<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 25, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PREMIER PARKS INC.
(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>
------------------------
SIX FLAGS ENTERTAINMENT CORPORATION
(Exact name of Registrant as specified in its charter)
------------------------
<TABLE>
<S> <C>
DELAWARE 22-313657
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
------------------------
11501 NORTHEAST EXPRESSWAY
OKLAHOMA CITY, OKLAHOMA 73131
TEL: (405) 475-2500
(Address, including zip code, and telephone number, including
area code, of Registrants' principal executive offices)
------------------------------
KIERAN E. BURKE
11501 NORTHEAST EXPRESSWAY
OKLAHOMA CITY, OKLAHOMA 73131
TEL: (405) 475-2500
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
JAMES M. COUGHLIN, ESQ. KIRK A. DAVENPORT, ESQ.
Baer Marks & Upham LLP Latham & Watkins
805 Third Avenue 885 Third Avenue
New York, New York 10022 New York, New York 10022-4802
Tel: (212) 702-5819 Tel: (212) 906-1200
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
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. / /
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
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. / /
------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
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.
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PRICE PER NOTE OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
SFEC Senior Notes............................... -- -- -- --
Guarantee of Premier Parks Inc.(2).............. -- -- -- --
Total........................................... -- -- $170,000,000 $50,150
</TABLE>
(1) Estimated in accordance with Rule 457(o) solely for the purposes of
computing the registration fee.
(2) Represents the full and unconditional guarantee on a subordinated basis by
Premier Parks Inc. of payments due on the SFEC Senior Notes. No separate
consideration will be received for such guarantee.
<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY 25, 1998
PROSPECTUS
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>
$170,000,000
PREMIER PARKS INC.
SIX FLAGS ENTERTAINMENT CORPORATION
% SENIOR NOTES DUE 2008
-----------------
INTEREST PAYABLE AND
--------------------
Six Flags Entertainment Corporation (the "Company" or "SFEC") is offering
$170,000,000 (the "Offering") in aggregate principal amount of its % Senior
Notes due (the "SFEC Senior Notes"). The SFEC Senior Notes will be
guaranteed (the "Guarantee") on an unsecured subordinated basis by Premier Parks
Inc. (collectively with its predecessor, "Premier"), which, following the Six
Flags Acquisition (as defined), will own 100% of the capital stock of the
Company. The SFEC Senior Notes will mature on , 2008.
Interest on the SFEC Senior Notes will be payable semi-annually in arrears
on and of each year, commencing on , 1998.
The net proceeds of the Offering, together with certain other funds, will be
deposited in escrow to repay in full at or prior to maturity, the Company's Zero
Coupon Senior Notes due 1999 ("SFEC Zero Coupon Senior Notes"). See "Description
of Notes--Escrow of Proceeds." The SFEC Senior Notes will be redeemable at the
option of the Company, in whole or in part, at any time on or after
, 2003, at the redemption prices set forth herein, plus accrued and
unpaid interest thereon to the date of redemption. In addition, prior to
, 2001, the Company may redeem up to 35% of the original aggregate
principal amount of the SFEC Senior Notes at % of the principal amount
thereof to the redemption date with the net cash proceeds of one or more Public
Equity Offerings (as defined) by, or Strategic Equity Investments (as defined)
in, (i) the Company or (ii) Premier to the extent the net cash proceeds thereof
are contributed to the Company as a capital contribution to the common equity of
the Company; provided that at least 65% of the aggregate principal amount of the
SFEC Senior Notes originally issued remains outstanding immediately after the
occurrence of each such redemption.
Upon the occurrence of a Change of Control (as defined), each holder of the
SFEC Senior Notes will have the right to require the Company to purchase all or
any part of such holder's SFEC Senior Notes at a purchase price equal to 101% of
the aggregate principal amount thereof, plus accrued and unpaid interest to the
date of purchase. See "Description of Notes."
Premier's obligations under the Guarantee will be subordinated to all
indebtedness of and other liabilities of Premier and effectively subordinated to
all indebtedness of and other liabilities of Premier's subsidiaries including
borrowings under the Premier Credit Facility (as defined), indebtedness
outstanding under the Old Premier Notes and the New Premier Notes (each as
defined), and Premier's obligations under the Subordinate Indemnity Agreement
(as defined). As of December 31, 1997, after giving pro forma effect to the Six
Flags Transactions and the Walibi Acquisition (each as defined), Premier and its
subsidiaries would have had approximately $ million of indebtedness
(including indebtedness outstanding under the SFEC Senior Notes) and $
million of other obligations outstanding. See "Prospectus Summary--Premier Parks
Inc." and "Description of the Six Flags Agreement."
All of the operations of the Company are conducted through its subsidiaries,
and none of the Company's subsidiaries will guarantee the Company's obligations
under the SFEC Senior Notes. Accordingly, the SFEC Senior Notes will be
effectively subordinated to all indebtedness and other liabilities of such
subsidiaries, including borrowings under the Six Flags Credit Facility and
indebtedness outstanding under the SFTP Senior Subordinated Notes (each as
defined). As of December 28, 1997, after giving pro forma effect to the Six
Flags Transactions, the Company would have had approximately $ million of
indebtedness outstanding and the Company's subsidiaries would have had
approximately $ million of indebtedness outstanding and approximately
$ million of other outstanding liabilities. See "Capitalization" and
"Description of Other Company Indebtedness."
Concurrently with the Offering, Premier is publicly offering in the U.S. and
internationally $500.0 million of its Common Stock, par value $0.05 per share
(the "Common Stock"), and depository receipts representing $200.0 million of its
% Convertible Exchangeable Preferred Stock (the "Mandatorily Convertible
Preferred Stock"). In addition, Premier is offering $280.0 million aggregate
principal amount of its % Senior Notes (the "Premier Senior Notes") due 2008
(the "Premier Senior Notes Offering") and $ million aggregate principal
amount at maturity of its % Senior Discount Notes, (the "Premier Discount
Notes" and, together with the Premier Senior Notes, the "New Premier Notes") due
2008 (the "Premier Discount Notes Offering" and, together with the Premier
Senior Notes Offering, the "Premier Notes Offering"). The closing of the
Offering is conditioned upon the closing of the Premier Notes Offering, the
offerings of Common Stock (the "Common Stock Offering") and Mandatorily
Convertible Preferred Stock (the "Convertible Preferred Stock Offering," and,
together with the Premier Notes Offering, and the Common Stock Offering, the
"Concurrent Offerings") and the closing of each of the Six Flags Transactions.
---------------------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE COMPANY NOTES, SEE "RISK FACTORS" BEGINNING ON PAGE
14.
--------------------
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>
Underwriting
Price to Discounts and Proceeds to
Investors(1) Commissions(2) Company(1)(3)
<S> <C> <C> <C>
Per SFEC Senior Note........................................... % % %
Total.......................................................... $ $ $
</TABLE>
(1) Plus accrued interest, if any, from the date of issuance to the date of
delivery.
(2) The Company and its operating subsidiaries and Premier have agreed to
indemnify the Underwriters (as defined) 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 $ .
---------------------------
The SFEC Senior Notes are being offered subject to prior sale, when, as and
if delivered to and accepted by the Underwriters and subject to certain
conditions. It is expected that delivery of the SFEC Senior Notes will be made
in book entry form through the facilities of The Depository Trust Company, on or
about , 1998, against payment therefor in immediately available funds.
---------------------------
LEHMAN BROTHERS SALOMON SMITH BARNEY
, 1998
<PAGE>
AVAILABLE INFORMATION
The Company and Premier (the "Registrants") have filed with the Commission a
Registration Statement on Form S-3 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act") with respect to the
securities 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 securities offered hereby, 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.
Upon the effectiveness of the Registration Statement, the Company will
become subject to the informational requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). Premier is currently subject to the
informational requirements of 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 Registrants 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 Registrants. The Common Stock of Premier is listed on
the NYSE. In addition, application will be made to list the depositary shares
representing interests in the Mandatorily Convertible Preferred Stock and the
Common Stock issuable on conversion of the Mandatorily Convertible Preferred
Stock on the NYSE. Such reports, proxy statements and other information
concerning Premier can also be inspected at the offices of the NYSE, 20 Broad
Street, New York, New York 10005.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by Premier with the Commission are
incorporated by reference into this Prospectus and made a part hereof as of
their respective dates:
1. Premier's Annual Report on Form 10-K for the year ended December 31,
1996.
2. Premier's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997.
3. Premier's Quarterly Report on Form 10-Q for the quarter ended June 30,
1997.
4. Premier's Quarterly Report on Form 10-Q for the quarter ended September
30, 1997.
5. Premier's Current Report on Form 8-K, dated February 6, 1997.
6. Premier's Current Report on Form 8-K, dated November 7, 1997, as amended.
7. Premier's Current Report on Form 8-K, dated December 15, 1997.
8. Premier's Current Report on Form 8-K, dated February 9, 1998.
9. The description of the shares of Common Stock contained in Premier's
Registration Statement on Form 8-A dated December 11, 1997 and filed under the
Exchange Act, including any amendment or report filed for the purpose of
updating such description.
10. The description of the rights relating to the shares of Common Stock
contained in Premier's Registration Statement on Form 8-A dated January 12, 1998
and filed under the Exchange Act, including any amendment or report filed for
the purpose of updating such description.
2
<PAGE>
11. The information contained in the Company's Registration Statement on
Form S-2 (Registration No. 333-16573) specified below:
(i) the Financial Statements of Elitch Gardens Company as of December
31, 1995 and 1994, for the year ended December 31, 1995 and for the period
from May 31, 1994 (date of inception) through December 31, 1994 and the
report of the independent auditors thereon (pages F-38 to F-51, inclusive,
of such Registration Statement);
(ii) the Financial Statements of The Great Escape as of October 31, 1994
and 1995, and for the years then ended and the independent auditors' reprot
thereon (pages F-52 to F-60, inclusive, of such Registration Statement); and
(iii) the Financial Statements of Stuart Amusement Company as of
September 30, 1996 and 1995 and for each of the years in the three-year
period ended September 30, 1996 and the independent auditors' report thereon
(pages F-81 to F-93, inclusive, of such Registration Statement).
All documents filed by the Registrants with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the Offering shall also be
deemed to be incorporated by reference into this Prospectus.
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).
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SFEC SENIOR NOTES
OFFERED HEREBY AT LEVELS WHICH MIGHT NOT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
LOONEY TUNES, BUGS BUNNY, DAFFY DUCK, TWEETY BIRD and YOSEMITE SAM are
copyrights and trademarks of Warner Bros. ("Warner Bros."), a division of Time
Warner Entertainment Company, L.P. ("TWE"). BATMAN, BATMOBILE, GOTHAM CITY AND
SUPERMAN are copyrights and trademarks of DC Comics, a partnership between TWE
and a subsidiary of Time Warner Inc. SPORTS ILLUSTRATED is a trademark of Time
Inc., a subsidiary of Time Warner Inc. HBO is a trademark of TWE. SIX FLAGS
GREAT ADVENTURE, SIX FLAGS GREAT AMERICA and SIX FLAGS are federally registered
trademarks of Six Flags Theme Parks Inc. FIESTA TEXAS and all related indicia
are trademarks of Fiesta Texas Theme Park, Ltd.
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."
3
<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. THE SFEC SENIOR NOTES WILL BE GUARANTEED ON AN UNSECURED
SUBORDINATED BASIS BY PREMIER, WHICH, FOLLOWING THE SIX FLAGS ACQUISITION (AS
DEFINED), WILL OWN 100% OF THE CAPITAL STOCK OF THE COMPANY. UNLESS OTHERWISE
INDICATED OR THE CONTEXT OTHERWISE REQUIRES, ALL INFORMATION IN THIS PROSPECTUS
HAS BEEN ADJUSTED TO GIVE EFFECT TO THE PREMIER MERGER (AS DEFINED HEREIN). AS
USED IN THIS PROSPECTUS, UNLESS THE CONTEXT REQUIRES OTHERWISE, THE TERMS (I)
THE "SIX FLAGS ACQUISITION" REFERS TO PREMIER'S ACQUISITION, BY MERGER, OF ALL
OF THE CAPITAL STOCK OF SIX FLAGS ENTERTAINMENT CORPORATION ("SFEC" AND,
TOGETHER WITH ITS CONSOLIDATED SUBSIDIARIES, "SIX FLAGS") WHICH WILL OCCUR
CONTEMPORANEOUSLY WITH THE CLOSING OF THE OFFERING AND (II) THE "SIX FLAGS
PARKS" REFERS TO THE PARKS OPERATED BY SIX FLAGS ON THE DATE OF THE SIX FLAGS
ACQUISITION, AND THE "PREMIER PARKS" REFERS TO ALL OF THE PARKS OPERATED BY
PREMIER PRIOR TO THE SIX FLAGS ACQUISITION ALONG WITH THE PARKS (THE "WALIBI
PARKS") TO BE ACQUIRED IN PREMIER'S ACQUISITION OF WALIBI, S.A. (THE "WALIBI
ACQUISITION") UNLESS THE CONTEXT OTHERWISE REQUIRES. ALL PARK ATTENDANCE
INFORMATION AND RANKINGS BASED ON SUCH DATA INCLUDED IN THIS PROSPECTUS (OTHER
THAN ATTENDANCE DATA FOR THE PREMIER PARKS AND THE SIX FLAGS PARKS) ARE BASED ON
INFORMATION PUBLISHED BY AMUSEMENT BUSINESS, A RECOGNIZED INDUSTRY PUBLICATION,
WHICH, ACCORDING TO SUCH PUBLICATION, INCLUDES ESTIMATES BASED ON SOURCES IT
BELIEVES TO BE RELIABLE. RANKINGS OF METROPOLITAN AND DESIGNATED MARKET AREAS
("DMA") ARE BASED ON A COPYRIGHTED 1996-97 SURVEY OF TELEVISION HOUSEHOLDS
PUBLISHED BY A.C. NIELSEN MEDIA RESEARCH.
PRIOR TO THE DATE OF THIS PROSPECTUS, THE EXISTING COMPANY CALLED "PREMIER
PARKS INC." WILL BECOME A WHOLLY-OWNED SUBSIDIARY OF PREMIER PARKS HOLDINGS
CORPORATION AND THE OUTSTANDING SHARES OF CAPITAL STOCK OF THE EXISTING PREMIER
PARKS INC. WILL BECOME, ON A SHARE-FOR-SHARE BASIS, SHARES OF CAPITAL STOCK OF
PREMIER PARKS HOLDINGS CORPORATION WHICH WILL THEN BE RENAMED "PREMIER PARKS
INC." (THE "PREMIER MERGER"). AS USED HEREIN, UNLESS THE CONTEXT OTHERWISE
REQUIRES, THE TERM "PREMIER" MEANS FOR ANY PERIOD PRIOR TO THE PREMIER MERGER,
THE EXISTING PREMIER PARKS INC. AND ITS CONSOLIDATED SUBSIDIARIES AND FOR ANY
PERIOD SUBSEQUENT THERETO, PREMIER PARKS HOLDINGS CORPORATION (WHICH WILL BE
RENAMED PREMIER PARKS INC.) AND ITS CONSOLIDATED SUBSIDIARIES.
THE COMPANY
Six Flags is the largest regional theme park company, and the second largest
theme park operator, in the world, based on 1997 attendance. Six Flags operates
eight regional theme parks, as well as three separately gated water parks and a
wildlife safari park (each of which is located near one of the theme parks). The
Six Flags Parks are located in six of the ten largest metropolitan areas in the
country: New York, Philadelphia, Los Angeles, Chicago, Atlanta and Dallas. Upon
consummation of the Six Flags Transactions, SFEC will transfer its interests in
the Co-Venture Parks (as defined) to Premier. The Company estimates that % of
the U.S. population lives within a 100-mile radius of the Six Flags Parks.
During 1997, the Six Flags Parks drew, in the aggregate, approximately % of
their patrons from within a 100-mile radius. During that year, Six Flags'
attendance, revenue and earnings before interest, taxes, depreciation and
amortization ("EBITDA") totaled approximately 22.3 million, $708.7 million and
$164.1 million, respectively.
Six Flags, including its predecessors, has operated regional theme parks
under the Six Flags name for over thirty years. As a result, Six Flags has
established a nationally-recognized brand name. Since 1991, Six Flags has used
certain Warner Bros. and DC Comics characters to market its parks and to provide
an enhanced family entertainment experience. These characters include BUGS
BUNNY, DAFFY DUCK, TWEETY BIRD, YOSEMITE SAM, BATMAN, SUPERMAN and others. The
Company utilizes these characters in marketing its parks, in theming revenue
outlets and in selling character merchandise within the parks. The Company
believes that its extensive use of the Warner Bros. and DC Comics characters
promotes attendance, supports higher ticket prices, increases lengths-of-stay
and enhances in-park spending.
The Six Flags Parks are individually themed and provide a complete
family-oriented entertainment experience. The Six Flags Parks generally offer a
broad selection of state-of-the-art and traditional thrill
4
<PAGE>
rides, water attractions, themed areas, concerts and shows, restaurants, game
venues and merchandise outlets. In the aggregate, the Six Flags Parks offer more
than 300 rides, including [57] roller coasters, making Six Flags one of the
leading providers of "thrill rides" in the industry.
Premier believes that the Company's parks benefit 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,
Premier's management estimates that it would cost at least $200 million and
would take a minimum of two years to construct a new regional theme park
comparable to the Company's largest parks.
According to AMUSEMENT BUSINESS, total North American amusement/theme park
attendance in 1997 was approximately 270 million, compared to million in 1994
(the first year in which such information is available from that publication),
representing a compound annual growth rate of %. Total attendance for the 40
largest parks in North America was 154.7 million in 1997, compared to
million in 1992, representing a compound annual growth rate of %. Premier
believes that this growth 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.
OPERATING STRATEGY
Premier believes there are substantial opportunities for continued internal
growth at the Six Flags Parks. Upon consummation of the Six Flags Acquisition,
Premier's management intends to apply its operating strategy to pursue growth
and margin expansion at Six Flags. Premier's operating strategy seeks to
increase revenues by increasing per capita spending, while also reducing
corporate overhead and improving cost controls at the Six Flags Parks. The
primary elements of this operating strategy applicable to the Six Flags Parks
are: (i) periodically adding rides and attractions and improving overall park
quality; (ii) enhancing marketing and sponsorship programs; (iii) adding and
enhancing restaurants and merchandise and other revenue outlets; and (iv) 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.
The Six Flags Parks generally enjoy significant market penetration. Thus,
although Premier plans to make targeted capital expenditures at these parks to
increase attendance and per capita spending levels, it expects to increase
significantly the EBITDA of these parks primarily through reduction in operating
expenses. First, and most importantly, Premier believes that it can
substantially reduce Six Flags' corporate overhead and other corporate-level
expenses. Second, Premier expects to achieve significant reduction in park-level
operating expenses. Third, by virtue of economies of scale, Premier believes
that operating efficiencies in areas such as marketing, insurance, promotion,
purchasing and other expenses can be realized. Finally, Premier believes that
its increased size following the Six Flags Acquisition will enable it to achieve
savings in capital expenditures.
EXPANSION STRATEGY
Premier may expand in the future certain of the Six Flags Parks by adding
complementary attractions, such as campgrounds, lodging facilities, new water
parks and concert venues. For example, Six Flags owns over 1,500 undeveloped
acres adjacent to Six Flags Great Adventure (located between New York City and
Philadelphia) suitable for such purposes. Additional acreage suitable for
development exists at several other Six Flags Parks.
ACQUISITION STRATEGY
The U.S. regional theme park industry is highly fragmented with over 150
parks owned by over 100 operators. Premier believes that there are numerous
acquisition opportunities, both in the U.S. and
5
<PAGE>
abroad, that can expand its business. Since 1989, Premier has pursued a strategy
of acquiring and improving regional theme parks. Premier's primary target for
acquisitions continues to be regional parks with attendance between 300,000 and
1.5 million annually, but will also consider acquisitions of larger parks or
chains. Although it anticipates making acquisitions primarily through Premier
Operations (as defined), Premier may also make acquisitions of additional parks
through Six Flags.
PREMIER PARKS INC.
After giving effect to the Six Flags Acquisition, Premier will be the
largest regional theme park operator, and the second largest theme park company,
in the world, based on 1997 attendance of approximately 37 million. Including
the Six Flags Parks and the Walibi Parks, it will operate 31 regional parks,
including 15 of the 50 largest theme parks in the U.S., based on 1997
attendance. On a pro forma basis, Premier's total revenue and EBITDA for the
year ended December 31, 1997 would have been approximately $ million and
$ million, respectively.
The Premier Parks consist of nine regional theme parks (six of which include
a water park component) and four water parks located acrosss the United States,
as well as six regional theme parks located in Europe and scheduled to be
acquired in March 1998 in the Walibi Acquisition. During the 1997 operating
season, the 11 parks then owned by Premier drew, on average, approximately 82%
of their patrons from within a 100-mile radius, with approximately 36.1% of
visitors utilizing group and other pre-sold tickets and approximately 20.6%
utilizing season passes. During the year ended December 31, 1997, the 11 parks
owned by the Company during the 1997 operating season achieved same park 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 expense) of %, % and %,
respectively, as compared to the comparable period of 1996.
Premier believes that, by virtue of the Six Flags Acquisition, a number of
the existing Premier Parks have the potential over the next several seasons to
accelerate their rate of growth. Recent attendance levels at the Six Flags Parks
(between 1.7 millon and 3.6 million in 1997) have been substantially higher than
the annual attendance at the largest Premier Parks (between 1.0 million and 1.5
million during that year). Premier management believes that a number of the
existing Premier Parks, many of which are located in or near major metropolitan
areas, can accelerate their market penetration and the expansion of their
geographic market by their use of the Six Flags brand name, aggressive marketing
campaigns featuring the animated characters licensed from Warner Bros. and D.C.
Comics, as well as continued capital investment in new rides and attractions.
Premier expects to commence general use of the Six Flags brand name and the
licensed characters at the Premier Parks for the 1999 season.
The Company's senior and operating management team has extensive experience
in the theme park industry. Premier's six senior executive officers have over
150 years aggregate experience in the industry and its nine general managers
(prior to the Six Flags Acquisition) have an aggregate of approximately 200
years experience in the industry, including approximately 80 years at the
Premier Parks. A number of Premier's executives and operating personnel have
experience at the Six Flags Parks.
Premier was incorporated in 1981 as The Tierco Group Inc. In 1994, Premier
changed its name to Premier Parks Inc. Premier's principal executive offices
are, and following the Six Flags Transactions, the Company's principal executive
offices will be, 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.
THE SIX FLAGS TRANSACTIONS
The Offering is one of a series of related transactions (the "Six Flags
Transactions") all of which will be consummated immediately prior to or
concurrently with the Offering. The elements of the Six Flags Transactions are:
THE PREMIER MERGER
The company presently named Premier Parks Inc. (together with its
consolidated subsidiaries, "Premier Operations") will merge in the Premier
Merger with a wholly-owned subsidiary of Premier Parks
6
<PAGE>
Holdings Corporation in accordance with Section 251(g) of the Delaware General
Corporation Law. As a result of the Premier Merger, holders of shares of Common
Stock of Premier Operations will become, on a share-for-share basis, holders of
Common Stock of Premier Parks Holdings Corporation, and Premier Operations will
become a wholly-owned subsidiary of Premier Parks Holdings Corporation. On the
effective date of the Premier Merger, Premier Operations will change its name to
Premier Parks Operations Inc., and Premier Parks Holdings Corporation will
change its name to Premier Parks Inc.
THE SIX FLAGS ACQUISITION
Pursuant to an Agreement and Plan of Merger dated as of February 9, 1998
(the "Six Flags Agreement"), Premier will acquire by merger all of the capital
stock of SFEC from its current stockholders (the "Sellers") for approximately
$965 million (subject to adjustment), less an amount equal to the excess of (i)
the aggregate payment in such merger to the current holders of options
exercisable for capital stock of SFEC OVER (ii) $5.0 million. The purchase price
is payable all in cash or, at Premier's option, cash and depositary shares (the
"Seller Depositary Shares") representing interests in up to $200.0 million (but
not less than $100.0 million) of Premier's % Convertible Redeemable Preferred
Stock (the "Seller Preferred Stock"). At the date of acquisition, Six Flags'
liabilities will include approximately $192.3 million principal amount at
maturity ($161.1 million accreted value at December 28, 1997) of SFEC Zero
Coupon Senior Notes and approximately $285.0 million principal amount at
maturity ($269.9 million accreted value at December 28, 1997) of 12 1/4% Series
A Senior Subordinated Discount Notes due 2005 (the "SFTP Senior Subordinated
Notes") of Six Flags Theme Parks Inc. (together with its subsidiaries, "SFTP"),
an indirect wholly-owned subsidiary of SFEC. In addition, Premier will refinance
all outstanding Six Flags bank and certain other indebtedness (approximately
$ million at December 31, 1997). See "Description of Six Flags
Agreement."
THE FINANCINGS
In the Offerings:
1. Premier will issue in the Common Stock Offering, shares of Common Stock
with estimated gross proceeds of $500.0 million.
2. Premier will issue in the Preferred Stock Offering, depositary shares
representing interests in Premier's % Convertible Exchangeable Preferred
Stock (the "Mandatorily Convertible Preferred Stock" and, together with the
Seller Preferred Stock, the "Convertible Preferred Stock") with estimated gross
proceeds of $200.0 million. See "Description of Premier Capital
Stock--Mandatorily Convertible Preferred Stock."
3. Premier will issue its Senior Discount Notes due 2008 (the "Premier
Discount Notes") with estimated gross proceeds of $250.0 million. See
"Description of Premier Indebtedness."
4. Premier will issue $280.0 million principal amount of its % Senior
Notes due 2008 (the "Premier Senior Notes" and, together with the Premier
Discount Notes, the "New Premier Notes"). See "Description of Premier
Indebtedness."
5. The Company will issue (the "Offering" and, together with the Concurrent
Offerings, the "Offerings") $170.0 million principal amount of its % Senior
Notes (the "SFEC Senior Notes"). The proceeds of the SFEC Senior Notes, together
with certain additional funds, will be deposited in escrow to repay in full at
or prior to maturity the SFEC Zero Coupon Senior Notes. See "Description of
Notes."
In addition, Premier will use approximately $ of borrowings under
its new Senior Credit Facility (the "Premier Credit Facility") to prefund
capital expenditures and provide working capital. Premier will also draw
approximately $ million of borrowings under a new $472.0 million Six Flags
senior secured credit facility (the "Six Flags Credit Facility" and, together
with the Premier Credit Facility, the "Credit Facilities") to repay bank
indebtedness of SFTP. See "Description of Other Company Indebtedness--Six Flags
Credit Facility" and "Description of Premier Indebtedness--Premier Credit
Facility."
7
<PAGE>
The closing of the Offering is conditioned upon the closing of all other
elements of the Six Flags Transactions. Although the size of one or more of the
Offerings may be changed, the aggregate gross proceeds of all the Offerings is
not expected to change materially.
The following table sets forth a summary of the expected sources and uses of
funds associated with the Six Flags Transactions:
<TABLE>
<CAPTION>
AMOUNT
(IN
SOURCES THOUSANDS)
-----------
<S> <C>
Common Stock Offering(1)....................................................... $ 500,000
Preferred Stock Offering(1).................................................... 200,000
Issuance of depositary shares for Seller Preferred Stock....................... 200,000
Premier Discount Notes Offering(1)............................................. 250,000
Premier Senior Notes Offering(1)............................................... 280,000
The Offering(1)................................................................ 170,000
Borrowings under the Premier Credit Facility(2)................................
Borrowings under the Six Flags Credit Facility.................................
-----------
Total...................................................................... $
-----------
-----------
USES
Acquisition of SFEC capital stock.............................................. $ 965,000
Deposit for repayment of SFEC Zero Coupon Senior Notes.........................
Repayment of Six Flags bank indebtedness.......................................
Escrow Account for Premier Senior Notes(3).....................................
Prefunding of capital expenditures(4)..........................................
Other cash.....................................................................
Transaction expenses...........................................................
-----------
Total...................................................................... $
-----------
-----------
</TABLE>
- ------------------------
(1) Reflects assumed gross proceeds.
(2) Does not include an estimated $ million (assuming an all cash tender
offer in the Walibi Acquisition) of borrowings to be used to fund, in part,
the Walibi Acquisition.
(3) Represents escrow to fund the first six semi-annual interest payments
thereon.
(4) See "Management's Discussion and Analysis of Financial Condition and Results
of Operations-- Liquidity, Capital Commitments and Resources."
Following the Six Flags Transactions, Premier's structure will be:
[Chart showing corporate structure and Offerings and Bank Facilities]
8
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities Offered................ $170,000,000 in aggregate principal amount of %
Senior Notes due , 2008.
Maturity Date..................... , 2008.
Yield and Interest................ Interest accrues from the date of issuance and will be
payable in cash semiannually in arrears on each
and , commencing
, 1998, at a rate of % per annum.
The Offerings..................... In addition to the Offering by SFEC, Premier is
concurrently offering (i) shares of its Common Stock
with estimated gross proceeds of $500.0 million, (ii)
depositary shares representing interests in $200.0
million of Mandatorily Convertible Preferred Stock,
(iii) $280.0 million aggregate principal amount of the
Premier Senior Notes and (iv) million in aggregate
principal amount at maturity of the Premier Discount
Notes. Premier also expects to issue depositary shares
representing interests in up to $200.0 million of Seller
Preferred Stock as part of the consideration for the Six
Flags Acquisition. See "--The Six Flags Transactions,"
"Description of Notes" and "Description of Premier
Indebtedness." The Offerings are conditioned upon the
closing of all other elements of the Six Flags
Transactions.
Use of Proceeds................... The Company intends to place in escrow the net proceeds
from the Offering, together with certain additional
funds, to provide for the repayment in full of the SFEC
Zero Coupon Senior Notes. See "Use of Proceeds."
Escrow............................ The net proceeds of the Offering will be used to
purchase a portfolio of Government Securities that will
be held in escrow to provide for the payment in full of
the SFEC Zero Coupon Notes and, under certain
circumstances, as security for the repayment of
principal of the SFEC Senior Notes. See "Description of
Notes."
Ranking of Notes.................. SFEC Senior Notes will be general unsecured obligations
of the Company, ranking PARI PASSU in right of payment
with the SFEC Zero Coupon Senior Notes (until repaid)
and all future senior indebtedness of the Company, and
senior in right of payment to all future subordinated
indebtedness of the Company. The Company is a holding
company whose only significant asset is the capital
stock of its subsidiaries. The SFEC Senior Notes will
not be guaranteed by such subsidiaries. Accordingly, the
SFEC Senior Notes will be structurally subordinated to
all indebtedness and other liabilities (including trade
payables) of the Company's subsidiaries, including all
borrowings under the Six Flags Credit Facility and all
indebtedness outstanding under the Six Flags Indentures
(as defined). As of December 28, 1997, Six Flags had
approximately $ million of indebtedness
outstanding and approximately $ million of other
outstanding liabilities.
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
Guarantee......................... Premier's obligations under the Guarantee will be
subordinated to all indebtedness of and other
liabilities of Premier Parks Inc. and effectively
subordinated to all indebtedness and other liabilities
of its subsidiaries, including borrowings under the
Premier Credit Facility, indebtedness outstanding under
the Old Premier Notes and the New Premier Notes, and
Premier's obligations under the Subordinate Indemnity
Agreement. As of December 31, 1997, after giving pro
forma effect to the Six Flags Transactions and the
Walibi Acquisition, Premier would have had approximately
$ million of indebtedness (including indebtedness
outstanding under the SFEC Senior Notes) and $
million of other obligations outstanding.
Change of Control................. Upon the occurrence of a Change of Control, the holders
of the SFEC Senior Notes will have the right to require
the Company to repurchase such holders' SFEC Senior
Notes, in whole or in part, at a price equal to 101% of
the aggregate principal amount thereof, plus accrued and
unpaid interest to the date of purchase. There can be no
assurance that the Company or Premier will be able to
raise sufficient funds to meet this obligation should it
arise. See "Risk Factors--Risks Associated with a Change
of Control" and "Description of Notes--Repurchase at the
Option of Holders--Change of Control."
Certain Covenants................. The indenture pursuant to which the SFEC Senior Notes
will be issued (the "SFEC Indenture") will contain
certain covenants that, among other things, limit the
ability of the Company and its subsidiaries to (i) incur
additional indebtedness and issue preferred stock, (ii)
pay dividends or make certain other restricted payments,
(iii) enter into transactions with affiliates, (iv) make
certain asset dispositions, (v) merge or consolidate
with, or transfer substantially all its assets to,
another Person (as defined), (vi) create Liens (as
defined), (vii) issue or sell Equity Interests (as
defined) of the Company's subsidiaries, (viii) engage in
sale and leaseback transactions or (ix) engage in
certain business activities. See "Description of
Notes--Certain Covenants."
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
Optional Redemption............... Except as described below, the SFEC Senior Notes will
not be redeemable at the Company's option prior to
, 2003. Thereafter, the SFEC Senior
Notes will be subject to redemption at any time at the
option of the Company, in whole or in part, at the
redemption prices set forth herein plus accrued and
unpaid interest to the applicable redemption date. In
addition, at any time prior to , 2001,
the Company may on any one or more occasions redeem up
to 35% of the aggregate principal amount of the SFEC
Senior Notes at a redemption price of % of the
aggregate principal amount thereof, with the net cash
proceeds from one or more Public Equity Offerings of, or
Strategic Equity Investments in, (i) the Company or (ii)
Premier to the extent the net cash proceeds thereof are
contributed to the Company as a capital contribution to
the common equity of the Company; PROVIDED that at least
65% of the aggregate principal amount of the SFEC Senior
Notes originally issued remains outstanding immediately
after the occurrence of each such redemption (excluding
SFEC Senior Notes held by the Company or any of its
subsidiaries). See "Description of Notes--Optional
Redemption."
</TABLE>
11
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA DATA
The tables below contain certain summary historical and pro forma financial
and operating data for the Company. The following summary historical financial
and operating data, except for attendance and revenue per visitor data, for each
of the years in the three-year period ended December 28, 1997, have been derived
from the financial statements of the Company appearing elsewhere in this
Prospectus 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
of the Company which are not included herein.
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED YEAR ENDED
DECEMBER JANUARY DECEMBER DECEMBER YEAR ENDED
26, 1, 31, 29, DECEMBER 28, 1997
--------- --------- --------- ----------- ----------------------------
1993 1995 1995 1996 ACTUAL PRO FORMA(1)
--------- --------- --------- ----------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS, EXCEPT RATIO AND
PER VISITOR AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:(1)
Total revenue........................ $ 532,455 $ 556,791 $ 629,457 $ 680,876 $ 708,666
Income from operations(2)............ 53,236 54,561 66,738 67,715 79,575
Interest expense, net................ 54,963 48,753 63,282 76,530 84,430
Net (loss)........................... (12,944) (695) (3,287) (15,249) (3,708)
OTHER DATA:
EBITDA(3)............................ 122,371 134,642 150,182 155,132 164,068
Net cash provided by operating
activities(4)...................... 111,934 100,895 124,587 128,602 110,303
Depreciation and amortization........ 69,135 80,081 83,444 87,417 84,493
Capital expenditures................. 34,057 42,039 45,578 75,627 67,675(5)
Total attendance..................... -- -- 21,830 22,796 22,229
Revenue per visitor.................. -- -- $ 28.83 $ 29.87 $ 31.88
Ratio of earnings to fixed
charges(6)......................... -- -- -- -- --
Ratio of earnings to combined fixed
charges and preferred stock
dividends(6)....................... -- -- -- -- --
EBITDA/total interest expense .......
EBITDA/cash interest expense ........
Total debt/EBITDA ...................
Net debt/EBITDA......................
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 28, 1997
---------------------------
ACTUAL PRO FORMA(7)
----------- --------------
<S> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................................ $ 16,805
Total assets......................................................................... 864,690
Total long-term debt (excluding current maturities).................................. 753,369
Total debt........................................................................... 810,002
Stockholders' equity (deficit)....................................................... (22,327)
</TABLE>
- --------------------------
(1) Prior to the Six Flags Acquisition, the Company, through two subsidiaries,
was the general partner in two theme park limited partnerships (the
"Co-Venture Partnerships"). For the years presented the Company accounted
for the parks as co-ventures, i.e., the revenues and expenses (excluding
partnership depreciation) are included in the Company's consolidated
statements of operations and the net amounts distributed to the limited
partners are deducted as expenses. Except for the limited partnership units
purchased pursuant to the tender offer, the Company has no rights or title
to the Co-Venture Parks' assets or to the proceeds from any sale of the
Co-Venture Parks' assets or liabilities. Accordingly, the Company's
consolidated balance sheets do not include any of the Co-Venture Parks'
assets. The investment in Co-Venture Parks included in the consolidated
balance sheets represents (i) the Company's interest in the estimated
future cash flows from the operations of the Co-Venture Parks and is
amortized over the life of the partnership agreements, and (ii) the value
of Limited Partnership units purchased pursuant to the SFOG tender offer.
The co-venture parks contributed revenues of $176.8 million, $152.0 million
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
12
<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)
and $160.6 million to the Company in the fiscal years 1997, 1996 and 1995,
respectively. In connection with the Six Flags Acquisition, the Company is
transferring its interests in the Co-Venture Parks to Premier. The pro
forma statement of operations data for the year ended December 28, 1997
gives effect to the transfer of such interests as if it occurred on
December 30, 1996.
