... (291,213) (512,756) (512,756) --
-------------- -------------- -------------- --------------
Net cash used in investing activities............ (37,145,499) (26,557,225) (24,272,858) (589,606)
Financing Activities:
Capital contributions, including subscription
payments..................................... 9,633,200 9,125,000 8,825,000 --
Proceeds from grant............................ 6,856,313 1,750,484 -- --
Proceeds from construction and bank loans...... 6,878,984 15,563,484 15,563,484 --
Proceeds from related party construction and
bank loans................................... 5,000,000 5,000,000 5,000,000 --
Proceeds from long-term debt................... 5,276,600 1,423,400 1,423,400 --
Principal payments on long-term debt........... -- -- -- (1,013,000)
Principal payments under capital lease
obligations.................................. -- -- -- (287,656)
Capitalized loan costs......................... (725,380) (1,534,990) (1,534,990) --
Cash reserves.................................. -- (2,158,998) (2,030,396) 2,158,998
Construction accounts payable.................. 4,857,532 -- -- --
-------------- -------------- -------------- --------------
Net cash provided by financing activities........ 37,777,249 29,168,380 27,246,498 858,342
-------------- -------------- -------------- --------------
Net change in cash............................... 592,654 2,828,131 4,167,897 (451,435)
Cash at beginning of period...................... -- 592,654 592,654 3,420,785
-------------- -------------- -------------- --------------
Cash at end of period............................ $ 592,654 $ 3,420,785 $ 4,760,551 $ 2,969,350
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
F-42
<PAGE>
ELITCH GARDENS COMPANY
STATEMENTS OF CASH FLOWS (CONTINUED)
SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING ACTIVITIES:
On May 31, 1994, Chilcott Entertainment Corp., the general partner,
contributed the following noncash items, at their fair value, to the Partnership
(see Note 1):
<TABLE>
<S> <C>
Land............................................................ $ 290,665
Costs included in construction in progress:
Rides....................................................... 3,500,000
Furniture and fixtures...................................... 250,000
Other....................................................... 236,760
Organization costs.............................................. 2,118,643
Goodwill........................................................ 1,000,000
Capitalized loan costs.......................................... 95,732
---------
$7,491,800
---------
---------
</TABLE>
On May 31, 1994, Hensel Phelps Construction Co., a limited partner ("Hensel
Phelps"), received partnership units with a fair value of $5,000,000 in exchange
for the commitment to issue an approximate $3,000,000 irrevocable letter of
credit in connection with permanent financing, an approximate $590,000 line of
credit available to the Partnership, and a $1,160,989 letter of credit to the
grant provider (see Note 2). Hensel Phelps received capital credit equal to the
letters of credit and $339,011 capital credit for the line of credit. The
letters and line of credit contributions have been recorded as capitalized loan
costs in the amount of $3,339,011 and goodwill and other intangibles in the
amount of $1,160,989. Hensel Phelps also contributed construction costs of
$500,000 incurred on behalf of the Partnership. (See Note 1.)
As of December 31, 1994, $375,000 of subscriptions receivable for the
purchase of partnership units remained outstanding. During 1995, the
subscriptions were paid and are included in capital contributions.
The construction accounts payable balance at December 31, 1994, of
$4,857,532 was paid through advances on the construction loan in 1995.
The Partnership entered into a capital lease obligation of $740,000 during
the nine months ended September 30, 1996.
See accompanying notes.
F-43
<PAGE>
ELITCH GARDENS COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995 AND SEPTEMBER 30, 1996
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
In May 1994, New Elitch Gardens, Ltd. (the "Partnership") was formed for the
purpose of constructing and operating a new amusement park in Denver, Colorado.
During 1995, the Partnership was renamed Elitch Gardens Company. Operations at
the new park began in June 1995. The general partner of the Partnership is
Chilcott Entertainment Corp. ("Chilcott"). The Partnership derives all its
revenues from operation of an amusement park near downtown Denver. Its principal
customer base includes Denver and the Front Range as well as tourists from other
parts of Colorado and surrounding states.
Under the terms of the partnership agreement, Chilcott contributed assets
with an estimated fair market value of $7,491,800 and cash of $1,508,200 in
exchange for 36 units in the Partnership during 1994. Hensel Phelps, the initial
limited partner, contributed assets with an estimated fair market value of
$5,000,000 and cash of $3,000,000 for 32 partnership units in 1994. The
remaining limited partners contributed cash of $14,250,000 for a total of 57
partnership units (22 in 1994 and 35 in 1995).
The financial statements of the Partnership are presented as if the
Partnership was formed on May 31, 1994, the date the construction loans closed.
See Note 4.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. Management estimates its available
cash together with cash generated during 1996 from improved park operations will
be sufficient to meet its cash needs for the next fiscal year assuming Banque
Nationale de Paris (the "Bank") does not request payment of debt which is
currently in default (see Note 4.) The Partnership is also attempting to
renegotiate the loan with the Bank. The financial statements do not include any
adjustments to reflect the possible future effects of the recoverability and
classification of assets or the amounts and classifications of liabilities that
may result from the possible inability of the Company to continue as a going
concern.
ACCOUNTING PERIOD
The Partnership's month end is the four- or five-week period ending on the
Sunday closest to the end of the month.
CASH AND CASH EQUIVALENTS
The Partnership considers all highly liquid debt instruments purchased with
an initial maturity of three months or less to be cash equivalents.
The Partnership is required to maintain compensating cash balances of
approximately $775,000 related to the construction of a pedestrian bridge and
certain other capital expenditures. In addition, the Partnership is required to
maintain compensating cash balances of approximately 3% of cumulative gross
profits related to certain other capital expenditures as part of the Banque
Nationale de Paris debt agreement covenants. The Partnership is in violation of
this covenant at September 30, 1996.
F-44
<PAGE>
ELITCH GARDENS COMPANY
NOTES TO FINANCIAL STATEMENTS --(CONTINUED)
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES --(CONTINUED)
INVENTORY
Inventory is valued at the lower of cost (first-in, first-out method) or
market.
PROPERTY, PLANT AND EQUIPMENT
Additions to property, plant and equipment are recorded at cost. Contributed
assets are recorded at estimated fair market value.
Interest, including related construction loan fees, of $1,308,179 and
$954,633 has been capitalized as property and equipment for the periods ended
December 31, 1995 and 1994, respectively.
OTHER ASSETS
Capitalized loan costs are amortized over the related life of the loan.
Organization costs are amortized over 10 years while goodwill is amortized over
30 years. See also New Accounting Standards.
ADVERTISING
The Partnership expenses advertising costs as incurred.
DEPRECIATION AND AMORTIZATION
The provision for depreciation and amortization of property, plant and
equipment, and other assets is computed using the straight-line method based
upon the estimated useful lives of the applicable assets, ranging from three to
thirty years.
DEFERRED INCOME
Deferred income consists of advance ticket sales and deposits and prepaid
sponsorship contracts. Income is recognized on advance ticket sales and
sponsorship contracts during the operating season for which the tickets were
sold, and over the term of the related sponsorship contract, respectively.
INCOME TAXES
No provision for the payment or refund of income taxes has been made in the
accompanying financial statements since the partners report their distributive
share of partnership taxable income or loss in their respective income tax
returns.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Partnership's financial instruments consist of cash, accounts
receivable, accounts payable, and long-term debt. The carrying values of these
assets and liabilities approximate fair value.
F-45
<PAGE>
ELITCH GARDENS COMPANY
NOTES TO FINANCIAL STATEMENTS --(CONTINUED)
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES --(CONTINUED)
NEW ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF. The Statement prescribes the accounting for the
impairment of long-lived assets, such as property, plant, and equipment, and
requires assets to be recorded at the lower of the assets' carrying amount or
fair value when events or circumstances indicate that an impairment may exist.
The Partnership implemented the statement on January 1, 1996. Based upon the
agreement for the sale of a majority of the Partnership's assets entered into on
September 23, 1996 (see Note 2), the Partnership has recorded an impairment loss
of $8,000,000 for the nine months ended September 30, 1996.
INTERIM FINANCIAL STATEMENTS
The unaudited financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form S-2 and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the nine-month period ended September 30, 1996 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1996.
NOTE 2: AGREEMENT FOR THE SALE OF A MAJORITY OF THE PARTNERSHIP'S ASSETS
On September 23, 1996, the Partnership entered into a sales agreement with
Premier Parks, Inc. for the sale of the majority of its assets, effective
October 31, 1996. The purchase price for such assets is to be $62,500,000,
subject to certain modifications as defined.
The net book value of the assets to be sold under this agreement is as
follows as of September 30, 1996:
<TABLE>
<CAPTION>
NET BOOK VALUE
--------------
<S> <C>
Property, plant and equipment................................................. $ 57,727,850
Inventory..................................................................... 860,025
Goodwill...................................................................... 1,000,000
--------------
$ 59,587,875
--------------
--------------
</TABLE>
The calculation of the asset impairment reserve as of September 30, 1996 is
as follows:
<TABLE>
<S> <C>
Net book value of assets to be sold............................ $59,587,875
Net book value of other related assets......................... 8,629,131
----------
68,217,006
Expected proceeds.............................................. 60,217,006
----------
Asset impairment reserve....................................... $8,000,000
----------
----------
</TABLE>
F-46
<PAGE>
ELITCH GARDENS COMPANY
NOTES TO FINANCIAL STATEMENTS --(CONTINUED)
NOTE 2: AGREEMENT FOR THE SALE OF A MAJORITY OF THE PARTNERSHIP'S ASSETS
- --(CONTINUED)
RECLASSIFICATIONS
Certain 1994 and 1995 amounts have been reclassified to conform with the
1996 presentation. These reclassifications had no effect on net income.
NOTE 3: GRANT
In connection with the construction of the new park, the Partnership
received a grant from the Denver Urban Renewal Authority ("DURA") for at least
$8,700,000 of which $6,856,313 was received in 1994 and $1,750,484 was received
in 1995 for a total of $8,606,797. The funds are for construction of the
infrastructure benefiting the site for the new park, including acquisition of
land, roads, fencing, sewer, water and storm drainage systems, and the addition
of landfill and grading. The grant was funded by DURA through proceeds from tax
increment financing bonds. The bonds are not the obligation of the Partnership.
In connection with the bonds, Hensel Phelps Construction Company (Hensel Phelps)
has provided a $1,160,989 letter of credit benefiting DURA as a credit
enhancement for the bonds. As consideration for the grant, the Partnership has
agreed not to appeal or otherwise contest any property tax assessment levied by
the City and County of Denver upon real or personal property to the extent such
appeal or contest would have the effect of reducing the assessment below debt
service coverage of the bonds. The Partnership is also restricted on transfer of
property or relocation of the park.
During the time any bonds are outstanding (original maturity dates of
September 1, 2011 and 2017), the Partnership is required to pay DURA $2 per
person entering the park for attendance exceeding the projected attendance in
the original grant agreement. However, no payment is due until after repayment
of certain permanent financing as defined in the grant agreement. No payments
were made in 1994 or 1995. Until the earlier of June 15, 2003, or an initial
public offering ("IPO") (the proceeds of which are used to refinance debt or
redeem limited partnership interests), if there is a sale or refinancing of the
property or if specified partnership units are sold, the net proceeds therefrom
received or deemed to be received by the partners are subject to a participation
interest due to DURA equal to up to 4.2% for the general and its affiliated
limited partners and 1% for all other limited partners. The Partnership also is
required to pay DURA 4.2% of the value of the general and its affiliated limited
partners' equity and 1% of the value of all other limited partners' equity of
net proceeds from any IPO.
Proceeds from the grant have been recorded as a reduction of property, plant
and equipment.
NOTE 4: LONG-TERM DEBT
The Partnership's debt consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
------------- ------------
<S> <C> <C>
Loan from bank, in default........................................................... $ 27,000,000 $ --
Section 108 loan from the City and County of Denver.................................. 7,000,000 5,276,600
Loan from related party, in default.................................................. 10,000,000 --
------------- ------------
44,000,000 5,276,600
Less current portion of long-term debt, including debt in default.................... 37,300,000 --
------------- ------------
Long-term portion of long-term debt.................................................. $ 6,700,000 $ 5,276,600
------------- ------------
------------- ------------
</TABLE>
F-47
<PAGE>
ELITCH GARDENS COMPANY
NOTES TO FINANCIAL STATEMENTS --(CONTINUED)
NOTE 4: LONG-TERM DEBT --(CONTINUED)
In June 1995, the Partnership obtained a loan from Banque Nationale de
Paris, which is secured by substantially all of the assets of the Partnership.
The loan has a fixed and variable rate, the combined of which is not to exceed
8.68% (7.59% at December 31, 1995), and interest is payable on a quarterly
basis. The principal will amortize quarterly over a 10-year period. Principal
payments are due quarterly beginning in December 1995. The Partnership was in
violation of one of the loan covenants of the debt agreement at December 31,
1995 and September 30, 1996. As a result, the total amount of the loan is in
default and due upon demand by the Bank. The entire balance of the loan is
recorded as a current liability on the September 30, 1996 and December 31, 1995
balance sheets.
The loan from the City and County of Denver was obtained from the United
States Department of Housing and Urban Development ("HUD") pursuant to Section
108 of Title I of the Housing and Community Development Act of 1974. The
interest rate is 1.2% above the LIBOR rate (6.544% at December 31, 1995) and is
payable quarterly in arrears. The loan is secured by a third deed of trust on
the park, a first deed of trust on the old park property owned by Chilcott,
guarantees from Chilcott and the president of Chilcott, and a $1,000,000
guarantee from Hensel Phelps available until approximately June 1996. The
principal will amortize quarterly over a 10-year period. Principal payments are
to be made quarterly commencing in November 1996; however, the first quarterly
interest payment became due in July 1995. Interest payments for both 1995 and
1996 were advanced to the Partnership by the general partner. These advances are
recorded as a payable to the general partner on the September 30, 1996 and
December 31, 1995 balance sheets.
During 1994, Hensel Phelps issued construction loans of $5,000,000 to the
Partnership. Hensel Phelps issued a replacement loan to the Partnership in June
1995 in the amount of $10,000,000, of which $2,500,000 was immediately assigned
to Total Petroleum, Inc. ("Total"). Principal and interest are payable in 120
monthly installments beginning in July 1995 for each of the loans. No principal
or interest has been paid on either of the two loans as of December 31, 1995 or
September 30, 1996, and both loans are in default and due upon demand by Hensel
Phelps and Total. Consequently, the Partnership has accrued interest at default
rates of 13% for Hensel Phelps and 14% for Total as provided in the loan
agreement, as well as a 5% late fee on all principal and interest charges due.
The loans are recorded as current liabilities on the September 30, 1996 and
December 31, 1995, balance sheets.
Future minimum payments under long-term debt, including accelerated
principal payments as a result of defaults, are summarized as follows at
December 31, 1995:
<TABLE>
<S> <C>
1996........................................................... $37,300,000
1997........................................................... 600,000
1998........................................................... 600,000
1999........................................................... 600,000
2000........................................................... 600,000
Thereafter..................................................... 4,300,000
----------
$44,000,000
----------
----------
</TABLE>
Interest payments totaled $1,993,680, $389,333, $1,165,514 and $0 for the
periods ended December 31, 1995 and 1994, and the nine months ended September
30, 1996 and 1995, respectively.
F-48
<PAGE>
ELITCH GARDENS COMPANY
NOTES TO FINANCIAL STATEMENTS --(CONTINUED)
NOTE 5: CONSTRUCTION LOANS
In 1994, the Partnership had a construction loan for $28,265,000, bearing
interest at one percentage point above the bank's prime rate. Interest was
payable monthly in arrears. At December 31, 1994, $6,878,984 was outstanding.
Substantially all of the Partnership s accounts payable at December 31, 1994,
were satisfied by additional draws on the construction loan in 1995. The loan
was secured by substantially all of the assets of the Partnership and was
guaranteed by Chilcott and the president of Chilcott. Hensel Phelps also
guaranteed completion of the park. Hensel Phelps issued irrevocable letters of
credit totaling approximately $3,000,000 benefiting the bank as a deposit for a
debt reserve required for permanent financing and an approximate $590,000
working capital line of credit for the Partnership's use. Proceeds from the loan
with the Bank (see Note 4) were used to retire the construction loan.
NOTE 6: REVOLVING LINE OF CREDIT
On March 28, 1996, the Partnership entered into a Revolving Loan Agreement
(the "Agreement") with Hensel Phelps and Ascent Arena Corporation (both limited
partners). The terms of the Agreement allow for the Partnership to make weekly
draws to help fund operating expenditures up to a total of $3,000,000. Interest
is payable monthly on all outstanding draws at the prime rate plus 1% (8.58% at
September 1, 1996). The Agreement expires on December 31, 1996. There are no
amounts outstanding as of September 30, 1996.
On October 1, 1996, the Company made a draw of $857,000 to pay principal and
interest due on the bank loan.
NOTE 7: RELATED PARTY TRANSACTIONS
In 1994, the Partnership contracted with Hensel Phelps to construct the new
park, resulting in expenditures of $31,413,816 and $20,972,824 for the periods
ended December 31, 1995 and 1994, respectively, including reimbursed costs and
interest on construction loans from Hensel Phelps. In addition, the Partnership
has obtained a loan from Hensel Phelps (see Note 4).
Amounts payable to the general partner as of December 31, 1995 and September
30, 1996, include interest payments made on behalf of the Partnership to the
City and County of Denver (see Note 4). Amounts payable to the general partner
as of December 31, 1994, principally consist of reimbursable general and
administrative expenses incurred by Chilcott on behalf of the Partnership.
In conjunction with the limited partnership agreement, the Partnership has
agreed to pay Chilcott a fee for managing the Partnership equal to 1% of the
Partnership's annual gross profit. Management fees of $171,551 were incurred in
1995.
During 1995, Comsat Video Enterprises and The Anschutz Corporation
(collectively "C/A") purchased 29 limited partner units of the Partnership in
conjunction with an agreement which C/A, Chilcott, and Hensel Phelps entered
into during 1994, guaranteeing the purchase of equity by C/A. Chilcott
transferred two units to each member of C/A, as limited partner units, in
consideration for the guarantee. The agreement also gives C/A the right, for a
period of one year after the official opening of the park, to purchase
partnership units at the original price of $250,000 per unit up to 50% ownership
in the Partnership. In addition, C/A has been granted use of parking facilities
for 10 years when the amusement park is either closed or not using the parking.
Conversely, if C/A builds an arena, the Partnership will have use of the arena
parking when the arena is not using its parking. At the request of C/A, the
Partnership will construct a pedestrian bridge linking the respective parking
lots, sharing the costs equally with C/A.
F-49
<PAGE>
ELITCH GARDENS COMPANY
NOTES TO FINANCIAL STATEMENTS --(CONTINUED)
NOTE 7: RELATED PARTY TRANSACTIONS --(CONTINUED)
Finally, the Partnership will designate a rent-free area of not less than .5
acre within the park for C/A to locate an exhibit.
During 1996, the Partnership entered into a capital lease agreement with one
of its limited partners, Hensel Phelps, whereby Hensel Phelps would develop and
build a new attraction, the Skycoaster, on behalf of the Partnership. The
Partnership is required to pay the greater of Hensel Phelps' cost plus a 30%
return on investment or 75% of all revenues that are generated by the
Skycoaster, as defined, through May 1998. The capital lease obligation will be
paid on the same revenue share basis as discussed above and is anticipated to be
paid by May 1998. The Partnership paid approximately $288,000 to Hensel Phelps
under the capital lease obligation for the nine months ended September 30, 1996.
NOTE 8: PROFIT-SHARING PLAN
The Partnership participates in Chilcott's profit-sharing plan, which
qualifies under Section 401(k) of the Internal Revenue Code. It covers all
full-time employees who have reached the age of 21 and have completed one year
of service. A participant may elect to defer up to 20% of compensation to a
maximum determined annually by the Internal Revenue Service ($9,240 in 1995).
The Company contributes a percentage for every dollar deferred limited to 5% of
the employee's compensation (the percentage is set at the beginning of each plan
year by the Company). There were no Company contributions during 1995 or 1996.
Participant contributions are fully vested. Employer contributions vest over 7
years as follows: 0-3 years of service, 0%; 3 years, 20%; 4 years, 40%; 5 years,
60%; 6 years, 80%; 7 years, 100%. In the event of employee death or disability,
employer contributions become fully vested.
NOTE 9: COMMITMENTS AND CONTINGENCIES
ALLOCATION AGREEMENT--ENVIRONMENTAL REMEDIATION
In January 1993, Chilcott, Trillium Corporation, and Public Service Company
of Colorado entered into an agreement regarding allocation of environmental
remediation costs to prepare the site for the new park. The agreement required
Trillium Corporation to place $1,800,000 in escrow for any required
environmental remediation costs, excluding costs for ground water monitoring and
certain other incidental costs for which the Partnership is responsible.
Approximately $1,400,000 has been expended through December 31, 1995 and
September 30, 1996, and the remaining $400,000 was returned to Trillium. In the
event that additional costs are incurred, Trillium is liable for additional
costs up to $400,000 (for a total of $1,800,000), and the Partnership is liable
for 50% of the next $200,000 between $1,800,000 and $2,000,000 with Trillium
being liable for the remaining 50%, none of which has been expended through 1995
or September 30, 1996. Should further costs be incurred beyond $2,000,000,
Public Service becomes responsible.
CONTINGENCIES
The Partnership is subject to various environmental laws and regulations of
federal and state agencies. Management believes it is in substantial compliance
with environmental laws and the ultimate resolution of any claims or legal
proceedings instituted against it will not have a material adverse effect on the
Partnership's financial position.
F-50
<PAGE>
ELITCH GARDENS COMPANY
NOTES TO FINANCIAL STATEMENTS --(CONTINUED)
NOTE 9: COMMITMENTS AND CONTINGENCIES --(CONTINUED)
The Company is involved in various legal actions arising in the normal
course of business. In the opinion of management, the Company's liability, if
any, in these pending actions would not have a material adverse effect on the
financial position of the Company.
SUBSEQUENT EVENTS
In October 1996, the Partnership was named the defendant in a lawsuit filed
by a contractor who was injured while working on a project for the Partnership
and is claiming that the Partnership was negligent and demonstrated willful and
wanton misconduct. The contractor is seeking punitive and exemplary damages for
approximately $2,000,000 plus additional unspecified damages, interest and costs
of the suit. Management believes the claim is without merit and, as such, these
financial statements do not contain any provision for potential loss relating to
this claim.
In October 1996, the Partnership was named the defendant in a lawsuit filed
by an individual who is seeking damages arising from a claim of bodily injury
obtained at the Partnership's amusement park. The amount of the claim is unknown
and the Partnership has not been able to determine if the claim is with or
without merit. Accordingly, these financial statements do not contain any
provision for potential loss relating to this claim.
F-51
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Boards of Directors and Stockholder
Storytown, USA, Inc.
Fantasy Rides, Inc.:
We have audited the accompanying balance sheets of The Great Escape as of
October 31, 1995 and 1994, and the related statements of operations,
stockholder's equity, and cash flows for the years then ended (as defined in
note 1 to the financial statements). These financial statements are the
responsibility of The Great Escape's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Great Escape as of
October 31, 1995 and 1994, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Oklahoma City, Oklahoma
October 11, 1996
F-52
<PAGE>
THE GREAT ESCAPE
BALANCE SHEETS
<TABLE>
<CAPTION>
OCTOBER 31,
--------------------------------
1994 1995
--------------- --------------- SEPTEMBER 30, 1996
------------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $ 94,000 $ 66,000 $ 569,000
Accounts receivable...................................... 134,000 62,000 265,000
Inventories.............................................. 188,000 221,000 94,000
Prepaid expenses......................................... 179,000 100,000 92,000
--------------- --------------- ------------------
Total current assets................................. 595,000 449,000 1,020,000
--------------- --------------- ------------------
Other assets-principally deferred financing costs.......... 342,000 300,000 63,000
Property and equipment, at cost............................ 15,913,000 17,529,000 17,827,000
Less accumulated depreciation............................ 1,523,000 2,512,000 3,831,000
--------------- --------------- ------------------
14,390,000 15,017,000 13,996,000
--------------- --------------- ------------------
Total assets......................................... $ 15,327,000 $ 15,766,000 $ 15,079,000
--------------- --------------- ------------------
--------------- --------------- ------------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses.................... $ 306,000 $ 566,000 $ 607,000
Current portion of long-term debt........................ 1,200,000 1,200,000 1,200,000
--------------- --------------- ------------------
Total current liabilities............................ 1,506,000 1,766,000 1,807,000
--------------- --------------- ------------------
Long-term debt............................................. 7,400,000 4,800,000 1,600,000
Advances from affiliates................................... 3,321,000 2,788,000 3,782,000
--------------- --------------- ------------------
Total liabilities.................................... 12,227,000 9,354,000 7,189,000
--------------- --------------- ------------------
Stockholder's equity....................................... 3,100,000 6,412,000 7,890,000
--------------- --------------- ------------------
Total liabilities and stockholder's equity........... $ 15,327,000 $ 15,766,000 $ 15,079,000
--------------- --------------- ------------------
--------------- --------------- ------------------
</TABLE>
See accompanying notes to financial statements.
F-53
<PAGE>
THE GREAT ESCAPE
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
ELEVEN MONTHS ENDED
YEARS ENDED OCTOBER 31, SEPTEMBER 30,
--------------------------- ---------------------------
1994 1995 1995 1996
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
(UNAUDITED)
Revenue:
Theme park admissions................................ $ 7,740,000 $ 8,503,000 $ 8,515,000 $ 8,938,000
Theme park food, merchandise, and other.............. 5,581,000 5,857,000 5,843,000 6,132,000
------------ ------------- ------------ -------------
Total revenue.................................... 13,321,000 14,360,000 14,358,000 15,070,000
------------ ------------- ------------ -------------
Operating costs and expenses:
Operating expenses................................... 4,442,000 4,702,000 4,477,000 4,610,000
Selling, general and administrative.................. 1,985,000 2,001,000 1,794,000 2,770,000
Costs of products sold............................... 1,610,000 1,701,000 1,715,000 1,824,000
Depreciation and amortization........................ 849,000 1,018,000 951,000 1,319,000
------------ ------------- ------------ -------------
Total operating costs and expenses............... 8,886,000 9,422,000 8,937,000 10,523,000
------------ ------------- ------------ -------------
Income from operations........................... 4,435,000 4,938,000 5,421,000 4,547,000
Interest expense, net.................................. (960,000) (964,000) (829,000) (821,000)
------------ ------------- ------------ -------------
Income before income taxes........................... 3,475,000 3,974,000 4,592,000 3,726,000
Income tax expense..................................... 10,000 34,000 39,000 40,000
------------ ------------- ------------ -------------
Net income....................................... $ 3,465,000 $ 3,940,000 $ 4,553,000 $ 3,686,000
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
</TABLE>
See accompanying notes to financial statements.
F-54
<PAGE>
THE GREAT ESCAPE
STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED OCTOBER 31, 1995 AND 1994 AND
ELEVEN MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<S> <C>
Balance at October 31, 1993..................................................... $ 166,000
Net income...................................................................... 3,465,000
Distributions to stockholder.................................................... (531,000)
----------
Balance at October 31, 1994..................................................... 3,100,000
Net income...................................................................... 3,940,000
Distributions to stockholder.................................................... (628,000)
----------
Balance at October 31, 1995..................................................... 6,412,000
Net income...................................................................... 3,686,000
Distributions to stockholder.................................................... (2,208,000)
----------
Balance at September 30, 1996 (Unaudited)....................................... $7,890,000
----------
----------
</TABLE>
See accompanying notes to financial statements.
F-55
<PAGE>
THE GREAT ESCAPE
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
ELEVEN MONTHS ENDED
YEARS ENDED OCTOBER 31, SEPTEMBER 30,
---------------------------- ----------------------------
1994 1995 1995 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Cash flows from operating activities:
Net income.......................................... $ 3,465,000 $ 3,940,000 $ 4,553,000 $ 3,686,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization..................... 849,000 1,018,000 951,000 1,319,000
Amortization of discount on debt issuance costs... 42,000 42,000 39,000 239,000
(Increase) decrease in accounts receivable........ (98,000) 72,000 (166,000) (203,000)
(Increase) decrease in inventories and prepaid
expenses........................................ (71,000) 46,000 (13,000) 133,000
Increase (decrease) in accounts payable and
accrued expenses................................ (209,000) 260,000 331,000 41,000
------------- ------------- ------------- -------------
Total adjustments............................... 513,000 1,438,000 1,142,000 1,529,000
------------- ------------- ------------- -------------
Net cash provided by operating activities....... 3,978,000 5,378,000 5,695,000 5,215,000
------------- ------------- ------------- -------------
Cash flows from investing activities--additions to
property and equipment.............................. (2,284,000) (1,645,000) (1,615,000) (298,000)
------------- ------------- ------------- -------------
Cash flows from financing activities:
Repayment of debt................................... (2,316,000) (2,600,000) (2,600,000) (3,200,000)
Advances from (payments to) affiliates, net......... 1,098,000 (533,000) (604,000) 994,000
Distributions to stockholder........................ (531,000) (628,000) (628,000) (2,208,000)
------------- ------------- ------------- -------------
Net cash used in financing activities........... (1,749,000) (3,761,000) (3,832,000) (4,414,000)
------------- ------------- ------------- -------------
Increase (decrease) in cash and cash
equivalents..................................... (55,000) (28,000) 248,000 503,000
Cash and cash equivalents at beginning of period...... 149,000 94,000 94,000 66,000
------------- ------------- ------------- -------------
Cash and cash equivalents at end of period............ $ 94,000 $ 66,000 $ 342,000 $ 569,000
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Supplementary cash flow information:
Cash paid for interest.............................. $ 912,000 $ 922,000 $ 797,000 $ 783,000
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Cash paid for income taxes.......................... $ 10,000 $ 34,000 $ 39,000 $ 40,000
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
See accompanying notes to financial statements.
F-56
<PAGE>
THE GREAT ESCAPE
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995 AND 1994
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR
THE ELEVEN MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
NOTE 1: SUMMARY OF SIGNIFICANT POLICIES
DESCRIPTION OF BUSINESS
The accompanying financial statements present the assets and liabilities and
results of operations of The Great Escape (the Park), a theme park located in
Lake George, New York, owned by Storytown USA, Inc. (Storytown) and Fantasy
Rides, Inc. (Fantasy) and subject to an asset sale agreement (Agreement) with
Premier Parks Inc. (Premier) (See Note 6). Nontheme park assets and liabilities
and operations of Storytown are not subject to the Agreement and have been
excluded from the accompanying financial statements. An individual stockholder
wholly owns both Storytown and Fantasy. The combined equity of Storytown and
Fantasy relating to the theme park subject to the Agreement is reflected as
stockholder's equity in the accompanying financial statements.
BASIS OF PRESENTATION
The Park accounting policies reflect industry practices and conform to
generally accepted accounting principles.
In the opinion of management, the accompanying unaudited consolidated
financial statements as of September 30, 1996 and for the eleven months ended
September 30, 1995 and 1996, reflect all adjustments (all of which were normal
and recurring) which, in the opinion of management, are necessary for fair
statement of the financial position and results of operations for the interim
periods presented. The results of operations for the eleven month period ended
September 30, 1996 are not indicative of the results to be expected for the full
year. The Park's business is highly seasonal. The great majority of the Park's
revenue is collected during the summer while operating expenditures are incurred
throughout the year. Accordingly, the Park historically incurs a net loss for
the last fiscal month.
CASH EQUIVALENTS
For purposes of the statements of cash flows, the Park considers all highly
liquid debt instruments with original maturities of three months or less to be
cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost (determined by first in, first
out method) or market and consist of products for resale including merchandise
and food and miscellaneous supplies including repair parts for rides.
ADVERTISING COSTS
Production costs of commercials and programming are charged to operations in
the year first aired. The costs of other advertising, promotion, and marketing
programs are charged to operations in the year incurred.
F-57
<PAGE>
THE GREAT ESCAPE
NOTES TO FINANCIAL STATEMENTS --(CONTINUED)
NOTE 1: SUMMARY OF SIGNIFICANT POLICIES --(CONTINUED)
DEFERRED FINANCING COSTS
The Park capitalizes all costs related to the issuance of debt with such
costs included in other assets in the accompanying balance sheets. The
amortization of such costs is recognized as interest expense under a method
approximating the interest method over the life of the respective debt issue.
DEPRECIATION AND AMORTIZATION
Buildings and improvements are depreciated over their estimated useful lives
of approximately 15-40 years by use of the straight-line method. Furniture and
equipment are depreciated using the straight-line method over 10-15 years. Rides
and attractions are depreciated using the straight-line method over 10-15 years.
Maintenance and repairs are charged directly to expense as incurred, while
betterments and renewals are generally capitalized in the property accounts.
When an item is retired or otherwise disposed of, the cost and applicable
accumulated depreciation are removed and the resulting gain or loss is
recognized.
INTEREST EXPENSE
Interest on notes payable is recognized as expense on the basis of stated
interest rates. Total interest expense incurred was $971,000, $969,000, $836,000
and $827,000 in the years ended October 31, 1995 and 1994, and periods ended
September 30, 1996 and 1995, respectively. Interest expense in the accompanying
statements of operations is shown net of interest income.
INCOME TAXES
Storytown and Fantasy, with the consent of their sole stockholder, have
elected under the Internal Revenue Code to be treated as "S" corporations. In
lieu of corporation federal income taxes, the individual stockholder of
Storytown and Fantasy is taxed on the Park's taxable income and/or losses.
Therefore, no provision or liability for federal income taxes has been included
in these financial statements. Provision for New York state income tax has been
made in accordance with the state's tax law for S corporations.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE 2: FAIR VALUE OF FINANCIAL INSTRUMENTS
The recorded amounts for cash and cash equivalents, accounts receivable, and
accounts payable and accrued expenses approximate fair value because of the
short maturity of these financial instruments. The fair value of the Park's
long-term debt approximates the recorded amounts due to the variable interest
rate on the debt. The fair value of the Park's advances from affiliates has not
been estimated as there are no prescribed repayment terms.
F-58
<PAGE>
THE GREAT ESCAPE
NOTES TO FINANCIAL STATEMENTS --(CONTINUED)
NOTE 3: PROPERTY AND EQUIPMENT
Property and equipment, at cost, consists of the following:
<TABLE>
<CAPTION>
OCTOBER 31,
---------------------------- SEPTEMBER 30,
1995 1994 1996
------------- ------------- -------------
<S> <C> <C> <C>
Land............................................ $ 1,960,000 $ 1,960,000 $ 1,960,000
Buildings and improvements...................... 2,345,000 2,345,000 2,345,000
Rides and attractions........................... 13,224,000 11,608,000 13,522,000
------------- ------------- -------------
Total....................................... $ 17,529,000 $ 15,913,000 $ 17,827,000
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
NOTE 4: LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
OCTOBER 31,
-------------------------- SEPTEMBER 30,
1995 1994 1996
------------ ------------ -------------
<S> <C> <C> <C>
Note payable to bank, due in principal payments of
$400,000, payable in August, September, and
October each year, which coincides with the
Park's operating season. Interest is payable
monthly on the unpaid principal balance at the
prime rate plus 1.25% (10.25% at October 31,
1995 and 9% at October 31, 1994). The note is
secured by personal property and a mortgage on
the real property. Additionally, the sole
stockholder has personally guaranteed this
obligation. Final payment is due October 2002.
Principal payments have been made which have
served to shorten the note term................. $ 6,000,000 $ 8,600,000 $ 2,800,000
------------ ------------ -------------
6,000,000 8,600,000 2,800,000
Less current portion.............................. 1,200,000 1,200,000 1,200,000
------------ ------------ -------------
Long-term debt.................................... $ 4,800,000 $ 7,400,000 $ 1,600,000
-------------
------------ ------------ -------------
------------ ------------
</TABLE>
F-59
<PAGE>
THE GREAT ESCAPE
NOTES TO FINANCIAL STATEMENTS --(CONTINUED)
NOTE 4: LONG-TERM DEBT --(CONTINUED)
Annual maturities of long-term debt during the five years subsequent to
October 31, 1995, are as follows:
<TABLE>
<S> <C>
1996............................................................ $1,200,000
1997............................................................ 1,200,000
1998............................................................ 1,200,000
1999............................................................ 1,200,000
2000............................................................ 1,200,000
---------
$6,000,000
---------
---------
</TABLE>
NOTE 5: RELATED PARTY TRANSACTIONS
The Park has certain shared service arrangements with several of its
affiliates, including payment of payroll, insurance, and other administrative
expenses. Amounts are allocated to affiliates based upon level of utilization or
coverage. Additionally, the Park has been advanced cash by certain of the
affiliates. The payments made by the Park for the benefit of its affiliates
reduce amounts owed by the Park to the affiliates. Interest expense is
recognized on the advances from affiliates using interest rates similar to the
Park's bank indebtedness. Interest expense from affiliates during the years
ended October 31, 1995 and 1994 and the eleven months ended September 30, 1995
and 1996 was $158,000, $207,000, $119,000, and $121,000, respectively. The
advances from affiliates have no prescribed repayment terms and are reflected as
noncurrent liabilities in the accompanying financial statements.
NOTE 6: SUBSEQUENT EVENT
On August 23, 1996, the stockholder of Storytown and Fantasy reached the
Agreement with Premier to sell all of the real estate, inventory, prepaid items,
theme park property and equipment, and supplies for approximately $33,000,000 in
cash. Certain of the proceeds from the sale will be used to satisfy the long-
term debt outstanding as of the closing date. As specified in the Agreement, the
closing date will be before December 10, 1996.
F-60
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and
Stockholders of FRE, Inc.
Sacramento, California
We have audited the accompanying balance sheet of FRE, Inc. as of December
31, 1995 and December 31, 1994, and the related statements of income, retained
earnings, and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly in
all material respects, the financial position of FRE, Inc. as of December 31,
1995 and December 31, 1994 and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
Nelson & Company
Gold River, California
March 21, 1996
F-61
<PAGE>
FRE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------------ -------------
1994 1995 1996
----------- ----------- -------------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash................................................................ $ 66,832 $ 10,403 $ --
Advances to Affiliates.............................................. 0 321,760 456,594
Accounts receivable................................................. 18,984 16,330 45,469
Inventory........................................................... 68,570 73,214 77,850
Prepaid expenses.................................................... 0 56,476 139,134
Franchise tax receivable............................................ 6,200 0 --
Notes receivable--current (Note 5).................................. 90,000 401,517
----------- ----------- -------------
Total Current Assets............................................ 250,586 879,700 719,047
----------- ----------- -------------
Property and Equipment, at Cost
Park assets......................................................... 6,934,661 7,424,971 8,524,906
Office and administrative assets.................................... 32,238 42,820 42,820
----------- ----------- -------------
6,966,899 7,467,791 8,567,726
Allowance for depreciation.......................................... (2,235,051) (2,784,024) (3,283,647)
----------- ----------- -------------
4,731,848 4,683,767 5,284,079
----------- ----------- -------------
Other Assets
Investment in CEC (Note 6).......................................... 382,668 1,985,601 2,711,020
Notes receivable (Note 5)........................................... 90,000 0 --
Loan costs.......................................................... 39,414 39,414 35,966
Accumulated amortization............................................ (4,598) (12,481) (15,766)
Deposits............................................................ 35,624 13,895 10,309
Expansion costs..................................................... 360,559 930,645 934,540
----------- ----------- -------------
Total Other Assets.............................................. 903,667 2,957,074 3,676,069
----------- ----------- -------------
Total Assets.................................................. $ 5,886,101 $ 8,520,541 $ 9,679,195
----------- ----------- -------------
----------- ----------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Bank overdraft...................................................... $ -- $ -- $ 125,600
Accounts payable.................................................... 273,503 66,663 --
Accrued payroll and payroll taxes................................... 176,571 222,761 49,304
Sales tax payable................................................... 1,158 1,939 15,615
Accrued interest payable............................................ 18,685 0 --
Franchise taxes payable............................................. 0 85,405 103,074
Other accrued expenses.............................................. 0 120,867 293,527
Deferred revenue.................................................... 4,895 2,344 --
Insurance claims reserve............................................ 93,735 133,646 154,651
Current portion long-term debt (Note 3)............................. 753,508 878,851 632,073
----------- ----------- -------------
Total Current Liabilities....................................... 1,322,055 1,512,476 1,373,844
Long-term debt due after one year (Note 3).............................. 1,788,762 2,300,000 2,000,000
----------- ----------- -------------
3,110,817 3,812,476 3,373,844
----------- ----------- -------------
Stockholders' Equity
Common stock, par value 10 cents per share, 300,000 shares
authorized, 10,000 shares issued and outstanding.................. 1,000 1,000 1,000
Class A common non-voting, par value 10 cents per share, 100,000
shares authorized, 10,000 shares issued and outstanding........... 1,000 1,000 1,000
Additional paid-in-capital.............................................. 391,710 391,710 391,710
Retained Earnings....................................................... 2,381,574 4,314,355 5,911,641
----------- ----------- -------------
2,775,284 4,708,065 6,305,351
----------- ----------- -------------
Total Liabilities and Stockholders' Equity.................... $ 5,886,101 $ 8,520,541 $ 9,679,195
----------- ----------- -------------
----------- ----------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-62
<PAGE>
FRE, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------- --------------------------
1993 1994 1995 1995 1996
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Sales
Gate admissions.......................... $ 2,661,103 $ 3,346,276 $ 3,272,068 $ 3,189,833 $ 3,362,756
Concessions and merchandise sales........ 1,187,576 1,563,204 1,518,320 1,377,446 1,691,660
Parking, rental and other income......... 706,205 1,028,074 1,020,866 770,364 772,000
Management fee income.................... -- -- 438,461 425,405 434,480
------------ ------------ ------------ ------------ ------------
4,554,884 5,937,554 6,249,715 5,763,048 6,260,896
Cost of Sales.............................. (463,019) (630,886) (632,485) (570,818) (691,001)
------------ ------------ ------------ ------------ ------------
4,091,865 5,306,886 5,617,230 5,192,230 5,569,895
------------ ------------ ------------ ------------ ------------
Operating Expenses
Advertising.............................. 188,432 247,923 257,311 248,269 300,301
Depreciation and amortization............ 521,423 555,942 556,856 428,600 511,085
Insurance and claims payments............ 158,711 200,221 193,789 147,078 145,103
Miscellaneous............................ 25,709 99,102 150,741 116,398 195,357
Payroll and related expenses............. 1,400,364 1,749,257 1,818,290 1,436,616 1,906,483
Printing and postage..................... 74,761 97,701 94,083 64,550 99,857
Professional services.................... 134,323 59,996 47,029 33,934 47,839
Rents.................................... 414,439 554,593 555,066 495,852 541,375
Repairs and maintenance.................. 244,038 305,028 287,409 224,197 177,869
Supplies................................. 40,497 18,824 56,782 34,798 100,467
Taxes and licenses....................... 62,978 107,477 109,604 77,858 85,280
Telephone and utilities.................. 167,060 198,232 220,855 199,341 185,540
Travel and entertainment................. 13,851 9,525 25,402 14,526 35,382
------------ ------------ ------------ ------------ ------------
Total Operating Expenses............... 3,446,586 4,203,831 4,373,217 3,522,017 4,331,938
------------ ------------ ------------ ------------ ------------
Income From Operations............... 645,279 1,103,055 1,244,013 1,670,213 1,237,957
------------ ------------ ------------ ------------ ------------
Other Income (Expense)
Interest income.......................... 43,489 26,895 21,081 13,253 15,140
Development fee income................... -- 91,668 183,333 183,333 --
Partnership income....................... -- -- 985,601 1,275,162 725,419
Interest expense......................... (226,838) (233,762) (287,428) (222,632) (218,230)
------------ ------------ ------------ ------------ ------------
Total Other Income (Expense)........... (183,349) (115,199) 902,587 1,249,116 522,329
------------ ------------ ------------ ------------ ------------
Income Before State Franchise Taxes........ 461,930 987,856 2,146,600 2,919,329 1,760,286
State Franchise Taxes--Current............. (800) (800) (91,605) (91,605) (163,000)
State Franchise Taxes--Deferred............ 15,882 -- -- -- --
------------ ------------ ------------ ------------ ------------
Income before extraordinary items.......... 477,012 987,056 2,054,995 2,827,724 1,597,286
Extraordinary items (Note 7)............... -- -- (122,213) -- --
------------ ------------ ------------ ------------ ------------
Net income................................. 477,012 987,056 1,932,782 2,827,724 1,597,286
Retained earnings, beginning of period..... 917,506 1,394,517 2,381,573 2,381,574 4,314,355
------------ ------------ ------------ ------------ ------------
Retained earnings, end of period........... $ 1,494,518 $ 2,381,573 $ 4,314,355 $ 5,209,928 $ 5,911,641
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-63
<PAGE>
FRE, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
NINE MONTHS ENDED SEPTEMBER 30, 1995
AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS
DECEMBER 31, ENDED SEPTEMBER 30,
---------------------------------- ----------------------
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net income (loss)................................ $ 477,012 $ 987,057 $1,932,782 $2,827,724 $1,597,286
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization.................. $ 512,423 345,619 556,856 428,600 511,085
Partnership income............................. -- -- (985,601) (1,275,162) (725,419)
Cash dividends................................. (100,000) -- -- -- --
Amortization of loan discount.................. (129,308) -- -- -- --
(Increase) decrease in accounts receivable..... (7,743) (19,065) (319,106) (918,840) (163,973)
(Increase) decrease in inventory............... (21,109) (22,069) (4,644) (23,157) (4,636)
(Increase) decrease in prepaid expenses........ (13,177) -- (56,476) (72,884) (82,658)
(Increase) in deposits......................... 126,133 5,208 21,729 (91,408) 3,586
Increase (decrease) in accounts payable and
accrued liabilities.......................... 61,804 238,995 (1,642) 129,344 (35,123)
Increase (decrease) in accrued interest
payable...................................... 140,000 (43,197) (18,685) (18,685) --
Increase in notes receivable................... (16,000) 140,000 (221,517) -- 401,517
Decrease in franchise taxes receivable......... (38,195) 9,800 6,200 6,200 --
Increase in income tax payable................. (15,882) -- 85,405 85,405 (17,669)
---------- ---------- ---------- ---------- ----------
Net Cash Provided By Operating Activities.... 984,958 1,680,478 995,301 1,077,128 1,483,996
---------- ---------- ---------- ---------- ----------
Cash Flows From Investing Activities:
Decrease in loan costs........................... (79,818) 170,908 -- -- 3,448
Purchase of Family Entertainment Center assets... (2,612,660) (43,435) (219,815) (158,373) (700,199)
Purchases of water park assets................... (70,202) (225,177) (281,077) (231,560) (372,575)
Expansion costs.................................. -- (360,559) (570,086) (373,716) (3,895)
Investment in CEC................................ -- (382,668) (617,332) (617,332) --
---------- ---------- ---------- ---------- ----------
Net Cash Used By Investing Activities........ (2,762,680) (840,931) (1,688,310) (1,380,981) (1,073,221)
---------- ---------- ---------- ---------- ----------
Cash Flows From Financing Activities:
Proceeds from revolving line of credit and
long-term borrowings........................... 3,297,291 2,508,762 1,092,963 1,568,841 2,571,979
Principal payments on revolving line of credit
and long-term borrowings....................... (1,502,975) (3,310,102) (456,382) (718,476) (3,118,757)
---------- ---------- ---------- ---------- ----------
Net Cash Provided By Financing Activities.... 1,794,316 (801,340) 636,581 850,365 (546,778)
---------- ---------- ---------- ---------- ----------
Net Increase (Decrease) in Cash.................... 16,594 38,207 (56,428) 546,512 (136,003)
Cash at Beginning of Year.......................... 12,030 28,624 66,831 66,831 10,403
---------- ---------- ---------- ---------- ----------
Cash at End of Year................................ $ 28,624 $ 66,831 $ 10,403 $ 613,343 $ (125,600)
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
<TABLE>
<S> <C> <C> <C> <C> <C>
Interest........................................... $ 165,034 $ 276,959 $ 312,657 $ 241,312 $ 218,230
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Income taxes....................................... $ 800 $ 800 $ 800 $ 800 $ 91,531
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
DISCLOSURE OF ACCOUNTING POLICY
For purposes of the statement of cash flows, the Company considers all
highly-liquid debt instruments, purchased with a maturity of three months or
less, to be cash equivalents.
