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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED: DECEMBER 31, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
Commission File Number: 0-9789
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PREMIER PARKS INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
DELAWARE 73-6137714
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
11501 NORTHEAST EXPRESSWAY
OKLAHOMA CITY, OKLAHOMA 73131
(Address of principal executive offices) (Zip Code)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(405) 475-2500
SECURITIES REGISTERED PURSUANT TO SEC. 12(B) OF THE ACT:
SHARES OF COMMON STOCK, PAR VALUE $.05 PER SHARE
RIGHTS TO PURCHASE SERIES A JUNIOR PREFERRED STOCK
(Title of class)
SECURITIES REGISTERED PURSUANT TO SEC. 12(G) OF THE ACT: NONE
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
State the aggregate market value of the voting stock held by non-affiliates
(assuming, solely for the purposes of this Form, that all the directors of the
Registrant are affiliates) of the Registrant:
Approximately $746,170,000 as of March 16, 1998 (based on the last sales
price on such date as reported on the New York Stock Exchange). See "Item 5. --
Market for the Registrant's Common Equity and Related Stockholder Matters."
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest most practicable date:
The number of shares of Common Stock of the Registrant outstanding as of
March 16, 1998 was 18,873,111 shares.
DOCUMENTS INCORPORATED BY REFERENCE
The information required in Part III by Item 10, as to directors, and by
Items 11, 12 and 13 is incorporated by reference to the Registrant's proxy
statement in connection with the annual meeting of stockholders to be held in
June 1998, which will be filed by the Registrant within 120 days after the close
of its 1997 fiscal year.
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PART I
ITEM 1. BUSINESS
INTRODUCTION
The Company(1) is a leading U.S. theme park company which, at December 31,
1997, operated thirteen regional parks. Based on 1997 attendance of
approximately eleven million visitors at these parks, the Company is the fourth
largest regional park operator. The Company's total revenue and earnings before
interest, taxes, depreciation and amortization ("EBITDA") for the twelve months
ended December 31, 1997 was approximately $193.9 million and $61.3 million,
respectively. Premier expects to acquire in March 1998 approximately 50% of the
outstanding capital stock of Walibi, which owns six theme parks and two smaller
attractions in Europe. Walibi's operations had combined 1997 attendance of
approximately 3.5 million. Following this acquisition the Company will commence
a tender offer for the remaining capital stock of Walibi. On February 9, 1998,
Premier entered into an agreement to acquire all of the outstanding capital
stock of Six Flags Entertainment Corporation ("SFEC"). SFEC, through it
subsidiaries, operates eight "Six Flags" branded regional theme parks, as well
as three separately gated water parks and a wildlife safari park, with aggregate
1997 attendance of approximately 22.2 million. The Company expects to close the
acquisition of SFEC in April 1998. See "-- Recent Developments."
The Company's thirteen parks at December 31, 1997, were located in
geographically diverse markets across the United States with concentrated
populations. During the 1997 operating season, the eleven parks then owned by
the Company drew, on average, approximately 82% of their patrons from within a
100-mile radius, with approximately 35.7% of visitors utilizing group and other
pre-sold tickets and approximately 20.6% utilizing season passes. Each of the
Company's parks is individually themed and provides a complete family-oriented
entertainment experience. The Company's theme parks generally offer a broad
selection of state-of-the-art and traditional thrill rides, water attractions,
themed areas, concerts and shows, restaurants, game venues and merchandise
outlets.
Since current management assumed control in 1989, the Company has acquired
twelve parks (including its leasehold and management interests in Marine World,
but excluding the parks to be acquired in the Walibi acquisition and the SFEC
acquisition) and has achieved significant internal growth. During the year ended
December 31, 1997, the eleven parks owned by the Company during the 1997 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
17.3%, 21.3% and 59.5%, respectively, as compared to 1996.
DESCRIPTION OF PARKS
ADVENTURE WORLD
Adventure World is a combination theme and water park located in Largo,
Maryland, approximately 15 miles east of Washington, D.C. and 30 miles southwest
of Baltimore, Maryland. The park's primary market includes Maryland, northern
Virginia, Washington, D.C. and parts of Pennsylvania and Delaware. This market
provides the park with a permanent resident population base of approximately 6.6
million
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(1) As used in this Report, unless the context requires otherwise, the terms (i)
the "1996 Acquisitions" refers to the acquisitions of Elitch Gardens, The
Great Escape, Waterworld Sacramento and Waterworld Concord (together, the
"Waterworld Parks") and Riverside Park, (ii) the "1997 Acquisitions" refers
to the acquisition of Kentucky Kingdom--The Thrill Park in Louisville,
Kentucky ("Kentucky Kingdom"), the proposed acquisition of all of the
outstanding capital stock of Walibi S.A. ("Walibi") assuming successful
completion of the Walibi Tender Offer (as defined herein), as well as the
Company's management contract, lease and purchase option with respect to
Marine World Africa USA in Vallejo, California ("Marine World") and (iii)
"Company" or "Premier" refers to Premier Parks Inc. and its consolidated
subsidiaries.
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people within 50 miles and 10.9 million people within 100 miles. Based on a
copyrighted 1996-97 survey of television households within designated market
areas ("DMAs") published by A.C. Nielsen Media Research, the Washington, D.C.
and Baltimore markets are the number 7 and number 23 DMAs in the United States,
respectively. Based upon in-park surveys, approximately 87% of the visitors to
Adventure World in 1997 resided within a 50-mile radius of the park, and 92%
resided within a 100-mile radius.
The Company owns a site of 515 acres, with 115 acres currently used for park
operations. The remaining 400 acres, which are fully zoned for entertainment and
recreational uses, provide the Company with ample expansion opportunity, as well
as the potential to develop complementary operations, such as an amphitheater.
Adventure World's principal competitors are King's Dominion Park, located in
Doswell, Virginia (near Richmond); Hershey Park, located in Hershey,
Pennsylvania; and Busch Gardens, located in Williamsburg, Virginia. These parks
are located approximately 120, 125 and 175 miles, respectively, from Adventure
World.
DARIEN LAKE & CAMPING RESORT
Darien Lake, a combination theme and water park, is the largest theme park
in the State of New York and the 38th largest theme park in the United States
based on 1997 attendance of 1.4 million. Darien Lake is located off Interstate
90 in Darien Center, New York, approximately 30, 40 and 120 miles from Buffalo,
Rochester and Syracuse, New York, respectively. The park's primary market
includes upstate New York, western and northern Pennsylvania and southern
Ontario, Canada. This market provides the park with a permanent resident
population base of approximately 2.1 million people within 50 miles of the park
and 3.1 million with 100 miles. The Buffalo, Rochester and Syracuse markets are
the number 40, number 75 and number 72 DMAs in the United States, respectively.
Based upon in-park surveys, approximately 62% of the visitors to Darien Lake in
1997 resided within a 50-mile radius of the park, and 79% resided within a
100-mile radius.
The Darien Lake property consists of approximately 1,000 acres, including
144 acres for the theme park, 242 acres of campgrounds and 593 acres of
agricultural, undeveloped and water areas. Darien Lake also has a 20,000 seat
amphitheater. Following the 1995 season, the Company entered into a long-term
arrangement with a national concert promoter to realize the cash flow potential
of the amphitheater. As a result, since it acquired the park, the Company has
realized substantial increases in revenues earned from concerts held at the
facility.
Adjacent to the Darien Lake theme park is a camping resort owned and
operated by the Company with 1,180 developed campsites, including 330
recreational vehicles (RV's) available for daily and weekly rental. In addition,
there are 500 other campsites available for tenting. Darien Lake is one of the
few theme parks in the United States which offers a first class campground
adjacent to the park. The campground is the fifth largest in the United States.
In 1997, approximately 310,000 people used the Darien Lake campgrounds. The
Company believes that substantially all of the camping visitors use the theme
park. The Company is constructing an economy motel at the site for the 1998
season to supplement the campgrounds.
Darien Lake's principal competitor is Wonderland Park located in Toronto,
Canada, approximately 125 miles from Darien Lake. In addition, Darien Lake
competes to a lesser degree with three smaller amusement parks located within 50
miles of the park. Darien Lake is significantly larger with a more diverse
complement of entertainment than any of these three smaller facilities.
ELITCH GARDENS
Elitch Gardens is a combination theme and water park located on
approximately 60 acres in the downtown area of Denver, Colorado, next to Mile
High Stadium and McNichols Arena, and close to Coors Field. Based on 1997
attendance of 1.5 million, Elitch Gardens is the 37th largest theme park in the
United States. The park's primary market includes the greater Denver area, as
well as most of central Colorado.
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This market provides the park with a permanent resident population base of
approximately 2.4 million people within 50 miles of the park and approximately
3.3 million people within 100 miles. The Denver area is the number 18 DMA in the
United States. Based upon in-park surveys, approximately 54% of the visitors to
Elitch Gardens in 1997 resided within a 50-mile radius of the park, and 78%
resided within a 100-mile radius.
A park in Denver under the name of "Elitch Gardens" has been in continuous
operation for over 100 years. During 1994 and 1995, the park was relocated from
its smaller location on the north side of Denver to its current location in
downtown Denver. The park was constructed at a cost of $100.0 million (including
land and equipment, as well as extensive infrastructure). The park was reopened
in 1995. Management believes that the park, as constructed, did not have
sufficient marketable rides and attractions to achieve its attendance potential.
In addition, prior to its acquisition in 1996, the park lacked theming and
landscaping, as well as creative marketing. Elitch Gardens has no significant
direct competitors.
FRONTIER CITY
Frontier City is a western theme park located along Interstate 35 in
northeast Oklahoma City, Oklahoma, approximately 100 miles from Tulsa. The
park's market includes nearly all of Oklahoma and certain parts of Texas and
Kansas, with its primary market in Oklahoma City and Tulsa. This market provides
the park with a permanent resident population base of approximately 1.2 million
people within 50 miles of the park and 2.1 million people within 100 miles. The
Oklahoma City and Tulsa markets are the number 43 and number 58 DMAs in the
United States, respectively. Based upon in-park surveys, approximately 63% of
the visitors to Frontier City in 1997 resided within a 50-mile radius of the
park, and 69% resided within a 100-mile radius.
The Company owns a site of approximately 90 acres, with 60 acres currently
used for park operations. The remaining 30 acres provide the Company with the
potential to develop complementary operations, such as campgrounds or an
amphitheater. Frontier City's only significant competitor is Six Flags Over
Texas, located in Arlington, Texas, approximately 225 miles from Frontier City.
GEAUGA LAKE
Geauga Lake is a combination theme and water park, and is the 40th largest
theme park in the United States based on 1997 attendance of 1.3 million. Geauga
Lake is located in Aurora, Ohio, 20 miles southeast of Cleveland and
approximately 30, 60 and 120 miles, respectively, from Akron and Youngstown,
Ohio and Pittsburgh, Pennsylvania. This market provides the park with a
permanent resident population base of approximately 4.0 million people within 50
miles of the park and 7.4 million within 100 miles. The Cleveland/Akron,
Youngstown and Pittsburgh markets are the number 13, number 97 and number 19
DMAs in the United States, respectively. Based upon in-park surveys,
approximately 44% of the visitors to Geauga Lake in 1997 resided within a
50-mile radius of the park, and 76% resided within a 100-mile radius.
The 257-acre property on which Geauga Lake is situated includes a 55-acre
spring-fed lake. The theme park itself presently occupies approximately 116
acres. There are approximately 87 acres of undeveloped land (of which
approximately 30 acres have the potential for further development).
Geauga Lake's principal competitors are Cedar Point in Sandusky, Ohio and
Kennywood in Pittsburgh, Pennsylvania. These parks are located approximately 90
miles and 120 miles, respectively, from Geauga Lake. There are also three small
water parks within a 50-mile radius of Geauga Lake, and Sea World, a marine
park, is located on the other side of Geauga Lake. While Sea World does, to some
extent, compete with Geauga Lake, it is a complementary attraction, and many
patrons visit both facilities. In that regard, the Company and Sea World conduct
joint marketing programs in outer market areas, involving joint television
advertising of combination passes. In addition, combination tickets are sold at
each park.
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THE GREAT ESCAPE
The Great Escape, which opened in 1954, is a combination theme and water
park located off Interstate 87 in the Lake George resort area, 180 miles north
of New York City and 40 miles north of Albany. The park's primary market
includes the Lake George tourist population and the upstate New York and western
New England resident population. Official statistics indicate that the area had
a visitor population of over 7.5 million people in 1995, of which over 3.5
million were overnight visitors, with an average length of stay of 4.3 days.
This market provides the park with a permanent resident population base of
approximately 800,000 people within 50 miles of the park and 3.3 million people
within 100 miles. The Albany market is the number 52 DMA in the United States.
Based upon in-park surveys, approximately 41% of the visitors to The Great
Escape in 1997 resided within a 50-mile radius of the park, and 69% resided
within a 100-mile radius.
The Great Escape is located on a site of approximately 335 acres, with 100
acres currently used for park operations. Approximately 30 of the undeveloped
acres are suitable for park expansion. The Great Escape's only significant
direct competitor is Riverside Park, the Company's park located in Springfield,
Massachusetts, approximately 150 miles from The Great Escape. In addition, there
is a smaller water park located in Lake George.
KENTUCKY KINGDOM
In November 1997, the Company acquired all of the membership interests of
the limited liability company that owns substantially all of the assets used in
the operation of Kentucky Kingdom, a combination theme and water park located in
Louisville, Kentucky, for an aggregate purchase price of $64.0 million, of which
approximately $4.8 million was paid by delivery of 121,671 shares of Common
Stock, with the balance paid in cash and by the assumption of liabilities.
Depending upon the level of revenues at Kentucky Kingdom during each of the
1998-2000 seasons, the Company may be required to issue additional shares of
Common Stock to the seller.
Kentucky Kingdom is a combination theme and water park, located on
approximately 58 acres on and adjacent to the grounds of the Kentucky State Fair
in Louisville, Kentucky, of which approximately 38 acres are leased under ground
leases with terms (including renewal options) expiring in 2049, with the balance
owned by the Company. Based on 1997 attendance of 1.1 million, Kentucky Kingdom
was the 47th largest theme park in the United States. The park's primary market
includes Louisville and Lexington, Kentucky, Evansville and Indianapolis,
Indiana and Nashville, Tennessee. This market provides the park with a permanent
resident population of approximately 1.4 million people within 50 miles and 4.6
million people within 100 miles. The Louisville and Lexington markets are the
number 50 and number 67 DMAs in the United States.
The Company believes that, although Kentucky Kingdom is outfitted with a
large number of rides and has a solid attendance base, the park has suffered
from limited available funds for investment and a lack of revenue outlets.
Premier intends to spend approximately $10 million prior to the 1998 season to
add two major new attractions and to upgrade the quality and quantity of the
merchandise outlets and restaurants. The Company also intends to implement more
professional and creative marketing, sales and promotional programs. Kentucky
Kingdom's only significant direct competitor is Paramount's Kings Island and The
Beach, located in Cincinnati, Ohio, approximately 100 miles from the park.
MARINE WORLD
Marine World, a theme park which has historically featured primarily marine
mammals and exotic land animals, is the 47th largest theme park in the United
States, based on 1997 attendance of 1.1 million. Marine World is located in
Vallejo, California, approximately 32 miles from San Francisco, 22 miles from
Oakland and 57 miles from Sacramento. This market provides the park with a
permanent resident population base of approximately 5.4 million people within 50
miles and 10.0 million people within 100 miles. The San Francisco/Oakland and
Sacramento areas are the number 5 and number 20 DMAs in the
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United States, respectively. Based upon in-park surveys, approximately 50% of
the visitors to Marine World in 1997 resided within a 50-mile radius of the
park, and 78% resided within a 100-mile radius.
In April 1997, the Company became manager of Marine World, pursuant to which
the Company is entitled to receive an annual base management fee of $250,000 and
up to $250,000 annually in additional fees based on park performance. In
November 1997, the Company exercised an option to lease approximately 40 acres
of land within the site for nominal rent and an initial term of 55 years (plus
four ten-year and one four-year renewal options). The Company intends to expand
the park's entertainment component by adding theme park rides and attractions on
the leased land, which is located within the existing park, in order to create
one fully-integrated regional theme park at the site. Premier is entitled to
receive, in addition to the management fee, 80% of the cash flow generated by
the combined operations at the park, after combined operating expenses and debt
service on outstanding debt obligations relating to the park. The Company is
currently implementing the first phase of the expansion of the entertainment
component at Marine World. The Company also has an option to purchase the entire
site commencing in February 2002 at a purchase price equal to the greater of the
then principal amount of certain debt obligations of the seller (expected to
aggregate $52.0 million at February 2002) or the then fair market value of the
seller's interest in the park (based on a formula relating to the seller's 20%
share of Marine World's cash flow). The Company currently expects to exercise
this purchase option when it becomes exercisable.
Marine World currently consists of 105 acres comprised of various
presentation stadiums, animal habitats, visitor walkways, parking, concession
and picnic areas, bordering a 55-acre man-made lake. The park provides for the
shelter and care of over 50 marine mammals, 600 land animals, over 70 sharks and
rays, birds and reptiles, over 2,600 tropical and cold water fish and marine
invertebrates, and 500 butterflies, all featured in a variety of exhibits and
participatory attractions.
Since taking over the management of Marine World in April 1997, the Company
has stabilized the park's performance by reducing operating expenses, shortening
the operating season, and beginning to expand the park's entertainment component
by adding a themed children's area with children's rides called "Popeye's
Seaport" and the DinoSphere TurboRide, a ride simulation theatre. The Company
expects to invest between $35-$40 million at Marine World for the 1998 season to
add fourteen new rides, including a boomerang steel roller coaster, a river
rapids ride and a shoot-the-chute giant splash ride.
Marine World's principal competitors are Underwater World at Pier 39 in San
Francisco, Great America in Santa Clara and Outer Bay at Monterey Bay Aquarium.
These parks are located approximately, 30, 60 and 130 miles from Marine World,
respectively. In addition, plans for Hecker Pass, a new theme park in Gilroy,
California (approximately 100 miles from Marine World) are under development. If
developed, the Company believes that the park would not be operational for at
least two years.
RIVERSIDE PARK
On February 5, 1997, the Company acquired all of the outstanding common
stock of the owner of Riverside Park and an adjacent multi-use stadium, for a
purchase price of $22,200,000 ($1,000,000 of which was paid through issuance of
32,129 shares of the Company's common stock). Riverside Park is a combination
theme park and motor speedway, located off Interstate 91 near Springfield,
Massachusetts, approximately 95 miles west of Boston. Riverside Park's primary
market includes Springfield and western Massachusetts, and Hartford and western
Connecticut, as well as portions of eastern Massachusetts (including Boston) and
eastern New York. Based on 1997 attendance of over 1.2 million, Riverside Park
is the 43rd largest theme park in the United States. This market provides the
park with a permanent resident population base of approximately 3.1 million
people within 50 miles and 14.7 million people within 100 miles. Based upon
in-park surveys, approximately 63% of the visitors to Riverside Park in 1997
resided within a 50-mile radius of the park, and 95% resided within a 100-mile
radius. Springfield, Hartford/New Haven and Boston are the number 103, number 27
and number 6 DMAs in the United States.
Riverside Park is comprised of approximately 160 acres, with 118 acres
currently used for park operations, 12 acres for a picnic grove and
approximately 30 undeveloped acres. Riverside Park's
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Speedway is a multi-use stadium which includes a one-quarter mile
NASCAR-sanctioned short track for automobile racing which can seat 6,200 for
speedway events and 15,000 festival style for concerts.
Riverside Park's most significant competitor is Lake Compounce located in
Bristol, Connecticut, approximately 50 miles from Riverside Park. Lake Compounce
had not been in regular full-service operation for several years. However, the
prior owner of the park entered into a joint venture relationship in 1996 with
an established park operator, and the park has received a substantial investment
of private and public funds and did operate in the 1997 season. To a lesser
extent, Riverside Park competes with The Great Escape, the Company's park
located in Lake George, New York, approximately 150 miles from Riverside Park.
WATERWORLD PARKS
The Waterworld Parks consist of two water parks (Waterworld USA/Concord and
Waterworld USA/ Sacramento) and one family entertainment center (Paradise
Island).
Waterworld USA/Concord is located in Concord, California, in the East Bay
area of San Francisco. The park's primary market includes nearly all of the San
Francisco Bay area. This market provides the park with a permanent resident
population base of approximately 6.8 million people within 50 miles of the park
and 10.0 million people within 100 miles. The San Francisco Bay market is the
number 5 DMA in the United States. Based upon in-park surveys, approximately 94%
of the visitors in 1997 resided within a 50-mile radius of the park, and 97%
resided within a 100-mile radius.
Waterworld USA/Sacramento is located on the grounds of the California State
Fair in Sacramento, California. Also located on the fair grounds is Paradise
Island, the Company's family entertainment center. The facilities' primary
market includes Sacramento and the immediate surrounding area. This market
provides the park with a permanent resident population base of approximately 2.7
million people within 50 miles of the park and 9.7 million people within 100
miles. The Sacramento market is the number 20 DMA in the United States. Based
upon in-park surveys, approximately 80% of the visitors in 1997 resided within a
50-mile radius of the park, and 96% resided within a 100-mile radius.
Both facilities are leased under long-term ground leases. The Concord site
includes approximately 29 acres, with 24 acres currently used for park
operations. The Sacramento facility is located on approximately 20 acres, all of
which is used for the park and the family entertainment center. Concord's only
significant direct competitor is Raging Waters located in San Jose,
approximately 100 miles from that facility. Sacramento's only significant
competitor is Sunsplash located in northeast Sacramento, approximately 40 miles
from that facility.
WHITE WATER BAY
White Water Bay is a tropical themed water park situated on 22 acres located
along Interstate 40 in southwest Oklahoma City, Oklahoma. The park is the 15th
largest water park in the United States based on 1997 attendance of
approximately 316,000. The park's primary market includes the greater Oklahoma
City metropolitan area. Oklahoma City is the number 43 DMA in the United States.
This market provides the park with a permanent resident population base of
approximately 1.2 million people within 50 miles of the park and 2.1 million
people within 100 miles. Based upon in-park surveys, approximately 80% of the
visitors to White Water Bay in 1997 resided within a 50-mile radius of the park,
and 87% resided within a 100-mile radius. White Water Bay has no direct
competitors.
WYANDOT LAKE
Wyandot Lake, a water park that also offers "dry" rides, is located just
outside of Columbus, Ohio, adjacent to the Columbus Zoo on property sub-leased
from the Columbus Zoo. The park's primary market includes the Columbus
metropolitan area and other central Ohio towns. This market provides the park
with a permanent resident population base of approximately 2.0 million people
within 50 miles of the park and approximately 6.4 million people within 100
miles. The Columbus market is the number 34 DMA in
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the United States. Based on in-park surveys, approximately 85% of the visitors
to Wyandot Lake in 1997 resided within a 50-mile radius of the park, and 93%
resided within a 100-mile radius.
The Company leases from the Columbus Zoo the land, the buildings and several
rides which existed on the property at the time the lease was entered into in
1983. The current lease expires in 1998, but the Company expects to exercise the
first of its two five-year renewal options. The land leased by Wyandot Lake
consists of approximately 18 acres. The park shares parking facilities with the
Columbus Zoo.
Wyandot Lake's direct competitors are Paramount's Kings Island and The
Beach, each located in Cincinnati, Ohio, and Cedar Point, located in Sandusky,
Ohio. Each of these parks is located approximately 100 miles from Wyandot Lake.
Although the Columbus Zoo is located adjacent to the park, it is a complementary
attraction, with many patrons visiting both facilities.
MARKETING AND PROMOTION
The Company attracts visitors through local oriented multi-media marketing
and promotional programs for each of its parks. These programs are tailored to
address the different characteristics of their respective markets and to
maximize the impact of specific park attractions and product introductions. All
marketing and promotional programs are updated or completely revamped each year
to address new developments. Marketing programs are supervised by the Company's
Vice President for Marketing, with the assistance of the Company'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. The Company has also arranged for popular local radio
and television programs to be filmed or broadcast live from its parks.
Group sales and pre-sold tickets provide the Company with a consistent and
stable base of attendance, representing over 35.7% of aggregate attendance in
1997 at the eleven parks owned during that season. 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. Historically,
Premier has been successful in substantially increasing group sales and pre-sold
tickets at its existing and acquired parks.
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, 20.6% of visitors to the
Company's eleven parks then owned 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 72% of patrons at the
Company's eleven parks then owned were admitted at a discount rate and, for the
year ended December 31, 1997, approximately 44.7% of the Company's revenue was
attributable to in-park spending (in-park spending does not include admissions,
sponsorship revenue or other income).
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
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offer a reduced admission price or provide some additional incentive to purchase
a ticket, such as combination tickets with a complementary location.
PARK OPERATIONS
The Company currently operates in geographically diverse markets in the
United States and, after completing the Walibi acquisition, in Europe. Each of
the Company's parks is operated to the extent practicable as a separate
operating division of the Company in order to maximize local marketing
opportunities and to provide flexibility in meeting local needs. Each park is
managed by a general manager who reports to one of the Company's regional
executives (each of whom reports to its Chief Operating Officer) and is
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 are designed to provide incentives (including stock options and cash
bonuses) for individual park managers to execute the Company's strategy and to
maximize revenues and operating cash flow at each park. The Company's ten
general managers at December 31, 1997 had an aggregate of approximately 210
years experience in the industry, including approximately 85 years at parks
owned or operated by Premier.
The Company's parks are generally open daily from Memorial Day through Labor
Day. In addition, most of the Company's parks are open during weekends prior to
and following their daily seasons, primarily as a site for theme events (such as
Hallowscream and Oktoberfest). Typically, the parks charge a basic daily
admission price, which allows unlimited use of all rides and attractions,
although in certain cases special rides and attractions require the payment of
an additional fee. The Company's family entertainment center is open year-round
and does not charge an admission price.
CAPITAL IMPROVEMENTS
The Company regularly makes capital investments in the development and
implementation of new rides and attractions at its parks. The Company purchases
both new and used rides. In addition, the Company rotates rides among its parks
to provide fresh attractions. The Company believes that the introduction of new
rides is an important factor in promoting each of the parks in order to achieve
market penetration and encourage longer visits, which lead to increased
attendance and in-park spending. In addition, the Company generally adds theming
to acquired parks and enhances the theming and landscaping of its existing parks
in order to provide a complete family oriented entertainment experience. Capital
expenditures are planned on a seasonal basis with most expenditures made during
the off-season. 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 drive significant
attendance growth at the parks and to provide an appropriate complement of
entertainment value, depending on the size of a particular market. As an
individual park begins to reach an appropriate attendance penetration for its
market, management generally plans a new ride or attraction every three to four
years in order to enhance the park's entertainment product.
8
<PAGE>
MAINTENANCE AND INSPECTION
The Company's rides are inspected daily by maintenance personnel during the
operating season. These inspections include safety checks as well as regular
maintenance and are made through both visual inspection of the ride and test
operation. Senior management of the Company and the individual parks evaluate
the risk aspects of each park's operation. Potential risks to employees and
staff as well as to the public are evaluated. Contingency plans for potential
emergency situations have been developed for each facility. During the
off-season, maintenance personnel examine the rides and repair, refurbish and
rebuild them where necessary. This process includes x-raying and magnafluxing (a
further examination for minute cracks and defects) steel portions of certain
rides at high-stress points. At March 1, 1998, the Company had approximately 125
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, the
Company's liability insurance carrier performs an annual inspection of each park
and all attractions and related maintenance procedures. The result of insurance
inspections are written evaluation and inspection reports, as well as written
suggestions on various aspects of park operations. State inspectors also conduct
annual ride inspections before the beginning of each season. Other portions of
each park are also subject to inspections by local fire marshals and health and
building department officials. Furthermore, the Company uses Ellis & Associates
as water safety consultants at its parks in order to train life guards and audit
safety procedures.
INSURANCE
The Company maintains insurance of the type and in amounts that it believes
are commercially reasonable and that are available to businesses in its
industry. The Company maintains multi-layered general liability policies that
provide for excess liability coverage of up to $25.0 million per occurrence. By
virtue of self-insured retention limits, the Company is required to pay the
first $50,000 of loss per occurrence. The Company also maintains fire and
extended coverage, workers' compensation, 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.
COMPETITION
The Company's parks compete directly with other theme parks, water and
amusement parks and indirectly with all other types of recreational facilities
and forms of entertainment within their market areas, including movies, sports
attractions and vacation travel. The Company's family entertainment center
competes directly with all types of recreational facilities and forms of
entertainment within its market. Accordingly, the Company's business is and will
continue to be subject to factors affecting the recreation and leisure time
industries generally, such as general economic conditions and changes in
discretionary consumer spending habits. Within each park's regional market area,
the principal factors affecting competition include location, price, the
uniqueness and perceived quality of the rides and attractions in a particular
park, the atmosphere and cleanliness of a park and the quality of its food and
entertainment. The Company believes its parks feature a sufficient variety of
rides and attractions, restaurants, merchandise outlets and family orientation
to enable it to compete effectively.
SEASONALITY
The operations of the Company are highly seasonal, with more than 80% of
park attendance occurring in the second and third calendar quarters and the most
active period falling between Memorial Day and Labor Day. The great majority of
the Company's revenues are collected in the second and third quarters of each
year.
9
<PAGE>
GOVERNMENT REGULATION
Operations at the parks are subject to certain local, state and federal
governmental regulations including, without limitation, labor, health, safety
and minimum wage regulations applicable to theme park operations, and local and
state regulations applicable to restaurant operations at the park. The Company
believes that it is in substantial compliance with applicable regulatory
standards and, although no assurance can be given, it does not foresee the need
for any significant expenditures in this area in the near future.
ENVIRONMENTAL REGULATION
The Company's operations are subject to federal, state and local
environmental laws and regulations governing water discharges, air emissions,
soil contamination, wetlands, the maintenance of underground storage tanks and
the disposal of waste and hazardous materials. The Company believes that it is
in substantial compliance with all such laws and regulations. At Geauga Lake,
the Company is conducting groundwater monitoring around a former on-site
landfill under the supervision of the Ohio Environmental Protection Agency. The
Company is awaiting administrative action on its request for curtailment of the
scope and duration of this monitoring, based on the sampling results to date.
The Company does not anticipate that it will be required to incur any material
costs in connection with the monitoring program or any other post-closure
activities.
Elitch Gardens is located on property that was used as a manufactured gas
plant by the Public Service Company of Colorado ("PSC"), a railroad yard for
Burlington Northern Railroad, and an auto shredding operation. Although these
operations were discontinued over 30 years ago, residual contamination related
to those operations remains in the soil and groundwater beneath the property.
Specifically, environmental investigations have documented the presence of trash
fill material, metals, hydrocarbon-contaminated soils and residual coal tars at
the site.
At the time of the construction of the park, the prior owner of the park
entered into a consent agreement with the Colorado Department of Health which
specifies the soil and groundwater management and monitoring requirements for
the site (the "Consent Agreement"). The Consent Agreement also contains a
limited release and covenant not to sue by the State of Colorado with respect to
then-known environmental conditions, subject to several conditions and
exceptions. In addition, the United States Environmental Protection Agency has
reviewed the Consent Agreement and stated that its intervention under applicable
Federal environmental statues would not be warranted, assuming compliance with
the Consent Agreement and barring a change in, or discovery of new information
about, environmental conditions relating to the property.
At the closing of the Company's acquisition of Elitch Gardens, PSC and
Trillium Corporation (successor-in-interest to Burlington Northern Railroad)
consented to the assignment to Premier by the prior owner of its rights under an
allocation agreement (the "Allocation Agreement"). Under the Allocation
Agreement, PSC and Trillium agreed to pay for 25 years, commencing in 1994, all
Contamination Expenses (as defined) with respect to the site, except that
Premier will be responsible, under certain circumstances, for a maximum of
$100,000 of such Contamination Expenses and, in all cases, for the costs of
groundwater monitoring required under the Consent Agreement. The Company does
not anticipate that it will be required to incur any material costs in
connection with the environmental condition of this site.
EMPLOYEES
At March 1, 1998, the Company employed approximately 712 full-time
employees, and the Company employed approximately 10,430 seasonal employees
during the 1997 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.
10
<PAGE>
Commencing April 1997, the Company became the manager of Marine World.
Certain of the employees at that park are currently subject to a labor agreement
with a local chapter of a national union that expires in January 2000. The
Company has not experienced any strikes or work stoppages by its employees, and
the Company considers its employee relations to be good.
RECENT DEVELOPMENTS
WALIBI
In December 1997, the Company entered into an agreement with three of the
principal stockholders of Walibi, pursuant to which the Company expects to
purchase in March 1998 approximately 50% of the outstanding capital stock of
Walibi (the "Private Acquisition"). Following the closing of the Private
Acquisition, the Company will commence a "public takeover bid," as defined and
regulated under Belgian law (the "Walibi Tender Offer"), for the remainder of
the outstanding capital stock of Walibi.
Walibi is a corporation (societe anonyme) organized under the laws of
Belgium. Walibi's stock is currently traded on the Official Market of the
Brussels Stock Exchange. It owns six theme parks (the "Walibi Parks"), two
located in Belgium, one in The Netherlands and three in France, as well as two
smaller attractions in Belgium. Walibi's operations had combined 1997 attendance
of approximately 3.5 million.
The transaction values Walibi at approximately $139.5 million (at the
exchange rate of Belgian Francs ("BEF") 37.065 to US$1 on December 31, 1997),
based on a multiple of seven times Walibi's 1997 EBITDA. This amount includes
the assumption or refinancing of Walibi net indebtedness (total debt less cash
and cash equivalents) which aggregated approximately $54.3 million at December
31, 1997. As a result, the aggregate consideration to be paid by the Company for
the outstanding stock of Walibi (assuming the Company acquires 100% of the
outstanding Walibi capital stock pursuant to the Walibi Tender Offer) will be
$85.2 million (based on the year-end exchange rate). The purchase price in the
Private Acquisition will be paid 80% in cash in BEF and 20% in Premier Common
Stock (approximately 228,000 shares). Shares of Premier Common Stock issuable in
the Private Acquisition will not be registered under the Securities Act of 1933
and are subject to a "lock-up" agreement until 41 days after the consummation of
the Private Acquisition. The consideration offered in the Walibi Tender Offer
will be payable at the election of the holders of Walibi capital stock (i) in
cash only or (ii) in cash and shares of Premier Common Stock in the same ratio
as the Private Acquisition. The Company will fund the cash portion of the
purchase price of the Walibi acquisition (as well as the refinancing of certain
indebtedness of Walibi) from borrowings under a $300.0 million senior secured
credit facility (the "Premier Credit Facility") entered into by Premier on March
13, 1998. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity, Capital Commitments and Resources." In
addition, the Company will be obligated to issue additional shares of Premier
Common Stock in the event certain gross revenue targets are met for the Walibi
Parks.
Under the terms of the Walibi Agreement, the Company has agreed to invest at
least BEF 1.4 billion (approximately $38 million based on the year-end exchange
rate) in the Walibi Parks over the three years commencing with the 1999 season.
SIX FLAGS
Pursuant to an Agreement and Plan of Merger dated as of February 9, 1998
(the "Six Flags Agreement"), Premier agreed to acquire by merger all of the
capital stock of SFEC from its current stockholders for $965 million (plus an
approximate $11 million adjustment based on year-end balance sheet adjustments
and option cancellation costs). During 1997, Six Flags' attendance, revenue and
EBITDA totaled approximately 22.2 million, $708.7 million and $164.1 million,
respectively. The purchase price is payable all in cash or, at the Company's
option, in cash and depositary shares representing interests
11
<PAGE>
in up to $200.0 million (but not less than $100.0 million) of the Company'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's Zero Coupon Senior Notes due 1999 (the "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% 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, the Company will refinance all
outstanding Six Flags bank indebtedness (approximately $348.5 million at
December 28, 1997) and certain other indebtedness of SFEC (approximately $30.5
million at December 28, 1997) primarily through borrowings under a $472.0
million senior secured credit facility (the "Six Flags Credit Facility" and,
together with the Premier Credit Facility, the "Credit Facilities") to be
entered into by SFTP concurrently with the closing under the Six Flags
Agreement. The acquisition is scheduled to close in April 1998.
In connection with the Six Flags Agreement, the company presently named
Premier Parks Inc. (together with its consolidated subsidiaries, "Premier
Operations") 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, 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 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 Company intends to fund the Six Flags acquisition with the proceeds of
the following public offerings (the "Offerings"):
1. The Company will issue approximately 13,000,000 shares of Common
Stock with estimated gross proceeds of $593.2 million (based upon the
average closing price of the Company's Common Stock for the twenty trading
days ended February 27, 1998).
2. The Company will issue approximately 5,000,000 Premium Income Equity
Securities ("PInES-SM-") representing interests in the Company's Mandatorily
Convertible Preferred Stock (the "Mandatorily Convertible Preferred Stock"
and, together with the Seller Preferred Stock, the "Convertible Preferred
Stock"), with estimated gross proceeds of $228.2 million (based upon the
average closing price of the Company's Common Stock for the twenty trading
days ended February 27, 1998).
3. The Company will issue Senior Discount Notes due 2008 (the "Company
Senior Discount Notes") with estimated gross proceeds of $250.0 million.
4. The Company will issue $280.0 million principal amount of its Senior
Notes due 2006 (the "Company Senior Notes" and, together with the Company
Senior Discount Notes, the "Company Notes").
5. SFEC will issue $170.0 million principal amount of its Senior Notes
due 2006 (the "New SFEC Notes") guaranteed on a fully subordinated basis by
the Company. The proceeds of the New SFEC Notes, together with additional
funds, will be deposited in escrow to repay in full at or prior to maturity
the SFEC Zero Coupon Senior Notes.
There can be no assurance that the Offerings and the Company's acquisition
of SFEC will be consummated, or, if consummated, that the terms of the
securities sold in the Offerings will conform to the proposed terms thereof
described in this Report. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity, Capital Commitments and
Resources."
12
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
AGE AS OF
NAME MARCH 1, 1998 POSITION
- ------------------------------------------ ----------------- ------------------------------------------------------
<S> <C> <C>
Kieran E. Burke........................... (40) Director, Chairman of the Board and Chief Executive
Officer since June 1994; Director, President and Chief
Executive Officer from October 1989 through June 1994.
Gary Story................................ (42) Director, President and Chief Operating Officer since
June 1994; Executive Vice President and Chief
Operating Officer from February 1992 through June
1994; prior to such period, general manager of
Frontier City theme park for more than five years.
James F. Dannhauser....................... (45) Chief Financial Officer since October 1, 1995;
Director since October 1992; prior to June 1996,
Managing Director of Lepercq de Neuflize & Co.
Incorporated for more than five years.
Hue W. Eichelberger....................... (39) Executive Vice President since February 1, 1997;
General Manager of Adventure World since May 1992;
Park Manager of White Water Bay from February 1991 to
May 1992.
Richard A. Kipf........................... (63) Secretary/Treasurer since 1975; Vice President since
June 1994.
Traci E. Blanks........................... (37) Vice President of Marketing since 1995; Vice President
Marketing for Frontier City and White Water Bay from
1992 through 1994; Director of Marketing for Frontier
City from 1986 through 1992.
</TABLE>
Each of the above executive officers has been elected to serve in the
position indicated until the next annual meeting of directors which will follow
the annual meeting of stockholders to be held in June 1998.
13
<PAGE>
ITEM 2. PROPERTIES
Set forth below is a brief description of the Company's real estate at March
1, 1998:
Adventure World, Largo, Maryland -- 515 acres (fee ownership
interest)
Darien Lake, Darien Center, New York -- 979 acres (fee ownership
interest)
Elitch Gardens, Denver, Colorado -- 60 acres (fee ownership
interest)
Frontier City, Oklahoma City, Oklahoma -- 90 acres (fee ownership
interest)
Geauga Lake, Aurora, Ohio -- 258 acres (fee ownership interest)
The Great Escape, Lake George, New York -- 335 acres (fee
ownership interest)
Kentucky Kingdom, Louisville, Kentucky -- 58 acres (fee ownership
and leasehold interest)(1)
Marine World, Vallejo, California -- 40 acres (long-term leasehold
interest at nominal rent)
Riverside Park, Agawam, Massachusetts -- 160 acres (fee ownership
interest)
Waterworld/Concord, Concord, California -- 29 acres (leasehold
interest)(2)
Waterworld/Sacramento, Sacramento, California -- 20 acres
(leasehold interest)(3)
White Water Bay, Oklahoma City, Oklahoma -- 22 acres (fee
ownership interest)
Wyandot Lake, Columbus, Ohio -- 18 acres (leasehold interest)(4)
In addition to the foregoing, at March 1, 1998, the Company indirectly owned
real estate interests through its non-controlling general partnership interest
in 229 East 79th Street Associates L.P., a limited partnership that converted to
cooperative ownership a New York City apartment building. The Company leases
office space in New York City for which it recognized approximately $64,000 in
net rental expense during 1997 after consideration of the rental payments made
by Windcrest Partners, an affiliate of the Company, which shares office space
with the Company. The Company also leases certain of the rides and attractions
at its parks. See Notes 5 and 11 to Notes to Consolidated Financial Statements.
The Company considers its properties to be well-maintained, in good
condition and adequate for their present uses and business requirements.
ITEM 3. 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
- ------------------------
(1) Approximately 38 acres are leased under ground leases with terms
(including renewal options) expiring in 2049, with the balance owned by the
Company.
(2) The site is leased from the City of Concord. The lease expires in 2025 and
the Company has five five- year renewal options.
(3) The site is leased from the California Exposition and State Fair. The
lease expires in 2015 and, subject to the satisfaction of certain
conditions, may be renewed by the Company for an additional ten-year term.
(4) The site is subleased from the Columbus Zoo. The lease expires in 1998 and
the Company has two five-year renewal options, the first of which will be
exercised in that year. Acreage for this site does not include approximately
30 acres of parking which is shared with the Columbus Zoo.
14
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock has been listed on the New York Stock Exchange
(the "NYSE") since December 22, 1997 under the symbol "PKS." Between May 30,
1996 and December 19, 1997, the Company's Common Stock was traded on the Nasdaq
National Market ("NASDAQ") and quoted under the symbol "PARK." Prior to May 30,
1996, trading in the Common Stock was reported on The Pink Sheets and the OTC
Bulletin Board. Set forth below in the first table are the high and low sales
prices for the Common Stock as reported by the NYSE since December 22, 1997. Set
forth below in the second table are the high and low sales prices for the Common
Stock as reported by NASDAQ from May 30, 1996 through December 19, 1997. The
third table sets forth the high and low bid quotations for the Common Stock as
reported on The Pink Sheets and the OTC Bulletin Board for the prior periods
indicated. These quotations reflect inter-dealer prices, without mark-up,
mark-down or commission and may not necessarily represent actual transactions.
Prices shown for periods prior to May 1996 have been adjusted to reflect the
Company's one-for-five reverse stock split at that time.
NEW YORK STOCK EXCHANGE
<TABLE>
<CAPTION>
YEAR QUARTER HIGH LOW
- --------- ---------------------- --------- ---------
<S> <C> <C> <C>
1998 First (through $55 1/8 $37 1/8
March 16, 1998)
1997 Fourth (beginning 40 1/2 40 1/16
December 22, 1997)
</TABLE>
NASDAQ NATIONAL MARKET
<TABLE>
<CAPTION>
YEAR QUARTER HIGH LOW
- --------- ---------------------- --------- ---------
<S> <C> <C> <C>
1997 Fourth (through $43 3/8 $37
December 19, 1997)
Third 37 3/4 32
Second 36 7/8 26
First 32 1/8 25 7/8
1996 Fourth 32 7/8 29 3/8
Third 29 3/4 20 3/4
Second (beginning 22 1/8 19 7/8
May 30, 1996)
</TABLE>
THE PINK SHEETS/OTC BULLETIN BOARD
<TABLE>
<CAPTION>
YEAR QUARTER HIGH LOW
- --------- ---------------------- --------- ---------
<S> <C> <C> <C>
1996 Second (through $20 $12 1/2
May 29, 1996)
First 13 3/4 10
</TABLE>
As of March 16, 1998, there were 747 holders of record of the Company's
Common Stock. The Company paid no cash dividends during the three years ended
December 31, 1997. The Company does not anticipate paying any cash dividends on
its Common Stock during the foreseeable future. The indentures relating to the
Premier Notes limit, and following the Six Flags acquisition the indentures
relating to the Company Notes will limit, the payment of cash dividends to
common stockholders.
15
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1997(1) 1996(2) 1995(3) 1994 1993
---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenue......................................................... $ 193,904 $ 93,447 $ 41,496 $ 24,899 $ 21,860
Depreciation and amortization................................... 19,792 8,533 3,866 1,997 1,537
Interest expense, net........................................... 17,775 11,121 5,578 2,299 1,438
Termination fee, net of expenses(4)............................. 8,364 -- -- -- --
Provision for income tax expense (benefit)...................... 9,615 1,497 (762) 68 91
Income (loss) before extraordinary loss......................... 14,099 1,765 (1,045) 102 1,354
Extraordinary (loss), net of tax effect......................... -- -- (140 (5) -- --
Net income (loss)............................................... 14,099 1,765 (1,185) 102 1,354
Per Share:
Income (loss) before extraordinary loss:
Basic....................................................... .79 .14 (.40 (5) .04 .51
Diluted..................................................... .76 .13 (.40 (5) .04 .51
Net income (loss):
Basic....................................................... .79 .14 (.44) .04 .51
Diluted..................................................... .76 .13 (.44) .04 .51
Cash Dividends................................................ -- -- -- -- --
Net cash provided by operating activities....................... 47,150 11,331 10,646 1,060 2,699
Net cash used in investing activities........................... (217,070) (155,149) (74,139) (10,177) (7,698)
Net cash provided by financing activities....................... 250,165 119,074 90,914 7,457 2,106
Total assets.................................................... 611,321 304,803 173,318 45,539 36,707
Long-term debt and capitalized lease obligations(6)............. $ 217,026 $ 150,834 $ 94,278 $ 24,108 $ 20,821
</TABLE>
- ------------------------
(1) The historical Statement of Operations Data for 1997 reflect the results of
Riverside Park from February 5, 1997 and Kentucky Kingdom from November 7,
1997 (the dates of their respective acquisitions).
(2) The historical Statement of Operations Data for 1996 reflect the results of
Elitch Gardens from October 31, 1996, the Waterworld Parks from November 19,
1996 and The Great Escape from December 4, 1996 (the dates of their
respective acquisitions).
(3) The historical Statement of Operations Data for 1995 reflect the results of
the parks acquired in the Company's acquisition of Funtime Parks from the
date of acquisition, August 15, 1995.
(4) Represents a termination fee (net of expenses) paid to the Company upon
termination of its prior agreement to become managing general partner of Six
Flags over Texas.
(5) During 1995, the Company incurred an extraordinary loss of $140,000, net of
income tax benefit, on extinguishment of debt in connection with the Funtime
Acquisition. This extraordinary loss is not included in income (loss) before
extraordinary loss and income (loss) before extraordinary loss per common
share for 1995.
(6) Includes current portion. Balances are at December 31 of the indicated year.
16
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's revenue is derived from the sale of tickets for entrance to
its parks (approximately 52.7%, 44.0% and 48.8% in 1995, 1996 and 1997,
respectively) and the sale of food, merchandise, games and attractions inside
its parks and other income (approximately 47.3%, 56.0% and 51.2% in 1995, 1996
and 1997, respectively). The Company's principal costs of operations include
salaries and wages, employee benefits, advertising, outside services,
maintenance, utilities and insurance. The Company's expenses are relatively
fixed. Costs for full-time employees, maintenance, utilities, advertising and
insurance do not vary significantly with attendance, thereby providing the
Company with a significant degree of operating leverage as attendance increases
and fixed costs per visitor decrease.
The Company acquired three parks in August 1995 in the Funtime acquisition,
and acquired four parks during the last quarter of 1996. The Company acquired
Riverside Park in February 1997, and Kentucky Kingdom in November 1997. In
addition, the Company assumed management of Marine World in April 1997,
exercised a lease option with respect to a portion of that park in November
1997, and executed a purchase option for the entire park in September 1997. The
following discussion as it relates to 1996 includes two presentations. The first
includes the historical results of the Company (including the results of the
parks acquired in the 1996 Acquisitions (other than Riverside Park) only from
their dates of acquisition forward (October 31, 1996 for Elitch Gardens;
November 19, 1996 for the Waterworld Parks; and December 4, 1996 for The Great
Escape). The second includes both the historical results for the Company and the
results of the parks acquired in the 1996 Acquisitions for periods prior to the
dates of their respective acquisition.
The following discussion as it relates to 1997 includes the results of the
parks acquired in the 1996 Acquisitions (other than Riverside Park) for the full
year, as well as Kentucky Kingdom and Riverside Park from their dates of
acquisition forward, and includes Marine World only to the extent of the
management fee received and depreciation expense related to that park.
The Company believes that significant opportunities exist to acquire
additional theme parks. Although the Company has had discussions with respect to
several additional business acquisitions, no agreement or understanding has been
reached with respect to any specific future acquisition other than the Six Flags
and Walibi acquisitions. In addition, the Company intends to continue its
on-going expansion of the rides and attractions and overall improvement of its
parks to maintain and enhance their appeal. Management believes this strategy
has contributed to increased attendance, lengths of stay and in-park spending
and, therefore, profitability. A consummated acquisition, including, the Six
Flags and Walibi acquisitions, when consummated, may adversely affect the
Company's operating results, at least in the short term, depending on many
factors including capital requirements and the accounting treatment of any such
acquisition.
17
<PAGE>
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997 AND 1996
The table below sets forth certain financial information with respect to the
Company (including the 1996 Acquisitions) for the year ended December 31, 1996
and with respect to the Company and Kentucky Kingdom and Marine World for the
year ended December 31, 1997:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997
YEAR ENDED DECEMBER 31, 1996 -------------------------
-------------------------------------------------------------------- HISTORICAL
HISTORICAL PREMIER
HISTORICAL 1996 (EXCLUDING
NINE MONTHS ENDED ACQUISITIONS MARINE KENTUCKY
SEPTEMBER 30, 1996 FOR PERIODS WORLD AND KINGDOM
HISTORICAL FOR 1996 SUBSEQUENT TO HISTORICAL KENTUCKY AND MARINE
PREMIER(1) ACQUISITIONS(2) SEPTEMBER 30, 1996(3) COMBINED KINGDOM)(4) WORLD(5)
----------- ------------------- --------------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<CAPTION>
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
REVENUE:
Theme park admissions....... $ 41,162 $ 34,062 $ 724 $ 75,948 $ 94,611 $ --
Theme park food, merchandise
and other................. 52,285 30,453 1,020 83,758 99,103 190
----------- ------- ------- ----------- ------------ -----------
Total revenue............. 93,447 64,515 1,744 159,706 193,714 190
----------- ------- ------- ----------- ------------ -----------
OPERATING COSTS AND EXPENSES:
Operating expenses.......... 42,425 23,204 3,116 68,745 80,307 1,049
Selling, general and
administrative............ 16,927 17,035 2,289 36,251 36,461 86
Costs of products sold...... 11,101 9,448 347 20,896 23,025 --
Depreciation and
amortization.............. 8,533 13,028 703 22,264 19,159 633
----------- ------- ------- ----------- ------------ -----------
Total operating costs and
expenses................ 78,986 62,715 6,455 148,156 158,952 1,768
----------- ------- ------- ----------- ------------ -----------
Income (loss) from
operations.................. 14,461 1,800 (4,711) 11,550 34,762 (1,578)
OTHER INCOME (EXPENSE):
Interest expense, net....... (11,121) (4,624) (517) (16,262) (17,763) (12)
Termination fee, net of
expenses.................. -- -- -- -- 8,364 --
Other income (expense)...... (78) (284) -- (362) (59) --
----------- ------- ------- ----------- ------------ -----------
Total other income
(expense)............... (11,199) (4,908) (517) (16,624) (9,458) (12)
----------- ------- ------- ----------- ------------ -----------
Income before income
taxes..................... 3,262 (3,108) (5,228) (5,074) 25,304 (1,590)
Income tax expense
(benefit)................. 1,497 1,131 -- 2,628 9,615 --
----------- ------- ------- ----------- ------------ -----------
Net income (loss)........... $ 1,765 $ (4,239) $ (5,228) $ (7,702) $ 15,689 $ (1,590)
----------- ------- ------- ----------- ------------ -----------
----------- ------- ------- ----------- ------------ -----------
<CAPTION>
HISTORICAL
PREMIER
-----------
<S> <C>
<S> <C>
REVENUE:
Theme park admissions....... $ 94,611
Theme park food, merchandise
and other................. 99,293
-----------
Total revenue............. 193,904
-----------
OPERATING COSTS AND EXPENSES:
Operating expenses.......... 81,356
Selling, general and
administrative............ 36,547
Costs of products sold...... 23,025
Depreciation and
amortization.............. 19,792
-----------
Total operating costs and
expenses................ 160,720
-----------
Income (loss) from
operations.................. 33,184
OTHER INCOME (EXPENSE):
Interest expense, net....... (17,775)
Termination fee, net of
expenses.................. 8,364
Other income (expense)...... (59)
-----------
Total other income
(expense)............... (9,470)
-----------
Income before income
taxes..................... 23,714
Income tax expense
(benefit)................. 9,615
-----------
Net income (loss)........... $ 14,099
-----------
-----------
</TABLE>
- ------------------------
(1) Includes results of the 1996 Acquisitions from and after the acquisition
dates.
(2) Includes results of the 1996 Acquisitions for the nine months ended
September 30, 1996.
(3) Includes results of the 1996 Acquisitions for the respective periods
commencing October 1, 1996 and (ending) on the respective acquisition dates
(or in the case of Riverside Park, December 31, 1996).
(4) Excludes management fee and depreciation expense relating to Marine World
and results of Kentucky Kingdom for the period subsequent to the acquisition
date, November 7, 1997.
(5) Represents management fee and depreciation expense relating to Marine World
and results of Kentucky Kingdom from the acquisition date through December
31, 1997.
18
<PAGE>
REVENUE. Revenue aggregated $193.9 million in 1997 ($193.7 million at the
eleven parks owned during the 1997 season), compared to $93.4 million in 1996,
and to combined revenue of $159.7 million in 1996. This 21.3% increase in
revenue at the same eleven parks is primarily attributable to increased
attendance (17.3%) at these eleven parks, which resulted in part from increased
season pass and group sales at several parks.
OPERATING EXPENSES. Operating expenses increased during 1997 to $81.4
million ($80.3 million at the eleven parks owned during the 1997 season) from
$42.4 million reported in 1996, and from $68.7 million combined operating
expenses for 1996. This 16.9% increase in operating expenses at the same eleven
parks is mainly due to additional staffing related to the increased attendance
levels and increased pay rates. As a percentage of revenue, operating expenses
at these parks constituted 41.5% for 1997 and 43.0% on a combined basis for
1996.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses at the eleven owned parks were $36.5 million in 1997, compared to $16.9
million reported, and $36.3 million combined, selling, general and
administrative expenses for 1996. As a percentage of revenues, these expenses at
the same eleven parks constituted 18.8% for 1997 and 22.7% for 1996 combined.
This increase over 1996 combined expenses relates primarily to increased
advertising and marketing expenses to promote the newly acquired parks and the
new rides and attractions at all of the parks, increased sales taxes arising
from increased volume generally and increased property taxes and professional
services, offset by significant reductions in personnel and insurance expenses.
COSTS OF PRODUCTS SOLD. Costs of products sold were $23.0 million at the
eleven parks for 1997 compared to $11.1 million reported and $20.9 million
combined for 1996. Cost of products sold (as a percentage of in-park revenue) at
these parks constituted approximately 23.2% for 1997 and 25.0% for 1996
combined. This $2.1 million or 10.2% increase over combined 1996 results is
directly related to the 18.3% increase in food, merchandise and other revenues.
DEPRECIATION AND INTEREST EXPENSE. Depreciation expense increased $11.3
million over the reported 1996 results. The increase is a result of the full
year's effect of the 1996 Acquisitions (other than Riverside Park), the purchase
price paid for the Riverside Park and Kentucky Kingdom acquisitions and the
on-going capital program at the Company's parks. Interest expense, net,
increased $6.7 million from 1996 as a result of interest on the 1997 Premier
Notes (as defined herein).
TERMINATION FEE, NET OF EXPENSES. During October 1997, the Company entered
into an agreement with the limited partner of the partnership that owns Six
Flags Over Texas to become the managing general partner of the partnership, to
manage the operations of the park, to receive a portion of the income from such
operations, and to purchase limited partnership units over the term of the
agreement.
The agreement was non-exclusive and contained a termination fee of
$10,750,000 payable to the Company in the event the agreement was terminated.
Subsequent to the Company's agreement with the limited partnership, the prior
operator of the park reached an agreement with the limited partnership, and the
Company's agreement was terminated. The Company received the termination fee in
December 1997 and included the termination fee, net of $2,386,000 of expenses
associated with the transaction, as income in 1997.
INCOME TAXES. The Company incurred income tax expense of $9.6 million
during 1997, compared to $1.5 million during 1996. The effective tax rate for
1997 was approximately 40.5% as compared to 45.9% in 1996. This decrease is the
result of the decline in the size of the non-deductible goodwill from the
Funtime Acquisition and the acquisition of Riverside Park relative to the
Company's income.
At December 31, 1997, the Company estimates that it had approximately $37
million of net operating losses ("NOLs") carryforwards 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
19
<PAGE>
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. See Note 7 to Notes to Consolidated
Financial Statements.
YEARS ENDED DECEMBER 31, 1996 AND 1995
The table below sets forth certain financial information with respect to the
Company and the Funtime parks for the year ended December 31, 1995 and with
respect to the Company and the 1996 Acquisitions (other than Riverside Park) for
the year ended December 31, 1996:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------------------------
HISTORICAL FUNTIME(2) YEAR ENDED DECEMBER 31, 1996
------------------------------------------------------ --------------------------------
SIX MONTHS HISTORICAL
ENDED FORTY-THREE PREMIER
HISTORICAL JULY 2, DAYS ENDED HISTORICAL (EXCLUDING 1996 1996
PREMIER(1) 1995 AUGUST 14, 1995 COMBINED ACQUISITIONS)(3) ACQUISITIONS(4)
----------- ----------- --------------- ----------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<CAPTION>
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
REVENUE:
Theme park admissions............... $ 21,863 $ 6,195 $ 9,680 $ 37,738 $ 41,157 $ 5
Theme park food, merchandise and
other............................. 19,633 8,958 13,450 42,041 52,148 137
----------- ----------- ------- ----------- ------- -------
Total revenue......................... 41,496 15,153 23,130 79,779 93,305 142
----------- ----------- ------- ----------- ------- -------
EXPENSES:
Operating expenses.................. 19,775 10,537 6,039 36,351 40,568 1,857
Selling, general and
administrative.................... 9,272 3,459 2,533 15,264 16,534 393
Costs of products sold.............. 4,635 2,083 2,953 9,671 11,071 30
Depreciation and amortization....... 3,866 3,316 829 8,011 7,785 748
----------- ----------- ------- ----------- ------- -------
Total costs and expenses.............. 37,548 19,395 12,354 69,297 75,958 3,028
----------- ----------- ------- ----------- ------- -------
Income (loss) from operations......... 3,948 (4,242) 10,776 10,482 17,347 (2,886)
Interest expense, net................. (5,578) (2,741) (321) (8,640) (11,121) --
Other income (expense)................ (177) 4 (4) (177) (78) --
----------- ----------- ------- ----------- ------- -------
Total other income (expense).......... (5,755) (2,737) (325) (8,817) (11,199) --
----------- ----------- ------- ----------- ------- -------
Income before income taxes and
extraordinary loss.................. (1,807) (6,979) 10,451 1,665 6,148 (2,886)
Income tax expense (benefit).......... (762) (2,722) 4,076 592 2,905 (1,408)
----------- ----------- ------- ----------- ------- -------
Income (loss) before extraordinary
loss................................ $ (1,045) $ (4,257) $ 6,375 $ 1,073 $ 3,243 $ (1,478)
----------- ----------- ------- ----------- ------- -------
----------- ----------- ------- ----------- ------- -------
<CAPTION>
HISTORICAL
PREMIER
-----------
<S> <C>
<S> <C>
REVENUE:
Theme park admissions............... $ 41,162
Theme park food, merchandise and
other............................. 52,285
-----------
Total revenue......................... 93,447
-----------
EXPENSES:
Operating expenses.................. 42,425
Selling, general and
administrative.................... 16,927
Costs of products sold.............. 11,101
Depreciation and amortization....... 8,533
-----------
Total costs and expenses.............. 78,986
-----------
Income (loss) from operations......... 14,461
Interest expense, net................. (11,121)
Other income (expense)................ (78)
-----------
Total other income (expense).......... (11,199)
-----------
Income before income taxes and
extraordinary loss.................. 3,262
Income tax expense (benefit).......... 1,497
-----------
Income (loss) before extraordinary
loss................................ $ 1,765
-----------
-----------
</TABLE>
- ------------------------
(1) Includes results of the Funtime acquisition from and after August 15, 1995,
the acquisition date.
(2) Represents results of the parks acquired in the Funtime acquisition from
January 1, 1995 to August 14, 1995.
(3) Excludes operating results of parks acquired in the 1996 Acquisitions, but
includes interest expense incurred by virtue of associated financings as of
the date incurred.
(4) Represents results of the parks acquired in the 1996 Acquisitions (other
than Riverside Park which was acquired in February 1997) from their
respective acquisition dates through December 31, 1996.
REVENUE. Revenue aggregated $93.4 million in 1996 ($93.3 million without
the 1996 Acquisitions), compared to $41.5 million actual in 1995, and to
combined revenue of $79.8 million in 1995. This 17.0% increase in revenue
(excluding the 1996 Acquisitions) over combined 1995 revenue at the same six
parks is attributable to increased attendance (10.3%) and per capita revenue
(6.3%) at the six parks and increased sponsorship revenue, as well as increased
season pass sales at several parks, and increased campground
20
<PAGE>
revenue at Darien Lake and income from the new contractual arrangements for 1996
at the Darien Lake Performance Arts Center.
OPERATING EXPENSES. Operating expenses increased during 1996 to $42.4
million ($40.6 million excluding the 1996 Acquisitions) from $19.8 million
reported in 1995 and from $36.4 million combined operating expenses for 1995.
This 11.6% increase in operating expenses (excluding the 1996 Acquisitions) over
combined 1995 operating expenses is mainly due to additional staffing related to
increased attendance levels and increased pay rates, offset to some extent by a
decrease in equipment rental expense in 1996 due to the purchase of equipment
that had been leased during 1995. As a percentage of revenue, operating expenses
(excluding the 1996 Acquisitions) constituted 43.5% for 1996 and 45.6% on a
combined basis for 1995.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses were $16.5 million in 1996 (excluding the 1996 Acquisitions), compared
to $9.3 million reported, and $15.3 million combined, selling, general and
administrative expenses for 1995. As a percentage of revenue, these expenses
constituted 17.7% for 1996 and 19.1% for 1995 combined. This increase over 1995
combined expenses relates primarily to increased advertising and marketing
expenses to promote the Funtime parks and the new rides and attractions at all
of the parks, increased sales taxes arising from increased volume generally and
increased property taxes and professional services.
COSTS OF PRODUCTS SOLD. Costs of products sold were $11.1 million for 1996
compared to $4.6 million reported and $9.7 million combined for 1995. Cost of
products sold (as a percentage of in-park revenue) constituted approximately
21.2% for 1996 and 23.0% for 1995 combined. This $1.4 million or 14.5% increase
over combined 1995 results is directly related to the 24.0% increase in 1996 in
food, merchandise and other revenue.
DEPRECIATION AND INTEREST EXPENSE. Depreciation and amortization expense
was $8.5 million for 1996 as compared to $3.9 million in 1995. The increase was
a result of the full year's effect of the Funtime acquisition, the $116.2
million spent during the fourth quarter of 1996 for the 1996 Acquisitions and
the on-going capital program at the Company's parks. Interest expense, net,
increased $5.5 million in 1996, as compared to 1995, as a result of interest on
the 1995 Premier Notes (as defined herein) for twelve months in 1996 as compared
to four and one-half months in 1995 and the Company's borrowings under its then-
existing senior credit facility made in connection with the 1996 Acquisitions.
INCOME TAXES. The Company incurred income tax expense of $1.5 million
during 1996, compared to a tax benefit of $762,000 during 1995. The effective
tax rate for 1996 was approximately 45.9% as compared to 42.2% in 1995. The
increase is the result of twelve months of goodwill amortization in 1996 versus
four and one-half months in 1995. The goodwill recognized for financial
reporting of the Funtime Acquisition and the 1996 Acquisitions is not deductible
for Federal income tax purposes. See Note 7 to Notes to Consolidated Financial
Statements.
LIQUIDITY, CAPITAL COMMITMENTS AND RESOURCES
The operations of the Company are highly seasonal, with the majority of the
operating season occurring between Memorial Day and Labor Day. Most of the
Company's revenue is collected in the second and third quarters of each year
while most expenditures for capital improvements and major maintenance are
incurred when the parks are closed. 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 these state minimum
wage rates, may result over time in increased compensation expense for the
Company as it relates to these employees as a result of competitive factors.
21
<PAGE>
HISTORICAL
During 1996, the Company generated net cash of $11.3 million from operating
activities. Net cash used in investing activities in 1996 totaled $155.1
million, $116.2 million of which was employed in connection with the 1996
Acquisitions (other than Riverside Park) and $39.4 million represented amounts
spent for capital expenditures, offset slightly by proceeds received from
equipment sales. Net cash provided by financing activities for 1996 totaled
$119.1 million, reflecting the net proceeds from the June 1996 public offering
described below and borrowings under the Company's senior credit facility,
offset, in part, by scheduled repayments of capitalized lease obligations.
During 1997, the Company generated net cash of $47.2 million from operating
activities. Net cash used in investing activities in 1997 totaled $217.1
million, $81.4 million of which was employed in connection with the acquisitions
of Riverside Park and Kentucky Kingdom and $135.9 million represented amounts
spent for capital expenditures at the Company's parks. Net cash provided by
financing activities for 1997 totaled $250.2 million, reflecting the net
proceeds from the January 1997 offerings of Common Stock and $125.0 million
principal amount of the Company's 9 3/4% Senior Notes due 2007 (the "1997
Premier Notes") described below, offset in part by repayment of borrowings under
the Company's senior credit facility.
In June 1996, the Company completed a public offering of approximately 3.9
million shares of Common Stock at a price to the public of $18.00 per share,
resulting in aggregate net proceeds to the Company of approximately $65.3
million. In connection with the June 1996 public offering, all of the Company's
then outstanding shares of preferred stock, together with all accrued dividends
thereon, were converted into approximately 2.6 million shares of Common Stock.
In January 1997, the Company completed two concurrent public offerings, issuing
an additional 6.9 million shares of Common Stock at a price to the public of
$29.00 per share, resulting in aggregate net proceeds to the Company of
approximately $189.5 million, and issuing $125.0 million principal amount of the
1997 Premier Notes, resulting in net proceeds of approximately $120.7 million.
On October 31, 1996, the Company acquired substantially all of the assets
used in the operation of Elitch Gardens for $62.5 million in cash. On November
19, 1996, the Company acquired substantially all of the assets used in the
operation of the Waterworld Parks for an aggregate cash consideration of $17.25
million. On December 4, 1996, the Company acquired substantially all of the
assets of The Great Escape for $33.0 million in cash. On February 5, 1997, the
Company acquired all of the capital stock of the owner of Riverside Park for
approximately $22.2 million, of which $1.0 million was paid in Common Stock with
the balance paid in cash. On April 1, 1997, the Company assumed management of
Marine World, and subsequently exercised a long-term lease option for a portion
of the park and obtained a purchase option with respect to the entire property.
In November 1997, the Company purchased substantially all of the assets used in
the operation of Kentucky Kingdom for a purchase price of $64.0 million, of
which approximately $4.8 million was paid by delivery of 121,671 shares of
Common Stock, with the balance paid in cash and by assumption of certain
liabilities. Depending on the level of revenues at Kentucky Kingdom during each
of the 1998 through 2000 seasons, the Company may be required to issue
additional shares of Common Stock to the seller.
At December 31, 1997, substantially all of Premier's indebtedness was
represented by the 1997 Premier Notes and the Company's 12% Senior Notes due
2003 (the "1995 Premier Notes," and, together with the 1997 Premier Notes, the
"Premier Notes") in an aggregate principal amount of $215.0 million, which
require aggregate annual interest payments of approximately $23.0 million.
Except in the event of a change of control of the Company and certain other
circumstances, no principal payment on the Premier Notes is due until the
maturity dates thereof, August 15, 2003 in the case of the 1995 Premier Notes
and January 15, 2007, in the case of the 1997 Premier Notes. In February 1998,
Premier terminated its $115.0 million senior secured credit facility and
obtained a commitment with respect to the Premier Credit Facility. The Company
will expense its remaining deferred charges related to the terminated facility
in the
22
<PAGE>
first quarter of 1998. The Company entered into the Premier Credit Facility on
March 13, 1998. The Company anticipates that it will borrow 125.0 million
thereunder, in connection with the Walibi acquisition.
PRO FORMA
Upon consummation of the Six Flags transactions, the Company intends to
issue (i) approximately 13,000,000 shares of Common Stock, (ii) approximately
5,000,000 PInES(SM) (depositary shares representing approximately $200.0 million
of Mandatorily Convertible Preferred Stock), (iii) depositary shares
representing up to $200.0 million of Seller Preferred Stock, (iv) approximately
$250.0 million accreted amount of Company Senior Discount Notes, (v) $280.0
million aggregate principal amount of Company Senior Notes and (vi) $170.0
million aggregate principal amount of New SFEC Notes. The PInES(SM) will accrue
cumulative dividends (payable, at the Company's option, in cash or shares of
Common Stock), and will be mandatorily convertible into Common Stock in 2001.
The Seller Preferred Stock will accrue cumulative cash dividends and the Company
is required to offer to purchase the Seller Preferred Stock in 2010. The Company
Senior Discount Notes will not require any interest payments prior to September
2003, and, except in the event of a change of control of the Company and certain
other circumstances, any principal payments prior to their maturity in 2008. The
Company Senior Notes will require annual interest payments of approximately $28
million (based on an assumed interest rate) 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 in 2006. The New SFEC Notes will
require annual interest payments of approximately $16 million (based on an
assumed interest rate) 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 in 2006. The net proceeds of the New SFEC Notes,
together with other funds, will be deposited in escrow to repay in full the SFEC
Zero Coupon Senior Notes. In addition, in connection with the Six Flags
transactions, the Company will (i) assume $285.0 million principal amount at
maturity of the SFTP Senior Subordinated Notes, which had an accreted value of
$269.9 million at December 28, 1997, (ii) refinance all outstanding SFTP bank
indebtedness with the proceeds of $420.0 million of borrowings under the Six
Flags Credit Facility, and (iii) refinance all outstanding bank debt of SFEC
with a portion of the proceeds of the Offerings. The SFTP Senior Subordinated
Notes 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 through 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 Credit Facility.
Borrowings under the Six Flags Credit Facility will be guaranteed by SFEC and
SFTP's subsidiaries and will be secured by a pledge by SFEC of the stock of SFTP
and by substantially all of the assets of SFTP and its subsidiaries (other than
real estate). The Premier Credit Facility includes a five-year $75.0 million
revolving credit facility, a five-year $100.0 million term loan facility (with
principal payments of $10.0 million, $25.0 million, $30.0 million and $35.0
million in the second, third, fourth and fifth years) and an eight-year $125.0
million term loan facility (with principal payments of $1.0 million in each of
the first six years and $25.0 million and $94.0 million in the seventh and
eighth years, respectively). Borrowings under the Premier Credit Facility are
guaranteed by Premier Operations' domestic subsidiaries and secured by
substantially all of the assets of Premier Operations and such subsidiaries
(other than real estate).
There can be no assurance that the Offerings and the Company's acquisition
of SFEC will be consummated, or, if consummated, that the terms of the
securities sold in the Offerings will conform to the proposed terms thereof
described in this Report.
On a pro forma basis as of December 31, 1997, the Company would have had
total outstanding indebtedness in the accreted principal amount of $1,832.0
million (excluding $161.1 million accreted value
23
<PAGE>
of the SFEC Zero Coupon Senior Notes which will be repaid from proceeds of the
New SFEC Notes, together with other funds). Based on actual interest rates for
debt outstanding at December 31, 1997 and assumed interest rates for pro forma
debt, annual interest payments for 1998 on this indebtedness would have
aggregated $136.9 million. In addition, annual dividend payments on the
Convertible Preferred Stock at assumed dividend rates would have aggregated
$28.0 million.
By reason of the Six Flags acquisition, the Company 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 March
16, 1998, the last reported sales price of these notes was substantially in
excess of their accreted amount. The Company does not expect to be required to
purchase any material amount of these notes by reason of this offer. Although
the Company 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 the Company will be able to
obtain any other financing in the event that it should become necessary.
Following the Six Flags transactions, the Company will be required 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 Texas and Six Flags Over Georgia (the "the Co-Venture Parks"); and (ii)
make minimum capital expenditures at each of the Co-Venture Parks during rolling
five-year periods, generally based on 6% of such park's revenue. Cash flow from
operations at the Co-Venture Parks will be used to satisfy these requirements,
before any funds are required from the Company. The Company has also agreed to
purchase a maximum number of 5% per year (accumulating to the extent not
purchased in any given year) of limited partnership units outstanding as of the
date of the co-venture agreements that govern the partnerships (to the extent
tendered by the unit holders). 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 (as defined
therein) 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. The Company's obligations
with respect to Six Flags Over Georgia and Six Flags Over Texas will continue
until 2026 and 2027, respectively. As the Company purchases units, it will be
entitled to the minimum distribution and other distributions attributable to
such units unless it is then in default under its obligations to its partners at
the Co-Venture Parks. The Company estimates that its maximum unit purchase
obligation for 1998, when purchases are required only for the Georgia park, will
aggregate approximately $13 million (approximately $31 million for 1999 when
purchases for both partnerships are required) and its minimum capital
expenditures at these parks for 1998 will total $11 million.
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, that significantly reduces
paid attendance and, therefore, revenue at any of its theme parks. On June 2,
1997, a slide collapsed at the Company's Waterworld park in Concord, California,
resulting in one fatality and the park's closure for twelve days. The park
re-opened with the approval of the City of Concord on June 14, 1997. Although
the collapse and the resulting closure had a material adverse impact on that
park's operating performance for 1997, as well as a lesser impact on the
Company's Sacramento water park (which is also named "Waterworld"), located
approximately seventy miles from the Concord park, the Company's other parks
were not adversely affected. The Company has recovered all of the Concord park's
operating shortfall under its business interruption insurance. In addition, the
Company believes that its liability insurance coverage should be more than
adequate to provide for any personal injury liability which may ultimately be
found to exist in connection with the collapse.
The Company believes that, based on current and anticipated operating
results, cash flow from operations, 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 the
24
<PAGE>
Company's future liquidity needs, including anticipated requirements for working
capital, capital expenditures, scheduled debt and preferred stock dividends and
its obligations under arrangements relating to the Co-Venture Parks, for at
least the next several years. The Company may, however, need to refinance all or
a portion of its debt on or prior to maturity or to obtain additional financing.
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. The Company
currently does not have any components of comprehensive income that are not
included in net income. After the acquisition of Walibi, the only item not
currently included in the Company's consolidated statement of operations would
be the currency translation adjustment that will be reported as part of
stockholders' equity after the acquisition. The Company will adopt SFAS No. 130
in the year 1998.
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. After the
acquisition of Walibi, the Company will be required to disclose certain
financial information related to its foreign operations.
In January 1997, the Securities and Exchange 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. The quantitative and qualitative disclosures required by the
release will be initially provided in the Company's annual report on Form 10-K
for the year ending December 31, 1998.
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 anticipates that it will be able to test its entire
system using its internal programming staff and outside computer consultants and
intends to make any necessary modifications to prevent disruption to its
operations. Costs in connection with any such modifications are not expected to
be material.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and schedules listed in Item 14(a)(1) and (2) are
included in this Report beginning on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
25
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Identification of Directors
Incorporated by reference from the information captioned "Proposal 1:
Election of Directors" included in the Company's Proxy Statement in connection
with the annual meeting of stockholders to be held in June 1998.
(b) Identification of Executive Officers
Information regarding executive officers is included in Item 1 of Part I
herein.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from the information captioned "Executive
Compensation" included in the Company's Proxy Statement in connection with the
annual meeting of stockholders to be held in June 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
(a), (b) Incorporated by reference from the information captioned "Stock
Ownership of Management and Certain Beneficial Holders" included in the
Company's Proxy Statement in connection with the annual meeting of stockholders
to be held in June 1998.
(c) Changes in Control
None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from the information captioned "Certain
Transactions" included in the Company's Proxy Statement in connection with the
annual meeting of stockholders to be held in June 1998.
26
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a)(1) and (2) Financial Statements and Financial Statement Schedules
The following consolidated financial statements of the Premier Parks Inc.
and subsidiaries, the notes thereto, the related report thereon of independent
auditors, and financial statement schedules are filed under Item 8 of this
Report:
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
Independent Auditors' Report.............................................................................. F-2
Consolidated Balance Sheets--December 31, 1997 and 1996................................................... F-3
Consolidated Statements of Operations
Years ended December 31, 1997, 1996 and 1995............................................................ F-4
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1997, 1996 and 1995............................................................ F-5
Consolidated Statements of Cash Flows
Years ended December 31, 1997, 1996 and 1995............................................................ F-6
Notes to Consolidated Financial Statements................................................................ F-8
</TABLE>
Schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are omitted because they
either are not required under the related instructions, are inapplicable, or the
required information is shown in the financial statements or notes thereto.
<TABLE>
<S> <C>
(a)(3) See Exhibit Index.
(b) Reports on Form 8-K
The Company's Current Report on Form 8-K, dated November 7, 1997, as amended.
The Company's Current Report on Form 8-K, dated December 15, 1997.
The Company's Current Report on Form 8-K, dated February 9, 1998.
(c) Exhibits
See Item 14(a)(3) above.
</TABLE>
27
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Form 10-K to be signed
on its behalf by the undersigned, thereunto duly authorized.
Date: March 23, 1998
<TABLE>
<S> <C> <C>
PREMIER PARKS INC.
By: /s/ KIERAN E. BURKE
-----------------------------------------
Kieran E. Burke
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the following capacities on the dates indicated.