(2) Income from operations is revenue less operating, general and
administrative expenses, costs of products sold and depreciation and
amortization.
(3) EBITDA is defined as earnings before interest expense, net, income tax
expense (benefit), depreciation and amortization and minority interest. 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.
(4) During each of the years ended December 28, 1997, December 29, 1996,
December 31 1995, January 1, 1995 and December 26, 1993, the Company's net
cash used in investing activities was approximately $149.7 million, $81.2
million, $93.9 million, $43.8 million and $41.6 million, respectively.
During these periods, net cash provided (used) in financing activities was
approximately $10.6 million, $(52.2) million, $10.6 million, $(55.6)
million and $(73.2) million, respectively.
(5) Does not include amount expended ($62.7 million) by the Company to purchase
interests in the limited partners of the Co-Venture Partnerships.
(6) For the purpose of determining the ratio of earnings to fixed charges and
the ratio of earnings to combined fixed charges and preferred stock
dividends, 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 and discount or premium relating
to indebtedness, and the portion (approximately one-third) of rental
expense that management believes represents the interest component of rent
expense. Preferred stock dividend requirements have been increased to an
amount representing the before tax earnings which would have been required
to cover such dividend requirements. On a pro forma basis, for the year
ended December 28, 1997, the Company's earnings were insufficient to cover
fixed charges and combined fixed charges and preferred stock dividends by
$ and $ , respectively.
(7) The pro forma balance sheet data give effect to the Six Flags Acquisition,
the Offerings, the related financings, and the transfer of the Company's
interests in the Co-Venture Parks to Premier as if they had occurred on
December 28, 1997.
13
<PAGE>
RISK FACTORS
PRIOR TO MAKING AN INVESTMENT IN THE SECURITIES 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, and following the Six Flags Transactions, Premier will be,
highly leveraged. On a pro forma basis, as of December 28, 1997, the Company had
total outstanding indebtedness of approximately $ million, including: (i) $
million under the Six Flags Credit Facility, (ii) $269.9 million in accreted
value at that date of SFTP Senior Subordinated Notes ($285.0 million principal
amount at maturity in 2005), and (iii) $170.0 million under the SFEC Senior
Notes. Indebtedness at that date also included $160.1 million accreted value of
SFEC Zero Coupon Senior Notes, which will be repaid with the proceeds of the
SFEC Senior Notes together with certain additional funds. Until such repayment,
the SFEC Zero Coupon Senior Notes will rank PARI PASSU with the SFEC Senior
Notes. On a pro forma basis, for the year ended December 28, 1997, the Company's
earnings would have been insufficient to cover its combined fixed charges by
approximately $ million. In addition the indentures relating to the SFEC
Senior Notes and the SFTP Senior Subordinated Notes (the "Six Flags Indentures")
and the Six Flags Credit Facility permit the Company to incur additional
indebtedness under certain circumstances. See "Description of Other Company
Indebtedness" and "Description of Notes--Certain Covenants."
In addition to the Company's indebtedness, following the Six Flags
Transactions, on a pro forma basis, as of December 31, 1997, Premier had
outstanding indebtedness of approximately $ million, including: (i)
$ million of Six Flags indebtedness, as described above; (ii) $250.0 million
in accreted value at that date of the Premier Discount Notes ($ million
principal amount at maturity in 2008); (iii) $280.0 million in aggregate
principal amount of Premier Senior Notes; (iv) $125.0 million in aggregate
principal amount of Premier Operations' 9 3/4% Senior Notes due 2007 (the "1997
Premier Notes"); (v) $90.0 million in aggregate principal amount of Premier
Operations' 12% Senior Notes due 2003 (the "1995 Premier Notes," together with
the 1997 Premier Notes, the "Old Premier Notes" and collectively with the SFEC
Senior Notes, the New Premier Notes and the SFTP Senior Subordinated Notes, the
"Senior Notes"); and (vi) $ million in outstanding borrowings under the
Premier Credit Facility. On a pro forma basis, as of December 31, 1997, Premier
would have had stockholders' equity of approximately $ million. In
addition, the annual dividends (which are payable in cash, in the case of the
Seller Preferred Stock, or in cash, or by issuance of shares of Common Stock, at
the option of the Company, in the case of the Mandatorily Convertible Preferred
Stock) on the Convertible Preferred Stock aggregate $ , and the Seller
Preferred Stock is mandatorily redeemable in 2010 (if not earlier redeemed or
converted). On a pro forma basis, for the year ended December 31, 1997,
Premier's earnings would have been insufficient to cover its combined fixed
charges and preferred stock dividends by approximately $ million. In
addition, the indentures relating to the Senior Notes (the "Indentures") permit
Premier to incur additional indebtedness under certain circumstances. See
"Capitalization," "Selected Historical and Pro Forma Financial and Operating
Data," "Description of Other Company Indebtedness," "Description of
Notes--Certain Covenants" and "Description of Premier Indebtedness."
By reason of the Six Flags Acquisition, SFTP will be required to offer to
repurchase the SFTP Senior Subordinated Notes at a price equal to 101% of their
accreted amount (approximately $287.9 million at June 15, 1998). On February ,
1998, the last reported sales price of these Notes was equivalent to % of
their accreted amount. SFTP has not entered into any standby arrangement to
finance the purchase of such notes and there can be no assurance that SFTP would
be able to obtain such financing in the event that it were to become necessary.
In addition to its obligations under its outstanding indebtedness and
preferred stock, Premier, along with the Company and SFTP, has guaranteed
certain obligations of the Co-Venture Parks (as defined below) to (i) make
minimum annual distributions of approximately $46.2 million (subject to cost of
living adjustments) to its partners in two Six Flags Parks, Six Flags Over
Georgia and Six Flags Over Texas (the
14
<PAGE>
"Co-Venture Parks") and (ii) make minimum capital expenditures at each of the
Co-Venture Parks during rolling five-year periods, based generally on 6% of such
park's revenues. Cash flow from operations at the Co-Venture Parks will be used
to satisfy these requirements first, before any funds are required from Premier,
the Company or SFTP. Premier has also agreed to purchase a maximum number of 5%
per year (accumulating to the extent not purchased in any given year) of the
total limited partnership units of these partnerships (the "Co-Venture
Partnerships") (to the extent tendered by the unit holders) and the Company and
SFTP have guaranteed these obligations. The agreed price for these purchases is
based on a valuation for each respective Co-Venture Park equal to the greater of
(i) a value derived by multiplying its weighted-average four year EBITDA by a
specified multiple (8.0 in the case of the Georgia park and 8.5 in the case of
the Texas park) or (ii) $250.0 million in the case of the Georgia park and
$374.8 million in the case of the Texas park. Premier's obligations with respect
to Six Flags Over Georgia and Six Flags Over Texas will continue until 2026 and
2027, respectively. As Premier purchases units, it will be entitled to the
minimum distribution and other distributions attributable to such units, unless
it is then in default under the Subordinate Indemnity Agreement. See
"Description of Six Flags Agreement." Premier estimates that its maximum unit
purchase obligation for 1998, when purchases are required only for the Georgia
park, will aggregate approximately $13 million (approximately $32 million for
1999, when purchases for both partnerships are required) and its minimum capital
expenditures for 1998 at these parks will total approximately $18 million. See
"Business--Description of Parks--Six Flags Over Georgia" and "--Six Flags Over
Texas; Six Flags Hurricane Harbor." In addition, Premier has agreed to invest
approximately $37.7 million to expand the Walibi Parks over three years,
commencing 1999.
The Company's ability to make scheduled payments on, or to refinance, its
indebtedness (including the SFEC Senior Notes), or to fund planned capital
expenditures, and Premier's ability to make scheduled payments on, or to
refinance, its indebtedness (including the Guarantee), or to fund planned
capital expenditures and its obligations under the arrangements relating to the
Co-Venture Parks, will depend on their respective future performances, which, to
a certain extent, are subject to general economic, financial, weather,
competitive and other factors that are beyond their control. The Company
believes that cash flow from operations, available cash and available borrowings
under the Six Flags Credit Facility will be adequate to meet the Company's
future liquidity needs, including anticipated requirements for working capital,
capital expenditures and scheduled debt payments, for at least the next several
years. Premier believes that cash flow from operations and available cash,
available borrowings under the Credit Facilities and the net proceeds of the
Offerings (to the extent not used in connection with the Six Flags Acquisition)
will be adequate to meet Premier's future liquidity needs, including anticipated
requirements for working capital, capital expenditures, scheduled debt and
preferred stock payments and its obligations under arrangements relating to the
Co-Venture Parks, for at least the next several years. However, the Company
and/or Premier may need to refinance all or a portion of their existing debt on
or prior to maturity or to obtain additional financing. There can be no
assurance that the Company's business will generate sufficient cash flow from
operations or that future borrowings will be available under the Six Flags
Credit Facility in an amount sufficient to enable the Company to service its
indebtedness or enable it to fund its other liquidity needs. Similarly, there
can be no assurance that Premier's business will generate sufficient cash flow
from operations or that future borrowings will be available under the Credit
Facilities in an amount sufficient to enable Premier to service its indebtedness
or enable it to fund its other liquidity needs. In addition, there can be no
assurance that the Company and/or Premier will be able to effect any such
refinancing on commercially reasonable terms or at all. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity, Capital Commitments and Resources."
The degree to which Premier and the Company will be leveraged following the
Six Flags Transactions could have important consequences to the holders of the
SFEC Senior Notes, including, but not limited to: (i) making it more difficult
for Premier and the Company to satisfy its obligations, (ii) increasing
Premier's and the Company's vulnerability to general adverse economic and
industry conditions, (iii) limiting Premier's and the Company's ability to
obtain additional financing to fund future working capital, capital
expenditures, acquisitions and other general corporate requirements, (iv)
requiring the dedication of a
15
<PAGE>
substantial portion of Premier's and the Company's cash flow from operations to
the payment of principal of, and interest on, its indebtedness, thereby reducing
the availability of such cash flow to fund working capital, capital
expenditures, acquisitions or other general corporate purposes, (v) limiting
Premier's and the Company's flexibility in planning for, or reacting to, changes
in its business and the industry, and (vi) placing Premier and the Company at a
competitive disadvantage vis-a-vis less leveraged competitors. In addition, the
Indentures and the Credit Facilities will contain financial and other
restrictive covenants that will limit the ability of Premier and the Company to,
among other things, borrow additional funds. Failure by Premier and the Company
to comply with such covenants could result in an event of default which, if not
cured or waived, could have a material adverse effect on the Company. In
addition, the degree to which Premier and the Company are leveraged could
prevent them from repurchasing all of the SFEC Senior Notes tendered to them
upon the occurrence of a Change of Control. See "Description of Other Company
Indebtedness," "Description of Notes--Repurchase at Option of Holders--Change of
Control" and "Description of Premier Indebtedness."
HOLDING COMPANY STRUCTURE; LIMITATIONS ON ACCESS TO CASH FLOW OF SUBSIDIARIES
The Company has no operations of its own and derives all of its revenue from
its subsidiaries. Premier is also a holding company. Therefore, the Company's
ability to pay its obligations (including debt service on the SFEC Senior Notes)
and Premier's ability to pay its obligations (including the Guarantee), when due
is entirely dependent upon the receipt of sufficient funds from their respective
direct and indirect subsidiaries.
Under the terms of the Six Flags Indentures and the Six Flags Credit
Facility, the payment of dividends by SFEC and SFTP are subject to certain
specified financial tests which will significantly restrict their ability to pay
dividends or make other distributions. However, SFTP is permitted to pay
dividends to the Company to fund interest payments on the SFEC Senior Notes
without regard to these financial tests. See "Description of Other Indebtedness"
for summary of the terms of the dividend restrictions. The terms of the SFEC
Senior Notes will permit the Company's subsidiaries to incur additional
indebtedness, the terms of which could further limit the payment of dividends or
the making of other distributions by such subsidiaries. On a pro forma basis, as
of December 28, 1997, SFTP would have had the ability to pay dividends or make
other restricted payments to the Company in an aggregate amount of approximately
$ million. There can be no assurance that dividends, distributions or
loans to the Company from its subsidiaries will be sufficient to fund its
obligations.
Under the terms of the Indentures and the Credit Facilities, the payment of
dividends by Premier Operations, SFEC and SFTP are subject to certain specified
financial tests which will significantly restrict their ability to pay dividends
or make other distributions. See "Description of Other Company Indebtedness" and
"Description of Premier Indebtedness" for summary of the terms of the dividend
restrictions. The terms of the New Premier Notes and the Mandatorily Convertible
Preferred Stock will permit Premier's subsidiaries to incur additional
indebtedness, the terms of which could further limit the payment of dividends or
the making of other distributions by such subsidiaries. On a pro forma basis, as
of December 31, 1997, Premier Operations and SFEC would have had the ability to
pay dividends or make other restricted payments to Premier in an aggregate
amount of approximately $ million. There can be no assurance that dividends,
distributions or loans to Premier from its subsidiaries will be sufficient to
fund its obligations.
The SFEC Senior Notes will be effectively subordinated to all indebtedness
and other obligations of the Company's subsidiaries. On a pro forma basis, as of
December 28, 1997, the aggregate amount of indebtedness and other obligations of
the Company's subsidiaries (including trade payables) that would effectively
rank senior in right of payment to the obligations of the Company under the SFEC
Senior Notes would have been approximately $ million (in addition,
approximately $ million would have been available for additional borrowings
under the Six Flags Credit Facility). If any indebtedness of any of the
Company's subsidiaries were to be accelerated, there would be no assurance that
the assets of any such
16
<PAGE>
subsidiary would be sufficient to repay such indebtedness. The Company's rights
to participate in the distribution of the assets of its operating subsidiaries
upon a liquidation or reorganization of such companies will be subject to the
prior claims of their respective creditors.
The Guarantee will be subordinated to all indebtedness and other obligations
of Premier Parks Inc. and effectively subordinated to all indebtedness and other
obligations of Premier's subsidiaries, including the Senior Notes, borrowings
under the credit facilities and Premier's obligations under the Subordinate
Indemnity Agreement. On a pro forma basis, as of December 31, 1997, the
aggregate amount of indebtedness and other obligations of Premier (including
trade payables and the SFEC Senior Notes) that would rank or effectively rank
senior in right of payment to the obligations of Premier under the Guarantee
would have been approximately $ million (in addition, approximately
$ million would have been available for additional borrowings under the Credit
Facilities). If any indebtedness of any of Premier's subsidiaries were to be
accelerated, there would be no assurance that the assets of any such subsidiary
would be sufficient to repay such indebtedness. Premier's rights to participate
in the distribution of the assets of its operating subsidiaries upon a
liquidation or reorganization of such companies will be subject to the prior
claims of their respective creditors.
RESTRICTIVE DEBT COVENANTS
The Credit Facilities contain a number of significant covenants that, among
other things, restrict the ability of the Company and other operating
subsidiaries of Premier to dispose of assets, incur additional indebtedness, pay
cash dividends, create 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 indebtedness of such
subsidiaries. In addition, under the Credit Facilities, Premier Operations and
SFTP are each required to comply with specified financial ratios and tests,
including interest expense, fixed charges, debt service and total debt coverage
ratios. The Indentures also contain a series of restrictive covenants.
The Company and Premier are currently in compliance with the respective
covenants and restrictions contained in the Credit Facilities and the
Indentures. However, their ability to continue to comply with the respective
financial tests and ratios in the Credit Facilities may be affected by events
beyond their control, including prevailing economic, financial, weather and
industry conditions. The breach of any such financial covenant could result in
the termination of the Credit Facilities (and the acceleration of the maturity
of all amounts outstanding thereunder) and, by virtue of cross-default and
cross-acceleration provisions, the acceleration of the maturity of other
indebtedness of the Company and/or Premier, including the SFEC Senior Notes.
In addition, under the terms of the Subordinate Indemnity Agreement to be
entered into in connection with the Six Flags Transactions (the "Subordinate
Indemnity Agreement") (which lasts until 2028), without the consent of Time
Warner Inc. (collectively with its affiliates, "Time Warner"), Premier cannot
incur indebtedness at SFEC or any of its subsidiaries that is secured by any
assets of Premier, Premier Operations or any of its subsidiaries, or secure any
indebtedness of Premier, Premier Operations or any of its subsidiaries, with any
of the assets of SFEC or any of its subsidiaries. These covenants could inhibit
the ability of Premier to borrow in the future.
RISKS OF ACCIDENTS AND DISTURBANCES AT PARKS; EFFECTS OF LOCAL CONDITIONS AND
EVENTS
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. Six Flags'
liability insurance policies provide coverage of up to $175.0 million per loss
occurrence and require Six Flags to pay the first $2.0 million per loss
occurrence.
Other local conditions and events can also adversely affect attendance. For
example, in 1994, the Six Flags Magic Mountain park experienced significant
attendance declines and interruptions of business as a result of the Los Angeles
County earthquake centered in Northridge, California. Six Flags Over Georgia
17
<PAGE>
experienced attendance declines in 1996 as a result of the 1996 Summer Olympics.
Management believes that the geographic diversity of the Company's theme parks
reduces the effects of such occurrences on the Company's consolidated results.
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 theme parks' attractions are outdoor
activities, attendance at parks and, accordingly, the Company's revenues are
significantly affected by the weather. Additionally, the Company's water parks,
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 80% 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.
HIGHLY COMPETITIVE BUSINESS
The Six Flags 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. 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.
RISKS ASSOCIATED WITH A CHANGE OF CONTROL
Upon a Change of Control, the Company will be required to offer to
repurchase all outstanding SFEC Senior Notes at 101% of the principal amount
thereof, plus accrued and unpaid interest thereon to the date of purchase.
However, there can be no assurance that sufficient funds will be available at
the time of any Change of Control to make any required repurchases of the SFEC
Senior Notes tendered or that restrictions in the Credit Facilities and the
Indentures will allow the Company to make such required repurchases.
Notwithstanding these provisions, the Company could enter into certain
transactions, including certain recapitalizations, that would not constitute a
Change of Control but would increase the amount of debt outstanding at such
time. See "Description of Notes--Repurchase at Option of Holders."
By virtue of the Six Flags Transactions, SFTP will be required to make an
offer to purchase the SFTP Senior Subordinated Notes. See "--Risks Associated
with Substantial Indebtedness." Warner Bros. can terminate the license agreement
if persons engaged in the movie or television industries or party to a material
judicial proceeding pending against Time Warner obtain control of Premier.
By virtue of the Six Flags Acquisition, certain reserved shares and options
to purchase shares of the Company issued to employees will vest this voting will
result in significant composition expense for the Company in the period in which
consummation of the Six Flags acquisition occurs.
18
<PAGE>
ABSENCE OF PUBLIC MARKET
There is no existing trading market for the SFEC Senior Notes. The Company
does not intend to apply for listing of the SFEC Senior Notes on any securities
exchange. The Underwriters have advised the Company that they currently intend
to make a market in the SFEC Senior Notes. However, they are not obligated to do
so and any such market making may be discontinued at any time without notice.
Accordingly, there can be no assurance as to the prices or liquidity of, or
trading markets for, the SFEC Senior Notes. The liquidity of any market for the
SFEC Senior Notes will depend upon the number of holders of SFEC Senior Notes,
the interest of securities dealers in making a market in the SFEC Senior Notes,
and other factors. The absence of an active market for the SFEC Senior Notes
could adversely affect the liquidity of the SFEC Senior Notes. Even if such a
market were to develop, the SFEC Senior Notes could trade at prices that may be
lower than their initial offering price as a result of many factors, including
prevailing interest rates and the Company's operating results and financial
condition at the time. The liquidity of, and trading markets for, the SFEC
Senior Notes may also be adversely affected by general declines in the market
for non-investment grade debt.
IMPACT OF YEAR 2000 ISSUE
An issue exists for all companies that rely on computers as the year 2000
approaches. The "Year 2000" problem is the result of the past practice in the
computer industry of using two digits rather than four to identify the
applicable year. This practice will result in incorrect results when computers
perform arithmetic operations, comparisons or data field sorting involving years
later than 1999. The Company has completed plans to ensure year 2000 compliance
and started conversions of applications beginning in 1996. These modifications
and replacements are expected to be completed by January 1999. Costs in
connection with any such modifications are not expected to be material. However,
if such modifications are not completed in a timely manner, the Year 2000
problem may have a material adverse impact on the operations of the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Impact of Year 2000 Issue."
19
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the Offering, after
deducting estimated underwriting discounts and commissions and estimated
expenses payable by the Company, will be approximately $ million. Net
proceeds from the Offering, together with certain additional funds, will be
deposited in escrow to repay in full at or prior to maturity the SFEC Zero
Coupon Senior Notes. See "Description of Notes--Escrow of Proceeds."
Premier intends to use the net proceeds from the Concurrent Offerings to
fund the $765 million cash portion of the purchase price payable to the Sellers
in the Six Flags Acquisition; to acquire and make improvements at additional
theme parks; to fund improvements and expansion of the Company's parks,
including the parks to be acquired in the Walibi Acquisition and the Six Flags
Parks; and for general corporate purposes, including working capital
requirements. Although Premier has had discussions with respect to several
additional acquisition opportunities, no agreement or understanding with respect
to any future acquisition (other than the Six Flags Acquisition) has been
reached. There can be no assurance that any such additional acquisitions will be
made.
Pending their ultimate use, the portion of net proceeds from the Concurrent
Offerings not used in connection with the Six Flags Acquisition may be invested
in short-term, investment grade, interest bearing securities, certificates of
deposit or direct or guaranteed obligations of the United States.
20
<PAGE>
CAPITALIZATION
The following table sets forth as of December 28, 1997, (i) the actual
capitalization of the Company; and (ii) the pro forma capitalization of the
Company after giving effect to the Offering and other related financings. This
table should be read in conjunction with the consolidated financial statements
of the Company and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 28, 1997
--------------------------
ACTUAL PRO FORMA
---------- --------------
(AUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents(1)....................................................... $ 16,805 $
---------- --------------
---------- --------------
Short-term debt(2)................................................................. $ 56,633 $
---------- --------------
---------- --------------
Long-term debt (excluding current maturities):
Six Flags Credit Facility...................................................... $ -- $ --
SFEC Senior Notes.............................................................. -- 170,000
Existing Credit Facility....................................................... 322,370 --
SFEC Zero Coupon Senior Notes(1)............................................... 161,074 161,074
SFTP Senior Subordinated Notes................................................. 269,925 269,925
Total long-term debt....................................................... 753,369
---------- --------------
Stockholders' equity (deficit)..................................................... (22,327)
---------- --------------
Total capitalization....................................................... $ 731,042 $
---------- --------------
---------- --------------
</TABLE>
- ------------------------
(1) The pro forma amount for the SFEC Zero Coupon Senior Notes does not give
effect to the repayment thereof from the net proceeds of the Offering.
Similarly, pro forma cash and cash equivalents includes the amount of such
net proceeds. See "Use of Proceeds."
(2) Represents short-term debt and current portion of long-term debt. At
February , 1998, the Company had $ outstanding under its short-term
revolving credit facility.
21
<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 the Company as of December 29, 1996
and December 28, 1997 and for each of the three-years in the period ended
December 28, 1997 are derived from the financial statements (audited in the case
of all annual periods) of the Company appearing elsewhere in this Prospectus.
The selected historical financial data of the Company for fiscal years 1993 and
1994 have been derived from audited financial statements which are not included
herein.
The pro forma financial and operating data are presented 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 relevant acquisitions had occurred on the assumed dates or which
may be achieved in the future.
22
<PAGE>
SELECTED HISTORICAL FINANCIAL AND OPERATING DATA
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER YEAR ENDED
31, DECEMBER YEAR ENDED
----------- 29, DECEMBER 28,
1995 1996 1997
----------- ----------- ----------------------------
ACTUAL PRO FORMA(1)
(UNAUDITED)
(IN THOUSANDS, EXCEPT RATIO AND PER VISITOR AMOUNTS)
<S> <C> <C> <C> <C>
THE COMPANY
STATEMENT OF OPERATIONS DATA(1):
Revenue:
Operating services................................... $ 366,665 $ 405,558 $ 427,569
Sales of products and other.......................... 262,792 275,318 281,097
----------- ----------- ----------- -----
Total(1)........................................... 629,457 680,876 708,666
----------- ----------- ----------- -----
Costs and expenses:
Operating, general and administrative................ 388,137 419,756 443,359
Cost of products sold................................ 91,138 105,988 101,239
Depreciation and amortization........................ 83,444 87,417 84,493
----------- ----------- ----------- -----
Total.............................................. 562,719 613,161 629,091
----------- ----------- ----------- -----
Income from operations(2).............................. 66,738 67,715 79,575
Other income (expense):
Interest expense, net................................ 63,282 76,530 84,430
Minority interest.................................... -- 1,297 (1,147)
----------- ----------- ----------- -----
Total.............................................. 63,282 77,827 83,283
----------- ----------- ----------- -----
Income (loss) before income taxes...................... 3,456 (10,112) (3,708)
Income tax expense..................................... 6,743 5,137 --
----------- ----------- ----------- -----
----------- ----------- ----------- -----
Net (loss)............................................. $ (3,287) $ (15,249) $ (3,708)
----------- ----------- ----------- -----
----------- ----------- ----------- -----
OTHER DATA:
EBITDA(3).............................................. $ 150,182 $ 155,132 $ 164,068
Net cash provided by operating activities(4)........... $ 124,587 $ 128,602 $ 110,303
Capital expenditures................................... $ 45,578 $ 75,627 $ 67,675(5)
Total attendance....................................... 21,830 22,796 22,229
Revenue per visitor.................................... $ 28.83 $ 29.87 $ 31.88
Ratio of earnings to fixed charges(6).................. (2)
Ratio of earnings to combined fixed charges and
preferred stock dividends(6)....................... (2)
EBITDA/total interest expense..........................
EBITDA/cash interest expense...........................
Total debt/EBITDA......................................
Net debt/EBITDA........................................
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 28,
DECEMBER 1997
29, ----------------------------
1996 PRO FORMA(7)
----------- ACTUAL
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
THE COMPANY
BALANCE SHEET DATA:
Cash and cash equivalents.......................................... $ 45,587 $ 16,805 $
Total assets....................................................... $ 826,767 $ 864,690 $
Total long-term debt............................................... $ 714,993 $ 753,369 $
Total debt......................................................... $ 754,910 $ 810,002 $
Stockholders' equity (deficit)..................................... $ (23,571) $ (22,327) $
</TABLE>
- ------------------------
(1) Prior to the Six Flags Acquisition, the Company, through two subsidiaries,
was the general partner in two theme park limited partnerships. For the
years presented, the Company accounted for the parks as co-ventures, i.e.,
the revenues and expenses (excluding partnership depreciation) are included
in the Company's consolidated statements of operations and the net amounts
distributed to the limited partners are deducted as expenses. Except for the
limited partnership units purchased pursuant to the tender offer, the
Company has no rights or title to the Co-Venture Parks' assets or to the
proceeds from any sale of the Co-Venture Park's assets. Accordingly, the
Company's consolidated balance sheets do not include any of the Co-Venture
Parks' assets or liabilities. The investment in the Co-Venture Parks
included in the consolidated balance sheets represents (i) the Company's
interest in the estimated future cash flows from the operations of the
Co-Venture Parks and is amortized over the life of the partnership
agreements, and (ii) the value of Limited Partnership units purchased
pursuant to the SFOG tender offer. The Co-Venture Parks contributed revenues
of $176.8 million, $152.0 million and $160.6 million to the Company in the
fiscal years 1997, 1996 and 1995, respectively. In connection with the Six
Flags Transactions, SFEC is transfering its interests in the Co-Venture
Parks to Premier. The pro forma statement of operations data for the year
ended December 28, 1997 give effect to the transfer of such interests as if
it occurred on December 30, 1996.
(2) Income from operations is revenue less operating, general and administrative
expenses, costs of products sold and depreciation and amortization.
(3) EBITDA is defined as earnings before interest expense, net, income tax
expense (benefit), depreciation and amortization and minority interest. 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 Cash Flows contained in the financial statements included
elsewhere herein.
(4) During each of the years ended December 28, 1997, December 29, 1996 and
December 31, 1995, the Company's net cash used in investing activities was
approximately $149.7 million, $81.2 million and $93.9 million, respectively.
During these periods, net cash provided (used) in financing activities was
approximately $10.6 million, $(52.2) million and $10.6 million,
respectively.
(5) Does not include amount expended ($62.7 million) by the Company to purchase
interests in the limited partners of the Co-Venture Partnerships.
(6) For the purpose of determining the ratio of earnings to fixed charges and
the ratio of earnings to combined fixed charges and preferred stock
dividends, 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 and discount or premium relating to
indebtedness and the portion (approximately one-third) of rental expense
that management believes represents the interest component of rent expense.
Preferred stock dividend requirements have been increased to an amount
representing the before tax earnings which would have been required to cover
such dividend requirements. On a pro forma basis, for the year ended
December 28, 1997, the Company's earnings were insufficient to cover fixed
charges and combined fixed charges and preferred stock dividends by $
and $ , respectively.
(7) The pro forma balance sheet data give effect to the Six Flags Acquisition,
the Offerings, the related financings, and the transfer of the Company's
interests in the Co-Venture Parks to Premier as if they had occurred on
December 28, 1997.
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's revenues are derived principally from the sale of tickets for
entrance to its parks, parking and corporate sponsorships (approximately 60.3%,
59.6% and 58.3% in the years ended December 28, 1997, December 29, 1996 and
December 31, 1995, respectively) and the sale of food, merchandise, gasoline,
games and attractions inside its parks and other income (approximately 39.7%,
40.4% and 41.7% in the years ended December 28, 1997, December 29, 1996 and
December 31, 1995, 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.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 28, 1997 AND DECEMBER 29, 1996
REVENUES. Revenues aggregated $708.7 million in 1997, compared to $680.9
million in 1996. The 4.1% increase in revenues is attributable to higher
spending per guest partially offset by decreased attendance. The average ticket
spending per guest increased 8.1% as a result of selected price increases and
reductions in ticket discounts. At large in-park spending per guest increased
4.4% primarily from gains in food service, stemming from improved processes,
quality and service and increases in games, attractions and parking spending.
Attendance declined by 2.5% primarily due to the postponement of the linear
induction motor ("LIM") coasters at three of the Company's parks, poor
early-season weather and increased price competition in the San Antonio market.
OPERATING, GENERAL AND ADMINISTRATIVE. Operating, general and
administrative expenses were $443.4 million in 1997, compared to $419.8 million
for 1996. As a percentage of revenues, these expenses constituted 62.6% for 1997
and 61.6 % for 1996. The increase over 1996 expenses relates primarily to
increased distributions to the limited partners of the Georgia park along with
higher compensation and maintenance expenses, which were partially offset by
reduced advertising costs and the reversal of expense accruals of approximately
$7.3 million during 1997 that are no longer deemed necessary. Limited partner
distributions increased as a result of the Georgia Agreements (as defined). The
higher compensation costs result from higher average seasonal wage rates,
additional operating hours in 1997, and a return to full staffing at the Georgia
park after reduced requirements in 1996. Higher maintenance costs were incurred
to repair major rides and facilities to enhance park operations. Advertising
costs were down due to lower spending by the Georgia park, which incurred much
higher advertising expense levels in 1996 as a result of the Olympics.
Additionally, the postponed opening of the LIM coasters resulted in lower
advertising costs at three of the Company's parks.
As a result of the Texas Agreements (as defined), the distributions to the
limited partners of the Texas Park will increase by approximately $20 million in
1998, compared to 1997, assuming that the Company does not acquire any LP Units
pursuant to the SFOT tender offer.
COSTS OF PRODUCTS SOLD. Costs of products sold were $101.2 million for 1997
compared to $106.0 million for 1996. The $4.7 million or 4.5% decrease from 1996
results primarily from and improvement in the costs of products sold as a
percentage of product revenue. This percentage improvement resulted from
centralized procurement of key food items and a shift in sales to higher margin
food products sold.
25
<PAGE>
DEPRECIATION, AMORTIZATION AND INTEREST EXPENSE. Depreciation and
amortization expense was $84.5 million for 1997 as compared to $87.4 million in
1996. The decrease resulted from lower amortization of the investment in the
Co-Venture Parks related to the Georgia Park and the Georgia Agreements.
Interest expense, net, increased $7.9 million in 1997, as compared to 1996,
primarily due to the increased at large borrowings in 1997 and higher interest
expense incurred at the Co-Venture Parks, partially offset by a decrease in at
large borrowing rates.
INCOME TAXES. The relationship between income (loss) before taxes and
income tax expense is principally affected by the amortization of the excess of
costs over net assets acquired, which is non-deductible for income tax purposes.
The income tax expense recorded for 1996 principally represents a valuation
allowance on the Company's deferred tax assets.
At May 31, 1997, the Company had carryforwards of approximately $123.0
million of net operating losses ("NOLs") for Federal income tax purposes. The
NOLs 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, the use of such NOLs is subject to limitations on the
amount of taxable income that can be offset with such NOLs. 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 to the Company and its
subsidiaries.
YEARS ENDED DECEMBER 29, 1996 AND DECEMBER 31, 1995
REVENUES. Revenues aggregated $680.9 million in 1996, a 8.2% increase over
1995 revenue of $629.5 million. This increase is primarily attributable to the
consolidation of Fiesta Park's operations in 1996 which accounted for
approximately $52.7 million of the total increase in revenues. The resulting
decrease in comparable revenues (exclusive of Fiesta Park's revenues) was due to
lower attendance, offset in part by higher average spending per guest.
Comparable in-park attendance declined by approximately 5.3%, while average
ticket spending per guest increased approximately 6.8% and average in-park
spending per guest increased approximately 3.9%. The decline in comparable
in-park attendance resulted primarily from unfavorable weather experienced by
several of the Company's theme parks, the adverse impact of the 1996 Summer
Olympics (which were held in Atlanta) on the Georgia park and the delayed
introduction of the SUPERMAN THE ESCAPE ride at Six Flags Magic Mountain (the
"Superman Ride"). The delayed introduction of the Superman Ride resulted from
propulsion issues with the new state-of-the-art technology incorporated into
this first 100-mile per hour thrill ride. The Superman Ride opened on March 15,
1997. The increases in average ticket spending per guest and average in-park
spending per guest were due to selected price increases, improvements to
retail/food outlets and product offerings, and new pay-per-ride Skycoasters at
Six Flag Over Texas, Six Flags Over Georgia, Six Flags AstroWorld, Six Flags St.
Louis and Six Flags Magic Mountain.
OPERATING, GENERAL AND ADMINISTRATIVE. Operating, general and
administrative expenses increased from approximately $388.1 million in 1995 to
approximately $419.8 million in 1996. These expenses (as a percentage of
revenue) constituted approximately 61.6% and 61.7% during 1996 and 1995,
respectively. The acquisition of Wet'n Wild in April 1995 (which was renamed Six
Flags Hurricane Harbor (Dallas)) and the consolidation of Fiesta Park's
operations accounted for approximately $39.3 million of the total increase in
operating, general and administrative expenses. The resulting $7.6 million
decrease in comparable expenses is primarily due to lower incentive compensation
in 1996, costs accrued in 1995 in connection with the reorganization of the
Company's headquarters and the absence of costs allocated from TWE (relating to
employees of TWE who served as senior management of the Company during 1995)
subsequent to June 1995.
COSTS OF PRODUCTS SOLD. Costs of products sold increased from $91.1 million
in 1995 to $106.0 million in 1996. A large portion of the increase
(approximately 59%) is a result of the consolidation of the Fiesta Park's
operations. Cost of products sold (as a percentage of in-park product revenue)
constituted
26
<PAGE>
approximately 39.5% and 35.7%, during 1996 and 1995, respectively. Excluding
Fiesta Park, costs of products sold increased by 3.8% due to increased cost for
higher quality products and the mark-down/ write-off of slow moving inventory.
DEPRECIATION, AMORTIZATION AND INTEREST EXPENSE. Depreciation and
amortization expense aggregated approximately $87.4 million in 1996 and
approximately $83.4 million in 1995. Interest expense, net, increased from $63.3
million in 1995 to $76.5 million in 1996, due to an increase in the average
outstanding debt level combined with an increase in the average cost of debt,
both of which resulted from the full year effect of the issuance of the SFTP
Senior Subordinated Notes and borrowings under Six Flags' then existing credit
facility, in each case, in June 1995.
INCOME TAXES. The relationship between income (loss) before taxes and
income tax expense is principally affected by the amortization of the excess of
costs over net assets acquired, which is non-deductible for income tax purposes.
The tax expense recorded for 1996 principally represents a valuation allowance
on the Company's deferred tax assets.
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 or operate only on weekends during the first
and fourth quarters of each year. 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 1996 increase of $.90
an hour over two years in the Federal minimum wage rate, and any increase in the
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.
During 1997, the Company generated $110.3 million in net cash provided by
operating activities. Net cash used in investing activities aggregated
approximately $149.7 million, $67.7 million of which represented amounts spent
for capital expenditures of the Company's wholly-owned theme parks and Fiesta
Texas and $62.7 million of which represented the amount expended to purchase
interests in the limited partners of the Co-Venture Partnerships. Net cash
provided by financing activities for 1997 aggregated $10.6 million reflecting
the net borrowings on revolving lines of credit, offset, in part, by the
repayment at that time of amounts outstanding under the revolving lines of
credit and proceeds from other interim loans, partially offset by payments on
term loans.