The accompanying notes are an integral part of
these financial statements.
F-64
<PAGE>
FRE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
(INFORMATION AS OF SEPTEMBER 30, 1996 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS ACTIVITY
FRE, Inc. dba, Waterworld U.S.A., (Company) was incorporated in the state of
Missouri on April 14, 1986. The Company owns and operates a water park and a
family entertainment center in Sacramento, California.
INVENTORY
Inventory consists of finished goods and food held for resale, and is stated
at the lower of cost or market using a first-in, first-out convention.
FIXED ASSETS
Fixed assets are recorded at cost. It is the policy of management to provide
for depreciation over the lesser of the useful lives of the assets or the
remaining life of the operating lease. Straight line and accelerated
depreciation methods consistent with generally accepted accounting principles
are used. In determining depreciation for income tax purposes, the Company uses
the accelerated cost recovery system and the modified accelerated cost recovery
system.
INCOME TAXES
The stockholders of the Company have elected to be taxed as an S Corporation
for federal income tax purposes. No federal income taxes are paid by the
Company. The income or loss is reflected on the income tax returns of the
stockholders with any resultant income tax liabilities borne by them.
The Company has not elected to be taxed as an S Corporation in California.
Accordingly, it is subject to state franchise taxes based on taxable income.
Therefore, when appropriate, deferred income taxes are provided for differences
between financial statement and income tax reporting, principally from differing
depreciation methods utilized for franchise tax purposes. Franchise taxes paid
through December 31, 1995 were $6,200.
USE OF ESTIMATES
The process of preparing financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
regarding certain types of assets, liabilities, revenues, and expenses. Such
estimates primarily relate to unsettled transactions and events as of the date
of the financial statements. Accordingly, upon settlement, actual results may
differ from estimated amounts.
BASIS OF PRESENTATION
The Company's accounting policies reflect industry practices and conform to
generally accepted accounting principles.
F-65
<PAGE>
FRE, INC.
NOTES TO FINANCIAL STATEMENTS --(CONTINUED)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --(CONTINUED)
In the opinion of management, the accompanying unaudited consolidated
financial statements as of September 30, 1996 and for the nine months ended
September 30, 1995 and 1996, reflect all adjustments (all of which were normal
and recurring) which, in the opinion of management, are necessary for fair
statement of the financial position and results of operations for the interim
periods presented. The results of operations for the nine month period ended
September 30, 1996 are not indicative of the results to be expected for the full
year. The Company's business is highly seasonal. The great majority of the
Company's revenue is collected during the summer while operating expenditures
are incurred throughout the year.
NOTE 2: LEASE COMMITMENTS
The Company's original lease with the state of California, dated May 23,
1986, was amended October 14, 1994. The lease term was extended until December
31, 2011.
In part, the amendments provide for modifications in rent formulas and
capital improvement requirements to the water park. In addition, the lease
provides for rent formulas and capital improvement requirements to the family
entertainment center.
The rent formulas and capital improvement requirements are stated separately
for the water park and entertainment center.
WATER PARK--RENT FORMULA
For operating seasons through 2004 the greater of:
1) The sum of:
a) Eight percent (8%) of the general gross revenues under four
million dollars ($4,000,000) for the operating season; plus
b) Ten percent (10%) of the general gross revenues in excess of four
million dollars ($4,000,000) for the operating season; plus
c) Ten percent (10%) of the gross food revenues for the operating
season,
2) Two hundred thousand dollars ($200,000).
For operating seasons 2005-2011 the greater of:
1) The sum of:
a) Ten percent (10%) of the general gross revenues for the operating
season; plus
b) Ten percent (10%) of the gross food revenues for the operating
season,
2) Two hundred thousand dollars ($200,000)
F-66
<PAGE>
FRE, INC.
NOTES TO FINANCIAL STATEMENTS --(CONTINUED)
NOTE 2: LEASE COMMITMENTS --(CONTINUED)
FAMILY ENTERTAINMENT CENTER--RENT FORMULA
For the operating seasons 1996-2011 the greater of:
1) The sum of:
a) Eight percent (8%) of the general gross revenues under one million
five hundred thousand dollars ($1,500,000) for the operating season; plus
b) Ten percent (10%) of the general gross revenues above one million
five hundred thousand dollars ($1,500,000) for the operating season; plus
c) Ten percent (10%) of the gross food revenues for the operating
season,
If the cumulative gross revenues for all years of operation exceed sixteen
million dollars ($16,000,000), the formula will be adjusted and rent to be the
sum of:
a) Fifteen percent (15%) of the general gross revenues for the
operating season; plus
b) Seventeen percent (17%) of the gross food revenues for the
operating season, or
2) One hundred thousand ($100,000).
Future minimum lease payments on the Sacramento lease are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31 AMOUNT
------------- ------------
<S> <C>
1996.......................................................................... $ 300,000
1997.......................................................................... 300,000
1998.......................................................................... 300,000
1999.......................................................................... 300,000
2000.......................................................................... 300,000
Thereafter.................................................................... 3,300,000
------------
$ 4,800,000
------------
------------
</TABLE>
CAPITAL IMPROVEMENTS
The lease provides for capital improvement requirements for the water park
and recreation center during the lease term.
WATER PARK
The water park's minimum capital improvements are to be the lower of the
following:
a) The higher of one hundred fifty thousand dollars (150,000) or five
percent (5%) of the gross revenues in the year preceding the year in which
improvements are carried out, or
b) $121,000, or
c) An amount which, when added to capital expenditures during the three
preceding years, would aggregate to the total minimum capital expenditures
required for those four years.
F-67
<PAGE>
FRE, INC.
NOTES TO FINANCIAL STATEMENTS --(CONTINUED)
NOTE 2: LEASE COMMITMENTS --(CONTINUED)
FAMILY ENTERTAINMENT CENTER
The family recreation center's minimum capital improvements are to be the
lower of the following:
a) The higher of twenty five thousand dollars ($25,000) or one percent
(1%) of the gross revenues in the year preceding the year in which
improvements are carried out, or
b) An amount which, when added to capital expenditures during the two
preceding years, would aggregate to the total minimum capital expenditures
required for those three years.
The Company satisfied the capital improvement requirements for the year
ended December 31, 1996.
NOTE 3: NOTES PAYABLE
Notes payable at December 31, 1994 and 1995 and September 30, 1996 consisted
of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1994 1995 SEPTEMBER 30, 1996
------------ ------------ ------------------
<S> <C> <C> <C>
(UNAUDITED)
Line of credit Wells Fargo Bank. Interest payable monthly at the
banks prime rate plus 1/2% due and payable June 1, 1996. (See
Note 4)......................................................... $ 600,000 $ 878,851 $ 632,073
Note payable Wells Fargo Bank. Interest payable monthly at the
bank's prime rate plus 3/4%. Due and payable December 31, 1999.
(See Note 4).................................................... 1,908,762 2,300,000 2,000,000
Non-interest bearing notes issued in connection with the
acquisition of the water park located in Phoenix, Arizona,
imputed interest of 11%. Principal and interest due in annual
installments beginning September 29, 1989....................... 33,508 -- --
------------ ------------ ------------------
2,542,270 3,178,851 2,632,073
Less current portion.............................................. (753,508) (878,851) (632,073)
------------ ------------ ------------------
Principal payments due after one year............................. $ 1,788,762 $ 2,300,000 $ 2,000,000
------------ ------------ ------------------
------------ ------------ ------------------
</TABLE>
NOTE 4: NOTES PAYABLE--WELLS FARGO BANK
In June 1994 the Company entered into a loan agreement with Wells Fargo Bank
providing for a working capital line-of-credit and a revolving reducing
commitment (loan commitment) for repayment of existing bank debt and future
expansion needs.
LINE-OF-CREDIT
The maximum principal amount of advances up to and including June 1, 1996
may not exceed $1,000,000. Interest to be paid monthly at the Bank's prime rate
plus 1/2%. Due to a $100,000 line of credit
F-68
<PAGE>
FRE, INC.
NOTES TO FINANCIAL STATEMENTS --(CONTINUED)
NOTE 4: NOTES PAYABLE--WELLS FARGO BANK --(CONTINUED)
in favor of CAL-Expo, the maximum available to the Company is $900,000. The
balance owing at December 31, 1995 was $878,851.
LOAN COMMITMENT
The loan commitment provides for the Company to borrow, repay and re-borrow
subject to the reductions as reflected below. The maximum principal amounts
outstanding may not exceed $3,600,000. Interest is payable monthly at the bank's
prime rate plus 3/4%, the loan matures December 31, 1999. Below is the maximum
principal loan amount available for each period:
<TABLE>
<S> <C>
Through December 31, 1996....................................... $2,880,000
Through December 31, 1997....................................... $2,160,000
Through December 31, 1998....................................... $1,440,000
Through December 31, 1999....................................... $ 720,000
</TABLE>
The balance owing at December 31, 1995 was $2,300,000.
NOTE 5: NOTES RECEIVABLE
Notes receivable consist of the following:
<TABLE>
<S> <C>
Note receivable--Water Park sale.................................. $ 61,416
Note receivable--Concord Entertainment Center..................... 340,101
---------
$ 401,517
---------
---------
</TABLE>
Notes receivable from the water park sale represents the balance owing at
December 31, 1995. As explained in Note 7, the Company reimbursed, through
offset of the note receivable, certain costs incurred by the buyer.
Notes receivable from Concord Entertainment Center reflects amounts advanced
on behalf of the Joint Venture for construction and operating expenses. The
obligation was paid in full as of March 21, 1996, the date of the auditor's
report.
NOTE 6: CONCORD ENTERTAINMENT COMPANY (CEC)
In September 1994, the Company entered into a 50% Joint Venture Agreement to
construct and operate a water park and family entertainment center in Concord,
California. Per the Joint Venture Agreement, the Company's mandatory capital
contribution is $1,000,000. During the year, the Company funded $617,332 to
satisfy the balance of its capital commitment. Also, the Company's 50% share of
net income totaled $985,601.
F-69
<PAGE>
FRE, INC.
NOTES TO FINANCIAL STATEMENTS --(CONTINUED)
NOTE 6: CONCORD ENTERTAINMENT COMPANY (CEC) --(CONTINUED)
In addition to 50% of sharing operating profits and losses, the Company is
entitled to the following:
DEVELOPMENT FEES
During construction the Company was entitled to receive development fees
equal to 5% of the projected construction cost, not to exceed $275,000. For the
years ended December 31, 1994 and 1995 payments received by the Company were as
follows:
<TABLE>
<CAPTION>
<S> <C>
1994.................................................................................................. $ 91,667
1995.................................................................................................. 183,333
----------
$ 275,000
----------
----------
</TABLE>
MANAGEMENT FEES
Upon commencement of operations, the Company entered into a management
contract with CEC to manage and operate the facilities. The management fee will
equal 7 1/2% of gross annual revenues. Management fees received through December
31, 1995 totaled $438,461.
NOTE 7: EXTRAORDINARY ITEM
Pursuant to the terms and conditions of the sale agreement relating to the
Arizona parks, the Company was obligated to resolve certain mandated
improvements. Although the new owners of the Arizona parks performed the work,
the Company was financially responsible for the costs they incurred. On December
27, 1995 a settlement agreement was reached and the costs were reimbursed
through a reduction of Notes Receivable generated by the sale. The $125,000
reduction of the notes has been recognized as an extraordinary item for
financial statement purposes.
F-70
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Partners of
Concord Entertainment Company
Concord, California
We have audited the accompanying balance sheet of Concord Entertainment Company
(a general partnership) as of December 31, 1995, and the related statements of
income, retained earnings, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with the generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly in all
material respects, the financial position of Concord Entertainment Company as of
December 31, 1995, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
Nelson & Company
Gold River, California
November 12, 1996
F-71
<PAGE>
'
CONCORD ENTERTAINMENT COMPANY
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------ SEPTEMBER 30,
1996
-------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets
Cash.............................................................................. $ 47,338 $ 979,746
Accounts receivable............................................................... 86,471 292,807
Inventory......................................................................... 60,115 65,081
Prepaid expenses.................................................................. 11,932 68,243
Deposits.......................................................................... 66,069 1,229
------------ -------------
Total Current Assets.......................................................... 271,925 1,407,106
------------ -------------
Property and Equipment, at Cost
Park assets and improvements...................................................... 8,440,221 9,770,482
Allowance for depreciation........................................................ (389,579) (901,705)
------------ -------------
8,050,642 8,868,777
------------ -------------
Other Assets
Organizational costs.............................................................. 423,401 423,401
Development fees.................................................................. 330,000 330,000
Loan costs........................................................................ 35,280 20,543
------------ -------------
788,681 773,944
Accumulated amortization............................................................ (68,188) (119,320)
------------ -------------
720,493 654,624
------------ -------------
Total Assets.................................................................. $9,043,060 $ 10,930,507
------------ -------------
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities
Accounts payable.................................................................. $ 34,485 $ 245,150
Partner advances.................................................................. 321,760 456,597
Other accrued expenses............................................................ 155,169 26,111
Deferred revenue.................................................................. 204,371 24,512
Insurance claims reserve.......................................................... 73,500 85,723
Notes payable-current portion..................................................... 1,081,942 988,745
------------ -------------
Total Current Liabilities......................................................... 1,871,227 1,826,838
Notes payable due after one year.................................................... 2,700,630 3,181,631
------------ -------------
4,571,857 5,008,469
Partners' equity.................................................................... 4,471,203 5,922,038
------------ -------------
Total Liabilities and Partners' Equity........................................ $9,043,060 $ 10,930,507
------------ -------------
------------ -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-72
<PAGE>
CONCORD ENTERTAINMENT COMPANY
STATEMENTS OF INCOME AND PARTNERS' EQUITY
YEAR ENDED DECEMBER 31, 1995
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
YEAR ENDED --------------------------
DECEMBER 31, 1995 1996
1995 ------------ ------------
------------ (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Net Sales.............................................................. $5,791,141 $ 5,647,313 $ 5,827,335
Cost of Sales.......................................................... (572,279) (556,387) (532,301)
------------ ------------ ------------
5,218,862 5,090,926 5,295,034
------------ ------------ ------------
Operating Expenses
Advertising.......................................................... 159,272 149,773 364,584
Depreciation and amortization........................................ 457,767 286,084 564,363
Insurance and claims payments........................................ 112,877 60,536 111,006
Miscellaneous........................................................ 80,055 64,636 89,040
Payroll and related expenses......................................... 1,035,556 831,383 1,083,951
Printing and postage................................................. 112,288 56,521 83,673
Professional services................................................ 8,608 3,602 22,697
Rents................................................................ 110,819 105,577 370,136
Repairs and maintenance.............................................. 154,771 142,281 69,005
Supplies............................................................. 49,581 43,515 92,257
Taxes and licenses................................................... 77,903 48,896 100,371
Telephone and utilities.............................................. 168,649 147,757 206,494
Travel and entertainment............................................. 8,924 8,516 8,552
------------ ------------ ------------
Income Operating Expenses.......................................... 2,537,070 1,949,077 3,166,129
------------ ------------ ------------
Income From Operations........................................... 2,681,792 3,141,849 2,128,905
------------ ------------ ------------
Other Income (Expenses)
Interest income...................................................... -- -- 4,668
Management fees...................................................... (433,743) (425,405) (434,480)
Interest expense..................................................... (276,846) (166,121) (248,258)
------------ ------------ ------------
Total Other Income (Expenses)...................................... (710,589) (591,526) (678,070)
------------ ------------ ------------
Net income............................................................. 1,971,203 2,550,323 1,450,835
Partners' equity, beginning of the year................................ 921,743 921,743 4,471,203
Partners' contributions................................................ 1,578,257 1,578,257 --
------------ ------------ ------------
Partners' equity, end of year.......................................... $4,471,203 $ 5,050,323 $ 5,922,038
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of
these financial statements.
F-73
<PAGE>
CONCORD ENTERTAINMENT COMPANY
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995
------------- NINE MONTHS ENDED
SEPTEMBER 30,
1995 1996
------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income......................................................... $ 1,971,203 $ 2,550,323 $ 1,450,835
Adjustments to reconcile net income to cash provided by operations:
Depreciation and amortization.................................... 457,767 286,084 564,363
Accounts receivable.............................................. (86,471) (774,760) (206,336)
Inventory........................................................ (60,115) (46,534) (4,996)
Prepaid expenses................................................. (11,932) (8,547) (56,311)
Deposits......................................................... (66,069) (66,069) 79,577
Accounts payable................................................. 34,485 163,679 210,665
Accrued expenses................................................. 155,169 246,666 (129,058)
Accrued claims liability......................................... 73,500 29,458 12,223
Deferred revenue................................................. 204,371 159,298 (179,859)
Partner advances................................................. 321,760 625,908 134,837
------------- ------------- -------------
Net cash provided by operating activities.......................... 2,993,668 3,165,506 1,875,970
------------- ------------- -------------
Cash flows from investing activities:
Purchase of fixed assets........................................... (7,383,166) (7,265,521) (1,331,366)
Intangible assets.................................................. (788,681) (788,681) --
------------- ------------- -------------
Net cash used in investing activities.............................. (8,171,847) (8,054,202) (1,331,366)
------------- ------------- -------------
Cash flows from financing activities:
Proceed from credit line borrowings and long-term debt............. 3,600,000 3,600,000 4,170,376
Principal payments of long-term debt............................... (648,778) (135,332) (3,782,572)
Loans from partners................................................ 696,038 230,202 --
Partner contributions.............................................. 1,578,257 1,578,257 --
------------- ------------- -------------
Net cash provided by financing activities........................ 5,225,517 5,273,127 387,804
------------- ------------- -------------
Net increase in cash................................................. 47,338 384,431 932,408
Cash at beginning of year............................................ -- -- 47,338
------------- ------------- -------------
Cash at end of year.................................................. $ 47,338 $ 384,431 $ 979,746
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of
these financial statements
F-74
<PAGE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
<TABLE>
<S> <C> <C> <C>
Cash paid during the year for interest $ 276,846 $ 166,141 $ 246,607
--------- --------- ---------
--------- --------- ---------
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
A capital lease obligation of $135,312 was incurred when the Partnership
entered into a lease for pool equipment.
DISCLOSURE OF ACCOUNTING POLICY
For purposes of the statement of cash flows, the Partnership considers all
highly-liquid debt instruments, purchased with maturity of three months or less,
to be cash equivalents.
F-75
<PAGE>
CONCORD ENTERTAINMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1995
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS ACTIVITY
Concord Entertainment Company ("the Partnership"), a California general
partnership, owns and operates a waterpark in Concord, California. Equal
interests of the Partnership are owned by a Missouri S Corporation and a
California Limited Liability Company (LLC).
REVENUE RECOGNITION
Season ticket revenue is recognized over the months the waterpark is open.
Group event revenue is recognized at the time the event occurs.
INVENTORY
Inventory consists of retail goods, food held for resale, and uniforms.
Inventory is stated at the lower of average cost or market.
FIXED ASSETS
Fixed assets are recorded at cost. It is the policy of management to provide
for depreciation over the lesser of the useful lives of the assets or the
remaining life of the operating lease. Straight line and accelerated
depreciation methods consistent with generally accepted accounting principles
are used. In determining depreciation for income tax purposes, the Partnership
uses the accelerated cost recovery system and the modified accelerated cost
recovery system.
INTANGIBLE ASSETS
Intangible assets consist of capitalized start-up costs, development and
loan fees. Amortization is computed using the straight-line method over lives
ranging from one to fifteen years.
INCOME TAXES
As a partnership, no income taxes are paid by Partnership, thus no income
tax expense has been recorded in these statements. Income, loss, credits, etc.,
from the Partnership are reported on a prorata basis by its partners on their
respective tax returns.
USE OF ESTIMATES
The process of preparing financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
regarding certain types of assets, liabilities, revenues, and expenses. Such
estimates primarily relate to unsettled transactions and events as of the date
of the financial statements. Accordingly, upon settlement, actual results may
differ from estimated amounts.
BASIS OF PRESENTATION
The Company's accounting policies reflect industry practices and conform to
generally accepted accounting principles.
F-76
<PAGE>
CONCORD ENTERTAINMENT COMPANY
NOTES TO FINANCIAL STATEMENTS --(CONTINUED)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --(CONTINUED)
In the opinion of management, the accompanying unaudited consolidated
financial statements as of September 30, 1996 and for the nine months ended
September 30, 1995 and 1996, reflect all adjustments (all of which were normal
and recurring) which, in the opinion of management, are necessary for fair
statement of the financial position and results of operations for the interim
periods presented. The results of operations for the nine month period ended
September 30, 1996 are not indicative of the results to be expected for the full
year. The Company's business is highly seasonal. The great majority of the
Company's revenue is collected during the summer while operating expenditures
are incurred throughout the year. Accordingly, the Company incurs a net loss for
the last calendar quarter.
NOTE 2: ACCRUED CLAIMS LIABILITY
The Partnership maintains a reserve for claims arising from public use of
the waterpark. For Each claim presented, a reserve for the lesser of the claim
or $10,000 (the deductible limit of the Partnership's liability insurance) is
established to recognize the potential liability.
F-77
<PAGE>
CONCORD ENTERTAINMENT COMPANY
NOTES TO FINANCIAL STATEMENTS --(CONTINUED)
NOTE 3: NOTES PAYABLE
Notes payable at December 31, 1995 and September 30, 1996 consists of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 SEPTEMBER 30, 1996
----------------- ------------------
<S> <C> <C>
Line of credit with Wells Fargo Bank with maximum
borrowings of $400,000. Interest is payable monthly at
the banks prime rate plus 3/4%. The loan matures June
30, 1996. The line of credit requires the Partnership
to meet certain loan covenants and financial ratios. At
December 31, 1995, the Partnership was in compliance
with these requirements................................ $ 400,000 --
Note payable to Wells Fargo Bank; payable in annual
installments of $640,000 with interest payable monthly
at the bank's prime rate plus 1%. The loan is
personally guaranteed by the individual owners of the
partners in the Partnership and secured by partnership
assets. The loan matures December 31, 1999. The
Partnership is required to meet certain loan covenants
and certain financial ratios. At December 31, 1995 the
Partnership was in compliance with these
requirements........................................... 2,560,000 --
Note payable to the general partners of the Partnership
due in three equal annual installments to commence
following repayment of notes payable, interest payable
at 12% per annum....................................... 696,038 --
Note payable to Union Bank, reducing revolving loan not
to exceed $6,000,000 with interest due monthly at 1.5%
in excess of the Banks Adjusted Treasuries rate or the
Adjusted LIBOR-Rate, the option is that of the
Partnership. The loan matures December 20, 2002........ -- 3,896,631
Notes payable, City of Concord payable, without
interest over thirty months from date of inception..... -- 189,153
Capital lease obligation (Note 4)...................... 126,534 84,592
----------------- ------------------
3,782,572 4,170,376
Less current portion................................... (1,081,942) (988,745)
----------------- ------------------
$ 2,700,630 $ 3,181,631
----------------- ------------------
----------------- ------------------
</TABLE>
F-78
<PAGE>
CONCORD ENTERTAINMENT COMPANY
NOTES TO FINANCIAL STATEMENTS --(CONTINUED)
NOTE 3: NOTES PAYABLE --(CONTINUED)
Future principal maturities on notes payable are as follows:
<TABLE>
<S> <C>
1996............................................................ $ 681,942
1997............................................................ 686,541
1998............................................................ 678,051
1999............................................................ 640,000
2000............................................................ 232,013
Thereafter...................................................... 464,025
---------
$3,382,572
---------
---------
</TABLE>
NOTE 4: LEASES
The Partnership leases equipment and land under operating leases expiring in
September, 2000 and August, 2024, respectively. The land lease is subject to
adjustment, beginning January 1, 2000 and every five years thereafter. The
Partnership also leases pool equipment under a capital lease which expires
August, 1998.
Future minimum lease payments under these agreements are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASE LEASES
---------- ------------
<S> <C> <C>
1996................................................................ $ 54,138 $ 159,137
1997................................................................ 54,138 159,137
1998................................................................ 40,604 132,495
1999................................................................ -- 105,853
2000................................................................ -- 105,365
Thereafter.......................................................... -- 2,374,905
---------- ------------
Total minimum lease payments.................................... 148,880 $ 3,036,892
---------- ------------
Less amounts representing interest.................................. (22,346)
----------
Obligations under Capital lease..................................... 126,534
Less current maturaties............................................. (41,942)
----------
$ 84,592
----------
----------
</TABLE>
Rent and equipment rentals for 1995 totaled $110,819.
Total minimum lease payments do not include contingent rentals that may be
paid under the land lease. Contingent rentals begin October 1, 1995 and are
based on 5% of gross sales less the base rent. Contingent rental payments may be
reduced by certain expenditures for capital improvements, and entertainment and
business taxes. No contingent rental payments were accrued in 1995
Interest rate on the capital lease is 10.5% which is imputed based on the
lower of the Partnership's incremental borrowing rate at the inception of the
lease or the lessor's implicit rate of return.
F-79
<PAGE>
CONCORD ENTERTAINMENT COMPANY
NOTES TO FINANCIAL STATEMENTS --(CONTINUED)
NOTE 5: RELATED PARTY TRANSACTIONS
The Missouri partner manages the Concord waterpark plus a waterpark and
entertainment center located in Sacramento, California. The partner receives a
management fee of 7.5% of gross sales plus out of pocket costs. Total management
fees paid or accrued under this agreement for year ended December 31, 1995 were
$438,461. The partner also bills the Partnership for payroll, worker's
compensation insurance and other operating expenses paid on behalf of the
Partnership. Total advances owing to this partner at December 31, 1995 were
$321,760.
The California partner receives a fee equal to .75% of gross sales for its
contribution of the water parks' land lease. Total fees accrued to the
California partner in 1995 were $43,846.
The Missouri partner received a development fee of $275,000 and the
California partner received a development fee of $55,000 for services in
connection with the waterpark's construction.
NOTE 6: SUBSEQUENT EVENTS
The Partnership constructed Phase II of the waterpark in 1996. The total
cost to complete the construction was approximately $1,450,000.
The Partnership entered into an agreement with Union Bank subsequent to
December 31, 1995 to refinance existing debt of Wells Fargo Bank and finance
Phase II construction of the waterpark with a six million reducing revolving
loan. The loan will mature on December 20, 2002. The loan will bear interest at
either the bank's reference rate, LIBOR, plus 1.5%, or Adjusted Treasuries, plus
1.5%. The loan is guaranteed by the Missouri partner and owners of the
California partner.
On October 10, 1996 the Partnership entered into a sales agreement to sell
its assets to an unrelated publicly held company. The transaction will be
structured in the form of an asset sale or a contribution of assets to another
partnership with a subsequent buy out of its partnership interest. The proposed
gross sales price approximates $8,100,000.
The Partnership negotiated a settlement with the City of Concord for
reimbursement of initial construction costs related to preparing the land leased
from the City. The Partnership received a cash payment of approximately
$390,000. Related to this settlement, was an agreement for the Partnership to
pay offsite costs, sewer hook-up and related fees to the city of approximately
$202,000. This amount is to be paid over thirty months. The balance due at the
date of this report approximates $175,000.
F-80
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Stuart Amusement Company and Subsidiaries
We have audited the accompanying consolidated balance sheets of Stuart
Amusement Company and Subsidiaries as of September 30, 1995 and 1996, and the
related consolidated statements of operations, changes in common and other
stockholders' equity and cash flows for each of the years in the three-year
period ended September 30, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described in note 1(b) to the consolidated financial statements, in
December 1996, the Company's shareholders entered into a purchase and sale
agreement ("Agreement"), whereby they agreed to sell all of the stock of the
Company to a third party. This sale is scheduled to be consummated on January
31, 1997 or not more than five days from the date that the conditions specified
in the Agreement are satisfied.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Stuart
Amusement Company and Subsidiaries as of September 30, 1995 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended September 30, 1996 in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
December 10, 1996, except as to the last sentence of
the third paragraph of Note 3,
which is as of December 24, 1996
Springfield, Massachusetts
F-81
<PAGE>
STUART AMUSEMENT COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
ASSETS (NOTES 3 AND 9)
Current assets:
Cash and cash equivalents............................................................. $ 19,694 $ 196,746
Accounts receivable:
Trade............................................................................... 303,509 664,256
Other............................................................................... 177,866 251,057
Due from affiliate (note 4)........................................................... 39,446 3,187
Inventory............................................................................. 754,627 785,888
Prepaid expenses and other assets..................................................... 195,361 187,818
Due from stockholder (note 4)......................................................... 65,228 65,228
Deferred income taxes (note 5)........................................................ 152,000 168,000
----------- -----------
Total current assets............................................................ 1,707,731 2,322,180
Property, plant and equipment, net (notes 2 and 6)...................................... 6,340,449 6,376,609
Deferred debt origination costs, net of accumulated amortization of $468,895 in 1996 and
$358,567 in 1995...................................................................... 303,398 193,070
Other assets............................................................................ 1,458 1,958
----------- -----------
Total assets.................................................................... $ 8,353,036 $ 8,893,817
----------- -----------
----------- -----------
LIABILITIES, REDEEMABLE PREFERRED STOCK AND COMMON AND OTHER STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt (note 3)....................................... $ 572,000 $ 1,149,778
Current installments of obligations under capital leases (note 6)..................... 11,941 985
Accounts payable...................................................................... 1,082,478 1,748,858
Accrued liabilities (note 8).......................................................... 941,636 1,103,784
Accrued income taxes.................................................................. 161,118 173,501
Dividends payable (note 9)............................................................ 92,302 236,226
----------- -----------
Total current liabilities....................................................... 2,861,475 4,413,132
----------- -----------
Long-term debt, less current installments (note 3)...................................... 1,149,778 --
Deferred income taxes (note 5).......................................................... 787,000 965,000
Redeemable, $80 cumulative annual dividend, non-voting preferred stock, $1 par value.
Authorized, issued and outstanding 3,405 shares (note 9).............................. 3,405,385 3,405,385
Common and Other Stockholders' equity:
Class A common stock, voting, no par value. Authorized 1,000 shares; issued and
outstanding 400 shares (note 9)..................................................... 400 400
Class B common stock, nonvoting, no par value. Authorized 1,000 shares; issued and
outstanding 600 shares (note 9)..................................................... 600 600
Additional paid-in capital............................................................ 21,614 21,614
Retained earnings (note 3)............................................................ 126,784 87,686
----------- -----------
Total common and other stockholders' equity..................................... 149,398 110,300
Commitments and contingencies (notes 3, 6, 8 and 9)
----------- -----------
Total liabilities, redeemable preferred stock and common and other stockholders'
equity........................................................................ $ 8,353,036 $ 8,893,817
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-82
<PAGE>
STUART AMUSEMENT COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1994, 1995, AND 1996
<TABLE>
<CAPTION>
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
Revenue:
Theme park admissions............................................. $ 7,602,736 $ 7,327,060 $ 7,484,054
Theme park food, merchandise and other............................ 11,678,063 12,139,037 11,362,270
------------- ------------- -------------
Total revenue................................................... 19,280,799 19,466,097 18,846,324
------------- ------------- -------------
Operating costs and expenses:
Operating expenses................................................ 8,672,312 8,436,372 7,514,852
Selling, general and administrative............................... 6,614,158 6,058,778 6,554,971
Costs of products sold............................................ 3,320,228 3,326,879 3,211,853
Depreciation and amortization..................................... 798,125 784,804 764,600
------------- ------------- -------------
Total operating costs and expenses.............................. 19,404,823 18,606,833 18,046,276
------------- ------------- -------------
Income (loss) from operations................................... (124,024) 859,264 800,048
Other expense:
Interest expense, net............................................. (382,554) (413,329) (341,944)
Other (expense) income, net (note 11)............................. 250,000 (13,916) (5,872)
------------- ------------- -------------
Total other expense............................................. (132,554) (427,245) (347,816)
------------- ------------- -------------
Income (loss) before income taxes............................... (256,578) 432,019 452,232
Income tax expense (benefit) (note 5)............................... (85,000) 182,000 209,000
------------- ------------- -------------
Net income (loss)............................................... $ (171,578) $ 250,019 $ 243,232
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-83
<PAGE>
STUART AMUSEMENT COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON AND OTHER STOCKHOLDERS' EQUITY
FOR THE TWELVE MONTHS ENDED SEPTEMBER30, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
TOTAL COMMON
CLASS A CLASS B ADDITIONAL TREASURY AND OTHER
COMMON COMMON PAID-IN RETAINED STOCK STOCKHOLDERS'
STOCK STOCK CAPITAL EARNINGS AT COST EQUITY
----------- ----------- ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance September 30, 1993....................... $ 1,000 $ 1,000 $ 128,528 $ 1,990,421 $(1,497,300) $ 623,649
Net loss for the twelve months ended September30,
1994........................................... -- -- -- (171,578) -- (171,578)
Preferred dividends declared..................... -- -- -- (276,343) -- (276,343)
Effect of capital reorganization................. (600) (400) (106,914) (1,389,386) 1,497,300 --
----------- ----------- ---------- ----------- ----------- ------------
Balance, September 30, 1994...................... 400 600 21,614 153,114 -- 175,728
Net income for the twelve months ended
September30, 1995.............................. -- -- -- 250,019 -- 250,019
Preferred dividends declared..................... -- -- -- (276,349) -- (276,349)
----------- ----------- ---------- ----------- ----------- ------------
Balance September 30, 1995....................... 400 600 21,614 126,784 -- 149,398
Net income for the twelve months ended
September30, 1996.............................. -- -- -- 243,232 -- 243,232
Preferred dividends declared..................... -- -- -- (282,330) -- (282,330)
----------- ----------- ---------- ----------- ----------- ------------
Balance, September 30, 1996...................... $ 400 $ 600 $ 21,614 $ 87,686 -- $ 110,300
----------- ----------- ---------- ----------- ----------- ------------
----------- ----------- ---------- ----------- ----------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-84
<PAGE>
STUART AMUSEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED SEPTEMBER30, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
1994 1995 1996
---------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................................... $ (171,578) $ 250,019 $ 243,232
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation and amortization............................................. 798,125 784,804 764,600
Gain on sale of property, plant and equipment............................. (7,387) -- (2,737)
Decrease (increase) in:
Accounts receivable..................................................... 73,432 (217,231) (433,938)
Due from affiliate...................................................... 12,503 13,200 36,259
Inventory............................................................... (110,328) 45,771 (31,261)
Prepaid expenses and other current assets............................... (16,379) 51,593 7,543
Other assets............................................................ (29,173) 56,953 (500)
Increase (decrease) in:
Accounts payable........................................................ 313,064 (171,063) 666,380
Accrued liabilities..................................................... (1,580) 109,589 162,148
Accrued and deferred income taxes....................................... (45,675) 159,300 174,383
---------- ----------- -----------
Net cash provided by operating activities............................. 815,024 1,082,935 1,586,109
---------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................................... (466,362) (328,158) (690,895)
Proceeds from sale of property, plant and equipment....................... 20,900 -- 3,200
---------- ----------- -----------
Net cash used by investing activities................................. (445,462) (328,158) (687,695)
---------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable................................................ (572,000) (572,000) (572,000)
Dividends paid............................................................ (276,059) (276,060) (138,406)
Payments of capital lease obligations..................................... (39,214) (42,225) (10,956)
Amount due from stockholder............................................... (18,000) (28,000) --
---------- ----------- -----------
Net cash used by financing activities................................. (905,273) (918,285) (721,362)
---------- ----------- -----------
Net increase (decrease) in cash and cash equivalents........................ (535,711) (163,508) 177,052
Cash and cash equivalents, beginning of twelve-month period................. 718,913 183,202 19,694
---------- ----------- -----------
Cash and cash equivalents, end of twelve-month period....................... $ 183,202 $ 19,694 $ 196,746
---------- ----------- -----------
---------- ----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the twelve months for:
Interest................................................................ $ 343,430 $ 413,329 $ 341,944
Income tax paid (refunds received), net................................. $ (39,325) $ 22,700 $ 22,300
</TABLE>
See accompanying notes to consolidated financial statements.
F-85
<PAGE>
STUART AMUSEMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1994, 1995 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) NATURE OF BUSINESS AND SEASONALITY
The Company operates Riverside Amusement Park, located in Western
Massachusetts, from April through September and on weekends during October. The
Company's year end for income tax and financial reporting purposes is March 31.
The accompanying financial statements as of September 30 and for the twelve
months then ended are prepared to comply with the Company's debt agreement.
(B) BASIS OF PRESENTATION AND STOCK PURCHASE AGREEMENT
On December 4, 1996, the shareholders of the Company entered into a stock
purchase agreement ("Agreement") whereby they agreed to sell 100% of the shares
of the Company to a third party. The closing date for the transaction is January
31, 1997 or not more than five days from such date that the conditions specified
in Article V to the Agreement are satisfied or waived. The outstanding debt of
the Company (note 3) will be satisfied and the outstanding preferred stock (note
9) will be redeemed from the proceeds of the sale at the closing.
The consolidated financial statements as of September 30, 1996 contain no
adjustments that may result from this contemplated transaction.
In the event the sale of the Company is not consummated, the Company would
seek alternative debt or equity financing. Management believes that these
alternative financings will be available and adequate to satisfy current
obligations.
(C) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Stuart
Amusement Company (the "Company") and its wholly-owned subsidiaries Riverside
Park Enterprises, Inc. and Riverside Park Food Services, Inc. All significant
intercompany balances and transactions have been eliminated in consolidation.
(D) INVENTORY
Inventory consists of prize merchandise, auto parts, food and supplies and
is stated at the lower of cost or market. Cost is determined using the first-in,
first-out (FIFO) method.
(E) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is charged to
expense over the estimated useful lives of the respective assets using a
combination of straight-line and accelerated methods for both financial
reporting and tax purposes. Maintenance and repairs are charged to expense as
incurred; major renewals and betterments are capitalized.
(F) DEFERRED DEBT ORIGINATION COSTS
Deferred debt origination costs are being amortized over the period of
expected repayment for the associated debt ranging from 5 to 10 years.
F-86
<PAGE>
STUART AMUSEMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1994, 1995 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(G) CASH EQUIVALENTS
For financial statement purposes, the Company considers all short-term
investments with a maturity at date of purchase of three months or less to be
cash equivalents.
(H) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(I) ADVERTISING COSTS
Production costs of commercials are charged to operations in the year first
aired. The costs of other advertising, promotion, and marketing programs are
charged to operations in the year incurred. There are no advertising costs
capitalized at September 30, 1995 or 1996.
(J) LONG-LIVED ASSETS
The Company assesses the recoverability of its property and equipment and
intangible assets by determining whether the depreciation of the property and
equipment over their remaining lives can be recovered through undiscounted
future operating cash flows generated from the operations of the long-lived
assets. The amount of impairment, if any, is measured based on projected
discounted future operating cash flows using an appropriate interest rate. The
assessment of the recoverability of long-lived assets will be impacted if
estimated future operating cash flows are not achieved.
(K) INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
F-87
<PAGE>
STUART AMUSEMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1994, 1995 AND 1996
(2) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
ESTIMATED
1995 1996 USEFUL LIVES
------------- ------------ -------------
<S> <C> <C> <C>
Land.................................................................. $ 139,259 139,259 --
Buildings............................................................. 6,605,149 6,605,149 20-40 years
Machinery and equipment............................................... 17,068,553 17,659,519 5-20 years
Motor vehicles........................................................ 227,055 243,264 3-10 years
------------- ------------
24,040,016 24,647,191
Less accumulated depreciation......................................... 17,699,567 18,270,582
------------- ------------
Property, plant and equipment, net.............................. $ 6,340,449 6,376,609
------------- ------------
------------- ------------
</TABLE>
Property, plant and equipment depreciation expense charged to income
amounted to $687,798, $674,475 and $654,272 for the twelve months ended
September 30, 1994, 1995 and 1996, respectively.
(3) LONG-TERM DEBT
On June 18, 1992, the Company entered into a credit facility and issued
preferred stock (see note 9) as full payment of the then outstanding debt.
The credit facility consists of a $3,000,000 revolving line of credit and a
$4,000,000 term note, both bearing interest at the prime rate plus 1% (total
rate of 9.25% at September 30, 1996). The term note requires monthly principal
payments of $52,000 for each of the months between July 1992 and April 1993,
inclusive, and principal payments of $143,000 in June, July, August and
September in each of the years 1993 through 1997, inclusive. The remainder of
the outstanding balance of the term note of approximately $578,000 is due in
September 1997. Interest is payable monthly in arrears on the revolving line of
credit and the term note.
The loan agreement contains several covenants, among which are financial
ratios to be met by the Company, limitations on capital expenditures,
restrictions on amount of indebtedness assumed, and restrictions on cash
dividends paid by the Company. At September 30, 1996, the Company was not in
compliance with certain of these financial ratio covenants regarding debt
service coverage and minimum tangible net worth. On December 24, 1996, the
Company received from the lender a waiver of these financial covenants for the
reporting period ended September 30, 1996 and through the date of maturity of
the loans.
The credit facility is secured by substantially all the assets of the
Company.