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
Chairman of the Board,
/s/ KIERAN E. BURKE Chief Executive Officer
- ------------------------------ (Principal Executive March 23, 1998
Kieran E. Burke Officer)
and Director
/s/ GARY STORY
- ------------------------------ President, Chief Operating March 23, 1998
Gary Story Officer and Director
Chief Financial Officer
/s/ JAMES F. DANNHAUSER (Principal Financial and
- ------------------------------ Accounting March 23, 1998
James F. Dannhauser Officer) and Director
/s/ PAUL A. BIDDELMAN
- ------------------------------ Director March 23, 1998
Paul A. Biddelman
/s/ MICHAEL E. GELLERT
- ------------------------------ Director March 23, 1998
Michael E. Gellert
/s/ JACK TYRRELL
- ------------------------------ Director March 23, 1998
Jack Tyrrell
/s/ SANDY GURTLER
- ------------------------------ Director March 23, 1998
Sandy Gurtler
/s/ CHARLES R. WOOD
- ------------------------------ Director March 23, 1998
Charles R. Wood
28
<PAGE>
PREMIER PARKS INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Independent Auditors' Report............................................................................... F-2
Consolidated Balance Sheets--December 31, 1997 and 1996.................................................... F-3
Consolidated Statements of Operations--Years ended December 31, 1997, 1996 and 1995........................ F-4
Consolidated Statements of Stockholders' Equity--Years ended December 31, 1997, 1996 and 1995.............. F-5
Consolidated Statements of Cash Flows--Years ended December 31, 1997, 1996 and 1995........................ F-6
Notes to Consolidated Financial Statements................................................................. F-8
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Premier Parks Inc.:
We have audited the accompanying consolidated balance sheets of Premier
Parks Inc. and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Premier
Parks Inc. and subsidiaries as of December 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1997, in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Oklahoma City, Oklahoma
February 23, 1998
F-2
<PAGE>
PREMIER PARKS INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
-------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................................... $ 84,288,000 4,043,000
Accounts receivable............................................................... 6,537,000 1,180,000
Inventories....................................................................... 5,547,000 4,200,000
Income tax receivable............................................................. 995,000 --
Prepaid expenses and other current assets......................................... 3,690,000 3,416,000
-------------- ------------
Total current assets.......................................................... 101,057,000 12,839,000
-------------- ------------
Other assets:
Deferred charges.................................................................. 10,123,000 6,752,000
Deposits and other................................................................ 3,949,000 9,087,000
-------------- ------------
Total other assets............................................................ 14,072,000 15,839,000
-------------- ------------
Property and equipment, at cost..................................................... 485,866,000 263,175,000
Less accumulated depreciation..................................................... 35,610,000 17,845,000
-------------- ------------
450,256,000 245,330,000
-------------- ------------
Intangible assets................................................................... 48,876,000 31,669,000
Less accumulated amortization..................................................... 2,940,000 874,000
-------------- ------------
45,936,000 30,795,000
-------------- ------------
Total assets.................................................................. $ 611,321,000 304,803,000
-------------- ------------
-------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses............................................. $ 23,199,000 11,059,000
Accrued interest payable.......................................................... 9,785,000 4,304,000
Current portion of capitalized lease obligations.................................. 795,000 1,492,000
-------------- ------------
Total current liabilities..................................................... 33,779,000 16,855,000
-------------- ------------
Long-term debt and capitalized lease obligations:
Long-term debt:
Senior notes.................................................................... 215,000,000 90,000,000
Credit facility................................................................. -- 57,574,000
Capitalized lease obligations..................................................... 1,231,000 1,768,000
-------------- ------------
Total long-term debt and capitalized lease obligations........................ 216,231,000 149,342,000
Other long-term liabilities......................................................... 4,025,000 4,846,000
Deferred income taxes............................................................... 33,537,000 20,578,000
-------------- ------------
Total liabilities............................................................. 287,572,000 191,621,000
-------------- ------------
Stockholders' equity:
Preferred stock, 500,000 shares authorized at December 31, 1997 and 1996; no
shares issued and outstanding at December 31, 1997 and 1996..................... -- --
Common stock, $.05 par value, 90,000,000 and 30,000,000 shares authorized at
December 31, 1997 and 1996, respectively; 18,899,457 and 11,392,669 shares
issued and 18,873,111 and 11,366,323 shares outstanding at December 31, 1997 and
1996, respectively.............................................................. 944,000 569,000
Capital in excess of par value.................................................... 354,235,000 144,642,000
Accumulated deficit............................................................... (17,241,000) (31,340,000)
Deferred compensation............................................................. (13,500,000) --
-------------- ------------
324,438,000 113,871,000
Less 26,346 common shares of treasury stock, at cost.............................. (689,000) (689,000)
-------------- ------------
Total stockholders' equity.................................................... 323,749,000 113,182,000
-------------- ------------
Total liabilities and stockholders' equity.................................... $ 611,321,000 304,803,000
-------------- ------------
-------------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
-------------- ------------- ------------
<S> <C> <C> <C>
Revenue:
Theme park admissions................................................... $ 94,611,000 41,162,000 21,863,000
Theme park food, merchandise, and other................................. 99,293,000 52,285,000 19,633,000
-------------- ------------- ------------
Total revenue....................................................... 193,904,000 93,447,000 41,496,000
-------------- ------------- ------------
Operating costs and expenses:
Operating expenses...................................................... 81,356,000 42,425,000 19,775,000
Selling, general and administrative..................................... 36,547,000 16,927,000 9,272,000
Costs of products sold.................................................. 23,025,000 11,101,000 4,635,000
Depreciation and amortization........................................... 19,792,000 8,533,000 3,866,000
-------------- ------------- ------------
Total operating costs and expenses.................................. 160,720,000 78,986,000 37,548,000
-------------- ------------- ------------
Income from operations.............................................. 33,184,000 14,461,000 3,948,000
Other income (expense):
Interest expense, net................................................... (17,775,000) (11,121,000) (5,578,000)
Termination fee, net of expenses........................................ 8,364,000 -- --
Other income (expense).................................................. (59,000) (78,000) (177,000)
-------------- ------------- ------------
Total other income (expense)........................................ (9,470,000) (11,199,000) (5,755,000)
-------------- ------------- ------------
Income (loss) before income taxes................................... 23,714,000 3,262,000 (1,807,000)
Income tax expense (benefit).............................................. 9,615,000 1,497,000 (762,000)
Income (loss) before extraordinary loss............................. 14,099,000 1,765,000 (1,045,000)
Extraordinary loss on extinguishment of debt, net of income tax benefit of
$90,000 in 1995......................................................... -- -- (140,000)
-------------- ------------- ------------
Net income (loss)................................................... $ 14,099,000 1,765,000 (1,185,000)
-------------- ------------- ------------
-------------- ------------- ------------
Net income (loss) applicable to common stock........................ $ 14,099,000 1,162,000 (1,714,000)
-------------- ------------- ------------
-------------- ------------- ------------
Weighted average number of common shares outstanding--basic............... 17,938,000 8,603,000 3,938,000
-------------- ------------- ------------
-------------- ------------- ------------
Income (loss) per average common share outstanding--basic:
Income (loss) before extraordinary loss............................. $ .79 .14 (.40)
Extraordinary loss.................................................. -- -- (.04)
-------------- ------------- ------------
Net income (loss)................................................... $ .79 .14 (.44)
-------------- ------------- ------------
-------------- ------------- ------------
Weighted average number of common shares outstanding--diluted............. 18,438,000 8,972,000 3,938,000
-------------- ------------- ------------
-------------- ------------- ------------
Income (loss) per average common share outstanding--diluted:
Income (loss) before extraordinary loss $ .76 .13 (.40)
Extraordinary loss.................................................. -- -- (.04)
-------------- ------------- ------------
Net income (loss)................................................... $ .76 .13 (.44)
-------------- ------------- ------------
-------------- ------------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
SERIES A, 7%
CUMULATIVE
CONVERTIBLE
PREFERRED STOCK COMMON STOCK
-------------------- -------------------- CAPITAL IN
SHARES SHARES EXCESS OF ACCUMULATED DEFERRED TREASURY
ISSUED AMOUNT ISSUED AMOUNT PAR VALUE DEFICIT COMPENSATION STOCK TOTAL
--------- --------- --------- --------- ---------- ------------ ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at
December 31,
1994............. -- $ -- 3,398,467 $ 170,000 50,573,000 (31,920,000) -- (689,000) 18,134,000
Issuance of
preferred
stock............ 200,000 200,000 -- -- 19,800,000 -- -- -- 20,000,000
Conversion of debt
to common stock.. -- -- 1,485,433 74,000 8,888,000 -- -- -- 8,962,000
Net loss........... -- -- -- -- -- (1,185,000) -- -- (1,185,000)
--------- --------- --------- --------- ---------- ------------ ------------- ----------- ----------
Balances at
December 31,
1995............. 200,000 200,000 4,883,900 244,000 79,261,000 (33,105,000) -- (689,000) 45,911,000
Conversion of
preferred stock
to common
stock............ (200,000) (200,000) 2,560,928 128,000 72,000 -- -- -- --
Issuance of common
stock............ -- -- 3,947,841 197,000 65,309,000 -- -- -- 65,506,000
Net income......... -- -- -- -- -- 1,765,000 -- -- 1,765,000
--------- --------- --------- --------- ---------- ------------ ------------- ----------- ----------
Balances at
December 31,
1996............. -- -- 11,392,669 569,000 144,642,000 (31,340,000) -- (689,000) 113,182,000
Issuance of common
stock............ -- -- 7,506,788 375,000 209,593,000 -- (14,625,000) -- 195,343,000
Amortization of
deferred
compensation..... -- -- -- -- -- -- 1,125,000 -- 1,125,000
Net income......... -- -- -- -- -- 14,099,000 -- -- 14,099,000
--------- --------- --------- --------- ---------- ------------ ------------- ----------- ----------
Balances at
December 31,
1997............. -- $ -- 18,899,457 $ 944,000 354,235,000 (17,241,000) (13,500,000) (689,000) 323,749,000
--------- --------- --------- --------- ---------- ------------ ------------- ----------- ----------
--------- --------- --------- --------- ---------- ------------ ------------- ----------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).............................................. $ 14,099,000 1,765,000 (1,185,000)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization................................ 19,792,000 8,533,000 3,866,000
Deferred compensation........................................ 1,125,000 -- --
Extraordinary loss on early extinguishment of debt........... -- -- 230,000
Amortization of debt issuance costs.......................... 1,918,000 811,000 317,000
Gain on sale of assets....................................... (46,000) (51,000) --
(Increase) decrease in accounts receivable................... (5,272,000) (215,000) 5,794,000
Deferred income taxes (benefit).............................. 6,737,000 1,433,000 (808,000)
Increase in income tax receivable............................ (995,000) -- --
Increase in inventories and prepaid expenses and other
current assets............................................. (1,150,000) (2,360,000) (455,000)
(Increase) decrease in deposits and other assets............. 6,237,000 (3,947,000) 1,197,000
Increase (decrease) in accounts payable and accrued
expenses................................................... (776,000) 5,216,000 (2,366,000)
Increase in accrued interest payable......................... 5,481,000 146,000 4,056,000
-------------- -------------- --------------
Total adjustments........................................ 33,051,000 9,566,000 11,831,000
-------------- -------------- --------------
Net cash provided by operating activities................ 47,150,000 11,331,000 10,646,000
-------------- -------------- --------------
Cash flows from investing activities:
Proceeds from the sale of equipment............................ 246,000 476,000 --
Other investments.............................................. (38,000) (48,000) (63,000)
Additions to property and equipment............................ (135,852,000) (39,423,000) (10,732,000)
Acquisition of theme park assets............................... (60,050,000) (116,154,000) --
Acquisition of Stuart Amusement Company in 1997 and Funtime
Parks, Inc. in 1995, net of cash acquired.................... (21,376,000) -- (63,344,000)
-------------- -------------- --------------
Net cash used in investing activities.................... (217,070,000) (155,149,000) (74,139,000)
-------------- -------------- --------------
Cash flows from financing activities:
Repayment of debt.............................................. (66,576,000) (1,082,000) (17,487,000)
Proceeds from borrowings....................................... 132,500,000 57,574,000 93,500,000
Net cash proceeds from issuance of preferred stock............. -- -- 20,000,000
Net cash proceeds from issuance of common stock................ 189,530,000 65,306,000 --
Payment of debt issuance costs................................. (5,289,000) (2,724,000) (5,099,000)
-------------- -------------- --------------
Net cash provided by financing activities................ 250,165,000 119,074,000 90,914,000
-------------- -------------- --------------
Increase (decrease) in cash and cash equivalents................. 80,245,000 (24,744,000) 27,421,000
Cash and cash equivalents at beginning of year................... 4,043,000 28,787,000 1,366,000
-------------- -------------- --------------
Cash and cash equivalents at end of year......................... $ 84,288,000 4,043,000 28,787,000
-------------- -------------- --------------
-------------- -------------- --------------
Supplementary cash flow information:
Cash paid for interest......................................... $ 18,315,000 11,640,000 1,701,000
-------------- -------------- --------------
-------------- -------------- --------------
Cash paid (received) for income taxes (refund)................. $ 3,697,000 64,000 (22,000)
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
F-6
<PAGE>
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Supplemental disclosure of noncash investing and financing activities:
1997
- The Company issued $5,813,000 of common stock (153,800 shares) as
components of theme park acquisitions.
- The Company issued restricted common stock (450,000 shares) to certain
employees valued at $14,625,000.
- The Company assumed $268,000 of capital lease obligations as a component
of a theme park acquisition.
1996
- Preferred stock (200,000 shares) was converted into common stock
(2,560,928 shares).
- The Company issued $200,000 of common stock (9,091 shares) as a component
of a theme park acquisition.
- The Company acquired certain equipment through a capital lease with an
obligation of $64,000.
1995
- Common stock (1,485,433 shares) was exchanged for $9,095,000 of debt, net
of $133,000 of costs.
- The Company acquired certain rides and attractions through capital leases
with obligations totaling $3,259,000.
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
(1) SUMMARY OF SIGNIFICANT POLICIES
DESCRIPTION OF BUSINESS
Premier Parks Inc. (the Company) owns and operates regional theme amusement
and water parks. As of December 31, 1997, the Company and its subsidiaries own
and operate twelve parks: Adventure World, a combination theme and water park
located in Largo, Maryland; Darien Lake & Camping Resort, a combination theme
and water park with an adjacent camping resort and performing arts center,
located between Buffalo and Rochester, New York; Elitch Gardens, a theme park
located in Denver, Colorado; Frontier City, a western theme park located in
Oklahoma City, Oklahoma; Geauga Lake, a combination theme and water park located
near Cleveland, Ohio; The Great Escape and Splash Water Kingdom, a combination
theme and water park located in Lake George, New York; Kentucky Kingdom--The
Thrill Park, located in Louisville, Kentucky; Riverside Park, a theme park
located near Springfield, Massachusetts; two water parks operated under the name
Waterworld/USA, located in Northern California; White Water Bay, a tropical
water park located in Oklahoma City, Oklahoma; and Wyandot Lake, a water park
which also includes "dry rides" located in Columbus, Ohio. The Company also
manages Marine World Africa USA in Vallejo, California.
BASIS OF PRESENTATION
The Company's accounting policies reflect industry practices and conform to
generally accepted accounting principles.
The consolidated financial statements include the accounts of the Company,
its wholly owned subsidiaries, and limited partnerships and limited liability
companies in which the Company beneficially owns 100% of the interests.
Intercompany transactions and balances have been eliminated in consolidation.
The Company's investment in a partnership in which it does not own a
controlling interest is accounted for using the equity method and included in
other assets.
CASH EQUIVALENTS
Cash equivalents of $73,694,000 and $2,753,000 at December 31, 1997 and
1996, respectively, consist of short-term highly liquid investments with a
remaining maturity as of purchase date of three months or less, which are
readily convertible into cash. For purposes of the consolidated statements of
cash flows, the Company considers all highly liquid debt instruments with
original maturities of three months or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost (first in, first out) or market
and primarily consist of products for resale including merchandise and food and
miscellaneous supplies including repair parts for rides and attractions.
F-8
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(1) SUMMARY OF SIGNIFICANT POLICIES (CONTINUED)
ADVERTISING COSTS
Production costs of commercials and programming are charged to operations in
the year first aired. The costs of other advertising, promotion, and marketing
programs are charged to operations in the year incurred. The amounts capitalized
at year-end are included in prepaid expenses.
Advertising and promotions expense incurred was $21,600,000, $9,100,000, and
$5,700,000 during 1997, 1996, and 1995, respectively.
DEFERRED CHARGES
The Company capitalizes all costs related to the issuance of debt with such
costs included in deferred charges in the consolidated balance sheets. The
amortization of such costs is recognized as interest expense under a method
approximating the interest method over the life of the respective debt issue. As
of December 31, 1996, approximately $626,000 of costs associated with the
Company's January 1997 debt and equity offerings (notes 5 and 8) were also
included in deferred charges.
DEPRECIATION AND AMORTIZATION
Buildings and improvements are depreciated over their estimated useful lives
of approximately 30 years by use of the straight-line method. Furniture and
equipment are depreciated using the straight-line method over 5-10 years. Rides
and attractions are depreciated using the straight-line method over 5-25 years.
Amortization of property associated with capitalized lease obligations is
included in depreciation expense in the consolidated financial statements.
Maintenance and repairs are charged directly to expense as incurred, while
betterments and renewals are generally capitalized in the property accounts.
When an item is retired or otherwise disposed of, the cost and applicable
accumulated depreciation are removed and the resulting gain or loss is
recognized.
INTANGIBLE ASSETS
Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over the expected
period to be benefited, generally 25 years. Impairment of goodwill is assessed
whenever events or changes in circumstances indicate that the carrying amount of
goodwill may not be recoverable.
LONG-LIVED ASSETS
The Company adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," on
January 1, 1996. SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. The adoption of SFAS No. 121 did not have an impact on the
Company's consolidated financial position or results of operations in 1996.
F-9
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(1) SUMMARY OF SIGNIFICANT POLICIES (CONTINUED)
INTEREST EXPENSE RECOGNITION
Interest on notes payable is generally recognized as expense on the basis of
stated interest rates. Capitalized lease obligations that do not have a stated
interest rate or that have interest rates considered to be lower than prevailing
market rates (when the obligations were incurred) are carried at amounts
discounted to impute a market rate of interest cost. Total interest expense
incurred was $25,714,000, $12,597,000, and $6,074,000 in 1997, 1996 and 1995,
respectively. Interest expense in the accompanying consolidated statements of
operations is shown net of interest income.
INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
INCOME (LOSS) PER COMMON SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share." SFAS No. 128
revised the previous calculation methods and presentations of earnings per
share. The statement requires that all prior-period earnings per share data be
restated. The Company adopted SFAS No. 128 in the fourth quarter of 1997 as
required by the statement. The effect of applying SFAS No. 128 was not material
to the Company's prior period's earnings per share data. The previously reported
amounts for earnings per share were replaced by basic earnings per share and
diluted earnings per share. Basic earnings per share for the second quarter of
1997 and for the year 1996 are $.01 per share higher than the previously
reported primary earnings per share amounts.
The Company issued convertible preferred stock in 1995. Preferred stock
dividends of $603,000 and $529,000, which were paid through additional issuances
of common stock, were considered in determining net income (loss) applicable to
common stock in 1996 and 1995, respectively.
Under the provisions of SFAS No. 128, basic earnings per share is computed
by dividing net income (loss) applicable to common stock by the weighted average
number of common shares outstanding for the period. Diluted earnings per share
reflects the potential dilution that could occur if the Company's outstanding
stock options were exercised (calculated using the treasury stock method).
The following table reconciles the weighted average number of common shares
outstanding used in the calculations of basic and diluted income per average
common share outstanding for the years 1997 and 1996. The Company incurred a
loss in 1995 and the effect on diluted loss per average common share
F-10
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(1) SUMMARY OF SIGNIFICANT POLICIES (CONTINUED)
outstanding of all contingently issuable common shares was antidilutive.
Therefore, there is no difference in the number of shares used in the basic and
diluted calculations for the year 1995.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
<S> <C> <C>
1997 1996
------------ ----------
Weighted average number of common shares outstanding--basic............................ 17,938,000 8,603,000
Dilutive effect of potential common shares issuable upon the exercise of employee stock
options.............................................................................. 500,000 369,000
------------ ----------
Weighted average number of common shares outstanding--diluted.......................... 18,438,000 8,972,000
------------ ----------
------------ ----------
</TABLE>
STOCK OPTIONS
On January 1, 1996, the Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation," which permits entities to recognize over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB No. 25, "Accounting for Stock Issued to Employees," whereby
compensation expense is recorded on the date of grant only if the current market
price of the underlying stock exceeds the exercise price. Companies which
continue to apply the provisions of APB No. 25 are required by SFAS No. 123 to
disclose pro forma net earnings and net earnings per share for employee stock
option grants made in 1995, 1996 and future years as if the fair-value-based
method defined in SFAS No. 123 had been applied. The Company has elected to
continue to apply the provisions of APB No. 25, and has provided the pro forma
disclosures required by SFAS No. 123 in note 8.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Reclassifications have been made to certain amounts reported in 1996 and
1995 to conform with the 1997 presentation.
(2) FAIR VALUE OF FINANCIAL INSTRUMENTS
The recorded amounts for cash and cash equivalents, accounts receivable,
accounts payable and accrued expenses, and accrued interest payable approximate
fair value because of the short maturity of these financial instruments. The
fair value estimates, methods, and assumptions relating to the Company's other
financial instruments are discussed in note 5.
F-11
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(3) ACQUISITION OF THEME PARKS PRIOR TO JANUARY 1998
Pursuant to a merger agreement, on August 15, 1995, the Company acquired
Funtime Parks, Inc. (Funtime), a company owning three regional theme parks, for
an initial purchase price of approximately $60,000,000 in cash, with an
additional amount of approximately $5,400,000 paid to the former shareholders as
a postclosing adjustment related to the operating cash flows of the former
Funtime parks after the acquisition date. The acquisition was accounted for as a
purchase. As of the acquisition date and after giving effect to the purchase,
$18,030,000 of deferred tax liabilities were recognized for the tax consequences
attributable to the differences between the financial statement carrying amounts
and the tax basis of Funtime's assets and liabilities. Approximately $13,500,000
of cost in excess of the fair value of the net assets acquired was recorded as
goodwill.
The accompanying 1997, 1996 and 1995 consolidated statements of operations
reflect the results of Funtime from the date of acquisition (August 15, 1995).
On October 31, 1996, the Company acquired all of the interests of a
partnership which owned substantially all of the assets used in the operation of
Elitch Gardens for $62,500,000 in cash. Thereupon, the partnership dissolved by
operation of law. As a result, the assets were then directly owned by the
Company. The transaction was accounted for as a purchase. In addition, the
Company entered into a five-year non-competition agreement with the president of
Elitch Gardens Company's general partner. Based upon the purchase method of
accounting, the purchase price was primarily allocated to property and equipment
with $4,506,000 of costs recorded as intangible assets, primarily goodwill. The
general partner and a principal limited partner of Elitch Gardens Company have
agreed severally to indemnify the Company for claims in excess of $100,000 in an
amount up to $1,000,000 per partner.
On November 19, 1996, the Company acquired all of the interests of two
partnerships which owned substantially all of the assets used in the operation
of the two Waterworld/USA water parks and a related family entertainment center
for an aggregate cash purchase price of approximately $17,250,000, of which
$862,500 was placed in escrow to fund potential indemnification claims by the
Company. Thereupon, the partnerships dissolved by operation of law. As a result,
the assets were then directly owned by the Company. The transaction was
accounted for as a purchase. Based upon the purchase method of accounting, the
purchase price was primarily allocated to property and equipment with $5,110,000
of costs recorded as intangible assets, primarily goodwill.
On December 4, 1996, the Company acquired all of the interests in a limited
liability company which owned substantially all of the assets used in the
operation of The Great Escape and Splash Water Kingdom for a cash purchase price
of $33,000,000. The transaction was accounted for as a purchase. In connection
with the acquisition, the Company entered into a non-competition agreement and a
related agreement with the former owner, providing for an aggregate
consideration of $1,250,000. In addition, as a component of the transaction, the
Company issued 9,091 shares of its common stock ($200,000) to an affiliate of
the former owner. Based upon the purchase method of accounting, the purchase
price was primarily allocated to property and equipment with $9,221,000 of costs
recorded as intangible assets, primarily goodwill.
The accompanying 1997 and 1996 consolidated statement of operations reflects
the results of the Elitch Gardens, Waterworld/USA, and The Great Escape and
Splash Water Kingdom acquisitions from their respective acquisition dates.
F-12
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(3) ACQUISITION OF THEME PARKS PRIOR TO JANUARY 1998 (CONTINUED)
On February 5, 1997, the Company acquired all of the outstanding common
stock of Stuart Amusement Company (Stuart), the owner of Riverside Park and an
adjacent multi-use stadium, for a purchase price of $22,200,000 ($1,000,000 of
which was paid through issuance of 32,129 of the Company's common shares). The
transaction was accounted for as a purchase. As of the acquisition date and
after giving effect to the purchase, $6,623,000 of deferred tax liabilities were
recognized for the tax consequences attributable to the differences between the
financial statement carrying amounts and the tax basis of Stuart's assets and
liabilities. Approximately $10,484,000 of cost in excess of the fair value of
the net assets acquired was recorded as intangible assets, primarily goodwill.
On November 7, 1997, the Company acquired all of the interests of a limited
liability company which owned substantially all of the theme park assets of
Kentucky Kingdom--The Thrill Park (Kentucky Kingdom), located in Louisville,
Kentucky, for a purchase price of $64,000,000 of which $4,831,000 was paid
through the issuance of 121,671 shares of the Company's common stock. The
Company may be required to issue additional shares of common stock based upon
the level of revenues at Kentucky Kingdom during 1998, 1999, and 2000. The
acquisition was accounted for as a purchase. The purchase price was primarily
allocated to property and equipment with $4,592,000 of costs recorded as
intangible assets, primarily goodwill. The value of the additional shares, if
any, will be recognized as additional goodwill.
The accompanying 1997 consolidated statement of operations reflects the
results of Stuart and Kentucky Kingdom from their respective acquisition dates.
The following summarized pro forma results of operations assumes that for
the year ended December 31, 1997, the Stuart and Kentucky Kingdom acquisitions
and related transactions occurred as of the beginning of 1997 and for the year
ended December 31, 1996, assumes that these acquisitions, the Elitch Gardens,
The Great Escape and Splash Water Kingdom, and Waterworld/USA acquisitions, and
the related transactions occurred as of the beginning of 1996.
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
(UNAUDITED)
(IN THOUSANDS)
Total revenues............................................... $ 215,620 175,224
Net income................................................... 15,210 12,436
Income per weighted average common share
outstanding--basic......................................... .81 .66
</TABLE>
F-13
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(4) PROPERTY AND EQUIPMENT
Property and equipment, at cost, are classified as follows:
<TABLE>
<CAPTION>
1997 1996
-------------- -------------
<S> <C> <C>
Land.......................................................... $ 40,099,000 27,760,000
Buildings and improvements.................................... 159,661,000 106,302,000
Rides and attractions......................................... 254,969,000 112,379,000
Equipment..................................................... 31,137,000 16,734,000
-------------- -------------
Total......................................................... 485,866,000 263,175,000
Less accumulated depreciation................................. (35,610,000) (17,845,000)
-------------- -------------
$ 450,256,000 245,330,000
-------------- -------------
-------------- -------------
</TABLE>
Included in property and equipment are costs and accumulated depreciation
associated with capitalized leases as follows:
<TABLE>
<CAPTION>
1997 1996
------------ ----------
<S> <C> <C>
Cost............................................................... $ 6,386,000 6,069,000
Accumulated depreciation........................................... (826,000) (577,000)
------------ ----------
$ 5,560,000 5,492,000
------------ ----------
------------ ----------
</TABLE>
(5) LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS
At December 31, 1997 and 1996, long-term debt and capitalized lease
obligations consist of:
<TABLE>
<CAPTION>
1997 1996
-------------- -------------
<S> <C> <C>
Long term debt:
Senior notes due 2003 (a)................................... $ 90,000,000 90,000,000
Senior notes due 2007 (b)................................... 125,000,000 --
Credit facility (c)......................................... -- 57,574,000
-------------- -------------
Total long-term debt........................................ 215,000,000 147,574,000
Capitalized lease obligations:
Capitalized lease obligations maturing 1998 through 2000,
requiring aggregate annual lease payments ranging from
approximately $20,000 to $548,000 including implicit
interest at rates ranging from 9.875% to 14% and secured
by equipment with a net book value of approximately
$5,560,000 as of December 31, 1997........................ 2,026,000 3,260,000
-------------- -------------
Total................................................... $ 217,026,000 150,834,000
-------------- -------------
-------------- -------------
</TABLE>
F-14
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(5) LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS (CONTINUED)
- ------------------------
(a) The notes are senior unsecured obligations of the Company, with a
$90,000,000 aggregate principal amount, and mature on August 15, 2003. The notes
bear interest at 12% per annum payable semiannually on August 15 and February 15
of each year, commencing February 15, 1996. The notes are redeemable, at the
Company's option, in whole or part, at any time on or after August 15, 1999, at
varying redemption prices. Additionally, at any time prior to August 15, 1998,
the Company may redeem in the aggregate up to 33 1/3% of the original aggregate
principal amount of notes with the proceeds of one or more public equity
offerings at a redemption price of 110% of the principal amount. These notes are
guaranteed on a senior, unsecured, joint and several basis by all of the
Company's principal operating subsidiaries.
The proceeds of the notes were used in the Funtime acquisition and in the
refinancing of previously existing indebtedness. The Company recognized a
$230,000 loss on early extinguishment of debt during 1995. The loss was
recorded, net of tax effect, as an extraordinary item.
The indenture under which the notes were issued was amended January 21, 1997, in
contemplation of the Company's January 1997 senior debt and equity offerings.
The indenture places limitations on operations and sales of assets by the
Company or its subsidiaries, permits incurrence of additional debt only in
compliance with certain financial ratios, and limits the Company's ability to
pay cash dividends or make other distributions to the holders of its capital
stock or to redeem such stock.
The indenture, as amended, permits the Company, subject to certain limitations,
to incur additional indebtedness, including the $125,000,000 of indebtedness
issued January 31, 1997 described below and secured senior revolving credit
facility indebtedness of up to $75,000,000.
All of the Company's subsidiaries, except for one indirect wholly owned
subsidiary, Funtime-Famous Recipe, Inc., are full, unconditional, and joint and
several guarantors of the notes. The assets and operations of Funtime-Famous
Recipe, Inc. are inconsequential to the Company and its consolidated financial
position and results of operations. Condensed financial statement information
for the guarantors is not included herein, as the Company does not believe such
information would be material to the understanding of the Company and its direct
and indirect subsidiaries.
(b) On January 31, 1997, the Company issued $125,000,000 of 9 3/4% senior
notes due January 2007. The notes are senior unsecured obligations of the
Company and equal to the Company's 2003 notes in priority upon liquidation.
Interest is payable on January 15 and July 15 of each year, commencing July 15,
1997. The notes are redeemable, at the Company's option, in whole or in part, at
any time on or after January 15, 2002, at varying redemption prices.
Additionally, at any time prior to January 15, 2000, the Company may redeem in
the aggregate up to 33 1/3% of the original aggregate principal amount of notes
with the proceeds of one or more public equity offerings at a redemption price
of 110% of the principal amount. The notes are guaranteed on a senior,
unsecured, joint and several basis by all of the Company's principal operating
subsidiaries.
The indenture under which the notes were issued places limitations substantially
similar to those of the Company's senior notes due in 2003. A portion of the
proceeds were used to fully pay amounts outstanding under the Company's Credit
Facility.
F-15
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(5) LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS (CONTINUED)
(c) In connection with the 1996 acquisitions described in note 3, in October
1996 the Company entered into a senior secured credit facility (the "Credit
Facility") with a syndicate of banks. The Credit Facility had an aggregate
availability of $115,000,000 of which (i) up to $30,000,000 under the revolving
credit facility (the "Revolving Credit Facility") was for working capital and
general corporate purposes; (ii) up to $25,000,000 ("Facility A") was to finance
capital expenditures prior to April 30, 1998; and (iii) up to $60,000,000
("Facility B") was to finance certain acquisitions by the Company (including the
acquisitions described in note 3), provided that at least 50% of the
consideration for any such acquisition or improvements under Facility A or
Facility B (collectively, the "Term Loan Facility") was required to have been
funded by the Company. Interest rates per annum under the Credit Facility were
equal to a base rate equal to the higher of the Federal Funds Rate plus 1/2% or
the prime rate of Citibank N.A., in each case plus the Applicable Margin (as
defined thereunder) or the London Interbank Offered Rate plus the Applicable
Margin. Commitment fees approximated $620,000 and $53,000 in 1997 and 1996,
respectively. The Revolving Credit Facility was to terminate October 31, 2002
(reducing to $15,000,000 on October 31, 2001) and borrowings under the Term Loan
Facility were to mature October 31, 2001; however, aggregate principal payments
of $7,500,000, $20,000,000 and $25,000,000 were to be required under the Term
Loan Facility during 1998, 1999 and 2000, respectively. Borrowings under the
Revolving Credit Facility were required to be fully paid for at least 30 days
each year and were secured by substantially all of the Company's assets (other
than real estate) and guarantees of the Company's principal subsidiaries.
Borrowings under the Term Loan Facility were secured by the assets acquired with
the proceeds thereof, and limited guarantees of the Company's principal
subsidiaries. The Credit Facility contained restrictive covenants that, among
other things, limited the ability of the Company and its subsidiaries to dispose
of assets; incur additional indebtedness or liens; pay dividends; repurchase
stock; make investments; engage in mergers or consolidations and engage in
certain transactions with subsidiaries and affiliates. In addition, the Credit
Facility required that the Company comply with certain specified financial
ratios and tests, including ratios of total debt to earnings before interest,
taxes and depreciation and amortization (EBITDA), interest expense to EBITDA,
and fixed charges to EBITDA.
On January 31, 1997, the Company and the syndicate of banks agreed to amend the
Credit Facility. The $30,000,000 Revolving Credit Facility has a maturity date
of December 31, 2001 (without reduction prior to that date). Additionally,
following repayment of amounts that were then outstanding under the Term Loan
Facility through the use of proceeds from the Company's January 1997 debt and
equity offerings, the Term Loan Facility was converted into an $85,000,000
reducing revolving credit facility. The Term Loan Facility, as amended, will be
available to fund acquisitions and make capital improvements. The amount
available under the Term Loan Facility reduces to $75,000,000 on December 31,
1999, to $45,000,000 on December 31, 2000, and matures on December 31, 2001.
Borrowings under the amended Credit Facility are secured by substantially all
the assets of the Company and its subsidiaries (other than real estate) and are
guaranteed by the Company's operating subsidiaries. The restrictive covenants
are essentially the same as those of the original October 1996 credit facility.
On February 9, 1998, the Company terminated the Credit Facility. No amounts
were outstanding as of December 31, 1997 or as of the termination date.
F-16
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(5) LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS (CONTINUED)
Annual maturities of long-term debt and capitalized lease obligations,
adjusted to reflect the payment of the amounts outstanding under the Credit
Facility through use of proceeds of the January 1997 note issuance, during the
five years subsequent to December 31, 1997, are as follows:
<TABLE>
<S> <C>
1998.......................................................... $ 795,000
1999.......................................................... 412,000
2000.......................................................... 723,000
2001.......................................................... 67,000
2002 and thereafter........................................... 215,029,000
-----------
$217,026,000
-----------
-----------
</TABLE>
The fair value of the Company's long-term debt is estimated by using quoted
prices or discounted cash flow analyses based on current borrowing rates for
debt with similar maturities. Under the above assumptions the estimated fair
value of long-term debt and capitalized lease obligations at December 31, 1997
and 1996, is approximately $236,000,000 and $160,000,000, respectively.
(6) TERMINATION FEE
During October 1997, the Company entered into an agreement with the limited
partner of the partnership that owns the Six Flags Over Texas theme park. The
general terms of the agreement were for the Company to become the managing
general partner of the partnership, to manage the operations of the park, to
receive a portion of the income from such operations, and to purchase limited
partnership units over the term of the agreement. The provisions of the
agreement also granted the Company an option to purchase all of the partnership
interests in the partnership at the end of the agreement.
The agreement was non-exclusive and contained a termination fee of
$10,750,000 payable to the Company in the event the agreement was terminated.
Subsequent to the Company's agreement with the limited partnership, the prior
operator of the theme park also reached an agreement with the limited
partnership. The Company received the termination fee in December 1997 and has
included the termination fee, net of $2,386,000 of expenses associated with the
transaction, as a component of other income (expense) in the accompanying 1997
consolidated statement of operations.
F-17
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(7) INCOME TAXES
Income tax expense (benefit) allocated to operations for 1997, 1996 and 1995
consists of the following:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------------ ---------- ----------
<S> <C> <C> <C>
1997:
U.S. Federal............................................................ $ 2,505,000 6,060,000 8,565,000
State and local......................................................... 373,000 677,000 1,050,000
------------ ---------- ----------
$ 2,878,000 6,737,000 9,615,000
------------ ---------- ----------
------------ ---------- ----------
1996:
U.S. Federal............................................................ -- 1,335,000 1,335,000
State and local......................................................... 64,000 98,000 162,000
------------ ---------- ----------
$ 64,000 1,433,000 1,497,000
------------ ---------- ----------
------------ ---------- ----------
1995:
U.S. Federal............................................................ (44,000) (508,000) (552,000)
State and local......................................................... -- (210,000) (210,000)
------------ ---------- ----------
$ (44,000) (718,000) (762,000)
------------ ---------- ----------
------------ ---------- ----------
</TABLE>
Recorded income tax expense (benefit) allocated to operations differed from
amounts computed by applying the U.S. federal income tax rate of 35% in 1997 and
34% in 1996 and 1995 to pretax income (loss) approximately as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ---------- ----------
<S> <C> <C> <C>
Computed "expected" federal income tax expense (benefit)................... $ 8,300,000 1,109,000 (614,000)
Amortization of goodwill................................................... 327,000 180,000 78,000
Other, net................................................................. 200,000 87,000 (68,000)
Effect of state and local income taxes, net of federal tax benefit......... 788,000 121,000 (158,000)
------------ ---------- ----------
$ 9,615,000 1,497,000 (762,000)
------------ ---------- ----------
------------ ---------- ----------
</TABLE>
Substantially all of the Company's future taxable temporary differences
(deferred tax liabilities) relate to the different financial accounting and tax
depreciation methods and periods for property and equipment. The Company's net
operating loss carryforwards, alternative minimum tax carryforwards, and
deferred compensation amounts represent future income tax deductions (deferred
tax assets). The tax effects of these temporary differences as of December 31,
1997 and 1996, are presented below:
<TABLE>
<CAPTION>
1997 1996
------------- ------------
<S> <C> <C>
Deferred tax assets before valuation allowance....................................... $ 21,891,000 11,496,000
Less valuation allowance............................................................. 1,196,000 1,196,000
------------- ------------
Net deferred tax assets.............................................................. 20,695,000 10,300,000
Deferred tax liabilities............................................................. 54,232,000 30,878,000
------------- ------------
Net deferred tax liability........................................................... $ 33,537,000 20,578,000
------------- ------------
------------- ------------
</TABLE>
F-18
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(7) INCOME TAXES (CONTINUED)
The Company's deferred tax liability results from the financial carrying
value for property and equipment being substantially in excess of the Company's
tax basis in the corresponding assets. The Company's property and equipment are
being depreciated primarily over a 7-year period for tax reporting purposes and
a longer 20- to 25-year period for financial purposes. The faster tax
depreciation has resulted in tax losses which can be carried forward to future
years to offset future taxable income. Because most of the Company's depreciable
assets' financial carrying value and tax basis difference will reverse before
the expiration of the Company's net operating loss carryforwards and taking into
account the Company's projections of future taxable income over the same period,
management believes that it will more likely than not realize the benefits of
these net future deductions.
The Company has experienced ownership changes within the meaning of the
Internal Revenue Code Section 382 and the regulations thereunder. As a result of
the ownership changes, net operating loss carryforwards generated before the
ownership changes can be deducted in subsequent periods only in certain limited
situations. Accordingly, it is probable that the Company will not be able to use
most of the net operating loss carryforwards generated prior to October 30,
1992. A valuation allowance for the pre-October 1992 net operating loss
carryforwards has been established. The Company experienced an additional
ownership change on June 4, 1996, as a result of the issuance of shares of
common stock and the conversion of preferred stock into additional shares of
common stock. This ownership change may limit the use of the Company's November
1992 through June 1996 net operating loss carryforwards in a given year;
however, it is more likely than not that the post-October 1992 carryforwards
will be fully utilized by the Company before their expiration.
As of December 31, 1997, the Company has approximately $36,709,000 of net
operating loss carryforwards available for federal income tax purposes which
expire through 2012. Included in that total are pre-October 30, 1992, net
operating loss carryforwards of which $3,400,000 are not expected to be
utilized. Additionally, the Company has approximately $4,370,000 of alternative
minimum tax credits which have no expiration date.
(8) STOCKHOLDERS' EQUITY
PREFERRED STOCK
The Company has authorized 500,000 shares of preferred stock, $1 par value.
During 1995, the Company issued 200,000 shares of Series A, 7% cumulative
convertible preferred stock at $100 per share. During June 1996, the shares,
including all dividends thereon, were converted into 2,560,928 common shares.
The Company has agreed to provide the former preferred stockholders certain
registration rights relative to the common stock issued upon conversion of the
preferred stock.
Holders of Series A preferred stock were entitled to receive cumulative
dividends at an annual rate of $7 per share. At the Company's election,
dividends were payable in cash and/or in additional Series A preferred stock.
The terms of the Company's senior notes and credit facility limit the Company's
ability to pay cash dividends. All dividends paid to the preferred stockholders
were made by additional issuances of common stock at the time of the conversion
into shares of common stock as described above.
All shares of preferred stock rank senior and prior in right to all of the
Company's now or hereafter issued common stock with respect to dividend payments
and distribution of assets upon liquidation or dissolution of the Company.
F-19
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(8) STOCKHOLDERS' EQUITY (CONTINUED)
COMMON STOCK
In August 1995, the Company issued 1,175,063 common shares in full exchange
for the Company's $7,000,000 senior subordinated convertible notes and 310,370
common shares in full exchange for the Company's $2,095,000 junior subordinated
term loan. The Company has agreed to provide the stockholders certain
registration rights in the future.
On April 4, 1996, a majority of the Company's common and preferred
shareholders and the Company's board of directors approved a one-for-five
reverse stock split effective May 6, 1996. The par value of common stock was
increased to $.05 per share from $.01 per share. Additionally, the authorized
common shares of the Company were changed to 30,000,000. The accompanying
consolidated financial statements and notes to the consolidated financial
statements reflect the reverse stock split as if it had occurred as of the
earliest date presented.
On June 4, 1996, and June 6, 1996, the Company issued 3,425,000 and 513,750,
respectively, of its common shares resulting in net proceeds to the Company of
$65,306,000. Additionally, on June 4, 1996, the Company exchanged 2,560,928 of
its common shares for all 200,000 shares of its previously outstanding preferred
stock.
On January 31, 1997, the Company issued 6,900,000 of its common shares
resulting in net proceeds to the Company of approximately $189,530,000.
STOCK OPTIONS AND WARRANTS
In 1996, 1995, 1994, and 1993, certain members of the Company's management
were issued seven-year options to purchase 337,500, 248,000, 36,000, and 145,200
of its common shares, at an exercise price of $22.00, $8.25, $7.50, and $5.00
per share, respectively, under the Company's 1996, 1995 and 1993 Stock Option
and Incentive Plans (the Plans). No stock options were issued during 1997. Stock
options are granted with an exercise price equal to the stock's fair market
value at the date of grant. These options may be exercised on a cumulative basis
with 20% of the total exercisable on date of issuance and with an additional 20%
being available for exercise on each of the succeeding anniversary dates. Any
unexercised portion of the options will automatically and without notice
terminate upon the seventh anniversary of the issuance date or upon termination
of employment.
At December 31, 1997, there were 503,300 additional shares available for
grant under the Plans. The per share weighted-average fair value of stock
options granted during 1996 and 1995 was $14.97 and $5.56 on the date of grant
using the Black--Scholes option-pricing model with the following
weighted-average assumptions: 1996--expected dividend yield 0%, risk-free
interest rate of 6.25%, and an expected life of 5 years; 1995--expected dividend
yield 0%, risk-free interest rate of 5.5%, and an expected life of 5 years.
The Company applies APB Opinion No. 25 in accounting for its stock options
and, accordingly, no compensation cost has been recognized for its stock options
in the consolidated financial statements. Had the Company determined
compensation cost based on the fair value at the grant date for its stock
options
F-20
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(8) STOCKHOLDERS' EQUITY (CONTINUED)
under SFAS No. 123, the Company's net income (loss) would have been changed to
the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1997 1996 1995
------------- ---------- -----------
<S> <C> <C> <C> <C>
Net income (loss) applicable to common stock:
As reported $ 14,099,000 1,162,000 (1,714,000)
Pro forma 13,325,000 390,000 (1,880,000)
Income (loss) per average common share
outstanding--basic:
As reported $ .79 .14 (.44)
Pro forma .74 .05 (.48)
</TABLE>
Pro forma net income (loss) applicable to common stock reflects only options
granted in 1996 and 1995. Therefore, the full impact of calculating compensation
cost for stock options under SFAS No. 123 is not reflected in the pro forma net
income (loss) amounts presented above because compensation cost is reflected
over the options' vesting period of 4 years and compensation cost for options
granted prior to January 1, 1995 is not considered.
Stock option activity during the periods indicated is as follows:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
----------- -----------------
<S> <C> <C>
Balance at December 31, 1994........................................................ 181,200 $ 5.50
Granted........................................................................... 248,000 8.25
Exercised......................................................................... -- --
Forfeited......................................................................... -- --
Expired........................................................................... -- --
----------- ------
Balance at December 31, 1995........................................................ 429,200 7.09
Granted........................................................................... 337,500 22.00
Exercised......................................................................... -- --
Forfeited......................................................................... -- --
Expired........................................................................... -- --
----------- ------
Balance at December 31, 1996........................................................ 766,700 13.65
Granted........................................................................... -- --
Exercised......................................................................... -- --
Forfeited......................................................................... (2,000) 5.00
Expired........................................................................... -- --
----------- ------
Balance at December 31, 1997........................................................ 764,700 $ 13.67
----------- ------
----------- ------
</TABLE>
At December 31, 1997, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $5.00 to $22.00 and 5.01
years, respectively.
F-21
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(8) STOCKHOLDERS' EQUITY (CONTINUED)
At December 31, 1997, 1996, and 1995, the number of options exercisable was
455,800, 304,460 and 151,120, respectively, and weighted-average exercise price
of those options was $11.25, $10.01 and $6.30, respectively.
In 1989, the Company's current chairman was issued a ten-year warrant to
purchase 26,346 common shares (currently being held as treasury stock) at an
exercise price of $1.00 per share and a ten-year warrant to purchase 18,693
common shares at an exercise price of $1.00 per share.
SHARE RIGHTS PLAN
On December 10, 1997, the Company's board of directors authorized a share
rights plan. Under the plan, stockholders have one right for each share of
common stock held. The rights become exercisable ten business days after (a) an
announcement that a person or group of affiliated or associated persons has
acquired beneficial ownership of 15% or more of the voting shares outstanding,
or (b) the commencement or announcement of a person's or group's intention to
commence a tender or exchange offer that could result in a person or group
owning 15% or more of the voting shares outstanding.
Each right entitles its holder (except a holder who is the acquiring person)
to purchase 1/100 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 for $250.00, subject to adjustment. In the event of certain merger
or asset sale transactions with another party or transactions which would
increase the equity ownership of a shareholder who then owned 15% or more of the
Company, each right will entitle its holder to purchase securities of the
merging or acquiring party with a value equal to twice the exercise price of the
right.
The rights, which have no voting power, expire in 2008. The rights may be
redeemed by the Company for $.01 per right until the right becomes exercisable.
RESTRICTED STOCK GRANT
The Company has issued 450,000 restricted common shares to members of the
Company's senior management. The restrictions on the stock lapse ratably over a
six-year term commencing January 1, 1998, generally based upon the continued
employment of the members of management. The restrictions also lapse if any or
all members are terminated without cause or if a change in control of the
Company occurs. The fair value of the restricted shares, as determined at the
date of grant, approximated $14,625,000 and will be recognized as an expense
over the vesting term.
(9) 401(K) PLAN
The Company has a qualified, contributory 401(k) plan (the Plan). All
regular employees are eligible to participate in the Plan if they have completed
one full year of service and are at least 21 years old. The Company matches 100%
of the first 2% and 25% of the next 6% of salary contributions made by
employees. The accounts of all participating employees are fully vested. The
Company recognized approximately $377,000, $150,000 and $32,000 of expense in
the years ended December 31, 1997, 1996 and 1995, respectively.
F-22
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(10) MARINE WORLD
In April 1997, the Company became manager of Marine World, a marine and
exotic wildlife park located in Vallejo, California, pursuant to a contract with
an agency of the City of Vallejo under which the Company is entitled to receive
an annual base management fee of $250,000 and up to $250,000 annually in
additional fees based on park performance. In November 1997, the Company
exercised its option to lease approximately 40 acres of land within the site for
nominal rent and an initial term of 55 years (plus four ten-year and one
four-year renewal options). At December 31, 1997, the Company is in the process
of adding theme park rides and attractions on the leased land, which is located
within the existing park, in order to create one fully-integrated regional theme
park at the site. The Company is entitled to receive, in addition to the
management fee, 80% of the cash flow generated by the combined operations at the
park, after combined operating expenses and debt service on outstanding debt
obligations relating to the park. The Company also has an option to purchase the
entire site commencing in February 2002 at a purchase price equal to the greater
of the then principal amount of certain debt obligations of the seller (expected
to aggregate $52.0 million at February 2002) or the then fair market value of
the seller's interest in the park (based on a formula relating to the seller's
20% share of Marine World's cash flow). The Company currently expects to
exercise this purchase option when it becomes exercisable.
(11) COMMITMENTS AND CONTINGENCIES
The Company leases office space under a lease agreement which expires April
30, 2001. The lease requires minimum monthly payments over its term and also
escalation charges for proportionate share of expenses as defined in the lease.
An affiliate of the Company shares office space with the Company and has agreed
to pay 50% of the rental payments. Rent expense recognized by the Company (after
deduction of amounts paid by the affiliate) for the years ended December 1997,
1996 and 1995, aggregated $64,000, $64,000, and $68,000, respectively.
The Company leases the sites of Wyandot Lake and each of the two
Waterworld/USA locations with rent based upon percentages of revenues earned by
each park. During 1997, 1996, and 1995, the Company recognized approximately
$1,110,000, $385,000 and $100,000, respectively, of rental expense under these
rent agreements.
Total rental expense, including office space and park sites, was
approximately $2,229,000, $1,227,000, and $550,000 for the years ended December
31, 1997, 1996, and 1995, respectively.
On June 2, 1997, a water slide collapsed at the Company's Waterworld/USA
park in Concord, California, resulting in one fatality and the park's closure
for twelve days. Although the collapse and the resulting closure had a material
adverse impact on that park's operating performance for 1997, as well as a
lesser impact on the Company's Sacramento water park (which is also named
"Waterworld/USA"), located approximately seventy miles from the Concord park,
the Company's other parks were not adversely affected. The Company has recovered
all of the Concord park's operating shortfall under its business interruption
insurance. In addition, the Company believes that its liability insurance
coverage should be adequate to provide for any personal injury liability which
may ultimately be found to exist in connection with the collapse.
The Company is party to various legal actions arising in the normal course
of business. Matters that are probable of unfavorable outcome to the Company and
which can be reasonably estimated are accrued. Such accruals are based on
information known about the matters, the Company's estimates of the
F-23
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(11) COMMITMENTS AND CONTINGENCIES (CONTINUED)
outcomes of such matters and its experience in contesting, litigating and
settling similar matters. None of the actions are believed by management to
involve amounts that would be material to consolidated financial condition,
operations, or liquidity after consideration of recorded accruals.
(12) CERTAIN TRANSACTIONS
During 1995, in connection with the acquisition of Funtime and the issuance
of the $90,000,000 senior notes, the Company paid investment banking and
financial advisory fees in the amount of $800,000 and $475,000 to Lepercq, de
Neuflize & Co. Incorporated (Lepercq) and Hanseatic Corporation (Hanseatic),
respectively. Two directors of the Company are director and treasurer,
respectively, of Lepercq and Hanseatic.
(13) PROPOSED ACQUISITIONS OF ADDITIONAL THEME PARKS
On December 15, 1997, the Company entered into an agreement with the
majority shareholders of Walibi, S.A. (Walibi), to purchase the outstanding
stock of Walibi held by the majority shareholders. The purchase agreement
commits the Company to tender for the remaining stock. The estimated aggregate
purchase price of the Walibi common stock plus the debt of Walibi to be assumed
by the Company will approximate $140,000,000. The acquisition will be accounted
for using the purchase method of accounting and is expected to be completed in
March 1998.
On February 9, 1998, the Company agreed to purchase 100% of the capital
stock of Six Flags Entertainment Corporation for $965,000,000 (subject to
adjustment) and the assumption of approximately $770,000,000 of indebtedness.
The purchase price is payable in cash or, at the Company's option, cash and up
to $200,000,000 of preferred stock. The Company has filed registration
statements to offer equity and debt securities to fund the cash portion of the
purchase price. The acquisition will be accounted for using the purchase method
of accounting and is expected to be completed in April 1998.
If the agreement to purchase Six Flags is terminated, except as a result of
legal or governmental restrictions or by mutual consent, the Company may be
required to pay a termination fee of $25,000,000.
F-24
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(14) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Following is a summary of the unaudited interim results of operations for
the years ended December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FIRST SECOND THIRD FOURTH FULL
QUARTER QUARTER QUARTER QUARTER YEAR
------------- ------------ ------------- ----------- -------------
Revenue......................................... $ 4,264,000 62,468,000 120,014,000 7,158,000 193,904,000
Net income (loss) applicable to common stock.... (9,742,000) 5,698,000 27,237,000 (9,094,000) 14,099,000
Net income (loss) applicable to common stock per
share:
Basic..................................... $ (.61) .31 1.49 (.48) .79
Diluted................................... $ (.61) .30 1.45 (.48) .76
</TABLE>
<TABLE>
<CAPTION>
1996
-------------------------------------------------------------------
FIRST SECOND THIRD FOURTH FULL
QUARTER QUARTER QUARTER QUARTER YEAR
------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenue..................................... $ 2,430,000 26,953,000 60,409,000 3,655,000 93,447,000
Net income (loss) applicable to common
stock..................................... (5,584,000) (744,000) 16,238,000 (8,748,000) 1,162,000
Net income (loss) applicable to common stock
per share:
Basic................................. $ (1.15) (.11) 1.43 (.77) .14
Diluted............................... $ (1.15) (.11) 1.39 (.77) .13
</TABLE>
F-25
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C> <C>
(3) Article of Incorporation and By-Laws:
(a) Certificate of Incorporation of Registrant dated March 24, 1981 -- incorporated by
reference from Exhibit 3 to Form 10-Q of Registrant for the quarter ended June 30, 1987.
(b) Plan and Agreement of Merger of Registrant and Tierco, a Massachusetts business trust,
dated March 31, 1981 -- incorporated by reference from Exhibit 3 to Form 10-Q of
Registrant for the quarter ended June 30, 1987.
(c) Certificate of Amendment of Certificate of Incorporation of Registrant dated April 14,
1985 -- incorporated by reference from Exhibit 3 to Form 10-Q of Registrant for the
quarter ended June 30, 1987.
(d) Certificate of Amendment of Certificate of Incorporation of Registrant dated May 8, 1987
--incorporated by reference from Exhibit 3 to Form 10-Q of Registrant for the quarter
ended June 30, 1987.
(e) Certificate of Amendment of Certificate of Incorporation of Registrant dated June 11,
1987 -- incorporated by reference from Exhibit 3 to Form 10-Q of Registrant for the
quarter ended June 30, 1987.
(f) Certificate of Amendment of Certificate of Incorporation of Registrant dated April 30,
1991 -- incorporated by reference from Exhibit 3(f) to Form 10-K of Registrant for the
year ended December 31, 1991.
(g) Certificate of Amendment of Certificate of Incorporation of Registrant dated June 30,
1992 -- incorporated by reference from Exhibit 3(g) to Form 10-K of Registrant for the
year ended December 31, 1992.
(h) Certificate of Amendment of Certificate of Incorporation of Registrant dated June 23,
1993 -- incorporated by reference from Exhibit 3(a) to Form 10-Q of Registrant for the
quarter ended June 30, 1993.
(i) Certificate of Amendment to Certificate of Incorporation dated October 7, 1994 --
incorporated by reference from Exhibit 3(i) to Form 10-K of Registrant for the year ended
December 31, 1994.
(j) Certificate of Designation of Series A 7% Cumulative Convertible Preferred Stock (the
"Preferred Stock") of Registrant -- incorporated by reference from Exhibit 3(10) to
Registrant's Registration Statement on Form S-1 (Reg. No. 33-62225) declared effective on
November 9, 1995 (the "Registration Statement").
(k) By-laws of Registrant, as amended --incorporated by reference from Exhibit 3(k) to Form
10-K of Registrant for the year ended December 31, 1996.
(l) Certificate of Amendment to Certificate of Incorporation dated May 6, 1996 --
incorporated by reference from Exhibit 3(l) to Form 10-K of Registrant for the year ended
December 31, 1996.
(m) Certificate of Designation of Series A Junior Preferred Stock of Registrant --
incorporated by reference from Exhibit 2(1.C) to Registrant's Registration Statement on
Form 8-A dated January 21, 1998.
*(n) Certificate of Amendment to Certificate of Incorporation dated June 16, 1997.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C> <C>
(4) Instruments Defining the Rights of Security Holders, Including Indentures:
(a) Indenture dated as of August 15, 1995, among the Registrant, the subsidiaries of the
Registrant named therein and United States Trust Company of New York, as trustee
(including the form of Notes) -- incorporated by reference from Exhibit 4(2) to the
Registration Statement.
(b) Form of First Supplemental Indenture dated as of November 9, 1995 -- incorporated by
reference from Exhibit 4(2.1) to the Registration Statement.
(c) Purchase Agreement, dated August 10, 1995, among the Registrant, the subsidiaries of the
Registrant named therein and Chemical Securities Inc. -- incorporated by reference from
Exhibit 4(3) to the Registration Statement.
(d) Exchange and Registration Rights Agreement, dated August 15, 1995, among the Registrant,
the subsidiaries of the Registrant named therein and Chemical Securities Inc. --
incorporated by reference from Exhibit 4(4) to the Registration Statement.
(e) Form of Subscription Agreement between the Registrant and each of the purchasers of
shares of Preferred Stock -- incorporated by reference from Exhibit 4(10) to the
Registration Statement.
(f) Convertible Note Purchase Agreement, dated as of March 3, 1993, between the Registrant
and the purchasers named therein (including forms of Senior Subordinated Convertible Note
and Registration Rights Agreement) -- incorporated by reference from Exhibit 4(i) to Form
10-K of the Registrant for the year ended December 31, 1992.
(g) Form of Subscription Agreement, dated October 1992, between the Registrant and certain
investors --incorporated by reference from Exhibit 4(a) to the Registrant's Current
Report on Form 8-K dated October 30, 1992.
(h) Stock Purchase and Warrant Issuance Agreement, dated October 16, 1989, between The Tierco
Group, Inc. and Kieran E. Burke -- incorporated by reference from Exhibit 4(i) to Form
10-K of Registrant for the year ended December 31, 1989.
(i) Warrant, dated October 16, 1989, to purchase 131,728 shares of Common Stock issued by The
Tierco Group, Inc. to Kieran E. Burke -- incorporated by reference from Exhibit 4(k) to
Form 10-K of Registrant for the year ended December 31, 1989.
(j) Warrant, dated October 16, 1989, to purchase 93,466 shares of Common Stock issued by The
Tierco Group, Inc. to Kieran E. Burke -- incorporated by reference from Exhibit 4(1) to
Form 10-K of Registrant for the year ended December 31, 1989.
(k) Form of Common Stock Certificate -- incorporated by reference from Exhibit 4(l) to
Registrant's Registration Statement on form S-2 (Reg. No. 333-08281) declared effective
on May 28, 1996.
(l) Form of Registration Rights Agreement among Registrant, Edward J. Carroll, Jr. and the
Carroll Family Limited Partnership -- incorporated by reference from Exhibit 4(m) to
Registrant's Registration Statement on Form S-2 (Reg. No. 333-16763) declared effective
on January 27, 1997.
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C> <C>
(m) Form of Indenture dated as of February 1, 1997, among the Registrant and the Bank of New
York, as trustee (including the form of Notes) -- incorporated by reference from Exhibit
4(l) to Registrant's Registration Statement on Form S-2 (Reg. No. 333-16763) declared
effective on January 27, 1997.
(n) Form of Second Supplemental Indenture dated January 21, 1997 -- incorporated by reference
form Exhibit 4(n) to Registrant's Registration Statement on Form S-2 (Reg. No. 333-16763)
declared effective on January 27, 1997.
(10) Material Contracts:
(a) Agreement of Limited Partnership of 229 East 79th Street Associates LP dated July 24,
1987, together with amendments thereto dated, respectively, August 31, 1987, October 21,
1987, and December 21, 1987 -- incorporated by reference from Exhibit 10(i) to Form 10-K
of Registrant for year ended December 31, 1987.
(b) Agreement of Limited Partnership of Frontier City Partners Limited Partnership, dated
October 18, 1989, between Frontier City Properties, Inc. as general partner, and the
Registrant and Frontier City Properties, Inc. as limited partners -- incorporated by
reference from Exhibit 10(g) to the Registrant's Current Report on Form 8-K dated October
18, 1989.
(c) Asset Purchase Agreement, dated December 10, 1990, between Registrant and Silver Dollar
City, Inc., -- incorporated by reference from Exhibit 10(c) to the Registrant's Current
Report on Form 8-K dated February 6, 1991.
(d) Asset Purchase Agreement, dated December 16, 1991, among the Registrant, Tierco Maryland,
RWP, John J. Mason and Stuart A. Bernstein -- incorporated by reference from Exhibit
10(a) to the Registrant's Current Report on Form-8K dated January 31, 1992.
(e) Asset Transfer Agreement, dated as of June 30, 1992, by and among the Registrant, B&E
Holding Company and the creditors referred to therein -- incorporated by reference from
Exhibit 10(a) to the Registrant's Current Report on Form 8-K dated July 20, 1992.
(f) Purchase Agreement, dated September 30, 1992, among the Registrant, Palma Real Estate
Management Company, First Stratford Life Insurance Company and Executive Life Insurance
Company -- incorporated by reference to Exhibit 2(a) to the Registrant's Current Report
on Form 8-K dated September 30, 1992.
(g) Lease Agreement, dated January 18, 1993, among Registrant, Frontier City Partners Limited
Partnership and Fitraco N.V. -- incorporated by reference from Exhibit 10(k) to Form 10-K
of Registrant for the year ended December 31, 1992.
(h) Lease Agreement, dated January 18, 1993, among Registrant, Tierco Maryland, Inc. and
Fitraco N.V. -- incorporated by reference from Exhibit 10(l) to Form 10-K of Registrant
for the year ended December 31, 1992.
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C> <C>
(i) Security Agreement and Conditional Sale Contract, between Chance Rides, Inc. and Tierco
Maryland, Inc. and Guaranty of Registrant in favor of Chance Rides, Inc. -- incorporated
by reference from Exhibit 10(m) to Form 10-K of Registrant for the year ended December
31, 1992.
(j) Registrant's 1993 Stock Option and Incentive Plan -- incorporated by reference from
Exhibit 10(k) to Form 10-K of Registrant for the year ended December 31, 1993.
(k) Agreement and Plan of Merger, dated as of June 30, 1995 among the Registrant, Premier
Parks Acquisition Inc., Funtime Parks, Inc. ("Funtime") and its shareholders --
incorporated by reference from Exhibit 10(11) to the Registration Statement.
(l) Escrow Agreement, dated as of August 15, 1995, among the Registrant, certain shareholders
of Funtime and First National Bank of Ohio, Trust Division -- incorporated by reference
from Exhibit 10(12) to the Registration Statement.
(m) Consulting Agreement, dated as of August 15, 1995, between Registrant and Bruce E.
Walborn -- incorporated by reference from Exhibit 10(13) to the Registration Statement.
(n) Consulting Agreement, dated as of August 15, 1995, between Registrant and Gaspar C.
Lococo --incorporated by reference from Exhibit 10(14) to the Registration Statement.
(o) Lease Agreement dated December 22, 1995 between Darien Lake Theme Park and Camping
Resort, Inc. and The Metropolitan Entertainment Co., Inc. -- incorporated by reference
from Exhibit 10(o) to Form 10-K of Registrant for the year ended December 31, 1995.
(p) Asset Purchase Agreement dated August 23, 1996, among the Registrant, a subsidiary of the
Registrant, Storytown USA, Inc., Fantasy Riders Corporation and Charles R. Wood --
incorporated by reference from Exhibit 10(p) to Registrant's Registration Statement on
Form S-2 (Reg. No. 333-16573) declared effective on January 27, 1997.
(q) Asset Purchase Agreement dated September 23, 1996, among the Registrant, a subsidiary of
the Registrant, Elitch Gardens Company, Hensel Phelps Construction Co. and Chilcott
Entertainment Company -- incorporated by reference from Exhibit 10(a) to the Company's
Current Report on Form 8-K, dated November 13, 1996.
(r) Asset Purchase Agreement dated as of October 10, 1996, among the Registrant, a subsidiary
of the Registrant, FRE, Inc. (Family Recreational Enterprises, Inc.) ("FRE") and the
shareholders of FRE listed on the signature page thereof -- incorporated by reference
from Exhibit 10(r) to Registrant's Registration Statement on Form S-2 (Reg. No.
333-16573) declared effective on January 27, 1997.
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C> <C>
(s) Asset Purchase Agreement dated as of October 10, 1996, among the Registrant, a subsidiary
of the Registrant, FRE, Concord Entertainment Company, R&B Entertainment, LLC, the
shareholders of FRE listed on the signature page thereof and the members of R&B listed on
the signature page thereof -- incorporated by reference from Exhibit 10(s) to
Registrant's Registration Statement on Form S-2 (Reg. No. 333-16573) declared effective
on January 27, 1997.
(t) Amended and Restated Credit Agreement, dated as of January 31, 1997, among the
Registrant, the Subsidiary Guarantors thereof, the lenders party thereto and the Bank of
New York, as Administrative Agent and Issuing Lender -- incorporated by reference from
Exhibit 10(t) to Form 10-K of Registrant for the year ended December 31, 1996.
(u) Consulting and Non-Competition Agreement, dated October 30, 1996, between Registrant and
Arnold S. Gurtler -- incorporated by reference from Exhibit 10(u) to Registrant's
Registration Statement on Form S-2 (Reg. No. 333-16573) declared effective on January 27,
1997.
(v) Non-Competition Agreement, dated as of October 30, 1996 between the Registrant and Ascent
Entertainment Group, Inc. -- incorporated by reference from Exhibit 10(s) to Registrant's
Registration Statement on Form S-2 (Reg. No. 333-16573) declared effective on January 27,
1997.
(w) Consulting Agreement, dated December 4, 1996, between the Registrant and Charles R. Wood
-- incorporated by reference from Exhibit 10(b) to the Registrant's Current Report on
Form 8-K, dated December 13, 1996.
(x) Non-Competition Agreement dated as of December 4, 1996 between the Registrant and Charles
R. Wood --incorporated by reference from Exhibit 10(c) of the Registrant's Current Report
on Form 8-K, dated December 13, 1996.
(y) Stock Purchase Agreement dated as of December 4, 1996, among the Registrant, Stuart
Amusement Company, Edward J. Carroll, Jr., and the Carroll Family Limited Partnership --
incorporated by reference from Exhibit 10(y) to Registrant's Registration Statement on
Form S-2 (Reg. No. 333-16573) declared effective on January 27, 1997.
*(z) Registrant's 1996 Stock Option and Incentive Plan.
*(aa) 1997 Management Agreement Relating to Marine World, by and between the Marine World Joint
Powers Authority and Park Managment Corp, dated as of the 1st day of February, 1997.
*(ab) Purchase Option Agreement Among City of Vallejo, Marine World Joint Powers Authority and
Redevelopment Agency of the City of Vallejo, and Park Management Corp., dated as of
August 29, 1997.
*(ac) Letter Agreement, dated November 7, 1997, amending 1997 Management Agreement Relating to
Marine World, by and between the Marine World Joint Powers Authority and Park Managment
Corp., dated as of the 1st day of February, 1997.
</TABLE>
v
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<TABLE>
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<S> <C> <C> <C>
*(ad) Reciprocal Easement Agreement between Marine World Joint Powers Authority and and Park
Management Corp., dated as of November 7, 1997.
*(ae) Parcel Lease between Marine World Joint Powers Authority and and Park Management Corp.,
dated as of November 7, 1997.
*(af) Employment Agreement, dated as of July 31, 1997, between Premier Parks Inc. and Kieran E.
Burke.
*(ag) Employment Agreement, dated as of July 31, 1997, between Premier Parks Inc. and Gary
Story.
*(ah) Employment Agreement, dated as of July 31, 1997, between Premier Parks Inc. and James F.
Dannhauser.
(ai) Stock Purchase Agreement dated as of September 26, 1997, among Registrant, Kentucky
Kingdom, Inc., Hart-Lunsford Enterprises, LLC, and Edward J. Hart -- incorporated by
reference from Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997.
(aj) Employment Agreement dated as of November 7, 1997, between Registrant and Edward J. Hart
-- incorporated by reference from Exhibit 10.2 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1997.
(ak) Rights Agreement dated as of January 12, 1998 between Premier Parks Inc. and Bank One
Trust Company, N.A., as Rights Agent -- incorporated by reference from Exhibit 4.1 to the
Registrant's Current Report on Form 8-K dated December 15, 1997.
(al) Stock Purchase Agreement dated as of December 15, 1997, between the Registrant and
Centrag S.A., Karaba N.V. and Westkoi N.V. -- incorporated by reference from Exhibit 10.1
to the Registrant's Current Report on Form 8-K dated December 15, 1997.
(am) Agreement and Plan of Merger dated as of February 9, 1998, by and among the Registrant,
Six Flags Entertainment Corporation and others -- incorporated by reference from Exhibit
10(a) to the Registrant's Current Report on Form 8-K dated February 9, 1998.
*(21) Subsidiaries of the Registrant.
*(23) Consent of KPMG Peat Marwick LLP
</TABLE>
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* Filed herewith.
vi
<PAGE>
EXHIBIT 3(n)
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
OF PREMIER PARKS INC.
PREMIER PARKS INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: that the Board of Directors of the Corporation at a meeting of the
Board of Directors, adopted a resolution proposing and declaring the
advisability of the following amendment to the Certificate of Incorporation.
RESOLVED, that the Certificate of Incorporation of the Corporation be
amended so that Article IV shall read in its entirety as follows:
"The total number of shares of stock which the Corporation shall
have authority to issue is 90,500,000 shares, of which 500,000 shares
shall be Preferred Stock with a par value of $1.00 per share and
90,000,000 shares shall be Common Stock with a par value of $.05 per
share.
The Preferred Stock is to be issued in one or more series, with each
series to have such designations, preferences, and relative participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, as shall be stated and expressed in the resolution
or resolutions provided for the issue of each series adopted by the Board
of Directors of the Corporation, subject to the limitations prescribed by
law and in accordance with the provisions hereof, the Board of Directors
being hereby expressly vested with authority to adopt any such resolution
or resolutions.
The authority of the Board of Directors with respect to each series shall
include, but not be limited to, the determination or fixing of the
following:
(1) the number of shares to constitute the series and the distinctive
designation thereof;
(2) The amount or rate of dividends on the shares of the series, whether
dividends shall be cumulative and, if so, from what date or dates;
(3) Whether the shares of the series shall be redeemable and, if
redeemable, the terms and provisions upon which the shares of the
series may be redeemed and the premium, if any, and any dividends
accrued thereon which the shares of the series shall be entitled to
receive upon the redemption thereof;
(4) Whether the shares of the series shall be subject to the operations
of a retirement or sinking fund to be applied to the purchase or
redemption of the shares for retirement and, if such retirement or
<PAGE>
sinking fund be established, the annual amount thereof and the terms
and provisions relative to the operation thereof;
(5) Whether the shares of the series shall be convertible into shares of
any class or classes, with or without par value, or of any other
series of the same class, and if convertible, the conversion price
or prices or the rate at which the conversion may be made and the
method, if any, of adjusting the same;
(6) The rights of the shares of the series in the event of the voluntary
or involuntary liquidation, dissolution, or winding up of the
Corporation;
(7) The restrictions, if any, on the payment of the dividends upon, and
the making of distributions to, any class of stock ranking junior to
the shares of the series, and the restrictions, if any, on the
purchase or redemption of the shares of any such junior class;
(8) Whether the series shall have voting rights in addition to the
voting rights provided by law, and, if so, the terms of such voting
rights; and
(9) Any other relative rights, preferences, and limitations of that
series.
The holders of the Common Stock shall be entitled to one vote for each
share of Common Stock held.
The amount of the authorized stock of any class may be increased or
decreased by the affirmative vote of the holders of a majority of the
total number of outstanding shares of any series of Preferred Stock
entitled to vote, and of Common Stock, voting as a single class."
SECOND: that such Amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware by the holders of a majority of the outstanding shares of Common Stock
of the Corporation entitled to vote thereon at a meeting of the stockholders of
the Corporation called and held upon notice in accordance with Section 222 of
the Delaware General Corporation Law.
IN WITNESS WHEREOF, Premier Parks Inc. has caused this Certificate
to be signed and attested by a duly authorized officer this 16th day of June,
1997.
PREMIER PARKS INC.
By: /s/ Kieran E. Burke
-----------------------------
Kieran E. Burke
Chairman and Chief Executive Officer
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<PAGE>
EXHIBIT 10(z)
PREMIER PARKS INC.
1996 STOCK OPTION AND INCENTIVE PLAN
I. THE PLAN
There is hereby established the 1996 Stock Option and Incentive Plan (the
"Plan") for Premier Parks Inc. (the "Company"), under which options may be
granted to purchase shares of the common stock, $.05 par value, of the Company,
under which shares of such common stock may be sold at incentive prices below
the market price at the time of sale, and under which stock appreciation rights
may be granted.
II. AMOUNT OF STOCK
An aggregate of Seven Hundred and Fifty Thousand (750,000) shares of the
Company's common stock may be issued upon exercises of options or stock
appreciation rights or upon purchases at incentive prices. Such shares may be
authorized but unissued shares, shares held in the treasury or outstanding
shares purchased from their owners on the market or otherwise. If any option or
stock appreciation right granted under the Plan terminates for any reason or
expires before the option or stock appreciation right is exercised in full or if
any shares sold under the Plan are reacquired by the Company by reason of any
right to reacquire such shares established at the time the shares were initially
sold, the shares previously reserved for issuance upon exercise of such option
or stock appreciation right or the shares so reacquired shall count toward the
maximum number of shares that may be issued under the plan, as adjusted pursuant
to next paragraph, and such shares shall not again be available to be issued
under the Plan. A reduction of the exercise price of an option shall be treated
for purposes of the preceding sentence as the expiration of the option and the
issuance of a new option.
If the outstanding shares of the Company's common stock are from time to
time increased, decreased, changed into or exchanged for a different number or
kind of shares of the Company through merger, consolidation, reorganization,
split-up, split-off, spin-off, recapitalization, reclassification, stock
dividend, stock split or reverse stock split, an appropriate and proportionate
adjustment shall be made in the number and kind of shares which may be issued
upon purchases made under the Plan and an appropriate and proportionate
adjustment shall be made in the number and kind of shares and/or other property
which may be issued upon exercise of options or stock appreciation rights
granted under the Plan such that each such option or stock appreciation right
shall thereafter be exercisable for such securities, cash and/or other property
as would have been received in respect of the shares subject to the option or
stock appreciation right had such option or right been exercised in full
immediately prior to such increase, decrease or change. Such adjustment shall be
made successively each time that any such increase, decrease or change is made.
In addition, in the event of any such increase, decrease or change, the Board of
<PAGE>
Directors or the Committee shall make such further adjustments as are
appropriate to the maximum number of shares subject to the Plan or to the other
provisions of the Plan or of incentive stock issued or options or stock
appreciation rights granted thereunder. Notwithstanding the foregoing, each such
increase, decrease, change or other adjustment with respect to an incentive
stock option, within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code") (hereafter, an "Incentive Stock Option") (i) shall
comply with the requirements to be an issuance or assumption of a stock option
in a transaction to which Section 424(a) of the Code applies and (ii) shall not
be made if, as a result, an Incentive Stock Option granted hereunder would not
be an Incentive Stock Option.
To the extent that the aggregate fair market value of stock subject to one
or more Incentive Stock Options first exercisable by any individual in any
calendar year under this Plan (or under all such plans of the Company and its
subsidiary corporations) exceeds $100,000, determined as of the time the option
is granted, such options shall be treated as options that are not Incentive
Stock Options. This limitation will be applied by taking into account options in
the order in which they were granted and without taking into account Incentive
Stock Options granted before 1987.
III. ADMINISTRATION
(a) The Plan shall be administered by the Board of Directors of the
Company or by a Committee appointed by the Board of Directors which shall
include not less than two Directors of the Company, each of whom shall be a
disinterested person' within the meaning of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended, and an 'outside director' within
the meaning of Treasury Regulation Section 1.162-27(e)(3) promulgated under
Section 162(m) of the Code. The Board of Directors may from time to time remove
members from or add members to the Committee. Vacancies on the Committee,
however caused, shall be filled by the Board of Directors. Acts of the Committee
may be authorized by a vote of the members if (i) at a meeting, held at a time
and place and in accordance with rules adopted by the Committee, at which a
majority of the members of the Committee are present and acting, or (ii) reduced
to and approved in writing by a majority of the members of the Committee.
(b) Subject to the express terms and conditions of the Plan, the Board of
Directors and the Committee, if it exists, shall have full power to construe the
Plan, to prescribe, amend and rescind rules and regulations relating to the Plan
and to make all other determinations necessary or advisable for the
administration of the Plan. The exercise of these powers by the Board of
Directors or the Committee, as the case may be, shall be conclusive and binding
upon all present, past and future participants in the Plan.
(c) The Board of Directors or the Committee may from time to time
determine to which officers or other employees eligible for selection as
participants in the Plan, if any, options shall be granted or shares shall be
sold under the Plan, the number of shares which may be issued upon exercise of
any such option or which may be sold to any such
-2-
<PAGE>
participant, the period during which any option or stock appreciation right may
be exercised, the exercise price of any option or the purchase price of any
shares, and the means of payment upon exercise of any option or for any shares,
determined in each case in accordance with the provisions of the Plan.
(d) The Board of Directors or the Committee may from time to time, with
the consent of the participant, adjust or reduce the option prices of options
held by such participant by cancelling such options and granting options to
purchase the same or a lesser number of shares at lower option prices or by
modifying, extending or renewing such options, as those terms are defined in
Section 424(h) of the Code, and the applicable regulations thereunder. The Board
of Directors or the Committee may, from time to time, conditionally or
unconditionally accelerate, in whole or in part, rights to exercise any option
granted under the Plan.
(e) The Board of Directors or the Committee shall report in writing to the
Secretary of the Company the names of the officers or other employees selected
as participants in the Plan, and the terms and conditions of the options to be
granted or the shares to be sold to each of them.
IV. ELIGIBILITY FOR PARTICIPATION
All officers and key employees of the Company and its subsidiary
corporations (including officers or employees who are members of the Company's
Board of Directors, but excluding directors who are not officers or employees)
shall be eligible for selection as participants in the Plan. For this purpose a
"subsidiary corporation" is a corporation so defined under Section 424(f) of the
Code.
V. TERMS AND CONDITIONS OF OPTIONS
The terms and conditions of each option granted under the Plan shall be
evidenced by a Stock Option Agreement executed by the Company and the
participant, which shall contain the following provisions, if applicable:
(a) The number of shares which may be issued upon exercise of the option,
the period during which the option may be exercised, the purchase price or
prices per share to exercise the option, and the means of payment for the
shares; provided, however, that notwithstanding any other provision of the Plan
to the contrary, an Incentive Stock Option shall not be exercisable after the
expiration of ten (10) years from the date it is granted, and, provided,
further, that in the case of an Incentive Stock Option granted to a person who,
at the time such Incentive Stock Option is granted, owns shares of the Company
or any of its subsidiary corporations which possess more than ten percent (10%)
of the total combined voting power of all classes of stock of the Company or of
any of such subsidiary corporations, such Incentive Stock Option shall not be
exercisable after the expiration of five (5) years from the date such option is
granted, and, provided, further,
-3-
<PAGE>
that the purchase price or prices of each share of the Company's common stock
subject to any option under the Plan shall be determined as follows:
(i) The price of each share subject to an Incentive Stock Option
under the Plan shall be not less than one hundred percent (100%) of the fair
market value of such share on the date the option is granted; provided, however,
that in the case of an Incentive Stock Option granted to a person who, at the
time such Incentive Stock Option is granted, owns shares of the Company or any
of its subsidiary corporations which possess more then ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of any of
such subsidiary corporations, the price of each share subject to such Incentive
Stock Option shall be not less than one hundred and ten percent (110%) of the
fair market value of such share on the date the option is granted. In
determining stock ownership of an employee for any purposes under the Plan, the
rules of Section 424(d) of the Code shall apply, and the Board of Directors or
the Committee may rely on the representations of fact made to it by the employee
and believed by it to be true.
(ii) The purchase price of each share subject to a nonqualified
stock option under the Plan shall be determined by the Board of Directors or the
Committee prior to granting the option. The Board of Directors or the Committee
shall set the purchase price for each share subject to a nonqualified stock
option at either the fair market value of such share on the date the option is
granted, or at such other price as the Board of Directors or the Committee in
its sole discretion shall determine; provided, however, that in no event shall
the purchase price of a share subject to a nonqualified stock option under the
Plan be less than 50% of the fair market value of such share on the date the
option is granted.
(iii) The fair market value of a share on a particular date shall be
deemed to be the average (mean) of the reported "high" and "low" sales prices on
the largest national securities exchange (based on the aggregate dollar value of
securities listed) on which such shares are then listed or traded. If such
shares are not listed or traded on any national securities exchange, then, in
each case, to the extent the Board of Directors or the Committee determines in
good faith that the following prices arise out of a bona fide, established
trading market for the shares, (i) the average of the reported "high" and "low"
sales prices for such shares in the over-the-counter market, as reported on the
National Association of Securities Dealers Automated Quotations System, or, if
such prices shall not be reported thereon, the average between the closing bid
and asked prices reported, or (ii) if such prices shall not be reported, then
the average closing bid and asked prices reported by the National Quotation
Bureau Incorporated. In all other cases, the fair market value of a share shall
be established by the Board of Directors or the Committee in good faith.
(b) Such terms and conditions of exercise as may be set by the Board of
Directors or the Committee and specified in the Stock Option Agreement.
