SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 0-9789
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PREMIER PARKS INC.
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(Exact name of Registrant as specified in its charter)
DELAWARE 13-3995059
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
11501 NORTHEAST EXPRESSWAY
OKLAHOMA CITY, OKLAHOMA 73131
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (405) 475-2500
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Securities registered pursuant to Sec. 12(b) of the Act:
Name of Each Exchange
Title of Class on Which Registered
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Shares of common stock, par value $.025 per share, New York Stock Exchange
with Rights to Purchase Series A Junior Preferred
Stock
Premium Income Equity Securities, consisting of New York Stock Exchange
Depositary Shares representing 1/500 of a share
of 7 1/2% Mandatorily Convertible Preferred Stock
Securities registered pursuant to Sec. 12(g) of the Act: NONE
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
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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 $1,952.2 million as of March 1, 1999 (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 1, 1999 was 76,513,796 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 1999, which will be filed by the Registrant within 120 days after the close
of its 1998 fiscal year.
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PART I
ITEM 1. BUSINESS
INTRODUCTION
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The Company(1) is the largest regional theme park operator and the
second largest theme park company in the world, based on 1998 attendance of
approximately 36.1 million. It operates 31 regional parks, including 15 of the
50 largest theme parks in North America, based on 1998 attendance. The Company's
theme parks serve 9 of the 10 largest metropolitan areas in the United States.
The Company estimates that approximately two-thirds of the population of the
continental United States live within a 150-mile radius of the Company's theme
parks.
For the year ended December 31, 1998, the Company's reported total
revenue was approximately $813.6 million and its earnings before interest,
taxes, depreciation and amortization and non-cash compensation ("EBITDA") was
approximately $286.3 million. Giving pro forma effect to the acquisitions of Six
Flags and Walibi described below as if they had occurred on January 1, 1998,
revenues and EBITDA for that year would have been $838.5 million and $235.2
million, respectively, and adjusted EBITDA (which includes the Company's
proportionate share of the EBITDA of the parks that are less than wholly-owned
by the Company and accounted for by the equity method, i.e., Six Flags Over
Georgia, Six Flags Over Texas and Six Flags Marine World (the "Partnership
Parks")) would have been $258.9 million. Aggregate combined revenues and EBITDA
of the Company and the Partnership Parks for 1998, on the same pro forma basis,
were $1,047.0 million and $288.2 million, respectively.
On April 1, 1998, the Company acquired (the "Six Flags Acquisition")
all of the outstanding capital stock of Six Flags Entertainment Corporation
("SFEC" and, together with its consolidated subsidiaries, "Six Flags"). In March
1998, the Company acquired (the "Walibi Acquisition") a controlling interest in
Walibi, S.A. ("Walibi") and at December 31, 1998 owned 97% of the outstanding
capital stock of Walibi. Prior to these acquisitions, the Company operated nine
regional theme parks (six of which include a water park component) and four
water parks located across the United States.
The parks acquired in the Six Flags Acquisition consist of eight
regional theme parks, as well as three separately gated water parks and a
wildlife safari park (each of which is located near one of the theme parks).
None of the Six Flags parks are located within the primary market of any of the
Company's other U.S. parks. The Walibi parks include six regional theme parks,
two located in Belgium, one in The Netherlands and three in France. For
additional information concerning these acquisitions and the financings thereof,
see Notes 2 and 6 to Notes to Consolidated Financial Statements.
Six Flags has operated regional theme parks under the Six Flags name
for over thirty years. As a result, Six Flags has established a
nationally-recognized brand name. Premier has obtained worldwide ownership of
the Six Flags brand name, and in the 1998 season commenced the use of the Six
Flags brand name at one of the parks owned prior to the Six Flags Acquisition
and is adding the brand name to four additional parks for the 1999 season.
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1 As used in this Report, unless the context requires otherwise, "Company"
or "Premier" refers to Premier Parks Inc. and its consolidated
subsidiaries.
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As part of the Six Flags Acquisition, the Company obtained the
exclusive right for theme-park usage of certain Warner Bros. and DC Comics
animated characters throughout the United States (except the Las Vegas
metropolitan area) and Canada. These characters include Bugs Bunny, Daffy Duck,
Tweety Bird, Yosemite Sam, Batman, Superman and others.(2)
The Company's 31 parks at December 31, 1998, were located in
geographically diverse markets across the United States with concentrated
populations, as well as in Belgium, France and The Netherlands. During the 1998
operating season, the Company's domestic parks drew, on average, approximately
75% of their patrons from within a 100-mile radius, with approximately 36% of
visitors utilizing group and other pre-sold tickets and approximately 23%
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. In the aggregate, the
Company's theme parks offer more than 800 rides, including over 90 roller
coasters, making the Company the leading provider of "thrill rides" in the
industry.
Since current management assumed control in 1989, the Company has
acquired 30 parks (including its interests in the Partnership Parks), and has
achieved significant internal growth.
DESCRIPTION OF PARKS
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SIX FLAGS AMERICA
Six Flags America (formerly known as Adventure World), 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 is the 50th
largest theme park in North America based on 1998 attendance. 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 people within 50 miles and
11.0 million people within 100 miles. Based on a copyrighted 1998 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 24 DMAs in the United States, respectively. Based upon
in-park surveys, approximately 87.5% of the visitors to Six Flags America in
1998 resided within a 50-mile radius of the park, and 91.9% 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.
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2 Looney Tunes, Bugs Bunny, Daffy Duck, Tweety Bird and Yosemite Sam are
copyrights and trademarks of Warner Bros., a division of Time Warner
Entertainment Company, L.P. ("TWE"). Batman and Superman are copyrights and
trademarks of DC Comics, a partnership between TWE and a subsidiary of Time
Warner Inc. Six Flags Great Adventure, Six Flags Great America, Six Flags
and all related indicia are federally registered trademarks of Six Flags
Theme Parks Inc., a subsidiary of the Company. Fiesta Texas and all related
indicia are trademarks of Fiesta Texas, Inc., a subsidiary of the Company.
Popeye and all related indicia are copyrights and trademarks of King
Features Syndicate, Inc., a unit of The Hearst Corporation.
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Six Flags America'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 Six Flags
America.
SIX FLAGS DARIEN LAKE & CAMPING RESORT
Six Flags Darien Lake, a combination theme and water park, is the
largest theme park in the State of New York and the 37th largest theme park in
North America. Six Flags 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 3.2 million
within 100 miles. The Buffalo, Rochester and Syracuse markets are the number 40,
number 77 and number 74 DMAs in the United States, respectively. Based upon
in-park surveys, approximately 65.7% of the visitors to Six Flags Darien Lake in
1998 resided within a 50-mile radius of the park, and 81.2% resided within a
100-mile radius.
The Six Flags Darien Lake property consists of approximately 988
acres, including 144 acres for the theme park, 242 acres of campgrounds and 593
acres of agricultural, undeveloped and water areas. Six Flags 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 Six Flags Darien Lake theme park is a 164 room hotel
and a camping resort, each owned and operated by the Company. The campgrounds
include 1,180 developed campsites, including 430 recreational vehicles (RV's)
available for daily and weekly rental. The campground is the fifth largest in
the United States. In 1998, approximately 346,000 people used the Six Flags
Darien Lake hotel and campgrounds. The Company believes that substantially all
of the hotel and camping visitors use the theme park.
Six Flags Darien Lake's principal competitor is Wonderland Park
located in Toronto, Canada, approximately 125 miles from Six Flags Darien Lake.
In addition, Six Flags Darien Lake competes to a lesser degree with three
smaller amusement parks located within 50 miles of the park. Six Flags Darien
Lake is significantly larger with a more diverse complement of entertainment
than any of these three smaller facilities.
SIX FLAGS ELITCH GARDENS
Six Flags Elitch Gardens is a combination theme and water park located
on approximately 67 acres in the downtown area of Denver, Colorado, next to Mile
High Stadium and McNichols Arena, and close to Coors Field. Based on 1998
attendance, Six Flags Elitch Gardens is the 38th largest theme park in North
America. The park's primary market includes the greater Denver area, as well as
most of central Colorado. This market provides the park with a permanent
resident population base of approximately 2.4 million people within 50 miles of
the park and approximately 3.3 million people within 100 miles. The Denver area
is the number 18 DMA in the United States. Based upon in-park surveys,
approximately 62.5% of the visitors to Six Flags Elitch Gardens in 1998 resided
within a 50-mile radius of the park, and 71.2% resided within a 100-mile radius.
Six Flags Elitch Gardens has no significant direct competitors.
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SIX FLAGS FIESTA TEXAS
Six Flags Fiesta Texas, the 39th largest theme park in North America,
is located on approximately 206 acres of land in San Antonio, Texas. The San
Antonio, Texas market provides the park with a permanent resident population of
1.7 million people within 50 miles and 3.0 million people within 100 miles. The
San Antonio market is the number 38 DMA in the United States. Based upon in-park
surveys, approximately 34.8% of the visitors to the park in 1998 resided within
a 50-mile radius of the park, and 44.8% resided within a 100-mile radius.
Following the 1998 season, Premier purchased the 40% minority interest in Six
Flags Fiesta Texas and title to the park for $45.0 million in cash.
Six Flags Fiesta Texas' principal competitor is Sea World of Texas
located in San Antonio. In addition, the park competes to a lesser degree with
Six Flags Houston, the Company's park located in Houston, Texas, approximately
200 miles from the park.
SIX FLAGS GREAT ADVENTURE AND SIX FLAGS WILD SAFARI ANIMAL PARK
Six Flags Great Adventure, the 11th largest theme park in North
America, and the separately gated adjacent Six Flags Wild Safari Animal Park,
are located in Jackson, New Jersey, approximately 70 miles south of New York
City and 50 miles east of Philadelphia. The New York and Philadelphia markets
provide the parks with a permanent resident population of 12.4 million people
within 50 miles and 25.9 million people within 100 miles. The New York and
Philadelphia markets are the number 1 and number 4 DMAs in the United States,
respectively. Based upon in-park surveys, approximately 53.9% of the visitors to
the parks in 1998 resided within a 50-mile radius of the park, and 86.2% resided
within a 100-mile radius.
The Company owns a site of approximately 2,200 acres, of which
approximately 125 acres are currently used for the theme park operations, and
approximately 350 adjacent acres are used for the wildlife safari park, home to
55 species of 1,200 exotic animals which can be seen over a four and one-half
mile drive. Approximately 1,640 acres remain undeveloped. Six Flags Great
Adventure's principal competitors are Hershey Park, located in Hershey,
Pennsylvania, approximately 150 miles from the park; and Dorney Park, located
in Allentown, Pennsylvania, approximately 75 miles from the park.
SIX FLAGS GREAT AMERICA
Six Flags Great America, the 19th largest theme park in North America,
is located in Gurnee, Illinois, between Chicago, Illinois and Milwaukee,
Wisconsin. The Chicago and Milwaukee markets provide the park with a permanent
resident population of 7.8 million people within 50 miles and 12.0 million
people within 100 miles. The Chicago and Milwaukee markets are the number 3 and
number 31 DMAs in the United States, respectively. Based upon in-park surveys,
approximately 66.6% of the visitors to the park in 1998 resided within a 50-mile
radius of the park, and 82.0% resided within a 100-mile radius.
The Company owns a site of approximately 440 acres of which 86 are
used for the theme park operations, and approximately 106 usable acres are in a
separate parcel available for expansion and complementary uses. Six Flags Great
America currently has no direct theme park competitors in the region, but does
compete to some extent with Kings Island, located near Cincinnati, Ohio,
approximately 350 miles from the park; Cedar Point, located in Sandusky, Ohio,
approximately 340 miles from the park; and Six Flags St. Louis, the Company's
park located outside St. Louis, Missouri, approximately 320 miles from the park.
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SIX FLAGS HOUSTON AND SIX FLAGS WATERWORLD
Six Flags Houston, the 30th largest theme park in North America, and
the separately gated adjacent Six Flags WaterWorld, are located in Houston,
Texas on the grounds of an entertainment and sports complex that includes the
Houston Astrodome. The Houston, Texas market provides the parks with a permanent
resident population of 4.3 million people within 50 miles and 5.2 million people
within 100 miles. The Houston market is the number 11 DMA in the United States.
Based upon in-park surveys, approximately 63.6% of the visitors to the theme
park in 1998 resided within a 50-mile radius of the park, and 69.9% resided
within a 100-mile radius.
The Company owns a site of approximately 90 acres used for the theme
park, and approximately 14 acres used for the water park. Six Flags Houston
indirectly competes with Sea World of Texas and the Company's Six Flags Fiesta
Texas, both located in San Antonio, Texas, approximately 200 miles from the
park. Six Flags WaterWorld competes with Splashtown and Water Works, two nearby
water parks.
SIX FLAGS KENTUCKY KINGDOM
Six Flags 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 between 2021
and 2049, with the balance owned by the Company. Based on 1998 attendance, Six
Flags Kentucky Kingdom was the 42nd largest theme park in North America. 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.
Based upon in-park surveys, approximately 47.2% of the visitors to the park in
1998 resided within a 50-mile radius of the park and 78.8% resided within a
100-mile radius.
Six Flags Kentucky Kingdom's only significant direct competitor is
Kings Island and The Beach, located in Cincinnati, Ohio, approximately 100 miles
from the park.
SIX FLAGS MAGIC MOUNTAIN AND SIX FLAGS HURRICANE HARBOR
Six Flags Magic Mountain, the 15th largest theme park in North
America, and the separately gated adjacent Six Flags Hurricane Harbor, the 15th
largest water park in the United States, are located in Valencia, California, in
the northwest section of Los Angeles County. The Los Angeles, California market
provides the parks with a permanent resident population of 9.8 million people
within 50 miles and 15.8 million people within 100 miles. The Los Angeles market
is the number 2 DMA in the United States. Based upon in-park surveys,
approximately 44.5% of the visitors to the theme park in 1998 resided within a
50-mile radius of the parks, and 67.0% resided within a 100-mile radius.
The Company owns a site of approximately 260 acres with 160 acres used
for the theme park, and approximately 12 acres used for the pirate-themed water
park. Six Flags Magic Mountain's principal competitors include Disneyland in
Anaheim, California, located approximately 60 miles from the park, Universal
Studios Hollywood in Universal City, California, located approximately 20 miles
from the park, Knott's Berry Farm in Buena Park, California, located
approximately 50 miles from the park, and Sea World of California in San Diego,
California, located approximately 150 miles from the park. In early 1999, a new
park, Legoland, opened approximately 120 miles from Magic Mountain. Six Flags
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Hurricane Harbor's only direct competitor in the area is Raging Waters,
approximately 50 miles from the water park.
SIX FLAGS MARINE WORLD
Six Flags Marine World, a theme park which historically featured
primarily marine mammals and exotic land animals, is the 32nd largest theme park
in North America. Six Flags Marine World is located in Vallejo, California,
approximately 30 miles from San Francisco, 20 miles from Oakland and 60 miles
from Sacramento. This market provides the park with a permanent resident
population base of approximately 5.2 million people within 50 miles and 9.7
million people within 100 miles. The San Francisco/Oakland and Sacramento areas
are the number 5 and number 20 DMAs in the United States, respectively. Based
upon in-park surveys, approximately 65.0% of the visitors to Six Flags Marine
World in 1998 resided within a 50-mile radius of the park, and 89.0% resided
within a 100-mile radius.
The Company manages the operations of Six Flags Marine World pursuant
to a management agreement entered into in February 1997, 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 addition,
in November 1997 the Company exercised at no additional cost an option to lease
approximately 55 acres of land at the site on a long-term basis and at nominal
rent, entitling the Company to receive, in addition to the management fee, 80%
of the cash flow generated by the combined operations of the park after
operating expenses and debt service. Finally, the Company has the option to
purchase the entire park beginning in February 2002, which it currently expects
to exercise at that time.
Six Flags Marine World currently consists of approximately 136 acres
comprised of various rides and other traditional theme park attractions, as well
as presentation stadiums, animal habitats 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.
Six Flags 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
Six Flags Marine World, respectively. In addition, plans for Hecker Pass, a new
theme park in Gilroy, California (approximately 100 miles from Six Flags Marine
World) are under development.
The Company accounts for its interest in Six Flags Marine World under
the equity method of accounting. See Notes 4 and 13 to Notes to Consolidated
Financial Statements.
SIX FLAGS OVER GEORGIA
Six Flags Over Georgia, the 22nd largest theme park in North America
is located in Mableton, Georgia, approximately 10 miles outside of Atlanta,
Georgia. The Atlanta, Georgia market provides the park with a permanent resident
population of 3.8 million people within 50 miles and 6.3 million people within
100 miles. The Atlanta market is the number 10 DMA in the United States. Based
upon in-park surveys, approximately 37.3% of the visitors to the park in 1998
resided within a 50-mile radius of the park, and 53.8% resided within a 100-mile
radius.
Six Flags Over Georgia's primary competitors include Carowinds in
Charlotte, North Carolina, located approximately 250 miles from the park,
Visionland in Birmingham, Alabama, located approximately 160 miles from the
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park, and Dollywood in Pigeon Forge, Tennessee, located approximately 200 miles
from the park. The Georgia Limited Partner (as defined below) owns the site of
approximately 270 acres, including approximately 75 acres of undeveloped land,
all of which is leased to Six Flags Over Georgia II, L.P. (the "Georgia
Co-Venture Partnership").
Partnership Structure. On March 18, 1997, Six Flags completed
arrangements pursuant to which the Company will manage the Georgia park through
2026. Under the agreements governing the new arrangements, the Georgia park is
owned (excluding real property) by the Georgia Co-Venture Partnership of which a
Premier subsidiary is the managing general partner. In the second quarter of
1997, two subsidiaries of Six Flags made a tender offer for partnership
interests ("LP Units") in the 99% limited partner of the Georgia Co-Venture
Partnership (the "Georgia Limited Partner"), that valued the Georgia park at
$250 million (the "Georgia Tender Offer Price"). Six Flags purchased
approximately 25% of the LP Units in the 1997 tender offer at an aggregate price
of $62.7 million.
The key elements of the new arrangements are as follows: (i) the
Georgia Limited Partner (which is not affiliated with the Company except for the
Company's ownership of certain LP Units) received minimum annual distributions
of $18.5 million in 1997 and $18.8 million in 1998, with the minimum
distribution increasing each subsequent year in proportion to increases in the
cost of living; (ii) thereafter, the Company will be entitled to receive from
available cash (after provision for reasonable reserves and after capital
expenditures per annum of approximately 6% of prior year's revenues) a
management fee equal to 3% of the prior year's gross revenues, and, thereafter,
any additional available cash will be distributed 95% to the Company and 5% to
the Georgia Limited Partner; (iii) on an annual basis, the Company will offer to
purchase additional LP Units at a price based on a valuation for the park equal
to the greater of $250.0 million or a value derived by multiplying the weighted
average four year EBITDA (as defined therein) of the park by 8.0; (iv) in 2027,
the Company will have the option to acquire all remaining interests in the
Georgia park at a price based on the Georgia Tender Offer Price, increased in
proportion to the increase in the cost of living between December 1996 and
December 2026, and (v) the Company is required to make minimum capital
expenditures at the Georgia park during rolling five-year periods, based
generally on 6% of the park's revenues. The Company was not required to purchase
a material number of LP Units in the 1998 offer to purchase. Cash flow from
operations at the Georgia park will be used to satisfy these requirements first,
before any funds are required from the Company. In addition, the Company is
entitled to retain its proportionate share (based on its holdings of LP Units)
of distributions made to the Georgia Limited Partner. In connection with the Six
Flags Acquisition, the Company entered into a Subordinated Indemnity Agreement
(the "Subordinated Indemnity Agreement") with certain Six Flags entities, Time
Warner Inc. ("Time Warner") and an affiliate of Time Warner, pursuant to which
the Company transferred to Time Warner (who has guaranteed the Six Flags
obligations under these arrangements) record title to the corporations which own
certain entities that have purchased and will purchase LP Units, and the Company
received an assignment from Time Warner of all cash flow received on such LP
Units and will otherwise control such entities, except in the event of a default
by the Company of its obligations under these arrangements. After all such
obligations have been satisfied, Time Warner is required to retransfer to the
Company such record title for a nominal consideration. In addition, the Company
issued preferred stock of the managing partner of the Georgia Limited Partner to
Time Warner which, in the event of such a default, would permit Time Warner to
obtain control of such entity.