There were no outstanding borrowings under the revolving line of credit at
September 30, 1995 or 1996.
F-88
<PAGE>
STUART AMUSEMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1994, 1995 AND 1996
(3) LONG-TERM DEBT (CONTINUED)
Long-term debt consists of the following at September 30:
<TABLE>
<CAPTION>
1995 1996
------------ ----------
<S> <C> <C>
Term note, as described above...................................... $ 1,721,778 1,149,778
Less current installments.......................................... 572,000 1,149,778
------------ ----------
1,149,778 $ --
------------ ----------
------------ ----------
</TABLE>
(4) TRANSACTIONS WITH RELATED PARTIES
The balance due from stockholder as of September 30, 1995 and 1996 relates
to advances made by the Company and bears interest at 10%. It is payable on
demand.
Riverside Park Enterprises, Inc. leases certain property, plant and
equipment from a related trust under various monthly rental agreements accounted
for as operating leases. Total rental expense under these rental agreements
amounted to $39,495, $11,290 and $16,975 for the twelve-month periods ended
September 30, 1996, 1995 and 1994, respectively.
Remington Associates ("Remington"), an affiliated company through common
control, provides advertising services to the Company. Related advertising costs
incurred by the Company totaled approximately $1,041,000, $962,000 and
$1,168,451 during the twelve-month periods ended September 30, 1994, 1995 and
1996, respectively. In addition, Remington rents its operating facility from the
Company on a month-to-month basis for approximately $7,000 per month. Rental
income recognized from Remington totaled approximately $84,000 for each of the
twelve-month periods ended September 30, 1994, 1995 and 1996. Approximately
$39,000 and $3,000 was due the Company from Remington at September 30, 1995 and
1996, respectively. The amounts due from Remington have been classified as "Due
from affiliate" in the accompanying consolidated balance sheets.
(5) INCOME TAXES
Income tax expense (benefit) consisted of the following:
<TABLE>
<CAPTION>
1994 1995 1996
---------- --------- ----------
<S> <C> <C> <C>
Current federal............................................ -- -- $ 2,000
Current state.............................................. 18,000 18,000 45,000
---------- --------- ----------
18,000 18,000 47,000
Deferred................................................... (103,000) 164,000 162,000
---------- --------- ----------
$ (85,000) 182,000 209,000
---------- --------- ----------
---------- --------- ----------
</TABLE>
F-89
<PAGE>
STUART AMUSEMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1994, 1995 AND 1996
(5) INCOME TAXES (CONTINUED)
The difference between the actual income tax expense (benefit) and the
income tax expense (benefit) computed by applying the statutory federal income
tax rate of 34% to income (loss) before income taxes is attributable to the
following:
<TABLE>
<CAPTION>
1994 1995 1996
---------- --------- ---------
<S> <C> <C> <C>
Computed expected tax expense (benefit)..................... $ (87,000) 147,000 154,000
State income taxes, net of federal benefit.................. 8,000 21,000 31,000
Charitable contributions.................................... 2,000 -- 3,000
Life insurance.............................................. 2,000 5,000 4,000
Other....................................................... (10,000) 9,000 17,000
---------- --------- ---------
$ (85,000) 182,000 209,000
---------- --------- ---------
---------- --------- ---------
</TABLE>
The tax effect of temporary differences that give rise to the deferred tax
assets and the deferred tax liability are:
<TABLE>
<CAPTION>
1995 1996
------------- -----------
<S> <C> <C>
Deferred tax assets:
Self-insurance................................................. $ 152,000 168,000
Federal tax operating loss carryforwards....................... 727,000 605,000
Federal alternative minimum tax credit......................... 27,000 11,000
General business credits....................................... 261,469 261,469
------------- -----------
Gross deferred tax assets.................................... 1,167,469 1,045,469
Less valuation allowance....................................... (261,469) (261,469)
------------- -----------
Net deferred tax assets...................................... 906,000 784,000
Deferred tax liability:
Depreciation................................................... (1,541,000) (1,581,000)
------------- -----------
Net deferred tax liability................................... $ (635,000) (797,000)
------------- -----------
------------- -----------
</TABLE>
The net deferred tax liability is classified in the accompanying
consolidated balance sheets as follows:
<TABLE>
<CAPTION>
1995 1996
----------- ----------
<S> <C> <C>
Current deferred income tax asset.................................... $ 152,000 168,000
Long-term deferred income tax liability.............................. (787,000) (965,000)
----------- ----------
Net deferred tax liability......................................... $ (635,000) (797,000)
----------- ----------
----------- ----------
</TABLE>
The Company has approximately $1,779,000 in net operating loss carryforwards
for federal income tax purposes that are available to reduce future income taxes
payable, provided sufficient taxable income is earned to permit their use
subject to applicable "carryforward" rules and limitations expiring as follows:
$1,101,000, March 31, 2005; $141,000, March 31, 2006; $137,000, March 31, 2007;
and $400,000, March 31,
F-90
<PAGE>
STUART AMUSEMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1994, 1995 AND 1996
(5) INCOME TAXES (CONTINUED)
2010. The Company also has general business credit carryforwards for federal
income tax purposes of $261,469 which are available to reduce future federal
income taxes, if any, expiring as follows:
<TABLE>
<CAPTION>
EXPIRATION DATE AMOUNT
- ---------------------------------------------------------------------------------- ----------
<S> <C>
March 31, 1997.................................................................... $ 10,009
March 31, 1998.................................................................... 183,050
March 31, 1999.................................................................... 2,687
March 31, 2000.................................................................... 32,444
March 31, 2001.................................................................... 30,850
March 31, 2002.................................................................... 2,429
----------
$ 261,469
----------
----------
</TABLE>
A valuation allowance of $261,469 has been established at September 30, 1995
and 1996. This allowance has been established due to the uncertainty of the
general business credits being used prior to their expiration. No valuation
allowance has been established against federal operating loss carryforwards. It
is management's belief that it is more likely than not that all of the
carryforwards will be used prior to their expiration.
(6) LEASES
The Company is obligated under various capital leases for certain machinery
and equipment; these leases expire at various dates during the next two years.
At September 30, 1996, the gross amount of machinery and equipment and related
accumulated amortization recorded under capital leases was $122,335 and $60,016,
respectively. At September 30, 1995, the gross amount of machinery and equipment
and related accumulated amortization recorded under capital leases was $122,335
and $44,664, respectively.
Amortization of assets held under capital leases is included with
depreciation expense.
The Company leases certain coin-operated machines under agreements accounted
for as operating leases. The leases are cancelable upon 60 to 90 days' notice by
either the lessee or lessor. Lease payments are based on a percentage of gross
proceeds collected in the coin-operated machines. The Company also rents certain
equipment, principally office and computer equipment, under lease agreements
accounted for as operating leases.
F-91
<PAGE>
STUART AMUSEMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1994, 1995 AND 1996
(6) LEASES (CONTINUED)
Future minimum lease payments under noncancelable operating leases and the
present value of future minimum capital lease payments as of September 30, 1996
are:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
----------- -----------
<S> <C> <C>
Twelve-month period ending September 30:
1997................................................................... $ 985 68,447
1998................................................................... -- 8,597
1999................................................................... -- 3,312
2000................................................................... -- 1,104
----- -----------
Total minimum lease payments......................................... 985 $ 81,460
-----------
-----------
Less amount representing interest........................................ --
-----
Net present value of minimum capital lease payments.................. $ 985
-----
-----
</TABLE>
Total rental expense, including the related party leases described in Note
4, was approximately $465,002, $349,546 and $348,273 for the twelve-month
periods ended September 30, 1994, 1995 and 1996, respectively.
(7) EMPLOYEE BENEFITS
The Company has a supplemental 401(k) savings plan (the "Plan") covering all
employees over 20 1/2 years of age who have been employed a minimum of 2 1/2
years. The Company, at its sole discretion, may provide a contribution of up to
3% of covered wages. In addition, the Company matches employee contributions up
to 5% of covered wages. The Company funds the Plan as the expense is incurred.
Expense under the Plan amounted to $141,994, $138,775 and $135,349 for the
twelve-month periods ended September 30, 1994, 1995 and 1996, respectively.
(8) COMMITMENTS AND CONTINGENCIES
The Company is self-insured, up to $50,000 per occurrence, for liability
claims filed for injuries sustained by park visitors. At September 30, 1995 and
1996, respectively, approximately $381,000 and $420,000 is accrued in the
accompanying consolidated balance sheets for unsettled claims. Management
believes that settlement of any of the liability claims will not have a material
adverse effect on the Company's consolidated financial statements.
The Company is a party to a number of legal actions arising in the ordinary
course of its business. In management's opinion, the Company has adequate legal
defenses and/or insurance coverage for those actions where the Company is a
defendant and does not believe that their settlement will materially affect the
Company's consolidated operations or financial position.
(9) REDEEMABLE PREFERRED STOCK
On June 18, 1992, the Company, in connection with the repayment of certain
debt facilities, issued 3,405 shares of $1 par value preferred stock. The
holders of Preferred Stock are entitled to receive
F-92
<PAGE>
STUART AMUSEMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1994, 1995 AND 1996
(9) REDEEMABLE PREFERRED STOCK (CONTINUED)
cumulative dividends of $80 per share per year. No dividends on the common stock
may be distributed while any shares of the Preferred Stock remain outstanding.
Holders of Preferred Stock may require the Company to redeem the Preferred
Stock at the earlier of five years from the date of issue or the event of a
substantial change in ownership as defined, payment in full of the Company's
indebtedness to institutional lenders, a default under the Company's new loan
agreements, or the failure to pay in full any two or more semiannual dividends.
The Company is in compliance with dividend payment requirements as of September
30, 1996. The Company shall redeem the Preferred Stock by issuing a promissory
note which will be subordinated to the then existing indebtedness to
institutional lenders, but not to exceed $7,000,000, and secured by a junior
mortgage and security interest on all assets. The note would be payable over
five years in ten equal semi-annual installments, bearing interest at the rate
of 9%.
Provided that no act or condition specified above has occurred, the Company
has the right to redeem the Preferred Stock at $1,000 per share at any time up
to the fifth anniversary of the issuance of such Preferred Stock. The Company's
right of redemption may only be exercised in full.
(10) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of financial instruments classified as current assets
and current liabilities approximates fair value due to the relatively short
maturity of these instruments. The carrying amount of long-term debt
approximates fair value due to the interest rate approximating the year end
market price for similar debt.
F-93
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY
SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN
OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Additional Information.......................... 2
Incorporation of Certain Information by
Reference..................................... 2
Prospectus Summary.............................. 3
Risk Factors.................................... 16
The Company..................................... 21
Use of Proceeds................................. 26
Capitalization.................................. 28
Selected Historical and Pro Forma Financial and
Operating Data................................ 29
Unaudited Pro Forma Combined Financial
Statements.................................... 40
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 54
Business........................................ 62
Management...................................... 94
Principal Stockholders.......................... 98
Certain Transactions............................ 100
Description of Indebtedness..................... 101
Description of the Notes........................ 103
Underwriting.................................... 128
Legal Matters................................... 129
Experts......................................... 129
Index to Financial Statements................... F-1
</TABLE>
$125,000,000
PREMIER PARKS INC.
% SENIOR NOTES
DUE 2007
[LOGO]
--------------
PROSPECTUS
, 1997
---------------------
LEHMAN BROTHERS
CHASE SECURITIES INC.
SMITH BARNEY INC.
FURMAN SELZ
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses to be borne by the
Company in connection with the issuance and distribution of the Common Stock
being registered (other than underwriting discounts and commissions). All
amounts presented are estimates except the Securities and Exchange Commission
registration fee, the National Association of Securities Dealers, Inc. filing
fee and the Nasdaq National Market listing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................ $ 37,879
National Association of Securities Dealers, Inc. filing fee........ 10,500
Accounting fees and expenses....................................... 100,000
Legal fees and expenses............................................ 140,000
Printing and engraving expenses.................................... 200,000
Trustee's fees..................................................... 11,000
Miscellaneous...................................................... 20,621
---------
Total fees and expenses............................................ $ 520,000
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law which covers the
indemnification of directors, officers, employees and agents of a corporation is
hereby incorporated herein by reference. Reference is made to Article XXV of
registrant's By-Laws which provides for indemnification by the registrant in the
manner and to the full extent permitted by Delaware law.
Reference is also made to Section 8 of the Underwriting Agreement filed as
Exhibit 1(a) to this Registration Statement.
ITEM 16. EXHIBITS.
See Exhibit Index.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes the following:
(1) To provide to the underwriters at the closing specified in the
underwriting agreement, certificates in such denominations and registered in
such names as required by the underwriters to permit prompt delivery to each
purchaser.
(2) That, for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(3) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-1
<PAGE>
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant, pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this amendment to this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, State of New York on the 20th day of
January, 1997.
PREMIER PARKS INC.
BY: /S/ KIERAN E. BURKE
-----------------------------------------
Kieran E. Burke
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this amendment
to this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
Chairman of the Board and
* Chief Executive Officer
- ------------------------------ (principal executive January 20, 1997
Kieran E. Burke officer)
* Director, President and
- ------------------------------ Chief Operating Officer January 20, 1997
Gary Story
* Chief Financial Officer and
- ------------------------------ Director (principal January 20, 1997
James F. Dannhauser financial officer)
* Vice President (principal
- ------------------------------ accounting officer) January 20, 1997
Richard R. Webb
* Director
- ------------------------------ January 20, 1997
Paul A. Biddelman
* Director
- ------------------------------ January 20, 1997
Michael E. Gellert
* Director
- ------------------------------ January 20, 1997
Jack Tyrrell
*By: /s/ JAMES M. COUGHLIN
- ------------------------------
James M. Coughlin January 20, 1997
Attorney-in-Fact
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, each
of the Co-Registrants listed below have duly caused this Amendment to this
Registration Statement to be signed on their behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on the
20th day of January, 1997.
TIERCO MARYLAND, INC.
TIERCO WATER PARK, INC.
FRONTIER CITY PROPERTIES, INC.
(on behalf of itself and as general partner of
Frontier City Partners Limited Partnership)
By: /s/ KIERAN E. BURKE
-----------------------------------------
Kieran E. Burke
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
Each person whose signature to this Registration Statement appears below
hereby appoints James M. Coughlin and Kieran E. Burke, and each individually,
either of whom may act without the joinder of the other, as his agent and
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all pre- and post-effective amendments to this Registration
Statement (and, in addition, any registration statement filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended, for the offering to which
this Registration Statement relates), which may make such changes and additions
to this Registration Statement as such agent and attorney-in-fact may deem
necessary or appropriate.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment to this Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
Chairman of the Board,
Chief Executive Officer
/s/ KIERAN E. BURKE and Director of the Co-
- ------------------------------ Registrants listed above January 20, 1997
Kieran E. Burke (Principal Executive
Officer)
President, Chief Operating
/s/ GARY STORY Officer and Director of
- ------------------------------ the Co-Registrants listed January 20, 1997
Gary Story above
/s/ JAMES F. DANNHAUSER Chief Financial Officer
- ------------------------------ (Principal Financial January 20, 1997
James F. Dannhauser Officer)
Vice President of the Co-
/s/ RICHARD R. WEBB Registrants listed above
- ------------------------------ (Principal Accounting January 20, 1997
Richard R. Webb Officer)
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, each
of the Co-Registrants listed below have duly caused this Amendment to this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, State of New York, on the 20th day of
January, 1997.
FUNTIME PARKS, INC.
FUNTIME, INC.
WYANDOT LAKE, INC.
DARIEN LAKE THEME PARK
and CAMPING RESORT, INC.
D.L. HOLDINGS, INC.
BY: /S/ KIERAN E. BURKE
-----------------------------------------
Kieran E. Burke
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
Each person whose signature to this Registration Statement appears below
hereby appoints James M. Coughlin and Kieran E. Burke, and each individually,
either of whom may act without the joinder of the other, as his agent and
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all pre- and post-effective amendments to this Registration
Statement (and, in addition, any registration statement filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended, for the offering to which
this Registration Statement relates), which may make such changes and additions
to this Registration Statement as such agent and attorney-in-fact may deem
necessary or appropriate.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment to this Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
Chairman of the Board,
Chief Executive Officer
/s/ KIERAN E. BURKE and Director of the Co-
- ------------------------------ Registrants listed above January 20, 1997
Kieran E. Burke (Principal Executive
Officer)
President, Chief Operating
/s/ GARY STORY Officer and Director of
- ------------------------------ the Co-Registrants listed January 20, 1997
Gary Story above
/s/ JAMES F. DANNHAUSER Chief Financial Officer
- ------------------------------ (Principal Financial January 20, 1997
James F. Dannhauser Officer)
Vice President of the Co-
/s/ JOHN P. GANNON Registrants listed above
- ------------------------------ (Principal Accounting January 20, 1997
John P. Gannon Officer)
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
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<S> <C> <C> <C>
(1) Underwriting Agreements
*(a) Form of Underwriting Agreement among the Registrant, Lehman Brothers Inc., Chase
Securities Inc., Smith Barney Inc., and Furman Selz LLC...................................
(4) Instruments Defining the Rights of Security Holders, Including Indentures:
(a) Indenture dated as of August 15, 1995, among the Registrant, the subsidiaries of the
Registrant named therein and United States Trust Company of New York, as trustee
(including the form of the Existing Notes)--incorporated by reference from Exhibit 4(2) to
Registrant's Registration Statement on Form S-1 (Reg. No. 33-62225) declared effective on
November 9, 1995 (the "Registration Statement")...........................................
(b) Form of First Supplemental Indenture dated as of November 9, 1995-- incorporated by
reference from Exhibit 4(2.1) to the Registration Statement...............................
(c) Purchase Agreement, dated August 10, 1995, among the Registrant, the subsidiaries of the
Registrant named therein and Chemical Securities Inc.-- incorporated by reference from
Exhibit 4(3) to the Registration Statement................................................
(d) Exchange and Registration Rights Agreement, dated August 14, 1995, among the Registrant,
the subsidiaries of the Registrant named therein and Chemical Securities
Inc.--incorporated by reference from Exhibit 4(4) to the Registration Statement...........
(e) Form of Subscription Agreement between the Registrant and each of the purchasers of shares
of Preferred Stock--incorporated by reference from Exhibit 4(10) to the Registration
Statement.................................................................................
(f) Convertible Note Purchase Agreement, dated as of March 3, 1993, between the Registrant and
the purchasers named therein (including forms of Senior Subordinated Convertible Note and
Registration Rights Agreement)-- incorporated by reference from Exhibit 4(i) to Form 10-K
of the Registrant for the year ended December 31, 1993....................................
(g) Form of Subscription Agreement, dated October 1992, between the Registrant and certain
investors--incorporated by reference from Exhibit 4(a) to the Registrant's Current Report
on Form 8-K dated October 30, 1992........................................................
(h) Stock Purchase and Warrant Issuance Agreement, dated October 16, 1989, between the
Registrant and Kieran E. Burke--incorporated by reference from Exhibit 4(i) to Form 10-K
of Registrant for the year ended December 31, 1989........................................
(i) Warrant, dated October 16, 1989, to purchase 131,728 shares of Common Stock issued by the
Registration to Kieran E. Burke--incorporated by reference from Exhibit 4(k) to Form 10-K
of Registrant for the year ended December 31, 1989........................................
(j) Warrant, dated October 16, 1989, to purchase 93.466 shares of Common Stock issued by the
Registrant to Kieran E. Burke--incorporated by reference from Exhibit 4(l) to Form 10-K of
Registrant for the year ended December 31,1989............................................
(k) Form of Common Stock Certificate--incorporated by reference from Exhibit 4(1) to
Registrant's Registration Statement on Form S-2 (Reg. No. 333-08281) declared effective on
May 28, 1996..............................................................................
*(l) Form of Indenture dated as of , 1997, among the Registrant, the subsidiaries of
the Registrant named therein and The Bank of New York, as trustee (including the form of
Notes) ...................................................................................
*(m) Form of Registration Rights Agreement among Registrant, Edward J. Carroll, Jr. and The
Carroll Family Limited Partnership........................................................
*(n) Form of Second Supplemental Indenture dated January 21, 1997..............................
*(5) Opinion of Baer Marks & Upham LLP, including consent......................................
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
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-----
<S> <C> <C> <C>
(10) Material Contracts:
(a) Agreement of Limited Partnership of 229 East 79th Street Associates LP dated July 24,
1987, together with amendments thereto dated, respectively, August 31, 1987, October 31,
1987, and December 31, 1987--incorporated by reference from Exhibit 10(i) to Form 10-K of
Registrant for the year ended December 31, 1987...........................................
(b) Agreement of Limited Partnership of Frontier City Partners Limited Partnership, dated
October 18, 1989, between Frontier City Properties, Inc. as general partner, and the
Registrant and Frontier City Properties, Inc. as limited partners-- incorporated by
reference from Exhibit 10(g) to the Registrant's Current Report on Form 8-K dated October
18, 1989..................................................................................
(c) Asset Purchase Agreement, dated December 10, 1990, between Registrant and Silver Dollar
City, Inc.--incorporated by reference from Exhibit 10(c) to the Registrant's Current
Report on Form 8-K dated February 6, 1991.................................................
(d) Asset Purchase Agreement, dated December 16, 1991, among the Registrant, Tierco Maryland
Inc., John J. Mason and Stuart A. Bernstein--incorporated by reference from Exhibit 10(a)
to the Registrant's Current Report on Form 8-K dated January 31, 1992.....................
(e) Asset Transfer Agreement, dated as of June 30, 1992, by and among the Registrant, B&E
Holding Company and the creditors referred to therein-- incorporated by reference from
Exhibit 10(a) to the Registrant's Current Report on Form 8-K dated July 20, 1992..........
(f) Purchase Agreement, dated September 30, 1992, among the Registrant, Palma Real Estate
Management Company, First Stratford Life Insurance Company and Executive Life Insurance
Company--incorporated by reference from Exhibit 2(a) to the Registrant's Current Report on
Form 8-K dated September 30, 1992.........................................................
(g) Lease Agreement, dated January 18,1993, among Registrant, Frontier City Partners Limited
Partnership and Fitraco N.V.--incorporated by reference from Exhibit 10(k) to Form 10-K of
Registrant for the year ended December 31, 1992...........................................
(h) Lease Agreement, dated January 18, 1993, among Registrant, Tierco Maryland Inc. and
Fitraco N.V.--incorporated by reference from Exhibit 10(l) to Form 10-K of Registrant for
the year ended December 31, 1992..........................................................
(i) Security Agreement and Conditional Sale Contract, between Chance Rides, Inc. and Tierco
Maryland, Inc. and Guaranty of Registrant in favor of Chance Rides, Inc.--incorporated by
reference from Exhibit 10(m) to Form 10-K of Registrant for the year ended December 31,
1992......................................................................................
(j) Registrant's 1993 Stock Option and Incentive Plan--incorporated by reference from Exhibit
10(k) to Form 10-K of Registrant for the year ended December 31, 1993.....................
(k) Agreement and Plan of Merger, dated as of June 30, 1995 among the Registrant, Premier
Parks Acquisition Inc., Funtime parks, Inc. ("Funtime") and its shareholders--incorporated
by reference from Exhibit 10(11) to the Registration Statement............................
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C> <C>
(l) Escrow Agreement, dated as of August 15, 1995, among the Registrant, certain shareholders
of Funtime and First National Bank of Ohio, Trust Division-- incorporated by reference
from Exhibit 10(12) to the Registration Statement.........................................
(m) Consulting Agreement, dated as of August 15, 1995, between Registrant and Bruce E.
Walborn--incorporated by reference from Exhibit 10(13) to the Registration Statement......
(n) Consulting Agreement, dated as of August 15, 1995, between Registrant and Gaspar C.
Lococo--incorporated by reference from Exhibit 10(14) to the Registration Statement ......
(o) Lease Agreement dated December 22, 1995, between Darien Lake Theme Park and Camping
Resort, Inc. and The Metropolitan Entertainment Co., Inc.-- incorporated by reference from
Exhibit 10(o) to Form 10-K of Registrant for the year ended December 31, 1995 ............
(p) Asset Purchase Agreement dated August 23, 1996, among the Registrant, a subsidiary of the
Registrant, Storytown USA, Inc., Fantasy Riders Corporation and Charles R.
Wood--incorporated by reference from Exhibit 10(p) to the Registrant's Registration
Statement on Form S-2 (Reg. No. 333-16573) ...............................................
(q) Asset Purchase Agreement dated September 23, 1996, among the Registrant, a subsidiary of
the Registrant, Elitch Gardens Company, Hensel Phelps Construction Co. and Chilcott
Entertainment Company--incorporated by reference from Exhibit 10(a) to the Company's
Current Report on Form 8-K, dated November 13, 1996 ......................................
(r) Asset Purchase Agreement dated as of October 10, 1996, among the Registrant, a subsidiary
of the Registrant, FRE, Inc. (Family Recreational Enterprises, Inc.) ("FRE") and the
shareholders of FRE listed on the signature page thereof-- incorporated by reference from
Exhibit 10(r) to the Registrant's Registration Statement on Form S-2 (Reg. No.
333-16573) ...............................................................................
(s) Asset Purchase Agreement dated as of October 10, 1996, among the Registrant, a subsidiary
of the Registrant, FRE, Concord Entertainment Company, R&B Entertainment, LLC, the
shareholders of FRE listed on the signature page thereof and the members of R&B listed on
the signature page thereof-- incorporated by reference from Exhibit 10(s) to the
Registrant's Registration Statement on Form S-2 (Reg. No. 333-16573) .....................
(t) Credit Agreement, dated October 30, 1996, between the Registrant and Lehman Commercial
Paper Inc.--incorporated by reference from Exhibit 10(b) to the Company's Current Report
on Form 8-K, dated November 13, 1996 .....................................................
(u) Consulting and Non-Competition Agreement, dated October 30, 1996, between Registrant and
Arnold S. Gurtler--incorporated by reference from Exhibit 10(u) to the Registrant's
Registration Statement on Form S-2 (Reg. No. 333-16573) ..................................
(v) Non-Competition Agreement, dated October 30, 1996, between the Registrant and Ascent
Entertainment Group, Inc.--incorporated by reference from Exhibit 10(v) to the
Registrant's Registration Statement on Form S-2 (Reg. No. 333-16573) .....................
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C> <C>
(w) Consulting Agreement dated as of December 4, 1996 between the Registrant and Charles R.
Wood--incorporated by reference from Exhibit 10(b) to the Registrant's Current Report on
Form 8-K, dated December 13, 1996.........................................................
(x) Non-Competition Agreement dated as of December 4, 1996 between the Registrant and Charles
R. Wood--incorporated by reference from Exhibit 10(c) of the Registrant's Current Report
on Form 8-K, dated December 13, 1996......................................................
(y) Stock Purchase Agreement dated as of December 4, 1996, among the Registrant, Stuart
Amusement Company, Edward J., Carroll, Jr., and The Carroll Family Limited
Partnership--incorporated by reference from Exhibit 23(y) to the Company's Registrant's
Registration Statement on Form S-2 (Reg. No. 333-16573)...................................
</TABLE>
<TABLE>
<S> <C> <C> <C>
(11) Statement re computation of per share earnings............................................
(12) Statement re computation of ratios........................................................
(15) Letter on interim financial information...................................................
</TABLE>
<TABLE>
<S> <C> <C> <C>
(23) Consents:
*(a) Consent of Baer Marks & Upham LLP (included in Exhibit (5))...........
*(b) Consent of KPMG Peat Marwick LLP......................................
*(c) Consent of KPMG Peat Marwick LLP......................................
*(d) Consent of Ernst & Young LLP..........................................
*(e) Consent of Ernst & Young LLP..........................................
*(f) Consent of Nelson & Company...........................................
*(g) Consent of Nelson & Company...........................................
*(h) Consent of KPMG Peat Marwick LLP......................................
</TABLE>
<TABLE>
<S> <C> <C> <C>
*(24) Power of Attorney (filed previously with respect to Premier Parks Inc.; See Pages II-4 and
II-5 with respect to additional Registrants)..............................................
*(25) Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York on
Form T-1 (bound separately)...............................................................
</TABLE>
- ------------------------
* Filed herewith
II-9
<PAGE>
Exhibit 1(a)
$125,000,000
PREMIER PARKS INC.
% SENIOR NOTES DUE 2007
UNDERWRITING AGREEMENT
, 1997
LEHMAN BROTHERS INC.
CHASE SECURITIES INC.
SMITH BARNEY INC.
FURMAN SELZ LLC
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Dear Sirs:
Premier Parks Inc., a Delaware corporation (the "Company"), proposes
to sell $125,000,000 of the Company's % Senior Notes due 2007 (the
"Securities"). The Securities are to be issued pursuant to an indenture to be
dated as of , 1997 (the "Indenture") between the Company
and The Bank of New York, as trustee (the "Trustee"). This is to confirm the
agreement concerning the purchase of the Securities from the Company by the
Underwriters named in Schedule 1 hereto (the "Underwriters").
1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company represents, warrants and agrees that:
(a) A registration statement on Form S-2 (Registration
No. 333-16763), and one or more amendments thereto, with respect to the
Securities have (i) been prepared by the Company in conformity in all
material respects with the requirements of the United States Securities Act
of 1933 (the "Securities Act") and the rules and regulations (the "Rule and
Regulations") of the United States Securities and Exchange Commission (the
"Commission") thereunder, (ii) been filed with the Commission under the
Securities Act and (iii) become effective under the Securities Act. Copies
of such registration statement and amendments
<PAGE>
2
thereto have been delivered by the Company to you as the Underwriters.
Upon your written request, but not without your agreement, the Company will
also file a Rule 462(b) Registration Statement in accordance with
Rule 462(b). As used in this Agreement, "Effective Time" means the date
and the time as of which such registration statement, the most recent
post-effective amendment thereto, if any, or any Rule 462(b) Registration
Statement became or become effective; "Effective Date" means the date of
the Effective Time; "Preliminary Prospectus" means each prospectus included
in such registration statement, or amendments thereof, before it became
effective under the Securities Act and any prospectus filed with the
Commission by the Company with the consent of the Representatives pursuant
to Rule 424(a) of the Rules and Regulations; "Registration Statement" means
such registration statement, as amended at the Effective Time, including
any documents incorporated by reference therein at such time and all
information contained in the final prospectus filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations in accordance with
Section 4(a) hereof and deemed to be a part of the registration statement
as of the Effective Time pursuant to paragraph (b) of Rule 430A of the
Rules and Regulations and, in the event any Rule 462(b) Registration
Statement becomes effective prior to the Delivery Date (as hereinafter
defined), also means such registration statement as so amended, unless the
context otherwise requires; and "Prospectus" means such final prospectus,
as first filed with the Commission pursuant to paragraph (1) or (4) of
Rule 424(b) of the Rules and Regulations; and "Rule 462(b) Registration
Statement" means the registration statement and any amendments thereto
filed pursuant to Rule 462(b) of the Rules and Regulations relating to the
offering covered by the initial Registration Statement (file
number 333-16763). Reference made herein to any Preliminary Prospectus or
to the Prospectus shall be deemed to refer to and include any documents
incorporated by reference therein pursuant to Item 12 of Form S-2 under the
Securities Act, as of the date of such Preliminary Prospectus or the
Prospectus, as the case may be. The Commission has not issued any order
preventing or suspending the use of any Preliminary Prospectus.
(b) The Registration Statement conforms, and the Prospectus, any
further amendments or supplements to the Registration Statement or the
Prospectus and any Rule 462(b) Registration Statement will, when they
become effective or are filed with the Commission, as the case may be,
conform in all material respects to the requirements of the Securities Act
and the Rules and Regulations and do not and will not, as of the applicable
effective date (as to the Registration Statement and any amendment or
supplement thereto) and as of the applicable filing date (as to the
Prospectus and any amendment or supplement thereto) contain an untrue
statement of a material fact or omit to state a material fact
<PAGE>
3
required to be stated therein or necessary to make the statements therein
not misleading; PROVIDED that no representation or warranty is made as to
(i) the Trustee's Statement of Eligibility and Qualification (Form T-1)
under the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"), and (ii) information contained in or omitted from the Registration
Statement or the Prospectus in reliance upon and in conformity with written
information furnished to the Company through the Underwriters by or on
behalf of any Underwriter specifically for inclusion therein. The
Indenture conforms in all respects to the requirements of the Trust
Indenture Act and the rules and regulations of the Commission thereunder.
(c) The documents incorporated by reference in the Prospectus, when
they were filed with the Commission, conformed in all material respects to
the requirements of the Securities Exchange Act of 1934 (the "Exchange
Act") and the rules and regulations of the Commission thereunder, and none
of such documents contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading.
(d) The Company and each of the Subsidiaries (as defined in
Section 14) that is a corporation (a "corporate Subsidiary", and
collectively with all other such subsidiaries, the "corporate
Subsidiaries") have been duly incorporated and are validly existing as
corporations in good standing under the laws of their respective
jurisdictions of incorporation; Frontier City Partners, Limited
Partnership, an Oklahoma limited partnership ("Frontier City Partners"), is
validly existing as a limited partnership in good standing under the laws
of Oklahoma; the Company, the corporate Subsidiaries and Frontier City
Partners are duly qualified to do business and are in good standing as
foreign corporations in each jurisdiction in which their respective
ownership or lease of property or the conduct of their respective
businesses requires such qualification, except where the failure to so
qualify would not have in the aggregate a material adverse effect on the
consolidated financial position, stockholders' equity (or partners' equity,
as applicable), results of operations, business or prospects of the Company
and the Subsidiaries taken as a whole (a "Material Adverse Effect") and
have all corporate or partnership power and authority, as the case may be,
necessary to own or hold their respective properties and to conduct the
businesses in which they are engaged; none of the subsidiaries (as defined
in Rule 405 of the Rules and Regulations) of the Company (other than the
Subsidiaries) is a "significant subsidiary", as such term is defined in
Rule 405 of the Rules and Regulations; and the assets, liabilities and
operations of such other subsidiaries are immaterial
<PAGE>
4
to the assets, liabilities, operations and prospects of the Company and the
Subsidiaries taken as a whole.
(e) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued, are fully paid and
non-assessable and conform to the description thereof contained in the
Prospectus; all of the issued shares of capital stock of each corporate
Subsidiary of the Company have been duly and validly authorized and issued
and are fully paid and non-assessable and, except for Stuart Amusement
Company ("Stuart"), a Massachusetts corporation and owner of Riverside Park
("Riverside Park"), which the Company has agreed to acquire pursuant to the
Stock Purchase Agreement by and among the Company, Stuart, The Carroll
Family Limited Partnership and Edward J. Carroll, Jr. dated December 4,
1996, are owned directly or indirectly by the Company, free and clear of
all liens, encumbrances, equities or claims and 100% of the partnership
interest in Frontier City Partners is held directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or claims
except, in each case, for the liens and encumbrances of the lenders under
the Credit Agreement between the Company and Lehman Commercial Paper Inc.
dated October 30, 1996 (the "New Credit Facility").
(f) The Indenture has been duly authorized, and when duly executed by
the proper officers of the Company (assuming due execution and delivery by
the Trustee) and delivered by the Company, will constitute a valid and
binding agreement of the Company enforceable against the Company in
accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at
law) or an implied covenant of good faith and fair dealing; and the
Securities have been duly authorized, and when duly executed,
authenticated, issued and delivered as provided in the Indenture, will be
duly and validly issued and outstanding and will constitute valid and
binding obligations of the Company entitled to the benefits of the
Indenture and enforceable in accordance with their terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors'
rights generally, general equitable principles (whether considered in a
proceeding in equity or at law) and an implied covenant of good faith and
fair dealing; and the Indenture and the Securities conform to the
descriptions thereof contained in the Prospectus.
<PAGE>
5
(g) This Agreement has been duly authorized, executed and delivered
by the Company.
(h) The execution, delivery and performance of this Agreement, the
Indenture and the Securities by the Company and the consummation of the
transactions contemplated hereby and thereby will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or any of
the Subsidiaries is a party or by which the Company or any of the
Subsidiaries is bound or to which any of the property or assets of the
Company or any of the Subsidiaries is subject, nor will such actions result
in any violation of the provisions of the charter or by-laws of the Company
or any of the Subsidiaries or, assuming that all consents, approvals,
authorizations, registrations or qualifications as may be required under
the Exchange Act and applicable state and foreign securities laws in
connection with the purchase and distribution of the Securities by the
Underwriters are obtained, any statute or any order, rule or regulation of
any court or governmental agency or body having jurisdiction over the
Company or any of the Subsidiaries or any of their properties or assets
except, in each case, breaches, violations or defaults which, in the
aggregate, are not reasonably likely to have a Material Adverse Effect; and
except for the registration of the Securities under the Securities Act and
such consents, approvals, authorizations, registrations or qualifications
as may be required under the Exchange Act and applicable state and foreign
securities laws in connection with the purchase and distribution of the
Securities by the Underwriters, no consent, approval, authorization or
order of, or filing, registration with, any such court or governmental
agency or body is required for the execution, delivery and performance of
this Agreement, the Indenture or the Securities by the Company and the
consummation of the transactions contemplated hereby and thereby.
(i) Except for the Company's agreement to file a registration
statement covering the resale of approximately 40,661 shares of Common
Stock issued in connection with its acquisition of substantially all of the
assets of Storytown USA, Inc. and Fantasy Rides Corporation used in the
operation of The Great Escape and Splashwater Kingdom ("The Great Escape")
on December 4, 1996 and issuable in connection with the Company's
acquisition of Stuart as disclosed in the Company's Registration Statement
on Form S-2 (Registration No. 333-16573), all contracts, agreements or
understandings between the Company and any person granting such person the
right to require the Company to file a registration statement under the
Securities Act with respect to any securities of the Company owned or to be
owned by such person or to require the Company to include such
<PAGE>
6
securities in the securities registered pursuant to the Registration
Statement or in any securities being registered pursuant to any other
registration statement filed by the Company under the Securities Act have
been amended so that such rights will not take effect prior to May 29,
1997.
(j) Neither the Company nor any of the Subsidiaries has sustained,
since the date of the latest audited financial statements included in the
Prospectus, any loss or interference with its business from fire,
explosion, flood, accident or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Prospectus,
except losses or interferences which will not, in the aggregate, have a
Material Adverse Effect; and, since such date, there has not been any
change in the capital stock or long-term debt of the Company or any of the
Subsidiaries or any material adverse change, or any development involving a
prospective material adverse change, in or affecting the general affairs,
management, financial position, stockholders' equity (or partners' equity,
as applicable) or results of operations of the Company and its
Subsidiaries, otherwise than as set forth or contemplated in the
Prospectus.
(k) The historical financial statements (including the related notes
and supporting schedules) filed as part of the Registration Statement or
included in the Prospectus present fairly the financial condition and
results of operations of the entities purported to be shown thereby at the
dates and for the periods indicated, and have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis
throughout the periods involved. The pro forma financial statements
included in the Prospectus have been prepared on a basis consistent with
such historical financial statements, except for the pro forma adjustments
specified therein, and comply in all material respects with Regulation S-X
under the Securities Act, and the pro form adjustments have been properly
applied to historical amounts in the compilation of such pro forma
financial statements.
(l) KPMG Peat Marwick LLP, who have certified certain financial
statements of the Company, The Great Escape and Stuart, Ernst & Young LLP,
who have certified certain financial statements of Funtime Parks, Inc.
("Funtime") and Elitch Gardens Company ("Elitch Gardens") and Nelson &
Company, who have certified certain financial statements of FRE, Inc.
(Family Recreational Enterprises, Inc.) ("FRE") and Concord Entertainment
Company ("Concord"), whose reports appear in the Prospectus and who have
each delivered the respective initial letters referred to in Section 6(f)
hereof, are independent public accountants as required by the Securities
Act and the Rules and Regulations.
<PAGE>
7
(m) The Company and each of the Subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to
all personal property owned by them, in each case free and clear of all
liens, encumbrances and defects except for liens arising under the New
Credit Facility and such liens, encumbrances and defects as are described
in the Prospectus or such as would not have a Material Adverse Effect; and
all real property and buildings held under lease by the Company and the
Subsidiaries are held by them under valid, subsisting and enforceable
leases, with such exceptions as would not have a Material Adverse Effect.
(n) The Company and each of the Subsidiaries carry, or are covered
by, insurance in such amounts and covering such risks as the Company has
reasonably concluded, based on its experience, is adequate for the conduct
of their respective businesses and the value of their respective properties
and as is customary for companies engaged in similar businesses in similar
industries.
(o) The Company and each of the Subsidiaries own or possess adequate
rights to use all material patents, patent applications, trademarks,
service marks, trade names, trademark registrations, service mark
registrations, copyrights and licenses necessary for the conduct of their
respective businesses as presently conducted and have no reason to believe
that the conduct of their respective businesses will conflict with, and
have not received any notice of any claim of conflict with, any such rights
of others.
(p) There are no legal or governmental proceedings pending to which
the Company or any of the Subsidiaries is a party or of which any property
or assets of the Company or any of the Subsidiaries is the subject which,
if determined adversely to the Company or any of the Subsidiaries, might
have a Material Adverse Effect or are otherwise required to be disclosed in
the Prospectus; and to the best of the Company's knowledge, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others.
(q) The conditions for use of Form S-2, as set forth in the General
Instructions thereto, have been satisfied.
(r) There are no contracts or other documents which are required to
be described in the Prospectus or filed as exhibits to the Registration
Statement by the Securities Act or by the Rules and Regulations which have
not been described in the Prospectus or filed as exhibits to the
Registration Statement or incorporated therein by reference as permitted by
the Rules and Regulations.
<PAGE>
8
(s) No relationship, direct or indirect, exists between or among the
Company on the one hand, and the directors, officers, stockholders,
customers or suppliers of the Company on the other hand, which is required
to be described in the Prospectus which is not so described.
(t) No labor disturbance by the employees of the Company exists or,
to the knowledge of the Company, is imminent which might be expected to
have a Material Adverse Effect .
(u) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security
Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in
ERISA) for which the Company would have any liability; the Company has not
incurred and does not expect to incur liability under (i) Title IV of ERISA
with respect to termination of, or withdrawal from, any "pension plan" or
(ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended,
including the regulations and published interpretations thereunder (the
"Code"); and each "pension plan" for which the Company would have any
liability that is intended to be qualified under Section 401(a) of the Code
is so qualified in all material respects and nothing has occurred, whether
by action or by failure to act, which might reasonably be expected to cause
the loss of such qualification.
(v) The Company and each of the Subsidiaries are in compliance in all
material respects with (i) all presently applicable provisions of the
Occupational Safety and Health Act of 1970, as amended, including all
applicable regulations thereunder and (ii) all presently applicable
material state and local laws and regulations relating to the safety of its
theme park and water park operations.
(w) The Company has filed all federal, state and local income and
franchise tax returns required to be filed through the date hereof other
than those filings being contested in good faith, and has paid all taxes of
which it has notice are due thereon, other than those being contested in
good faith and for which adequate reserves have been provided or those
currently payable without penalty or interest and no tax deficiency has
been determined adversely to the Company or any of the Subsidiaries which
has had, nor does the Company have any knowledge of any tax deficiency
which, if determined adversely to the Company or any of the Subsidiaries,
might have, a Material Adverse Effect.
<PAGE>
9
(x) Since the date as of which information is given in the Prospectus
through the date hereof, and except as may otherwise be disclosed in the
Prospectus, the Company has not (i) issued or granted any securities,
(ii) incurred any material liability or obligation, direct or contingent,
other than liabilities and obligations which were incurred in the ordinary
course of business, (iii) entered into any material transaction not in the
ordinary course of business or (iv) declared or paid any dividend on its
capital stock.
(y) The Company (i) makes and keeps accurate books and records and
(ii) maintains internal accounting controls sufficient to provide
reasonable assurance that (A) transactions are executed in accordance with
management's authorization, (B) transactions are recorded as necessary to
permit preparation of its financial statements in conformity with generally
accepted accounting principles and to maintain accountability for its
assets, (C) access to its assets is permitted only in accordance with
management's authorization and (D) the recorded accountability for its
assets is compared with existing assets at reasonable intervals.
(z) Neither the Company nor any of the Subsidiaries (i) is in
violation of its charter or by-laws (or its partnership agreement, as
applicable), (ii) is in default in any material respect, and no event has
occurred which, with notice or lapse of time or both, would constitute such
a default, in the due performance or observance of any term, covenant or
condition contained in any material indenture, mortgage, deed of trust,
loan agreement or other material agreement or instrument to which it is a
party or by which it is bound or to which any of its properties or assets
is subject or (iii) is in violation in any material respect of any material
law, ordinance, governmental rule, regulation or court decree to which it
or its property or assets may be subject or has failed to obtain any
material license, permit, certificate, franchise or other governmental
authorization or permit necessary to the ownership of its property or to
the conduct of its business.