(c) That the option is not transferable other than by will or the laws of
descent and distribution and that the option is exercisable during the grantee's
lifetime only by the grantee or, if the grantee is disabled, by his guardian or
legal representative.
-4-
<PAGE>
(d) In addition to the restrictions set forth in (c) above, such
restrictions on transfer of the option, and such restrictions on transfer of the
shares acquired upon exercise of the option, as may be set by the Board of
Directors or the Committee.
(e) Such other terms and conditions not inconsistent with the Plan as may
be set by the Board of Directors or the Committee, including provisions allowing
acceleration of options upon a change of control of the Company or otherwise.
(f) In the discretion of the Board of Directors or the Committee, any
option granted hereunder may provide that such option may be exercised by the
holder's surrender of all or part of such option to the Company in exchange for
a number of shares of the Company's common stock having a total market value, as
of the date of surrender, equal to the excess of (i) the market value, as of the
date of surrender, of the number of shares that could be acquired by the
exercise of that portion of the option which is surrendered, over (ii) the
aggregate exercise price which would otherwise be paid to the Company upon a
normal exercise of the option as to the number of shares surrendered. In the
event the foregoing calculation would require the issuance of a fractional
share, the Company shall, in lieu thereof, pay cash in an amount equal to the
fair market value of such fraction as of the date of surrender.
(g) The Board of Directors or the Committee may, in its discretion, grant
stock appreciation rights to participants who are concurrently being granted, or
previously have been granted, options under the Plan. A stock appreciation right
shall be related to a particular option (either an option previously granted to
a participant or an option granted concurrently with the stock appreciation
right) and shall entitle the participant, at such time or times as the related
option is exercisable, and upon surrender of the then exercisable option, or
part thereof, and exercise of the stock appreciation right, to receive payment
of an amount determined pursuant to paragraph (ii) below.
Stock appreciation rights shall be subject to the following terms and
conditions, to the terms of subsection (c) above regarding transferability, and
to such other terms and conditions not inconsistent with this Plan as the Board
of Directors or Committee may approve and direct:
(i) A stock appreciation right shall be exercisable by a participant
at such time or times, and to such extent, as the option to which it
relates shall be then exercisable; provided, however, that a stock
appreciation right may be exercised for cash only during the period
beginning on the third business day following the date of release for
publication by the Company of quarterly or annual summary statements of
earnings and ending on the twelfth business day following such date and
that the Board of Directors or Committee may impose such other conditions
on exercise as may be required to satisfy the requirements of Rule 16b-3
under the Exchange Act (or and successor provision in effect at that
time).
-5-
<PAGE>
(ii) Upon exercise of the stock appreciation right and surrender of
an exercisable portion of the related option, a participant shall be
entitled to receive payment of an amount determined by multiplying:
A. the difference obtained by subtracting the option exercise
price per share of common stock subject to the related option from
the fair market value of a share of common stock of the Company on
the date of exercise of the stock appreciation right, by
B. the number of shares subject to the related option with
respect to which the stock appreciation right shall have been
exercised.
(iii) Unless otherwise provided, payment of the amount determined
under paragraph (ii) above shall be made one-half in cash and one-half in
shares of common stock of the Company valued at their fair market value on
the date of exercise of the stock appreciation right, provided, however,
that the Board of Directors or the Committee, in its sole discretion, may
either require or allow the holder of the stock appreciation right to
elect for such stock appreciation right to be settled solely in such
shares, solely in cash, or in some other proportion of shares and cash,
and provided, further, however, that cash shall, in any event, be paid in
lieu of fractional shares.
(iv) A stock appreciation right shall in no event be exercisable
unless and until six months have elapsed from the date of grant of such
stock appreciation right.
(v) The shares and/or cash delivered or paid to a participant upon
exercise of the stock appreciation right shall be issued or paid in
consideration of services performed for the Company or for its benefit by
the participant.
(h) Notwithstanding anything herein to the contrary, no participant may be
granted options or other rights to purchase, including stock appreciation rights
with respect to, more than 662/3% in the aggregate of the number of shares of
common stock authorized to be issued under the Plan, counted as provided in and
as adjusted pursuant to, Section 2 above. In the event of an increase in the
number of shares authorized under the Plan, the 662/3% limitation will apply to
the increased number of shares so authorized.
VI. LIMITATION ON PRICE FOR SHARES
No option shall be granted under the Plan, and no stock shall be sold
under the Plan, at an exercise price in the case of options or a purchase price
in the case of direct sales of stock that is less than the par value of the
shares optioned or sold.
-6-
<PAGE>
VII. PROCEEDS FROM SALES OF SHARES
The proceeds from the sale of shares under the Plan, upon the exercise of
options or directly, shall be added to the general funds of the Company and may
thereafter be used from time to time for such corporate purposes as the Board of
Directors may determine and direct.
VIII. AMENDMENT SUSPENSION OR TERMINATION OF PLAN
The Board of Directors may at any time amend, suspend or terminate the
Plan. However, no such action by the Board of Directors may be taken without the
approval of the stockholders of the Company if such action would increase the
aggregate number of shares subject to the Plan (other than pursuant to Section
II of the Plan), change the provisions regarding eligibility for participation
in the Plan, reduce the exercise price of an Incentive Stock Option to below the
price required by Section V(a)(i) of the Plan or materially increase the benefit
accruing to participants under the Plan. No amendment, suspension or termination
of the Plan shall alter or impair any rights or obligations under any
outstanding Stock Option Agreement without the consent of the holder.
IX. PROVISIONS FOR EMPLOYEES OF SUBSIDIARIES
In connection with the granting of an option or the sale of any shares to
a participant who is an employee of a subsidiary corporation, as defined in
Section IV of the Plan, the Company may sell the shares to be optioned or sold
to such employee to the subsidiary corporation which is his employer, at a price
which shall be not less than the option exercise price or the purchase price of
the shares to such participant, but which may be more, in order that the shares
sold to the participant, or issued to the participant upon exercise of an option
may be issued or sold to him directly by his employer corporation.
X. EFFECTIVE DATE AND TERMINATION OF THE PLAN
(a) The Plan shall be submitted for a vote at a meeting of the
stockholders of the Company or shall be approved by written consent of the
stockholders, in either case in accordance with and only to the extent permitted
by the requirements of Rule 16b-3 of the Exchange Act, by the Company's charter
and by-laws and by applicable state laws prescribing the method and degree of
stockholder approval required for the issuance of corporate stock or options;
provided, that if applicable state law does not provide a method and degree of
required approval, the Plan must be approved by a majority of the votes cast at
a duly held stockholders' meeting at which a quorum representing a majority of
all outstanding voting stock is, either in person or by proxy, present and
voting on the Plan.
(b) If approved by the stockholders of the Company within 12 months before
or after adoption of the Plan by the Board, the Plan shall become effective on
the date of such
-7-
<PAGE>
stockholder approval (the "Effective Date"). Unless sooner terminated by the
Board, the Plan shall terminate on the date ten (10) years after the earlier of
(i) the date the Plan is adopted by the Board or (ii) the Effective Date. After
termination of the Plan, no further options may be granted or shares sold under
the Plan (other than upon the exercise of options previously granted under the
Plan); provided, however, that such termination will not affect any options
granted or shares sold prior to termination of the Plan.
XI. MISCELLANEOUS
(a) The invalidity or illegality of any provision of the Plan shall not
affect the validity or legality of any other provision of the Plan.
(b) The Plan, any options or stock appreciation rights granted or shares
sold thereunder and all related matters shall be governed by, and construed and
enforced in accordance with, the laws of the state of Delaware from time to time
obtaining.
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<PAGE>
EXHIBIT 10(aa)
1997 MANAGEMENT AGREEMENT
RELATING TO MARINE WORLD
THIS 1997 MANAGEMENT AGREEMENT RELATING TO MARINE WORLD (the "Agreement")
is made and entered into as of the 1st day of February, 1997, by and between the
MARINE WORLD JOINT POWERS AUTHORITY, a joint exercise of powers authority duly
created under the laws of the State of California (the "Authority"), and PARK
MANAGEMENT CORP., a California corporation (the "Manager").
RECITALS:
A. The Authority owns various animals, facilities, leasehold interests
and other assets related to the facility known as Marine World/Africa USA in
Vallejo, California ("Marine World").
B. The Manager has expertise in the operation of recreational facilities
similar in scope to that of Marine World, and is willing to provide management
services in connection with the operation of Marine World on the terms and
subject to the conditions set forth herein.
C. The Authority and the Manager now wish to enter into this Agreement in
order to set forth the rights and obligations of the parties with respect to the
provision of management services by the Manager for the period commencing
February 24, 1997.
AGREEMENT:
In consideration of the foregoing and the mutual promises herein set forth,
the parties hereto hereby agree as follows:
SECTION 1
REPRESENTATIONS AND RESPONSIBILITIES OF THE AUTHORITY
1.1 FULL POWER AND AUTHORITY. The Authority warrants and represents to
the Manager that it has full power and authority to enter into this Agreement
and to perform its obligations hereunder. As of the date hereof, and at all
times prior to commencement by the Manager of its services hereunder, Marine
World has, and will have, been operated in compliance in all material respects
with all applicable federal, state and local laws, regulations, ordinances,
orders, and contracts and leases, including, without limitation, those relating
to employment, wages, hours and working conditions.
1.2 APPROVALS AND LICENSES FOR MARINE WORLD. The Authority warrants and
represents that it has all rights, interests, approvals, licenses, consents,
permits and agreements necessary to operate Marine World as it was operated
immediately prior to the effective date of this Agreement.
1.3 RESPONSIBILITIES OF THE AUTHORITY. As between the Authority and the
Manager (in its capacity as manager of Marine World hereunder), the Authority
shall have the direct and primary responsibility for:
1
<PAGE>
(i) the review and approval of all operating and capital budgets for
Marine World;
(ii) the appointment and supervision of an independent certified
public accountant (the "Auditor") to review all financial matters concerning
Marine World deemed relevant or appropriate by the Authority;
(iii) overall responsibility for all activities and facilities at
Marine World; and
(iv) the supervision and approval of all development and licensing of
intellectual property rights owned by the Authority.
1.4 BANK ACCOUNTS AND DISBURSEMENTS. The Authority shall establish
appropriate bank accounts for the deposit of gross receipts generated by, and
for cash disbursements required for, the operations of Marine World. The Manager
shall deposit all gross receipts in Authority accounts designated for such
purpose by the Authority, such deposits to be made as frequently as determined
prudent by the Manager with the approval of the Executive Director of the
Authority. The Manager is hereby authorized to disburse such receipts pursuant
to Section 2.9 below, subject to the provisions of Section 1.3(i) and (iii)
above and 2.2.3 below.
SECTION 2
REPRESENTATIONS AND RESPONSIBILITIES OF THE MANAGER
2.1 FULL POWER AND AUTHORITY. The Manager warrants and represents that it
has full power and authority to enter into this Agreement and perform its
obligations hereunder, and that it has conducted its own review of Marine World
prior to its execution of this Agreement and it is not relying on any
representation (other than as expressly set forth herein) of the Authority, the
City of Vallejo, the Redevelopment Agency of the City of Vallejo or the Vallejo
Public Financing Authority in connection with its execution of this Agreement
and its agreeing to act as Manager hereunder. The Manager warrants and
represents that it is a wholly-owned subsidiary of Premier Parks Inc., that its
sole business is acting as Manager under this Agreement, and that it is
authorized to transact business in the State of California to the extent
necessary to discharge its obligations hereunder.
2.2 RESPONSIBILITIES OF THE MANAGER.
2.2.1 As between the Manager and the Authority, the Manager (in
its capacity as manager of Marine World) shall have the direct responsibility
within the budgets approved by the Authority under Section 1.3(i) hereof and
subject to any specific direction by the Authority consistent with the
provisions hereof, for:
(i) the production and direction of all exhibitions at Marine
World;
(ii) the care, feeding and training of all marine mammals, exotic
land animals and other living creatures in captivity ("Animals") at Marine
World;
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(iii) the coordination of the activities of the Authority and the
Manager as necessary to achieve the efficient management and operation of
Marine World;
(iv) the maintenance and repair of all facilities, landscaping and
vegetation at Marine World, including, without limitation, elements of the
electrical and mechanical systems, all furniture, fixtures and equipment,
plumbing systems, building exteriors, drains, roofs, sidewalks, entrance
ways, exterior lighting, interior promenades and walkways (such maintenance
shall include custodial cleaning services, pest control and trash removal,
repairs, routine preventative maintenance, and any other activities
necessary to maintain Marine World in first class condition and usable on
all occasions as a recreational facility), and the design and installation
of any additional landscaping and vegetation;
(v) the organization and management of all admissions,
concessions, merchandising, security systems and parking facilities at
Marine World in a manner not inconsistent with the budgets and operational
reports referred to in Section 4;
(vi) the organization and management of all advertising and public
relations programs relating to Marine World, including the preparation and
submission to the Authority of an annual marketing plan for Marine World to
be submitted within sixty (60) days of the effective date of this Agreement
and on or about each January 31st thereafter during the term of this
Agreement, which shall set forth in detail the Manager's strategy for
marketing and promoting Marine World for the next year, including
attendance goals and other relevant information;
(vii) providing all assistance reasonably requested by the Authority
in connection with the preparation of budgets and operating policies for
Marine World, and the preparation of operating and capital budgets as
specified in Section 4 hereof;
(viii) establishing cash flow management and control systems and
financial reporting systems for Marine World in conjunction with the
Authority's representatives and the Auditor;
(ix) the use, protection and licensing of all intellectual property
rights of the Authority;
(x) coordination with the Authority as to and the maintenance of
ongoing fundraising, sponsorship and membership programs (taking into
consideration the provisions of Section 2.16(iii) hereof); and
(xi) the employment and management of all persons, and the
acquisition of all materials and equipment, necessary to carry out the
foregoing responsibilities (taking into consideration the provisions of
Section 2.16(ii) hereof).
In discharging its responsibilities described above, the Manager shall have full
authority to act within the operating and capital budgets approved by Authority,
and otherwise consistent with the marketing, maintenance and security plans
approved by the Authority. In addition, (i) in the event of an emergency, the
Manager shall contact the Executive Director of the Authority as soon as
practicable as to the Manager's response to the situation, and the Manager may
act as it deems necessary and as described to the Executive Director until such
time as it can obtain approval of the Authority as to any additional actions,
and (ii) in all
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other instances, the Manager may deviate up to ten percent (10%) from any
specific expense portion of the Authority-approved budget upon notice to the
Executive Director of the Authority and a showing of the means by which such
additional expense will be paid. Any material deviations by the Manager from
the Authority-approved budgets and plans for Marine World not described in the
preceding sentence must be approved by the Authority, or in exigent
circumstances by the Executive Director or another authorized representative of
the Authority.
2.2.2 The Manager and the Authority shall cause any governmental
licenses necessary and otherwise pertaining to Marine World (including but not
limited to any related to the sale of alcoholic beverages) to be transferred to
and maintained in the Manager's name, or, if the Authority shall request in
writing, in the name of the Authority.
2.2.3 Within the provisions of this Agreement, the Authority shall
retain direct authority over all activities at Marine World. The Authority may
appoint a subcommittee of its Board of Directors, and the Manager shall meet and
confer with such subcommittee and any duly authorized representative of the
Authority (including but not limited to the Executive Director of the Authority)
as soon as reasonably practicable following delivery to the Manager of a request
for such a meeting.
2.2.4 The Manager shall be permitted to review the personnel files of
all individuals who were employed at Marine World prior to the date of this
Agreement who apply for employment with the Manager. The Manager shall have
sole discretion as to all decisions relating to hiring of employees, the
employment of employees and the direction of the work force. The Manager shall
have the sole discretion to set all terms and conditions of employment for all
personnel the Manager will employ to operate Marine World. It is hereby
acknowledged that the Manager will not employ any persons associated with Marine
World prior to the commencement of the Manager's services hereunder until such
person's prior employment has been terminated. The Authority hereby
acknowledges that it has terminated the existing manager for Marine World
effective upon the commencement of the activities of the Manager hereunder. The
Authority shall have terminated or laid off any employees of the Authority
related to Marine World prior to the commencement of Manager's services under
this Agreement.
2.3 DESIGN AND CONSTRUCTION ADVISORY SERVICES. The Manager shall act as
the liaison between the Authority and the architects, engineers, contractors,
construction managers and construction lenders responsible for the design and
construction of any improvements to the Marine World facilities (the
"Construction"). The Manager shall monitor the progress, plans, budgets and
reports of the architects, engineers, contractors, construction manager and
construction lenders for the Marine World facilities and shall make written and
verbal reports regarding the design and construction to the Authority on a
regular basis as required by the Authority. In addition, and without limiting
the foregoing, the Authority hereby appoints the Manager as its agent, and the
Manager accepts appointment as agent of the Authority, to carry out all phases
of any improvements to the Marine World facilities, and the Manager, as agent of
the Authority, subject to the provisions hereof, assumes all rights, duties and
responsibilities of the Authority regarding supervision of the acquisition,
construction and installation of any improvements to the Marine World
facilities. Without in any way limiting the duties of the Manager under this
paragraph, in discharging its duties under this paragraph, the Manager shall
within the approved budgets and subject to Section 1.3 hereof:
(i) negotiate, enter into and administer all agreements for
architectural, contracting, engineering, testing or consulting services
related to the Construction, and any agreements for the
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furnishing of any supplies, materials, machinery or equipment relating to
the Construction, or any amendments to any such agreements; provided that
no agreement shall be executed on behalf of or be binding on the Authority
unless (a) such agreement is within the capital budget approved by the
Authority, or (b) the terms and conditions thereof and the party with whom
the agreement is to be made have been approved in writing by the Authority;
(ii) receive and audit, together with the appropriate supporting
documentation, all requests for payment in connection with the
Construction;
(iii) apply for and maintain in full force and effect any and all
governmental permits and approvals required for the lawful completion of
the Construction;
(iv) ensure compliance with all public bidding and prevailing wage
requirements related to any Construction, and all terms and conditions
contained in any governmental permit or approval required or obtained for
the lawful completion of the Construction, or in any insurance policy
affecting or covering the Construction, or in any surety bond obtained in
connection with the Construction;
(v) keep the Authority fully informed on a regular basis of the
progress of the Construction, including the preparation of such reports as
may from time to time be reasonably requested by the Authority;
(vi) inspect the progress of the course of the Construction,
including verification of the materials and labor furnished so as to be
competent to approve or disapprove requests for payment made by any persons
with respect to the Construction, and, in addition, verify that the
Construction is being carried out substantially in accordance with the
plans and specifications approved by the Authority, or, in the event that
the Construction is not being so carried out, to take corrective action and
promptly notify the Authority;
(vii) subject to the provisions of Section 2.5 hereof, hire and
retain as its employees and not as employees of the Authority, such
qualified personnel as may be required to fully perform the Manager
functions hereunder;
(viii) not permit (a) any change to the plans and specifications
relating to the Construction originally approved by the Authority if such
change would have the effect of materially scaling back, reducing,
eliminating or adversely affecting the quality of the facilities to be
constructed as contemplated by the capital budget approved by the Authority
with respect to the Construction, or (b) any change to the plans and
specifications originally approved by the Executive Director which would
require an additional expenditure in excess of $100,000; and
(ix) provide to the Authority upon its request copies of all
documents relating to the Construction including copies of all agreements
with contractors, subcontractors and material or equipment suppliers and
all correspondence between the Manager and such contractors, subcontractors
or suppliers.
Notwithstanding the foregoing, no portion of the Construction shall be
undertaken unless (a) it is expressly
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contemplated by and within the limitations of the capital budget approved by the
Authority and otherwise within the parameters of Section 2.3(viii) above, and/or
(b) the Manager has obtained the express prior written approval of the Authority
as to the scope and cost thereof.
2.4 PROFESSIONAL MANNER. The Manager shall fulfill its responsibilities
hereunder in a professional and diligent manner within the budgetary and
operating policy limitations established from time to time by the Authority and
in compliance in all material respects with all applicable federal, state and
local laws, regulations, ordinances, orders, contracts and leases governing the
operation of Marine World.
2.5 SUBCONTRACTORS. The Manager may subcontract the whole or any part of
the performance of its obligations and duties herein described to any affiliate
of the Manager or to any other person, firm or corporation approved in writing
by the Authority, which approval shall not be unreasonably withheld. The
subcontracting of the whole or any part of its obligations and duties as
aforesaid shall not relieve the Manager from liability and responsibility for
the performance of such obligations and duties. The Manager shall provide to
the Authority upon its request a list of any subcontractors performing services
at Marine World.
2.6 INSURANCE. The Manager shall recommend insurance coverage on behalf
of the Authority as is required pursuant to all leases governing the operation
of Marine World or is otherwise prudent in the judgment of the Manager, and the
Authority shall obtain and maintain such insurance coverage as it deems
necessary or reasonable for the operation of Marine World. Notwithstanding the
foregoing, the Manager shall at all times keep in full force and effect at least
such insurance coverage for Marine World as is required under the 1997 Second
Sublease Agreement Relating to Marine World, dated as of January 1, 1997,
between the Authority and the Redevelopment Agency of the City of Vallejo (the
"Second Sublease Agreement") as in effect on the date hereof.
2.7 FIDELITY COVERAGE. The Manager shall provide blanket fidelity
insurance coverage in an amount of at least $100,000, and otherwise in form and
substance satisfactory to the Authority, covering all personnel with access to
cash or with the ability or authority to make expenditures on behalf of the
Authority.
2.8 LIMITATION OF CONTRACTS. The Authority acknowledges that unless
otherwise provided herein or unless the Manager is otherwise directed by the
Authority, all contracts and agreements obligating the Authority with a term
(including any renewals or extensions) of not more than one (1) year from the
date of execution of the contract or the date hereof, whichever is later, with
respect to the duties of the Manager under Section 2.2, and otherwise consistent
with the approved budget for that year and the written operating policies (if
any) of the Authority (to the extent a written copy of which policies has been
provided to the Manager), may be entered into by the Manager and in the name of
the Authority without the further approval of the Authority, except that no
portion of the compensation under any such contract or agreement may be based
upon net profits from all or part of the operations of Marine World, and all
compensation under any such contract must be reasonable for the services
rendered, and any such contract shall be subject to termination at the option of
the Authority upon termination of this Agreement. Notwithstanding the
foregoing, the Manager may negotiate and enter into a collective bargaining
agreement with any union representing the Manager's employees and/or establish
the terms of employment of such employees without the need for any approval of
the Authority.
Notwithstanding any provision to the contrary contained in this Agreement,
the Manager shall not enter into any agreement on behalf of the Authority which
shall not be in compliance with Internal Revenue
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Service Revenue Procedure 93-19, or any successor Internal Revenue Service
regulation or procedure which may be applicable in the future, unless otherwise
expressly approved in writing by the Authority or its Executive Director.
The Manager agrees to take all actions necessary to evidence all contracts
entered into on behalf of the Authority and to assist the Authority in the
enforcement thereof. The Manager shall provide the Authority with copies of all
contracts and agreements which are binding upon or obligate the Authority.
2.9 COLLECTION OF REVENUES AND PAYMENT OF EXPENSES. The Manager is
authorized for and on behalf of the Authority to receive all cash receipts and
other revenues from Marine World and to make all disbursements necessary to
carry out the obligations of the Authority and the Manager hereunder within the
budgetary and policy limits approved or agreed to in writing by the Authority.
Within such limits and subject to Section 2.2.3, the Manager shall be entitled
to reimbursement from the Authority for all reasonable costs and expenses
incurred by the Manager to carry out such obligations, which shall include
without limitation all costs of the Manager which reasonably are allocable to
the services provided by the Manager under this Agreement. Notwithstanding the
foregoing, the Manager shall be entitled to reimbursement from the Authority for
all reasonable costs and expenses incurred by it in connection with the
commencement of its services hereunder, other than fees and expenses relating to
the negotiation, execution and delivery of (i) this Agreement, (ii) any option
to lease land within or adjacent to Marine World, or (iii) any option to
purchase all or any portion of Marine World.
2.10 FINANCIAL RESPONSIBILITY OF AUTHORITY. Except as otherwise provided
herein, it is hereby acknowledged that no payment shall be made under Section
2.9 or otherwise by the Authority to the Manager in respect of the compensation
and employee benefit expenses of the executive officers (and any overhead
expense) of Premier Parks Inc. incident to provision of management services
under this Agreement, except for the Management Fee referred to in Section 3.1
hereof.
Notwithstanding the foregoing, in performing its obligations hereunder, the
Manager shall act solely as agent of Authority and, in that connection, all
operating expenses of Marine World and all expenses of Manager incurred in the
performance of its obligations hereunder (including, without limitation, all
compensation or employee benefits expenses of all employees of any prior manager
of Marine World, all employees of the Authority and all employees of the Manager
providing services at or to Marine World, except as otherwise provided in
Section 2.12 hereof) in accordance with this Agreement, shall be borne by the
Authority, except that the Authority shall not pay or otherwise be responsible
for the payment of amounts referred to in the preceding paragraph (except for
the Management Fee). Without limiting the generality of the foregoing, all
debts and liabilities to third parties incurred by Manager in the course of
providing its services hereunder and within the limitations herein provided
shall be the debts and liabilities of Authority, and Manager may so inform any
such third party. To the extent funds necessary therefor are not generated by
the operation of Marine World or by any working capital financing of the
Authority, the Authority agrees to supply such funds. The Authority agrees to
use its best efforts to obtain working capital financing for Marine World
consistent with past practices of the Authority.
The Manager shall, in no event, be required to advance any of its funds for
the operation of Marine World nor to incur any liability in connection
therewith, unless the Authority shall have furnished the Manager with funds
necessary for the discharge therefor. However, the Manager shall have the right
(exercisable after three weeks prior written notice to the Authority), but not
the obligation, to advance on
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behalf of the Authority its own funds to the extent required to pay any such
obligation or liability of Marine World or the Authority. The Authority agrees
to repay the Manager on written demand any such advance, plus interest thereon
from the date of advancement at the prime rate.
2.11 COOPERATION. The Manager shall cooperate fully with and assist the
Authority in attempting to achieve the Authority's goals and objectives with
respect to Marine World.
2.12 TRANSITION OF MANAGEMENT AND OPERATION OF MARINE WORLD. Upon the
termination of this Agreement pursuant to Section 6 hereof, the Manager agrees
and covenants to cooperate fully with the Authority in the smooth and
businesslike transition of the management and operation of Marine World. The
Manager shall provide any prospective manager identified in writing by the
Authority with access to all activities at Marine World, and shall assist any
entity designated by the Authority to be the successor manager of Marine World
in employing any employee of the Manager whose primary duties are related to
Marine World, in connection with the future operation of Marine World on such
terms and conditions as shall be agreed to by each employee and such new
manager. The Authority shall in no way be responsible for any severance or
termination compensation to any employee of the Manager that is not employed by
the successor manager, to the extent that such severance or termination
compensation has accrued under arrangements contractually offered or negotiated
by the Manager from and after the date hereof without the prior written consent
of the Authority as to the specific employees and amounts involved.
The Manager shall, on the date of termination of this Agreement, (i)
transfer all licenses, permits and agreements of the Manager that relate to
Marine World to the new manager, (ii) transfer possession of any and all
Authority property to such new manager or as otherwise directed in writing by
the Authority, and (iii) vacate the Marine World site. The Authority shall
reimburse the Manager for any reasonable costs or expenses borne by the Manager
in connection with its performance of any obligations under this Section 2.12.
2.13 ALTERATIONS AND LIENS. The Manager shall not make, or suffer to be
made, any material alterations to any facility at Marine World without the prior
written consent of the Authority. The Manager shall not permit the assets of the
Authority to become subject to any lien arising out of the responsibilities of
the Manager hereunder.
2.14 NO DISCRIMINATION. The Manager shall not discriminate against any
employee or applicant for employment because of race, color, citizenship status,
national origin, ancestry, sex, sexual orientation, age, religion, creed,
physical or mental disability, marital status, veteran status, or any other
factor protected by law. The Manager shall not discriminate because of race,
color, citizenship status, national origin, ancestry, sex, sexual orientation,
age, religion, creed, physical or mental disability, marital status, veteran
status or any other factor protected by law against any person by refusing to
furnish such person any service or privilege offered to or enjoyed by the
general public, nor shall the Manager or its employees publicize Marine World in
any manner that would directly or inferentially reflect on the acceptability of
the patronage of any person because of race, color, citizenship status, national
origin, ancestry, sex, sexual orientation, age, religion, creed, physical or
mental disability, marital status, veteran status, or any other factor protected
by law.
The Manager shall take no action which would cause the Authority to violate
the provisions of Section 7.6(b) of the Second Sublease Agreement referred to in
Section 2.6 hereof.
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2.15 COOPERATION WITH FINANCING. The Manager agrees to cooperate, in
accordance with the terms of this Agreement, with the Authority in its efforts
to obtain financing to pay for the working capital needs of Marine World, the
refunding or payment of debt relating to Marine World, and/or the construction
of improvements at Marine World, and to sign such documents or take such actions
as reasonably may be requested by the Authority or the lenders of such
financing. The Authority shall be responsible for the repayment of any such
financing, and the Authority acknowledges that the Manager (in its capacity as
Manager hereunder) shall have no liability or responsibility whatsoever for the
repayment of any debt incurred to finance Marine World or the inability of the
Authority to obtain any such financing.
As of the date of execution of this Agreement, the Manager acknowledges
that it has supplied no equipment to the Authority and that it has no interest,
legal or equitable, including security interests, in or to any item of real
property, any fixture or any item of personal property located at Marine World.
The Manager shall inform the Authority in writing as to any such equipment or
interest that may be supplied or arise in the course of its performance
hereunder.
2.16 PROMOTION OF VALLEJO. The Manager shall include references to the
City of Vallejo in marketing and promotional materials related to Marine World,
and use its best efforts to (i) use contractors, vendors and service providers
located in the City of Vallejo in discharging its responsibilities under Section
2.2.1 hereof, and to give preference to such contractors, vendors and service
providers in the event of equivalent quality and price, and (ii) include in its
annual operating budgets under Section 4.1 and otherwise to implement reduced
price admission and/or other programs targeted towards allowing access to Marine
World for economically disadvantaged residents of Vallejo, especially families
and children.
SECTION 3
MANAGEMENT FEE
3.1 MANAGEMENT FEE. The Manager shall be entitled to receive a management
fee (the "Management Fee") consisting of: (i) $250,000 annually, payable in
equal monthly installments of $20,833.33, commencing on the first business day
of the calendar month which first commences after the effective date of this
Agreement and continuing on the first business day of each month thereafter so
long as this Agreement remains in effect; plus (ii) an annual fee equal to
twenty percent (20%) of the gross revenues arising from Marine World in excess
of $35,000,000 during each twelve month period from November 1 through October
31 (but in the case of the period commencing on the date hereof and ending on
October 31, 1997, $31,700,000); provided that any compensation payable under the
preceding clause (ii) shall not be more than the compensation paid during the
applicable twelve month period to which such compensation relates under the
preceding clause (i). Not later than January 31 of each year during the term of
this Agreement, commencing January 31, 1998 and otherwise following the
completion of the annual financial audit of Marine World, the Manager shall
submit to the Authority a request for any compensation due to it under clause
(ii) of the first sentence of this Section 3.1, providing supporting detail for
the amount owed. The Authority shall promptly review such information and make
payment of any amount owed to the Manager under said clause (ii) by the
succeeding February 28.
3.2 MANAGEMENT FEE REASONABLE. The Authority and the Manager acknowledge
and agree that the amount of the Management Fee is reasonable in relation to the
services to be performed by the Manager
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hereunder.
3.3 PAYMENT ABSOLUTE. Payment of the Management Fee shall be made without
regard to the financial status of Marine World.
SECTION 4
ANNUAL BUDGETS AND REPORTS
4.1 OPERATING BUDGET. Within sixty (60) days of the effective date of
this Agreement and on or about January 31 of each year during the term of this
Agreement, the Manager shall prepare operating programs and a budget for Marine
World for the remainder of the then current operating year in the case of the
first budget, and for the succeeding operating year in the case of all other
budgets, and shall submit them to the Authority by such date. Such budgets
shall include detailed line items with respect to (i) projected attendance, (ii)
revenues (including expected prices and/or pricing policies for admission,
parking, concessions and merchandise), (iii) expenses and (iv) capital
improvements, and shall otherwise set forth the Manager's general strategy for
reducing expenses and increasing revenues.
4.2 CAPITAL BUDGET. Within sixty (60) days of the effective date of this
Agreement and on or about January 31 of each year during the term of this
Agreement, the Manager shall submit to the Authority an annual capital
expenditure request and cash flow projection as well as a projected capital and
operating reserves report. The reports due on each January 31 shall include a
summary five year capital improvement plan for Marine World.
4.3 OTHER PLANNING DOCUMENTS. The Manager shall, in addition to the other
budgets and reports required under this Section 4, submit to the Authority for
its review and approval, within ninety (90) days of the effective date of this
Agreement and on or about each January 31 during the term of this Agreement, (i)
the marketing plan referred to in Section 2.2.1(vi) and consistent with Section
2.16(i), (ii) a maintenance plan for Marine World consistent with Section
2.2.1(iv), (iii) a security plan consistent with Section 2.2.1(v), and including
both emergency and non emergency protocols to be followed by management
employees, and (iv) a list of insurance maintained for Marine World consistent
with Section 2.6. In addition, the Manager shall prepare a cash flow budget and
otherwise assist the Authority in connection with the annual cash flow borrowing
by the Authority for Marine World, which budget must be prepared and refined in
late September or early October of each year so that such cash flow borrowing
can be completed by November 1 of each year.
4.4 AUTHORITY REVIEW AND APPROVAL. The Authority shall notify the Manager
of its approval or disapproval of any budgets or reports submitted to it
pursuant to Section 4.1, 4.2 and 4.3 with thirty (30) days of any such
submittal. Failure of the Authority to disapprove of any such report or budget,
or any portion thereof, within said thirty day period shall be deemed to be
approval by the Authority. If the Authority disapproves a portion of any report
or budget, the Manager may act under the portions thereof not so disapproved,
and shall revise the portion that was disapproved until satisfactory to the
Authority. With respect to any portion thereof not approved or deemed approved
by the Authority, the prior period's budget or report shall remain in effect
with respect to such portion until a new budget or report with respect thereto
shall have been so approved. The Manager shall revise reports from time to time
to reflect Authority comments or concerns, and material changes in the
operations of Marine World.
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4.5 ANNUAL DISCLOSURE. The Manager shall assist the Authority and
promptly provide any information requested by the Authority in connection with,
the annual disclosure responsibilities of the Authority under Section 7.9 of the
Second Sublease Agreement referred to in Section 2.6, or otherwise in connection
with the annual cash flow borrowing of the Authority.
4.6 ASSISTANCE CONCERNING MEETINGS. The Manager shall provide such
information or assistance to the Authority as the Authority may request in
relation to preparing for meetings of the Board of Directors of the Authority.
SECTION 5
RECORDS; ACCOUNTS AND MONTHLY REPORTS
5.1 MAINTENANCE OF RECORDS. The Manager shall cause to be kept at Marine
World full, true and accurate, in all material respects, books, accounts and
records of the management and operations of Marine World and of all transactions
relating thereto as such operations extend to the responsibilities of the
Manager hereunder.
5.2 ACCOUNTING METHOD; AVAILABILITY. Such books, accounts and records
shall be kept on the accrual basis of accounting in accordance with generally
accepted accounting principles and practices and shall be available for
inspection by the Auditor, the Authority and their respective agents and
employees.
5.3 FINANCIAL STATEMENTS AND INFORMATION. The Manager shall provide the
Authority with monthly financial statements, in a form reasonably acceptable to
the Executive Director of the Authority, respecting the operations of Marine
World, including a balance sheet, cash flow report, statement of operations,
budget variance to date and other pertinent financial data reasonably requested
by the Authority, no later than twenty (20) days following the end of each
month. The Manager shall provide to the Authority for its review a list of
warrants representing amounts disbursed in furtherance of the activities and
operations at Marine World on a monthly basis, or as otherwise requested by the
Authority. In addition, the Manager shall cause to be prepared such other
management and financial reports concerning Marine World as the Authority may
reasonably request from time to time.
5.4 RIGHT TO INSPECT. The Authority has the right to inspect and to audit
all the books and records relating to the management and operation of Marine
World which rights shall remain in effect for the duration of this Agreement and
for five (5) years thereafter.
SECTION 6
TERM AND TERMINATION
6.1 TERM OF AGREEMENT. This Agreement shall commence on the date of
termination of the Interim Management Agreement Relating to Marine World,
entered into as of November 1, 1996, between the Authority and Marine
World/Africa USA Partners, a California Limited Partnership, and shall terminate
on February 1, 2002, unless sooner terminated as set forth in paragraph 6.3.
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6.2 DEFAULT.
6.2.1 Failure by either party hereto to pay or deposit sums due
by one party to the other, or as otherwise required under this Agreement,
within five (5) days notice by the other of such failure shall be a default
hereunder, provided that if the default is of a nature that it cannot be
cured within five (5) days, then the defaulting party shall not be deemed
in default if it takes reasonable steps to commence to cure the default
within such five (5) day period and proceeds with due diligence thereafter
to cure its default within ten (10) days of notice of default.
6.2.2 Violation in any material respect by the Manager of any
laws, ordinances, rules and regulations or orders of any public authority
having jurisdiction over Marine World and failure by the Manager to cure
the applicable violation within five (5) days following notice of any
violation thereof from the Authority, any officer thereof or the applicable
governmental agency shall be a default by the Manager hereunder; provided,
however, that the Manager shall not be in default hereunder if such cure
cannot be reasonably accomplished within such period so long as the Manager
commences cure within such five (5) day period and proceeds with due
diligence thereafter to cure said default within (i) thirty (30) days of
notice thereof; or (ii) if not so cured during such period, so long as a
failure to cure the violation does not have a material adverse effect on
the operations or financial condition of the Park, such longer period as is
necessary to effect such cure.
6.2.3 Either party shall be deemed in default under this
Agreement in the event of an uncured material breach of any provision of
this Agreement not otherwise referred to in Sections 6.2.1 or 6.2.2. The
nondefaulting party must give written notice to the defaulting party
specifying the full particulars of the breach alleged. The defaulting
party shall have thirty (30) days from the date of the notice to cure the
breach or take steps reasonably acceptable to the nondefaulting party to
cure the breach which actions must be diligently pursued and concluded in a
reasonable period.
6.2.4 The occurrence of any affirmative act by the Manager (i)
which directly causes an Event of Default (as such term is defined in the
Second Sublease Agreement referred to in Section 2.6 hereof) with respect
to any obligation of the Authority under Sections 5.2, 5.3, 5.4, 5.5, 5.7,
5.9, 6.1, 7.2 or 7.6 of said Second Sublease Agreement as the same exists
on the date hereof, or an Event of Default (as such term is defined in the
Trust Agreement referred to in said Second Sublease Agreement) in Section
10.06 of said Trust Agreement as the same exists on the date hereof, and
(ii) which has a material adverse effect on the operations or financial
condition of Marine World.
6.3 EARLIER TERMINATION. Notwithstanding the provisions of Section 6.1
hereof, this Agreement shall be terminated sooner:
(i) at the option of either party hereto, if the Authority and
Premier Parks Inc. (or a wholly-owned subsidiary thereof) have not entered
into an option agreement in respect of a lease of property adjacent to or
within Marine World which is mutually satisfactory to them by April 1,
1997, upon ninety (90) days prior written notice to the other party,
provided that any such termination by the Manager shall not be effective
until the earlier of (a) at the option of the Authority, two hundred
seventy (270) days from the receipt by the Authority of such notice, or (b)
the appointment of and assumption of duties by a new manager for Marine
World;
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(ii) at the option of the Manager, if the Authority and Premier Parks
Inc. (or a wholly-owned subsidiary thereof) have not entered into an option
agreement in respect of a purchase by Premier Parks Inc. (or a wholly-owned
subsidiary thereof) of Marine World by September 1, 1997, upon not less
than ninety (90) days prior written notice by the Manager to the Authority;
(iii) at any time by mutual agreement between the Manager and the
Authority;
(iv) at the option of either party hereto, upon substantial
destruction or taking by eminent domain of such portions of Marine World so
as to make the operation of Marine World, in the opinion of the Authority,
economically infeasible;
(v) subject to the provisions of Section 6.4, immediately upon a
default under Section 6.2 at the election of the nondefaulting party;
(vi) at the option of the Authority with thirty days prior written
notice to the Manager, and effective upon appointment of and assumption of
duties by a new manager for Marine World, (a) on the date which is three
(3) years from the date of this Agreement, and (b) following notice to the
Authority by Premier Parks Inc. (or its wholly owned subsidiary which is
the holder of the option) that it will not exercise an option to lease land
adjacent to Marine World as such option is contemplated by the option
agreement referred to in clause (i) above; or
(vii) at the option of the Manager, if the Manager in good faith has
a material disagreement with the Authority over (a) changes mandated by the
Authority to budgets previously approved by the Authority under Section 4.4
hereof or (b) the Authority's operating policies with respect to Marine
World, upon ninety days written notice from the Manager to the Authority as
to the substance of such disagreement, provided that any such termination
by the Manager shall not be effective until the earlier of (a) at the
option of the Authority, one hundred fifty (150) days from the receipt by
the Authority of such notice, or (b) the appointment of and assumption of
duties by a new manager for Marine World.
6.4 AGENCY RIGHT TO CURE. The Redevelopment Agency of the City of Vallejo
(the "Agency") shall have the right to receive from the Manager notice of and
have the right to cure any breach by or default of the Authority under this
Agreement, on behalf of and at the expense of the Authority during any period
that Authority is in default thereunder; provided that, except in case of an
emergency requiring earlier action, the Agency shall give Authority not less
than fifteen (15) days prior written notice of the Agency's intent to cure on
behalf of Authority. The Agency shall have a reasonable period of time
(considering the nature of the default) to cure any default of Authority,
following the expiration of all periods (including any extensions of time and
period during which performance is waived) allowed for Authority's cure of such
default, in the event that Authority has failed to cure.
6.5 PRORATION OF MANAGEMENT FEE UPON TERMINATION. If this Agreement is
terminated prior to the end of its term (as described in Section 6.1), the
Authority shall pay to the Manager, within thirty (30) days after such
termination and after deducting any amounts owed by the Manager to the Authority
hereunder, any compensation due under Section 4.1(i), and a pro rata amount to
be agreed upon by the Authority and the Manager in respect of Section 4.1(ii)
based upon the operations of Marine World to the date of termination as compared
to the immediately preceding two years; provided that no such compensation
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shall be owing in respect of Section 4.1(ii) in the event of a termination by
the Authority by reason of a default by the Manager of the character described
in Section 6.2.
SECTION 7
INDEMNIFICATION
7.1 INDEMNIFICATION BY AUTHORITY. The Authority shall indemnify and hold
the Manager harmless from any and all claims, costs, damages and liabilities,
including reasonable attorneys fees and expenses ("Loss"), as and when incurred
by reason of or arising out of (i) any and all debts, liabilities or
obligations, whether direct or contingent, of any party relating to Marine
World, existing on, or arising out of the operation or ownership of Marine World
prior to, the commencement of Manager's services hereunder or (ii) the
performance by the Manager of its duties and responsibilities hereunder or its
status as "manager" of Marine World, except for those arising out of:
(a) the negligence or willful misconduct of the Manager or its
officers, directors, agents or employees; or
(b) a breach by the Manager or its employees, agents, subcontractors
or assigns of its duties or obligations hereunder.
7.2 INDEMNIFICATION BY THE MANAGER. The Manager shall indemnify, defend
(with counsel approved by the Authority) and hold the Authority and its
officers, directors, employees and agents harmless from any and all claims,
costs, damages or liabilities, including reasonable attorneys fees and expenses
("Loss") as and when incurred by reason of or arising from:
(i) the gross negligence or willful misconduct of the Manager or its
employees, agents or subcontractors; or
(ii) a breach by the Manager or its employees, agents, subcontractors
or assigns of its duties or obligations hereunder.
7.3 INSURANCE PROCEEDS. Any loss to be indemnified under this Section 7
shall be after deducting any insurance proceeds received in connection with such
loss by the party suffering the loss.
SECTION 8
FORCE MAJEURE
8.1 OBLIGATIONS SUSPENDED. If the Manager or the Authority is unable by
reason of Force Majeure (as herein defined) to carry out any obligation under
this Agreement, such obligation shall be suspended only so far as it is
physically affected by such Force Majeure during the continuance thereof. The
party unable to perform shall give the other party prompt notice of such Force
Majeure with reasonably full particulars thereof and, insofar as is known, the
probable extent to which it will be unable to perform or be delayed in
performing such obligation. The party unable to perform shall use all possible
diligence to remove such Force Majeure as quickly as possible.
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8.2 REMOVAL OF FORCE MAJEURE. The requirement that any Force Majeure
shall be removed with all possible diligence shall not require the settlement by
the party unable to perform of strikes, lockouts or other labor disputes or the
meeting of any claims of or demands by any supplier or government entity which
reasonably may be harmful to the best interests of the Authority or the Manager.
8.3 DEFINITION. For the purpose of paragraphs 8.1 and 8.2 hereof, "Force
Majeure" shall mean an act of God, strike, lockout or other industrial
disturbance, act of a public enemy, war, blockade, public riot, lightning, fire,
storm, earthquake, flood, explosion, governmental restraint, breakage, or
accidents to equipment and any other cause whether of the kind specifically
enumerated above or otherwise, which shall not reasonably be within the control
of the party claiming suspension.
SECTION 9
MISCELLANEOUS
9.1 NO PRIVATE BUSINESS USE. The Manager shall take all reasonable steps
in connection with this Agreement as may be requested by the Authority to ensure
that Marine World is not deemed to be used for a private business use within the
meaning of Section 141(b) of the Internal Revenue Code of 1986 and applicable
rulings, procedures and regulations of the Internal Revenue Service, so as to
cause the City of Vallejo or the Authority to violate the covenant in Section
10.05(a) of the 1997 Trust Agreement Relating to Marine World, dated as of
January 1, 1997, among the City of Vallejo, the Authority and BNY Western Trust
Company.
9.2 NO WAIVER. No delay or failure on the part of any party in exercising
any right hereunder shall impair any such right or any remedy of the party so
delaying or failing, nor shall it be construed to be a waiver of any continuing
breach or default hereunder or any acquiescence therein or of any similar breach
or default thereafter occurring, nor shall any waiver of any single breach or
default hereunder be deemed a waiver of any other breach or default theretofore
or thereafter occurring.
9.3 AMENDMENTS. This Agreement may be amended, modified, waived, released
or discharged only by a written amendment executed by the parties hereto.
9.4 SEVERABILITY. If any court of competent jurisdiction holds that any
provision of this Agreement is void, voidable, illegal or unenforceable, or that
this Agreement would be void, voidable, illegal or unenforceable unless any
provision hereof were severed herefrom, that provision shall be severable from
and shall not affect the continued operation of the rest of this Agreement;
provided that if the provision to be severed is a material part of this
Agreement, the foregoing shall not apply, and the parties shall in good faith
renegotiate such provision.
9.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding on all
parties hereto and their respective successors and permitted assigns. A party
may not assign its rights or be released from its obligations in, to or under,
this Agreement except as may expressly be approved in writing by the other party
hereto in its sole and absolute discretion; provided that the Authority may at
any time assign this Agreement to the City of Vallejo, the Agency, the Vallejo
Public Financing Authority or another agency of either the City or the Agency
which has the use and possession of Marine World. The experience and
capabilities of the
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Manager were of primary importance to the Authority in entering into this
Agreement, and the Authority shall be under no obligation whatsoever to approve
any prospective assignee of the Manager hereunder.
9.6 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which, when so executed, shall be deemed to be an original and all of which,
when taken together, shall constitute one agreement.
9.7 NOTICES. Any notice, document or other item to be given, delivered,
furnished or received under this Agreement shall be deemed given, delivered,
furnished or received when given in writing and personally delivered to an
officer of the applicable party or, after the same is deposited with the United
States Postal Service, postage prepaid, registered or certified first class
mail, return receipt requested, addressed to such applicable party at the
address or addresses indicated herein therefor, or at such other address or
addresses as such party may from time to time designate by written notice to the
other, at the time of delivery shown on such return receipt:
(a) If to the Authority: Marine World Joint Powers Authority, c/o
City of Vallejo, City Hall, 555 Santa Clara Street, Vallejo, California
94590, Attention: City Manager, with a copy to City Attorney of the City of
Vallejo, City Hall, 555 Santa Clara Street, Vallejo, California 94590.
(b) If to the Manager: Park Management Corp., c/o Premier Parks Inc.,
122 East 42nd Street, 49th Floor, New York, New York 10168, Attention:
Chief Financial Officer, with a copy to Baer Marks & Upham LLP, 805 Third
Avenue, 20th Floor, New York, New York 10022, Attention: James M.
Coughlin.
9.8 INDEPENDENT CONTRACTOR. The relationship between the Manager and the
Authority is that of an independent contractor and, except as herein expressly
provided, neither party is granted any right or authority to assume or create
any obligation or responsibility, express or implied, on behalf of or in the
name of the other or to bind the other in any manner or thing whatsoever.
9.9 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the management and operation of Marine World
by the Manager during the term of this Agreement.
9.10 ARBITRATION OF DISPUTES.
9.10.1 Any disputes between the parties arising out of or
related to this Agreement which cannot be resolved by good faith
negotiation shall be resolved through binding arbitration. Any party may
elect to commence arbitration at any time by giving notice to the other
party. The parties then shall attempt to agree on the appointment of a
panel of three independent arbitrators. Each party may select one of the
arbitrators for such panel, and if they do not identify their respective
arbitrator to the other party or they cannot agree on the third arbitrator
within twenty (20) days of the notice electing arbitration, such
arbitrator(s) shall be appointed through the procedures of the American
Arbitration Association. Any arbitrator selected to serve shall be
qualified by training and experience for the matters for which such
arbitrator is designated to serve. The arbitration shall be conducted in
Vallejo, California under the commercial arbitration rules then in effect
of the American Arbitration Association. The written decision and findings
of a majority of the panel of
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arbitrators shall be final, binding and conclusive as between the parties
and may be entered in any court having jurisdiction. The parties hereby
consent to the jurisdiction and venue of the federal courts located in the
Eastern District of the State of California and state courts located in
Solano County, California for this purpose.
9.10.2 The parties each shall advance one-half (1/2) of the costs of
any arbitration. However, the prevailing party in any arbitration
proceeding or legal action arising out of, or in connection with, this
Agreement shall be entitled to recover its reasonable attorney's fees and
its costs and expenses incurred in connection with such arbitration
proceeding or legal action. The arbitrators shall specify the prevailing
party or parties in its award. If more than one arbitrable dispute is
adjudicated then the costs and expenses of the arbitration shall be
apportioned by the arbitrators in the arbitration award to each separate
dispute.
9.11 REMEDIES NOT EXCLUSIVE. The remedies provided herein for breach of
this Agreement are not exclusive, and in event of breach, the parties hereto
shall have all the remedies provided by law.
9.12 NO THIRD PARTY BENEFICIARIES. This Agreement is not intended to and
does not create any rights or interests in any person not a party hereto, except
the Agency, as provided in Section 6.4 hereof.
9.13 AUTHORITY CONSENTS AND APPROVALS. No consents, authorization or
approval required by this Agreement to be given by the Authority will be
unreasonably withheld. Unless otherwise provided herein, all matters submitted
by the Manager for approval by the Authority shall be deemed approved by the
Authority unless the Authority notifies Manager in writing of its disapproval
thereof within the time period specified herein for such approval or, if no such
time period is specified, within thirty (30) days after such matter is so
submitted in writing by the Manager to the Authority.
9.14 LIMITATION ON MANAGER'S ACTIVITIES. The Manager hereby acknowledges
and agrees that it is a single purpose corporation whose sole corporate purpose
is to act as Manager hereunder, and that it will not engage in any activities
unrelated to its performance as Manager hereunder without the prior written
consent of the Authority.
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9.15 APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable to contracts made
and performed in such State, and Solano County, California, shall be the county
of venue in the event of any legal proceedings with respect to this Agreement.
IN WITNESS WHEREOF the parties have executed this Agreement effective as of
the date first above written.
MARINE WORLD JOINT POWERS AUTHORITY
By: /s/
--------------------------------
Executive Director
PARK MANAGEMENT CORP.
By: /s/
--------------------------------
Chairman and
Chief Executive Officer
Premier Parks Inc. hereby fully and unconditionally guarantees the
performance by Park Management Corp. of its obligations under Sections 2, 4, 5
and 7.2 of the foregoing Agreement.
PREMIER PARKS INC.
By: /s/
------------------------------
Chairman and
Chief Executive Officer
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EXHIBIT 10(ab)
================================================================================
PURCHASE OPTION AGREEMENT
Among
CITY OF VALLEJO,
MARINE WORLD JOINT POWERS AUTHORITY
and
REDEVELOPMENT AGENCY OF THE CITY OF VALLEJO,
collectively, as Optionor
and
PARK MANAGEMENT CORP.,
as Optionee
Property:
Marine World Park and Adjacent Property
City of Vallejo
Solano County, California
Dated as of August 29, 1997
================================================================================
Prepared by:
Baer Marks & Upham LLP
805 Third Avenue
New York, New York 10022
<PAGE>
PURCHASE OPTION AGREEMENT
THIS PURCHASE OPTION AGREEMENT ("Agreement") is entered into as of
this 29th day of August, 1997 by and among the CITY OF VALLEJO, a municipal
corporation organized and existing under the laws of the State of California
(the "City"), the MARINE WORLD JOINT POWERS AUTHORITY, a joint exercise of
powers authority organized and existing under the laws of the State of
California (the "Authority") and the REDEVELOPMENT AGENCY OF THE CITY OF
VALLEJO, a public body, corporate and politic, organized and existing under the
laws of the State of California (the "Agency"); and PARK MANAGEMENT CORP., a
California corporation (the "Corporation").
R E C I T A L S:
A. The City owns fee simple title to approximately one hundred
thirty-eight (138) acres of land located in the City of Vallejo, County of
Solano, State of California, and more particularly described in Exhibit A
attached hereto and made a part hereof (the "Land"). The City also owns or
controls the right to use the surface of Lake Chabot, a flood control and
drainage reservoir consisting of approximately fifty-five (55) acres ("Lake
Chabot").
B. The City has entered into a 1997 Site Lease Relating to Marine
World dated as of January 1, 1997, whereby the City has leased the Land and
rights to use a portion of the surface of Lake Chabot to the Authority (the
"1997 City-Marine World Lease").
C. In connection with the Certificates of Participation Financing
(as defined in Section 7.14), the Authority and the City have entered into a
1997 Lease Agreement Relating to Marine World dated as of January 1, 1997 (the
"1997 Marine World-City Lease"), whereby the Authority leased back to the City a
portion of the Land more particularly described in Exhibit B attached hereto and
made a part hereof (the "Public Parcel", which Public Parcel shall be
hereinafter deemed to include all Improvements thereon) and rights to use a
portion of the surface of Lake Chabot, the City and the Agency have entered into
a 1997 First Sublease Agreement Relating to Marine World dated as of January 1,
1997 (the "1997 City-Agency Lease"), whereby the City subleased to the Agency
the Public Parcel and the rights to use a portion of the surface of Lake Chabot,
and the Agency and the Authority have entered into a 1997 Second Sublease
Agreement Relating to Marine World, dated as of January 1, 1997, whereby the
Agency subleased to the Authority the Public Parcel and the rights to use a
portion of the surface of Lake Chabot (the "1997 Agency-Marine World Lease").
The 1997 City-Marine World Lease, the 1997 Marine World-City Lease, the 1997
City-Agency Lease and the 1997 Agency-Marine World Lease are collectively
referred to herein as the "Public Leases" and the City, the Agency and the
Authority are hereinafter, as their interests may appear, collectively referred
to as the "Optionor."
<PAGE>
D. Pursuant to that certain Option Agreement (Parcel Lease) dated as
of May 30, 1997, among the Authority, the Agency and the Corporation, the
Authority granted to the Corporation an option to lease a portion of the Land
identified in Exhibit C attached hereto and made a part hereof (the "Private
Parcel," which Private Parcel shall be hereinafter deemed to include all
Improvements thereon), to enable the Corporation to construct and operate
facilities on the Private Parcel compatible with those on the Public Parcel.
E. Optionor desires to grant to the Corporation an option (the
"Option") to acquire all of the right, title and interest of Optionor in and to
the Option Property on the terms, and subject to the conditions, set forth
herein, and the Agency and the Authority desire to relinquish, transfer and
assign all of their respective right, title and interest thereto and under the
Public Leases, on the terms, and subject to the conditions, set forth herein.
F. The Corporation desires to acquire the Option upon the terms and
conditions hereinafter set forth.
A G R E E M E N T
In consideration of the promises set forth herein and for other good
and valuable consideration, including but not limited to, amounts expended and
to be expended by or on behalf of the Corporation in connection with the making
of certain Improvements to the Option Property, the receipt and sufficiency of
which the parties hereto hereby acknowledge, the parties hereto hereby agree as
follows (refer to Section 7.14 for definitions of capitalized terms):
ARTICLE 1
TERMS OF OPTION
SECTION 1.1 Sale of Option. Optionor hereby grants to the
Corporation, and the Corporation hereby accepts from Optionor, the Option for
the consideration recited above, and on the terms set forth herein. In the event
the Corporation exercises the Option in accordance with Section 1.4, the parties
shall, at the Corporation's election, either execute and deliver a contract of
sale for the Option Property in form and substance reasonably acceptable to
Optionor and the Corporation, including but not limited to, and otherwise
consistent with, the terms set forth herein (the "Contract of Sale"), or
consummate the Closing in accordance with the terms hereof.
SECTION 1.2 Term. The term of the Option shall begin as of the date
hereof and expire on the date which is the soonest to occur of (i) the Closing
Date, (ii) the expiration of the Option in accordance with the terms hereof,
(iii) February 1, 2007 and (iv) the expiration by its terms of the Option under
and as defined in the Lease Option without exercise thereof by the Corporation
(such period shall hereinafter be referred to as the "Term"). If the Option is
not exercised in accordance herewith on or prior to the last day of the Term,
the Option shall
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automatically and without requiring further documentation, terminate and cease
to be of force and effect.
SECTION 1.3 Exclusivity. The Option to purchase the Option Property
shall be exclusive during the Term; provided, however, the parties shall have
the right to assign the Option and all of their respective right, title and
interest hereunder in accordance with Section 7.3 below.
SECTION 1.4 Exercise; Rescission. (a) Exercise of the Option herein
granted shall be by written notice thereof given by the Corporation to Optionor
not more than one hundred twenty (120) days prior to the prospective Closing in
the manner hereinafter provided during the Term (the "Exercise Notice").
Notwithstanding the foregoing, the Option may only be exercised (i) if the
Corporation has theretofore exercised the Option under and as defined in the
Lease Option and (ii) if the Exercise Notice is delivered more than one hundred
twenty (120) days prior to February 1, 2002, the Corporation shall have obtained
an opinion of a nationally recognized bond counsel acceptable to the Optionor to
the effect that the exercise of the Option will not cause the interest component
of the Lease Payments under the 1997 Marine World-City Lease to be includable in
the gross incomes of the owners of the related Certificates of Participation.
(b) Notwithstanding any provision of this Agreement to
contrary, at any time after delivery of the Exercise Notice, and on or before
the thirty-fifth (35th) day prior to the prospective Closing Date, for any
reason or for no reason and without the necessity of any explanation, the
Corporation may give Optionor a written notice in the manner hereinafter
provided during the Term (the "Rescission Notice") whereby the Corporation
elects to rescind the Exercise Notice, whereupon this Agreement and the
obligations of the parties hereunder shall continue in force and effect as if
such Exercise Notice had not been delivered. In the event that the Corporation
delivers any such Rescission Notice, the Corporation shall promptly pay, upon
receipt of an invoice therefor, all costs incurred by Optionor related to
actions taken by Optionor in response to the Exercise Notice reasonably related
to preparing for the Closing.
SECTION 1.5 Time and Place of Closing. Upon timely and proper
exercise of the Option as herein provided, the purchase and sale of the Option
Property shall be consummated at a closing (the "Closing") to occur on a date
(the "Closing Date") selected by the Corporation in the Exercise Notice, which
is not less than sixty (60) days following the delivery of such Exercise Notice.
The Closing shall occur at the office of the City Manager or at such other
location as shall be mutually acceptable to the Corporation and the Optionor.
ARTICLE 2
CLOSING
SECTION 2.1 Purchase Price. If the Option is exercised by the
Corporation in accordance with the terms hereof, the Corporation shall pay to,
or as directed by, the Authority on or prior to the Closing Date as
consideration for the acquisition of the Option Property, an amount (the
"Purchase Price") equal to the greater of (i) the sum of (A) the then
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applicable Assessment Bond Amount and (B) the outstanding principal amount of
the Certificates of Participation as of the Closing Date or (ii) the Fair Market
Value. Except as otherwise provided herein, the Purchase Price shall be paid in
immediately available funds by federal funds wire transfer, or as otherwise
directed by Optionor in writing at least five (5) business days' prior to the
Closing. The Purchase Price shall be allocated among the Option Property as set
forth on a schedule prepared by the Corporation, reasonably acceptable to the
Optionor and delivered on or prior to the Closing. Each party shall make all
appropriate tax and other filings on a basis consistent with such allocation.
SECTION 2.2 The Corporation's Closing Conditions. Upon the
Corporation's exercise of the Option, the Corporation shall effectuate the
Closing on the Closing Date in accordance with the terms hereof or the Contract
of Sale (if any), provided the following conditions have been satisfied or
waived by the Corporation on or prior to such Closing Date:
(a) Optionor's Closing Documents (as described in Section 2.4
hereof) shall have been duly executed and delivered to the Corporation.
(b) The Corporation shall have received all Governmental
Approvals and such other permits, licenses, reports, including but not limited
to an environmental report with soil samples, and such other evidence reasonably
required by the Corporation, showing that the Option Property and the Business
are in substantial compliance with all applicable Laws, including but not
limited to Environmental Laws, except to the extent that any non-compliance does
not have a material adverse effect on the Option Property or the Condition of
the Business.
(c) All of the representations and warranties of Optionor set
forth herein and in any Contract of Sale shall have been true and correct in all
material respects on the date hereof or thereof, as the case may be, and on the
Closing Date, and Optionor shall have performed and complied with all
agreements, obligations and covenants required by this Agreement or any Contract
of Sale to be performed or complied with by it at or prior to the Closing Date.
(d) The Corporation shall have received an A.L.T.A. form of
owner's policy of title insurance issued by a title company acceptable to it
(the "Title Company"), insuring fee simple marketable title in the Realty in the
name of the Corporation (or its nominee or designee) subject to the Permitted
Encumbrances.
(e) The Certificates of Participation and all other
indebtedness or other liabilities secured by all or any part of the Option
Property or any interest therein, other than Assumed Liabilities and Permitted
Encumbrances, shall have been paid in full by, or on behalf of, Optionor or
shall have been duly called for prepayment in full on the Closing Date and the
Corporation shall have received evidence satisfactory to it that such prepayment
shall have been made or will be made on the Closing Date from the Purchase Price
received by the Authority.
(f) If, on the Closing Date, the Corporation shall not be the
manager of the Business, the Corporation shall have received evidence,
satisfactory to it, that any Contract between Optionor and any third party,
pursuant to which such party acts as manager of the Business shall terminate on
the Closing Date.
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(g) All accounts payable relating to the Business and other
Retained Liabilities existing as of the Closing Date shall have been paid by
Optionor, duly provided for under the RSA or paid by the Corporation on behalf
of Optionor out of the Purchase Price.
(h) All Optionor Required Consents (as defined in Section
3.1(j)) shall have been obtained and the Corporation shall have received
evidence, reasonably satisfactory to it, to that effect.
(i) Optionor shall have delivered to the Corporation at the
Closing possession and control of the Option Property.
(j) No change shall have occurred subsequent to the Exercise
Notice but prior to the Closing to all or any part of the Option Property which
alone or in the aggregate has a material adverse effect on the Option Property,
the Business or the Fair Market Value, nor has any event occurred or condition
exist at or prior to the Closing which may give rise to such change.
(k) No Claim (as defined in Section 3.1(d)) instituted by any
person (other than the Corporation or its Affiliates) shall have been commenced
or be pending against Optionor, the Corporation or any of their Affiliates,
which Claim seeks to restrain, prevent, change or delay in any material respect
the transactions contemplated hereby or seeks to challenge any of the material
terms or provisions of this Agreement or seeks material damages in connection
with any of such transactions.
SECTION 2.3 Optionor's Closing Conditions. Upon the Corporation's
exercise of the Option, Optionor shall effectuate the Closing on the Closing
Date in accordance with, the terms hereof or with the Contract of Sale (if any),
provided (a) the Corporation shall have paid, or caused to be paid, the Purchase
Price and (b) the Corporation's Closing Documents (as described in Section 2.4)
shall have been executed and delivered to Optionor.
SECTION 2.4 Closing Deliveries. (a) Optionor shall deliver, or cause
to be delivered, at Closing, the following (collectively, the "Optionor's
Closing Documents"):
(i) The City shall have executed and delivered to the
Corporation a general warranty deed in the form generally in use in California
and otherwise acceptable to the Corporation and reasonably approved by counsel
to Optionor (the "Deed") conveying fee simple marketable title to the Realty to
the Corporation (or a nominee or designee thereof), free and clear of all liens,
claims, encumbrances and other matters affecting such title, except those set
forth in Exhibit D attached hereto and made a part hereof (the "Permitted
Encumbrances").
(ii) Each Optionor shall have executed and delivered to
the Corporation such bills of sale, assignments and other instruments of
transfer, in form and substance acceptable to the Corporation and reasonably
approved by counsel to Optionor, as shall be necessary or desirable to vest in
the Corporation all of its respective right, title and interest in, to and under
the Option Property and to consummate the transactions contemplated hereby.
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(iii) Evidence, reasonably acceptable to the
Corporation, of Optionor's due formation, good standing and authorization to
effectuate the transactions contemplated herein, and such certificates of duly
authorized representatives of Optionor as the Corporation shall reasonably
request with respect to such transactions.
(iv) Evidence, reasonably acceptable to the Corporation,
of the satisfaction and discharge of the Certificates of Participation and the
other Retained Liabilities referred to in Section 2.2(e) and (g).
(v) Any and all other documentation required or
reasonably requested by the Title Company in order to issue a title policy in
the form required under Section 2.2(d) hereof in order to effectuate the
transactions contemplated herein and in the Contract of Sale (if any).
(b) The Corporation shall deliver, or cause to be delivered,
at the Closing, the following (collectively, the "Corporation's Closing
Documents"):
(i) An assumption agreement of the Corporation, in form
and substance acceptable to Optionor, with respect to the Assumed Liabilities.
(ii) Evidence, reasonably acceptable to Optionor, of the
Corporation's due formation, good standing and authorization to effectuate the
transactions contemplated herein.
SECTION 2.5 Closing Costs.
(a) Optionor shall pay, or cause to be paid, the following in
connection with the Closing: (i) all revenue, documentary, and/or transfer
stamps or taxes, if any, incident to the Deed or conveyance thereupon; (ii)
fifty percent (50%) of all costs, fees and expenses of the Appraiser; and (iii)
all of its attorneys' fees and disbursements.
(b) The Corporation shall pay, or cause to be paid, the
following in connection with the Closing: (i) fifty percent (50%) of all costs,
fees and expenses of the Appraiser; (ii) one hundred percent (100%) of all title
insurance, survey and environmental report costs; and (iii) all of its
attorneys' fees and disbursements.
ARTICLE 3
REPRESENTATIONS AND COVENANTS
SECTION 3.1 Representations and Warranties of Optionor. Each
Optionor jointly and severally represents, warrants and covenants as follows:
(a) The City is the owner in fee simple of the Realty, free
and clear of all liens, claims, encumbrances and other matters affecting title,
except for the Permitted Encumbrances.
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(b) Optionor owns, or has a valid leasehold interest in and
to, the Option Property (other than the Realty) free and clear of all liens,
claims and encumbrances, except for Assumed Liabilities and the Permitted
Encumbrances.
(c)(i) If the Corporation is not then the manager of the
Business, within twenty (20) days after delivery of the Exercise Notice,
Optionor will deliver to the Corporation an accurate and complete list as of the
date of the Exercise Notice (the "Contract Schedule") of all Contracts relating
to the Business to which Optionor is a party or by which Optionor or the Option
Property are bound or subject, except for those Contracts with persons who are
not affiliates of Optionor relating solely to the purchase or sale of property
(other than the Realty) or services by or on behalf of Optionor in the ordinary
course of the Business which (x) require Optionor to make or receive payments
not in excess of $40,000 and (y) have a remaining term of less than twelve
months on the Closing Date or are terminable by Optionor without penalty during
such period. True and correct copies of all written Contracts listed on such
Schedule and summaries of the material provisions of all oral Contracts so
listed will accompany the Contract Schedule.
(ii) As of the Closing Date, all Contracts listed on the
Contract Schedule will be valid, subsisting, in full force and effect and
binding upon Optionor and the other parties thereto in accordance with their
terms. Optionor will not be in default under any such Contract in any material
respect, nor will any other party thereto be in default thereunder in any
material respect.
(d) If the Corporation is not then the manager of the
Business, within twenty (20) days after delivery of the Exercise Notice,
Optionor will deliver to the Corporation an accurate and complete list as of the
date of the Exercise Notice (the "Claims Schedule") of (i) all outstanding
Orders of any Governmental Authority against or involving the Option Property or
the Business, and (ii) all actions, suits, claims or counterclaims or legal,
administrative, governmental, arbitral or other proceedings or investigations
(collectively, "Claims") (whether or not the defense thereof or liabilities in
respect thereof are covered by insurance), pending or to the knowledge of
Optionor threatened on such date, against or involving the Option Property or
the Business. At the Closing there will be no such Orders or Claims pending or
threatened, other than Orders or Claims that, individually or in the aggregate,
could not reasonably be expected to have a material adverse effect on the
Condition of the Business. As of the Closing, there will exist no such fact,
event or circumstance known to Optionor that would give rise to any Claim that,
if pending or threatened on the Closing Date, could reasonably be expected to
have a material adverse effect on the Condition of the Business.
(e) Optionor is not in violation in any material respect of
any order, judgment, injunction, award, citation, decree, consent decree or writ
(collectively, "Orders") applicable to the Option Property or the Business, or
any material Law affecting the Option Property or the Business. All Permits
material to the use and occupancy of the Option Property and the conduct of the
Business are in full force and effect and the Optionor is in compliance in all
material respects therewith. If the Corporation shall not then be the manager of
the Business, within twenty (20) days after delivery of the Exercise Notice,
Optionor will deliver
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to the Corporation an accurate and complete list of all Permits, indicating
thereon which Permits are then non-transferable to the Corporation.
(f) To the best of Optionor's knowledge, (i) the Realty has
never been used to store, bury, deposit, place, dump, discharge, spill, release,
incinerate or otherwise dispose of any Hazardous Materials (as hereinafter
defined); (ii) there are no existing Environmental Conditions affecting the
Option Property or Environmental Compliance Liability with respect thereto, nor
is Optionor aware of the existence of any event or condition which may give rise
thereto; and (iii) Optionor has not received any notice of any violation of any
Environmental Law.
(g) If the Corporation is not then the manager of the
Business, within twenty (20) days after delivery of the Exercise Notice,
Optionor will deliver to the Corporation an accurate and complete list as of the
date of the Exercise Notice (i) all Intellectual Property Rights, including a
copy of all registrations and applications with respect thereto filed with or
issued by any Governmental Authority, and (ii) a list of all employees of the
Business and a description of all employee benefit plans, Contracts or
arrangements with respect to employment, applicable to such employees. The
transactions contemplated by this Agreement will not have an adverse effect on
the right, title and interest of the Corporation as of the Closing Date in and
to the Intellectual Property Rights.
(h) Optionor has not dealt with any real estate broker which
has been involved in the granting of the Option or the execution of this
Agreement, and no broker's or real estate commission is due as a result thereof
or of the consummation of the transactions contemplated herein. The Authority
shall be solely responsible and liable for any broker's or real estate
commission which may be payable in consequence of the execution of this Option
and/or the sale and purchase of the Option Property pursuant to the exercise of
the Option herein granted.
(i) Each Optionor is duly formed and in good standing in the
State of California and each Optionor and each person executing this Agreement
on behalf thereof, is duly and validly authorized to do so, and has full power
and authority to do so and has taken all necessary corporate, municipal or other
governmental action on its part in connection with the performance of its
obligations hereunder and under the Contract of Sale (if any). Each of this
Agreement and the Contract of Sale, if any, is a legal, valid and binding
obligation of Optionor.
(j) No consents from, notice to, filings with, approvals by,
or other permission of any third party is, or at the Closing will be, required,
under Law, Contract or otherwise, in order for Optionor to execute and deliver
this Agreement or the Contract of Sale and to perform its obligations hereunder
or thereunder or otherwise effectuate the transactions contemplated thereby,
except such that have been obtained or made on or prior to the Closing (the
"Optionor Required Consents"). The execution, delivery and performance by
Optionor of this Agreement and each other agreement or instrument executed and
delivered hereunder to which each is or will be a party or the consummation of
the transactions contemplated hereby does not and will not (i) violate any
provision of the organizational documents of Optionor; (ii) require Optionor to
obtain any consent, approval or action of or waiver from, or make any
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filing with, or give any notice to, any Governmental Authority or any other
person, except for Optionor Required Consents; (iii) if Optionor Required
Consents are obtained prior to Closing, violate, conflict with or result in a
breach or default under (after the giving of notice or the passage of time or
both), or permit the termination of, any Contract of a type required to be
listed on the Contract Schedule to which Optionor is a party or by which it, the
Option Property or the Business may be bound or subject, or result in the
creation of any lien upon the Option Property pursuant to the terms of any such
Contract; (iv) if Optionor Required Consents are obtained prior to Closing,
violate any Law or Order of any Governmental Authority against, or binding upon,
Optionor, the Option Property or the Business; or (v) if Optionor Required
Consents are obtained prior to Closing, violate or result in the revocation or
suspension of any Permit.
(k) As of the Closing, the Option Property will be sufficient
and adequate to permit the continued conduct of the Business as it was
theretofore conducted by Optionor.
SECTION 3.2 Covenants.
(a) In the event the purchase and sale of the Option Property
will result in a subdivision of the Option Property or otherwise requires
Governmental Approval, the Authority agrees to use its best efforts to cause
such Governmental Approvals to be granted. The Authority shall cooperate with
the Corporation in order that any such Governmental Approvals shall be issued.
The costs and expenses of obtaining any Governmental Approval required to
consummate the transactions contemplated hereby shall be borne equally by the
parties.
(b) Within thirty (30) days from the date of execution of this
Option by Optionor, Optionor will furnish, or cause to be furnished, or as
directed by, the Corporation, at Optionor's sole expense, copies of all existing
title insurance policies and reports covering the Option Property, all
topographic and boundary surveys and legal descriptions of the Option Property,
all engineering and environmental reports and all appraisals with respect to the
Option Property, to the extent in the possession of the City or the Authority.
(c) Except as may otherwise be expressly permitted under any
Other Agreement, Optionor shall not sell, assign, transfer, convey, mortgage,
pledge or otherwise encumber the Realty during the Term. Subsequent to the date
of the Exercise Notice, Optionor shall not sell, assign, transfer, convey,
mortgage, pledge or otherwise encumber any Assets, except in the ordinary course
of the Business, consistent with past practice.
(d) Except as may be expressly permitted under any Other
Agreement, Optionor shall not cause, create, permit or otherwise consent to any
event, condition, action or documentation which may have which alone or in the
aggregate has a material adverse effect on the Option Property or the Condition
of the Business, and shall promptly notify the Corporation of any event or
condition which may give rise to such change.
(e) Optionor shall comply with its obligations under the Other
Agreements, including but not limited to any obligations with respect to the
payment of Impositions and other sums and maintenance of the Option Property.
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(f) The Authority shall not request or consent to any change
or variance in the current zoning or use (including uses permitted by any
approved master plan) permitted by Governmental Authorities of all or any part
of the Option Property without the prior written consent of the Corporation, to
be exercised in its sole discretion. This covenant shall survive the Closing.
(g) Subsequent to the date of this Agreement and, except in
the ordinary course of the Business, the Optionor will not, without the prior
written consent of the Corporation, enter into any Contract relating to the
Business or the Option Property of the type required to be included on the
Contract Schedule or exercise any rights to renew or extend any such Contract if
the term of such Contract (including any renewal or extension periods) ends
after February 1, 2002.
(h) All Impositions, general and special assessments and
general and special utility charges and other operating expenses relating to the
Business shall be duly provided for under the RSA or apportioned at the Closing
as of the Closing Date. At the Closing, the Corporation and Optionor shall
reimburse the other party, as appropriate, for amounts payable pursuant to this
Section.
(i) Except as otherwise contemplated under the RSA, Optionor
agrees to pay and discharge when due all claims of creditors of Optionor or
other Retained Liabilities that may be asserted against the Corporation or any
Affiliate thereof in their capacities as such under this Agreement, except with
respect to the Assumed Liabilities.
(j) Subsequent to the date of the Exercise Notice, Optionor
will not increase the compensation of, or make any change in any employee
benefit plans, Contracts or arrangements applicable to, any employee of the
Business and will operate the Business only in the ordinary course of the
Business, consistent with past practice, or as otherwise consented to by the
Corporation.
(k) Subject to the terms and conditions herein, each of the
Optionor and the Corporation shall take or cause to be taken all action and
shall do or cause to be done all things necessary, proper or advisable to
consummate and make effective, as soon as reasonably practicable after the date
of the Exercise Notice, the transactions contemplated hereby, including, but not
limited to, the obtaining of all Optionor Required Consents and Permits or
consents of any third party, whether private or governmental, required in
connection with such party's performance of such transactions and each party
hereto shall cooperate with the other in all of the foregoing. Without limiting
the generality of the foregoing, the Optionor covenants and agrees to take or
cause to be taken all action and to do or cause to be done all things necessary,
proper or advisable in order to cause the representations and warranties of
Optionor herein and in any Contract of Sale to be true and correct on and as of
the Closing Date.
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ARTICLE 4
INSPECTION; ACCESS
During the Term, in the event the Corporation is no longer the
manager of the Business, upon reasonable prior written notice to the City
Manager, the Corporation shall have the right to go upon all or any part of the
Realty to make such investigation of the Option Property and the Business, as
such examination of the books and records relating thereto, as the Corporation
shall deem necessary or desirable in order to determine whether to exercise the
Option. Such investigation may include surveys, appraisals, engineering studies,
test borings, and inspections (including subsurface inspections), and as may
otherwise be required in order to obtain Governmental Approvals; provided,
however, in the exercise of the rights herein given, the Corporation shall not
unreasonably interfere with the use by Optionor of the Option Property, subject
to its rights under the Other Agreements, if same is then being used thereby.
ARTICLE 5
CONDEMNATION; CASUALTY
If, prior to the Closing, all or any part of the Option Property
shall be damaged or destroyed by fire or other casualty, or taken in any
proceeding by any Governmental Authority vested with the power of eminent
domain, by condemnation or otherwise, or shall be acquired for public or
quasi-public purposes, or condemnation proceedings therefor shall have been
threatened or instituted, then the Corporation shall have the right and election
of sending a Rescission Notice in accordance with this Agreement with the effect
being as set forth in Section 1.4(b). If the Option is exercised in accordance
herewith, then at the election of the Corporation, Optionor shall assign,
transfer and set over to the Corporation all of its right, title and interest in
and to any proceeds and award that may be made for such damage, destruction or
taking, in which event the Purchase Price of the Option Property shall remain
unchanged.
ARTICLE 6
EVENT OF DEFAULT
SECTION 6.1 Rights Upon Default. (a) If, following delivery of an
Exercise Notice and if no Rescission Notice is delivered, Optionor does not
close the purchase of the Option Property in accordance with the terms of this
Agreement (including without limitation the nonsatisfaction of the conditions to
Closing specified in Section 2.2), or shall otherwise fail or refuse to observe
and keep the terms of this Agreement or the Contract of Sale, then the
Corporation shall have the right, at its sole option, to (i) elect to declare
this Agreement cancelled, whereupon, the Corporation shall be entitled to
exercise any and all rights and remedies available to it by contract, at law or
in equity, which rights and remedies shall be cumulative, or (ii) elect to
affirm this Agreement and enforce its specific performance or recover against
the Authority for its breach. The Authority shall be liable for and agrees to
pay all damages, costs and expenses incurred by the Corporation arising out of
or in connection with
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or resulting from the failure or refusal of Optionor to close the purchase and
observe and keep the terms of this Agreement or the Contract of Sale, as
aforesaid, including reasonable attorneys' and other experts' fees and
disbursements.