The Company accounts for its interests in the Georgia park under the
equity method of accounting. See Notes 2 and 4 to Notes to Consolidated
Financial Statements.
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SIX FLAGS OVER TEXAS AND SIX FLAGS HURRICANE HARBOR
Six Flags Over Texas, the 20th largest theme park in North America,
and the separately gated Six Flags Hurricane Harbor, the 7th largest water park
in the United States, are located across Interstate 30 from each other in
Arlington, Texas, between Dallas and Fort Worth, Texas. The Dallas/Fort Worth
market provides the parks with a permanent resident population of 4.5 million
people within 50 miles and 5.6 million people within 100 miles. The Dallas/Fort
Worth market is the number 8 DMA in the United States. Based upon in-park
surveys, approximately 54.6% of the visitors to the theme park in 1998 resided
within a 50-mile radius of the theme park, and 63.6% resided within a 100-mile
radius.
The Texas Limited Partner (as defined below) owns a site of
approximately 200 acres used for the theme park. Six Flags Over Texas' principal
competitors include Sea World of Texas and the Company's Six Flags Fiesta Texas,
both located in San Antonio, Texas, approximately 285 miles from the park. The
Company owns directly approximately 47 acres, of which approximately 18 acres
are currently used for Hurricane Harbor and 31 acres remain undeveloped. Six
Flags Hurricane Harbor has no direct competitors in the area other than a
municipal water park.
Partnership Structure. Six Flags Over Texas is owned (excluding real
property) by Texas Flags, Ltd. (the "Texas Co-Venture Partnership"), a Texas
limited partnership of which the 1% general partner is a wholly-owned subsidiary
of Premier, and the 99% limited partner is Six Flags Fund II, Ltd., a Texas
limited partnership (the "Texas Limited Partner") which is unaffiliated with the
Company except that the Company owns certain limited partnership units in the
Texas Limited Partner as described below. Six Flags Hurricane Harbor is 100%
owned by the Company and is not included in these partnership arrangements.
In December 1997, Six Flags completed arrangements pursuant to which
the Company will manage Six Flags Over Texas through 2027. The key elements of
the new arrangements are as follows: (i) the Texas Limited Partner received
minimum annual distribution of $27.7 million in 1998, increasing each year
thereafter in proportion to increases in the cost of living; (ii) thereafter,
the Company will be entitled to receive from available cash (after provision for
reasonable reserves and after capital expenditures per annum of approximately
6.0% of prior year's revenues) a management fee equal to 3% of the prior year's
gross revenues, and, thereafter, any additional available cash will be
distributed 92.5% to the Company and 7.5% to the Texas Limited Partner; (iii) in
the first quarter of 1998, the Company made a tender offer for partnership units
("LP Units") in the Texas Limited Partner that valued the park at approximately
$374.8 million (the "Texas Tender Offer Price"); (iv) commencing in 1999, and on
an annual basis thereafter, Six Flags will offer to purchase LP Units at a price
based on a valuation for the park equal to the greater of $374.8 million or a
value derived by multiplying the weighted-average four year EBITDA of the park
by 8.5; (v) in 2028 the Company will have the option to acquire all remaining
interests in the park at a price based on the Texas Tender Offer Price,
increased in proportion to the increase in the cost of living between December
1997 and December 2027; and (vi) the Company is required to make minimum capital
expenditures at the Texas park during rolling five-year periods, based generally
on 6% of such park's revenues. Cash flow from operations at the Texas park will
be used to satisfy these requirements first, before any funds are required from
the Company. In addition, the Company is entitled to retain its proportionate
share (based on its holdings of LP Units) of distributions made to the Texas
Limited Partner. The Company purchased approximately 33% of the LP Units in the
1998 tender offer at an aggregate price of $117.9 million. In connection with
the Subordinated Indemnity Agreement, the Company transferred to Time Warner
(who has guaranteed the Six Flags obligations under these arrangements) record
title to the corporations which own certain entities that have purchased and
will purchase LP Units and the Company received an assignment from Time Warner
of all cash flow received on such LP Units and will otherwise control such
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entities, except in the event of a default by the Company of its obligations
under these arrangements. After all such obligations have been satisfied, Time
Warner is required to retransfer to the Company such record title for a nominal
consideration. In addition, the Company issued preferred stock of the managing
general partner of the Texas Co-Venture Partnership to Time Warner which, in the
event of such a default, would permit Time Warner to obtain control of such
entity.
The Company accounts for its interests in Six Flags Over Texas under
the equity method of accounting. See Notes 2 and 4 to Notes to Consolidated
Financial Statements.
SIX FLAGS ST. LOUIS
Six Flags St. Louis, the 36th largest theme park in North America, is
located in Eureka, Missouri, about 35 miles west of St. Louis, Missouri. The St.
Louis market provides the park with a permanent resident population of
2.6 million people within 50 miles and 3.7 million people within 100 miles. The
St. Louis market is the number 21 DMA in the United States. Based upon in-park
surveys, approximately 55.3% of the visitors to the park in 1998 resided within
a 50-mile radius of the park, and 65.1% resided within a 100-mile radius.
The Company owns a site of approximately 497 acres used for the theme
park operations. Six Flags St. Louis competes with Kings Island and The Beach,
located near Cincinnati, Ohio, approximately 350 miles from the park; Cedar
Point, located in Sandusky, Ohio, approximately 515 miles from the park; Silver
Dollar City, located in Branson, Missouri, approximately 250 miles from the
park; and Six Flags Great America, the Company's park located near Chicago,
Illinois, approximately 320 miles from the park.
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 2.4 million people within 100 miles. The
Oklahoma City and Tulsa markets are the number 45 and number 59 DMAs in the
United States, respectively. Based upon in-park surveys, approximately 57.3% of
the visitors to Frontier City in 1998 resided within a 50-mile radius of the
park, and 65.6% resided within a 100-mile radius.
The Company owns a site of approximately 95 acres, with 60 acres
currently used for park operations. Frontier City's only significant competitor
is the Company's 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 43rd
largest theme park in North America. 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 7.2 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 72.3% of the visitors to Geauga Lake
in 1998 resided within a 50-mile radius of the park, and 77.0% resided within a
100-mile radius.
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The 258-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. Prior to the 1998 season, the Company purchased a
campground located on approximately 127 acres near the park with 314 campsites
and following that season purchased a 145-room hotel.
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. This market provides the park with a permanent
resident population base of approximately 870,000 people within 50 miles of the
park and 2.9 million people within 100 miles. The Albany market is the number 52
DMA in the United States. Based upon in-park surveys, approximately 45.4% of the
visitors to The Great Escape in 1998 resided within a 50-mile radius of the
park, and 70.2% resided within a 100-mile radius.
The Great Escape is located on a site of approximately 335 acres, with
143 acres currently used for park operations. Approximately 43 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.
RIVERSIDE PARK
Riverside Park is a combination theme park and motor speedway, located
off Interstate 91 near Springfield, Massachusetts, approximately 95 miles west
of Boston. Based on 1998 attendance, Riverside Park is the 35th largest theme
park in North America. 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. 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 60.4% of the visitors to Riverside Park in
1998 resided within a 50-mile radius of the park, and 93.7% 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 164 acres, with 118 acres
currently used for park operations, 12 acres for a picnic grove and
approximately 34 undeveloped acres. Riverside Park's Speedway is a multi-use
stadium which includes a one-quarter mile NASCAR-sanctioned short track for
automobile racing which can seat 6,200 for speedway events and 15,000 festival
style for concerts.
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Riverside Park's only 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 an
investment of private and public funds and did operate in the 1998 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.
WALIBI PARKS
In March 1998, Premier initially acquired approximately 50% of the
shares of capital stock of Walibi and thereafter acquired in 1998 an additional
47% of such shares. The Company expects to acquire in 1999 all remaining shares
not currently owned. Walibi, a Belgian corporation, owns six theme parks, two
located in Belgium, one in the Netherlands and three in France. During 1998,
Walibi sold its two non-theme park attractions, Mini Europe and Oceade, both
located in Brussels. Excluding those two attractions, Walibi's parks had
combined 1998 attendance of approximately 3.0 million.
The Walibi parks consist of Bellewaerde, Walibi Aquitaine, Walibi
Flevo, Walibi Rhone-Alpes, Walibi Schtroumpf and Walibi Wavre. The Walibi parks'
primary markets include Belgium, The Netherlands, southwestern France, eastern
France and northern France. These markets provide the Walibi parks with a
permanent resident population of 23.0 million people within 50 miles and 54.5
million people within 100 miles.
The Walibi parks' most significant competitors are Disneyland Paris,
located in France, Meli Park and Bobbeejaanland, each located in Belgium, de
Efteling, located in The Netherlands, and Parc Asterix, located in France.
From and after the date of their acquisition through December 31,
1998, the Walibi parks generated aggregate revenues of $66.8 million. For
additional financial and other information concerning the Company's European
operations, see Note 15 to Notes to Consolidated Financial Statements.
WATERWORLD PARKS
The Waterworld Parks consist of two water parks (Waterworld
USA/Concord and Waterworld USA/Sacramento) and one family entertainment center
(Paradise Family Fun Park).
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 6.4 million people within 50 miles of the park
and 9.8 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
88.0% of the visitors in 1998 resided within a 50-mile radius of the park, and
91.0% 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 Family Fun Park, 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 9.8 million
people within 100 miles. The Sacramento market is the number 20 DMA in the
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United States. Based upon in-park surveys, approximately 81.0% of the visitors
in 1998 resided within a 50-mile radius of the park, and 93.2% resided within a
100-mile radius.
Both facilities are leased under long-term ground leases. The Concord
site includes approximately 21 acres. 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
approximately 22 acres located along Interstate 40 in southwest Oklahoma City,
Oklahoma. The park's primary market includes the greater Oklahoma City
metropolitan area. Oklahoma City is the number 45 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 2.0 million
people within 100 miles. Based upon in-park surveys, approximately 79.3% of the
visitors to White Water Bay in 1998 resided within a 50-mile radius of the park,
and 86.8% 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
subleased 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 the United States. Based on
in-park surveys, approximately 88.4% of the visitors to Wyandot Lake in 1998
resided within a 50-mile radius of the park, and 91.0% resided within a 100-mile
radius. The park is the 13th largest water park in the United States.
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 1999, 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 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 locally 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 Senior Vice President for Marketing, with the
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assistance of the Company's senior management and in-house marketing staff, as
well as 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 36% of aggregate attendance in
1998 at the Company's parks. Each park has a group sales and pre-sold ticket
manager and a well-trained sales staff dedicated to selling multiple group sales
and pre-sold ticket programs through a variety of methods, including direct
mail, telemarketing and personal sales calls.
The Company has also developed effective programs for marketing season
pass tickets. Season pass sales establish a solid attendance base in advance of
the season, thus reducing exposure to inclement weather. Additionally, season
pass holders often bring paying guests and generate "word-of-mouth" advertising
for the parks. During 1998, 23% of visitors to the Company's parks utilized
season passes.
A significant portion of the Company's attendance is attributable to
the sale of discount admission tickets. The Company offers discounts on season
and multi-visit tickets, tickets for specific dates and tickets to affiliated
groups such as businesses, schools and religious, fraternal and similar
organizations. The increased in-park spending which results from such attendance
is not offset by incremental operating expenses, since such expenses are
relatively fixed during the operating season.
The Company also implements promotional programs as a means of
targeting specific market segments and geographic locations not reached through
its group or retail sales efforts. The promotional programs utilize coupons,
sweepstakes, reward incentives and rebates to attract additional visitors. These
programs are implemented through direct mail, telemarketing, direct response
media, sponsorship marketing and targeted multi-media programs. The special
promotional offers are usually for a limited time and offer a reduced admission
price or provide some additional incentive to purchase a ticket, such as
combination tickets with a complementary location.
LICENSES
- --------
Pursuant to a license agreement (the "License Agreement") among Warner
Bros., DC Comics, the Company and SFTP, the Company has the exclusive right on a
long-term basis to use Warner Bros. and DC Comics animated characters in theme
parks throughout the United States (other than the Las Vegas metropolitan area)
and Canada. In particular, the License Agreement entitles the Company to use,
subject to customary approval rights of Warner Bros. and, in limited
circumstances, approval rights of certain third parties, all animated and comic
book characters that Warner Bros. and DC Comics have the right to license,
including as of the date hereof, Batman, Superman, Bugs Bunny, Daffy Duck,
Tweety Bird and Yosemite Sam, and includes the right to sell merchandise using
the characters. The license fee is fixed (without regard to the number of the
Company's parks) until 2005, and thereafter the license fee will be subject to
periodic scheduled increases and will be payable on a per-theme park basis. In
addition, the Company will be required to pay a royalty fee on merchandise that
uses the licensed characters manufactured by or for the Company where a fee has
not been paid by the manufacturer. Warner Bros. has the right to terminate the
License Agreement under certain circumstances, including if any persons involved
in the movie or television industries obtain control of the Company and upon a
default under the Subordinated Indemnity Agreement. Premier also licenses on a
non-exclusive basis certain other characters, including Popeye, for use at
certain parks.
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PARK OPERATIONS
- ---------------
The Company currently operates in geographically diverse markets in
the United States and 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 three Executive Vice Presidents (each of whom reports to the 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 theme 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 19 general managers in the United States have an aggregate of
approximately 440 years experience in the industry, including approximately 320
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). Certain of the parks have longer
operating seasons. 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 two to four
years in order to enhance the park's entertainment product.
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The Company believes that there are ample sources for rides and other
attractions, and the Company is not dependent on any single source.
Certain of these manufacturers are located outside the United States.
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, 1999, the Company had approximately
1,000 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 a periodic 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 $100.0 million per occurrence.
With respect to liability claims arising out of occurrences on and after July 1,
1998, there is no self-insured retention by the Company. However, with respect
to claims arising out of occurrences prior to July 1, 1998 at the parks
purchased in the Six Flags Acquisition, the self-insured portion is the first
$2.0 million of loss per occurrence. The self-insurance portion of claims
arising out of occurrences prior to that date at the Company's other U.S. parks
is $50,000. 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. 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
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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 90%
of park attendance in 1998 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.
ENVIRONMENTAL AND OTHER REGULATION
- ----------------------------------
The Company's operations are subject to increasingly stringent
federal, state and local environmental laws and regulations including laws and
regulations governing water discharges, air emissions, soil and groundwater
contamination, the maintenance of underground storage tanks and the disposal of
waste and hazardous materials. In addition, its operations are subject to other
local, state and federal governmental regulations including, without limitation,
labor, health, safety, zoning and land use 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 environmental and other laws and
regulations and, although no assurance can be given, it does not foresee the
need for any significant expenditures in this area in the near future.
In addition, portions of the undeveloped areas at some parks are
classified as wetlands. Accordingly, the Company may need to obtain governmental
permits and other approvals prior to conducting development activities that
affect these areas, and future development may be limited in some or all of
these areas.
EMPLOYEES
- ---------
At March 1, 1999, the Company employed approximately 2,300 full-time
employees, and the Company employed approximately 38,000 seasonal employees
during the 1998 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.
Approximately 12.6% of the Company's full-time and approximately 7.7%
of its seasonal employees are subject to labor agreements with local chapters of
national unions. These labor agreements expire in January 2000 (Six Flags Over
Texas), December 2000 (Six Flags Over Georgia), December 1999 (Six Flags Great
Adventure), January 2000 (Six Flags St. Louis) and January 2000 (Six Flags
Marine World). The Company has not experienced any strikes or work stoppages by
its employees, and the Company considers its employee relations to be good.
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EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------
Age as of
Name March 1, 1999 Position
- ---- ------------- --------
Kieran E. Burke (41) 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 (43) 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 (46) 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 (40) Executive Vice President since
February 1, 1997; General Manager of Six
Flags America from May 1992 to 1998;
Park Manager of White Water Bay from
February 1991 to May 1992.
John E. Bement (46) Executive Vice President since May 1998;
General Manager of Six Flags Over
Georgia from January 1993 to May 1998.
Daniel P. Aylward (46) Executive Vice President since June
1998; General Manager of Six Flags
Marine World from February 1997 to June
1998; President and General Manager of
Silverwood Theme Park from January 1995
to February 1997; General Manager of Old
Tucson Studios for six years prior
thereto.
Traci E. Blanks (38) Senior Vice President of Marketing since
January 1998; Vice President of
Marketing from 1995 to January 1998;
Vice President Marketing for Frontier
City and White Water Bay from 1992
through 1994; Director of Marketing for
Frontier City from 1986 through 1992.
Richard A. Kipf (64) Secretary/Treasurer since 1975; Vice
President since June 1994.
James M. Coughlin (47) General Counsel since May 1998; partner,
Baer Marks & Upham LLP for five years
prior thereto.
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 1999.
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ITEM 2. PROPERTIES
Set forth below is a brief description of the Company's material real estate at
March 1, 1999:
Six Flags America, Largo, Maryland -- 515 acres (fee ownership)
Six Flags Darien Lake, Darien Center, New York -- 988 acres (fee ownership)
Six Flags Elitch Gardens, Denver, Colorado -- 67 acres (fee ownership)
Six Flags Fiesta Texas, San Antonio, Texas -- 206 acres (fee ownership)
Six Flags Great Adventure & Wild Safari, Jackson, New Jersey -- 2,200 acres
(fee ownership)(3)
Six Flags Great America, Gurnee, Illinois -- 440 acres (fee ownership)(3)
Six Flags Houston, Houston, Texas -- 90 acres (fee ownership)(3)
Six Flags Hurricane Harbor, Arlington, Texas -- 47 acres (fee ownership)(3)
Six Flags Hurricane Harbor, Valencia, California -- 12 acres (fee ownership)(3)
Six Flags Kentucky Kingdom, Louisville, Kentucky -- 58 acres (fee ownership and
leasehold interest)(4)
Six Flags Magic Mountain, Valencia, California -- 248 acres (fee ownership)(3)
Six Flags Marine World, Vallejo, California -- 55 acres (long-term leasehold
interest at nominal rent)
Six Flags Over Georgia, Atlanta, Georgia -- 270 acres (leasehold interest)(5)
Six Flags Over Texas, Arlington, Texas -- 200 acres (leasehold interest)(5)
Six Flags St. Louis, Eureka, Missouri -- 497 acres (fee ownership)(3)
Six Flags WaterWorld, Houston, Texas -- 14 acres (fee ownership)(3)
Bellewaerde, Ieper, Belgium -- 133 acres (fee ownership)
Frontier City, Oklahoma City, Oklahoma -- 95 acres (fee ownership)
Geauga Lake, Aurora, Ohio -- 258 acres (fee ownership)
The Great Escape, Lake George, New York -- 335 acres (fee ownership)
Riverside Park, Agawam, Massachusetts -- 164 acres (fee ownership)
Walibi Aquitaine, Roquefort, France -- 74 acres (fee ownership)
Walibi Flevo, Biddinghuizen, The Netherlands -- 35 acres (fee ownership)
Walibi Rhone-Alpes, Les Avenieres, France -- 375 acres (fee ownership)
Walibi Schtroumpf, Metz, France -- 375 acres (fee ownership)
Walibi Wavre and Aqualibi, Brussels, Belgium -- 120 acres (fee ownership)
Waterworld/Concord, Concord, California -- 21 acres (leasehold interest)(6)
Waterworld/Sacramento, Sacramento, California -- 20 acres (leasehold
interest)(7)
White Water Bay, Oklahoma City, Oklahoma -- 22 acres (fee ownership)
Wyandot Lake, Columbus, Ohio -- 18 acres (leasehold interest)(8)
- -------------------
3 The Company has granted to its lenders under the Six Flags credit agreement
a mortgage on this property.