(aa) Neither the Company nor any of the Subsidiaries, nor, to its
knowledge, any director, officer, agent, employee or other person
associated with or acting on behalf of the Company or any of the
Subsidiaries, has used any corporate or partnership funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating to
political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the Foreign Corrupt
Practices Act of 1977; or made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment.
<PAGE>
10
(ab) There has been no storage, disposal, generation, manufacture,
refinement, transportation, handling or treatment of toxic wastes, medical
wastes, hazardous wastes or hazardous substances by the Company or any of
the Subsidiaries (or, except as disclosed in the Registration Statement, to
the knowledge of the Company, any of their predecessors in interest) at,
upon or from any of the property now or previously owned or leased by the
Company or the Subsidiaries in violation of any applicable law, ordinance,
rule, regulation, order, judgment, decree or permit or which would require
remedial action under any applicable law, ordinance, rule, regulation,
order, judgment, decree or permit, except for any violation or remedial
action which would not have, or could not be reasonably likely to have,
singularly or in the aggregate with all such violations and remedial
actions, a Material Adverse Effect; there has been no material spill,
discharge, leak, emission, injection, escape, dumping or release of any
kind onto such property or into the environment surrounding such property
of any toxic wastes, medical wastes, solid wastes, hazardous wastes or
hazardous substances due to or caused by the Company or any of the
Subsidiaries or, except as disclosed in the Registration Statement, with
respect to which the Company or any of the Subsidiaries have knowledge,
except for any such spill, discharge, leak, emission, injection, escape,
dumping or release which would not have or would not be reasonably likely
to have, singularly or in the aggregate with all such spills, discharges,
leaks, emissions, injections, escapes, dumpings and releases, a Material
Adverse Effect; and the terms "hazardous wastes", "toxic wastes",
"hazardous substances" and "medical wastes" shall have the meanings
specified in any applicable local, state, federal and foreign laws or
regulations with respect to environmental protection.
(ac) Neither the Company nor any Subsidiary is an "investment
company" within the meaning of such term under the Investment Company Act
of 1940 and the rules and regulations of the Commission thereunder.
2. PURCHASE OF THE SECURITIES BY THE UNDERWRITERS. On the basis of
the representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, the Company agrees to issue and to sell to the
several Underwriters and each of the Underwriters, severally and not jointly,
agrees to purchase the principal amount of the Securities set opposite that
Underwriter's name in Schedule 1 hereto at a purchase price equal to % of
the principal amount thereof, plus accrued interest, if any, from 1997.
The Company shall not be obligated to deliver any of the Securities to
be delivered except upon payment for all the Securities to be purchased as
provided herein.
<PAGE>
11
3. DELIVERY OF AND PAYMENT FOR THE SECURITIES. Delivery of and
payment for the Securities shall be made at the office of Cravath, Swaine &
Moore, Worldwide Plaza, 825 Eighth Avenue, New York, NY 10019, at 10:00 A.M.,
New York City time, on the third full business day following the date of this
Agreement or at such other date or place as shall be determined by agreement
between the Underwriters and the Company. This date and time are sometimes
referred to as the "Delivery Date." On the Delivery Date, the Company shall
deliver or cause to be delivered the Securities to the Underwriters for the
account of each Underwriter against payment to or upon the order of the Company
of the purchase price by wire transfer in immediately available funds. Time
shall be of the essence (except that the Company will not be responsible for any
delay resulting from any action or inaction of any Underwriter) and delivery at
the time and place specified pursuant to this Agreement is a further condition
of the obligations of each Underwriter hereunder. Upon delivery, the Securities
shall be registered in such names and in such denominations as the
Representatives shall request in writing not less than two full business days
prior to the Delivery Date. For the purpose of expediting the checking and
packaging of the certificates for the Securities, the Company shall make the
certificates representing the Securities available for inspection by the
Underwriters in New York, New York, not later than 2:00 P.M., New York City
time, on the business day prior to the Delivery Date.
4. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees:
(a) To prepare the Prospectus in a form approved by the Underwriters
and to file such Prospectus pursuant to Rule 424(b) under the Securities
Act not later than Commission's close of business on the second business
day following the execution and delivery of this Agreement or, if
applicable, such earlier time as may be required by Rule 430A(a)(3) under
the Securities Act; to make no further amendment or any supplement to the
Registration Statement or to the Prospectus and to file no Rule 462(b)
Registration Statement except as permitted herein; to advise the
Underwriters, promptly after it receives notice thereof, of the time when
any amendment to the Registration Statement has been filed or becomes
effective or any supplement to the Prospectus or any amended Prospectus has
been filed and to furnish the Underwriters with copies thereof; upon your
request, to cause the Rule 462(b) Registration Statement, properly
completed, to be filed with the Commission pursuant to Rule 462(b) and to
provide evidence satisfactory to the Underwriters of such filing; to advise
the Underwriters, promptly after it receives notice thereof, of the
issuance by the Commission of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus, of the
suspension of the qualification of the Securities for offering or sale in
any jurisdiction, of the initiation or threatening of any proceeding for
any such purpose, or of any request
<PAGE>
12
by the Commission for the amending or supplementing of the Registration
Statement or the Prospectus or for additional information; and, in the
event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus or
suspending any such qualification, to use promptly its reasonable best
efforts to obtain its withdrawal;
(b) To furnish reasonably promptly to each of the Underwriters and to
counsel for the Underwriters a signed copy of the Registration Statement as
originally filed with the Commission, each amendment thereto and any
Rule 462(b) Registration Statement filed with the Commission, including all
consents and exhibits filed therewith;
(c) To deliver promptly to the Underwriters such number of the
following documents as the Underwriters shall reasonably request:
(i) conformed copies of the Registration Statement as originally filed with
the Commission, each amendment thereto (in each case excluding exhibits
other than this Agreement and the computation of per share earnings) and
any Rule 462(b) Registration Statement, (ii) each Preliminary Prospectus,
the Prospectus and any amended or supplemented Prospectus and (iii) any
document incorporated by reference in the Prospectus (excluding exhibits
thereto); and, if the delivery of a prospectus is required at any time
after the Effective Time in connection with the offering or sale of the
Securities or any other securities relating thereto and if at such time any
events shall have occurred as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made when such Prospectus is delivered, not misleading, or, if for any
other reason it shall be necessary to amend or supplement the Prospectus or
to file under the Exchange Act any document incorporated by reference in
the Prospectus in order to comply with the Securities Act or the Exchange
Act, to notify the Underwriters and, upon their request, to file such
document and to prepare and furnish without charge to each Underwriter and
to any dealer in securities as many copies as the Underwriters may from
time to time reasonably request of an amended or supplemented Prospectus
which will correct such statement or omission or effect such compliance.
(d) To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the
Prospectus that may, in the judgment of the Company or the Underwriters, be
required by the Securities Act or requested by the Commission;
<PAGE>
13
(e) Prior to filing with the Commission any amendment to the
Registration Statement or supplement to the Prospectus, any document
incorporated by reference in the Prospectus, any Prospectus pursuant to
Rule 424 of the Rules and Regulations or any Rule 462(b) Registration
Statement to furnish a copy thereof to the Underwriters and counsel for the
Underwriters and obtain the consent of the Underwriters to the filing;
(f) As soon as practicable after the Effective Date (it being
understood that the Company shall have until at least 410 days after the
end of the Company's current fiscal quarter), to make generally available
to the Company's security holders and to deliver to the Underwriters an
earnings statement of the Company and its subsidiaries (which need not be
audited) complying with Section 11(a) of the Securities Act and the Rules
and Regulations (including, at the option of the Company, Rule 158);
(g) For a period of five years following the Effective Date, to
furnish to the Underwriters copies of all materials furnished by the
Company to its public shareholders and all public reports and all reports
and financial statements furnished by the Company to the principal national
securities exchange upon which the Securities may be listed pursuant to
requirements of or agreements with such exchange or to the Commission
pursuant to the Exchange Act or any rule or regulation of the Commission
thereunder;
(h) Promptly from time to time to take such action as the
Underwriters may reasonably request to qualify the Securities for offering
and sale (or obtain an exemption from registration) under the securities
laws of such jurisdictions as the Underwriters may request and to comply
with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to complete
the distribution of the Securities; provided, however, that the Company
shall not be required to qualify as a foreign corporation or a dealer in
securities or to execute a general consent to service of process in any
jurisdiction in any action other than one arising out of the offering or
sale of the Securities;
(i) To apply the net proceeds from the sale of the Securities being
sold by the Company as set forth in the Prospectus; and
(j) To take such steps as shall be necessary to ensure that neither
the Company nor any subsidiary shall become an "investment company" within
the meaning of such term under the Investment Company Act of 1940 and the
rules and regulations of the Commission thereunder.
<PAGE>
14
5.EXPENSES. The Company agrees to pay (a) the costs incident to the
authorization, issuance, sale and delivery of the Securities and any taxes
payable in that connection; (b) the costs incident to the preparation, printing
and filing under the Securities Act of the Registration Statement and any
amendments and exhibits thereto and the preparation, printing and filing under
the Trust Indenture Act of the Indenture and the Statement of Eligibility and
Qualification of the Trustee on Form T-1; (c) the costs of distributing the
Registration Statement as originally filed and each amendment thereto and any
post-effective amendments thereof (including, in each case, exhibits), any
Preliminary Prospectus, the Prospectus and any amendment or supplement to the
Prospectus or any document incorporated by reference therein, all as provided in
this Agreement; (d) the costs of producing and distributing this Agreement, the
Indenture and any other related documents in connection with the offering,
purchase, sale and delivery of the Securities; (e) the filing fees incident to
securing any required review by the National Association of Securities Dealers,
Inc. of the terms of sale of the Securities; (f) any applicable listing or other
fees; (g) the fees and expenses of qualifying the Securities under the
securities laws of the several jurisdictions as provided in Section 4(h) and of
preparing, printing and distributing a Blue Sky Memorandum (including related
fees and expenses of counsel to the Underwriters); (h) all fees and expenses of
in its capacity as a qualified independent underwriter;
(i) the fees and expenses of the Trustee and any agent of the Trustee and the
fees and disbursements of any counsel for the Trustee in connection with the
Indenture and the Securities; (j) any fees or expenses charged by securities
rating services for rating the Securities; (k) the costs of preparing
certificates representing the Securities; and (l) all other costs and expenses
incident to the performance of the obligations of the Company under this
Agreement; PROVIDED that, except as provided in this Section 5 and in
Section 10, the Underwriters shall pay their own costs and expenses, including
the costs and expenses of their counsel, any transfer taxes on the Securities
which they may sell and the expenses of advertising any offering of the
Securities made by the Underwriters.
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The respective
obligations of the Underwriters hereunder are subject to the accuracy, when made
and on the Delivery Date, of the representations and warranties of the Company
contained herein, to the performance by the Company of its obligations
hereunder, and to each of the following additional terms and conditions:
(a) The Prospectus shall have been timely filed with the Commission
in accordance with Section 4(a); no stop order suspending the effectiveness
of the Registration Statement or any part thereof shall have been issued
and no proceeding for that purpose shall have been initiated or threatened
by the Commission; and any request of the Commission for inclusion of
additional
<PAGE>
15
information in the Registration Statement or the Prospectus or otherwise
shall have been complied with.
(b) No Underwriter shall have discovered and disclosed to the Company
on or prior to the Delivery Date that the Registration Statement or the
Prospectus or any amendment or supplement thereto contains an untrue
statement of a fact which, in the opinion of Cravath, Swaine & Moore,
counsel for the Underwriters, is material or omits to state a fact which,
in the opinion of such counsel, is material and is required to be stated
therein or is necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(c) All corporate proceedings and other legal matters incident to the
authorization, form and validity of this Agreement, the Indenture, the
Securities, the Registration Statement and the Prospectus, and all other
legal matters relating to this Agreement and the transactions contemplated
hereby shall be reasonably satisfactory in all material respects to counsel
for the Underwriters, and the Company shall have furnished to such counsel
all documents and information that they may reasonably request to enable
them to pass upon such matters.
(d) Baer Marks & Upham LLP shall have furnished to the Underwriters
its written opinion, as counsel to the Company, addressed to the
Underwriters and dated the Delivery Date, in form reasonably satisfactory
to the Underwriters, to the effect that:
(i) The Company and each of its corporate Subsidiaries have been
duly incorporated and are validly existing as corporations in good
standing under the laws of their respective jurisdictions of
incorporation; Frontier City Partners is validly existing as a limited
partnership in good standing under the laws of Oklahoma; and the
Company, the corporate Subsidiaries and Frontier City Partners are
duly qualified to do business and are in good standing as foreign
corporations in each jurisdiction in which their respective ownership
or lease of property or the conduct of their respective businesses
requires such qualification except where the failure to so qualify
would not have a Material Adverse Effect and have all corporate or
partnership power and authority necessary to own or hold their
respective properties and conduct the businesses in which they are
engaged as described in the Prospectus;
(ii) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of
the Company
<PAGE>
16
now outstanding have been duly and validly authorized and issued, are
fully paid and non-assessable and conform to the description thereof
contained in the Prospectus; to such counsel's knowledge, all of the
issued shares of capital stock of each corporate Subsidiary of the
Company have been duly and validly authorized and issued and are fully
paid, non-assessable and are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or
claims, except for liens or encumbrances arising under the New Credit
Facility; and 100% of the partnership interest in Frontier City
Partners is held directly or indirectly by the Company, free and clear
of all liens, encumbrances, equities or claims, except for liens and
encumbrances arising under the New Credit Facility;
(iii) The Indenture has been duly authorized, executed and
delivered by the Company, and, assuming due authorization, execution
and delivery thereof by the Trustee, constitutes a valid and legally
binding instrument of the Company enforceable against the Company in
accordance with its terms, (A) subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or effecting creditors' rights
generally and general equitable principles (whether considered in a
proceeding in equity or at law) and (B) except that the remedy of
specific performance and other forms of equitable relief may be
subject to certain equitable defenses and to the discretion of the
court before which proceedings may be brought;
(iv) The Securities have been duly authorized, executed, issued
and delivered by the Company, and assuming due authentication thereof
by the Trustee and upon payment and delivery in accordance with this
Agreement, will constitute valid and legally binding obligations of
the Company, enforceable against the Company in accordance with their
terms and entitled to the benefits of the Indenture, (A) subject to
the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally and general equitable principles
(whether considered in a proceeding in equity or at law) and
(B) except that the remedy of specific performance and other forms of
equitable relief may be subject to certain equitable defenses and to
the discretion of the court before which proceedings may be brought;
(v) The Indenture and the Securities conform in all material
respects to the statements concerning them in the Prospectus;
<PAGE>
17
(vi) To the best of such counsel's knowledge and other than as
set forth in the Prospectus, there are no legal or governmental
proceedings pending to which the Company or any of the Subsidiaries is
a party or of which any property or assets of the Company or any of
the Subsidiaries is the subject which, if determined adversely to the
Company or any of the Subsidiaries, might have a Material Adverse
Effect; and, to the best of such counsel's knowledge, no such
proceedings are threatened or contemplated by governmental authorities
or threatened by others;
(vii) Based solely upon oral confirmation from the staff of the
Commission, the Registration Statement was declared effective under
the Securities Act as of the date and time specified in such opinion;
the Prospectus was filed with the Commission pursuant to the
subparagraph of Rule 424(b) of the Rules and Regulations specified in
such opinion on the date specified therein and no stop order
suspending the effectiveness of the Registration Statement has been
issued and, to the knowledge of such counsel, no proceeding for that
purpose is pending or threatened by the Commission;
(viii) The Registration Statement and the Prospectus and any
further amendments or supplements thereto made by the Company prior to
the Delivery Date (other than the financial statements and related
schedules therein and other financial or statistical data included
therein, as to which such counsel need express no opinion) comply as
to form in all material respects with the requirements of the
Securities Act and the Rules and Regulations; and the documents
incorporated by reference in the Prospectus (other than the financial
statements and related schedules therein and other financial or
statistical data included therein, as to which such counsel need
express no opinion), when they were filed with the Commission,
complied as to form in all material respects with the requirements of
the Exchange Act and the rules and regulations of the Commission
thereunder;
(ix) To the best of such counsel's knowledge, there are no
contracts or other documents which are required to be described in the
Prospectus or filed as exhibits to the Registration Statement by the
Securities Act or by the Rules and Regulations which have not been
described or filed as exhibits to the Registration Statement or
incorporated therein by reference as permitted by the Rules and
Regulations;
<PAGE>
18
(x) This Agreement has been duly authorized, executed and
delivered by the Company;
(xi) The issue and sale of the Securities being delivered on
the Delivery Date by the Company and the compliance by the Company
with all of the provisions of this Agreement, the Indenture and the
Securities will not conflict with or result in a breach or violation
of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument known to such counsel to which the Company or
any of the Subsidiaries is a party or by which the Company or any of
the Subsidiaries is bound or to which any of the property or assets of
the Company or any of the Subsidiaries is subject, nor will such
actions result in any violation of the provisions of the charter or
by-laws of the Company or any of the Subsidiaries or, assuming that
all consents, approvals, authorizations, registrations or
qualifications as may be required under the Exchange Act and
applicable state or foreign securities laws in connection with the
purchase and distribution of the Securities by the Underwriters are
obtained, any Federal or New York State statute, the Delaware General
Corporation Law, or any order, rule or regulation known to such
counsel of any court or governmental agency or body having
jurisdiction over the Company or any of the Subsidiaries or any of
their properties or assets; and, except for the registration of the
Securities under the Securities Act and such consents, approvals,
authorizations, registrations or qualifications as may be required
under the Exchange Act and applicable state or foreign securities laws
in connection with the purchase and distribution of the Securities by
the Underwriters, no consent, approval, authorization or order of, or
filing or registration with, any such court or governmental agency or
body is required for the execution, delivery and performance of this
Agreement, the Indenture and the Securities by the Company and the
consummation of the transactions contemplated hereby; and
(xii) Except for the Company's agreement to file a registration
statement covering the resale of approximately 40,662 shares of Common
Stock issued in connection with its acquisition of The Great Escape
and issuable in connection with its acquisition of Stuart as disclosed
in the Company's Registration Statement on Form S-2 (Registration
No. 333-16573), to the best of such counsel's knowledge, all
contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the
<PAGE>
19
Company owned or to be owned by such person or to require the Company
to include such securities in the securities registered pursuant to
the Registration Statement or in any securities being registered
pursuant to any other registration statement filed by the Company
under the Securities Act have been amended so that such rights will
not take effect prior to May 29, 1997.
In rendering such opinion, such counsel may state that its opinion is
limited to matters governed by the Federal laws of the United States of
America, the laws of the State of New York and the General Corporation Law
of the State of Delaware and that such counsel is not admitted in the
States of Delaware, Ohio, Oklahoma, Colorado, California or Massachusetts;
and, in respect of matters of fact, may rely upon certificates of officers
of the Company or the Subsidiaries, PROVIDED that such counsel shall state
that it believes that both the Underwriters and it are justified in relying
upon such certificates. Such counsel shall also have furnished to the
Underwriters a written statement, addressed to the Underwriters and dated
the Delivery Date, in form satisfactory to the Underwriters, to the effect
that (x) such counsel has acted as counsel to the Company on a regular
basis (although the Company is also represented with respect to litigation
matters, regulatory matters and certain other matters, by other outside
counsel), has acted as counsel to the Company in connection with financing
transactions since February 1992 and has acted as counsel to the Company in
connection with the preparation of the Registration Statement, and
(y) based on the foregoing, no facts have come to the attention of such
counsel which lead it to believe that (I) the Registration Statement (other
than the financial statements and other financial and statistical data
contained therein, as to which such counsel need express no belief), as of
the Effective Date, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein not misleading, or that the
Prospectus (other than the financial statements and other financial and
statistical data contained therein, as to which such counsel need express
no belief) contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which
they were made, not misleading or (II) any documents incorporated by
reference in the Prospectus (other than the financial statements and other
financial and statistical data contained therein, as to which such counsel
need express no belief) when they were filed with the Commission contained
an untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The foregoing
opinion and statement may be qualified by a statement
<PAGE>
20
to the effect that such counsel does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus except for the statements made in
the Prospectus under the captions "Description of Securities" and
"Description of Indebtedness", insofar as such statements relate to the
Securities or concern legal matters.
(e) The Underwriters shall have received from Cravath, Swaine &
Moore, counsel for the Underwriters, such opinion or opinions and such
statement or statements, dated the Delivery Date, with respect to the
issuance and sale of the Securities, the Registration Statement, the
Prospectus and other related matters as the Underwriters may reasonably
require, and the Company shall have furnished to such counsel such
documents as they reasonably request for the purpose of enabling them to
pass upon such matters.
(f) At the time of execution of this Agreement, the Underwriters
shall have received from (I) KPMG Peat Marwick LLP a letter, in form and
substance satisfactory to the Underwriters, addressed to the Underwriters
and dated the date hereof (i) confirming that they are independent public
accountants within the meaning of the Securities Act and are in compliance
with the applicable requirements relating to the qualification of
accountants under Rule 2-01 of Regulation S-X of the Commission and
(ii) stating, as of the date hereof (or, with respect to matters involving
changes or developments since the respective dates as of which specified
financial information is given in the Prospectus, as of a date not more
than five days prior to the date hereof), the conclusions and findings of
such firm with respect to the financial information and other matters
ordinarily covered by accountants' "comfort letters" to underwriters in
connection with registered public offerings, except for the financial
information and other matters covered in the letters from KPMG Peat Marwick
LLP, Ernst & Young LLP and Nelson & Company described immediately
hereinafter; from (II) KPMG Peat Marwick LLP a letter, in form and
substance satisfactory to the Underwriters, addressed to the Underwriters
and dated the date hereof (i) confirming that they are independent
accountants within the meaning of the Securities Act and are in compliance
with the applicable requirements relating to the qualification of
accountants under Rule 2-01 of Regulation S-X of the Commission and
(ii) stating, as of the date hereof, the conclusions and findings of such
firm with respect to certain financial information and other matters
relating to The Great Escape as have been previously agreed to by such firm
and the Underwriters; from (III) KPMG Peat Marwick LLP a letter, in form
and substance satisfactory to the Underwriters, addressed to the
Underwriters and dated the date hereof (i) confirming that they are
independent accountants within the meaning of the Securities Act and are in
compliance with the applicable requirements relating to
<PAGE>
21
the qualification of accountants under Rule 2-01 of Regulation S-X of
the Commission and (ii) stating, as of the date hereof, the
conclusions and findings of such firm with respect to certain
financial information and other matters relating to Stuart Amusement
Company and its subsidiaries as have been previously agreed to by such
firm and the Underwriters; from (IV) Ernst & Young LLP a letter, in
form and substance satisfactory to the Representatives, addressed to
the Underwriters and dated the date hereof (i) confirming that they
are independent accountants within the meaning of the Securities Act
and are in compliance with the applicable requirements relating to the
qualification of accountants under Rule 2-01 of Regulation S-X of the
Commission and (ii) stating, as of the date hereof, the conclusions
and findings of such firm with respect to certain financial
information and other matters relating to Funtime and its subsidiaries
as have been previously agreed to by such firm and the Underwriters;
from (V) Ernst & Young LLP a letter, in form and substance
satisfactory to the Underwriters, addressed to the Underwriters and
dated the date hereof (i) confirming that they are independent
accountants within the meaning of the Securities Act and are in
compliance with the applicable requirements relating to the
qualification of accountants under Rule 2-01 of Regulation S-X of the
Commission and (ii) stating, as of the date hereof, the conclusions
and findings of such firm with respect to certain financial
information and other matters relating to Elitch Gardens as have been
previously agreed to by such firm and the Underwriters; and from
(VI) Nelson & Company a letter, in form and substance satisfactory to
the Underwriters, addressed to the Underwriters and dated the date
hereof (i) confirming that they are independent accountants within the
meaning of the Securities Act and are in compliance with the
applicable requirements relating to the qualification of accountants
under Rule 2-01 of Regulation S-X of the Commission and (ii) stating,
as of the date hereof, the conclusions and findings of such firm with
respect to certain financial information and other matters relating to
FRE and Concord, as have been previously agreed to by such firm and
the Representatives.
(g) With respect to the letters of KPMG Peat Marwick LLP,
Ernst & Young LLP and Nelson & Company referred to in the preceding
paragraph and delivered to the Underwriters concurrently with the
execution of this Agreement (the "initial letters"), the Company shall
have furnished to the Representatives a letter (the "bring-down
letters") of each of such accountants, addressed to the Underwriters
and dated the Delivery Date (i) confirming that they are independent
public accountants within the meaning of the Securities Act and are in
compliance with the applicable requirements relating to the
qualification of accountants under Rule 2-01 of Regulation S-X of the
Commission, (ii) stating, as of the date of the bring-down letter (or,
in the case of the letter of KPMG Peat Marwick LLP, with
<PAGE>
22
respect to matters involving changes or developments since the
respective dates as of which specified financial information is given
in the Prospectus, as of a date not more than five days prior to the
date of the bring-down letter), the conclusions and findings of such
firm with respect to the financial information and other matters
covered by the initial letter and (iii) confirming in all material
respects the conclusions and findings set forth in the initial letter.
(h) The Company shall have furnished to the Underwriters a
certificate, dated the Delivery Date, of its Chairman of the Board, its
President or a Vice President and its chief financial officer stating that:
(i) The representations, warranties and agreements of
the Company in Section 1 are true and correct as of such
Delivery Date; the Company has complied with all its
agreements contained herein; and the conditions set forth in
Sections 6(a) and 6(i) have been fulfilled; and
(ii) They have carefully examined the Registration
Statement and the Prospectus and, in their opinion (A) as of
the Effective Date, the Registration Statement and
Prospectus did not include any untrue statement of a
material fact and did not omit to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading, and (B) since the
Effective Date no event has occurred which should have been
set forth in a supplement or amendment to the Registration
Statement or the Prospectus.
(i) Since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus there shall
not have been any change in the capital stock (or partners' equity, as
applicable) or long-term debt of the Company or any of the
Subsidiaries or any change, or any development involving a prospective
change, in or affecting the general affairs, management, financial
position, stockholders' equity (or partners' equity, as applicable) or
results of operations of the Company and its subsidiaries, otherwise,
in each case, than as set forth or contemplated in the Prospectus, the
effect of which, in any such case, is, in the judgment of the
Representatives, so material (to the Company and its Subsidiaries,
taken as a whole) and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Securities being delivered on the Delivery Date on the terms and in
the manner contemplated in the Prospectus.
(j) Subsequent to the execution and delivery of this Agreement
(i) no downgrading shall have occurred in the rating accorded the
Securities or any of
<PAGE>
23
the Company's other debt securities by any "nationally recognized
statistical rating organization", as that term is defined by the
Commission for purposes of Rule 436(g)(2) of the Rules and Regulations
and (ii) no such organization shall have publicly announced that it
has under surveillance or review, with possible negative implications,
its rating of the Securities or any of the Company's other debt
securities.
(k) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i) trading in
securities generally on the New York Stock Exchange or the American
Stock Exchange or in the over-the-counter market, or trading in any
securities of the Company on any exchange or in the over-the-counter
market, shall have been suspended or minimum prices shall have been
established on any such exchange or such market by the Commission, by
such exchange or by any other regulatory body or governmental
authority having jurisdiction, (ii) a banking moratorium shall have
been declared by Federal or state authorities, (iii) the United States
shall have become engaged in hostilities, there shall have been an
escalation in hostilities involving the United States or there shall
have been a declaration of a national emergency or war by the United
States or (iv) there shall have occurred such a material adverse
change in general economic, political or financial conditions (or the
effect of international conditions on the financial markets in the
United States shall be such) as to make it, in the judgment of a
majority in interest of the several Underwriters, impracticable or
inadvisable to proceed with the public offering or delivery of the
Securities being delivered on the Delivery Date on the terms and in
the manner contemplated in the Prospectus.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and scope reasonably satisfactory to
counsel for the Underwriters.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company shall indemnify and hold harmless each Underwriter
(including any Underwriter in its role as qualified independent underwriter
pursuant to the rules of the National Association of Securities Dealers, Inc.),
its officers and employees and each person, if any, who controls any Underwriter
within the meaning of the Securities Act, from and against any loss, claim,
damage or liability, joint or several, or any action in respect thereof
(including, but not limited to, any loss, claim, damage, liability or action
relating to purchases and sales of Securities), to which that Underwriter,
officer, employee or controlling person may become subject, under the
<PAGE>
24
Securities Act or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained (A) in any Preliminary Prospectus,
the Registration Statement or the Prospectus or in any amendment or supplement
thereto or (B) in any blue sky application or other document prepared or
executed by the Company (or based upon any written information furnished by the
Company) specifically for the purpose of qualifying any or all of the Securities
under the securities laws of any jurisdiction (any such application, document or
information being hereinafter called a "Blue Sky Application"), (ii) the
omission or alleged omission to state in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or in any amendment or supplement
thereto, or in any Blue Sky Application any material fact required to be stated
therein or necessary to make the statements therein not misleading or (iii) any
act or failure to act or any alleged act or failure to act by any Underwriter in
connection with, or relating in any manner to, the Securities or the offering
contemplated hereby, and which is included as part of or referred to in any
loss, claim, damage, liability or action arising out of or based upon matters
covered by clause (i) or (ii) above (PROVIDED that the Company shall not be
liable under this clause (iii) to the extent that it is determined in a final
judgment by a court of competent jurisdiction that such loss, claim, damage,
liability or action resulted directly from any such acts or failures to act
undertaken or omitted to be taken by such Underwriter through its gross
negligence or willful misconduct), and shall reimburse each Underwriter and each
such officer, employee or controlling person promptly upon demand for any legal
or other expenses reasonably incurred by that Underwriter, officer, employee or
controlling person in connection with investigating or defending or preparing to
defend against any such loss, claim, damage, liability or action as such
expenses are incurred; PROVIDED, HOWEVER, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, any untrue statement or alleged untrue
statement or omission or alleged omission made in any Preliminary Prospectus,
the Registration Statement or the Prospectus, or in any such amendment or
supplement, or in any Blue Sky Application, in reliance upon and in conformity
with written information concerning any Underwriter furnished to the Company
through the Underwriters by or on behalf of any Underwriter specifically for
inclusion therein; and PROVIDED FURTHER that with respect to any such untrue
statement or omission made in the Preliminary Prospectus, the indemnity
agreement contained in this Section 7(a) shall not enure to the benefit of the
Underwriter from whom the person asserting any such losses, claims, damages or
liabilities purchased the Securities concerned if, to the extent that such sale
was an initial sale by such Underwriter and any such loss, claim, damage or
liability of such Underwriter is a result of the fact that both (A) a copy of
the Prospectus was not sent or given to such person at or prior to the written
confirmation of the sale of such Securities to such person, and (B) the untrue
statement or omission in the Preliminary Prospectus was corrected in the
Prospectus unless, in either case, such failure to deliver the Prospectus was a
result of
<PAGE>
25
noncompliance by the Company with Section 4(c). The foregoing indemnity
agreement is in addition to any liability which the Company may otherwise have
to any Underwriter or to any officer, employee or controlling person of that
Underwriter.
The Company also will indemnify and hold harmless the Independent
Underwriter, its officers and employees and each person, if any, who controls
the Independent Underwriter within the meaning of the Securities Act, from and
against any and all losses, claims, damages, liabilities and judgments incurred
as a result of the Independent Underwriter's participation as a "qualified
independent underwriter" within the meaning of Rule 2720 of the Conduct Rules of
the National Association of Securities Dealers, Inc. in connection with the
offering of the Securities, except for any losses, claims, damages, liabilities
and judgments resulting from the Independent Underwriter's or such controlling
person's willful misconduct or gross negligence.
(b) Each Underwriter, severally and not jointly, shall indemnify and
hold harmless the Company, its officers and employees, each of its directors,
and each person, if any, who controls the Company within the meaning of the
Securities Act, from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof, to which the Company or any such
director, officer or controlling person may become subject, under the Securities
Act or otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged untrue
statement of a material fact contained (A) in any Preliminary Prospectus, the
Registration Statement or the Prospectus or in any amendment or supplement
thereto, or (B) in any Blue Sky Application or (ii) the omission or alleged
omission to state in any Preliminary Prospectus, the Registration Statement or
the Prospectus, or in any amendment or supplement thereto, or in any Blue Sky
Application any material fact required to be stated therein or necessary to make
the statements therein not misleading, but in each case only to the extent that
the untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information concerning
such Underwriter furnished to the Company through the Underwriters by or on
behalf of that Underwriter specifically for inclusion therein, and shall
reimburse the Company and any such director, officer or controlling person for
any legal or other expenses reasonably incurred by the Company or any such
director, officer or controlling person in connection with investigating or
defending or preparing to defend against any such loss, claim, damage, liability
or action as such expenses are incurred. The foregoing indemnity agreement is
in addition to any liability which any Underwriter may otherwise have to the
Company or any such director, officer, employee or controlling person.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of any claim or the commencement of any action, the
indemnified party shall,
<PAGE>
26
if a claim in respect thereof is to be made against the indemnifying party under
this Section 7, notify the indemnifying party in writing of the claim or the
commencement of that action; PROVIDED, HOWEVER, that the failure to notify the
indemnifying party shall not relieve it from any liability which it may have
under this Section 7 except to the extent it has been materially prejudiced by
such failure and, PROVIDED FURTHER, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have to an
indemnified party otherwise than under this Section 7. If any such claim or
action shall be brought against an indemnified party, and it shall notify the
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 7 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; PROVIDED, HOWEVER, that
the Underwriters shall have the right, upon written notice to the Company, to
employ counsel to represent jointly the Underwriters and their respective
officers, employees and controlling persons who may be subject to liability
arising out of any claim in respect of which indemnity may be sought by the
Underwriters against the Company under this Section 7 if, in the reasonable
judgment of the Underwriters it is advisable for the Underwriters and those
officers, employees and controlling persons to be jointly represented by
separate counsel, and in that event the reasonable fees and expenses of such
separate counsel shall be paid by the Company. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm of attorneys (in
addition to any local counsel) at any one time for all such indemnified party or
parties; PROVIDED HOWEVER, that, if indemnity is sought pursuant to the second
paragraph of Section 7(a), then, in addition to such counsel for the indemnified
parties, the indemnifying party shall be liable for the reasonable fees and
expenses of not more than one separate counsel (in addition to any necessary
local counsel) for the Independent Underwriter in its capacity as a "qualified
independent underwriter," its officers and employees and all persons, if any,
who control the Independent Underwriter within the meaning of the Securities
Act, if, in the reasonable judgment of the Independent Underwriter there may
exist a conflict or interest between the Independent Underwriter and the other
indemnified parties. In the case of any such separate counsel for the
Independent Underwriter and such control persons of the Independent Underwriter,
such counsel shall be designated in writing by the Independent Underwriter. No
indemnifying party shall (i) without the prior written consent of the
indemnified parties (which consent shall not be unreasonably withheld), settle
or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in
<PAGE>
27
respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified parties are actual or potential parties to such
claim or action) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising out
of such claim, action, suit or proceeding, or (ii) be liable for any settlement
of any such action effected without its written consent (which consent shall not
be unreasonably withheld), but if settled with the consent of the indemnifying
party or if there be a final judgment of the plaintiff in any such action, the
indemnifying party agrees to indemnify and hold harmless any indemnified party
from and against any loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 7 shall for
any reason be unavailable to or insufficient to hold harmless an indemnified
party under Section 7(a) or 7(c) in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriters on the other from
the offering of the Securities or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company on the one hand and the Underwriters on
the other with respect to the statements or omissions which resulted in such
loss, claim, damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other with respect to such
offering shall be deemed to be in the same proportion as the total net proceeds
from the offering of the Securities purchased under this Agreement (before
deducting expenses) received by the Company on the one hand, and the total
underwriting discounts and commissions received by the Underwriters with respect
to the shares of the Securities purchased under this Agreement, on the other
hand, bear to the total gross proceeds from the offering of the shares of the
Securities under this Agreement, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault shall be determined by
reference to whether the untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or the Underwriters, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and the Underwriters agree that
will not receive any additional benefits hereunder for serving as
the Independent Underwriter in connection with the offering and sale of the
Securities. The Company and the Underwriters agree that it would not be just
and equitable if contributions pursuant to this Section 7(d) were to be
determined by pro rata allocation (even if the Underwriters were
<PAGE>
28
treated as one entity for such purpose) or by any other method of allocation
which does not take into account the equitable considerations referred to
herein. The amount paid or payable by an indemnified party as a result of the
loss, claim, damage or liability, or action in respect thereof, referred to
above in this Section shall be deemed to include, for purposes of this
Section 7(d), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 7(d), no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities underwritten by it and distributed to the
public was offered to the public exceeds the amount of any damages which such
Underwriter has otherwise paid or become liable to pay by reason of any untrue
or alleged untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations to
contribute as provided in this Section 7(d) are several in proportion to their
respective underwriting obligations and not joint.
(e) The Underwriters severally confirm and the Company acknowledges
that the statements with respect to the public offering of the Securities by the
Underwriters set forth on the cover page of, the legend concerning
over-allotments on the second page of and the concession and reallowance figures
appearing under the caption "Underwriting" in, the Prospectus constitute the
only information concerning such Underwriters furnished in writing to the
Company by or on behalf of the Underwriters specifically for inclusion in the
Registration Statement and the Prospectus.
8. DEFAULTING UNDERWRITERS.
If, on the Delivery Date, any Underwriter defaults in the performance
of its obligations under this Agreement, the remaining non-defaulting
Underwriters shall be obligated to purchase the Securities which the defaulting
Underwriter agreed but failed to purchase on the Delivery Date in the respective
proportions which the principal amount of Securities set opposite the name of
each remaining non-defaulting Underwriter in Schedule 1 hereto bears to the
aggregate principal amount of Securities set opposite the names of all the
remaining non-defaulting Underwriters in Schedule 1 hereto; PROVIDED, HOWEVER,
that the remaining non-defaulting Underwriters shall not be obligated to
purchase any of the Securities on the Delivery Date if the aggregate principal
amount of the Securities which the defaulting Underwriter or Underwriters agreed
but failed to purchase on such date exceeds 9.09% of the Securities to be
purchased on the Delivery Date, and any remaining non-defaulting Underwriter
shall not be obligated to purchase more than 110% of the principal amount of
Securities which it agreed to purchase on the Delivery Date pursuant to the
terms of Section 2. If the foregoing maximums are
<PAGE>
29
exceeded, the remaining non-defaulting Underwriters, or those other underwriters
satisfactory to the Underwriters who so agree, shall have the right, but shall
not be obligated, to purchase, in such proportion as may be agreed upon among
them, all the Securities to be purchased on the Delivery Date. If the remaining
Underwriters or other underwriters satisfactory to the Representatives do not
elect to purchase the Securities which the defaulting Underwriter or
Underwriters agreed but failed to purchase on the Delivery Date, this Agreement
shall terminate without liability on the part of any non-defaulting Underwriter
or the Company, except that the Company will continue to be liable for the
payment of expenses to the extent set forth in Section 5. As used in this
Agreement, the term "Underwriter" includes, for all purposes of this Agreement
unless the context requires otherwise, any party not listed in Schedule 1 hereto
who, pursuant to this Section 8, purchases Securities which a defaulting
Underwriter agreed but failed to purchase.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have to the Company for damages caused by its default. If
other underwriters are obligated or agree to purchase the Securities of a
defaulting or withdrawing Underwriter, either the Underwriters or the Company
may postpone the Delivery Date for up to seven full business days in order to
effect any changes that in the opinion of counsel for the Company or counsel for
the Underwriters may be necessary in the Registration Statement, the Prospectus
or in any other document or arrangement.
9. TERMINATION. The obligations of the Underwriters hereunder may be
terminated by the Underwriters by notice given to and received by the Company
prior to delivery of and payment for the Securities if, prior to that time, any
of the events described in Sections 6(j), 6(k) or 6(l) shall have occurred or if
the Underwriters shall decline to purchase the Securities for any reason
permitted under this Agreement.
10. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If the Company shall
fail to tender the Securities for delivery to the Underwriters by reason of any
failure, refusal or inability on the part of the Company to perform any
agreement on its part to be performed, or because any other condition of the
Underwriters' obligations hereunder required to be fulfilled by the Company is
not fulfilled (other than by reason of any events described in Section 6(l)
except for the suspension of trading or minimum prices of the securities of the
Company), the Company will reimburse the Underwriters for all reasonable
out-of-pocket expenses (including fees and disbursements of counsel) incurred by
the Underwriters in connection with this Agreement and the proposed purchase of
the Securities, and promptly following demand the Company shall pay the full
amount thereof to the Underwriters. If this Agreement is terminated pursuant to
Section 8 by
<PAGE>
30
reason of the default of one or more Underwriters, the Company shall not be
obligated to reimburse any defaulting Underwriter on account of those expenses.
11. NOTICES, ETC. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Underwriters, shall be delivered or sent by mail,
telex or facsimile transmission to Lehman Brothers Inc., Three World
Financial Center, New York, New York 10285, Attention: Syndicate
Department (Fax: 212-526-6588), with a copy, in the case of any
notice pursuant to Section 8(c), to the Director of Litigation, Office
of the General Counsel, Lehman Brothers Inc., 3 World Financial
Center, 10th Floor, New York, NY 10285;
(b) if to the Company, shall be delivered or sent by mail, telex
or facsimile transmission to 122 East 42nd Street, 49th Floor,
New York, NY 10168, Attention: Kieran E. Burke (Fax: 212-949-6203);
PROVIDED, HOWEVER, that any notice to a Underwriter pursuant to Section 7(c)
shall be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its acceptance telex to the
Underwriters, which address will be supplied to any other party hereto by the
Underwriters upon request. Any such statements, requests, notices or agreements
shall take effect at the time of receipt thereof. The Company shall be entitled
to act and rely upon any request, consent, notice or agreement given or made on
behalf of the Underwriters by Lehman Brothers Inc.
12. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of and be binding upon the Underwriters, the Company, and
their respective successors. This Agreement and the terms and provisions hereof
are for the sole benefit of only those persons, except that (A) the
representations, warranties, indemnities and agreements of the Company contained
in this Agreement shall also be deemed to be for the benefit of the officers and
employees of each Underwriter and the person or persons, if any, who control any
Underwriter within the meaning of Section 15 of the Securities Act and (B) the
indemnity agreement of the Underwriters contained in Section 7(b) of this
Agreement shall be deemed to be for the benefit of directors of the Company,
officers of the Company who have signed the Registration Statement and any
person controlling the Company within the meaning of Section 15 of the
Securities Act. Nothing in this Agreement is intended or shall be construed to
give any person, other than the persons referred to in this Section 12, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision contained herein.
<PAGE>
31
13. SURVIVAL. The respective indemnities, representations, warranties
and agreements of the Company and the Underwriters contained in this Agreement
or made by or on behalf of them, respectively, pursuant to this Agreement, shall
survive the delivery of and payment for the Securities and shall remain in full
force and effect, regardless of any investigation made by or on behalf of any of
them or any person controlling any of them.
14. DEFINITION OF THE TERMS "BUSINESS DAY" AND "SUBSIDIARY". For
purposes of this Agreement, (a) "business day" means any day on which the New
York Stock Exchange, Inc. is open for trading and (b) "Subsidiary" means each of
Funtime Parks, Inc., an Ohio corporation, Funtime, Inc., an Ohio corporation,
Wyandot Lake, Inc., an Ohio corporation, Darien Lake Theme Park and Camping
Resort, Inc., a New York corporation, Tierco Maryland, Inc., a Delaware
corporation, Tierco Water Park, Inc., an Oklahoma corporation, Frontier City
Properties, Inc., an Oklahoma corporation, Frontier City Partners, Limited
Partnership, an Oklahoma limited partnership, and Stuart Amusement
Company, a Massachusetts corporation (collectively, the "Subsidiaries").
15. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF NEW YORK.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
17. HEADINGS. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
<PAGE>
32
If the foregoing correctly sets forth the agreement between the
Company and the Underwriters, please indicate your acceptance in the space
provided for that purpose below.
Very truly yours,
PREMIER PARKS INC.
By
--------------------------------
Name:
Title:
Accepted:
LEHMAN BROTHERS INC.
CHASE SECURITIES INC.
SMITH BARNEY INC.
FURMAN SELZ LLC
By LEHMAN BROTHERS INC.
By
---------------------
Authorized Representative
<PAGE>
Schedule 1
Principal Amount
Underwriters of Securities
- ------------ ---------------
Lehman Brothers Inc. . . . . . . . . . . . . . . . . .
Chase Securities . . . . . . . . . . . . . . . . . . .
Smith Barney Inc. . . . . . . . . . . . . . . . . . .