(b) If, having given the Exercise Notice and not having given
a Rescission Notice, the Corporation does not close the purchase of the Option
Property in accordance with the terms of this Agreement or shall otherwise fail
or refuse to observe and keep the terms of this Agreement or the Contract of
Sale, then Optionor shall be entitled to exercise any and all rights and
remedies available to it by contract, at law or in equity. The Corporation shall
be liable for and agrees to pay all damages, costs and expenses incurred by
Optionor arising out of or in connection with or resulting from the failure or
refusal of the Corporation to close the purchase and observe and keep the terms
of this Agreement or the Contract of Sale, as aforesaid, including reasonable
attorneys' and other experts' fees and disbursements.
(c) In furtherance of the foregoing, the parties acknowledge
that (i) it will be impossible to measure in money the damage to the Corporation
of any failure by Optionor to comply with any of the obligations imposed by this
Agreement, including its failure to cause the conditions to Closing specified in
Section 2.2 to be satisfied, (ii) every such restriction and obligation is
material, and (iii) in the event of any such failure, the Corporation will not
have an adequate remedy at law or in damages. Therefore, each Optionor hereby
consents to the issuance of an injunction or the enforcement of other equitable
remedies against it upon the suit of the Corporation, without bond or other
security, to compel performance of any term hereof, and waives any defenses to
any such suit in the nature of failure of consideration, breach of any other
provision of this Agreement (other than the failure by the Corporation to tender
payment of the Purchase Price as provided herein), and availability of relief in
damages; provided, however, that the foregoing shall not be deemed to constitute
a waiver of any claim for damages that Optionor may have under Section 6.1(b)
above or otherwise.
(d) In the event that any condition to Closing specified in
Section 2.2 shall not have been satisfied on or prior to the Closing Date, the
Corporation shall have the right, which shall be in addition to any other rights
or remedies it may have hereunder, at law or in equity, to postpone the Closing
for a reasonable period and, during such period, the Corporation shall have the
right, in the name, on behalf and at the expense of Optionor, to take such
action or do such things as shall be necessary, proper or advisable to cause all
such conditions to Closing to be satisfied. In such event, all references herein
to the Closing Date shall be to the actual date on which the Closing occurs.
SECTION 6.2 Attorneys' Fees. Should litigation be commenced between
the parties hereto concerning this Agreement, the Contract of Sale or the rights
and duties of the parties in relation thereto or otherwise with respect to the
Option Property, whether it be an action for damages or equitable or declaratory
relief, the prevailing party in such litigation shall be entitled, in addition
to all other relief as may be granted by a court of competent jurisdiction,
reasonable sums as and for attorneys' fees and disbursements. If any court
proceeding hereunder embraces more than one dispute and one party is the
prevailing party with respect to one but not all of those disputes, the court
shall apportion the costs and expenses and the reasonable attorneys' fees and
disbursements incurred by the parties to the separate disputes
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embraced by the proceeding, and thereby equitably determine the amount thereof
to be borne by each party.
ARTICLE 7
GENERAL PROVISIONS
SECTION 7.1 Notices. For purposes of serving notices, or requesting
or granting approvals or authorizations under this Agreement, as well as for
purposes of transmitting correspondence concerning this Agreement and all of the
activities of the parties hereunder, the addresses of the parties shall be as
follows:
If to the Corporation: c/o Premier Parks Inc.
122 East 42nd Street, 49th Floor
New York, New York 10168
Attention: Kieran E. Burke
Chairman and CEO
with a copy to: Baer Marks & Upham LLP
805 Third Avenue, 20th Floor
New York, New York 10022
Attention: James M. Coughlin, Esq.
If to the City: City of Vallejo
City Hall
555 Santa Clara Street
Vallejo, California 94590
Attention: City Manager
If to the Agency: The Redevelopment Agency of the City of Vallejo
c/o City of Vallejo
City Hall
555 Santa Clara Street
Vallejo, California 94590
Attention: Executive Director
If to the Authority: Marine World Joint Powers Authority
c/o City Manager
City of Vallejo
City Hall
555 Santa Clara Street
Vallejo, California 94590
Any party may change its address as stated above upon written notice to the
other parties. Any notice or other communication under this Agreement shall be
deemed given (i) upon personal delivery, (ii) upon receipt by each other party
as evidenced by a written receipt of the United
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States Postal Service or any reputable courier service, (iii) three (3) days
after deposit, postage prepaid and correctly addressed, with the United States
Postal Service, registered or certified, or with a reputable courier service,
(iv) one (1) day after delivery, postage prepaid and correctly addressed, with a
reputable courier service guaranteeing overnight delivery, or (v) upon receipt
of a telecopy provided a confirmation of delivery is sent via first class,
registered or certified mail with the United States Postal Service or with a
reputable courier service.
SECTION 7.2 Additional Actions and Documents. The parties agree to
execute and deliver such further documents and take such actions as may be
required to carry out the intent and purposes of this Agreement and to comply
with any Laws which may be applicable to this Agreement. Optionor shall
cooperate with the Corporation in connection with the Corporation's full
exercise of its rights hereunder, such cooperation to be at the Corporation's
cost and expense (but the Corporation shall not be obligated to pay Optionor for
any of Optionor's overhead), Optionor's cooperation to include but not be
limited to the furnishing of information required under Section 3.2(b) and such
other information as reasonably requested by the Corporation from time to time
during the Term.
SECTION 7.3 Successors and Assigns. This Agreement shall inure to
the benefit of and apply to and bind the respective heirs, successors,
executors, administrators and assigns of the parties to this Agreement.
Notwithstanding the foregoing, no party may assign its rights or obligations
under this Agreement, other than (a) in connection with a Permitted Sale under,
and in accordance with, the Private Parcel Lease, (b) the Corporation to Premier
Parks Inc. (or a wholly-owned subsidiary thereof), (c) the Authority to the
Agency or City, or (d) the Agency to the City; provided, however, that no
assignment (whether or not so permitted) shall be effective unless and until the
assignee expressly assumes in writing all of the obligations of assignor
hereunder; and further provided that no such assignment shall relieve any
assignor from its obligations and liabilities hereunder. Notwithstanding
anything to the contrary set forth herein or in any Public Lease or Other
Agreement, any assignment by a party of its interest hereunder or in the Option
Property shall be expressly made subject to this Agreement and the rights of the
Corporation and the Optionor hereunder and shall have no effect thereupon.
SECTION 7.4 Counterparts. This Agreement may be executed in
counterparts, each of which when taken together shall constitute one agreement.
SECTION 7.5 Captions; Gender; Phrases. The captions used in this
Agreement are for convenience only and shall not be considered in the
construction or interpretation of any provision hereof. When the context of this
Agreement requires, the neuter gender includes the masculine, the feminine, a
partnership or corporation or joint venture, and the singular includes the
plural. The terms "shall," "will" and "agree" are mandatory. The term "may" is
permissive. When a party is required to do something by this Agreement, it shall
do so at its sole cost and expense without right of reimbursement from the other
party unless specific provision is made therefor.
SECTION 7.6 Invalidity. Where any party is obligated not to perform
any act, such party is also obligated to restrain any others within its control
from performing such act, including its agents, invitees, contractors,
subcontractors, and employees. Should any provision of this Agreement prove to
be invalid or illegal, such invalidity or illegality shall in no way
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affect, impair or invalidate any other provision hereof, and such remaining
provisions shall remain in full force and effect.
SECTION 7.7 Entire Agreement; Modifications. This Agreement and the
Exhibits attached hereto, which are incorporated herein by this reference, shall
constitute the entire agreement between the parties and shall supersede all
other agreements respecting the Option. No subsequent change or addition to this
Agreement shall be binding unless it is in writing and is signed by the parties
hereto.
SECTION 7.8 Arbitration of Disputes. Any disputes between Optionor
and the Corporation arising out of or related to this Agreement which cannot be
resolved by good faith negotiation shall be resolved through binding
arbitration. Any such party may elect to commence arbitration at any time by
giving notice to the other party. The parties then shall attempt to agree on the
appointment of a panel of three independent arbitrators. Each of Optionor and
the Corporation may select one of the arbitrators for such panel, and if they do
not identify their respective arbitrator to the other party or they cannot agree
on the third arbitrator within twenty (20) days of the notice electing
arbitration, such arbitrators) shall be appointed through the procedures of the
American Arbitration Association. Any arbitrator selected to serve shall be
qualified by training and experience for the matters for which such arbitrator
is designated to serve. The arbitration shall be conducted in Vallejo,
California under the commercial arbitration rules then in effect of the American
Arbitration Association. The written decision and findings of a majority of the
panel of arbitrators shall be final, binding and conclusive as between the
parties and may be enforced on the application by any party or by order or
judgment entered in any court having jurisdiction. The parties hereby consent to
the jurisdiction and venue of the federal courts located in the Eastern District
of the State of California and state courts located in Solano County, California
for this purpose. The parties shall use all commercially practicable efforts to
cause arbitrator or arbitrators so selected to furnish Optionor and the
Corporation with a written decision within forty-five (45) days of the date of
selection of the last of the arbitrators to be so selected. Any decision so
submitted shall be signed by a majority of the arbitrators.
The Corporation and Optionor each shall advance one-half (1/2) of
the costs of any arbitration. However, the prevailing party in any arbitration
proceeding or legal action arising out of, or in connection with, this Agreement
shall be entitled to recover its reasonable attorneys' and experts' fees and
disbursements and its costs and expenses incurred in connection with such
arbitration proceeding or legal action. The arbitrators shall specify the
prevailing party or parties in its award. If more than one arbitrable dispute is
adjudicated then the costs and expenses of the arbitration shall be apportioned
by the arbitrators in the arbitration award to each separate dispute.
SECTION 7.9 No Joint Venture. This Agreement is not intended, nor
shall it be deemed, to create a joint venture between the Corporation and any or
all Optionors or to grant any existing right of ownership of the Corporation in
or to the Public Parcel or the Improvements thereon.
SECTION 7.10 Waiver of Personal Liability. No member, officer, agent
or employee of the Authority, the Agency or the Corporation shall be
individually or personally
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liable for the obligations of the Authority, the Agency or the Corporation,
respectively, hereunder; but nothing herein contained shall relieve any such
member, officer, agent or employee of any Optionor from the performance of any
official duty provided by law or this Agreement.
SECTION 7.11 Controlling Law. This Agreement shall be governed by,
and construed and enforced in accordance with, the laws of the State of
California.
SECTION 7.12 Survival. Any provision herein contained which by its
nature and effect if required to be observed, kept or performed after the
Closing shall survive the Closing and remain binding upon and for the benefit of
the parties hereto their heirs, assigns, successors and legal or personal
representatives until fully observed, kept or performed.
SECTION 7.13 Recording of Option. Optionor shall execute,
acknowledge, deliver and file with the Recorder's Office for Solano County a
short form of this Agreement suitable for recording, which instrument shall not
reveal the purchase price and/or any other dollar amounts herein mentioned.
SECTION 7.14 Certain Definitions. For purposes of this Agreement,
the following terms shall have the meaning ascribed thereto below:
Affiliate of any person means any other person directly or
indirectly through one or more intermediary persons, controlling, controlled by
or under common control with such person.
Appraiser has the meaning set forth in the definition of "Fair
Market Value."
Assessment Bond Amount means (i) if the Exercise Notice is delivered
on or before January 31, 2003, $1,000,000 or (ii) if the Exercise Notice is
delivered after that date, $2,000,000; less, in each case, the outstanding
principal amount of the Assessment Bonds which are secured by a lien on the
Option Property as of the Closing Date. In no event shall the Assessment Bond
Amount be less than zero.
Assessment Bonds mean the portion of the principal amount of the
City's Assessment Bonds (Fairground Drive Assessment District No. 65), the
repayment of which is payable from parking revenues at the Option Property and
which are secured by a lien on the Option Property, which portion of such
principal amount equals $4,810,410.46 on the date of this Agreement.
Assets means all of the property, assets and rights (other than the
Realty) used or held for use in the Business, including:
(i) the rides, machinery, equipment, tools, supplies,
spare parts, rolling stock, furniture and other tangible personal property of
Optionor used or held for use in the Business on the Closing Date;
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(ii) all of Optionor's patents, patent applications,
trade names, trademarks, copyrights, servicemarks, trademark and servicemark
registrations and applications (including, without limitation, the name "Marine
World Africa USA" and any derivation thereof), used in the Business;
(iii) all trade secrets, formulae and specifications and
technical know-how, whether being used or under development, including
engineering and other drawings, data, design and specifications, product
literature and related materials, in each case which relate to the Business and
are owned or licensed by Optionor as of the Closing Date and all books, records
and computer programs relating thereto (together with the items referred to in
clause (ii) above, the "Intellectual Property Rights");
(iv) the goodwill of Optionor in the Business;
(v) Optionor's rights under all Transferred Contracts
and all prepaid expenses, claims and other prepayments, including security
deposits and other retentions held by third parties, with respect to the
Transferred Contracts as of the Closing Date;
(vi) all inventory, wherever located, of Optionor with
respect to the Business as such exists on the Closing Date;
(vii) all of Optionor's rights under all Permits
relating to or necessary to the conduct of the Business as of the Closing Date,
to the extent such items are transferable;
(viii) all transferable warranties and guarantees owned
by or for the benefit of Optionor pertaining to the Assets;
(ix) all proceeds from the sale of passes or tickets to
customers of the Business to the extent applicable to periods after the Closing;
and
(x) all books and records of the Authority relating to
the Business and the Option Property (whether kept or maintained by Optionor or
any third party) including, without limitation, copies of lists of customers and
suppliers; admission tickets, season passes, records with respect to costs,
inventory and equipment; business development plans; advertising materials,
catalogues, correspondence, mailing lists, photographs, sales materials and
records; purchasing materials and records; personnel records with respect to
employees of the Business; media materials and plates; sales order files;
ledgers and other books of account; plans, specifications, surveys, reports and
other materials relating to the Realty; other records of the Authority required
to continue the Business as then being conducted by or on behalf of the
Authority; and all software programs, computer printouts, databases and related
items of the Authority used in the Business.
The term Assets shall exclude the following assets and
property:
(i) all of Optionor's rights, title and interest in and
to this Agreement;
17
<PAGE>
(ii) except as contemplated by clause (ix) above, cash
on hand, cash equivalents, investments (including, without limitation, stock,
debt instruments, options and other instruments and securities) and bank
deposits of Optionor as of the Closing Date;
(iii) all of the accounts receivable of Optionor as of
the Closing Date;
(iv) tax refunds and recoveries and similar benefits of
Optionor which relate to any period prior to the Closing Date and all of
Optionor's income tax returns and records as of the Closing Date; and
(v) all assets of Optionor not related to the Business.
Assumed Liabilities means the liabilities and obligations of
Optionor arising and to be performed after the Closing under the Transferred
Contracts, other than any such liability or obligation arising out of a breach
or default by Optionor thereunder at or prior to the Closing Date (including any
event occurring prior to the Closing that with the passage of time or giving of
notice, or both, would become a breach or default under any Transferred
Contract).
Business means the ownership and operation of Marine World Africa
USA conducted on the Public Parcel and, to the extent of Optionor's interest
therein, the Private Parcel.
Certificates of Participation means those certain certificates of
participation, the proceeds of which refinanced certain improvements on the
Public Parcel, delivered on January 30, 1997 in the original aggregate principal
amount of $63,465,000, as the same exist on the date of this Agreement, together
with any refinancing thereof and any other debt financing obtained by, or debt
obligations of, an Optionor in lieu thereof, or in addition thereto to the
extent secured by or otherwise encumbering all or any part of the Option
Property or any interest therein.
Condition of the Business means the condition (financial or
otherwise), results of operations or prospects of the Business.
Contract means any contract, agreement, indenture, note, bond,
lease, conditional sale contract, mortgage, license, franchise, instrument,
commitment or other binding arrangement, whether written or oral, and all
modifications and amendments thereto and substitutes thereof, to which Optionor
is a party or a beneficiary, relating to the Business.
Easements means all easements, rights-of-way, sidewalks, gores of
land, streets, ways, alleys, passages, passageways, sewer rights, waters, water
courses, water rights and powers, air, light and other rights, estates, titles,
interests, privileges, liberties, servitudes, licenses, tenements, hereditaments
and appurtenances whatsoever, in any way belonging, relating or appertaining to
the Realty or any part thereof, or which hereafter shall in any way belong,
relate or be appurtenant thereto, and all reversions, remainders and rents
thereof.
Environmental Compliance Liability means any obligation or liability
arising as the result of any default, violation or breach by Optionor of its
affiliates or previous tenants of
18
<PAGE>
the Option Property or adjoining tenants during the Term of: (i) environmental
permits and other approvals, consents, licenses, certificates and authorizations
applicable to such Option Property of the operation of prior tenant's or other
occupant's business and activities thereon which are required by Environmental
Laws; (ii) any environmental regulatory compliance requirements applicable to
such Option Property or operations conducted on or from such Option Property
under Environmental Laws; or (iii) other Environmental Laws, except, in each
case, for any obligation or liability arising out of the negligence or willful
misconduct of the Corporation.
Environmental Condition means circumstances with respect to soil,
land surface, subsurface strata, surface waters, groundwaters, stream sediments,
air and similar environmental media both on and off the Option Property
resulting from any activity, inactivity, operations or Release occurring on or
off the Option Property, which under Environmental Laws require investigatory,
corrective and/or remedial measures and/or that may result in claims or demands
or give rise to liabilities of any Optionor or the Corporation or to third
parties including, but not limited to, Governmental Authorities.
Environmental Laws means any and all Laws concerning air, water,
solid waste, Hazardous Materials, Releases, worker and community right-to-know,
hazard communication, noise, resource protection, subdivision, inland wetlands
and watercourses, health protection and similar environmental, health, safety,
and land use concerns in all cases at any time, from time to time in effect
during the Term.
Fair Market Value means the aggregate fair market value of the
Business, valued as a going concern as determined below by an investment banking
firm selected by the Corporation and reasonably acceptable to Optionor (the
"Appraiser"). The parties agree that Fair Market Value shall be determined as
encumbered by the Other Agreements (including without limitation, the RSA) and
any other obligations of Optionor relating to the Option Property. In order to
give effect to such determination, the parties hereby instruct the Appraiser to
determine Fair Market Value using an income approach, by (a) multiplying (i) the
cash flow received by Optionor under clause (v) of Section 1.3(c) of the RSA
with respect to the last full fiscal year of the Authority immediately preceding
the date on which the Option is exercised, plus any amounts paid during such
fiscal year in respect of the regularly scheduled debt service on the debt
obligations relating to the Business referred to in clause (iv) of such Section
1.3(c)) by (ii) five (or such other multiple that is determined by the Appraiser
to represent the then prevailing multiple of cash flow used to value businesses
comparable to the Business in connection with the purchase and sale thereof),
and (b) subtracting from such product the outstanding principal amount of the
debt referred to in clause (iv) of such Section 1.3(c).
Governmental Approvals means all approvals, permits, licenses
consents, authorizations, waivers, variances, acknowledgments and the like by
Governmental Authorities which are a condition to the consummation of the
transactions contemplated hereunder at Closing. Governmental Approvals will not
be deemed to have been secured unless all of same are final and unappealable.
The Corporation may, at its sole option, but without obligation, waive any or
all Governmental Approvals.
19
<PAGE>
Governmental Authority means any government, any department of any
government or any entity controlled by any of the foregoing directly or
indirectly (federal, state, county, town or local) and includes utility and
telephone companies and any other entity with the power of eminent domain or
with jurisdiction over, or which could impact, affect or stop, the Business.
Hazardous Materials means an petroleum, petroleum products, fuel
oil, derivatives of petroleum products or fuel oil, explosives, reactive
materials, ignitable materials, corrosive materials, hazardous chemicals,
hazardous wastes, hazardous substances, extremely hazardous substances, toxic
substances, toxic chemicals, radioactive materials, medical waste, biomedical
waste, infectious materials and any other element, compound mixture, solution or
substance which may pose a present or potential hazard to human health or safety
or to the environment.
Imposition means all taxes (including possessory interest taxes
associated with the Option Property), assessments (including all assessments for
public improvements or benefits, fees, water, sewer or similar rents, rates and
charges, excises, levies, license fees, permit fees, inspection fees and other
authorization fees and other governmental charges of any kind or nature
whatsoever, whether general or special, ordinary or extraordinary, foreseen or
unforeseen, or hereafter levied or assessed in lieu of or in substitution of any
of the foregoing of every character (including all interest and penalties
thereon), which at any time during or in respect of the Term may be assessed,
levied, confirmed or imposed on or in respect of or be a lien upon the Option
Property, or any part thereof or interest therein, on the leasehold estate
created by any lease or which may be imposed upon any taxable interest of an
Optionor acquired pursuant to a Public Lease or on account of any taxable
possessory right which an Optionor may have acquired pursuant to a Public Lease,
or any part thereof or which may be levied upon or measured by the rent payable
thereunder. Notwithstanding anything to the contrary set forth above,
"Impositions" shall not include any income, excess profit, estate, inheritance,
successions transfer, franchise, capital or other tax assessment upon the
interest of any other party in the Option Property.
Improvements means any buildings, improvements, fixtures, additions,
signs, rides and attractions built, installed or constructed upon, or affixed
to, the Land.
Laws means all applicable present and future laws, ordinances,
rules, regulations, permits, authorizations, orders and requirements, including,
without limitation, all consents or approvals required to be obtained from, and
all rules and regulations of, and all building and zoning laws of, all federal,
state county and municipal governments, the departments, bureaus, agencies or
commissions thereof, authorities, board of officers, any national or local board
of fire underwriters, or any other body or bodies exercising similar functions,
having or acquiring jurisdiction of, or which may affect or be applicable to the
Option Property.
Lease Option means that certain Option Agreement (Parcel Lease)
dated as of May 30, 1997 among the Authority, the Agency and the Corporation.
Option Property means all of Optionor's right, title and interest in
and to, all of the following: (a) the Realty, (b) the rights to use the portion
of the surface of Lake Chabot identified in Exhibit E hereto and (c) the Assets.
20
<PAGE>
Other Agreements mean the Private Parcel Lease, Lease Option, REA
and RSA.
Permits means all licenses, permits and approvals for the ownership,
construction, maintenance, operation, use and occupancy of the Option Property,
the conduct of the Business or any part thereof and any amendments, renewals and
replacements thereof.
Private Parcel Lease means that certain Parcel Lease between the
Authority and the Corporation which may be entered into pursuant to the Lease
Option.
REA means that certain Reciprocal Easement Agreement between the
Authority and the Corporation, which may from time to time be in effect during
the Term pursuant to the Private Parcel Lease.
Realty means the Land, all Improvements and all Easements, including
the Public Parcel and the Private Parcel.
Release means releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing or
dumping, or as otherwise defined under the Resource Conservation and Recovery
Act (42 U.S.C. Section 6901), et seq.) ("RCA"), the Comprehensive Environmental
Response, Compensation and Liability Act (42 US.C. Section 9601, et seq.)
("CERCLA"), or any other federal, state or local Environmental Law, including
Laws relating to emissions, discharges, releases or threatened releases or
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the environment (including ambient air, surface water,
ground water, land surface or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemical, or industrial,
toxic or hazardous substances or wastes as may be amended from time to time, or
other Environmental Laws.
Rescission Notice has the meaning set forth in Section 1.4(b).
Retained Liabilities means any and all duties, responsibilities,
obligations or liabilities of Optionor of any kind or nature, known, unknown,
contingent or otherwise ("Liabilities"), other than Assumed Liabilities. Without
limiting the generality of the foregoing, except as otherwise provided in this
Agreement, Retained Liabilities shall include:
(i) any Liabilities of Optionor or their Affiliates
relating to the ownership or operation of the Option Property or the Business on
or prior to the Closing Date;
(ii) all accounts payable relating to the Business
incurred on or prior to the Closing Date;
(iii) any Environmental Compliance Liabilities arising
out of the ownership of the Option Property or the operation of the Business on
or prior to the Closing;
(iv) Liabilities and obligations with respect to any
Claims, whether existing on the Closing Date or arising thereafter, arising out
of the ownership of the Option
21
<PAGE>
Property or the operation of the Business on or prior to the Closing, except for
Claims arising out of the negligence or willful misconduct of the Corporation;
(v) Liabilities and obligations to persons employed by
Optionor in connection with the Business at any time prior to the Closing (or
any of such employee's beneficiaries, heirs or assignees) arising out of such
employee's employment;
(vi) Liabilities and obligations with respect to any
federal, state, local or foreign income, profits, franchise, sales or similar
tax relating to the ownership of the Option Property or the conduct of the
Business on or prior to the Closing or arising out of the transactions
contemplated hereby; and
(vii) any Liabilities in respect of any debt of
Optionor.
RSA means that certain Revenue Sharing Agreement among the
Authority, the Agency and the Corporation which may, from time to time during
the Term be in effect pursuant to the Private Parcel Lease.
Transferred Contracts means all Contracts existing on the Closing
Date, other than (i) if at the time of the delivery of the Exercise Notice, the
Corporation shall not be the manager of the Business, any Contract listed on the
Contract Schedule that the Corporation has notified Optionor in writing prior to
the Closing that the Corporation will not assume, (ii) any Contract of a type
required to be listed on the Contract Schedule and not so listed, (iii) any
Contract entered into after the date of the Contract Schedule, except as
permitted hereby and (iv) any Contract that cannot be transferred to or assumed
by the Corporation under applicable law or the transfer or assignment thereof
would result in debt obligations of the City losing their tax-exempt status
(i.e., bonds related to the assessment district for the parking area).
SECTION 7.15 Exhibits. The parties acknowledge that the Exhibits
hereto have not been finalized on the date of execution hereof. The parties
agree to finalize such Exhibits promptly following confirmation of certain
matters relating to title and existing encumbrances in respect of the Option
Property, and this Agreement shall be the legal and binding obligation of the
parties at all times after execution hereof unless all such Exhibits have not
been mutually agreed to within thirty (30) days after the date hereof.
22
<PAGE>
IN WITNESS WHEREOF, Optionor and the Corporation have executed this
Agreement as of the date set forth hereinafter.
OPTIONOR:
PARK MANAGEMENT CORP. CITY OF VALLEJO
By: /s/ James F. Dannhauser By: /s/
--------------------------------- ------------------------------------
James F. Dannhauser City Manager
Vice President and
Chief Financial Officer
MARINE WORLD JOINT POWERS
AUTHORITY
By: /s/
----------------------------------
Executive Director
REDEVELOPMENT AGENCY OF THE
CITY OF VALLEJO
By: /s/
----------------------------------
Executive Director
23
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On August 28, 1997 before me, Jan P. Goode, Notary Public,
personally appeared James F. Dannhauser, personally known to me (or proved to me
on the basis of satisfactory evidence) to be the person whose name is subscribed
to the within instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument, the person, or
the entity on behalf of which the person acted, executed the instrument.
Witness my hand and notarial seal.
- ------------------------------------
Signature of Notary Public (Seal)
STATE OF )
) ss.:
COUNTY OF )
On August __, 1997 before me, ________________, Notary Public
personally appeared ____________________, personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person(s) whose name(s)
is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature on the instrument, the person(s), or the entity
on behalf of which the person(s) acted, executed the instrument.
Witness my hand and notarial seal.
- ------------------------------------
Signature of Notary Public (Seal)
<PAGE>
STATE OF )
) ss.:
COUNTY OF )
On August __, 1997 before me, ________________, Notary Public
personally appeared ____________________, personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person(s) whose name(s)
is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature on the instrument, the person(s), or the entity
on behalf of which the person(s) acted, executed the instrument.
Witness my hand and notarial seal.
- ------------------------------------
Signature of Notary Public (Seal)
STATE OF )
) ss.:
COUNTY OF )
On August __, 1997 before me, ________________, Notary Public
personally appeared ____________________, personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person(s) whose name(s)
is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature on the instrument, the person(s), or the entity
on behalf of which the person(s) acted, executed the instrument.
Witness my hand and notarial seal.
- ------------------------------------
Signature of Notary Public (Seal)
<PAGE>
Exhibit A
Legal Description of Land
<PAGE>
Exhibit B
Legal Description of Public Parcel
<PAGE>
Exhibit C
Legal Description of Private Parcel
REAL PROPERTY in the City of Vallejo, County of Solano, State of
California, being a portion of Parcel One described in Exhibit A to this
Agreement, described as follows:
<PAGE>
Exhibit D
Schedule of Permitted Encumbrances
<PAGE>
Exhibit E
Portion of Surface of Lake Chabot
CERTAIN PROPERTY, and the rights therein and incidental thereto, in
the City of Vallejo, County of Solano, State of California, described as
follows:
<PAGE>
EXHIBIT 10(ac)
November 7, 1997
Park Management Corp.
Marine World Parkway
Vallejo, CA 94589
Attn: Kieran E. Burke, Chairman
Dear Sirs:
The undersigned, Marine World Joint Powers Authority (the "Authority") and
Park Management Corp., are parties to the 1997 Management Agreement Relating to
Marine World, dated as of February 1, 1997, as amended (the "Management
Agreement").
The parties wish to amend Section 6.3(vi) of the Management Agreement in
its entirety to provide as follows:
"(vi) at the option of the Authority with thirty days prior written
notice to the Manager, and effective upon appointment of and assumption of
duties by a new manager for Marine World, (a) on the date which is three
(3) years from November 7, 1997, and (b) following notice to the Authority
by Premier Parks Inc. (or its wholly owned subsidiary which is the holder
of the option) that it will not exercise an option to lease land adjacent
to Marine World as such option is contemplated by the option agreement
referred to in clause (i) above; or"
Except as provided above, the Management Agreement shall remain in full
force and effect.
If the foregoing sets forth our agreement, please sign this letter where
indicated below.
Very truly yours,
MARINE WORLD JOINT POWERS AUTHORITY
By: /s/
---------------------------------
Executive Director
Agreed and Accepted:
PARK MANAGEMENT CORP.
By: /s/
-------------------------------
<PAGE>
EXHIBIT 10(ad)
RECIPROCAL EASEMENT AGREEMENT
between
MARINE WORLD JOINT POWERS AUTHORITY
and
PARK MANAGEMENT CORP.
Dated as of November 7, 1997
<PAGE>
TABLE ON CONTENTS
ARTICLE 1
OPERATION AND MAINTENANCE - GENERAL
SECTION 1.1. Operation and Maintenance. . . . . . . . . . . . . . . . 2
SECTION 1.2. Damage or Destruction to Improvements on any Parcel. . . 3
SECTION 1.3. Clearing Debris from Razed Improvements. . . . . . . . . 3
SECTION 1.4. Miscellaneous Repairs and Alterations. . . . . . . . . . 3
SECTION 1.5. Liability of Mortgagee . . . . . . . . . . . . . . . . . 4
SECTION 1.6. Limitation on Detrimental Characteristics. . . . . . . . 4
SECTION 1.7. Parking. . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.8. Compliance With Laws . . . . . . . . . . . . . . . . . . 5
SECTION 1.9. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . 5
SECTION 1.10. Environmental Matters. . . . . . . . . . . . . . . . . . 5
SECTION 1.11. Conflict with Article 2. . . . . . . . . . . . . . . . . 5
ARTICLE 2
OPERATION AND MAINTENANCE OF PUBLIC AREAS
SECTION 2.1. Operation and Maintenance of Public Areas. . . . . . . . 5
SECTION 2.2. Rules and Regulations. . . . . . . . . . . . . . . . . . 6
SECTION 2.3. Restrictions on Public Areas and Otherwise . . . . . . . 6
SECTION 2.4. Failure of Performance . . . . . . . . . . . . . . . . . 6
SECTION 2.5. Damage to or Destruction of Public Areas . . . . . . . . 6
SECTION 2.6. Operation of the Public Parking. . . . . . . . . . . . . 7
SECTION 2.7. Noninterference with Permittee Circulation . . . . . . . 7
SECTION 2.8. Fences . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.9. Signs and Banners. . . . . . . . . . . . . . . . . . . . 7
ARTICLE 3
RECIPROCAL EASEMENTS
SECTION 3.1. Definitions and Documentation. . . . . . . . . . . . . . 8
SECTION 3.2. Nature of Easements. . . . . . . . . . . . . . . . . . . 8
SECTION 3.3. General Easements. . . . . . . . . . . . . . . . . . . . 9
SECTION 3.4. Easements for Utility Facilities . . . . . . . . . . . . 10
SECTION 3.5. Temporary Construction Easements . . . . . . . . . . . . 11
SECTION 3.6. Termination and Abandonment of Easements.. . . . . . . . 11
ARTICLE 4
GENERAL CONSTRUCTION REQUIREMENTS
SECTION 4.1. "Construction" Defined.. . . . . . . . . . . . . . . . . 12
SECTION 4.2. Construction to Proceed in Reasonable Manner.. . . . . . 12
SECTION 4.3. Construction Barricades. . . . . . . . . . . . . . . . . 12
SECTION 4.4. Safety Matters . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.5. Workmanship. . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.6. Liens. . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 5
OTHER AGREEMENTS
2
<PAGE>
SECTION 5.1. Covenant to Perform. . . . . . . . . . . . . . . . . . . 13
SECTION 5.2. Subordination of Leases. . . . . . . . . . . . . . . . . 13
SECTION 5.3. Indemnification by Parties . . . . . . . . . . . . . . . 13
SECTION 5.4. Liability Insurance and Waiver of Subrogation. . . . . . 14
SECTION 5.5. Casualty Insurance . . . . . . . . . . . . . . . . . . . 15
SECTION 5.6. Condemnation . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 5.7. Fire or Other Casualty . . . . . . . . . . . . . . . . . 16
SECTION 5.8. Application of Proceeds and Awards . . . . . . . . . . . 16
ARTICLE 6
REAL ESTATE TAXES OR IMPOSITIONS
SECTION 6.1. Payment of Taxes or Impositions. . . . . . . . . . . . . 17
SECTION 6.2. Contesting Impositions.. . . . . . . . . . . . . . . . . 17
SECTION 6.3. Failure to Pay Impositions.. . . . . . . . . . . . . . . 17
SECTION 6.4. Additional Provisions Regarding Impositions. . . . . . . 17
SECTION 6.5. Other Governmental Charges . . . . . . . . . . . . . . . 19
SECTION 6.6. Exceptions from Impositions; Charges in Lieu of
Impositions. . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 7
ARBITRATION
SECTION 7.1. Disputes Subject to Arbitration. . . . . . . . . . . . . 19
SECTION 7.2. Arbitration Procedures.. . . . . . . . . . . . . . . . . 19
SECTION 7.3. Proceedings. . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 8
NOTICES AND APPROVALS
SECTION 8.1. Notices to Parties.. . . . . . . . . . . . . . . . . . . 19
SECTION 8.2. Time and Form of Approvals.. . . . . . . . . . . . . . . 20
SECTION 8.3. Notice to Mortgagees and Opportunity to Cure . . . . . . 20
ARTICLE 9
AMENDMENT
SECTION 9.1. Amendment. . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 10
EXPIRATION DATE
SECTION 10.1. Term.. . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 11
MISCELLANEOUS
SECTION 11.1. Limited Liability of Parties.. . . . . . . . . . . . . . 21
SECTION 11.2. Exhibits.. . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 11.3. References to Articles, Sections and Subsections.. . . . 22
SECTION 11.4. Table of Contents and Captions.. . . . . . . . . . . . . 22
SECTION 11.5. Locative Adverbs.. . . . . . . . . . . . . . . . . . . . 22
SECTION 11.6. REA for Exclusive Benefit of the Parties.. . . . . . . . 22
SECTION 11.7. Waiver of Default. . . . . . . . . . . . . . . . . . . . 22
SECTION 11.8. Payment on Default.. . . . . . . . . . . . . . . . . . . 23
SECTION 11.9. No Partnership Joint Venture or Principal Agent
Relationship.. . . . . . . . . . . . . . . . . . . . . . 23
3
<PAGE>
SECTION 11.10. Successors.. . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 11.11. Severability.. . . . . . . . . . . . . . . . . . . . . . 23
SECTION 11.12. Governing Laws.. . . . . . . . . . . . . . . . . . . . . 23
SECTION 11.13. Release. . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 11.14. No Dedication. . . . . . . . . . . . . . . . . . . . . . 24
SECTION 11.15. Written Consent Required.. . . . . . . . . . . . . . . . 24
SECTION 11.16. Covenants Run With the Land. . . . . . . . . . . . . . . 24
SECTION 11.17. Rules. . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 11.18. Default Shall Not Permit Termination of REA. . . . . . . 24
SECTION 11.19. Right to Enjoin. . . . . . . . . . . . . . . . . . . . . 25
SECTION 11.20. Rights, Privileges, and Easements with Respect to Liens. 25
SECTION 11.21. Identification of Utility Facilities.. . . . . . . . . . 25
SECTION 11.22. Generally Accepted Accounting Principles.. . . . . . . . 25
SECTION 11.23. Counterparts.. . . . . . . . . . . . . . . . . . . . . . 25
SECTION 11.24. Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . 25
SECTION 11.25. Breach Shall Not Defeat Mortgage.. . . . . . . . . . . . 25
SECTION 11.26. Estoppel Certificate.. . . . . . . . . . . . . . . . . . 25
SECTION 11.27. Time of Essence. . . . . . . . . . . . . . . . . . . . . 26
SECTION 11.28. Liability of Mortgagees. . . . . . . . . . . . . . . . . 26
ARTICLE 12
DEFINITIONS
SECTION 12.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . 26
EXHIBIT A DESCRIPTION OF THE LAND
EXHIBIT B DESCRIPTION OF THE PRIVATE PARCEL
EXHIBIT C DESCRIPTION OF THE PUBLIC PARCEL
EXHIBIT D DESCRIPTION OF PUBLIC AREAS
EXHIBIT E RULES AND REGULATIONS
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RECIPROCAL EASEMENT AGREEMENT
This Reciprocal Easement Agreement, dated as of November 7, 1997 (the
"REA"), is made by and between the Marine World Joint Powers Authority, a joint
exercise of powers authority organized and existing under the laws of the State
of California (the "Authority"), and Park Management Corp., a California
corporation (the "Corporation").
RECITALS
A. All capitalized terms used herein and not defined in the section where
first used in this REA are defined in Article 12 hereof or the definition of
such capitalized term is referenced in Article 12 hereof.
B. The City of Vallejo (the "City") owns approximately one hundred
thirty-eight (138) acres of land located in the County of Solano, State of
California, described in Exhibit A attached hereto (the "Land"). The City also
owns or controls the right to use the surface of Lake Chabot, a flood control
and drainage reservoir consisting of approximately fifty-five (55) acres.
C. Certain improvements to the portion of the Land identified as the
"Public Parcel" below were refinanced on January 30, 1997, with the proceeds of
certificates of participation in the aggregate principal amount of $63,465,000
(the "Certificates of Participation Financing").
D. In connection with the Certificates of Participation Financing, (i) the
City entered into a 1997 Site Lease Relating to Marine World dated as of January
1, 1997 whereby the City leased the Land and rights to use Lake Chabot to the
Authority (the "1997 City-Marine World Lease"), (ii) the Authority and the City
entered into a 1997 Lease Agreement Relating to Marine World, dated as of
January 1, 1997, whereby the Authority leased back to the City a portion of the
Land identified in Exhibit C hereto (the "Public Parcel," which Public Parcel
shall be hereinafter deemed to include, as appropriate, all Improvements
thereon) and rights to use Lake Chabot, (iii) the City and the Redevelopment
Agency of the City of Vallejo (the "Agency") entered into a 1997 First Sublease
Agreement Relating to Marine World, dated as of January 1 1997, whereby the City
subleased to the Agency the Public Parcel and the rights to use Lake Chabot, and
(iv) the Agency and the Authority entered into a 1997 Second Sublease Agreement
Relating to Marine World, dated as of January 1, 1997, whereby the Agency
subleased to the Authority the Public Parcel and the rights to use Lake Chabot
(the "1997 Agency-Marine World Lease") to enable the Authority to operate and
maintain a park under the name "Marine World/Africa U.S.A."
E. The Authority and the Corporation have entered into a 1997 Management
Agreement Relating to Marine World as of February 1, 1997 (said agreements,
together with any successor agreement with respect to the management of the
improvements on the Public Parcel, being herein called the "Management
Agreement") pursuant to which the Corporation acts as the manager of the
improvements located on the Public Parcel (the manager under the initial
Management Agreement, and any manager of the Improvements on the Public Parcel
under any successor Management Agreement, being herein called the "Manager").
F. The Authority, as landlord, and the Corporation, as Tenant, have
entered into a Parcel Lease of even dated herewith (the "Parcel Lease") pursuant
to which the Authority has leased to the Corporation the land identified in
Exhibit B hereto (the "Private Parcel," which Private Parcel shall be
hereinafter deemed to
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include, as appropriate, all Improvements thereon).
G. The Improvements to the Public Parcel include parking facilities from
time to time maintained on or used in connection with the Public Parcel (the
"Parking Areas"), an entry area which includes ticket sales and admission
facilities, various public walkways, paths, restrooms, dining facilities, picnic
areas and other related or similar areas that are intended for use by patrons
of the Public Parcel and/or the Private Parcel in connection with, or are
otherwise integral to, the operations of the Public Parcel and the Private
Parcel (together with any similar Improvements on or later constructed on the
Private Parcel, and all as more completely described in Exhibit D hereto,
collectively herein call the "Public Areas"). The Public Areas shall not
include any stadia, rides, exhibit facilities or other attractions that relate
specifically to the theme and character of the operation of the respective
Parcel or which such Public Area is located.
H. The parties to this REA desire to provide for the maintenance and
operation of the Public Areas and of the Improvements, and to otherwise create
and provide for certain rights, privileges and easements and to impose certain
restrictions and covenants on the Public Parcel, the Private Parcel and the
Public Areas as hereinafter more specifically set forth, including, but not
limited to, certain rights of ingress, egress, and access as specifically set
forth herein to and among the Public Areas, various portions of the Private
Parcel and various portions of the Public Parcel.
I. It is hereby agreed by the parties hereto that this REA shall run with
the Private Parcel and the Public Parcel and shall govern and be binding upon
all Persons who shall succeed to any interest in any portion or portions of the
Land and any improvements thereon, whether by lease, sublease, or any other
conveyance, succession upon default, foreclosure, or operation of law until such
time as this REA shall terminate in accordance with its own terms or unless and
until every Party and the City, the Agency and every Mortgagee, if any, shall
execute and acknowledge a declaration of termination of this REA and cause such
declaration to be duly recorded in the Official Records, County of Solano, State
of California.
AGREEMENT
ARTICLE 1
OPERATION AND MAINTENANCE - GENERAL
SECTION 1.1 OPERATION AND MAINTENANCE. The Authority shall have full
responsibility to operate and maintain the Public Parcel, including any
Improvements thereon and any Public Areas therein in a manner consistent with
the manner of operations thereof, as a whole, during the two year period
preceding the date of this REA, and the Corporation shall have full
responsibility to operate and maintain the Private Parcel, including any
Improvements thereon and any Public Areas therein in a manner consistent with
other regional theme parks operated by PPI or related entities. Each Party
shall operate and maintain, at its sole cost and expense, the Improvements on
such Party's Parcel in accordance with this REA, the Leases to which it is a
party, as applicable, and the Revenue Sharing Agreement. Each Party shall
operate and maintain the Improvements on such Party's Parcel in a manner which
does not unreasonably impede access between the Public Areas of the Parcels, or
otherwise materially interfere with the use or operation of the Public Areas or
the respective Parcels on which such Public Areas are located, and in a manner
which is otherwise compatible with the uses of the Public Areas as permitted
under this REA.
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The Authority has retained the Manager to operate and maintain the Public
Parcel as described in the Management Agreement. The Corporation acknowledges
receipt of a copy of the Management Agreement in effect on the date hereof, and
assents to its terms as they relate to the operation and maintenance of the
Public Parcel. The Authority shall provide the Corporation with any proposed
amendment to the Management Agreement and any proposed successor Management
Agreement at least two weeks prior to its effective date, and shall not enter
into any such amendment or successor agreement to which the Corporation shall
reasonably object, provided that said objections are delivered in writing during
such two week period by the Corporation to the Authority and that said objection
or objections relate to: (a) the standards of operation or maintenance of the
Public Parcel and the Improvements thereon and the Public Areas therein, or (b)
the compensation to be paid to the proposed manager, if such compensation is
materially in excess of the then prevailing rate of compensation for managers of
regional, non-destination theme parks of comparable size and with comparable
annual attendance.
If either Party shall fail to properly maintain its Parcel in accordance
with this Section 1.1, then the other Party (or, in the case of the Authority,
the Manager on its behalf) shall have the rights under the provisions of Section
2.4 to take action to correct such failures and to collect the costs of such
corrective action in the manner provided in Section 11.8.
SECTION 1.2 DAMAGE OR DESTRUCTION TO IMPROVEMENTS ON ANY PARCEL.
Unless provided otherwise herein or in any Lease, each Party severally covenants
to and with the other Party that in the event of any damage to or destruction of
all or any portion of the Improvements, such Party shall, within a reasonable
period of time commence and complete (subject to Unavoidable Delays) the
restoration, replacement, or rebuilding of the Improvements with such
alterations and additions as may be made at the Party's election pursuant to and
subject to the terms of the applicable Lease (such restoration, replacement,
rebuilding, alterations and additions, together with any temporary repairs and
property protection pending completion of the work, being hereinafter called
"Restoration"); provided, however, the Party's obligations with respect to such
Restoration are limited to the amount of insurance proceeds which are payable to
such Party on account of such damage or destruction.
Subject to the provisions of the applicable Lease and Article 5 hereof, in
the event such damage or destruction is to or of all or substantially all of the
Improvements on a Party's Parcel, or if the insurance proceeds payable to the
Party are not sufficient to complete Restoration or if there are no insurance
proceeds, or if in the opinion of the Party it is not commercially practicable
to undertake Restoration, then such Party shall promptly as practicable either
(a) commence and complete (subject to Unavoidable Delays) Restoration of the
damaged Improvements, subject to the limitation with respect to insurance
proceeds set forth herein, or (b) remove any unusable Improvements and cause the
portion of the Parcel occupied by the damaged Improvements as to which the Party
has not elected to undertake Restoration to be returned to a safe condition, and
thereafter proceed in accordance with Section 1.3.
SECTION 1.3 CLEARING DEBRIS FROM RAZED IMPROVEMENTS. If a Party who
owns or leases an Improvement is not obligated herein or in any Lease to which
it is a party to rebuild, replace or repair an Improvement that has been damaged
or destroyed, and if such Party elects not to do so, then (unless otherwise
required hereunder or under a Lease) it shall raze such Improvement (or such
part thereof as has been damaged or destroyed) and clear the area of all debris.
After such razing has been completed, the area shall be landscaped and shall be
so improved by the Party performing the razing so as to match adjacent
landscaping and Improvements until such time as rebuilding may occur thereon.
All activities that are
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performed by the Party razing the Improvements and constructing the landscaping
shall be at such Party's sole cost and expense.
SECTION 1.4 MISCELLANEOUS REPAIRS AND ALTERATIONS. Subject to the
preceding Sections of this Article and the other provisions of this REA, each
Party may make such repairs, alterations, reconstructions or additions to its
Improvements as it deems necessary or advisable under the circumstances.
SECTION 1.5 LIABILITY OF MORTGAGEE. Anything in this Article 1 to
the contrary notwithstanding, it is expressly understood and agreed that the
provisions of Sections 1.2, 1.3 and 2.5 shall be applicable to any Mortgagee of
any Parcel only in the following instances:
(a) where any such Mortgagee acquires title by reason of foreclosure,
or deed in lieu of foreclosure, or by termination for default of a
leaseback in a sale and leaseback transaction or a sublease in a sublease
and leaseback transaction, such Mortgagee or the purchaser at a foreclosure
sale shall only be liable for such reconstruction for damage (whether or
not such damage is caused by a peril included within the risks required to
be insured against under this REA) which occurs subsequent to such
foreclosure, sale, conveyance or termination of leaseback; or
(b) where damage or destruction is either (i) caused by a peril
required to be insured against under this REA; or (ii) is caused by a peril
actually insured against; and occurs prior to such foreclosure sale, any
such Mortgagee who acquires title by reason of foreclosure or deed in lieu
of foreclosure or termination for default of a leaseback, or the purchaser
at the foreclosure sale, shall be liable for such reconstruction but only
to the extent of the insurance proceeds actually received by the Mortgagee
under such insurance.
If a purchaser at the foreclosure sale is not required pursuant to the
foregoing subparagraphs to restore, repair or rebuild any Improvement that has
been damaged or destroyed and elects not to do so then such purchaser at the
foreclosure sale shall promptly raze such Improvement or such part thereof that
has been so damaged or destroyed, and clear the premises of all debris. After
the area has been cleared, it shall be landscaped and shall be so improved by
the Person performing the razing so as to match adjacent landscaping until such
time as rebuilding may occur thereon. Nothing in this Section 1.5 shall be
construed to relieve a Party of its obligations under Sections 1.2 and 1.3.
SECTION 1.6 LIMITATION ON DETRIMENTAL CHARACTERISTICS. No use or
operation will be made, conducted or permitted on any part of the Land which use
or operation is clearly detrimental to the development or operation of the
Improvements, as provided herein and in the Leases. No portion of any Parcel
may be leased, used or occupied as a funeral parlor; industrial manufacturing
facility; automobile dealership; adult bookstore or establishment selling,
exhibiting or distributing pornographic or obscene materials; massage parlor;
so-called "head shop"; body and fender shop; car wash; or off-track betting
parlor. Also included among the uses or operations which are prohibited are
uses or operations which produce or are accompanied by the following
characteristics, which list is not intended to be all-inclusive: (a) any noise,
vibration, litter, odor or other activity which constitutes a public or private
nuisance or interferes in a material adverse way with the normal conduct of the
business of any Party; or (b) any dangerous firing, explosion or other damaging
hazards; provided, however, all attractions, amusements and other activities
conducted at other theme parks operated by PPI (to the extent permitted under
applicable Law including but not limited to any local zoning and land use
regulations) shall be permitted notwithstanding the foregoing.
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SECTION 1.7 PARKING. The Authority hereby grants and conveys to the
Corporation, for the benefit of the Private Parcel and the Public Parcel, a
non-exclusive easement and right to the use, during the Term (as defined in the
Parcel Lease) of the Parking Areas for purposes of vehicular parking for the
benefit of the Parcels. Notwithstanding the foregoing easements, the Authority
shall maintain the Parking Areas as described in Section 2.6 hereof, and shall
not obstruct or unreasonably interfere with access, ingress or egress thereto.;
SECTION 1.8 COMPLIANCE WITH LAWS. Each Party shall cause the Public
Areas and all buildings and Improvements located on its Parcel to comply in all
material respects with all applicable Laws; provided however, that a Party may
contest any such Law so long as such contest does not create any material danger
of a loss of title to, or material impairment in any way of the use of, all or
any portion of the Public Areas for their intended purposes.
SECTION 1.9 MISCELLANEOUS. The easements granted hereby shall be for
the benefit of, but not restricted solely to, the Parties and each such Party
may grant the benefit of such easement to tenants of the Public Parcel and the
Private Parcel for the duration of such occupancy (but not longer than this REA
is in effect), and to the customers, employees, agents and business invitees
thereof; but same is not intended nor shall it be construed as creating any
rights in or for the benefit of the general public nor shall it affect any real
property outside of the Parcels (except for the Parking Areas). Such easement
areas are reserved for said use so long as this REA is in effect.
SECTION 1.10 ENVIRONMENTAL MATTERS. The Authority represents and
warrants that it shall not create, place, store, transport, or dispose of any
Environmental Condition or Hazardous Materials in, on, at, around or under or
affecting all or any part of the Private Parcel, and further, that the Authority
shall be responsible for all Environmental Compliance Liability with respect to
the Private Parcel which, and solely to the extent that it, results from the
Authority's negligence or willful misconduct or that of its agents, employees or
contractors. The Corporation represents and warrants that it shall not create,
place, store, transport, or dispose of any Environmental Condition or Hazardous
Materials in, on, at, around or under or affecting all or any part of the Public
Parcel, and further, that the Corporation shall be responsible for all
Environmental Compliance Liability with respect to the Public Parcel which, and
solely to the extent that it, results from the Corporation's negligence or
willful misconduct or that of its agents, employees or contractors.
SECTION 1.11 CONFLICT WITH ARTICLE 2. In the event of any conflict
or inconsistency between the provisions of this Article 1 and Article 2 below,
the provisions of Article 2 shall govern.
ARTICLE 2
OPERATION AND MAINTENANCE OF PUBLIC AREAS
SECTION 2.1 OPERATION AND MAINTENANCE OF PUBLIC AREAS. Each Party
shall, at its own cost and expense (subject to the Revenue Sharing Agreement)
operate, provide policing and adequate lighting and security for, maintain,
repair, and to the extent provided for herein, replace, including, to the extent
required under any Lease, the provision of adequate reserves to cover the cost
of maintenance and repairs, that portion of the Public Areas which are within
the Party's Parcel in good order, and sanitary condition and repair in a
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manner at least comparable to those standards generally in effect from time to
time in other regional, non-destination theme parks (including those operated
by PPI and its subsidiaries), and in accordance with any Rules and Regulations.
The Corporation shall advise the Authority in writing of any such standards at
parks operated by PPI of which it considers the Authority in violation, and the
Authority will advise the Corporation in writing of any such standard at other
regional, non-destination theme parks of which it considers the Corporation in
violation. The Authority shall have full responsibility to operate and maintain
the Public Parcel, including any Improvements thereon and any Public Areas
therein in the manner required hereunder and under the Leases to which it is a
party, and the Corporation shall have full responsibility to operate and
maintain the Private Parcel, including any Improvements thereon and any Public
Areas therein in the manner required hereunder and under the Leases to which it
is a party.
If either Party shall fail to properly maintain its Parcel in accordance
with this Section 2.1, then the other Party (or, in the case of the Authority,
the Manager on its behalf) shall have the rights under the provisions of Section
2.4 to take action to correct such failures and to collect the costs of such
corrective action in the manner provided in Section 11.8.
SECTION 2.2 RULES AND REGULATIONS. The Parties agree that the
maintenance and operation of the Parcels and the Public Areas shall be subject
to the Rules and Regulations. Any amendment or supplement to the Rules and
Regulations must be in writing, consented to and executed by each of the
Parties. Each Party agrees to consider in good faith any amendment or
supplement to the Rules and Regulations requested in writing by the other Party,
and which does not materially adversely affect or interfere with the use or
operation of its Parcel.
SECTION 2.3 RESTRICTIONS ON PUBLIC AREAS AND OTHERWISE. The Parcels
and Parking Areas shall be subject to the following restrictions which shall be
binding on each Party and each of its tenants, occupants, employees, agents or
invitees: (a) No obstruction to the free flow of traffic and joint use of the
parking and delivery facilities shall be permitted except to the extent, if at
all, expressly provided in this REA. (b) Any construction shall be conducted
by or on behalf of a Party in a manner which will limit to the maximum extent
practicable any interference with the operation of the other Party's Parcel, and
shall be performed diligently in a good workmanlike manner and in compliance in
all material respects with all applicable Laws, and completed as expeditiously
as possible. (c) Except as otherwise permitted in this REA, there shall be no
activities in the Public Areas which would materially interfere with the use of
the Parcels and the Improvements for their intended purposes.
SECTION 2.4 FAILURE OF PERFORMANCE. If either Party fails to
perform any of its duties or obligations provided for in this REA, any other
Party (if it is not the Person failing to perform) may at any time give a
written notice to the failing Party, setting forth the specific failures to
comply, and if such failures are: (a) not corrected within thirty (30) days
after receipt of such notice (or such sooner period as may be required elsewhere
herein or by Law), or (b) such that they cannot be corrected within such time
and the Party receiving such notice fails to commence the correction of such
failures within such period and diligently prosecute the same thereafter, then,
in the case of either (a) or (b), the Party giving such notice shall have the
right to correct such failures, including the right to enter upon any Parcel to
correct such failures, and the Party receiving such notice shall pay the
reasonable costs thereof. The defaulting Party shall pay any amounts so expended
with interest in accordance with Section 11.8; provided, however, these
provisions shall be without prejudice to the right of the Party receiving such
notice to contest the right of the other Party to make such repairs or expend
such monies and to withhold such amounts. Notwithstanding anything hereinabove
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contained to the contrary, in the event of any emergency situation, a Party not
in default may without notice cure any such default and, thereafter, shall be
entitled to the benefits of this Section 2.4.
In addition to the remedies set forth above or elsewhere, a party shall be
entitled to the following additional remedies: (a) to seek specific performance;
and (b) to seek injunctive relief.
SECTION 2.5 DAMAGE TO OR DESTRUCTION OF PUBLIC AREAS. Except as
otherwise provided herein or in the Lease pertaining to a Parcel, if any of the
Improvements located in any of the Public Areas are damaged or destroyed by fire
or any other cause whatsoever, whether insured or uninsured, during the term of
this REA, the Party upon whose Parcel any portion of the damaged Improvements
are located shall, at its own expense, be responsible for all necessary repairs,
including foundations, supports, roof, exterior and interior bearing walls and
all necessary repairs or replacements of any kind on such Improvements and shall
promptly rebuild, replace or repair such damaged or destroyed Improvements to
the same condition and to the same general appearance as existed immediately
prior to such damage or destruction. Except as otherwise provided herein or in
the Lease pertaining to a Parcel, any changes in the location of such restored
Improvements in any of the Public Areas shall be in accordance with plans
reasonably acceptable to the other Party, and any Improvements located in any of
the Pubic Areas which any Person is required to rebuild, replace or repair shall
be diligently prosecuted to completion and such Person shall, prior to
commencing such rebuilding, replacement or repair, comply with the requirements
set forth in Article 4.
SECTION 2.6 OPERATION OF THE PUBLIC PARKING. The Authority shall
have the right and obligation to manage and operate or oversee the management
and operation of the Parking Areas in accordance with policies and standards
adopted by the Authority and the Rules and Regulations, as applicable, and may
at any time and from time to time designate one or more other Persons (including
the Manager) to manage and operate the Parking Areas upon such terms and
conditions and for such periods of time as the Authority deems reasonable,
subject, however, to any specific requirements set forth elsewhere in this REA.
The Authority, at its cost (which shall constitute Operating Expenses under the
Revenue Sharing Agreement) shall cause the Parking Areas to be: (a) maintained
in good order and repair, in a clean and sanitary condition and in a manner
consistent with first-class standards of theme park practices; (b) kept properly
drained and reasonably free from snow, ice and debris; (c) provided with
adequate lighting and security during the hours of operation of the Parcels; and
(d) kept open, unobstructed and completely accessible to vehicles and pedestrian
traffic during the hours of operation of the Parcels.
SECTION 2.7 NONINTERFERENCE WITH PERMITTEE CIRCULATION. Except as
otherwise provided herein, there shall be no selling or other activities
conducted in the Public Areas so as to unreasonably interfere with efficient
pedestrian traffic flow between any Party's Improvements and all other areas in
the Parcels, except as may be incident to restaurant or food services
operations.
SECTION 2.8 FENCES. Except as otherwise permitted herein including
but not limited to in connection with any construction done pursuant to Section
3.5 or Article 4, no fence, structure or other obstruction of any kind (except
for a perimeter fence around the Improvements and as may be specifically
permitted herein, or except for decorative features and customer conveniences)
shall be placed, kept, permitted or maintained in the Public Areas in a manner
which unreasonably interferes with pedestrian traffic flow over the Public Areas
or otherwise with the use and operation by a Party of its Parcel.
SECTION 2.9 SIGNS AND BANNERS. The Parties shall negotiate in good
faith from time to time
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to establish and adjust, as necessary or desirable, the criteria for all signs,
banners, balloons, inflated figures and other lighter-than-air devices to be
installed anywhere on the Parcels, except for signs located within individual
Parcel not visible from the exterior of such Parcel. The sign criteria will be
subject to the provisions of any Lease entered into prior to the date hereof. No
such signs, banners, balloons, inflated figures and other lighter-than-air
devices shall be installed on the Parcels that do not conform to the
agreed-upon sign criteria. Notwithstanding anything to the contrary set forth
in this Section 2.9, the Corporation shall be permitted to install on the
Private Parcel any and all signs, banners, balloons, inflated figures, other
lighter than air devices and other identification materials which are similar to
those then being used at other theme parks operated by or on behalf of PPI so
long as no such materials that are visible beyond the exterior of the Private
Parcel are materially misleading as to the ownership of the respective Parcels,
and the Authority shall be permitted to install on the Public Parcel any and all
signs, banners, balloons, inflated figures, and other lighter than air devices
and other identification materials which are similar to those in use on the
Public Parcel prior to the date of this REA.
ARTICLE 3
RECIPROCAL EASEMENTS
SECTION 3.1 DEFINITIONS AND DOCUMENTATION. For the purposes of this
Article, the following will apply:
(a) The Party granting an easement is called the "Grantor", it being
intended that the grant shall thereby bind and include not only the Party
but also its successors and assigns.
(b) The Party to whom the easement is granted is called the
"Grantee", it being intended that the grant shall benefit and include not
only such Party but its permitted successors in interest hereunder.
(c) The word "in" with respect to an easement granted "in" a
particular Parcel means, as the context may require, "in", "to", "on",
"over", "through", "upon", "across" and "under", or any one or more of the
foregoing.
(d) The term "Separate Utility Facilities" means sewers (including,
without limitation, storm drainage and sanitary and septic sewer systems),
domestic water systems, natural gas systems and mains, electrical systems,
safety systems, fire protection water systems and water mains, telephone
systems, data or other communication systems, and all other utility systems
and facilities which serve only one Parcel or which connect Common Utility
Facilities to the Improvements.
(e) The grant of an easement by a Grantor shall bind and burden its
ownership or leasehold interest, for the purpose of this REA, be deemed to
be the servient tenement.
(f) The grant of an easement to a Grantee shall benefit and bind its
ownership or leasehold interest, for the purpose of this REA, be deemed to
be the dominant tenement.
(g) Unless provided otherwise, all easements granted hereunder are
non-exclusive and irrevocable.
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SECTION 3.2 NATURE OF EASEMENTS. All easements granted hereunder
shall exist by virtue of this REA, without the necessity of confirmation by any
other document. Likewise, upon the termination of any easement (in whole or in
part) or its release in respect of all or any part of a Parcel, the same shall
be deemed to have been terminated or released without the necessity of
confirmation by any other document. However, upon the request of any Party, the
other Party will sign and acknowledge a document memorializing the existence
(including the location and any conditions to the granting or exercise), or the
termination (in whole or in part), or the release (in whole or in part), as the
case may be, of any easement, if the form and substance of the document is
acceptable to the Party requesting the same. Any Grantor may, and at the
written request of a Party hereto shall, at the Grantor's expense (which shall
constitute Operating Expenses under and as defined in the Revenue Sharing
Agreement) cause to be prepared and recorded a survey showing the location of
the permanent easements granted hereunder in the Grantor's Parcel.
SECTION 3.3 GENERAL EASEMENTS. Each Party hereby grants and conveys
to the other Party for the benefit of the Parcel owned, leased and/or operated
by such other Party, a non-exclusive easement and the right to the use during
the term of this REA of the Public Areas, and the common curb cuts, roadways,
driveways, aisles, walkways and sidewalks located on the Public Parcel and the
Private Parcel, the location of which is shown or described on Exhibit D
attached hereto, and in any other area designated or set aside herein or in the
future under a written amendment to this REA for the use by others on its
respective Parcel for:
(a) ingress to and egress from the Grantee's Parcel;
(b) the passage and delivery of vehicles through areas designated for
that purpose;
(c) the passage and delivery and accommodation of pedestrians; and
(d) any such other purposes as are herein expressly authorized to be
done in all of the Public Areas designated for the use by others under this
REA; provided, however, that such easements are limited to such portions of
the Public Areas designated for the use by others on the Grantor's Parcel
as are now or hereafter under a written amendment to this REA set aside,
maintained and authorized for such use under this REA, on those portions
of the Land designated as Public Areas in Exhibit D.
Each Party hereby grants and conveys to the Manager, and to any successor
Manager, a non-exclusive easement and right to the use of the Public Areas, as
they may exist from time to time, for purposes of ingress and egress and for
purposes of enforcement of the provisions of this REA and of the Rules and
Regulations adopted hereunder.
Each Party hereby reserves the right to eject from the Public Areas
designated for the use by others on its Parcel any Persons not authorized to use
the same and Persons using the same in a manner which violates this REA
(including the Rules and Regulations) or the provisions of any Lease pertaining
to its Parcel. In addition, each Party reserves the right to close off the
Public Areas designated for the use by others on its Parcel for such reasonable
periods of time as may be required for serious security situations or as legally
necessary to prevent the acquisition of prescriptive rights by anyone; provided,
however, before closing off any part of the Public Areas designated for the use
by others as provided above, such Party must
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give at least 14 days' prior written notice to the Manager and the other Party
of its intention to do so and must coordinate its closing with the activities of
the other Party so that no unreasonable interference with the use or operation
of the Improvements occurs, and such Party shall use commercially practicable
efforts to minimize the time of such closure and interruption of business.
The easements provided for in this Section are subject to the rights to use
the Public Areas or other areas designated for the use by others for other
purposes provided for in this REA; however, except as otherwise herein provided,
no changes shall be made by a Party in the Public Areas or in the location or
design of the Improvements on the Public Areas without the prior written
approval of the other Party (which approval shall not be unreasonably withheld
or delayed), when any such change shall substantially adversely affect such
other Party.
Each Party hereby grants to each tenant, subtenant, licensee,
concessionaire and permitted occupant of a Parcel a non-exclusive license for
reasonable pedestrian circulation across open areas that may exist from time to
time to circulate between the various Parcels. However, no Party shall have the
right to designate specific areas for such reasonable circulation.
SECTION 3.4 EASEMENTS FOR UTILITY FACILITIES. Each Party hereby
grants and conveys to each of the other Parties for the benefit of the Private
Parcel and the Public Parcel, a non-exclusive easement in its Parcel, for the
installation, use, operation, maintenance, repair, replacement, relocation and
removal of Separate Utility Facilities and the Common Utility Facilities
existing at any time. The installation of Separate Utility Facilities and
Common Utility Facilities shall be subject, as to location, to the approval of
the Grantor, which approval shall not be unreasonably withheld or delayed.
Except as otherwise provided herein, the Grantee of any easement for
Separate Utility Facilities under this Section shall be responsible, as between
such Grantee and the Grantor, for the installation, maintenance, repair and
removal of all Separate Utility Facilities installed by the Grantee within such
easements, as well as for all Separate Utility Facilities installed by the
Grantee on its own Parcel and shall complete same as expeditiously as possible.
The Party so obligated to perform such repair, installation, maintenance and/or
removal shall, at its sole cost and expense, repair any damage to any
Improvements caused thereby. After initial installation thereof is completed,
any permitted installation, maintenance, repair, replacement, relocation and
removal of Separate Utility Facilities that is required to be performed by
Grantee must be performed by Grantee and then only after two (2) weeks' advance
written notice to Grantor of Grantee's intention to do such work. However, in
the case of an emergency, any such work may be immediately performed after such
advance notice to Grantor as is reasonably practicable under the circumstances.
In addition, the Parties agree that all such installation, maintenance, repair
and removal shall be performed in a manner that causes as little disturbance to
the Parties and their use and operation of their respective Parcels as may be
reasonably practicable under the circumstances and any and all portions of the
surface area of Grantor's Parcel which may have been excavated, damaged or
otherwise disturbed as a result of such work shall be restored at the sole cost
and expense of Grantee to essentially the same condition as the same were in
prior to the commencement of any such work.
The Grantor of any easement for Separate Utility Facilities under this
Section may use the Separate Utility Facilities as so installed, provided the
increase in costs incurred in order to make such Separate Utility Facilities
adequate to serve such additional use shall be borne by such Grantor, unless
otherwise provided under the Revenue Sharing Agreement, and, provided, further,
that Grantor complies with the requirements
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of subparagraphs (a), (b), (c), and (d) of this Section 3.4.
The Grantor of any easement under this Section may, if reasonably required,
relocate on its premises any Separate Utility Facilities, or Common Utility
Facilities installed thereon under any easement granted by it, provided such
relocation:
(a) may be performed only after Grantor has given Grantee thirty (30)
days' prior written notice of its intention to relocate such facilities and
has set forth in such notice the reasons why such relocation is required;
(b) shall not interfere with or diminish the utility services to the
Grantee; however, temporary interferences with and diminutions in utility
services shall be permitted if:
(i) they occur during the non-business hours of Grantee or
during the off-season of the operations of the Parcels, and
(ii) Grantor promptly reimburses Grantee for all cost, expense
and loss (excluding any estimated unrealized operating profits)
incurred by Grantee as a result of such interferences or diminutions,
or both, unless otherwise provided under the Revenue Sharing
Agreement;
(c) shall not reduce or unreasonably impair the usefulness or
function of the facilities in question; and
(d) shall be performed at the sole cost of Grantor, and
(e) Grantee approves such relocation, which approval shall not be
unreasonably withheld or delayed.
All Common Utility Facilities lying within any of the Public Areas shall,
depending upon their location, for all purposes be deemed to be included within
the definition of the Improvements for the specific Public Areas so affected.
SECTION 3.5 TEMPORARY CONSTRUCTION EASEMENTS. In connection with any
construction (as defined in Section 4.1) each Party hereby grants to each of the
other Parties a non-exclusive, temporary easement for incidental encroachments
upon those portions of the Land included in its Parcel which may occur as a
result of construction, and so long as such encroachments are kept within the
reasonable requirements of construction work, expeditiously pursued, and so long
as customary insurance is maintained protecting the Grantor from the risks
involved and evidence thereof is delivered to the affected Parties.
Except as otherwise provided for herein the location of all temporary
easements under this Section shall be subject to the approval of Grantor (which
approval shall not be unreasonably withheld or delayed). The plans and
specifications showing the Improvements to be constructed, together with the
location of the required construction easements, shall be submitted to the
Grantor and approval thereof by Grantor shall constitute designation by the
Grantor of the portions of its Parcel to be used for such temporary easements;
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any such approval of Grantor shall not be unreasonably withheld or delayed.
The use of the temporary easements under this Section must not result in
damage or injury to the Improvements of the other Parcel and shall not
materially adversely affect or otherwise unreasonably interfere with or
interrupt the business operations conducted on the other Parcel. In addition,
each Grantee, at its expense, shall promptly repair, replace or restore any and
all Improvements of Grantor which have been damaged or destroyed by Grantee in
the use of the temporary easements granted under this Section or the activities
of the Grantee thereupon or in connection therewith.
SECTION 3.6 TERMINATION AND ABANDONMENT OF EASEMENTS. Any easement
granted pursuant to this Article 3, or any part thereof, may be abandoned and
terminated if: (a) all Grantors and Grantees mutually agree; or (b) the use
thereof shall have been abandoned by the Grantee thereof and continues to be
abandoned for a period of two (2) consecutive years after the Grantor of such
easement gives the Grantee thereof prior written notice in accordance with
Article 8 to the then Grantee benefited by such easement and the then record
owner, if any, of any leasehold interest in such benefited Parcel, stating that
such easement has been abandoned, and places of record in the Recorder's Office
in Solano County, California, an affidavit that such abandonment has taken place
and that such notice has been properly given, and any record owner of the fee of
or leasehold interest in the benefited Parcel within such two (2) year period
fails to place of record in the Recorder's Office in Solano County, California,
an affidavit that such easement has been used within such two (2) year period.
Notwithstanding the foregoing, no easement may be abandoned as aforesaid if the
Grantee thereof delivers to Grantor within 15 days after delivery by Grantor of
its notice as aforesaid written notice that such easement has not been
abandoned, and that such Grantee intends to use such easement and such Grantee
does use such easement within six (6) months thereafter, then such Grantor shall
not terminate the easement as aforesaid.
ARTICLE 4
GENERAL CONSTRUCTION REQUIREMENTS
SECTION 4.1 "CONSTRUCTION" DEFINED. As used in Section 3.5 and this
Article the word "construction" includes initial construction of Improvements,
work performed in connection with any Restoration and, except where otherwise
specified, subsequent construction carried on under this REA.
SECTION 4.2 CONSTRUCTION TO PROCEED IN REASONABLE MANNER. Each Party
agrees that construction shall not be performed so as to (a) unreasonably
interfere with construction being performed by the other Party, (b) cause any
unreasonable increase in the cost of construction being performed by the other
Party, or (c) unreasonably interfere with the other Party's operations and
rights as contemplated by this REA. Notwithstanding the foregoing, or anything
else in this Article, including Section 4.3, no Party shall perform construction
or erect such barricades in a manner which materially adversely affects, or
otherwise substantially interferes with, the use and operation by any other
Party of its Parcel, except to the extent specifically permitted elsewhere
herein.
SECTION 4.3 CONSTRUCTION BARRICADES. If any Party begins or
continues construction after the Improvements of any other Party have opened for
business to the general public, then the Party carrying on the construction
shall erect adequate, painted construction barricades substantially enclosing
the area of its construction. All barricades shall be painted in colors
reasonably approved by the other Party. Such Party
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shall maintain these construction barricades until the construction has been
substantially completed (to the extent reasonably necessary to remove the
hazardous construction conditions).
This Section 4.3 applies only to construction that can be reasonably be
deemed to constitute a hazardous condition for Permittees; however, each Party
may erect construction barricades, as hereinabove specified, at the time of any
construction and maintain in accordance with this Article the same until the
building surrounded is secure from unauthorized intrusion.
SECTION 4.4 SAFETY MATTERS. Each Party initiating or being
responsible for the construction shall take all safety measures reasonably
required to protect each of the other Parties and all Permittees and the
property of each from injury or damage caused by or resulting from the
performance of its construction.
SECTION 4.5 WORKMANSHIP; EVIDENCE OF COMPLIANCE WITH CONSTRUCTION
REQUIREMENTS. Each Party agrees that all construction to be performed
hereunder by such Party shall be done in a diligent, good and workmanlike
manner, with materials at least comparable to those used in other regional,
non-destination theme parks (including those operated by PPI) and in accordance
with all applicable Laws. Each Party shall pay all costs, expenses, liabilities
and liens arising out of or in any way connected with such construction. After
it has completed any construction, each Party shall, within sixty (60) days
after the written request of the other Party, deliver to the requesting Party
evidence that the construction has been completed in compliance with all
applicable Laws. A certificate of occupancy (or the equivalent thereof) issued
by the governmental body having jurisdiction thereof shall be deemed
satisfactory evidence of compliance with the requirements of this Section.
SECTION 4.6 LIENS. Each Party agrees that in the event any
mechanic's lien or other statutory lien shall be filed during the term of this
REA against the ownership or leasehold interest of the other Party in the Public
Areas by reason of work, labor, services, or materials supplied to or at the
request of said Party or pursuant to any construction, it shall pay and
discharge the same of record within thirty (30) days after receiving notice of
the filing thereof, subject also to the provisions of the following sentence.
Each such Party shall have the right to contest the validity, amount or
applicability of any such respective liens by appropriate legal proceedings, and
so long as it shall furnish bond or indemnity as hereinafter provided, and be
prosecuting such contest in good faith, the requirement that it pay and
discharge such items within said thirty (30) day period shall not be applicable;
provided, however, that in any event such Party shall within thirty (30) days
after receiving notice of the filing thereof bond or indemnify against such
liens in amount and form satisfactory to induce the title insurance company
which insured title to the respective Parcel to each of the Parties hereto to
insure over such liens or to reissue or update its existing policy, binder or
commitment without showing any title exception by reason of such liens. In the
event such legal proceedings shall be finally concluded (so that no further
appeal may be taken) adversely to the Party contesting such liens, such Party
shall, within five (5) business days thereafter, cause the lien(s) to be
discharged of record.
ARTICLE 5
OTHER AGREEMENTS
SECTION 5.1 COVENANT TO PERFORM. (a) Each Party covenants and agrees
to and for the benefit of each other Party that:
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(i) it shall not enter into any agreement, amendment,
cancellation or other modification of any agreement that will preclude
such Party from fully complying with this REA; and
(ii) it shall not enter into any agreement, amendment,
cancellation or other modification of any agreement that will preclude
any other Party from exercising and enjoying all rights granted in
this REA to such other Party.
(b) Each Party covenants and agrees to and for the benefit of each
other Party that it shall provide in each grant deed or other instrument or
agreement conveying any ownership or security interest in its ownership or
leasehold interest, that each successor to such interest shall be bound by
and become a Party to this REA.
SECTION 5.2 SUBORDINATION OF LEASES. The Parties acknowledge and
agree that the terms and provisions of this REA are superior and prior to the
1997 Agency-Marine World Lease and the Parcel Lease, and, to the extent there is
a conflict in a Party's obligations hereunder and under the foregoing Leases,
the terms of this REA shall govern and control. The City, by the execution of
this REA, acknowledges and agrees that all of the real property included in
Parcels, including the City's fee interest therein and any other security
interest therein, will be subject to the terms and provisions of this REA.
SECTION 5.3 INDEMNIFICATION BY PARTIES. (a) Each Party
("Indemnitor") agrees to indemnify and save harmless the other Party, its
officers, directors, shareholders, successors, assigns and agents (collectively,
the "Indemnified Parties") from and against (i) all claims of whatever nature
against each Indemnified Party arising from any willful misconduct or gross
negligence of Indemnitor, its contractors, licensees, agents, servants,
employees, invitees, customers, concessionaires or visitors, including any
claims arising from such act (including, without limitation, any thing
whatsoever done or any condition created), (ii) all claims against each
Indemnified Party arising from any accident, injury or damage whatsoever caused
to any person or to the property of any person and occurring during, or (if
Indemnitor shall continue to use and occupy its Parcel) after the expiration of
the Term of this REA, in or about the Parcel owned or leased and operated by or
on behalf of Indemnitor, (iii) all claims arising against each Indemnified Party
relating to the imposition of any liens of mechanics or materialmen or otherwise
relating to construction done or services provided to, for, at the request, or
on behalf of Indemnitor, and (iv) any breach, violation or non-performance of
any representation, covenant, condition or agreement in this REA set forth and
contained on the part of Indemnitor to be fulfilled, kept, observed and
performed. This indemnity and hold harmless agreement shall include indemnity
from and against any and all liability, fines, suits, damages, losses, demands,
costs and expenses of any kind or nature incurred in or in connection with any
such claim or proceeding brought thereon, and the defense thereof with counsel
reasonably approved by Indemnified Party in writing, which approval shall not be
unreasonably withheld or delayed; provided, however, that the counsel designated
by Indemnitor's insurance carrier shall be deemed approved by Indemnified Party,
and the office of the City Attorney shall be deemed approved by the Corporation.
Th Indemnified Party agrees to give prompt notice to Indemnitor of any such
claim or proceeding, and the opportunity to defend such claim or proceeding if
Indemnified Party does not elect to do so. This Section 5.3 shall survive the
expiration or termination of this REA.
(b) No provision in this REA providing for the indemnification of any
Indemnified Party shall apply in any instances arising out of the gross
negligence or willful misconduct of such Indemnified Party, its agents,
servants, employees, contractors or other tenants of such Indemnified Party,
their agents, servants,
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employees, contractors, or other licensees or invitees.
SECTION 5.4 LIABILITY INSURANCE AND WAIVER OF SUBROGATION. (a) Each
Party shall maintain or cause to be maintained so long as this REA is in effect
public liability and property damage insurance insuring against claims on
account of loss of life, bodily injury or property damage that may arise from,
or be occasioned by the condition, use or occupancy of the Public Areas by the
Party and the tenants, agents, contractors, employees, licensees, customers and
invitees, of such Party or the occupants of its Parcel except as herein
provided. Said insurance shall be carried by a reputable insurance company or
companies under insurance policies having limits for loss in the minimum
amounts, and otherwise under the material terms and conditions, as are contained
in insurance policies from time to time carried by operators of other regional
theme parks of comparable size and attendance (including other theme parks owned
or operated by or on behalf of PPI); provided, however, in no event shall the
minimum amount of coverage per occurrence be less than $5,000,000, nor the
deductible in connection therewith exceed $50,000 and the Authority shall
maintain insurance for the Public Parcel reasonably comparable to that
maintained by the Corporation for the Private Parcel. Notwithstanding the
foregoing, any Party responsible to maintain such insurance that has a net worth
in excess of $100,000,000 or is part of a governmental joint insurance pool may
"self insure", or provide for a deductible from said coverage related to the
Parcel to the extent of one percent (1 %) of the net worth of said Party in its
last annual or fiscal year as certified by an independent certified public
accountant and computed in accordance with generally accepted accounting
principles consistently applied. Such insurance may be carried under a
"blanket" policy or policies covering other properties of the party and its
subsidiaries, controlling or affiliated corporations. Each Party shall, upon
written request from the other Party, furnish to the Party making such request
certificates of insurance or other ocumentation evidencing the existence of the
insurance required to be carried pursuant to this Article or evidence of a
self-insurance capacity as hereinabove provided, as the case may be. All such
insurance shall include provisions denying to the insurer subrogation rights
against the other parties to the extent such rights have been waived by the
insured prior to the occurrence of damage or loss, so long as such coverage is
obtainable and includable at no additional cost.