4 Approximately 38 acres are leased under ground leases with terms (including
renewal options) expiring between 2021 and 2049, with the balance owned by
the Company.
5 Lessor is the limited partner of the partnership that owns the park. The
leases expire in 2027 and 2028, respectively, at which time the Company has
the option to acquire all of the interests in the respective lessor not
previously acquired.
6 The site is leased from the City of Concord. The lease expires in 2025 and
the Company has five five-year renewal options.
7 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.
8 The site is subleased from the Columbus Zoo. The lease expires in 1999 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.
-18-
<PAGE>
In addition to the foregoing, at March 1, 1999, the Company owned
certain undeveloped land in Indiana and 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. In addition, the Company leases certain office
space and also certain of the rides and attractions at its parks. See Notes 6
and 14 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.
In June 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. A series of lawsuits arising out of the incident have been consolidated in
California Superior Court under the name Ghilotti et al. v. Waterworld USA et
al. The Company has funded its $50,000 self-insurance retention limit in respect
of the incident under its then liability insurance policy and, although there
can be no assurances, does not expect to pay any additional amounts in
connection with this litigation.
In December 1998, a final judgment of $197.3 million in compensatory
damages was entered against SFEC, SFTP, Six Flags Over Georgia, Inc. and TWE,
and a final judgment of $245.0 million in punitive damages was entered against
TWE and of $12.0 million in punitive damages was entered against the referenced
Six Flags entities. TWE has indicated that it intends to appeal the judgments.
The judgments arose out of a case entitled Six Flags Over Georgia, LLC et al. v.
Time Warner Entertainment Company, L.P. et al. based on, among other things,
certain disputed partnership affairs prior to the Six Flags Acquisition at Six
Flags Over Georgia, including alleged breaches of fiduciary duty.
The sellers in the Six Flags Acquisition, including Time Warner, have
agreed to indemnify the Company from any and all liabilities arising out of this
litigation.
On March 21, 1999, a raft capsized in the river rapids ride at Six
Flags Over Texas, resulting in one fatality and injuries to ten others. While
the Park is covered by Premier's multi-layered general liability policy that
provides excess liability coverage of up to $100.0 million per occurrence, with
no self-insured retention, the impact of this incident on the Company's
financial position, operations or liquidity has not yet been determined.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
-19-
<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." 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 January 1, 1997 through December 19, 1997. Prices shown for periods
prior to July 1998 have been adjusted to reflect the Company's two-for-one stock
split at that time.
NEW YORK STOCK EXCHANGE
Year Quarter High Low
---- ------- ---- ---
1999 First (through $34 5/16 $28 1/8
March 22, 1999)
1998 Fourth 30 1/4 15 7/16
Third 33 9/32 15 5/16
Second 33 5/16 26 15/32
First 29 19/32 18 9/16
1997 Fourth (beginning 20 1/4 20 1/32
December 22, 1997)
NASDAQ NATIONAL MARKET
Year Quarter High Low
---- ------- ---- ---
1997 Fourth (through $21 1/2 $18 1/2
December 19, 1997)
Third 18 7/8 16
Second 18 13
First 16 12 1/2
As of March 1, 1999, there were 762 holders of record of the Company's
Common Stock. The Company paid no cash dividends on its Common Stock during the
three years ended December 31, 1998. The Company does not anticipate paying any
cash dividends on its Common Stock during the foreseeable future. The indentures
relating to Premier Parks Inc.'s 9 1/4% Senior Notes Due 2006 (the "Senior
Notes") and 10% Senior Discount Notes Due 2008 (the "Senior Discount Notes")
limit the payment of cash dividends to common stockholders. See Note 6 to Notes
to Consolidated Financial Statements.
-20-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
Results for 1994 reflect the results of the three parks owned by the
Company during that year. In August 1995, the Company acquired three additional
parks in its acquisition of Funtime Parks, the operations of which are reflected
in 1995 results for the period subsequent to the acquisition date. In the fourth
quarter of 1996, the Company acquired four parks. In February and November 1997,
respectively, the Company acquired Riverside Park and Six Flags Kentucky
Kingdom. In 1998, the Company acquired Six Flags and substantially all of the
capital stock of Walibi. See Note 2 to Notes to Consolidated Financial
Statements.
(In thousands, except per share data)
-----------------------------------
1998 1997
---- ----
Revenue .................................... $ 813,627 $ 193,904
Depreciation and amortization .............. 109,841 19,792
Equity in operations of theme
park partnerships ....................... 24,054 --
Interest expense, net ...................... 115,849 17,775
Provision for income tax expense (benefit) . 40,716 9,615
Income (loss) before extraordinary loss .... 35,628 14,099 1
Extraordinary loss, net of tax effect ...... (788) --
Net income (loss) .......................... 34,840 14,099 1
Net income (loss) applicable to common stock 17,374 14,099 1
Per Share:
Income (loss) before extraordinary loss:
Basic ................................. .27 .39
Diluted ............................... .26 .38
Extraordinary loss, net of tax effect:
Basic ................................. (.01) --
Diluted ............................... (.01) --
Income (loss):
Basic ................................. .26 .39
Diluted ............................... .25 .38
Cash Dividends-- Common ................. -- --
Net cash provided by operating activities .. 119,010 47,150
Net cash used in investing activities ...... (1,664,883) (217,070)
Net cash provided by financing activities .. 1,861,098 250,165
Total assets ............................... 4,052,465 611,321
Long-term debt2 ............................ 2,060,725 217,026
EBITDA3 .................................... 286,325 54,101
Pro forma combined Adjusted EBITDA4 ........ 258,943 N/A
(In thousands, except per share data)
-----------------------------------
1996 1995 1994
---- ---- ----
Revenue .................................. $ 93,447 $ 41,496 $ 24,899
Depreciation and amortization ............ 8,533 3,866 1,997
Equity in operations of theme
park partnerships ..................... -- -- --
Interest expense, net .................... 11,121 5,578 2,299
Provision for income tax expense (benefit) 1,497 (762) 68
Income (loss) before extraordinary loss .. 1,765 (1,045) 102
Extraordinary loss, net of tax effect .... -- (140) --
Net income (loss) ........................ 1,765 (1,185) 102
Net income (loss) applicable to common stock 1,162 (1,714) 102
Per Share:
Income (loss) before extraordinary loss:
Basic ............................... .07 (.20) .02
Diluted ............................. .06 (.20) .02
Extraordinary loss, net of tax effect:
Basic ............................... -- (.02) --
Diluted ............................. -- (.02) --
Income (loss):
Basic ............................... .07 (.22) .02
Diluted ............................. .06 (.22) .02
Cash Dividends-- Common ............... -- -- --
Net cash provided by operating activities. 11,331 10,646 1,060
Net cash used in investing activities .... (155,149) (74,139) (10,177)
Net cash provided by financing activities. 119,074 90,914 7,457
Total assets ............................. 304,803 173,318 45,539
Long-term debt2 .......................... 150,834 94,278 24,108
EBITDA3 .................................. 22,994 7,706 4,549
Pro forma combined Adjusted EBITDA4 ...... N/A N/A N/A
- -----------------------
1 Included in determining net income for 1997 is an $8.4 million ($5.1 million
after tax effect) termination fee, net of expenses.
2 Includes current portion. Also includes in 1998 $182.9 million of certain
zero coupon notes due December 1999 which have been defeased for covenant
purposes. Excluding defeased notes, long-term debt is $1,877.8 million at
December 31, 1998.
3 EBITDA is defined as earnings before interest expense, net, income tax
expense (benefit), non-cash compensation, depreciation and amortization and
minority interest. The Company has included information concerning EBITDA
because it is used by certain investors as a measure of a company's ability
to service and/or incur debt. EBITDA is not required by generally accepted
accounting principles ("GAAP") and should not be considered in isolation or
as an alternative to net income, net cash provided by operating, investing
and financing activities or other financial data prepared in accordance with
GAAP or as an indicator of the Company's operating performance. This
information should be read in conjunction with the Statements of Cash Flows
contained in the Consolidated Financial Statements.
4 Adjusted EBITDA is defined as EBITDA of the Company plus the Company's share
(based on its ownership interests) of the EBITDA of the Partnership Parks,
determined on a pro forma basis as if Six Flags, Walibi and the Company's
interests in the Partnership Parks had been acquired on January 1, 1998.
-21-
<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 52.0%, 48.8% and 44.0%, in 1998, 1997 and 1996,
respectively) and the sale of food, merchandise, games and attractions inside
its parks, as well as sponsorship and other income (approximately 48.0%, 51.2%
and 56.0%, in 1998, 1997 and 1996, 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.
Historical results of operations for 1998 include the results of
Riverside Park and Kentucky Kingdom (each of which was acquired during 1997)
(the "1997 Acquisitions") for the entire period. Results of Walibi and Six Flags
are included in 1998 results only from the dates of their respective
acquisitions (March 26, 1998, in the case of Walibi, and April 1, 1998, in the
case of Six Flags). Historical results for 1997 reflect the results of Riverside
Park from its acquisition date (February 5, 1997), and Kentucky Kingdom from its
acquisition date (November 7, 1997) and do not include the results of Walibi or
Six Flags for those periods. In addition, 1998 historical results include in the
Company's equity in earnings the Company's share of the revenues of Marine World
under the applicable lease and related documents. Those results are not included
in the 1997 periods. With respect to 1996, historical results include the
results of the four parks (Elitch Gardens, The Great Escape, Waterworld Concord
and Waterworld Sacramento) acquired in the fourth quarter of that year (the
"1996 Acquisitions") only from their respective acquisition dates, and do not
include the results of Riverside Park, Kentucky Kingdom, Walibi, Six Flags or
Marine World.
The Company believes that significant opportunities exist to acquire
additional theme parks. 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.
-22-
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
YEARS ENDED DECEMBER 31, 1998 AND 1997
The table below sets forth certain financial information with respect
to the Company, Six Flags, Walibi and, for the period prior to its acquisition,
Kentucky Kingdom for the year ended December 31, 1997 and with respect to the
Company and, for periods prior to their respective acquisitions, Six Flags and
Walibi for the year ended December 31, 1998:
Year Ended December 31, 1998
--------------------------------------------------
Historical
Six Flags Historical
for Walibi for
Period Period Prior
Prior to to
Historical April 1, March 26, Historical
Premier 1998(1) 1998(2) Combined
------- ---------- ---------- -----------
(Unaudited) (Unaudited) (Unaudited)
(In thousands)
REVENUE:
Theme park admissions ....... $ 423,461 $ 15,047 $ 883 $ 439,391
Theme park food, merchandise
and other .................. 390,166 8,356 624 399,146
--------- -------- -------- --------
Total revenue .............. 813,627 23,403 1,507 838,537
--------- -------- -------- --------
OPERATING COSTS AND EXPENSES:
Operating expenses .......... 297,266 45,679 4,626 347,571
Selling, general and
administration ........... 126,985 19,278 3,407 149,670
Noncash compensation ........ 6,362 -- -- 6,362
Costs of products sold ...... 103,051 2,757 248 106,056
Depreciation and amortization 109,841 17,629 3,214 130,684
--------- -------- -------- --------
Total operating costs
and expenses ............. 643,505 85,343 11,495 740,343
--------- -------- -------- --------
Income (loss) from operations . 170,122 (61,940) (9,988) 98,194
Equity in operations of theme
park partnerships ........... 24,054 -- -- 24,054
OTHER INCOME (EXPENSE):
Interest expense, net ....... (115,849) (21,262) (889) (138,000)
Termination fee, net of
expenses ................ -- -- -- --
Minority interest ........... (960) -- -- --
Other income (expense) ...... (1,023) -- (1) (1,984)
--------- -------- -------- ---------
Total other income
(expense) ................ (117,832) (21,262) (890) (139,984)
--------- -------- -------- ---------
Income (loss) before income
taxes and extraordinary
loss ................... 76,344 (83,202) (10,878) (17,736)
Income tax expense (benefit) 40,716 (30,377) (4,134) 6,205
--------- -------- -------- ---------
Income (loss) before
extraordinary loss ....... $ 35,628 $(52,825) $ (6,744) $ (23,941)
========= ======== ======== =========
EBITDA(6) ................... $ 286,325 $(44,311) $ (6,774) $ 235,240
========= ======== ======== =========
Year Ended December 31, 1997
--------------------------------------------
Historical Historical Historical
Premier Six flags(4) Walibi
------- ----------- ------------
(Unaudited) (Unaudited)
(In Thousands)
REVENUE:
Theme park admissions ....... $ 94,611 $ 274,193 $ 43,742
Theme park food, merchandise
and other .................. 99,293 257,679 24,101
--------- --------- --------
Total revenue .............. 193,904 531,872 67,843
--------- --------- --------
OPERATING COSTS AND EXPENSES:
Operating expenses .......... 81,356 229,588 31,629
Selling, general and
administration ........... 35,422 95,852 10,567
Noncash compensation ........ 1,125 -- --
Costs of products sold ...... 23,025 77,102 6,097
Depreciation and amortization 19,792 72,386 13,998
--------- --------- --------
Total operating costs
and expenses ............. 160,720 474,928 62,291
--------- --------- --------
Income (loss) from operations . 33,184 56,944 5,552
Equity in operations of theme
park partnerships ........... -- -- --
OTHER INCOME (EXPENSE):
Interest expense, net ....... (17,775) (84,430) (3,409)
Termination fee, net of
expenses ................ 8,364 -- --
Minority interest ........... -- 1,147 --
Other income (expense) ...... (59) -- (289)
--------- --------- --------
Total other income
(expense) ................ (9,470) (83,283) (3,698)
--------- --------- --------
Income (loss) before income
taxes and extraordinary
loss ................... 23,714 (3,708) 1,854
Income tax expense (benefit) 9,615 -- 2,373
--------- --------- --------
Income (loss) before
extraordinary loss ....... $ 14,099 $ (3,708) $ (519)
========= ========= ========
EBITDA(6) ................... $ 54,101 $ 129,330 $ 19,550
========= ========= ========
Year Ended December 31, 1997
-----------------------------------
Historical
Kentucky Historical
Kingdom(5) Combined
---------- ----------
(Unaudited) (Unaudited)
(In thousands)
REVENUE:
Theme park admissions ....... $ 11,562 $ 424,108
Theme park food, merchandise
and other .................. 10,152 391,225
-------- ---------
Total revenue .............. 21,714 815,333
-------- ---------
OPERATING COSTS AND EXPENSES:
Operating expenses .......... 5,705 348,278
Selling, general and
administration ........... 5,194 147,035
Noncash compensation ........ -- 1,125
Costs of products sold ...... 2,684 108,908
Depreciation and amortization 2,344 108,520
-------- ---------
Total operating costs
and expenses ............. 15,927 713,866
--------- ---------
Income (loss) from operations . 5,787 101,467
Equity in operations of theme
park partnerships ........... -- --
OTHER INCOME (EXPENSE):
Interest expense, net ....... (3,974) (109,588)
Termination fee, net of
expenses ................ -- 8,364
Minority interest ........... -- 1,147
Other income (expense) ...... 293 (55)
-------- ---------
Total other income
(expense) ................ (3,681) (100,132)
-------- ---------
Income (loss) before income
taxes and extraordinary
loss ................... 2,106 1,335
Income tax expense (benefit) -- 11,988
-------- ---------
Income (loss) before
extraordinary loss ....... $ 2,106 $ (10,635)
======== =========
EBITDA(6) ................... $ 8,131 $ 211,112
======== =========
- -------------------
(1) Includes results of Six Flags for the period prior to April 1, 1998, the
acquisition date, adjusted to (i) eliminate off-season expense deferral of
$86,196, (ii) eliminate results of Partnership Parks, (iii) reflect
recognition of season pass revenue upon receipt, consistent with the
Company's policies and (iv) eliminate the expense associated with certain
one-time option payments made from the purchase price.
(2) Includes results of Walibi for the period prior to March 26, 1998, the
acquisition date.
(3) Includes results of Riverside Park and Kentucky Kingdom from and after
their respective acquisition dates, February 5 and November 7, 1997.
(4) Includes results of Six Flags adjusted to eliminate results of Partnership
Parks.
(5) Includes results of Kentucky Kingdom for the ten months of 1997 prior to
its acquisition by the Company.
(6) Excludes termination fee in 1997.
-23-
<PAGE>
Revenue. Revenue aggregated $813.6 million in 1998 ($838.5 million
combined), compared to $193.9 million reported in 1997. Of reported 1998
revenue, $564.5 million represented revenues of Six Flags and Walibi (the
"Acquired Parks") which were acquired in 1998, and thus not included in reported
1997 results. Revenues generated by the Company's other twelve parks (excluding
Marine World) amounted to $249.1 million in 1998, as compared to $193.7 million
from the Company's eleven parks in 1997. Of this $55.4 million increase, $28.4
million relates to Kentucky Kingdom which was purchased in November of the prior
year, and the balance ($27.0 million) results from improved performance at the
other eleven parks. During 1998, the Company's thirteen parks (including Marine
World) experienced a 14.3% increase in attendance and a 5.0% increase in per
capita spending over the performance of those thirteen parks in the prior year.
Operating Expenses. Operating expenses increased during 1998 to $297.3
million ($347.6 million combined) from $81.4 million reported in 1997. Of
reported 1998 operating expenses, $197.4 million related directly to the
Acquired Parks. Operating expenses at the Company's other twelve parks
(excluding Marine World) increased $18.5 million, primarily reflecting an
incremental $10.3 million of operating expenses for Kentucky Kingdom which was
included for only two months in the prior year, and increased salary expense at
the parks. As a percentage of total reported revenue, reported operating
expenses were 36.5% of revenue (and combined operating expenses were 41.4% of
combined revenues) in 1998 as compared to 42.0% in 1997.
Selling, General and Administrative. Selling, general and
administrative expenses (including non-cash compensation) were $133.3 million in
1998 ($156.0 million on a combined basis), compared to $36.5 million reported
for 1997. Of reported expenses for 1998, $68.2 million related to the Acquired
Parks. Selling, general and administrative expenses at the remaining twelve
parks (excluding Marine World) increased $28.5 million over 1997 levels,
primarily reflecting an incremental $5.2 million of selling, general and
administrative expenses at Kentucky Kingdom, $5.3 million of noncash
compensation relating to restricted stock awards and conditional option grants
over amounts included in 1997, increased corporate expenses reflecting the
larger scope of the Company's operations and, to a lesser extent, increased
marketing and advertising costs and real estate taxes. As a percentage of total
reported revenue, consolidated selling, general and administrative expenses
(excluding non-cash compensation) were 15.6% of revenue (and combined selling,
general and administrative expenses (excluding non-cash compensation) were 17.8%
of combined revenues) in 1998 as compared to 18.3% for 1997. The decrease is a
result of the Company's continued ability to use operating leverage to increase
operations without having to increase administrative costs by a like percentage.
Costs of Products Sold. Costs of products sold were $103.1 million for
1998 ($106.1 million on a combined basis) compared to $23.0 million reported for
1997. Reported costs for 1998 include $75.2 million related to the Acquired
Parks. The balance of the increase ($4.9 million) over reported 1997 costs
primarily related to $2.7 million of costs of sales at Kentucky Kingdom and to
increased product sales at the parks owned in both years.
Depreciation and Interest Expense. Depreciation and amortization
expense increased $90.0 million from $19.8 million in 1997 to $109.8 million in
1998, of which $82.6 million was attributable to the recognition of depreciation
and amortization expense for the Acquired Parks, an incremental $2.9 million was
attributable to Kentucky Kingdom and the balance was attributable to the
Company's on-going capital program. Interest expense, net of interest income,
increased from $17.8 million to $115.9 million in 1998 principally as a result
of borrowings made in connection with the acquisition of Six Flags and Walibi.
See Notes 2 and 6 to Notes to Consolidated Financial Statements.
Equity in Operations of Theme Parks. Equity in operations of theme
park partnerships results from the Company's shares of the operations of Six
Flags Over Texas (33%)effective Company ownership) and Six Flags Over Georgia
-24-
<PAGE>
(25% effective Company ownership), the lease of Six Flags Marine World and the
management of all three parks. The Company did not have the partial ownership or
lease arrangement with any of the parks prior to commencement of the 1998
operating season. See Notes 2, 4 and 13 to Notes to Consolidated Financial
Statements.