At December 31, 1997, the Texas Co-Venture Partnership had a $15.0 million
line of credit available for anticipated working capital requirements and the
Georgia Co-Venture Partnership had a $19.0 million line of credit available for
working capital, capital expenditures and partner distributions.
In addition to its obligations under its outstanding indebtedness and
preferred stock, Premier, along with the Company and SFTP, has guaranteed
certain obligations of the Co-Venture Parks to (i) make minimum annual
distributions of approximately $46.2 million (subject to cost of living
adjustments) to its partners in the Co-Venture Parks and (ii) make minimum
capital expenditures at each of the Co-Venture Parks during rolling five-year
periods, based generally on 6% of such park's revenues. Cash flow from
operations at the Co-Venture Parks will be used to satisfy these requirements
first, before any funds are required from Premier, the Company or SFTP. Premier
has also agreed to purchase a maximum number of 5% per year (accumulating to the
extent not purchased in any given year) of the total limited partnership units
of these partnerships (to the extent tendered by the unit holders) and the
Company and SFTP have guaranteed these obligations. The agreed price for these
purchases is based on a valuation for each respective Co-Venture Park equal to
the greater of (i) a value derived by multiplying its weighted-average
27
<PAGE>
four year EBITDA by a specified multiple (8.0 in the case of the Georgia park
and 8.5 in the case of the Texas park) or (ii) $250.0 million in the case of the
Georgia park and $374.8 million in the case of the Texas park. Premier's
obligations with respect to Six Flags Over Georgia and Six Flags Over Texas will
continue until 2026 and 2027, respectively. As Premier purchases limited
partnership units, it will be entitled to the minimum distribution and other
distributions attributable to such units, unless it is then in default under the
Subordinate Indemnity Agreement. Premier estimates that its maximum unit
purchase obligation for 1998, when purchases are required only for the Georgia
park, will aggregate approximately $13 million (approximately $32 million for
1999, when purchases for both partnerships are required) and its minimum capital
expenditures for 1998 at these parks will total approximately $18 million.
The Company accounted for Six Flags Over Georgia and Six Flags Over Texas as
co-ventures, i.e., the revenues and expenses (excluding partnership
depreciation) are included in the Company's consolidated statements of
operations and the net amounts distributed to the limited partners are deducted
as expenses. Except for the limited partnership units purchased pursuant to the
tender offer, the Company has no rights or title to the Co-Venture Park assets
or to the proceeds from any sale of the Co-Venture Park's assets. Accordingly,
the Company's consolidated balance sheets do not include any of the Co-Venture
Parks' assets. The investment in the Co-Venture Parks included in the
consolidated balance sheets represents (i) the Company's interest in the
estimated future cash flows from the operations of the Co-Venture Parks and is
amortized over the life of the partnership agreements, (ii) the value of Limited
Partnership units purchased pursuant to the SFOG tender offer, and (iii) capital
contributions made by the Company to the Co-Venture Parks. The Co-Venture Parks
contributed revenues of $176.8 million, $152.0 million and $160.6 million to the
Company in the fiscal years 1997, 1996 and 1995, respectively.
In connection with the Six Flags Transaction, SFEC is transferring its
interests in the Co-Venture Parks to Premier. Accordingly, cash flows from these
parks will not be available to service the debt of SFEC (including the SFEC
Senior Notes) except to the extent any such funds are contributed to SFEC by
Premier.
The SFEC Senior Notes will require annual interest payments of $
and, except in the event of a change of control of the Company or certain other
circumstances, will not require any principal payments prior to their maturity.
The net proceeds of the Offering, together with other funds, will be deposited
in escrow to repay in full at or prior to maturity the SFEC Zero Coupon Senior
Notes. The SFTP Senior Subordinated Notes (accreted value of $269.9 million at
December 31, 1997) require interest payments of approximately $34.9 million per
annum, payable semi-annually commencing December 15, 1998, and, except in
certain circumstances, no principal payments are due thereon until their
maturity date, June 15, 2005. Term loan borrowings under the Six Flags Credit
Facility will mature on November 30, 2004 (with principal payments of $1.0
million in each of 1998--2001, $25.0 million in 2002, $40.0 million in 2003 and
$303.0 million at maturity), Revolving credit borrowings under this facility
($100.0 million) mature on the fifth anniversary of the Six Flags Acquisition.
Borrowings under the Six Flags Credit Facility will be guaranteed by SFTP's
subsidiaries and will be secured by substantially all of the assets of SFTP and
its subsidiaries. See "Description of Other Company Indebtedness," and
"Description of Notes."
By reason of the Six Flags Acquisition, SFTP will be required to offer to
purchase the SFTP Senior Subordinated Notes at a price equal to 101% of their
accreted amount (approximately $287.9 million at June 15, 1998). On February
, 1998, the last reported sales price of these notes was equivalent to
% of their accreted amount. SFTP does not expect to be required to purchase
any material amount of these Notes by reason of this offer. Although Premier has
entered into discussions with lenders to provide a standby arrangement to
finance the purchase of such Notes, there can be no assurance that such
discussions will be successful or that Premier will be able to obtain any other
financing in the event that it should become necessary.
The Company's liquidity could be adversely affected by unfavorable weather,
accidents or the occurrence of an event or condition, including negative
publicity or significant local competitive events
28
<PAGE>
(such as the 1996 Summer Olympics in the case of Six Flags Over Georgia) that
significantly reduces paid attendance and, therefore, revenue at any of its
theme parks.
On a pro forma basis, as of December 28, 1997, the Company had total
outstanding indebtedness of approximately $ million, including: (i) $
million under the Six Flags Credit Facility, (ii) $269.9 million in accreted
value at that date of SFTP Senior Subordinated Notes ($285.0 million principal
amount at maturity in 2005), and (iii) $170.0 million under the SFEC Senior
Notes. Indebtedness at that date also included $160.1 million accreted value of
SFEC Zero Coupon Senior Notes, which will be repaid with the proceeds of the
SFEC Senior Notes together with certain additional funds. On a pro forma basis,
for the year ended December 28, 1997, the Company's earnings would have been
insufficient to cover its combined fixed charges by approximately $ million.
In addition the indentures relating to the SFEC Senior Notes and the SFTP Senior
Subordinated Notes and the Six Flags Credit Facility permit the Company to incur
additional indebtedness under certain circumstances. See "Description of Other
Company Indebtedness" and "Description of Notes--Certain Covenants."
In addition to the Company's indebtedness, following the Six Flags
Transactions, on a pro forma basis, as of December 31, 1997, Premier had
outstanding indebtedness of approximately $ million, including: (i)
$ million of Six Flags indebtedness, as described above; (ii) $250.0 million
in accreted value at that date of the Premier Discount Notes ($ million
principal amount at maturity in 2008); (iii) $280.0 million in aggregate
principal amount of Premier Senior Notes; (iv) $125.0 million in aggregate
principal amount of 1997 Premier Notes; (v) $90.0 million in aggregate principal
amount of 1995 Premier Notes; and (vi) $ million in outstanding
borrowings under the Premier Credit Facility. On a pro forma basis, as of
December 31, 1997, Premier would have had stockholders' equity of approximately
$ million. In addition, the annual dividends (which are payable in cash,
in the case of the Seller Preferred Stock, or in cash, or by issuance of shares
of Common Stock, at the option of the Company, in the case of the Mandatorily
Convertible Preferred Stock) on the Convertible Preferred Stock aggregate
$ , and the Seller Preferred Stock is mandatorily redeemable in 2010 (if
not earlier redeemed or converted). On a pro forma basis, for the year ended
December 31, 1997, Premier's earnings would have been insufficient to cover its
combined fixed charges and preferred stock dividends by approximately $
million. In addition, the Indentures permit Premier to incur additional
indebtedness under certain circumstances. See "Risk Factors--Risks Associated
with Substantial Indebtedness," "Capitalization," "Description of Other Company
Indebtedness," "Description of Notes--Certain Covenants" and "Description of
Premier Indebtedness."
Premier believes that cash flow from operations and available cash and
available borrowings under the Six Flags Credit Facility will be adequate to
meet the Company's future liquidity needs, including anticipated requirements
for working capital, capital expenditures and scheduled debt, for at least the
next several years. Premier believes that cash flow from operations and
available cash, available borrowings under the Credit Facilities and the net
proceeds of the Offerings (to the extent not used in connection with the Six
Flags Acquisition) will be adequate to meet Premier's future liquidity needs,
including anticipated requirements for working capital, capital expenditures,
scheduled debt and preferred stock payments and its obligations under
arrangements relating to the Co-Venture Parks, for at least the next several
years. See "Risk Factors--Risks Associated with Substantial Indebtedness."
NEWLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." SFAS
No. 130 is effective for fiscal years beginning after December 15, 1997. SFAS
No. 130 establishes standards for reporting and display of "comprehensive
income" and its components in a set of financial statements. It requires that
all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements.
29
<PAGE>
The Company currently does not have any components of comprehensive income that
are not included in net income.
Also in June 1997, Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information," was
issued. SFAS No. 131 is effective for periods beginning after December 15, 1997.
SFAS No. 131 requires that a public entity report financial and descriptive
information about its reportable segments. Operating segments are components of
an enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. The Company will adopt SFAS No.
131 in 1998. However, such adoption is not expected to impact the Company's
financial disclosures because the Company's current operations are limited to
one reportable operating segment under SFAS No. 131's definitions.
In January 1997, the Commission issued Release No. 33-7386, which requires
enhanced descriptions of accounting policies for derivative financial
instruments and derivative commodity instruments in the footnotes to financial
statements. The release also requires certain quantitative and qualitative
disclosure outside financial statements about market risks inherent in market
risk sensitive instruments and other financial instruments. The requirements
regarding accounting policy descriptions were effective for any fiscal period
ending after June 15, 1997. However, because derivative financial and commodity
instruments have not materially affected the Company's consolidated financial
position, cash flows or results of operations, this part of the release does not
affect the Company's 1997 financial statement disclosures.
IMPACT OF YEAR 2000 ISSUE
An issue exists for all companies that rely on computers as the year 2000
approaches. The "Year 2000" problem is the result of past practices in the
computer industry of using two digits rather than four to identify the
applicable year. This practice will result in incorrect results when computers
perform arithmetic operations, comparisons or data field sorting involving years
later than 1999. The Company has completed plans to ensure year 2000 compliance
and started conversions of applications beginning in 1996. These modifications
and replacements are expected to be completed by January 1999. Costs in
connection with any such modifications are not expected to be material. See
"Risk Factors -- Impact of Year 2000 Issue."
30
<PAGE>
BUSINESS
GENERAL
Six Flags is the largest regional theme park company, and the second largest
theme park operator, in the world, based on 1997 attendance. Six Flags operates
eight regional theme parks, as well as three separately gated water parks and a
wildlife safari park (each of which is located near one of the theme parks). The
Six Flags Parks are located in six of the ten largest metropolitan areas in the
country: New York, Philadelphia, Los Angeles, Chicago, Atlanta and Dallas. The
Company estimates that % of the U.S. population lives within a 100-mile
radius of the Six Flags Parks. During 1997, the Six Flags Parks drew, in the
aggregate, approximately % of their patrons from within a 100-mile radius.
During that year, Six Flags' attendance, revenue and EBITDA totaled
approximately 22.3 million, $708.7 million and $164.1 million, respectively.
The following table sets forth certain information for the Six Flag's Parks:
<TABLE>
<CAPTION>
NAME TYPE OF PARK PRIMARY MARKET 1997 ATTENDANCE ACRES(1)
- ---------------------------------- --------------- --------------------------------- ----------------- -------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
SIX FLAGS PARKS:
Six Flags Astro-World............. Theme Houston 1,990 90
Six Flags Water World............. Water Houston 280 14
Six Flags Fiesta Texas............ Theme San Antonio 1,640 200
Six Flags Great Adventure......... Theme New York City/Philadelphia 3,690(2) 576(2)
Six Flags Wild Safari Animal
Park.............................. Wildlife New York City/Philadelphia (2) (2)
Six Flags Great America........... Theme Chicago/Milwaukee 3,040 86
Six Flags Magic Mountain.......... Theme Los Angeles 3,270 110
Six Flags Hurricane Harbor........ Water Los Angeles 350 11
Six Flags St. Louis............... Theme St. Louis 1,690 499
Six Flags Over Georgia............ Theme Atlanta 2,780 196
Six Flags Over Texas.............. Theme Dallas/Fort Worth 2,950 197
Six Flags Hurricane Harbor........ Water Dallas/Fort Worth 560 49
</TABLE>
- ------------------------
(1) Includes acreage currently dedicated to park usage. Additional acreage
suitable for development exists at many of the facilities.
(2) Attendance and acreage information for Six Flags Great Adventure also
includes data for the adjacent Six Flags Wild Safari Animal Park.
Six Flags, including its predecessors, has operated regional theme parks
under the Six Flags name for over thirty years. As a result, Six Flags has
established a nationally-recognized brand name. Since 1991, Six Flags has used
certain Warner Bros. and DC Comics characters to market its parks and to provide
an enhanced family entertainment experience. These characters include BUGS
BUNNY, DAFFY DUCK, TWEETY BIRD, YOSEMITE SAM, BATMAN, SUPERMAN and others. The
Company utilizes these characters in marketing its parks, in theming revenue
outlets and in selling character merchandise within the parks. The Company
believes that its extensive use of the Warner Bros. and DC Comics characters
promotes attendance, supports higher ticket prices, increases lengths-of-stay
and enhances in-park spending.
The Six Flags Parks are individually themed and provide a complete
family-oriented entertainment experience. The Six Flags 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. In the aggregate, the Six Flags Parks offer more than 300
rides, including [57] roller coasters, making Six Flags one of the leading
providers of "thrill rides" in the industry.
Premier believes that the Company's parks benefit 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,
Premier's management estimates that it would cost at least $200
31
<PAGE>
million and would take a minimum of two years to construct a new regional theme
park comparable to the Company's largest parks.
According to AMUSEMENT BUSINESS, total North American amusement/theme park
attendance in 1997 was approximately 270 million, compared to million in
1994 (the first year in which such information is available from that
publication), representing a compound annual growth rate of %. Total
attendance for the 40 largest parks in North America was 154.7 million in 1997,
compared to million in 1992, representing a compound annual growth rate of
%. Premier believes that this growth 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.
OPERATING STRATEGY
Premier believes there are substantial opportunities for continued internal
growth at the Six Flags Parks. Upon consummation of the Six Flags Acquisition,
Premier's management intends to apply its operating strategy to pursue revenue
growth and margin expansion at Six Flags. Premier's operating strategy seeks to
increase revenues by increasing per capita spending, while also reducing
corporate overhead and improving cost controls at the Six Flags Parks. 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. The primary elements of this operating strategy
applicable to the Six Flags Park include:
--ADDING RIDES AND ATTRACTIONS AND IMPROVING OVERALL PARK QUALITY. Premier
regularly makes investments in the development and implementation of new rides
and attractions at its parks. Premier believes that the introduction of
marketable rides is an important factor in promoting each of the parks in order
to increase 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, Premier will add new
marketable attractions at that park only every three to four years.
--ENHANCING MARKETING AND SPONSORSHIP PROGRAMS. The Six Flags 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 emphasize the Six Flags
brand name, as well as the animated characters licensed from Warner Bros. The
Company has also successfully attracted well known sponsorship and promotional
partners, such as McDonald's, Coca-Cola, First USA Bank and Best Western.
--INCREASING AND ENHANCING RESTAURANTS AND MERCHANDISE AND OTHER REVENUE
OUTLETS TO INCREASE LENGTH OF STAY AND IN-PARK SPENDING. Premier also seeks to
increase in-park spending by adding well-themed restaurants, remodeling and
updating existing restaurants and adding new merchandise outlets. Additionally,
the Company has taken steps to decrease the waiting time for its most popular
restaurants and merchandise outlets.
--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 Fright
Fest-Registered Trademark-, a Halloween event in which parks are transformed
with supernatural theming, scary rides and haunting shows, and Holiday in the
Park-Registered Trademark-, a winter holiday event, in which several parks are
transformed with winter and holiday theming.
The Six Flags Parks generally enjoy significant market penetration. Thus,
although Premier plans to make targeted capital expenditures at these parks to
increase their attendance and per capita spending levels, it expects to increase
significantly the EBITDA of these parks primarily through reduction in operating
expenses. First and most importantly, Premier believes that it can substantially
reduce Six Flags'
32
<PAGE>
corporate overhead and other corporate-level expenses. Second, Premier expects
to achieve significant reduction in park-level operating expenses. Third, by
virtue of economies of scale, Premier believes that operating efficiencies in
areas such as marketing, insurance, promotion, purchasing and other expenses can
be realized. Finally, Premier believes that its increased size following the Six
Flags Acquisition will enable it to achieve savings in capital expenditures,
including its ability to rotate rides among its parks.
EXPANSION STRATEGY
Premier may expand in the future certain of the Six Flags Parks by adding
complementary attractions, such as campgrounds, lodging facilities, new water
parks and concert venues. For example, Six Flags owns over 1,500 undeveloped
acres adjacent to Six Flags Great Adventure (located between New York City and
Philadelphia) suitable for such purposes. Additional acreage suitable for
development exists at several other Six Flags Parks.
ACQUISITION STRATEGY
The U.S. regional theme park industry is highly fragmented with over 150
parks owned by over 100 operators. Premier believes that there are numerous
acquisition opportunities, both in the U.S. and abroad, that can expand its
business. Since 1989, Premier has pursued a strategy of acquiring and improving
regional theme parks. Premier's primary target for acquisitions continues to be
regional parks with attendance between 300,000 and 1.5 million annually, but
will also consider acquisitions of larger parks or park chains. Although it
anticipates making new acquisitions primarily through Premier Operations,
Premier may also make acquisitions of additional parks through Six Flags.
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 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.
The following table identifies the nine largest operators of theme park
chains worldwide ranked by total attendance, showing the number and type of such
parks operated by each and the aggregate attendance in 1997.
<TABLE>
<CAPTION>
TYPE NUMBER 1997
NAME OF OPERATOR OF PARK OF PARKS ATTENDANCE
- --------------------------------------------------------------- ----------------------- ------------- -------------
<S> <C> <C> <C>
(IN
THOUSANDS)
Disney......................................................... Destination 8 86,000
Premier Parks(1)............................................... Regional 31 36,700
Anheuser-Busch................................................. Regional/Destination 9 20,700
Universal Studios.............................................. Destination 2 14,300
Cedar Fair..................................................... Regional 7 13,400
Paramount Parks................................................ Regional 6 12,800
Blackpool Pleasure Beach Co.(2)................................ Destination 3 8,800
The Tussauds Group(2).......................................... Regional 3 7,400
Silver Dollar City............................................. Regional/Destination 5 4,900
</TABLE>
33
<PAGE>
- ------------------------
(1) Attendance figures for Premier Parks reflect acquisitions made by Premier
during 1997, the Walibi Acquisition and the Six Flags Acquisition as if such
acquisitions had all occurred at the commencement of the 1997 season.
(2) Does not operate parks in North America.
DESTINATION PARKS VERSUS REGIONAL PARKS
Destination parks are those designed primarily to attract visitors willing
generally 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. With the exception of Six Flags Magic Mountain, located in the
same market as Disneyland and Universal Studios Hollywood, the Company does not
believe that its parks compete directly with destination parks.
Regional theme parks, such as those historically 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 may be 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.
HISTORY
Six Flags, including its predecessors, has been in the theme park business
since 1961. Six Flags was incorporated in Delaware in 1981 under the name "Six
Flags Corporation" in connection with the acquisition by Bally Manufacturing
Corporation ("Bally") of Six Flags Corporation from Penn Central Corporation. In
1987, Bally sold its interest in Six Flags Corporation to an investor group
organized and
34
<PAGE>
led by Wesray Capital Corporation (the "Wesray Group"). In 1990, Time Warner
Enterprises Inc. ("Enterprises"), a subsidiary of Time Warner, acquired a 20%
interest in Six Flags Corporation. In 1991, Enterprises, together with
Blackstone Capital Partners L.P. ("Blackstone") and a limited partnership
organized by Wertheim Schroder & Co. Incorporated ("WSW"), organized SFEC, which
acquired Six Flags Corporation from Wesray Group. As a result of such
acquisition, Enterprises owned 50% of SFEC, and Blackstone and WSW owned the
remaining 50%. In June 1992, Time Warner caused all of Enterprises' interest in
SFEC and Six Flags Corporation to be contributed to TWE. In December 1992,
Blackstone substantially reduced and WSW substantially increased their
respective interests in SFEC. Also in 1992, Six Flags Corporation's name was
changed to its current name "Six Flags Theme Parks Inc." In 1993, SFEC
repurchased the equity interest held by Blackstone and WSW and as a result
thereof, SFEC became a wholly-owned subsidiary of TWE. On June 23, 1995, TWE
sold 51% of its interest in SFEC to the Investor Group led by Boston Ventures.
On February 9, 1998, pursuant to the Six Flags Agreement, Premier agreed to
acquire, by merger, all of the capital stock of SFEC from its current
stockholders.
DESCRIPTION OF PARKS
Six Flags operates 12 "Six Flags" branded theme parks in eight locations in
the United States, consisting of eight major regional theme parks, as well as
three separately gated water parks and one wildlife safari park (each located
near one of the theme parks). The Six Flags Parks include:
SIX FLAGS ASTRO-WORLD AND SIX FLAGS WATERWORLD
Six Flags Astro-World, the 28th largest theme park in the United States with
1997 attendance of 2.0 million, and the separately gated adjacent Six Flags
WaterWorld, with 1997 attendance of 283,000, are located in Houston, Texas on
the grounds of an entertainment and sports complex that includes the Houston
Astrodome. The Houston, Texas market provides the parks with a permanent
resident population of million people within 50 miles and million
people within 100 miles. The Houston market is the number 11 DMA in the United
States. Based upon in-park surveys, approximately % of the visitors to the
parks in 1997 resided within a 50-mile radius of the park, and % resided
within a 100-mile radius.
The Company owns a site of approximately 90 acres used for the theme park,
and approximately 14 acres used for the water park. Six Flags Astro-World
indirectly competes with Sea World of Texas and the Company's Six Flags Fiesta
Texas, both located in San Antonio, Texas, approximately 200 miles from the
park. Six Flags WaterWorld competes with Splashtown and Water Works, two nearby
water parks.
SIX FLAGS FIESTA TEXAS
Six Flags Fiesta Texas, the 33rd largest theme park in the United States
with 1997 attendance of 1.6 million, is located in San Antonio, Texas. The San
Antonio, Texas market provides the park with a permanent resident population of
million people within 50 miles and million people within 100 miles. The
San Antonio market is the number 38 DMA in the United States. Based upon in-park
surveys, approximately % of the visitors to the parks in 1997 resided within a
50-mile radius of the park, and % resided within a 100-mile radius.
Six Flags Fiesta Texas' principal competitor is Sea World of Texas located
in San Antonio. In addition, the park competes to a lesser degree with Six Flags
Astro-World, the Company's park located in Houston, Texas, approximately 200
miles from the park.
PARTNERSHIP STRUCTURE. In March 1996, Six Flags completed arrangements
under which it took over management of the then named Fiesta Texas park ("Fiesta
Park"). Fiesta Park is located on 200 acres and is owned by La Cantera
Development Company ("La Cantera"), an affiliate of United Service Automobile
Associates and is leased to a then formed new limited partnership (the "Fiesta
Partnership"). Pursuant to the terms of the lease (the "Fiesta Lease"), the
Fiesta Partnership pays La Cantera a nominal annual
35
<PAGE>
rental and is required to make certain capital improvements to and cover all
operating expenses of the park.
The Fiesta Partnership is a limited partnership formed by Six Flags San
Antonio, L.P., a Delaware limited partnership between two wholly-owned
subsidiaries of the Company (the "Six Flags GP"), as general partner, San
Antonio Park GP, LLC, a Delaware limited liability company which is managed by
managers elected by TWE, on the one hand, and an investor group, on the other
hand and in which SFEC holds a non-voting 99% equity interest (the "LLC GP"), as
general partner, and Fiesta Texas Theme Park, Ltd., a Texas limited partnership
wholly-owned by La Cantera (the "La Cantera LP"), as limited partner. The Fiesta
Partnership is controlled by the general partners and is owned 59% by the Six
Flags GP, 1% by the LLC GP and 40% by the La Cantera LP, which interests reflect
the partners' respective original contributions to the Fiesta Partnership.
The Fiesta Lease has an initial term which extends through the end of fiscal
year 2005, but under certain circumstances may be extended until the end of
fiscal year 2015. The extended Fiesta Lease can be terminated at the end of
fiscal year 2010 at the option of either the Fiesta Partnership or the lessor,
La Cantera LP. The Fiesta Partnership will also have the right to terminate the
Fiesta Lease effective at the end of fiscal year 2001 based on a specified
cumulative operating loss for the 1998 through 2001 fiscal years. As long as the
Fiesta Lease continues in effect, the Fiesta Partnership has the option to
purchase the tangible and intangible assets of Fiesta Park, as well as the La
Cantera LP's interest in the Fiesta Partnership, during the initial term of the
Fiesta Lease, at the end of fiscal year 2010 should the lessor terminate the
Fiesta Lease and at the end of fiscal year 2015.
In connection with Six Flags' management of Fiesta Park, the Six Flags GP
entered into a management agreement with the Fiesta Partnership (the "Management
Agreement") under which it will manage and operate Fiesta Park on the Fiesta
Partnership's behalf. Under the terms of the Management Agreement, the Fiesta
Partnership will pay the Six Flags GP an annual management fee and intellectual
property fee. For the 1996 and 1997 fiscal years, the annual management fee
payable to the Six Flags GP was 6% of the Fiesta Partnership's Gross Revenues
(as defined in the Management Agreement) for such year. Commencing with the 1998
fiscal year, the management fee is 25% of EBITDA (as defined in the Management
Agreement). The intellectual property fee payable to the Six Flags GP throughout
the term of the Management Agreement will be based on the Fiesta Partnership's
Gross Revenues.
SIX FLAGS GREAT ADVENTURE AND SIX FLAGS WILD SAFARI ANIMAL PARK
Six Flags Great Adventure, the 10th largest theme park in the United States,
and the separately gated adjacent Six Flags Wild Safari Animal Park, the 23rd
largest theme park in the United States with 1997 combined attendance of 3.7
million, are located in Jackson, New Jersey, approximately 70 miles south of New
York City and 50 miles east of Philadelphia. The New York and Philadelphia
markets provide the parks with a permanent resident population of million
people within 50 miles and million people within 100 miles. The New York and
Philadelphia markets are the number 1 and number 4 DMAs in the United States,
respectively. Based upon in-park surveys, approximately % of the visitors to
the parks in 1997 resided within a 50-mile radius of the park, and % resided
within a 100-mile radius.
The Company owns a site of approximately 1,862 acres, of which approximately
221 acres are currently used for the thrill-ride based theme park operations,
and 1,641 acres remain undeveloped. Additionally, the Company owns approximately
355 adjacent acres that are used for the wildlife safari park, home to 55
species of 1,200 exotic animals which can be seen over a four and a half mile
drive. Six Flags Great Adventure's principal competitors are Hershey Park,
located in Hershey, Pennsylvania, approximately 150 miles from the park; and
Dorney Park, located in Allentown, Pennsylvania, approximately 75 miles from the
park.
36
<PAGE>
SIX FLAGS GREAT AMERICA
Six Flags Great America, the 16th largest theme park in the United States
with 1997 attendance of 3.0 million, is located in Gurnee, Illinois, between
Chicago, Illinois and Milwaukee, Wisconsin. The Chicago and Milwaukee markets
provide the park with a permanent resident population of million people
within 50 miles and million people within 100 miles. The Chicago and
Milwaukee markets are the number 3 and number 31 DMAs in the United States,
respectively. Based upon in-park surveys, approximately % of the visitors to
the park in 1997 resided within a 50-mile radius of the park, and % resided
within a 100-mile radius.
The Company owns a site of approximately 86 acres used for the theme park
operations. Six Flags Great America currently has no direct theme park
competitors in the region, but does compete with Paramount's Kings Island,
located near Cincinnati, Ohio, approximately 350 miles from the park; Cedar
Point, located in Sandusky, Ohio, approximately 340 miles from the park; and Six
Flags St. Louis, the Company's park located near St. Louis, Missouri,
approximately 320 miles from the park.
SIX FLAGS MAGIC MOUNTAIN AND SIX FLAGS HURRICANE HARBOR
Six Flags Magic Mountain, the 12th largest theme park in the United States
with 1997 attendance of 3.3 million, and the separately gated adjacent Six Flags
Hurricane Harbor, the 11th largest water park in the United States with 1997
attendance of 351,000, are located in Valencia, California, in the northwest
section of Los Angeles County. The Los Angeles, California market provides the
parks with a permanent resident population of million people within 50
miles and million people within 100 miles. The Los Angeles market is the
number 2 DMA in the United States. Based upon in-park surveys, approximately
% of the visitors to the parks in 1997 resided within a 50-mile radius of the
parks, and % resided within a 100-mile radius.
The Company owns a site of approximately 110 acres used for the theme park,
and approximately 11 acres used for the pirate-themed water park. Six Flags
Magic Mountain's principal competitors include Disneyland in Anaheim,
California, located approximately 60 miles from the park, Universal Studios
Hollywood in Universal City, California, located approximately 20 miles from the
park, Knott's Berry Farm in Buena Park, California, located approximately 50
miles from the park, and Sea World of California in San Diego, California,
located approximately 150 miles from the park. Six Flags Hurricane Harbor has no
direct competitors in the area.
SIX FLAGS OVER GEORGIA
Six Flags Over Georgia, the 20th largest theme park in the United States
with 1997 attendance of 2.8 million, is located in Mableton, Georgia,
approximately 10 miles outside of Atlanta, Georgia. The Atlanta, Georgia market
provides the park with a permanent resident population of million people
within 50 miles and million people within 100 miles. The Atlanta market is
the number 10 DMA in the United States. Based upon in-park surveys,
approximately % of the visitors to the park in 1997 resided within a 50-mile
radius of the park, and % resided within a 100-mile radius.
Six Flags Over Georgia's primary competitors include Paramount's Carowinds
in Charlotte, North Carolina, located approximately 250 miles from the park, and
Dollywood in Pigeon Forge, Tennessee, located approximately 200 miles from the
park. The Georgia Limited Partnership (as defined below) owns the site of
approximately 283 acres, including approximately 87 acres of undeveloped land,
all of which is leased to Six Flags Over Georgia II (the "Georgia Co-Venture
Partnership").
PARTNERSHIP STRUCTURE. On March 18, 1997, Six Flags completed arrangements
pursuant to which Six Flags will manage the Georgia park through 2026. Under the
agreements governing the new arrangements (the "Georgia Agreements"), the
Georgia park is to be owned by the Georgia Co-Venture Partnership of which a Six
Flags subsidiary is the managing general partner. In the second quarter of 1997,
two
37
<PAGE>
subsidiaries of Six Flags made a tender offer for partnership interests ("LP
Units") in the 99% limited partner of the Georgia Co-Venture Partnership (the
"Georgia Limited Partnership"), that values the Georgia park at the greater of
$250 million or eight times 1997 EBITDA of the Georgia park (the "Tender Offer
Price"). Six Flags purchased approximately 25% of the LP Units in the 1997
tender offer at an aggregate price of $60.1 million. In connection with the Six
Flags Transactions, SFEC will transfer its interests in Six Flags Over Georgia
to Premier.
The key elements of the new arrangements are as follows: (i) the limited
partner (which is not affiliated with Six Flags) received minimum annual
distributions of $18.5 million in 1997, which will increase each year thereafter
in proportion to increases in the cost of living; (ii) thereafter, Six Flags
will be entitled to receive from available cash (after provision for reasonable
reserves and after capital expenditures per annum of approximately 6% of prior
year's revenues) a management fee equal to 3% of the prior year's gross
revenues, and, thereafter, any additional available cash will be distributed 95%
to Six Flags and 5% to the limited partner; (iii) commencing in 1998, and on an
annual basis thereafter, Six Flags will offer to purchase additional LP Units at
a price based on a valuation for the park equal to the greater of $250.0 million
or a value derived by multiplying the weighted average four year EBITDA by 8.0;
(iv) in 2026, Six Flags will have the option to acquire all remaining interests
in the Georgia park at a price based on the Tender Offer Price, increased in
proportion to the increase in the cost of living between December 1996 and
December 2026, and (v) the Company is required to make minimum capital
expenditures at the Georgia park during rolling five-year periods, based
generally on 6% of such park's revenues. Cash flow from operations at the
Georgia park will be used to satisfy these requirements first, before any funds
are required from the Company. In connection with the Subordinate Indemnity
Agreement, the Company is transferring to Time Warner (who has guaranteed the
Six Flags obligations under these arrangements) record title to certain entities
that have purchased and will purchase LP Units, and the Company will receive an
assignment from Time Warner of all cash flow received on such LP Units and will
otherwise control such entities, except in the event of a default by the Company
of its obligations under these arrangements. After all such obligations have
been satisfied, Time Warner is required to transfer to the Company such stock
for a nominal consideration. In addition, the Company will issue preferred stock
of the managing partner of the Georgia Partnership to Time Warner which, in the
event of such a default, would permit Time Warner to obtain control of such
entity. See "Description of Six Flags Agreement."
Six Flags has accounted for the Georgia park as a co-venture and included
the revenues and expenses of the Georgia Co-Venture Partnership (excluding
partnership depreciation and interest expense associated with limited
partnership debt) in Six Flags' consolidated financial statements and deducted
as expenses the net amounts distributed to the limited partners. Under the
previous partnership agreement for the Georgia Co-Venture partnership, net cash
flow (as defined in the partnership agreement) was distributed in the following
order: $2.1 million to the limited partner; then $2.1 million to the general
partner; then a management fee to the general partner equal to 3% of the
preceding year's gross revenues; and finally, of the remainder, 30% to the
limited partner and 70% to the general partner. In 1997, the Georgia park
contributed $ million of Six Flags' EBITDA, representing % thereof.
SIX FLAGS OVER TEXAS AND SIX FLAGS HURRICANE HARBOR
Six Flags Over Texas, the 16th largest theme park in the United States with
1997 attendance of 2.9 million, and the separately gated Six Flags Hurricane
Harbor, the 7th largest water park in the United States with 1997 attendance of
558,000, are located across Interstate 30 from each other in Arlington, Texas,
between Dallas and Fort Worth, Texas. The Dallas/Fort Worth market provides the
parks with a permanent resident population of million people within 50 miles
and million people within 100 miles. The Dallas/Fort Worth market is the
number 8 DMA in the United States. Based upon in-park surveys, approximately
% of the visitors to the parks in 1997 resided within a 50-mile radius of
the park, and % resided within a 100-mile radius.
38
<PAGE>
Six Flags Hurricane Harbor includes a year-round family entertainment center
named "Funsphere," which includes a laser tag facility, a games arcade, two
go-cart tracks, a miniature golf course, batting cages and other attractions.
Funsphere does not charge front gate admission; attractions are offered on a
pay-as-you-play basis.
The Texas Co-Venture Partnership (defined below) owns the site of
approximately 197 acres used for the theme park, and the Company owns
approximately an additional 49 acres, of which approximately 18 acres are
currently used for Hurricane Harbor, seven acres are used for Funsphere (an
adjacent family entertainment center), and 22 acres remain undeveloped. Six
Flags Over Texas' principal competitors include Sea World of Texas and the
Company's Six Flags Fiesta Texas, both located in San Antonio, Texas,
approximately miles from the park. Six Flags Hurricane Harbor has no direct
competitors in the area.
PARTNERSHIP STRUCTURE. Six Flags Over Texas is owned by Texas Flags, Ltd.
(the "Texas Co-Venture Partnership"), a Texas limited partnership of which the
1% general partner is a wholly-owned subsidiary of Six Flags, and the 99%
limited partner is Six Flags Over Texas Fund, Ltd., a Texas limited partnership
(the "Texas Limited Partner") which is unaffiliated with Six Flags. Under the
terms of the prior partnership agreement, the Texas Partnership was scheduled to
dissolve on December 31, 1997, unless 66 2/3% of the Texas Investors voted in
favor of continuing the partnership. In connection with the Six Flags
Transactions, SFEC will transfer its interests in Six Flags Over Texas to
Premier.