(b) To the extent permitted by Law, each Party hereby waives any rights of
recovery against any other Party, its directors, officers, employees, agents and
tenants and occupants for any damage or consequential loss covered by said
policies (or "deemed policy" in the case of self-insurance), against which such
Party is protected (or deemed protected) by insurance (or self-insurance), to
the extent of the proceeds payable under such policies (or to the extent of the
deemed self-insurance), whether or not such damage or loss shall have been
caused by any acts or omissions of the other Party or its directors, officers,
employees, agents, tenants or occupants.
SECTION 5.5 CASUALTY INSURANCE. In order to assure performance of
their respective obligations under this REA, each Party shall also cause to be
carried fire and extended coverage insurance on all Improvements on their
respective Parcels or interest therein as follows: (a) with respect to the
Corporation, in minimum amounts and otherwise under the terms and conditions
required by the Parcel Lease; and (b) with respect to the Authority, in the
minimum amount, and otherwise under terms, required under Section 5.4 of the
1997 Agency - Marine World Lease (but the percentage in clause (i) of the first
sentence of said Section 5.4 shall be deemed to be seventy-five percent (75%)
instead of ninety percent (90%), and otherwise without giving effect to clause
(ii) or (iii) of the first sentence of said Section 5.4), subject to the right
of each such Party, or other party responsible for any required restorations, to
"self insure" pursuant to Section 5.4. Any such insurance shall otherwise
conform to the provisions with respect to insurance contained in Section 5.4.
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SECTION 5.6 CONDEMNATION. For purposes of this Section 5.6: (a)
"Condemnation" means: (i) the taking of all or any part of the Land or
Improvements or the possession thereof under the power of eminent domain; or
(ii) the voluntary sale (with the consent of the Party then in possession, the
other Party and any other Persons having a permitted interest therein) of all or
any part of the Land or Improvements to any Person having the power of eminent
domain, provided that the Land or Development or such part thereof is then under
the threat of condemnation from such Person. (b) Condemnation Date means the
earlier of: (i) the date when possession of the condemned Parcel (or any part
thereof) is taken by the condemning authority; or (ii) the date when title to
the condemned Parcel (of any part thereof) vests in the condemning authority.
If any part of the Improvements situated on any Party's Parcel is taken by
condemnation, such Party shall reconstruct said Improvements as nearly as
possible to the condition thereof as existed immediately prior to such taking in
accordance with the requirements and subject to the conditions of this Section
5.6, and only to the extent of any condemnation award with respect thereto. All
reconstruction hereunder shall include rebuilding and restoring the same to a
complete architectural unit. In the event of any such rebuilding of any
Improvements, the same shall be done in accordance with the provisions set forth
in Article 4 hereof.
Notwithstanding anything to the contrary contained in this Section 5.6, in
no event shall any tenant or Mortgagee be required to rebuild, replace or
restore any Improvements beyond the extent it would be required to so rebuild,
replace or restore pursuant to Sections 1.2, 1.5 and 2.5, as the case may be.
In the event a Parcel, or any part thereof, is taken by condemnation, each
Party waives, in favor of the Party whose property or any part thereof is taken
by condemnation, any value of the condemnation award attributable to any
easements which any other Party holds in the property of such other Party; and
no part of such award shall be payable to the holder of the dominant tenement by
virtue of such easement. However, a waiver under this Section shall not preclude
the holder of any interest in another Parcel from claiming and collecting the
severance and consequential damages to its own Parcel resulting from the taking
of the condemned portion of the other Parcel.
No termination under this Article of any Party's obligations to restore,
operate, and maintain as provided in this REA shall affect the existence of the
easements granted under Article 3, except to the extent such easements burden
the land taken by condemnation.
Nothing herein contained shall be deemed to prohibit any Mortgagee from
participating in any eminent domain proceedings on behalf of any Party, or in
conjunction with any Party.
The provisions of this Section 5.6 are subject to any applicable provisions
of the Leases.
SECTION 5.7 FIRE OR OTHER CASUALTY. (a) If any of the Improvements
located on any Parcel are damaged or destroyed by fire or other cause, the owner
or lessee of such Improvement ("NOTIFYING PARTY") shall exercise its election
under clause (a) or (b) of the second paragraph of Section 1.2 within 45 days
after the occurrence of such fire or other casualty, by delivering written
notice thereof (the "CASUALTY NOTICE") to the other Party, which Casualty Notice
shall set forth the Notifying Party's election to pursue either of the
following, subject to its obligations elsewhere in this REA and in the Leases to
which it is a party: (i) the repair, Restoration, or rebuilding of the
Improvement so damaged or destroyed, or (ii) the razing of any damaged
Improvement, the filling of any excavation, and performance of any other work
necessary to put
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such portion of the applicable Parcel in a clean, sightly and safe condition,
blacktopped or planted with grass. The Notifying Party shall promptly commence
and diligently pursue completing whichever of the foregoing options it elects.
(b) Notwithstanding the foregoing, in the event (i) the Notifying Party
does not send the Casualty Notice as required above, or (ii) does send a
Casualty Notice but does not complete the work elected therein in material
compliance with all Laws within a reasonable period after the Casualty Notice,
or (iii) fails to complete any Restoration for which it is responsible under
this REA, then the other Party ("ELECTING PARTY") shall have the right (in
addition to any other rights it may have), following written notice to the
Notifying Party given: (1) within 15 days after receipt of the Casualty Notice,
(2) within 15 days after the last date on which the Casualty Notice should have
been delivered, if it is not so delivered, or (3) within a reasonable time with
respect to any Restoration under clauses (ii) or (iii) above, to effect the
Restoration of the Improvements so damaged or destroyed, at its sole cost and
expense (to the extent the insurance proceeds payable to it are insufficient),
whereupon, it shall promptly commence and diligently pursue completion of such
work, including but not limited to, submitting all plans and specifications to
the Notifying Party for its prior written approval, not to be unreasonably
withheld or delayed. In such event, the Electing Party shall have the right to
receive any insurance proceeds payable in connection with such damage or
destruction to be used for such Restoration. The Notifying Party shall
cooperate with the Electing Party in connection with any such repair or
restoration. Upon completion of the Restoration, the Electing Party shall have
the right to reimbursement for reasonable amounts expended under this Section
5.7(b) from the amount otherwise payable to the Notifying Party under clause (v)
of Section 1.3(c) of the Revenue Sharing Agreement.
SECTION 5.8 APPLICATION OF PROCEEDS AND AWARDS. Except to the extent
otherwise required under the Leases in effect from time to time, to the extent a
Party is required to commence the repair and restoration as aforesaid or under
Section 5.6 hereof and/or under any Lease, all insurance proceeds or
condemnation awards, respectively, shall be paid over to such Party to be used
in connection therewith and shall be so used by such Party.
ARTICLE 6
REAL ESTATE TAXES OR IMPOSITIONS
SECTION 6.1 PAYMENT OF TAXES OR IMPOSITIONS. Subject to the
provisions of Section 6.3, each Party shall pay (or cause to be paid) before
delinquency all Impositions levied on its respective ownership or leasehold
interest (including the Improvements and personalty situated thereon), provided,
however, that (a) if, by Law, any Imposition may, at the option of the Person on
whom it is imposed, be paid in installments, the Party may exercise such option,
and shall pay all such installments (and interest, if any) becoming due as the
same respectively become due and before any further interest or any penalty,
fine or cost may be added thereto; and (b) any Imposition relating to a fiscal
period of the taxing authority, a part of which period occurs prior to the date
upon which the leasehold or fee title to such interest is conveyed to such
Party, and a part of which period occurs after the date of such conveyance,
shall be adjusted between the Person transferring such leasehold or fee and such
Party so that the Person transferring such leasehold or fee shall pay that
portion of such Impositions allocable to the period prior to the date of such
conveyance and such Party shall pay the remainder thereof. Each Party shall
upon the request of any other Party exhibit to such other Party for examination
receipts for all Impositions required to be paid by the Party pursuant to this
Article 6.
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SECTION 6.2 CONTESTING IMPOSITIONS. Each Party may, at its own cost
and after notice to the other Parties of its intention to contest Impositions,
by appropriate proceedings conducted in good faith and with due diligence
contest the validity, applicability and/or the amount of any Impositions.
Nothing in this Article requires a Party to pay any Impositions as long as it
contests the validity, applicability or the amount thereof in good faith in
accordance with this REA and so long as it does not allow the affected Parcel to
be forfeited to the imposer of such Impositions as a result of its non-payment.
The contesting Person shall within a reasonable period of time given notice to
the other Party of the commencement of any such contest and of the final
determination of such contest.
SECTION 6.3 FAILURE TO PAY IMPOSITIONS. If a Party fails to comply
with this Article, the other Party may pay the Imposition in question in
accordance with this REA and shall be entitled to prompt reimbursement from the
defaulting Party for the sums so expended with interest thereon as stated in
Section 11.8.
SECTION 6.4 ADDITIONAL PROVISIONS REGARDING IMPOSITIONS.
Notwithstanding anything to the contrary set forth above, Impositions shall be
payable as follows:
(a) The Corporation and the Authority shall each be responsible for the
payment of that portion of the Impositions which are due and payable as assessed
against their interests in their respective Parcel and Improvements in which
each has a possessory interest. The Parties shall take all reasonable efforts
to arrange, to the extent permitted under applicable law, for the relevant
taxing authorities to send all tax bills for any tax year directly to the
Corporation and the Authority, and to accept payment of their respective
portions directly from the Corporation and the Authority. The amount of
Impositions payable by each of the Parties hereunder for any tax year (or
portion thereof) shall be timely paid by each party directly to the taxing
authority for said tax year (or portion thereof) so as to avoid the accrual of
interest or the payment of a penalty or creation of a lien, and evidence of each
such payment shall be provided upon request to the other Party.
(b) The Impositions upon a Parcel for any tax year shall mean such amounts
as shall be finally determined after deducting net reductions or abatements,
refunds or rebates, if any, to be the Impositions payable with respect to the
Parcel for said tax year. For the purposes of determining payments due from
each of the Corporation and the Authority in accordance with the provisions of
this Article, the Impositions upon a Parcel for any tax year shall be deemed to
be the Impositions assessed for such year until such time as a reduction,
abatement, refund or rebate shall be made for such tax year, and, if any
reduction, abatement, rebate or refund shall be made for any tax year, an
appropriate refund shall be made with respect to the amount paid by each of the
Corporation and the Authority on account of Impositions dependent upon the
amount of such reduction, abatement, rebate or refund, less the cost and expense
of obtaining the same.
(c) If the Land, or any part thereof, is entitled to any abatements,
exemptions or credits of or against Impositions and same are granted, each of
the Parties hereto, including the Agency, hereby agrees that thereafter it shall
use commercially reasonable efforts to ensure that said abatements, exemptions
or credits of Impositions shall not be terminated, rescinded or otherwise lost
due to its willful misconduct or gross negligence (whether or not such willful
misconduct is permitted by this REA).
(d) Notwithstanding the foregoing, or anything to the contrary set forth
herein, each Party shall
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have the right, exercisable following at least ten (10) business days prior
written notice to the other Party, to make any payment of the other Party's
share of the Impositions in order to avoid the accrual of interest or other late
fees or the imposition of a penalty or creation of a lien upon the Parcel of the
noticed Party if such noticed Party does not pay same within said ten (10)
business days from the date of delivery of such notice. In the event that a
Party makes any such payment or otherwise incurs any cost or expense in
accordance with this Section 6.4 as a result of the non-payment of the share of
the Impositions allocated to another Party, such first Party shall have the
right to be reimbursed therefore as a component of Operating Expenses under the
Revenue Sharing Agreement,
(e) Each Party shall also pay before any fine, penalty, interest or cost
may be added thereto or become due or be imposed by operation of Law for the
non-payment thereof, all excises, levies, licenses and permit fees and other
governmental charges, general and special, ordinary and extraordinary,
unforeseen and foreseen, of any kind and nature whatsoever which at any time
during the Term, with respect to the Corporation, and prior to or during the
Term of this REA with respect to the other Parties, may be assessed, levied,
confirmed, imposed upon, or grow or become due and payable out of or in respect
of or become a lien on, their respective Parcels or any part thereof or any
appurtenance thereto as the result of or in connection with the use to which the
Parcels are put by such Party (notwithstanding that such use may be for the
purposes herein permitted or may have been consented to by the other Party).
(f) The Corporation and the Authority shall each have the right to employ
a tax consulting firm, reasonably acceptable to the other Party, to attempt to
assure a fair tax burden on each of the Parcels. Each Party shall pay fifty
percent (50%) of the cost of such service. Additionally, the Parties shall in
their reasonable determination have the right to contest, at their sole expense,
any tax assessment, valuation or levy against all or any portion of their
respective parcel, and to retain legal counsel and expert witnesses to assist in
such contest. In the event such contest results in a refund of Impositions in
any year, the other Party shall be entitled to receive its proportionate share
of such refund, pro-rated for the period with respect to which the Party paid
its share of Impositions for such year, after deducting from the refund all
fees, expenses and costs incurred in connection with such contest.
(g) Any payment to be made pursuant to this Section with respect to the
real estate tax year in which this REA commences or terminates shall bear the
same ratio to the payment which would be required to be made for the full tax
year as that part of such tax year covered by the Term of this REA bears to a
full tax year.
SECTION 6.5 OTHER GOVERNMENTAL CHARGES. Each party shall also pay
before any fine, penalty, interest or cost may be added thereto or become due or
be imposed by operation of Law for the non-payment thereof, all excises, levies,
licenses and permit fees and other governmental charges, general and special,
ordinary and extraordinary, unforeseen and foreseen, of any kind and nature
whatsoever which during the Term, with respect to the Corporation, and at any
time prior to or during the Term, with respect to the other Parties may be
assessed, levied, confirmed, imposed upon, or grow or become due and payable out
of or in respect of or become a lien on, their interests in respective Parcels,
or any part thereof or any appurtenance thereto as the result of or in
connection with the use to which the Parcels are put by such Party
(notwithstanding that such use may be for the purposes herein permitted or may
have been consented to by the other Party).
SECTION 6.6 EXCEPTIONS FROM IMPOSITIONS; CHARGES IN LIEU OF
IMPOSITIONS. Nothing herein
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contained shall require either Party to pay any portion of any estate,
inheritance, succession, capital levy, corporate franchise, gross receipts,
transfer or income tax of any other Party, nor shall any of the same be deemed
to be included within the term "Impositions" as defined herein, unless the same
shall be imposed in lieu of any Impositions referred to in this Article 6.
ARTICLE 7
ARBITRATION
SECTION 7.1 DISPUTES SUBJECT TO ARBITRATION. Any dispute under this
REA shall be resolved by arbitration under this Article.
SECTION 7.2 ARBITRATION PROCEDURES. Any arbitration shall be
conducted in the manner provided in Section 20.01 of the Parcel Lease.
SECTION 7.3 PROCEEDINGS. To the extent permitted by Law, but subject
to the exception described in the second sentence of Section 7.1 above,
compliance with this Article 7 is a condition precedent to the commencement by
any Party of any judicial proceeding arising out of a dispute subject to
arbitration. The decision of the arbitrator may be entered as a judgment in a
court of competent jurisdiction.
ARTICLE 8
NOTICES AND APPROVALS
SECTION 8.1 NOTICES TO PARTIES. For purposes of serving notices, or
requesting or granting approvals or authorizations under this REA, as well as
for purposes of transmitting correspondence concerning this REA and all of the
activities of the parties hereunder, the addresses of the parties shall be as
follows:
If to the Corporation or the Manager: Premier Parks Inc.
122 East 42nd Street, 49th Floor
New York, New York 10168
Attention: Kieran E. Burke
Chairman and CEO
with a copy to: Baer Marks & Upham LLP
805 Third Avenue, 20th Floor
New York, New York 10022
Attention: James M. Coughlin, Esq.
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If to the Agency: Executive Director, Redevelopment Agency
of the City of Vallejo
City of Vallejo
City Hall
555 Santa Clara Street
Vallejo, California 94590
If to the Authority: Marine World Joint Powers Authority
c/o City Manager
City of Vallejo
City Hall
555 Santa Clara Street
Vallejo, California 94590
Any party may change its address as stated above upon written notice to the
other parties. Any notice or other communication under this Agreement shall be
deemed given (a) upon personal delivery, (b) upon receipt by each other party as
evidenced by a written receipt of the United States Postal Service or any
reputable courier service, (c) three (3) business days after deposit, postage
prepaid and correctly addressed, with the United States Postal Service,
registered or certified, or with a reputable courier service, (d) one (1)
business day after delivery, postage prepaid and correctly addressed, with a
reputable courier service guaranteeing overnight delivery, or (e) upon receipt
of a telecopy provided a confirmation of delivery is sent via first class,
registered or certified mail with the United States Postal Service or with a
reputable courier service. The attorneys for any Party may, but shall not be
required to, give any notice on behalf of its respective client.
SECTION 8.2 TIME AND FORM OF APPROVALS. Wherever in this REA
approval of a Party is required, and unless a different time limit is provided
herein, such approval or disapproval shall be given in writing within thirty
(30) days following the receipt of the item to be so approved or disapproved, or
the same shall be conclusively deemed to have been approved by such Party. Any
disapproval which requires objective reasonableness shall specify with
particularity the reasons therefor.
The item to be so approved shall be clearly marked (or shall be accompanied
by a cover letter which is clearly marked) "Request for Approval" and indicate
the Section of this REA under which approval is required.
Wherever in this REA a lesser period of time for approval or disapproval is
provided for than the thirty (30) day period specified in this Section, such
lesser time limit shall not be applicable unless the notice to the Person whose
consent, approval or disapproval is required contains a specific statement of
the period of time within which such Person shall act. Failure to specify such
time shall not invalidate the notice but simply shall require the action of such
Person to be taken within thirty (30) days.
SECTION 8.3 NOTICE TO MORTGAGEES AND OPPORTUNITY TO CURE.
The Mortgagee under any Mortgage affecting ownership or leasehold interest
of any Party shall be entitled to receive notice of any default by any Party,
provided that such Mortgagee shall have delivered a copy of a notice in the form
hereinafter contained to both Parties and to the Manager. The form of such
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notice shall be as follows:
The undersigned, whose address is __________________________, does
hereby certify that it is a Mortgagee of _____________'s interest in the
________________ Parcel(s), a legal description of which is attached hereto
as Exhibit A and made a part hereof. In the event that any notice shall be
given of the default of any Party to this REA, a copy thereof shall be
delivered to the undersigned. In the event the Party in default, as
specified in such notice, is _____________________, then the undersigned
shall have all rights of such Party to cure such default with a period to
cure equivalent to that given to the defaulting Party. Failure to deliver
a copy of such notice to the undersigned shall in no way affect the
validity of the notice of default as it respects any Party, but shall make
the same invalid as it respects the interest of the undersigned and its
Mortgage upon said Parcel(s).
Any such notice to a Mortgagee shall be given in the same manner as
provided in Article 8.1 hereof. Giving of any notice of default or the failure
to deliver a copy to any Mortgagee shall in no event create any liability on the
part of the Party so declaring a default. In the event that any notice shall be
given of the default of a Party and such defaulting Party has failed to cure or
commence to cure such default as provided in this REA, then and in that event
the Mortgagee under the Mortgage affecting the defaulting Party's interest shall
be entitled to receive an additional notice given in the manner provided in
Article 8.1 hereof, that the defaulting Party has failed to cure such default
and such Mortgagee shall have thirty (30) days after the receipt of said
additional notice (but shall not be required) to cure any such default, or, if
such default cannot be cured within thirty (30) days, to diligently commence
curing within such time and diligently cure within a reasonable time thereafter.
ARTICLE 9
AMENDMENT
SECTION 9.1 AMENDMENT;. Except as otherwise provided for herein, this
REA may be amended or otherwise modified only by a writing signed and
acknowledged by all of the Parties and recorded in the office of the Recorder
for Solano County, California. Each Party agrees to consent to any changes in
this REA reasonably required by a Mortgagee, provided the Party is not
materially adversely affected by the change.
ARTICLE 10
EXPIRATION DATE
SECTION 10.1 TERM. This REA shall remain in full force and effect so
long as the Parcel Lease is in effect. This REA shall in all events terminate
at such date as may be required in order that this REA will not be invalidated
or be subject to invalidation by reason of a limitation imposed by Law on the
duration hereof. Notwithstanding the foregoing, this REA is intended by the
Parties to run with the Land for the benefit of the Parties and their successors
and assigns unless and until this REA terminates in accordance with the terms
hereof.
ARTICLE 11
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MISCELLANEOUS
SECTION 11.1 LIMITED LIABILITY OF PARTIES. Except as otherwise
expressly set forth in this REA, the liability of any Party under this REA shall
be limited solely to the interest of the Party in its Parcel. No partner,
officer, agent or employee of any Party, nor any of such Person's separate
property shall be personally liable for any claim arising out of or related to
this REA. Notwithstanding any provision hereof to the contrary, and except as
otherwise provided below, any monetary obligations of the City hereunder shall
be limited to funds available from insurance proceeds, condemnation proceeds or
amounts obtained by City in respect of such obligations hereunder.
Any obligations of the City hereunder shall be special limited obligations
payable solely from amounts obtained under the REA, the Revenue Sharing
Agreement, insurance proceeds, or condemnation proceeds, and in no event shall
the City's general fund or taxing power be called upon to satisfy its
obligations hereunder.
The provisions of this Section 11.1 shall not relieve the City from fully
and completely discharging its obligations under the Leases to which it is a
party. Furthermore, notwithstanding any other provision of this REA or this
Section 11.29, this Section 11.29 shall not limit City's liability for
intentional or negligent actions or omissions, and shall not limit the City's
liability for failure to perform any obligation hereunder in the event that
funds for the City's performance thereof were made available to the City on a
timely basis from the REA, the Revenue Sharing Agreement insurance proceeds, or
condemnation proceeds, but City nevertheless failed to discharge such obligation
as required hereby.
SECTION 11.2 EXHIBITS. Each reference herein to an Exhibit refers to
the applicable Exhibit that is attached to this REA, which Exhibit may be
amended by the Parties from time to time in accordance with the provisions of
Article 9. All such Exhibits constitute a part of this REA and by this Section
are expressly made a part hereof.
SECTION 11.3 REFERENCES TO ARTICLES, SECTIONS AND SUBSECTIONS. All
references herein to a given Article, Section, subsection or subparagraph refer
to the Article, subsection or subparagraph of this REA.
SECTION 11.4 TABLE OF CONTENTS AND CAPTIONS. The table of contents
and captions of this REA are inserted only as a matter of convenience and for
reference. They do not define, limit or describe the scope or intent of this
REA and they shall not affect the interpretation hereof. For example, there are
substantive agreements of the Parties contained within Article 12, which is
entitled "Definitions".
SECTION 11.5 LOCATIVE ADVERBS. The locative adverbs "herein",
"hereunder", "hereto", "hereby", "hereinafter", and like words wherever the same
appear herein, mean and refer to this REA in its entirety and not to any
specific Article, Section or Subsection hereof.
SECTION 11.6 REA FOR EXCLUSIVE BENEFIT OF THE PARTIES. Except for
provisions herein for the benefit of a Mortgagee, the provisions of this REA are
for the exclusive benefit of the Parties, their successors and assigns, and not
for the benefit of any third Person, and this REA shall not be deemed to have
conferred any rights upon any third Person.
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SECTION 11.7 WAIVER OF DEFAULT. A waiver of any default by a Party
must be in writing and no such waiver shall be implied from any omission by a
Party to take any action in respect of such default. No express written waiver
of any default shall affect any default or cover any period of time other than
the default and period of time specified in such express waiver. One or more
written waivers of any default in the performance of any provision of this REA
shall not be deemed to be a waiver of any subsequent default in the performance
of the same provision or any other term or provision contained herein. The
consent or approval by a Party to or of any act or request by another Party
requiring consent or approval shall not be deemed to waive or render unnecessary
the consent or approval to or of any subsequent similar acts or requests. The
rights and remedies given to a Party by this REA shall be deemed to be
cumulative and no one of such rights and remedies shall be exclusive of any of
the others, or of any other right or remedy at law or in equity which a Party
might otherwise have by virtue of a default under this REA, and the exercise of
one such right or remedy by a Party shall not impair such Party's standing to
exercise any other right or remedy.
SECTION 11.8 PAYMENT ON DEFAULT. If under this REA a Party is
compelled or elects to pay any sum of money or do any acts that require the
payment of money by reason of the other Party's failure or inability to perform
any of the provisions of this REA to be performed by such other Party, the
defaulting Party shall promptly upon demand reimburse the paying Party for such
sums, and all such sums shall bear interest at the rate of two percent (2%) per
annum over the then existing prime rate of interest charged by the Bank of
America National Trust and Savings Association, San Francisco, California (but
in no event exceeding the maximum rate per annum permitted by California law)
from the date of expenditure until the date of such reimbursement. Any other
sums payable by any Party to any other Party under this REA that shall not be
paid when due shall bear interest at the rate of two percent (2%) per annum over
the then existing prime rate of interest charged by said Bank of America (but in
no event exceeding said maximum lawful annual rate) from the due date of payment
thereof.
Whenever a Party hereto is entitled to reimbursement or compensation by
another Party hereto and said amount is not paid when due, if such obligation is
not of a character such that it is included in the definition of Operating
Expenses under the Revenue Sharing Agreement and entitled to be paid as such,
the amount so owing shall be paid from said Party's share under clause (v) of
Section 1.3(c) of the Revenue Sharing Agreement prior to the remission of any
amount otherwise to be disbursed to the delinquent party under said clause (v).
Any Party desiring to avail itself of the foregoing provision, shall send
written notice of the amount owing (and the specific obligation giving rise to
the debt) to the Treasurer (as defined in the Revenue Sharing Agreement) with a
copy to the delinquent Party.
SECTION 11.9 NO PARTNERSHIP JOINT VENTURE OR PRINCIPAL AGENT
RELATIONSHIP. Neither anything in this REA nor any acts of the Parties shall
be deemed by the Parties, or by any third Person, to create the relationship of
principal and agent, or of partnership, or of joint venture, or of any
association between the Parties and no provisions of this REA are intended to
create or constitute any Person a third party beneficiary hereof.
SECTION 11.10 SUCCESSORS. This REA shall be binding upon and inure
to the benefit of the respective successors and assigns of the Parties and the
Mortgagees.
SECTION 11.11 SEVERABILITY. If any provision of this REA shall to
any extent be invalid or unenforceable, the remainder of this REA (or the
application of such provision to Persons or circumstances other than those in
respect of which it is invalid or unenforceable) shall not be affected thereby,
and each
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provision of this REA, unless specifically conditioned upon such invalid or
unenforceable provision shall be valid and enforceable to the fullest extent
permitted by law.
SECTION 11.12 GOVERNING LAWS. This REA shall be construed and
enforced in accordance with the laws of the State of California applicable to
contracts made and performed in California.
SECTION 11.13 RELEASE. If a Party or other Person obligated to
comply with any provisions of this REA sells, transfers or otherwise conveys its
Parcel, or any part thereof, such Party or Person shall, as respects the Parcel
or part thereof so conveyed, be released from all liabilities of thereafter
complying with the provisions of this REA provided:
(a) it gives prior written notice to the other Party of its sale,
transfer or other conveyance promptly after the filing for record of the
instrument effecting the same;
(b) all amounts that are then due and payable by such Party or Person
to the other Parties have been paid to such other Parties;
(c) such Party or Person delivers to the other Party an instrument
signed by its assignee in recordable form that acknowledges such
assignee's assumption of the duties, responsibilities and obligations
imposed on such Party or Person by this REA and assumed by such assignee's,
which instrument must be in a form reasonably satisfactory to said other
Party; and
(d) such sale, transfer or other conveyance complies with the Leases
to which such Person is a Party.
Notwithstanding such Party's or Person's failure to provide the other Party
with the document described above in Subsection 11.13(c), the grantee of any
sale, transfer or other conveyance of such Parcel, or any part thereof, shall be
deemed to have automatically assumed all provisions of this REA that such Party
or Person was theretofore obligated to perform.
SECTION 11.14 NO DEDICATION. Nothing herein contained shall be
deemed to be a gift or dedication of any part of the Land, the Parcels or the
Public Areas to the general public, or for the general public or for any public
purpose whatsoever, it being the intention of the Parties that this REA shall be
strictly limited to and for the purposes herein expressed. A Party shall not
dedicate any part of its Parcel for public purposes without the consent of the
other Party and any Mortgagee whose Mortgage encumbers that Parcel.
All or a part of the Public Areas may be closed from time to time to such
extent as may be sufficient in the opinion of the legal counsel to the Parties
to prevent a dedication thereof or the accrual of rights of any person or of the
public therein.
SECTION 11.15 WRITTEN CONSENT REQUIRED. Whenever a Party is
requested to consent to or approve of any matter with respect to which its
consent or approval is required by this REA, such consent or approval shall be
given in writing, and shall (except as otherwise provided in this REA) not be
unreasonably delayed or withheld.
SECTION 11.16 COVENANTS RUN WITH THE LAND. It is intended that the
covenants, easements,
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agreements, promises and duties of each Party as set forth in this REA shall be
construed as covenants and not as conditions, and that, to the fullest extent
legally possible, all such covenants shall run with the land or constitute
equitable servitudes as between the Parcel of the respective Grantor, as the
servient tenement, and the Parcel of the respective Grantee as the dominant
tenement.
Unless the context indicates otherwise, every covenant, easement, agreement
and promise of each Party as set forth in this REA shall be deemed a covenant,
easement, agreement and promise made for the joint and severable benefit of the
other Party and every duty of each Party as set forth in this REA shall be
deemed to run to and for the joint and severable benefit of the other Party.
SECTION 11.17 RULES. Each Party shall observe and shall use all
commercially practicable efforts to cause its Permittees to observe the Rules
and Regulations.
SECTION 11.18 DEFAULT SHALL NOT PERMIT TERMINATION OF REA. No
default under this REA shall entitle any Party to cancel or otherwise rescind
this REA, provided, however, that this limitation shall not affect any other
rights or remedies that the Parties may have by reason of any default under this
REA.
SECTION 11.19 RIGHT TO ENJOIN. In the event of any violation or
threatened violation of any of the provisions of this REA by a Party, any other
party shall have the right, to apply to a court of competent jurisdiction for an
injunction against such violation or threatened violation, but nothing in this
Section 11.19 shall be deemed to affect whether or not injunctive relief is
available on account of such violation or threatened violation.
SECTION 11.20 RIGHTS, PRIVILEGES, AND EASEMENTS WITH RESPECT TO
LIENS. This REA and the rights, privileges and easements of each Party with
respect to the other Party and their respective ownership and leasehold
interests shall in all events be superior and senior to any lien placed upon any
Parcel, including the lien of any Mortgages. Subject to Article 9, any
amendments or modification hereof, whenever made, shall be deemed superior and
senior to any and all liens, including the lien of Mortgages and any lien or
encumbrance created or arising out of a Party's Lease or this REA, the same as
if the same had been executed concurrently herewith.
SECTION 11.21 IDENTIFICATION OF UTILITY FACILITIES. Upon the written
request of the Manager or the other Party hereto, a Party shall provide, at its
sole cost and expense, a copy of any "as-built" construction drawings which have
been prepared so as to appropriately identify the type and location of each
Separate Utility Facility and Common Utility Facility.
SECTION 11.22 GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. Whenever in
this REA there is a provision requiring the determination of the cost or expense
of any construction, replacement, repair, maintenance or operation such costs or
expense shall be determined on the basis of generally accepted accounting
principles, consistently applied, provided that the cash basis may be used.
SECTION 11.23 COUNTERPARTS. This REA may be signed in several
counterparts, each of which shall be deemed an original, and all such
counterparts shall constitute one and the same instrument. The signature of a
Party to any counterpart may be removed and attached to any other counterpart.
Any counterpart to which is attached the signatures of all Parties shall
constitute an original of this REA.
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SECTION 11.24 ATTORNEYS' FEES. In the event any Party shall
institute any action, arbitration or proceeding against the other relating to
the provisions of this REA, or any default hereunder, the unsuccessful
litigant(s) in such action, arbitration or proceeding agree(s) to reimburse the
successful litigant(s) therein for the reasonable expenses of attorneys' fees
(including the reasonable cost of outside counsel and the cost allocable to
in-house counsel), expert's fees and disbursements incurred therein by the
successful litigant(s) as determined by the court or arbitrator.
SECTION 11.25 BREACH SHALL NOT DEFEAT MORTGAGE. A breach of any of
the terms, conditions, covenants, or restrictions of this REA shall not defeat
or render invalid the lien of any Mortgage made in good faith and for value,
but, subject to the provisions of Section 8.3 hereof (with respect to the cure
of defaults by Mortgagees), such term, condition, covenant or restriction shall
be binding upon and effective against any Person who becomes a Party by
acquiring title to said Parcel or any portion thereof by foreclosure, trustee's
sale or otherwise.
SECTION 11.26 ESTOPPEL CERTIFICATE. Each Party hereby severally
covenants that within 10 business days after a written request of the other
Party or the Manager, it will issue to such other Party, or to any Mortgagee, or
the Manager or to any permitted prospective purchaser or prospective Mortgagee
specified by such requesting Party or the Manager, an estoppel certificate
stating: (a) whether the Party to whom the request has been directed knows of
any default under the REA, or any event or condition that with notice and/or the
passage of time would be a default under the REA, and if any are known, then
specifying the nature thereof; (b) whether the REA has been modified or amended
in any way (or if it has, then stating the nature thereof; (c) that to the
Party's knowledge the REA as of that date is in full force and effect; and (d)
the status of any other condition, covenant or requirement under the REA. Such
statement shall act as a waiver of any claim by the Party furnishing it to the
extent such claim is based upon facts contrary to those asserted in the
statement and to the extent the claim is asserted against a bona fide
encumbrancer or purchaser for value who has acted in reasonable reliance upon
the statement. However, such statement shall in no event subject the Party
furnishing it to any liability whatsoever, notwithstanding the inadvertent
failure of such Party to disclose correct and/or relevant information.
SECTION 11.27 TIME OF ESSENCE. Time is of the essence with respect
to the performance of each of the covenants and agreements contained in this
REA.
SECTION 11.28 LIABILITY OF MORTGAGEES. (a) Whether before or after
a Mortgagee takes title to the property covered by its Mortgage (the "mortgaged
property") whether by foreclosure or by deed or assignment in lieu of
foreclosure, by a new lease, or otherwise, the Parties shall look only to, and
their sole and exclusive recourse against the Mortgagee shall be against the
proceeds received upon execution of judgment against the Mortgagee's right,
title and interest in and to the mortgaged property (including the rents or
other income therefrom and the consideration from the sale or other disposition
thereof) for the satisfaction of a judgment, arbitration award, or other
judicial process requiring the payment of money by the Mortgagee in the event of
any default by the Mortgagee under this REA and no other property or assets of
the Mortgagee (nor of any officer, employee, shareholder, partner or tenant in
common of or with the Mortgagee or any other person or entity related to or
having an interest in the Mortgagee, none of whom, including the Mortgagee,
shall be personally liable for any deficiency in the payment of such judgment,
arbitration award, or other judicial process) shall be subject to any execution
or other enforcement procedure for the satisfaction of a judgment or other
judicial process or a Party's remedies under or with respect to this REA, the
relationship of the Parties hereunder or a Party's use or occupancy of the Land.
Nothing herein shall be
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construed as to prohibit a Party from obtaining an equitable decree requiring
the performance by a Mortgagee of any of the Mortgagee's obligations under this
REA. The provisions of this Section 11.28 shall inure to the benefit of the
successors and assigns of each Mortgagee.
(b) Subject to the provisions of Section 1.5 and 11.28(a), if any
Mortgagee or any purchaser at any foreclosure sale acquires title to the
mortgaged property, whether by foreclosure, or by deed or assignment in lieu of
foreclosure, by a new lease, or otherwise, such Mortgagee or purchaser shall
only be liable for the obligations of the Party which granted or executed the
applicable Mortgage and which accrue under this REA from and after the earlier
of (i) the date of its acquisition of title, or (ii) the date upon which such
Mortgagee takes possession of the mortgaged property personally (and not by a
receiver).
ARTICLE 12
DEFINITIONS
SECTION 12.1 DEFINITIONS. As used in this REA, the following terms
have the following meanings:
"Accounting Period" means any period beginning on November 1 and ending on
the next following October 31.
"Authority" is defined in the introductory paragraph of this REA.
"Certificate of Participation Financing" is defined in Recital B.
"City" is defined in Recital A.
"Common Utility Facilities" means all storm drainage facilities, sanitary
sewer systems, natural gas systems, domestic water systems, fire life safety
detection/protection systems, electrical systems, emergency light, lighting,
telephone systems, data or other communication systems, cable television systems
and all other utility systems and facilities located or situated on the Land
designed to be used by more than one Parcel.
"Construction" is defined in Section 4.1.
"Corporation" is defined in the introductory paragraph of this REA.
"Environmental Laws" means any and all Laws concerning air, water, solid
waste, Hazardous Materials, Releases, worker and community right-to-know, hazard
communication, noise, resource protection, subdivision, inland wetlands and
watercourses, health protection and similar environmental, health, safety, and
land use concerns in all cases at any time, from time to time in effect during
the Term of this REA.
"Environmental Condition" means circumstances with respect to soil, land
surface, subsurface strata, surface waters, groundwaters, stream sediments, air
and similar environmental media both on and off the respective Parcel resulting
from any activity, inactivity, operations or Release occurring on or off the
respective Parcel, which under Environmental Laws require investigatory,
corrective and/or remedial
28
<PAGE>
measures and/or that may result in claims or demands or give rise to liabilities
of the Authority or the Corporation or to third parties including, but not
limited to, governmental entities.
"Environmental Compliance Liability" means any obligation or liability
arising as the result of any default, violation or breach by a Party or its
affiliates or previous tenants of such Party's Parcel or adjoining tenants
during the Term of this REA of: (i) environmental permits and other approvals,
consents, licenses, certificates and authorizations applicable to such Party's
Parcel of the operation of prior tenant's or other occupant's business and
activities thereon which are required by Environmental Laws; (ii) any
environmental regulatory compliance requirements applicable to such Party's
Parcel or operations conducted on or from such Party's Parcel under
Environmental Laws; or (iii) other Environmental Laws.
"Expiration Date" means the date on which this REA shall terminate pursuant
to Article 10 hereof.
"Grantee" means any Party hereto being granted the benefit of any easement
pursuant to the terms hereof, its successors and assigns to its interest in a
Parcel.
"Grantor" means any Party hereto granting any easement pursuant to the
terms hereof, its successors and assigns to its interest in a Parcel.
"Hazardous Materials" means any petroleum, petroleum products, fuel oil,
derivatives of petroleum products or fuel oil, explosives, reactive materials,
ignitable materials, corrosive materials, hazardous chemicals, hazardous wastes,
hazardous substances, extremely hazardous substances, toxic substances, toxic
chemicals, radioactive materials, medical waste, biomedical waste, infectious
materials and any other element, compound mixture, solution or substance which
may pose a present or potential hazard to human health or safety or to the
environment.
"Impositions" means all taxes, (including possessory interest taxes
associated with a Parcel and the execution of any Lease), assessments (including
all assessments for public improvements or benefits, fees, water, sewer or
similar rents, rates and charges, excises, levies, license fees, permit fees,
inspection fees and other authorization fees and other governmental charges of
any kind or nature whatsoever, whether general or special, ordinary or
extraordinary, foreseen or unforeseen, or hereafter levied or assessed in lieu
of or in substitution of any of the foregoing of every character (including all
interest and penalties thereon), which at any time during or in respect of the
Term may be assessed, levied, confirmed or imposed on or in respect of or be a
lien upon a Parcel, any Improvements, any personal Property now or hereafter
located thereon, on the leasehold estate created by any lease or which may be
imposed upon any taxable interest of a Party acquired pursuant to a Lease or on
account of any taxable possessory right which a Party may have acquired pursuant
to a Lease, or any part thereof or which may be levied upon or measured by the
rent payable thereunder. Notwithstanding anything to the contrary set forth
above, "Impositions" shall not include any income, excess profit, estate,
inheritance, successions transfer, franchise, capital or other tax assessment
upon the interest of any other Party in a Parcel or upon the rentals payable
under a Lease.
"Improvements" means any buildings, outbuildings, structures, plazas,
walkways, rides, attractions, improvements, fixtures, signs or anything else
(including renewals and replacements thereof) now or hereafter erected, built,
placed, installed or constructed upon either of the Parcels.
"Land" is defined in Recital A.
29
<PAGE>
"Law" shall mean all applicable present and future laws, ordinances,
rules, regulations, permits, authorizations, orders and requirements, including,
without limitation, all consents or approvals required to be obtained from, and
all rules and regulations of, and all building and zoning laws of, all federal,
state, county and municipal governments, the departments, bureaus, agencies or
commissions thereof, authorities, board or officers, any national or local board
of fire underwriters, or any other body or bodies exercising similar functions,
having or acquiring jurisdiction of, or which may affect or be applicable to the
Parcels.
"Lease" means any or all, as the context requires, of the 1997
Agency-Marine World Lease, the Parcel Lease, or any of the other Public Leases
(as defined in the Parcel Lease).
"Management Agreement" is defined in Recital D.
"Manager" is defined in Recital D.
"Mortgagee" means a mortgagee and/or a trustee and beneficiary under a
Mortgage as hereinafter defined. Except as expressly otherwise provided in this
REA, the term "Mortgagee" shall not refer to any of the foregoing Persons when
in possession of the Parcel of any Party; provided, however, this sentence shall
not be deemed a limitation upon any rights or benefits conferred by this REA
upon a Mortgagee with respect to the period after such Mortgagee takes title to
or possession of the Parcel of any Party. "Mortgage" means any first mortgage,
indenture of first mortgage, or first deed of trust of the interest, of a Party
in a Parcel. Any notice given under this REA to a Person which is a Mortgagee in
more than one capacity shall be deemed a notice given in accordance with the
terms hereof to such Person in all such capacities if the address for notice to
such Mortgagee in all such capacities is the same.
"1997 Agency-Marine World Lease" is defined in Recital C.
"PPI" means Premier Parks Inc. and its wholly-owned subsidiaries.
"Parcel" means, individually, the Public Parcel and the Private Parcel, and
collectively, both of such parcels.
"Parcel Lease" is defined in Recital F.
"Parking Areas" is defined in Recital G.
"Patrons" means all Persons using the Parcels as customers, guests,
visitors or other invitees.
"Party" means the Authority, the Corporation and their permitted successors
in interest and assigns hereunder.
"Permittees" means all Persons entitled by sublease, license or contract to
use and occupy any portion of the Parcels, and their respective officers,
directors, employees, agents, partners, contractors, licensees and
concessionaires and Patrons.
"Person" or "Persons" mean individuals, partnerships, associations,
corporations and any other form
30
<PAGE>
of business organization, or one or more of them, as the context may require.
"Private Parcel" is defined in Recital F.
"Public Areas" is defined in Recital G, and are more particularly described
in Exhibit D hereto.
"Public Parcel" is defined in Recital C and includes the Parking Areas.
"REA" means this Reciprocal Easement Agreement.
"Release" means releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, disposing or dumping, or
as otherwise defined under the Resource Conservation and Recovery Act (42 U.S.C.
Section 6901, et seq.) ("RCRA"), the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601, et seq.) ("CERCLA"), or
any other federal, state or local Environmental Law, including Laws relating to
emissions, discharges, releases or threatened releases or pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment (including ambient air, surface water, ground water, land
surface or subsurface strata) or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes as may be amended from time to time, or other
Environmental Laws.
"Restoration" is defined in Section 1.2.
"Rules and Regulations" means those rules and regulations pertaining to the
Parcels and/or the Public Areas, as applicable, set forth in Exhibit E hereto,
as such Exhibit is amended or supplemented in accordance with the provisions of
Section 2.2 and 11.30 hereof.
"Second Sublease" means that certain 1997 Second Sublease Agreement
Relating to Marine World, dated as of January 1, 1997 by and between the
Redevelopment Agency of the City of Vallejo, as lessor, and the Authority, as
lessee.
"Separate Utility Facilities" is defined in Section 3.1.
"Subsequent Construction" or "subsequent construction" means any and all
work, construction or improvements in connection with any repairs,
reconstructions, replacements, additions, expansions, restorations, alterations
or modifications.
"Unavoidable Delays" means delays or defaults due to war; insurrection;
strikes; lock-outs; riots; floods; earthquakes; fires; casualties; acts of God;
acts of the public enemy; epidemics; quarantine restrictions; freight embargoes;
lack of transportation, government restrictions or priority; unusually severe
weather; inability to secure necessary labor; materials or tools; acts of the
other party; acts or failure to act of the City or any other public or
governmental agency or entity (other than an act or failure to act by the
Authority, which shall not excuse performance by the Authority), or any other
causes beyond the control or without the fault of the Party claiming an
extension of time to perform; provided that failure to lease or sell or to
finance or inability to make a payment is not an Unavoidable Delay. An extension
of time for any such cause shall be for the period of the enforced delay and
shall commence to run from the time of the
31
<PAGE>
commencement of the cause if notice by the Party claiming such extension is
given to the other Party or Parties within thirty (30) days after the
commencement of the cause.
32
<PAGE>
IN WITNESS WHEREOF, the Authority and the Corporation have caused this REA
to be signed by their duly authorized officers as of the day and year first
above written, but this REA shall not be effective until it is recorded in the
Official Records of Solano County, California.
"AUTHORITY"
MARINE WORLD JOINT POWERS AUTHORITY
By: /s/
--------------------------------
Executive Director
"CORPORATION"
PARK MANAGEMENT CORP.
By: /s/
--------------------------------
Its:
The foregoing REA and all easements
granted hereunder by the Parties
are hereby consented to.
CITY OF VALLEJO
By: /s/
--------------------------
City Manager
REDEVELOPMENT AGENCY OF THE CITY
OF VALLEJO
By: /s/
--------------------------
Executive Director
33
<PAGE>
STATE OF CALIFORNIA )
) ss
COUNTY OF ___________)
On _________________, 1997 before me, _____________________, Notary Public,
personally appeared _________________________, personally known to me (or proved
to me on the basis of satisfactory evidence) to be the person(s) whose name(s)
is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature of Notary (Seal)
<PAGE>
STATE OF CALIFORNIA )
) ss
COUNTY OF____________)
On _______________________, 1997 before me, _______________, Notary Public,
personally appeared _____________________________________, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person(s)
whose name(s) is/are subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their authorized capacity(ies),
and that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature of Notary (Seal)
<PAGE>
STATE OF CALIFORNIA )
) ss
COUNTY OF )
On ___________________, 1997 before me, ___________________________, Notary
Public, personally appeared _____________________________, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person(s)
whose name(s) is/are subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their authorized capacity(ies),
and that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature of Notary (Seal)
<PAGE>
STATE OF CALIFORNIA )
) ss
COUNTY OF )
On ___________________, 1997 before me, ___________________________, Notary
Public, personally appeared _____________________________, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person(s)
whose name(s) is/are subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their authorized capacity(ies),
and that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature of Notary (Seal)
<PAGE>
EXHIBIT A
DESCRIPTION OF THE LAND
The real property constituting the Site consists of that certain land
located in the City of Vallejo, County of Solano, State of California, more
fully described as follows:
REAL PROPERTY in the City of Vallejo, County of Solano, State of California,
described as follows:
PARCEL ONE:
A portion of the Parcel of land described in the Deed to the City of Vallejo,
recorded February 16, 1946 in Book 337 of Official Records, Page 337, Series No.
2545, and being a portion of Section 6, Township 3 North, Range 3 West, Mount
Diablo Base and Meridian, described as follows:
Beginning at the Northeasterly corner of Lot 13, Lewis Ranch Estates, Unit
No. 3, as shown in Book 22 of Maps at Page 19, Solano County Records; thence
along the Northerly line of said Lewis Ranch Estates, Unit No. 3 and Lewis
Ranch Estates, Unit No. 1 shown in Book 19 of Maps at Page 24, Solano County
Records, North 89 Degrees 28'32" West, 1,500.00 feet; thence North 15 Degrees
40'00" East, 758.00 feet; thence North 23 Degrees 22'00" East, 223.00 feet;
thence North 41 Degrees 08'00" East, 382.00 feet; thence North 45 Degrees
24'00" East, 230.21 feet; thence North 85 Degrees 55'13" East, 215.99 feet;
thence North 4 Degrees 04'47" West, 350.00 feet; thence South 85 Degrees
55'13" West, 889.86 feet; thence North 38 Degrees 23'17" West, 2,260.00 feet;
thence North 51 Degrees 36'43" East, 189.51 feet; thence North 41 Degrees
55'09" West, 427.75 feet to a point on the proposed new Southerly
right-of-way line of State Highway No. 37; thence along said Southerly line,
South 84 Degrees 57'14" East, 1,180.93 feet; thence East 265.00 feet; thence
South 84 Degrees 46'02" East, 348.45 feet; thence South 80 Degrees 54'00"
East 229.08 feet; thence South 82 Degrees 55'13" East, 217.44 feet to the
intersection of the proposed Westerly line of Fairgrounds Drive; thence South
36 Degrees 18'50" East, 93.97 feet; thence South 37 Degrees 19'48" East,
215.15 feet; thence South 10 Degrees 15'18" East, 73.76 feet to the beginning
of a curve to the left with a radius of 86.00 feet; thence along said curve,
through a central angle of 27 Degrees 04'27", an arc distance of 40.64 feet;
thence South 37 Degrees 19'45" East, 85.33 feet to the beginning of a
A-1
<PAGE>
curve to the left with a radius of 44.00 feet; thence along said curve,
through a central angle of 90 Degrees 00'00" an arc distance of 69.12 feet;
thence South 32 Degrees 30'00" East 142.51 feet; thence South 37 Degrees
19'53" East, 40.96 feet to the beginning of a curve to the right with a
radius of 978.00 feet; thence along said curve, through a central angle of 5
Degrees 24'00", an arc distance of 92.17 feet to a point of compound
curvature; thence along a curve to the right with a radius of 170.00 feet,
through a central angle of 32 Degrees 15'00", an arc distance of 95.69 feet;
thence South 20 Degrees 30'53" East, 101.30 feet to the beginning of a curve
to the right with a radius of 941.00 feet; thence along said curve, through a
central angle of 16 Degrees 57'00", an arc distance of 278.37 feet; thence
South 3 Degrees 33'55" East, 52.43 feet; thence South 86 Degrees 26'14" West,
46.99 feet; thence South 31 Degrees 13'02" East, 123.95 feet; thence South 6
Degrees 34'05" East, 639.79 feet; thence South 4 Degrees 43'59" East, 800.07
feet; thence South 5 Degrees 26'51" East, 400.12 feet; thence South 4 Degrees
40'07" East, 440.03 feet; thence South 12 Degrees 55'17" West, 162.65 feet to
the point of beginning.
EXCEPTING FROM PARCEL ONE ABOVE: That portion of the premises conveyed to the
State of California, by Deed recorded November 29, 1973 in Book 1866 of
Official Records, Page 536, Series No. 28896, Solano County Records, and as
modified by the State of California Relinquishment to the City of Vallejo in
Instrument recorded July 12, 1979 in Book 1979 at Page 57270, Series No.
33917, Solano County Official Records.
FURTHER EXCEPTING THEREFROM: All those portions of Parcel One above conveyed by
Marine World Foundation, a California non-profit public benefit corporation to
Richard A. Hyland, etal, by the following Corporation Grant Deeds, recorded June
26, 1987 t Book 1987, Pages 86969, 86974, 87009, 86979, 87049, 87004, 87044,
87039, 86984, 87014, 87019, 87024, 87029, 87034, 86989, 86994 and 86999, Solano
County Records.
FURTHER EXCEPTING THEREFROM: All those portions of Parcel One above conveyed by
Marine World Foundation, a California nonprofit public benefit corporation, to
the State of California, by Quitclaim Deed recorded December 11, 1989, Series
No. 890088359, and by Quitclaim Deed recorded February 6, 1990, Series No.
900009554, Solano County Records.
PARCEL TWO:
A-2
<PAGE>
An easement as an appurtenance to Parcel One above for the surface use of
Lake Chabot and being a portion of the parcel of land described in the Deed
to the City of Vallejo, recorded February 16, 1946 in Book 337 of Official
Records, Page 337, Series No. 2545, and being a portion of Section 6,
Township 3 North, Range 3 West, Mount Diablo Base and Meridian, described as
follows:
Commencing at the Northeasterly corner of Lot 13, Lewis Ranch Estates Unit
No. 3 as shown in Book 22 of Maps at Page 19, Solano County Records, thence
along the Northerly line of Lewis Ranch Estates Unit No. 3 and the Northerly
line of Lewis Ranch Estates Unit No. 1, said Unit No. 1 being shown in Book
19 of Maps at Page 24, Solano County Records, North 89 Degrees 28'32" West,
1,500.00 feet; thence along the Easterly fence of Dan Foley Park, North 15
Degrees 40'00" East, 758.00 feet; thence North 23 Degrees 22'00" East, 223.00
feet; thence North 41 Degrees 08'00" East, 382.00 feet; thence North 45
Degrees 24'00" East, 230.21 feet; thence North 85 Degrees 55'13" East to its
intersection with the 72.5 foot contour line on the Southerly shore of Lake
Chabot (City of Vallejo Datum) shown on Topographic Map showing the
boundaries of Parcel 1, Flosden Acres Redevelopment Plan, Amendment No.
3-857023, Schwafel Engineers-Bissell & Karn, and as amended by the site rough
grading lakeshore development drawing C-2.1 of April 1985, said point of
intersection being the true point of beginning; thence following said 72.5
foot contour line in a Northwesterly, Northeasterly, Southeasterly, Southerly
and Westerly direction around the shore of Lake Chabot to the point of
beginning.
A-3
<PAGE>
EXHIBIT B
DESCRIPTION OF THE PRIVATE PARCEL
All that certain property situated in the City of Vallejo, County of
Solano, State of California, described as follows:
REAL PROPERTY in the City of Vallejo, County of Solano, State of California,
described as follows:
PARCEL ONE:
A portion of the Parcel of land described in the Deed to the City of Vallejo,
recorded February 16, 1946 in Book 337 of Official Records, Page 337, Series
No. 2545, and being a portion of Section 6, Township 3 North, Range 3 West,
Mount Diablo Base and Meridian, described as follows:
Beginning at the Northeasterly corner of Lot 13, Lewis Ranch Estates, Unit
No. 3, as shown in Book 22 of Maps at Page 19, Solano County Records; thence
along the Northerly line of said Lewis Ranch Estates, Unit No. 3 and Lewis
Ranch Estates, Unit No. 1 shown in Book 19 of Maps at Page 24, Solano County
Records, North 89 Degrees 28'32" West, 1,500.00 feet; thence North 15 Degrees
40'00" East, 758.00 feet; thence North 23 Degrees 22'00" East, 223.00 feet;
thence North 41 Degrees 08'00" East, 382.00 feet; thence North 45 Degrees
24'00" East, 230.21 feet; thence North 85 Degrees 55'13" East, 215.99 feet;
thence North 4 Degrees 04'47" West, 350.00 feet; thence South 85 Degrees
55'13" West, 889.86 feet; thence North 38 Degrees 23'17" West, 2,260.00 feet;
thence North 51 Degrees 36'43" East, 189.51 feet; thence North 41 Degrees
55'09" West, 427.75 feet to a point on the proposed new Southerly
right-of-way line of State Highway No. 37; thence along said Southerly line,
South 84 Degrees 57'14" East, 1,180.93 feet; thence East 265.00 feet; thence
South 84 Degrees 46'02" East, 348.45 feet; thence South 80 Degrees 54'00"
East 229.08 feet; thence South 82 Degrees 55'13" East, 217.44 feet to the
intersection of the proposed Westerly line of Fairgrounds Drive; thence South
36 Degrees 18'50" East, 93.97 feet; thence South 37 Degrees 19'48" East,
215.15 feet; thence South 10 Degrees 15'18" East, 73.76 feet to the beginning
of a curve to the left with a radius of 86.00 feet; thence along said curve,
through a central angle of 27 Degrees 04'27", an arc distance of 40.64 feet;
thence South 37 Degrees 19'45" East, 85.33 feet to the beginning of a
B-1
<PAGE>
curve to the left with a radius of 44.00 feet; thence along said curve,
through a central angle of 90 Degrees 00'00" an arc distance of 69.12 feet;
thence South 32 Degrees 30'00" East 142.51 feet; thence South 37 Degrees
19'53" East, 40.96 feet to the beginning of a curve to the right with a
radius of 978.00 feet; thence along said curve, through a central angle of 5
Degrees 24'00", an arc distance of 92.17 feet to a point of compound
curvature; thence along a curve to the right with a radius of 170.00 feet,
through a central angle of 32 Degrees 15'00", an arc distance of 95.69 feet;
thence South 20 Degrees 30'53" East, 101.30 feet to the beginning of a curve
to the right with a radius of 941.00 feet; thence along said curve, through a
central angle of 16 Degrees 57'00", an arc distance of 278.37 feet; thence
South 3 Degrees 33'55" East, 52.43 feet; thence South 86 Degrees 26'14" West,
46.99 feet; thence South 31 Degrees 13'02" East, 123.95 feet; thence South 6
Degrees 34'05" East, 639.79 feet; thence South 4 Degrees 43'59" East, 800.07
feet; thence South 5 Degrees 26'51" East, 400.12 feet; thence South 4 Degrees
40'07" East, 440.03 feet; thence South 12 Degrees 55'17" West, 162.65 feet to
the point of beginning.
EXCEPTING FROM PARCEL ONE ABOVE: That portion of the premises conveyed to the
State of California, by Deed recorded November 29, 1973 in Book 1866 of
Official Records, Page 536, Series No. 28896, Solano County Records, and as
modified by the State of California Relinquishment to the City of Vallejo in
Instrument recorded July 12, 1979 in Book 1979 at Page 57270, Series No.
33917, Solano County Official Records.
FURTHER EXCEPTING THEREFROM: All those portions of Parcel One above conveyed
by Marine World Foundation, a California non-profit public benefit
corporation to Richard A. Hyland, etal, by the following Corporation Grant
Deeds, recorded June 26, 1987 t Book 1987, Pages 86969, 86974, 87009, 86979,
87049, 87004, 87044, 87039, 86984, 87014, 87019, 87024, 87029, 87034, 86989,
86994 and 86999, Solano County Records.
FURTHER EXCEPTING THEREFROM: All those portions of Parcel One above conveyed
by Marine World Foundation, a California nonprofit public benefit
corporation, to the State of California, by Quitclaim Deed recorded December
11, 1989, Series No. 890088359, and by Quitclaim Deed recorded February 6,
1990, Series No. 900009554, Solano County Records.
FURTHER EXCEPTING THEREFROM: The portion of Parcel One described as follows:
beginning at a point that bears North 12 Degrees 55'17" East,. 51.21 feet
from the Northeasterly corner of Lot 13, Lewis Ranch
B-2
<PAGE>
Estates, Unit No. 3, as shown in Book 22 of Maps at page 19, Solano County
Records; thence North 89 Degrees 28'32" West, 1497.46 feet; thence North 15
Degrees 40'00" East, 706.20 feet; thence North 23 Degrees 22'00" East, 223.00
feet; thence North 41 Degrees 08'00" East, 382.00 feet; thence North 45
Degrees 24'00" East, 230.21 feet; thence North 85 Degrees 55'13" East, 215.99
feet; thence North 4 Degrees 04'47" West, 925.66 feet; thence North 86
Degrees 08'44" East, 251.21 feet; thence South 89 Degrees 46'55" East, 189.52
feet; thence South 2 Degrees 20'41" East, 63.55 feet; thence South 89 Degrees
44'56" East, 38.69 feet; thence South 6 Degrees 34'05" East, 499.35 feet;
thence South 4 Degrees 43'59" East, 800.07 feet; thence South 5 Degrees
26'51" East, 400.12 feet;thence South 4 Degrees 40'07" East, 440.03 feet;
thence South 12 Degrees 55'17" West, 111.44 feet to the point of beginning,
containing 48.54 acres more or less.
FURTHER EXCEPTING THEREFROM: The portions of Parcel One described as Parcels
A, B, C, D and E in the attachment hereto.
PARCEL TWO:
An easement as an appurtenance to Parcel One above for the surface use of
Lake Chabot and being a portion of the parcel of land described in the Deed
to the City of Vallejo, recorded February 16, 1946 in Book 337 of Official
Records, Page 337, Series No. 2545, and being a portion of Section 6,
Township 3 North, Range 3 West, Mount Diablo Base and Meridian, described as
follows:
Commencing at the Northeasterly corner of Lot 13, Lewis Ranch Estates Unit
No. 3 as shown in Book 22 of Maps at Page 19, Solano County Records, thence
along the Northerly line of Lewis Ranch Estates Unit No. 3 and the Northerly
line of Lewis Ranch Estates Unit No. 1, said Unit No. 1 being shown in Book
19 of Maps at Page 24, Solano County Records, North 89 Degrees 28'32" West,
1,500.00 feet; thence along the Easterly fence of Dan Foley Park, North 15
Degrees 40'00" East, 758.00 feet; thence North 23 Degrees 22'00" East, 223.00
feet; thence North 41 Degrees 08'00" East, 382.00 feet; thence North 45
Degrees 24'00" East, 230.21 feet; thence North 85 Degrees 55'13" East to its
intersection with the 72.5 foot contour line on the Southerly shore of Lake
Chabot (City of Vallejo Datum) shown on Topographic Map showing the
boundaries of Parcel 1, Flosden Acres Redevelopment Plan, Amendment No.
3-857023, Schwafel Engineers-Bissell & Karn, and as amended by the site rough
grading lakeshore development drawing C-2.1 of April 1985, said point of
intersection being the true point of beginning; thence following said 72.5
foot contour line in a Northwesterly, Northeasterly, Southeasterly, Southerly
and Westerly direction around the shore of Lake Chabot to the point of
beginning.
B-3
<PAGE>
[ATTACH HERE DESCRIPTION OF PARCELS A, B, C, D AND E]
B-4
<PAGE>
EXHIBIT C
DESCRIPTION OF THE PUBLIC PARCEL
All of the real property described in Exhibit A to this Reciprocal Easement
Agreement, other than the real property described in Exhibit B to this
Reciprocal Easement Agreement.
C-1
<PAGE>
EXHIBIT D
DESCRIPTION OF PUBLIC AREAS
The Public Areas include the following facilities or improvements located
on the Public Parcel, the present locations of some of which are identified on
the map attached hereto:
Front Entrance System
Ticket Booths
Restrooms
Merchandise Shop
First Aid Center/Main Gate
Cash Room
Food Commissary Warehouse
Merchandise Warehouse
Security/Employee Entrance
Walkways/Paths/Driveways
Food Services Areas
Parking Areas
Maintenance Shop
Office and Administrative Areas
The Public Areas also include the following facilities or improvements now
located or when constructed on the Private Parcel:
Walkways/Paths/Driveways
Restrooms
Restaurants
Food Service Areas
Parking Areas
D-1
<PAGE>
Merchandise Shop
Office and Administrative Areas
D-2
<PAGE>
EXHIBIT E
RULES AND REGULATIONS
1. All local, state, and federal Laws will be adhered to and enforced (in
all material respects), subject to and otherwise in compliance with this REA.
2. Non-motorized strollers must be stored in the appropriate storage
areas, located in the Public Areas.
3. There shall be no unreasonable obstructions or obstacles to parking in
the Parking Areas and the passage and circulation of pedestrians and vehicles to
and from the Parking Areas, at all times, except as otherwise expressly
permitted in this REA.
4. Carrying fire arms of any type or open sheath knife (regardless of
size) in violation of Law is prohibited.
5. Use of all Public Areas by Patrons will be restricted to the time
period commencing one (1) hour before the Parcels are open for business and
ending one (1) hour after the Parcels are closed for business.
6. Access to Patrons of the Parcels to all portions of the Public Areas
shall be provided. Said access shall not grant priority to any one person over
that of another person based upon race, color, religion, gender, or national
origin, and shall also be subject to any applicable Local, State and Federal
Law.
E-1
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EXHIBIT 10(ae)
PARCEL LEASE
BETWEEN
MARINE WORLD JOINT POWERS AUTHORITY ,
LANDLORD
AND
PARK MANAGEMENT CORP.,
TENANT
DATED AS OF NOVEMBER 7, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
DEMISE; TERM
SECTION 1.01. Demise of the Private Parcel. . . . . . . . . . . . . . . . . .2
SECTION 1.02. Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
SECTION 1.03. Renewal Option. . . . . . . . . . . . . . . . . . . . . . . . .2
SECTION 1.04. Rule Against Perpetuities . . . . . . . . . . . . . . . . . . .2
ARTICLE 2
RENT
SECTION 2.01. Minimum Annual Rent . . . . . . . . . . . . . . . . . . . . . .2
SECTION 2.02. Payment of Rent . . . . . . . . . . . . . . . . . . . . . . . .3
SECTION 2.03. No Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . .3
ARTICLE 3
USE; ACCESS
SECTION 3.01. Use of Private Parcel . . . . . . . . . . . . . . . . . . . . l3
SECTION 3.02. Limitation on Use . . . . . . . . . . . . . . . . . . . . . . .4
SECTION 3.03. Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . .4
SECTION 3.04. Other Agreements. . . . . . . . . . . . . . . . . . . . . . . .4
SECTION 3.05. Minimum Investment. . . . . . . . . . . . . . . . . . . . . . .5
SECTION 3.06. Title to Improvements . . . . . . . . . . . . . . . . . . . . .5
SECTION 3.07. Use by Vendors; Parking . . . . . . . . . . . . . . . . . . . .6
SECTION 3.08. Access to Private Parcel. . . . . . . . . . . . . . . . . . . .6
SECTION 3.09. Signs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
SECTION 3.10. Tenant's Property . . . . . . . . . . . . . . . . . . . . . . .6
ARTICLE 4
IMPOSITIONS
SECTION 4.01. Tenant's Obligation to Pay Impositions. . . . . . . . . . . . .7
SECTION 4.02. Segregation and Payment of Impositions. . . . . . . . . . . . .8
SECTION 4.03. Taxes Imposed Upon Creation of Leasehold. . . . . . . . . . . .9
ARTICLE 5
INSURANCE
SECTION 5.01. Extended Coverage and Liability . . . . . . . . . . . . . . . .9
SECTION 5.02. Carriers; Policies. . . . . . . . . . . . . . . . . . . . . . 10
SECTION 5.03. Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 5.04. Certificate of Insurance. . . . . . . . . . . . . . . . . . . 10
SECTION 5.05. Release and Waiver of Subrogation . . . . . . . . . . . . . . 10
SECTION 5.06. Title Insurance . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 5.07. Landlord's Insurance. . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 6
MAINTENANCE OF PROPERTY
SECTION 6.01. No Waste. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 6.02. Tenant's Maintenance Obligations. . . . . . . . . . . . . . . 11
2
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ARTICLE 7
ALTERATIONS BY TENANT
SECTION 7.01. Alterations . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 7.02. Tenant Improvements . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 8
UTILITY SERVICES
SECTION 8.01. Utility Services. . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 9
DAMAGE TO THE PROPERTY
SECTION 9.01. Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 9.02. Restoration or Termination. . . . . . . . . . . . . . . . . . 13
SECTION 9.03. Effect of Lease Termination . . . . . . . . . . . . . . . . . 14
SECTION 9.04. Insurance Proceeds. . . . . . . . . . . . . . . . . . . . . . 14
SECTION 9.05. Restoration . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 10
CONDEMNATION
SECTION 10.01. Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 10.02. Total Taking. . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 10.03. Partial Taking. . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 10.04. Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 10.05. Abatement of Rent . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 10.06. Landlord's Condemnation Covenant. . . . . . . . . . . . . . . 16
ARTICLE 11
LIENS
SECTION 11.01. No Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.02. Mechanics' Liens. . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 12
INSPECTION OF PREMISES BY LANDLORD
SECTION 12.01. Entry . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 12.02. Exhibit for Sale or Lease . . . . . . . . . . . . . . . . . . 17
ARTICLE 13
ASSIGNMENT AND SUBLEASING
SECTION 13.01. Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 13.02. Permitted Assignee. . . . . . . . . . . . . . . . . . . . . . 18
SECTION 13.03. Subleases . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 13.04. Provisions Applicable to Both Assignments and Subleases . . . 19
ARTICLE 14
LEASEHOLD MORTGAGES
SECTION 14.01. Tenant's Right to Create Leasehold Mortgages. . . . . . . . . 19
SECTION 14.02. Insurance and Condemnation Proceeds . . . . . . . . . . . . . 20
SECTION 14.03. Permitted Leasehold Mortgagees. . . . . . . . . . . . . . . . 20
3
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SECTION 14.04. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 14.05. Time to Cure Defaults . . . . . . . . . . . . . . . . . . . . 20
SECTION 14.06. Right to Cure . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 14.07. No Amendment of Lease . . . . . . . . . . . . . . . . . . . . 21
SECTION 14.08. Foreclosure Permitted . . . . . . . . . . . . . . . . . . . . 21
SECTION 14.09. Right to Assign Following Foreclosure . . . . . . . . . . . . 22
SECTION 14.10. New Lease . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 14.11. Additional Leasehold Mortgagee Requirements . . . . . . . . . 22
ARTICLE 15
TRANSFER BY LANDLORD
SECTION 15.01. Limitation of Landlord's Liability. . . . . . . . . . . . . . 23
SECTION 15.02. Limitation on Encumbrance by Landlord . . . . . . . . . . . . 23
SECTION 15.03. Other Limitations . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 16
INDEMNIFICATION
SECTION 16.01. Indemnification of Landlord . . . . . . . . . . . . . . . . . 23
SECTION 16.02. Indemnification of Tenant . . . . . . . . . . . . . . . . . . 24
ARTICLE 17
TENANT'S DEFAULT AND LANDLORD'S REMEDIES
SECTION 17.01. Tenant Default. . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 17.02. Notice From Landlord. . . . . . . . . . . . . . . . . . . . . 25
SECTION 17.03. Termination of Tenant's Right to Possession . . . . . . . . . 25
SECTION 17.04. Termination . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 17.05. Landlord's Equitable Relief . . . . . . . . . . . . . . . . . 26
SECTION 17.06. Landlord's Right to Perform Tenant's Covenants. . . . . . . . 26
SECTION 17.07. No Waiver by Landlord or Tenant . . . . . . . . . . . . . . . 26
SECTION 17.08. Landlord's Remedies Cumulative. . . . . . . . . . . . . . . . 26
SECTION 17.09. Counterclaims by Tenant in Action to Recover Possession . . . 27
SECTION 17.10. Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 18
LANDLORD'S DEFAULT AND TENANT'S REMEDIES
SECTION 18.01. Landlord's Default. . . . . . . . . . . . . . . . . . . . . . 27
SECTION 18.02. Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 18.03. Tenant's Remedies . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 18.04. No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 19
ESTOPPEL CERTIFICATES; NON-DISTURBANCE
SECTION 19.01. Estoppel Certificate by Tenant. . . . . . . . . . . . . . . . 28
SECTION 19.02. Estoppel Certificate by Landlord. . . . . . . . . . . . . . . 28
SECTION 19.03. Estoppel Non-Disturbance. . . . . . . . . . . . . . . . . . . 28
ARTICLE 20
ARBITRATION; APPRAISAL
SECTION 20.01. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . 29
4
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SECTION 20.02. Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 20.03. No Alteration of Lease. . . . . . . . . . . . . . . . . . . . 30
ARTICLE 21
END OF TERM; TERMINATION
SECTION 21.01. End of Term . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 21.02. Holding Over. . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 21.03. Acceptance of Surrender . . . . . . . . . . . . . . . . . . . 30
SECTION 21.04. Compensation to Tenant Upon Certain Events of Termination . . 30
SECTION 21.05. General Effect of Termination . . . . . . . . . . . . . . . . 31
ARTICLE 22
GENERAL PROVISIONS
SECTION 22.01. Provisions Subject to Applicable Law. . . . . . . . . . . . . 31
SECTION 22.02. Time is of the Essence. . . . . . . . . . . . . . . . . . . . 31
SECTION 22.03. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 22.04. Invalidity of Particular Provisions . . . . . . . . . . . . . 32
SECTION 22.05. Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 22.06. No Joint Venture. . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 22.07. Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 22.08. Net Lease . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 22.09. Source of Payment of Obligations Incurred Under this Lease. . 32
SECTION 22.10. Successors. . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 22.11. No Merger of Title. . . . . . . . . . . . . . . . . . . . . . 32
SECTION 22.12. Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 22.13. Contests. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 22.14. Nondiscrimination . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 22.15. Interpretation. . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 22.16. Integration . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 22.17. Memorandum of Lease for Recording . . . . . . . . . . . . . . 34
SECTION 22.18. Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 23
ENVIRONMENTAL MATTERS
SECTION 23.01. Landlord's Environmental Obligations. . . . . . . . . . . . . 34
SECTION 23.02. Tenant's Environmental Obligations. . . . . . . . . . . . . . 35
SECTION 23.03. Legal Contests. . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 23.04. Additional Landlord Responsibilities; Termination of Lease. . 36
ARTICLE 24
SALE OF PRIVATE PARCEL; REPURCHASE OF TENANT'S ESTATE
SECTION 24.01. Landlord's Right to Sell. . . . . . . . . . . . . . . . . . . 36
SECTION 24.02. Repurchase of Tenant's Estate . . . . . . . . . . . . . . . . 37
ARTICLE 24A
ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF LANDLORD
SECTION 24A.01.Landlord's Additional Representations and Warranties. . . . . 38
5
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ARTICLE 25
DEFINITION OF CERTAIN TERMS
SECTION 25.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 39
EXHIBITS
- --------
EXHIBIT A - DESCRIPTION OF THE LAND
EXHIBIT B - DESCRIPTION OF THE PRIVATE PARCEL
EXHIBIT C - PERMITTED EXCEPTIONS
EXHIBIT D - RECIPROCAL EASEMENT AGREEMENT
EXHIBIT E - REVENUE SHARING AGREEMENT
<PAGE>
PARCEL LEASE
This Parcel Lease, dated as of November 7, 1997 (the "Lease"), is made by
and between Marine World Joint Powers Authority, a joint exercise of powers
authority organized and existing under the laws of the State of California
(hereinafter called "Landlord"), whose address is City Hall, 555 Santa Clara
Street, Vallejo, California 94590, and Park Management Corp., a California
corporation (hereinafter called "Tenant"), whose address is Marine World
Parkway, Vallejo, California 94590.
RECITALS
A. All capitalized terms used herein and not defined in the section where
first used in this Lease are defined in Article 25 hereof or the definition of
such capitalized term is referenced in Article 25 hereof.
B. The City of Vallejo (the "City") owns approximately one hundred
thirty-eight (138) acres of land located in the County of Solano, State of
California, described in Exhibit A attached hereto (the "Land"). The City also
owns or controls the right to use the surface of Lake Chabot, a flood control
and drainage reservoir consisting of approximately fifty-five (55) acres.
C. Certain improvements to the portion of the Land identified as the
"Public Parcel" below were refinanced on January 30, 1997, with the proceeds of
certificates of participation in the aggregate principal amount of $63,465,000
(the "Certificates of Participation Financing").
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D. In connection with the Certificates of Participation Financing, (i)
the City entered into a 1997 Site Lease Relating to Marine World dated as of
January 1, 1997 whereby the City leased the Land and rights to use Lake Chabot
to the Landlord (the "1997 City-Marine World Lease"), (ii) the Landlord and the
City entered into a 1997 Lease Agreement Relating to Marine World, dated as of
January 1, 1997, whereby the Landlord leased back to the City a portion of the
Land (the "Public Parcel") and rights to use Lake Chabot (the "1997 Marine
World-City Lease), (iii) the City and the Redevelopment Agency of the City of
Vallejo (the "Agency") entered into a 1997 First Sublease Agreement Relating to
Marine World, dated as of January 1 1997, whereby the City subleased to the
Agency the Public Parcel and the rights to use Lake Chabot (the "1997
City-Agency Lease"), and (iv) the Agency and the Landlord entered into a 1997
Second Sublease Agreement Relating to Marine World, dated as of January 1, 1997,
whereby the Agency subleased to the Landlord the Public Parcel and the rights to
use Lake Chabot (the "1997 Agency-Marine World Lease") to enable the Landlord to
operate and maintain a park under the name "Marine World/Africa U.S.A."
E. In connection with the exercise of an option (the "Option") granted by
the Landlord under the Option Agreement (Parcel Lease), dated as of May 30,
1997, between the Landlord and the Tenant, the Landlord and the Tenant now
desire to provide for a lease of the portion of the land identified in Exhibit B
attached hereto (the "Private Parcel," which Private Parcel shall be hereinafter
deemed to include, as appropriate, all Improvements thereon), to enable the
Tenant to construct and operate facilities on the Private Parcel compatible with
those on the Public Parcel.
ARTICLE 1
2
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DEMISE TERM
SECTION 1.01. DEMISE OF THE PRIVATE PARCEL. Landlord hereby leases
to Tenant and Tenant hereby leases from Landlord, on the terms and conditions
set forth herein and subject only to the exceptions to title described in
Exhibit C attached hereto (the "Permitted Exceptions"), the Private Parcel
together with any buildings, structures, facilities, fixtures, equipment,
paving, surfacing, sewers, storm drains and other improvements which may now or
hereafter be located thereon belonging to or leased by Landlord, and all
easements, rights of way and other rights therein and appurtenances thereto.
Tenant has no rights under this Lease to the use of the surface or any part of
Lake Chabot. Landlord warrants that the Land is subject only to the Permitted
Exceptions.
SECTION 1.02. TERM. The term of this Lease (the "Term") shall be for
a period of fifty-five (55) years commencing on the date of exercise of the
Option (the "Term Commencement Date") and ending on the date which is fifty-five
(55) years after the Term Commencement Date, unless this Lease is terminated on
an earlier date, or renewed in accordance with Section 1.03 below. Landlord
shall deliver possession of the Private Parcel to Tenant under this Lease on the
Term Commencement Date, and no other person or entity shall be in possession of
any thereof.
SECTION 1.03. RENEWAL OPTION. Tenant shall have the right, at its
election, to extend the original term of this Lease for four (4) extension
periods of ten (10) years each, and a final extension period of four (4) years
(each a "Renewal Option"). Each Renewal Option shall commence upon the
expiration of the original term or the prior Renewal Option (as the case may
be), provided that Tenant shall give to Landlord notice of the exercise of its
selection at least four (4) months prior to the expiration of the original
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term or such prior Renewal Option (as the case may be). Prior to the exercise by
Tenant of any of said elections to extend the original term, the expression "the
term of this Lease" or any equivalent expression shall mean the original term;
after the exercise by Tenant of any of the aforesaid elections, the expression
"the term of this Lease" or equivalent expression shall mean the original term
as it may have been extended. Except as expressly otherwise provided in this
Lease, all the agreements and conditions in this Lease contained shall apply to
the additional period or periods to which the original term shall be extended as
aforesaid, the term shall be extended upon the giving of the notice without the
requirement of any action on the part of Landlord.
SECTION 1.04. RULE AGAINST PERPETUITIES. If and to the extent that
any of the options, rights and privileges granted to Tenant under the provisions
of this Lease would, in the absence of the limitation imposed by this Section,
be invalid or unenforceable as being in violation of the rule against perpetuity
or any other rule of law relating to the vesting of interests in property or the
suspension of the power of alienation of property, then it is agreed that
notwithstanding any other provision of this Lease, said options, rights and
privileges, subject to the respective conditions governing the exercise of such
options, rights and privileges, shall be exercisable by Tenant only during a
period which shall end no later than twenty (20) years after the date of
execution of this Lease in which event, Tenant shall have the right, to the
extent permitted by Law, to exercise any or all of its Renewal Options prior to
the expiration of such period.
ARTICLE 2
RENT
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SECTION 2.01. MINIMUM ANNUAL RENT. Commencing on the Rent
Commencement Date and continuing throughout the remainder of the Term, Tenant
shall pay an annual fixed rent of One Dollar ($l.00) (the "Minimum Annual
Rent"). Tenant's obligation to pay Minimum Annual Rent on the Private Parcel
under this Lease shall commence on the date of exercise of the Option (the "Rent
Commencement Date").
SECTION 2.02. PAYMENT OF RENT. The Minimum Annual Rent shall be paid
in advance on the Rent Commencement Date and on each one year anniversary
thereof during the Term.
SECTION 2.03. NO SETOFF. Tenant covenants to pay the Minimum Annual
Rent herein reserved and all other sums which may become due hereunder or be
payable by Tenant hereunder, at the times and in the manner provided in this
Lease without notice or demand except as otherwise expressly provided herein.
The Minimum Annual Rent and any other amounts required to be paid by Tenant
hereunder are sometimes collectively referred to as, and shall constitute,
"rent".