Income Taxes. Income tax expense was $40.7 million for 1998 as
compared to $9.6 million for 1997. The increase in the effective tax rate to
53.3% from 40.5% is a function of the non-deductible intangible asset
amortization associated with the Six Flags Acquisition. Approximately $10.0
million of non-deductible amortization will be recognized each quarter. The
Company's quarterly effective income tax rate will vary from period-to-period
based upon the inherent seasonal nature of the theme park business.
At December 31, 1998, the Company estimates that it had approximately
$346.1 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
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 9 to Notes to Consolidated
Financial Statements.
Net Income. Net income applicable to common stock in 1998 reflects as
a charge to net income the preferred stock dividends accrued since the April 1,
1998 issuance of the Company's Premium Income Equity Securities ("PIES"). The
PIES accrue cumulative dividends at 7 1/2% per annum (17/8% per quarter), which
approximates an annual dividend requirement of $23.3 million (approximately
$5.8 million per quarter). The dividend is payable in cash or shares of Common
Stock at the option of the Company. To date, the Company has elected to pay the
dividend in cash.
-25-
<PAGE>
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:
Year Ended December 31, 1997
--------------------------------------------
Historical
Premier
(Excluding
Marine World Kentucky
and Kentucky Kingdom and Historical
Kingdom)(1) Marine World(2) Premier
------- ------------ -------
(Unaudited) (Unaudited)
(In thousands)
REVENUE:
Theme park admissions ............. $94,611 $ -- $94,611
Theme park food, merchandise
and other ........................ 99,103 190 99,293
--------- ------- ---------
Total revenue .................... 193,714 190 193,904
--------- ------- ---------
OPERATING COSTS AND EXPENSES:
Operating expenses ................ 80,307 1,049 81,356
Selling, general and administrative 53,336 86 35,422
Noncash compensation .............. 1,125 -- 1,125
Costs of products sold ............ 23,025 -- 23,025
Depreciation and amortization ..... 19,159 633 19,792
--------- ------- ---------
Total operating costs
and expenses ................... 158,952 1,768 160,720
--------- ------- ---------
Income (loss) from operations ....... 34,762 (1,578) 33,184
OTHER INCOME (EXPENSE):
Interest expense, net ............. (17,763) (12) (17,775)
Termination fee, net of expenses .. 8,364 -- 8,364
Other income (expense) ............ (59) -- (59)
--------- ------- ---------
Total other income (expense) ..... (9,458) (12) (9,470)
--------- ------- ---------
Income (loss) before income taxes . 25,304 (1,590) 23,714
Income tax expense (benefit) ...... 9,615 -- 9,615
--------- ------- ---------
Net income (loss) ................. $15,689 $(1,590) $14,099
========= ======= =========
EBITDA(6) ......................... $53,921 $(945) $52,976
========= ======= =========
Year Ended December 31, 1996
-------------------------------------------
Historical
Historical 1996
Nine Months Acquisitions
Ended for Period
September 30 Subsequent to
Historical 1996 for 1996 September 30,
Premier(3) Acquisitions(4) 30,1996(5)
---------- --------------- -------------
(Unaudited) (Unaudited)
(In thousands)
REVENUE:
Theme park admissions ............. $41,162 $34,062 $724
Theme park food, merchandise
and other ........................ 52,285 30,453 1,020
-------- -------- -------
Total revenue .................... 93,447 64,515 1,744
-------- -------- -------
OPERATING COSTS AND EXPENSES:
Operating expenses ................ 42,425 23,204 3,116
Selling, general and administrative 16,927 17,035 2,289
Noncash compensation .............. -- -- --
Costs of products sold ............ 11,101 9,448 347
Depreciation and amortization ..... 8,533 13,028 703
-------- -------- -------
Total operating costs
and expenses ................... 78,986 62,715 6,455
-------- -------- -------
Income (loss) from operations ....... 14,461 1,800 (4,711)
OTHER INCOME (EXPENSE):
Interest expense, net ............. (11,121) (4,624) (517)
Termination fee, net of expenses .. -- -- --
Other income (expense) ............ (78) (284) --
-------- -------- -------
Total other income (expense) ..... (11,199) (4,908) (517)
-------- -------- -------
Income (loss) before income taxes . 3,262 (3,108) (5,228)
Income tax expense (benefit) ...... 1,497 1,131 --
-------- -------- -------
Net income (loss) ................. $1,765 $(4,239) $(5,228)
======== ======== =======
EBITDA(6) ......................... $22,994 $14,828 $(4,008)
======== ======== =======
Year Ended December 31, 1996
-----------------------------
Historical
Combined
--------
(Unaudited)
(In thousands)
REVENUE:
Theme park admissions ............. $75,948
Theme park food, merchandise
and other ........................ 83,758
-------
Total revenue .................... 159,706
-------
OPERATING COSTS AND EXPENSES:
Operating expenses ................ 68,745
Selling, general and administrative 36,251
Noncash compensation .............. --
Costs of products sold ............ 20,896
Depreciation and amortization ..... 22,264
-------
Total operating costs
and expenses ................... 148,156
-------
Income (loss) from operations ....... 11,550
OTHER INCOME (EXPENSE):
Interest expense, net ............. (16,262)
Termination fee, net of expenses .. --
Other income (expense) ............ (362)
---------
Total other income (expense) ..... (16,624)
---------
Income (loss) before income taxes . (5,074)
Income tax expense (benefit) ...... 2,628
---------
Net income (loss) ................. $(7,702)
=========
EBITDA(6) ......................... $33,814
=========
- -------------------
(1) 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.
(2) Represents management fee and depreciation expense relating to Marine World
and results of Kentucky Kingdom from the acquisition date through
December 31, 1997.
(3) Includes results of the 1996 Acquisitions from and after the acquisition
dates.
(4) Includes results of the 1996 Acquisitions for the nine months ended
September 30, 1996.
(5) 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).
(6) Excludes termination fee in 1997.
-26-
<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 (8.9%) 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 (including noncash compensation) 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 10.1% 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 Company's 9 3/4%
Senior Notes due 2007.
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
-27-
<PAGE>
Funtime Acquisition and the acquisition of Riverside Park relative to the
Company's income.
LIQUIDITY, CAPITAL COMMITMENTS AND RESOURCES
- --------------------------------------------
At December 31, 1998, the Company's indebtedness (including $182.9
million carrying value of the pre-existing SFEC notes (the "Old SFEC Notes")
which will be repaid in full on or prior to December 15, 1999 from the proceeds
of SFEC's 87/8% Senior Notes Due 2006 ("SFEC Notes") issued in connection with
the Six Flags Acquisition, together with other funds, all of which have been
deposited as a restricted-use investment in escrow) aggregated $2,060.8 million,
of which approximately $15.2 million (excluding the prefunded Old SFEC Notes)
matures prior to December 31, 1999. Based on interest rates at December 31, 1998
for floating rate debt, annual cash interest payments for 1999 on this
indebtedness will total approximately $145.9 million, of which $25.9 million has
been deposited in a dedicated escrow account which has been classified as a
restricted-use investment. In addition, annual dividend payments on the PIES are
$23.3 million, payable at the Company's option in cash or shares of Common
Stock. See Notes 6 and 10 to Notes to Consolidated Financial Statements for
additional information regarding the Company's indebtedness.
During the year ended December 31, 1998, net cash provided by
operating activities was $119.0 million. Net cash used in investing activities
in 1998 totaled $1,664.9 million, consisting primarily of the Company's
acquisition of Six Flags and Walibi ($1,037.4 million, net of cash acquired)
and, to a lesser extent, title to and the minority interest in Six Flags Fiesta
Texas, a hotel near the Company's Geauga Lake theme park and capital
expenditures for the 1998 and 1999 seasons. Net cash provided by financing
activities in 1998 was $1,861.1 million, representing proceeds of borrowings
under the Premier and Six Flags credit facilities, and proceeds of the public
offerings of Common Stock, PIES, Senior Notes, Senior Discount Notes and SFEC
Notes issued in connection with the Six Flags Acquisition and described in Notes
2 and 6 to Notes to Consolidated Financial Statements, offset in part by debt
payments and the payment of certain debt issuance costs.
As more fully described in "Business -- Six Flags Over Georgia" and
"-- Six Flags Over Texas and Six Flags Hurricane Harbor" and in Note 2 to Notes
to Consolidated Financial Statements, in connection with the Six Flags
Acquisition, the Company guaranteed certain obligations relating to Six Flags
Over Georgia and Six Flags Over Texas (the "Co-Venture Parks"). Among such
obligations are (i) minimum distributions of approximately $47.3 million in 1999
to partners in the Co-Venture Parks (of which the Company will be entitled to
receive $14.1 million based on its present ownership interests), (ii) up to
approximately $43.75 million of limited partnership unit purchase obligations
for 1999 with respect to both parks and (iii) minimum capital expenditures for
that year at both parks of approximately $14.6 million. Cash flows from
operations at the Co-Venture Parks will be used to satisfy these requirements,
before any funds are required from the Company.
The degree to which the Company is leveraged could adversely affect
its liquidity. The Company's liquidity could also 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 October 30, 1998, the Company purchased the 40% minority interest
in Six Flags Fiesta Texas and title to the park for approximately $45.0 million
in cash.
The Company believes that, based on historical and anticipated
operating results, cash flows from operations, available cash and available
amounts under the Premier and Six Flags Credit Facilities will be adequate to
meet the Company's future liquidity needs, including anticipated requirements
-28-
<PAGE>
for working capital, capital expenditures, scheduled debt and PIES requirements
and 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 existing debt on or prior to maturity or to seek additional
financing.
MARKET RISKS AND SENSITIVITY ANALYSES
- -------------------------------------
Like other global companies, Premier is exposed to market risks
relating to fluctuations in interest rates and currency exchange rates. The
objective of financial risk management at Premier is to minimize the negative
impact of interest rate and foreign exchange rate fluctuations on the Company's
earnings, cash flows and equity. Premier does not acquire market risk sensitive
instruments for trading purposes.
To manage market risks, on a limited basis Premier has used derivative
financial instruments, exclusively foreign exchange forward contracts. These
derivative financial instruments have been held to maturity and Premier only
uses non-leveraged instruments. These contracts are entered into with major
financial institutions, thereby minimizing the risk of credit loss. Premier has
used forward contracts to "lock-in" the U.S. dollar cost of equipment to be
purchased from foreign vendors or manufacturers where the contracts related
thereto are denominated in foreign currency. See Note 5 to Notes to Consolidated
Financial Statements for a more complete description of Premier's accounting
policies and use of such instruments.
The following analyses present the sensitivity of the market value,
earnings and cash flows of Premier's financial instruments to hypothetical
changes in interest and exchange rates as if these changes occurred at
December 31, 1998. The range of changes chosen for these analyses reflect
Premier's view of changes which are reasonably possible over a one-year period.
Market values are the present values of projected future cash flows based on the
interest rate and exchange rate assumptions. These forward looking disclosures
are selective in nature and only address the potential impacts from financial
instruments. They do not include other potential effects which could impact
Premier's business as a result of these changes in interest and exchange rates.
INTEREST RATE AND DEBT SENSITIVITY ANALYSIS
At December 31, 1998, Premier had debt totaling $2,060.8 million, of
which $1,451.0 million represents fixed-rate debt and $609.8 million represents
floating-rate debt. For fixed-rate debt, interest rate changes affect the fair
market value but do not impact book value, earnings or cash flows. Conversely,
for floating-rate debt, interest rate changes generally do not affect the fair
market value but do impact future earnings and cash flows, assuming other
factors remain constant.
Assuming other variables remain constant (such as foreign exchange
rates and debt levels), the pre-tax earnings and cash flows impact resulting
from a one percentage point increase in interest rates would be approximately
$6.1 million.
EXCHANGE RATE SENSITIVITY ANALYSIS
Premier's exchange rate exposures result from its investments and
ongoing operations in Europe, specifically Belgium, France and The Netherlands,
and certain other business transactions such as the purchase of rides from
foreign vendors or manufacturers. Among other techniques, Premier utilizes
foreign exchange forward contracts to hedge these exposures. At present, Premier
does not use financial instruments to hedge against currency risks associated
-29-
<PAGE>
with its Walibi operations. At December 31, 1998, Premier had $17.7 million
notional amount of foreign exchange contracts to hedge the risks associated with
$33.3 million firm purchase commitments.
Holding other variables constant, if there were a ten percent adverse
change in foreign currency exchange rates (i.e., a weakening of the dollar
against the applicable European currencies), the market value of foreign
currency contracts outstanding at December 31, 1998 would decrease by
approximately $1.8 million. No amount of this decrease would impact earnings
since the gain (loss) on these contracts would be offset by an equal loss (gain)
on the underlying exposure being hedged.
Assuming the Walibi parks generate the same level of earnings and cash
flow in 1999 as they did in 1998, earnings and cash flows of the Company in the
event of such ten percent adverse change would decrease by less than $100,000
and $2.5 million, respectively.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS NOT YET ADOPTED
- --------------------------------------------------------------
In June, 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
an entity to recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. If
certain conditions are met, a derivative may be specifically designated as a
hedge. The accounting for changes in the fair value of a derivative (that is
gains and losses) depends on the intended use of the derivative and the
resulting designation. SFAS No. 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999. It is expected that the Company will
adopt the provision of SFAS No. 133 as of January 1, 2000. If the provisions of
SFAS No. 133 were to be applied as of December 31, 1998, it would not have a
material effect on the Company's financial position as of such date, or the
results of operations for the year then ended.
In April 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities" (SOP 98-5). SOP 98-5 establishes standards for the financial report
of start-up costs and organization costs. It requires that those costs be
expensed as incurred. The effect of the implementation of SOP 98-5 is accounted
for as a cumulative effect of a change in accounting principle. Premier is
required to adopt the provisions of SOP 98-5 in the first quarter of 1999 and
does not anticipate that the adoption of the provision of SOP 98-5 will have a
material effect on Premier's financial position as of that date or the results
of operations for the year then ended.
IMPACT OF YEAR 2000 ISSUE
- -------------------------
The Company's Year 2000 Project (the "Project") is in process. The
Project is addressing the Year 2000 issue caused by computer programs being
written utilizing two digits rather than four to define an applicable year. As a
result, the Company's computer equipment, software and devices with embedded
technology that are time sensitive may misinterpret the actual date beginning on
January 1, 2000. This could result in a system failure or miscalculations
causing disruptions of operations, including, but not limited to, a temporary
inability to process transactions.
The Company has undertaken various initiatives intended to ensure that
its computer equipment and software will function properly with respect to dates
in the Year 2000 and thereafter. In planning and developing the Project, the
Company has considered both its information technology ("IT") and its non-IT
systems. The term "computer equipment and software" includes systems that are
commonly thought of as IT systems, including accounting, data processing,
telephone systems, scanning equipment and other miscellaneous systems. Those
-30-
<PAGE>
items not to be considered as IT technology include alarm systems, fax machines,
monitors for park operations or other miscellaneous systems. Both IT and non-IT
systems may contain embedded technology, which complicates the Company's Year
2000 identification, assessment, remediation and testing efforts. Based upon its
identification and assessment efforts to date, the Company is in the process of
replacing the computer equipment and upgrading the software it currently uses to
become Year 2000 compliant. In addition, in the ordinary course of replacing
computer equipment and software, the Company plans to obtain replacements that
are in compliance with Year 2000.
The Company has initiated correspondence with its significant vendors
and service providers to determine the extent such entities are vulnerable to
Year 2000 issues and whether the products and services purchased from such
entities are Year 2000 compliant. The Company expects to receive a favorable
response from such third parties and it is anticipated that their significant
Year 2000 issues will be addressed on a timely basis.
With regard to IT, non-IT systems and communications with third
parties, the Company anticipates that the Project will be completed in November
1999.
As noted above, the Company is in the process of replacing certain
computer equipment and software because of the Year 2000 issue. The Company
estimates that the total cost of such replacements will be no more than $1.5
million. Substantially all of the personnel being used on the Project are
existing Company employees. Therefore, the labor costs of its Year 2000
identification, assessment, remediation and testing efforts, as well as
currently anticipated labor costs to be incurred by the Company with respect to
Year 2000 issues of third parties, are expected to be less than $0.8 million.
The Company has not yet developed a most reasonably likely worst case
scenario with respect to Year 2000 issues, but instead has focused its efforts
on reducing uncertainties through the review described above. The Company has
not developed Year 2000 contingency plans other than as described above, and
does not expect to do so unless merited by the results of its continuing review.
The Company presently does not expect to incur significant operational
problems due to the Year 2000 issue. However, if all Year 2000 issues are not
properly and timely identified, assessed, remediated and tested, there can be no
assurance that the Year 2000 issue will not materially impact the Company's
results of operations or adversely affect its relationships with vendors or
others. Additionally, there can be no assurance that the Year 2000 issues of
other entities will not have a material impact on the Company's systems or
results of operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Reference is made to the information appearing under the subheading
"Market Risks and Sensitivity Analyses" under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 29-30 of this Report.
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.
-31-
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
-32-
<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 1999.
(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 1999.
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 1999.
(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 1999.
-33-
<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 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:
PAGE
----
Independent Auditors' Report F-2
Consolidated Balance Sheets-- December 31, 1998 and 1997 F-3
Consolidated Statements of Operations
Years ended December 31, 1998, 1997 and 1996 F-4
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1998, 1997 and 1996 F-5
Consolidated Statements of Cash Flows
Years ended December 31, 1998, 1997 and 1996 F-6
Notes to Consolidated Financial Statements F-8
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.
(a)(3) See Exhibit Index.
(b) Reports on Form 8-K
-------------------
None.
(c) Exhibits
See Item 14(a)(3) above.
-34-
<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 31, 1999
PREMIER PARKS INC.
By: /s/ Kieran E. Burke
---------------------------------
Kieran E. Burke
Chairman of the Board
and Chief Executive Officer
-35-
<PAGE>
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.
Signature Title Date
- --------- ----- ----
/s/ Kieran E. Burke Chairman of the Board, Chief March 31, 1999
- -------------------------------- Executive Officer (Principal
Kieran E. Burke Executive Officer) and
Director
/s/ Gary Story President, Chief Operating March 31, 1999
- -------------------------------- Officer and Director
Gary Story
/s/ James F. Dannhauser Chief Financial Officer March 31, 1999
- -------------------------------- (Principal Financial and
James F. Dannhauser Accounting Officer) and
Director
/s/ Paul A. Biddelman Director March 31, 1999
- --------------------------------
Paul A. Biddelman
/s/ Michael E. Gellert Director March 31, 1999
- --------------------------------
Michael E. Gellert
/s/ Sandy Gurtler Director March 31, 1999
- --------------------------------
Sandy Gurtler
/s/ Charles R. Wood Director March 31, 1999
- --------------------------------
Charles R. Wood
-36-
<PAGE>
PREMIER PARKS INC.
Index to Consolidated Financial Statements
Page
Independent Auditors' Report F-2
Consolidated Balance Sheets - December 31, 1998 and 1997 F-3
Consolidated Statements of Operations - Years ended
December 31, 1998, 1997 and 1996 F-4
Consolidated Statements of Stockholders' Equity - Years ended
December 31, 1998, 1997 and 1996 F-5
Consolidated Statements of Cash Flows - Years ended
December 31, 1998, 1997 and 1996 F-6
Notes to Consolidated Financial Statements F-8
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, 1998 and 1997, 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, 1998. 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, 1998 and 1997, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
KPMG LLP
Oklahoma City, Oklahoma
March 22, 1999
F-2
<PAGE>
<TABLE>
PREMIER PARKS INC.