In December 1997, Six Flags completed arrangements (the "Texas Agreements")
pursuant to which it will manage Six Flags Over Texas through 2027. The key
elements of the new arrangements are as follows: (i) the Texas Limited Partner
will receive minimum annual distributions of $27.7 million in 1998, increasing
each year thereafter in proportion to increases in the cost of living; (ii)
thereafter, Six Flags will be entitled to receive from available cash (after
provision for reasonable reserves and after capital expenditures per annum of
approximately 6.0% of prior year's revenues) a management fee equal to 3% of the
prior year's gross revenues, and, thereafter, any additional available cash will
be distributed 92.5% to Six Flags and 7.5% to the Texas Limited Partner; (iii)
in the first quarter of 1998, Six Flags made a tender offer for partnership
units ("LP Units") in the Texas Limited Partner that values the park at the
greater of approximately $374.8 million or 8.5 times 1997 EBITDA of the park
(the "Tender Offer Price"); (iv) commencing in 1999, and on an annual basis
thereafter, Six Flags will offer to purchase LP Units at a price based on a
valuation for the park equal to the greater of $374.8 million or a value derived
by multiplying the weighted-average four year EBITDA of the park by 8.5; (v) in
2027 Six Flags and its affiliates will have the option to acquire all remaining
interests in the park at a price based on the Tender Offer Price, increased in
proportion to the increase in the cost of living between December 1997 and
December 2027; and (vi) the Company is required to make minimum capital
expenditures at the Texas park during rolling five-year periods, based generally
on 6% of such park's revenues. Cash flow from operations at the Texas park will
be used to satisfy these requirements first, before any funds are required from
the Company. Six Flags purchased approximately % of the LP units in the 1998
tender offer at an aggregate price of $ million. In connection with the
Subordinate Indemnity Agreement, the Company is transferring to Time Warner (who
has guaranteed the Six Flags obligations under these arrangements) record title
to certain entities that have purchased and will purchase LP Units and the
Company will receive an assignment from Time Warner of all cash flow received on
such LP Units and will otherwise control such entities, except in the event of a
default by the Company of its obligations under these arrangements. After all
such obligations have been satisfied, Time Warner is required to transfer to the
Company such stock for a nominal consideration. In addition, the Company will
issue preferred stock of the managing partner of the Texas Co-Venture
Partnership to Time Warner which, in the event of such a default, would permit
Time Warner to obtain control of such entity. See "Description of Six Flags
Agreement."
Six Flags has accounted for the park as a co-venture and included the
revenues and expenses of the Texas Co-Venture Partnership (excluding partnership
depreciation and interest expense associated with limited partnership debt) in
its consolidated financial statements and deducted as expenses the net
39
<PAGE>
amounts distributed to the Texas Limited Partner. Under the previous partnership
agreement for the Texas Co-Venture Partnership, net cash flow (as defined in the
partnership agreement) is distributed 30% to the limited partner and 70% to the
general partner. The 70%--30% split became effective after the limited partner
received cumulative net cash flow distributions from the Texas Co-Venture
Partnership subsequent to its formation equal to an aggregate amount of $110
million. In 1997, the park contributed $ million of Six Flags' EBITDA,
representing % thereof.
SIX FLAGS ST. LOUIS
Six Flags St. Louis, the 33rd largest theme park in the United States with
1997 attendance of 1.7 million, is located in Eureka, Missouri, about 35 miles
west of St. Louis, Missouri. The St. Louis market provides the park with a
permanent resident population of million people within 50 miles and
million people within 100 miles. The St. Louis market is the number 21 DMA in
the United States. Based upon in-park surveys, approximately % of the
visitors to the park in 1997 resided within a 50-mile radius of the park, and
% resided within a 100-mile radius.
The Company owns a site of approximately 499 acres used for the theme park
operations. Six Flags St. Louis competes with Paramount's Kings Island, located
near Cincinnati, Ohio, approximately 350 miles from the park; Cedar Point,
located in Sandusky, Ohio, approximately 515 miles from the park; Silver Dollar
City, located in Branson, Missouri, approximately 250 miles from the park, and
Six Flags Great America, the Company's park located near Chicago, Illinois,
approximately 320 miles from the park.
MARKETING AND PROMOTION
The Company attracts visitors through national and local multi-media
marketing and promotional programs for each of its parks. The national programs
are designed to market and enhance the Six Flags brand name. Local 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. Following the Six Flags
Acquisition, marketing programs for the Six Flags Parks will be supervised by
Premier's Vice President for Marketing, with the assistance of Premier's senior
management and its national advertising agency.
The Company also develops partnership relationships with well-known national
and regional consumer goods companies and retailers to supplement its
advertising efforts and to provide attendance incentives in the form of
discounts and/or premiums.
Group sales and pre-sold tickets provide the Company with a consistent and
stable base of attendance, representing approximately % of aggregate
attendance in 1997. 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.
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. 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. During 1997, % of visitors to the Six
Flags 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.
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 1997, approximately
40
<PAGE>
% of patrons at the Six Flags Parks were admitted at a discount rate and, for
the year ended December 31, 1997, approximately % 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 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 limited time and offer a reduced admission price or
provide some additional incentive to purchase a ticket, such as combination
tickets with a complementary location.
LICENSES
Six Flags currently has, and pursuant to the License Agreement Premier will
have upon consummation of the Six Flags Acquisition, the exclusive right for a
term through 2053 to use Warner Bros. and DC Comics characters in theme parks
throughout the United States and Canada (other than the Las Vegas metropolitan
area). In particular, the License Agreement entitles Six Flags and Premier to
use, subject to customary approval rights of Warner Bros., and in limited
circumstances, approval rights of certain third parties, all animated cartoon
and comic book characters that Warner Bros. and DC Comics have the right to
license, including as of the date hereof, BATMAN, SUPERMAN, BUGS BUNNY, DAFFY
DUCK, TWEETY BIRD and YOSEMITE SAM, and will include the right to sell
merchandise using the characters. The license fee is fixed until 2005, and
thereafter, the license fee will be subject to periodic scheduled increases and
will be payable on a per-theme park basis. Six Flags is also a party to certain
additional license agreements with Warner Bros. and Time Warner concerning,
among others, HBO BACKLOT COMMISSARY and SPORTS ILLUSTRATED FESTIVAL. Warner
Bros. has the right to terminate the License Agreement if any persons involved
in the movie or television industries or party to a material judicial proceeding
pending against Time Warner obtain control of Premier.
PARK OPERATIONS
The Company currently operates in geographically diverse markets in the
United States. After the Six Flags Acquisition, each of the Company's parks will
be 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. After the Six Flags Acquisition, each park
will be managed by a general manager who will report to one of Premier's [three]
Executive Vice Presidents (each of whom report to its Chief Operating Officer)
and will be responsible for all operations and management of the individual
park. Local advertising, ticket sales, community relations and hiring and
training of personnel are the responsibility of individual park management in
coordination with corporate support teams.
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 will be designed to provide incentives (including stock options and
cash bonuses) for individual park managers to execute Premier's strategy and to
maximize revenues and operating cash flow at each park.
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
Fright Fest-Registered Trademark- and Holiday in the
Park-Registered Trademark-). 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.
41
<PAGE>
CAPITAL IMPROVEMENTS
The Company regularly makes capital investments in the development and
implementation of new rides and attractions at its parks. In addition, the
Company may at times rotate rides among its parks to provide fresh attractions.
Premier believes that the introduction of new rides is an important factor in
promoting each of the parks in order to promote market penetration and encourage
longer visits, which lead to increased attendance and in-park spending. In
addition, the Company utilizes theming and landscaping at its 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. 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.
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 support significant
attendance 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 Six Flags Parks
generally enjoy significant market penetration. As such, the Company anticipates
employing levels of capital expenditures necessary to sustain or incrementally
improve current levels of attendance.
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 Premier and the individual parks will 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 full-time
employees who devote substantially all of their time to maintaining the parks
and their rides and attractions.
In addition to the Company's maintenance and inspection procedures,
Premier'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, Premier uses Ellis & Associates as
water safety consultants at its parks in order to train life guards and audit
safety procedures.
EMPLOYEES
The Company employs approximately full-time employees and
approximately 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.
42
<PAGE>
Approximately % of the Company's full-time and approximately % of its
seasonal employees are subject to labor agreements with local chapters of
national unions. These labor agreements expire in (Six Flags Over
Georgia and Six Flags Over Texas), December 1999 (Six Flags Great Adventure),
and January 2000 (Six Flags St. Louis). The Company has never experienced any
work stoppages, and believes that it has a strong relationship with its
employees and unions.
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. Six Flags maintains multi-layered general liability policies that
provide for excess liability coverage of up to $175.0 million per occurrence. By
virtue of self-insured retention limits ($500,000 per occurrence) and first
dollar coverage by a captive insurance company, Six Flags or its wholly-owned
insurance company subsidiary is required to pay the first $2 million of loss per
occurrence. Six Flags' combined cost for insurance and for self-insured claims
for 1997 was $ million compared to $ million in 1996 and
$ million in 1995. The Company also maintains fire and extended
coverage, workers' compensation, business interruption 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. Following the Six
Flags Acquisition, Premier may modify the insurance coverage applicable to the
Six Flags Parks.
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.
On March 19, 1997, SFTP, and its wholly-owned subsidiary Six Flags Over
Georgia, Inc. (collectively, the "Six Flags Parties") commenced a declaratory
judgment action in the Superior Court of Gwinnett County, Georgia, entitled Six
Flags Over Georgia, Inc. and Six Flags Theme Parks, Inc. v. Six Flags Fund, Ltd.
and Avram Salkin, as Trustee of the Claims Trust. The Six Flags Parties sought,
among other things, a declaration and determination of the rights and
obligations of the partners of Six Flags Over Georgia, L.P., with respect to
certain disputed partnership affairs and an accounting of all partnership
affairs. On April 21, 1997, defendants Six Flags Fund, Ltd. and its affiliates
(collectively, the "SFOG Fund Parties") filed a motion to dismiss the
declaratory judgment action as well as an answer and counterclaim naming SFEC
and Time Warner Entertainment Company, L.P. as additional
counterclaim-defendants. The counterclaim seeks imposition of a constructive
trust and an accounting, compensatory damages of in excess of $250 million and
unspecified punitive damages for alleged breaches of fiduciary duty, conversion,
fraud and conspiracy allegedly committed by the counterclaim-defendants in
connection with the management of the Six Flags Over Georgia.
On June 9, 1997, the parties entered into a Consent Order in which they
agreed, among other things, to realign the parties. An Amended Complaint was
then filed by the SFOG Fund Parties as the newly-aligned plaintiffs against the
Six Flags Parties in which the same substantive claims were asserted. The Six
Flags Parties filed their answer denying liability and asserting several
affirmative defenses on July 24, 1997. The Six Flags Parties intend to
vigorously contest the allegations of the complaint.
The Sellers have agreed to indemnify Premier from any and all liabilities
arising from these proceedings.
43
<PAGE>
DESCRIPTION OF SIX FLAGS AGREEMENT
GENERAL
On February 9, 1998, the company presently named Premier Parks Inc., certain
wholly-owned subsidiaries of Premier, SFEC and each of the Sellers entered into
the Six Flags Agreement. The Six Flags Agreement provides for the Six Flags
Acquisition, pursuant to which Premier will acquire, by merger, all of the
capital stock of SFEC from the Sellers for an amount (such amount, the "Capital
Stock Consideration") equal to (i) $965 million, adjusted as described below
(the "Preliminary Base Amount"), MINUS (ii) the excess of the SFEC Option
Consideration (as defined below) over $5 million. The Capital Stock
Consideration will be payable in depositary shares representing interests in up
to $200 million, but not less than $100 million, of the Seller Preferred Stock,
with the balance payable in cash. The net proceeds of the Offerings will be
used, in part, to fund the cash portion of the Capital Stock Consideration.
Consummation of the Six Flags Acquisition is a condition to the Offerings.
The Preliminary Base Amount will be adjusted as follows. If the actual
tangible net worth of SFEC as of the end of its 1997 fiscal year exceeds
$ (the estimated tangible net worth of SFEC as of the end of its 1997
fiscal year), the Preliminary Base Amount will be increased by an amount equal
to such excess. If, however, such actual tangible net worth is less than
$ , then the Preliminary Base Amount will be reduced accordingly.
THE MERGERS
Prior to the Six Flags Acquisition, and pursuant to the Premier Merger, the
company presently named Premier Parks Inc. will merge with a wholly-owned
subsidiary of Premier Parks Holdings Corporation in accordance with Section
251(g) of the Delaware General Corporation Law. As a result of the Premier
Merger, holders of shares of Common Stock of Premier will become, on a
share-for-share basis, holders of Common Stock of Premier Parks Holdings
Corporation, and Premier will become a wholly-owned subsidiary of Premier Parks
Holdings Corporation. On the effective date of the Premier Merger, Premier will
change its name to Premier Parks Operations Inc., and Premier Parks Holdings
Corporation will change its name to Premier Parks Inc.
In addition to the share-for-share exchange, each option or similar right
exercisable for capital stock of Premier Operations outstanding immediately
prior to the Reorganization automatically will be converted into an option or
similar right exercisable for a number of shares of the Common Stock equal to
the number of shares of capital stock of Premier for which such option or
similar right was exercisable immediately prior to the Premier Merger.
Immediately following the closing of the Offerings, SFEC and a wholly-owned
subsidiary of Premier will be merged pursuant to the Six Flags Acquisition, with
SFEC continuing as the surviving corporation and as a wholly-owned subsidiary of
Premier. Pursuant to the Six Flags Acquisition, (i) each share of capital stock
of SFEC outstanding immediately prior to the Six Flags Acquisition, all of which
are held by the Sellers, automatically will be converted into the right to
receive a pro rata share of the Capital Stock Consideration based on the
aggregate number of such shares (together with a cash payment in lieu of any
fractional shares of Seller Preferred Stock to which the Sellers would have
otherwise been entitled as part of the Capital Stock Consideration) and (ii)
each option or similar right exercisable for capital stock of SFEC outstanding
immediately prior to the Six Flags Acquisition automatically will be cancelled
in exchange for a cash payment by SFEC (all such cash payments together, the
"SFEC Option Consideration").
44
<PAGE>
CONDITIONS
The Six Flags Agreement contains customary closing conditions of the
parties. In addition, the Six Flags Acquisition is subject to the condition that
Premier will raise equity capital in an amount at least equal to the difference
between $900.0 million and the value of the Seller Preferred Stock issued to the
Sellers pursuant to the Six Flags Acquisition.
INDEMNIFICATION
The Six Flags Agreement contains customary representations, warranties,
covenants and other agreements of the parties. The Sellers have agreed to
indemnify and hold harmless Premier against certain damages, claims and
liabilities (and the cost and expenses related thereto) suffered by Premier in
respect of (i) any breach of or inaccuracy in any representation or warranty
contained in the Six Flags Agreement made by any Seller individually, or by the
Sellers collectively, and (ii) any breach or violation of any covenant or
agreement made by any Seller for itself or on behalf of SFEC or its subsidiaries
contained in the Six Flags Agreement or any documents delivered at the closing
thereunder.
Generally, no party may make a claim for indemnification for breaches of
representations and warranties and of covenants and other agreements as
described in the immediately preceding paragraph after the date (the "Claims
Termination Date") which is the earlier of (i) the 45th day following the date
on which audited annual financial statements of the Registrant and its
consolidated subsidiaries for the 1998 fiscal year are first made available to
the Registrant and (ii) April 30, 1999.
Premier may not make any claims for indemnification for breaches of any of
the Sellers' representations and warranties until the aggregate amount of the
damages suffered exceeds $5 million (the "Basket Amount"), whereupon the Sellers
are obligated to pay in full all such amounts for indemnification, including the
Basket Amount. The total maximum amount that the Sellers are required to pay for
indemnification for breaches of the Sellers' representations and warranties
under the Six Flags Agreement is $25 million. Upon consummation of the Six Flags
Acquisition, Premier will deposit $25 million in cash into an escrow fund under
a General Indemnity Escrow Agreement to be entered into by the Company with the
Sellers and certain holders of options exercisable for capital stock of SFEC. A
portion of such deposit will come from the Capital Stock Consideration payable
to the Sellers, with the balance to come from the SFEC Option Consideration
payable to the optionholders party to the General Indemnity Escrow Agreement.
The escrow fund will be the sole source of payment for the Sellers'
indemnification obligations to the Company for breaches of or inaccuracies in
the Sellers' representations and warranties.
In addition, the Sellers have agreed to indemnify and hold harmless Premier,
pursuant to the Georgia Litigation Indemnity Agreement being entered into at the
closing under the Six Flags Agreement, from any damages, claims and liabilities
(and the costs and expenses related thereto) suffered in connection with the
Georgia Litigation. See "Business--Legal Proceedings."
AGREEMENTS RELATED TO THE SIX FLAGS AGREEMENT
Certain ancillary agreements will be entered into pursuant to the Six Flags
Agreement in connection with the Six Flags Acquisition. See
"Business--Licenses."
In addition to the ancillary agreements to be entered into in connection
with the Six Flags Acquisition that are described elsewhere herein, SFEC,
certain of SFEC's subsidiaries (together with SFEC, the "SFEC Parties"), Time
Warner, and Premier and a wholly-owned subsidiary of Premier (together, the
"Premier Parties") will enter into the Subordinate Indemnity Agreement. The
purpose of the Subordinate Indemnity Agreement is to have the SFEC Parties and
the Premier Parties provide support for certain payment and performance
obligations of Time Warner and SFEC Parties under the arrangements relating to
the Co-Venture Partnerships, the SFEC Zero Coupon Senior Notes and certain other
obligations. The obligations of Premier under the Subordinate Indemnity
Agreement rank senior to its obligations, under the Guarantee.
45
<PAGE>
DESCRIPTION OF OTHER COMPANY INDEBTEDNESS
SIX FLAGS CREDIT FACILITY
Borrowings under the Six Flags Credit Facility, which will be entered into
on or prior to the closing of the Six Flags Acquisition, will be secured by
substantially all of the assets of SFTP and its subsidiaries, and guaranteed by
such subsidiaries. The Six Flags Credit Facility will have an aggregate
availability of $472 million consisting of (i) up to $100.0 million under a
Revolving Credit Facility to be used to refinance existing outstanding Six Flags
bank indebtedness and for working capital and other general corporate purposes;
and (ii) up to $372.0 million under Facility B to be used to refinance existing
outstanding Six Flags bank indebtedness and fund acquisitions and make capital
improvements. The Company anticipates that Facility B will be fully funded in
connection with the Six Flags Acquisition. Interest rates per annum under the
Six Flags Credit Facility are equal to either (a) 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 therein) or (b) the London
Interbank Offered Rate plus the Applicable Margin. The Revolving Credit Facility
will terminate five years from the closing of the Six Flags Acquisition.
Borrowings under Facility B will mature on November 30, 2004. However, for
Facility B, aggregate principal payments and reductions of $1.0 million will be
required during each of the first, second, third and fourth years; aggregate
principal payments of $25.0 million and $40.0 million are required in years five
and six and $303.0 million in aggregate principal payments are required at
maturity.
The Six Flags Credit Facility will contain restrictive covenants that, among
other things, limit the ability of SFTP 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 Six Flags Credit
Facility will require SFTP to 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.
Defaults under the Six Flags Credit Facility will 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 SFTP'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; (v) default by SFTP or any of its principal
subsidiaries in respect of any indebtedness above specified levels; (vi) certain
events of bankruptcy; (vii) certain judgments against SFTP or any of its
principal subsidiaries; (viii) the occurrence of a Change in Control (as defined
thereunder); (ix) the assertion of certain Environmental Claims (as defined
thereunder); and (x) under certain circumstances, the failure by Messrs. Burke
and Story to serve as Chief Executive Officer and Chief Operating Officer of
SFTP and the failure to replace them within a specified time period.
SFTP SENIOR SUBORDINATED NOTES
The SFTP Senior Subordinated Notes are unsecured senior subordinated
obligations of SFTP, in an aggregate principal amount of $285.0 million and will
mature on June 15, 2005. The SFTP Senior Subordinated Notes accrete in value
until June 15, 1998, at which time the accreted value will equal 100% of their
principal amount. The SFTP Senior Subordinated Notes bear interest at the rate
of 12 1/4% per annum, payable semiannually on June 15 and December 15 of each
year, commencing December 15, 1998.
The SFTP Senior Subordinated Notes are redeemable, at SFTP's option, in
whole or in part, at any time on or after June 15, 2000 at specified redemption
prices, together with accrued and unpaid interest, if any, to the date of
redemption. Upon the occurrence of a Change of Control (as defined in the
applicable Indenture), SFTP is required to make an offer to repurchase the SFTP
Senior Subordinated Notes at a price equal to 101% of the principal amount
thereof, together with accrued and unpaid interest, if any, to
46
<PAGE>
the date of repurchase. The Six Flags Transactions constitute a Change of
Control under the Indenture relating to the SFTP Senior Subordinated Notes, and
Premier will be required to make an offer to purchase the SFTP Senior
Subordinated Notes within 30 days of the closing of the Six Flags Transactions.
Premier does not expect that it will be required to purchase any material amount
of such Notes pursuant to such offer. See "Risk Factors--Risks Associated with
Substantial Indebtedness."
The Indenture pursuant to which the SFTP Senior Subordinated Notes were
issued contains restrictive covenants that, among other things, limit the
ability of SFTP and its subsidiaries 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 this Indenture include (i) failure to pay interest on the
SFTP Senior Subordinated 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 SFTP'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 SFTP or any Significant Subsidiary (as defined in the applicable
Indenture) in respect of any indebtedness above specified levels; (v) certain
events of bankruptcy; (vi) certain judgments against SFTP or any Significant
Subsidiary; (vii) any Note Guarantee (as defined in the applicable 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 applicable Indenture or any Note Guarantee, which
continues for 10 days.
SFEC ZERO COUPON SENIOR NOTES
The SFEC Zero Coupon Senior Notes are senior unsecured obligations of SFEC,
in an aggregate principal amount of $192.25 million and will mature on December
15, 1999. The SFEC Zero Coupon Senior Notes accrete in value until December 15,
1999, at which time the accreted value will equal 100% of their principal
amount. There are no periodic payments on the SFEC Zero Coupon Senior Notes. One
of the Sellers has effectively guaranteed the SFEC Zero Coupon Senior Notes, and
the Company has indemnified that Seller in respect of its guarantee. The Company
will use the proceeds of the Offering, together with other funds, to provide for
the payment, at or prior to maturity of the SFEC Zero Coupon Senior Notes. Until
so used, such proceeds (or U.S. government obligations purchased from such
proceeds) will be deposited in escrow.
The SFEC Zero Coupon Senior Notes may not be redeemed prior to maturity.
From and after the consummation of the Six Flags Transaction, the
restrictive covenants contained in the indenture pursuant to which the SFEC Zero
Coupon Senior Notes were issued will generally not be applicable to SFEC or its
subsidiaries.
Defaults under this indenture include (i) the failure by SFEC or Time Warner
to comply for 30 days after written notice with any covenant in the applicable
Indenture; (ii) failure to pay, when due, upon final maturity or upon
acceleration, the principal amount of any indebtedness of SFEC or any of its
subsidiaries in excess of $5.0 million, or any indebtedness of Time Warner or
any of its Material Subsidiaries (as defined in the applicable indenture) in
excess of $50 million, if such indebtedness is not discharged within 60 days
after written notice; (iii) certain events of bankruptcy of SFEC or Seller; and
(iv) failure to pay the principal amount of any SFEC Zero Coupon Senior Note at
its maturity date. Accordingly, after the Six Flags Acquisition, such a default
by Time Warner could result in the acceleration of the maturity of the SFEC Zero
Coupon Senior Notes.
47
<PAGE>
DESCRIPTION OF NOTES
GENERAL
The Notes will be issued pursuant to an Indenture (the "Indenture") between
the Company and , as trustee (the "Trustee"). The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"). The Notes are subject to all such terms and Holders of Notes are referred
to the Indenture and the Trust Indenture Act for a statement thereof. The
following summary of the material provisions of the Indenture and the Pledge and
Escrow Agreement does not purport to be complete and is qualified in its
entirety by reference to the Indenture and the Pledge and Escrow Agreement,
including the definitions therein of certain terms used below. The proposed
forms of the Indenture and Pledge and Escrow Agreement have been filed as
exhibits to the Registration Statement of which this Prospectus is a part and
copies of the proposed forms of the Indenture and Pledge and Escrow Agreement
are available as set forth below under "--Additional Information." The
definitions of certain terms used in the following summary are set forth below
under "--Certain Definitions." For purposes of this summary, the term "Company"
refers only to Six Flags Entertainment Corporation and not to any of its
Subsidiaries and the term "Premier" refers only to Premier Parks Inc. and not to
any of its Subsidiaries.
The Notes will be general unsecured obligations of the Company and will rank
PARI PASSU in right of payment with all future unsecured senior indebtedness of
the Company. However, the operations of the Company are conducted through its
Subsidiaries and, therefore, the Company is dependent upon the cash flow of its
Subsidiaries to meet its obligations, including its obligations under the Notes.
The Company's Subsidiaries will not be guarantors of the Notes. As a result, the
Notes will be effectively subordinated to all Indebtedness and other liabilities
and commitments (including trade payables) of the Company's Subsidiaries. Any
right of the Company to receive assets of any of its Subsidiaries upon the
latter's liquidation or reorganization (and the consequent right of the Holders
of the Notes to participate in those assets) will be effectively subordinated to
the claims of that Subsidiary's creditors, except to the extent that the Company
is itself recognized as a creditor of such Subsidiary, in which case the claims
of the Company would still be subordinate to any security in the assets of such
Subsidiary and any indebtedness of such Subsidiary senior to that held by the
Company. On a pro forma basis, as of December 31, 1997, the Company's
Subsidiaries would have had approximately $ million of Indebtedness
(including the SFTP Senior Subordinated Notes and borrowings under the Six Flags
Credit Facility) and $ million of trade payables and other liabilities
outstanding. See "Risk Factors--Holding Company Structure; Limitations on Access
to Cash Flow of Subsidiaries."
As of the date of the Indenture, all of the Company's Subsidiaries will be
Restricted Subsidiaries. However, under certain circumstances, the Company will
be able to designate current or future Subsidiaries as Unrestricted
Subsidiaries. Unrestricted Subsidiaries will not be subject to many of the
restrictive covenants set forth in the Indenture.
ESCROW OF PROCEEDS
Certain of the Company's obligations under the Notes will be secured pending
disbursement pursuant to the Pledge and Escrow Agreement by a pledge of the
Escrow Account. Approximately $ million will remain in the Escrow Account
and be used to effectively defease the SFEC Zero Coupon Senior Notes within
days of original issuance of the Notes and, prior to such defeasance, to
purchase a portfolio of Government Securities that will be pledged as security
for payments under the Notes.
The Pledge and Escrow Agreement will provide for the grant by the Company to
the Trustee of a security interest in the Escrow Account for the benefit of the
Holders of the Notes. All such security interests will secure the payment and
performance when due of the Obligations of the Company under the Indenture and
under such Notes, as provided in the Pledge and Escrow Agreement. The ability of
holders to realize upon such funds or securities may be subject to certain
bankruptcy law limitations in the event of a bankruptcy of the Company.
48
<PAGE>
Pending such defeasance, all funds contained in the Escrow Account will be
invested in Government Securities. Upon the acceleration of the maturity of the
Notes or the failure to pay principal at maturity or upon certain redemptions
and repurchases of the Notes, the Pledge and Escrow Agreement will provide for
the foreclosure by the Trustee upon the net proceeds of the Escrow Account.
Under the terms of the Indenture, the proceeds of the Escrow Account shall be
applied, first, to amounts owing to the Trustee in respect of fees and expenses
of the Trustee and second, to the Obligations under the Notes and the Indenture.
In the event of the Company's bankruptcy, the Company, as debtor in
possession under Chapter 11 of the Bankruptcy Code, would be entitled to
petition the United States Bankruptcy Court having jurisdiction over its case
for permission, under Section 363 of the Bankruptcy Code, to use the proceeds of
the Escrow Account to fund its operations during the pendency of the
reorganization proceedings. Permission for such use is likely to be granted so
long as the interests of the Trustee, for the benefit of the Holders of Notes
and itself as Trustee, are "adequately protected." A secured creditor's interest
in cash collateral to be used by a debtor in possession may be "adequately
protected" by, among other means, the granting of liens on substitute collateral
which may be substantially less liquid than Government Securities.
PRINCIPAL AND MATURITY OF AND INTEREST ON THE NOTES
The Notes will be limited in aggregate principal amount to $170.0 million
and will mature on , 2008. Interest on the Notes will accrue at the rate
of % per annum and will be payable semi-annually in arrears on and
of each year, to Holders of record on the immediately preceding and
. Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
original issuance. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. Principal, premium, if any, and interest on
the Notes will be payable at the office or agency of the Company maintained for
such purpose within the City and State of New York or, at the option of the
Company, payment of interest may be made by check mailed to the Holders of the
Notes at their respective addresses set forth in the register of Holders of
Notes; PROVIDED that all payments of principal, premium and interest with
respect to Notes the Holders of which have given wire transfer instructions to
the Company will be required to be made by wire transfer of immediately
available funds to the accounts specified by the Holders thereof. Until
otherwise designated by the Company, the Company's office or agency in New York
will be the office of the Trustee maintained for such purpose. The Notes will be
issued in denominations of $1,000 and integral multiples thereof.
OPTIONAL REDEMPTION
The Notes will not be redeemable at the Company's option prior to ,
2003. Thereafter, the Notes will be subject to redemption at any time at the
option of the Company, in whole or in part, upon not less than 30 nor more than
60 days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ------------------------------------------------------------------------ -----------
<S> <C>
2003.................................................................... %
2004....................................................................
2005....................................................................
2006 and thereafter..................................................... 100.00%
</TABLE>
Notwithstanding the foregoing, during the first 36 months after the date of
original issuance of the Notes, the Company may on any one or more occasions
redeem up to 35% of the aggregate principal amount of Notes originally issued
under the Indenture at a redemption price of % of the principal amount
thereof on the redemption date with the net cash proceeds of one or more Public
Equity Offerings by (i) the Company or (ii) Premier to the extent the net cash
proceeds thereof are contributed to the
49
<PAGE>
Company as a capital contribution to the common equity of the Company and/or the
net cash proceeds of a Strategic Equity Investment in (i) the Company or (ii)
Premier to the extent the net cash proceeds thereof are contributed to the
Company as a capital contribution to the common equity of the Company; PROVIDED
that in each case at least 65% of the aggregate principal amount of Notes
originally issued remains outstanding immediately after the occurrence of each
such redemption (excluding Notes held by the Company and its Subsidiaries); and
PROVIDED, FURTHER, that any such redemption shall occur within 45 days of the
date of the closing of each such Public Equity Offering and/or Strategic Equity
Investment.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
such Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; provided
that no Notes of $1,000 or less shall be redeemed in part.
Notices of redemption shall be mailed by first class mail at least 30 but
not more than 60 days before the redemption date to each Holder of Notes to be
redeemed at its registered address. Notices of redemption may not be
conditional. If any Note is to be redeemed in part only, the notice of
redemption that relates 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. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date, interest ceases to
accrue on Notes or portions of them called for redemption.
MANDATORY REDEMPTION
Except as set forth below under the caption "--Repurchase at the Option
Holders," the Company is not required to make mandatory redemption or sinking
fund payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be obligated to
make an offer (the "Change of Control Offer") to each Holder of Notes to
repurchase all or any part (equal to $1,000 or an integral multiple thereof) of
such Holder's Notes at an offer price in cash equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest thereon, if any, to
the date of purchase. Within ten days following any Change of Control, the
Company will mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes pursuant to the procedures required by the Indenture and described in such
notice. The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; PROVIDED that each such new Note will be in a
50
<PAGE>
principal amount of $1,000 or an integral multiple thereof. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The Indenture will provide that the Company will fix the Change of Control
Payment Date no earlier than 30 days and no later than 60 days after the Change
of Control Offer is mailed as set forth above. Prior to complying with the
provisions of the preceding sentence, but in any event within 90 days following
a Change of Control, the Company will either repay all outstanding Indebtedness
of its Subsidiaries or obtain the requisite consents, if any, under all
agreements governing all such outstanding Indebtedness of its Subsidiaries to
permit the repurchase of Notes required by this covenant. Under the terms of the
indenture governing the SFTP Senior Subordinated Notes and the Six Flags Credit
Facility, the payment of dividends by SFTP are subject to certain specified
financial tests which will significantly restrict its ability to pay dividends
or make other distributions. If the Company does not obtain the consent of the
lenders under agreements governing outstanding Indebtedness of its Subsidiaries,
including under the Six Flags Credit Facility and the indenture governing the
SFTP Senior Subordinated Notes, to permit the repurchase of Notes or does not
refinance such Indebtedness, the Company will likely not have the financial
resources to purchase Notes and the Company's Subsidiaries will be restricted by
the terms of such Indebtedness from paying dividends to the Company or otherwise
lending funds to the Company for the purpose of such purchase. In any event,
there can be no assurance that the Company's Subsidiaries will have the
resources available to pay any such dividend or make any such distribution. The
Company's failure to make a Change of Control Offer when required or to purchase
tendered Notes when tendered would constitute an Event of Default under the
Indenture. See "Risk Factors--Holding Company Structure; Limitations on Access
to Cash Flow of Subsidiaries" and "--Risks Associated with a Change of Control."
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require that the Company
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of Notes to require the Company to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
ASSET SALES
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 75% of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of cash; PROVIDED that the amount of (x) any liabilities (as shown
on the Company's or such Restricted Subsidiary's most recent balance sheet), of
the Company or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any guarantee
thereof) that are assumed
51
<PAGE>
by the transferee of any such assets pursuant to a customary novation agreement
that releases the Company or such Restricted Subsidiary from further liability
and (y) any securities, notes or other obligations received by the Company or
such Restricted Subsidiary from such transferee that are contemporaneously
(subject to ordinary settlement periods) converted by the Company or such
Restricted Subsidiary into cash (to the extent of the cash received), shall be
deemed to be cash for purposes of this provision.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or the applicable Restricted Subsidiary may apply such Net Proceeds
(a) to repay Indebtedness of a Restricted Subsidiary of the Company (and to
correspondingly reduce commitments with respect thereto in the case of revolving
credit borrowings) or (b) to the acquisition of all or substantially all of the
assets of, or a majority of the Voting Stock of, another Permitted Business, (c)
to the making of a capital expenditure or (d) to the acquisition of other
long-term assets that are used or useful in a Permitted Business. Pending the
final application of any such Net Proceeds, the Company or such Restricted
Subsidiary may temporarily reduce revolving credit borrowings or otherwise
invest such Net Proceeds in any manner that is not prohibited by the Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as provided
in the first sentence of this paragraph will be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $ million,
the Company will be required to make an offer to all Holders of Notes and all
holders of other PARI PASSU Indebtedness containing provisions similar to those
set forth in the Indenture with respect to offers to purchase or redeem with the
proceeds of sales of assets (an "Asset Sale Offer") to purchase the maximum
principal amount of Notes and such other PARI PASSU Indebtedness that may be
purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
thereon, if any, to the date of purchase, in accordance with the procedures set
forth in the Indenture and such other Indebtedness. To the extent that any
Excess Proceeds remain after consummation of an Asset Sale Offer, the Company
may use such Excess Proceeds for any purpose not otherwise prohibited by the
Indenture. If the aggregate principal amount of Notes and such other
Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess
Proceeds, the Trustee shall select the Notes and such other Indebtedness to be
purchased on a pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset at zero.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to an Asset Sale Offer.
Under the terms of the indenture governing the SFTP Senior Subordinated
Notes and the Six Flags Credit Facility, the payment of dividends by SFTP are
subject to certain specified financial tests which will significantly restrict
its ability to pay dividends or make other distributions. If the Company does
not obtain the consent of the lenders under agreements governing outstanding
Indebtedness of its Subsidiaries, including under the Six Flags Credit Facility
and the indenture governing the SFTP Senior Subordinated Notes, to permit the
repurchase of Notes or does not refinance such Indebtedness, the Company will
likely not have the financial resources to purchase Notes and the Company's
Subsidiaries will be restricted by the terms of such Indebtedness from paying
dividends to the Company or otherwise lending funds to the Company for the
purpose of such purchase. In any event, there can be no assurance that the
Company's Subsidiaries will have the resources available to pay any such
dividend or make any such distribution. The Company's failure to make an Asset
Sale Offer when required or to purchase tendered Notes when tendered would
constitute an Event of Default under the Indenture. See "Risk Factors--Risks
Associated with Substantial Indebtedness" and "--Holding Company Structure;
Limitations on Access to Cash Flow of Subsidiaries."
52
<PAGE>
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or
pay any dividend or make any other payment or distribution on account of any
Equity Interests of the Company (including, without limitation, any payment in
connection with any merger or consolidation involving the Company) or to the
direct or indirect holders of any Equity Interests of the Company in their
capacity as such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company); (ii) purchase, redeem
or otherwise acquire or retire for value (including, without limitation, in
connection with any merger or consolidation involving the Company) any Equity
Interests of the Company or any direct or indirect parent of the Company; (iii)
make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness of the Company that is
subordinated to the Notes, except a payment of interest or principal at Stated
Maturity; or (iv) make any Restricted Investment (all such payments and other
actions set forth in clauses (i) through (iv) above being collectively referred
to as "Restricted Payments"), unless, at the time of and after giving effect to
such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Debt to
Cash Flow test set forth in the first paragraph of the covenant described
below under caption "-- Incurrence of Indebtedness and Issuance of Preferred
Stock;" and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments declared or made after the date of the Indenture
(excluding Restricted Payments permitted by clauses (ii) and (iii) of the
next succeeding paragraph) shall not exceed, at the date of determination,
the sum, without duplication, of (i) an amount equal to the Company's
Consolidated Cash Flow for the period (taken as one accounting period) from
the beginning of the first fiscal quarter commencing after the date of the
Indenture to the end of the Company's most recently ended full fiscal
quarter for which internal financial statements are available (the "Basket
Period") LESS the product of times the Company's Consolidated Interest
Expense for the Basket Period, PLUS (ii) 100% of the aggregate net cash
proceeds received by the Company after the date of the Indenture as a
contribution to its common equity capital or from the issue or sale of
Equity Interests of the Company (other than Disqualified Stock) or from the
issue or sale after the date of the Indenture of Disqualified Stock or debt
securities of the Company that have been converted into such Equity
Interests (other than Equity Interests (or Disqualified Stock or convertible
debt securities) sold to a Subsidiary of the Company and other than in, or
with the proceeds of, the Offerings), PLUS (iii) to the extent that any
Restricted Investment that was made after the date of the Indenture is sold
for cash or otherwise liquidated or repaid for cash, the lesser of (A) the
cash return of capital with respect to such Restricted Investment (less the
cost of disposition, if any) and (B) the initial amount of such Restricted
Investment, PLUS (iv) to the extent that any Unrestricted Subsidiary is
redesignated as a Restricted Subsidiary after the date of the Indenture, the
fair market value of the Issuer's Investment in such Subsidiary as of the
date of such redesignation.