Furman Selz LLC . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . $125,000,000
<PAGE>
EXHIBIT 4(l)
___________________________________________________________________
___________________________________________________________________
PREMIER PARKS INC.
% Senior Notes Due 2007
------------------------
INDENTURE
Dated as of , 1997
------------------------
THE BANK OF NEW YORK,
Trustee
___________________________________________________________________
___________________________________________________________________
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
310(a)(1) .............................. 7.10
(a)(2) .............................. 7.10
(a)(3) .............................. N.A.
(a)(4) .............................. N.A.
(b) .............................. 7.08; 7.10
(c) .............................. N.A.
311(a) .............................. 7.11
(b) .............................. 7.11
(c) .............................. N.A.
312(a) .............................. 2.05
(b) .............................. 11.03
(c) .............................. 11.03
313(a) .............................. 7.06
(b)(1) .............................. N.A.
(b)(2) .............................. 7.06
(c) .............................. 11.02
(d) .............................. 7.06
314(a) .............................. 4.02;
4.09; 11.02
(b) .............................. N.A.
(c)(1) .............................. 11.04
(c)(2) .............................. 11.04
(c)(3) .............................. N.A.
(d) .............................. N.A.
(e) .............................. 11.05
(f) .............................. 4.10
315(a) .............................. 7.01
(b) .............................. 7.05; 11.02
(c) .............................. 7.01
(d) .............................. 7.01
(e) .............................. 6.11
316(a)(last sentence) .......................... 11.06
(a)(1)(A) .............................. 6.05
(a)(1)(B) .............................. 6.04
(a)(2) .............................. N.A.
(b) .............................. 6.07
317(a)(1) .............................. 6.08
(a)(2) .............................. 6.09
(b) .............................. 2.04
318(a) .............................. 11.01
N.A. means Not Applicable.
Note: This Cross-Reference Table shall not, for any purpose, be deemed
to be part of the Indenture.
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 PAGE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions ..................................... 1
SECTION 1.02. Other Definitions ................................ 24
SECTION 1.03. Incorporation by Reference of Trust
Indenture Act .................................. 24
SECTION 1.04. Rules of Construction ............................ 25
ARTICLE 2
THE SECURITIES
SECTION 2.01. Form and Dating .................................. 26
SECTION 2.02. Execution and Authentication ..................... 27
SECTION 2.03. Registrar and Paying Agent ....................... 28
SECTION 2.04. Paying Agent To Hold Money in Trust............... 29
SECTION 2.05. Securityholder Lists ............................. 29
SECTION 2.06. Transfer and Exchange ............................ 29
SECTION 2.07. Replacement Securities ........................... 34
SECTION 2.08. Outstanding Securities ........................... 34
SECTION 2.09. Temporary Securities ............................. 35
SECTION 2.10. Cancellation ..................................... 36
SECTION 2.11. Defaulted Interest ............................... 36
SECTION 2.12. CUSIP Numbers .................................... 36
ARTICLE 3
REDEMPTION
SECTION 3.01. Notices to Trustee ............................... 37
SECTION 3.02. Selection of Securities To Be
Redeemed ....................................... 37
SECTION 3.03. Notice of Redemption ............................. 37
SECTION 3.04. Effect of Notice of Redemption ................... 38
SECTION 3.05. Deposit of Redemption Price ...................... 39
SECTION 3.06. Securities Redeemed in Part ...................... 39
<PAGE>
2
PAGE
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Securities ............................ 39
SECTION 4.02. SEC Reports ...................................... 40
SECTION 4.03. Limitation on Indebtedness ....................... 40
SECTION 4.04. Limitation on Restricted Payments ................ 42
SECTION 4.05. Limitation on Restrictions on Dis-
tributions from Subsidiaries ................... 44
SECTION 4.06. Limitation on Sales of Assets and
Subsidiary Stock ............................... 45
SECTION 4.07. Limitation on Transactions with
Affiliates ..................................... 50
SECTION 4.08. Change of Control ................................ 51
SECTION 4.09. Compliance Certificate ........................... 52
SECTION 4.10. Further Instruments and Acts ..................... 52
SECTION 4.11. Limitation on Liens .............................. 53
SECTION 4.12. Limitation on Sale/Leaseback
Transactions ................................... 53
SECTION 4.13. Limitation on Lines of Business .................. 53
SECTION 4.14. Future Note Guarantors ........................... 53
SECTION 4.15. Limitation on Sale or Issuance of Capital
Stock of Restricted Subsidiaries ............... 53
ARTICLE 5
SUCCESSOR COMPANY
SECTION 5.01. When Company May Merge or Transfer
Assets ......................................... 54
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default ................................ 55
SECTION 6.02. Acceleration ..................................... 58
SECTION 6.03. Other Remedies ................................... 58
SECTION 6.04. Waiver of Past Defaults .......................... 59
SECTION 6.05. Control by Majority .............................. 59
SECTION 6.06. Limitation on Suits .............................. 59
SECTION 6.07. Rights of Holders To Receive Payment ............. 60
<PAGE>
3
PAGE
SECTION 6.08. Collection Suit by Trustee ...................... 60
SECTION 6.09. Trustee May File Proofs of Claim ................. 60
SECTION 6.10. Priorities ....................................... 60
SECTION 6.11. Undertaking for Costs ............................ 61
SECTION 6.12. Waiver of Stay or Extension Laws ................. 61
ARTICLE 7
TRUSTEE
SECTION 7.01. Duties of Trustee ................................ 62
SECTION 7.02. Rights of Trustee ................................ 63
SECTION 7.03. Individual Rights of Trustee ..................... 64
SECTION 7.04. Trustee's Disclaimer ............................. 64
SECTION 7.05. Notice of Defaults ............................... 64
SECTION 7.06. Reports by Trustee to Holders .................... 65
SECTION 7.07. Compensation and Indemnity ....................... 65
SECTION 7.08. Replacement of Trustee ........................... 66
SECTION 7.09. Successor Trustee by Merger ...................... 67
SECTION 7.10. Eligibility; Disqualification .................... 68
SECTION 7.11. Preferential Collection of Claims
Against Company ................................ 68
ARTICLE 8
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Discharge of Liability on Securities;
Defeasance ..................................... 68
SECTION 8.02. Conditions to Defeasance ......................... 69
SECTION 8.03. Application of Trust Money ....................... 71
SECTION 8.04. Repayment to Company ............................. 71
SECTION 8.05. Indemnity for Government
Obligations .................................... 71
SECTION 8.06. Reinstatement ................................... 71
ARTICLE 9
AMENDMENTS
SECTION 9.01. Without Consent of Holders ....................... 72
SECTION 9.02. With Consent of Holders .......................... 73
SECTION 9.03. Compliance with Trust Indenture .................. 74
<PAGE>
4
PAGE
SECTION 9.04. Revocation and Effect of Consents
and Waivers .................................... 74
SECTION 9.05. Notation on or Exchange of
Securities ..................................... 74
SECTION 9.06. Trustee To Sign Amendments ...................... 75
SECTION 9.07. Payment for Consent .............................. 75
ARTICLE 10
NOTE GUARANTEES
SECTION 10.01. Note Guarantees ................................ 75
SECTION 10.02. Limitation on Liability ........................ 78
SECTION 10.03. Successors and Assigns ......................... 78
SECTION 10.04. No Waiver ...................................... 78
SECTION 10.05. Modification ................................... 78
SECTION 10.06. Execution of Supplemental Indenture
for Future Note Guarantors .................... 79
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act Controls ................... 79
SECTION 11.02. Notices ........................................ 79
SECTION 11.03. Communication by Holders with Other
Holders ....................................... 80
SECTION 11.04. Certificate and Opinion as to
Conditions Precedent .......................... 80
SECTION 11.05. Statements Required in Certificate
or Opinion .................................... 81
SECTION 11.06. When Securities Disregarded .................... 81
SECTION 11.07. Rules by Trustee, Paying Agent and
Registrar ..................................... 81
SECTION 11.08. Legal Holidays ................................. 81
SECTION 11.09. Governing Law .................................. 82
SECTION 11.10. No Recourse Against Others ..................... 82
SECTION 11.11. Successors ..................................... 82
SECTION 11.12. Multiple Originals ............................. 82
SECTION 11.13. Table of Contents; Headings .................... 82
Exhibit A - Form of Security
Exhibit B - Form of Supplemental Indenture
<PAGE>
INDENTURE dated as of , 1997, among PREMIER PARKS INC.,
a Delaware corporation (the "Company"); FUNTIME PARKS, INC., an
Ohio corporation, FUNTIME, INC., an Ohio corporation, WYANDOT
LAKE, INC., an Ohio corporation, DARIEN LAKE THEME PARK AND
CAMPING RESORT, INC., a New York corporation, D.L. HOLDINGS,
INC., an Ohio corporation, TIERCO MARYLAND, INC., a Delaware
corporation, TIERCO WATER PARK, INC., an Oklahoma corporation,
FRONTIER CITY PROPERTIES, INC., an Oklahoma corporation,
FRONTIER CITY PARTNERS, Limited Partnership, an Oklahoma limited
partnership, (collectively, the "Note Guarantors"); and THE BANK
OF NEW YORK, a New York corporation (the "Trustee").
Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the Holders of the Company's % Senior
Notes due 2007 (the "Securities"):
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock of
a Person that becomes a Restricted Subsidiary as a result of the acquisition of
such Capital Stock by the Company or another Restricted Subsidiary or
(iii) Capital Stock constituting a minority interest in any Person that at such
time is a Restricted Subsidiary; PROVIDED, HOWEVER, that any such Restricted
Subsidiary described in clauses (ii) or (iii) above is primarily engaged in a
Related Business.
"Affiliate" of any specified Person means (i) any other Person,
directly or indirectly, controlling or controlled by or under direct or indirect
common control with such specified Person or (ii) any Person who is a director
or executive officer (a) of such Person, (b) of any
<PAGE>
2
Subsidiary of such Person or (c) of any Person described in clause (i) above.
For the purposes of this definition, "control" when used with respect to any
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and controlled" have meanings
correlative to the foregoing. For purposes of Section 4.06 and 4.07 only,
"Affiliate" shall also mean any beneficial owner of shares representing 5% or
more of the total voting power of the Voting Stock (on a fully diluted basis) of
the Company or of rights or warrants to purchase such Voting Stock (whether or
not currently exercisable) and any Person who would be an Affiliate of any such
beneficial owner pursuant to the first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other
disposition of shares of Capital Stock of a Restricted Subsidiary (other than
directors' qualifying shares), property or other assets (each referred to for
the purposes of this definition as a "disposition") by the Company or any of its
Restricted Subsidiaries (including any disposition by means of a merger,
consolidation or similar transaction) other than (i) a disposition by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Wholly Owned Subsidiary, (ii) a disposition of inventory in the
ordinary course of business, (iii) a disposition of all or substantially the
assets of the Company permitted by Section 5.01 and (iv) for purposes of
Section 4.06 only, a disposition that constitutes a Restricted Payment permitted
by Section 4.04.
"Asset Value" of any asset, as of the date of determination thereof,
means the greater of the depreciated book value (as of the end of the fiscal
quarter ended immediately prior to such date of determination as to which
financial statements are available) and the appraised value of such asset;
PROVIDED, HOWEVER, that any such appraisal (i) shall not have been made more
than two years prior to such date of determination and (ii) shall have been made
by a qualified, independent and nationally recognized appraiser.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means,
as at the time of determination, the present value (discounted at the interest
rate borne by the Securities, compounded annually) of the total obligations of
the lessee for rental payments during the remaining term of
<PAGE>
3
the lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"Average Life" means, as of the date of determination, with respect to
any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the
sum of the products of numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board.
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to close.
"Capital Lease Obligation" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Change of Control" means the occurrence of any of the following
events:
(i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than one or more Permitted Holders,
is or becomes the beneficial owner (as defined in Rules 13d-3 and
13d-5 under the Exchange Act, except that a person shall be deemed to
have "beneficial ownership" of all shares
<PAGE>
4
that any such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly
or indirectly, of more than 35% of the Voting Stock of the Company;
PROVIDED that the Permitted Holders beneficially own (as so defined),
directly or indirectly, in the aggregate a lesser percentage of the
Voting Stock of the Company than such other Person and do not have the
right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors of the
Company;
(ii) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Board of Directors
(together with any new directors whose election by such Board of
Directors or whose nomination for election by shareholders of the
Company was approved by a vote of a majority of the directors of the
Company then still in office who were either directors at the
beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a
majority of the Board of Directors then in office; or
(iii) the merger or consolidation of the Company with or into
another Person or the merger of another Person with or into the
Company, or the sale of all or substantially all the assets of the
Company to another Person (in each case, other than a Person that is
controlled by the Permitted Holders), and, in the case of any such
merger or consolidation, the securities of the Company that are
outstanding immediately prior to such transaction and which represent
100% of the aggregate voting power of the Voting Stock of the Company
are changed into or exchanged for cash, securities or property, unless
pursuant to such transaction such securities are changed into or
exchanged for, in addition to any other consideration, securities of
the surviving corporation that represent immediately after such
transaction, at least a majority of the aggregate voting power of the
Voting Stock of the surviving corporation.
"Code" means the Internal Revenue Code of 1986, as amended.
<PAGE>
5
"Company" means Premier Parks Inc. until a successor replaces it and
succeeds to and assumes its obligations under this Indenture and thereafter
means the successor and, for purposes of any provision contained herein and
required by the TIA, each other obligor on the indenture securities.
"Consolidated Coverage Ratio" as of any date of determination means
the ratio of (i) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters ending prior to the date of such
determination as to which financial statements are available to
(ii) Consolidated Interest Expense for such four fiscal quarters; PROVIDED,
HOWEVER, that (1) if the Company or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains outstanding on such
date of determination or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both,
EBITDA and Consolidated Interest Expense for such period shall be calculated
after giving effect on a pro forma basis to such Indebtedness as if such
Indebtedness had been Incurred on the first day of such period and the discharge
of any other Indebtedness repaid, repurchased, defeased or otherwise discharged
with the proceeds of such new Indebtedness as if such discharge had occurred on
the first day of such period, (2) if since the beginning of such period the
Company or any Restricted Subsidiary shall have made any Asset Disposition, the
EBITDA for such period shall be reduced by an amount equal to the EBITDA (if
positive) directly attributable to the assets which are the subject of such
Asset Disposition for such period, or increased by an amount equal to the EBITDA
(if negative), directly attributable thereto for such period and Consolidated
Interest Expense for such period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Indebtedness of the
Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise
discharged with respect to the Company and its continuing Restricted
Subsidiaries in connection with such Asset Disposition for such period (or, if
the Capital Stock of any Restricted Subsidiary is sold, the Consolidated
Interest Expense for such period directly attributable to the Indebtedness of
such Restricted Subsidiary to the extent the Company and its continuing
Restricted Subsidiaries are no longer liable for such Indebtedness after such
sale), (3) if since the beginning of such period the Company or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment in any
<PAGE>
6
Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary) or
an acquisition of assets, including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made hereunder, which
constitutes all or substantially all of an operating unit of a business, EBITDA
and Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto (including the Incurrence of any Indebtedness)
as if such Investment or acquisition occurred on the first day of such period,
(4) if since the beginning of such period the Company or any Restricted
Subsidiary shall have repaid, repurchased, defeased or otherwise discharged any
Indebtedness, pursuant to the terms of this Indenture, with the Net Cash
Proceeds received by the Company from the issuance or sale of its Capital Stock
(other than Disqualified Stock and other than an issuance or sale to a
Subsidiary of the Company and other than an issuance or sale to an employee
stock ownership plan or other trust established by the Company or any of its
Subsidiaries for the benefit of their employees to the extent the purchase by
such plan or trust is financed by Indebtedness of such plan or trust and for
which the Company is liable as Guarantor or otherwise), EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving effect on a
pro forma basis to such discharge of Indebtedness as if such discharge had
occurred on the first day of such period, and (5) if since the beginning of such
period any Person (that subsequently became a Restricted Subsidiary or was
merged with or into the Company or any Restricted Subsidiary since the beginning
of such period) shall have made any Asset Disposition, any Investment or
acquisition of assets that would have required an adjustment pursuant to
clause (2) or (3) above if made by the Company or a Restricted Subsidiary during
such period, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto as if such Asset Disposition,
Investment or acquisition occurred on the first day of such period. For
purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto, and
the amount of Consolidated Interest Expense associated with any Indebtedness
Incurred in connection therewith, the pro forma calculations shall be determined
in good faith by a responsible financial or accounting Officer of the Company.
If any Indebtedness bears a floating rate of interest and is being given pro
forma effect, the interest of such Indebtedness shall be calculated as if the
rate in effect on the date of
<PAGE>
7
determination had been the applicable rate for the entire period (taking into
account any Interest Rate Agreement applicable to such Indebtedness if such
Interest Rate Agreement has a remaining term as at the date of determination in
excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its Consolidated Restricted Subsidiaries,
plus, to the extent not included in such total interest expense, and to the
extent incurred by the Company or its Restricted Subsidiaries, (i) interest
expense attributable to Capital Lease Obligations, (ii) amortization of debt
discount, (iii) capitalized interest, (iv) non-cash interest expenses,
(v) commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing, (vi) net costs associated
with Hedging Obligations (including amortization of fees), (vii) Preferred Stock
dividends in respect of all Preferred Stock of Subsidiaries of the Company and
Disqualified Stock of the Company held by Persons other than the Company or a
Wholly Owned Subsidiary, (viii) interest accruing on any Indebtedness of any
other Person to the extent such Indebtedness is Guaranteed by the Company or any
Restricted Subsidiary; PROVIDED that payment of such amounts by the Company or
any Restricted Subsidiary is being made to, or is sought by, the holders of such
Indebtedness pursuant to such guarantee, and (ix) the cash contributions to any
employee stock ownership plan or similar trust to the extent such contributions
are used by such plan or trust to pay interest or fees to any Person (other than
the Company) in connection with Indebtedness Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income (loss)
of the Company and its Consolidated Subsidiaries; PROVIDED, HOWEVER, that there
shall not be included in such Consolidated Net Income: (i) any net income
(loss) of any Person if such Person is not a Restricted Subsidiary, except that
(A) subject to the limitations contained in clause (iv) below, the Company's
equity in the net income of any such Person for such period shall be included in
such Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Person during such period to the Company or a Restricted
Subsidiary as a dividend or other distribution (subject, in the case of a
dividend or other distribution paid to a Restricted Subsidiary, to the
limitations contained in clause (iii) below) and (B) the Company's equity in a
net loss of any
<PAGE>
8
such Person (other than an Unrestricted Subsidiary) for such period shall be
included in determining such Consolidated Net Income, up to the aggregate amount
of cash actually contributed or advanced to such Person by the Company or its
Restricted Subsidiaries during or with respect to such Period; (ii) any net
income (loss) of any Person acquired by the Company or a Subsidiary in a pooling
of interests transaction for any period prior to the date of such acquisition;
(iii) any net income of any Restricted Subsidiary if such Restricted Subsidiary
is subject at such time to restrictions, directly or indirectly, on the payment
of dividends or the making of distributions by such Restricted Subsidiary,
directly or indirectly, to the Company, except that (A) subject to the
limitations contained in clause (iv) below, the Company's equity in the net
income of any such Restricted Subsidiary for such period shall be included in
such Consolidated Net Income up to the aggregate amount of cash that could have
been distributed by such Restricted Subsidiary during such period to the Company
or another Restricted Subsidiary as a dividend or other distribution (subject,
in the case of a dividend or other distribution that could have been made to
another Restricted Subsidiary, to the limitation contained in this clause) and
(B) the Company's equity in a net loss of any such Restricted Subsidiary for
such period shall be included in determining such Consolidated Net Income;
(iv) any gain (but not loss) realized upon the sale or other disposition of any
property, plant or equipment of the Company or its Consolidated Subsidiaries
(including pursuant to any Sale/Leaseback Transaction) which is not sold or
otherwise disposed of in the ordinary course of business and any gain (but not
loss) realized upon the sale or other disposition of any Capital Stock of any
Person; (v) extraordinary gains (but not losses); and (vi) the cumulative effect
of a change in accounting principles. Notwithstanding the foregoing, for the
purposes of Section 4.04 only, there shall be excluded from Consolidated Net
Income any dividends, repayments of loans or advances or other transfers of
assets from Unrestricted Subsidiaries to the Company or a Restricted Subsidiary
to the extent such dividends, repayments or transfers increase the amount of
Restricted Payments permitted under such section pursuant to clause (a)(3)(D)
thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and the Restricted Subsidiaries, determined on a
Consolidated basis in accordance with GAAP, as of the end of the most recent
<PAGE>
9
fiscal quarter of the Company ending prior to the taking of any action for the
purpose of which the determination is being made as to which financial
statements are available, as (i) the par or stated value of all outstanding
Capital Stock of the Company plus (ii) paid-in capital or capital surplus
relating to such Capital Stock plus (iii) any retained earnings or earned
surplus less (A) any accumulated deficit and (B) any amounts attributable to
Disqualified Stock.
"Consolidation" means the consolidation of the amounts of each of the
Restricted Subsidiaries with those of the Company in accordance with GAAP
consistently applied; PROVIDED, HOWEVER, that "Consolidation" shall not include
consolidation of the accounts of any Unrestricted Subsidiary, but the interest
of the Company or any Restricted Subsidiary in an Unrestricted Subsidiary shall
be accounted for as an Investment. The term "Consolidated" has a correlative
meaning.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Definitive Securities" means certificated Securities in the form of
Exhibit A attached hereto that do not include the Global Securities Legend
thereon.
"Depository" means, with respect to the Securities issuable or issued
in whole or in part in global form, The Depository Trust Company, until a
successor shall have been appointed and become such pursuant to the applicable
provisions of this Indenture, and thereafter, "Depository" shall mean or include
such successor.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable or exercisable) or upon the
happening of any event (i) matures or is mandatorily redeemable pursuant to a
sinking fund obligation or otherwise, (ii) is convertible or exchangeable for
Indebtedness or Disqualified Stock or (iii) is redeemable at
<PAGE>
10
the option of the holder thereof, in whole or in part, in the case of
clauses (i), (ii) or (iii) on or prior to the first anniversary of the Stated
Maturity of the Securities.
"East 79th Street Partnership Agreement" means the Agreement of
229 East 79th Street Associates, dated July 24, 1987, as amended to the Issue
Date.
"EBITDA" for any period means the Consolidated Net Income for such
period, plus the following to the extent deducted in calculating such
Consolidated Net Income: (i) all income tax expense of the Company,
(ii) Consolidated Interest Expense, (iii) depreciation expense and
(iv) amortization expense, in each case for such period. Notwithstanding the
foregoing, the provision for taxes based on the income or profits of, and the
depreciation and amortization and other non-cash charges of, a Restricted
Subsidiary of the Company shall be added to Consolidated Net Income to compute
EBITDA only to the extent (and in the same proportion) that the net income of
such Subsidiary was included in calculating Consolidated Net Income and only if
a corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Restricted Subsidiary without prior approval
(that has not been obtained), pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to such Restricted Subsidiary or its
stockholders.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
["Exchangeable Preferred Stock" means up to 220,000 shares of the
Company's Series A Redeemable Exchangeable Preferred Stock, which will be issued
to fund the cash portion of the Purchase Price of the Riverside Acquisition in
the event that such acquisition closes before the Company's proposed offering of
4,000,000 shares of its common stock.]
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Issue Date, including, without
limitation, those 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 approved by a significant
<PAGE>
11
segment of the accounting profession. All ratios and computations based on GAAP
contained in this Indenture shall be computed in conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person and any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or other obligation of such other
Person (whether arising by virtue of partnership arrangements, or by agreements
to keep-well, to purchase assets, goods, securities or services, to take-or-pay,
or to maintain financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the obligee of such Indebtedness
or other obligation of the payment thereof or to protect such obligee against
loss in respect thereof (in whole or in part); PROVIDED, HOWEVER, that the term
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning. The term "Guarantor" shall mean any Person Guaranteeing
any obligation.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Securityholder" means the Person in whose name a Security
is registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for; PROVIDED, HOWEVER, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of indebtedness of such Person for borrowed money; (ii) the principal
of and premium (if any) in respect of obligations evidenced by bonds,
debentures, notes or other similar instruments;
<PAGE>
12
(iii) all obligations of such Person in respect of letters of credit or other
similar instruments (including reimbursement obligations with respect thereto);
(iv) all obligations of such Person to pay the deferred and unpaid purchase
price of property or services (except Trade Payables), which purchase price is
due more than six months after the date of placing such property in service or
taking delivery and title thereto or the completion of such services; (v) all
Capital Lease Obligations of such Person and all Attributable Debt of such
Person; (vi) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or, with
respect to any Subsidiary of the Company, any Preferred Stock (but excluding, in
each case, any accrued dividends); (vii) all Indebtedness of other Persons
secured by a Lien on any asset of such Person, whether or not such Indebtedness
is assumed by such Person; PROVIDED, HOWEVER, that the amount of Indebtedness of
such Person shall be the lesser of (A) the fair market value of such asset at
such date of determination and (B) the amount of such Indebtedness of such other
Persons; (viii) all Indebtedness of other Persons to the extent Guaranteed by
such Person; and (ix) to the extent not otherwise included in this definition,
Hedging Obligations of such Person. The amount of Indebtedness of any Person at
any date shall be the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability, upon the occurrence of
the contingency giving rise to the obligation, of any contingent obligations at
such date.
"Interest Rate Agreement" means with respect to any Person any
interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement as to which such Person is party or a
beneficiary.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of such Person) or other
extension of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such
<PAGE>
13
Person. For purposes of the definition of "Unrestricted Subsidiary", the
definition of "Restricted Payment" and Section 4.04, (i) "Investment" shall
include the portion (proportionate to the Company's equity interest in such
Subsidiary) of the fair market value of the net assets of any Subsidiary of the
Company at the time that such Subsidiary is designated an Unrestricted
Subsidiary; PROVIDED, HOWEVER, that upon a redesignation of such Subsidiary as a
Restricted Subsidiary, the Company shall be deemed to continue to have a
permanent "Investment" in an Unrestricted Subsidiary equal to an amount (if
positive) equal to (x) the Company's "Investment" in such Subsidiary at the time
of such redesignation less (y) the portion (proportionate to the Company's
equity interest in such Subsidiary) of the fair market value of the net assets
of such Subsidiary at the time of such redesignation; and (ii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer, in each case as determined in good
faith by the Board of Directors.
"Issue Date" means the date on which the Securities are issued.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only as
and when received, but excluding any other consideration received in the form of
assumption by the acquiring person of Indebtedness or other obligations relating
to the properties or assets that are the subject of such Asset Disposition or
received in any other noncash form) therefrom in each case net of (i) all legal,
title and recording tax expenses, commissions and other fees and expenses
incurred, and all Federal, state, provincial, foreign and local taxes required
to be accrued as a liability under GAAP, as a consequence of such Asset
Disposition, (ii) all payments made on any Indebtedness which is secured by any
assets subject to such Asset Disposition, in accordance with the terms of any
Lien upon or other security agreement of any kind with respect to such assets,
or which must by its terms, or in order to obtain a necessary consent to such
<PAGE>
14
Asset Disposition, or by applicable law be repaid out of the proceeds from such
Asset Disposition, (iii) all distributions and other payments required to be
made to minority interest holders in Subsidiaries or joint ventures as a result
of such Asset Disposition and (iv) appropriate amounts to be provided by the
seller as a reserve, in accordance with GAAP, against any liabilities associated
with the assets disposed of in such Asset Disposition and retained by the
Company or any Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Note Guarantee" means any Guarantee which may from time to time be
executed and delivered by a Subsidiary of the Company pursuant to the terms of
this Indenture. Each such Note Guarantee shall be in the form prescribed in
this Indenture.
"Note Guarantor" means the parties named as such in this Indenture and
any other Subsidiary that has issued a Note Guarantee, until a successor
replaces it and thereafter, means such successor.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the President, the Chief Financial Officer, Chief Operating Officer,
any Vice President, the Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"Permitted Holders" means Hanseatic Corporation, Robert J. Gellert,
Michael E. Gellert, Jack Tyrell and each of their respective Affiliates.
<PAGE>
15
"Permitted Investment" means an Investment by the Company or any
Restricted Subsidiary in (i) a Restricted Subsidiary or a Person which shall,
upon the making of such Investment, become a Restricted Subsidiary; PROVIDED,
HOWEVER, that the primary business of such Restricted Subsidiary is a Related
Business; (ii) another Person if as a result of such Investment such other
Person is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Company or a Restricted Subsidiary;
PROVIDED, HOWEVER, that such Person's primary business is a Related Business;
(iii) another Person if the aggregate amount of all Investments in all such
other Persons does not exceed $20,000,000; PROVIDED, HOWEVER, that such Person's
primary business is a Related Business; (iv) promissory notes received as
consideration for an Asset Disposition which are secured by a lien on the asset
subject to such Asset Disposition; PROVIDED that the aggregate amount of all
such promissory notes at any one time outstanding does not exceed $1,000,000;
(v) Temporary Cash Investments; (vi) receivables owing to the Company or any
Restricted Subsidiary, if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms; PROVIDED,
HOWEVER, that such trade terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances; (vii) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of business;
(viii) loans or advances to employees made in the ordinary course of business
consistent with past practices of the Company or such Restricted Subsidiary;
(ix) stock, obligations or securities received in settlement of debts created in
the ordinary course of business and owing to the Company or any Restricted
Subsidiary or in satisfaction of judgments; and (x) Investments in the aggregate
not to exceed $100,000 in any year pursuant to the East 79th Street Partnership
Agreement.
"Permitted Liens" means, with respect to any Person, (a) pledges or
deposits by such Person under workmen's compensation laws, unemployment
insurance laws or similar legislation, or good faith deposits in connection with
bids, tenders, contracts (other than for the payment of Indebtedness) or leases
to which such Person is a party, or deposits to secure public or statutory
obligations of such Person or deposits of cash or United States government bonds
<PAGE>
16
to secure surety or appeal bonds to which such Person is a party, or deposits as
security for contested taxes or import duties or for the payment of rent, in
each case Incurred in the ordinary course of business; (b) Liens imposed by law,
such as carriers', warehousemen's and mechanics' Liens, in each case for sums
not yet due or being contested in good faith by appropriate proceedings or other
Liens arising out of judgments or awards against such Person with respect to
which such Person shall then be proceeding with an appeal or other proceedings
for review; (c) Liens for property taxes not yet due or payable or subject to
penalties for non-payment or which are being contested in good faith and by
appropriate proceedings; (d) Liens in favor of issuers of surety bonds or
letters of credit issued pursuant to the request of and for the account of such
Person in the ordinary course of its business; PROVIDED, HOWEVER, that such
letters of credit do not constitute Indebtedness; (e) minor survey exceptions,
minor encumbrances, easements or reservations of, or rights of others for,
licenses, rights of way, sewers, electric lines, telegraph and telephone lines
and other similar purposes, or zoning or other restrictions as to the use of
real properties or Liens incidental to the conduct of the business of such
Person or to the ownership of its properties which were not Incurred in
connection with Indebtedness and which do not in the aggregate materially impair
the use of such properties in the operation of the business of such Person;
(f) Liens securing Purchase Money Indebtedness; PROVIDED, HOWEVER, that (i) the
Indebtedness secured by such Liens is otherwise permitted to be Incurred under
this Indenture, (ii) the principal amount of any Indebtedness secured by any
such Lien does not exceed the cost of assets or property so acquired or
constructed and (iii) the amount of Indebtedness secured by any such Lien is not
subsequently increased; (g) Liens to secure (i) Indebtedness permitted under the
provisions described in clause (b)(i) or (viii) under Section 4.03 and
(ii) Senior Indebtedness; PROVIDED, HOWEVER, that (A) the Indebtedness secured
by such Liens is otherwise permitted to be Incurred under this Indenture,
(B) the principal amount of all Indebtedness secured by any such Lien permitted
by this clause (ii) does not exceed 50% of the Asset Value of the assets
encumbered by such Lien at the time of Incurrence and (C) the principal amount
of Indebtedness secured by all such Liens, combined with the principal amount of
all other Indebtedness secured by Permitted Liens (except for Indebtedness
Incurred pursuant to clause (b)(1) under Section 4.03), does not exceed, as of
the date of the most recent Incurrence of Indebtedness
<PAGE>
17
secured by a Lien permitted by this clause (ii), 50% of the Asset Value of the
assets of the Company and its Subsidiaries taken as a whole; (h) Liens existing
on the Issue Date; (i) Liens on property or shares of Capital Stock of another
Person at the time such other Person becomes a Subsidiary of such Person;
PROVIDED, HOWEVER, that such Liens are not created, incurred or assumed in
connection with, or in contemplation of, such other Person becoming such a
Subsidiary; PROVIDED FURTHER, HOWEVER, that such Lien may not extend to any
other property owned by such Person or any of its Subsidiaries; (j) Liens on
property at the time such Person or any of its Subsidiaries acquires the
property, including any acquisition by means of a merger or consolidation with
or into such Person or a Subsidiary of such Person; PROVIDED, HOWEVER, that such
Liens are not created, incurred or assumed in connection with, or in
contemplation of, such acquisition; PROVIDED FURTHER, HOWEVER, that the Liens
may not extend to any other property owned by such Person or any of its
Subsidiaries; (k) Liens securing Indebtedness or other obligations of a
Subsidiary of such Person owing to such Person or a wholly owned Subsidiary of
such Person; (l) Liens securing Hedging Obligations so long as the related
Indebtedness is, and is permitted to be under this Indenture, secured by a Lien
on the same property securing such Hedging Obligations; (m) Liens to secure any
Refinancing (or successive Refinancings) as a whole, or in part, of any
Indebtedness secured by any Lien referred to in the foregoing clauses (f), (g),
(h), (i) and (j); PROVIDED, HOWEVER, that (x) such new Lien shall be limited to
all or part of the same property that secured the original Lien (plus
improvements on such property) and (y) the Indebtedness secured by such Lien at
such time is not increased to any amount greater than the sum of (A) the
outstanding principal amount or, if greater, committed amount of the
Indebtedness described under clauses (f), (g), (h), (i) or (j) at the time the
original Lien became a Permitted Lien and (B) an amount necessary to pay any
fees and expenses, including premiums, related to such refinancing, refunding,
extension, renewal or replacement and (n)(i) mortgages, liens, security
interests, restrictions or encumbrances that have been placed by any developer,
landlord or other third party on property over which the Company or any
Restricted Subsidiary of the Company has easement rights or on any real property
leased by the Company and subordination or similar agreements relating thereto
and (ii) any condemnation or eminent domain proceedings affecting any real
property. Notwithstanding the foregoing, "Permitted Liens" shall not
<PAGE>
18
include any Lien described in clauses (f), (i) or (j) above if such Lien applies
to any Additional Assets acquired directly or indirectly from Net Available Cash
pursuant to Section 4.06.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"principal" of a Security means the principal of the Security plus the
premium, if any, payable on the Security which is due or overdue or is to become
due at the relevant time.
"Public Equity Offering" means an underwritten primary public offering
of common stock of the Company with aggregate gross proceeds of at least
$15,000,000 pursuant to an effective registration statement (other than a
registration statement on Form S-4, S-8 or any successor or similar forms) under
the Securities Act.
"Public Market" means any time after a Public Equity Offering has been
consummated and the common stock subject thereto has been distributed by means
of an effective registration statement under the Securities Act.
"Purchase Money Indebtedness" means Indebtedness (i) consisting of the
deferred purchase price of property, conditional sale obligations, obligation
under any title retention agreement and other purchase money obligations, in
each case where the maturity of such Indebtedness does not exceed the
anticipated useful life of the asset being financed, and (ii) incurred to
finance the acquisition by the Company or a Restricted Subsidiary of such asset,
including additions and improvements; PROVIDED, HOWEVER, that any Lien arising
in connection with any such Indebtedness shall be limited to the specified asset
being financed or, in the case of real property or fixtures,
<PAGE>
19
including additions and improvements, the real property on which such asset is
attached; and PROVIDED FURTHER, that such Indebtedness is Incurred within
180 days after such acquisition, addition or improvement by the Company or
Restricted Subsidiary of such asset.
"Refinance" means, in respect of any Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
other Indebtedness in exchange or replacement for, such indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with this Indenture including Indebtedness that
Refinances Refinancing Indebtedness; PROVIDED, HOWEVER, that (i) such
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed under the Indebtedness being Refinanced; PROVIDED
FURTHER, HOWEVER, that Refinancing Indebtedness shall not include
(x) Indebtedness of a Restricted Subsidiary that Refinances Indebtedness of the
Company or (y) Indebtedness of the Company or a Restricted Subsidiary that
Refinances Indebtedness of an Unrestricted Subsidiary.
"Related Business" means any business related, ancillary or
complementary to the businesses of the Company and the Restricted Subsidiaries
on the Issue Date.
"Restricted Payment" with respect to any Person means (i) the
declaration or payment of any dividends or any other distributions of any sort
in respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving such Person) or similar payment to the direct
or indirect holders of its Capital Stock (other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) or rights to
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20
acquire its Capital Stock (other than Disqualified Stock) and dividends or
distributions payable solely to the Company or a Restricted Subsidiary, and
other than pro rata dividends or other distributions made by a Subsidiary that
is not a Wholly Owned Subsidiary to minority stockholders (or owners of an
equivalent interest in the case of a Subsidiary that is an entity other than a
corporation)), (ii) the purchase, redemption or other acquisition or retirement
for value of any Capital Stock of the Company or of any Restricted Subsidiary
held by any Person (other than a Wholly Owned Subsidiary), including the
exercise of any option to exchange any Capital Stock (other than into Capital
Stock of the Company that is not Disqualified Stock), (iii) the purchase,
repurchase, redemption, defeasance or other acquisition or retirement for value,
prior to scheduled maturity, scheduled repayment or scheduled sinking fund
payment of any Subordinated Obligations (other than the purchase, repurchase or
other acquisition of Subordinated Obligations purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of acquisition) or (iv) the making
of any Investment, other than a Permitted Investment, in any Unrestricted
Subsidiary or any Affiliate of the Company other than a Wholly Owned Subsidiary
or a Person that shall become a Wholly Owned Subsidiary as a result of any such
Investment.
"Restricted Subsidiary" means any Subsidiary of the Company that is
not an Unrestricted Subsidiary.
["Riverside Acquisition" means the Company's pending acquisition of
all of the capital stock of Stuart Amusement Company, the owner of Riverside
Park, scheduled to occur in late January 1997, subject to the satisfaction or
waiver of certain conditions.]
"Sale/Leaseback Transaction" means an arrangement relating to property
now owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases it from such Person, other than leases between the Company and a Wholly
Owned Subsidiary or between Wholly Owned Subsidiaries.
"SEC" means the Securities and Exchange Commission.
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21
"Securities" means Securities issued under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means the custodian with respect to the Global
Security (as appointed by the Depository), or any successor entity thereto and
shall initially be the Trustee.
"Senior Indebtedness" means any Indebtedness which is not by its
express terms subordinated in right of payment to the Securities or any Note
Guarantee.
"Shelf Registration Statement" has the meaning given to that term in
the Registration Rights Agreement.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency beyond the control of the issuer unless such
contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the Company
(whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the Securities pursuant to a
written agreement to that effect.
"Subsidiary" means, 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.
"Temporary Cash Investments" means any of the following: (i) any
investment in direct obligations of the United States of America or any agency
thereof or
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22
obligations guaranteed by the United States of America or any agency thereof,
(ii) investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States, and which bank or trust company has capital, surplus and
undivided profits aggregating in excess of $250,000,000 (or the foreign currency
equivalent thereof) and has outstanding debt which is rated "A" (or such similar
equivalent rating) or higher by at least one nationally recognized statistical
rating organization (as defined in Rule 436 under the Securities Act),
(iii) repurchase obligations with a term of not more than 30 days for underlying
securities of the types described in clause (i) above entered into with a bank
meeting the qualifications described in clause (ii) above, (iv) investments in
commercial paper, maturing not more than 90 days after the date of acquisition,
issued by a corporation (other than an Affiliate of the Company) organized and
in existence under the laws of the United States of America or any foreign
country recognized by the United States of America with a rating at the time as
of which any investment therein is made of "P-1" (or higher) according to
Moody's Investors Service, Inc. or "A-1" (or higher) according to Standard and
Poor's Corporation, and (v) investments in securities with maturities of six
months or less from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A" by
Standard & Poor's Corporation or "A" by Moody's Investors Service, Inc.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as amended by the Trust Indenture Reform Act of 1990, as it may
be amended from time to time.
"Trade Payables" means, with respect to any Person, any accounts
payable or any Indebtedness or monetary obligation to trade creditors Incurred
by such Person arising in the ordinary course of business in connection with the
acquisition of goods or services.
"Trust Officer", when used with respect to the Trustee, means any
officer within the Corporate Trust Division (or any successor group) of the
Trustee, including
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23
without limitation any Vice President, any Assistant Vice President, any
Assistant Secretary or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers,
who shall, in any case, be responsible for the administration of this document
or have familiarity with it, and also means, with respect to particular
corporate trust matters, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
"Uniform Commercial Code" means the New York Uniform Commercial Code
as in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that
at the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary
of the Company (including any newly acquired or newly formed Subsidiary) to be
an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries
owns any Capital Stock or Indebtedness of, or holds any Lien on any property of,
the Company or any other Subsidiary of the Company that is not a Subsidiary of
the Subsidiary to be so designated; PROVIDED, HOWEVER, that either (A) the
Subsidiary to be so designated has total consolidated assets of $1,000 or less
or (B) if such Subsidiary has consolidated assets greater than $1,000, such
designation would be permitted under Section 4.04. The Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED,
HOWEVER, that immediately after giving effect to such designation (x) the
Company could Incur $1.00 of additional Indebtedness under Section 4.03(a) and
(y) no Default shall have occurred and be continuing. Any such designation by
the Board of Directors shall be evidenced to the Trustee by promptly filing with
the Trustee a copy of the board resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of
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24
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Voting Stock" of a corporation means all classes of Capital Stock of
such corporation then outstanding and normally entitled to vote in the election
of directors.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of the Company
all the Capital Stock of which (other than directors' qualifying shares) is
owned by the Company or one or more Wholly Owned Subsidiaries.
SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
---- ----------
"Affiliate Transaction" ................ 4.07
"Agent Members" ........................ 2.01(b)
"Bankruptcy Law" ....................... 6.01
"covenant defeasance option" ........... 8.01(b)
"Custodian" ............................ 6.01
"Event of Default" ..................... 6.01
"Global Security" ...................... 2.01(a)
"legal defeasance option" .............. 8.01(b)
"Legal Holiday" ........................ 11.08
"Obligations" .......................... 10.01
"Offer" ................................ 4.06(b)
"Offer Amount" ......................... 4.06(c)
"Offer Period" ......................... 4.06(c)
"Paying Agent" .......................... 2.03
"Purchase Date" ........................ 4.06(c)
"Registrar"............................. 2.03
"Successor Company" .................... 5.01
"Underwriting Agreement" ............... 2.01(a)
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
This Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
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25
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.04. RULES OF CONSTRUCTION. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) unsecured Indebtedness shall not be deemed to be subordinate or
junior to secured Indebtedness merely by virtue of its nature as unsecured
Indebtedness;
(7) the principal amount of any noninterest bearing or other discount
security at any date shall be the principal amount thereof that would be
shown on a balance sheet of the issuer dated such date prepared in
accordance with GAAP and accretion of principal on such security shall be
deemed to be the Incurrence of Indebtedness; and
(8) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory
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26
redemption or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater.
ARTICLE 2
THE SECURITIES
SECTION 2.01. FORM AND DATING. The Securities and the Trustee's
certificate of authentication shall be substantially in the form of Exhibit A
hereto, which is hereby incorporated in and expressly made a part of this
Indenture. The Securities may have notations, legends or endorsements required
by law, stock exchange rule, agreements to which the Company is subject, if any,
or usage (provided that any such notation, legend or endorsement is in a form
acceptable to the Company). A copy of any such legends, notations or
endorsements shall be furnished to the Trustee in writing. Each Security shall
be dated the date of its authentication. The terms of the Securities set forth
in Exhibit A hereto are part of the terms of this Indenture.
(a) GLOBAL SECURITIES. The Securities are being offered and sold by
the Company pursuant to an Underwriting Agreement, dated , 1997, among
the Company[, the Note Guarantors] and Lehman Brothers Inc., Chase Securities
Inc., Smith Barney Inc. and Furman Selz LLC (the "Underwriting Agreement").