Consolidated Balance Sheets
December 31, 1998 and 1997
Assets 1998 1997
--------------- ---------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 400,578,000 84,288,000
Accounts receivable 31,484,000 6,537,000
Inventories 21,703,000 5,547,000
Income tax receivable -- 995,000
Prepaid expenses and other current assets 29,200,000 3,690,000
Restricted-use investment securities 206,075,000 --
--------------- ---------------
Total current assets 689,040,000 101,057,000
--------------- ---------------
Other assets:
Debt issuance costs 45,099,000 10,123,000
Restricted-use investment securities 111,577,000 --
Deposits and other assets 73,887,000 3,949,000
--------------- ---------------
Total other assets 230,563,000 14,072,000
--------------- ---------------
Property and equipment, at cost 1,675,959,000 479,271,000
Less accumulated depreciation 104,806,000 35,474,000
--------------- ---------------
1,571,153,000 443,797,000
--------------- ---------------
Investment in theme park partnerships 294,893,000 6,595,000
Less accumulated amortization 11,373,000 136,000
--------------- ---------------
283,520,000 6,459,000
--------------- ---------------
Intangible assets, principally goodwill 1,321,616,000 48,876,000
Less accumulated amortization 43,427,000 2,940,000
--------------- ---------------
1,278,189,000 45,936,000
--------------- ---------------
Total assets $ 4,052,465,000 611,321,000
=============== ===============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 25,285,000 10,051,000
Accrued interest payable 33,269,000 9,785,000
Accrued compensation 6,433,000 3,110,000
Accrued insurance 28,727,000 --
Other accrued liabilities 65,446,000 10,038,000
Current portion of long-term debt 198,038,000 795,000
--------------- ---------------
Total current liabilities 357,198,000 33,779,000
Long-term debt 1,862,687,000 216,231,000
Other long-term liabilities 54,037,000 4,025,000
Deferred income taxes 151,978,000 33,537,000
--------------- ---------------
Total liabilities 2,425,900,000 287,572,000
--------------- ---------------
Stockholders' equity:
Preferred stock, 5,000,000 and 500,000 shares authorized at December 31,
1998 and 1997, respectively; 11,500 and no shares issued and
outstanding at December 31, 1998 and 1997, respectively 12,000 --
Common stock, $.025 par value, 150,000,000 and 90,000,000 shares
authorized at December 31, 1998 and 1997, respectively; 76,488,661 and
37,798,914 shares issued and 76,488,661 and 37,746,222 shares
outstanding at December 31, 1998 and 1997, respectively 1,912,000 944,000
Capital in excess of par value 1,640,532,000 354,235,000
Retained earnings (accumulated deficit) 133,000 (17,241,000)
Deferred compensation (25,111,000) (13,500,000)
Accumulated other comprehensive income 9,087,000 --
--------------- ---------------
1,626,565,000 324,438,000
Less 52,692 common shares of treasury stock, at cost at December 31, 1997 -- (689,000)
--------------- ---------------
Total stockholders' equity 1,626,565,000 323,749,000
--------------- ---------------
Total liabilities and stockholders' equity $ 4,052,465,000 611,321,000
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
<TABLE>
PREMIER PARKS INC.
Consolidated Statements of Operations
Years ended December 31, 1998, 1997 and 1996
<CAPTION>
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
Theme park admissions $ 423,461,000 94,611,000 41,162,000
Theme park food, merchandise and other 390,166,000 99,293,000 52,285,000
------------- ------------- -------------
Total revenue 813,627,000 193,904,000 93,447,000
------------- ------------- -------------
Operating costs and expenses:
Operating expenses 297,266,000 81,356,000 42,425,000
Selling, general and administrative 126,985,000 35,422,000 16,927,000
Noncash compensation 6,362,000 1,125,000 --
Costs of products sold 103,051,000 23,025,000 11,101,000
Depreciation and amortization 109,841,000 19,792,000 8,533,000
------------- ------------- -------------
Total operating costs and expenses 643,505,000 160,720,000 78,986,000
------------- ------------- -------------
Income from operations 170,122,000 33,184,000 14,461,000
------------- ------------- -------------
Other income (expense):
Interest expense (149,820,000) (25,714,000) (12,597,000)
Interest income 33,971,000 7,939,000 1,476,000
Equity in operations of theme park partnerships 24,054,000 -- --
Minority interest in earnings (960,000) -- --
Termination fee, net of expenses -- 8,364,000 --
Other income (expense) (1,023,000) (59,000) (78,000)
------------- ------------- -------------
Total other income (expense) (93,778,000) (9,470,000) (11,199,000)
------------- ------------- -------------
Income before income taxes 76,344,000 23,714,000 3,262,000
Income tax expense 40,716,000 9,615,000 1,497,000
------------- ------------- -------------
Income before extraordinary loss 35,628,000 14,099,000 1,765,000
Extraordinary loss on extinguishment of debt,
net of income tax benefit of $526,000 in 1998 (788,000) -- --
------------- ------------- -------------
Net income $ 34,840,000 14,099,000 1,765,000
============= ============= =============
Net income applicable to common stock $ 17,374,000 14,099,000 1,162,000
============= ============= =============
Weighted average number of common shares
outstanding -- basic 66,430,000 35,876,000 17,206,000
============= ============= =============
Income per average common share outstanding -- basic:
Income before extraordinary loss $ 0.27 0.39 0.07
Extraordinary loss (0.01) -- --
------------- ------------- -------------
Net income $ 0.26 0.39 0.07
============= ============= =============
Weighted average number of common shares
outstanding -- diluted 68,518,000 36,876,000 17,944,000
============= ============= =============
Income per average common share outstanding -- diluted:
Income before extraordinary loss $ 0.26 0.38 0.06
Extraordinary loss (0.01) -- --
------------- ------------- -------------
Net income $ 0.25 0.38 0.06
============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
PREMIER PARKS INC.
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1998, 1997 and 1996
Preferred Stock Common Stock
-------------------------------- ------------------------------- Capital in
Shares Shares Excess of
Issued Amount Issued Amount Par Value
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1995 200,000 $ 200,000 9,767,800 $ 244,000 79,261,000
Conversion of preferred stock to
common stock (200,000) (200,000) 5,121,856 128,000 72,000
Issuance of common stock -- -- 7,895,682 197,000 65,309,000
Net income -- -- -- -- --
-------------- -------------- -------------- -------------- --------------
Balances at December 31, 1996 -- -- 22,785,338 569,000 144,642,000
Issuance of common stock -- -- 15,013,576 375,000 209,593,000
Amortization of deferred
compensation -- -- -- -- --
Net income -- -- -- -- --
-------------- -------------- -------------- -------------- --------------
Balances at December 31, 1997 -- -- 37,798,914 944,000 354,235,000
Issuance of preferred stock 11,500 12,000 -- -- 301,173,000
Issuance of common stock -- -- 38,742,439 969,000 985,812,000
Amortization of deferred
compensation -- -- -- -- --
Retirement of treasury stock -- -- (52,692) (1,000) (688,000)
Net income -- -- -- -- --
Other comprehensive income -
foreign currency translation
adjustment -- -- -- -- --
Comprehensive income
Preferred stock dividends -- -- -- -- --
-------------- -------------- -------------- -------------- --------------
Balances at December 31, 1998 11,500 $ 12,000 76,488,661 $ 1,912,000 1,640,532,000
============== ============== ============== ============== ==============
<CAPTION>
Retained Accumulated
Earnings Other
(Accumulated Deferred Comprehensive Treasury
Deficit) Compensation Income Stock Total
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1995 (33,105,000) -- -- (689,000) 45,911,000
Conversion of preferred stock to
common stock -- -- -- -- --
Issuance of common stock -- -- -- -- 65,506,000
Net income 1,765,000 -- -- -- 1,765,000
-------------- -------------- -------------- -------------- --------------
Balances at December 31, 1996 (31,340,000) -- -- (689,000) 113,182,000
Issuance of common stock -- (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 (17,241,000) (13,500,000) -- (689,000) 323,749,000
Issuance of preferred stock -- -- -- -- 301,185,000
Issuance of common stock -- (16,100,000) -- -- 970,681,000
Amortization of deferred
compensation -- 4,489,000 -- -- 4,489,000
Retirement of treasury stock -- -- -- 689,000 --
Net income 34,840,000 -- -- -- 34,840,000
Other comprehensive income -
foreign currency translation
adjustment -- -- 9,087,000 -- 9,087,000
--------------
Comprehensive income 43,927,000
--------------
Preferred stock dividends (17,466,000) -- -- -- (17,466,000)
-------------- -------------- -------------- -------------- --------------
Balances at December 31, 1998 133,000 (25,111,000) 9,087,000 -- 1,626,565,000
============== ============== ============== ============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
PREMIER PARKS INC.
Consolidated Statements of Cash Flows
Years ended December 31, 1998, 1997 and 1996
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 34,840,000 14,099,000 1,765,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 109,841,000 19,792,000 8,533,000
Equity in operations of theme park
partnerships, net of cash received (8,240,000) -- --
Minority interest in earnings 960,000 -- --
Noncash compensation 6,362,000 1,125,000 --
Interest accretion on notes payable 28,713,000 -- --
Interest accretion on restricted-use
investments (7,267,000) -- --
Extraordinary loss on early extinguishment
of debt 1,314,000 -- --
Amortization of debt issuance costs 5,351,000 1,918,000 811,000
(Gain) loss on sale of assets 920,000 (46,000) (51,000)
Deferred income taxes 38,698,000 6,737,000 1,433,000
Increase in accounts receivable (17,816,000) (5,272,000) (215,000)
(Increase) decrease in income tax
receivable 995,000 (995,000) --
Increase in inventories and prepaid
expenses and other current assets (12,154,000) (1,150,000) (2,360,000)
(Increase) decrease in deposits and
other assets (25,185,000) 6,237,000 (3,947,000)
Increase (decrease) in accounts payable
and accrued expenses (61,806,000) (776,000) 5,216,000
Increase in accrued interest payable 23,484,000 5,481,000 146,000
--------------- --------------- ---------------
Total adjustments 84,170,000 33,051,000 9,566,000
--------------- --------------- ---------------
Net cash provided by operating
activities 119,010,000 47,150,000 11,331,000
--------------- --------------- ---------------
Cash flows from investing activities:
Additions to property and equipment (205,754,000) (129,049,000) (38,995,000)
Investment in theme park partnerships (60,739,000) (6,595,000) --
Acquisition of theme park assets (50,593,000) (60,050,000) (116,154,000)
Acquisition of theme park companies, net
of cash acquired (1,037,412,000) (21,376,000) --
Purchase of restricted-use investments (321,750,000) -- --
Maturities of restricted-use investments 11,365,000 -- --
--------------- --------------- ---------------
Net cash used in investing
activities (1,664,883,000) (217,070,000) (155,149,000)
--------------- --------------- ---------------
Cash flows from financing activities:
Repayment of long-term debt (703,639,000) (66,576,000) (1,082,000)
Proceeds from borrowings 1,361,703,000 132,500,000 57,574,000
Net cash proceeds from issuance of
preferred stock 301,185,000 -- --
Net cash proceeds from issuance of
common stock 955,134,000 189,530,000 65,306,000
Payment of cash dividends (11,644,000) -- --
Payment of debt issuance costs (41,641,000) (5,289,000) (2,724,000)
--------------- --------------- ---------------
Net cash provided by
financing activities 1,861,098,000 250,165,000 119,074,000
--------------- --------------- ---------------
</TABLE>
(Continued)
F-6
<PAGE>
<TABLE>
PREMIER PARKS INC.
Consolidated Statements of Cash Flows
Years ended December 31, 1998, 1997 and 1996
<CAPTION>
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Effect of exchange rate changes on cash
and cash equivalents $ 1,065,000 -- --
--------------- --------------- ---------------
Increase (decrease) in cash and cash
equivalents 316,290,000 80,245,000 (24,744,000)
Cash and cash equivalents at beginning of year 84,288,000 4,043,000 28,787,000
--------------- --------------- ---------------
Cash and cash equivalents at end of year $ 400,578,000 84,288,000 4,043,000
=============== =============== ===============
Supplementary cash flow information:
Cash paid for interest $ 92,272,000 18,315,000 11,640,000
=============== =============== ===============
Cash paid for income taxes $ 497,000 3,697,000 64,000
=============== =============== ===============
</TABLE>
Supplemental disclosure of noncash investing and financing activities:
1998
() The Company issued $15,547,000 of common stock (805,954 shares) as
consideration for a theme park acquisition.
() The Company issued restricted common stock (920,000 shares) to certain
employees valued at $16,100,000.
1997
() The Company issued $5,831,000 of common stock (307,600 shares) as
components of theme park acquisitions.
() The Company issued restricted common stock (900,000 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
(5,121,856 shares).
() The Company issued $200,000 of common stock (18,182 shares) as a
component of a theme park acquisition.
() The Company acquired certain equipment through a capital lease with an
obligation of $64,000.
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(1) Summary of Significant Policies
(a) Description of Business
Premier owns and operates regional theme amusement and water parks. As
of December 31, 1998, the Company and its subsidiaries own and operate
31 parks, including 25 domestic parks and six European parks.
On March 24, 1998, the company then known as Premier Parks Inc.
("Premier Operations") merged (the "Merger") with an indirect
wholly-owned subsidiary thereof, pursuant to which Premier Operations
became a wholly-owned subsidiary of Premier Parks Holdings Corporation
("Holdings") and the holders of shares of common stock of Premier
Operations became, on a share-for-share basis, holders of common stock
of Holdings. On the Merger date, Premier Operations' name was changed
to Premier Parks Operations Inc., and Holdings' name was changed to
Premier Parks Inc. References herein to the "Company" or "Premier"
mean (i) for all periods or dates prior to March 24, 1998, Premier
Operations and its consolidated subsidiaries and (ii) for all
subsequent periods or dates, Holdings and its consolidated
subsidiaries (including Premier Operations). As used herein, Holdings
refers only to Premier Parks Inc., without regard to its subsidiaries.
During the first six months of 1998, the Company purchased
approximately 95% of the outstanding capital stock of Walibi, S.A.
("Walibi") and as of December 31, 1998 owns approximately 97%. See
Note 2 below. On April 1, 1998, the Company purchased all of the
outstanding capital stock of Six Flags Entertainment Corporation
("SFEC" and, together with its subsidiaries, "Six Flags") and
consummated the other transactions described in Note 2 below.
The accompanying consolidated financial statements for the year ended
December 31, 1998 reflect the results of Riverside Park and Kentucky
Kingdom from January 1, 1998, of Walibi from March 26, 1998, and of
Six Flags from April 1, 1998. See Note 2. The accompanying
consolidated financial statements for the year ended December 31, 1997
reflect the results of Riverside Park only from its acquisition date,
February 5, 1997; Kentucky Kingdom only from its acquisition date,
November 7, 1997; and do not include the results of Walibi or Six
Flags. The accompanying consolidated financial statements for the year
ended December 31, 1996 reflect the results of Elitch Gardens, the two
Waterworld/USA water parks, and The Great Escape and Splashwater
Kingdom from their acquisition dates, October 31, 1996, November 19,
1996, and December 4, 1996, respectively, and do not include the
results of Riverside Park, Kentucky Kingdom, Walibi or Six Flags. In
addition, 1998 results include the Company's share of the results of
Marine World under the applicable lease and related documents. See
Note 13. Those results are not included in the 1997 and 1996 periods.
F-8
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(b) 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 partnerships in which it does not own
controlling interests are accounted for using the equity method and
included in investment in theme park partnerships.
(c) Cash Equivalents
Cash equivalents of $357,984,000 and $73,694,000 at December 31, 1998
and 1997, 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 remaining maturities as of
their purchase date of three months or less to be cash equivalents.
(d) 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.
(e) 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 was $66,141,000, $21,600,000, and
$9,100,000 during 1998, 1997, and 1996, respectively.
(f) Debt Issuance Costs
The Company capitalizes costs related to the issuance of debt. 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.
F-9
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(g) Depreciation and Amortization
Rides and attractions are depreciated using the straight-line method
over 5-25 years. 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. 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.
(h) Investment in Theme Park Partnerships
The Company manages three parks in which the Company does not
currently own a controlling interest. The Company accounts for its
investment in these three parks using the equity method of accounting.
The equity method of accounting recognizes the Company's share of the
activity of Six Flags Over Texas, Six Flags Over Georgia and Six Flags
Marine World in the accompanying statements of operations in the
caption "equity in operations of theme park partnerships." The equity
method of accounting differs from the consolidation method of
accounting used for the theme parks in which the Company owns a
controlling interest. In the consolidation method of accounting, the
activities of the controlled parks are reflected in each revenue and
expense caption rather than aggregated into one caption.
(i) 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. The
Company assesses the recoverability of this intangible asset by
determining whether the amortization of the goodwill balance over its
remaining life can be recovered through undiscounted future operating
cash flows of the acquisition. The amount of goodwill impairment, if
any, is measured based on projected discounted future operating cash
flows using a discount rate reflecting the Company's average borrowing
rate.
(j) Long-Lived Assets
The Company reviews long-lived assets and certain identifiable
intangibles for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset or group of assets to
future net cash flows expected to be generated by the asset or group
of assets. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the
carrying amount of the
(Continued)
F-10
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
assets exceed the fair value of the assets. Assets to be disposed of
are reported at the lower of the carrying amount or fair value less
costs to sell.
(k) 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.
(l) 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. United States deferred income taxes have not been provided on
foreign earnings which are being permanently reinvested.
(m) Income Per Common Share
Basic earnings per share is computed by dividing net income 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 would occur if the Company's outstanding stock
options were exercised (calculated using the treasury stock method).
Additionally, the weighted average number of shares for the year ended
December 31, 1998 does not include the impact of the conversion of the
Company's mandatorily convertible preferred stock into a maximum of
11,500,000 shares of common stock and a minimum of 9,554,000 shares of
common stock as the effect of the conversion and resulting decrease in
preferred stock dividends would be antidilutive.
During the first five months of 1996, the Company had convertible
preferred stock outstanding. Preferred stock dividends of $603,000,
which were paid through additional issuances of common stock, were
considered in determining net income applicable to common stock in
1996. During the last nine months of 1998, the Company's mandatorily
convertible preferred stock was outstanding. Preferred stock dividends
of $17,466,000 were considered in determining net income applicable to
common stock in 1998.
On June 9, 1998, the Company's common shareholders approved a
two-for-one stock split effective July 24, 1998. The par value of the
common stock was decreased to $.025 per share
(Continued)
F-11
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
from $.05 per share. Additionally, the authorized common shares of the
Company were increased to 150,000,000. The accompanying consolidated
financial statements and notes to the consolidated financial
statements reflect the stock split as if it had occurred as of the
beginning of the earliest year presented.
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 1998, 1997
and 1996.
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Weighted average number of common shares
outstanding - basic 66,430,000 35,876,000 17,206,000
Dilutive effect of potential common shares issuable upon
the exercise of employee stock options 2,088,000 1,000,000 738,000
---------- ---------- ----------
Weighted average number of common shares
outstanding - diluted 68,518,000 36,876,000 17,944,000
========== ========== ==========
</TABLE>
(n) Stock Options
For unconditional employee stock options, the Company recognizes over
the service period, compensation expense only if the current market
price of the underlying stock exceeds the exercise price on the date
of the grant. For employee stock options that are conditioned upon the
achievement of performance goals, compensation expense, as determined
by the extent that the quoted market price of the underlying stock at
the time that the condition for grant is achieved exceeds the stock
option price, is recognized over the service period. For stock options
issued to nonemployees, the Company recognizes compensation expense at
the time of issuance based upon the fair value of the options issued.
Pro forma net income and net income per share for employee stock
option grants made in and subsequent to 1995 as if the
fair-value-based method had been applied are provided in Note 10.
(o) Investment Securities
Restricted-use investment securities at December 31, 1998 consist of
U.S. Treasury securities. The securities are restricted to provide a
redemption fund for indebtedness maturing in 1999; to provide for
three years of interest payments on debt issued in 1998; and to
collateralize the Company's obligations under certain purchase
guarantees described in Note 2. The Company classifies its investment
securities in one of two categories: available-for-sale or
held-to-maturity. Held-to-maturity securities are those securities in
which the Company has the ability
(Continued)
F-12
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
and intent to hold the security until maturity. All other securities
held by the Company are classified as available-for-sale. The Company
does not purchase securities principally for the purpose of selling
them in the near term and thus has no securities classified as
trading.