The foregoing provisions will not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of the Indenture;
(ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the
Company in exchange for, or out of the net cash proceeds of
53
<PAGE>
the substantially concurrent sale (other than to a Subsidiary of the
Company) of, Equity Interests of the Company (other than Disqualified
Stock); PROVIDED that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement, defeasance or
other acquisition shall be excluded from clause (c)(ii) of the preceding
paragraph;
(iii) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness;
(iv) so long as no Event of Default or Default shall have occurred and
be continuing (or would result therefrom), (a) the purchase, redemption,
retirement or other acquisition by the Company or any Restricted Subsidiary
of the Company of limited partnership interests held by the limited partners
in the Co-Venture Partnerships, or their successors, in accordance with and
in the manner required by the terms of the Partnership Park Agreements as
the same are in effect on the date of the Indenture and (b) dividends or
other distributions to Premier to enable Premier to purchase, redeem, retire
or otherwise acquire limited partnership interests held by the limited
partners in the Co-Venture Partnerships, or their successors, in accordance
with and in the manner required by the terms of the Partnership Park
Agreements as the same are in effect on the date of the Indenture;
(v) so long as no Event of Default or Default shall have occurred and be
continuing (or would result therefrom), any transactions pursuant to and
payments in connection with, and, in each case, in accordance with, the
terms of the Partnership Park Agreements as the same are in effect on the
date of the Indenture;
(vi) so long as no Event of Default or Default shall have occurred and
be continuing (or would result therefrom), the payment of dividends or other
distributions to Premier to enable Premier to pay dividends on the Seller
Preferred Stock in accordance with the terms thereof as in effect on the
date of the Indenture; and
(vii) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of the Company from employees, former
employees, directors or former directors of the Company or any of its
Restricted Subsidiaries (or permitted transferees of such employees, former
employees, directors or former directors); PROVIDED, HOWEVER, that the
aggregate amount of such repurchases shall not exceed $ million in any
twelve-month period.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default; PROVIDED
that in no event shall the business currently operated by SFTP be transferred to
or held by an Unrestricted Subsidiary. For purposes of making such
determination, all outstanding Investments held by the Company and its
Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary
so designated will be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments under
the first paragraph of this covenant. All such outstanding Investments will be
deemed to constitute Investments in an amount equal to the fair market value of
such Investments at the time of such designation. Such designation will only be
permitted if such Restricted Payment would be permitted at such time and if such
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Subsidiary, as the
case may be, pursuant to the Restricted Payment. The fair market value of any
non-cash Restricted Payment shall be determined by the Board of Directors of the
Company whose resolution with respect thereto shall be delivered to the Trustee,
such determination to be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if such
fair market value exceeds $ million. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by the covenant "Restricted
54
<PAGE>
Payments" were computed, together with a copy of any fairness opinion or
appraisal required by the Indenture.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Indenture will provide that the Company will not, and will not permit
any of its Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt) and that the Company will not issue any
Disqualified Stock and will not permit any of its Subsidiaries to issue any
shares of preferred stock; PROVIDED, HOWEVER, that the Company may incur
Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock if
the Company's Debt to Cash Flow Ratio at the time of incurrence of such
Indebtedness or the issuance of such Disqualified Stock or such preferred stock,
as the case may be, after giving pro forma effect to such incurrence or issuance
as of such date and to the use of the proceeds therefrom as if the same had
occurred at the beginning of the most recently ended four full fiscal quarter
period of the Company for which internal financial statements are available,
would have been no greater than (a) to 1, if such incurrence or issuance
is on or prior to , , and (b) to 1, if such incurrence or
issuance is after , .
The Indenture will also provide that the Company will not incur any
Indebtedness that is contractually subordinated in right of payment to any other
Indebtedness of the Company unless such Indebtedness is also contractually
subordinated in right of payment to the Notes on substantially identical terms;
PROVIDED, HOWEVER, that no Indebtedness of the Company shall be deemed to be
contractually subordinated in right of payment to any other Indebtedness of the
Company solely by virtue of being unsecured.
The provisions of the first paragraph of this covenant will not apply to the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company and its Restricted Subsidiaries of
term Indebtedness under Credit Facilities; PROVIDED that the aggregate
principal amount of all term Indebtedness outstanding under all Credit
Facilities after giving effect to such incurrence does not exceed an amount
equal to $ million LESS the aggregate amount of all mandatory or
scheduled repayments by the Company or any of its Restricted Subsidiaries of
the principal of any term Indebtedness under a Credit Facility (other than
repayments that are immediately reborrowed) that have been made since the
date of the Indenture;
(ii) the incurrence by the Company and its Restricted Subsidiaries of
revolving credit Indebtedness and letters of credit pursuant to Credit
Facilities; PROVIDED that the aggregate principal amount of all revolving
credit Indebtedness and letters of credit (with letters of credit being
deemed to have a principal amount equal to the maximum potential liability
of the Company and its Restricted Subsidiaries thereunder) outstanding under
all Credit Facilities of the Company and its Restricted Subsidiaries after
giving effect to such incurrence does not exceed $ million LESS the
aggregate amount of all commitment reductions by the Company or any of its
Restricted Subsidiaries with respect to revolving credit borrowings that
have been made since the date of the Indenture as a result of the
application of Net Proceeds of Asset Sales pursuant to the covenant
described above under the caption "--Repurchase at the Option of Holders
Asset Sales" and, PROVIDED FURTHER, that the aggregate principal amount of
all Indebtedness incurred pursuant to this clause (ii) is reduced to an
outstanding balance of $1.0 million or less for at least 30 consecutive days
in each fiscal year;
(iii) the incurrence by the Company and its Restricted Subsidiaries of
the Existing Indebtedness;
(iv) the incurrence by the Company of Indebtedness represented by the
Notes;
(v) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case incurred for the
purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in the
business of the Company or such
55
<PAGE>
Restricted Subsidiary, in an aggregate principal amount not to exceed
$ million at any time outstanding;
(vi) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness and Indebtedness incurred pursuant to clauses (i)
and (ii) above) that was permitted by the Indenture to be incurred;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Restricted Subsidiaries; PROVIDED, HOWEVER, that (i) if the
Company is the obligor on such Indebtedness, such Indebtedness is expressly
subordinated to the prior payment in full in cash of all Obligations with
respect to the Notes and (ii)(A) any subsequent issuance or transfer of
Equity Interests that results in any such Indebtedness being held by a
Person other than the Company or a Restricted Subsidiary thereof and (B) any
sale or other transfer of any such Indebtedness to a Person that is not
either the Company or a Restricted Subsidiary thereof shall be deemed, in
each case, to constitute an incurrence of such Indebtedness by the Company
or such Restricted Subsidiary, as the case may be, that was not permitted by
this clause (vii);
(viii) the incurrence by the Company or any of its Restricted
Subsidiaries of (a) Hedging Obligations that are incurred for the purpose of
fixing or hedging interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of the Indenture to be incurred
and (b) Currency Agreements that do not increase the Indebtedness of the
Company and its Restricted Subsidiaries outstanding at any time other than
as a result of fluctuations in foreign currency exchange rates or interest
rates or by reason of fees, indemnities and compensation payable thereunder;
(ix) Indebtedness in respect of performance bonds, letters of credits,
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;
(x) the guarantee by the Company or any of its Restricted Subsidiaries
of Indebtedness of the Company or a Restricted Subsidiary of the Company
that was permitted to be incurred by another provision of this covenant
(including, without limiting the generality of the forgoing, the guarantee
by any Restricted Subsidiary of the Company of Existing Indebtedness);
(xi) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, PROVIDED, HOWEVER, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company that was not permitted by this clause (xi); and
(xii) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal amount (or
accreted value, as applicable) at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (xii), not to exceed
$ million.
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories of
Permitted Debt described in clauses (i) through (xii) above or is entitled to be
incurred pursuant to the first paragraph of this covenant, the Company shall, in
its sole discretion, classify such item of Indebtedness in any manner that
complies with this covenant and such item of Indebtedness will be treated as
having been incurred pursuant to only one of such clauses or pursuant to the
first paragraph hereof. Accrual of interest, accretion or amortization of
original issue discount, the payment of interest on any Indebtedness in the form
of additional Indebtedness with the same terms, and the payment of dividends on
preferred stock in the form of additional shares of the same class of preferred
stock will not be deemed to be an incurrence of Indebtedness or an issuance of
preferred stock for purposes of this covenant; PROVIDED, in each such case, that
the amount thereof is included in Consolidated Indebtedness of the Company as
accrued.
56
<PAGE>
SALE AND LEASEBACK TRANSACTIONS
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, enter into any sale and leaseback
transaction; PROVIDED that the Company or a Restricted Subsidiary of the Company
may enter into a sale and leaseback transaction if (i) the Company could have
(a) incurred Indebtedness in an amount equal to the Attributable Debt relating
to such sale and leaseback transaction pursuant to the Debt to Cash Flow test
set forth in the first paragraph of the covenant described above under the
caption "--Incurrence of Additional Indebtedness and Issuance of Preferred
Stock" and (b) incurred a Lien to secure such Indebtedness pursuant to the
covenant described below under the caption "--Liens," (ii) the gross cash
proceeds of such sale and leaseback transaction are at least equal to the fair
market value (as determined in good faith by the Board of Directors and set
forth in an Officers' Certificate delivered to the Trustee) of the property that
is the subject of such sale and leaseback transaction and (iii) the transfer of
assets in such sale and leaseback transaction is permitted by, and the Company
or such Restricted Subsidiary applies the proceeds of such transaction in
compliance with, the covenant described above under the caption "--Asset Sales."
LIENS
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create, incur,
assume or suffer to exist any Lien securing trade payables, Attributable Debt or
Indebtedness on any asset now owned or hereafter acquired, except Permitted
Liens.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to (i)(a) pay dividends
or make any other distributions to the Company or any of its Restricted
Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest
or participation in, or measured by, its profits, or (b) pay any indebtedness
owed to the Company or any of its Restricted Subsidiaries, (ii) make loans or
advances to the Company or any of its Restricted Subsidiaries or (iii) transfer
any of its properties or assets to the Company or any of its Restricted
Subsidiaries. However, the foregoing restrictions will not apply to encumbrances
or restrictions existing under or by reason of (a) Existing Indebtedness as in
effect on the date of the Indenture, (b) the Partnership Parks Agreements as
such are in effect on the date of the Indenture, (c) the Six Flags Credit
Facility as in effect as of the date of the Indenture, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, PROVIDED that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are no more restrictive, taken as a whole, with
respect to such dividend and other payment restrictions than those contained in
the Six Flags Credit Facility as in effect on the date of the Indenture, (d) the
Indenture and the Notes, (e) applicable law, (f) any instrument governing
Indebtedness or Capital Stock of a Person acquired by the Company or any of its
Restricted Subsidiaries as in effect at the time of such acquisition (except to
the extent such Indebtedness was incurred in connection with or in contemplation
of such acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, PROVIDED that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the Indenture to
be incurred, (g) customary non-assignment provisions in leases entered into in
the ordinary course of business and consistent with past practices, (h) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired, (i) any agreement for the sale of a Restricted Subsidiary
that restricts distributions by that Restricted Subsidiary pending its sale, (j)
secured Indebtedness otherwise permitted to be incurred pursuant to the
provisions of the covenant described above under the caption "--Liens" that
limits the right of the debtor to dispose of the assets securing such
Indebtedness, (k) provisions with
57
<PAGE>
respect to the disposition or distribution of assets or property in joint
venture agreements and other similar agreements entered into in the ordinary
course of business and (l) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the ordinary course of
business.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Indenture will provide that the Company may not consolidate or merge
with or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Notes, the Indenture and the Pledge and Escrow Agreement
pursuant to a supplemental Indenture in form reasonably satisfactory to the
Trustee; (iii) immediately after such transaction no Default or Event of Default
exists; and (iv) except in the case of a merger of the Company with or into a
Wholly Owned Restricted Subsidiary of the Company, the Company or the entity or
Person formed by or surviving any such consolidation or merger (if other than
the Company), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made (A) will have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated Net
Worth of the Company immediately preceding the transaction and (B) will, both at
the time of such transaction and after giving pro forma effect thereto as if
such transaction had occurred at the beginning of the applicable four-quarter
period, be permitted to incur at least $1.00 of additional Indebtedness pursuant
to the Debt to Cash Flow test set forth in the first paragraph of the covenant
described above under the caption "--Incurrence of Indebtedness and Issuance of
Preferred Stock."
TRANSACTIONS WITH AFFILIATES
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, make any payment to, or sell, lease,
transfer or otherwise dispose of any of its properties or assets to, or purchase
any property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $ million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $ million, an opinion as to the fairness
to the Holders of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of national
standing. Notwithstanding the foregoing, the following items shall not be deemed
to be Affiliate Transactions: (i) any employment agreement entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of
business, or 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, or the grant of stock options or similar rights to
employees and directors of the Company pursuant to plans approved by the Board
of Directors, (ii) transactions between
58
<PAGE>
or among the Company and/or its Restricted Subsidiaries, (iii) payment of
reasonable directors fees to Persons who are not otherwise employees of the
Company or its Restricted Subsidiaries, (iv) loans or advances to employees in
the ordinary course of business, (v) Restricted Payments that are permitted by
the provisions of the Indenture described above under the caption "--Restricted
Payments," (vi) transactions pursuant to, and in accordance with, the terms of
the Subordinate Indemnity Agreement as the same is in effect as of the date of
the Indenture, (vii) transactions pursuant to, and in accordance with, the terms
of the Shared Services Agreement as the same is in effect as of the date of the
Indenture, (viii) transactions pursuant to, and in accordance with, the terms of
the Tax Sharing Agreement as the same is in effect as of the date of the
Indenture and (ix) transactions pursuant to and payments in connection with,
and, in each case, in accordance with, the terms of the Partnership Park
Agreements as the same are in effect on the date of the Indenture.
LIMITATION ON ISSUANCES AND SALES OF EQUITY INTERESTS IN RESTRICTED
SUBSIDIARIES
The Indenture will provide that the Company (i) will not, and will not
permit any Restricted Subsidiary of the Company to, transfer, convey, sell,
lease or otherwise dispose of any Equity Interests in any Restricted Subsidiary
of the Company to any Person (other than the Company or a Restricted Subsidiary
of the Company), unless (a)(1) such transfer, conveyance, sale, lease or other
disposition is of all the Equity Interests in such Restricted Subsidiary or (2)
after giving effect thereto, such Restricted Subsidiary will still constitute a
Restricted Subsidiary and (b) the cash Net Proceeds from such transfer,
conveyance, sale, lease or other disposition are applied in accordance with the
covenant described above under the caption "--Repurchase at the Option of
Holders--Asset Sales," and (ii) will not permit any Restricted Subsidiary of the
Company to issue any of its Equity Interests (other than, if necessary, shares
of its Capital Stock constituting directors' qualifying shares) to any Person
other than to the Company or a Wholly Owned Restricted Subsidiary of the
Company.
BUSINESS ACTIVITIES
The Indenture will provide that the Company will not, and will not permit
any Restricted Subsidiary to, engage in any business other than Permitted
Businesses, except to such extent as would not be material to the Company and
its Restricted Subsidiaries taken as a whole.
PAYMENTS FOR CONSENT
The Indenture will provide that neither the Company nor any of its
Subsidiaries will, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
any Notes for or as an inducement to any consent, waiver or amendment of any of
the terms or provisions of the Indenture or the Notes unless such consideration
is offered to be paid or is paid to all Holders of the Notes that consent, waive
or agree to amend in the time frame set forth in the solicitation documents
relating to such consent, waiver or agreement.
REPORTS
The Indenture will provide that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Notes are outstanding, the Company will furnish to the Holders of
Notes (i) all quarterly and annual financial information that would be required
to be contained in a filing with the Commission on Forms 10-Q and 10-K if the
Company were required to file such Forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" that describes
the financial condition and results of operations of the Company and its
consolidated Subsidiaries (showing in reasonable detail, either on the face of
the financial statements or in the footnotes thereto and in Management's
Discussion and Analysis of Financial Condition and Results of Operations, the
financial condition and results of operations of the Company and its Restricted
Subsidiaries separate from the financial condition and results of operations of
the Unrestricted Subsidiaries of the Company) and, with respect to the annual
information only, a report thereon by the Company's certified
59
<PAGE>
independent accountants and (ii) all current reports that would be required to
be filed with the Commis-
sion on Form 8-K if the Company were required to file such reports, in each case
within the time periods specified in the Commission's rules and regulations. In
addition, whether or not required by the rules and regulations of the
Commission, the Company will file a copy of all such information and reports
with the Commission for public availability within the time periods specified in
the Commission's rules and regulations (unless the Commission will not accept
such a filing) and make such information available to securities analysts and
prospective investors upon request.
EVENTS OF DEFAULT AND REMEDIES
The Indenture will provide that each of the following constitutes an Event
of Default with respect to the Notes: (i) default for 30 days in the payment
when due of interest on the Notes; (ii) default in payment when due of the
principal of or premium, if any, on the Notes; (iii) failure by the Company to
comply for 30 days with the provisions described under the captions "--Escrow of
Proceeds," "--Repurchase at the Option of Holders" and "--Certain Covenants" (in
each case, other than a failure to purchase Notes); (iv) failure by the Company
for 60 days after notice to comply with any of the Company's other agreements in
the Indenture, the Pledge and Escrow Agreement or the Notes; (v) the failure by
the Company or any Restricted Subsidiary to pay 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 $ million; (vi) failure by the
Company or any of its Restricted Subsidiaries to pay final judgments aggregating
in excess of $ million, which judgments are not paid, discharged or stayed
for a period of 60 days; and (vii) certain events of bankruptcy or insolvency
with respect to the Company, any Restricted Subsidiary that constitutes a
Significant Subsidiary or any group of Restricted Subsidiaries that, taken
together, would constitute a Significant Subsidiary.
If any Event of Default occurs and is continuing, either Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company, any Restricted Subsidiary
of the Company that constitutes a Significant Subsidiary or any group of
Restricted Subsidiaries of the Company that, taken together, would constitute a
Significant Subsidiary, all outstanding Notes will become due and payable
without further action or notice. Holders of the Notes may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to
, 2003 by reason of any willful action (or inaction) taken (or not taken)
by or on behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to , 2003, then the premium specified in the
Indenture shall also become immediately due and payable to the extent permitted
by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes of such series waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of Default
in the payment of interest on, or the principal of, the Notes.
60
<PAGE>
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Notes, the Indenture or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each Holder of Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance"), except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
on such Notes when such payments are due from the trust referred to below, (ii)
the Company's obligations with respect to the Notes concerning issuing temporary
Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payment and money for security payments
held in trust, (iii) the rights, powers, trusts, duties and immunities of the
Trustee, and the Company's obligations in connection therewith and (iv) the
Legal Defeasance provisions of the Indenture. In addition, the Company may, at
its option and at any time, elect to have the obligations of the Company
released with respect to certain covenants that are described in the Indenture
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the Notes. In the event Covenant Defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, rehabilitation and insolvency
events) described under "Events of Default" will no longer constitute an Event
of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest on the outstanding Notes
on the stated maturity or on the applicable redemption date, as the case may be,
and the Company must specify whether the Notes are being defeased to maturity or
to a particular redemption date; (ii) in the case of Legal Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to such Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of the 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 Holders will not
recognize income, gain or loss for federal income tax purposes as a result of
such Legal Defeasance and will 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 Legal Defeasance had not occurred; (iii) in the case of Covenant
Defeasance, the Company shall have delivered to the Trustee an opinion of
counsel in the United States reasonably acceptable to the Trustee confirming
that the Holders of the outstanding Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Covenant Defeasance and
will 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; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit) or insofar
as Events of Default from bankruptcy or insolvency events are concerned, at any
time in the period ending on the 91st day after the date of deposit; (v) such
Legal
61
<PAGE>
Defeasance or Covenant Defeasance will not result in a breach or violation of,
or constitute a default under any material agreement or instrument (other than
the Indenture) to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound; (vi) the Company must
have delivered to the Trustee an opinion of counsel to the effect that after the
91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally; (vii) the Company must deliver to the
Trustee an Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders of Notes over the other
creditors of the Company with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or others; and (viii) the Company must
deliver to the Trustee an Officers' Certificate and an opinion of counsel, each
stating that all conditions precedent provided for relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture the
Notes or the Pledge and Escrow Agreement may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the Notes
then outstanding (including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for such Notes), and any
existing default or compliance with any provision of the Indenture, the Notes or
the Pledge and Escrow Agreement may be waived with the consent of the Holders of
a majority in principal amount of the then outstanding Notes (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions relating to the covenants described above under the caption
"--Repurchase at the Option of Holders"), (iii) reduce the rate of or change the
time for payment of interest on any Note, (iv) waive a Default or Event of
Default in the payment of principal of or premium, if any, or interest on the
Notes (except a rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount thereof and a waiver of the
payment default that resulted from such acceleration), (v) make any Note payable
in money other than that stated in the Notes, (vi) make any change in the
provisions of the Indenture relating to waivers of past Defaults or the rights
of Holders of Notes to receive payments of principal of or premium, if any, or
interest on the Notes, (vii) waive a redemption payment with respect to any Note
(other than a payment required by one of the covenants described above under the
caption "-- Repurchase at the Option of Holders"), or (viii) make any change in
the foregoing amendment and waiver provisions. In addition, any amendments to
the Pledge and Escrow Agreement or the provisions of the Indenture governing the
Pledge and Escrow Agreement will require the consent of the Holders of at least
75% in aggregate principal amount of Notes then outstanding if such amendment
would adversely affect the rights of Holders of Notes.
62
<PAGE>
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture, the Notes or
the Pledge and Escrow Agreement to cure any ambiguity, defect or inconsistency,
to provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's obligations to Holders of
Notes in the case of a merger or consolidation or sale of all or substantially
all of the Company's assets, to make any change that would provide any
additional rights or benefits to the Holders of Notes or that does not adversely
affect the legal rights under the Indenture of any such Holder, or to comply
with requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be 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 not be under an
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture
without charge by writing to Six Flags Entertainment Corporation, 11501
Northeast Expressway, Oklahoma City, Oklahoma 73131, Attention: Chief Financial
Officer.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the Notes to be resold as set
forth herein will initially be issued in the form of one or more Global Notes
(the "Global Notes"). The Global Notes will be deposited on the date of the
closing of the sale of the Notes offered hereby (the "Closing Date") with, or on
behalf of, The Depository Trust Company (the "Depositary") and registered in the
name of Cede & Co., as nominee of the Depositary (such nominee being referred to
herein as the "Global Note Holder").
Notes that are issued as described below under "--Certificated Securities"
will be issued in the form of registered definitive certificates (the
"Certificated Securities"). Upon the transfer of Certificated Securities, such
Certificated Securities may, unless all Global Notes have previously been
exchanged for Certificated Securities, be exchanged for an interest in the
Global Note representing the principal amount of Notes being transferred,
subject to the transfer restrictions set forth in the Indenture.
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the
Underwriters), banks and trust companies, clearing corporations and certain
other organizations. Access to the Depositary's system is also available to
other entities such as banks, brokers, dealers and trust companies
(collectively, the "Indirect Participants" or the "Depositary's Indirect
Participants") that clear through or maintain a custodial relationship with a
63
<PAGE>
Participant, either directly or indirectly. Persons who are not Participants may
beneficially own securities held by or on behalf of the Depositary only thorough
the Depositary's Participants or the Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Notes, the Depositary will credit the
accounts of Participants designated by the Underwriters with portions of the
principal amount of the Global Notes and (ii) ownership of the Notes evidenced
by the Global Notes will be shown on, and the transfer of ownership thereof will
be effected only through, records maintained by the Depositary (with respect to
the interests of the Depositary's Participants), the Depositary's Participants
and the Depositary's Indirect Participants. Prospective purchasers are advised
that the laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer Notes evidenced by the Global Note will be limited to such extent. For
certain other restrictions on the transferability of the Notes, see "Notice to
Investors."
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole Holder under the Indenture of any
Notes evidenced by the Global Notes. Beneficial owners of Notes evidenced by the
Global Notes will not be considered the owners or Holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or liability for any aspect
of the records of the Depositary or for maintaining, supervising or reviewing
any records of the Depositary relating to the Notes.
Payments in respect of the principal of, premium, if any, interest on any
Notes registered in the name of the Global Note Holder on the applicable record
date will be payable by the Trustee to or at the direction of the Global Note
Holder in its capacity as the registered Holder under the Indenture. Under the
terms of the Indenture, the Company and the Trustee may treat the persons in
whose names Notes, including the Global Notes, are registered as the owners
thereof for the purpose of receiving such payments. Consequently, neither the
Company nor any Trustee has or will have any responsibility or liability for the
payment of such amounts to beneficial owners of Notes. The Company believes,
however, that it is currently the policy of the Depositary to immediately credit
the accounts of the relevant Participants with such payments, in amounts
proportionate to their respective holdings of beneficial interests in the
relevant security as shown on the records of the Depositary. Payments by the
Depositary's Participants and the Depositary's Indirect Participants to the
beneficial owners of Notes will be governed by standing instructions and
customary practice and will be the responsibility of the Depositary's
Participants or the Depositary's Indirect Participants.
CERTIFICATED SECURITIES
Subject to certain conditions, any person having a beneficial interest in a
Global Note may, upon request to the Trustee, exchange such beneficial interest
for Notes in the form of Certificated Securities. Upon any such issuance, the
Trustee is required to register such Certificated Securities in the name of, and
cause the same to be delivered to, such person or persons (or the nominee of any
thereof). All such certificated Notes would be subject to the legend
requirements described herein under "Notice to Investors." In addition, if (i)
the Company notifies the Trustee in writing that the Depositary is no longer
willing or able to act as a depositary 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 the form
of Certificated Securities under the Indenture, then, upon surrender by the
Global Note Holder of its Global Note, Notes in such form will be issued to each
person that the Global Note Holder and the Depositary identify as being the
beneficial owner of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
64
<PAGE>
SAME DAY SETTLEMENT AND PAYMENT
The Indenture will require that payments in respect of the Notes represented
by the Global Note (including principal, premium, if any, interest , if any) be
made by wire transfer of immediately available next day funds to the accounts
specified by the Global Note Holder. With respect to Certificated Securities,
the Company will make all payments of principal, premium, if any, interest , if
any, by wire transfer of immediately available funds to the accounts specified
by the Holders thereof or, if no such account is specified, by mailing a check
to each such Holder's registered address. The Company expects that secondary
trading in the Certificated Securities will also be settled in immediately
available funds.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control.
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
(PROVIDED that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole will be governed by the provisions of the Indenture described
above under the caption "--Certain Covenants--Change of Control" and/or the
provisions described above under the caption "--Certain Covenants--Merger,
Consolidation or Sale of Assets" and not by the provisions of the Asset Sale
covenant), and (ii) the issue or sale by the Company or any of its Restricted
Subsidiaries of Equity Interests of any of the Company's Restricted
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $5.0 million or (b) for net proceeds in excess of $5.0
million. Notwithstanding the foregoing, the following items shall not be deemed
to be Asset Sales: (i) a transfer of assets by the Company to a Wholly Owned
Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to the Company
or to another Wholly Owned Restricted Subsidiary, (ii) an issuance of Equity
Interests by a Wholly Owned Restricted Subsidiary to the Company or to another
Wholly Owned Restricted Subsidiary, and (iii) a Restricted Payment that is
permitted by the covenant described above under the caption "--Certain
Covenants--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.
65
<PAGE>
"ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction means, at
the time of determination, the present value (discounted at the rate of interest
implicit in such transaction, determined in accordance with GAAP) of the
obligation of the lessee for net rental payments during the remaining term of
the lease included in such sale and leaseback transaction (including any period
for which such lease has been extended or may, at the option of the lessor, be
extended).
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"CASH EQUIVALENTS" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having maturities of not
more than six months from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any lender party to the Credit
Facilities or with any domestic commercial bank having capital and surplus in
excess of $500.0 million and a Thompson Bank Watch Rating of "B" or better, (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (ii) and (iii) above entered into
with any financial institution meeting the qualifications specified in clause
(iii) above, (v) commercial paper having the highest rating obtainable from
Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each
case maturing within six months after the date of acquisition and (vi) money
market funds at least 95% of the assets of which constitute Cash Equivalents of
the kinds described in clauses (i) through (v) of this definition.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries, taken as a
whole, or Premier and its Subsidiaries, taken as a whole, to any "person" (as
such term is used in Section 13(d)(3) of the Exchange Act) other than, in case
of the Company, to Premier or a Wholly-Owned Subsidiary of Premier, (ii) the
adoption of a plan relating to the liquidation or dissolution of the Company or
Premier, (iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 35%
of the Voting Stock of Premier, (iv) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of which
is that Premier ceases to be the direct owner of all of the outstanding Equity
Interests of the Company or (v) the first day on which a majority of the members
of the Board of Directors of the Company or Premier are not Continuing
Directors.
"COMMON STOCK OFFERING" means the public offering of the common stock of
Premier offered concurrently with the Notes.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) provision
for taxes based on income or profits of such Person and its Restricted
Subsidiaries for such period, to the extent that such provision for taxes was
included in computing such Consolidated Net Income, plus (ii) consolidated
interest expense of such Person and its Restricted Subsidiaries for such period,
whether paid or accrued and whether or not
66
<PAGE>
capitalized (including, without limitation, amortization of debt issuance costs
and original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), to the extent that any such expense
was deducted in computing such Consolidated Net Income, plus (iii) depreciation,
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period) and other non-cash expenses (excluding any such non-cash expense to the
extent that it represents an accrual of or reserve for cash expenses in any
future period or amortization of a prepaid cash expense that was paid in a prior
period) of such Person and its Restricted Subsidiaries for such period to the
extent that such depreciation, amortization and other non-cash expenses were
deducted in computing such Consolidated Net Income, minus (iv) non-cash items
increasing such Consolidated Net Income for such period, in each case, on a
consolidated basis and determined in accordance with GAAP (other than accrual of
income in the ordinary course of business in respect of a future cash payment).
"CONSOLIDATED INDEBTEDNESS" means, with respect to any Person as of any date
of determination, the sum, without duplication, of (i) the total amount of
Indebtedness and Attributable Debt of such Person and its Restricted
Subsidiaries, PLUS (ii) the total amount of Indebtedness and Attributable Debt
of any other Person, to the extent that the same has been guaranteed by the
referent Person or one or more of its Restricted Subsidiaries, PLUS (iii) the
aggregate liquidation value of all Disqualified Stock of such Person and all
preferred stock of Restricted Subsidiaries of such Person, in each case,
determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for any
period, the sum of (i) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization or original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Debt, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations) and (ii) the consolidated interest expense of such Person and its
Restricted Subsidiaries that was capitalized during such period, and (iii) any
interest expense on Indebtedness or Attributable Debt of another Person that is
guaranteed by such Person or one of its Restricted Subsidiaries or secured by a
Lien on assets of such Person or one of its Restricted Subsidiaries (whether or
not such guarantee or Lien is called upon) and (iv) the product of (a) all
dividend payments on any series of preferred stock of such Person or any of its
Restricted Subsidiaries, times (b) a fraction, the numerator of which is one and
the denominator of which is one minus the then current combined federal, state
and local statutory tax rate of such Person, expressed as a decimal, in each
case, on a consolidated basis and in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, and prior to any deduction in respect
of dividends on any series of preferred stock of such Person, determined in
accordance with GAAP; PROVIDED that (i) the Net Income (but not loss) of any
Person that is not a Restricted Subsidiary or that is accounted for by the
equity method of accounting shall be included only to the extent of the amount
of dividends or distributions paid in cash to the referent Person or a Wholly
Owned Restricted Subsidiary thereof; (ii) the Net Income of any Person acquired
in a pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded and (iii) the cumulative effect of a change in
accounting principles shall be excluded.
67
<PAGE>
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"CO-VENTURE PARTNERSHIPS" means (i) Six Flags Over Georgia, Ltd., a Georgia
Limited Partnership, (ii) Texas Flags, Ltd., a Texas Limited Partnership and
(iii) Fiesta Texas Theme Park, Ltd., a Texas Limited Partnership.
"CREDIT FACILITIES" means, with respect to the Company or any of its
Restricted Subsidiaries, one or more debt facilities (including, without
limitation, the Six Flags Credit Facility) or commercial paper facilities with
banks or other institutional lenders providing for revolving credit loans, term
loans, receivables financing (including through the sale of receivables to such
lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time.
"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.
"DEBT TO CASH FLOW RATIO" means, as of any date of determination, the ratio
of (a) the Consolidated Indebtedness of the Company as of such date to (b) the
Consolidated Cash Flow of the Company for the four most recent full fiscal
quarters ending immediately prior to such date for which internal financial
statements are available, determined on a pro forma basis after giving effect to
all acquisitions or dispositions of assets made by the Company and its
Restricted Subsidiaries from the beginning of such four-quarter period through
and including such date of determination (including any related financing
transactions) as if such acquisitions and dispositions had occurred at the
beginning of such four-quarter period. In addition, for purposes of making the
computation referred to above, (i) acquisitions that have been made by the
Company or any of its Restricted Subsidiaries, including through mergers or
consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (ii) of the
proviso set forth in the definition of Consolidated Net Income, and (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
68
<PAGE>
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature; provided, however, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the right
to require the Company to repurchase such Capital Stock upon the occurrence of a
Change of Control or an Asset Sale shall not constitute Disqualified Stock if
the terms of such Capital Stock provide that the Company may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless such repurchase
or redemption complies with the covenant described above under the caption
"--Certain Covenants-- Restricted Payments."
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"ESCROW ACCOUNT" means the Escrow Account for the initial deposit of
approximately $ million of the net proceeds from the sale of the Notes under
the Pledge and Escrow Agreement.
"EXISTING INDEBTEDNESS" means up to $ million in aggregate principal
amount of Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under the Credit Facilities) in existence on the date of the
Indenture, until such amounts are repaid..
"GAAP" means generally accepted accounting principles 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 have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"GOVERNMENT SECUTITIES" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States of America is
pledged.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the guarantee
by such Person of any indebtedness of any other Person. The amount of any
Indebtedness outstanding as of any date shall be (i) the accreted value thereof,
in the case of any Indebtedness issued with original issue discount, and (ii)
the principal amount thereof, together with any interest thereon that is more
than 30 days past due, in the case of any other Indebtedness.
69
<PAGE>
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of the covenant described
above under the caption "--Certain Covenants--Restricted Payments."
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain or loss,
together with any related provision for taxes on such gain or loss, realized in
connection with any Asset Sale (including, without limitation, dispositions
pursuant to sale and leaseback transactions) and (ii) any extraordinary gain or
loss, together with any related provision for taxes on such extraordinary gain
or loss.
"NET PROCEEDS" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing that they will not have any recourse to the stock or assets of the
Company or any of its Restricted Subsidiaries.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"PARTNERSHIP PARKS AGREEMENTS" means (i) the Overall Agreement, dated as of
February 15, 1997, among Six Flags Fund, Ltd. (L.P.), Salkin Family Trust, SFG,
Inc., SFG-I, LLC, SFG-II, LLC, Six Flags Over Georgia, Ltd., SFOG II, Inc., SFOG
II Employee, Inc., SFOG Acquisition A, Inc., SFOG Acquisition
70
<PAGE>
B, L.L.C., Six Flags Over Georgia, Inc., Six Flags Services of Georgia, Inc.,
Six Flags Theme Parks Inc. and Six Flags Entertainment Corporation, (ii) Overall
Agreement, dated as of November 24, 1997, among Six Flags Over Texas Fund, Ltd.,
Flags' Directors, L.L.C., FD-II, L.L.C., Texas Flags, Ltd., SFOT Employee, Inc.,
SFOT Acquisition I, Inc., SFOT Acquisition II, Inc., Six Flags Over Texas, Inc.,
Six Flags Theme Parks Inc. and Six Flags Entertainment Corporation, (iii) the
Lease Agreement with Option to Purchase, dated as of March 9, 1996, among Fiesta
Texas Theme Park, Ltd., a Texas Limited Partnership, San Antonio Theme Park,
L.P., and Six Flags San Antonio, L.P. and (iv) the Agreement of Limited
Partnership as of March 9, 1996, among San Antonio Park GP, L.L.C., Six Flags
San Antonio, L.P. and Fiesta Texas Theme Park, Ltd., in each case, as the same
are in effect on the date of the Indenture.
"PERMITTED BUSINESS" means any business related, ancillary or complementary
to the businesses of the Company and its Restricted Subsidiaries on the date of
the Indenture.