ARTICLE 3
USE ACCESS
SECTION 3.01. USE OF PRIVATE PARCEL. Tenant shall develop the
Private Parcel with various Improvements, which may include, without limitation,
thrill rides, water attractions, themed areas, concert facilities, restaurants
and other food outlets, courts or other areas for preparation and/or service or
dispensing of food, game venues, theater and other show areas and merchandise
shops, all of which shall be compatible with the Improvements located on the
Public Parcel as of the date hereof. Tenant shall also in good faith
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consider the construction of a conference center in connection with its
development of the Private Parcel. Landlord shall cooperate with and assist
Tenant (at the written request and cost of the Tenant), in effecting development
of the Private Parcel.
Tenant shall furnish and equip the Improvements constructed on the Private
Parcel with all fixtures, furniture, furnishings, and other equipment and other
personal property (collectively, "Personal Property") of a quantity and quality
necessary to operate the Private Parcel in a manner at least comparable to the
operation of the other theme parks operated by PPI (the "Premier Parks");
provided, however, that Tenant, in its sole discretion, shall determine the
nature and quantity of attractions to be located at the Private Parcel at any
time during the Term. Tenant further agrees to maintain the Improvements and
such Personal Property and keep the same in good order and condition ordinary
wear and tear excepted, and promptly make all necessary repairs, replacements
and renewals thereof, except as otherwise expressly provided in this Lease
(including, but not limited to, Section 6.02).
The Private Parcel shall at all times be used as a theme and/or amusement
park and/or other entertainment venue, and/or in any other manner consistent
with the use of the Public Parcel, and shall be generally open for admission by
patrons at the same times as are the facilities on the Public Parcel, except as
otherwise expressly provided in this Lease; provided, however, it is expressly
understood and agreed that nothing in this Lease shall be deemed or construed to
require that all or any of the Private Parcel be continuously operated. Tenant
shall have the right to close all or any portion of the Private Parcel during
all or any such portion of the off season as Tenant shall determine.
The Landlord will implement as soon as practicable any substitution of
property between the Private
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Parcel and the Public Parcel which is requested by the Tenant in writing and is
otherwise consistent with the provisions of the 1997 Marine World-City Lease and
not adverse in any material respect to the operations conducted on the Public
Parcel. Upon any such substitution, the property transferred to the Private
Parcel shall for all purposes hereof be deemed part of the Private Parcel and
subject to the provisions of this Lease as if such property were originally part
of the Private Parcel. In connection with any such substitution, Tenant shall
promptly arrange for the recordation of a supplement to the description of the
Private Parcel in Exhibit B hereto in the real property records of Solano
County, California consistent therewith.
Once commenced, all construction, alteration or repair work permitted
herein shall be accomplished as expeditiously and diligently as is commercially
practicable. Tenant shall take all reasonably necessary measures to minimize
any damage, disruption or inconvenience to the Public Parcel caused by such work
and make adequate reasonable and customary provision for the safety and
convenience of all persons affected thereby, including but not limited to using
commercially practicable methods to control all objectionable or unpleasant
dust, noise, odor and other materially adverse effects thereof, upon the Public
Parcel and/or the normal use thereof. Tenant shall repair, at its own cost and
expense, any and all damage caused by such work, except as otherwise expressly
provided in this Lease.
Any work performed by or on behalf of Landlord or by or on behalf of Tenant
or any occupant or sublessee to connect to, repair, relocate, maintain or
install any storm drain, sanitary sewer, water line, gas-line, telephone conduit
or any other public utility service shall be performed so as to minimize
interference with the provision of such services to occupants, sublessees and
other persons.
SECTION 3.02. LIMITATION ON USE. Tenant shall not use or permit to
be used any part of the
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Private Parcel for any illegal purposes and will not cause or maintain any
nuisance in, at or on the Private Parcel. Tenant shall not do anything, or
permit anything to be done, in or about the Private Parcel which will: (i)
invalidate or be in conflict in any material way with the provisions of any fire
or other insurance policies covering the Private Parcel; or (ii) result in an
inability of Tenant to obtain fire insurance from reputable companies for the
Improvements on the Private Parcel as required by Article 5.
SECTION 3.03. COMPLIANCE. Throughout the Term Tenant shall timely
comply in all material respects with all Laws and the requirements of all
policies of insurance which may be applicable to the Private Parcel, including
the making of any required Improvements on the Private Parcel; provided,
however, that notwithstanding the foregoing Tenant shall have the right to use
the Private Parcel for the uses permitted pursuant to Sections 3.01 and 3.02
even if there is a change in Laws applicable to the Private Parcel, and further
provided that Landlord shall be responsible for any and all violations of Law
existing on the Term Commencement Date. Landlord agrees, within thirty (30)
days (or such sooner period as may be required by Law) after delivery by Tenant
of written notice to Landlord which notice is delivered within one year of the
Term Commencement Date, to either (a) cure any such violation(s) existing on the
Term Commencement Date in compliance with Laws or (b) to notify Tenant in
writing of Landlord's desire that Tenant effect such cure and its commitment to
reimburse Tenant for all reasonable costs expended by Tenant in order to
effectuate such cure; provided, however, if Landlord fails to either: (i) effect
such cure at least ten (10) business days prior to the expiration of the period
prescribed by Law to do so; or (ii) notify Tenant of its election of
subparagraph (b) above within ten (10) business days of receipt of Tenant's
notice, then Tenant may effectuate such cure and be promptly reimbursed by
Landlord.
SECTION 3.04. OTHER AGREEMENTS. Landlord and Tenant acknowledge and
agree that there
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shall be no merger of this Lease and any of the Master Lease, the 1997
City-Marine World Lease, the 1997 Marine World-City Lease, the 1997 City-Agency
Lease or the 1997 Agency-Marine World Lease (collectively, the "Public Leases").
Notwithstanding the foregoing, Landlord and Tenant acknowledge that they will
benefit from a common plan of operation of improvements on the Public Parcel and
the Improvements on the Private Parcel, and by allowing patrons of the Public
Parcel free access to the public areas of the Private Parcel, and patrons of the
Private Parcel free access to the public areas of the Public Parcel, subject to
the terms and conditions of this Lease and the Reciprocal Easement Agreement.
To that end, Landlord and Tenant have entered into the Reciprocal Easement
Agreement and the Revenue Sharing Agreement (the "Other Agreements"), and
acknowledge and agree that the terms of the Other Agreements and the Public
Leases are integral to Tenant's use of the Private Parcel and Landlord's use of
the Public Parcel.
SECTION 3.05. MINIMUM INVESTMENT. Tenant hereby agrees to expend at
least an aggregate $7,000,000 towards the construction of Improvements (which
shall include at least one major attraction) on the Private Parcel (the "Minimum
Investment") during the two year period commencing with the Term Commencement
Date. Notwithstanding the foregoing, (a) the Minimum Investment shall be
reduced by an amount equivalent to the amount, if any, by which the amounts
expended by Tenant under that certain Option Agreement exceeds the "Purchase
Amount" as defined therein (and as referenced in clause (i)(b) of Section 1.05
thereof), provided that, in any event, the Improvements to be so constructed
shall include a major attraction or attractions; (b) Tenant shall not expend in
excess of $50,000,000 (exclusive of any costs of Restoration, replacement of
damaged or obsolescent Improvements) towards construction of Improvements on the
Private Parcel during the Term, unless it shall first obtain an opinion of
nationally-recognized bond counsel acceptable to the Landlord to the effect that
expenditures in excess of such amount will not result in
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the interest component of the Certificates of Participation Financing being
included in the gross incomes of the owners of the certificates of participation
for federal income tax purposes or otherwise result in a breach of the
Landlord's covenants in Section 10.05 of the Trust Agreement referenced in the
Agency-Marine World Lease, and (c) Landlord will reasonably consider any
proposal in writing by Tenant to include the cost of any of Tenant's Property
towards the Minimum Investment, and if such Tenant's Property is ever removed
from the Private Parcel, it is replaced with other property of equal or greater
value.
From time to time (but not less than annually), and otherwise upon written
request of Landlord, Tenant shall provide Landlord with a written report as to
the extent of its investment in Improvements to the Private Parcel and the then
value thereof, which value shall be based on the actual cost of such
Improvements less depreciation thereof determined in accordance with generally
accepted accounting principles and less the value (after depreciation determined
as aforesaid) of any such damaged, destroyed or taken Improvements which are
not replaced or reconstructed during the period covered by the report. Each
annual report shall, at a minimum, show any additional Investment during the
immediately preceding year. The amounts actually expended, from time to time,
by Tenant towards the construction of Improvements in accordance with the
preceding paragraph, as may be adjusted in accordance with the terms hereof and
valued in accordance with the preceding sentence, shall be referred to herein as
the "Investment."
SECTION 3.06. TITLE TO IMPROVEMENTS. If Improvements are constructed
by Tenant on the Private Parcel under this Lease, title to such Improvements
shall remain the property of Tenant during the remainder of the Term and, upon
expiration of the Term, title to all Improvements then vested in Tenant which
have not been removed from the Private Parcel within twenty (20) days after
expiration shall vest in Landlord and the same shall become the property of
Landlord at that time without notice or execution of
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further instruments and without cost, expense or obligation of any kind or
nature to Landlord; provided, however, notwithstanding anything to the contrary
in any Public Lease or in any Other Agreement, the parties acknowledge that
Tenant may remove any and all Improvements at any time prior to the expiration
or earlier termination of this Lease either: (a) in connection with any
Restoration; or (b) at any other time Tenant determines, in its sole discretion,
so long as the Minimum Investment has been made and is being maintained in
accordance with the terms of this Lease. Upon expiration or termination of this
Lease (other than termination arising out of a Total Taking or a Landlord's
Default), Tenant agrees to not remove Improvements selected by Tenant (which
shall include at least one major attraction) with an original cost to Tenant
equal to the Minimum Investment. Tenant agrees to execute, deliver, and if
necessary, cause to be recorded, such instruments as Landlord shall reasonably
request to cause title to all Improvements located on the Private Parcel upon
the expiration or earlier termination of this Lease to be so vested in Landlord
if not removed by Tenant as aforesaid.
SECTION 3.07. USE BY VENDORS; PARKING. (a) At any time during the
term of this Lease, Tenant may lease or license departments, grant concessions
or enter into space/occupancy leases granting third parties the right to sell
goods, wares, merchandise, food and services and/or provide games, attractions,
arcades and other entertainment in or at the Private Parcel. The foregoing
shall not be considered a subletting or assignment for purposes of this Lease,
including but not limited to Article 13 hereof nor shall such licensee or
concessionaire be considered a subtenant within the meaning of this Lease,
provided that such party's business is not in the eyes of the public separately
identifiable from Tenant's business at the Private Parcel, and the subletting is
not for more than an insubstantial portion of the area of the Private Parcel.
Tenant shall assure that any such leases, licenses or concessions are
subordinate to this Lease, and terminate upon termination of this Lease.
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(b) Tenant (including any subtenant, licensee and concessionaire thereof)
shall be entitled to the use of parking spaces in the parking lot serving the
Public Parcel for its employees, agents, guests and other invitees on the same
terms as employees, agents, guests and other invitees of Landlord with respect
to the Public Parcel, subject to the Rules and Regulations (as defined in the
REA) and the other terms of the REA.
SECTION 3.08. ACCESS TO PRIVATE PARCEL. Landlord agrees that
Tenant shall have sole and exclusive access to all of the Private Parcel at all
times during the term of this Lease, except to the extent otherwise expressly
provided herein or in the Reciprocal Easement Agreement, and that Landlord shall
not permit or create, or cause to be permitted or created, any event or
condition which results in preventing or restricting Tenant from, or otherwise
materially interfering with, the use and enjoyment by Tenant of the Private
Parcel for its intended purpose, including but not limited to impairing its
access thereto.
SECTION 3.09. SIGNS. Tenant may install and maintain a sign or signs
at the Private Parcel provided same are in compliance with any and all
applicable Laws. Landlord shall cooperate with Tenant (including, without
limitation, execution of all applications) in connection with any Permits which
are required in connection with the installation or maintenance of said signs.
Landlord shall not erect any signs at the Private Parcel without Tenant's prior
written consent.
SECTION 3.10. TENANT'S PROPERTY. (a) All stock-in-trade, personal
property, furniture, furnishings, machinery, equipment and movable trade
fixtures (not constituting Improvements) supplied by or installed by or on
behalf of Tenant at Tenant's sole cost and expense, including Personal Property
("Tenant's Property"), shall remain the property of Tenant and Tenant may remove
Tenant's Property from
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the Private Parcel at anytime during the Term so long as such removal does not
otherwise cause a Tenant's Default, and at the end of the Term or upon sooner
termination as aforesaid.
(b) Tenant shall have the right, without obtaining Landlord's prior written
consent, to enter into various leasing or other financing arrangements with
respect to such Tenant's Property ("Equipment Financing"), whether such
Equipment Financing is in the form of conditional sale contract, chattel
mortgage, lease or other like security interest. Neither the Landlord nor any
party claiming by, through or under Landlord shall have any lien for the
performance of any obligations of Tenant upon any Tenant's Property and
Landlord, for itself and any party claiming by, through or under Landlord,
hereby expressly waives the provisions of any Law giving to it such a lien.
Landlord agrees, if requested by or on behalf of any lender to which Tenant
shall grant a security interest in the Tenant's Property or any lessor of
Tenant's Property in connection with such Equipment Financing (collectively, the
"Equipment Lessor"), to promptly execute, acknowledge and deliver such waivers
or other instruments reasonably required by Tenant and/or the Equipment Lessor
to confirm that Landlord: (i) has waived any such lien, (ii) agrees that the
Equipment Lessor shall have the right to enter upon the Private Parcel for the
purposes of removing Tenant's Property, and (iii) shall not hinder or delay such
removal, provided that Tenant or the Equipment Lessor shall agree to (A) repair
any damage to the Improvements caused by such removal, and (B) otherwise comply
with the terms of this Lease in connection with such removal. Landlord shall use
all commercially reasonable efforts to require the holder of any mortgage
affecting Landlord's interest in the Private Parcel to agree to do likewise (or
in lieu thereof deliver a non-disturbance agreement containing appropriate
provision therefor). Anything herein to the contrary notwithstanding, the
existence or continuance of any such security interest in connection with
Tenant's Property shall not be deemed a Tenant Default hereunder.
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ARTICLE 4
IMPOSITIONS
SECTION 4.01. TENANT'S OBLIGATION TO PAY IMPOSITIONS. Tenant shall
pay, before any fine, penalty, interest or cost may be added thereto for the
non-payment thereof, all Impositions which are hereafter assessed, imposed or
become a lien upon the Private Parcel or any part thereof during the Term;
provided, however, that Tenant shall only be obligated to pay Impositions
assessed against its possessory interest created by this Lease and not against
the fee and reversion, or any other interest or property or other asset retained
by Landlord. If, by Law, any such Imposition may be paid in installments,
Tenant may pay the same (and, to the extent required, any accrued interest
thereon) in installments before any fine, penalty, interest or cost may be added
thereto for the nonpayment thereof and Tenant shall only be required to pay
those installments coming due during the Term.
"Impositions" shall be defined as all taxes (including possessory interest
taxes associated with the Private Parcel and the execution of this Lease),
assessments (including all assessments for public improvements or benefits,
fees, water, sewer or similar rents, rates and charges, excises, levies, license
fees, permit fees, inspection fees and other authorization fees and other
governmental charges of any kind or nature whatsoever, whether general or
special, ordinary or extraordinary, foreseen or unforeseen, or hereafter levied
or assessed in lieu of or in substitution of any of the foregoing of every
character (including all interest and penalties thereon), which at any time
during or in respect of the Term may be assessed, levied, confirmed or imposed
on or in respect of or be a lien upon the Private Parcel, any Improvements, any
of Tenant's Personal Property now or hereafter located thereon, on the leasehold
estate created hereby or which may be imposed
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upon any taxable interest of Tenant acquired pursuant to this Lease or on
account of any taxable possessory right which Tenant may have acquired pursuant
to this Lease, or any part thereof or which may be levied upon or measured by
the rent payable hereunder. Notwithstanding anything to the contrary set forth
above or elsewhere in this Lease, "Impositions" shall not include any income,
excess profit, estate, inheritance, successions transfer, franchise, capital or
other tax assessment upon the fee interest of Landlord in the Private Parcel or
upon the rentals payable under this Lease, all of which shall be the obligation
of Landlord. Tenant will pay or reimburse Landlord, as the case may be, for any
fine, penalty, interest or cost which may be added by the collecting authority
for the late payment or nonpayment of any Imposition required to be paid by
Tenant hereunder. All Impositions imposed for the tax year in which this Lease
shall commence, and the tax year in which this Lease shall terminate, shall be
apportioned between Tenant and Landlord.
Notwithstanding the foregoing, Tenant shall have the right to contest any
Imposition or other assessment, valuation or levy against all or any part of the
Private Parcel, or any interest therein, in accordance with applicable Laws and
the provisions of Section 22.13 hereof.
SECTION 4.02. SEGREGATION AND PAYMENT OF IMPOSITIONS.
Notwithstanding the foregoing or anything in the REA to the contrary:
(a) If Tenant, in its sole discretion, desires that the parties' respective
interests in the Private Parcel and the Public Parcel be separately assessed
with respect to the assessment of Impositions (and abatements, exemptions and
credits available with respect thereto), based on the value of the relevant
parties' respective interests therein, then Tenant (or, if required by Law,
promptly after written notice from Tenant, Landlord)
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shall make application to the assessor's office therefore and Landlord shall
execute and deliver, or cause to be executed and delivered, all such documents,
instruments, applications or other forms which may be necessary in connection
therewith, and otherwise cooperate with Tenant, at Tenant's expense, in
connection with such application.
(b) If Tenant's interest in the Private Parcel is not separately assessed
as aforesaid, then Tenant's share of the Impositions shall be deemed to be the
Impositions which are due and payable as assessed against Tenant's possessory
interest in the Private Parcel and the Improvements only. The parties shall
arrange for the relevant taxing authorities to send copies of all tax bills for
any tax year related to the Private Parcel or the Improvements to Tenant and, if
legally permissible, to accept payment of their respective portions directly
from Tenant and Landlord. The amount of Impositions payable by each of the
parties hereunder related to the Private Parcel or the Improvements for any tax
year shall be timely paid by each party directly to the taxing authority for
said tax year so as to avoid the accrual of interest or the payment of a
penalty.
(c) The Imposition upon the Private Parcel and the Improvements for any tax
year shall mean such amounts as shall be finally determined after deducting net
reductions or abatements, refunds or rebates, if any, to be the Impositions
payable with respect to the Private Parcel and the Improvements for said tax
year. For the purposes of determining payments due from each of Tenant and
Landlord in accordance with the provisions of this Article, the Impositions upon
the Private Parcel and the Improvements for any tax year shall be deemed to be
the Impositions assessed for such year until such time as a reduction,
abatement, refund or rebate shall be made for such tax year, and, if any
reduction, abatement, rebate or
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refund shall be made for any tax year, an appropriate refund shall be made with
respect to the amount paid by each of Tenant and Landlord on account of
Impositions dependent upon the amount of such reduction, abatement, rebate or
refund, less the cost and expense of obtaining the same.
(d) If the Private Parcel and the Improvements, or any part thereof is
entitled to any abatements, exemptions or credits of or against Impositions and
same are granted, each of the parties hereto hereby agrees that thereafter it
shall use commercially reasonable efforts to ensure that said abatements,
exemptions or credits of Impositions shall not be terminated, rescinded or
otherwise lost due to its wrongful acts or omissions (whether or not acts or
omissions are permitted by this Lease).
(e) If Tenant is required to escrow Impositions with a Leasehold Mortgagee,
then, at Tenant's request and upon reasonable evidence of such requirement,
Landlord shall pay to Tenant on the first day of each month during the term of
this Lease that Tenant is required to so escrow Impositions, a sum equal to one
twelfth (1/12) of amount, if any, payable by Landlord in respect of Impositions
against the fee and reversion retained by Landlord in the Private Parcel
hereunder.
(f) Notwithstanding the foregoing, or anything to the contrary set forth
herein or anything in the REA to the contrary, Tenant shall have the right,
exercisable upon written notice to Landlord, to make any payment of Landlord's
share of the Impositions in order to avoid the accrual of interest or other late
fees or the imposition of a penalty or creation of a lien upon the Private
Parcel if Landlord does not pay same on or before the later of 3 business days:
(i) from the date of delivery of such notice, or (ii) prior to the date such
payment is due to in order to avoid the accrual of interest or other late fees
or the imposition of a penalty or creation of a lien upon the Private Parcel. In
the event Tenant makes any such payment or otherwise incurs any cost or expense
as a result of the non-payment of the share of the Impositions allocated to the
Landlord, Tenant shall have the right to immediate repayment of the same from
Landlord together with interest thereon
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until paid at the Interest Rate.
(g) Notwithstanding the foregoing, or anything to the contrary set forth
herein, Landlord shall have the right, exercisable upon written notice to
Tenant, to make any payment of Tenant's share of the Impositions in order to
avoid the accrual of interest or other late fees or the imposition of a penalty
or creation of a lien upon the Private Parcel if Tenant does not pay same on or
before the later of 3 business days: (i) from the date of delivery of such
notice, or (ii) prior to the date such payment is due to in order to avoid the
accrual of interest or other late fees or the imposition of a penalty or
creation of a lien upon the Private Parcel. In the event Landlord makes any such
payment or otherwise incurs any cost or expense as a result of the non-payment
of the share of the Impositions allocated to the Tenant, Landlord shall have the
right to immediate repayment of the same from Tenant together with interest
thereon until paid at the Interest Rate.
SECTION 4.03. TAXES IMPOSED UPON CREATION OF LEASEHOLD. Landlord
shall be solely responsible for and shall pay all realty transfer taxes and
similar taxes imposed by any governmental authority upon or in connection with
the execution and delivery of this Lease or the recording of a short form
hereof, or both, and Landlord and Tenant shall timely execute any realty
transfer tax return or similar instruments required in connection therewith.
ARTICLE 5
INSURANCE
SECTION 5.01. EXTENDED COVERAGE AND LIABILITY. Tenant shall,
throughout the Term, maintain
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with respect to the Private Parcel and Tenant's Personal Property insurance of
the following character:
(a) A policy of fire and extended coverage insurance on the Improvements
in an amount not less than 75% of the actual replacement cost of all of the
Improvements on the Private Parcel with diminution of such cost for depreciation
or obsolescence.
(b) Comprehensive public liability and property damage insurance covering
the Private Parcel and the Improvements with combined single limit coverage in
an amount not less than that customarily, from time to time carried by other
regional, nondestination theme parks of comparable size and with comparable
facilities at such time, which shall be conclusively evidenced by a certificate
of Tenant to the effect that the insurance maintained hereunder is not less than
that maintained at Premier Parks and other comparable regional, non destination
theme parks.
(c) A policy or policies of worker's compensation insurance and any other
employee benefit insurance sufficient to comply with all Laws.
(d) Such other insurance, in such amounts and against such other risks, as
is not less than that customarily, from time to time carried by other regional,
nondestination theme parks of comparable size and with comparable facilities at
such time, which shall be conclusively evidenced by a certificate of Tenant to
the effect that the insurance maintained hereunder is not less than that
maintained at Premier Parks and other comparable regional, non destination theme
parks.
SECTION 5.02. CARRIERS; POLICIES. All insurance provided for
pursuant to Section 5.01 hereof
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shall:
(a) Be effected under a valid and enforceable policy or policies issued by
insurers of recognized responsibility; provided, however, it is acknowledged and
agreed that [to be completed prior to execution of this Parcel Lease] is an
acceptable insurer;
(b) Name Landlord and Tenant as insured parties thereunder, as their
respective interests may appear;
(c) Provide that (i) no cancellation, modification (to the extent of a
modification to coverage which results in non-compliance hereunder) or
termination thereof on account of nonpayment of premiums or any other reason
shall be effective until at least twenty (20) days after delivery of written
notice thereof to Landlord, and (ii) to the extent obtainable without additional
premium, such insurance shall not be invalidated as to the interest of Landlord
by any act, omission or neglect of Tenant, any Leasehold Mortgagee, their
respective employees or agents or any occupant of the Private Parcel which might
otherwise result in a forfeiture or suspension of such insurance; and
(d) Have, at Tenant's election, deductibles not greater than those for
insurance carried by Premier Parks and other regional, non destination theme
parks generally, as certified by Tenant to Landlord.
Tenant shall be permitted to effect any of the insurance coverage required
under this Article to be procured and maintained by Tenant by means of a
"blanket" or "umbrella" policy or policies of insurance or
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to self-insure as to any of the insurance required by the terms of this Article
5 for so long as Tenant's net worth, computed in accordance with generally
accepted accounting principles consistently applied, exceeds one hundred million
dollars ($100,000,000) and Tenant otherwise has liquid assets in excess of one
million dollars ($1,000,000). If Tenant so elects to self-insure, Tenant shall
give Landlord written notice of its election and shall simultaneously furnish to
Landlord proof of its net worth at the time of such election and, thereafter, at
least once a year.
SECTION 5.03. PROCEEDS. Fire and extended coverage insurance
proceeds and boiler and machinery insurance proceeds paid to Tenant by reason of
damage to the Improvements, subject to the provisions of Article 9 hereof, shall
be used by Tenant to restore the Improvements if Tenant elects to do so under
Article 9.
SECTION 5.04. CERTIFICATE OF INSURANCE. Tenant shall furnish to
Landlord a certificate of insurance, insurance binders or other reasonable
evidence as set forth in Section 5.02 or otherwise herein, issued by the
insurance provider, or its authorized agent (or if there is no insurance
provider, other evidence of applicable coverage), evidencing Tenant's compliance
with the insurance coverage requirements of this Article upon the execution and
delivery of this Lease, and thirty (30) days before the expiration of any
insurance policy required hereunder.
SECTION 5.05. RELEASE AND WAIVER OF SUBROGATION. To the extent
permitted by Law, Landlord and Tenant hereby waive all rights of recovery and
causes of action, and each releases the other from any liability (provided such
party's right of full recovery under the applicable policy is not adversely
affected), from all claims it might otherwise have (including a claim for
negligence) which it might have against the
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other party for losses, damages or destruction occasioned during the Term to the
property of each located within or upon or constituting a part of the Private
Parcel, which losses and damages are of the type covered under the policies
required by this Article or actually carried. The policies required by this
Article shall provide for waivers of any right of subrogation that the insurer
of such party may acquire against the other party hereto with respect to any
such losses so long as the same is obtainable at no significant additional cost.
Notwithstanding the foregoing, nothing shall be deemed to release either party
hereto from liability for damages resulting from the fault or negligence of said
party or its agents.
SECTION 5.06. TITLE INSURANCE. Landlord shall provide to Tenant, on
the Term Commencement Date, a title insurance policy (or irrevocable commitment
to issue same subject to no conditions) issued by a title company designated by
Landlord and reasonably acceptable to Tenant, which shall insure that a valid
leasehold interest in the entire Private Parcel has been created under this
Lease in favor of Tenant, subject only to the Permitted Exceptions in a form and
containing such endorsements as are reasonably acceptable to Tenant and
customary in the circumstances. The amount of the title insurance shall be not
less than $7,000,000; provided that Landlord shall obtain an endorsement thereto
to the effect that coverage thereunder shall increase such that it is always
equivalent to the Investment.
SECTION 5.07. LANDLORD'S INSURANCE. (a) Landlord agrees that at all
time during the term of this Lease, it will maintain with respect to the Public
Parcel, insurance in an amount not less than that required under the 1997
Agency-Marine World Lease (without giving effect to clause (ii) and (iii) of the
first sentence of Section 5.4 thereof, but the percentage in clause (i) of the
first sentence of said Section 5.4 shall be deemed to be seventy-five percent
(75%) instead of ninety percent (90%) for purposes of this Parcel Lease).
Landlord agrees that, upon the written request of Tenant, Landlord shall furnish
Tenant with
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evidence of insurance required under the foregoing provision.
(b) It is expressly understood and agreed that at such times (if any) as
Landlord or Landlord's contractors, agents, employees or representatives are in
or about the Private Parcel in connection with Tenant's work and/or any work
being performed by or on behalf of Landlord, Landlord's commercial general
liability insurance or the commercial general liability insurance maintained by
Landlord's contractors shall in all events be deemed to be the primary coverage
(regardless of any requirement that Tenant be named, for some purposes, as an
additional insured on such policies, and regardless of any other insurance that
Tenant may maintain or elect to obtain) with respect to any and all injury, loss
or damage or claims for injury, death, loss or damage, of whatever nature, to
any person or property in the Private Parcel or resulting from any occurrence
in, on or about the Private Parcel directly attributable to Landlord or
Landlord's contractors, agents, employees or representatives.
ARTICLE 6
MAINTENANCE OF PROPERTY
SECTION 6.01. NO WASTE. Tenant shall not commit waste or damage the
Private Parcel.
SECTION 6.02. TENANT'S MAINTENANCE OBLIGATIONS;. Except as
specifically provided herein or in the REA, Landlord shall not be obligated to
make repairs or replacements of any kind or to maintain the Private Parcel.
Throughout the Term, Tenant shall maintain the Improvements, if any, in such
operating condition and repair as may be necessary at any time to maintain the
Private Parcel in a manner at least
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comparable to other Premier Parks and other regional, non destination theme
parks of comparable size and attendance. Except as otherwise provided in this
Lease or the Reciprocal Easement Agreement, Tenant shall make all necessary
repairs and replacements to the Improvements, whether structural or
nonstructural, interior or exterior, ordinary or extraordinary, foreseen or
unforeseen as are necessary to comply with the preceding sentence. Except as
otherwise provided herein or the REA, Tenant hereby expressly waives all right
to make repairs at Landlord's expense under Section 1941 of the California Civil
Code, as it may from time to time be amended, replaced or restated.
ARTICLE 7
ALTERATIONS BY TENANT
SECTION 7.01. ALTERATIONS. At any time and from time to time during
the Term, Tenant may, but is not obligated to, construct or otherwise make new
Improvements on any part of the Private Parcel and to demolish, remove, replace,
alter, relocate, reconstruct, or add to any existing Improvements in whole or in
part, to modify or change the contour or grade, or both, of the Private Parcel
(any of which activities is referred to herein as an "Alteration"), provided
that all of the following conditions are satisfied with respect to the
Alteration in question:
(a) Once commenced, each Alteration shall be effected with due diligence,
in a good workmanlike manner, and in material compliance with all Laws and
insurance requirements.
(b) The expenses for any Alteration shall be timely and-fully paid or
shall be adequately
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provided for by Tenant; provided, however, that Tenant shall be permitted to
contest the validity and/or amount of any such expense provided that it does not
result in the imposition of a lien against the Private Parcel unless either: (i)
such lien is removed within 60 days from the date Tenant receives notice
thereof, or (ii) such lien is adequately bonded, or otherwise provided for in a
manner acceptable to Landlord.
(c) Prior to making any Alteration which costs in excess of One Hundred
Thousand Dollars ($100,000), Landlord shall have received at least ten (10) days
prior written notice from Tenant of the proposed Alteration; provided that
notice may be given such lesser period of time in advance as is required by Law
or emergency.
SECTION 7.02. TENANT IMPROVEMENTS. (a) Landlord shall cooperate with
Tenant (including its architects and contractors), which shall include but not
be limited to, executing all documents, providing all information, appearing
before governmental boards and authorities and such other actions as may be
required or otherwise reasonably requested by Tenant in connection with
obtaining all building permits, licensees and other governmental approvals and
authorizations which may be required to commence or complete Improvements and
other work at the Private Parcel, proposed by Tenant (collectively, the
"Permits"), at Tenant's written request and at Tenant's expense.
(b) If, within six (6) months after the Term Commencement Date, despite
prompt application to and diligent prosecution with the appropriate governmental
authorities, Tenant is unable to obtain the Permit(s) necessary to enable Tenant
to construct such Improvements necessary to satisfy Tenant's obligations under
Section 3.05 hereof, Tenant shall be entitled, at is sole discretion, to either
(i) terminate this Lease, or (ii)
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continue to attempt to obtain same within the next ensuing twenty-four (24)
months. Notwithstanding the foregoing, if (x) the Permit(s) are refused, or (y)
the Permit(s) have not been issued by the expiration of said additional
twenty-four (24) month period, or (z) the City is required to advance monies to
make regularly scheduled Lease Payments under the 1997 Marine World-City Lease
from its own funds at any time during any such twenty-four (24) month period,
then at any time after the occurrence of any of such events (but prior to the
issuance of said Permit(s)), either Landlord or Tenant may cancel this Lease by
written notice to the other, effective on the tenth (10th) day following the
date of such notice. In such event, this Lease shall thereupon be terminated,
and neither party shall have any further liability to the other hereunder,
except as may otherwise be expressly provided herein.
(c) Landlord hereby grants to Tenant for use by Tenant and its servants,
agents, employees and independent contractors working on, or in connection with,
Improvements proposed by Tenant, any replacement, restoration, alteration,
improvement, or repair thereof, and the installation, replacement or repair of
Tenant's Property, trade fixtures, furniture and equipment, all necessary or
appropriate rights of access, ingress and egress across the Public Areas (as
defined in the REA) to and from the Private Parcel, and the right to do all such
other things as may be incidental thereto. During the course of such work there
shall be made available to those working on or in the Improvements, for the
parking of trucks and delivery and workmen's vehicles and storage of materials,
those portions of Public Parcel as are required for such purpose under the REA.
ARTICLE 8
UTILITY SERVICES
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SECTION 8.01. UTILITY SERVICES. Subject to any applicable provisions
of the Reciprocal Easement Agreement, Tenant shall (i) pay as the same become
due all charges for all public and private utility services at any time rendered
to or for the benefit of the Private Parcel, (ii) comply in all material
respects with all contracts relating to such services, and (iii) do all other
things reasonably required for the maintenance and continuance of all such
services. Tenant hereby expressly waives any and all claims for compensation,
damages, payments or offset against Landlord based upon or with respect to any
and all loss or damage now or hereafter sustained by Tenant by reason of any
defect, deficiency, failure or impairment of whatever kind or nature in any
service or utility furnished or supplied to or used by Tenant or any other party
in connection with the use, occupancy, maintenance, or operation of the Private
Parcel, except for any damage caused by Landlord's act or failure to act with
respect to supplying any utility.
ARTICLE 9
DAMAGE TO THE PROPERTY
SECTION 9.01. NOTICE. In the event of any material damage to the
Private Parcel caused by fire or other peril, Tenant shall promptly give written
notice thereof to Landlord generally describing the nature and extent of such
damage.
SECTION 9.02. RESTORATION OR TERMINATION.
(a) Except as provided to the contrary elsewhere in this Lease, in the
event of any damage to the
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Improvements for which insurance proceeds are made available to Tenant, Tenant
shall, within a reasonable period of time, commence and complete such
restoration, replacement, or rebuilding of the Improvements as Tenant
determines, in its sole discretion, to make, so long as and on condition that
upon the completion of such restoration, replacement and/or rebuilding Tenant's
obligations to maintain the Minimum Investment are met, to the extent possible
with the available insurance proceeds (such restoration, replacement, and
rebuilding, together with any temporary repairs pending completion of the work,
being hereinafter called "Restoration"). In the event of any Major Damage to
the Improvements, Tenant shall, at Tenant's option upon written notice to
Landlord, as promptly as practicable, either (i) commence and complete
Restoration, (ii) so long as the Minimum Investment is then maintained by
Tenant, elect to operate with the remaining Improvements; or (iii) elect to
terminate this Lease. If Tenant elects to so terminate this Lease and there are
any insurance proceeds made available to Tenant, then such proceeds shall be
payable to Tenant, except as may otherwise be provided under any Leasehold
Mortgage.
(b) For purposes hereof, "Major Damage" to the Improvements shall mean
such damage that the cost of Restoration by reason thereof will exceed
twenty-five percent (25%) of the cost to replace the Improvements on the Land in
their entirety as of the date of the damage. "Major Damage" shall also include
damage, destruction or casualty to the Private Parcel or the Improvements
thereat which: (i) is total or substantially total; (ii) renders such Private
Parcel, the Improvements or the use thereof untenantable or substantially
untenantable; or (iii) cannot be repaired or restored at least two years prior
to the expiration of the Term. For purposes hereof, "untenantable" shall mean
that Tenant is prevented or prohibited from using the Private Parcel or the
Improvements in a manner substantially comparable to that existing on the date
immediately preceding the subject damage, destruction or casualty. In the event
Landlord and Tenant cannot mutually agree upon such replacement cost or the
percentage of such damage, such matter or matters shall
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be submitted to arbitration pursuant to Section 20.01.
SECTION 9.03. EFFECT OF LEASE TERMINATION. If Tenant elects to
terminate this Lease pursuant to this Article, the following shall apply:
(a) If Landlord so elects, Tenant shall raze that part of the Improvements
that have been damaged and clear the area of all debris; provided that Tenant
shall have no obligation under this Section 9.03(a) if the damage, destruction
or other casualty resulted from or was related to the negligence, fraud or
willful misconduct of Landlord, its agents, employees, contractors or licensees.
(b) This Lease shall terminate and the parties shall thereupon be released
from their obligations under this Lease, except for those obligations which have
accrued prior to the effective date of such termination, upon either: (i) the
date set forth in Tenant's notice of termination, or (ii) if Landlord makes the
election under subparagraph (a) above, the date on which such demolition and
clearing is completed.
SECTION 9.04. INSURANCE PROCEEDS. Any loss in excess of Five Hundred
Thousand Dollars ($500,000) that results in the aggregate value of the
Improvements being less than the Minimum Investment, which is covered by the
insurance required to be carried hereunder shall be payable to a trustee (which
shall be a bank or trust company, designated by Landlord and approved by Tenant,
having an office in San Francisco, California and which has capital and surplus
of at least Fifty Million Dollars ($50,000,000) or to a Leasehold Mortgagee of
Tenant that is the holder of any first mortgage or deed of trust which is a lien
against the Improvements which have been damaged, at the option of such
Leasehold Mortgagee; provided,
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however, such payment shall be made to a bank or trust company, in trust, if
there is no Leasehold Mortgagee. All amounts collected on any such policies
shall be made available to Tenant, and shall be paid out by the said trustee or
Leasehold Mortgagee from time to time as the Restoration shall progress, in
amounts designated by certification by architects licensed to do business in the
State of California, showing the application of said amounts as payment for such
Restoration; provided, however, that such trustee or Leasehold Mortgagee, as
applicable, shall first be satisfied that the amount necessary to provide for
the Restoration, according to the plans adopted therefor, which may be in excess
of the amount received upon such policies, has been provided by the insured for
such purposes and its application for such purposes is assured. If the damage
is such that the insurance award is for less than Five Hundred Thousand Dollars
($500,000), or if the Minimum Investment has been satisfied or, to the extent
not satisfied deposited into escrow in accordance with this Lease, then the
insurance award shall be paid directly over to Tenant. Tenant shall pay all
reasonable fees of the trustee for its services. Any excess of monies received
from insurance remaining with the trustee or Leasehold Mortgagee after the
reconstruction or repairof the Improvements shall be paid to Tenant.
SECTION 9.05. RESTORATION. All Restoration undertaken by Tenant
pursuant to this Article 9 and pursuant to Article 10 shall be effected with due
diligence, in a good workmanlike manner, in material compliance with all Laws
and insurance requirements.
ARTICLE 10
CONDEMNATION
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SECTION 10.01. NOTICE. In the event of a Taking of all or any part
of the Private Parcel, or the commencement of any proceedings or negotiations
which might result in such Taking, Tenant shall, within a reasonable period of
time, give written notice thereof to Landlord.
SECTION 10.02. TOTAL TAKING. In the event of a Taking of the entire
Private Parcel and/or Improvements, this Lease shall terminate as of the date
title vests in the condemning authority or the date the condemning authority is
entitled to possession, whichever first occurs (the "Date of Taking"). In case
of a Taking of such a substantial part of the Private Parcel and/or Improvements
as shall result in the Private Parcel remaining after such Taking (even if
Restoration were made) being unsuitable or economically unfeasible for the use
to which the Private Parcel had been put by Tenant prior to such Taking, Tenant
may, at its option, terminate this Lease by written notice to Landlord given
within ninety (90) days after the Date of Taking, such termination to be
effective as of a date specified in such notice within one hundred twenty (120)
days after the Date of Taking; provided, however, Tenant shall be relieved of
all monetary obligations and other liabilities arising under this Lease from and
after the date of such Taking, except for any such obligation or liability which
arises solely as a result of Tenant's gross negligence or willful misconduct.
Any Taking of the Private Parcel of the character referred to in this Section
which results in the termination of this Lease is referred to herein as a "Total
Taking". If Tenant elects to terminate this Lease pursuant to the provisions
hereof, then the parties shall be released thereby without further obligations
to the other party as of the effective date of such termination subject to (i)
the indemnification provisions hereof with respect to events occurring prior to
termination, and (ii) the payment to Landlord by Tenant of all accrued
obligations of Tenant to Landlord hereunder as of the effective date of such
termination.
SECTION 10.03. PARTIAL TAKING. In case of a Taking of the Private
Parcel and/or the
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Improvements other than a Total Taking (a "Partial Taking"), (i) this Lease
shall remain in full force and effect as to the portion of the Private Parcel
remaining immediately after such Taking, and (ii) Tenant shall promptly commence
and complete Restoration of the Private Parcel provided that (so long as
Tenant's obligations hereunder as to the Minimum Investment are satisfied)
Tenant shall not be obligated to expend more for the Restoration than the amount
awarded for such Restoration by the condemning authority, which amount shall be
paid to Tenant for use in completing such Restoration.
SECTION 10.04. AWARD. Any award and other payments on account of a
Taking, less costs, fees and expenses incurred in the collection thereof ("Net
Award") shall be applied as follows:
(a) In case of a Partial Taking (except a Taking for temporary use) ,
Tenant shall furnish to Landlord evidence satisfactory to Landlord of the total
estimated cost of the Restoration required by Section 10.03.
(b) The Net Award received on account of a Partial Taking (except a Taking
for temporary use) shall be held by Tenant and applied to pay the cost of
Restoration. The balance, if any, shall be paid as follows: (i) first, an
amount equivalent to the Investment made by Tenant as of the date immediately
prior to such Taking shall be paid to Tenant and (ii) then, the balance, if any,
shall be divided between Landlord and Tenant in the ratio, as nearly as
practicable, which (i) the then value of Landlord's interest in the Private
Parcel valued as unimproved and encumbered by this Lease, bears to (ii) the then
value of Tenant's interest in this Lease for the remainder of the Term
(including the period of all Renewal Options and the full value of all
Improvements), each as determined by appraisal conducted pursuant to Section
20.02.
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(c) Any Net Award received on account of a Taking for temporary use shall
be paid as follows:
(i) each party shall attempt to obtain a separate award for its own
damages resulting from such temporary Taking;
(ii) if the condemning authority fails or refuses to grant separate
awards to each party, then the Net Award for a Taking for temporary
use-shall be divided between Landlord and Tenant based on the then existing
value of their respective interests in the Private Parcel. If the parties
are unable to agree on the amount to be so paid, the dispute shall be
submitted to arbitration pursuant to Section 20.01;
provided, however, that (A) if any portion of any such award is paid by the
condemnor by reason of any damage to the Improvements, such portion shall be
held for the benefit of Tenant and applied as provided in the first sentence of
subsection (b) of this Section; and (B) if any portion of an award or payment on
account of a Taking for temporary use relates to a period beyond the date of
termination of the Term, such portion shall be paid to Landlord.
(d) The Net Award received on account of a Total Taking shall be allocated
as set forth in the second sentence of subsection (b) of this Section.
SECTION 10.05. ABATEMENT OF RENT;. In the event of a Partial Taking,
effective as of the Date
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of Taking the Minimum Annual Rent shall be permanently reduced to that amount
which bears the same relationship to the Minimum Annual Rent due as of the Rent
Commencement Date as the fair market value of the Private Parcel which remains
after the taking bears to the fair market value of all of the Private Parcel
immediately prior to the Taking. In the event of a Taking for temporary use,
the Minimum Annual Rent shall be temporarily abated during the period of such
Taking in proportion to the degree to which Tenant's use of the Private Parcel
is impaired by such Taking. If the parties are unable to agree on the amount of
any abatement required by this Section, the dispute shall be submitted to
arbitration pursuant to Section 20.01.
SECTION 10.06. LANDLORD'S CONDEMNATION COVENANT;. Landlord hereby
covenants and agrees to refrain from consenting to, or permitting, any Taking
without obtaining Tenant's prior written consent thereto and further, that
Tenant shall, at its option, to be exercised in its sole discretion, be entitled
to participate in any proceedings and negotiations in connection with any such
Taking and other agreements relating or incidental thereto.
ARTICLE 11
LIENS
SECTION 11.01. NO LIENS. Tenant will not create any mortgage, deed
of trust, lien, security interest, encumbrance or charge on, pledge of or
conditional sale or other title retention agreement with respect to the Private
Parcel, other than (i) this Lease, subleases and other agreements permitted by
Article 13, and Leasehold Mortgages permitted by Article 14, (ii) liens for
Impositions not yet payable, or payable without the addition of any fine,
penalty, interest or cost for nonpayment, or being contested as permitted by
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Section 22.13, (iii) liens of mechanics, materialmen, suppliers or vendors, or
rights thereto, for sums which under the terms of the related contracts are not
at the time due or which are being contested as permitted by Section 22.13, (iv)
the Reciprocal Easement Agreement and as may be expressly permitted thereunder,
(v) the granting of easements, restrictions and rights of way necessary or
desirable in connection with the construction of the Improvements or otherwise
granted in the ordinary course of business; or (vi) liens on and in connection
with any Equipment Financing or otherwise in connection with the acquisition of
Tenant's Property.
SECTION 11.02. MECHANICS' LIENS. Nothing contained in this Lease
shall be construed as a requirement of Landlord for the performance of any labor
or the furnishing of any materials for any specific improvements, alterations or
repairs of or to the Private Parcel. Tenant agrees that Tenant will, at all
times when the same may be necessary, or in Tenant's opinion desirable, and
subject to Tenant's rights under Section 22.13, take such action as may be
required under any Law then in existence which will prevent the enforcement of
any mechanics' or similar liens against the fee of the Private Parcel for or on
account of labor, services or materials furnished to Tenant, or furnished at
Tenant's request. Tenant will allow Landlord from time to time to post a notice
of nonresponsibility on the Private Parcel.
ARTICLE 12
INSPECTION OF PREMISES BY LANDLORD
SECTION 12.01. ENTRY. Tenant shall permit Landlord and the
authorized representatives of Landlord to enter the Private Parcel at all
reasonable times after at least twenty-four (24) hours prior notice
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to Tenant (and at any time in the event of emergencies) for the purpose of (a)
inspecting the same, and (b) performing any work therein that may be necessary
by reason of a Tenant Default, which work shall be performed in material
compliance with all applicable Laws. Nothing herein shall imply any duty upon
the part of Landlord to do any such work which, under any provision of this
Lease, Tenant may be required to perform, nor to place upon Landlord any
obligation for the care, supervision or repair of the Private Parcel except as
otherwise specified in this Lease. Landlord may, during the progress of any
work on the Private Parcel, keep and store therein all necessary materials,
tools and equipment. Landlord's entry shall not unreasonably interfere with
Tenant's use of the Private Parcel. Landlord shall indemnify, defend and hold
Tenant harmless from and against any and all loss, claim, cost expense and other
liability incurred or suffered by Tenant as a result of the presence of Landlord
on the Private Parcel or the work performed thereby.
SECTION 12.02. EXHIBIT FOR SALE OR LEASE. Landlord is hereby given
the right during usual business hours to enter the Private Parcel and to exhibit
the same in a reasonable manner for the purpose of sale, and during the last
twenty-four (24) months of the Term of this lease to exhibit the same to any
prospective tenant provided, in both cases, Landlord complies with the
requirements of Section 12.01 and so long as any applicable conditions in
Article 24 have been satisfied.
ARTICLE 13
ASSIGNMENT AND SUBLEASING
SECTION 13.01. ASSIGNMENT. Tenant shall have the absolute right to
assign or otherwise transfer Tenant's interest in this Lease, the Improvements
and any of Tenant's Property ("Tenant's Estate")
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(i) to any persons or entities so long as Tenant first obtains Landlord's
consent, which consent shall not be unreasonably withheld or delayed, and/or
(ii) to a Permitted Assignee. The following provisions shall apply to any
assignment by Tenant:
(a) Any proposed assignee, by instrument in writing, shall expressly
assume all of the obligations of Tenant to be performed under this Lease, the
Reciprocal Easement Agreement and the Revenue Sharing Agreement from and after
the effective date of the assignment.
(b) Following any assignment made in accordance with the provisions of
this Section, the assignor shall have no further obligations under this Lease
and shall be released from all liability therefor except for the performance of
obligations under this Lease accruing before the effective date of the
assignment.
(c) The provisions of this Section regarding assignment shall not apply to
any Leasehold Mortgage, which shall be governed by the provisions of ARTICLE 14.
SECTION 13.02. PERMITTED ASSIGNEE;. As used herein, the term
"Permitted Assignee" shall mean any of the following:
(a) An assignee which at the time of the proposed assignment (i) has such
financial standing and responsibility as to give reasonable assurance that all
of Tenant's obligations under the Lease, the Reciprocal Easement Agreement and
the Revenue Sharing Agreement following the assignment will be performed, and
(ii) has such experience and reputation in the operation of the
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business then being operated on the Private Parcel to give reasonable assurance
that such business will continue to be operated at the level and in accordance
with the standards maintained prior to the assignment, or such proposed assignee
has entered into a management agreement with an entity that has such experience
and reputation, and (iii) certifies to the Landlord in writing to the effect
that (A) it is not then nor has ever been the subject of a voluntary bankruptcy
or insolvency proceeding or any involuntary such proceeding that was not
dismissed within 120 days of the filing thereof, (B) it is not the subject of
any state or federal investigation with respect to its management, financial
statements or operations (nor is any manager referred to in the preceeding
clause (ii)), (C) it is not in violation of any State or federal rule or
regulation applicable to it, and (D) no litigation is pending or known to be
threatened against it which could materially adversely affect its financial
condition or operations.; or
(b) A successor or affiliate of the assigning Tenant, which is defined as
(i) any corporation that controls, is controlled by, or is under common control
with the assigning Tenant (ii) the surviving corporation in connection with a
corporate reorganization, or the merger of Tenant into, or the consolidation of
Tenant with, another corporation or corporations, or (iii) any successor owner
of all or substantially all of Tenant's business or assets located on the
Private Parcel.
SECTION 13.03. SUBLEASES. Tenant shall have the absolute right to
sublet all or any part of the Private Parcel so long as either: (x) the total
aggregate area affected by all subleases then in effect does not constitute more
than twenty percent (20%) of the Private Parcel; or (b) such sublease is to an
entity described in Section 13.02 (a) or (b). In addition, Tenant may enter
into other subleases which would not qualify under the preceding sentence with
the approval of Landlord, which approval shall not be unreasonably withheld
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or delayed. Each of the following provisions shall apply to any sublease
entered into in compliance with this Section:
(a) Tenant shall remain primarily obligated to perform Tenant's
obligations under this Lease.
(b) Each sublease shall contain a provision requiring the subtenant to
attorn to Landlord in the event this Lease is terminated.
(c) With respect to any sublease between unrelated parties requiring the
subtenant to pay a fair market rent and which is otherwise on market terms and
complies with this Section, Landlord shall, upon request by such subtenant,
enter into a recognition and nondisturbance agreement which provides for the
following: (i) Landlord shall recognize the sublease and not disturb the
subtenant's possession only so long as such subtenant shall not be in default
under its sublease: (ii) the subtenant will attorn to Landlord; and (iii)
Landlord shall not be responsible to the subtenant under the sublease except for
obligations accruing subsequent to the date of such attornment.
SECTION 13.04. PROVISIONS APPLICABLE TO BOTH ASSIGNMENTS AND
SUBLEASES. The following provisions shall apply to any assignment or sublease
proposed by Tenant:
(a) Tenant shall give Landlord at least thirty (30) days prior written
notice of any desire to enter into any assignment or sublease, unless such
assignee or sublessee is an entity under Section 13.02(b), which notice shall
describe in reasonable detail the proposed terms of such transfer,
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along with identity of the proposed assignee or subtenant, and sufficient
financial information about the proposed assignee or subtenant to enable
Landlord to reasonably evaluate the financial condition of the proposed assignee
or subtenant. If Landlord fails to approve or disapprove the proposed transfer
within thirty (30) days after receipt of Tenant's written notice requesting such
approval, Landlord shall be deemed to have approved the transfer in question.
(b) Any attempted assignment or sublease that does not comply with the
provisions of this Article shall be voidable at Landlord's option within 30 days
after delivery of written notice thereof to Landlord.
(c) Landlord's consent to any one assignment or sublease shall not
constitute a waiver of the provisions of this Article as to any subsequent
proposed assignment or sublease.
(d) In the event a dispute arises between Landlord and Tenant as to
whether or not Landlord is obligated to approve an assignment or sublease
proposed by Tenant, such dispute shall be settled by arbitration conducted in
accordance with the procedures described in Section 20.01.
ARTICLE 14
LEASEHOLD MORTGAGES
SECTION 14.01. TENANT'S RIGHT TO CREATE LEASEHOLD MORTGAGES. At any
time and from time to time during the Term, Tenant may assign or encumber all or
any part of Tenant's Estate by way of one or
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more deeds of trust, mortgages, or other security devices (a "Leasehold
Mortgage", the holder of which is referred to herein as a "Leasehold
Mortgagee"); provided, that any such Leasehold Mortgage shall be subject and
subordinate to the rights of Landlord hereunder. Any Leasehold Mortgage shall
cover no interest in any real property other than Tenant's Estate. Any
Leasehold Mortgage shall be subordinate to Landlord's interest in the Private
Parcel and Landlord's rights under Section 17.10.
SECTION 14.02. INSURANCE AND CONDEMNATION PROCEEDS. Any Leasehold
Mortgage shall contain provisions permitting the disposition and application of
insurance proceeds and condemnation awards in the manner provided in this Lease
to the extent necessary to maintain the Minimum Investment; and if not so
necessary, insurance proceeds and condemnation awards may be disposed of and
applied as required under any such Leasehold Mortgage. Upon the written request
of any Leasehold Mortgagee, the Leasehold Mortgagee shall be named as an
additional insured on all policies of insurance carried by Tenant pursuant to
Article 5 as its interests appear. Each Leasehold Mortgagee shall have the
right to participate in any settlement or adjustment of insurance proceeds or
condemnation awards. If an institutional lender is the holder of a Leasehold
Mortgage which is a first lien on Tenant's Estate and if such lender so
requires, all insurance proceeds and condemnation proceeds shall be paid to such
lender to be held in trust for disbursal in accordance with the provisions of
this Lease.
SECTION 14.03. PERMITTED LEASEHOLD MORTGAGEES. Any Leasehold
Mortgage may be given only to (i) an institutional lender, which shall include a
bank or trust company, savings bank, insurance company, pension or retirement
fund, credit company, or real estate investment trust having assets of not less
than Twenty-Five Million Dollars ($25,000,000), or (ii) such other type of
lender as may be approved by Landlord, which approval shall not be unreasonably
withheld or withheld.
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SECTION 14.04. NOTICES. If a Leasehold Mortgagee shall have given to
Landlord a notice specifying its name and address, Landlord shall give to such
Leasehold Mortgagee a copy of any and all notices from time to time given to
Tenant by Landlord (including, without limitation, any notice of default) at the
same time and manner as and whenever any such notice shall thereafter be given
by Landlord to Tenant, addressed to such Leasehold Mortgagee at the address last
furnished to Landlord;. No such notice of any kind by Landlord shall be deemed
to have been given to Tenant unless and until a copy thereof shall have been so
given to such Leasehold Mortgagee.
SECTION 14.05. TIME TO CURE DEFAULTS. In the case of any notice of
default given by Landlord to Tenant, the Leasehold Mortgagee shall thereupon
have the same concurrent grace periods as are given Tenant for remedying a
default or causing it to be remedied, plus, in each case, an additional period
of thirty (30) days after the expiration thereof or after Landlord has served
such notice of default upon each Leasehold Mortgagee, whichever is later.
Provided that all monetary obligations of Tenant under this Lease shall be duly
performed, these grace periods shall be extended as set forth in the respective
circumstances below.
(a) In those instances which reasonably require the Leasehold Mortgagee to
be in possession of the Private Parcel to cure any default by Lessee, the time
therein allowed the Leasehold Mortgagee to cure any default by Tenant shall be
deemed extended to include the period of time required by the Leasehold
Mortgagee to obtain such possession with due diligence.
(b) In those instances in which a Leasehold Mortgagee is prohibited by any
process or injunction issued by any court or by reason of any action by any
court having jurisdiction of any
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bankruptcy or insolvency proceeding involving Tenant or by the provisions of the
bankruptcy laws from commencing or prosecuting foreclosure or other appropriate
proceedings in the nature thereof, the time herein allowed a Leasehold Mortgagee
to prosecute such foreclosure or other proceeding shall be extended for the
period of such prohibition.
SECTION 14.06. RIGHT TO CURE. During the continuation of a Tenant
Default, a Leasehold Mortgagee shall, without prejudice to its rights against
Tenant, without payment of any penalty to Landlord and within the period and as
otherwise provided herein, have the right, but not the obligation, to do any of
the following if Tenant has failed to do so within applicable notice and cure
periods: pay all of the rents due hereunder, to effect any insurance, to pay any
Impositions, to make any repairs and improvements, to do any other act or thing
required of Tenant hereunder or which may be necessary and proper to be done in
the performance and observance of the agreements, covenants and conditions
hereof, to remedy any default of Tenant or cause the same to be remedied, to
acquire Tenants Estate, or to commence foreclosure or other appropriate
proceedings. For such purposes Landlord and Tenant hereby authorize a Leasehold
Mortgagee to enter upon the Private Parcel and to exercise any of Tenant's
rights and powers under this Lease, and, subject to the provisions of this
Lease, under the Leasehold Mortgage. Landlord shall accept performance by the
Leasehold Mortgagee of any covenant, condition or agreement on Tenant's part to
be performed hereunder with the same force and effect as though performed by
Tenant. No Tenant Default shall be deemed to exist and this Lease shall not be
terminated by Landlord so long as any Leasehold Mortgagee shall, in good faith,
have commenced to rectify any claimed Tenant Default or to exercise its rights
to acquire Tenant's Estate or commence foreclosure or other appropriate
proceedings, and to prosecute the same to completion with diligence and
continuity; provided, however, that the Leasehold Mortgagee shall not be
required to continue such foreclosure proceedings if such Tenant Default be
cured. Notwithstanding anything
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contained in this Lease to the contrary, Landlord may not terminate this Lease
as a result of any Tenant Default relating to bankruptcy or other act of
insolvency described in subparagraphs (c), d), (e), (f), or (g) of SECTION 17.01
if any Leasehold Mortgagee commences or has commenced and thereafter is
continuously pursuing the foreclosure of its Leasehold Mortgage but only so long
as such Leasehold Mortgagee performs, or otherwise causes to be performed, in
accordance with Section 14.05 all obligations of Tenant under the Lease which
are susceptible of being performed by such Leasehold Mortgagee (including the
payment of rent and all other monetary obligations) until such time as the
interest of Tenant under this Lease is so acquired or sold upon foreclosure or
by way of other appropriate proceedings in the nature thereof.
SECTION 14.07. NO AMENDMENT OF LEASE. From and after receiving
notice from any Leasehold Mortgagee that a Leasehold Mortgage has been created
and continues in effect, if and to the extent required under said Leasehold
Mortgage, neither Landlord nor Tenant shall cancel, terminate, surrender, modify
or amend this Lease in any respect which materially adversely affects the
Leasehold Mortgagee without the prior written consent of the Leasehold
Mortgagee. No Leasehold Mortgagee shall become liable under the provisions of
this Lease unless and until such time as it becomes, and then only for so long
as it remains, the owner of Tenant's Estate, and such liability shall be limited
to the rights and insurances required to be carried hereunder (whether or not so
carried) and to its interest in the Private Parcel.
SECTION 14.08. FORECLOSURE PERMITTED. Foreclosure of a Leasehold
Mortgage, or any sale thereunder, whether by judicial proceedings or by virtue
of any power contained in the Leasehold Mortgage, or any conveyance of Tenant's
Estate from Tenant to a Leasehold Mortgagee, its nominee, designee, successor
and/or assign through, or in lieu of, foreclosure or other appropriate
proceedings in the nature thereof, shall not require the consent of Landlord nor
shall it constitute a breach of any provision of or a
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default under this Lease, and upon such foreclosure, sale or conveyance Landlord
shall recognize the Leasehold Mortgagee as Tenant hereunder.
SECTION 14.09. RIGHT TO ASSIGN FOLLOWING FORECLOSURE. If a Leasehold
Mortgagee, its nominee, designee, successor and/or assign shall acquire Tenant's
Estate as a result of a sale under a Leasehold Mortgage pursuant to a power of
sale contained therein, pursuant to a judgment of foreclosure, through any
transfer in lieu of foreclosure, or through settlement of or arising out of any
pending or contemplated foreclosure action, or in the event a Leasehold
Mortgagee, its nominee, designee, successor and/or assign becomes Tenant under
this Lease or any new lease obtained pursuant to SECTION 14.10, such Leasehold
Mortgagee's right thereafter to assign or transfer this Lease or such new lease
shall be subject to the reasonable approval of the Landlord, which approval may
be conditioned upon a showing that the assignee or transferee satisfies the
requirements for a "Permitted Assignee" under Section 13.02(a) hereof. Upon an
assignment by a Leasehold Mortgagee, its nominee, designee, successor and/or
assign of Tenant's Estate, such Leasehold Mortgagee, its nominee, designee,
successor and/or assign shall be released from any further liability for the
performance of the obligations of the Tenant under this Lease. Any purchaser at
a foreclosure sale, other than a Leasehold Mortgagee, its nominee, designee,
successor and/or assign, must be conditioned upon the factors described in
clauses (i) and (ii) of the preceding sentence, and must assume this Lease and
Tenant's obligations under the Reciprocal Easement Agreement and the Revenue
Sharing Agreement, and it shall have no right in respect to the Private Parcel
unless it has obtained such approval and so assumes and delivers a duplicate
original of the assumption agreement (to be executed in form for recording)
within ten (10) days after such purchaser acquires title to the Tenant's Estate.
SECTION 14.10. NEW LEASE. In the event that this Lease is terminated
by Landlord on account
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of a Tenant Default (and provided that an unsatisfied Leasehold Mortgage stands
of record) or in the event Tenant's Estate shall be sold, assigned or
transferred pursuant to the exercise of any remedy of a Leasehold Mortgagee, or
pursuant to judicial or other proceedings, subject to compliance with Section
14.09, Landlord shall execute and deliver a new lease of the premises leased
hereby to the Leasehold Mortgagee or its nominee, designee, purchaser, assignee
or transferee, upon written request by such person or entity given within sixty
(60) days after such termination, sale, assignment or transfer for the remainder
of the Term with the same agreements, covenants and conditions (except for any
requirements which have been fulfilled by Tenant prior to termination) as are
contained herein and with priority equal to that of this Lease; provided,
however, that the Leasehold Mortgagee shall promptly cure, or cause to be cured,
any existing Tenant Default hereunder, and provided further that if more than
one Leasehold Mortgagee requests such new lease, the Leasehold Mortgagee holding
the most senior Leasehold Mortgage shall prevail. Upon execution and delivery
of such new lease, Landlord shall cooperate with the new tenant thereunder, at
the expense of the said new tenant, in taking such action as shall be necessary
to cancel and discharge this Lease and to remove Tenant named herein from the
Private Parcel. In such event the ownership of the Improvements shall be deemed
to have been transferred directly to such transferee of Tenant's Estate and the
provisions of this Lease causing such Improvements to become the property of
Landlord in the event of termination of this Lease shall be ineffective as
applied to any such transfer. Landlord shall, at no expense to Landlord,
execute such deed or other instrument of conveyance as may be necessary for fee
simple title to the Improvements, but not the Private Parcel, to be insured upon
such transfer of enant's Estate.
SECTION 14.11. ADDITIONAL LEASEHOLD MORTGAGEE REQUIREMENTS. Landlord
and Tenant shall cooperate in including in this Lease by suitable amendment from
time to time any provision consistent with the provisions of this Lease which
may reasonably be requested by any proposed Leasehold Mortgagee for
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the purpose of implementing the mortgagee protection provisions contained in
this Lease and allowing such Leasehold Mortgagee reasonable means to protect or
preserve the validity or enforceability of the lien the Leasehold Mortgage on
the occurrence of a Tenant Default under the terms of this Lease. Landlord and
Tenant each agree to execute and deliver (and to acknowledge, if necessary, for
recording purposes) any agreement necessary to effect any such amendment;
provided, however, that any such amendment shall not in any way affect the term
or rent under this Lease nor otherwise in any material respect adversely affect
any rights of Landlord under this Lease.
Tenant shall, on or about October 1st of each year that this Lease in in
effect, provide Landlord with a written list of all Leasehold Mortgages then in
effect and setting forth the identity of each Leasehold Mortgagee, the lease
assets and the term of each such Leasehold Mortgage. Upon written request of
the Landlord, Tenant shall provide Landlord with a copy of any Leasehold
Mortgage then in effect.
ARTICLE 15
TRANSFER BY LANDLORD
SECTION 15.01. LIMITATION OF LANDLORD'S LIABILITY. The term
"Landlord" as used in this Lease shall be limited to mean only the Landlord
named herein, its successors and assigns. In the event of any transfer of all
of Landlord's interest in and to the premises leased hereby in accordance with
the terms of this Lease, including but not limited to, Article 24 hereof, the
Landlord named herein (and in case of any subsequent transfers, the then
transferor) shall be automatically freed and relieved from and after the date of
such transfer of all liability with regard to the performance of any covenants
or obligations on the part of Landlord contained in this Lease thereafter to be
performed, provided that any funds in the hands of, under
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the control of, or being held for the benefit of Landlord (or the then
transferor at the time of such transfer) in which Tenant has an interest shall
be turned over to the transferee, in trust, for application pursuant to the
provisions hereof, and any amount then due and payable to Tenant by Landlord or
the then transferor under any provision of this Lease shall be paid to Tenant
and such transfer is made in compliance with this Lease.
SECTION 15.02. LIMITATION ON ENCUMBRANCE BY LANDLORD. This Lease
shall automatically and without further documentation be prior and superior to
any lease (other than the Public Leases), mortgage, deed of trust, hypothecate,
pledge or other encumbrance made, created, or permitted by Landlord or resulting
from actions or omissions of Landlord (including tax liens or judgment liens),
and Landlord shall not cause or permit any such hypothecation, pledge, deed of
trust or other encumbrance to be made (whether arising voluntarily, by operation
of Law or otherwise) unless such hypothecation, pledge, deed of trust or other
encumbrance specifically by its terms provides that it is subject and
subordinate to this Lease in a manner and in a form approved by Tenant.
SECTION 15.03. OTHER LIMITATIONS. Landlord covenants and agrees with
Tenant that it shall not cause, create or permit (whether voluntarily, by
operation of Law or otherwise) any lien, claim, charge or attachment to be filed
against all or any portion of the Private Parcel, the Improvements and/or any
interest created by this Lease.
ARTICLE 16
INDEMNIFICATION
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SECTION 16.01. INDEMNIFICATION OF LANDLORD. Tenant shall protect,
indemnify, defend and hold Landlord harmless from and against all liabilities,
obligations, claims, damages, penalties, causes of action, judgments,
settlements, orders and other costs and expenses (including, without limitation,
attorneys' fees and expenses) imposed upon or incurred by or asserted against
Landlord or the Private Parcel by reason of the occurrence or existence of any
of the following: (i) any accident, injury to or death of persons (including
workmen) or loss of or damage to property occurring on the Private Parcel or any
part thereof; (ii) any use, non-use, possession, occupation, operation,
maintenance, management or condition of the Private Parcel or any part thereof
during the Term; (iii) any failure on the part of Tenant to perform or comply
with any of the terms of this Lease; (iv) the performance of any labor or
services or the furnishing of any materials or other property in respect of the
Private Parcel or any part thereof by or on behalf of Tenant; or (v) any gross
negligence or willful misconduct on the part of Tenant or any of its agents,
contractors, servants, employees, sublessees, licensees or invitees; except in
each case described in the preceding clauses (i) through (v) to the extent
caused by a breach by Landlord or by the gross negligence or willful misconduct
of Landlord, its agents, servants, employees, sublessees contractors, licensees,
invitees, representatives or assigns.
SECTION 16.02. INDEMNIFICATION OF TENANT. Landlord shall protect,
indemnify, defend and hold Tenant harmless from and against all liabilities,
obligations, claims, damages, penalties, causes of action, judgments,
settlements, orders and other costs and expenses (including, without limitation,
reasonable attorneys fees and expenses) imposed upon or incurred by or asserted
against Tenant or the Private Parcel by reason of the occurrence or existence of
any death, bodily injury, personal injury or property damage resulting from the
gross negligence or willful misconduct of Landlord, its agents servants,
employees, sublessees, contractors, licensees, invitees, representatives or
assigns or resulting from any failure on the part of Landlord to perform or
comply with any of the terms of this Lease or the breach of any representation
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made by Landlord in this Lease.
ARTICLE 17
TENANT'S DEFAULT AND LANDLORD'S REMEDIES
SECTION 17.01. TENANT DEFAULT. The occurrence and continuation
beyond the expiration of applicable notice and cure periods of any one or more
of the following events shall be a "Tenant Default":
(a) Tenant shall fail to pay any sum due to Landlord hereunder within
thirty (30) days after written notice that the same is past due and payable.
(b) Tenant shall fail to perform or comply with any other term hereof,
such failure shall continue for more than thirty (30) days after notice thereof
from Landlord, and Tenant shall not within such period commence with due
diligence and dispatch the curing of such default, or having so commenced, shall
thereafter fail or neglect to prosecute or complete with diligence and dispatch
the curing of such default.
(c) The filing by or against Tenant, of any proceedings under any state or
federal insolvency or bankruptcy law, or any comparable law that is now or
hereafter may be in effect, whether for liquidation or reorganization, where
such proceedings are not dismissed within ninety (90) days after filing.
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(d) The entry of an order for relief against Tenant under any bankruptcy,
insolvency or reorganization case.
(e) The appointment of a receiver, trustee, liquidator, custodian or
similar officer of all or any part of the property of Tenant if such appointment
is not discharged within sixty (60) days after such appointment.
(f) The assignment of all or substantially all of the property of Tenant
for the benefit of creditors.
(g) A writ of attachment or execution is levied on Tenant's interest in
this Lease which writ is not discharged within sixty (60) days after attachment
or execution.
(h) Tenant shall default in the performance of any of its obligations
under the Reciprocal Easement Agreement or the Revenue Sharing Agreement and
such default continues for more than thirty (30) days after notice from
Landlord, and Tenant shall not within such period commence with due diligence
and dispatch the curing of such default, or having so commenced, shall
thereafter fail or neglect to prosecute or complete with diligence and dispatch
the curing of such default.
(i) Failure by Tenant to complete the Minimum Investment within two years
of the Term Commencement Date, provided that so long as Tenant is proceeding in
good faith no such default shall occur by reason of delays arising out of
compliance with any Laws applicable to construction of Improvements incident to
the Minimum Investment or other Force Majeure and; PROVIDED FURTHER,
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that no Tenant Default shall occur and be continuing hereunder if, prior to the
end of such two-year period, Tenant has deposited into escrow, on terms
reasonably acceptable to Landlord, an amount equal to the unexpended portion of
the Minimum Investment.
SECTION 17.02. NOTICE FROM LANDLORD. Subject to the terms of Article
14 of this Lease, if there exists a Tenant Default Landlord, at any time
thereafter while such Tenant Default exists, may give a written termination
notice to Tenant, and on the date specified in such notice (which shall be at
least ten business days after the delivery of such notice) this Lease shall
terminate unless Tenant has cured such Tenant Default and, subject to any
equitable or other rights available at law to prevent or mitigate a forfeiture,
the Term shall expire and terminate and all rights of Tenant under this Lease
shall cease. If there exists a Tenant Default, Landlord may elect not to
terminate this Lease and may continue to enforce all of its rights and remedies
under this Lease, including the right to recover the rent as it becomes due as
provided by California Civil Code Section 1951.4. Tenant shall reimburse
Landlord for all costs and expenses incurred by or on behalf of Landlord
(including, without limitation, reasonable attorneys' fees and expenses)
occasioned by any Tenant Default under this Lease.
SECTION 17.03. TERMINATION OF TENANT'S RIGHT TO POSSESSION. If there
exists a Tenant Default, then, subject to the terms of Article 14 of this Lease,
Landlord shall have the immediate right to re-enter the Private Parcel and
terminate Tenant's right to possession of the Private Parcel, in which event
Tenant shall promptly surrender possession of the Private Parcel and pay to
Landlord all amounts due Landlord hereunder. Landlord may, but shall have no
obligation to, remove all persons and property therefrom, subject to Tenant's
rights to remove and retain same under Sections 3.06 and 3.10 above. Such
property may be removed and stored in a warehouse or elsewhere at the expense
and risk of and for the account of Tenant. Should Landlord
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elect, in accordance with this Lease, to re-enter, or should Landlord terminate
Tenant's right to possession pursuant to legal proceedings or to any notice
provided for by law, this Lease shall terminate.
SECTION 17.04. TERMINATION. If this Lease is terminated by Landlord
in accordance with the terms hereof because of the occurrence of a Tenant
Default, Landlord may recover from Tenant:
(a) The worth at the time of award of the unpaid rent and all other sums
payable hereunder which are due, owing and unpaid by Tenant to Landlord at the
time of termination;
(b) The worth at the time of award of the unpaid rent and all other sums
payable hereunder which would have come due after termination until the time of
award, reduced by the amount, if any, of such loss which Tenant proves could
have been reasonably avoided;
(c) All other amounts necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its obligations
under this Lease; and
(d) At Landlord's election, such other amounts in addition to or in lieu
of the foregoing as may be permitted from time to time by the laws of the State
of California. As used in subsections (a) and (b) above, the term "worth at the
time of award" is computed by allowing interest at a rate equal to the lesser of
(i) two percent (2%) over the reference rate announced from time to time by Bank
of America National Trust and Savings Association, or (ii) the maximum rate an
individual is permitted by law to charge (the "Interest Rate"). As used in
subsection (c) above, the term "worth at the time of award" is computed by
discounting such amount at the discount rate of the Federal
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Reserve Bank of San Francisco at the time of award, plus one percent (1%).
SECTION 17.05. LANDLORD'S EQUITABLE RELIEF. No expiration or
termination of this Lease pursuant to Section 17.04, or by operation of Law or
otherwise in the event of a Tenant Default, and no repossession of the Private
Parcel pursuant to Section 17.03 or otherwise, shall relieve Tenant of its
liabilities and obligations arising prior to such termination or repossession,
all of which shall survive such expiration, termination or repossession,
including, without limitation, the right of Landlord under Section 16.01 to
indemnification for liability, arising prior to termination of this Lease to the
extent provided for therein, for personal injuries or property damage, nor shall
anything in this Lease be deemed to affect the right of Landlord to equitable
relief where such relief is permitted at Law.
SECTION 17.06. LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS.
Tenant covenants and agrees that if Tenant shall at any time fail to perform any
act, covenant, term, condition or agreement on Tenant's part to be performed
under this Lease, Landlord may, but shall not be obligated to do so, after ten
(10) business days prior written notice, or such longer notice as may be
required to be given pursuant to the terms hereof, or such lesser notice as
required to comply with applicable Law or by reason of an emergency, if Tenant
has not cured such failure, perform any such act, covenant, term, condition or
agreement for and on behalf of Tenant, and Tenant shall reimburse Landlord for
all sums so paid by Landlord, and all necessary incidental costs and expenses in
connection with the performance of any such act by Landlord, including
reasonable attorneys' fees, together with interest thereon at the Interest Rate
from the date of the making of such expenditure by Landlord.
SECTION 17.07. NO WAIVER BY LANDLORD OR TENANT. No failure by
Landlord or Tenant to insist
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upon the strict performance of any term hereof or to exercise any right, power
or remedy consequent upon a breach thereof, and no submission by Tenant or
acceptance by Landlord of full or partial rent during the continuance of any
such breach shall constitute a waiver of any such breach or of any such term.
No waiver of any breach shall affect or alter this Lease, which shall continue
in full force and effect, or the respective rights of Landlord or Tenant with
respect to any other then existing or subsequent breach.
The failure of Landlord to insist upon strict performance of any of the
obligations of Tenant hereunder in one or more instances shall not be deemed a
waiver of Landlord's right to insist upon the full and strict performance of the
same or any other obligation of Tenant at a subsequent times nor shall the
failure of Landlord to seek redress for the violation of any obligation or
covenant of Tenant be deemed to preclude Landlord from seeking redress for any
subsequent violation nor to prevent a subsequent act which would originally have
constituted a violation from having all the force and effect of an original
violation.
SECTION 17.08. LANDLORD'S REMEDIES CUMULATIVE. Each right, power and
remedy of Landlord provided for in this Lease or existing at Law or in equity
shall be cumulative and concurrent and shall be in addition to every other
right, power or remedy provided for in this Lease or existing at Law or in
equity, and the exercise or beginning of the exercise by Landlord of any one or
more of the rights, powers or remedies provided for in this Lease or existing at
Law or in equity shall not preclude the simultaneous or later exercise by
Landlord of any or all such other rights, powers or remedies.
SECTION 17.09. COUNTERCLAIMS BY TENANT IN ACTION TO RECOVER
POSSESSION. Anything to the contrary contained in this Lease notwithstanding,
nothing contained herein shall be deemed to preclude Tenant from interposing any
counterclaim in a summary proceeding instituted by Landlord to recover
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possession of the Private Parcel if Tenant's failure to do so would operate as a
bar to or waiver of Tenant's right to raise such claim in another action or
proceeding.
SECTION 17.10. FORCE MAJEURE. Anything to the contrary contained in
this Lease notwithstanding, Tenant shall not be deemed to be in default of any
such obligations if it shall be prevented from or delayed in performing such
obligation by reason of the occurrence of a Force Majeure, and Tenant's time for
such performance shall be extended by the number of days during which any
condition of Force Majeure prevails.
ARTICLE 18
LANDLORD'S DEFAULT AND TENANT'S REMEDIES
SECTION 18.01. LANDLORD'S DEFAULT. A "Landlord's Default" shall have
occurred hereunder thereby entitling Tenant to exercise each right, power and
remedy to which it is entitled under this Lease, at Law or in equity, if
Landlord breaches any representation or warranty (when made) or covenant on its
part to be performed under this Lease or any Other Agreement which is not cured
within thirty (30) days (or such sooner period as may be required by Law, or by
virtue of an emergency) after written notice by Tenant to Landlord and the City
specifying wherein Landlord has failed to perform such obligation; provided,
however, that if the nature of Landlord's obligation is such that more than
thirty (30) days are reasonably required for performance, then Landlord shall
not be in default if Landlord commences performance within such thirty-day
period and thereafter diligently prosecutes the same to completion.
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SECTION 18.02. FORCE MAJEURE. Anything to the contrary contained in
this Lease notwithstanding, Landlord shall not be deemed to be in default of any
of its obligations hereunder if it shall be prevented from or delayed in
performing such obligation by reason of Force Majeure and Landlord's time for
such performance shall be extended by the number of days during which any
condition of Force Majeure prevails.
SECTION 18.03. TENANT'S REMEDIES. If a Landlord's Default occurs,
then Tenant shall have the right, in addition to any and all other remedies to
which it is entitled under this Lease, including but not limited to Section
21.04 (a) after ten (10) business days' (or such sooner period as may be
required by Law, or by virtue of an emergency) written notice to Landlord and
the City of its intent to do so, to perform any obligation of Landlord and to
either, at Tenant's option: (i) obtain immediate reimbursement of all costs of
performing such obligation plus interest at the Interest Rate from the date any
sum is expended until Landlord reimburses Tenant, or (ii) deduct the cost of
performing such obligations plus interest at the Interest Rate from the date so
incurred from its next installment of rent, or (b) seek specific performance.
Tenant shall also have any other remedy available to it at Law or in equity
under California law, which remedies shall be cumulative in the manner described
by Section 17.08 for Landlord's remedies.
SECTION 18.04. NO WAIVER. The failure of Tenant to insist upon
strict performance of any of the obligations of Landlord hereunder in one or
more instances shall not be deemed a waiver of Tenant's right to insist upon the
full and strict performance of the same or any other obligation of Landlord at a
subsequent times nor shall the failure of Tenant to seek redress for the
violation of any obligation or covenant of Landlord be deemed to preclude Tenant
from seeking redress for any subsequent violation nor to prevent a subsequent
act which would originally have constituted a violation from having all the
force and effect of
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an original violation.