Available-for-sale securities are recorded at fair value. As of
December 31, 1998, the fair value of the restricted-use investments
classified as available-for-sale was $74,000,000 which approximated
the amortized cost of the securities. Unrealized holding gains and
losses, net of the related tax effect, on available-for-sale
securities are excluded from earnings and are reported as a separate
component of other comprehensive income until realized. Realized gains
and losses from the sale of available-for-sale securities are
determined on a specific identification basis. Held-to-maturity
securities are recorded at amortized cost, adjusted for the
amortization or accretion of premiums or discounts.
As of December 31, 1998, all of the Company's restricted-use
investment securities classified as available-for-sale had remaining
maturities of less than one year; however, these securities are
reflected as noncurrent assets as they are restricted for future use.
As of December 31, 1998, $206,075,000 of restricted-use investment
securities classified as held-to-maturity had maturities and
restricted purposes of less than one year and are reflected as current
assets. The remaining restricted-use investment securities classified
as held-to-maturity have a remaining term of less than three years.
Premiums and discounts are amortized or accreted over the life of the
related held-to-maturity security as an adjustment to yield using the
effective interest method. Dividend and interest income are recognized
when earned.
(p) Comprehensive Income
On January 1, 1998, the Company adopted SFAS No. 130, Reporting
Comprehensive Income. SFAS No. 130 establishes standards for reporting
and presentation of comprehensive income and its components in a full
set of financial statements. Comprehensive income consists of net
income, changes in the foreign currency translation adjustment, and
net unrealized gains (losses) on available-for-sale investment
securities and is presented in the 1998 consolidated statement of
stockholders' equity as accumulated other comprehensive income. The
Statement requires only additional disclosures in the consolidated
financial statements; it does not affect the Company's financial
position or results of operations. The Company's 1997 and earlier
financial statements do not reflect any effect from the adoption as
prior to 1998 the Company did not have foreign operations or own
significant investment securities.
(q) 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
(Continued)
F-13
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
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.
(r) Reclassifications
Reclassifications have been made to certain amounts reported in 1997
and 1996 to conform with the 1998 presentation.
(2) Acquisition of Theme Parks
On March 26, 1998, the Company purchased (the "Private Acquisition")
approximately 49.9% of the outstanding capital stock of Walibi for an
aggregate purchase price of $42,300,000, of which 20% was paid through
issuance of 448,910 shares of common stock and 80% was paid in cash. In
June 1998, the Company purchased an additional 44.0% of the outstanding
capital stock of Walibi for an aggregate purchase price of $38,100,000,
which was paid through issuance of 347,746 shares of common stock and
$31,400,000 in cash. During the remainder of the year, Premier purchased an
additional 3% of Walibi, which included the issuance of an additional 9,298
shares of common stock. On the date of the Private Acquisition, Walibi's
indebtedness aggregated $71,181,000, which indebtedness was assumed or
refinanced by the Company. The Company funded the cash portion of the
purchase price (and the refinancing of such indebtedness) from borrowings
under its senior secured credit facility (the "Premier Credit Facility")
entered into in March 1998. See Note 6(c). As of the acquisition dates and
after giving effect to the purchases, $11,519,000 of deferred tax
liabilities were recognized for the tax consequences attributable to the
differences between the financial carrying amounts and the tax basis of
Walibi's assets and liabilities. Approximately $60,118,000 of costs in
excess of the fair value of the net assets acquired were recorded as
goodwill. The Company may be required to issue additional shares of common
stock based on Walibi's revenues during 1999, 2000 or 2001. The value of
the additional shares, if any, will be recorded as additional goodwill.
On April 1, 1998 the Company acquired (the "Six Flags Acquisition") all of
the capital stock of SFEC for $976,000,000, paid in cash. In connection
with the Six Flags Acquisition, the Company issued through public offerings
(i) 36,800,000 shares of common stock (with gross proceeds of
$993,600,000), (ii) 5,750,000 Premium Income Equity Securities ("PIES")
(with gross proceeds of $310,500,000), (iii) $410,000,000 aggregate
principal amount at maturity of the Company's 10% Senior Discount Notes due
2008 (the "Senior Discount Notes") (with gross proceeds of $251,700,000)
and (iv) $280,000,000 aggregate principal amount of the Company's 9 1/4%
Senior Notes due 2006 (the "Senior Notes"), and SFEC issued $170,000,000
aggregate principal amount of its 8 7/8% Senior Notes due 2006 (the "SFEC
Notes"). In addition, in connection with the Six Flags Acquisition, the
Company (i) assumed $285,000,000 principal amount at maturity of senior
subordinated notes (the "SFTP Senior Subordinated Notes") of Six Flags
Theme Parks Inc. ("SFTP"), an indirect wholly-owned subsidiary of SFEC,
which notes had an accreted value of $278,100,000 at April 1,
(Continued)
F-14
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
1998 (fair value of $318,500,000 at that date) and (ii) refinanced all
outstanding SFTP bank indebtedness with the proceeds of $410,000,000 of
borrowings under a new $472,000,000 senior secured credit facility of SFTP
(the "Six Flags Credit Facility"). As of the acquisition date and after
giving effect to the purchase, $65,619,000 of deferred tax liabilities were
recognized for the tax consequences attributable to the differences between
the financial carrying amounts and the tax basis of Six Flags' assets and
liabilities. Approximately $1,200,974,000 of costs in excess of the fair
value of the net assets acquired was recorded as goodwill.
In addition to its obligations under outstanding indebtedness and other
securities issued or assumed in the Six Flags Acquisition, the Company also
guaranteed in connection therewith certain contractual obligations relating
to the partnerships that own two Six Flags parks, Six Flags Over Texas and
Six Flags Over Georgia (the "Co-Venture Parks"). Specifically, the Company
guaranteed the obligations of the general partners of those partnerships to
(i) make minimum annual distributions of approximately $46,300,000 (subject
to cost of living adjustments) to the limited partners in the Co-Venture
Parks and (ii) make minimum capital expenditures at each of the Co-Venture
Parks during rolling five-year periods, based generally on 6% of such
park's revenues. Cash flow from operations at the Co-Venture Parks will be
used to satisfy these requirements first, before any funds are required
from the Company. The Company also guaranteed the obligation to purchase a
maximum number of 5% per year (accumulating to the extent not purchased in
any given year) of the total limited partnership units outstanding as of
the date of the co-venture agreements (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 such park's weighted-average four-year EBITDA (as defined in
the Co-Venture Agreements) 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) $250,000,000 in
the case of the Georgia park and $374,800,000 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 2027 and 2028, respectively.
As the Company purchases units relating to either Co-Venture Park, it will
be entitled to the minimum distribution and other distributions
attributable to such units, unless it is then in default under the
applicable agreements with its partners at such Co-Venture Park. On
December 31, 1998, the Company owned approximately 25% and 33%,
respectively, of the limited partnership units in the Georgia and Texas
partnerships. The maximum unit purchase obligations for 1999 at both parks
will aggregate approximately $43,750,000.
The accompanying 1998 consolidated statement of operations reflects the
results of the Six Flags Acquisition and the Walibi acquisitions from their
respective acquisition dates.
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 64,278 of the Company's
common shares). The transaction was accounted for as a purchase. As of the
acquisition
(Continued)
F-15
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
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
goodwill.
On November 7, 1997, the Company acquired Kentucky Kingdom--The Thrill Park
(Kentucky Kingdom) for a preliminary purchase price of $64,000,000 of which
$4,831,000 was paid through the issuance of 243,342 shares of the Company's
common stock. As a result of 1998 revenues exceeding levels specified in
the purchase agreement, Premier is required to issue the former owners of
Kentucky Kingdom an estimated additional 336,000 shares of common stock in
April of 1999, of which 76,000 shares will be placed in an escrow account
to offset potential pre-acquisition claims by the Company. The Company may
be required to issue additional shares of common stock based upon the level
of revenues at Kentucky Kingdom during 1999 and 2000. The acquisition was
accounted for as a purchase. The purchase price was primarily allocated to
property and equipment with $12,546,000 of costs recorded as goodwill. The
value of the additional shares to be issued relative to 1999 or 2000
revenue levels, if any, will be recognized as additional goodwill.
The accompanying 1998 and 1997 consolidated statements of operations
reflect the results of Stuart and Kentucky Kingdom from their respective
acquisition dates.
On October 31, 1996, the Company acquired Elitch Gardens for $62,500,000 in
cash. 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 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. 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 goodwill.
On December 4, 1996, the Company acquired 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 18,182 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 goodwill.
F-16
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
The accompanying 1998, 1997 and 1996 consolidated statements of operation
reflect the results of the Elitch Gardens, Waterworld/USA, and The Great
Escape and Splash Water Kingdom acquisitions from their respective
acquisition dates.
The following summarized unaudited pro forma results of operations for the
years ended December 31, 1998 and 1997, assume that the Six Flags
Acquisition, the acquisition of Walibi, the acquisition of Kentucky
Kingdom, and the related financings occurred as of January 1, 1997.
1998 1997
--------------------------
(Unaudited)
(In thousands)
Total revenues $ 838,537 815,333
Income (loss) before extraordinary loss (53,121) (56,497)
Income (loss) per common share - basic (1.01) (1.06)
Income (loss) per common share - diluted (1.01) (1.06)
The following summarized unaudited pro forma results of operations for the
year ended December 31, 1997 and 1996, assume that the Stuart, the Kentucky
Kingdom, the Elitch Gardens, The Great Escape and Splash Water Kingdom, and
the Waterworld/USA acquisitions, and the related transactions occurred as
of January 1, 1996.
1997 1996
--------------------------
(Unaudited)
(In thousands)
Total revenues $ 215,620 175,224
Net income 15,210 12,436
Income per common share - basic .40 .33
Income per common share - diluted .39 .32
F-17
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(3) Property and Equipment
Property and equipment, at cost, are classified as follows:
1998 1997
-------------- --------------
Land $ 281,403,000 40,099,000
Buildings and improvements 492,654,000 159,661,000
Rides and attractions 796,654,000 248,374,000
Equipment 105,248,000 31,137,000
-------------- --------------
Total 1,675,959,000 479,271,000
Less accumulated depreciation 104,806,000 35,474,000
-------------- --------------
$1,571,153,000 443,797,000
============== ==============
(4) Investment in Theme Park Partnerships
The following reflects the summarized assets, liabilities, and equity as of
December 31, 1998 and the results of the three parks managed by the Company
for the year ended December 31, 1998, in the case of Six Flags Marine
World, and for the period subsequent to April 1, 1998 (the date of the Six
Flags Acquisition), in the case of the Co-Venture Parks. Previous periods
are not presented as the general partner and limited partnership interests
in the Co-Venture Parks were purchased on April 1, 1998 and the lease
agreement with the owner of Six Flags Marine World, which established a
revenue sharing arrangement in which the Company participates, became
effective at the beginning of the 1998 operating season.
Assets:
Current assets $ 34,055,000
Property and equipment, net 189,632,000
Other assets 24,289,000
------------
Total assets $247,976,000
============
Liabilities and equity:
Current liabilities $ 34,189,000
Long-term debt 120,244,000
Equity 93,543,000
------------
Total liabilities and equity $247,976,000
============
F-18
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
Revenue $202,183,000
------------
Expenses:
Operating expenses 75,680,000
Selling, general and administrative 24,933,000
Costs of products sold 26,689,000
Depreciation and amortization 13,325,000
Interest expense, net 6,301,000
Other expense 1,451,000
------------
Total 148,379,000
------------
Net income $ 53,804,000
============
The Company's share of operations of the three theme parks for the year
ended December 31, 1998 was $35,408,000, prior to depreciation and
amortization charges of $9,763,000 and interest expense of $1,591,000. A
substantial difference exists between the carrying value of the Company's
investment in the theme parks and the Company's share of the net book value
of the theme parks. The difference is being amortized over 20 years for the
Co-Venture Parks and being amortized over the expected useful life of the
rides and equipment installed by the Company at Six Flags Marine World.
Included in long-term debt above is $68,590,000 of long-term debt that is
not guaranteed by the Company. The long-term debt is an obligation of the
other parties that have an interest in Six Flags Marine World. The
remaining long-term debt is that of the Co-Venture Parks, of which the
Company serves as the managing general partner for each park and such debt
includes approximately $27,407,000 of long-term debt owed to the Company,
with the remainder consisting of primarily capitalized lease obligations
associated with rides and equipment.
(5) Derivative Financial Instruments
The Company has only limited involvement with derivative financial
instruments, entering into contracts only to manage foreign-currency
exchange rate risks.
Foreign currency forward-purchase agreements are used to reduce the
potential impact of changes in foreign currency exchange rates on the cost
of rides and equipment purchased from European suppliers. At December 31,
1998, the Company was a party to two forward purchase agreements of
European currencies with terms expiring in 1999. The agreements require the
Company to purchase European currencies from the counterparties (an
investment bank and a large financial institution), at specified intervals,
for approximately $17,679,000. The specified transaction intervals coincide
with the dates that payments are due to the manufacturer of the rides and
equipment.
F-19
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
The fair value of the forward purchase agreements was $577,000 at December
31, 1998. The fair value is estimated using values provided by the
counterparties based upon quoted exchange rates for forward purchases.
The Company is exposed to credit losses in the event of nonperformance by
the counterparties to its forward purchase agreements. The Company
anticipates, however, that counterparties will fully satisfy their
obligations under the contracts. The Company does not obtain collateral to
support its financial instruments but monitors the credit standing of the
counterparties.
(6) Long-Term Debt
At December 31, 1998 and 1997, long-term debt consists of:
1998 1997
-------------- -----------
Long-term debt:
1995 Notes due 2003 (a) $ 90,000,000 90,000,000
1997 Notes due 2007 (b) 125,000,000 125,000,000
Premier Credit Facility (c) 200,000,000 --
Senior Discount Notes (d) 270,895,000 --
Senior Notes (d) 280,000,000 --
SFEC Notes (e) 170,000,000 --
SFEC Zero Coupon Notes (e) 182,877,000 --
SFTP Senior Subordinated Notes (f) 321,167,000 --
Six Flags Credit Facility (g) 409,750,000 --
-------------- -----------
Other 11,036,000 2,026,000
2,060,725,000 217,026,000
Less current portion, in 1998
primarily the SFEC Zero
Coupon Notes (carrying
value of $182,877,000 as of
December 31, 1998) which
have been prefunded with
restricted-use investments
See note (e) 198,038,000 795,000
-------------- -----------
$1,862,687,000 216,231,000
============== ===========
(a) In August 1995, Premier Operations issued $90,000,000 principal amount
of senior notes (the "1995 Notes"). The 1995 Notes are senior
unsecured obligations of Premier Operations, which mature on August
15, 2003. The 1995 Notes bear interest at 12% per annum payable
semiannually. The 1995 Notes are redeemable, at Premier Operations'
option, in whole or part, at any time on or after August 15, 1999, at
varying redemption prices. The 1995 Notes are guaranteed on a senior,
unsecured, joint and several basis by all of Premier Operations'
principal domestic subsidiaries.
F-20
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
The proceeds of the 1995 Notes were used in the acquisition by Premier
Operations of Funtime Parks, Inc. in August 1995 and in the
refinancing at that time of previously existing indebtedness.
The indenture limits the ability of Premier Operations and its
subsidiaries to dispose of assets; incur additional indebtedness or
liens; pay dividends; engage in mergers or consolidations; and engage
in certain transactions with affiliates.
All obligations under the 1995 Notes and the related indenture
remained as obligations of Premier Operations and were not assumed by
Holdings after the Merger.
(b) On January 31, 1997, Premier Operations issued $125,000,000 of senior
notes due January 2007 (the "1997 Notes"). The 1997 Notes are senior
unsecured obligations of Premier Operations and equal to the 1995
Notes in priority upon liquidation. The 1997 Notes bear interest at 9
3/4% per annum payable semiannually and are redeemable, at Premier
Operations' option, in whole or in part, at any time on or after
January 15, 2002, at varying redemption prices. The 1997 Notes are
guaranteed on a senior, unsecured, joint and several basis by all of
Premier Operations' principal domestic subsidiaries.
The indenture under which the 1997 Notes were issued contains
covenants substantially similar to those relating to the 1995 Notes. A
portion of the proceeds were used to pay in full all amounts
outstanding under Premier Operations' then credit facility.
All obligations under the 1997 Notes and the related indenture
remained as obligations of Premier Operations and were not assumed by
Holdings after the Merger.
(c) In March 1998, Premier Operations entered into the Premier Credit
Facility and terminated its then outstanding $115,000,000 credit
facility, resulting in a $788,000 extraordinary loss, net of tax
benefit of $526,000, in the first quarter of 1998 in respect of debt
issuance costs related to the terminated facility. At December 31,
1998, Premier Operations had borrowed $200,000,000 under the Premier
Credit Facility, in part to fund the acquisition of Walibi. The
Premier Credit Facility includes a five-year $75,000,000 revolving
credit facility (none of which was outstanding at December 31, 1998),
a five-year $100,000,000 term loan facility (subsequently reduced to
$75,000,000, which amount was outstanding at December 31, 1998),
requiring principal payments of $10,000,000, $25,000,000, $30,000,000
and $10,000,000 in the second, third, fourth and fifth years, and an
eight-year $125,000,000 term loan facility (which was fully drawn as
of December 31, 1998 and requires principal payments of $1,000,000 in
each of the first six years and $25,000,000 and $94,000,000 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). The Premier
Credit Facility contains restrictive covenants that, among other
things, limit the ability of Premier Operations and its subsidiaries
to dispose of assets; incur additional indebtedness or liens; pay
dividends; repurchase stock; make investments; engage in mergers or
consolidations and
F-21
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
engage in certain transactions with subsidiaries and affiliates. In
addition, the Premier Credit Facility requires that Premier Operations
comply with certain specified financial ratios and tests.
All obligations of the Company under the Premier Credit Facility
remained as obligations of Premier Operations and were not assumed by
Holdings after the Merger
(d) On April 1, 1998, Holdings issued at a discount $410,000,000 principal
amount at maturity ($270,895,000 carrying value as of December 31,
1998) of Senior Discount Notes and $280,000,000 principal amount of
Senior Notes. The notes are senior unsecured obligations of Holdings,
and are not guaranteed by Holdings' subsidiaries. The Senior Discount
Notes do not require any interest payments prior to October 1, 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 Senior Notes require annual interest payments of
approximately $25,900,000 (9 1/4% per annum) and, except in the event
of a change of control of the Company and certain other circumstances,
do not require any principal payments prior to their maturity in 2006.
The notes are redeemable, at the Company's option, in whole or in
part, at any time on or after April 1, 2002 (in the case of the Senior
Notes) and April 1, 2003 (in the case of the Senior Discount Notes),
at varying redemption prices.
Approximately $70,700,000 of the net proceeds of the Senior Notes were
deposited in escrow to prefund the first six semi-annual interest
payments thereon, and $75,000,000 of the net proceeds of the Senior
Discount Notes were invested in restricted-use securities, until April
1, 2003, to provide funds to pay certain of Premier's obligations to
the limited partners of the Co-Venture Parks. See Note 2.
The indentures under which the Senior Discount Notes and the Senior
Notes were issued limit the ability of Holdings and its subsidiaries
to dispose of assets; incur additional indebtedness or liens; pay
dividends; engage in mergers or consolidations; and engage in certain
transactions with affiliates.
(e) On April 1, 1998, SFEC issued $170,000,000 principal amount of SFEC
Notes, which are senior obligations of SFEC. The SFEC Notes were
guaranteed on a fully subordinated basis by Holdings. The SFEC Notes
require annual interest payments of approximately $15,100,000 (8 7/8%
per annum) and, except in the event of a change of control of SFEC and
certain other circumstances, do not require any principal payments
prior to their maturity in 2006. The SFEC Notes are redeemable, at
SFEC's option, in whole or in part, at any time on or after April 1,
2002, at varying redemption prices. The net proceeds of the SFEC
Notes, together with other funds, were invested in restricted-use
securities to provide for the repayment in full on or before December
15, 1999 of pre-existing notes of SFEC (with a carrying value of
$182,877,000 at December 31, 1998).