"PERMITTED INVESTMENTS" means an Investment by the Company or any Restricted
Subsidiary in (i) cash or Cash Equivalents, (ii) the Company, 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 Permitted Business; (iii) 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 Permitted Business; (iv) another Person if the aggregate
amount of all Investments in all such other Persons does not exceed $ million
at any one time outstanding (with each Investment being valued as of the date
made and without giving effect to subsequent changes in value); PROVIDED,
HOWEVER, that such Person's primary business is a Permitted Business; (v)
promissory notes received as consideration for an Asset Sale which are secured
by a Lien on the asset subject to such Asset Sale; PROVIDED that the aggregate
amount of all such promissory notes at any one time outstanding does not exceed
$5.0 million; (vi) non-cash consideration from an Asset Sale that was made
pursuant to and in compliance with the covenant described above under the
caption "--Repurchase at the Option of Holders--Asset Sales;" (vii) assets
acquired solely in exchange for the issuance of Equity Interests (other than
Disqualified Stock) of the Company; (viii) 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; (ix) 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; (x) loans or advances to employees made in the ordinary course of
business consistent with past practices of the Company or such Restricted
Subsidiary; (xi) 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; (xii) transactions
pursuant to, and in accordance with, the terms of the Subordinate Indemnity
Agreement as the same is in effect as of the date of the Indenture and (xiii)
transactions pursuant to and payments in connection with, and, in each case, in
accordance with, the terms of the Partnership Park Agreements as the same are in
effect on the date of the Indenture.
"PERMITTED LIENS" means (a) Liens to secure Indebtedness permitted under the
provisions described in clauses (i), (ii) and (x) under the covenant described
under the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance
of Preferred Stock"; PROVIDED, HOWEVER, that (A) the Indebtedness secured by
such Liens is otherwise permitted to be incurred under the Indenture and (B) the
principal amount of all Indebtedness secured by any such Lien permitted by this
clause (a) does not exceed % of the Asset Value of the assets encumbered by
such Lien at the time of incurrence; (b) Liens existing on the Issue Date; (c)
Liens on property or shares of Capital Stock of another Person at the time such
other Person becomes a Restricted 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 Restricted Subsidiary;
PROVIDED FURTHER, HOWEVER, that such Lien may not extend to any other property
71
<PAGE>
owned by such Person or any of its Restricted Subsidiaries; (d) Liens on
property at the time such Person or any of its Restricted Subsidiaries acquires
the property, including any acquisition by means of a merger or consolidation
with or into such Person or a Restricted 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 Restricted Subsidiaries; (e) Liens securing Indebtedness or other
obligations of a Restricted Subsidiary of such Person owing to such Person or a
Restricted Subsidiary of such Person; (f) 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 type of property securing such Hedging
Obligations; (g) Liens to secure any Permitted Refinancing Indebtedness;
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 refinanced 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; (h)(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; (i) 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; (j)
Liens imposed by law, such as carriers', warehousemen's and mechanic's 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; (k) 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; (l) 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
the Indebtedness and which do not in the aggregate materially impair the use of
such properties in the operation of the business of such Person; (m) 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, and (n) Liens incurred in the ordinary course of
business of the Company or any Subsidiary of the Company with respect to
obligations that do not exceed $ million at any one time outstanding.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); PROVIDED that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses,
including premiums, incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final
72
<PAGE>
maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
is subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"PLEDGE AND ESCROW AGREEMENT" means the Pledge, Escrow and Disbursement
Agreement, dated as of the date of the Indenture, by and between the Company and
the Trustee governing the disbursement of funds from the Escrow Account, as
amended from time to time in accordance with the Indenture.
"PREMIER" means Premier Parks Inc., a Delaware corporation.
"PUBLIC EQUITY OFFERING" means an underwritten primary public offering of
common stock of the Company pursuant to an effective registration statement
under the Securities Act, excluding the Common Stock Offering.
"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.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"SHARED SERVICES AGREEMENT" means the Shared Services Agreement among the
Company, Premier and Premier Operations.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"STATED MATURITY" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"STRATEGIC EQUITY INVESTMENT" means a cash contribution to the common equity
capital of the Company or a purchase from the Company of common Equity Interests
(other than Disqualified Stock), in either case by or from a Strategic Equity
Investor and for aggregate cash consideration of at least $10.0 million.
"STRATEGIC EQUITY INVESTOR" means, as of any date, any Person (other than an
Affiliate of the Company) engaged in a Permitted Business which, as of the day
immediately before such date, had a Total Equity Market Capitalization of at
least $ million.
73
<PAGE>
"SUBORDINATE INDEMNITY AGREEMENT" means the Subordinate Indemnity Agreement,
to be dated the date of the consummation of the Six Flags Acquisition, among
Premier, SFEC and its subsidiaries, Time Warner Inc., Time Warner Entertainment
Company, L.P. and TW-SPV Co.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock 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 such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership or limited liability company (a) the sole
general partner or the managing general partner (or equivalent) of which is such
Person or a Subsidiary of such Person or (b) the only general partners of which
are such Person or one or more Subsidiaries of such Person (or any combination
thereof).
"TAX SHARING AGREEMENT" means that certain Tax Sharing Agreement between
Premier, the Company and the other parties named therein.
"TOTAL EQUITY MARKET CAPITALIZATION" of any Person means, as of any day of
determination, the sum of (i) the product of (A) the aggregate number of
outstanding primary shares of common stock of such Person on such day (which
shall not include any options or warrants on, or securities convertible or
exchangeable into, shares of common stock of such Person) multiplied by (B) the
average closing price of such common stock listed on a national securities
exchange or the Nasdaq National Market System over the 20 consecutive business
days immediately preceding such day, plus (ii) the liquidation value of any
outstanding shares of preferred stock of such Person on such day.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary (other than SFTP or any
successor to SFTP) that is designated by the Board of Directors as an
Unrestricted Subsidiary pursuant to a Board Resolution; but only to the extent
that such Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b)
is not party to any agreement, contract, arrangement or understanding with the
Company or any Restricted Subsidiary of the Company unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to the
Company or such Restricted Subsidiary than those that might be obtained at the
time from Persons who are not Affiliates of the Company; (c) is a Person with
respect to which neither the Company nor any of its Restricted Subsidiaries has
any direct or indirect obligation (x) to subscribe for additional Equity
Interests or (y) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results; (d) has
not guaranteed or otherwise directly or indirectly provided credit support for
any Indebtedness of the Company or any of its Restricted Subsidiaries; and (e)
has at least one director on its board of directors that is not a director or
executive officer of the Company or any of its Restricted Subsidiaries and has
at least one executive officer that is not a director or executive officer of
the Company or any of its Restricted Subsidiaries. Any such designation by the
Board of Directors shall be evidenced to the Trustee by filing with the Trustee
a certified copy of the Board Resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing conditions and was permitted by the covenant described above under the
caption "--Certain Covenants--Restricted Payments." If, at any time, any
Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary
shall be deemed to be incurred by a Restricted Subsidiary of the Company as of
such date (and, if such Indebtedness is not permitted to be incurred as of such
date under the covenant described under the caption "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock," the
Company shall be in default of such covenant). The Board of Directors of the
Company may at any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; PROVIDED that such designation shall be deemed to be an incurrence
of Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (i) such Indebtedness is permitted under the covenant described
under the caption "--Certain Covenants-- Incurrence of Indebtedness and Issuance
of Preferred Stock," calculated on a pro forma basis as if such
74
<PAGE>
designation had occurred at the beginning of the four-quarter reference period,
and (ii) no Default or Event of Default would be in existence following such
designation.
"VOTING STOCK" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.
"WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
75
<PAGE>
DESCRIPTION OF PREMIER INDEBTEDNESS
PREMIER CREDIT FACILITY
Borrowings under the Premier Credit Facility, which will be entered into in
March 1998, will be secured by substantially all of the assets of Premier
Operations and its domestic subsidiaries, and guaranteed by such subsidiaries.
The Premier Credit Facility will have an aggregate availability of $300 million
consisting of (i) a five-year $75.0 million revolving credit facility for
working capital and general corporate purposes (the "Revolving Credit
Facility"); (ii) a five-year $100.0 million term loan facility ("Facility B");
and (iii) an eight-year $125.0 million term loan facility ("Facility C" and,
together with Facility B, the "Term Loan Facilities"), in each case, to fund
acquisitions and make capital improvements. As of March , 1998, Premier
had borrowed $ million under Facility . Interest rates per annum
under the Premier Credit Facility are equal to either (a) 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 (b) the London Interbank
Offered Rate plus the Applicable Margin. The Revolving Credit Facility will
terminate on March , 2003. Borrowings under Facility B will mature on March
, 2003 and borrowings under Facility C will mature on March , 2006; however,
aggregate principal payments and reductions of $10.0 million, $25.0 million,
$30.0 million and $35.0 million will be required during the second, third,
fourth and fifth years of Facility B and aggregate principal payments of $1.0
million each are required in each of the first six years of Facility C in
addition to a $25.0 million payment in year seven and a $94.0 million payment in
year eight.
The Premier Credit Facility will contain restrictive covenants that, among
other things, limit the ability of Premier Operations 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 Premier Credit Facility will require that Premier Operations 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.
Defaults under the Premier Credit Facility will 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 Premier Operations'
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; (v) default by Premier
Operations or any of its principal subsidiaries in respect of any indebtedness
above specified levels; (vi) certain events of bankruptcy; (vii) certain
judgments against Premier Operations or any of its principal subsidiaries;
(viii) the occurrence of a Change in Control (as defined thereunder); (ix) the
assertion of certain Environmental Claims (as defined thereunder); and (x) under
certain circumstances, the failure by Messrs. Burke and Story to serve Premier
Operations in their present positions and the failure to replace them within a
specified time period.
OLD PREMIER NOTES
The Old Premier Notes are senior, unsecured obligations of Premier
Operations, in the aggregate principal amount of $215 million, of which $90.0
million will mature on August 15, 2003 (the 1995 Premier Notes) and $125.0
million will mature on January 15, 2007 (the 1997 Premier Notes). The 1995
Premier Notes bear interest at the rate of 12% per annum and the 1997 Premier
Notes bear interest at the rate of 9 3/4% per annum. The Old Premier Notes are
guaranteed on a senior, unsecured basis by the principal operating subsidiaries
of Premier Operations.
The 1995 Premier Notes are redeemable, at Premier Operations' option, in
whole or in part, at any time on or after August 15, 1999, at specified
redemption prices, together with accrued and unpaid
76
<PAGE>
interest, if any, to the date of redemption. The 1997 Premier Notes are
redeemable, at Premier Operations' option, in whole or in part, at any time on
or after January 15, 2002, at specified redemption prices, together with accrued
and unpaid interest, if any, to the date of redemption.
Upon the occurrence of a Change of Control (as defined in the relevant
Indenture), Premier Operations will be required to make an offer to repurchase
the Old Premier 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.
Neither the Premier Merger nor the Six Flags Acquisition constitutes a Change of
Control under the Indentures relating to the Old Premier Notes.
The Indentures relating to the Old Premier Notes contain restrictive
covenants that, among other things, limit the ability of Premier Operations 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 these Indentures include (i) failure
to pay interest on the applicable Premier 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 Premier
Operations' 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 applicable Indenture; (iv) the default by Premier Operations 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 Premier Operations or any Note Guarantor; (vii) any
Note Guarantee (as defined in the Indentures) 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 applicable
Indentures or any Note Guarantee, which continues for 10 days.
PREMIER DISCOUNT NOTES
The Premier Discount Notes are senior, unsecured obligations of Premier, in
an aggregate principal amount at maturity sufficient to generate gross proceeds
of $250.0 million. The Premier Discount Notes will mature on , 2008.
The Premier Discount Notes bear interest at the rate of % per annum and are
not guaranteed by Premier's subsidiaries.
The Premier Discount Notes are redeemable, at Premier's option, in whole or
in part, at any time on or after , 2003, at specified redemption
prices, together with accrued and unpaid interest, if any, to the date of
redemption.
Upon the occurrence of a Change of Control (as defined in the applicable
Indenture), the Premier will be required to make an offer to repurchase the
Premier Discount Notes at a price equal to 101% of the accreted value thereof,
plus accrued and unpaid interest, if any, to the date of purchase prior to
, 2003 or 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of purchase on or after , 2003.
Neither the Premier Merger nor the Six Flags Acquisition constitutes a Change of
Control under the Indenture relating to the Premier Discount Notes.
The Indenture relating to the Discount Notes contains restrictive covenants
that, among other things, limit the ability of Premier 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 applicable Indenture include (i) failure to pay
interest on the Premier Discount Notes within 30 days after such payments are
due; (ii) failure to pay principal or premium, if any, on the Premier Discount
Notes; (iii) failure to comply for 30 days after notice with Premier's
repurchase obligations upon the occurrence of a Change of Control, an Asset Sale
(as defined in the applicable Indenture) or certain covenants and failure to
comply for 60 days after notice with the other agreements contained in the
applicable Indenture; (iv) the default by Premier or any of its subsidiaries in
respect of any indebtedness
77
<PAGE>
above specified levels; (v) certain events of bankruptcy or insolvency; and (vi)
certain judgments against Premier or any of its subsidiaries above specified
levels.
PREMIER SENIOR NOTES
The Premier Senior Notes are senior, unsecured obligations of Premier, in
the aggregate principal amount of up to $280.0 million of which up to $80.0
million will be used to capitalize a three-year overfund account with respect to
the Premier Senior Notes. The Premier Senior Notes will mature on ,
2008. The Premier Senior Notes bear interest at the rate of % per annum and
are not guaranteed by Premier's subsidiaries.
The Premier Senior Notes are redeemable, at Premier's option, in whole or in
part, at any time on or after , 2003, at specified redemption prices,
together with accrued and unpaid interest, if any, to the date of redemption.
Upon the occurrence of a Change of Control (as defined in the applicable
Indenture) Premier will be required to make an offer to repurchase the Premier
Senior 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. Neither the
Premier Merger nor the Six Flags Acquisition constitutes a Change of Control
under the Indenture relating to the Premier Senior Notes.
The Indenture relating to the Premier Senior Notes contains restrictive
covenants that, among other things, limit the ability of Premier 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 applicable Indenture include (i) failure to pay
interest on Premier Senior Notes within 30 days after such payments are due;
(ii) failure to pay principal or premium, if any on the Premier Senior Notes;
(iii) failure to comply for 30 days after notice with Premier's repurchase
obligations upon the occurrence of a Change of Control, an Asset Sale (as
defined in the applicable Indenture) or certain covenants and failure to comply
for 60 days after notice with the other agreements contained in the applicable
Indenture; (iv) the default by Premier or any of its subsidiaries in respect of
any indebtedness above specified levels; (v) certain events of bankruptcy or
insolvency; and (vi) certain judgments against Premier or any of its
subsidiaries above specified levels.
78
<PAGE>
DESCRIPTION OF PREMIER CAPITAL STOCK
COMMON STOCK
Premier's authorized capital stock includes 90,000,000 shares of Common
Stock, par value $0.05 per share. Each share of Common Stock entitles the holder
thereof to one vote. Holders of the Common Stock have equal ratable rights to
dividends from funds legally available therefor, when, as and if declared by the
Board of Directors and are entitled to share ratably, as a single class, in all
of the assets of Premier available for distribution to holders of Common Stock
upon the liquidation, dissolution or winding up of the affairs of Premier.
Holders of Common Stock do not have preemptive, subscription or conversion
rights. However, each outstanding share of Common Stock currently has attached
to it one right (a "Right") issued pursuant to a Rights Agreement (the "Rights
Agreement"). Each Right entitles its registered holder to purchase one
one-hundredth of a share of a junior participating series of Preferred Stock
designated to have economic and voting terms similar to those of one share of
Common Stock. After the Offerings, shares of Common Stock will be
outstanding and shares will be reserved for future issuance ( for
options and warrants and upon conversion of the Convertible Preferred
Stock).
Bank One Trust Company, N.A., Oklahoma City, Oklahoma, is the transfer agent
and registrar for the Common Stock.
PREFERRED STOCK
Premier's authorized capital stock includes 500,000 shares of Preferred
Stock, par value $1.00 per share. The Preferred Stock may be issued in series,
and shares of each series will have such rights and preferences as are fixed by
the Board of Directors in resolutions authorizing the issuance of that
particular series. In designating any series of Preferred Stock, the Board of
Directors may, without further action by the holders of Common Stock, fix the
number of shares constituting that series and fix the dividend rights, dividend
rate, conversion rights, voting rights (which may be greater or lesser than the
voting rights of the Common Stock), rights and terms of redemption (including
any sinking fund provisions), and the liquidation preferences of such series of
Preferred Stock. Holders of any series of Preferred Stock, when and if issued,
may have priority claims to dividends and to any distributions upon liquidation
of Premier, and other preferences over the holders of the Common Stock. After
giving effect to the Six Flags Transactions, shares of Preferred Stock
will be outstanding. In addition, approximately 206,000 shares (which will be
amended to 20,600 prior to the date of this Prospectus) of Preferred Stock have
been reserved for issuance under the Rights Plan.
MANDATORILY CONVERTIBLE PREFERRED STOCK
Pursuant to the Preferred Stock Offering, Premier will issue Public
Depositary Shares in respect of its Mandatorily Convertible Preferred Stock.
DIVIDENDS. Subject to the terms of the New Premier Notes, holders of the
shares of Mandatorily Convertible Preferred Stock will be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available therefor, cash dividends from the date of initial issuance of the
shares of Mandatorily Convertible Preferred Stock at the rate of $ per
annum or $ per quarter. Dividends will cease to accrue on the shares of
Mandatorily Convertible Preferred Stock on the Mandatory Conversion Date or on
the date of their earlier conversion at the option of the holder.
Dividends may be paid, at the election of Premier, (i) out of funds legally
available therefor, (ii) through the delivery of shares of Common Stock or (iii)
through any combination of the foregoing forms of consideration elected by the
Board of Directors in its sole discretion.
79
<PAGE>
The shares of Mandatorily Convertible Preferred Stock will rank on a parity,
both as to payment of dividends and distribution of assets upon liquidation,
with the Seller Preferred Stock and any other preferred stock issued in the
future by Premier that by its terms ranks PARI PASSU with the shares of
Mandatorily Convertible Preferred Stock.
MANDATORY CONVERSION OF MANDATORILY CONVERTIBLE PREFERRED STOCK. Unless
voluntarily converted into Common Stock, as hereinafter described, on
, 2001 (the "Mandatory Conversion Date") each share of Mandatorily
Convertible Preferred Stock will automatically convert into a number of shares
of Common Stock (or the equivalent amount of cash) at the Conversion Rate (as
defined below). The "Conversion Rate" is equal to, (a) if the Conversion Price
(as defined below) is greater than or equal to $ (the "Threshold
Appreciation Price"), shares of Common Stock per Mandatorily Convertible
Preferred Stock (equivalent to shares of Common Stock for each Depositary
Share), (b) if the Conversion Price is less than the Threshold Appreciation
Price but is greater than $ (the "Initial Price"), a fraction, equal to
the Initial Price divided by the Conversion Price, of five hundred shares of
Common Stock per Mandatorily Convertible Preferred Stock (equivalent to 1/500th
of such number of shares for each Public Depositary Share) and (c) if the
Conversion Price is less than or equal to the Initial Price, 500 shares of
Common Stock per Mandatorily Convertible Preferred Stock (equivalent to one
share of Common Stock for each Public Depositary Share). The Conversion Rate is
subject to adjustment in certain circumstances, including if Premier shall (a)
pay a stock dividend or make a distribution with respect to its Common Stock in
shares of Common Stock, (b) subdivide or split its outstanding Common Stock, (c)
combine its outstanding Common Stock into a smaller number of shares, (d) issue
by reclassification of its shares of Common Stock any shares of Common Stock,
(e) issue certain rights or warrants to all holders of its Common Stock unless
such rights or warrants are issued to each holder of shares of Mandatorily
Convertible Preferred Stock on a pro rata basis with the shares of Common Stock
based on the Conversion Rate in effect on the date immediately preceding such
issuance, or (f) pay certain dividends or distribute to all holders of its
Common Stock evidences of its indebtedness, cash or other assets unless such
dividend or distribution is made to each holder of shares of Mandatorily
Convertible Preferred Stock on a pro rata basis with the shares of Common Stock
based on the Conversion Rate in effect on the date immediately preceding such
dividend or distribution.
The "Conversion Price" is the average closing price per share of Common
Stock for the 20 trading days immediately prior to (but not including) the
Mandatory Conversion Date; provided, however, that if there are not 20 trading
days for the Common Stock occurring later than the 60th calendar day immediately
prior to, but not including, the Mandatory Conversion Date, "Conversion Price"
will be the market value per share of Common Stock as of the Mandatory
Conversion Date as determined by a nationally recognized investment banking firm
retained for such purpose by Premier. The Conversion Price is subject to
adjustment in certain circumstances.
Premier will have the option, exercisable in its sole discretion, to satisfy
its obligations pursuant to the mandatory conversion of the Mandatorily
Convertible Preferred Stock at the Mandatory Conversion Date by delivering to
holders of the Mandatorily Convertible Preferred Stock either the number of
shares of Common Stock specified above or cash in an amount equal to the product
of such number of shares multiplied by the Conversion Price.
CONVERSION AT THE OPTION OF THE HOLDER. The shares of Mandatorily
Convertible Preferred Stock (and thereby the Public Depositary Shares) are
convertible, in whole or in part, at the option of the holders thereof, at any
time prior to the Mandatory Conversion Date, into shares of Common Stock at a
rate of shares of Common Stock for each share of Mandatorily Convertible
Preferred Stock (or a rate of shares of Common Stock for each Public
Depositary Share) equivalent, for each Depositary Share, to a conversion price
of $ per share of Common Stock, subject to adjustment in certain
circumstances, including if Premier shall (a) pay a stock dividend or make a
distribution with respect to its Common Stock in shares of Common Stock, (b)
subdivide or split its outstanding Common Stock, (c) combine its outstanding
Common Stock into a smaller number of shares, (d) issue by reclassification of
80
<PAGE>
its shares of Common Stock any shares of Common Stock, (e) issue certain rights
or warrants to all holders of its Common Stock unless such rights or warrants
are issued to each holder of shares of Mandatorily Convertible Preferred Stock
on a pro rata basis with the shares of Common Stock based on the Conversion Rate
in effect on the date immediately preceding such issuance, or (f) pay certain
dividends or distribute to all holders of its Common Stock evidences of its
indebtedness, cash or other assets unless such dividend or distribution is made
to each holder of shares of Mandatorily Convertible Preferred Stock on a pro
rata basis with the shares of Common Stock based on the Conversion Rate in
effect on the date immediately preceding such dividend or distribution.
The depositary shares representing shares of Mandatorily Convertible
Preferred Stock may be voluntarily converted by the holders thereof upon the
same terms and conditions as the shares of Mandatorily Convertible Preferred
Stock represented by such depositary shares, adjusted to reflect the fact that
depositary shares represent a one-five hundredth interest of a share of
Mandatorily Convertible Preferred Stock.
LIQUIDATION RIGHTS. In the event of any voluntary or involuntary
liquidation, dissolution, or winding up of Premier, and subject to the rights of
holders of any other series of Preferred Stock, the holders of outstanding
shares of Mandatorily Convertible Preferred Stock are entitled to receive an
amount equal to the per share price to investors of the shares of Mandatorily
Convertible Preferred Stock plus accrued and unpaid dividends thereon, out of
the assets of Premier available for distribution to stockholders, before any
distribution of assets is made to holders of junior ranking stock upon
liquidation, dissolution or winding up.
VOTING RIGHTS. The holders of shares of Mandatorily Convertible Preferred
Stock shall not be entitled to any voting rights, except as required by
applicable state law and as described below.
In the event that dividends on the shares of Mandatorily Convertible
Preferred Stock or any other series of Preferred Stock shall be in arrears and
unpaid for six quarterly dividend periods, or if any other series of Preferred
Stock shall be entitled for any other reason to exercise voting rights, separate
from the Common Stock, to elect any Directors of Premier ("Preferred Stock
Directors"), the holders of the shares of Mandatorily Convertible Preferred
Stock, will be entitled to vote for the election of two Preferred Stock
Directors, such Directors to be in addition to the number of Directors
constituting the Board of Directors immediately prior to the accrual of such
right.
Premier will not, without the approval of the holders of at least 66 2/3
percent of all the shares of Mandatorily Convertible Preferred Stock then
outstanding: (i) amend, alter, or repeal any of the provisions of the
Certificate of Incorporation or the By-laws of the Company so as to affect
adversely the powers, preferences, or rights of the holders of the shares of
Mandatorily Convertible Preferred Stock then outstanding or reduce the minimum
time required for any notice to which only the holders of the shares of
Mandatorily Convertible Preferred Stock then outstanding may be entitled; (ii)
create any series of preferred stock ranking prior to the shares of Mandatorily
Convertible Preferred Stock as to payment of dividends or the distribution of
assets upon liquidation; or (iii) authorize or create, or increase the
authorized amount of, any capital stock, or any security convertible into
capital stock, of any class ranking prior to the shares of Mandatorily
Convertible Preferred Stock as to payment of dividends or the distribution of
assets upon liquidation.
Holders of shares of Mandatorily Convertible Preferred Stock have no
preemptive rights.
SELLER PREFERRED STOCK
In connection with the Six Flags Acquisition, Premier will issue to the
Sellers up to Seller Depositary Shares for up to $200 million of Seller
Preferred Stock. The Company has the right to pay cash in lieu of all or a
portion of such shares, provided that if any Seller Depositary Shares are issued
to the
81
<PAGE>
Sellers not less than shares (representing not less than $100 million of the
Capital Stock Consideration must be issued). The following is a summary of the
terms of the Seller Preferred Stock.
DIVIDENDS. Subject to the terms of the New Premier Notes, holders of shares
of the Seller Preferred Stock will be entitled to receive annually, cash
dividends out of funds of the Company legally available for payment, at an
annual rate of % of the $ liquidation value (the "Liquidation Value")
per share. Dividends will be cumulative from the date of original issuance of
the Seller Preferred Stock. The Seller Preferred Stock will rank PARI PASSU as
to dividends with the Mandatorily Convertible Preferred Stock and have priority
as to dividends over the Common Stock and any other series or class of Premier's
stock hereafter issued.
LIQUIDATION RIGHTS. In case of the voluntary or involuntary liquidation,
dissolution or winding up of Premier, holders of shares of Seller Preferred
Stock are entitled to receive the amount equal to the Liquidation Value thereof,
plus an amount equal to any accrued and unpaid dividends to the payment date,
before any payment or distribution is made to the holders of Common Stock or any
other series or class of Premier's stock hereafter issued which ranks junior as
to liquidations rights to the Seller Preferred Stock. The Seller Preferred Stock
will rank PARI PASSU as to liquidation with the Mandatorily Convertible
Preferred Stock.
VOTING RIGHTS. The holders of each share of the Seller Preferred Stock
shall not be entitled to any voting rights, except as required by Delaware law
and except in certain circumstances involving the default by Premier in the
payment of dividends, the authorization of securities having a preference over
the Seller Preferred Stock, charter amendments materially affecting the rights
of the holders or the merger or consolidation of Premier.
CONVERSION RIGHTS. Shares of the Seller Preferred Stock (and thereby the
Seller Depositary Shares) will be convertible, in whole or in part, at any time,
at the option of the holder into shares of Common Stock at a conversion price of
$ per share of Common Stock, subject to adjustment as described below.
The holders of Seller Preferred Stock will be entitled at any time after the
90th day following the date of issuance to convert their shares of Convertible
Preferred Stock into Common Stock at an initial conversion price equal to
% of the weighted average of the trading prices for all of the sales of
the Common Stock on the NYSE for the 20 consecutive trading days ending on the
third trading day prior to the issuance of the Seller Preferred Stock, subject
to adjustment in certain circumstances, including the payment of a stock
dividend on shares of the Common Stock, combinations and subdivisions of the
Common Stock, certain reclassifications of the Common Stock, the issuance to
Premier's stockholders of rights or warrants to subscribe for or purchase shares
of Common Stock at a price per share less than the then-current market price
(determined as provided in the Certificate of Designation of the Seller
Preferred Stock) of the Common Stock and certain cash dividends and
distributions of evidences of indebtedness or assets to holders of certain of
Premier's capital stock.
The depositary shares representing shares of Seller Preferred Stock may be
voluntarily converted by the holders thereof upon the same terms and conditions
as the Seller Preferred Stock represented by such depositary shares, adjusted to
reflect the fact that the depositary shares represent a one-five hundredth
interest of a share of Seller Preferred Stock.
OPTIONAL REDEMPTION BY PREMIER. Shares of Seller Preferred Stock will not
be redeemable prior to 2001. On or after such date, the shares of Seller
Preferred Stock will be redeemable at the option of the Company, in whole or in
part, at any time or from time to time on not less than 30 nor more than 60 days
82
<PAGE>
notice by mail, at the redemption prices set forth below, in each case, plus an
amount equal to the sum of all accrued and unpaid dividends to the redemption
date:
<TABLE>
<CAPTION>
IF REDEEMED DURING THE TWELVE-MONTH REDEMPTION PRICE PER REDEMPTION PRICE PER
PERIOD BEGINNING ON PREFERRED SHARE DEPOSITARY SHARE
- -------------------------------------------------- -------------------- --------------------
<S> <C> <C>
2001..............................................
2002..............................................
2003..............................................
2004..............................................
2005..............................................
2006..............................................
200[ ] and thereafter.............................
</TABLE>
MANDATORY REDEMPTION BY PREMIER. On the twelfth anniversary of the date of
issuance of the Seller Preferred Stock, Premier must redeem all outstanding
shares at the Liquidation Value, plus accrued and unpaid dividends thereon to
the date of redemption.
The holders of the shares of the Seller Preferred Stock have no preemptive
rights with respect to any shares of capital stock of Premier or any other
securities of Premier convertible into or carrying rights or options to purchase
any such shares.
83
<PAGE>
UNDERWRITING
The Company has entered into an Underwriting Agreement (the form of which
has been filed as an exhibit to Registration Statement of which this Prospectus
is a part) dated , 1998 (the "Underwriting Agreement"), with the
underwriters named below (the "Underwriters") pursuant to which, on the terms
and subject to the conditions thereof, the Company has agreed to sell to the
Underwriters and the Underwriters have agreed to purchase from the Company, the
aggregate principal amount of SFEC Senior Notes set forth opposite their names
below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OF SFEC
UNDERWRITERS SENIOR NOTES
- --------------------------------------------------------------------------------- ---------------------
<S> <C>
Lehman Brothers Inc.............................................................. $
Salomon Brothers Inc.............................................................
---------------------
Total.......................................................................... $ 170,000,000
---------------------
---------------------
</TABLE>
The Underwriting Agreement provides that the obligation of each Underwriter
to pay for and accept delivery of the SFEC Senior Notes is subject to certain
conditions, including delivery of certain legal opinions by their counsel.
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the SFEC Senior Notes if
any are taken. The Closing of the Offering is conditioned upon the closing of
each of the Offerings and each of the Six Flags Transactions.
The Company has been advised by the Underwriters that they propose to offer
the SFEC Senior Notes offered hereby 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 concession
not to exceed % of the aggregate principal amount at maturity of the SFEC
Senior Notes. The Underwriters or such selected dealers may reallow a commission
to certain other dealers not to exceed % of the aggregate principal amount at
maturity of the SFEC Senior Notes. After the initial public offering of the SFEC
Senior Notes, the public offering price, the concession to selected dealers and
the reallowance to the other dealers may be changed by the Underwriters.
The Underwriting Agreement provides that the Company and its operating
subsidiaries (including Six Flags) and Premier will indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act, and
will contribute to payments the Underwriters may be required to make in respect
hereof.
The Company does not intend to list the SFEC Senior Notes on any national
securities exchange or to seek the admission thereof to trading on the NASDAQ
National Market System. The Company has been advised by the Underwriters that
following the completion of the Offering, the Underwriters currently intend to
make a market in the SFEC Senior Notes. However, the Underwriters are not
obligated to do so. Any market making activities with respect to the Company
Notes may be discontinued at any time without notice. In addition, such
market-making activity will be subject to the limits imposed by the Securities
Act and the Exchange Act. See "Risk Factors--Absence of Public Market."
In connection with the Offering, the Underwriters may engage in certain
transactions that stabilize the price of the SFEC Senior Notes. Such
transactions may consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of the SFEC Senior Notes. If the Underwriters create a
short position in the SFEC Senior Notes in connection with the Offering (i.e.,
if they sell more SFEC Senior Notes than are set forth on the cover page of this
Prospectus) the Underwriters may reduce that short position by purchasing SFEC
Senior Notes in open market.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might otherwise be in the absence of such purchases.
84
<PAGE>
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Company Notes. In addition, neither
the Company nor any of the Underwriters makes any representation that anyone
will engage in such transactions or that such transactions, once commenced, will
not be discontinued without notice.
Each of Lehman Brothers and Smith Barney Inc. (predecessor to Salomon Smith
Barney) has from time to time provided certain investment banking services to
the Company and Premier and their respective affiliates for which they have
received customary fees. LBI Group Inc., an affiliate of Lehman Brothers is
party to a financing commitment provided to Premier in connection with the Six
Flags Transactions and has received customary fees in connection therewith. In
addition, Lehman Brothers and Smith Barney Inc. acted as underwriters of
Premier's 1996 and 1997 public offerings and are acting as underwriters in
connection with the Concurrent Offerings and will receive customary fees in
connection therewith. An affiliate of Lehman Brothers is a lender under each of
the Credit Facilities.
LEGAL MATTERS
The validity of the SFEC Senior Notes offered hereby and certain legal
matters in connection with the Offering will be passed upon for the Company by
Baer Marks & Upham LLP, New York, New York. The Underwriters are being
represented by Latham & Watkins, New York, New York.
EXPERTS
The financial statements of the Company at December 28, 1997 and December
29, 1996, and for the three years ended December 28, 1997, December 29, 1996 and
December 31, 1995, appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report 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 consolidated financial statements of Premier as of December 31, 1996 and
1995, and for each of the years in the three-year period ended December 31,
1996, are incorporated by reference herein in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, incorporated by
reference herein and upon the authority of said 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 Premier's
Registration Statement (Form S-2 No. 333-16573) have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon (which
contains an explanatory paragraph with respect to that company's ability to
continue as a going concern) and are incorporated by reference herein 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, 1995 and
1994, and for the years then ended, included in Premier's Registration Statement
(Form S-2 No. 333-16573) portions of which are incorporated by reference herein
are incorporated herein in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, included in the Form S-2, 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, 1996 and 1995, and for each of the years in the three-year period
ended September 30, 1996, included in Premier's Registration Statement (Form S-2
No. 333-16573) portions of which are incorporated by reference herein are
incorporated herein in reliance upon the report of KPMG Peat Marwick LLP,
independent certified
85
<PAGE>
public accountants, included in the Form S-2, and upon the authority of said
firm as experts in accounting and auditing.
The financial statements of Kentucky Kingdom, Inc. at November 2, 1997 and
for the 52-week period then ended, appearing in Premier's Form 8-K dated
November 7, 1997, as amended, which is incorporated by reference herein are
incorporated herein in reliance upon the report of Carpenter Mountjoy &
Bressler, independent certified public accountants, included in the Form 8-K and
upon the authority of said firm as experts in accounting and auditing.