ARTICLE 19
ESTOPPEL CERTIFICATES; NON-DISTURBANCE
SECTION 19.01. ESTOPPEL CERTIFICATE BY TENANT. Tenant will execute,
acknowledge and deliver to Landlord within twenty (20) days after a written
request therefor a certificate certifying that (i) this Lease is unmodified and
in full force and effect (or, if there have been modifications, that this Lease
is in full force and effect, as modified and stating the modifications), (ii)
the dates, if any, to which any rent and other sums payable hereunder have been
paid, and (iii) no notice has been received by Tenant of any default which has
not been cured, and to the knowledge of Tenant no defaults by Landlord then
exist, except in either case as to defaults specified in said certificate. Any
such certificate may be relied upon by any prospective purchaser or mortgagee of
the Land or any part thereof, so long as such sale or mortgage is made in
compliance with this Lease, including but not limited to Article 24 below.
SECTION 19.02. ESTOPPEL CERTIFICATE BY LANDLORD. Landlord will
execute, acknowledge and deliver to Tenant or any sublessee within twenty (20)
days after a written request therefor, a certificate certifying (i) that this
Lease is unmodified and in full force and effect (or, if there have been
modifications, that this Lease is in full force and effect as modified, and
stating the modifications), (ii) that the dates, if any, to which rent and other
sums payable hereunder have been paid, and (iii) whether or not, to the
knowledge of Landlord, there are then existing any defaults under this Lease
(and if so, specifying the same). Any such certificate may be relied upon by
any prospective transferee, mortgagee, or sublessee of Tenant's interest
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under this Lease.
SECTION 19.03. ESTOPPEL NON-DISTURBANCE. (a) Landlord shall cause
the lessor of each and every ground, overriding or underlying lease of the
Private Parcel, now or hereafter in effect, whether or not such lease shall
cover other lands or buildings or leases, and all renewals, extensions,
supplements, modifications, consolidations and replacements thereof or thereto
and substitutions therefor (each, a "Superior Lease"), and the holder of each
and every trust indenture and mortgage, whether or not such trust indenture or
mortgage shall cover other lands or buildings or leases, which affects all or
any part of the Private Parcel, the Improvements or any such Superior Lease and
the leasehold interest created thereby, and all renewals, extensions,
supplements, modifications, consolidations and replacements thereof or thereto
and substitutions therefor (each a "Superior Mortgage") to execute, acknowledge
and deliver an agreement to the effect that the leasehold estate granted to
Tenant under this Lease and the rights of Tenant to quiet and peaceful
possession under this Lease will not be terminated or disturbed by reason of any
termination of such Superior Lease(s) or the foreclosure of any such Superior
Mortgage(s), so long as there shall not be then existing a Tenant Default under
this Lease
(b) In the event of any act or omission of Landlord which would give the
lessor of a Superior Lease (each, a "Superior Lessor") the right, immediately or
after lapse of a period of time, to cancel or terminate the Superior Lease, or
to otherwise recover possession of all or any part of the Private Parcel,
Superior Lessor shall not exercise such right until: (i) it has given written
notice of such act or omission to Tenant and a reasonable period for remedying
such act or omission (which reasonable period shall in no event be less than the
period to which Landlord would be entitled under Superior Lease or otherwise,
plus an additional 30 days); and (ii) Tenant shall not have cured, or caused to
be cured, such act or omission within such reasonable
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period following the giving of such notice and following the time when such
Superior Lessor shall have become entitled under the Superior Lease to remedy
the same; provided, however, that if Tenant has given written notice of
intention to, and commenced to, remedy such act or omission within said
reasonable period, Tenant shall be entitled to a reasonable amount of time to
complete curing same.
ARTICLE 20
ARBITRATION APPRAISAL
SECTION 20.01. ARBITRATION. Whenever in this Lease it is provided
that a dispute shall be determined by arbitration or if any of the Parties shall
otherwise desire arbitration, the arbitration shall be conducted as provided in
this Article. The party desiring such arbitration shall give written notice
thereof to the other specifying the dispute to be arbitrated. Within thirty
(30) days after the date on which the arbitration procedure is invoked, each
party shall appoint an experienced arbitrator and notify the other party of the
arbitrator's name and address. The two arbitrators so appointed shall appoint a
third experienced arbitrator. If the three arbitrators to be so appointed are
not appointed within forty-five (45) days of the date the arbitration procedure
is invoked, then either Landlord or Tenant shall be entitled to apply to the
Presiding Judge of the Superior Court of the County of Solano for the selection
of a third arbitrator who shall then participate in the arbitration. The
arbitration shall be conducted in Solano County, California under the commercial
arbitration rules then in effect of the American Arbitration Association. The
written decision and findings of a majority of the panel of arbitrators shall be
final, binding and conclusive as between the parties and may be enforced on the
application of either party or by the order or judgment entered in any court
having jurisdiction. The parties hereby consent to the jurisdiction and venue
of the federal courts located in
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the Eastern District of the State of California and state courts located in
Solano County, California for this purpose. The parties hereto shall use all
commercially practicable efforts to cause the arbitrator or arbitrators so
selected to furnish Landlord and Tenant with a written decision within
forty-five (45) days of the date of selection of the last of the arbitrators to
be so selected. Any decision so submitted shall be signed by a majority of the
arbitrators.
Landlord and Tenant each shall advance one-half (1/2) of the costs of any
arbitration. However, the prevailing party in any arbitration proceeding or
legal action arising out of, or in connection with, this Lease shall be entitled
to recover its reasonable attorney's fees and its costs and expenses incurred in
connection with such arbitration proceeding or legal action. The arbitrators
shall specify the prevailing party or parties in its award. If more than one
arbitrable dispute is adjudicated then the costs and expenses of the arbitration
shall be apportioned by the arbitrators in the arbitration award to each
separate dispute.
SECTION 20.02. APPRAISAL. Any appraisal required or permitted
hereunder shall be made in the manner described in this Section. Within thirty
(30) days of the event giving rise the need for an appraisal, Landlord and
Tenant shall each appoint one appraiser to determine the fair market value of
the interest or property to be appraised, and notice of such appointment shall
be given to the other party. If either party shall fail or refuse so to appoint
an appraiser and give notice thereof within such period, the appraiser appointed
by the other party shall within fifteen (15) days thereafter individually make
such determination. If the parties have each so appointed an appraiser within
such thirty (30) day period and the appraisers thus appointed shall be unable to
agree on such value within sixty (60) days of such appointment, they shall,
within fifteen (15) days thereafter, join to appoint a third appraiser and, if
they fail so to appoint such third appraiser within such period, the third
appraiser shall be appointed by the Presiding Judge of the Superior
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Court for the County of Solano, and such third appraiser shall then individually
determine such value, such determination to be binding upon each of the parties.
All appraisers appointed hereunder shall be competent, qualified by training and
experience in the County of Solano, disinterested and independent and shall be
members in good standing of the American Institute of Real Estate Appraisers or
its successor and all appraisal reports shall be rendered in writing and signed
by the appraiser or appraisers making the report. All costs, fees and expenses
of the appraisers appointed by each party shall be borne by the party appointing
such appraiser, and all costs, fees and expenses of the third appraiser, if any,
shall be borne equally by Tenant and Landlord.
SECTION 20.03. NO ALTERATION OF LEASE. The arbitrator or
arbitrators, or appraiser or appraisers, shall have the right only to interpret
and apply the terms of this Lease, and may not change any such terms or deprive
any party to this Lease of any right or remedy expressly or impliedly provided
in this Lease.
ARTICLE 21
END OF TERM TERMINATION
SECTION 21.01. END OF TERM. Upon the expiration of the Term or other
termination of the Lease, Tenant shall quit and surrender to Landlord the
Private Parcel in good order and condition, ordinary wear and tear and damage by
fire and other perils excepted. If Landlord shall so require and notifies
Tenant in writing of such requirement at least one hundred eighty (180) days
before the end of the Term, Tenant shall at its sole cost remove any
Improvements designated by Landlord for removal and clear the Private Parcel
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of all debris. Tenant agrees to execute all documents reasonably necessary to
evidence any such termination. The foregoing is not intended and shall not be
construed to derogate in any way Tenant's rights to remove its Improvements and
Tenant's Property under Sections 3.06 and 3.10 above.
SECTION 21.02. HOLDING OVER. Any holding over by Tenant after the
expiration or termination of this Lease shall not constitute renewal hereof or
give Tenant any rights hereunder or in the Private Parcel, except with the prior
written consent of Landlord. Any holding over after the expiration or
termination of this Lease with the consent of Landlord shall be construed to be
a tenancy from month to month at a rent equal to the rent payable by Tenant
hereunder prior to such expiration or termination (prorated on a monthly basis)
and shall otherwise be on the terms and conditions herein specified so far as
applicable. Any holding over without Landlord's consent shall constitute a
default by Tenant and entitle Landlord to exercise any or all of its remedies as
provided herein.
SECTION 21.03. ACCEPTANCE OF SURRENDER. No modification, termination
or surrender of this Lease or surrender of the Private Parcel by Tenant shall be
valid or effective unless agreed to and accepted in writing by Landlord, and no
act by any representative or agent of Landlord, other than such a written
agreement and acceptance by Landlord, shall constitute an acceptance thereof.
SECTION 21.04. COMPENSATION TO TENANT UPON CERTAIN EVENTS OF
TERMINATION. In the event of (a) a Landlord's Default, and (b) such Landlord's
Default has a material adverse effect on the value and/or operation of the
Tenant's business conducted on the Private Parcel, and (c) no adequate remedy at
Law or in equity exists to cure the Landlord's Default or fully compensate
Tenant for its detriment as a result thereof, and (d) no Tenant Default has
occurred and is then continuing hereunder, and (e) Tenant elects to terminate
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this Lease and so terminates this Lease in accordance with its terms, Tenant
shall be entitled to receive, as liquidated damages (it being agreed that
Tenant's damages in such event are not as certainable) an amount equal to the
sum of : (i) the then value of the Investment as determined under Section 3.05,
(ii) the Purchase Price (as defined in the Option Agreement) plus any investment
made by Tenant towards improvement of the Public Parcel in accordance with the
procedure set forth in Section 1.05 of the Option Agreement, but less fifteen
percent 15% of such amount (but not more than a total of 100%) for each Lease
Year that has elapsed since the Rent Commencement Date (so that no amount will
be added by reason of this clause (ii) after the seventh Lease Year), and (iii)
interest on the amounts set forth in clauses (i) and (ii) at the Interest Rate
from the date each such amount was expended by Tenant to the date of payment or
such earlier date, if any, as the Improvement was destroyed, taken or rendered
obsolete and not replaced; reduced by an amount equal to the fair market value
of any Improvements removed by Tenant in connection with such termination (less
any expenses incurred by Tenant in connection with such removal); but not to
exceed, in total, the then going concern value of Tenant's business conducted on
the Private Parcel prior to such Landlord Default and termination as determined
by an investment banking firm selected by Tenant and reasonably acceptable to
Landlord. The provisions of Section 11.1 of the REA shall in no way limit
Tenant's rights under this Section 21.04.
SECTION 21.05. GENERAL EFFECT OF TERMINATION. Whenever in this Lease
provision is made that either party shall have the right to terminate this
Lease, then unless in said provision it is expressly provided otherwise
(including, without limitation, as is provided in this Article 21), neither
party hereto shall thereafter have any claim against the other under this Lease
or on account of the termination hereof, except for those accruing prior to the
effective date of such termination. It is intended by the parties hereto that
all of the obligations and liabilities of Landlord and Tenant which shall have
accrued as the date of termination of this
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Lease shall survive termination of the Lease, except as specifically set forth
in this Lease. Termination of this Lease shall also result in a concurrent
termination of the REA and the Revenue Sharing Agreement.
ARTICLE 22
GENERAL PROVISIONS
SECTION 22.01. PROVISIONS SUBJECT TO APPLICABLE LAW. All rights,
powers and remedies provided herein may be exercised only to the extent that the
exercise thereof does not violate any applicable Law, and are intended to be
limited to the extent necessary so that they will not render this Lease invalid,
unenforceable or not entitled to be recorded under any applicable Law.
SECTION 22.02. TIME IS OF THE ESSENCE. Time is of the essence in the
performance of all of the terms and provisions of this Lease; provided, however,
that any prevention or delay due to Force Majeure shall excuse the performance,
for a period equal to the period of any such prevention or delay, of any
obligation hereunder.
SECTION 22.03. NOTICES. All notices, demands, consents, and requests
which may or are to be given by any party to the other shall be in writing. All
notices, demands, consents and requests to Tenant shall be deemed to have been
properly given if served personally on Tenant during business hours, or if by
United States registered or certified mail, return receipt requested, postage
prepaid, or via nationally recognized overnight mail carrier addressed to Tenant
at its address first set forth above, or at such other place or places as Tenant
may from time to time designate by written notice to Landlord. All notices,
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demands, consents and requests to Landlord shall be deemed to have been properly
given if served personally on Landlord, or if sent by United States registered
or certified mail, return receipt requested, postage prepaid, or via nationally
recognized overnight mail carrier addressed to Landlord at its address first set
forth above, or at such place or places as Landlord may from time to time
designate by written notice to Tenant. Notices, demands, consents and requests
which are served upon either party in the manner aforesaid shall be deemed
sufficiently served or given for all purposes hereunder as follows: (a) on the
date delivered, if served personally; (b) the third business day after being
mailed, if served by certified or registered mail; or (c) the next business day,
if served by overnight mail. Copies of all notices to Tenant shall be sent in
the same manner and at the same time to Tenant's attorneys, Baer Marks & Upham,
LLP, 805 Third Avenue, New York, NY 10022, Attention: James M. Coughlin, Esq.
SECTION 22.04. INVALIDITY OF PARTICULAR PROVISIONS. If any term or
provision of this Lease or the application thereof to any persons or
circumstances shall, to any extent, be invalid or unenforceable, the remainder
of this Lease, or the application of such term or provision to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each term and provision of this Lease shall
be valid and be enforced to the fullest extent permitted by Law.
SECTION 22.05. APPLICABLE LAW. This Lease and the rights of the
parties hereunder shall be governed by the Laws of the State of California,
applicable to contracts made and performed in such State.
SECTION 22.06. NO JOINT VENTURE. It is agreed that no thing
contained in this Lease shall be deemed or construed as creating a partnership
or joint venture between Landlord and Tenant or between Landlord and any other
party, or cause Landlord to be responsible in any way for the debts or
obligations of
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Tenant or any other party.
SECTION 22.07. ATTORNEYS' FEES. Should any party here to institute
any action or proceeding in court or before an arbitrator to enforce any
provision hereof or for damages by reason of an alleged breach of any provision
of this Lease, the prevailing party shall be entitled to receive from the losing
party, in addition to the court or arbitration costs incurred by the prevailing
party, such amount as the court or arbitrator may adjudge to be reasonable
attorneys' fees for the services rendered the prevailing party in such action or
proceeding.
SECTION 22.08. NET LEASE. This Lease is a net lease, and payments
due and payable hereunder to or on behalf of Landlord shall be paid without
notice or demand and without offset, counterclaim, abatement, suspension,
deferment, deduction or defense, except as otherwise expressly provided herein.
SECTION 22.09. SOURCE OF PAYMENT OF OBLIGATIONS INCURRED UNDER THIS
LEASE. Whenever a party hereto is entitled to reimbursement or compensation by
the other party hereto and said amount is not paid when due, if such obligation
is not of a character such that it is included in the definition of Operating
Expenses under the Revenue Sharing Agreement and entitled to be paid as such,
the amount so owing shall be paid from said party's share under clause (v) of
Section 1.3(c) of the Revenue Sharing Agreement prior to the remission of any
amount otherwise to be disbursed to the delinquent party under said clause (v).
Any party desiring to avail itself of the foregoing provision, shall send
written notice of the amount owing (and the specific obligation giving rise to
the debt) to the Treasurer (as defined in the Revenue Sharing Agreement) with a
copy to the delinquent party.
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SECTION 22.10. SUCCESSORS. The terms and conditions contained in
this Lease shall run with the Land and shall bind and inure the benefit of
Landlord and Tenant, and to their respective successors and assigns.
SECTION 22.11. NO MERGER OF TITLE. There shall be no merger of the
leasehold estate created by this Lease with the fee estate in the Private Parcel
by reason of the fact that the same person may own or hold (i) the leasehold
estate created by this Lease or any interest in such leasehold estate, and (ii)
any interest in such fee estate, unless Tenant is such holder and Tenant desires
title to so merge. No such merger shall occur unless and until all persons
having any interest in the leasehold estate created by this Lease and the fee
estate in the Private Parcel shall join in a written instrument effecting such
merger.
SECTION 22.12. QUIET ENJOYMENT. This Lease is subject to the 1997
City-Marine World Lease. Landlord represents that this Lease does not violate
any provision of the Public Leases, and that no provision of this Lease is in
conflict with any of the provisions of any of the Public Leases. As long as a
Tenant Default does not exist, Landlord shall be obligated to perform all of its
obligations under any of the Public Leases to which it is a party, and during
the Term Tenant shall have quiet enjoyment of the premises leased hereby. If
Landlord is given the right under any of the Public Leases to terminate any such
Public Lease (other than for reasons related to a Tenant Default), Landlord
shall not exercise such right of termination without the prior written consent
of Tenant which consent shall not be unreasonably withheld or delayed. Landlord
shall not enter into, and shall not consent to any amendment, modification,
extension or other agreement with respect to any or all Public Leases to which
it is a party which adversely affects Tenant's interest in the Private Parcel,
the Improvements or this Lease.
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SECTION 22.13. CONTESTS. Tenant shall have the right, after at least
ten (10) days prior written notice to Landlord (or such shorter period as may be
required at Law in order to preserve the right to do so), to contest the amount
or validity of any Imposition or Law or lien by appropriate proceedings
conducted in good faith and with due diligence, at its sole cost and expense.
If Tenant has not yet made the Minimum Investment, or deposited into escrow
under terms and conditions reasonably satisfactory to Landlord the amount by
which the Minimum Investment then exceeds the Investment, then, Tenant shall
furnish to Landlord security reasonably satisfactory to Landlord against any
claim, loss, liability or expense incurred as a result of such nonpayment or
delay therein. In the event of any such contest, if the final determination
thereof is adverse to Tenant, then Tenant shall pay fully the amounts involved
in such contest, together with any penalties, fines, interests, costs and
expenses that may have accrued thereon or that may result from any such contest
by Tenant, and after such payment by Tenant, Landlord will promptly return to
Tenant such security as Landlord shall have received in connection with such
contest, unless such adverse determination results directly from or is otherwise
directly related to Landlord's failure to comply with its obligations under this
Lease, or Landlord's negligence or misconduct, in which event, Landlord shall
immediately after written notice of such adverse determination return such
deposit to Tenant. Landlord shall join in any such proceeding if any Law now or
hereafter in effect shall require that such proceedings be brought by and/or in
the name of Landlord or any owner of the Private Parcel. Neither Landlord nor
the Private Parcel shall be subjected to any liability for the payment of any
costs, fees, including attorneys' fees, or expenses in connection with any such
proceeding (except to the extent that such adverse determination results from or
is otherwise related to Landlord's failure tocomply with its obligations under
this Lease, or Landlord's negligence or misconduct). Tenant shall be entitled to
any refund of any such Imposition and penalties or interest thereon, which shall
have been paid by Tenant or paid by Landlord, for which Landlord shall have been
fully reimbursed.
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SECTION 22.14. NONDISCRIMINATION. Tenant covenants by and for
itself, its heirs, executors, administrators and assigns and all persons
claiming under or through it, and this Lease is made and accepted upon and
subject to the condition, that there shall be no discrimination against or
segregation of any person or group of persons on account of sex, marital status,
race, color, religion, creed, national origin or ancestry, in the leasing,
subleasing, transferring, use, or enjoyment of the premises herein leased nor
shall Tenant, or any person claiming under or through it, establish or permit
any such practice or practices of discrimination or segregation with reference
to the selection, location, number, use or occupancy of tenants, subtenants,
licensees, vendees invitees, or customers with respect to the Private Parcel or
the operation of any business thereon.
SECTION 22.15. INTERPRETATION. The language in all parts of this
Lease shall be construed as a whole according to its fair meaning, and not
strictly for or against either Landlord or Tenant. The captions used in this
Lease are for convenience only and shall not be considered in the construction
or interpretation of any provision hereof. When the context of this Lease
requires, the neuter gender includes the masculine, the feminine, a partnership
or corporation or joint venture, and the singular includes the plural. The
terms "shall," "will," and "agree" are mandatory. The term "may" is permissive.
When a party is required to do something by thin Lease, it shall do so at its
sole cost and expense without right of reimbursement from the other party unless
a specific provision is made therefor.
SECTION 22.16. INTEGRATION. This Lease, together with the Reciprocal
Easement Agreement and the Revenue Sharing Agreement and their respective
exhibits and documents incorporated by reference, constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and there
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are no conditions, representations or agreements regarding the matters covered
by this Lease which are not expressed herein or in the Reciprocal Easement
Agreement and the Revenue Sharing Agreement.
SECTION 22.17. MEMORANDUM OF LEASE FOR RECORDING. Landlord and
Tenant shall, upon the Term Commencement Date, execute a memorandum or "short
form" of this Lease in a form prepared by Landlord and reasonably acceptable to
Tenant, for purposes of, and in a form suitable for, being recorded. The
memorandum or "short form" of this Lease shall describe the parties, Landlord
and Tenant, set forth a description of the Lease Premises, specify the term of
this Lease, and shall incorporate this Lease by reference. Said memorandum
shall be recorded in the office of the County Recorder of the County of Solano
as soon as practicable after the date of execution of this Lease.
SECTION 22.18. CONSENTS. Whenever any consent or approval is
required under the terms of this Lease, except as otherwise specifically
provided herein such consent shall not unreasonably be withheld, conditioned or
delayed. In the event that a party shall fail to give written notice of its
intention not to give consent or approval, together with the reason(s) therefor,
within fifteen (15) days after written request for such consent or approval, the
consent or approval shall be deemed to have been given.
ARTICLE 23
ENVIRONMENTAL MATTERS
SECTION 23.01. LANDLORD'S ENVIRONMENTAL OBLIGATIONS. Landlord
represents and warrants that it has not created, placed, stored, transported, or
disposed of, nor is it aware of, any Environmental
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Condition or Hazardous Materials in, on, at, around or under or affecting all or
any part of the Private Parcel, and further, that Landlord shall be responsible
for all Environmental Compliance Liability with respect to the Private Parcel,
unless resulting from Tenant's breach of any obligation hereunder, or from
Tenant's gross negligence or willful misconduct, subject to the provisions of
Section 3.03 hereof. Landlord further represents, warrants, covenants and agrees
that no portion of the land constituting the Private Parcel (including the
surface and subsurface thereof) was ever used for the dumping or storage of any
Hazardous Materials. Notwithstanding anything to the contrary contained
elsewhere herein, Landlord agrees to be responsible for and indemnify, defend
and hold harmless Tenant and its officers, directors and employees, affiliates
and its successors and assigns, at Landlord's sole cost and expense, from and
against any and all losses, claims, liabilities, damages, judgments, expenses
(including reasonable attorneys' fees and disbursements), fees, fines and other
costs (whether relating to or arising out of actions or claims by governmental
authorities or private parties), relating to or arising out of the existence of
any Environmental Compliance Liability or other Environmental Condition existing
in, on, at, around or under or affecting the Private Parcel on the Term
Commencement Date (subject to the provisions of Section 3.03 hereof), or
otherwise arising from the gross negligence or willful misconduct of Landlord
its agents, servants, employees, contractors, sublessees or other tenants,
occupants, or licensees (or their guests and invitees) of the Public Parcel.
Landlord represents and warrants that it shall not permit any dumping or storage
on, in, around, under, or about the Private Parcel of any Hazardous Materials,
or otherwise cause, create, permitor suffer an Environmental Condition, during
the Term of this Lease.
In the event at any time during the Term Tenant should desire to make any
alterations, additions or improvements to the Private Parcel, including the
Improvements, and is forced to incur any identifiable charges or expenses
arising as a result of Hazardous Materials or other Environmental Condition in
or at the
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Private Parcel which existed as of the Term Commencement Date, then,
notwithstanding anything to the contrary set forth in this Lease or the REA
Landlord shall be fully responsible for and shall reimburse Tenant for such
expenses upon demand of Tenant that were caused by the existence of such
Hazardous Materials or other Environmental Condition.
SECTION 23.02. TENANT'S ENVIRONMENTAL OBLIGATIONS. Tenant represents
and warrants that it shall not create, place, store, transport, or dispose of
any Environmental Condition or Hazardous Materials in, on, at, around or under
or affecting all or any part of the Private Parcel, and further, that Tenant
shall be responsible for all Environmental Compliance Liability with respect to
the Private Parcel which results from Tenant's gross negligence or willful
misconduct or that of its agents, employees or contractors. Notwithstanding
anything to the contrary contained elsewhere herein, Tenant agrees to be
responsible for and indemnify, defend and hold harmless Landlord and its
officers, directors and employees, and its successors and assigns, at Tenant's
sole cost and expense, from and against any and all losses, claims, liabilities,
damages, judgments, expenses (including reasonable attorneys' fees and
disbursements), fees, fines and other costs (whether relating to or arising out
of actions or claims by governmental authorities or private parties), relating
to or arising out of the existence of any Environmental Condition created in,
on, at or under the Private Parcel during the Term of this Lease (except to the
extent resulting or arising from the gross negligence or willful misconduct of
Landlord or its officers, employees, agents, contractors, licensees, guests or
invitees), or otherwise arising from the gross negligence or willful misconduct
of Tenant or other tenants, occupants, or licensees (or their guests) of Tenant.
It is a condition to Tenant's obligations under this subparagraph that Tenant
shall receive reasonably prompt notice of any claim against Landlord.
SECTION 23.03. LEGAL CONTESTS. For purposes of this Article, any
party entitled to be
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indemnified under subparagraphs (a) or (b) above shall be referred to as the
"Indemnified Party;" and any party required to so indemnify another party shall
be referred to as an "Indemnifying Party." The Indemnified Party shall have the
right to contest, by appropriate legal proceedings, but without cost, liability
or expense to the Indemnifying Party, the validity of any Environmental Law
provided that such contest will not result in any lien, charge or liability,
civil or criminal, or result in a default under any Leasehold Mortgage. In
addition, if compliance with such Environmental Law may be legally held in
abeyance without the occurrence of any danger to persons or property or threat
thereof, lien, charge or liability, civil or criminal, or a default under any
Leasehold Mortgage, for a failure to comply during such contest, the
Indemnifying Party may postpone compliance therewith until the final
determination of any such proceedings, provided that such proceedings are
pursued in good faith and with due diligence. The provisions of this Section
shall survive the expiration or sooner termination of this Lease.
SECTION 23.04. ADDITIONAL LANDLORD RESPONSIBILITIES; TERMINATION OF
LEASE. If, as a result of the presence of any Environmental Compliance
Liability, Hazardous Materials or other Environmental Condition within, on,
under, about or otherwise affecting the Private Parcel which existed as of the
Term Commencement Date or is directly attributable to the breach by Landlord of
its obligations under this Article or the gross negligence or willful misconduct
of Landlord, any of the following shall occur, then Tenant shall have the right
to terminate this Lease upon sixty (60) days written notice sent to Landlord if:
(i) Tenant shall be unable to conduct, or shall be prohibited by public
authorities from conducting, its normal business operations within the Private
Parcel, (ii) normal business operations within the Private Parcel or normal
pedestrian and vehicular access to the Private Parcel shall be unreasonably
interfered with as a result of any work of removal, repair, restoration or other
construction work performed in connection with the removal and/or remediation of
any such Environmental Compliance Liability, Hazardous Materials or other
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Environmental Condition, or (iii) Landlord shall have failed to do either of the
following, at Tenant's option, within the specified periods: (A) to promptly
initiate and diligently prosecute to completion any action which may be
necessary to abate and remediate such event or conditions, to Tenant's
satisfaction based on an environmental report prepared by a licensed
environmental engineer selected by Tenant (and reasonably acceptable to
Landlord), showing the abatement and remediation of such event or condition in
compliance with applicable Law, the cost for which shall be paid by Landlord
promptly after written request therefor from Tenant, or (B) pay to Tenant,
within fifteen (15) days after written request therefor, the amount reasonably
estimated by Tenant to be required for Tenant to complete the abatement and
remediation of such event or conditions, which estimate shall be based on a
Phase I environmental site assessment prepared by a licensedenvironmental
engineer selected by Tenant (and reasonably acceptable to Landlord), the cost
for which shall be borne by Landlord and included in such payment.
ARTICLE 24
SALE OF PRIVATE PARCEL REPURCHASE OF TENANT'S ESTATE
SECTION 24.01. LANDLORD'S RIGHT TO SELL. (a) Notwithstanding anything
to the contrary set forth elsewhere in this Lease, neither Landlord nor the
Agency shall cause or permit (whether voluntarily, by operation of Law or
otherwise) the sale, transfer or conveyance (collectively, a "TRANSFER") of any
of their respective interests in either the Public Parcel or the Private Parcel,
without the prior written consent of Tenant, to be given or withheld in its sole
discretion, prior to or during the month following, the date on which Tenant (or
any affiliate thereof) may exercise an option (the "PURCHASE OPTION") to
purchase the Public Parcel and the Private Parcel for a purchase price not
exceeding the greater of (i) the principal amount
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of the Certificates of Participation Financing as of the date of the exercise of
the Purchase Option or (ii) the aggregate fair market value of the Public Parcel
and the Private Parcel on such date (determined without regard to Tenant's
Investment), and otherwise under mutually acceptable terms.
(b) Subject to the restrictions set forth in Section 24.01(a), Landlord
shall have the right to transfer to any person its leasehold estate in the
Private Parcel and assign its interest in this Lease (a "Permitted Sale")
without limitation; provided, however, that any such transfer shall also include
the simultaneous transfer to, and assumption by, such person of all of
Landlord's rights, title and obligations in and to the Reciprocal Easement
Agreement and the Revenue Sharing Agreement, and further provided that such
Permitted Sale shall be subject to this Lease and any Purchase Option then in
effect and transferee shall assume in writing, in form and substance reasonably
acceptable to Tenant, the obligations of Landlord under this Lease, the Revenue
Sharing Agreement and the REA. Upon any such Permitted Sale in accordance with
the foregoing, Landlord shall automatically be relieved of any obligations under
this Lease, other than those obligations which accrued prior to the date
thereof.
(c) In the event Landlord desires to effect a Permitted Sale, it shall
first submit to Tenant in writing the terms of the proposed sale (the "Sale
Terms"). Tenant shall have forty-five (45) days after receipt of Landlord's
written notice of the Sale Terms (the "Refusal Period") within which to accept
the Sale Terms in writing to Landlord. If Tenant does not accept the Sale Terms
as aforesaid within such Refusal Period, then Landlord shall have the right
effect the Permitted Sale on the Sale Terms within 120 days after the end of the
Refusal Period (the "Third Party Period"), without any further notice or other
obligation to Tenant. If the Permitted Sale is not effected within such Third
Party Period, then, prior to any Permitted Sale after the expiration of such
Third Party Period (a "New Permitted Sale") (regardless of whether the Terms of
such
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New Permitted Sale are the same or different from those of the Permitted Sale),
the Terms of the New Permitted Sale shall first be submitted to Tenant as
aforesaid, and the provisions of this Section again shall apply.
(d) The foregoing provisions shall not apply to any transfer by Landlord of
its interest in the Private Parcel to the Agency, the City or the Vallejo Public
Financing Authority, which transfer may be made at any time at the discretion of
Landlord without the consent of Tenant, provided that the transfer shall be
subject to all of the obligations of Landlord under this Lease, the Purchase
Option, the Reciprocal Easement Agreement and the Revenue Sharing Agreement and
the transferee shall assume in writing, in form and substance reasonably
acceptable to Tenant, the obligations of Landlord under this Lease, the Revenue
Sharing Agreement, the Purchase Option and the REA.
(e) In addition to any other rights or remedies set forth herein, including
but not limited to those at Law or in equity, the breach of any of the
obligations of Landlord or the Agency under this Section 24.01 shall entitle
Tenant to terminate this Lease upon written notice to Landlord, whereupon the
Lease shall have no further force and effect and such termination shall have the
effect more particularly set forth in Article 21 including but not limited to
Section 21.04.
SECTION 24.02. REPURCHASE OF TENANT'S ESTATE. Notwithstanding any
other provision of this Lease but subject to the restrictions set forth in
Section 24.01(a), Landlord shall have the right to purchase from Tenant all of
Tenant's right, title and interest in and to Tenant's Estate, the Reciprocal
Easement Agreement and the Revenue Sharing Agreement (the "Repurchase") on the
following terms and conditions:
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(i) The Repurchase shall be incident to a Permitted Sale to a
transferee totally independent of, unrelated to, Landlord, the City, the
Agency or the Vallejo Public Financing Authority.
(ii) Tenant shall have failed to exercise its right of purchase under
Section 24.01 within the Refusal Period.
(iii) The price of the Repurchase (the "Repurchase Price") shall be
equal to the fair market value of the operations of Tenant (as reflected in
this Lease, the Reciprocal Easement Agreement and the Revenue Sharing
Agreement), valued as a going concern, as determined by an investment
banking firm selected by Tenant and reasonably approved in writing by
Landlord. Tenant shall promptly provide to the investment banking firm such
information as is reasonably requested by such firm to determine said fair
market value. The Repurchase Price shall be payable in immediately
available funds from Landlord to Tenant on the earlier of the date of the
Repurchase or the closing of the Permitted Sale.
(iv) Tenant shall execute and deliver such documents evidencing
reconveyance of Tenant's Estate as shall be reasonably requested by
Landlord, and shall vacate the Private Parcel, upon receipt by Tenant of
the Repurchase Price.
(v) Any Repurchase shall not occur if the same shall cause the
Authority to breach any term or provisions of the 1997 Agency-Authority
Lease, or otherwise result in a default under any of the documents related
to the Certificates of Participation Financing, in which case the related
Permitted Sale shall not occur.
ARTICLE 24A
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ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF LANDLORD:
SECTION 24A.01. LANDLORD'S ADDITIONAL REPRESENTATIONS AND WARRANTIES.
Landlord represents and warrants to Tenant (upon which warranties and
representations Tenant has relied in executing and delivering this Lease) that:
(a) With respect to each of the Public Leases to which Landlord is a party
, the following is true and correct: (i) it is in full force and effect; (ii)
there are no defaults by Landlord or the other parties thereto existing
thereunder beyond the expiration of applicable notice and cure periods; (iii)
all rent and other amounts due thereunder have been paid to the last day of the
month preceding the month in which this Lease is executed; and (iv) there have
been no amendments, modifications, supplement, extensions or other agreement
entered into between Landlord and the other parties thereto affecting the
matters set forth therein, except as have been disclosed to Tenant in writing;
(b) A valid certificate of occupancy exists for the improvements currently
existing on the Private Parcel and Landlord has not done and is not aware of any
work, improvements or other acts taken with respect to the Private Parcel
requiring an amendment or modification of such certificate, or the issuance of a
new certificate;
(c) No work has been done or materials or services provided to or on
behalf of Landlord which may entitle a mechanic, materialman or warehouseman to
file a lien against or affecting all or any part of the Private Parcel;
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(d) Landlord has no knowledge of pending or contemplated condemnation
proceedings affecting the Private Parcel or any part thereof; and
(e) There are no portions of the Private Parcel which lie within areas
designated by any governmental authority as "wetlands".
Landlord's breach of any of the foregoing representations shall entitle
Tenant to terminate this Lease upon prior written notice to Landlord whereupon
this Lease shall automatically terminate on the date set forth in such notice,
which date shall be deemed to be the expiration of the Term hereof, and the
parties shall have no further rights or obligations hereinafter except as
otherwise expressly provided herein, including under Article 21.
ARTICLE 25
DEFINITION OF CERTAIN TERMS
SECTION 25.01. DEFINITIONS. The meanings of the following terms when
used in this Lease shall be determined as follows:
ALTERATION is defined in SECTION 7.01.
CERTIFICATES OF PARTICIPATION FINANCING is defined in RECITAL C.
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CITY is defined in RECITAL B.
DATE OF TAKING is defined in SECTION 10.02.
ENVIRONMENTAL LAWS means any and all Laws concerning air, water, solid
waste, Hazardous Materials, Releases, worker and community right-to-know hazard
communication, noise, resource protection, subdivision, inland wetlands and
watercourses, health protection and similar environmental, health, safety, and
land use concerns in all cases at any time, from time to time in effect at or
prior to the commencement of the term of this Lease.
ENVIRONMENTAL CONDITION means circumstances with respect to soil, land
surface, subsurface strata, surface waters, groundwaters, stream sediments, air
and similar environmental media both on and off the Private Parcel resulting
from any activity, inactivity, operations or Release occurring on or off such
Private Parcel, which under Environmental Laws require investigatory, corrective
and/or remedial measures and/or that may result in claims or demands or give
rise to liabilities of Landlord or Tenant or to third parties including, but not
limited to, governmental entities.
ENVIRONMENTAL COMPLIANCE LIABILITY means any obligation or liability
arising as the result of any default, violation or breach by Landlord or its
affiliates or previous tenants of the demised premises or adjoining tenants
prior to the commencement of the term of this Lease of: (i) environmental
Permits and other approvals, consents, licenses, certificates and authorizations
applicable to the Private Parcel of
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the operation of prior tenant's or other occupant's business and activities
thereon which are required by Environmental Laws; (ii) any environmental
regulatory compliance requirements applicable to the Private Parcel or
operations conducted on or from the Private Parcel under Environmental Laws; or
(iii) other Environmental Laws.
EQUIPMENT FINANCING is defined in SECTION 3.10.
EQUIPMENT LESSOR is defined in SECTION 3.10.
FORCE MAJEURE shall mean delays or defaults due to war; insurrection;
strikes, lockouts; riots; floods; earthquakes; fires; casualties; acts of God;
acts of the public enemy; epidemics; quarantine restrictions; unusually severe
weather; or other causes beyond the reasonable control of the party obligated to
perform (except financial inability). An extension of time for any such cause
shall be for the period of the enforced delay and shall commence to run from the
time of the commencement of the cause if notice by the party claiming such
extension is given to the other party or parties within thirty (30) days after
the commencement of the cause.
HAZARDOUS MATERIALS means any petroleum, petroleum products, fuel oil,
derivatives of petroleum products or fuel oil, explosives, reactive materials,
ignitable materials, corrosive materials, hazardous chemicals, hazardous wastes,
hazardous substances, extremely hazardous substances, toxic substances, toxic
chemicals, radioactive materials, medical waste, biomedical waste, infectious
materials and any other element, compound mixture, solution or substance which
may pose a present or potential hazard to human health or safety or to the
environment.
IMPOSITIONS is defined in SECTION 4.01.
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IMPROVEMENTS shall mean any buildings, improvements, fixtures, signs,
rides, attractions, and any renewals and replacements thereof, erected, built,
installed or constructed upon the Private Parcel during the Term.
INTEREST RATE is defined in SECTION 17.04.
INVESTMENT is defined in SECTION 3.05.
LAKE CHABOT is defined in RECITAL B.
LAND is defined in RECITAL B.
LANDLORD is defined in the introductory paragraph to this Lease.
LANDLORD'S DEFAULT is defined in SECTION 18.01.
LAWS shall mean all applicable present and future laws, ordinances, rules,
regulations, permits, authorizations, orders and requirements, including,
without limitation, all consents or approvals required to be obtained from, and
all rules and regulations of, and all building and zoning laws of, all federal,
state, county and municipal governments, the departments, bureaus, agencies or
commissions thereof, authorities, board or officers, any national or local board
of fire underwriters, or any other body or bodies exercising similar functions,
having or acquiring jurisdiction of, or which may affect or be applicable to the
Private
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Parcel.
LEASE shall mean this Parcel Lease.
LEASE YEAR shall mean (i) the period from the Rent Commencement Date to and
including the day prior to the Rent Commencement Date next following, (ii) each
successive twelve (12) month period thereafter during the Term, and (iii) the
period ending on the date on which this Lease terminates and beginning on the
anniversary of the Rent Commencement Date preceding such termination date.
LEASEHOLD MORTGAGE is defined in SECTION 14.01 and (shall exclude any
Equipment Financing).
LEASEHOLD MORTGAGEE is defined in Section 14.01 and (shall exclude any
Equipment Lessor).
MAJOR DAMAGE is defined in SECTION 9.02.
MASTER LEASE means the Master Lease dated December 20, 1974 between the
City and the Greater Vallejo Recreation District.
MINIMUM ANNUAL RENT is defined in SECTION 2.01.
MINIMUM INVESTMENT is defined in SECTION 3.05.
NET AWARD is defined in SECTION 10.04.
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1997 CITY - MARINE WORLD LEASE is defined in RECITAL D.
1997 MARINE WORLD - CITY LEASE is defined in RECITAL D.
1997 CITY - AGENCY LEASE is defined in RECITAL D.
1997 AGENCY - MARINE WORLD LEASE is defined in RECITAL D.
NEW PERMITTED SALE is defined in SECTION 24.01.
OPTION is defined in RECITAL E.
OTHER AGREEMENTS is defined in SECTION 3.04.
PPI means Premier Parks Inc. and/or its wholly-owned subsidiaries.
PARTIAL TAKING is defined in SECTION 10.03.
PERMITTED ASSIGNEE is defined in SECTION 13.02.
PERMITTED EXCEPTIONS is defined in SECTION 1.01.
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PERMITTED SALE is defined in SECTION 24.01.
PERSONAL PROPERTY shall mean all fixtures, furniture, furnishings, and
other equipment and other personal property, excluding Improvements, placed on
the Private Parcel by Tenant.
PREMIER PARKS is defined in SECTION 3.01.
PRIVATE PARCEL shall mean the portion of the Land leased hereby.
PUBLIC LEASE is defined in SECTION 3.04.
PUBLIC PARCEL is defined in RECITAL D.
PURCHASE OPTION is defined in SECTION 24.01(A).
RECIPROCAL EASEMENT AGREEMENT or REA shall mean the Reciprocal Easement
Agreement between the Landlord and the Tenant in the form attached hereto as
EXHIBIT D.
REFUSAL PERIOD is defined in SECTION 24.01.
RELEASE means releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, disposing or dumping, or
as otherwise defined under the Resource Conservation and Recovery Act (42 U.S.C.
Section 6901, et seq.) ("RCRA"), the Comprehensive Environmental Response,
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Compensation and Liability Act (42 U.S.C. Section 9601, et seq.) ("CERCLA"), or
any other federal, state or local Environmental Law, including Laws relating to
emissions, discharges, releases or threatened releases or pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment (including ambient air, surface water, ground water, land
surface or subsurface strata) or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes as may be amended from time to time, or other
Environmental Laws.
RENT COMMENCEMENT DATE is defined in SECTION 2.01.
REPURCHASE is defined in SECTION 24.02.
REPURCHASE PRICE is defined in SECTION 24.02.
REVENUE SHARING AGREEMENT shall mean the agreement by that name between the
Landlord and the Tenant in the form attached hereto as EXHIBIT E.
RESTORATION is defined in SECTION 9.02.
SALE TERMS is defined in SECTION 24.01.
SUPERIOR LEASE is defined in SECTION 19.03.
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SUPERIOR LESSOR is defined in SECTION 19.03.
SUPERIOR MORTGAGE is defined in SECTION 19.03.
TAKING shall mean the taking of all or any part of the Private Parcel or
the possession thereof under the power of eminent domain or voluntary sale of
all or any part of the Private Parcel to any person having the power of eminent
domain, provided that the Private Parcel or such part thereof is then under the
threat of condemnation.
TENANT DEFAULT is defined in SECTION 17.01.
TENANT'S ESTATE is defined in SECTION 13.01.
TENANT'S PROPERTY is defined in SECTION 3.10.
TERM is defined in SECTION 1.02.
TERM COMMENCEMENT DATE is defined in SECTION 1.02.
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THIRD PARTY PERIOD is defined in SECTION 24.01.
TOTAL TAKING is defined in SECTION 10.02.
LANDLORD:
MARINE WORLD JOINT POWERS AUTHORITY
By: /s/
---------------------------
Executive Director
TENANT:
PARK MANAGEMENT CORP.
By: /s/
-----------------------------
Chairman and Chief Executive
Officer
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The undersigned hereby acknowledges and consents to the foregoing Parcel Lease
and all of the terms and conditions set forth therein.
CITY OF VALLEJO
By: /s/
----------------------------
City Manager
REDEVELOPMENT AGENCY OF THE CITY OF VALLEJO
By: /s/
----------------------------
Executive Director
<PAGE>
EXHIBIT A
DESCRIPTION OF THE LAND
The real property constituting the Site consists of that certain land
located in the City of Vallejo, County of Solano, State of California, more
fully described as follows:
REAL PROPERTY in the City of Vallejo, County of Solano, State of California,
described as follows:
PARCEL ONE:
A portion of the Parcel of land described in the Deed to the City of Vallejo,
recorded February 16, 1946 in Book 337 of Official Records, Page 337, Series No.
2545, and being a portion of Section 6, Township 3 North, Range 3 West, Mount
Diablo Base and Meridian, described as follows:
Beginning at the Northeasterly corner of Lot 13, Lewis Ranch Estates, Unit
No. 3, as shown in Book 22 of Maps at Page 19, Solano County Records; thence
along the Northerly line of said Lewis Ranch Estates, Unit No. 3 and Lewis
Ranch Estates, Unit No. 1 shown in Book 19 of Maps at Page 24, Solano County
Records, North 89 degree 28'32" West, 1,500.00 feet; thence North 15 degree
40'00" East, 758.00 feet; thence North 23 degree 22'00" East, 223.00 feet;
thence North 41 degree 08'00" East, 382.00 feet; thence North 45 degree
24'00" East, 230.21 feet; thence North 85 degree 55'13" East, 215.99 feet;
thence North 4 degree 04'47" West, 350.00 feet; thence South 85 degree 55'13"
West, 889.86
A-2
<PAGE>
feet; thence North 38 degree 23'17" West, 2,260.00 feet; thence North 51
degree 36'43" East, 189.51 feet; thence North 41 degree 55'09" West, 427.75
feet to a point on the proposed new Southerly right-of-way line of State
Highway No. 37; thence along said Southerly line, South 84 degree 57'14"
East, 1,180.93 feet; thence East 265.00 feet; thence South 84 degree 46'02"
East, 348.45 feet; thence South 80 degree 54'00" East 229.08 feet; thence
South 82 degree 55'13" East, 217.44 feet to the intersection of the proposed
Westerly line of Fairgrounds Drive; thence South 36 degree 18'50" East, 93.97
feet; thence South 37 degree 19'48" East, 215.15 feet; thence South 10 degree
15'18" East, 73.76 feet to the beginning of a curve to the left with a radius
of 86.00 feet; thence along said curve, through a central angle of 27 degree
04'27", an arc distance of 40.64 feet; thence South 37 degree 19'45" East,
85.33 feet to the beginning of a curve to the left with a radius of 44.00
feet; thence along said curve, through a central angle of 90 degree 00'00" an
arc distance of 69.12 feet; thence South 32 degree 30'00" East 142.51 feet;
thence South 37 degree 19'53" East, 40.96 feet to the beginning of a curve to
the right with a radius of 978.00 feet; thence along said curve, through a
central angle of 5 degree 24'00", an arc distance of 92.17 feet to a point of
compound curvature; thence along a curve to the right with a radius of 170.00
feet, through a central angle of 32 degree 15'00", an arc distance of 95.69
feet; thence South 20 degree 30'53" East, 101.30 feet to the beginning of a
curve to the right with a radius of 941.00 feet; thence along said curve,
through a central angle of 16 degree 57'00", an arc distance of 278.37 feet;
thence South 3 degree 33'55" East, 52.43 feet; thence South 86 degree 26'14"
West, 46.99 feet; thence South 31 degree 13'02" East, 123.95 feet; thence
South 6 degree 34'05" East, 639.79 feet; thence South 4 degree 43'59" East,
800.07 feet; thence South 5 degree 26'51" East, 400.12 feet; thence South 4
degree 40'07" East, 440.03 feet; thence South 12 degree 55'17" West, 162.65
feet to the point of beginning.
EXCEPTING FROM PARCEL ONE ABOVE: That portion of the premises conveyed to the
State of California, by Deed recorded November 29, 1973 in Book 1866 of Official
Records, Page 536, Series No. 28896, Solano County Records, and as modified by
the State of California Relinquishment to the City of
A-3
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Vallejo in Instrument recorded July 12, 1979 in Book 1979 at Page 57270, Series
No. 33917, Solano County Official Records.
FURTHER EXCEPTING THEREFROM: All those portions of Parcel One above conveyed by
Marine World Foundation, a California non-profit public benefit corporation to
Richard A. Hyland, etal, by the following Corporation Grant Deeds, recorded June
26, 1987 t Book 1987, Pages 86969, 86974, 87009, 86979, 87049, 87004, 87044,
87039, 86984, 87014, 87019, 87024, 87029, 87034, 86989, 86994 and 86999, Solano
County Records.
FURTHER EXCEPTING THEREFROM: All those portions of Parcel One above conveyed by
Marine World Foundation, a California nonprofit public benefit corporation, to
the State of California, by Quitclaim Deed recorded December 11, 1989, Series
No. 890088359, and by Quitclaim Deed recorded February 6, 1990, Series No.
900009554, Solano County Records.
PARCEL TWO:
An easement as an appurtenance to Parcel One above for the surface use of Lake
Chabot and being a portion of the parcel of land described in the Deed to the
City of Vallejo, recorded February 16, 1946 in Book 337 of Official Records,
Page 337, Series No. 2545, and being a portion of Section 6, Township 3 North,
Range 3 West, Mount Diablo Base and Meridian, described as follows:
Commencing at the Northeasterly corner of Lot 13, Lewis Ranch Estates Unit No. 3
as shown in Book 22 of Maps at Page 19, Solano County Records, thence along the
Northerly line of Lewis Ranch Estates Unit
A-4
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No. 3 and the Northerly line of Lewis Ranch Estates Unit No. 1, said Unit No.
1 being shown in Book 19 of Maps at Page 24, Solano County Records, North 89
degree 28'32" West, 1,500.00 feet; thence along the Easterly fence of Dan
Foley Park, North 15 degree 40'00" East, 758.00 feet; thence North 23 degree
22'00" East, 223.00 feet; thence North 41 degree 08'00" East, 382.00 feet;
thence North 45 degree 24'00" East, 230.21 feet; thence North 85 degree
55'13" East to its intersection with the 72.5 foot contour line on the
Southerly shore of Lake Chabot (City of Vallejo Datum) shown on Topographic
Map showing the boundaries of Parcel 1, Flosden Acres Redevelopment Plan,
Amendment No. 3-857023, Schwafel Engineers-Bissell & Karn, and as amended by
the site rough grading lakeshore development drawing C-2.1 of April 1985,
said point of intersection being the true point of beginning; thence
following said 72.5 foot contour line in a Northwesterly, Northeasterly,
Southeasterly, Southerly and Westerly direction around the shore of Lake
Chabot to the point of beginning.
A-5
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EXHIBIT B
DESCRIPTION OF THE PROPERTY
[to come Y description to include all or a portion of the
real property described in the 1997 Site Lease Relating to
Marine World, that was not leased under the 1997 Lease
Agreement Relating to Marine World]
B-1
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EXHIBIT C
PERMITTED EXCEPTIONS
[to be completed prior to execution of the Parcel Lease,
based upon a title report, acceptable to the parties, done
prior to execution]
C-1
<PAGE>
EXHIBIT D
RECIPROCAL EASEMENT AGREEMENT
D-1
<PAGE>
EXHIBIT E
REVENUE SHARING AGREEMENT
E-2
<PAGE>
EXHIBIT 10(af)
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement"), dated as of July 31, 1997, between PREMIER
PARKS INC., a Delaware corporation (the "Company"), and KIERAN E. BURKE (the
"Executive").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Executive is and has been for more than seven years the Chief
Executive Officer of the Company;
WHEREAS, the Executive possesses an intimate knowledge of the business and
affairs of the Company;
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the Executive's contribution as Chairman of the Board and Chief Executive
Officer to the growth and success of the Company has been substantial and
desires to assure the Company the continued employment of the Executive as
Chairman of the Board and Chief Executive Officer of the Company and to
compensate him therefor; and
WHEREAS, the Executive desires to continue to serve as Chairman of the
Board and Chief Executive Officer of the Company, on the terms and conditions
set forth herein;
NOW, THEREFORE, in consideration of the mutual promises, representations
and warranties set forth herein, and for other good and valuable consideration,
it is hereby agreed as follows:
1. CERTAIN DEFINITIONS. As used herein, the following terms shall have
the following meanings:
"ACTUAL EBITDA" for any year means EBITDA for such year, PROVIDED that
(i) if, during such year, the Company or any Subsidiary acquires (A) capital
stock (or other equity interests) of any person (other than a person which was,
prior thereto, a Subsidiary), whether by acquisition, merger, consolidation or
otherwise, and, by virtue of such acquisition, the results of operations of such
person for any portion of such year were consolidated with those of the Company
and its Subsidiaries in the preparation of the Company's consolidated financial
statements for such year or (B) all or substantially all of the assets of any
person or any operating unit of any person, and, in either case, such
acquisition was not contemplated in the preparation of Budgeted EBITDA for such
year, the results of operations of such person or attributable to such assets
and the costs and expenses (including financing costs) incurred by the Company
or any Subsidiary in connection with, or arising out of, such acquisition shall
be disregarded in the calculation of Actual EBITDA for such year, and (ii) in
determining Actual EBITDA for any year, the
<PAGE>
Committee may (but will not be required to) increase (but not decrease) EBITDA
by an amount that the Committee reasonably deems to be appropriate to eliminate
or offset the effects upon EBITDA for such year of events the Committee deems
extraordinary or unusual in nature.
"AFFILIATE" of a person shall mean any other person that directly or
indirectly controls, is controlled by, or is under common control with the
person specified. For the purposes of this Agreement, "CONTROL," when used with
respect to any person, shall mean the power to direct the management and
policies of such person, whether through the ownership of securities, by
contract or otherwise.
"BASE SALARY" shall have the meaning provided in Section 5(a).
"BOARD" shall have the meaning provided in the third recital to this
Agreement.
"BONUS" shall have the meaning provided in Section 5(b).
"BUDGETED EBITDA" for any year means the amount of EBITDA that the
Company projects to achieve during such year, as specified in the definitive
annual budget of the Company for such year approved by the Board. For the year
ending December 31, 1997, Budgeted EBITDA means $52 million.
"CAUSE" shall mean (i) the willful or repeated failure of the
Executive to perform his obligations hereunder as provided herein, PROVIDED that
such Cause shall not exist unless the Company shall first have provided the
Executive with written notice specifying in reasonable detail the factors
constituting such failure and such failure shall not have been cured by the
Executive within 30 days after such notice; (ii) the conviction of the Executive
of a crime which constitutes a felony involving moral turpitude under applicable
law or the entering by him of a plea of guilty or NOLO CONTENDERE with respect
thereto; (iii) the commission by the Executive of any act involving fraud,
misappropriation of Company funds or other gross misconduct injurious to the
Company; (iv) the good faith determination by the Board that the Executive is
dependent upon alcohol or drugs; or (v) the determination by the Board that the
Executive has violated in any material respect the provisions of Sections 4(c)
or 13(c) hereof.
"CHANGE OF CONTROL" shall have the meaning provided in the Indenture,
dated as of January 15, 1997, between the Company and The Bank of New York, as
trustee, as the same exists on the date of this Agreement.
"COMMITTEE" shall mean the Compensation Committee of the Board.
"CONSTRUCTIVE TERMINATION WITHOUT CAUSE" shall mean a termination of
the Executive's employment at his initiative as provided in Section 10(d) below
following the
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occurrence, without the Executive's prior written consent, of one or more of the
following events (except in consequence of a prior termination): (i) a
reduction in the Executive's then current Base Salary or in the Bonus payable to
him under Section 5(b) (except pursuant to the terms thereof) or the termination
or material reduction of any employee material benefit or perquisite enjoyed by
him during the term of this Agreement; (ii) the failure to elect or reelect the
Executive to any of the positions in the Company described in Section 4(a) below
or removal of him from any such position; (iii) a material diminution in the
Executive's duties or the assignment to the Executive of duties which are
materially inconsistent with his other duties or which materially impair the
Executive's ability to function as the Chairman of the Board and Chief Executive
Officer of the Company; (iv) the relocation of the Company's executive office,
or the Executive's own office location as assigned to him by the Company, to a
location more than 50 miles from New York, New York; (v) the failure of the
Company to obtain the assumption in writing of its obligations under this
Agreement by any successor to the business of the Company on or prior to the
date of a merger, consolidation, sale or similar transaction; or (vi) the
failure by the Company to offer the Executive a new employment agreement with
compensation and benefit provisions on terms at least as favorable to the
Executive as those set forth herein (other than those provided in Section 9
hereof).
"DISABILITY" shall mean the Executive's inability by reason of
physical or mental illness to substantially perform his duties and
responsibilities under this Agreement for a period of 180 consecutive days or a
period of in excess of 180 days during any calendar year during the Term.
"EBITDA" for any period means the income before extraordinary items
and/or cumulative effect of change in accounting principles of the Company and
its Subsidiaries for such period, plus the sum of the following, to the extent
deducted in calculating such income, of (i) income tax expense (or, in the case
of income tax benefit, minus the amount thereof), (ii) interest expense, net of
interest income, and (iii) depreciation and amortization expense, in each case
for such period. All components of EBITDA shall be determined on a consolidated
basis in accordance with generally acceptable accounting principles in the
United States as in effect as of the date of the determination of Budgeted
EBITDA for such period, consistently applied by the Company for all periods
during the Term. Notwithstanding the foregoing, EBITDA shall for all purposes
of this Agreement be calculated for each year without recognition of any expense
incurred in connection with (i) any bonuses paid or payable to the Executive,
the President and Chief Operating Officer, or the Chief Financial Officer of the
Company or (ii) any Restricted Shares and Additional Restricted Shares (as
defined herein) now or hereafter granted to those officers.
"PERSON" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any other entity.
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"SUBSIDIARY" shall mean, in respect of any person, any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of capital stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by (i) such person,
(ii) such person and one or more Subsidiaries of such person or (iii) one or
more Subsidiaries of such person.
"TERM" shall mean the period specified in Section 3 below.
2. EMPLOYMENT. The Company hereby agrees to continue to employ the
Executive, and the Executive hereby accepts such employment, upon the terms and
conditions set forth herein.
3. TERM. Unless sooner terminated in accordance with the provisions of
Section 10 hereof, the term of the Executive's employment under this Agreement
shall commence on the date hereof and shall end on the third anniversary hereof
(the "Term").
4. POSITION AND DUTIES. (a) During the Term, the Executive shall serve
as the Chairman of the Board and Chief Executive Officer of the Company and
shall have the authority, functions, duties, powers and responsibilities
normally associated with such positions and as from time to time may be
prescribed by the Board. The Executive agrees, subject to his election as such
and without additional compensation, to serve during the Term in such additional
offices of comparable stature and responsibility to which he may be elected from
time to time in the Company's Subsidiaries and to serve as a director and as a
member of any committee of the Board and as a director of the Company's
Subsidiaries.
(b) During the Term and subject to the provisions of Section 4(c),
(i) the Executive's services shall be rendered on a full-time, exclusive basis,
(ii) he will apply on a full-time basis all of his skill and experience to the
performance of his duties in such employment, and shall report only to the
Board, (iii) he shall have no other employment or outside business activities
and (iv) unless the Executive otherwise consents, the headquarters for the
performance of his services shall be the executive offices of the Company in the
greater New York City area, subject to such reasonable travel as the performance
of his duties in the business of the Company may require.
(c) During the Term, the Executive shall not, directly or indirectly,
without the prior written consent of the Board, render any services to any
person (other than the Company and its Subsidiaries and other persons in which
the Company may have an interest), or acquire any interest of any type in any
such other person that is in competition with the Company or any of its
Subsidiaries or in conflict with his full-time, exclusive position as a senior
executive officer of the Company; PROVIDED, HOWEVER, that the foregoing shall
not be deemed to prohibit the Executive from (i) acquiring, solely as an
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investment, securities of any person which are registered under Section 12(b) or
12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
and which are publicly traded, so long as he is not part of any group required
to make any filing under Section 13(d) of the Exchange Act in respect of such
person and such securities do not constitute 2% or more of any class of
outstanding securities of such person, (ii) acquiring, solely as an investment,
any securities of any person (other than a person that has outstanding
securities covered by the preceding clause (i)) so long as he remains a passive
investor in such person and does not become part of any control group thereof
and so long as such person is not, directly or indirectly, in competition with
the Company or any of its Subsidiaries or (iii)(A) serving on the boards of
directors of a reasonable number of other corporations (none of which are in
competition with the Company or its Subsidiaries) or the boards of a reasonable
number of trade associations and/or charitable organizations or, with the prior
written consent of the Committee, to provide consulting services for any such
corporation, trade association and/or charitable organization, (B) engaging in
charitable activities and community affairs and (C) managing his personal
investments and affairs, PROVIDED that the activities referred to in this clause
(iii) do not in the aggregate interfere in any material respect with the proper
performance of his duties and responsibilities as the Company's Chairman of the
Board and Chief Executive Officer. For purposes of the foregoing, a person
shall be deemed to be in competition with the Company or any of its Subsidiaries
if it (or its Subsidiaries or Affiliates) is then engaged in any line of
business that is substantially the same as any line of business in which the
Company or any of its Subsidiaries is engaged.
(d) The Company shall use its best efforts to cause the Executive to
be a member of the Board throughout the Term and shall include him in the
management slate for election as a director at every stockholders' meeting at
which his term as a director would otherwise expire.
5. COMPENSATION. (a) BASE SALARY. The Company shall pay or cause to be
paid to the Executive a base salary (the "Base Salary") of (i) during the
balance of the year ending December 31, 1997, $400,000 per annum, and (ii)
during each succeeding calendar year (or portion thereof) during the Term an
amount per annum equal to $30,000 plus the Base Salary in effect at the end of
the immediately preceding calendar year. The Company may increase, but not
decrease, the Base Salary at any time and from time to time during the Term.
The Base Salary shall be payable in monthly or more frequent installments in
accordance with the Company's regular payroll practices for senior executives.
(b) BONUS. In addition to the Base Salary, the Executive shall be
entitled to receive an annual cash bonus (the "Bonus") in an amount equal to the
sum of (a) .00778 multiplied by the Budgeted EBITDA for the applicable year plus
(b) .02723 multiplied by the amount, if any, by which the Actual EBITDA for such
year exceeded the Budgeted EBITDA for such year; PROVIDED, HOWEVER, that if in
any year, the Actual EBITDA is less than 95% of the amount of the Budgeted
EBITDA for such year, the product obtained by clause (a) above shall be
multiplied by the Applicable Percentage set forth on Exhibit A in
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determining the amount of the Bonus payable with respect to such year. The
Bonus will be payable with respect to each of the Company's fiscal years ending
December 31, 1997, December 31, 1998 and December 31, 1999 and, except as
provided in Section 5(c), will be payable as follows: (i) 75% of the estimated
Bonus will be paid to the Executive in the immediately succeeding January; and
(ii) the remaining amount of the Bonus over the amount previously paid in
January of that year will be paid to the Executive not later than 120 days after
the end of the preceding year.
Within 95 days following the end of each applicable year during the
Term, the independent public accountants of the Company shall deliver to the
Committee a certificate setting forth the calculation of EBITDA for such year
based on the Company's audited financial statements for such year and, if
applicable, an agreed upon procedure report on all adjustments to EBITDA
required by clause (i) of the definition of Actual EBITDA. Within 100 days
after the end of each such year, the Committee shall deliver to the Executive a
notice, in reasonable detail, showing the calculation of Actual EBITDA for such
year, the Bonus payable to the Executive under this Section 5(b) with respect to
such year and the number of Restricted Shares with respect to which the
Restriction Period has expired by virtue of such Actual EBITDA pursuant to
Section 9(c)(ii) hereof.
(c) DEFERRED COMPENSATION. The Executive by timely notice delivered
to the Committee may elect to defer any portion of the Base Salary or Bonus with
respect to any year on terms reasonably acceptable to the Company, PROVIDED such
deferral does not result in the Company incurring any additional expense.
6. EMPLOYEE BENEFIT PROGRAMS. During the Term, the Executive shall be
entitled to participate in all employee pension and welfare benefit plans and
programs made available to the Company's senior level executives or its
employees generally, as such plans or programs may be in effect from time to
time, including without limitation, pension, savings and other retirement plans
or programs, medical, dental, hospitalization, short-term and long-term
disability and life insurance plans, and any other employee benefit plans or
programs that may be sponsored by the Company from time to time, whether funded
or unfunded.
7. REIMBURSEMENT OF EXPENSES. During the Term, the Company shall pay or
reimburse the Executive for all reasonable travel, entertainment and other
business expenses actually incurred or paid by the Executive in the performance
of his duties hereunder upon presentation of expense statements or vouchers or
such other supporting information as the Company may reasonably require.
8. VACATIONS. In addition to customary paid holidays, the Executive
shall be entitled to four (4) weeks of paid vacation during each year of the
Term (and a pro rata portion thereof for any portion of the Term that is less
than a full year). Any unused vacation days during any year shall not be
carried forward to subsequent years, nor shall the Executive receive any
additional compensation for such unused vacation days.
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9. THE SHARES. (a) On the date hereof, and in consideration of services
to be performed by the Executive hereunder, the Company has granted to the
Executive, subject to the provisions of this Section 9, 170,010 shares (the
"Restricted Shares") of the Company's Common Stock, par value $.05 per share
(the "Common Stock"). In addition, on the date hereof, the Company shall
reserve for future grant to the Executive, at the sole and absolute discretion
of the Committee taking into account EBITDA and other factors, an additional
170,010 shares of Common Stock (the "Additional Restricted Shares" and together
with the Restricted Shares, the "Shares").
(b) During the Restriction Period (as defined below) relating to any
Restricted Shares, such Restricted Shares may not be sold, assigned,
transferred, pledged or otherwise encumbered by the Executive. Except as
provided in this Section 9, the Executive, as the owner of Restricted Shares,
shall have all the rights of a holder of Common Stock, including but not limited
to the right to receive all cash dividends or distributions paid on and the
right to vote such Restricted Shares until such date as such Restricted Shares
shall have been forfeited pursuant to Section 9(g).
(c) The restrictions contained in this Section 9 on the rights of the
Executive to sell, assign, transfer or encumber the Restricted Shares and on his
ability to hold the certificates representing the Restricted Shares pursuant to
Section 9(d) shall expire as follows:
(i) the restrictions on 28,335 Restricted Shares shall expire
on each of January 1, 1998, January 1, 1999, January 1, 2000, January 1, 2001,
January 1, 2002 and January 1, 2003, PROVIDED that the Executive's employment
hereunder has not been terminated pursuant to Section 10(c) of this Agreement or
the equivalent provision of any successor agreements prior to such date.
(ii) The period during which the restrictions set forth in this
Section 9(c) as to the ownership, transfer and disposition by the Executive of
any Restricted Shares shall be in effect shall be referred to herein as the
"Restriction Period."
(d) Each certificate representing Restricted Shares or Additional
Restricted Shares shall be registered in the name of the Executive, deposited by
him with the Company together with a stock power endorsed in blank and bear the
following, or a substantially similar, legend:
"The transferability of this Certificate and the Common
Stock represented hereby is subject to the terms and
conditions, including forfeiture, contained in the
Employment Agreement, dated July __, 1997, between the
Company and Kieran E. Burke. A copy of the Employment
Agreement is on file in the executive offices of Premier
Parks Inc., 11501 Northeast Expressway, Oklahoma City,
Oklahoma 73131."
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(e) The Executive hereby represents and warrants that he (i) is
acquiring the Restricted Shares for his own account and not with a view to the
sale or distribution thereof except in compliance with the Securities Act of
1933, as amended (the "Securities Act") and applicable state securities laws and
(ii) is an "accredited investor" as such term is defined in Regulation D under
the Securities Act.
(f) After the Restriction Period relating to any Restricted Shares
has expired, upon the written request of the Executive, or the Executive's legal
representative, permitted successor or heir, the Company shall deliver to the
Executive, or such legal representative, permitted successor or heir, a
certificate or certificates, without the legend referred to in Section 9(d), for
the number of such Restricted Shares. Notwithstanding the foregoing, any
certificate or certificates so delivered shall bear such legends as the Company
may deem advisable to reflect restrictions which may be imposed by law,
including, without limitation, the Securities Act or any state "blue sky" or
other applicable securities laws.
(g) The Executive's rights to any Restricted Shares shall be
forfeited on the first date on which it can be determined that the Restriction
Period with respect to such Restricted Shares is incapable of expiring pursuant
to the provisions of Section 9(c). Any Restricted Shares with respect to which
the Restriction Period has not expired shall be forfeited as of the last day
thereof. Certificates representing any forfeited Restricted Shares shall be
cancelled by the Company, and the Executive shall have no rights with respect to
any such forfeited Shares.
(h) If the Company shall be consolidated or merged with another
corporation, and such consolidation or merger is not a Change of Control, the
Executive will deposit with the successor corporation the certificates for the
stock or securities or the other property that the Executive is entitled to
receive by reason of his ownership of Restricted Shares in a manner consistent
with Section 9(d), and such stock, securities or other property shall become
subject to the restrictions and requirements imposed by this Section 9, and the
certificates therefor or other evidence thereof shall bear a legend similar in
form and substance to the legend set forth in Section 9(d).
(i) In the event of a stock dividend, stock split, share combination,
exchange of shares, recapitalization, merger, consolidation, reorganization,
liquidation or other comparable changes or transactions of or by the Company, an
appropriate adjustment to the number of Shares shall be made to give proper
effect to such event.
10. TERMINATION OF EMPLOYMENT.
(a) TERMINATION DUE TO DEATH. The Executive's employment shall
immediately terminate upon his death. In such event, his estate or his
beneficiaries, as the case may be, shall be entitled to:
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(i) Base Salary (at the applicable rate in effect on the date
of his death) for a period of 365 days;
(ii) a Bonus for the year in which the Executive's death occurs
in an amount equal to the Bonus (if any) that would have been payable to the
Executive with respect to such year had his death not occurred, multiplied (in
the event such death occurs before June 30 of such year) by a fraction the
numerator of which shall be the number of days elapsed during such year prior to
the date of the Executive's death and the denominator of which shall be 181,
payable as provided in Section 5(b);
(iii) all Restricted Shares with respect to which the
Restriction Period had expired prior to the date of this death, all Restricted
Shares as to which the Restriction Period under Section 9(c) hereof has not yet
expired (as to which the restriction shall then automatically expire), and such
Additional Restricted Shares as the Committee may in its discretion grant;
(iv) unless otherwise required by any plan, the continued right
to exercise any then vested stock option for the remainder of its term;
(v) any amounts earned, accrued or owing but not yet paid
under Sections 5, 6 or 7 above; and
(vi) other or additional benefits in accordance with applicable
plans and programs of the Company.
(b) TERMINATION DUE TO DISABILITY. The Company may terminate the
Executive's employment, by written notice delivered to him, due to his
Disability. In such event, he shall be entitled to:
(i) an amount equal to 100% of Base Salary, at the rate in
effect at the date of such termination of his employment, for a period of 365
days following the date of termination, less the amount of any disability
benefits provided to the Executive under any disability plan or policy;
(ii) a Bonus for the year in which such termination occurs in
an amount equal to the Bonus that would have been payable to the Executive with
respect to such year had such termination not occurred, multiplied (in the event
such termination occurs before June 30 of such year) by a fraction the numerator
of which shall be the number of days elapsed during such year prior to the date
of such termination and the denominator of which shall be 181, payable as
provided in Section 5(b);
(iii) all Restricted Shares with respect to which the
Restriction Period had expired prior to the date of termination due to his
Disability and all Restricted Shares as to which the Restriction Period under
Section 9(c) hereof has not yet expired (as
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to which the restriction shall automatically expire), and such Additional
Restricted Shares as the Committee may in its discretion grant;
(iv) unless otherwise required by any plan, the continued right
to exercise any then vested stock option for the remainder of its term;
(v) any amounts earned, accrued or owing but not yet paid
under Sections 5, 6 or 7 above;
(vi) continued participation at the expense of the Company in
medical, dental and hospitalization insurance coverage in which he was
participating on the date of termination of his employment for a period equal to
the longest of (x) 12 months from the date of such termination, (y) the minimum
period prescribed by applicable law or (z) the period set forth in the
applicable plan or program of the Company; and
(vii) other or additional benefits in accordance with applicable
plans and programs of the Company.
(c) TERMINATION BY THE COMPANY FOR CAUSE. In the event the Company
proposes to terminate the Executive's employment for Cause, it shall so notify
the Executive in writing, which notice shall include (A) in reasonable detail
the particular act or acts or failure or failures to act that constitute the
grounds on which the proposed termination for Cause is based and (B) the date
(which shall not be earlier than 21 days following the date of such notice),
time and location of a Board meeting at which the Executive shall be entitled to
a hearing as to such grounds. If, within five days after such hearing, the
Executive is furnished written notice that a majority of all then members of the
Board (excluding the Executive) have confirmed that, in their judgment, grounds
for Cause exist, his employment shall thereupon terminate for Cause. In such
event, he shall be entitled to:
(i) the Base Salary then in effect through the date of the
termination of his employment for Cause;
(ii) all Restricted Shares with respect to which the
Restriction Period had expired prior to the date of such termination;
(iii) any amounts earned, accrued or owing but not yet paid
under Sections 5, 6 or 7 above; and
(iv) other or additional benefits in accordance with applicable
plans or programs of the Company.
(d) TERMINATION WITHOUT CAUSE OR CONSTRUCTIVE TERMINATION WITHOUT
CAUSE. In the event the Executive's employment is terminated by the Company
without
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Cause, other than due to his Disability or death, or is terminated by the
Executive due to a Constructive Termination Without Cause, the Executive shall
be entitled to:
(i) the Base Salary through the date of termination of the
Executive's employment;
(ii) the Bonus for the year in which such termination occurs in
an amount equal to the Bonus that would have been payable to the Executive with
respect to such year had such termination not occurred, multiplied (in the event
such termination occurs before June 30 of such year) by a fraction, the
numerator of which shall be the number of days elapsed during such year prior to
the date of such termination and the denominator of which shall be 181, payable
immediately;
(iii) an amount equal to the product obtained by multiplying
three times the aggregate amount paid or payable to the Executive as Base Salary
and Bonus with respect to the calendar year immediately preceding the year in
which such termination occurs, payable in one lump sum within ten Business Days
after such termination;
(iv) (a) all Restricted Shares with respect to which the
Restriction Period had expired prior to the date of termination and all
Restricted Shares as to which the Restriction Period under Section 9(c) hereof
has not yet expired (as to which the restriction shall then automatically
expire), and (b) such Additional Restricted Shares as the Committee in its
discretion has theretofore granted to the Executive (as to which all restriction
periods related thereto shall then automatically terminate);
(v) exercise any stock option to the extent exercisable at the
date of his termination without Cause or Constructive Termination Without Cause,
for a period of 90 days after such termination;
(vi) any amounts earned, accrued or owing but not yet paid
under Sections 4, 5 or 6 above;
(vii) continued participation at the Company's expense in
medical, dental and hospitalization insurance coverage and in all other employee
benefit plans and programs in which he was participating on the date of
termination of his employment for a period equal to of the longest of (x) 6
months from the date of such termination, (y) the minimum period prescribed by
applicable law or (z) the period set forth in the applicable plan or program of
the Company; and
(viii) other or additional benefits in accordance with applicable
plans and programs of the Company.
(e) CHANGE OF CONTROL. (i) In the event of a Change of Control
(whether or not the Executive's employment is terminated), the Executive shall
be entitled to (A) all
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Restricted Shares with respect to which the Restriction Period had expired prior
to the date of the Change of Control and all Restricted Shares as to which the
Restriction Period under Section 9(c) hereof has not yet expired (as to which
the restriction shall then automatically expire), and (b) such Additional
Restricted Shares as the Committee in its discretion has theretofore granted to
the Executive (as to which all restriction periods related thereto shall then
automatically terminate); and (B) all Additional Restricted Shares not
theretofore granted to the Executive, as to which all restriction periods
related thereto shall automatically expire, subject, however, as to the
Additional Restricted Shares not theretofore granted to the Executive to the
condition that the Market Price (as defined herein) of the Common Stock is not
less than $40.00 per share, subject to appropriate adjustments for stock
dividends, stock splits, share combinations, exchanges of shares,
recapitalizations or comparable changes or transactions by the Company to give
proper effect to this provision. For purposes hereof, the term "Market Price"
shall mean the average of the daily closing prices of the Common Stock on the
principal securities exchange or market in which such stock is traded or quoted
for 20 consecutive trading days commencing 30 trading days prior to the
consummation of such Change of Control or in the event the Common Stock is not
so traded or quoted at that time, the fair value of the Common Stock as
determined by the Committee.
(ii) If during the 180 day period following a Change of
Control, the Executive's employment is terminated by the Company (other than due
to his Disability or death) or is terminated due to a Constructive Termination
Without Cause, the Executive shall be entitled to (A) the payments and benefits
provided in Section 10(d); (B) all Additional Restricted Shares, whether or not
theretofore granted to the Executive, and as to which all restriction periods
related thereto shall then automatically expire; and (C) all amounts,
entitlements or benefits under all employee benefit plans as to which the
Executive is not yet vested shall become fully vested except to the extent such
vesting would be inconsistent with the terms of the relevant plan.
(f) VOLUNTARY TERMINATION. In the event of a termination of
employment by the Executive on his own initiative other than a termination due
to a Construction Termination Without Cause, the Executive shall have the same
entitlements as provided in Section 10(c) for a termination for Cause. A
voluntary termination under this Section 10 shall be effective upon not less
than 90 days prior notice written to the Company.
(g) LIMITATION FOLLOWING A CHANGE OF CONTROL. In the event that the
termination of the Executive's employment is pursuant to Section 10(e) above and
the aggregate of all payments or benefits made or provided to the Executive
under Section 10(e) above and under all other plans and programs of the Company
(the "Aggregate Payment") is determined to constitute a Parachute Payment, as
such term is defined in Section 280G(b)(2) of the Internal Revenue Code of 1986,
as amended (the "Code"), then the Company shall pay the Executive such
additional amounts as are required to be paid by such Executive for any excise
taxes imposed on the Executive in connection with such Aggregate Payments
pursuant to Section 4999 of the Code.
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(h) NO MITIGATION. In the event of any termination of employment
under this Section 10, the Executive shall be under no obligation to seek other
employment.
(i) NATURE OF PAYMENTS. Any amounts due under this Section 10 are in
the nature of severance payments considered to be reasonable by the Company and
are not in the nature of a penalty.
(j) NOTICE OF TERMINATION. Except as otherwise provided in this
Section 10 and except in the case of a termination due to the Executive's death,
the Company or the Executive (as the case may be) shall deliver written notice
of termination of employment to the other party hereto which notice shall
specify the effective date of termination in accordance herewith.
11. INDEMNIFICATION. (a) The Executive shall be entitled to the benefit
of the indemnification provisions contained on the date hereof in the
Certificate of Incorporation and By-Laws of the Company (not including any
amendments or additions hereafter that limit or narrow, but including any that
add to or broaden, the protection afforded to the Executive by those
provisions), to the fullest extent permitted by applicable law at the time of
the assertion of any liability against the Executive in respect of any matter
relating to the period during which the Executive is employed by the Company, no
matter when arising.
(b) During the period in which the Executive is employed by the
Company, the Company agrees to maintain a directors' and officers' liability
insurance policy covering the Executive to the extent the Company provides such
coverage for its other executive officers, which policy shall be maintained on a
claims occurred, rather than claims made, basis.
12. EFFECT OF AGREEMENT ON OTHER BENEFITS. Except as specifically
provided in this Agreement, the existence of this Agreement shall not prohibit
or restrict the Executive's entitlement to full participation in the employee
benefit and other plans or programs in which senior executives of the Company
are eligible to participate.
13. COVENANT NOT-TO-COMPETE. During the two years following the end of
the Executive's employment by the Company (the "Covenant Period"):
(a) The Executive agrees that he will not, directly or indirectly, as
a partner, officer, employee, director, stockholder, proprietor, consultant,
representative, agent or otherwise become or be interested in, or associate with
or render assistance to (i) any person engaged in the ownership, operation
and/or management of any water park, amusement park, theme park, marine or
wildlife park, outdoor mini-theme park or family amusement or entertainment
center (collectively, "Parks") located within the United States of America (or
in the event the Company owns or otherwise operates any Park outside the United
States of America, in any location within a 250 mile radius of such location) or
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(ii) if during the Term, the Company commences any line of business, in addition
to the ownership, operation and/or management of Parks, and if, during the last
full fiscal year of the Company preceding the date of the termination of the
Executive's employment, such other line of business accounted for at least 10%
of the Company's revenue during such year, any person engaged in such other line
of business within a 250 mile radius of any location at which the Company is
then engaged therein. The foregoing provisions shall not, however, prohibit the
ownership by any Executive of securities in accordance with Section 4(c)(i).