F-22
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
The indenture under which the SFEC Notes were issued limits the
ability of SFEC and its subsidiaries to dispose of assets; incur
additional indebtedness or liens; pay dividends; engage in mergers or
consolidations; and engage in certain transactions with affiliates.
(f) The SFTP Senior Subordinated Notes are senior subordinated obligations
of SFTP in an aggregate principal amount of $285,000,000. The SFTP
Senior Subordinated Notes were issued at a discount and effective in
1999 require interest payments of approximately $34,900,000 per annum
(12 1/2% per annum). The first interest payment was paid in December
1998. Except in certain circumstances, no principal payments are
required prior to their maturity in 2005. The SFTP Senior Subordinated
Notes are guaranteed on a senior subordinated basis by the principal
operating subsidiaries of SFTP. The Notes are redeemable, at SFTP's
option, in whole or in part, at any time on or after June 15, 2000, at
varying redemption prices. As a result of the application of purchase
accounting, the carrying value of the SFTP Senior Subordinated Notes
was increased to $318,500,000, which was the estimated fair value at
the acquisition date of April 1, 1998. The premium that resulted from
the adjustment of the carrying value will be amortized as a reduction
to interest expense over the remaining term of the SFTP Senior
Subordinated Notes and will result in an effective interest rate of
approximately 9 3/4%.
The indenture under which the SFTP Senior Subordinated Notes were
issued limits the ability of SFTP and its subsidiaries to dispose of
assets; incur additional indebtedness or liens; pay dividends; engage
in mergers or consolidations; and engage in certain transactions with
subsidiaries and affiliates.
(g) On April 1, 1998, SFTP entered into the Six Flags Credit Facility,
pursuant to which it had outstanding $409,750,000 at December 31,
1998. The Six Flags Credit Facility includes (i) a $100,000,000
five-year revolving credit facility used to refinance Six Flags bank
indebtedness as of April 1, 1998 and for working capital and other
general corporate purposes (of which $38,000,000 was outstanding on
December 31, 1998); and (ii) a $372,000,000 term loan facility (the
"Term Loan Facility") which was fully drawn on December 31, 1998.
Borrowings under the Term Loan Facility will mature on November 30,
2004. However, aggregate principal payments and reductions of
$1,000,000 are required during each of the first, second, third and
fourth years; aggregate principal payments of $25,000,000 and
$40,000,000 are required in years five and six, respectively, and
$303,000,000 at maturity. Borrowings under the Six Flags Credit
Facility are secured by substantially all of the assets of SFTP and
its subsidiaries and a pledge of the stock of SFTP, and are guaranteed
by such subsidiaries and SFEC.
The Six Flags Credit Facility contains restrictive covenants that,
among other things, limit the ability of SFTP and its subsidiaries to
dispose of assets; incur additional indebtedness or liens; pay
dividends, (except that, subject to covenant compliance, dividends
will be permitted to allow SFEC to meet cash pay interest obligations
with respect to the SFEC Notes); repurchase stock; make investments;
engage in mergers or consolidations and engage in certain transactions
with
(Continued)
F-23
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
subsidiaries and affiliates. In addition, the Six Flags Credit
Facility requires that SFTP comply with certain specified financial
ratios and tests.
Annual maturities of long-term debt and capitalized lease obligations,
during the five years subsequent to December 31, 1998, are as follows:
1999 $ 198,038,000
2000 25,924,000
2001 32,330,000
2002 24,510,000
2003 and thereafter 1,779,923,000
--------------
$2,060,725,000
==============
As discussed in (a) to (g), the long-term debt of the Company has been
issued by both Holdings and by several of its subsidiaries. The
following table provides information as of and for the year ended
December 31, 1998 of the assets held by, and the results of operations
and cash flows of, each of the consolidating groups that have issued
registered debt.
Holdings is the issuer of the notes described in (d) above. The
information presented below for Holdings contains the assets,
liabilities, results of operations and cash flows of Holdings. SFEC is
the issuer of the notes described in (e) above with the SFEC Notes
guaranteed on a subordinated basis by Holdings. The information for
SFEC contains the assets, liabilities, results of operations and cash
flows of SFEC. SFTP is the issuer of the notes that are described in
note (f) above. The subsidiaries of SFTP guarantee the notes on a
full, unconditional, and joint and several basis. The information for
the SFTP contains the assets, liabilities, results of operations, and
cash flows of SFTP and its subsidiaries. Premier Operations is the
issuer of the notes described in notes (a) and (b) above. The domestic
subsidiaries of Premier Operations guarantee the notes on a full,
unconditional, and joint and several basis. The information for
Premier Operations contains the assets, liabilities, results of
operations and cash flows of Premier Operations and its domestic
subsidiaries. The non-guarantor group is comprised of the assets,
liabilities, results of operations and cash flows of Premier
Operations' foreign subsidiaries that are not guarantors of any of the
debt described in (a) through (g) above.
F-24
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Premier Non-
Holdings SFEC SFTP Operations Guarantors Eliminations Total
----------- ----------- ----------- ----------- ----------- ------------ -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Cash and cash equivalents $ 320,411 709 45,403 13,763 20,292 -- 400,578
Restricted-use investment securities 22,734 183,341 -- -- -- -- 206,075
Other current assets 38,067 -- 30,065 23,340 8,377 (17,462) 82,387
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total current assets 381,212 184,050 75,468 37,103 28,669 (17,462) 689,040
Intercompany receivables (payables) -- -- -- 864 (864) -- --
Other assets 133,333 30,867 32,764 85,469 747 (52,617) 230,563
Investment in subsidiaries 1,432,883 1,223,369 -- 104,852 -- (2,761,104) --
Investment in theme park partnerships 226,324 -- -- 57,196 -- -- 283,520
Property and equipment, net 23,758 -- 892,913 531,029 123,453 -- 1,571,153
Intangible assets, net 3,624 -- 1,189,765 45,049 68,575 (28,824) 1,278,189
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total assets $ 2,201,134 1,438,286 2,190,910 861,562 220,580 (2,860,007) 4,052,465
=========== =========== =========== =========== =========== =========== ===========
Liabilities and equity:
Current portion of long-term debt $ -- 182,877 1,000 8,173 21,084 (15,096) 198,038
Other current liabilities 22,888 4,107 81,986 35,956 16,589 (2,366) 159,160
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total current liabilities 22,888 186,984 82,986 44,129 37,673 (17,462) 357,198
Long-term debt 550,896 170,000 729,917 407,224 57,267 (52,617) 1,862,687
Other long-term liabilities 568 25,000 22,502 2,412 4,123 (568) 54,037
Deferred income taxes 217 (4,547) 132,704 35,763 16,665 (28,824) 151,978
Stockholders' equity 1,626,565 1,060,849 1,222,801 372,034 104,852 (2,760,536) 1,626,565
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total liabilities and equity $ 2,201,134 1,438,286 2,190,910 861,562 220,580 (2,860,007) 4,052,465
=========== =========== =========== =========== =========== =========== ===========
Revenue:
Theme park admissions $ -- -- 256,316 125,160 41,985 -- 423,461
Theme park food, merchandise
and other 340 -- 241,412 123,642 24,772 -- 390,166
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total revenue 340 -- 497,728 248,802 66,757 -- 813,627
----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating costs and expenses:
Operating expenses -- -- 172,750 101,235 23,281 -- 297,266
Selling, general and administrative 9,351 -- 61,471 45,341 10,822 -- 126,985
Noncash compensation 5,687 -- -- 675 -- -- 6,362
Costs of products sold -- -- 69,643 27,879 5,529 -- 103,051
Depreciation and amortization 166 -- 71,895 27,092 10,688 -- 109,841
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total operating costs and expenses 15,204 -- 375,759 202,222 50,320 -- 643,505
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income from operations (14,864) -- 121,969 46,580 16,437 -- 170,122
----------- ----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
F-25
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Premier Non-
Holdings SFEC SFTP Operations Guarantors Eliminations Total
----------- ----------- ----------- ----------- ----------- ------------ -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Other income (expense):
Interest expense $ (41,031) (19,243) (49,559) (38,702) (3,171) 1,886 (149,820)
Interest income 20,593 7,277 2,866 4,621 500 (1,886) 33,971
Equity in operations of theme park
partnerships 21,002 -- -- 3,052 -- -- 24,054
Minority interest in earnings -- -- 36 -- (996) -- (960)
Other income (expense) -- -- (151) (703) (169) -- (1,023)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total other income (expense) 564 (11,966) (46,808) (31,732) (3,836) -- (93,778)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before income
taxes (14,300) (11,966) 75,161 14,848 12,601 -- 76,344
Income tax expense (benefit) (5,918) (4,547) 39,060 5,926 6,195 -- 40,716
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before
extraordinary loss (8,382) (7,419) 36,101 8,922 6,406 -- 35,628
Extraordinary loss on extinguishment
of debt, net of income tax benefit -- -- -- (788) -- -- (788)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) $ (8,382) (7,419) 36,101 8,134 6,406 -- 34,840
=========== =========== =========== =========== =========== =========== ===========
Net income (loss) applicable
to common stock $ (25,848) (7,419) 36,101 8,134 6,406 -- 17,374
=========== =========== =========== =========== =========== =========== ===========
Cash flow information:
Operating cash flows $ (17,367) (10,357) 98,051 27,145 21,538 -- 119,010
----------- ----------- ----------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Additions to property and equipment (23,970) -- (56,415) (105,309) (20,060) -- (205,754)
Investment in theme park partnerships (217,641) -- -- (51,180) -- 208,082 (60,739)
Sale of assets to Holdings -- 162,082 46,000 -- -- (208,082) --
Acquisition of theme park assets -- -- (45,049) (5,544) -- -- (50,593)
Acquisitions of theme park companies (1,000,065) -- -- (68,629) -- 31,282 (1,037,412)
Investment in subsidiaries (39,030) -- -- -- -- 39,030 --
Purchase of restricted-use investments (145,675) (176,075) -- -- -- -- (321,750)
Maturities of restricted-use
investments 11,365 -- -- -- -- -- 11,365
----------- ----------- ----------- ----------- ----------- ----------- -----------
(1,415,016) (13,993) (55,464) (230,662) (20,060) 70,312 (1,664,883)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Repayment of long-term debt -- (165,686) (423,750) (119,340) (47,480) 52,617 (703,639)
Proceeds from borrowings 531,703 170,000 410,000 250,000 52,617 (52,617) 1,361,703
Net cash proceeds from issuance
of stock 1,256,319 -- -- -- -- -- 1,256,319
Capital contributions -- 25,856 6,611 6,563 -- (39,030) --
Payment of preferred dividends (11,644) -- -- -- -- -- (11,644)
Payment of debt issuance costs (23,584) (6,472) (7,354) (4,231) -- -- (41,641)
----------- ----------- ----------- ----------- ----------- ----------- -----------
1,752,794 23,698 (14,493) 132,992 5,137 (39,030) 1,861,098
Effect of exchange rate changes
on cash -- -- -- -- 1,065 -- 1,065
----------- ----------- ----------- ----------- ----------- ----------- -----------
Increase in cash and cash equivalents $ 320,411 (652) 28,094 (70,525) 7,680 31,282 316,290
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
F-26
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
The debt indentures or credit facility agreements generally restrict the
ability of the obligors to distribute assets to parent companies or in
the case of Holdings to shareholders. The following table discloses the
amounts available for distribution (other than permitted payments in
respect of shared administrative and other corporate expenses and tax
sharing payments) at December 31, 1998 by each debt group based upon the
most restrictive applicable limitation. The terms of the Premier
Operations credit facility require approval by the lender for any
distributions. As such, the net assets of Premier Operations are
considered to be fully restricted.
Amount
Available
--------------
(in thousands)
Holdings $158,037
SFEC 111,220
SFTP 3,772
(7) Fair Value of Financial Instruments
The following table presents the carrying amounts and estimated fair values
of the Company's financial instruments at December 31, 1998 and 1997. The
fair value of a financial instrument is the amount at which the instrument
could be exchanged in a current transaction between willing parties.
<TABLE>
<CAPTION>
Carrying Fair Carrying Fair
Amount Value Amount Value
-------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
Financial assets (liabilities):
Restricted-use investment securities $ 317,652,000 320,059,000 -- --
Long-term debt (2,060,725,000) (2,094,807,000) (217,026,000) (236,000,000)
Foreign currency forward-purchase
agreements -- 577,000 -- --
</TABLE>
The carrying amounts shown in the table are included in the consolidated
balance sheets under the indicated captions, except for the foreign
currency forward-purchase agreements (Note 5) which are not reflected in
the consolidated balance sheets.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
() The fair value of cash and cash equivalents, accounts receivable,
accounts payable, and other accrued liabilities approximate fair value
because of the short maturity of these instruments.
F-27
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
() Restricted-use investment securities: The fair values of debt
securities (both available-for-sale and held-to-maturity investments)
are based on quoted market prices at the reporting date for those or
similar investments.
() Long-term debt: The fair value of the Company's long-term debt is
estimated by discounting the future cash flows of each instrument at
rates currently offered to the Company for similar debt instruments of
comparable maturities by the Company's investment bankers or based
upon quoted market prices.
(8) Termination Fee
During October 1997, the Company entered into an agreement with the limited
partner of the partnership that owned 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.
(9) Income Taxes
Income tax expense allocated to operations for 1998, 1997 and 1996 consists
of the following:
Current Deferred Total
------------ ---------- ----------
1998:
U.S. federal $ (564,000) 32,318,000 31,754,000
Foreign 1,049,000 5,146,000 6,195,000
State and local 1,007,000 1,760,000 2,767,000
------------ ------------ ------------
$ 1,492,000 39,224,000 40,716,000
============ ============ ============
F-28
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
Current Deferred Total
------------ ------------ ------------
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
============ ============ ============
Recorded income tax expense allocated to operations differed from amounts
computed by applying the U.S. federal income tax rate of 35% in 1998 and
1997 and 34% in 1996 to income before income taxes as follows:
1998 1997 1996
------------ ------------ ------------
Computed "expected" federal
income tax expense $ 26,720,000 8,300,000 1,109,000
Amortization of goodwill 10,825,000 327,000 180,000
Other, net (328,000) 200,000 87,000
Effect of foreign income taxes 1,645,000 -- --
Effect of state and local
income taxes,
net of federal tax benefit 1,854,000 788,000 121,000
------------ ------------ ------------
$ 40,716,000 9,615,000 1,497,000
============ ============ ============
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, accrued insurance expenses, and deferred compensation
amounts represent future income tax deductions (deferred tax assets). The
tax effects of these temporary differences as of December 31, 1998 and
1997, are presented below:
F-29
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
1998 1997
------------ ------------
Deferred tax assets before valuation allowance $172,227,000 21,891,000
Less valuation allowance 1,196,000 1,196,000
------------ ------------
Net deferred tax assets 171,031,000 20,695,000
Deferred tax liabilities 323,009,000 54,232,000
------------ ------------
Net deferred tax liability $151,978,000 33,537,000
============ ============
The Company's deferred tax liability results from the financial carrying
amounts for property and equipment being substantially in excess of the
Company's tax basis in the corresponding assets. The majority of the
Company's property and equipment is depreciated 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 amounts 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 the Company will more likely than not realize the benefits of
these net future deductions.
As of December 31, 1998, the Company has approximately $346,086,000 of net
operating loss carryforwards available for federal income tax purposes
which expire through 2018. Included in that total are net operating loss
carryforwards of $3,400,000 which are not expected to be utilized as a
result of an ownership change on October 30, 1992. A valuation allowance
for the pre-October 1992 net operating loss carryforwards has been
established. Additionally, the Company has approximately $7,537,000 of
alternative minimum tax credits which have no expiration date.
The Company has experienced ownership changes within the meaning of the
Internal Revenue Code Section 382 and the regulations thereunder. 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 post-October 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.
Included in the Company's tax net operating loss carryforward amounts are
approximately $249,353,000 of net operating loss carryforwards of Six Flags
generated prior to acquisition by the Company. Six Flags experienced an
ownership change on April 1, 1998 as a result of the Six Flags Acquisition.
Due to this ownership change, no more than $49,200,000 of such net
operating loss carryforwards may be used to offset taxable income of Six
Flags and no more than the taxable income of the Company in any year;
however, it is more likely than not that all of the Company's
(Conitnued)
F-30
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
carryforwards generated subsequent to October 1992 and all of the Six
Flags' carryfowards will be utilized by the Company before their
expiration.
(10) Stockholders' Equity
(a) Preferred Stock
The Company has authorized 5,000,000 shares of preferred stock, $1.00
par value per share. 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 5,121,856 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.
In connection with the Company's acquisition of SFEC on April 1, 1998,
the Company issued 5,750,000 PIES, each representing one
five-hundredth of a share of the Company's mandatorily convertible
preferred stock (an aggregate of 11,500 shares of preferred stock).
See Note 2. The PIES accrue cumulative dividends (payable, at the
Company's option, in cash or shares of common stock) at 7 1/2% per
annum (approximately $23,300,000 per annum) and are mandatorily
convertible into shares of common stock on April 1, 2001. Holders can
voluntarily convert the PIES into shares of common stock at any
time prior to April 1, 2001.
Prior to April 1, 2001, the PIES are convertible at the option of the
holder into 1.6616 common shares. On April 1, 2001, the PIES will
mandatorily convert into common shares based upon the average of the
closing quoted market price of the common stock for the last twenty
days prior to the conversion. If the average market price of the
common stock is equal to or less than $27 per common share, each
PIES share would convert into two shares of common stock. If the
average market price of the common stock is equal to or more than
$32.50 per common share, each PIES share would convert into 1.6616
common shares. If the average market price of the common stock is
between $27 and $32.50 per common share, each PIES share converts
into a declining number of common shares based upon the proportional
excess of the average market price over $27 per common share until
the 1.6616 conversion rate is achieved at the average market price
of $32.50. Any conversion is also adjusted for dividends that have
accumulated, but not yet paid in cash or common stock.
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-31
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(b) Common Stock
In August 1995, the Company issued 2,350,126 common shares in full
exchange for the Company's $7,000,000 senior subordinated convertible
notes and 620,740 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.
On June 4, 1996, and June 6, 1996, the Company issued 6,850,000 and
1,027,500, respectively, of its common shares resulting in net
proceeds to the Company of $65,306,000. Additionally, on June 4, 1996,
the Company exchanged 5,121,856 of its common shares for all 200,000
shares of its previously outstanding preferred stock.
On January 31, 1997, the Company issued 13,800,000 of its common
shares resulting in net proceeds to the Company of approximately
$189,530,000.
In connection with the Company's acquisition of SFEC on April 1, 1998,
the Company issued 36,800,000 shares of Common Stock resulting in net
proceeds to the Company of $954,542,000.
On June 9, 1998, the Company's common shareholders approved a
two-for-one stock split effective July 24, 1998. The par value of the
common stock was decreased to $.025 per share from $.05 per share.
Additionally, the authorized common shares of the Company were
increased to 150,000,000. The accompanying consolidated financial
statements and notes to the consolidated financial statements reflect
the stock split as if it had occurred as of the earliest date
presented.
(c) Stock Options and Warrants
In 1998, 1996, 1995, 1994, and 1993, certain members of the Company's
management were issued seven-year options to purchase 3,437,000,
705,000, 496,000, 72,000 and 290,401 of its common shares, at an
exercise price of $17.50, $11.00, $4.13, $3.75, and $2.50 per share,
respectively, under the Company's 1998, 1996, 1995 and 1993 Stock
Option and Incentive Plans (collectively, the "Option Plans"). No
stock options were issued during 1997. Under the Option Plans, stock
options are granted with an exercise price equal to the underlying
stock's fair value at the date of grant. Except for the 1,531,000
conditional options issued in 1998, 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 terminate upon the seventh anniversary of the
issuance date or following termination of employment. The conditional
stock options issued in 1998 have the same vesting schedule as the
unconditional stock options, except that no conditional option can be
exercised until after the conditions restricting the stock option are
met. Generally, the conditions related to these stock options will be
determined by the end of 1999.