86
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Six Flags Entertainment Corporation:
Report of Independent Auditors............................................................................. F-2
Consolidated Statements of Operations...................................................................... F-3
Consolidated Balance Sheets................................................................................ F-4
Consolidated Statements of Stockholders' Equity (Deficit).................................................. F-5
Consolidated Statements of Cash Flows...................................................................... F-6
Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Six Flags Entertainment Corporation
We have audited the accompanying consolidated balance sheets of Six Flags
Entertainment Corporation as of December 28, 1997 and December 29, 1996 and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for each of the three years in the period ended December 28,
1997. 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 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 consolidated financial position of
Six Flags Entertainment Corporation at December 28, 1997 and December 29, 1996
and the consolidated results of its operations and its cash flows for each of
the three years in the period ended December 28, 1997 in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
February 14, 1998
F-2
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 28, 1997, DECEMBER 29, 1996 AND DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Operating services........................................................... $ 366,665 $ 405,558 $ 427,569
Sales of products............................................................ 255,030 268,150 271,046
Other........................................................................ 7,762 7,168 10,051
---------- ---------- ----------
629,457 680,876 708,666
---------- ---------- ----------
Costs and expenses:
Operating, general and administrative expenses............................... 388,137 419,756 443,359
Cost of products sold........................................................ 91,138 105,988 101,239
Depreciation................................................................. 51,848 55,090 58,902
Amortization................................................................. 31,596 32,327 25,591
Interest, net................................................................ 63,282 76,530 84,430
Minority interest............................................................ -- 1,297 (1,147)
---------- ---------- ----------
626,001 690,988 712,374
---------- ---------- ----------
Income (loss) before income taxes............................................ 3,456 (10,112) (3,708)
Income tax expense........................................................... 6,743 5,137 --
---------- ---------- ----------
Net loss..................................................................... $ (3,287) $ (15,249) $ (3,708)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 28, 1997 AND DECEMBER 29, 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................................. $ 45,587 $ 16,805
Receivables, net.......................................................................... 6,559 3,258
Receivable from affiliate................................................................. -- 4,000
Inventories, net.......................................................................... 13,526 14,338
Maintenance supplies...................................................................... 6,620 8,051
Prepaid expenses and other current assets................................................. 4,150 3,848
---------- ----------
Total current assets...................................................................... 76,442 50,300
Property and equipment, net............................................................... 489,068 492,137
Investment in co-venture parks, net....................................................... 19,135 78,370
Excess of cost over net assets acquired, net.............................................. 205,117 196,928
Deferred financing costs, net............................................................. 24,278 20,171
Other assets, net......................................................................... 12,727 26,784
---------- ----------
Total assets.............................................................................. $ 826,767 $ 864,690
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable.......................................................................... $ 29,518 $ 21,055
Accrued liabilities....................................................................... 49,885 43,390
Current portion of long-term debt......................................................... 38,332 26,130
Short-term borrowings..................................................................... 1,585 30,503
---------- ----------
Total current liabilities................................................................. 119,320 121,078
Long-term debt............................................................................ 714,993 753,369
Other long-term liabilities............................................................... 14,728 12,420
Minority interest......................................................................... 1,297 150
Commitments and contingencies
Stockholders' Deficit:
Class A Convertible Preferred Stock ($.01 par value per share: 6,100,000 shares
authorized; 5,100,000 shares issued and outstanding at December 28, 1997 and December
29, 1996; $273,499 and $243,572 aggregate liquidation preference at December 28, 1997
and December 29, 1996, respectively).................................................... 51 51
Class B Convertible Preferred Stock ($.01 par value per share; 4,900,000 shares
authorized, issued and outstanding at December 28, 1997 and December 29, 1996; $196,000
aggregate liquidation preference at December 28, 1997 and December 29, 1996)............ 49 49
Class A Common Stock ($.01 par value per share; 6,100,000 shares authorized; 51 shares
issued and outstanding at December 28, 1997 and December 29, 1996)...................... -- --
Class B Common Stock ($.01 par value per share: 20,000,000 shares authorized; 49 shares
issued and outstanding at December 28, 1997 and December 29, 1996)...................... -- --
Additional paid-in capital................................................................ 35,983 40,217
Accumulated deficit....................................................................... (56,159) (59,867)
Unearned compensation reserved stock awards............................................... (3,495) (2,777)
---------- ----------
Total stockholders' deficit............................................................... (23,571) (22,327)
---------- ----------
Total liabilities and stockholders' deficit............................................... $ 826,767 $ 864,690
---------- ----------
---------- ----------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 28, 1997, DECEMBER 29, 1996, AND DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
PREFERRED STOCK A PREFERRED STOCK B COMMON STOCK ADDITIONAL
---------------------- ---------------------- ------------------------ PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
--------- ----------- --------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995... -- $ -- -- $ -- 300 $ -- $ 122,320 $ (37,623)
Net loss..................... -- -- -- -- -- -- -- (3,287)
1995 Refinancing............. -- -- -- -- -- -- (90,843) --
1995 Recapitalization........ 5,100,000 51 4,900,000 49 (200) -- (100) --
Reserved stock awards........ -- -- -- -- -- -- 4,372 --
Amortization of unearned
compensation............... -- -- -- -- -- -- -- --
--------- ----- --------- ----- --- ----- ----------- ------------
Balance at December 31,
1995....................... 5,100,000 51 4,900,000 49 100 -- 35,749 (40,910)
Net loss..................... -- -- -- -- -- -- -- (15,249)
Reserved stock awards........ -- -- -- -- -- -- 234 --
Amortization of unearned
compensation............... -- -- -- -- -- -- -- --
--------- ----- --------- ----- --- ----- ----------- ------------
Balance at December 29,
1996....................... 5,100,000 51 4,900,000 49 100 -- 35,983 (56,159)
Net loss..................... -- -- -- -- -- -- -- (3,708)
Reserved stock awards........ -- -- -- -- -- -- 234 --
Amortization of unearned
compensation............... -- -- -- -- -- -- -- --
Capital contribution......... -- -- -- -- -- -- 4,000 --
--------- ----- --------- ----- --- ----- ----------- ------------
Balance at December 28,
1997....................... 5,100,000 $ 51 4,900,000 $ 49 100 $ -- $ 40,217 $ (59,867)
--------- ----- --------- ----- --- ----- ----------- ------------
--------- ----- --------- ----- --- ----- ----------- ------------
<CAPTION>
STOCKHOLDERS'
UNEARNED EQUITY
COMPENSATION (DEFICIT)
--------------- -------------
<S> <C> <C>
Balance at January 1, 1995... $ -- $ 84,697
Net loss..................... -- (3,287)
1995 Refinancing............. -- (90,843)
1995 Recapitalization........ -- --
Reserved stock awards........ (4,372) --
Amortization of unearned
compensation............... 220 220
------- -------------
Balance at December 31,
1995....................... (4,152) (9,213)
Net loss..................... -- (15,249)
Reserved stock awards........ (234) --
Amortization of unearned
compensation............... 891 891
------- -------------
Balance at December 29,
1996....................... (3,495) (23,571)
Net loss..................... -- (3,708)
Reserved stock awards........ (234) --
Amortization of unearned
compensation............... 952 952
Capital contribution......... -- 4,000
------- -------------
Balance at December 28,
1997....................... $ (2,777) $ (22,327)
------- -------------
------- -------------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 28, 1997, DECEMBER 29, 1996 AND DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996 1997
----------- ---------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss..................................................................... $ (3,287) $ (15,249) $ (3,708)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization.............................................. 83,444 87,417 84,493
Noncash interest expense................................................... 26,998 43,688 48,552
Minority interest.......................................................... -- 1,297 (1,147)
Inventory reserve.......................................................... -- 1,077 --
Deferred income taxes...................................................... 806 5,137 --
Changes in current assets and liabilities:
Receivables................................................................ 3,068 401 3,301
Inventories................................................................ (1,518) (3,648) (812)
Maintenance supplies....................................................... (303) (914) (1,431)
Prepaid expenses and other current assets.................................. (1,308) 43 302
Accounts payable and accrued liabilities................................... 17,820 9,286 (14,958)
Other, net................................................................... (1,133) 67 (4,289)
----------- ---------- ----------
Net cash provided by operating activities.................................... 124,587 128,602 110,303
----------- ---------- ----------
INVESTING ACTIVITIES:
Investment in co-venture parks............................................... (8,729) (5,548) (10,654)
Cost of acquisitions, including real estate held for development............. (39,593) -- --
Purchase of co-venture limited partnership units............................. -- -- (62,678)
Prepayment of SFOT partnership obligation.................................... -- -- (10,725)
Purchase of property and equipment........................................... (45,578) (75,627) (67,675)
Proceeds from sale of land and property...................................... -- -- 2,000
----------- ---------- ----------
Net cash used in investing activities........................................ (93,900) (81,175) (149,732)
----------- ---------- ----------
FINANCING ACTIVITIES:
Net proceeds from related party debt......................................... 65,969 -- --
Proceeds from revolving lines of credit...................................... 2,205 41,673 97,936
Payments on revolving lines of credit........................................ (2,124) (40,881) (58,521)
Payments on term loans....................................................... (55,500) (53,000) (59,000)
Proceeds from other debt..................................................... -- -- 30,232
----------- ---------- ----------
Net cash provided by (used in) financing activities.......................... 10,550 (52,208) 10,647
----------- ---------- ----------
Increase (decrease) in cash and cash equivalents............................. 41,237 (4,781) (28,782)
Cash and cash equivalents at beginning of year............................... 9,131 50,368 45,587
----------- ---------- ----------
Cash and cash equivalents at end of year..................................... $ 50,368 $ 45,587 $ 16,805
----------- ---------- ----------
----------- ---------- ----------
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
Six Flags Entertainment Corporation ("SFEC", and together with its
subsidiaries, the "Company"), a Delaware corporation, was formed in 1991 to
effect the acquisition of S.F. Holdings, Inc. ("Holdings") and its subsidiary
Six Flags Theme Parks Inc. ("Six Flags"). The Company owns 100% of the Common
Stock of Holdings, which owns 100% of the Common Stock of Six Flags. Prior to
June 23, 1995, the Company was wholly owned by Time Warner Entertainment
Company, L.P., a Delaware limited partnership ("TWE"). On June 23, 1995, TWE
caused the Company to undergo a recapitalization and TWE sold 51% of its
interest in the Company to an investor group (the "Investor Group") led by
Boston Ventures Management, Inc., a private investment management firm (the
"1995 Recapitalization"). In connection with the 1995 Recapitalization, the
Company consummated a series of transactions (the "1995 Refinancing", together
with the 1995 Recapitalization, the "1995 Refinancing and Recapitalization").
SFEC and Holdings are holding companies which have no significant operations
independent of their ownership of Six Flags. Accordingly, the consolidated
financial statements of the Company consist principally of the assets,
liabilities, operations and cash flows of Six Flags. All significant
intercompany accounts and transactions have been eliminated. Certain amounts
have been reclassified to conform to the current year presentation.
Six Flags operates twelve "Six Flags" branded theme parks in eight locations
throughout the United States. Nine of the theme parks--Six Flags Great Adventure
and Wild Safari Animal Park (New York-Philadelphia), Six Flags Great America
(Chicago-Milwaukee), Six Flags Magic Mountain and Six Flags Hurricane Harbor
(Los Angeles) (collectively "Six Flags California"), Six Flags Astroworld and
Six Flags Waterworld (Houston) (collectively "Six Flags Houston"), Six Flags St.
Louis (St. Louis) and Six Flags Hurricane Harbor (Dallas-Ft. Worth)--are owned
directly by Six Flags. Six Flags Fiesta Texas located in San Antonio, Texas is
leased by a limited partnership of which a subsidiary of Six Flags is a general
partner and manages the park. Two parks--Six Flags Over Texas (Dallas-Ft. Worth)
and Six Flags Over Georgia (Atlanta)--are operated by Six Flags pursuant to
partnership agreements (the "co-venture parks"). Six Flags Over Texas is owned
by a limited partnership ("Texas Flags") of which the managing general partner
is a wholly-owned subsidiary of Six Flags. Six Flags Over Georgia is owned by a
limited partnership of which the managing general partner is SFOG II, Inc., a
Delaware corporation which is a wholly-owned subsidiary of SFEC ("SFOG II"). The
Company has entered into new partnership agreements for the management of Six
Flags Over Georgia and Six Flags Over Texas through 2026 and 2027, respectively.
See the Investment In Co-venture Parks footnote for a description of these new
agreements.
In March 1996, Six Flags completed arrangements pursuant to which Six Flags,
through wholly-owned subsidiaries, manages the Fiesta Texas theme park located
in San Antonio, Texas ("Fiesta Park"). The Fiesta Park, which is owned by a
subsidiary of La Cantera Development Company ("La Cantera"), an affiliate of
United Service Automobile Association ("USAA"), was leased to a newly formed
limited partnership (the "Fiesta Partnership") in which Six Flags, acting
through wholly-owned subsidiaries (the "Six Flags GP"), is a general partner
with an approximate 60% equity interest. La Cantera is the limited partner with
a 40% equity interest. In connection with these arrangements, the Fiesta
Partnership obtained an option to purchase the tangible and intangible assets
related to the Fiesta Park as well as the limited partner's interest in the
Fiesta Partnership. In addition, Six Flags GP receives an annual management fee
and intellectual property fee in connection with the management of the Fiesta
Park. The management fee is based on revenues for 1996 and 1997 and will be
based on operating profit thereafter. The intellectual property fee is based on
revenues.
F-7
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Six Flags' consolidated results for 1996 include a full year of Fiesta
Park's operations. The following unaudited proforma financial information for
the 1995 fiscal year gives effect to consolidation of Fiesta Park as if it had
occurred at the beginning of the 1995 fiscal year. These proforma results are
not necessarily indicative of what the results would have been had Six Flags
actually managed the park during 1995. Proforma revenues and net loss would have
been $672 million and $8.6 million, respectively, if the consolidation of the
Fiesta Park occurred at the beginning of the 1995 fiscal year.
The 1997, 1996, and 1995 fiscal years each consisted of 52 weeks. The 1997
fiscal year ended on December 28, 1997, while the 1996 and 1995 fiscal years
ended on December 29, 1996 and December 31, 1995, respectively.
1995 REFINANCING AND RECAPITALIZATION
The 1995 Refinancing and Recapitalization was effected through the following
transactions consummated in June 1995:
1. SFEC effected a recapitalization (the "Recapitalization") pursuant to
which its Common Stock (all of which was owned by TWE) was recapitalized
into shares of Class A Convertible Preferred Stock (representing
approximately 51% of the equity), Class B Convertible Preferred Stock
(representing approximately 49% of the equity) and Common Stock (the
"SFEC Common Stock"), which has nominal value.
2. TWE sold to the Investor Group all of the outstanding shares of SFEC's
Class A Convertible Preferred Stock and 51% of the outstanding shares of
the SFEC Common Stock.
3. Six Flags borrowed $475.0 million on a term basis pursuant to a credit
agreement dated as of June 23, 1995 (the "Credit Agreement") with a group
of banks.
4. Six Flags issued $285.0 million aggregate principal amount of 12.25%
Senior Subordinated Discount Notes due 2005 (the "12.25% Notes") at an
aggregate issue price of $200.0 million.
5. Six Flags paid TWE $640 million in connection with (i) the repurchase of
all assets previously sold to TWE as part of the sale and leaseback
transactions, (ii) the repayment of intercompany indebtedness and related
accrued interest, (iii) a payment as required under a license agreement
entered into with TWE and (iv) a payment in consideration of TWE entering
into a non-competition agreement for the benefit of the Company. The
total amount paid to TWE in excess of the outstanding indebtedness to TWE
has been accounted for as an equity transaction.
6. Six Flags incurred approximately $27.5 million in deferred financing
fees and approximately $7.5 million in transaction fees related to the
1995 Refinancing and Recapitalization. The amount paid for transaction
fees has been accounted for as an equity transaction. In addition, the 2%
participation in a trust, which holds all TWE-owned aircraft, ceased upon
the consummation of the 1995 Refinancing and Recapitalization. The
elimination of the remaining net book value of this 2% interest
(approximately $1.8 million) has been accounted for as an equity
transaction.
ACCOUNTING AND FINANCIAL REPORTING POLICIES
REVENUES AND EXPENSES
Operating services revenue consists primarily of theme park admissions and
parking, corporate sponsorships and other in-park services. Sales of products
consist primarily of revenues from the in-park sales of food and beverages,
merchandise, gifts and souvenirs, games of skill and gasoline. Operating
F-8
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
expenses consist of theme park employee compensation and benefits (approximately
50%) and advertising media and production (approximately 10%-15%). Park
maintenance materials and services, utilities, operating supplies, insurance and
other operating service costs account for the remainder. Cost of products sold
consists of the cost of food and beverages, gifts and souvenirs, games of skill
prizes and gasoline sold. During 1997, the Company reversed approximately $7.3
million of expense accruals no longer deemed necessary. Such amounts have been
reflected as expense reductions of $0.7 million in cost of products sold, and
$6.6 million in operating, general and administrative expenses in the current
year statement of operations.
INCOME TAXES
The Company uses the liability method of accounting for income taxes
required by FASB Statement No. 109, "Accounting for Income Taxes".
CASH EQUIVALENTS
Cash equivalents consist of short-term, highly liquid investments purchased
with a maturity date of three months or less.
INVENTORIES
Inventories, primarily products held for resale, are valued at the lower of
cost or market. Cost is determined principally using the first-in, first-out
method.
OFF-SEASON EXPENSES
Theme park operations are highly seasonal with substantially all revenues
being generated in the second and third quarters. Such revenues are recognized
when earned, while cost of products sold, general and administrative expenses,
interest on debt and income taxes are recognized when incurred. All other
interim period costs related to park operations are considered off-season
expenses and are charged to interim periods based upon estimated annual
revenues. No costs are deferred at the end of a fiscal year.
PROPERTY AND EQUIPMENT
Property and equipment, which includes land, rides and attractions,
buildings and improvements, and other (principally machinery and equipment) are
stated at cost (fair value at the date of acquisition). Depreciation is computed
for financial reporting purposes using the straight-line method over the
estimated useful lives of the assets. The estimated lives used in computing
depreciation are:
<TABLE>
<S> <C>
Rides and attractions........................................ 3 to 25 years
10 to 33
Buildings and improvements................................... years
Other........................................................ 3 to 15 years
</TABLE>
INVESTMENT IN CO-VENTURE PARKS
The Company, through two subsidiaries, is the general partner in two theme
park limited partnerships. The Company accounts for the parks as co-ventures,
i.e., the revenues and expenses (excluding partnership depreciation) are
included in the Company's consolidated statements of operations and the net
amounts distributed to the limited partners are deducted as expenses. Except for
the limited partnership units purchased pursuant to the tender offer, the
Company has no rights or title to the co-
F-9
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
venture park assets or to the proceeds from any sale of the co-venture park's
assets. Accordingly, the Company's consolidated balance sheets do not include
any of the co-venture parks' assets. The investment in co-venture parks included
in the consolidated balance sheets represents (i) the Company's interest in the
estimated future cash flows from the operations of the co-venture parks and is
amortized over the life of the partnership agreements, and (ii) the value of
Limited Partnership units purchased pursuant to the SFOG tender offer. The
co-venture parks contributed revenues of $176.8 million, $152.0 million and
$160.6 million to the Company in the fiscal years 1997, 1996 and 1995,
respectively. See the Investment In Co-venture Parks footnote below for a
description of the new agreements extending the management of Six Flags Over
Georgia and Six Flags Over Texas, each for another 30-year term.
DEFERRED FINANCING COSTS
Deferred financing costs consist of debt issuance costs incurred in
connection with the Credit Agreement, the issuance of the 12.25% Notes and the
issuance of the $192.3 million aggregate principal amount of Zero Coupon Senior
Notes due 1999 (the "Zero Coupon Notes") in December 1992. Deferred financing
costs are amortized over the life of the related debt. Accumulated amortization
of deferred financing costs at December 28, 1997 and December 29, 1996 amounted
to $12.0 million and $8.3 million, respectively.
EXCESS OF COST OVER NET ASSETS ACQUIRED
The excess of cost over net assets acquired is amortized over periods not
exceeding forty years using the straight-line method. Accumulated amortization
at December 28, 1997 and December 29, 1996 amounted to $47.7 million and $39.6
million, respectively.
OTHER ASSETS
Other assets consist primarily of intangible assets, which are amortized
over periods of two to thirteen years using the straight-line method.
Additionally, in 1997, other assets include a $10.7 million prepayment in
accordance with the Texas Agreements. See Investment In Co-venture Parks
footnote.
REVENUE RECOGNITION
In general, the Company recognizes operating revenue from ticket sales when
guests are admitted to the parks. Theme park operations are highly seasonal and
substantially all revenues are generated in the second and third quarters of the
fiscal year.
CONCENTRATIONS OF CREDIT RISKS
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist primarily of cash and cash equivalents
and receivables. The Company places its cash and cash equivalents with high
credit, quality institutions and minimizes its credit risk exposure relating to
receivables through formal credit policies and monitoring procedures.
FINANCIAL INSTRUMENTS
The fair value of financial instruments, such as long-term debt, is
disclosed when significantly different from the recorded values of such
instruments in the consolidated balance sheets pursuant to FASB Statement No.
107, "Disclosure about Fair Value of Financial Instruments." The Company
generally estimates the fair value of its long-term debt by using discounted
cash flow analyses based on the
F-10
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Company's current borrowing rates for debt with similar maturities, or by quoted
market prices for the same issues.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
IMPAIRMENT OF LONG-LIVED ASSETS
The carrying value of long-lived assets, including intangibles, is reviewed
if the facts and circumstances, such as significant declines in revenues,
earnings or cash flows, or material adverse changes in the business climate,
suggest that it may be impaired. Six Flags performs its review by comparing the
book value relating to long-lived assets to the estimated future undiscounted
cash flows relating to such long-lived assets. If any impairment in the value of
the long-lived assets is indicated, the carrying value of the long-lived assets
is adjusted to reflect such impairment calculated based on the discounted cash
flows of the impaired assets or the assets fair value, as appropriate.
ADVERTISING
Advertising costs are expensed as incurred or the first time the advertising
takes place. The Company incurred advertising costs of approximately $61.1
million, $64.6 million and $53.4 million in the 1997, 1996 and 1995 fiscal
years, respectively.
INVENTORIES
Inventories at December 28, 1997 and December 29, 1996 consist of the
following (in thousands):
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Merchandise, gifts and souvenirs........................................ $ 10,892 $ 12,029
Food and beverages...................................................... 1,242 948
Games................................................................... 1,158 1,133
Other................................................................... 234 228
--------- ---------
$ 13,526 $ 14,338
--------- ---------
--------- ---------
</TABLE>
F-11
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment at December 28, 1997 and December 29, 1996 consist of
the following (in thousands):
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Land................................................................ $ 55,218 $ 50,582
Buildings and improvements.......................................... 249,066 263,475
Rides and attractions............................................... 364,770 389,798
Other............................................................... 8,239 9,033
Construction in progress............................................ 36,950 55,368
----------- -----------
714,243 768,256
Less accumulated depreciation....................................... (225,175) (276,119)
----------- -----------
$ 489,068 $ 492,137
----------- -----------
----------- -----------
</TABLE>
INVESTMENT IN CO-VENTURE PARKS
Changes in the investment in co-venture parks at December 28, 1997 and
December 29, 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Balance at beginning of period........................................ $ 34,404 $ 19,135
Capital additions made by the co-venture parks........................ 5,436 16,147
Operations, net of distributions to the limited partners.............. 18,603 18,633
Distributions to the Company.......................................... (18,491) (24,126)
Amortization.......................................................... (20,817) (11,515)
---------- ----------
19,135 18,274
---------- ----------
Purchase of SFOG limited partnership units............................ -- 62,678
Amortization.......................................................... -- (2,582)
---------- ----------
-- 60,096
---------- ----------
$ 19,135 $ 78,370
---------- ----------
---------- ----------
</TABLE>
F-12
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SIX FLAGS OVER GEORGIA
On March 18, 1997, Six Flags, SFEC, Time Warner and TWE completed
arrangements pursuant to which SFOG II will manage the Six Flags Over Georgia
Park through 2026. Under the agreements governing the new arrangements (the
"Georgia Agreements"), the Six Flags Over Georgia Park is owned by a newly
formed limited partnership ("Six Flags Over Georgia II") of which SFOG II is the
managing general partner.
The key elements of the new arrangements are as follows: (i) the limited
partner (which is not affiliated with Six Flags) will receive minimum annual
distributions of $18.5 million in 1997, increasing each year thereafter in
proportion to increases in the cost of living; thereafter, SFOG II will be
entitled to receive from available cash (after provision for reasonable reserves
and after capital expenditures per annum of approximately 6% of prior year
revenues) a management fee equal to 3% of the prior year's gross revenues; and,
thereafter, any additional available cash will be distributed 95% to SFOG II and
5% to the limited partner; (ii) in the second quarter of 1997, a subsidiary of
Six Flags (the "Six Flags Subsidiary") and a subsidiary of SFEC (the "SFEC
Subsidiary") made a tender offer for partnership interests ("SFOG LP Units") in
Six Flags Fund, Ltd. (L.P.), which owns 99% of the limited partner of Six Flags
Over Georgia II, that valued the Six Flags Over Georgia Park at $250 million
(the "SFOG Tender Offer Price"); (iii) commencing in 1998, and on an annual
basis thereafter, the Six Flags Subsidiary and the SFEC Subsidiary will offer to
purchase additional SFOG LP Units at a price based on the greater of the SFOG
Tender Offer Price or the EBITDA of the Six Flags Over Georgia Park for the
prior four years (provided that no more than $50 million of such SFOG LP Units
will be acquired by the Six Flags Subsidiary); and (iv) in 2026, Six Flags and
its affiliates will have the option to acquire the Six Flags Over Georgia Park
at a price based on the Tender Offer Price, increased in proportion to the
increase in the cost of living between December 1996 and December 2026. SFEC,
Six Flags, and TWE have guaranteed certain of the obligations (including the
minimum annual distributions noted in (i) above) of SFOG II and Six Flags Over
Georgia II under the Georgia Agreements, and in consideration therefor, SFOG II
has agreed to assign to Six Flags at least 90% of the cash distributions it
receives from time to time from Six Flags Over Georgia II. Six Flags continues
to account for the Six Flags Over Georgia Park as a co-venture and includes the
revenues and expenses of Six Flags Over Georgia II partnership (excluding
partnership depreciation) in Six Flags' consolidated financial statements and
deducts as expenses the net amounts distributed to the limited partners. As a
result of entering into the Georgia Agreements, Six Flags expects a reduction in
net income and net cash flow allocation from Six Flags Over Georgia II.
On May 6, 1997, in connection with the closing of the tender offer described
above, the Six Flags Subsidiary and the SFEC Subsidiary purchased approximately
17% and 8%, respectively, of SFOG LP Units for approximately $42.4 million and
$20.3 million, respectively. The purchase of SFOG LP Units entitles each such
purchaser the right to receive minimum annual distributions and any residual
distributions (5% of available cash after the minimum annual distributions and
management fee distributions) in proportion to the percentage amounts purchased.
The purchase of SFOG LP Units by the Six Flags Subsidiary was financed through a
drawdown on the Company's secured revolving line of credit available for
acquisitions under the Credit Agreement and the purchase of SFOG LP Units by the
SFEC Subsidiary was financed through loans from TWE, which were subsequently
refinanced with demand loans from Chase. See Long-Term Debt footnote.
In connection with the purchase of the SFOG LP Units, approximately $49.8
million of the excess of cost over net assets acquired associated with this
investment is being amortized over 30 years. The net
F-13
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
investment in SFOG LP Units is presented as part of the investment in co-venture
parks. Accumulated amortization at December 28, 1997 amounted to $2.6 million.
SIX FLAGS OVER TEXAS
On November 24, 1997, Six Flags, SFEC, Time Warner and TWE completed
arrangements pursuant to which Six Flags Over Texas, Inc., a wholly-owned
subsidiary of Six Flags ("SFOT"), will manage the Six Flags Over Texas Park
through 2027. Under the agreements governing the new arrangements (the "Texas
Agreements"), the Six Flags Over Texas Park will continue to be owned by Texas
Flags Ltd., a limited partnership ("Six Flags Over Texas") of which SFOT is the
managing general partner.
The key elements of the new arrangements are as follows: (i) the limited
partner (which is not affiliated with Six Flags) will receive minimum annual
distributions of $27.7 million in 1998, increasing each year thereafter in
proportion to increases in the cost of living; thereafter, SFOT II will be
entitled to receive from available cash (after provision for reasonable reserves
and after capital expenditures per annum of approximately 6% of prior year
revenues) a management fee equal to 3% of the prior year's gross revenues; and,
thereafter, any additional available cash will be distributed 92.5% to SFOT and
7.5% to the limited partner; (ii) in the first quarter of 1998, a subsidiary of
Six Flags and a subsidiary of SFEC have commenced a tender offer for partnership
interests ("SFOT LP Units") in Six Flags Over Texas, Ltd., which owns 99% of the
limited partner of Six Flags Over Texas, that values the Six Flags Over Texas
Park at the greater of $375 million or 8.5 times 1998 EBITDA of the Six Flags
Over Texas Park (the "SFOT Tender Offer Price"); (iii) commencing in 1999, and
on an annual basis thereafter, the Six Flags Subsidiary and the SFEC Subsidiary
will offer to purchase additional SFOT LP Units at a price based on the EBITDA
of the Six Flags Over Texas Park for the prior four years; and (iv) in 2027, Six
Flags and its affiliates will have the option to acquire the Six Flags Over
Texas Park at a price based on the SFOT Tender Offer Price, increased in
proportion to the increase in the cost of living between December 1997 and
December 2027. SFEC, Six Flags and TWE have guaranteed certain of the
obligations (including the minimum annual distributions noted in (i) above) of
SFOT under the Texas Agreements. Six Flags intends to continue to account for
the Six Flags Over Texas Park as a co-venture and to include the revenues and
expenses of Texas Flags partnership (excluding partnership depreciation) in Six
Flags' consolidated financial statements and deduct as expenses the net amounts
distributed to the limited partners. As a result of entering into the Texas
Agreements, Six Flags expects a reduction in net income and net cash flow
allocation from Texas Flags.
In connection with the entering into the Texas Agreements, a subsidiary of
SFEC loaned $10.7 million to Texas Flags Ltd. during December 1997 as a
prepayment of its obligations under the Texas Agreements. This amount has been
included in other assets, net as of December 28, 1997.
The tender offer for SFOT LP Units commenced on January 23, 1998 and is
expected to close on March 12, 1998. The Company will purchase these units
through the SFEC Subsidiary and will finance the purchase of such units through
loans from a syndicate of lenders.
F-14
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ACCRUED LIABILITIES
Accrued liabilities at December 28, 1997 and December 29, 1996 consist of
the following (in thousands):
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Insurance............................................................... $ 15,867 $ 15,608
Income taxes payable.................................................... 4,036 557
Real estate and property taxes.......................................... 2,983 3,352
Compensation and payroll taxes.......................................... 7,920 8,728
Interest................................................................ 2,741 3,431
Pension costs........................................................... 2,868 921
Deferred revenue........................................................ 4,422 4,352
Other................................................................... 9,048 6,441
--------- ---------
$ 49,885 $ 43,390
--------- ---------
--------- ---------
</TABLE>
SHORT-TERM BORROWINGS
Short-term borrowings at December 28, 1997 and December 29, 1996 consist of
the following (in thousands):
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
8.5% Note payable to Chase Bank, due March 31, 1998...................... $ -- $ 19,778
7.2% Note payable to TWE, due March 31, 1998............................. -- 10,725
Co-venture parks general partner line of credit.......................... 1,585 --
--------- ---------
$ 1,585 $ 30,503
--------- ---------
--------- ---------
</TABLE>
The proceeds from the note payable to Chase Bank were used to purchase
approximately 8% of SFOG LP Units pursuant to the tender offer for such units.
The proceeds from the TWE note payable were loaned to Texas Flags Ltd. in
connection with the Texas Agreements. See Investment in Co-venture Parks
footnote. The weighted average interest rate of short-term borrowings
outstanding as of December 28, 1997 and December 29, 1996 was 8.5 % and 7.5%,
respectively.
F-15
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LONG-TERM DEBT
Long-term debt of the Company at December 28, 1997 and December 29, 1996
consists of the following (in thousands):
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Credit Agreement, due through 2003, interest rates from 8.5% to
9.13%............................................................... $ 366,500 $ 348,500
12.25% Notes, due 2005, less unamortized discount of $15,075 and
$45,328 at December 28, 1997 and December 29, 1996, respectively.... 239,672 269,925
Zero Coupon Notes, due 1999, less unamortized discount of $31,176 and
$45,097 at December 28, 1997 and December 29, 1996, respectively.... 147,153 161,074
---------- ----------
753,325 779,499
Less current portion.................................................. (38,332) (26,130)
---------- ----------
$ 714,993 $ 753,369
---------- ----------
---------- ----------
</TABLE>
The scheduled annual maturities of the Company's debt are as follows (in
thousands):
<TABLE>
<S> <C>
1998.............................................................. $ 26,130
1999.............................................................. 216,074
2000.............................................................. 65,000
2001.............................................................. 60,000
2002.............................................................. 39,870
Thereafter........................................................ 372,425
---------
$ 779,499
---------
---------
</TABLE>
CREDIT AGREEMENT
In 1995, the Company entered into a $600 million Credit Agreement with a
group of lenders. The Credit Agreement consists of a $345 million Tranche A
Senior Secured Term Loan Facility (the "Tranche A Term Facility"), a $130
million Tranche B Senior Secured Term Loan Facility (the "Tranche B Term
Facility")(together the "Term Facilities"), and a Senior Secured Revolving
Credit Facility (the "Revolving Facility"). The Revolving Facility provides for
revolving loans to the Company and the issuance of letters of credit for the
account of the Company in an aggregate principal amount of up to $125 million,
of which not more than $12 million may be represented by letters of credit. The
interest rates per annum applicable to the Tranche A Term Facility and Revolving
Facility are LIBOR plus 2.50%, as adjusted semi-annually. The interest rate per
annum applicable to the Tranche B Term Facility is LIBOR plus 3.00%, as adjusted
semi-annually. The amounts outstanding under the Term Facilities were $307.5
million at December 28, 1997. The amounts borrowed against the Revolving
Facility as of December 28, 1997 were $41 million. At December 29, 1996, there
were no amounts borrowed against the Revolving Facility. As of December 28,
1997, the Company had $9.3 million in letters of credit outstanding.
Borrowings under the Tranche A Term Facility are payable as to principal in
July and September of each year through 2001. Borrowings under the Tranche B
Term Facility are payable in July and September
F-16
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
of each year through 2002 and in June 23, 2003. The Company is required to make
mandatory prepayments of loans, and letters of credit will be mandatorily
reduced based on certain criteria, as defined in the Credit Agreement.
At least once during the period from June 30 to August 31 in each fiscal
year, the Company must repay all loans outstanding under the Revolving Facility
in excess of an amount equal to the lesser of (a) $50.0 million and (b) the
principal amount of loans then outstanding under the Revolving Facility that
were used to finance related business acquisitions. The Company may not make
drawings under the Revolving Facility for 30 consecutive days following the date
of such repayment. During such period, the Company must also cause each
co-venture park limited partnership to repay all amounts outstanding under their
unsecured credit lines and not to make drawings thereunder for 30 consecutive
days following the date of such repayment.
The obligations of the Company under the Credit Agreement are
unconditionally and irrevocably guaranteed by each of the Company's direct or
indirect subsidiaries, other than the co-venture partnerships and certain
special purpose subsidiaries. In addition, the Credit Agreement is secured by
first priority security interests in all capital stock and other equity
interests of the Company and its subsidiaries.
The Company is required to pay a per annum fee equal to 2.50%, plus a
fronting fee of 0.25%, of the aggregate face amount of outstanding letters of
credit under the Revolving Facility and a per annum fee equal to 0.50% on the
undrawn portion of the commitments in respect of the Revolving Facility.
Commitment fees totaled $0.4 million, $0.6 million and $0.3 million in 1997,
1996 and 1995, respectively.
The Credit Agreement contains a number of significant covenants that, among
other things, restricts the ability of the Company to dispose of assets, incur
additional indebtedness, repay other indebtedness, amend material agreements,
pay dividends, create liens on assets, enter into leases, make investments or
acquisitions, engage in mergers or consolidations, make capital expenditures, or
engage in certain transactions with subsidiaries and affiliates and will
otherwise restrict corporate activities. In addition, under the Credit Agreement
the Company is required to comply with specified financial ratios and tests,
including cash interest expense coverage, debt service coverage and debt to
earnings ratios. The Credit Agreement also contains provisions that prohibit any
modification of the indenture governing the Notes in any manner adverse to the
lenders under the Credit Agreement and that limit the Company's ability to
refinance the Notes without the consent of such lenders.
In December 1995, the Company entered into no-cost interest rate collar
transactions with certain lenders (or their affiliates) under the Credit
Agreement. The interest rate collar transactions effectively protect against an
increase in the three month LIBOR above 7% but limits the Company's ability to
benefit from a decline in the three month LIBOR below 4.55% with respect to $172
million, $150 million and $130 million notional amounts of debt during the 1996,
1997 and 1998 fiscal years, respectively. Interest payments/receipts on these
interest rate collar agreements will be made quarterly. No such
payments/receipts occurred through December 28, 1997.
The fair value of the Credit Agreement and related interest rate collar
transactions approximated their carrying value as of December 28, 1997 and
December 29, 1996.
SENIOR SUBORDINATED DISCOUNT NOTES
The Company issued the 12.25% Notes on June 23, 1995 (the "Issue Date")
pursuant to an Indenture dated as of such date, among the Company, the Note
Guarantors and United States Trust Company of New York, as trustee. In November
1995, the Company offered to exchange $285.0 million aggregate principal amount
of its 12.25% Series A Senior Subordinated Discount Notes due 2005 (the "Series
A
F-17
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Notes" and, together with the 12.25% Notes, the "Notes") for a like principal
amount of its 12.25% Notes. The exchange offer expired on December 18, 1995, and
$283.5 million aggregate principal amount of the Series A Notes were exchanged
for an equal principal amount of 12.25% Notes. The Series A Notes are governed
by the same indenture as, and are substantially identical to, the 12.25% Notes.
However, unlike the 12.25% Notes, the Series A Notes were issued in a
transaction registered under the Securities Act of 1933, as amended.
The Notes are and will be unsecured senior subordinated obligations of Six
Flags, limited to $285.0 million aggregate principal amount, maturing on June
15, 2005. The Notes will accrete in value for purposes of the Indenture until
June 15, 1998, at which time the accreted value of the Notes will equal 100% of
their principal amount ($285 million). Interest payable in cash will not accrue
or be payable prior to June 15, 1998; thereafter, the accreted value of the
Notes will no longer increase and cash interest will be payable semi-annually on
June 15 and December 15 of each year, commencing December 15, 1998, at a rate of
12.25% per annum.