(b) The Executive agrees that he will not, directly or indirectly,
during the Covenant Period, for his own benefit or for the benefit of any other
person knowingly solicit the professional services of any employee of the
Company or any Subsidiary or any person who had been such an employee within
three months prior thereto or otherwise interfere with the relationship between
the Company or any Subsidiary and any of such persons.
(c) The Executive recognizes and acknowledges that, in connection
with his employment with the Company, he has had and will continue to have
access to valuable trade secrets and confidential information of the Company and
its Subsidiaries and Affiliates including, but not limited to, customer and
supplier lists, business methods and processes, marketing, promotional, pricing
and financial information and data relating to employees and agents
(collectively, "Confidential Information") and that such Confidential
Information is being made available to the Executive only in connection with the
furtherance of his employment with the Company. The Executive agrees that
during the Term and thereafter, he will not use or disclose any of such
Confidential Information to any person, except that disclosure of Confidential
Information will be permitted: (i) to the Company, its Subsidiaries and
Affiliates and their respective advisors; (ii) if such Confidential Information
has previously become available to the public through no fault of the Executive;
(iii) if required by any court or governmental agency or body or is otherwise
required by law; (iv) if necessary to establish or assert the rights of the
Executive hereunder; or (v) if expressly consented to by the Company.
(d) The parties agree that a violation of the foregoing agreements
not to compete or disclose, or any provision thereof, will cause irreparable
damage to the Company, and the Company shall be entitled (without any
requirement of posting a bond or other security), in addition to any other
rights and remedies which it may have, at law or in equity, to an injunction
enjoining and restraining the Executive from doing or continuing to do any such
act or any other violations or threatened violations of this Section 13.
(e) The Executive acknowledges and agrees that the restrictive
covenants set forth in this Section 13 (the "Restrictive Covenants") are
reasonable and valid in geographical and temporal scope and in all other
respects. If any court determines that any of the Restrictive Covenants, or any
part thereof, is invalid or unenforceable, the remainder
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of the Restrictive Covenants shall not thereby be affected and shall be given
full force and effect, without regard to the invalid or unenforceable parts.
(f) If any court determines that any of the Restrictive Covenants, or
any part thereof, is invalid or unenforceable for any reason, such court shall
have the power to modify such Restrictive Covenant, or any part thereof, and, in
its modified form, such Restrictive Covenant shall then be valid and
enforceable.
14. SEVERABILITY. Should any provision of this Agreement be held, by a
court of competent jurisdiction, to be invalid or unenforceable, such invalidity
or unenforceability shall not render the entire Agreement invalid or
unenforceable, and this Agreement and each individual provision hereof shall be
enforceable and valid to the fullest extent permitted by law.
15. SUCCESSORS AND ASSIGNS. (a) This Agreement and all rights under this
Agreement are personal to the Executive and shall not be assignable other than
by will or the laws of descent. All of the Executive's rights under the
Agreement shall inure to the benefit of his heirs, personal representatives,
designees or other legal representatives, as the case may be.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns. Any person succeeding to the
business of the Company by merger, purchase, consolidation or otherwise shall
assume by contract or operation of law the obligations of the Company under this
Agreement.
16. GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the laws of the State of New York, without regard to the
conflicts of laws rules thereof.
17. NOTICES. All notices, requests and demands given to or made upon the
respective parties hereto shall be deemed to have been given or made three (3)
business days after the date of mailing when mailed by registered or certified
mail, postage prepaid, or on the date of delivery if delivered by hand, or by
any nationally-recognized overnight delivery service, addressed to the parties
at their addresses set forth below or to such other addresses furnished by
notice given in accordance with this Section 17: (a) if to the Company, 122
East 42nd Street, New York, New York 10168, Attn: Board of Directors, and (b) if
to the Executive, 69 Prospect Street, Summit, New Jersey 07901.
18. WITHHOLDING. All payments required to be made by the Company to the
Executive under this Agreement shall be subject to withholding taxes, social
security and other payroll deductions in accordance with the Company's policies
applicable to senior executives of the Company and the provisions of any
applicable employee benefit plan or program of the Company.
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<PAGE>
19. COMPLETE UNDERSTANDING. This Agreement supersedes any prior
contracts, understandings, discussions and agreements relating to employment
between the Executive and the Company and constitutes the complete understanding
between the parties with respect to the subject matter hereof. No statement,
representation, warranty or covenant has been made by either party with respect
to the subject matter hereof except as expressly set forth herein.
20. MODIFICATION; WAIVER. (a) This Agreement may be amended or waived if,
and only if, such amendment or waiver is in writing and signed, in the case of
an amendment, by the Company and the Executive or in the case of a waiver, by
the party against whom the waiver is to be effective. Any such waiver shall be
effective only to the extent specifically set forth in such writing.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise thereof preclude any other or further exercise thereof or
the exercise of any other right, power or privilege.
21. MUTUAL REPRESENTATIONS. (a) The Executive represents and warrants to
the Company that the execution and delivery of this Agreement and the
fulfillment of the terms hereof (i) will not constitute a default under or
conflict with any agreement or other instrument to which he is a party or by
which he is bound and (ii) do not require the consent of any person.
(b) The Company represents and warrants to the Executive that this
Agreement has been duly authorized, executed and delivered by the Company and
that such execution and delivery and the fulfillment of the terms hereof (i)
will not constitute a default under or conflict with any agreement or other
instrument to which it is a party or by which it is bound and (ii) do not
require the consent of any person.
(c) Each party hereto represents and warrants to the other that this
Agreement constitutes the valid and binding obligation of such party enforceable
against such party in accordance with its terms.
22. HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not control or affect the meaning or construction of
this Agreement.
23. COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective when each party hereto shall have received counterparts
hereof signed by the other party hereto.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed in its corporate name, and the Executive has manually signed his
name hereto, all as of the day and year first above written.
PREMIER PARKS INC.
By: /s/
--------------------------------
Paul A. Biddelman
Chairman of the
Compensation Committee
/s/
-----------------------------------
KIERAN E. BURKE
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EXHIBIT A
---------
If the quotient of
Actual EBITDA for the applicable year
- -----------------------------------------
Budgeted EBITDA for the applicable year Applicable Percentage
---------------------
(rounded to the nearest thousandths) equals:
between (and including) .945 and (but excluding) .950 95%
between .940 and (but excluding) .945 90%
between .935 and (but excluding) .940 85%
between .930 and (but excluding) .935 80%
between .925 and (but excluding) .930 75%
between .920 and (but excluding) .925 70%
between .915 and (but excluding) .920 65%
between .910 and (but excluding) .915 60%
between .905 and (but excluding) .910 55%
between .900 and (but excluding) .905 50%
between .895 and (but excluding) .900 45%
between .890 and (but excluding) .895 40%
between .885 and (but excluding) .890 35%
between .880 and (but excluding) .885 30%
between .875 and (but excluding) .880 25%
between .870 and (but excluding) .875 20%
between .865 and (but excluding) .870 15%
between .860 and (but excluding) .865 10%
between .850 and (but excluding) .860 5%
less than .850 0%
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EXHIBIT 10(ag)
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement"), dated as of July 31, 1997, between PREMIER
PARKS INC., a Delaware corporation (the "Company"), and GARY STORY (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Executive is and has been for more than three years the
President of the Company;
WHEREAS, the Executive possesses an intimate knowledge of the business and
affairs of the Company;
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the Executive's contribution as President and Chief Operating Officer to
the growth and success of the Company has been substantial and desires to assure
the Company the continued employment of the Executive as President and Chief
Operating Officer of the Company and to compensate him therefor; and
WHEREAS, the Executive desires to continue to serve as President and Chief
Operating Officer of the Company, on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises, representations
and warranties set forth herein, and for other good and valuable consideration,
it is hereby agreed as follows:
1. Certain Definitions. As used herein, the following terms shall have the
following meanings:
"Actual EBITDA" for any year means EBITDA for such year, provided
that (i) if, during such year, the Company or any Subsidiary acquires (A)
capital stock (or other equity interests) of any person (other than a person
which was, prior thereto, a Subsidiary), whether by acquisition, merger,
consolidation or otherwise, and, by virtue of such acquisition, the results of
operations of such person for any portion of such year were consolidated with
those of the Company and its Subsidiaries in the preparation of the Company's
consolidated financial statements for such year or (B) all or substantially all
of the assets of any person or any operating unit of any person, and, in either
case, such acquisition was not contemplated in the preparation of Budgeted
EBITDA for such year, the results of operations of such person or attributable
to such assets and the costs and expenses (including financing costs) incurred
by the Company or any Subsidiary in connection with, or arising out of, such
acquisition shall be disregarded in the calculation of Actual EBITDA for such
year, and (ii) in determining Actual EBITDA for any year, the
<PAGE>
Committee may (but will not be required to) increase (but not decrease) EBITDA
by an amount that the Committee reasonably deems to be appropriate to eliminate
or offset the effects upon EBITDA for such year of events the Committee deems
extraordinary or unusual in nature.
"Affiliate" of a person shall mean any other person that directly or
indirectly controls, is controlled by, or is under common control with the
person specified. For the purposes of this Agreement, "control," when used with
respect to any person, shall mean the power to direct the management and
policies of such person, whether through the ownership of securities, by
contract or otherwise.
"Base Salary" shall have the meaning provided in Section 5(a).
"Board" shall have the meaning provided in the third recital to this
Agreement.
"Bonus" shall have the meaning provided in Section 5(b).
"Budgeted EBITDA" for any year means the amount of EBITDA that the
Company projects to achieve during such year, as specified in the definitive
annual budget of the Company for such year approved by the Board. For the year
ending December 31, 1997, Budgeted EBITDA means $52 million.
"Cause" shall mean (i) the willful or repeated failure of the
Executive to perform his obligations hereunder as provided herein, provided that
such Cause shall not exist unless the Company shall first have provided the
Executive with written notice specifying in reasonable detail the factors
constituting such failure and such failure shall not have been cured by the
Executive within 30 days after such notice; (ii) the conviction of the Executive
of a crime which constitutes a felony involving moral turpitude under applicable
law or the entering by him of a plea of guilty or nolo contendere with respect
thereto; (iii) the commission by the Executive of any act involving fraud,
misappropriation of Company funds or other gross misconduct injurious to the
Company; (iv) the good faith determination by the Board that the Executive is
dependent upon alcohol or drugs; or (v) the determination by the Board that the
Executive has violated in any material respect the provisions of Sections 4(c)
or 13(c) hereof.
"Change of Control" shall have the meaning provided in the
Indenture, dated as of January 15, 1997, between the Company and The Bank of New
York, as trustee, as the same exists on the date of this Agreement.
"Committee" shall mean the Compensation Committee of the Board.
"Constructive Termination Without Cause" shall mean a termination of
the Executive's employment at his initiative as provided in Section 10(d) below
following the
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occurrence, without the Executive's prior written consent, of one or more of the
following events (except in consequence of a prior termination): (i) a reduction
in the Executive's then current Base Salary or in the Bonus payable to him under
Section 5(b) (except pursuant to the terms thereof) or the termination or
material reduction of any employee material benefit or perquisite enjoyed by him
during the term of this Agreement; (ii) the failure to elect or reelect the
Executive to any of the positions in the Company described in Section 4(a) below
or removal of him from any such position; (iii) a material diminution in the
Executive's duties or the assignment to the Executive of duties which are
materially inconsistent with his other duties or which materially impair the
Executive's ability to function as the President and Chief Operating Officer of
the Company; (iv) the relocation of the Company's executive office, or the
Executive's own office location as assigned to him by the Company, to a location
more than 50 miles from Oklahoma City, Oklahoma; (v) the failure of the Company
to obtain the assumption in writing of its obligations under this Agreement by
any successor to the business of the Company on or prior to the date of a
merger, consolidation, sale or similar transaction; or (vi) the failure by the
Company to offer the Executive a new employment agreement with compensation and
benefit provisions on terms at least as favorable to the Executive as those set
forth herein (other than those provided in Section 9 hereof).
"Disability" shall mean the Executive's inability by reason of
physical or mental illness to substantially perform his duties and
responsibilities under this Agreement for a period of 180 consecutive days or a
period of in excess of 180 days during any calendar year during the Term.
"EBITDA" for any period means the income before extraordinary items
and/or cumulative effect of change in accounting principles of the Company and
its Subsidiaries for such period, plus the sum of the following, to the extent
deducted in calculating such income, of (i) income tax expense (or, in the case
of income tax benefit, minus the amount thereof), (ii) interest expense, net of
interest income, and (iii) depreciation and amortization expense, in each case
for such period. All components of EBITDA shall be determined on a consolidated
basis in accordance with generally acceptable accounting principles in the
United States as in effect as of the date of the determination of Budgeted
EBITDA for such period, consistently applied by the Company for all periods
during the Term. Notwithstanding the foregoing, EBITDA shall for all purposes of
this Agreement be calculated for each year without recognition of any expense
incurred in connection with (i) any bonuses paid or payable to the Executive,
the President and Chief Operating Officer, or the Chief Financial Officer of the
Company or (ii) any Restricted Shares and Additional Restricted Shares (as
defined herein) now or hereafter granted to those officers.
"person" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any other entity.
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"Subsidiary" shall mean, in respect of any person, any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of capital stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by (i) such person,
(ii) such person and one or more Subsidiaries of such person or (iii) one or
more Subsidiaries of such person.
"Term" shall mean the period specified in Section 3 below.
2. Employment. The Company hereby agrees to continue to employ the
Executive, and the Executive hereby accepts such employment, upon the terms and
conditions set forth herein.
3. Term. Unless sooner terminated in accordance with the provisions of
Section 10 hereof, the term of the Executive's employment under this Agreement
shall commence on the date hereof and shall end on the third anniversary hereof
(the "Term").
4. Position and Duties. (a) During the Term, the Executive shall serve as
the President and Chief Operating Officer of the Company and shall have the
authority, functions, duties, powers and responsibilities normally associated
with such positions and as from time to time may be prescribed by the Board. The
Executive agrees, subject to his election as such and without additional
compensation, to serve during the Term in such additional offices of comparable
stature and responsibility to which he may be elected from time to time in the
Company's Subsidiaries and to serve as a director and as a member of any
committee of the Board and as a director of the Company's Subsidiaries.
(b) During the Term and subject to the provisions of Section 4(c),
(i) the Executive's services shall be rendered on a full-time, exclusive basis,
(ii) he will apply on a full-time basis all of his skill and experience to the
performance of his duties in such employment, and shall report only to the
Board, (iii) he shall have no other employment or outside business activities
and (iv) unless the Executive otherwise consents, the headquarters for the
performance of his services shall be the executive offices of the Company in the
greater Oklahoma City area, subject to such reasonable travel as the performance
of his duties in the business of the Company may require.
(c) During the Term, the Executive shall not, directly or
indirectly, without the prior written consent of the Board, render any services
to any person (other than the Company and its Subsidiaries and other persons in
which the Company may have an interest), or acquire any interest of any type in
any such other person that is in competition with the Company or any of its
Subsidiaries or in conflict with his full-time, exclusive position as a senior
executive officer of the Company; provided, however, that the foregoing shall
not be deemed to prohibit the Executive from (i) acquiring, solely as an
investment, securities of any person which are registered under Section 12(b) or
12(g) of the
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<PAGE>
Securities Exchange Act of 1934, as amended (the "Exchange Act") and which are
publicly traded, so long as he is not part of any group required to make any
filing under Section 13(d) of the Exchange Act in respect of such person and
such securities do not constitute 2% or more of any class of outstanding
securities of such person, (ii) acquiring, solely as an investment, any
securities of any person (other than a person that has outstanding securities
covered by the preceding clause (i)) so long as he remains a passive investor in
such person and does not become part of any control group thereof and so long as
such person is not, directly or indirectly, in competition with the Company or
any of its Subsidiaries or (iii)(A) serving on the boards of directors of a
reasonable number of other corporations (none of which are in competition with
the Company or its Subsidiaries) or the boards of a reasonable number of trade
associations and/or charitable organizations or, with the prior written consent
of the Committee, to provide consulting services for any such corporation, trade
association and/or charitable organization, (B) engaging in charitable
activities and community affairs and (C) managing his personal investments and
affairs, provided that the activities referred to in this clause (iii) do not in
the aggregate interfere in any material respect with the proper performance of
his duties and responsibilities as the Company's President and Chief Operating
Officer. For purposes of the foregoing, a person shall be deemed to be in
competition with the Company or any of its Subsidiaries if it (or its
Subsidiaries or Affiliates) is then engaged in any line of business that is
substantially the same as any line of business in which the Company or any of
its Subsidiaries is engaged.
(d) The Company shall use its best efforts to cause the Executive to
be a member of the Board throughout the Term and shall include him in the
management slate for election as a director at every stockholders' meeting at
which his term as a director would otherwise expire.
5. Compensation. (a) Base Salary. The Company shall pay or cause to be
paid to the Executive a base salary (the "Base Salary") of (i) during the
balance of the year ending December 31, 1997, $300,000 per annum, and (ii)
during each succeeding calendar year (or portion thereof) during the Term an
amount per annum equal to $30,000 plus the Base Salary in effect at the end of
the immediately preceding calendar year. The Company may increase, but not
decrease, the Base Salary at any time and from time to time during the Term. The
Base Salary shall be payable in monthly or more frequent installments in
accordance with the Company's regular payroll practices for senior executives.
(b) Bonus. In addition to the Base Salary, the Executive shall be
entitled to receive an annual cash bonus (the "Bonus") in an amount equal to the
sum of (a) .006660 multiplied by the Budgeted EBITDA for the applicable year
plus (b) .02331 multiplied by the amount, if any, by which the Actual EBITDA for
such year exceeded the Budgeted EBITDA for such year; provided, however, that if
in any year, the Actual EBITDA is less than 95% of the amount of the Budgeted
EBITDA for such year, the product obtained by clause (a) above shall be
multiplied by the Applicable Percentage set forth on Exhibit A in determining
the amount of the Bonus payable with respect to such year. The Bonus will be
payable with respect to each of the Company's fiscal years ending December 31,
1997,
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December 31, 1998 and December 31, 1999 and, except as provided in Section 5(c),
will be payable as follows: (i) 75% of the estimated Bonus will be paid to the
Executive in the immediately succeeding January; and (ii) the remaining amount
of the Bonus over the amount previously paid in January of that year will be
paid to the Executive not later than 120 days after the end of the preceding
year.
Within 95 days following the end of each applicable year during the
Term, the independent public accountants of the Company shall deliver to the
Committee a certificate setting forth the calculation of EBITDA for such year
based on the Company's audited financial statements for such year and, if
applicable, an agreed upon procedure report on all adjustments to EBITDA
required by clause (i) of the definition of Actual EBITDA. Within 100 days after
the end of each such year, the Committee shall deliver to the Executive a
notice, in reasonable detail, showing the calculation of Actual EBITDA for such
year, the Bonus payable to the Executive under this Section 5(b) with respect to
such year and the number of Restricted Shares with respect to which the
Restriction Period has expired by virtue of such Actual EBITDA pursuant to
Section 9(c)(ii) hereof.
(c) Deferred Compensation. The Executive by timely notice delivered
to the Committee may elect to defer any portion of the Base Salary or Bonus with
respect to any year on terms reasonably acceptable to the Company, provided such
deferral does not result in the Company incurring any additional expense.
6. Employee Benefit Programs. During the Term, the Executive shall be
entitled to participate in all employee pension and welfare benefit plans and
programs made available to the Company's senior level executives or its
employees generally, as such plans or programs may be in effect from time to
time, including without limitation, pension, savings and other retirement plans
or programs, medical, dental, hospitalization, short-term and long-term
disability and life insurance plans, and any other employee benefit plans or
programs that may be sponsored by the Company from time to time, whether funded
or unfunded.
7. Reimbursement of Expenses. During the Term, the Company shall pay or
reimburse the Executive for all reasonable travel, entertainment and other
business expenses actually incurred or paid by the Executive in the performance
of his duties hereunder upon presentation of expense statements or vouchers or
such other supporting information as the Company may reasonably require.
8. Vacations. In addition to customary paid holidays, the Executive shall
be entitled to four (4) weeks of paid vacation during each year of the Term (and
a pro rata portion thereof for any portion of the Term that is less than a full
year). Any unused vacation days during any year shall not be carried forward to
subsequent years, nor shall the Executive receive any additional compensation
for such unused vacation days.
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9. The Shares. (a) On the date hereof, and in consideration of services to
be performed by the Executive hereunder, the Company has granted to the
Executive, subject to the provisions of this Section 9, 150,000 shares (the
"Restricted Shares") of the Company's Common Stock, par value $.05 per share
(the "Common Stock"). In addition, on the date hereof, the Company shall reserve
for future grant to the Executive, at the sole and absolute discretion of the
Committee taking into account EBITDA and other factors, an additional 150,000
shares of Common Stock (the "Additional Restricted Shares" and together with the
Restricted Shares, the "Shares").
(b) During the Restriction Period (as defined below) relating to any
Restricted Shares, such Restricted Shares may not be sold, assigned,
transferred, pledged or otherwise encumbered by the Executive. Except as
provided in this Section 9, the Executive, as the owner of Restricted Shares,
shall have all the rights of a holder of Common Stock, including but not limited
to the right to receive all cash dividends or distributions paid on and the
right to vote such Restricted Shares until such date as such Restricted Shares
shall have been forfeited pursuant to Section 9(g).
(c) The restrictions contained in this Section 9 on the rights of
the Executive to sell, assign, transfer or encumber the Restricted Shares and on
his ability to hold the certificates representing the Restricted Shares pursuant
to Section 9(d) shall expire as follows:
(i) the restrictions on 25,000 Restricted Shares shall expire
on each of January 1, 1998, January 1, 1999, January 1, 2000, January 1, 2001,
January 1, 2002 and January 1, 2003, provided that the Executive's employment
hereunder has not been terminated pursuant to Section 10(c) of this Agreement or
the equivalent provision of any successor agreements prior to such date.
(ii) The period during which the restrictions set forth in
this Section 9(c) as to the ownership, transfer and disposition by the Executive
of any Restricted Shares shall be in effect shall be referred to herein as the
"Restriction Period."
(d) Each certificate representing Restricted Shares or Additional
Restricted Shares shall be registered in the name of the Executive, deposited by
him with the Company together with a stock power endorsed in blank and bear the
following, or a substantially similar, legend:
"The transferability of this Certificate and the Common Stock
represented hereby is subject to the terms and conditions, including
forfeiture, contained in the Employment Agreement, dated July __,
1997, between the Company and Gary Story. A copy of the Employment
Agreement is on file in the executive offices of Premier Parks Inc.,
11501 Northeast Expressway, Oklahoma City, Oklahoma 73131."
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(e) The Executive hereby represents and warrants that he (i) is
acquiring the Restricted Shares for his own account and not with a view to the
sale or distribution thereof except in compliance with the Securities Act of
1933, as amended (the "Securities Act") and applicable state securities laws and
(ii) is an "accredited investor" as such term is defined in Regulation D under
the Securities Act.
(f) After the Restriction Period relating to any Restricted Shares
has expired, upon the written request of the Executive, or the Executive's legal
representative, permitted successor or heir, the Company shall deliver to the
Executive, or such legal representative, permitted successor or heir, a
certificate or certificates, without the legend referred to in Section 9(d), for
the number of such Restricted Shares. Notwithstanding the foregoing, any
certificate or certificates so delivered shall bear such legends as the Company
may deem advisable to reflect restrictions which may be imposed by law,
including, without limitation, the Securities Act or any state "blue sky" or
other applicable securities laws.
(g) The Executive's rights to any Restricted Shares shall be
forfeited on the first date on which it can be determined that the Restriction
Period with respect to such Restricted Shares is incapable of expiring pursuant
to the provisions of Section 9(c). Any Restricted Shares with respect to which
the Restriction Period has not expired shall be forfeited as of the last day
thereof. Certificates representing any forfeited Restricted Shares shall be
cancelled by the Company, and the Executive shall have no rights with respect to
any such forfeited Shares.
(h) If the Company shall be consolidated or merged with another
corporation, and such consolidation or merger is not a Change of Control, the
Executive will deposit with the successor corporation the certificates for the
stock or securities or the other property that the Executive is entitled to
receive by reason of his ownership of Restricted Shares in a manner consistent
with Section 9(d), and such stock, securities or other property shall become
subject to the restrictions and requirements imposed by this Section 9, and the
certificates therefor or other evidence thereof shall bear a legend similar in
form and substance to the legend set forth in Section 9(d).
(i) In the event of a stock dividend, stock split, share
combination, exchange of shares, recapitalization, merger, consolidation,
reorganization, liquidation or other comparable changes or transactions of or by
the Company, an appropriate adjustment to the number of Shares shall be made to
give proper effect to such event.
10. Termination of Employment.
(a) Termination Due to Death. The Executive's employment shall
immediately terminate upon his death. In such event, his estate or his
beneficiaries, as the case may be, shall be entitled to:
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(i) Base Salary (at the applicable rate in effect on the date
of his death) for a period of 365 days;
(ii) a Bonus for the year in which the Executive's death
occurs in an amount equal to the Bonus (if any) that would have been payable to
the Executive with respect to such year had his death not occurred, multiplied
(in the event such death occurs before June 30 of such year) by a fraction the
numerator of which shall be the number of days elapsed during such year prior to
the date of the Executive's death and the denominator of which shall be 181,
payable as provided in Section 5(b);
(iii) all Restricted Shares with respect to which the
Restriction Period had expired prior to the date of this death, all Restricted
Shares as to which the Restriction Period under Section 9(c) hereof has not yet
expired (as to which the restriction shall then automatically expire), and such
Additional Restricted Shares as the Committee may in its discretion grant;
(iv) unless otherwise required by any plan, the continued
right to exercise any then vested stock option for the remainder of its term;
(v) any amounts earned, accrued or owing but not yet paid
under Sections 5, 6 or 7 above; and
(vi) other or additional benefits in accordance with
applicable plans and programs of the Company.
(b) Termination Due to Disability. The Company may terminate the
Executive's employment, by written notice delivered to him, due to his
Disability. In such event, he shall be entitled to:
(i) an amount equal to 100% of Base Salary, at the rate in
effect at the date of such termination of his employment, for a period of 365
days following the date of termination, less the amount of any disability
benefits provided to the Executive under any disability plan or policy;
(ii) a Bonus for the year in which such termination occurs in
an amount equal to the Bonus that would have been payable to the Executive with
respect to such year had such termination not occurred, multiplied (in the event
such termination occurs before June 30 of such year) by a fraction the numerator
of which shall be the number of days elapsed during such year prior to the date
of such termination and the denominator of which shall be 181, payable as
provided in Section 5(b);
(iii) all Restricted Shares with respect to which the
Restriction Period had expired prior to the date of termination due to his
Disability and all Restricted Shares as to which the Restriction Period under
Section 9(c) hereof has not yet expired (as
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to which the restriction shall automatically expire), and such Additional
Restricted Shares as the Committee may in its discretion grant;
(iv) unless otherwise required by any plan, the continued
right to exercise any then vested stock option for the remainder of its term;
(v) any amounts earned, accrued or owing but not yet paid
under Sections 5, 6 or 7 above;
(vi) continued participation at the expense of the Company in
medical, dental and hospitalization insurance coverage in which he was
participating on the date of termination of his employment for a period equal to
the longest of (x) 12 months from the date of such termination, (y) the minimum
period prescribed by applicable law or (z) the period set forth in the
applicable plan or program of the Company; and
(vii) other or additional benefits in accordance with
applicable plans and programs of the Company.
(c) Termination by the Company for Cause. In the event the Company
proposes to terminate the Executive's employment for Cause, it shall so notify
the Executive in writing, which notice shall include (A) in reasonable detail
the particular act or acts or failure or failures to act that constitute the
grounds on which the proposed termination for Cause is based and (B) the date
(which shall not be earlier than 21 days following the date of such notice),
time and location of a Board meeting at which the Executive shall be entitled to
a hearing as to such grounds. If, within five days after such hearing, the
Executive is furnished written notice that a majority of all then members of the
Board (excluding the Executive) have confirmed that, in their judgment, grounds
for Cause exist, his employment shall thereupon terminate for Cause. In such
event, he shall be entitled to:
(i) the Base Salary then in effect through the date of the
termination of his employment for Cause;
(ii) all Restricted Shares with respect to which the
Restriction Period had expired prior to the date of such termination;
(iii) any amounts earned, accrued or owing but not yet paid
under Sections 5, 6 or 7 above; and
(iv) other or additional benefits in accordance with
applicable plans or programs of the Company.
(d) Termination Without Cause or Constructive Termination Without
Cause. In the event the Executive's employment is terminated by the Company
without
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Cause, other than due to his Disability or death, or is terminated by the
Executive due to a Constructive Termination Without Cause, the Executive shall
be entitled to:
(i) the Base Salary through the date of termination of the
Executive's employment;
(ii) the Bonus for the year in which such termination occurs
in an amount equal to the Bonus that would have been payable to the Executive
with respect to such year had such termination not occurred, multiplied (in the
event such termination occurs before June 30 of such year) by a fraction, the
numerator of which shall be the number of days elapsed during such year prior to
the date of such termination and the denominator of which shall be 181, payable
immediately;
(iii) an amount equal to the product obtained by multiplying
three times the aggregate amount paid or payable to the Executive as Base Salary
and Bonus with respect to the calendar year immediately preceding the year in
which such termination occurs, payable in one lump sum within ten Business Days
after such termination;
(iv) (a) all Restricted Shares with respect to which the
Restriction Period had expired prior to the date of termination and all
Restricted Shares as to which the Restriction Period under Section 9(c) hereof
has not yet expired (as to which the restriction shall then automatically
expire), and (b) such Additional Restricted Shares as the Committee in its
discretion has theretofore granted to the Executive (as to which all restriction
periods related thereto shall then automatically terminate);
(v) exercise any stock option to the extent exercisable at the
date of his termination without Cause or Constructive Termination Without Cause,
for a period of 90 days after such termination;
(vi) any amounts earned, accrued or owing but not yet paid
under Sections 4, 5 or 6 above;
(vii) continued participation at the Company's expense in
medical, dental and hospitalization insurance coverage and in all other employee
benefit plans and programs in which he was participating on the date of
termination of his employment for a period equal to of the longest of (x) 6
months from the date of such termination, (y) the minimum period prescribed by
applicable law or (z) the period set forth in the applicable plan or program of
the Company; and
(viii) other or additional benefits in accordance with
applicable plans and programs of the Company.
(e) Change of Control. (i) In the event of a Change of Control
(whether or not the Executive's employment is terminated), the Executive shall
be entitled to (A) all
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Restricted Shares with respect to which the Restriction Period had expired prior
to the date of the Change of Control and all Restricted Shares as to which the
Restriction Period under Section 9(c) hereof has not yet expired (as to which
the restriction shall then automatically expire), and (b) such Additional
Restricted Shares as the Committee in its discretion has theretofore granted to
the Executive (as to which all restriction periods related thereto shall then
automatically terminate); and (B) all Additional Restricted Shares not
theretofore granted to the Executive, as to which all restriction periods
related thereto shall automatically expire, subject, however, as to the
Additional Restricted Shares not theretofore granted to the Executive to the
condition that the Market Price (as defined herein) of the Common Stock is not
less than $40.00 per share, subject to appropriate adjustments for stock
dividends, stock splits, share combinations, exchanges of shares,
recapitalizations or comparable changes or transactions by the Company to give
proper effect to this provision. For purposes hereof, the term "Market Price"
shall mean the average of the daily closing prices of the Common Stock on the
principal securities exchange or market in which such stock is traded or quoted
for 20 consecutive trading days commencing 30 trading days prior to the
consummation of such Change of Control or in the event the Common Stock is not
so traded or quoted at that time, the fair value of the Common Stock as
determined by the Committee.
(ii) If during the 180 day period following a Change of
Control, the Executive's employment is terminated by the Company (other than due
to his Disability or death) or is terminated due to a Constructive Termination
Without Cause, the Executive shall be entitled to (A) the payments and benefits
provided in Section 10(d); (B) all Additional Restricted Shares, whether or not
theretofore granted to the Executive, and as to which all restriction periods
related thereto shall then automatically expire; and (C) all amounts,
entitlements or benefits under all employee benefit plans as to which the
Executive is not yet vested shall become fully vested except to the extent such
vesting would be inconsistent with the terms of the relevant plan.
(f) Voluntary Termination. In the event of a termination of
employment by the Executive on his own initiative other than a termination due
to a Construction Termination Without Cause, the Executive shall have the same
entitlements as provided in Section 10(c) for a termination for Cause. A
voluntary termination under this Section 10 shall be effective upon not less
than 90 days prior notice written to the Company.
(g) Limitation Following a Change of Control. In the event that the
termination of the Executive's employment is pursuant to Section 10(e) above and
the aggregate of all payments or benefits made or provided to the Executive
under Section 10(e) above and under all other plans and programs of the Company
(the "Aggregate Payment") is determined to constitute a Parachute Payment, as
such term is defined in Section 280G(b)(2) of the Internal Revenue Code of 1986,
as amended (the "Code"), then the Company shall pay the Executive such
additional amounts as are required to be paid by such Executive for any excise
taxes imposed on the Executive in connection with such Aggregate Payments
pursuant to Section 4999 of the Code.
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<PAGE>
(h) No Mitigation. In the event of any termination of employment
under this Section 10, the Executive shall be under no obligation to seek other
employment.
(i) Nature of Payments. Any amounts due under this Section 10 are in
the nature of severance payments considered to be reasonable by the Company and
are not in the nature of a penalty.
(j) Notice of Termination. Except as otherwise provided in this
Section 10 and except in the case of a termination due to the Executive's death,
the Company or the Executive (as the case may be) shall deliver written notice
of termination of employment to the other party hereto which notice shall
specify the effective date of termination in accordance herewith.
11. Indemnification. (a) The Executive shall be entitled to the benefit of
the indemnification provisions contained on the date hereof in the Certificate
of Incorporation and By-Laws of the Company (not including any amendments or
additions hereafter that limit or narrow, but including any that add to or
broaden, the protection afforded to the Executive by those provisions), to the
fullest extent permitted by applicable law at the time of the assertion of any
liability against the Executive in respect of any matter relating to the period
during which the Executive is employed by the Company, no matter when arising.
(b) During the period in which the Executive is employed by the
Company, the Company agrees to maintain a directors' and officers' liability
insurance policy covering the Executive to the extent the Company provides such
coverage for its other executive officers, which policy shall be maintained on a
claims occurred, rather than claims made, basis.
12. Effect of Agreement on Other Benefits. Except as specifically provided
in this Agreement, the existence of this Agreement shall not prohibit or
restrict the Executive's entitlement to full participation in the employee
benefit and other plans or programs in which senior executives of the Company
are eligible to participate.
13. Covenant Not-to-Compete. During the two years following the end of the
Executive's employment by the Company (the "Covenant Period"):
(a) The Executive agrees that he will not, directly or indirectly,
as a partner, officer, employee, director, stockholder, proprietor, consultant,
representative, agent or otherwise become or be interested in, or associate with
or render assistance to (i) any person engaged in the ownership, operation
and/or management of any water park, amusement park, theme park, marine or
wildlife park, outdoor mini-theme park or family amusement or entertainment
center (collectively, "Parks") located within the United States of America (or
in the event the Company owns or otherwise operates any Park outside the United
States of America, in any location within a 250 mile radius of such location) or
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(ii) if during the Term, the Company commences any line of business, in addition
to the ownership, operation and/or management of Parks, and if, during the last
full fiscal year of the Company preceding the date of the termination of the
Executive's employment, such other line of business accounted for at least 10%
of the Company's revenue during such year, any person engaged in such other line
of business within a 250 mile radius of any location at which the Company is
then engaged therein. The foregoing provisions shall not, however, prohibit the
ownership by any Executive of securities in accordance with Section 4(c)(i).
(b) The Executive agrees that he will not, directly or indirectly,
during the Covenant Period, for his own benefit or for the benefit of any other
person knowingly solicit the professional services of any employee of the
Company or any Subsidiary or any person who had been such an employee within
three months prior thereto or otherwise interfere with the relationship between
the Company or any Subsidiary and any of such persons.
(c) The Executive recognizes and acknowledges that, in connection
with his employment with the Company, he has had and will continue to have
access to valuable trade secrets and confidential information of the Company and
its Subsidiaries and Affiliates including, but not limited to, customer and
supplier lists, business methods and processes, marketing, promotional, pricing
and financial information and data relating to employees and agents
(collectively, "Confidential Information") and that such Confidential
Information is being made available to the Executive only in connection with the
furtherance of his employment with the Company. The Executive agrees that during
the Term and thereafter, he will not use or disclose any of such Confidential
Information to any person, except that disclosure of Confidential Information
will be permitted: (i) to the Company, its Subsidiaries and Affiliates and their
respective advisors; (ii) if such Confidential Information has previously become
available to the public through no fault of the Executive; (iii) if required by
any court or governmental agency or body or is otherwise required by law; (iv)
if necessary to establish or assert the rights of the Executive hereunder; or
(v) if expressly consented to by the Company.
(d) The parties agree that a violation of the foregoing agreements
not to compete or disclose, or any provision thereof, will cause irreparable
damage to the Company, and the Company shall be entitled (without any
requirement of posting a bond or other security), in addition to any other
rights and remedies which it may have, at law or in equity, to an injunction
enjoining and restraining the Executive from doing or continuing to do any such
act or any other violations or threatened violations of this Section 13.
(e) The Executive acknowledges and agrees that the restrictive
covenants set forth in this Section 13 (the "Restrictive Covenants") are
reasonable and valid in geographical and temporal scope and in all other
respects. If any court determines that any of the Restrictive Covenants, or any
part thereof, is invalid or unenforceable, the remainder
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of the Restrictive Covenants shall not thereby be affected and shall be given
full force and effect, without regard to the invalid or unenforceable parts.
(f) If any court determines that any of the Restrictive Covenants,
or any part thereof, is invalid or unenforceable for any reason, such court
shall have the power to modify such Restrictive Covenant, or any part thereof,
and, in its modified form, such Restrictive Covenant shall then be valid and
enforceable.
14. Severability. Should any provision of this Agreement be held, by a
court of competent jurisdiction, to be invalid or unenforceable, such invalidity
or unenforceability shall not render the entire Agreement invalid or
unenforceable, and this Agreement and each individual provision hereof shall be
enforceable and valid to the fullest extent permitted by law.
15. Successors and Assigns. (a) This Agreement and all rights under this
Agreement are personal to the Executive and shall not be assignable other than
by will or the laws of descent. All of the Executive's rights under the
Agreement shall inure to the benefit of his heirs, personal representatives,
designees or other legal representatives, as the case may be.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns. Any person succeeding to the
business of the Company by merger, purchase, consolidation or otherwise shall
assume by contract or operation of law the obligations of the Company under this
Agreement.
16. Governing Law. This Agreement shall be construed in accordance with
and governed by the laws of the State of New York, without regard to the
conflicts of laws rules thereof.
17. Notices. All notices, requests and demands given to or made upon the
respective parties hereto shall be deemed to have been given or made three (3)
business days after the date of mailing when mailed by registered or certified
mail, postage prepaid, or on the date of delivery if delivered by hand, or by
any nationally-recognized overnight delivery service, addressed to the parties
at their addresses set forth below or to such other addresses furnished by
notice given in accordance with this Section 17: (a) if to the Company, 122 East
42nd Street, New York, New York 10168, Attn: Board of Directors, and (b) if to
the Executive, 2532 Sweetbriar, Edmond, Oklahoma 73034.
18. Withholding. All payments required to be made by the Company to the
Executive under this Agreement shall be subject to withholding taxes, social
security and other payroll deductions in accordance with the Company's policies
applicable to senior executives of the Company and the provisions of any
applicable employee benefit plan or program of the Company.
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19. Complete Understanding. This Agreement supersedes any prior contracts,
understandings, discussions and agreements relating to employment between the
Executive and the Company and constitutes the complete understanding between the
parties with respect to the subject matter hereof. No statement, representation,
warranty or covenant has been made by either party with respect to the subject
matter hereof except as expressly set forth herein.
20. Modification; Waiver. (a) This Agreement may be amended or waived if,
and only if, such amendment or waiver is in writing and signed, in the case of
an amendment, by the Company and the Executive or in the case of a waiver, by
the party against whom the waiver is to be effective. Any such waiver shall be
effective only to the extent specifically set forth in such writing.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise thereof preclude any other or further exercise thereof or
the exercise of any other right, power or privilege.
21. Mutual Representations. (a) The Executive represents and warrants to
the Company that the execution and delivery of this Agreement and the
fulfillment of the terms hereof (i) will not constitute a default under or
conflict with any agreement or other instrument to which he is a party or by
which he is bound and (ii) do not require the consent of any person.
(b) The Company represents and warrants to the Executive that this
Agreement has been duly authorized, executed and delivered by the Company and
that such execution and delivery and the fulfillment of the terms hereof (i)
will not constitute a default under or conflict with any agreement or other
instrument to which it is a party or by which it is bound and (ii) do not
require the consent of any person.
(c) Each party hereto represents and warrants to the other that this
Agreement constitutes the valid and binding obligation of such party enforceable
against such party in accordance with its terms.
22. Headings. The headings in this Agreement are for convenience of
reference only and shall not control or affect the meaning or construction of
this Agreement.
23. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective when each party hereto shall have received counterparts
hereof signed by the other party hereto.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed in its corporate name, and the Executive has manually signed his name
hereto, all as of the day and year first above written.
PREMIER PARKS INC.
By: /s/
---------------------------------
Paul A. Biddelman
Chairman of the
Compensation Committee
/s/
------------------------------------
GARY STORY
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EXHIBIT A
If the quotient of
Actual EBITDA for the applicable year
- ---------------------------------------
Budgeted EBITDA for the applicable year Applicable Percentage
---------------------
(rounded to the nearest thousandths) equals:
between (and including) .945 and (but excluding) .950 95%
between .940 and (but excluding) .945 90%
between .935 and (but excluding) .940 85%
between .930 and (but excluding) .935 80%
between .925 and (but excluding) .930 75%
between .920 and (but excluding) .925 70%
between .915 and (but excluding) .920 65%
between .910 and (but excluding) .915 60%
between .905 and (but excluding) .910 55%
between .900 and (but excluding) .905 50%
between .895 and (but excluding) .900 45%
between .890 and (but excluding) .895 40%
between .885 and (but excluding) .890 35%
between .880 and (but excluding) .885 30%
between .875 and (but excluding) .880 25%
between .870 and (but excluding) .875 20%
between .865 and (but excluding) .870 15%
between .860 and (but excluding) .865 10%
between .850 and (but excluding) .860 5%
less than .850 0%
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EXHIBIT 10(ah)
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement"), dated as of July 31, 1997, between PREMIER
PARKS INC., a Delaware corporation (the "Company"), and JAMES F. DANNHAUSER (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Executive is and has been for more than two years the Chief
Financial Officer of the Company;
WHEREAS, the Executive possesses an intimate knowledge of the business and
affairs of the Company;
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the Executive's contribution as Chief Financial Officer to the growth and
success of the Company has been substantial and desires to assure the Company
the continued employment of the Chief Financial Officer of the Company and to
compensate him therefor; and
WHEREAS, the Executive desires to continue to serve as Chief Financial
Officer of the Company, on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises, representations
and warranties set forth herein, and for other good and valuable consideration,
it is hereby agreed as follows:
1. Certain Definitions. As used herein, the following terms shall have the
following meanings:
"Actual EBITDA" for any year means EBITDA for such year, provided
that (i) if, during such year, the Company or any Subsidiary acquires (A)
capital stock (or other equity interests) of any person (other than a person
which was, prior thereto, a Subsidiary), whether by acquisition, merger,
consolidation or otherwise, and, by virtue of such acquisition, the results of
operations of such person for any portion of such year were consolidated with
those of the Company and its Subsidiaries in the preparation of the Company's
consolidated financial statements for such year or (B) all or substantially all
of the assets of any person or any operating unit of any person, and, in either
case, such acquisition was not contemplated in the preparation of Budgeted
EBITDA for such year, the results of operations of such person or attributable
to such assets and the costs and expenses (including financing costs) incurred
by the Company or any Subsidiary in connection with, or arising out of, such
acquisition shall be disregarded in the calculation of Actual EBITDA for such
year, and (ii) in determining Actual EBITDA for any year, the
<PAGE>
Committee may (but will not be required to) increase (but not decrease) EBITDA
by an amount that the Committee reasonably deems to be appropriate to eliminate
oroffset the effects upon EBITDA for such year of events the Committee deems
extraordinary or unusual in nature.
"Affiliate" of a person shall mean any other person that directly or
indirectly controls, is controlled by, or is under common control with the
person specified. For the purposes of this Agreement, "control," when used with
respect to any person, shall mean the power to direct the management and
policies of such person, whether through the ownership of securities, by
contract or otherwise.
"Base Salary" shall have the meaning provided in Section 5(a).
"Board" shall have the meaning provided in the third recital to this
Agreement.
"Bonus" shall have the meaning provided in Section 5(b).
"Budgeted EBITDA" for any year means the amount of EBITDA that the
Company projects to achieve during such year, as specified in the definitive
annual budget of the Company for such year approved by the Board. For the year
ending December 31, 1997, Budgeted EBITDA means $52 million.
"Cause" shall mean (i) the willful or repeated failure of the
Executive to perform his obligations hereunder as provided herein, provided that
such Cause shall not exist unless the Company shall first have provided the
Executive with written notice specifying in reasonable detail the factors
constituting such failure and such failure shall not have been cured by the
Executive within 30 days after such notice; (ii) the conviction of the Executive
of a crime which constitutes a felony involving moral turpitude under applicable
law or the entering by him of a plea of guilty or nolo contendere with respect
thereto; (iii) the commission by the Executive of any act involving fraud,
misappropriation of Company funds or other gross misconduct injurious to the
Company; (iv) the good faith determination by the Board that the Executive is
dependent upon alcohol or drugs; or (v) the determination by the Board that the
Executive has violated in any material respect the provisions of Sections 4(c)
or 13(c) hereof.
"Change of Control" shall have the meaning provided in the
Indenture, dated as of January 15, 1997, between the Company and The Bank of New
York, as trustee, as the same exists on the date of this Agreement.
"Committee" shall mean the Compensation Committee of the Board.
"Constructive Termination Without Cause" shall mean a termination of
the Executive's employment at his initiative as provided in Section 10(d) below
following the
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occurrence, without the Executive's prior written consent, of one or more of the
following events (except in consequence of a prior termination): (i) a reduction
in the Executive's then current Base Salary or in the Bonus payable to him under
Section 5(b) (except pursuant to the terms thereof) or the termination or
material reduction of any employee material benefit or perquisite enjoyed by him
during the term of this Agreement; (ii) the failure to elect or reelect the
Executive to any of the positions in the Company described in Section 4(a) below
or removal of him from any such position; (iii) a material diminution in the
Executive's duties or the assignment to the Executive of duties which are
materially inconsistent with his other duties or which materially impair the
Executive's ability to function as the Chief Financial Officer of the Company;
(iv) the relocation of the Company's executive office, or the Executive's own
office location as assigned to him by the Company, to a location more than 50
miles from New York, New York; (v) the failure of the Company to obtain the
assumption in writing of its obligations under this Agreement by any successor
to the business of the Company on or prior to the date of a merger,
consolidation, sale or similar transaction; or (vi) the failure by the Company
to offer the Executive a new employment agreement with compensation and benefit
provisions on terms at least as favorable to the Executive as those set forth
herein (other than those provided in Section 9 hereof).
"Disability" shall mean the Executive's inability by reason of
physical or mental illness to substantially perform his duties and
responsibilities under this Agreement for a period of 180 consecutive days or a
period of in excess of 180 days during any calendar year during the Term.
"EBITDA" for any period means the income before extraordinary items
and/or cumulative effect of change in accounting principles of the Company and
its Subsidiaries for such period, plus the sum of the following, to the extent
deducted in calculating such income, of (i) income tax expense (or, in the case
of income tax benefit, minus the amount thereof), (ii) interest expense, net of
interest income, and (iii) depreciation and amortization expense, in each case
for such period. All components of EBITDA shall be determined on a consolidated
basis in accordance with generally acceptable accounting principles in the
United States as in effect as of the date of the determination of Budgeted
EBITDA for such period, consistently applied by the Company for all periods
during the Term. Notwithstanding the foregoing, EBITDA shall for all purposes of
this Agreement be calculated for each year without recognition of any expense
incurred in connection with (i) any bonuses paid or payable to the Executive,
the President and Chief Operating Officer, or the Chief Financial Officer of the
Company or (ii) any Restricted Shares and Additional Restricted Shares (as
defined herein) now or hereafter granted to those officers.
"person" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any other entity.
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"Subsidiary" shall mean, in respect of any person, any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of capital stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by (i) such person,
(ii) such person and one or more Subsidiaries of such person or (iii) one or
more Subsidiaries of such person.
"Term" shall mean the period specified in Section 3 below.
2. Employment. The Company hereby agrees to continue to employ the
Executive, and the Executive hereby accepts such employment, upon the terms and
conditions set forth herein.
3. Term. Unless sooner terminated in accordance with the provisions of
Section 10 hereof, the term of the Executive's employment under this Agreement
shall commence on the date hereof and shall end on the third anniversary hereof
(the "Term").
4. Position and Duties. (a) During the Term, the Executive shall serve as
the Chief Financial Officer of the Company and shall have the authority,
functions, duties, powers and responsibilities normally associated with such
positions and as from time to time may be prescribed by the Board. The Executive
agrees, subject to his election as such and without additional compensation, to
serve during the Term in such additional offices of comparable stature and
responsibility to which he may be elected from time to time in the Company's
Subsidiaries and to serve as a director and as a member of any committee of the
Board and as a director of the Company's Subsidiaries.
(b) During the Term and subject to the provisions of Section 4(c),
(i) the Executive's services shall be rendered on a full-time, exclusive basis,
(ii) he will apply on a full-time basis all of his skill and experience to the
performance of his duties in such employment, and shall report only to the
Board, (iii) he shall have no other employment or outside business activities
and (iv) unless the Executive otherwise consents, the headquarters for the
performance of his services shall be the executive offices of the Company in the
greater New York City area, subject to such reasonable travel as the performance
of his duties in the business of the Company may require.
(c) During the Term, the Executive shall not, directly or
indirectly, without the prior written consent of the Board, render any services
to any person (other than the Company and its Subsidiaries and other persons in
which the Company may have an interest), or acquire any interest of any type in
any such other person that is in competition with the Company or any of its
Subsidiaries or in conflict with his full-time, exclusive position as a senior
executive officer of the Company; provided, however, that the foregoing shall
not be deemed to prohibit the Executive from (i) acquiring, solely as an
investment, securities of any person which are registered under Section 12(b) or
12(g) of the
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Securities Exchange Act of 1934, as amended (the "Exchange Act") and which are
publicly traded, so long as he is not part of any group required to make any
filing under Section 13(d) of the Exchange Act in respect of such person and
such securities do not constitute 2% or more of any class of outstanding
securities of such person, (ii) acquiring, solely as an investment, any
securities of any person (other than a person that has outstanding securities
covered by the preceding clause (i)) so long as he remains a passive investor in
such person and does not become part of any control group thereof and so long as
such person is not, directly or indirectly, in competition with the Company or
any of its Subsidiaries or (iii)(A) serving on the boards of directors of a
reasonable number of other corporations (none of which are in competition with
the Company or its Subsidiaries) or the boards of a reasonable number of trade
associations and/or charitable organizations or, with the prior written consent
of the Committee, to provide consulting services for any such corporation, trade
association and/or charitable organization, (B) engaging in charitable
activities and community affairs and (C) managing his personal investments and
affairs, provided that the activities referred to in this clause (iii) do not in
the aggregate interfere in any material respect with the proper performance of
his duties and responsibilities as the Company's Chief Financial Officer. For
purposes of the foregoing, a person shall be deemed to be in competition with
the Company or any of its Subsidiaries if it (or its Subsidiaries or Affiliates)
is then engaged in any line of business that is substantially the same as any
line of business in which the Company or any of its Subsidiaries is engaged.
(d) The Company shall use its best efforts to cause the Executive to
be a member of the Board throughout the Term and shall include him in the
management slate for election as a director at every stockholders' meeting at
which his term as a director would otherwise expire.
5. Compensation. (a) Base Salary. The Company shall pay or cause to be
paid to the Executive a base salary (the "Base Salary") of (i) during the
balance of the year ending December 31, 1997, $250,000 per annum, and (ii)
during each succeeding calendar year (or portion thereof) during the Term an
amount per annum equal to $30,000 plus the Base Salary in effect at the end of
the immediately preceding calendar year. The Company may increase, but not
decrease, the Base Salary at any time and from time to time during the Term. The
Base Salary shall be payable in monthly or more frequent installments in
accordance with the Company's regular payroll practices for senior executives.
(b) Bonus. In addition to the Base Salary, the Executive shall be
entitled to receive an annual cash bonus (the "Bonus") in an amount equal to the
sum of (a) .005560 multiplied by the Budgeted EBITDA for the applicable year
plus (b) .01946 multiplied by the amount, if any, by which the Actual EBITDA
for such year exceeded the Budgeted EBITDA for such year; provided, however,
that if in any year, the Actual EBITDA is less than 95% of the amount of the
Budgeted EBITDA for such year, the product obtained by clause (a) above shall be
multiplied by the Applicable Percentage set forth on Exhibit A in determining
the amount of the Bonus payable with respect to such year. The Bonus will be
payable with respect to each of the Company's fiscal years ending December 31,
1997,
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December 31, 1998 and December 31, 1999 and, except as provided in Section 5(c),
will be payable as follows: (i) 75% of the estimated Bonus will be paid to the
Executive in the immediately succeeding January; and (ii) the remaining amount
of the Bonus over the amount previously paid in January of that year will be
paid to the Executive not later than 120 days after the end of the preceding
year.
Within 95 days following the end of each applicable year during the
Term, the independent public accountants of the Company shall deliver to the
Committee a certificate setting forth the calculation of EBITDA for such year
based on the Company's audited financial statements for such year and, if
applicable, an agreed upon procedure report on all adjustments to EBITDA
required by clause (i) of the definition of Actual EBITDA. Within 100 days after
the end of each such year, the Committee shall deliver to the Executive a
notice, in reasonable detail, showing the calculation of Actual EBITDA for such
year, the Bonus payable to the Executive under this Section 5(b) with respect to
such year and the number of Restricted Shares with respect to which the
Restriction Period has expired by virtue of such Actual EBITDA pursuant to
Section 9(c)(ii) hereof.
(c) Deferred Compensation. The Executive by timely notice delivered
to the Committee may elect to defer any portion of the Base Salary or Bonus with
respect to any year on terms reasonably acceptable to the Company, provided such
deferral does not result in the Company incurring any additional expense.
6. Employee Benefit Programs. During the Term, the Executive shall be
entitled to participate in all employee pension and welfare benefit plans and
programs made available to the Company's senior level executives or its
employees generally, as such plans or programs may be in effect from time to
time, including without limitation, pension, savings and other retirement plans
or programs, medical, dental, hospitalization, short-term and long-term
disability and life insurance plans, and any other employee benefit plans or
programs that may be sponsored by the Company from time to time, whether funded
or unfunded.
7. Reimbursement of Expenses. During the Term, the Company shall pay or
reimburse the Executive for all reasonable travel, entertainment and other
business expenses actually incurred or paid by the Executive in the performance
of his duties hereunder upon presentation of expense statements or vouchers or
such other supporting information as the Company may reasonably require.
8. Vacations. In addition to customary paid holidays, the Executive shall
be entitled to four (4) weeks of paid vacation during each year of the Term (and
a pro rata portion thereof for any portion of the Term that is less than a full
year). Any unused vacation days during any year shall not be carried forward to
subsequent years, nor shall the Executive receive any additional compensation
for such unused vacation days.
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9. The Shares. (a) On the date hereof, and in consideration of services to
be performed by the Executive hereunder, the Company has granted to the
Executive, subject to the provisions of this Section 9, 129,990 shares (the
"Restricted Shares") of the Company's Common Stock, par value $.05 per share
(the "Common Stock"). In addition, on the date hereof, the Company shall reserve
for future grant to the Executive, at the sole and absolute discretion of the
Committee taking into account EBITDA and other factors, an additional 129,990
shares of Common Stock (the "Additional Restricted Shares" and together with the
Restricted Shares, the "Shares").
(b) During the Restriction Period (as defined below) relating to any
Restricted Shares, such Restricted Shares may not be sold, assigned,
transferred, pledged or otherwise encumbered by the Executive. Except as
provided in this Section 9, the Executive, as the owner of Restricted Shares,
shall have all the rights of a holder of Common Stock, including but not limited
to the right to receive all cash dividends or distributions paid on and the
right to vote such Restricted Shares until such date as such Restricted Shares
shall have been forfeited pursuant to Section 9(g).
(c) The restrictions contained in this Section 9 on the rights of
the Executive to sell, assign, transfer or encumber the Restricted Shares and on
his ability to hold the certificates representing the Restricted Shares pursuant
to Section 9(d) shall expire as follows:
(i) the restrictions on 21,665 Restricted Shares shall expire
on each of January 1, 1998, January 1, 1999, January 1, 2000, January 1, 2001,
January 1, 2002 and January 1, 2003, provided that the Executive's employment
hereunder has not been terminated pursuant to Section 10(c) of this Agreement or
the equivalent provision of any successor agreements prior to such date.
(ii) The period during which the restrictions set forth in
this Section 9(c) as to the ownership, transfer and disposition by the Executive
of any Restricted Shares shall be in effect shall be referred to herein as the
"Restriction Period."
(d) Each certificate representing Restricted Shares or Additional
Restricted Shares shall be registered in the name of the Executive, deposited by
him with the Company together with a stock power endorsed in blank and bear the
following, or a substantially similar, legend:
"The transferability of this Certificate and the Common Stock
represented hereby is subject to the terms and conditions, including
forfeiture, contained in the Employment Agreement, dated July __,
1997, between the Company and James F. Dannhauser . A copy of the
Employment Agreement is on file in the executive offices of Premier
Parks Inc., 11501 Northeast Expressway, Oklahoma City, Oklahoma
73131."
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<PAGE>
(e) The Executive hereby represents and warrants that he (i) is
acquiring the Restricted Shares for his own account and not with a view to the
sale or distribution thereof except in compliance with the Securities Act of
1933, as amended (the "Securities Act") and applicable state securities laws and
(ii) is an "accredited investor" as such term is defined in Regulation D under
the Securities Act.
(f) After the Restriction Period relating to any Restricted Shares
has expired, upon the written request of the Executive, or the Executive's legal
representative, permitted successor or heir, the Company shall deliver to the
Executive, or such legal representative, permitted successor or heir, a
certificate or certificates, without the legend referred to in Section 9(d), for
the number of such Restricted Shares. Notwithstanding the foregoing, any
certificate or certificates so delivered shall bear such legends as the Company
may deem advisable to reflect restrictions which may be imposed by law,
including, without limitation, the Securities Act or any state "blue sky" or
other applicable securities laws.
(g) The Executive's rights to any Restricted Shares shall be
forfeited on the first date on which it can be determined that the Restriction
Period with respect to such Restricted Shares is incapable of expiring pursuant
to the provisions of Section 9(c). Any Restricted Shares with respect to which
the Restriction Period has not expired shall be forfeited as of the last day
thereof. Certificates representing any forfeited Restricted Shares shall be
cancelled by the Company, and the Executive shall have no rights with respect to
any such forfeited Shares.
(h) If the Company shall be consolidated or merged with another
corporation, and such consolidation or merger is not a Change of Control, the
Executive will deposit with the successor corporation the certificates for the
stock or securities or the other property that the Executive is entitled to
receive by reason of his ownership of Restricted Shares in a manner consistent
with Section 9(d), and such stock, securities or other property shall become
subject to the restrictions and requirements imposed by this Section 9, and the
certificates therefor or other evidence thereof shall bear a legend similar in
form and substance to the legend set forth in Section 9(d).
(i) In the event of a stock dividend, stock split, share
combination, exchange of shares, recapitalization, merger, consolidation,
reorganization, liquidation or other comparable changes or transactions of or by
the Company, an appropriate adjustment to the number of Shares shall be made to
give proper effect to such event.
10. Termination of Employment.
(a) Termination Due to Death. The Executive's employment shall
immediately terminate upon his death. In such event, his estate or his
beneficiaries, as the case may be, shall be entitled to:
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(i) Base Salary (at the applicable rate in effect on the date
of his death) for a period of 365 days;
(ii) a Bonus for the year in which the Executive's death
occurs in an amount equal to the Bonus (if any) that would have been payable to
the Executive with respect to such year had his death not occurred, multiplied
(in the event such death occurs before June 30 of such year) by a fraction the
numerator of which shall be the number of days elapsed during such year prior to
the date of the Executive's death and the denominator of which shall be 181,
payable as provided in Section 5(b);
(iii) all Restricted Shares with respect to which the
Restriction Period had expired prior to the date of this death, all Restricted
Shares as to which the Restriction Period under Section 9(c) hereof has not yet
expired (as to which the restriction shall then automatically expire), and such
Additional Restricted Shares as the Committee may in its discretion grant;
(iv) unless otherwise required by any plan, the continued
right to exercise any then vested stock option for the remainder of its term;
(v) any amounts earned, accrued or owing but not yet paid
under Sections 5, 6 or 7 above; and
(vi) other or additional benefits in accordance with
applicable plans and programs of the Company.
(b) Termination Due to Disability. The Company may terminate the
Executive's employment, by written notice delivered to him, due to his
Disability. In such event, he shall be entitled to:
(i) an amount equal to 100% of Base Salary, at the rate in
effect at the date of such termination of his employment, for a period of 365
days following the date of termination, less the amount of any disability
benefits provided to the Executive under any disability plan or policy;
(ii) a Bonus for the year in which such termination occurs in
an amount equal to the Bonus that would have been payable to the Executive with
respect to such year had such termination not occurred, multiplied (in the event
such termination occurs before June 30 of such year) by a fraction the numerator
of which shall be the number of days elapsed during such year prior to the date
of such termination and the denominator of which shall be 181, payable as
provided in Section 5(b);
(iii) all Restricted Shares with respect to which the
Restriction Period had expired prior to the date of termination due to his
Disability and all Restricted Shares as to which the Restriction Period under
Section 9(c) hereof has not yet expired (as
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to which the restriction shall automatically expire), and such Additional
Restricted Shares as the Committee may in its discretion grant;
(iv) unless otherwise required by any plan, the continued
right to exercise any then vested stock option for the remainder of its term;
(v) any amounts earned, accrued or owing but not yet paid
under Sections 5, 6 or 7 above;
(vi) continued participation at the expense of the Company in
medical, dental and hospitalization insurance coverage in which he was
participating on the date of termination of his employment for a period equal to
the longest of (x) 12 months from the date of such termination, (y) the minimum
period prescribed by applicable law or (z) the period set forth in the
applicable plan or program of the Company; and
(vii) other or additional benefits in accordance with
applicable plans and programs of the Company.
(c) Termination by the Company for Cause. In the event the Company
proposes to terminate the Executive's employment for Cause, it shall so notify
the Executive in writing, which notice shall include (A) in reasonable detail
the particular act or acts or failure or failures to act that constitute the
grounds on which the proposed termination for Cause is based and (B) the date
(which shall not be earlier than 21 days following the date of such notice),
time and location of a Board meeting at which the Executive shall be entitled to
a hearing as to such grounds. If, within five days after such hearing, the
Executive is furnished written notice that a majority of all then members of the
Board (excluding the Executive) have confirmed that, in their judgment, grounds
for Cause exist, his employment shall thereupon terminate for Cause. In such
event, he shall be entitled to:
(i) the Base Salary then in effect through the date of the
termination of his employment for Cause;
(ii) all Restricted Shares with respect to which the
Restriction Period had expired prior to the date of such termination;
(iii) any amounts earned, accrued or owing but not yet paid
under Sections 5, 6 or 7 above; and
(iv) other or additional benefits in accordance with
applicable plans or programs of the Company.
(d) Termination Without Cause or Constructive Termination Without
Cause. In the event the Executive's employment is terminated by the Company
without
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<PAGE>
Cause, other than due to his Disability or death, or is terminated by the
Executive due to a Constructive Termination Without Cause, the Executive shall
be entitled to:
(i) the Base Salary through the date of termination of the
Executive's employment;
(ii) the Bonus for the year in which such termination occurs
in an amount equal to the Bonus that would have been payable to the Executive
with respect to such year had such termination not occurred, multiplied (in the
event such termination occurs before June 30 of such year) by a fraction, the
numerator of which shall be the number of days elapsed during such year prior to
the date of such termination and the denominator of which shall be 181, payable
immediately;
(iii) an amount equal to the product obtained by multiplying
three times the aggregate amount paid or payable to the Executive as Base Salary
and Bonus with respect to the calendar year immediately preceding the year in
which such termination occurs, payable in one lump sum within ten Business Days
after such termination;
(iv) (a) all Restricted Shares with respect to which the
Restriction Period had expired prior to the date of termination and all
Restricted Shares as to which the Restriction Period under Section 9(c) hereof
has not yet expired (as to which the restriction shall then automatically
expire), and (b) such Additional Restricted Shares as the Committee in its
discretion has theretofore granted to the Executive (as to which all restriction
periods related thereto shall then automatically terminate);
(v) exercise any stock option to the extent exercisable at the
date of his termination without Cause or Constructive Termination Without Cause,
for a period of 90 days after such termination;
(vi) any amounts earned, accrued or owing but not yet paid
under Sections 4, 5 or 6 above;
(vii) continued participation at the Company's expense in
medical, dental and hospitalization insurance coverage and in all other employee
benefit plans and programs in which he was participating on the date of
termination of his employment for a period equal to of the longest of (x) 6
months from the date of such termination, (y) the minimum period prescribed by
applicable law or (z) the period set forth in the applicable plan or program of
the Company; and
(viii) other or additional benefits in accordance with
applicable plans and programs of the Company.
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<PAGE>
(e) Change of Control. (i) In the event of a Change of Control
(whether or not the Executive's employment is terminated), the Executive shall
be entitled to (A) all Restricted Shares with respect to which the Restriction
Period had expired prior to the date of the Change of Control and all Restricted
Shares as to which the Restriction Period under Section 9(c) hereof has not yet
expired (as to which the restriction shall then automatically expire), and (b)
such Additional Restricted Shares as the Committee in its discretion has
theretofore granted to the Executive (as to which all restriction periods
related thereto shall then automatically terminate); and (B) all Additional
Restricted Shares not theretofore granted to the Executive, as to which all
restriction periods related thereto shall automatically expire, subject,
however, as to the Additional Restricted Shares not theretofore granted to the
Executive to the condition that the Market Price (as defined herein) of the
Common Stock is not less than $40.00 per share, subject to appropriate
adjustments for stock dividends, stock splits, share combinations, exchanges of
shares, recapitalizations or comparable changes or transactions by the Company
to give proper effect to this provision. For purposes hereof, the term "Market
Price" shall mean the average of the daily closing prices of the Common Stock on
the principal securities exchange or market in which such stock is traded or
quoted for 20 consecutive trading days commencing 30 trading days prior to the
consummation of such Change of Control or in the event the Common Stock is not
so traded or quoted at that time, the fair value of the Common Stock as
determined by the
(ii) If during the 180 day period following a Change of
Control, the Executive's employment is terminated by the Company (other than due
to his Disability or death) or is terminated due to a Constructive Termination
Without Cause, the Executive shall be entitled to (A) the payments and benefits
provided in Section 10(d); (B) all Additional Restricted Shares, whether or not
theretofore granted to the Executive, and as to which all restriction periods
related thereto shall then automatically expire; and (C) all amounts,
entitlements or benefits under all employee benefit plans as to which the
Executive is not yet vested shall become fully vested except to the extent such
vesting would be inconsistent with the terms of the relevant plan.
(f) Voluntary Termination. In the event of a termination of
employment by the Executive on his own initiative other than a termination due
to a Construction Termination Without Cause, the Executive shall have the same
entitlements as provided in Section 10(c) for a termination for Cause. A
voluntary termination under this Section 10 shall be effective upon not less
than 90 days prior notice written to the Company.
(g) Limitation Following a Change of Control. In the event that the
termination of the Executive's employment is pursuant to Section 10(e) above and
the aggregate of all payments or benefits made or provided to the Executive
under Section 10(e) above and under all other plans and programs of the Company
(the "Aggregate Payment") is determined to constitute a Parachute Payment, as
such term is defined in Section 280G(b)(2) of the Internal Revenue Code of 1986,
as amended (the "Code"), then the Company shall pay the Executive such
additional amounts as are required to be paid by
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<PAGE>
such Executive for any excise taxes imposed on the Executive in connection with
such Aggregate Payments pursuant to Section 4999 of the Code.
(h) No Mitigation. In the event of any termination of employment
under this Section 10, the Executive shall be under no obligation to seek other
employment.
(i) Nature of Payments. Any amounts due under this Section 10 are in
the nature of severance payments considered to be reasonable by the Company and
are not in the nature of a penalty.
(j) Notice of Termination. Except as otherwise provided in this
Section 10 and except in the case of a termination due to the Executive's death,
the Company or the Executive (as the case may be) shall deliver written notice
of termination of employment to the other party hereto which notice shall
specify the effective date of termination in accordance herewith.
11. Indemnification. (a) The Executive shall be entitled to the benefit of
the indemnification provisions contained on the date hereof in the Certificate
of Incorporation and By-Laws of the Company (not including any amendments or
additions hereafter that limit or narrow, but including any that add to or
broaden, the protection afforded to the Executive by those provisions), to the
fullest extent permitted by applicable law at the time of the assertion of any
liability against the Executive in respect of any matter relating to the period
during which the Executive is employed by the Company, no matter when arising.
(b) During the period in which the Executive is employed by the
Company, the Company agrees to maintain a directors' and officers' liability
insurance policy covering the Executive to the extent the Company provides such
coverage for its other executive officers, which policy shall be maintained on a
claims occurred, rather than claims made, basis.
12. Effect of Agreement on Other Benefits. Except as specifically provided
in this Agreement, the existence of this Agreement shall not prohibit or
restrict the Executive's entitlement to full participation in the employee
benefit and other plans or programs in which senior executives of the Company
are eligible to participate.
13. Covenant Not-to-Compete. During the two years following the end of the
Executive's employment by the Company (the "Covenant Period"):
(a) The Executive agrees that he will not, directly or indirectly,
as a partner, officer, employee, director, stockholder, proprietor, consultant,
representative, agent or otherwise become or be interested in, or associate with
or render assistance to (i) any person engaged in the ownership, operation
and/or management of any water park, amusement park, theme park, marine or
wildlife park, outdoor mini-theme park or family
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<PAGE>
amusement or entertainment center (collectively, "Parks") located within the
United States of America (or in the event the Company owns or otherwise operates
any Park outside the United States of America, in any location within a 250 mile
radius of such location) or (ii) if during the Term, the Company commences any
line of business, in addition to the ownership, operation and/or management of
Parks, and if, during the last full fiscal year of the Company preceding the
date of the termination of the Executive's employment, such other line of
business accounted for at least 10% of the Company's revenue during such year,
any person engaged in such other line of business within a 250 mile radius of
any location at which the Company is then engaged therein. The foregoing
provisions shall not, however, prohibit the ownership by any Executive of
securities in accordance with Section 4(c)(i).
(b) The Executive agrees that he will not, directly or indirectly,
during the Covenant Period, for his own benefit or for the benefit of any other
person knowingly solicit the professional services of any employee of the
Company or any Subsidiary or any person who had been such an employee within
three months prior thereto or otherwise interfere with the relationship between
the Company or any Subsidiary and any of such persons.
(c) The Executive recognizes and acknowledges that, in connection
with his employment with the Company, he has had and will continue to have
access to valuable trade secrets and confidential information of the Company and
its Subsidiaries and Affiliates including, but not limited to, customer and
supplier lists, business methods and processes, marketing, promotional, pricing
and financial information and data relating to employees and agents
(collectively, "Confidential Information") and that such Confidential
Information is being made available to the Executive only in connection with the
furtherance of his employment with the Company. The Executive agrees that during
the Term and thereafter, he will not use or disclose any of such Confidential
Information to any person, except that disclosure of Confidential Information
will be permitted: (i) to the Company, its Subsidiaries and Affiliates and their
respective advisors; (ii) if such Confidential Information has previously become
available to the public through no fault of the Executive; (iii) if required by
any court or governmental agency or body or is otherwise required by law; (iv)
if necessary to establish or assert the rights of the Executive hereunder; or
(v) if expressly consented to by the Company.
(d) The parties agree that a violation of the foregoing agreements
not to compete or disclose, or any provision thereof, will cause irreparable
damage to the Company, and the Company shall be entitled (without any
requirement of posting a bond or other security), in addition to any other
rights and remedies which it may have, at law or in equity, to an injunction
enjoining and restraining the Executive from doing or continuing to do any such
act or any other violations or threatened violations of this Section 13.
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(e) The Executive acknowledges and agrees that the restrictive
covenants set forth in this Section 13 (the "Restrictive Covenants") are
reasonable and valid in geographical and temporal scope and in all other
respects. If any court determines that any of the Restrictive Covenants, or any
part thereof, is invalid or unenforceable, the remainder of the Restrictive
Covenants shall not thereby be affected and shall be given full force and
effect, without regard to the invalid or unenforceable parts.
(f) If any court determines that any of the Restrictive Covenants,
or any part thereof, is invalid or unenforceable for any reason, such court
shall have the power to modify such Restrictive Covenant, or any part thereof,
and, in its modified form, such Restrictive Covenant shall then be valid and
enforceable.
14. Severability. Should any provision of this Agreement be held, by a
court of competent jurisdiction, to be invalid or unenforceable, such invalidity
or unenforceability shall not render the entire Agreement invalid or
unenforceable, and this Agreement and each individual provision hereof shall be
enforceable and valid to the fullest extent permitted by law.
15. Successors and Assigns. (a) This Agreement and all rights under this
Agreement are personal to the Executive and shall not be assignable other than
by will or the laws of descent. All of the Executive's rights under the
Agreement shall inure to the benefit of his heirs, personal representatives,
designees or other legal representatives, as the case may be.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns. Any person succeeding to the
business of the Company by merger, purchase, consolidation or otherwise shall
assume by contract or operation of law the obligations of the Company under this
Agreement.
16. Governing Law. This Agreement shall be construed in accordance with
and governed by the laws of the State of New York, without regard to the
conflicts of laws rules thereof.
17. Notices. All notices, requests and demands given to or made upon the
respective parties hereto shall be deemed to have been given or made three (3)
business days after the date of mailing when mailed by registered or certified
mail, postage prepaid, or on the date of delivery if delivered by hand, or by
any nationally-recognized overnight delivery service, addressed to the parties
at their addresses set forth below or to such other addresses furnished by
notice given in accordance with this Section 17: (a) if to the Company, 122 East
42nd Street, New York, New York 10168, Attn: Board of Directors, and (b) if to
the Executive, 4 Oval Court, Bronxville, New York 10708.
18. Withholding. All payments required to be made by the Company to the
Executive under this Agreement shall be subject to withholding taxes, social
security and
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other payroll deductions in accordance with the Company's policies applicable to
senior executives of the Company and the provisions of any applicable employee
benefit plan or program of the Company.
19. Complete Understanding. This Agreement supersedes any prior contracts,
understandings, discussions and agreements relating to employment between the
Executive and the Company and constitutes the complete understanding between the
parties with respect to the subject matter hereof. No statement, representation,
warranty or covenant has been made by either party with respect to the subject
matter hereof except as expressly set forth herein.
20. Modification; Waiver. (a) This Agreement may be amended or waived if,
and only if, such amendment or waiver is in writing and signed, in the case of
an amendment, by the Company and the Executive or in the case of a waiver, by
the party against whom the waiver is to be effective. Any such waiver shall be
effective only to the extent specifically set forth in such writing.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise thereof preclude any other or further exercise thereof or
the exercise of any other right, power or privilege.
21. Mutual Representations. (a) The Executive represents and warrants to
the Company that the execution and delivery of this Agreement and the
fulfillment of the terms hereof (i) will not constitute a default under or
conflict with any agreement or other instrument to which he is a party or by
which he is bound and (ii) do not require the consent of any person.
(b) The Company represents and warrants to the Executive that this
Agreement has been duly authorized, executed and delivered by the Company and
that such execution and delivery and the fulfillment of the terms hereof (i)
will not constitute a default under or conflict with any agreement or other
instrument to which it is a party or by which it is bound and (ii) do not
require the consent of any person.
(c) Each party hereto represents and warrants to the other that this
Agreement constitutes the valid and binding obligation of such party enforceable
against such party in accordance with its terms.
22. Headings. The headings in this Agreement are for convenience of
reference only and shall not control or affect the meaning or construction of
this Agreement.
23. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective
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when each party hereto shall have received counterparts hereof signed by the
other party hereto.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed in its corporate name, and the Executive has manually signed his name
hereto, all as of the day and year first above written.
PREMIER PARKS INC.
By: /s/
-------------------------------
Paul A. Biddelman
Chairman of the
Compensation Committee
/s/
----------------------------------
JAMES F. DANNHAUSER
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EXHIBIT A
If the quotient of
Actual EBITDA for the applicable year
-------------------------------------
Budgeted EBITDA for the applicable year Applicable Percentage
---------------------
(rounded to the nearest thousandths) equals:
between (and including) .945 and (but excluding) .950 95%
between .940 and (but excluding) .945 90%
between .935 and (but excluding) .940 85%
between .930 and (but excluding) .935 80%
between .925 and (but excluding) .930 75%
between .920 and (but excluding) .925 70%
between .915 and (but excluding) .920 65%
between .910 and (but excluding) .915 60%
between .905 and (but excluding) .910 55%
between .900 and (but excluding) .905 50%
between .895 and (but excluding) .900 45%
between .890 and (but excluding) .895 40%
between .885 and (but excluding) .890 35%
between .880 and (but excluding) .885 30%
between .875 and (but excluding) .880 25%
between .870 and (but excluding) .875 20%
between .865 and (but excluding) .870 15%
between .860 and (but excluding) .865 10%
between .850 and (but excluding) .860 5%
less than .850 0%
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EXHIBIT 21
SUBSIDIARIES OF
PREMIER PARKS INC.
1. FUNTIME, INC. [an Ohio corporation]
2. FUNTIME PARKS, INC. [an Ohio corporation]
3. DARIEN LAKE THEME PARK AND CAMPING RESORT, INC. [a New York corporation]
4. GREAT ESCAPE HOLDING INC. [a New York corporation]
5. GREAT ESCAPE LLC [a New York limited liability company]
6. GREAT ESCAPE THEME PARK LLC [a New York limited liability company]
7. ELITCH GARDENS L.P. [a Colorado limited partnership]
8. PREMIER PARKS OF COLORADO INC. [a Colorado corporation]
9. PREMIER WATERWORLD CONCORD INC. [a California corporation]
10. PREMIER WATERWORLD SACRAMENTO INC. [a California corporation]
11. WYANDOT LAKE, INC. [an Ohio corporation]
12. TIERCO MARYLAND, INC. [a Delaware corporation]
13. TIERCO WATER PARK, INC. [an Oklahoma corporation]
14. FRONTIER CITY PROPERTIES, INC. [an Oklahoma corporation]
15. FRONTIER CITY PARTNERS LIMITED PARTNERSHIP [an Oklahoma limited
partnership]
16. STUART AMUSEMENT COMPANY [a Massachusetts corporation]
17. RIVERSIDE PARK ENTERPRISES, INC. [a Massachusetts corporation]
18. RIVERSIDE PARK FOOD SERVICES, INC. [a Massachusetts corporation]
19. PARK MANAGEMENT CORP. [a California corporation]
20. INDIANA PARKS, INC. [an Indiana corporation]
21. AURORA CAMPGROUND, INC. [an Ohio corporation]
22. OHIO CAMPGROUNDS INC. [an Ohio corporation]
23. KKI, LLC [a Delaware limited liability company]
24. PREMIER INTERNATIONAL HOLDINGS, INC. [a Delaware corporation]
25. PREMIER PARKS HOLDINGS CORPORATION [a Delaware corporation] ("Holdco")
26. PREMIER PARKS MERGER CORPORATION* [a Delaware corporation]
27. PPSTAR I, INC.* [a Delaware corporation]
- --------
* wholly-owned subsidiary of Holdco
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Premier Parks Inc.:
We consent to incorporation by reference in the registration statements
(Nos. 333-21627, 333-40703, 333-45859, 333-46167, and 333-46897) on Form S-3 of
Premier Parks Inc. of our report dated February 23, 1998, relating to the
consolidated balance sheets of Premier Parks Inc. and subsidiaries as of
December 31, 1997 and 1996, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1997, which report appears in the December
31, 1997, annual report on Form 10-K of Premier Park Inc.
KPMG Peat Marwick LLP
Oklahoma City, Oklahoma
March 23, 1998