Securities in the form of Exhibit A hereto shall be issued initially
in the form of one or more permanent global Securities in definitive, fully
registered form without interest coupons, with the Global Securities Legend as
set forth in such Exhibit (each, a "Global Security"), which shall be deposited
on behalf of the purchasers of the Securities represented thereby with the
Trustee, at its New York office, as custodian for the Depository, and registered
in the name of the Depository or a nominee of the Depository, duly executed by
the Company and authenticated by the Trustee as hereinafter provided. The
aggregate principal amount of the Global Securities may from time to time be
increased or decreased by adjustments made on the records of the Trustee and the
Depository or its nominee as hereinafter provided.
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27
(b) BOOK-ENTRY PROVISIONS. This Section 2.01(b) shall apply only to
the Global Security deposited with or on behalf of the Depository.
The Company shall execute and the Trustee shall, upon receipt of an
Officers' Certificate, in accordance with this Section 2.01(b) and Section 2.02,
authenticate and deliver initially one or more Global Securities that (i) shall
be registered in the name of the Depository for such Global Security or Global
Securities or the nominee of such Depository and (ii) shall be delivered by the
Trustee to such Depository or pursuant to such Depository's instructions or held
by the Trustee as custodian for the Depository.
Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depository or by the Trustee as the Securities Custodian for
the Depository or under such Global Security, and the Depository or the nominee
of such Depository, as the case may be, may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the absolute owner of
such Global Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any agent of
the Company or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by the Depository or impair, as between
the Depository and its Agent Members, the operation of customary practices of
such Depository governing the exercise of the rights of a holder of a beneficial
interest in any Global Security.
(c) CERTIFICATED SECURITIES. Except as provided in Section 2.06(f)
and 2.09, owners of beneficial interests in Global Securities shall not be
entitled to receive physical delivery of Definitive Securities.
SECTION 2.02. EXECUTION AND AUTHENTICATION. Two Officers shall sign
the Securities for the Company by manual or facsimile signature. The Company's
seal shall be impressed, affixed, imprinted or reproduced on the Securities and
may be in facsimile form.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall be
valid nevertheless.
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A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate and deliver Securities for original
issue in an aggregate principal amount of $ upon a written order of
the Company signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of the Company. Such order shall specify
the amount of the Securities to be authenticated and the date on which the
original issue of Securities is to be authenticated. The aggregate principal
amount of Securities outstanding at any time may not exceed that amount except
as provided in Section 2.07.
The Trustee may appoint (at the expense of the Company) an
authenticating agent reasonably acceptable to the Company to authenticate the
Securities. Unless limited by the terms of such appointment, an authenticating
agent may authenticate Securities whenever the Trustee may do so. Each
reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as
any Registrar, Paying Agent or agent for service of notices and demands.
SECTION 2.03. REGISTRAR AND PAYING AGENT. The Company shall maintain
an office or agency where Securities may be presented for registration of
transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange. The
Company may have one or more additional paying agents. The term "Paying Agent"
includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with any
Registrar or Paying Agent not a party to this Indenture, which shall incorporate
the terms of the TIA. The agreement shall implement the provisions of this
Indenture that relate to such agent. The Company shall notify the Trustee of
the name and address of any such agent. If the Company fails to maintain a
Registrar or Paying Agent, the Trustee shall act as such and shall be entitled
to appropriate compensation therefor pursuant to Section 7.07. The Company or
any of its domestically
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29
incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or
transfer agent.
The Company initially appoints the Trustee as Registrar and Paying
Agent in connection with the Securities.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. Prior to each due
date of the principal of and any liquidated damages and interest on any
Security, the Company shall deposit with the Paying Agent a sum sufficient to
pay such principal, any liquidated damages and interest when so becoming due.
The Company shall require each Paying Agent (other than the Trustee) to agree in
writing that the Paying Agent shall hold in trust for the benefit of
Securityholders or the Trustee all money held by the Paying Agent for the
payment of principal of, or any liquidated damages or interest on, the
Securities and shall notify the Trustee of any default by the Company in making
any such payment. If the Company or a Subsidiary acts as Paying Agent, it shall
segregate the money held by it as Paying Agent and hold it as a separate trust
fund. The Company at any time may require a Paying Agent to pay all money held
by it to the Trustee and to account for any funds disbursed by the Paying Agent
Upon complying with this Section, the Paying Agent shall have no further
liability for the money delivered to the Trustee.
SECTION 2.05. SECURITYHOLDER LISTS. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee, in writing at least five
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Securityholders.
SECTION 2.06. TRANSFER AND EXCHANGE. (a) TRANSFER AND EXCHANGE OF
DEFINITIVE SECURITIES. When Definitive Securities are presented to the
Registrar with a request:
(x) to register the transfer of such Definitive Securities; or
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30
(y) to exchange such Definitive Securities for an equal principal
amount of Definitive Securities of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its reasonable requirements for such transaction are met; PROVIDED, HOWEVER,
that the Definitive Securities surrendered for transfer or exchange shall be
duly endorsed or accompanied by a written instrument of transfer in form
reasonably satisfactory to the Company and the Registrar, duly executed by the
Holder thereof or his attorney duly authorized in writing.
(b) RESTRICTIONS ON TRANSFER OF A DEFINITIVE SECURITY FOR A
BENEFICIAL INTEREST IN A GLOBAL SECURITY. A Definitive Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Trustee
of a Definitive Security, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Trustee, together with
written instructions directing the Trustee to make, or to direct the Securities
Custodian to make, an adjustment on its books and records with respect to such
Global Security to reflect an increase in the aggregate principal amount of the
Securities represented by the Global Security, the Trustee shall cancel such
Definitive Security and cause, or direct the Securities Custodian to cause, in
accordance with the standing instructions and procedures existing between the
Depository and the Securities Custodian, the aggregate principal amount of
Securities represented by the Global Security to be increased accordingly. If
no Global Securities are then outstanding, the Company shall issue and the
Trustee shall authenticate, upon written order of the Company in the form of an
Officers' Certificate, a new Global Security in the appropriate principal
amount.
(c) TRANSFER AND EXCHANGE OF GLOBAL SECURITIES. The transfer and
exchange of Global Securities or beneficial interests therein shall be effected
through the Depository, in accordance with this Indenture and the procedures of
the Depository therefor.
(d) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL SECURITY FOR A
DEFINITIVE SECURITY.
(i) Subject to Section 2.01(c) any person having a beneficial
interest in a Global Security may upon
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31
request exchange such beneficial interest for a Definitive Security of the
same aggregate principal amount.
(ii) Definitive Securities issued in exchange for a beneficial
interest in a Global Security pursuant to this Section 2.06(d) shall be
registered in such names and in such authorized denominations as the
Depository, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee. The Trustee shall
deliver such Definitive Securities to the persons in whose names such
Securities are so registered in accordance with the instructions of the
Depository.
(e) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL SECURITIES.
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in subsection (f) of this Section 2.06), a Global Security
may not be transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(f) AUTHENTICATION OF DEFINITIVE SECURITIES. If at any time:
(i) the Depository notifies the Company that the Depository is
unwilling or unable to continue as Depository for the Global Securities and
a successor Depository for the Global Securities is not appointed by the
Company within 90 days after delivery of such notice; or
(ii) the Company, in its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of Definitive Securities under
this Indenture,
then the Company shall execute, and the Trustee, upon receipt of a written order
of the Company signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of the Company requesting the authentication
and delivery of Definitive Securities to the Persons designated by the Company,
shall authenticate and deliver Definitive Securities, in an aggregate principal
amount equal to the principal amount of Global Securities or
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32
interests therein being exchanged, in exchange for such Global Securities or
interests therein.
(g) CANCELLATION OR ADJUSTMENT OF GLOBAL SECURITY. At such time as
all beneficial interests in a Global Security have either been exchanged for
Definitive Securities, redeemed, repurchased or canceled, such Global Security
shall be returned to the Depository for cancellation or retained and canceled by
the Trustee. At any time prior to such cancellation, if any beneficial interest
in a Global Security is exchanged for Definitive Securities, redeemed,
repurchased or canceled, the principal amount of Securities represented by such
Global Security shall be reduced and an adjustment shall be made on the books
and records of the Trustee (if it is then the Securities Custodian for such
Global Security) with respect to such Global Security, by the Trustee or the
Securities Custodian, to reflect such reduction.
(h) OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF
SECURITIES.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Definitive Securities and
Global Securities at the Registrar's request.
(ii) No service charge shall be made for any registration of transfer
or exchange, but the Company may require payment of a sum sufficient to
cover any transfer tax, assessments, or similar governmental charge payable
in connection therewith.
(iii) The Registrar shall not be required to register the transfer of
or exchange of (a) any Definitive Security selected for redemption in whole
or in part pursuant to Article 3, except the unredeemed portion of any
Definitive Security being redeemed in part, or (b) any Security for a
period beginning 15 Business Days before the mailing of a notice of an
offer to repurchase or redeem Securities or 15 Business Days before an
interest payment date.
(iv) Prior to the due presentation for registration of transfer of
any Security, the Company, the Trustee, the Paying Agent or the Registrar
may deem and treat the Person in whose name a Security is registered as the
absolute owner of such Security for
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33
the purpose of receiving payment of principal of and any liquidated
damages and interest on such Security and for all other purposes
whatsoever, whether or not such Security is overdue, and none of the
Company, the Trustee, the Paying Agent or the Registrar shall be
affected by notice to the contrary.
(v) All Securities issued upon any transfer or exchange pursuant to
the terms of this Indenture shall evidence the same debt and shall be
entitled to the same benefits under this Indenture as the Securities
surrendered upon such transfer or exchange.
(i) NO OBLIGATION OF THE TRUSTEE. (i) The Trustee shall have no
responsibility or obligation to any beneficial owner of a Global Security, a
member of, or a participant in the Depository or other Person with respect to
the accuracy of the records of the Depository or its nominee or of any Agent
Members, with respect to any ownership interest in the Securities or with
respect to the delivery to any participant, member, beneficial owner or other
Person (other than the Depository) of any notice (including any notice of
redemption) or the payment of any amount, under or with respect to such
Securities. All notices and communications to be given to the Holders and all
payments to be made to Holders under the Securities shall be given or made only
to or upon the order of the registered Holders (which shall be the Depository or
its nominee in the case of a Global Security). The rights of beneficial owners
in any Global Security shall be exercised only through the Depository subject to
the applicable rules and procedures of the Depository. The Trustee may rely and
shall be fully protected in relying upon information furnished by the Depository
with respect to its members, participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any state or federal securities
laws with respect to any transfer of any interest in any Security
(including any transfers between or among Depository participants, members
or beneficial owners in any Global Security) other than (with respect to
Definitive Securities, but not with respect to any Global Security) to
require delivery of such certificates and other documentation or evidence
as are expressly required by, and to do so if and when expressly required
by, the terms of this Indenture, and to examine the same to determine
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34
substantial compliance as to form with the express requirements hereof.
SECTION 2.07. REPLACEMENT SECURITIES. If a mutilated Security is
surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies
any other reasonable requirements of the Trustee. If required by the Trustee or
the Company, such Holder shall furnish an indemnity bond sufficient in the
judgment of the Company and the Trustee to protect the Company, the Trustee, the
Paying Agent and the Registrar from any loss which any of them may suffer if a
Security is replaced. The Company and the Trustee may charge the Holder for
their expenses in replacing a Security.
Every replacement Security is an additional obligation of the Company.
SECTION 2.08. OUTSTANDING SECURITIES. Securities outstanding at any
time are all Securities authenticated by the Trustee except for those canceled
by it, those delivered to it for cancellation and those described in this
Section as not outstanding. A Security does not cease to be outstanding because
the Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance with
this Indenture, on a redemption date or maturity date money sufficient to pay
all principal and any liquidated damages and interest payable on that date with
respect to the Securities (or portions thereof) to be redeemed or maturing, as
the case may be, and the Paying Agent is not prohibited from paying such money
to the Securityholders on that date pursuant to the terms of this Indenture,
then on and after that date such Securities (or portions thereof) cease to be
outstanding and interest on them ceases to accrue.
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35
SECTION 2.09. TEMPORARY SECURITIES. (a) Until Definitive Securities
are ready for delivery, the Company may prepare and the Trustee shall
authenticate temporary Securities. Temporary Securities shall be substantially
in the form of Definitive Securities but may have variations that the Company
considers appropriate for temporary Securities. Without unreasonable delay, the
Company shall prepare and the Trustee shall authenticate Definitive Securities
and deliver them in exchange for temporary Securities.
(b) A Global Security deposited with the Depository or with the
Trustee as custodian for the Depository pursuant to Section 2.01 shall be
transferred to the beneficial owners thereof only if such transfer complies with
Section 2.06 and (i) the Depository notifies the Company that it is unwilling or
unable to continue as Depository for such Global Security or if at any time such
Depository ceases to be a "clearing agency" registered under the Exchange Act
and a successor depositary is not appointed by the Company within 90 days of
such notice, or (ii) an Event of Default has occurred and is continuing.
(c) Any Global Security that is transferable to the beneficial owners
thereof pursuant to this Section shall be surrendered by the Depository to the
Trustee located in the Borough of Manhattan, The City of New York, to be so
transferred, in whole or from time to time in part, without charge, and the
Trustee shall authenticate and deliver, upon such transfer of each portion of
such Global Security, an equal aggregate principal amount of Definitive
Securities of authorized denominations. Any portion of a Global Security
transferred pursuant to this Section shall be executed, authenticated and
delivered only in principal denominations of $1,000 and any integral multiple
thereof and registered in such names as the Depository shall direct.
(d) Subject to the provisions of Section 2.09(c), the registered
Holder of a Global Security may grant proxies and otherwise authorize any
Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Indenture or the Securities.
(e) In the event of the occurrence of either of the events specified
in Section 2.09(b), the Company shall promptly make available to the Trustee a
reasonable supply
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36
of certificated Securities in definitive, fully registered form without interest
coupons.
SECTION 2.10. CANCELLATION. The Company at any time may deliver
Securities to the Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel and
destroy (subject to the record retention requirements of the Exchange Act) all
Securities surrendered for registration of transfer, exchange, payment or
cancellation and deliver a certificate of such destruction to the Company unless
the Company, prior to such cancellation or destruction, the Trustee receives
written directions from the Company to deliver canceled Securities to the
Company. The Company may not issue new Securities to replace Securities it has
redeemed, paid or delivered to the Trustee for cancellation.
SECTION 2.11. DEFAULTED INTEREST. If the Company defaults in a
payment of interest or liquidated damages on the Securities, the Company shall
pay defaulted interest on such interest or liquidated damages, as the case may
be (plus interest on such defaulted interest to the extent lawful), in any
lawful manner. The Company may pay the defaulted interest to the persons who
are Securityholders on a subsequent special record date. The Company shall fix
or cause to be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee which specified record date shall not be
less than 10 days prior to the payment date for such defaulted interest and
shall promptly mail to each Securityholder a notice that states the special
record date, the payment date and the amount of defaulted interest to be paid.
The Company shall notify the Trustee in writing of the amount of defaulted
interest proposed to be paid on each Security and the date of the proposed
payment, and at the same time the Company shall deposit with the Trustee an
amount of money equal to the aggregate amount proposed to be paid in respect of
such defaulted interest or shall make arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Person entitled to such
defaulted interest as in this subsection provided.
SECTION 2.12. CUSIP NUMBERS. The Company in issuing the Securities
may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall
use "CUSIP"
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37
numbers in notices of redemption as a convenience to Holders; PROVIDED, HOWEVER,
that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers.
ARTICLE 3
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE. If the Company elects to redeem
Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the redemption date and the principal amount of Securities
to be redeemed. The Company shall give each notice to the Trustee provided for
in this Section at least 60 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and an Opinion of Counsel from the Company to the effect that such
redemption shall comply with the conditions herein.
SECTION 3.02. SELECTION OF SECURITIES TO BE REDEEMED. If fewer than
all the Securities are to be redeemed, the Trustee shall select the Securities
to be redeemed pro rata or by lot or by a method that complies with applicable
legal and securities exchange requirements, if any, and that the Trustee
considers fair and appropriate and in accordance with methods generally used at
the time of selection by fiduciaries in similar circumstances. The Trustee
shall make the selection from outstanding Securities not previously called for
redemption. The Trustee may select for redemption portions of the principal of
Securities that have denominations larger than $1,000. Securities and portions
of them the Trustee selects shall be in amounts of $1,000 or a whole multiple of
$1,000. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption. The
Trustee shall notify the Company promptly of the Securities or portions of
Securities to be redeemed.
SECTION 3.03. NOTICE OF REDEMPTION. At least 30 days but not more
than 60 days before a date for
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38
redemption of Securities, the Company shall mail a notice of redemption by
first-class mail to each Holder of Securities to be redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be redeemed,
the identification and principal amounts of the particular Securities to be
redeemed;
(6) that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment pursuant
to the terms of this Indenture, interest and liquidated damages, if any, on
Securities (or portion thereof) called for redemption cease to accrue on
and after the redemption date;
(7) the CUSIP number, if any, printed on the Securities being
redeemed; and
(8) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Securities.
At the Company's written request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued
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39
and unpaid interest, if any, to the redemption date; PROVIDED that if the
redemption date is after a regular record date and on or prior to an interest
payment date, the accrued interest and liquidated damages, if any, shall be
payable to the Securityholder of the redeemed Securities registered on the
relevant record date. Failure to give notice or any defect in the notice to any
Holder shall not affect the validity of the notice to any other Holder.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE. Prior to the redemption
date, the Company shall deposit with the Paying Agent (or, if the Company or a
Subsidiary is the Paying Agent, shall segregate and hold in trust) money
sufficient to pay the redemption price of and accrued interest and liquidated
damages, if any, on all Securities to be redeemed on that date other than
Securities or portions of Securities called for redemption which have been
delivered by the Company to the Trustee for cancellation.
SECTION 3.06. SECURITIES REDEEMED IN PART. Upon surrender of a
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in principal amount to the unredeemed portion of the Security surrendered.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF SECURITIES. The Company shall promptly pay
the principal of, and any liquidated damages and interest on, the Securities on
the dates and in the manner provided in the Securities and in this Indenture.
Principal, any liquidated damages and interest shall be considered paid on the
date due if on such date the Trustee or the Paying Agent holds in accordance
with this Indenture money sufficient to pay all principal, any liquidated
damages and interest then due and the Trustee or the Paying Agent, as the case
may be, is not prohibited from paying such money to the Securityholders on that
date pursuant to the terms of this Indenture.
The Company shall pay interest on overdue principal at the rate
specified therefor in the Securities, and it shall pay interest on overdue
installments of
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40
interest or liquidated damages at the same rate to the extent lawful.
SECTION 4.02. SEC REPORTS. The Company shall file with the Trustee
and provide current (at their addresses as set forth in the register of
Securities), within 15 days after it files them with the SEC, copies of its
annual report and the information, documents and other reports which the Company
is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange
Act. Notwithstanding that the Company may not be required to remain or be
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company shall provide the Trustee and current (at their addresses as
set forth in the register of Securities) and prospective Securityholders (upon
request) with the annual, quarterly and other reports at the times and
containing in all material respects the information specified in Sections 13 and
15(d) of the Exchange Act. The Company also shall comply with the other
provisions of TIA Section 314(a).
SECTION 4.03. LIMITATION ON INDEBTEDNESS. (a) The Company shall
not, and shall not permit any Restricted Subsidiary to, Incur, directly or
indirectly, any Indebtedness (and shall not permit any Restricted Subsidiary to
Incur Preferred Stock); PROVIDED, HOWEVER, that the Company and its Restricted
Subsidiaries may Incur Indebtedness if on the date of the Incurrence of such
Indebtedness the Consolidated Coverage Ratio exceeds 2.0:1.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur the following Indebtedness:
(i) Indebtedness Incurred pursuant to a revolving credit facility in
an aggregate principal amount on the date of Incurrence which, when added
to all other Indebtedness Incurred pursuant to this clause (i) and then
outstanding does not exceed $75,000,000, PROVIDED that the Company must
repay all loans outstanding under any such facility at least once during
each fiscal year and may not make drawings thereunder for 30 consecutive
days following the date of such repayment;
(ii) Indebtedness (A) of the Company owed to and held by a Wholly
Owned Subsidiary or (B) of any Restricted Subsidiary owed to and held by
the Company or any other Wholly Owned Subsidiary; PROVIDED,
<PAGE>
41
HOWEVER, that any subsequent issuance or transfer of any Capital
Stock which results in any such Wholly Owned Subsidiary ceasing to be a
Wholly Owned Subsidiary or any subsequent transfer of such Indebtedness
(other than to another Wholly Owned Subsidiary) shall be deemed, in each
case, to constitute the Incurrence of such Indebtedness by the issuer
thereof;
(iii) the Securities;
(iv) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (i) or (iii) of this Section 4.03(b));
(v) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to paragraph (a) or pursuant to clause (ii), (iii), (iv), or this
clause (v);
(vi) Hedging Obligations consisting of interest rate swaps with
respect to Indebtedness permitted to be Incurred by the Company pursuant to
this Indenture;
(vii) Purchase Money Indebtedness and Capital Lease Obligations
Incurred after the Issue Date which do not exceed at any time outstanding
$15,000,000;
(viii) Indebtedness represented by the Note Guarantees and Guarantees
of Indebtedness Incurred pursuant to clause (i) or (iii) above;
(ix) Indebtedness in respect of performance bonds, letters of credit,
surety or appeal bonds, prior to any drawing thereunder, for or in
connection with pledges, deposits or payments made or given in the ordinary
course of business, and which do not secure any Indebtedness except
Indebtedness so secured in an amount not to exceed $2,500,000 outstanding
at any time; and
(x) Indebtedness in an aggregate principal amount which, together with
all other Indebtedness of the Company and its Restricted Subsidiaries then
outstanding (other than Indebtedness permitted by clauses (i) through (ix)
above or paragraph (a)), does not exceed $5,000,000.
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42
(c) Notwithstanding the foregoing, neither the Company nor any
Restricted Subsidiary shall Incur any Indebtedness pursuant to the foregoing
paragraph (b) if the proceeds thereof are used, directly or indirectly, to
Refinance any Subordinated Obligations unless such Indebtedness shall be
subordinated to the Securities to at least the same extent as such Subordinated
Obligations.
SECTION 4.04. LIMITATION ON RESTRICTED PAYMENTS. (a) The Company
shall not, and shall not permit any Restricted Subsidiary, directly or
indirectly, to make a Restricted Payment if at the time the Company or such
Restricted Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would result
therefrom);
(2) the Company is not able to Incur an additional $1.00 of
Indebtedness pursuant to Section 4.03(a); or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments since the Issue Date would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the Issue Date to the end of
the most recent fiscal quarter ending at least 45 days prior to the
date of such Restricted Payment (or, in case such Consolidated Net
Income shall be a deficit, minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received by the Company from
the issuance or sale of its Capital Stock (other than Disqualified
Stock) subsequent to the Issue Date (other than an issuance or sale to
a Subsidiary of the Company and other than an issuance or sale to an
employee stock ownership plan or other trust established by the
Company or any of its Subsidiaries for the benefit of their employees
to the extent the purchase by such plan or trust is financed by
Indebtedness of such plan or trust and for which the Company is liable
as Guarantor or otherwise);
(C) the amount by which Indebtedness of the Company is reduced on
the Company's balance sheet upon the conversion or exchange (other than
by a
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43
Subsidiary of the Company) subsequent to the Issue Date, of
any Indebtedness of the Company convertible or exchangeable
for Capital Stock (other than Disqualified Stock) of the
Company (less the amount of any cash, or other property
(other than Capital Stock), distributed by the Company upon
such conversion or exchange); and
(D) an amount equal to the sum of (i) the net reduction in
Investments in Unrestricted Subsidiaries resulting from dividends,
repayments of loans or advances, or other transfers of assets, in each
case to the Company or any Restricted Subsidiary from Unrestricted
Subsidiaries, and (ii) the portion (proportionate to the Company's
equity interest in such Subsidiary) of the fair market value of the
net assets of an Unrestricted Subsidiary at the time such Unrestricted
Subsidiary is designated a Restricted Subsidiary; PROVIDED, HOWEVER,
that the foregoing sum shall not exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments previously made by
the Company or any Restricted Subsidiary in such Unrestricted
Subsidiary, which amount was treated as a Restricted Payment.
(b) The provisions of the foregoing paragraph (a) shall not prohibit:
(i) any purchase or redemption of Capital Stock or Subordinated
Obligations of the Company made by exchange for, or out of the proceeds of
the substantially concurrent sale of, Capital Stock of the Company (other
than Disqualified Stock and other than Capital Stock issued or sold to a
Subsidiary of the Company or an employee stock ownership plan or similar
trust); PROVIDED, HOWEVER, that (A) such purchase or redemption shall be
excluded in the calculation of the amount of Restricted Payments and (B)
the Net Cash Proceeds from such sale shall be excluded from the calculation
of amounts under clause (3)(B) of paragraph (a) above;
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially concurrent sale
of, Indebtedness of the Company which is permitted
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44
to be Incurred pursuant to Section 4.03; PROVIDED, HOWEVER, that such
purchase or redemption shall be excluded in the calculation of the amount
of Restricted Payments;
(iii) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have
complied with Section 4.04(a); PROVIDED, HOWEVER, that at the time of
payment of such dividend, no other Default shall have occurred and be
continuing (or result therefrom); PROVIDED FURTHER, HOWEVER, that such
dividend shall be included in the calculation of the amount of
Restricted Payments; or
(iv) the repurchase of shares of, or options to purchase shares of,
common stock of the Company or any of its Subsidiaries from employees,
former employees, directors or former directors of the Company or any
of its Subsidiaries (or permitted transferees of such employees, former
employees, directors or former directors), pursuant to the terms of the
agreements (including employment agreements) or plans (or amendments
thereto) approved by the Board of Directors under which such persons
purchase or sell or are granted the option to purchase or sell, shares
of such common stock; PROVIDED, HOWEVER, that the aggregate amount of
such repurchases shall not exceed $2,500,000; PROVIDED FURTHER,
HOWEVER, that such repurchases shall be included in the calculation of
the amount of Restricted Payments.
SECTION 4.05. LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM
SUBSIDIARIES. The Company shall not, and shall not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or become effective
any consensual encumbrance or restriction on the ability of any Restricted
Subsidiary (i) to pay dividends or make any other distributions on its Capital
Stock or pay any Indebtedness owed to the Company, (ii) to make any loans or
advances to the Company or (iii) transfer any of its property or assets to the
Company, except:
(1) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Issue Date, including under a
revolving credit facility;
(2) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement
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45
relating to any Indebtedness Incurred by such Restricted Subsidiary on
or prior to the date on which such Restricted Subsidiary was acquired
by the Company (other than Indebtedness Incurred as consideration in,
or to provide all or any portion of the funds or credit support
utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by the Company) and outstanding
on such date;
(3) any encumbrance or restriction pursuant to an agreement effecting
a Refinancing of Indebtedness Incurred pursuant to an agreement referred to
in clause (1) or (2) above or contained in any amendment to an agreement
referred to in clause (1) or (2) above; PROVIDED, HOWEVER, that the
encumbrances and restrictions with respect to such Restricted Subsidiary
contained in any such refinancing agreement or amendment are no less
favorable to the Securityholders than encumbrances and restrictions with
respect to such Restricted Subsidiary contained in such agreements;
(4) any such encumbrance or restriction consisting of customary
nonsubletting, nontransfer and nonassignment provisions in leases, licenses
or contracts arising or entered into in the ordinary course of business;
(5) in the case of clause (iii) above, restrictions contained in
security agreements or mortgages securing Indebtedness of a Restricted
Subsidiary to the extent such restrictions restrict the transfer of the
property subject to such security agreements or mortgages;
(6) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition; and
(7) encumbrances or restrictions arising or existing by reason of
applicable law.
SECTION 4.06. LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK.
(a) The Company shall not, and shall not
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46
permit any Restricted Subsidiary to, make any Asset Disposition unless
(i) the Company or such Restricted Subsidiary receives consideration
(including by way of relief from, or by any other Person assuming sole
responsibility for, any liabilities, contingent or otherwise) at the
time of such Asset Disposition at least equal to the fair market
value, as determined in good faith by the Board of Directors
(including as to the value of all non-cash consideration), of the
shares and assets subject to such Asset Disposition, (ii) at least 75%
of the consideration thereof received by the Company or such
Restricted Subsidiary is in the form of cash; PROVIDED, HOWEVER, that
a portion of such cash consideration requirement may be in the form of
a promissory note secured by a lien on the asset subject to such Asset
Disposition, PROVIDED that the aggregate amount of all such promissory
notes at any one time outstanding does not exceed $1,000,000 and (iii)
an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by the Company (or such Restricted Subsidiary,
as the case may be) (A) FIRST, to the extent the Company or such
Restricted Subsidiary elects (or is required by the terms of any
Senior Indebtedness or Indebtedness (other than Preferred Stock) of a
Wholly Owned Subsidiary), to prepay, repay or purchase Senior
Indebtedness or such Indebtedness (in each case other than
Indebtedness owed to the Company or an Affiliate of the Company)
within 180 days after the later of the date of such Asset Disposition
or the receipt of such Net Available Cash; (B) SECOND, to the extent
of the balance of Net Available Cash after application in accordance
with clause (A), to the extent the Company or such Restricted
Subsidiary elects, to reinvest in Additional Assets (including by
means of an Investment in Additional Assets by a Restricted Subsidiary
with Net Available Cash received by the Company or another Restricted
Subsidiary) within 365 days from the later of such Asset Disposition
or the receipt of such Net Available Cash; (C) THIRD, to the extent of
the balance of such Net Available Cash after application in accordance
with clauses (A) and (B) exceeds $5,000,000, to make an Offer to
purchase the Securities pursuant to and subject to the conditions set
forth in Section 4.06(b); and (D) FOURTH, to the extent of the balance
of such Net Available Cash after application in accordance with
clauses (A), (B) and (C), to (x) acquire Additional Assets (other than
Indebtedness and Capital Stock) or (y) prepay, repay or purchase
Indebtedness of the Company (other than Indebtedness owed to an
Affiliate of the Company and other than Disqualified Stock of the
Company) or Indebtedness of any Restricted Subsidiary (other
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47
than Indebtedness owed to the Company or an Affiliate of the Company), in each
case described in this clause (D) within one year from the receipt of such Net
Available Cash or, if the Company has made an Offer pursuant to clause (C), six
months from the date such Offer is consummated; PROVIDED, HOWEVER, that in
connection with any prepayment, repayment or purchase of Indebtedness pursuant
to clause (A), (C) or (D) above, the Company or such Restricted Subsidiary shall
retire such Indebtedness and shall cause the related loan commitment (if any) to
be permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased; PROVIDED FURTHER that prior to applying such Net Available
Cash in accordance with clause (A), (B), (C) or (D) above, such Net Available
Cash may be invested in Temporary Cash Investments. The Company and the
Restricted Subsidiaries shall not be required to apply any Net Available Cash in
accordance with this Section 4.06 except to the extent that the aggregate Net
Available Cash from all Asset Dispositions which are not applied in accordance
with this Section 4.06 exceeds $500,000.
For the purposes of this Section 4.06, the following shall be deemed
to be cash: (x) the assumption of Indebtedness of the Company (other than
Disqualified Stock of the Company) or any Restricted Subsidiary and the release
of the Company or such Restricted Subsidiary from all liability on such
Indebtedness in connection with such Asset Disposition and (y) securities
received by the Company or any Restricted Subsidiary from the transferee that
are promptly converted by the Company or such Restricted Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the purchase
of Securities pursuant to Section 4.06(a)(iii)(C), the Company shall be required
to purchase Securities tendered pursuant to an Offer, commenced within one year
after the date of such Asset Disposition, by the Company for the Securities (the
"Offer") at a purchase price of 100% of their principal amount plus accrued
interest to the Purchase Date in accordance with the procedures (including
prorationing in the event of oversubscription) set forth in Section 4.06(c). If
the aggregate purchase price of Securities tendered pursuant to the Offer is
less than the Net Available Cash allotted to the purchase of the Securities, the
Company shall apply the remaining Net Available Cash in accordance with Section
4.06(a)(iii)(D). The Company shall not be required to make an Offer for
Securities pursuant to this Section if the Net Available
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48
Cash available therefor (after application of the proceeds as provided in
clauses (A) and (B) of this Section 4.06(a)(iii)) is less than $5,000,000 for
any Asset Disposition (which lesser amounts shall be carried forward for
purposes of determining whether an Offer is required with respect to the Net
Available Cash from any subsequent Asset Disposition).
(c)(1) Promptly, and in any event within 10 days after the Company
becomes obligated to make an Offer, the Company shall be obligated to deliver to
the Trustee and send, by first-class mail to each Holder, a written notice
stating that the Holder may elect to have his Securities purchased by the
Company either in whole or in part (subject to prorationing as hereinafter
described in the event the Offer is oversubscribed) in integral multiples of
$1,000 of principal amount, at the applicable purchase price. The notice shall
specify a purchase date not less than 30 days nor more than 60 days after the
date of such notice (the "Purchase Date") and shall contain such information
concerning the business of the Company which the Company in good faith believes
shall enable such Holders to make an informed decision (which at a minimum shall
include (i) the most recent annual report, quarterly reports, if any, subsequent
to such annual reports and any current reports subsequent to the most recent
annual or quarterly report, as the case may be, required to be delivered
pursuant to Section 4.02 hereof, other than current reports describing Asset
Dispositions otherwise described in the offering materials (or corresponding
successor reports), (ii) a description of material developments in the Company's
business subsequent to the date of the latest of such Reports, and (iii) if
material, appropriate pro forma financial information) and all instructions and
materials necessary to tender Securities pursuant to the Offer, together with
the information contained in clause (3).
(2) Not later than the date upon which written notice of an Offer is
delivered to the Trustee as provided below, the Company shall deliver to the
Trustee an Officers' Certificate as to (i) the amount of the Offer (the "Offer
Amount"), (ii) the allocation of the Net Available Cash from the Asset
Dispositions pursuant to which such Offer is being made and (iii) the compliance
of such allocation with the provisions of Section 4.06(a). On such date, the
Company shall also irrevocably deposit with the Trustee or with a paying agent
(or, if the Company is acting as its own paying agent, segregate and hold in
trust) in Temporary Cash
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49
Investments an amount equal to the Offer Amount to be held for payment in
accordance with the provisions of this Section. Upon the expiration of the
period for which the Offer remains open (the "Offer Period"), the Company shall
deliver to the Trustee for cancellation the Securities or portions thereof which
have been properly tendered to and are to be accepted by the Company. The
Trustee shall, on the Purchase Date, mail or deliver payment to each tendering
Holder in the amount of the purchase price. In the event that the aggregate
purchase price of the Securities delivered by the Company to the Trustee is less
than the Offer Amount, the Trustee shall deliver the excess to the Company
immediately after the expiration of the Offer Period for application in
accordance with this Section.
(3) Holders electing to have a Security purchased shall be required
to surrender the Security, with an appropriate form duly completed, to the
Company at the address specified in the notice at least three Business Days
prior to the Purchase Date. Holders shall be entitled to withdraw their
election if the Trustee or the Company receives not later than one Business Day
prior to the Purchase Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the Security which
was delivered for purchase by the Holder and a statement that such Holder is
withdrawing his election to have such Security purchased. If at the expiration
of the Offer Period the aggregate principal amount of Securities surrendered by
Holders exceeds the Offer Amount, the Company shall select the Securities to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Securities in principal denominations of
$1,000, or integral multiples thereof, shall be purchased). Holders whose
Securities are purchased only in part shall be issued new Securities equal in
principal amount to the unpurchased portion of the Securities surrendered.
(4) At the time the Company delivers Securities to the Trustee which
are to be accepted for purchase, the Company shall also deliver an Officers'
Certificate stating that such Securities are to be accepted by the Company
pursuant to and in accordance with the terms of this Section. A Security shall
be deemed to have been accepted for purchase at the time the Trustee, directly
or through an agent, mails or delivers payment therefor to the surrendering
Holder.
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(d) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section. To the extent that the provisions of any securities laws or regulations
conflict with provisions of this Section, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section by virtue thereof.
SECTION 4.07. LIMITATION ON TRANSACTIONS WITH AFFILIATES. (a) The
Company shall not, and shall not permit any Restricted Subsidiary to, enter into
or permit to exist any transaction (including the purchase, sale, lease or
exchange of any property, employee compensation arrangements or the rendering of
any service) with any Affiliate of the Company, [except for the issuance of the
Exchangeable Preferred Stock to fund the cash portion of the purchase price of
the Riverside Acquisition in the event that such Acquisition closes before the
Company's proposed offering of 4,000,000 shares of its common stock,] unless the
terms thereof (1) are no less favorable to the Company or such Restricted
Subsidiary than those which could be obtained at the time of such transaction in
arm's-length dealings with a Person who is not such an Affiliate and (2) if such
Affiliate Transaction involves an amount in excess of $500,000, (i) are set
forth in writing and (ii) have been approved by a majority of the members of the
Board of Directors having no personal stake in such Affiliate Transaction. In
addition if such Affiliate Transaction involves an amount in excess of
$5,000,000 a fairness opinion must be provided by a nationally recognized
investment banking firm.
(b) The provisions of the foregoing paragraph (a) shall not apply to
(i) any Restricted Payment permitted to be paid pursuant Section 4.04, (ii) any
issuance of securities, or other payments, awards or grants in cash, securities
or otherwise pursuant to, or the funding of, employment or indemnification
arrangements, stock options and stock ownership plans approved by the Board of
Directors, (iii) the grant of stock options or similar rights to employees and
directors of the Company pursuant to plans approved by the Board of Directors,
(iv) loans or advances to employees in the ordinary course of business in
accordance with the past practices of the Company or its Restricted
Subsidiaries, but in any event not to exceed
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51
$250,000 in the aggregate outstanding at any one time; (v) the payment of
reasonable fees to directors of the Company and its Restricted Subsidiaries who
are not employees of the Company or its Restricted Subsidiaries; and (vi) any
Affiliate Transaction between the Company and a Wholly Owned Subsidiary or
between Wholly Owned Subsidiaries.
SECTION 4.08. CHANGE OF CONTROL. (a) Upon a Change of Control, each
Holder shall have the right to require that the Company repurchase such Holder's
Securities at a purchase price in cash equal to 101% of the principal amount
thereof plus accrued and unpaid interest to and including the date of purchase
(subject to the right of Holders of record on a record date to receive interest
on the relevant interest payment date), in accordance with the terms
contemplated in Section 4.08(b).
(b) Within 30 days following any Change of Control, the Company shall
mail a notice to each Holder with a copy to the Trustee stating:
(1) that a Change of Control has occurred and that such Holder has the
right to require the Company to purchase such Holder's Securities at a
purchase price in cash equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, to and including the date of purchase
(subject to the right of Holders of record on a record date to receive
interest on the relevant interest payment date);
(2) the circumstances and relevant facts regarding such Change of
Control (including information with respect to pro forma historical income,
cash flow and capitalization after giving effect to such Change of
Control);
(3) the repurchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and
(4) the instructions determined by the Company, consistent with this
Section, that a Holder must follow in order to have its Securities
purchased.
(c) Holders electing to have a Security purchased shall be required
to surrender the Security, with an appropriate form duly completed, to the
Company at the
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52
address specified in the notice at least three Business Days prior to the
purchase date. Holders shall be entitled to withdraw their election if the
Trustee or the Company receives not later than one Business Day prior to the
purchase date, a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount of the Security which was delivered
for purchase by the Holder and a statement that such Holder is withdrawing his
election to have such Security purchased.
(d) On the purchase date, all Securities purchased by the Company
under this Section shall be delivered by the Trustee for cancellation, and the
Company shall pay the purchase price plus accrued and unpaid interest, if any,
to the Holders entitled thereto.
(e) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Section by virtue thereof.
SECTION 4.09. COMPLIANCE CERTIFICATE. The Company and each Note
Guarantor shall deliver to the Trustee within 120 days after the end of each
fiscal year of the Company or such Note Guarantor (as applicable) an Officers'
Certificate stating that in the course of the performance by the signers of
their duties as Officers of the Company or such Note Guarantor, as the case may
be, they would normally have knowledge of any Default by the Company or such
Guarantor, as the case may be, and whether or not the signers know of any
Default that occurred during such period. If they do, the certificate shall
describe the Default, its status and what action the Company or such Note
Guarantor (as applicable) is taking or proposes to take with respect thereto.
The Company also shall comply with TIA Section 314(a)(4).
SECTION 4.10. FURTHER INSTRUMENTS AND ACTS. Upon request of the
Trustee, the Company shall execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
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53
SECTION 4.11. LIMITATION ON LIENS. The Company shall not, and shall
not permit any Restricted Subsidiary to, directly or indirectly, create or
permit to exist any Lien on any of its property or assets (including Capital
Stock), whether owned on the Issue Date or thereafter acquired, securing any
obligation other than Permitted Liens unless contemporaneously therewith
effective provision is made to secure the Securities equally and ratably with
(or on a senior basis to, in the case of Subordinated Obligations) such
obligation for so long as such obligation is so secured.
SECTION 4.12. LIMITATION ON SALE/LEASEBACK TRANSACTIONS. The Company
shall not, and shall not permit any Restricted Subsidiary to, enter into any
Sale/Leaseback Transaction with respect to any property unless (i) the Company
or such Subsidiary would be entitled to (A) Incur Indebtedness in an amount
equal to the Attributable Debt with respect to such Sale/Leaseback Transaction
pursuant to Section 4.03 and (B) create a Lien on such property securing such
Attributable Debt without equally and ratably securing the Securities pursuant
to Section 4.11, (ii) the net proceeds received by the Company or any Restricted
Subsidiary in connection with such Sale/Leaseback Transaction are at least equal
to the fair value (as determined by the Board of Directors) of such property and
(iii) the transfer of such property is permitted by, and the Company applies the
proceeds of such transaction in compliance with, Section 4.06.
SECTION 4.13. LIMITATION ON LINES OF BUSINESS. The Company shall not,
and shall not permit any Restricted Subsidiary to, engage in any business, other
than a Related Business.
SECTION 4.14. FUTURE NOTE GUARANTORS. After the Issue Date, the
Company shall cause each Restricted Subsidiary which Incurs Indebtedness, other
than Indebtedness owed to the Company or a Wholly Owned Subsidiary, including
each Restricted Subsidiary which is a guarantor of Indebtedness Incurred
pursuant to Section 4.03(b)(i), to execute and deliver to the Trustee a
supplemental indenture in the form of Exhibit B hereto, pursuant to which such
Restricted Subsidiary shall Guarantee payment of the Securities as provided in
Section 10.06.
SECTION 4.15. LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK OF
RESTRICTED SUBSIDIARIES. The Company
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54
shall not sell any shares of Capital Stock of a Restricted Subsidiary, and shall
not permit any Restricted Subsidiary, directly or indirectly, to issue or sell
any shares of its Capital Stock except (i) to the Company or a Wholly Owned
Subsidiary or (ii) if, immediately after giving effect to such issuance or sale,
such Restricted Subsidiary would no longer constitute a Restricted Subsidiary.
Notwithstanding the foregoing, the Company is permitted to sell all the Capital
Stock of a Subsidiary as long as the Company is in compliance with the terms of
Section 4.06.
ARTICLE 5
SUCCESSOR COMPANY
SECTION 5.01. WHEN COMPANY MAY MERGE OR TRANSFER ASSETS. The Company
shall not consolidate with or merge with or into, or convey, transfer or lease
all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor
Company") shall be a Person organized and existing under the laws of the
United States of America, any State thereof or the District of Columbia and
the Successor Company (if not the Company) shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee, in
form satisfactory to the Trustee, all the obligations of the Company under
the Securities and this Indenture;
(ii) immediately after giving effect to such transaction (and treating
any Indebtedness which becomes an obligation of the Successor Company or
any Subsidiary as a result of such transaction as having been Incurred by
such Successor Company or such Subsidiary at the time of such transaction),
no Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction, the
Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to Section 4.03(a);
(iv) immediately after giving effect to such transaction, the
Successor Company shall have Consolidated Net Worth in an amount which is
not less
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55
the Consolidated Net Worth of the Company prior to such
transaction; and
(v) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with this Indenture.
The Successor Company shall be the successor to the Company and shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture, but the predecessor Company in the case of a
conveyance, transfer or lease shall not be released from the obligation to pay
the principal of and interest on the Securities.