The Notes will be redeemable, at the Company's option, in whole or in part,
at any time on or after June 15, 2000 through maturity. If redeemed during the
12-month period commencing on June 15 of the years set forth below, the Company
will be required to pay the following redemption prices:
<TABLE>
<CAPTION>
PERIOD REDEMPTION PRICE
- ---------------------------------------------------------------------------- ----------------
<S> <C>
2000........................................................................ 106.0%
2001........................................................................ 104.0%
2002........................................................................ 102.0%
2003 and thereafter......................................................... 100.0%
</TABLE>
In addition, at any time prior to June 15, 1998, the Company may, subject to
certain requirements, redeem Notes having a principal amount of up to 35% of the
original aggregate principal amount of the Notes with the net cash proceeds of
one or more public equity offering by the Company at a redemption price equal to
112.25% of the accreted value of the Notes to be redeemed as of the redemption
date; provided, however, that at least 65% of the original aggregate principal
amount of the Notes must remain outstanding.
The fair value of the Notes, estimated based on the quoted market prices,
was $303.5 million and $230.1 million at December 28, 1997 and December 29,
1996, respectively.
The Notes are guaranteed on an unsecured, senior subordinated basis by Six
Flags Over Georgia, Inc., Six Flags Over Texas, Inc. and S.F. Partnership (the
"Note Guarantors"), each of which is a wholly-owned subsidiary of the Company.
ZERO COUPON NOTES
The Zero Coupon Notes are unsecured obligations of the Company issued under
an Indenture dated as of December 16, 1992, as amended, between the Company, TWE
and the United States Trust Company of New York, as trustee (the "Indenture").
The Zero Coupon Notes may not be redeemed prior to maturity and there will be no
periodic payments of interest over the life of the Zero Coupon Notes.
TWE has unconditionally and irrevocably agreed that upon a failure by the
Company to pay the principal amount of the Zero Coupon Notes upon maturity, or
to pay the Accreted Value Amount (as defined in the Indenture) upon a
declaration of acceleration following a Secondary Event of Default (as defined
in the Indenture), TWE will offer to purchase the Zero Coupon Notes from the
holders thereof at
F-18
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
a predetermined price. TWE's obligation to make the offer to purchase will rank
PARI PASSU with all other unsecured and unsubordinated obligations for money
borrowed of TWE.
The fair value of the Notes, estimated based on the quoted market prices,
was $170.1 million and $154.3 million at December 28, 1997 and December 29,
1996, respectively.
STOCKHOLDERS' EQUITY
Pursuant to the 1995 Refinancing and Recapitalization, the Company's
outstanding equity consists of 5,100,000 shares of Class A Convertible Preferred
Stock, par value $.01 per share, 4,900,000 shares of Class B Convertible
Preferred Stock, par value $.01 per share, 51 shares of Class A Common Stock,
par value $.01 per share ("Class A Common Stock"), and 49 shares of Class B
Common Stock, par value $.01 per share ("Class B Common Stock"). The Class A
Convertible Preferred Stock has a liquidation preference per share of $40 plus
accrued and unpaid dividends to the liquidation date. Dividends accrue on the
outstanding shares of Class A Convertible Preferred Stock on a daily basis at
the rate of 12% per annum, compounded semi-annually on December 1 and June 1 of
each year. Accrued and unpaid dividends for the Class A Convertible Preferred
Stock were $69.5 million and $39.6 million at December 28, 1997 and December 29,
1996, respectively. The Class B Convertible Preferred Stock has a liquidation
preference per share of $40. No dividends shall accrue on the Class B
Convertible Preferred Stock. Members of the Investor Group own 51% of the equity
of the Company, consisting of all of the outstanding shares of Class A
Convertible Preferred Stock and Class A Common Stock, and TWE owns 49% of the
equity of the Company, consisting of all of the outstanding shares of Class B
Convertible Preferred Stock and Class B Common Stock. The Company's Class A
Convertible Preferred Stock and Class A Common Stock are further divided into
shares of voting stock (known as Class A-1 Convertible Preferred Stock and Class
A-1 Common Stock, respectively) and non-voting stock (known as Class A-2
Convertible Preferred Stock and Class A-2 Common Stock, respectively). The
non-voting shares of each such class were created for the benefit of certain
regulated entities (each a "Regulated Holder") whose ability to own voting stock
is restricted. Shares of Class A-1 Convertible Preferred Stock and Class A-1
Common Stock may be exchanged by a Regulated Holder on a share-for-share basis
for non-voting shares of such class. Shares of Class A-2 Convertible Preferred
Stock and Class A-2 Common Stock may be exchanged on a share-for-share basis for
voting shares of each such class if such shares are held by a person other than
by a Regulated Holder. Except for voting rights specifically accorded to a
particular class under Delaware law, the shares of Class A-1 Common Stock and
Class B Common Stock vote together as a single class on matters requiring
stockholder action.
The Company has entered into an Employment Agreement ("the Agreement") with
an Executive (the "Executive") whereby the Company agrees to reserve for
issuance a certain number of shares of Class B Common Stock (the "Reserved
Shares"), as defined in the Agreement. The Reserved Shares will become vested on
December 31, 2000, subject to the Executive's employment having continued
through such date or prior thereto if certain events occur as defined in the
Agreement. Upon vesting of the Reserved Shares, the Executive will be entitled
to receive from the Company, in addition to the issued shares, any dividends or
distributions had such shares been issued and outstanding at the time that such
dividends or distributions were declared and paid as defined in the Agreement.
The Company has recognized compensation expense related to the Reserved Shares
during 1997 and 1996.
Under the Agreement, the Executive was also granted options to purchase
shares of the Company's Class B Common Stock. The options include an option to
purchase an additional 163,936 shares of the Company's Class B Common Stock (the
"Tranche 1 Option"), and a second option to purchase an additional 327,872
shares of the Company's Class B Common Stock (the "Tranche 2 Option"). The
F-19
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
exercise price of the Tranche 1 Option is based on a September 1995 exercise
price of $40.64 per share, increasing at a cumulative annual rate of 10%. The
exercise price of the Tranche 2 Option is based on a September 1995 exercise
price of $40.94, increasing at a cumulative annual rate of 15%. On each
September 15 while the Executive is employed under Agreement, the number of
shares of the Company's Class B Common Stock reserved for issuance under the
terms of the Tranche 1 Option will decrease by 5,858.9 shares, at which time the
Executive will be granted a like number of additional Reserved Shares. In
addition, the Company granted additional options for the purchase of 327,872
shares of the Company's Class B Common Stock to members of management of the
Company and its subsidiaries. The terms of these options will be similar to the
Tranche 1 Option and Tranche 2 Option described above.
The options become exercisable only if there is a triggering event, as
defined in the stock option plan agreement. Accordingly, these stock options
have been treated as if they were unissued due to the uncertainty regarding the
Executive's and other management employees' ability to exercise such options.
In 1995, the Financial Accounting Standards Board issued SFAS. No. 123,
"Accounting for Stock-Based Compensation," which permits either recording the
estimated value of stock-based compensation over the applicable vesting period
or disclosing such cost in the notes to the financial statements. Six Flags has
adopted the disclosure-only provisions of SFAS 123. Had compensation cost for
the stock options been determined consistent with SFAS 123, the proforma effect
would not be significant.
PENSION PLAN
Six Flags maintains a noncontributory, defined benefit pension plan (the
"Plan") covering substantially all of Six Flags' full-time employees. The Plan
permits normal retirement at age 65, with early retirement at ages 55 through 64
upon attainment of ten years of credited service. The early retirement benefit
is reduced for benefits commencing before age 62. Plan benefits are calculated
according to a benefit formula based on age, average compensation over the
highest consecutive five-year period during the employee's last ten years of
employment and years of service. Plan assets are invested primarily in common
stocks and mutual funds. The Plan does not have significant liabilities other
than benefit obligations. Under Six Flags' funding policy, contributions to the
Plan are determined using the projected unit credit cost method. This funding
policy meets the requirements under the Employee Retirement Income Security Act
of 1974.
F-20
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The reconciliation of the funded status of the Plan for the fiscal years
1997 and 1996 follows (in thousands):
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Actuarial present value of current accumulated pension obligations,
including vested benefits of $45,289 and $35,615 in 1997 and 1996,
respectively.......................................................... $ 41,243 $ 52,436
--------- ---------
--------- ---------
Actuarial present value of accumulated pension obligations, adjusted for
assumptions regarding future compensation levels (projected benefit
obligations).......................................................... $ 58,702 $ 68,912
Pension assets at market value.......................................... 60,560 77,024
--------- ---------
Projected benefit obligation less than pension assets................... (1,858) (8,112)
Unrecognized net gain................................................... 3,389 7,943
Unrecognized prior service costs........................................ 1,337 1,090
--------- ---------
Accrued pension liability............................................... $ 2,868 $ 921
--------- ---------
--------- ---------
</TABLE>
Net pension cost for the fiscal years 1997, 1996 and 1995 included the
following components (in thousands):
<TABLE>
<CAPTION>
1995 1996 1997
---------- --------- ----------
<S> <C> <C> <C>
Pension costs for benefits earned........................... $ 2,035 $ 3,133 $ 3,025
Interest cost on projected benefit obligation............... 3,612 4,436 4,858
Actual return on pension assets............................. (3,510) (8,484) (13,584)
Net amortization and deferrals.............................. (176) 3,776 7,912
---------- --------- ----------
Net pension cost............................................ $ 1,961 $ 2,861 $ 2,211
---------- --------- ----------
---------- --------- ----------
</TABLE>
Measurement of the projected benefit obligation was based on the following
assumptions:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Discount rate.......................................................... 7.25% 7.75% 7.25%
Return on plan assets.................................................. 9.00% 9.00% 9.00%
Expected rate of salary progression.................................... 6.00% 6.00% 5.00%
</TABLE>
SAVINGS PLAN
Under the provisions of the Six Flags' savings plan, all full-time and
seasonal employees of Six Flags completing one year of service (minimum 1,000
hours) and attaining age 21 are eligible to participate and may contribute up to
6% of compensation as a tax deferred basic contribution. Each participant may
also elect to make additional contributions of up to 10% of compensation (up to
4% tax deferred). Tax deferred contributions to the savings plan may not exceed
amounts defined by the Internal Revenue Service ($9,500 for 1997). Both the
basic and additional contributions are at all times vested. Six Flags, at its
discretion, may make matching contributions of up to 100% of its employees'
basic contributions. Six Flags plans to make $0.9 million in contributions for
the 1997 plan year. Six Flags contributed $0.7 million for each of the 1996 and
1995 Plan years, representing up to 30% of the employees' basic contributions.
Six Flags matching contributions to the savings plan are made in the first
quarter of the succeeding year.
F-21
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
INCOME TAXES
Significant components of income tax expense are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Current
Federal........................................................ $ 3,668 $ -- $ --
State.......................................................... 2,269 -- --
--------- --------- ---------
Total current.................................................... 5,937 -- --
--------- --------- ---------
Deferred
Federal........................................................ 606 4,369 --
State.......................................................... 200 768 --
--------- --------- ---------
Total deferred................................................... 806 5,137 --
--------- --------- ---------
$ 6,743 $ 5,137 $ --
--------- --------- ---------
--------- --------- ---------
</TABLE>
Income tax expense (benefit) varied from the U.S. federal statutory income
tax rate due to the following (in thousands):
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Tax provision (benefit) on income (loss) at U.S. federal
statutory rate of 35%....................................... $ 1,209 $ (3,539) $ (1,298)
Non-deductible amortization of goodwill....................... 2,762 2,287 2,866
State income taxes, net of federal benefit.................... 1,600 499 --
Carryover of net operating losses............................. -- 5,822 (1,241)
Other......................................................... 1,172 68 (327)
--------- --------- ---------
Income tax expense............................................ $ 6,743 $ 5,137 $ --
--------- --------- ---------
--------- --------- ---------
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
F-22
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Significant components of the Company's deferred tax assets and liabilities at
December 28, 1997 and December 29, 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1997
---------- ---------
<S> <C> <C>
Deferred tax liabilities:
Depreciation......................................................... $ 18,800 $ 33,736
Deferral related to tax and fiscal year end difference............... 41,051 46,225
Other................................................................ 22,824 7,256
---------- ---------
Total deferred tax liabilities......................................... 82,675 87,217
---------- ---------
Deferred tax assets:
Tax basis in excess of book basis.................................... 58,964 55,467
Net operating loss carryforwards..................................... 24,698 43,071
Other................................................................ 4,835 4,600
---------- ---------
Total deferred tax assets.............................................. 88,497 103,138
Valuation allowance.................................................... (5,822) (15,921)
---------- ---------
Net deferred tax assets................................................ 82,675 87,217
---------- ---------
Net deferred income taxes.............................................. $ -- $ --
---------- ---------
---------- ---------
</TABLE>
Realization of deferred tax assets associated with the net operating loss
carryforwards is dependent upon generating sufficient taxable income prior to
their expiration. Management believes that there is a risk that certain of these
net operating loss carryforwards may expire unused and, accordingly, has
established a valuation allowance against them. Although realization is not
assured for the remaining deferred tax assets, management believes it is more
likely than not that they will be realized through future taxable earnings or
alternative tax strategies.
At December 31, 1997, the Company has approximately $123.0 million of net
operating loss carryforwards, which expire through 2012.
SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow information consists of the following (in thousands):
<TABLE>
<CAPTION>
1995 1996 1997
----------- --------- ----------
<S> <C> <C> <C>
Cash interest paid........................................ $ 35,282 $ 34,284 $ 36,089
----------- --------- ----------
----------- --------- ----------
Income taxes paid......................................... $ 5,401 $ -- $ 3,479
----------- --------- ----------
----------- --------- ----------
1995 Refinancing and Recapitalization:
Proceeds from term loans................................ $ 475,000 $ -- $ --
Proceeds from the 12.25% Notes.......................... 200,024 -- --
Repayment of TWE debt................................... (558,453) -- --
Return of capital....................................... (89,047) -- --
Payment of deferred financing fees...................... (27,524) -- --
----------- --------- ----------
$ -- $ -- $ --
----------- --------- ----------
----------- --------- ----------
</TABLE>
F-23
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
RELATED PARTY TRANSACTIONS
TRANSACTIONS WITH TIME WARNER ENTERTAINMENT COMPANY, L.P. AND AFFILIATES
On December 31, 1997, TWE contributed $4.0 million to the Company pursuant
to an agreement with the Investor Group. This capital contribution is reflected
as an affiliate receivable as of December 28, 1997.
On May 5, 1997, TWE loaned $19.5 million to a subsidiary of the Company. The
proceeds from this affiliate loan were used to purchase approximately 8% of SFOG
LP Units pursuant to the tender offer for such units. On December 23, 1997, this
affiliate loan, along with accrued interest, was refinanced with Chase. On
November 24, 1997, TWE loaned $10.7 million to another Company subsidiary. The
proceeds of this affiliate loan were loaned to Texas Flags Ltd. in connection
with the Texas Agreements. See the Investment In Co-venture Parks footnote.
In 1997 and 1996, Six Flags reimbursed TWE and its affiliates $2.6 million
and $4.4 million, respectively, for royalties on merchandise, advertising and
other expenses. Employees of a subsidiary of TWE served as senior management of
Six Flags during 1995. Costs associated with this management team, including
compensation and overhead, were charged to Six Flags by TWE. During 1995, Six
Flags was also allocated costs for additional services from TWE, including
accounting services, insurance coverage, transportation, and other services.
Costs allocated from TWE were at a level agreed upon by TWE and Six Flags. Six
Flags believes that this method of allocation was reasonable and that the
allocated costs approximated the costs which would have been incurred on a
stand-alone basis. In 1995, Six Flags recorded approximately $5.3 million for
merchandise royalties, advertising, and other expenses, as well as compensation,
overhead and other services allocated to Six Flags by TWE. Liabilities relating
to such amounts are included in other long-term liabilities in the accompanying
consolidated balance sheets. There were no costs allocated from TWE subsequent
to June 23, 1995.
As part of the 1995 Refinancing and Recapitalization, the Company entered
into a new license agreement (the "License Agreement") pursuant to which it
obtained the exclusive right for a term of 55 years to theme park use in the
United States and Canada (excluding the Las Vegas, Nevada metropolitan area) of
all animated, cartoon and comic book characters that Warner Bros. and DC Comics
have the right to license for such use during the term of the agreement,
including all characters which, prior to the effectiveness of the License
Agreement, already had been licensed by Warner Bros. and DC Comics to the
Company for use in connection with the Company's theme parks.
Under the License Agreement, the Company will pay an annual license fee of
$500,000 for each of the first ten years of the license term. Thereafter, the
license fee will be subject to periodic scheduled increases and will be payable
on a per-theme park basis. The annual license fees will also be increased by
amounts equal to any third-party payments which may be payable by Warner Bros.
or DC Comics as a result of the use of any licensed character by the Company.
The Company entered into an amendment to the License Agreement ("Amendment #
1") which provides the exclusive right for a period of 3 years ending December
31, 1998, to theme park use of elements contained in released versions of
certain theatrical motion pictures and television shows, along with usage of the
"Warner Bros. Backlot Logo" (the "Logo Usage"). Each separate motion picture,
television series and/or Logo Usage may be utilized only in connection with live
shows within the Company's parks. The Company was charged $400,000 in total for
the years 1997 and 1996 and will be charged $150,000 in 1998 for the rights
granted pursuant to Amendment # 1.
F-24
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In addition to the annual license fees described above, the Company is also
required to pay royalties on sales of products incorporating the licensed
characters at standard royalty rates for such products, subject to increase from
time to time. Warner Bros. will be entitled to terminate the License Agreement
prior to the expiration of the stated term if the Company, at any time during
the term, is directly or indirectly controlled by a person that derives
significant revenues from the production or distribution of motion pictures or
engages in certain other businesses competitive with TWE.
The Company also entered into a license agreement with TWE pursuant to which
TWE granted the Company a 25-year license to use the trademarks and service
marks relating to the "Home Box Office" and "HBO" names and the "HBO" logo for
use in connection with the operation of restaurants in the Company's theme
parks. The TWE license is royalty-free for the first ten years of its term.
Thereafter, annual royalties will be established every five years. The Company
also entered into an agreement entitling the Company (i) to use the name "Time
Warner" in connection with operating a retail merchandise outlet with the name
"Time Warner Studio Store" at the Company's theme parks and for establishing a
themed area in each of the Company's theme parks to be called "Time Warner
Studios" and (ii) to stage a concert series in the Company's theme parks under
the name "Warner Music Rock Review." The Company also entered into a license
agreement with the Sports Illustrated division of Time Warner pursuant to which
Time Warner granted the Company a ten-year royalty-free license to use the
"Sports Illustrated" and "Sports Illustrated for Kids" trademarks and service
marks in connection with the operation of a sports festival at the Company's
theme parks. The licensor under each of these additional license agreements has
the right to terminate the license granted thereby if, during the stated term of
any such license agreement, the Warner Bros. License Agreement is terminated for
any reason. The licensor also has the right under certain circumstances to
suspend the right of any of the Company's theme parks to use the licenses
granted thereby if the license is not sufficiently utilized in such theme park.
At January 1, 1995, Six Flags had amounts outstanding to TWE aggregating
$488.0 million. Interest expense relating to the amounts due to TWE for fiscal
year 1995 amounted to $18.0 million. At January 1, 1995, accrued interest on the
TWE debt amounted to $7.2 million. As part of the 1995 Refinancing, all amounts
due to TWE were repaid.
COMMITMENTS AND CONTINGENCIES
LEGAL PROCEEDINGS AND OTHER
The Company is a party to lawsuits incidental to its business and against
which the Company believes it is adequately insured or which will not result in
losses material to the consolidated financial position or results of operations
of the Company.
On March 19, 1997, the Company, and its wholly-owned subsidiary Six Flags
Over Georgia, Inc. (collectively, the "Six Flags Parties") commenced a
declaratory judgement action in the Superior Court of Gwinnett County, Georgia,
entitled Six Flags Over Georgia, Inc. and Six Flags Theme Parks, Inc. v. Six
Flags Fund, Ltd. and Avram Salkin, as Trustee of the Claims Court. The Six Flags
Parties sought, among other things, a declaration and determination of rights
and obligations of the partners of Six Flags Over Georgia, LP with respect to
certain disputed partnership affairs and an accounting of all partnership
affairs. On April 21, 1997, defendants Six Flags Fund Ltd. and its affiliates
(collectively, the "SFOG Fund Parties") filed a motion to discuss the
declaratory judgment action as well as an answer and counterclaim naming Six
Flags Entertainment Corporation and Time Warner Entertainment Company, LP as
additional counterclaim-defendants. The counterclaim seeks imposition of a
constructive trust, compensatory damages of in excess of $250 million and
unspecified punitive damages for alleged breaches of fiduciary duty, conversion,
fraud and conspiracy allegedly committed by the counterclaim-defendants in
connection with
F-25
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
the management of the Six Flags Over Georgia theme park (the "Georgia Park").
The Company and the other counterclaim-defendants intend to vigorously contest
these allegations.
On June 9, 1997, the parties entered into a Consent Order in which they
agreed, among other things, to realign the parties. An Amended Complaint was
then filed by the SFOG Fund Parties as the newly aligned plaintiffs against the
Six Flags Parties in which the same substantive claims were asserted. The Six
Flags Parties filed their answer denying liability and asserting several
affirmative defenses on July 24, 1997. The Six Flags Parties intend to
vigorously contest the allegations of the complaint.
On February 2, 1995, the Company entered into an agreement with the Jackson
Township Municipal Utilities Authority of New Jersey (the "Authority") which
provides for the extension of the Authority's sanitary sewer collection
facilities to Six Flags Great Adventure ("SFGA"), the Company's theme park
located in Jackson, New Jersey, and connection of the SFGA property to such
facilities. SFGA will be entitled to utilize approximately 40% of the total
capacity of the extension and the Authority will waive SFGA's fees relating to
connecting to the extension. The Authority through the New Jersey Waste Water
Treatment Trust ("NJWWTT") plans to issue approximately $6.5 million of
tax-exempt bonds (the "Bonds") to finance the costs of the extension. The
Company has agreed to pay the Authority amounts equal to principal and interest
on the Bonds plus fees to the NJWWTT. Such debt service payments are estimated
at approximately $0.5 million per annum over the 20-year life of the bonds. In
addition, the Company has permitted the Authority to retain, as security, $0.9
million that the Authority currently owes to the Company. These amounts will be
repaid to the Company on a pro rata basis as the principal of the Bonds is
amortized. The Company will be entitled to credits against the debt service
payments as new users connect to the extension and pay for the 60% of capacity
not used by SFGA. The Company made the first principal and interest payment on
the bonds, approximately $0.2 million, during the first quarter of 1998.
LEASES
Six Flags leases certain buildings, vehicles, equipment and rides under
operating leases. Vehicles are generally leased under a Fleet Lease Agreement,
which provides for early lease termination under certain conditions. All other
leases are generally noncancellable and may contain renewal options upon
expiration.
Total rent expense for the fiscal years ended 1997, 1996 and 1995 was $9.7
million, $8.5 million and $12.0 million, respectively. Minimum future rent
payments totaling $16.0 million under commitments for noncancellable operating
leases in effect at the end of 1997 are payable as follows: $5.7 million in
1998, $4.3 million in 1999, $3.0 million in 2000, $1.9 million in 2001, $1.0
million in 2002 and $0.1 million for years thereafter.
SUBSEQUENT EVENT
On February 9, 1998, TWE and Boston Ventures entered into an agreement with
Premier Parks Inc. ("Premier") to sell SFEC for approximately $1.9 billion.
Under the terms of the agreement, Premier will acquire 100% of the equity of
SFEC for $965 million, subject to adjustment, including $765 million in cash and
$200 million in convertible preferred stock of Premier. Premier will assume a
total of approximately $890 million of debt. As part of the transaction, the
companies will enter into a long-term licensing agreement that gives Premier the
exclusive theme park rights in the U.S. and Canada (excluding the Las Vegas,
Nevada Metropolitan area) of all Warner Bros. and DC Comics animated cartoon and
comic book characters. The transaction is expected to close in the second
quarter of 1998. These financial statements do not reflect any adjustments
relating to the consummation of the transaction.
F-26
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Premier expects to finance the transaction with approximately $700 million
of public equity and equity equivalents as well as public debt and bank
financing.
The consummation of this transaction will cause the reserved shares and
options discussed in the Stockholders' Equity footnote to become vested and
exercisable, respectively.
F-27
<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 ANY OF 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>
Available Information.....................................................
Incorporation of Certain Information by Reference.........................
Prospectus Summary........................................................
Risk Factors..............................................................
Use of Proceeds...........................................................
Capitalization............................................................
Selected Historical and Pro Forma Financial and Operating Data............
Management's Discussion and Analysis of Financial Condition and Results of
Operations..............................................................
Business..................................................................
Principal Stockholders....................................................
Description of Six Flags Agreement........................................
Description of Other Company Indebtedness.................................
Description of Notes......................................................
Description of Premier Indebtedness.......................................
Description of Premier Capital Stock......................................
Underwriting..............................................................
Legal Matters.............................................................
Experts...................................................................
Index to Financial Statements.............................................
</TABLE>
$170,000,000
PREMIER PARKS INC.
SIX FLAGS
ENTERTAINMENT
CORPORATION
% SENIOR NOTES DUE 2008
---------------------
PROSPECTUS
, 1998
------------------------
LEHMAN BROTHERS
SALOMON SMITH BARNEY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses to be borne by the
Registrant in connection with the issuance and distribution of the securities
being registered (other than underwriting discounts and commissions). All
amounts presented are estimates except the Securities and Exchange Commission
registration fee and the National Association of Securities Dealers, Inc. filing
fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............................... $ 50,150
National Association of Securities Dealers, Inc. filing fee....................... 17,500
Accounting fees and expenses......................................................
Legal fees and expenses...........................................................
Printing and engraving expenses...................................................
Transfer agent and registrar fees.................................................
Miscellaneous.....................................................................
---------
Total fees and expenses........................................................... $
</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 9 of the
Company'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 of the Underwriting Agreement, to be
filed by amendment as Exhibit 1(a).
ITEM 16. EXHIBITS.
See Exhibit Index.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes that, for the purposes of
determining any liability under the Securities Act of 1933 (the "Act"), each
filing of the Registrant's annual report pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 that is incorporated by reference herein
shall be deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Act 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 Act 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 Act and will be governed by the final adjudication of
such issue.
II-1
<PAGE>
(c) The undersigned Registrant hereby undertakes the following:
(1) That, for purposes of determining any liability under the Act, 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 Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) That, for the purpose of determining any liability under the Act,
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-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-3 and has duly caused 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 25 day of February
1998.
PREMIER PARKS INC.
By: /s/ KIERAN E. BURKE
------------------------------------------
Kieran E. Burke
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
II-3
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each director and officer whose
signature appears below constitutes and appoints Kieran E. Burke, Gary Story,
James F. Dannhauser and James M. Coughlin, or any of them, as his true and
lawful attorneys-in-fact and agents, with full powers of substitution and
re-substitution, for him and in his name, place and stead, to sign in any and
all capacities any and all amendments (including post-effective amendments) to
this registration statement on Form S-3, and any subsequent registration
statement filed by the Registrant pursuant to Rule 462(b) of the Securities Act
of 1933, and to file the same, with all exhibits thereto and all other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming that all such attorneys-in-fact and
agents, or any of them, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement on Form S-3 has been signed by the following persons in
the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
Chairman of the Board and
/s/ KIERAN E. BURKE Chief Executive Officer
- ------------------------------ (principal executive February 25, 1998
Kieran E. Burke officer)
/s/ GARY STORY Director, President and
- ------------------------------ Chief February 25, 1998
Gary Story Operating Officer
Chief Financial Officer
/s/ JAMES F. DANNHAUSER and
- ------------------------------ Director (principal February 25, 1998
James F. Dannhauser financial and accounting
officer)
/s/ PAUL A. BIDDELMAN
- ------------------------------ Director February 25, 1998
Paul A. Biddelman
/s/ MICHAEL E. GELLERT
- ------------------------------ Director February 25, 1998
Michael E. Gellert
/s/ JACK TYRRELL
- ------------------------------ Director February 25, 1998
Jack Tyrrell
/s/ SANDY GURTLER
- ------------------------------ Director February 25, 1998
Sandy Gurtler
/s/ CHARLES R. WOOD
- ------------------------------ Director February 25, 1998
Charles R. Wood
II-4
<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-3 and has duly caused 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 25th day of
February 1998.
SIX FLAGS ENTERTAINMENT CORPORATION
By: /s/ LARRY D. BOUTS
------------------------------------------
Larry D. Bouts
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
II-5
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each director and officer whose
signature appears below constitutes and appoints Peter R. Haje and Richard J.
Bressler, or any of them, as his true and lawful attorneys-in-fact and agents,
with full powers of substitution and re-substitution, for him and in his name,
place and stead, to sign in any and all capacities any and all amendments
(including post-effective amendments) to this registration statement on Form
S-3, and any subsequent registration statement filed by the Registrant pursuant
to Rule 462(b) of the Securities Act of 1933, and to file the same, with all
exhibits thereto and all other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
that all such attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement on Form S-3 has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
Chairman of the Board and
/s/ LARRY D. BOUTS Chief Executive Officer
- ------------------------------ (principal executive February 25, 1998
Larry D. Bouts officer)
/s/ ARTHUR B. WINKLEBLACK Chief Financial Officer
- ------------------------------ (principal financial and February 25, 1998
Arthur B. Winkleblack accounting officer)
/s/ ROBERT D. BLANK
- ------------------------------ Director February 25, 1998
Robert D. Blank
/s/ ANTHONY J. BOLLAND
- ------------------------------ Director February 25, 1998
Anthony J. Bolland
/s/ MARTHA H.W.
CROWNINSHIELD
- ------------------------------ Director February 25, 1998
Martha H.W. Crowninshield
/s/ ROBERT A. RAYNE
- ------------------------------ Director February 25, 1998
Robert A. Rayne
- ------------------------------ Director February , 1998
Jeffrey C. Walker
/s/ SANFORD ANSTEY
- ------------------------------ Director February 25, 1998
Sanford Anstey
/s/ RICHARD J. BRESSLER
- ------------------------------ Director February 25, 1998
Richard J. Bressler
/s/ PETER R. HAJE
- ------------------------------ Director February 25, 1998
Peter R. Haje
- ------------------------------ Director February , 1998
Gerald M. Levin
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ PHILIP R. LOCHNER, JR.
- ------------------------------ Director February 25, 1998
Philip R. Lochner, Jr.
- ------------------------------ Director February , 1998
Richard D. Parsons
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C> <C>
(1) Underwriting Agreements:
* (a) Form of Underwriting Agreement among Six Flags Entertainment Corporation, Lehman Brothers Inc.,
as representatives of the several Underwriters (SFEC Senior Notes)......................
* (b) Form of Underwriting Agreement among Premier, Lehman Brothers Inc., and Salomon Brothers Inc as
representatives of the several Underwriters (Company Senior Discount Notes and Company Senior
Notes).........................................................................................
* (c) Form of U.S. Underwriting Agreement among Premier, Lehman Brothers Inc., and Smith Barney Inc.,
as representatives of the several U.S. Underwriters............................................
* (d) Form of International Underwriting Agreement among Premier, Lehman Brothers International
(Europe), Smith Barney Inc., as representatives of the several International Managers..........
* (e) Form of Agreement among U.S. Underwriters and International Managers...........................
* (f) Form of Underwriting Agreement among Premier, Lehman Brothers Inc., Smith Barney Inc., as
representative of the several Underwriters (Mandatorily Convertible Preferred Stock)...........
(4) Instruments Defining the Rights of Security Holders, Including Indentures:
(a) Indenture dated as of August 15, 1995, among Premier, the subsidiaries of Premier 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 Premier'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 Premier, the subsidiaries of Premier 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 Premier, the
subsidiaries of Premier named therein and Chemical Securities Inc. -- incorporated by reference
from Exhibit 4(4) to the Registration Statement................................................
(e) Form of Subscription Agreement between Premier 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 Premier 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
Premier for the year ended December 31, 1993...................................................
(g) Form of Subscription Agreement, dated October 1992, between Premier and certain investors --
incorporated by reference from Exhibit 4(a) to Premier's Current Report on Form 8-K dated
October 30, 1992...............................................................................
(h) Stock Purchase and Warrant Issuance Agreement, dated October 16, 1989, between Premier and
Kieran E. Burke -- incorporated by reference from Exhibit 4(i) to Form 10-K of Premier 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
Premier for the year ended December 31, 1989...................................................
</TABLE>
II-8
<PAGE>
<TABLE>
<S> <C> <C> <C>
(j) Warrant, dated October 16, 1989, to purchase 93,466 shares of Common Stock issued by Premier to
Kieran E. Burke -- incorporated by reference from Exhibit 4(l) to Form 10-K of Premier for the
year ended December 31, 1989...................................................................
(k) Form of Common Stock Certificate -- incorporated by reference from Exhibit 4(l) to Premier's
Registration Statement on Form S-2 (Reg. No. 333-08281) declared effective on May 28, 1996.....
* (l) Form of Registration Rights Agreement among Premier, Kentucky Kingdom, Inc. and certain
individuals....................................................................................
(m) Form of Indenture dated as of February 1, 1997, among Premier and the Bank of New York, as
trustee (including the form of Notes) -- incorporated by reference from Exhibit 4(l) to
Premier's Registration Statement on Form S-2 (Reg. No. 333-16573) filed with the Securities and
Exchange Commission on January 22, 1997........................................................
(n) Form of Second Supplemental Indenture dated January 21, 1997 -- incorporated by reference from
Exhibit 4(n) to Premier's Registration Statement on Form S-2 (Reg. No. 333-16573) filed with
the Securities and Exchange Commission on January 22, 1997.....................................
* (o) Form of Indenture, dated as of , 1998, between Premier and ........................
* (p) Form of Indenture, dated as of , 1998, between Premier and ........................
* (q) Form of Indenture, dated as of , 1998, between Six Flags Entertainment Corporation and
.........................................................................................
* (r) Form of Certificate of Designation, Rights and Preferences relating to Seller Preferred
Stock..........................................................................................
* (s) Form of Certificate of Designation, Rights and Preferences relating to Mandatorily Convertible
Preferred Stock................................................................................
* (t) Rights Agreement, dated January 12, 1998, between Premier and Bank One Trust Company, N.A.
(including certificate of designation of Series A Junior Participating Preferred Stock)
incorporated by reference from Exhibit to Premier's Current Report on Form 8-K, dated
December 15, 1997..............................................................................
*(5) Opinion of Baer Marks & Upham LLP, including consent............................................................
(23) Consents:
* (a) Consent of Baer Marks & Upham LLP (included in Exhibit (5))....................................
(b) Consent of Ernst & Young LLP...................................................................
(c) Consent of KPMG Peat Marwick LLP
* (d) Consent of Ernst & Young LLP
(e) Consent of KPMG Peat Marwick LLP
(f) Consent or KPMG Peat Marwick LLP
* (g) Consent of Carpenter Mountjoy & Bressler, PSC
(24) Power of Attorney (included on Signature Page of Registration Statement)........................................
</TABLE>
- ------------------------
* To be filed by amendment
II-9
<PAGE>
EXHIBIT 23(b)
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 14, 1998, with respect to the financial
statements of Six Flags Entertainment Corporation included in the Registration
Statement (Form S-3) and related Prospectus of Premier Parks Inc. for the
registration of $170,000,000 Senior Notes.
Ernst & Young LLP
New York, New York
February 24, 1998
<PAGE>
EXHIBIT 23(C)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Premier Parks Inc.:
We consent to the incorporation by reference in the registration statement
on Form S-3 of Premier Parks Inc. and Six Flags Entertainment Corporation of our
report dated March 7, 1997, relating to the consolidated balance sheets of
Premier Parks Inc. as of December 31, 1996 and 1995, and the related
consolidated statements of operations, stockholder's equity, and cash flows for
each of the years in the three-year period ended December 31, 1996, which report
appears in the December 31, 1996 annual report on Form 10-K of Premier Parks
Inc. and to the reference to our firm under the heading "Experts" in the
Prospectus.
KPMG Peat Marwick LLP
Oklahoma City, Oklahoma
February 25, 1998
<PAGE>
EXHIBIT 23(E)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Storytown, U.S.A. Inc.
Fantasy Rides Corporation:
We consent to the incorporation by reference in the registration statement
on Form S-3 of Premier Parks Inc. and Six Flags Entertainment Corporation of our
report dated October 11, 1996, relating to the balance sheets of The Great
Escape (as defined in note 1 to the financial statements) as of October 31, 1995
and 1994, and the related statements of operations, stockholder's equity, and
cash flows for the years then ended, which report appears in the registration
statement on Form S-2 (Registration No. 333-16573) of Premier Parks Inc. and to
the reference to our firm under the heading "Experts" in the Prospectus.
KPMG Peat Marwick LLP
Oklahoma City, Oklahoma
February 25, 1998
<PAGE>
EXHIBIT 23(F)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Stuart Amusement Company:
We consent to the incorporation by reference in the registration statement on
Form S-3 of Premier Parks Inc. and Six Flags Entertainment Corporation of our
report dated December 10, 1996, except as to the last sentence of the third
paragraph of note 3, which is as of December 24, 1996, relating to the
consolidated balance sheets of Stuart Amusement Company and subsidiaries as of
September 30, 1996 and 1995, 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, which
report appears in the registration statement on Form S-2 (Registration No.
333-16573) of Premier Parks Inc. and to the reference to our firm under the
heading "Experts" in the Prospectus.
KPMG Peat Marwick LLP
Springfield, Massachusetts
February 25, 1998