Notwithstanding the foregoing clauses (ii), (iii) and (iv), any
Restricted Subsidiary may consolidate with, merge into or transfer all or part
of its properties and assets to the Company or a Wholly Owned Subsidiary.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT. An "Event of Default" occurs if:
(1) the Company defaults in any payment of interest on any Security
when the same becomes due and payable, and such default continues for a
period of 30 days;
(2) the Company (i) defaults in the payment of the principal of any
Security when the same becomes due and payable at its Stated Maturity, upon
redemption, upon declaration or otherwise or (ii) fails to redeem or
purchase Securities when required pursuant to this Indenture or the
Securities;
(3) the Company fails to comply with Section 5.01;
(4) the Company fails to comply with Section 4.02, 4.03, 4.04, 4.05,
4.06, 4.07, 4.08, 4.11, 4.12, 4.13, 4.14 or 4.15 (other than a failure to
purchase Securities when required under Section 4.06 or 4.08)
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56
and such failure continues for 30 days after the notice specified
below;
(5) the Company or any Note Guarantor fails to comply with any of its
agreements in the Securities or this Indenture (other than those referred
to in (1), (2), (3) or (4) above) and such failure continues for 60 days
after the notice specified below;
(6) Indebtedness of the Company or any Subsidiary is not paid within
any applicable grace period after final maturity or is accelerated by the
holders thereof because of a default and the total amount of such
Indebtedness unpaid or accelerated exceeds $5,000,000 or its foreign
currency equivalent at the time and such default continues for 10 days
after the notice specified below;
(7) the Company or any Restricted Subsidiary pursuant to or within the
meaning of any Bankruptcy Law (as defined below):
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in an
involuntary case;
(C) consents to the appointment of a Custodian (as defined below)
of it or for any substantial part of its property; or
(D) makes a general assignment for the benefit of its creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(8) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company or any Restricted
Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any Restricted
Subsidiary or for any substantial part of its property; or
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(C) orders the winding up or liquidation of the Company or any
Restricted Subsidiary;
or any similar relief is granted under any foreign laws and the order,
decree or relief remains unstayed and in effect for 60 days;
(9) any judgment or decree for the payment of money in excess of
$5,000,000 or its foreign currency equivalent at the time is entered
against the Company or any Subsidiary and is not discharged and either
(A) an enforcement proceeding has been commenced by any creditor upon such
judgment or decree or (B) there is a period of 60 days following the entry
of such judgment or decree during which such judgment or decree is not
discharged, waived or the execution thereof stayed and such default
continues for 10 days after the notice specified below; or
(10) any Note Guarantee shall cease to be in full force and effect
(except as contemplated by the terms thereof) or any Note Guarantor shall
deny or disaffirm its obligations under this Indenture or any Note
Guarantee and such Default continues for 10 days.
The foregoing shall constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
The term "Bankruptcy Law" means Title 11, UNITED STATES CODE, or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
A Default under clause (4), (5), (6) or (9) is not an Event of Default
until the Trustee or the Holders of at least 25% in principal amount of the
Securities notify the Company of the Default and the Company does not cure such
Default within the time specified after receipt of such notice. Such notice
must specify the Default, demand that it be remedied and state that such notice
is a "Notice of Default".
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The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clause (3), (6) and (7) and any event which with the
giving of notice or the lapse of time would become an Event of Default under
clause (4), (5), (8), (9) or (10), its status and what action the Company is
taking or proposes to take with respect thereto.
SECTION 6.02. ACCELERATION. If an Event of Default (other than an
Event of Default specified in Section 6.01(7) or (8) with respect to the
Company) occurs and is continuing, the Trustee by notice to the Company, or the
Holders of at least 25% in principal amount of the Securities by notice to the
Company and the Trustee, may declare the principal of, and accrued and unpaid
interest, if any, on all the Securities to be due and payable. Upon such a
declaration, such principal and interest shall be due and payable immediately.
If an Event of Default specified in Section 6.01(7) or (8) with respect to the
Company occurs, the principal of and interest on all the Securities shall IPSO
FACTO become and be immediately due and payable without any declaration or other
act on the part of the Trustee or any Securityholders. The Holders of a
majority in principal amount of the Securities by notice to the Trustee may
rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default have
been cured or waived except nonpayment of principal or interest that has become
due solely because of acceleration. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.
SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
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59
SECTION 6.04. WAIVER OF PAST DEFAULTS. The Holders of a majority in
principal amount of the Securities by notice to the Trustee may waive an
existing Default and its consequences except (i) a Default in the payment of the
principal of or interest on a Security or (ii) a Default in respect of a
provision that under Section 9.02 cannot be amended without the consent of each
Securityholder affected. When a Default is waived, it is deemed cured, but no
such waiver shall extend to any subsequent or other Default or impair any
consequent right.
SECTION 6.05. CONTROL BY MAJORITY. The Holders of a majority in
principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee
may refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.01, that the Trustee determines is unduly prejudicial to
the rights of other Securityholders or would involve the Trustee in personal
liability; PROVIDED, HOWEVER, that the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
SECTION 6.06. LIMITATION ON SUITS. A Securityholder may not pursue
any remedy with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the Securities
make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of security or indemnity; and
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(5) the Holders of a majority in principal amount of the Securities do
not give the Trustee a direction inconsistent with the request during such
60-day period.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding
any other provision of this Indenture, the right of any Holder to receive
payment of principal of and any liquidated damages and interest on the
Securities held by such Holder, on or after the respective due dates expressed
in the Securities, or to bring suit for the enforcement (including against any
Note Guarantor) of any such payment on or after such respective dates, shall not
be impaired or affected without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default
specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount then due and owing (together with interest on any
unpaid interest to the extent lawful) and the amounts provided for in
Section 7.07.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Company, any Note Guarantor,
their respective creditors or properties and, unless prohibited by law or
applicable regulations, may vote on behalf of the Holders in any election of a
trustee in bankruptcy or other Person performing similar functions, and any
Custodian in any such judicial proceeding is hereby authorized by each Holder to
make payments to the Trustee and, in the event that the Trustee shall consent to
the making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel, and any other amounts due
the Trustee under Section 7.07.
SECTION 6.10. PRIORITIES. If the Trustee collects any money or
property pursuant to this Article 6,
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61
it shall pay out the money or property in the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, and any liquidated damages
without preference or priority of any kind, according to the amounts due
and payable on the Securities for principal, any liquidated damages and
interest, respectively; and
THIRD: to the Company.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section. At least 15 days before such record
date, the Company shall mail to each Securityholder and the Trustee a notice
that states the record date, the payment date and amount to be paid.
SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of
more than 10% in principal amount of the Securities.
SECTION 6.12. WAIVER OF STAY OR EXTENSION LAWS. Neither the Company
nor any Note Guarantor (to the extent it may lawfully do so) shall at any time
insist upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Indenture; and the Company and each Note Guarantor (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and shall not hinder, delay or impede the execution of any power herein
granted to the
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Trustee, but shall suffer and permit the execution of every such power as though
no such law had been enacted.
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(1) this paragraph does not limit the effect of paragraph (b) of this
Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith
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63
in accordance with a direction received by it pursuant to
Section 6.05.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (g) of this Section.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
SECTION 7.02. RIGHTS OF TRUSTEE. (a) The Trustee may rely on any
document believed by it to be genuine and to have been signed or presented by
the proper person. The Trustee need not investigate any fact or matter stated
in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on the
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers;
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64
PROVIDED, HOWEVER, that the Trustee's conduct does not constitute wilful
misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or opinion
of counsel with respect to legal matters relating to this Indenture and the
Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
(f) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, notice, request, direction, consent, order, bond, debenture, or other
paper or document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit, and, if
the Trustee shall determine to make such further inquiry or investigation, it
shall be entitled, upon reasonable notice to the Company, to examine the books,
records, and premises of the Company, personally or by agent or attorney.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar or co-paying
agent may do the same with like rights. However, the Trustee must comply with
Sections 7.10 and 7.11.
SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for any
statement of the Company in this Indenture or in any document issued in
connection with the sale of the Securities or in the Securities other than the
Trustee's certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS. If a Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall mail to each
Securityholder notice of the Default within the earlier of 90 days after it
occurs or 30 days after it is known to a trust officer. Except in the case of a
Default in payment of principal of or interest on
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65
any Security (including payments pursuant to the mandatory redemption provisions
of such Security, if any), the Trustee may withhold the notice if and so long as
a committee of its Trust Officers in good faith determines that withholding the
notice is in the interests of Securityholders.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. As promptly as
practicable after each May 15 beginning with the May 15 following the date of
this Indenture, and in any event prior to July 15 in each year, the Trustee
shall mail to each Securityholder a brief report dated as of May 15 that
complies with TIA Section 313(a). The Trustee also shall comply with TIA
Section 313(b).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each stock exchange (if any) on which the
Securities are listed. The Company agrees to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any delisting
thereof.
SECTION 7.07. COMPENSATION AND INDEMNITY. The Company shall pay to
the Trustee from time to time reasonable compensation for its services as the
Company and the Trustee may agree from time to time in writing. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company shall reimburse the Trustee upon request for all
reasonable out-of-pocket expenses incurred or made by it, including costs of
collection, in addition to the compensation for its services. Such expenses
shall include the reasonable compensation and expenses, disbursements and
advances of the Trustee's agents, counsel, accountants and experts. The Company
and each Note Guarantor, jointly and severally, shall indemnify the Trustee
against any and all loss, liability or expense (including reasonable attorneys'
fees, expenses, advances and disbursements) incurred by it in connection with
the administration of this trust and the performance of its duties hereunder.
The Trustee shall notify the Company promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Company shall not relieve
the Company or any Note Guarantor of their obligations hereunder. The Company
shall defend the claim and the Trustee may have separate counsel and the Company
shall pay the reasonable fees and expenses of such counsel. The Company need
not reimburse any expense or indemnify against any loss, liability or expense
incurred by
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the Trustee through the Trustee's own wilful misconduct, negligence or bad
faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee other than money or property held in trust to pay
principal of and interest and any liquidated damages on particular Securities.
The Company's payment obligations pursuant to this Section shall
survive the satisfaction or discharge of this Indenture, any rejection or
termination of this Indenture under any bankruptcy law or the resignation or
removal of the Trustee. When the Trustee incurs expenses after the occurrence
of a Default specified in Section 6.01(7) or (8) with respect to the Company,
the expenses are intended to constitute expenses of administration under the
Bankruptcy Law.
SECTION 7.08. REPLACEMENT OF TRUSTEE. The Trustee may resign at any
time by so notifying the Company. The Holders of a majority in principal amount
of the Securities may remove the Trustee by so notifying the Trustee and may
appoint a successor Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the Holders of
a majority in principal amount of the Securities and such Holders do not
reasonably promptly appoint a successor Trustee, or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the
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retiring Trustee shall become effective, and the successor Trustee shall have
all the rights, powers and duties of the Trustee under this Indenture. The
successor Trustee shall mail a notice of its succession to Securityholders. The
retiring Trustee shall promptly transfer all property held by it as Trustee to
the successor Trustee, subject to the lien provided for in Section 7.07.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
10% in principal amount of the Securities may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger, conversion
or consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Securities shall have been authenticated but not delivered,
any such successor to the Trustee may adopt the certificate of authentication of
any predecessor trustee, and deliver such Securities so authenticated; and in
case at that time any of the Securities shall not have been authenticated, any
successor to the Trustee may authenticate such Securities either in the name of
any predecessor hereunder or in the name of the successor to the Trustee; and in
all such cases such certificates shall have the full force which it is anywhere
in the Securities or in this Indenture provided that the certificate of the
Trustee shall have.
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SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. The Trustee shall at
all times satisfy the requirements of TIA Section 310(a). The Trustee shall
have a combined capital and surplus of at least $50,000,000 as set forth in its
most recent published annual report of condition. The Trustee shall comply with
TIA Section 310(b); PROVIDED, HOWEVER, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which
other securities or certificates of interest or participation in other
securities of the Company are outstanding if the requirements for such exclusion
set forth in TIA Section 310(b)(1) are met.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The
Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated.
ARTICLE 8
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. DISCHARGE OF LIABILITY ON SECURITIES; DEFEASANCE.
(a) When (i) the Company delivers to the Trustee all outstanding Securities
(other than Securities replaced pursuant to Section 2.07) for cancellation or
(ii) all outstanding Securities have become due and payable, whether at maturity
or as a result of the mailing of a notice of redemption pursuant to Article 3
hereof and the Company irrevocably deposits with the Trustee funds sufficient to
pay at maturity or upon redemption all outstanding Securities, including
interest thereon to maturity or such redemption date (other than Securities
replaced pursuant to Section 2.07), and if in either case the Company pays all
other sums payable hereunder by the Company, then this Indenture shall, subject
to Section 8.01(c), cease to be of further effect. The Trustee shall
acknowledge satisfaction and discharge of this Indenture on demand of the
Company accompanied by an Officers' Certificate and an Opinion of Counsel and at
the cost and expense of the Company.
(b) Subject to Sections 8.01(c) and 8.02, the Company at any time may
terminate (i) all its obligations under the Securities and this Indenture
("legal defeasance option") or (ii) its obligations under Sections 4.02, 4.03,
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4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14 and 4.15 and
the operation of Section 6.01(4), 6.01(6), 6.01(7) (but only with respect to a
Subsidiary), 6.01(8) (but only with respect to a Subsidiary) and 6.01(9)
("covenant defeasance option"). The Company may exercise its legal defeasance
option notwithstanding its prior exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the
Company exercises its covenant defeasance option, payment of the Securities may
not be accelerated because of an Event of Default specified in 6.01(4), 6.01(6),
6.01(7) (but only with respect to a Subsidiary), 6.01(8) (but only with respect
to a Subsidiary) and 6.01(9) or because of the failure of the Company to comply
with clauses (iii) and (iv) of Section 5.01.
Upon satisfaction of the conditions set forth herein and upon request
of the Company, the Trustee shall acknowledge in writing the discharge of those
obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 7.07, 7.08, 8.04, 8.05 and
8.06 shall survive until the Securities have been paid in full. Thereafter, the
Company's obligations in Sections 7.07, 8.04 and 8.05 shall survive.
SECTION 8.02. CONDITIONS TO DEFEASANCE. The Company may exercise its
legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits in trust with the Trustee money
or U.S. Government Obligations for the payment of principal of and interest
on the Securities to maturity or redemption, as the case may be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and without
reinvestment on the deposited U.S. Government Obligations plus any
deposited money without investment shall provide cash at such times and in
such amounts as
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shall be sufficient to pay principal and interest when due on all the
Securities to maturity or redemption, as the case may be;
(3) 123 days pass after the deposit is made and during the 123-day
period no Default specified in Section 6.01(7) or (8) with respect to the
Company occurs which is continuing at the end of the period;
(4) the deposit does not constitute a default under any other
agreement binding on the Company;
(5) the Company delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or is
qualified as, a regulated investment company under the Investment Company
Act of 1940;
(6) in the case of the legal defeasance option, the Company shall have
delivered to the Trustee an Opinion of Counsel stating that (i) the Company
has received from, or there has been published by, the Internal Revenue
Service a ruling, or (ii) since the date of this Indenture there has been a
change in the applicable Federal income tax law, in either case to the
effect that, and based thereon such Opinion of Counsel shall confirm that,
the Securityholders shall not recognize income, gain or loss for Federal
income tax purposes as a result of such defeasance and shall be subject to
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such defeasance had not occurred;
(7) in the case of the covenant defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Securityholders shall not recognize income, gain or loss for Federal income
tax purposes as a result of such covenant defeasance and shall be subject
to Federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such covenant defeasance had not
occurred; and
(8) the Company delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the Securities as contemplated by this
Article 8 have been complied with.
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Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article 3.
SECTION 8.03. APPLICATION OF TRUST MONEY. The Trustee shall hold in
trust money or U.S. Government Obligations deposited with it pursuant to this
Article 8. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of and interest on the Securities.
SECTION 8.04. REPAYMENT TO COMPANY. The Trustee and the Paying Agent
shall promptly turn over to the Company upon written request any excess money or
securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Company upon written request any money held by
them for the payment of principal or interest that remains unclaimed for two
years, and, thereafter, Securityholders entitled to the money must look to the
Company for payment as general creditors.
SECTION 8.05. INDEMNITY FOR GOVERNMENT OBLIGATIONS. The Company
shall pay and shall indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against deposited U.S. Government Obligations or the
principal and interest received on such U.S. Government Obligations.
SECTION 8.06. REINSTATEMENT. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with this
Article 8 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article 8 until such time as the Trustee
or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article 8; PROVIDED, HOWEVER, that, if the
Company has made any payment of interest on or principal of any Securities
because of the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Securities to receive such payment
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from the money or U.S. Government Obligations held by the Trustee or Paying
Agent.
ARTICLE 9
AMENDMENTS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS. The Company, the Note
Guarantors and the Trustee may amend this Indenture or the Securities without
notice to or consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 5;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; PROVIDED, HOWEVER, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(4) to make any change in Article 10 that would limit or terminate the
benefits available to any holder of Senior Indebtedness (or Representatives
therefor) under Article 10;
(5) to add guarantees with respect to the Securities or to secure the
Securities;
(6) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company;
(7) to comply with any requirements of the SEC in connection with
qualifying this Indenture under the TIA; or
(8) to make any change that does not adversely affect the rights of
any Securityholder.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to
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give such notice to all Securityholders, or any defect therein, shall not impair
or affect the validity of an amendment under this Section.
SECTION 9.02. WITH CONSENT OF HOLDERS. The Company, the Note
Guarantors and the Trustee may amend this Indenture or the Securities without
notice to any Securityholder but with the written consent of the Holders of at
least a majority in principal amount of the Securities. However, without the
consent of each Securityholder affected, an amendment may not:
(1) reduce the amount of Securities whose Holders must consent to an
amendment;
(2) reduce the rate of or extend the time for payment of interest or
any liquidated damages on any Security;
(3) reduce the principal of or extend the Stated Maturity of any
Security;
(4) reduce the premium payable upon the redemption of any Security or
change the time at which any Security may or shall be redeemed in
accordance with Article 3;
(5) make any Security payable in money other than that stated in the
Security;
(6) modify or affect in any manner adverse to the Holders the terms
and conditions of the obligation of any Note Guarantor for the due and
punctual payment of the principal of or any liquidated damages or interest
on Securities; or
(7) make any change in Section 6.04 or 6.07 or the second sentence of
this Section.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent approves the substance thereof.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect
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therein, shall not impair or affect the validity of an amendment under this
Section.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment
to this Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS AND WAIVERS. A
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any
such Holder or subsequent Holder may revoke the consent or waiver as to such
Holder's Security or portion of the Security if the Trustee receives the notice
of revocation before the date the amendment or waiver becomes effective. After
an amendment or waiver becomes effective, it shall bind every Securityholder.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Securityholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 120
days after such record date.
SECTION 9.05. NOTATION ON OR EXCHANGE OF SECURITIES. If an amendment
changes the terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determines, the Company
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
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SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS. The Trustee shall sign any
amendment authorized pursuant to this Article 9 if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.01) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that such
amendment is authorized or permitted by this Indenture and that such amendment
is the legal, valid and binding obligation of the Company and the Note
Guarantors enforceable against them in accordance with its terms, subject to
customary exceptions.
SECTION 9.07. PAYMENT FOR CONSENT. Neither the Company nor any
Affiliate of the Company shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of this Indenture or the Securities unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
ARTICLE 10
NOTE GUARANTEES
SECTION 10.01. NOTE GUARANTEES. Each Note Guarantor hereby jointly
and severally unconditionally and irrevocably guarantees on a senior basis to
each Holder and to the Trustee and its successors and assigns (a) the full and
punctual payment of principal of and interest on the Securities when due,
whether at maturity, by acceleration, by redemption or otherwise, and all other
monetary obligations of the Company under this Indenture (including obligations
to the Trustee) and the Securities and (b) the full and punctual performance
within applicable grace periods of all other obligations of the Company under
this Indenture and the Securities (all the foregoing being hereinafter
collectively called the "Obligations"). Each Note Guarantor further agrees that
the Obligations may be extended or renewed, in whole or in part, without notice
or further assent from each such Note Guarantor, and that each
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such Note Guarantor shall remain bound under this Article 10 notwithstanding any
extension or renewal of any Obligation.
Each Note Guarantor waives presentation to, demand of, payment from
and protest to the Company of any of the Obligations and also waives notice of
protest for nonpayment. Each Note Guarantor waives notice of any default under
the Securities or the Obligations. The obligations of each Note Guarantor
hereunder shall not be affected by (a) the failure of any Holder or the Trustee
to assert any claim or demand or to enforce any right or remedy against the
Company or any other Person under this Indenture, the Securities or any other
agreement or otherwise; (b) any extension or renewal of any thereof; (c) any
rescission, waiver, amendment or modification of any of the terms or provisions
of this Indenture, the Securities or any other agreement; (d) the release of any
security held by any Holder or the Trustee for the Obligations or any of them;
(e) the failure of any Holder or Trustee to exercise any right or remedy against
any other guarantor of the Obligations; or (f) any change in the ownership of
such Note Guarantor, except as provided in Section 10.02(b).
Each Note Guarantor further agrees that its Note Guarantee herein
constitutes a guarantee of payment, performance and compliance when due (and not
a guarantee of collection) and waives any right to require that any resort be
had by any Holder or the Trustee to any security held for payment of the
Obligations.
The obligations of each Note Guarantor hereunder shall not be subject
to any reduction, limitation, impairment or termination for any reason,
including any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to any defense of setoff, counterclaim, recoupment or
termination whatsoever or by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of each Note Guarantor herein shall
not be discharged or impaired or otherwise affected by the failure of any Holder
or the Trustee to assert any claim or demand or to enforce any remedy under this
Indenture, the Securities or any other agreement, by any waiver or modification
of any thereof, by any default, failure or delay, willful or otherwise, in the
performance of the obligations, or by any other act or thing or omission or
delay to do any other act or thing which may or might in any manner or to any
extent vary the risk of any
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Note Guarantor or would otherwise operate as a discharge of any Note Guarantor
as a matter of law or equity.
Each Note Guarantor further agrees that its Note Guarantee herein
shall continue to be effective or be reinstated, as the case may be, if at any
time payment, or any part thereof, of principal of or interest on any Obligation
is rescinded or must otherwise be restored by any Holder or the Trustee upon the
bankruptcy or reorganization of the Company or otherwise.
In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against any Note
Guarantor by virtue hereof, upon the failure of the Company to pay the principal
of or interest on any Obligation when and as the same shall become due, whether
at maturity, by acceleration, by redemption or otherwise, or to perform or
comply with any other Obligation, each Note Guarantor hereby promises to and
shall forthwith pay, or cause to be paid, in cash, to the Holders or the Trustee
an amount equal to the sum of (i) the unpaid principal amount of such
Obligations, (ii) accrued and unpaid interest on such Obligations (but only to
the extent not prohibited by law) and (iii) all other monetary Obligations of
the Company to the Holders and the Trustee.
Each Note Guarantor agrees that it shall not be entitled to any right
of subrogation in relation to the Holders in respect of any Obligations
guaranteed hereby until payment in full of all Obligations. Each Note Guarantor
further agrees that, as between it, on the one hand, and the Holders and the
Trustee, on the other hand, (x) the maturity of the Obligations guaranteed
hereby may be accelerated as provided in Article 6 for the purposes of any Note
Guarantor's Note Guarantee herein, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the Obligations
guaranteed hereby, and (y) in the event of any declaration of acceleration of
such obligations as provided in Article 6, such Obligations (whether or not due
and payable) shall forthwith become due and payable by such Note Guarantor for
the purposes of this Section.
Each Note Guarantor also agrees to pay any and all costs and expenses
(including reasonable attorneys' fees) incurred by the Trustee or any Holder in
enforcing any rights under this Section.
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SECTION 10.02. LIMITATION ON LIABILITY. (a) Any term or provision
of this Indenture to the contrary notwithstanding, the maximum, aggregate amount
of the Obligations guaranteed hereunder by any Note Guarantor shall not exceed
the maximum amount that can be hereby guaranteed without rendering this
Indenture, as it relates to any Note Guarantor, voidable under applicable law
relating to fraudulent conveyance or fraudulent transfer.
(b) This Note Guarantee as to any Note Guarantor shall terminate and
be of no further force or effect upon the sale or other transfer (i) by such
Note Guarantor of all or substantially all of its assets or (ii) by the Company
of all of its stock or other equity interests in such Note Guarantor, to a
Person that is not an Affiliate of the Company; PROVIDED, HOWEVER, that such
sale or transfer shall be deemed to constitute an Asset Disposition and the
Company shall comply with its obligations under Section 4.06.
SECTION 10.03. SUCCESSORS AND ASSIGNS. This Article 10 shall be
binding upon each Note Guarantor and, except as provided in Section 10.02(b),
its successors and assigns and shall enure to the benefit of the successors and
assigns of the Trustee and the Holders and, in the event of any transfer or
assignment of rights by any Holder or the Trustee, the rights and privileges
conferred upon that party in this Indenture and in the Securities shall
automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions of this Indenture.
SECTION 10.04. NO WAIVER. Neither a failure nor a delay on the part
of either the Trustee or the Holders in exercising any right, power or privilege
under this Article 10 shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Trustee and the
Holders herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which either may have under this Article 10 at law,
in equity, by statute or otherwise.
SECTION 10.05. MODIFICATION. No modification, amendment or waiver of
any provision of this Article 10, nor the consent to any departure by any Note
Guarantor therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Trustee, and then such waiver or consent shall be
effective only in the specific
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instance and for the purpose for which given. No notice to or demand on any
Note Guarantor in any case shall entitle such Note Guarantor to any other or
further notice or demand in the same, similar or other circumstances.
SECTION 10.06. EXECUTION OF SUPPLEMENTAL INDENTURE FOR FUTURE NOTE
GUARANTORS. Each Subsidiary which is required to become a Note Guarantor
pursuant to Section 4.14 shall promptly execute and deliver to the Trustee a
supplemental indenture in the form of Exhibit B hereto pursuant to which such
Subsidiary shall become a Note Guarantor under this Article 10 and shall
guarantee the Obligations. Concurrently with the execution and delivery of such
supplemental indenture, the Company shall deliver to the Trustee an Opinion of
Counsel to the effect that such supplemental indenture has been duly authorized,
executed and delivered by such Subsidiary and that, subject to the application
of bankruptcy, insolvency, moratorium, fraudulent conveyance or transfer and
other similar laws relating to creditors' rights generally and to the principals
of equity, whether considered in a proceeding at law or in equity, the Note
Guarantee of such Note Guarantor is a legal, valid and binding obligation of
such Note Guarantor, enforceable against such Note Guarantor in accordance with
its terms.
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS. If any provision of
this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 11.02. NOTICES. Any notice or communication shall be in
writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company or any Note Guarantor:
Premier Parks Inc.
122 East 42nd Street
49th Floor
New York, N.Y. 10168
Attention of: Kieran E. Burke,
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Chairman and Chief Executive Officer
if to the Trustee:
The Bank of New York
One Wall Street
New York, NY 10286
Attention of: Corporate Trust Division
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Securityholder shall be mailed
to the Securityholder at the Securityholder's address as it appears on the
registration books of the Registrar and shall be sufficiently given if so mailed
within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 11.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA Section 312(c).
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take or refrain
from taking any action under this Indenture, the Company shall furnish to the
Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in
<PAGE>
81
the opinion of such counsel, all such conditions precedent have been
complied with.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each
Certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 11.06. WHEN SECURITIES DISREGARDED. In determining whether
the Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
securities which the Trustee knows are so owned shall be so disregarded. Also,
subject to the foregoing, only Securities outstanding at the time shall be
considered in any such determination.
SECTION 11.07. RULES BY TRUSTEE, PAYING AGENT AND REGISTRAR. The
Trustee may make reasonable rules for action by or a meeting of Securityholders.
the Registrar and the Paying Agent may make reasonable rules for their
functions.
SECTION 11.08. LEGAL HOLIDAYS. A "Legal Holiday" is a Saturday, a
Sunday or a day on which banking
<PAGE>
82
institutions are not required to be open in the State of New York. If a payment
date is a Legal Holiday, payment shall be made on the next succeeding day that
is not a Legal Holiday, and no interest shall accrue for the intervening period.
If a regular record date is a Legal Holiday, the record date shall not be
affected.
SECTION 11.09. GOVERNING LAW. This Indenture and the Securities
shall be governed by, and construed in accordance with, the laws of the State of
New York but without giving effect to applicable principles of conflicts of law
to the extent that the application of the laws of another jurisdiction would be
required thereby.
SECTION 11.10. NO RECOURSE AGAINST OTHERS. A director, officer,
employee or stockholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Securities or this Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder shall waive and release
all such liability. The waiver and release shall be part of the consideration
for the issue of the Securities.
SECTION 11.11. SUCCESSORS. All agreements of the Company and each
Note Guarantor in this Indenture and the Securities shall bind their respective
successors. All agreements of the Trustee in this Indenture shall bind its
successors.
SECTION 11.12. MULTIPLE ORIGINALS. The parties may sign any number
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
SECTION 11.13. TABLE OF CONTENTS; HEADINGS. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be
<PAGE>
83
considered a part hereof and shall not modify or restrict any of the terms or
provisions hereof.
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
PREMIER PARKS INC.,
by
______________________________
Name:
Title:
FUNTIME PARKS, INC.,
by
______________________________
Name:
Title:
FUNTIME, INC.,
by
______________________________
Name:
Title:
WYANDOT LAKE, INC.,
by
______________________________
Name:
Title:
DARIEN LAKE THEME PARK AND CAMPING
RESORT, INC.,
by
______________________________
Name:
Title:
<PAGE>
84
D.L. HOLDINGS, INC.,
by
______________________________
Name:
Title:
TIERCO MARYLAND, INC.,
by
______________________________
Name:
Title:
TIERCO WATER PARK, INC.,
by
______________________________
Name:
Title:
FRONTIER CITY PROPERTIES, INC.,
by
______________________________
Name:
Title:
FRONTIER CITY PARTNERS, Limited
Partnership,
by Frontier City Properties,
Inc., as General Partner
by
____________________________
Name:
Title:
<PAGE>
85
THE BANK OF NEW YORK,
by
______________________________
Name:
Title:
<PAGE>
EXHIBIT A
[FORM OF FACE OF SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
<PAGE>
2
No. Principal Amount at Stated Maturity $
CUSIP NO.
% Senior Note due 2007
Premier Parks Inc., a Delaware corporation, promises to pay to
, or registered assigns, the principal sum of Dollars on
, 2007.
Interest Payment Dates: and commencing ,
1997.
Record Dates: and commencing , 1997
(whether or not a business day).
Additional provisions of this Security are set forth on the other side
of this Security.
Dated: PREMIER PARKS INC.,
by
______________________
Chairman of the Board and
Chief Executive Officer
______________________
President and Chief
Operating Officer
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE BANK OF NEW YORK
as Trustee, certifies [Seal]
that this is one of
the Securities referred
to in the Indenture.
by
______________________
Authorized Signatory
<PAGE>
3
[FORM OF REVERSE SIDE OF SECURITY]
% Senior Note due 2007
1. INTEREST
PREMIER PARKS INC., a Delaware corporation (such corporation, and its
successors and assigns under the Indenture hereinafter referred to, being herein
called the "Company"), promises to pay interest on the principal amount of this
Security at the rate per annum shown above.
The Company will pay interest semiannually on and
of each year, commencing , 1997. Interest on the
Securities will accrue from the most recent date to which interest has been paid
on the Securities or, if no interest has been paid, from , 1997.
Interest and liquidated damages (if any) will be computed on the basis of a
360-day year of twelve 30-day months. The Company shall pay interest on overdue
principal at the rate borne by the Securities plus 1% per annum.
2.METHOD OF PAYMENT
The Company will pay interest (except defaulted interest) on and
liquidated damages, if any, in respect of the Securities to the Persons who are
registered holders of Securities at the close of business on the or
, whether or not a business day (each a "record date"), next preceding
the applicable payment date even if Securities are cancelled after the record
date and on or before the applicable payment date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Company will
pay principal and interest in money of the United States that at the time of
payment is legal tender for payment of public and private debts. However, the
Company may pay principal and interest by check payable in such money. It may
mail an interest check to a Holder's registered address.
3. PAYING AGENT AND REGISTRAR
Initially, The Bank of New York, a New York corporation (the
"Trustee"), will act as Paying Agent and Registrar. The Company may appoint and
change any Paying
<PAGE>
4
Agent or Registrar without notice. The Company or any of its domestically
incorporated Wholly Owned Subsidiaries may act as Paying Agent or Registrar.
4. INDENTURE
The Company issued the Securities under an Indenture dated as of
, 1997 (the "Indenture"), among the Company; Funtime Parks, Inc.,
Funtime, Inc., Wyandot Lake, Inc., Darien Lake Theme Park and Camping Resort,
Inc., D.L. Holdings, Inc., Tierco Maryland, Inc., Tierco Water Park, Inc.,
Frontier City Properties, Inc., Frontier City Partners, Limited Partnership,
[Elitch Gardens subsidiary], [The Great Escape subsidiary] and [Waterworld
subsidiary] (collectively, the "Note Guarantors"); and the Trustee. The terms
of the Securities include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as amended by the Trust Indenture Reform Act of 1990, as
it may be amended from time to time (the "Act"). Capitalized terms used herein
and not defined herein have the meanings ascribed thereto in the Indenture. The
Securities are subject to all such terms, and Securityholders are referred to
the Indenture and the Act for a statement of those terms.
The Securities are general unsecured obligations of the Company
limited to $ aggregate principal amount (subject to Section 2.07 of
the Indenture). The Indenture imposes certain limitations on the Incurrence of
Indebtedness by the Company and certain of its Subsidiaries, the payment of
dividends and other distributions on the Capital Stock of the Company and
certain of its Subsidiaries, the purchase or redemption of Capital Stock of the
Company and of certain Capital Stock of such Subsidiaries, certain purchases or
redemptions of Subordinated Obligations, the sale or transfer of assets and
Subsidiary stock, the creation of liens, the issuance or sale of Capital Stock
of Restricted Subsidiaries, the business activities and investments of the
Company and certain of its Subsidiaries and transactions with Affiliates. In
addition, the Indenture limits the ability of the Company and certain of its
Subsidiaries to restrict distributions and dividends from Subsidiaries.
To secure the due and punctual payment of the principal and liquidated
damages and interest, if any, on the Securities and all other amounts payable by
the Company
<PAGE>
5
under the Indenture and the Securities when and as the same shall be due and
payable, whether at maturity, by acceleration or otherwise, according to the
terms of the Securities and the Indenture, the Note Guarantors have
unconditionally guaranteed the Obligations on a senior basis pursuant to the
terms of the Indenture.
5. OPTIONAL REDEMPTION
Except as set forth in this paragraph 5, the Securities will not be
redeemable prior to , 2002. On and after such date, the Securities will
be redeemable, at the Company's option, in whole or in part, upon not less than
30 nor more than 60 days' prior notice mailed by first class mail to each
Holder's registered address, at the redemption prices (expressed as percentages
of principal amount) set forth below plus accrued interest and liquidated
damages (if any) to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date), if redeemed during the 12-month period commencing on
August 15 of the years set forth below:
Year Redemption Price
1999 . . . . . . . . . . . . . . . . . . . . . . %
2000 . . . . . . . . . . . . . . . . . . . . . . %
2001 . . . . . . . . . . . . . . . . . . . . . . %
2002 and thereafter . . . . . . . . . . . . . . 100.000%
Notwithstanding the foregoing, at any time and from time to time prior
to , 2000, the Company may, subject to certain requirements, redeem in
the aggregate up to 33-1/3% of the original aggregate principal amount of the
Securities with the Net Cash Proceeds of one or more Public Equity Offerings by
the Company, following which there is a Public Market, at a redemption price of
% of the principal amount of the Securities to be redeemed as of the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest and any liquidated damages due on the relevant
interest payment date); PROVIDED, HOWEVER, that at least 66-2/3% of the original
aggregate principal amount of the Securities must remain outstanding after each
such redemption.
<PAGE>
6
6. NOTICE OF REDEMPTION
Notice of redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each Holder of Securities to be redeemed
at his registered address. Securities in denominations of principal amount
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000. If money sufficient to pay the redemption price of and accrued interest
on all Securities (or portions thereof) to be redeemed on the redemption date is
deposited with the Paying Agent on or before the redemption date and certain
other conditions are satisfied, on and after such date interest ceases to accrue
on such Securities (or such portions thereof) called for redemption.
7. PUT PROVISIONS
Upon a Change of Control, any Holder of Securities will have the right
to cause the Company to repurchase all or any part of the Securities of such
Holder at a repurchase price equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, to and including the date of repurchase as
provided in, and subject to the terms of, the Indenture.
8. DENOMINATIONS; TRANSFER; EXCHANGE
The Securities are in registered form without coupons in denominations
of principal amount of $1,000 and whole multiples of $1,000. A Holder may
transfer or exchange Securities in accordance with the Indenture. The Registrar
may require a Holder, among other things, to furnish appropriate endorsements or
transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture. The Registrar need not register the transfer of or exchange any
Securities selected for redemption (except, in the case of a Security to be
redeemed in part, the portion of the Security not to be redeemed) or any
Securities for a period of 15 days before a selection of Securities to be
redeemed or 15 days before an interest payment date.
9. PERSONS DEEMED OWNERS
The registered holder of this Security may be treated as the owner of
it for all purposes.
<PAGE>
7
10. UNCLAIMED MONEY
If money for the payment of principal, interest or liquidated damages
remains unclaimed for two years, the Trustee or Paying Agent shall pay the money
back to the Company at its request unless an abandoned property law designates
another person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
11. DEFEASANCE
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Securities and the Indenture if the
Company deposits with the Trustee money or U.S. Government Obligations for the
payment of principal and interest on the Securities to redemption or maturity,
as the case may be.
12. AMENDMENT, WAIVER
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount of the outstanding Securities
and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in principal amount of the
outstanding Securities. Subject to certain exceptions set forth in the
Indenture, without the consent of any Securityholder, the Company, the Note
Guarantors and the Trustee may amend the Indenture or the Securities to cure any
ambiguity, omission, defect or inconsistency, or to comply with Article 5 of the
Indenture, or to provide for uncertificated Securities in addition to or in
place of certificated Securities, or to add guarantees with respect to the
Securities or to secure the Securities, or to add additional covenants or
surrender rights or powers conferred on the Company, or to comply with any
requirements of the SEC in connection with qualifying the Indenture under the
Act, or to make any change that does not adversely affect the rights of any
Securityholder, or to provide for the issuance of Exchange Notes.
13. DEFAULTS AND REMEDIES
Under the Indenture, Events of Default include (i) default for 30 days
in payment of interest on the Securities; (ii) default in payment of principal
on the
<PAGE>
8
Securities at maturity, upon redemption pursuant to paragraph 5 of the
Securities, upon required repurchase, upon declaration or otherwise;
(iii) failure by the Company to comply with other agreements in the Indenture or
the Securities, in certain cases subject to notice and lapse of time;
(iv) certain accelerations (including failure to pay within any grace period
after final maturity) of other Indebtedness of the Company or Subsidiaries if
the amount accelerated (or so unpaid) exceeds $5 million; (v) certain events of
bankruptcy or insolvency with respect to the Company or any Subsidiary; and
(vi) certain judgments or decrees for the payment of money in excess of $5
million. If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Securities may declare all
the Securities to be due and payable immediately. Certain events of bankruptcy
or insolvency are Events of Default which will result in the Securities being
due and payable immediately upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may refuse to enforce the Indenture
or the Securities unless it receives reasonable indemnity or security. Subject
to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default
(except a Default in payment of principal or interest) if it determines that
withholding notice is in their interest.
14. TRUSTEE DEALINGS WITH THE COMPANY
Subject to certain limitations imposed by the Act, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its affiliates and may otherwise deal with the Company
or its affiliates with the same rights it would have if it were not Trustee.
15. NO RECOURSE AGAINST OTHERS
A director, officer, employee or stockholder, as such, of the Company
or the Trustee shall not have any liability for any obligations of the Company
under the Securities or the Indenture or for any claim based on, in
<PAGE>
9
respect of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder waives and releases all such liability. The
waiver and release are part of the consideration for the issue of the
Securities.
16. AUTHENTICATION
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
17. ABBREVIATIONS
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common) TEN ENT (=tenants by the
entirety) JT TEN (=joint tenants with rights of survivorship and not as tenants
in common) CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act).
18. CUSIP NUMBERS
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Security-holders. No representation
is made as to the accuracy of such numbers either as printed on the Securities
or as contained in any notice of redemption and reliance may be placed only on
the other identification numbers placed thereon.
THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN
REQUEST AND WITHOUT CHARGE TO THE SECURITYHOLDER A COPY OF THE
INDENTURE WHICH HAS IN IT THE TEXT OF THIS SECURITY IN LARGER
TYPE. REQUESTS MAY BE MADE TO:
ATTENTION OF: PREMIER PARKS INC.
11501 NORTHEAST EXPRESSWAY
OKLAHOMA CITY, OKLAHOMA 73131
ATTENTION OF: CORPORATE SECRETARY
<PAGE>
10
ASSIGNMENT FORM
TO ASSIGN THIS SECURITY, FILL IN THE FORM BELOW:
I OR WE ASSIGN AND TRANSFER THIS SECURITY TO
(PRINT OR TYPE ASSIGNEE'S NAME, ADDRESS AND ZIP CODE)
(INSERT ASSIGNEE'S SOC. SEC. OR TAX I.D. NO.)
AND IRREVOCABLY APPOINT AGENT TO TRANSFER THIS SECURITY ON THE
BOOKS OF THE COMPANY. THE AGENT MAY SUBSTITUTE ANOTHER TO ACT FOR HIM.
_________________________________________________________________
DATE: _______________ YOUR SIGNATURE: ______________________
Signature Guarantee: __________________________________________
(Signature must be guaranteed)
____________________________________________________________
Sign exactly as your name appears on the other side of this Security.
<PAGE>
11
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company pursuant to
Section 4.06 or 4.08 of the Indenture, check the box:
/ /
If you want to elect to have only part of this Security purchased by the Company
pursuant to Section 4.06 or 4.08 of the Indenture, state the amount in principal
amount (must be integral multiple of $1,000): $
Date: __________ Your Signature _____________________
(Sign exactly as your name appears on the
other side of the Security)
Signature Guarantee: _______________________________________
(Signature must be guaranteed)
<PAGE>
EXHIBIT B
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"),
dated as of , between (the "Note
Guarantor"), a subsidiary of Premier Parks Inc. (or its
successor), a Delaware corporation (the "Company"), and The Bank
of New York, a New York corporation, as trustee under the
indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of , 1997, providing
for the issuance of an aggregate principal amount of $ of % Senior
Notes due 2007 (the "Securities");
WHEREAS, Section 4.14 of the Indenture provides that under certain
circumstances the Company is required to cause the Note Guarantor to execute and
deliver to the Trustee a supplemental indenture pursuant to which the Note
Guarantor shall unconditionally guarantee all of the Company's obligations under
the Securities pursuant to a Note Guarantee on the terms and conditions set
forth herein; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Note Guarantor and the Trustee mutually covenant and agree for the equal and
ratable benefit of the holders of the Securities as follows:
1. DEFINITIONS. (a) Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
(b) For all purposes of this Supplement, except as otherwise herein
expressly provided or unless the context otherwise requires: (i) the terms and
expressions used
<PAGE>
2
herein shall have the same meanings as corresponding terms and expressions used
in the Indenture; and (ii) the words "herein," "hereof" and "hereby" and other
words of similar import used in this Supplement refer to this Supplement as a
whole and not to any particular section hereof.
2. AGREEMENT TO GUARANTEE. The Note Guarantor hereby agrees,
jointly and severally with all other Note Guarantors under the Indenture, to
guarantee the Company's obligations under the Securities on the terms and
subject to the conditions set forth in Section 10 of the Indenture and to be
bound by all other applicable provisions of the Indenture. Except as expressly
amended hereby, the Indenture is in all respects ratified and confirmed and all
the terms, conditions and provisions thereof shall remain in full force and
effect. This Supplemental Indenture shall form a part of the Indenture for all
purposes, and every holder of Notes heretofore or hereafter authenticated and
delivered shall be bound hereby.
3. GOVERNING LAW. This Supplemental Indenture shall be governed by,
and construed in accordance with, the laws of the State of New York but without
giving effect to applicable principles of conflicts of law to the extent that
the application of the laws of another jurisdiction would be required thereby.
4. TRUSTEE MAKES NO REPRESENTATION. The Trustee makes no
representation as to the validity or sufficiency of this Supplemental Indenture.
5. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
6. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not effect the construction thereof.
<PAGE>
3
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
[NOTE GUARANTOR],
by
________________________
Name:
Title:
THE BANK OF NEW YORK,
by
________________________
Name:
Title:
<PAGE>
EXHIBIT 4(m)
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("AGREEMENT") is made
this day of ___________, 1997, by and among Premier Parks Inc., a
Delaware corporation ("BUYER"), Edward J. Carroll, Jr. ("CARROLL") and The
Carroll Family Limited Partnership (the "PARTNERSHIP") (Carroll and the
Partnership are sometimes hereinafter referred to as "SELLERS" or the
"HOLDERS" and individually, as a "SELLER" or a "HOLDER").
Buyer, Stuart Amusement Company, a Massachusetts corporation, and
Sellers have executed and delivered a Stock Purchase Agreement dated as of
December 4, 1996 (the "STOCK PURCHASE AGREEMENT"), pursuant to which Buyer
has agreed to purchase all of the Shares owned by each Seller in accordance
with the terms of the Stock Purchase Agreement.
Pursuant to the Stock Purchase Agreement, the Holders will receive
in payment of 10% of the Net Proceeds the number of shares of Buyer Stock
(the "TRANSACTION SHARES") set forth on Exhibit A hereto in accordance with
the terms of the Stock Purchase Agreement;
Pursuant to the Stock Purchase Agreement, Buyer has agreed to
register the Transaction Shares under the Securities Act of 1933, as amended
(the "SECURITIES ACT");
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS. All capitalized terms used herein but not
otherwise defined shall have the meanings ascribed to them in the Stock
Purchase Agreement.
2. SHELF REGISTRATION. (a) No later than the fifth business day
following the Closing Date, Buyer shall file with the Securities and Exchange
Commission (the "SEC")
<PAGE>
a registration statement on Form S-3 (or a successor registration form) (the
"SHELF REGISTRATION STATEMENT") under the Securities Act covering all of the
Transaction Shares (the Transaction Shares being so registered are hereinafter
referred to as the "REGISTERED SECURITIES"). Buyer shall use its reasonable
good faith efforts to have the Registration Statement declared effective as soon
as practicable following the filing date and to keep current the prospectus (the
"PROSPECTUS") included in the Shelf Registration Statement for a period of two
(2) years (the "TERM") from the effective date (the "EFFECTIVE DATE") of the
Shelf Registration Statement.
Notwithstanding anything contained herein to the contrary, the
Holders acknowledge that Buyer may include in the Shelf Registration
Statement any shares of Buyer Stock held by securityholders of Buyer who as
of the filing date thereof shall be entitled to include such shares of Buyer
Stock in the Shelf Registration Statement pursuant to certain agreements
between Buyer and such securityholders.
3. HOLDBACK AGREEMENT. If at any time during the Term Buyer
proposes to register any shares of Buyer Stock in one or more registration
statements under the Securities Act pursuant to an underwritten offering (the
"UNDERWRITTEN OFFERING") and if requested by the managing underwriters of the
Underwritten Offering, each Holder agrees not to effect any public sale or
distribution of Registered Shares pursuant to the Shelf Registration
Statement during the ten-day period prior to, and during the 90-day period
beginning on, the closing date of each such Underwritten Offering, without
the consent of the managing underwriters, to the extent such Holder is timely
notified in writing by Buyer or the managing underwriters. Notwithstanding
the foregoing, the Holders shall have the right
2
<PAGE>
to sell Registered Shares pursuant to the Shelf Registration Statement without
regard to the provisions of this Section 3 and notwithstanding the occurrence of
any Underwriter Offerings for at least 45 consecutive days during each of the
first and the second six-month periods of each year of the Term and, unless such
a 45-day period shall have previously occurred during any applicable six-month
period, such 45-day period shall be the last 45 days of such six-month period.
4. REGISTRATION PROCEDURES. In connection with the registration
of the Registered Securities, Buyer shall:
(a) before filing the Shelf Registration Statement or a
Prospectus or any amendments or supplements thereto (excluding documents
incorporated by reference), furnish to the Holders, if any, copies of all
such documents proposed to be filed. Buyer shall not file the Shelf
Registration Statement or amendment or supplement thereto or Prospectus to
which the Holders of a majority of the Registered Securities covered in the
Shelf Registration Statement shall reasonably object;
(b) prepare and file with the SEC such amendments or
supplements to the Prospectus and such post-effective amendments to the Shelf
Registration Statement as may be necessary to keep the Prospectus current for
the Term, and otherwise comply with the provisions of the Securities Act
applicable to it in connection with the offer and sale of the Registered
Securities pursuant to the Shelf Registration Statement during the Term in
accordance with the intended methods of disposition by the Holders set forth
in the Shelf Registration Statement;
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(c) notify the Holders of Registered Securities being
registered promptly, and (if requested by any such person) confirm such
advice in writing (1) when the Shelf Registration Statement, the Prospectus
or any supplement or amendment thereto has been filed, and, with respect to
the Shelf Registration Statement or any post-effective amendment thereto,
when the same has become effective, (2) of any request by the SEC for
amendments or supplements to the Shelf Registration Statement or the
Prospectus or for additional information, (3) of the issuance by the SEC of
any stop order suspending the effectiveness of the Shelf Registration
Statement or the initiation of any proceedings for that purpose, (4) of the
receipt by Buyer of any notification with respect to the suspension of the
qualification of the Registered Securities for sale in any jurisdiction or
the initiation or threatening of any proceeding for such purpose, and (5) of
the happening of any event which makes any statement made in the Shelf
Registration Statement, the Prospectus or any document incorporated therein
by reference untrue in any material respect or which requires the making of
any changes in the Shelf Registration Statement, the Prospectus or any
document incorporated therein by reference in order to make the statements
therein not misleading in any material respect;
(d) use reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of the Shelf Registration Statement at the
earliest possible moment;
(e) if requested by the Holders of a majority of the Registered
Securities being registered, incorporate in the Shelf Registration Statement,
the Prospectus or any supplement or amendment thereto such information as
such Holders agree should be
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included therein relating to the distribution of the Registered Securities;
and make all required filings of the Shelf Registration Statement,
Prospectus, amendment or supplement as soon as practicable following the
notification of the matters to be incorporated therein;
(f) furnish to each Holder of the Registered Securities, without
charge, at least one signed copy of the Shelf Registration Statement and any
amendment thereto, including financial statements and schedules and all
documents incorporated therein by reference;
(g) deliver to each Holder of Registered Securities, without
charge, as many copies of the Prospectus and any amendment or supplement
thereto as such persons may reasonably request; Buyer consents to the use of
the Prospectus or any amendment or supplement thereto by each of the Holders
in connection with the offering and sale of the Registered Securities covered
by the Prospectus or any amendment or supplement thereto;
(h) prior to any public offering of Registered Securities, use
reasonable efforts to register or qualify, and to cooperate with the Holders
and their respective counsel in connection with the registration or
qualification of, such Registered Securities for offer and sale under the
securities or blue sky laws of such jurisdictions as any such Holder
reasonably requests in writing; PROVIDED that Buyer will not be required to
qualify generally to do business in any jurisdiction where it is not then so
qualified or to take any action which would subject it to general service of
process in any such jurisdiction where it is not then so subject;
(i) upon the occurrence of any event contemplated by Section
(4)(c) above, prepare a post-effective amendment to the Shelf Registration
Statement and/or a
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supplement to the Prospectus and/or an amendment to any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of the Registered Securities, the Prospectus will
not contain an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading;
(j) use its best efforts to list the Registered Securities on
the securities exchange on which Buyer Stock is then listed, if any.
Buyer may require each Holder to furnish to Buyer such
information regarding the distribution of the Registered Securities as Buyer
may from time to time reasonably request in writing.
Each Holder agrees that, upon receipt of any notice from
Buyer of the happening of any event of the kind described in Section 4(c)
hereof, such Holder will forthwith discontinue disposition of Registered
Securities pursuant to the Shelf Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated
by Section 4(i) hereof, or until it is advised in writing by Buyer that the
use of the Prospectus may be resumed, and has received copies of any
additional or supplemental filings which are incorporated by reference in the
Prospectus, and, if so directed by Buyer, each Holder will deliver to Buyer
all copies, other than permanent file copies then in such Holder's
possession, of the Prospectus covering such Registered Securities at the time
of receipt of such notice.
5. REGISTRATION EXPENSES. Except as otherwise provided below, all
expenses incident to Buyer's performance of or compliance with this Agreement,
including,
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without limitation, all registration and filing fees, including with respect to
filings required to be made with the National Association of Securities Dealers,
fees and expenses of compliance with state securities or blue sky laws, printing
expenses, mailing and delivery expenses, and fees and disbursements of counsel
for Buyer will be borne by Buyer. Buyer shall not be liable for, and the
Holders shall bear the entire cost of, any discounts, commissions, selling fees
of or other payments to, underwriters, selling brokers or similar persons
relating to the distribution of the Registered Securities and the fees and
expenses of counsel for such Holder. Buyer shall not be liable for any stock
transfer taxes in connection with any resale of Registered Securities by a
Holder.
6. INDEMNIFICATION. (a) Buyer will indemnify and hold each Holder
and each officer, director or partner thereof, and each person who controls
any such Holder within the meaning of Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act of 1934 (the "1934 ACT") (each such
Holder, and each such controlling person being referred to as an "INDEMNIFIED
PERSON") harmless from and against any and all losses, claims, damages,
liabilities and expenses arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the Shelf
Registration Statement or the Prospectus, or in any amendment or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances
under which they were made, except insofar as such losses, claims, damages,
liabilities or expenses arise out of or are based upon any untrue statement
or omission or allegation thereof based upon information furnished in writing
to Buyer by such Indemnified Person
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expressly for use therein. Notwithstanding the foregoing, Buyer shall not be
obligated to so indemnify any such Holder or controlling person with respect to
any such loss, claim, damage, liability or expense arising out of (i) the
failure by such Holder to comply with the prospectus delivery requirements under
the Securities Act and the rules and regulations promulgated thereunder or (ii)
the failure by such Holder to comply with the provisions of the last paragraph
of Section 4 hereof.
(b) If any action or proceeding (including any governmental
investigation) shall be brought, threatened or asserted against any
Indemnified Person in respect of which indemnity may be sought from Buyer,
such Indemnified Person shall promptly notify Buyer in writing, and Buyer
shall assume the defense thereof, including employment of counsel and the
payment of all expenses related thereto. Any such Indemnified Person shall
have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Person unless (i) Buyer has
agreed to pay such fees and expenses; or (ii) Buyer shall have failed to
assume the defense of such action or proceeding and employ counsel in such
action or proceeding; or (iii) the named parties to any such action or
proceeding (including any impleaded parties) include both such Indemnified
Person and Buyer, and such Indemnified Person shall have been advised by
counsel that there is reasonable likelihood that a conflict of interest will
exist between such Indemnified Person and Buyer (in which case, if such
Indemnified Person notifies Buyer in writing that it elects to employ
separate counsel at the expense of Buyer, Buyer, will not have the right to
assume the defense of such action or proceeding on behalf of such Indemnified
Person); provided,
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however, that Buyer will not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings arising out of the same general allegations or circumstances be
liable for the fees and expenses of more than one separate firm of attorneys at
any time for all such Indemnified Persons, which firm shall be designated in
writing by a majority in interest of such Indemnified Persons. Buyer shall not
be liable for any default judgment caused by any Indemnified Person or
settlement of any such action or proceeding or confession of judgment without
its prior written consent, but if settled with its written consent, or if there
be a final judgment (other than such default judgment) for the plaintiff in any
such action or proceeding, Buyer agrees to indemnify and hold harmless such
Indemnified Person from and against any loss or liability by reason of such
settlement or judgment. If Buyer agrees to a settlement of an action or
proceeding against an Indemnified Person which does not involve any finding or
admission of liability or wrongdoing on the part of the Indemnified Person and
stands ready, willing and able to pay such settlement and the Indemnified Person
refuses to settle, then the Indemnified Person shall continue the defense at its
own expense and Buyer shall be responsible to indemnify only the lesser of the
amount of the settlement accepted by Buyer or the cost of the final disposition
of the claim.
(c) Each Holder agrees to indemnify and hold harmless Buyer, its
directors and officers, and each person, if any, who controls Buyer within the
meaning of either Section 15 of the Securities Act or Section 20 of the 1934
Act, to the same extent as the indemnity from Buyer to each Indemnified Person
set forth in Section 6(a), but only with respect to (i) untrue statements,
alleged untrue statements, omissions or alleged omissions
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relating to such Holder or an Indemnified Person who is such by reason of such
person's relationship to such Holder, furnished in writing by such Holder or
such person to Buyer expressly for use in the Shelf Registration Statement or
the Prospectus, or any amendment or supplement thereto, (ii) any failure by such
Holder to comply with the prospectus delivery requirements under the Securities
Act and the rules and regulations thereunder and (iii) any failure by such
Holder to comply with the provisions of the last paragraph of Section 4 hereof.
In case any action or proceeding shall be brought against Buyer or its officers
or directors or any such controlling person in respect of which indemnity may be
sought against a Holder under the provisions of this Section 6(c), such Holder
shall have the rights and duties given to Buyer and each of Buyer or its
directors or its officers or its controlling persons shall have the rights and
duties given to each Holder and other Indemnified Persons, under the terms of
Section 6(b) above. In no event shall the obligation of the Holder hereunder be
greater than the dollar amount of the proceeds received by such Holder upon the
sale of the Registered Securities giving rise to such indemnification
obligations.
(d) If the indemnification provided for under Section 6(a) or
Section 6(c) hereof is unavailable to an indemnified party thereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then each applicable indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative benefits to Buyer, on the one hand, and the Holders, on the other,
of the transactions contemplated by the Shelf Registration Statement, the
relative fault of Buyer, on the one hand, and of the Holders, on the other,
in connection with the statements or omissions that resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of Buyer, on the one hand, and
of the Holders, on
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the other, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by Buyer or by such Holders and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. Notwithstanding the
provisions of this paragraph (d), no Holder shall be required to contribute any
amount in excess of the amount by which the net proceeds from the sale of its
shares exceeds the amount of any damages it has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Subsection 11(f) of the Securities Act) shall be entitled to contribution
from any person who is not guilty of such fraudulent misrepresentation.
7. NOTIFICATION OF SALE. Each Holder agrees to notify Buyer in
writing of any sale of Registered Securities made by such Holder during the
Term pursuant to the Shelf Registration Statement promptly following such
sale.
8. TERMINATION OF REGISTRATION RIGHTS. The provisions of this
Agreement (other than Section 6 with respect to any claim for indemnification
thereunder), and the rights and obligations of the parties hereunder, will
terminate on the earlier of (i) the expiration of the Term or (ii) the sale
by the Holders of all of the Registered Securities pursuant to the Shelf
Registration Statement. Claims for indemnification may be made at any
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time prior to the expiration of the statutes of limitation applicable to the
claims for which indemnification is sought.
9. OTHER AGREEMENTS. Promptly following the filing thereof with
the SEC, Buyer shall deliver to each of the Holders a copy of each of Buyer's
reports, documents and other filings made pursuant to Section 13 or 15(d) of
the 1934 Act.
10. MISCELLANEOUS. (a) This Agreement constitutes the entire
agreement between the parties relating to its subject matter and merges and
supersedes and terminates all prior written and oral agreements (other than
the Stock Purchase Agreement), and all contemporaneous oral agreements,
between the parties. This Agreement may not be changed in any respect except
by a writing duly executed by the party to be charged.
(b) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to
conflict of laws principles applied in the State of New York.
(c) This Agreement shall be binding upon and shall inure to
the benefit of the parties and to their respective successors and assigns.
(d) The headings of the Sections of this Agreement are for
convenience of reference only, are not part of this Agreement and shall not be
used in its interpretation.
(e) No provision of this Agreement that is held to be
unenforceable by a court of competent jurisdiction shall in any way
invalidate any other provision of this Agreement, all of which shall remain
in full force and effect.
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(f) The rights and obligations of Buyer and the Holders under
this Agreement may not be assigned or delegated without the prior written
consent of the other party.
(g) This Agreement may be executed in counterparts, each of which
shall constitute an original document and all of which together shall constitute
one and the same document.
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IN WITNESS WHEREOF, the parties have hereunto executed this
Agreement as of the day and year first above written.
PREMIER PARKS INC.
By:
------------------------------------
Name:
Title:
---------------------------------------
Edward J. Carroll, Jr.
The Carroll Family Limited Partnership
By:
------------------------------------
Edward J. Carroll, Jr., President
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EXHIBIT 4(N)
Draft 1/20/97
SECOND SUPPLEMENTAL INDENTURE
SECOND SUPPLEMENTAL INDENTURE dated as of January 21, 1997, among PREMIER
PARKS INC., a Delaware corporation (the "Company"); FUNTIME PARKS, INC., an Ohio
corporation, FUNTIME, INC., an Ohio corporation, WYANDOT LAKE, INC., an Ohio
corporation, DARIEN LAKE THEME PARK AND CAMPING RESORT, INC., a New York
corporation, D.L. HOLDINGS, INC., an Ohio corporation, TIERCO MARYLAND, INC., a
Delaware corporation, TIERCO WATER PARK, INC., an Oklahoma corporation, FRONTIER
CITY PROPERTIES, INC., an Oklahoma corporation, and FRONTIER CITY PARTNERS,
LIMITED PARTNERSHIP, an Oklahoma limited partnership (collectively, the "Note
Guarantors"); and UNITED STATES TRUST COMPANY OF NEW YORK, a New York
corporation, (the "Trustee").
RECITALS
WHEREAS, the Company, the Note Guarantors and the Trustee entered into an
Indenture, dated as of August 15, 1995 (as amended, the "Indenture"), pursuant
to which the Company issued $90,000,000 principal amount of its 12% Senior Notes
due 2003 (the "Securities") (capitalized terms used herein without definition
shall have the respective meanings ascribed to them in the Indenture); and
WHEREAS, Section 9.02 of the Indenture provides that the Company, the Note
Guarantors and the Trustee may amend certain provisions of the Indenture with
the written consent of the Holders of at least a majority in principal amount of
the Securities (the "Requisite Consents") to make certain changes in the
Indenture; and
WHEREAS, the Company is soliciting consents from the Holders of record of
the Securities to the amendments to the Indenture contained in this Second
Supplemental Indenture; and
WHEREAS, other than the receipt of the Requisite Consents, all acts and
things prescribed by the Indenture, by law and by the Certificate of
Incorporation and By-Laws of the Company, of the Note Guarantors and of the
Trustee necessary to make this Second Supplemental Indenture a valid instrument
legally binding on the Company, the Note Guarantors and the Trustee, in
accordance with its terms, have been duly done and performed.
NOW, THEREFORE, to comply with the provisions of the Indenture and in
consideration of the above premises, the Company, the Note Guarantors and the
Trustee covenant and agree as follows:
<PAGE>
ARTICLE 1
Section 1.1 SECOND SUPPLEMENTAL INDENTURE. From and after the Effective
Time (as defined below), this Second Supplemental Indenture shall be
supplemental to the Indenture and shall and shall be deemed to form a part of,
and shall be construed in connection with and as part of, this Indenture for any
and all purposes.
Section 1.2 EFFECTIVE TIME. This Second Supplemental Indenture, having
as of the day and year first above written been executed and delivered by each
of the Company, the Note Guarantors and the Trustee, shall become effective at
noon, New York time, on January 21, 1997 (the "Effective Time") immediately upon
delivery of written notice to the Trustee of the receipt by the Company of the
Requisite Consents.
Section 1.3 AMENDMENT TO SECTION 1.01 OF INDENTURE. Section 1.01 of this
Indenture is amended as of the Effective Time as follows:
(i) By adding the following definition entitled "Asset Value"
after the definition entitled "Asset Disposition":
""Asset Value" of any asset, as of the date of determination thereof,
means the greater of the depreciated book value (as of the end of the
fiscal quarter ended immediately prior to such date of determination as to
which financial statements are available) and the appraised value of such
asset; PROVIDED, HOWEVER, that any such appraisal (i) shall not have been
made more than two years prior to such date of determination and (ii) shall
have been made by a qualified, independent and nationally recognized
appraiser."
(ii) By adding the following new definition entitled "New Notes
Issue Date" after the definition entitled "Net Cash Proceeds":
""New Notes Issue Date" means the date on which the Company's %
Senior Notes due 2007 to be offered pursuant to Registration No. 333-16763
filed with the Securities and Exchange Commission on November 26, 1996, are
issued."
(iii) By deleting the amount "$5,000,000" in clause (iii) of the
definition entitled "Permitted Investment" and replacing such amount with
"$20,000,000".
(iv) By amending and restating in its entirety the definition
entitled "Permitted Liens" to read as follows:
""Permitted Liens" means, with respect to any Person, (a) pledges
or deposits by such Person under workmen's compensation laws,
unemployment insurance laws or similar legislation, or good faith
deposits in connection with bids, tenders, contracts (other than for
the payment of Indebtedness) or leases to which such Person is a
party, or deposits to secure public or statutory obligations of such
Person or deposits of cash or United States government bonds to secure
surety or appeal bonds to which such
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Person is a party, or deposits as security for contested taxes or
import duties or for the payment of rent, in each case Incurred in the
ordinary course of business; (b) Liens imposed by law, such as
carriers', warehousemen's and mechanics' Liens, in each case for sums
not yet due or being contested in good faith by appropriate
proceedings or other Liens arising out of judgments or awards against
such Person with respect to which such Person shall then be proceeding
with an appeal or other proceedings for review; (c) Liens for property
taxes not yet due or payable or subject to penalties for non-payment
or which are being contested in good faith and by appropriate
proceedings; (d) Liens in favor of issuers of surety bonds or letters
of credit issued pursuant to the request of and for the account of
such Person in the ordinary course of its business; PROVIDED, HOWEVER,
that such letters of credit do not constitute Indebtedness; (e) minor
survey exceptions, minor encumbrances, easements or reservations of,
or rights of others for, licenses, rights of way, sewers, electric
lines, telegraph and telephone lines and other similar purposes, or
zoning or other restrictions as to the use of real properties or Liens
incidental to the conduct of the business of such Person or to the
ownership of its properties which were not Incurred in connection with
Indebtedness and which do not in the aggregate materially impair the
use of such properties in the operation of the business of such
Person; (f) Liens securing Purchase Money Indebtedness; PROVIDED,
HOWEVER, that (i) the Indebtedness secured by such Liens is otherwise
permitted to be Incurred under this Indenture, (ii) the principal
amount of any Indebtedness secured by any such Lien does not exceed
the cost of assets or property so acquired or constructed and
(iii) the amount of Indebtedness secured by any such Lien is not
subsequently increased; (g) Liens to secure (i) Indebtedness permitted
under the provisions described in clause (b)(i) or (viii) under
Section 4.03 and (ii) Senior Indebtedness; PROVIDED, HOWEVER, that
(A) the Indebtedness secured by such Liens is otherwise permitted to
be Incurred under this Indenture, (B) the principal amount of all
Indebtedness secured by any such Lien permitted by this clause (ii)
does not exceed 50% of the Asset Value of the assets encumbered by
such Lien at the time of Incurrence and (C) the principal amount of
Indebtedness secured by all such Liens, combined with the principal
amount of all other Indebtedness secured by Permitted Liens (except
for Indebtedness Incurred pursuant to clause (b)(i) under Section
4.03), does not exceed, as of the date of the most recent Incurrence
of Indebtedness secured by a Lien permitted by this clause (ii), 50%
of the Asset Value of the assets of the Company and its Subsidiaries
taken as a whole; (h) Liens existing on the Issue Date; (i) Liens on
property or shares of Capital Stock of another Person at the time such
other Person becomes a Subsidiary of such Person; PROVIDED, HOWEVER,
that such Liens are not created, incurred or assumed in connection
with, or in contemplation of, such other Person becoming such a
Subsidiary; PROVIDED FURTHER, HOWEVER, that such Lien may not extend
to any other property owned by such Person or any of its Subsidiaries;
(j) Liens on property at the time such Person or any of its
Subsidiaries acquires the property, including any acquisition by means
of a merger or consolidation with or into such Person or a Subsidiary
of such Person; PROVIDED, HOWEVER, that such Liens are not created,
incurred or assumed in connection with, or in contemplation of, such
acquisition; PROVIDED FURTHER, HOWEVER, that the Liens may not extend
to any other property owned by such Person or any of its Subsidiaries;
(k) Liens securing Indebtedness or other obligations of a Subsidiary
of such Person owing to such Person or a wholly owned Subsidiary of
such Person; (l) Liens securing Hedging Obligations
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so long as the related Indebtedness is, and is permitted to be under
this Indenture, secured by a Lien on the same property securing such
Hedging Obligations; (m) Liens to secure any Refinancing (or
successive Refinancings) as a whole, or in part, of any Indebtedness
secured by any Lien referred to in the foregoing clauses (f), (g),
(h), (i) and (j); PROVIDED, HOWEVER, that (x) such new Lien shall be
limited to all or part of the same property that secured the original
Lien (plus improvements on such property) and (y) the Indebtedness
secured by such Lien at such time is not increased to any amount
greater than the sum of (A) the outstanding principal amount or, if
greater, committed amount of the Indebtedness described under clauses
(f), (g) (h), (i) or (j) at the time the original Lien became a
Permitted Lien and (B) an amount necessary to pay any fees and
expenses, including premiums, related to such refinancing, refunding,
extension, renewal or replacement and (n)(i) mortgages, liens,
security interests, restrictions or encumbrances that have been placed
by any developer, landlord or other third party on property over which
the Company or any Restricted Subsidiary of the Company has easement
rights or on any real property leased by the Company and subordination
or similar agreements relating thereto and (ii) any condemnation or
eminent domain proceedings affecting any real property.
Notwithstanding the foregoing, "Permitted Liens" will not include any
Lien described in clauses (f), (i) or (j) above if such Lien applies
to any Additional Assets acquired directly or indirectly from Net
Available Cash pursuant to Section 4.06."
Section 1.4 AMENDMENT TO SECTION 4.03 OF INDENTURE. Section 4.03 of the
Indenture is amended as of the Effective Time and restated in its entirety to
read as follows:
"SECTION 4.03 Limitation on Indebtedness.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, Incur, directly or indirectly, any Indebtedness (and shall not
permit any Restricted Subsidiary to Incur Preferred Stock); PROVIDED, HOWEVER,
that the Company and its Restricted Subsidiaries may Incur Indebtedness if on
the date of the Incurrence of such Indebtedness the Consolidated Coverage Ratio
exceeds 2.00:1 if such Indebtedness is Incurred on or prior to September 30,
1999; 2:25:1 if such Indebtedness is Incurred after September 30, 1999 and on or
prior to September 30, 2000; and 2:50:1 if such Indebtedness is Incurred after
September 30, 2000.
(b) Notwithstanding the foregoing paragraph (a), the Company and
its Restricted Subsidiaries may Incur the following Indebtedness:
(i) Indebtedness Incurred pursuant to a revolving credit
facility in an aggregate principal amount on the date of Incurrence which, when
added to all other Indebtedness Incurred pursuant to this clause (i) and then
outstanding, does not exceed $75,000,000, PROVIDED that the Company must repay
all loans outstanding under any such facility at least once during each fiscal
year and may not make drawings thereunder for 30 consecutive days following the
date of such repayment;
(ii) Indebtedness (A) of the Company owed to and held by a
Wholly Owned Subsidiary or (B) of any Restricted Subsidiary owed to and held by
the Company or
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any other Wholly Owned Subsidiary; PROVIDED, HOWEVER, that any subsequent
issuance or transfer of any Capital Stock which results in any such Wholly Owned
Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of
such Indebtedness (other than to another Wholly Owned Subsidiary) shall be
deemed, in each case, to constitute the Incurrence of such Indebtedness by the
issuer thereof;
(iii) the Securities and up to $125,000,000 aggregate principal
amount of its Senior Notes due 2007 to be issued pursuant to a single registered
public offering;
(iv) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (i) or (iii) of this Section 4.03(b));
(v) Refinancing Indebtedness in respect of Indebtedness
Incurred pursuant to paragraph (a) or pursuant to clause (ii), (iii), (iv), or
this clause (v);
(vi) Hedging Obligations consisting of interest rate swaps
with respect to Indebtedness permitted to be Incurred by the Company pursuant to
this Indenture;
(vii) Purchase Money Indebtedness and Capital Lease Obligations
Incurred after the Issue Date which do not exceed $15,000,000 outstanding at any
time;
(viii) Indebtedness represented by the Note Guarantees and
Guarantees of Indebtedness Incurred pursuant to clause (i) or (iii) above;
(ix) Indebtedness in respect of performance bonds, letters of
credit, surety or appeal bonds, prior to any drawing thereunder, for or in
connection with pledges, deposits or payments made or given in the ordinary
course of business, and which do not secure any Indebtedness except Indebtedness
so secured in an amount not to exceed $2,500,000 outstanding at any time; and
(x) Indebtedness in an aggregate principal amount which,
together with all other Indebtedness of the Company and its Restricted
Subsidiaries then outstanding (other than Indebtedness permitted by clauses (i)
through (ix) above or paragraph (a)), does not exceed $5,000,000.
(c) Notwithstanding the foregoing, neither the Company nor any Restricted
Subsidiary shall Incur any Indebtedness pursuant to the foregoing paragraph (b)
if the proceeds thereof are used, directly or indirectly, to Refinance any
Subordinated Obligations unless such Indebtedness will be subordinated to the
Securities to at least the same extent as such Subordinated Obligations."
Section 1.7 AMENDMENT TO SECTION 4.04(A) OF INDENTURE. Section
4.04(a) is amended as of the Effective Time and restated in its entirety to read
as follows:
"SECTION 4.04. Limitation on Restricted Payments. (a) The Company shall
not, and shall not permit any Restricted Subsidiary, directly or indirectly, to
make a Restricted Payment if at the time the Company or such Restricted
Subsidiary makes such Restricted Payment:
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<PAGE>
(1) a Default shall have occurred and be continuing (or would result
therefrom);
(2) the Company is not able to Incur an additional $1.00 of
Indebtedness pursuant to Section 4.03(a); or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments since the earlier of the New Notes Issue Date or
February 28, 1997 would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the earlier of the New Notes Issue Date
or February 28, 1997 to the end of the most recent fiscal quarter ending at
least 45 days prior to the date of such Restricted Payment (or, in case such
Consolidated Net Income shall be a deficit, minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received by the Company from
the issuance or sale of its Capital Stock (other than Disqualified Stock)
subsequent to the earlier of the New Notes Issue Date or February 28, 1997
(other than an issuance or sale to a Subsidiary of the Company and other than an
issuance or sale to an employee stock ownership plan or other trust established
by the Company or any of its Subsidiaries for the benefit of their employees to
the extent the purchase by such plan or trust is financed by Indebtedness of
such plan or trust and for which the Company is liable as Guarantor or
otherwise);
(C) the amount by which Indebtedness of the Company is reduced
on the Company's balance sheet upon the conversion or exchange (other than by a
Subsidiary of the Company) subsequent to the earlier of the New Notes Issue Date
or February 28, 1997, of any Indebtedness of the Company convertible or
exchangeable for Capital Stock (other than Disqualified Stock) of the Company
(less the amount of any cash, or other property (other than Capital Stock),
distributed by the Company upon such conversion or exchange); and
(D) an amount equal to the sum of (i) the net reduction in
Investments in Unrestricted Subsidiaries resulting from dividends, repayments of
loans or advances, or other transfers of assets, in each case to the Company or
any Restricted Subsidiary from Unrestricted Subsidiaries, and (ii) the portion
(proportionate to the Company's equity interest in such Subsidiary) of the fair
market value of the net assets of an Unrestricted Subsidiary at the time such
Unrestricted Subsidiary is designated a Restricted Subsidiary; PROVIDED,
HOWEVER, that the foregoing sum shall not exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments previously made by the
Company or any Restricted Subsidiary in such Unrestricted Subsidiary, which
amount was treated as a Restricted Payment.
Section 1.8 AMENDMENT TO SECTION 4.06(A) OF INDENTURE. Section 4.06(a)
of the Indenture is amended as of the Effective Time by adding the phrase "or
such Restricted Subsidiary" before the word "elects" in clause (iii)(A) thereof.
-6-
<PAGE>
ARTICLE 2
Section 2.1 INCORPORATION OF SECOND SUPPLEMENTAL INDENTURE, RATIFICATION
OF INDENTURE. As of the Effective Time, all of the provisions of this Second
Supplemental Indenture shall be deemed to be incorporated in, and made a part
of, the Indenture; and the Indenture, as supplemented and amended by this Second
Supplemental Indenture, shall be read, taken and construed as one and the same
instrument. Except as otherwise expressly modified herein, the Indenture shall
remain in full force and effect and is hereby ratified.
Section 2.2 HEADINGS. The headings of the Articles and Sections of this
Second Supplemental Indenture have been inserted for convenience of reference
only and are not to be considered a part of this Second Supplemental Indenture
and shall in no way modify or restrict any of the terms or provisions hereof.
Section 2.3 COUNTERPART ORIGINALS. The parties may sign any number of
copies of this Second Supplemental Indenture. Each signed copy shall be an
original, but all of them taken together represent the same agreement.
Section 2.4 CONFLICT WITH TRUST INDENTURE ACT. If any provision of this
Second Supplemental Indenture limits, qualifies or conflicts with the duties
imposed by TIA Section 318(c), the imposed duties shall control.
Section 2.5 SUCCESSORS. All agreements of the Company and the Note
Guarantors in this Second Supplemental Indenture shall bind their respective
successors. All agreements of the Trustee in this Second Supplemental Indenture
shall bind its successors.
Section 2.6 BENEFITS OF SECOND SUPPLEMENTAL INDENTURE. Nothing in this
Second Supplemental Indenture, express or implied, shall give to any person
other than the parties hereto and their successors hereunder and the Holders,
any benefit or legal or equitable right, remedy or claim under this Second
Supplemental Indenture.
Section 2.7 NO REPRESENTATION. The Trustee makes no representation as
to the validity or sufficiency of this Second Supplemental Indenture. The
recitals contained herein are recitals of the Company and the Guarantors, and
the Trustee makes no representation with respect thereto and shall have no
responsibility therefor.
Section 2.8 GOVERNING LAW. The internal law of the State of New York
shall govern and be used to construe this Second Supplemental Indenture without
regard to principles of conflict of laws.
-7-
<PAGE>
IN WITNESS WHEREOF, the Company, the Note Guarantors and the Trustee have
caused this Second Supplemental Indenture to be duly executed, all as of the day
and year first above written.
PREMIER PARKS INC.,
By:
--------------------------------------
Kieran E. Burke
Chairman
FUNTIME PARKS, INC.,
By:
--------------------------------------
Kieran E. Burke
Chairman
FUNTIME, INC.,
By:
--------------------------------------
Kieran E. Burke
Chairman
WYANDOT LAKE, INC.,
By:
--------------------------------------
Kieran E. Burke
Chairman
DARIEN LAKE THEME PARK AND
CAMPING RESORT, INC.,
By:
--------------------------------------
Kieran E. Burke
Chairman
D.L. HOLDINGS, INC.,
By:
--------------------------------------
Kieran E. Burke
Chairman
-8-
<PAGE>
TIERCO MARYLAND, INC.,
By:
--------------------------------------
Kieran E. Burke
Chairman
TIERCO WATER PARK, INC.,
By:
--------------------------------------
Kieran E. Burke
Chairman
FRONTIER CITY PROPERTIES, INC.,
By:
--------------------------------------
Kieran E. Burke
Chairman
FRONTIER CITY PARTNERS,
Limited Partnership,
By: Frontier City Properties,
Inc., as General Partner
By:
----------------------------
Kieran E. Burke
Chairman
UNITED STATES TRUST COMPANY
OF NEW YORK
By:
--------------------------------------
Name:
Title:
-9-
<PAGE>
Exhibit 5
January 20, 1997
Premier Parks Inc.
122 East 42nd Street
New York, New York 10168
Re: Registration Statement on Form S-2
(File No. 333-16763)
--------------------
Gentlemen:
We refer to the above-captioned registration statement (the "Registration
Statement"), under the Securities Act of 1933, as amended (the "Securities
Act") filed by Premier Parks Inc., a Delaware corporation (the "Company"),
with the Securities and Exchange Commission, in connection with its offering
(the "Notes Offering") of $125 million principal amount of its ___% Senior
Notes due 2007 (the "Notes") to be unconditionally guaranteed on a senior
unsecured basis (the "Note Guarantees" and together with the Notes, the
"Securities") by Funtime Parks, Inc., an Ohio corporation, Funtime, Inc.,
an Ohio corporation, Wyandot Lake, Inc., an Ohio corporation, Darien Lake
Theme Park and Camping Resort, Inc., a New York corporation, D.L. Holdings,
Inc., an Ohio corporation, Tierco Maryland, Inc., a Delaware corporation,
Tierco Water Park, Inc., an Oklahoma corporation, Frontier City Properties,
Inc., an Oklahoma corporation, and Frontier City Partners, Limited Partnership,
an Oklahoma limited partnership (collectively, the "Note Guarantors").
Capitalized terms used but not otherwise defined herein shall have the
respective meanings set forth in the Registration Statement.
In connection with the foregoing, we have examined the originals or
photocopies or certified copies of such records of the Company and the Note
Guarantors, certificates of officers of the Company and public officials, and
other documents as we have deemed relevant and necessary as a basis for the
opinion hereinafter expressed. In such examination, we have assumed the
genuineness of all signatures, the authenticity and accuracy of all documents
submitted to us as originals, the conformity to the original documents of all
documents submitted to us as certified copies or photocopies and the
authenticity of such latter documents.
Based on our examination mentioned above, and such other investigation
as we have deemed necessary, we are of the opinion that the Securities to be
issued by the Company and the Note Guarantors pursuant to the Registration
Statement and in accordance with the terms of the Indenture will, upon issuance
and authentication by the trustee under the Indenture, be duly authorized and
issued and constitute valid and binding obligations of the Company and each of
the Note Guarantors, enforceable in accordance with their terms, subject to
bankruptcy and other laws of general application affecting the rights and
remedies of creditors, and, subject in the case of the Note Guarantors, to the
legal principles described in the Registration Statement under the caption
"Risk Factors -- Potential Subordination or Voiding of Note Guarantees Bond on
Fraudulent Conveyance."
<PAGE>
Premier Parks Inc.
January 20, 1997
Page 2
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus forming a part of the Registration Statement. In
giving such consent, we do not thereby concede that we are in the category of
persons whose consent is required under Section 7 of the Securities Act or the
rules and regulations promulgated thereunder, or that we are "experts" within
the meaning of the Securities Act or the rules and regulations promulgated
thereunder.
Very truly yours,
<PAGE>
EXHIBIT 23(B)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Premier Parks Inc.:
We consent to the use of our audit report dated February 29, 1996 on the
consolidated financial statements of Premier Parks Inc. and subsidiaries as of
December 31, 1995 and 1994, and for each of the years in the three-year period
then ended included herein and to the reference to our firm under the heading
"Experts" in the prospectus.
KPMG Peat Marwick LLP
Oklahoma City, Oklahoma
January 22, 1997
<PAGE>
EXHIBIT 23(C)
INDEPENDENT AUDITORS' CONSENT
The Boards of Directors
Storytown USA, Inc.
Fantasy Rides, Inc.:
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Oklahoma City, Oklahoma
January 22, 1997
<PAGE>
EXHIBIT 23(D)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated January 25, 1995, except for Note 13 as to which the
date is August 29, 1995 with respect to the consolidated financial statements of
Funtime Parks, Inc. included in Amendment No. 3 to the Registration Statement
(Form S-2 No. 333-16763) and related Prospectus of Premier Parks Inc. for the
registration of its % Senior Notes due .
ERNST & YOUNG LLP
Akron, Ohio
January 22, 1997
<PAGE>
EXHIBIT 23(E)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 16, 1996, with respect to the financial
statements of Elitch Gardens Company included in Amendment No. 3 to the
Registration Statement (Form S-2) and related Prospectus of Premier Parks Inc.
for the registration of Senior Notes.
Denver, Colorado
December 23, 1996
ERNST & YOUNG LLP
<PAGE>
EXHIBIT 23(F)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
FRE, Inc.:
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
Nelson & Company
Gold River, California
January 21, 1997
<PAGE>
EXHIBIT 23(G)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Concord Entertainment Company:
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
Nelson & Company
Gold River, California
January 21, 1997
<PAGE>
EXHIBIT 23(H)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Stuart Amusement Company:
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Springfield, Massachusetts
January 22, 1997
<PAGE>
EXHIBIT 25
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) ___
--------------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
--------------------------------
PREMIER PARKS INC.
(Exact name of obligor as specified in its charter)
Delaware 73-6137714
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
11501 Northeast Expressway
Oklahoma City, Oklahoma 73131
(Address of principal executive offices) (Zip code)
--------------------------------
% Senior Notes due 2007
(Title of the indenture securities)
===============================================================================
<PAGE>
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None. (See Note on page 3.)
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND RULE 24 OF THE
COMMISSION'S RULES OF PRACTICE.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 7th day of January, 1997.
THE BANK OF NEW YORK
By: /s/ STEPHEN J. GIURLANDO
-----------------------------
Name: STEPHEN J. GIURLANDO
Title: ASSISTANT VICE PRESIDENT
<PAGE>
Exhibit 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business September 30,
1996, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin . . . . . . . . . . . . . . . . . . . $ 4,404,522
Interest-bearing balances . . . . . . . . . . . . . . . 732,833
Securities:
Held-to-maturity securities . . . . . . . . . . . . . . 789,964
Available-for-sale securities . . . . . . . . . . . . . 2,005,509
Federal funds sold in domestic offices
of the bank:
Federal funds sold. . . . . . . . . . . . . . . . . . . . 3,364,838
Loans and lease financing
receivables:
Loans and leases, net of unearned
income . . . . . . . . . . . . . . . . . . . . . . . 28,728,602
LESS: Allowance for loan and
lease losses . . . . . . . . . . . . . . . . . . . . 584,525
LESS: Allocated transfer risk
reserve . . . . . . . . . . . . . . . . . . . . . . . 429
Loans and leases, net of unearned
income, allowance, and reserve . . . . . . . . . . . 28,143,648
Assets held in trading accounts . . . . . . . . . . . . . 1,004,242
Premises and fixed assets (including
capitalized leases) . . . . . . . . . . . . . . . . . . 605,668
Other real estate owned . . . . . . . . . . . . . . . . . 41,238
Investments in unconsolidated
subsidiaries and associated
companies . . . . . . . . . . . . . . . . . . . . . . . 205,031
Customers' liability to this bank on
acceptances outstanding . . . . . . . . . . . . . . . . 949,154
Intangible assets . . . . . . . . . . . . . . . . . . . . 490,524
Other assets. . . . . . . . . . . . . . . . . . . . . . . 1,305,839
Total assets. . . . . . . . . . . . . . . . . . . . . . . $44,043,010
LIABILITIES
Deposits:
In domestic offices . . . . . . . . . . . . . . . . . . $20,441,318
Noninterest-bearing . . . . . . . . . . . . . . . . . . 8,158,472
Interest-bearing . . . . . . . . . . . . . . . . . . . 12,282,846
In foreign offices, Edge and
Agreement subsidiaries, and IBFs .... . . . . . . . . . 11,710,903
Noninterest-bearing . . . . . . . . . . . . . . . . . . 46,182
Interest-bearing . . . . . . . . . . . . . . . . . . . 11,664,721
Federal funds purchased in
domestic offices of the
bank:
Federal funds purchased . . . . . . . . . . . . . . . . 1,565,288
Demand notes issued to the U.S.
Treasury. . . . . . . . . . . . . . . . . . . . . . . . 293,186
Trading liabilities . . . . . . . . . . . . . . . . . . . 826,856
Other borrowed money:
With original maturity of one year
or less . . . . . . . . . . . . . . . . . . . . . . . 2,103,443
With original maturity of more than
one year. . . . . . . . . . . . . . . . . . . . . . . 20,766
Bank's liability on acceptances exe-
cuted and outstanding . . . . . . . . . . . . . . . . . 951,116
Subordinated notes and debentures . . . . . . . . . . . . 1,020,400
Other liabilities . . . . . . . . . . . . . . . . . . . . 1,522,884
Total liabilities . . . . . . . . . . . . . . . . . . . . 40,456,160
EQUITY CAPITAL
Common stock. . . . . . . . . . . . . . . . . . . . . . . 942,284
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . 525,666
Undivided profits and capital
reserves. . . . . . . . . . . . . . . . . . . . . . . . 2,129,376
Net unrealized holding gains
(losses) on available-for-sale
securities. . . . . . . . . . . . . . . . . . . . . . . ( 2,073)
Cumulative foreign currency transla-
tion adjustments. . . . . . . . . . . . . . . . . . . . ( 8,403)
Total equity capital. . . . . . . . . . . . . . . . . . . 3,586,850
Total liabilities and equity
capital . . . . . . . . . . . . . . . . . . . . . . . . $44,043,010
-----------
-----------
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot
Thomas A. Renyi Directors
Alan R. Griffith