F-32
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
In 1998, the Company also issued to certain consultants options to
purchase 70,000 common shares, of which the option to purchase 20,000
shares are conditional. The options have substantially the same terms
and conditions as the options granted under the Option Plans. The
Company has recognized the fair value of the options issued to the
consultants as an expense in the accompanying 1998 statement of
operations.
At December 31, 1998, there were 5,543,599 additional shares available
for grant under the Option Plans. The per share weighted-average fair
value of stock options granted during 1998 and 1996 was $12.74 and
$7.74, respectively, on the date of grant using the Black--Scholes
option-pricing model with the following weighted-average assumptions:
1998--expected dividend yield 0%, risk-free interest rate of 4.5%,
expected volatility of 84%, and an expected life of 5 years;
1996--expected dividend yield 0%, risk-free interest rate of 6.25%,
expected volatility of 92%, and an expected life of 5 years.
No compensation cost has been recognized for the unconditional stock
options in the consolidated financial statements. Had the Company
determined compensation cost based on the fair value at the grant date
for all its unconditional stock options, the Company's net income
would have been as indicated below:
1998 1997 1996
-------------- ------------- ------------
Net income applicable to
common stock
As reported $ 17,374,000 14,099,000 1,162,000
Pro forma 11,212,000 13,325,000 390,000
Income per average
common share
outstanding - basic:
As reported .26 .39 .07
Pro forma .17 .37 .02
Pro forma net income applicable to common stock reflects only options
granted in 1998, 1996 and 1995. Therefore, the full impact of
calculating compensation cost for stock options is not reflected in
the pro forma net income 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.
F-33
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
Stock option activity during the periods indicated is as follows:
Weighted-
Average
Number of Exercise
Shares Price
---------- ----------
Balance at December 31, 1995 858,401 $ 3.55
Granted 705,000 11.00
Exercised -- --
Forfeited -- --
Expired -- --
---------- ----------
Balance at December 31, 1996 1,563,401 6.91
Granted -- --
Exercised -- --
Forfeited (4,000) 2.50
Expired -- --
---------- ----------
Balance at December 31, 1997 1,559,401 6.92
Granted 3,507,000 17.50
Exercised (216,485) 3.52
Forfeited -- --
Expired -- --
---------- ----------
Balance at December 31, 1998 4,849,916 $ 14.72
========== ==========
At December 31, 1998, the range of exercise prices and
weighted-average remaining contractual life of outstanding options was
$2.50 to $17.50 and 5.97 years, respectively.
At December 31, 1998, 1997, and 1996, the number of options
exercisable was 1,366,700, 891,600 and 608,900, respectively, and
weighted-average exercise price of those options was $9.83, $5.63 and
$5.00, respectively.
In 1989, the Company's current chairman was issued a ten-year warrant
to purchase 52,692 common shares at an exercise price of $.50 per
share and a ten-year warrant to purchase 37,386 common shares at an
exercise price of $.50 per share.
(d) Share Rights Plan
On December 10, 1997, the Company's board of directors authorized a
share rights plan. The plan was subsequently amended on February 4,
1998. Under the plan, stockholders have one right for each share of
common stock held. The rights become exercisable ten business days
after
(Continued)
F-34
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(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 1/1000 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.
(e) Restricted Stock Grants
The Company issued 900,000 restricted common shares with an estimated
aggregate value of $14,625,000 to members of the Company's senior
management in July 1997. 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 Company
issued an additional 920,000 restricted common shares with an
estimated aggregate value of $16,100,000 to members of the Company's
senior management in October 1998. The restrictions of the stock lapse
ratably over a three-year term commencing on January 1, 1999. The
restrictions also lapse if any or all members are terminated without
cause or if a change in control of the Company occurs. Compensation
expense equal to the aggregate value of the shares will be recognized
as an expense over the vesting period.
(11) Pension Benefits
As part of the acquisition of Six Flags by the Company on April 1, 1998,
the Company assumed the obligations related to the Six Flags Defined
Benefit Plan (the "Benefit Plan"). The Benefit Plan covers substantially
all of Six Flags' full-time employees. Subsequent to December 31, 1998, the
Benefit Plan was extended to cover substantially all of the Company's
full-time employees. The Benefit Plan permits normal retirement at age 65,
with early retirement at ages 55 through 64 upon attainment of ten years of
credited service. The early retirement benefit is reduced for benefits
commencing before age 62. Benefit Plan benefits are calculated according to
a benefit formula based on age, average compensation over the highest
consecutive five-year period during the employee's last ten years of
employment and year of service. Benefit Plan assets are invested primarily
in common stock and mutual funds. The Benefit Plan does not have
significant liabilities other than benefit obligations.
(Continued)
F-35
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
Under the Company's funding policy, contributions to the Benefit Plan are
determined using the projected unit credit cost method. This funding policy
meets the requirements under the Employee Retirement Income Security Act of
1974.
The following table sets forth the aggregate funded status of the Benefit
Plan and the related amounts recognized in the Company's consolidated
balance sheets:
Change in benefit obligation:
Benefit obligation, at date of
acquisition of Six Flags $ 68,712,000
Service cost 2,444,000
Interest cost 3,808,000
Actuarial loss 757,000
Benefits paid (1,063,000)
------------
Benefit obligation at December 31, 1998 74,658,000
------------
Change in plan assets:
Fair value of assets, at date of
acquisition of Six Flags 85,236,000
Actual return on plan assets 3,097,000
Benefits paid (1,063,000)
------------
Fair value of assets, at December 31, 1998 87,270,000
------------
Plan assets in excess of benefit obligations 12,612,000
Unrecognized net actuarial loss 3,317,000
------------
Prepaid benefit cost (included in deposits
and other assets) $ 15,929,000
============
Net pension expense of the Benefit Plan for the nine-month period ended
December 31, 1998 included the following components:
Service cost $ 2,444,000
Interest cost 3,808,000
Expected return on plan assets (5,657,000)
------------
Net periodic cost $ 595,000
============
The weighted average discount rate used in determining the actuarial
present value of the projected benefit obligation in 1998 was 6.75%. The
rate of increase in future compensation levels was 4.5%. The expected
long-term rate of return on assets was 9%.
F-36
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(12) 401(k) Plan
The Company has a qualified, contributory 401(k) plan (the "401(k) Plan").
All regular employees are eligible to participate in the 401(k) 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 $417,000,
$377,000 and $150,000 of expense in the years ended December 31, 1998, 1997
and 1996, respectively.
As part of the acquisition of Six Flags by the Company, the Company assumed
the administration of the Six Flags' savings plan. Under the provisions of
the Six Flags' savings plan, all full-time and seasonal employees of Six
Flags completing one year of service (minimum 1,000 hours) and attaining
age 21 are eligible to participate and may contribute up to 6% of
compensation as a tax deferred basic contribution. Each participant may
also elect to make additional contributions of up to 10% of compensation
(up to 4% tax deferred). Tax deferred contributions to the savings plan may
not exceed amounts defined by the Internal Revenue Service ($10,000 for
1998). Both the basic and additional contributions are at all times vested.
Six Flags, at its discretion, may make matching contributions of up to 100%
of its employees' basic contributions. Six Flags made $743,000 in
contributions for the 1998 plan year. Six Flags matching contributions to
the savings plan are made in the first quarter of the succeeding year.
During the first quarter of 1999, the Six Flags' savings plan was merged
into the 401(k) Plan.
(13) Marine World
In April 1997, the Company became manager of Marine World (subsequently
named Six Flags Marine World), then 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 revenues. 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). In 1998, the Company added 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 $52,000,000 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.
F-37
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(14) Commitments and Contingencies
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 1998, 1997, and 1996, the Company recognized
approximately $1,002,000, $1,110,000, and $385,000 respectively, of rental
expense under these rent agreements.
Total rental expense, including office space and park sites, was
approximately $7,918,000, $2,229,000 and $1,227,000 for the years ended
December 31, 1998, 1997, and 1996, respectively.
In December 1998, a final judgment of $197.3 million in compensatory
damages was entered against SFEC, SFTP, Six Flags Over Georgia, Inc. and
Time Warner Entertainment Company, L.P. (TWE), and a final judgment of
$245,000,000 in punitive damages was entered against TWE and of $12,000,000
in punitive damages was entered against the referenced Six Flags entities.
TWE has indicated that it intends to appeal the judgments. The judgments
arose out of a case entitled Six Flags Over Georgia, Inc. and Six Flags
Theme Parks, Inc. v. Six Flags Fund, Ltd., and Avram Salkin, as Trustee of
the Claims Trust based on certain disputed partnership affairs prior to the
Six Flags Acquisition at Six Flags Over Georgia, including alleged breaches
of fiduciary duty. The sellers in the Six Flags Acquisition, including Time
Warner, Inc., have agreed to indemnify the Company from any and all
liabilities arising out of this litigation.
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. The Company has paid
the self-retention limit on its liability insurance and believes that such
liability insurance coverage should be adequate to provide for any
additional personal injury liability which may ultimately be found to exist
in connection with the collapse.
On March 21, 1999, a raft capsized in the river rapids ride at Six Flags
over Texas, one of the Company's Co-Venture parks, resulting in one
fatality and injuries to ten others. While the Co-Venture park is covered
by the Company's multi-layered general liability insurance coverage of up
to $100,000,000 per occurrence, with no self-insured retention, the impact
of this incident on the Company's financial position, operations, or
liquidity has not yet been determined.
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 outcomes of such matters and its experience in contesting,
litigating and settling similar matters.
(Continued)
F-38
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
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.
(15) Business Segments
The Company manages its operations on an individual park location basis.
Discrete financial information is maintained for each park and provided to
the Company's management for review and as a basis for decision-making. The
primary performance measure used to allocate resources is earnings before
interest, tax expense, depreciation, and amortization (EBITDA). All of the
Company's parks provide similar products and services through a similar
process to the same class of customer through a consistent method. As such,
the Company has only one reportable segment - operation of theme parks. The
following tables present segment financial information, a reconciliation of
the primary segment performance measure to income before income taxes and a
reconciliation of theme park revenues to consolidated total revenues. Park
level expenses exclude all non-cash operating expenses, principally
depreciation and amortization.
1998 1997 1996
----------- ----------- -----------
(Amounts in thousands)
Theme park revenues $ 1,015,470 193,531 93,305
Theme park cash expenses 634,001 133,302 65,413
----------- ----------- -----------
Aggregate park EBITDA 381,469 60,229 27,892
Third-party share of EBITDA from
parks accounted for under the
equity method (41,064) -- --
Amortization of investment in theme
park partnerships (9,763) -- --
Unallocated net expenses, including
corporate and expenses from parks
acquired after completion of the
operating season (28,608) (7,312) (4,976)
Termination fee, net of expenses -- 8,364 --
Depreciation and amortization (109,841) (19,792) (8,533)
Interest expense (149,820) (25,714) (12,597)
Interest income 33,971 7,939 1,476
----------- ----------- -----------
Income before income taxes $ 76,344 23,714 3,262
=========== =========== ===========
F-39
<PAGE>
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
1998 1997 1996
----------- ----------- -----------
(Amounts in thousands)
Theme park revenues $ 1,015,470 193,531 93,305
Theme park revenues from parks
accounted for under the equity
method (202,183) -- --
Other revenues 340 373 142
----------- ----------- -----------
Consolidated total revenues $ 813,627 193,904 93,447
=========== =========== ===========
Six of the Company's locations are located in Europe. The following
information reflects the Company's assets and revenue by domestic and
European categories for 1998 (the Company did not have any foreign
operations prior to March 1998):
Domestic European Total
----------- ----------- -----------
Long-lived assets $ 3,831,885 220,580 4,052,465
Revenue 746,870 66,757 813,627
(16) Quarterly Financial Information (Unaudited)
Following is a summary of the unaudited interim results of operations for
the years ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998
---------------------------------------------------------------------------
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Total revenue $ 6,831,000 299,684,000 446,381,000 60,731,000 813,627,000
Net income (loss) applicable to common (15,450,000) 14,741,000 94,934,000 (76,851,000) 17,374,000
stock
Income (loss) applicable to common stock
per share:
Basic (0.82) 0.20 1.26 (1.00) .26
Diluted (0.82) 0.19 1.24 (1.00) .25
<CAPTION>
1997
---------------------------------------------------------------------------
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Total revenue $ 4,264,000 62,468,000 120,014,000 7,158,000 193,904,000
Net income (loss) applicable to common (9,742,000) 5,698,000 27,237,000 (9,094,000) 14,099,000
stock
Income (loss) applicable to common stock
per share:
Basic (0.31) 0.16 0.74 (0.24) 0.39
Diluted (0.31) 0.15 0.72 (0.24) 0.38
</TABLE>
F-40
<PAGE>
EXHIBIT INDEX
PAGE
----
(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 --
incorporated by reference from Exhibit 3(n) to
Form 10-k of Registrant for year ended December
31, 1997.
(o) Certificate of Designation, Rights and
Preferences for 7 1/2% Mandatorily Convertible
Preferred Stock of Registrant -incorporated by
reference from Exhibit 4(s) to Registrant's
Registration Statement on Form S-3 (No. 333-
45859) declared effective on March 26, 1998.
*(p) Certificate of Amendment of Certificate of
Incorporation of Registrant dated July 24,
1998.
i
<PAGE>
(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.
(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.
(o) Form of Depositary Receipt evidencing ownership
of Registrant's Premium Income Equity
Securities -incorporated by reference from
Exhibit 4(k) to Registrant's Registration
Statement on Form S-3 (No. 333-45859) declared
effective on March 26, 1998.
(p) Indenture dated as of April 1, 1998 between
Premier Parks Inc. and The Bank of New York, as
Trustee with respect to the Registrant's 10%
Senior Discount Notes due 2008 incorporated by
reference from Exhibit 4(o) to Registrant's
Registration Statement on Form S-3 (No. 333-
45859) declared effective on March 26, 1998.
ii
<PAGE>
(q) Indenture dated as of April 1, 1998 between
Premier Parks Inc. and The Bank of New York, as
Trustee with respect to the Registrant's 9 1/4%
Senior Notes due 2006 incorporated by reference
from Exhibit 4(p) to Registrant's Registration
Statement on Form S-3 (No. 333-45859) declared
effective on March 26, 1998.
(r) Indenture dated as of April 1, 1998 between
Premier Parks Inc., Six Flags Entertainment
Corporation and The Bank of New York, as
Trustee with respect to Six Flags' 8 7/8%
Senior Notes due 2006 incorporated by reference
from Exhibit 4(q) to Registrant's Registration
Statement on Form S-3 (No. 333-45859) declared
effective on March 26, 1998.
(s) Deposit Agreement dated as of April 1, 1998
among the Registrant, the Bank of New York, and
the holders from time to time of depositary
receipts executed and delivered thereunder
incorporated by reference from Exhibit 4(u) to
Registrant's Registration Statement on Form S-3
(No. 333-45859) declared effective on March 26,
1998.
*(t) Indenture dated as of June 25, 1995 between Six
Flags Theme Parks Inc. and United States Trust
Company, as Trustee with respect to SFTP's 12
1/4% Senior Subordinated Discount Notes due
2005.
(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.
(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.
iii
<PAGE>
(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.
(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.
iv
<PAGE>
(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--incorporated by reference from Exhibit
10(z) to Form 10-K of Registrant for year ended
December 31, 1997.
(aa) 1997 Management Agreement Relating to Marine
World, by and between the Marine World Joint
Powers Authority and Park Management Corp,
dated as of the 1st day of February, 1997--
incorporated by reference from Exhibit 10(aa)
to Form 10-K of Registrant for year ended
December 31, 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 --incorporated by reference
from Exhibit 10(ab) to Form 10-K of Registrant
for year ended December 31, 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 Management
Corp., dated as of the 1st day of February,
1997 --incorporated by reference from Exhibit
10(ac) to Form 10-K of Registrant for year
ended December 31, 1997.
(ad) Reciprocal Easement Agreement between Marine
World Joint Powers Authority and Park
Management Corp., dated as of November 7, 1997
--incorporated by reference from Exhibit 10(ad)
to Form 10-K of Registrant for year ended
December 31, 1997.
(ae) Parcel Lease between Marine World Joint Powers
Authority and Park Management Corp., dated as
of November 7, 1997 --incorporated by reference
from Exhibit 10(ae) to Form 10-K of Registrant
for year ended December 31, 1997.
(af) Employment Agreement, dated as of July 31,
1997, between Premier Parks Inc. and Kieran E.
Burke --incorporated by reference from Exhibit
10(af) to Form 10-K of Registrant for year
ended December 31, 1997.
(ag) Employment Agreement, dated as of July 31,
1997, between Premier Parks Inc. and Gary Story
--incorporated by reference from Exhibit 10(ag)
to Form 10-K of Registrant for year ended
December 31, 1997.
(ah) Employment Agreement, dated as of July 31,
1997, between Premier Parks Inc. and James F.
Dannhauser --incorporated by reference from
Exhibit 10(ah) to Form 10-K of Registrant for
year ended December 31, 1997..
(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.
v
<PAGE>
(an) Agreement and Plan of Merger dated as of
February 9, 1998 by and among Premier Parks
Inc., Premier Parks Holdings Corporation and
Premier Parks Merger Corporation incorporated
by reference from Exhibit 2.1 to the
Registrant's Current Report on Form 8-K dated
March 25, 1998.
(ao) Amended and Restated Rights Agreement between
Premier Parks Inc. and Bank One Trust Company,
as Rights Agent incorporated by reference from
Exhibit 4.1 to the Registrant's Current Report
on Form 8-K dated December 15, 1997, as
amended.
*(ap) Registrant's 1998 Stock Option and Incentive
Plan.
(aq) Subordinated Indemnity Agreement dated February
9, 1998, among the Registrant, the subsidiaries
of the Registrant named therein, Time Warner
Inc., the subsidiaries of Time Warner Inc.
named therein, Six Flags Entertainment
Corporation and the subsidiaries of Six Flags
Entertainment Corporation named therein
incorporated by reference from Exhibit 2(b) to
Registrant's Registration Statement on Form S-3
(No. 333-45859) declared effective on March 26,
1998.
*(ar) Credit Agreement dated as of April 1, 1998 by
and among Six Flags Theme Parks Inc., Six Flags
Entertainment Corporation, S.F. Holdings, Inc.,
the subsidiary guarantors named therein, the
lender parties thereto and the Bank of New
York, as Administrative Agent and Lehman
Brothers Inc. as Advisor, Arranger, and
Syndication Agent
*(as) Credit Agreement dated as of March 13, 1998 by
and among The Registrant, the subsidiary
guarantors named therein, the lender parties
thereto and Lehman Commercial Paper Inc., as
Administrative Agent and Lehman Brothers Inc.,
as Advisor, Arranger and Syndication Agent
*(at) Sale and Purchase Agreement dated as of October
20, 1998 by and between the Registrant and
Fiesta Texas Theme Park, Ltd.
*(au) Overall Agreement dated as of February 15, 1997
among Six Flags Fund, Ltd. (L.P.), Salkin
Family Trust, SFG, Inc., SFG-I, LLC, SFG-II,
LLC, Six Flags Over Georgia, Ltd., SFOG II
Inc., SFOG II Employee, Inc., SFOG Acquisition
A, Inc., SFOG Acquisition B, Inc., Six Flags
Over Georgia, Inc., Six Flags Series of
Georgia, Inc., Six Flags Theme Parks, Inc., and
Six Flags Entertainment Corporation.
*(av) Overall Agreement dated as of November 24, 1997
among Six Flags Over Texas Fund, Ltd., Flags'
Directors, LLC, FD-II, LLC, Texas Flags, Ltd.,
SFOT Employee, Inc., SFOT Acquisition I, Inc.,
SFOT Acquisitions II, Inc., Six Flags Over
Texas, Inc., Six Flags Theme Parks Inc., and
Six Flags Entertainment Corporation.
*(21) Subsidiaries of the Registrant
*(23) Consent of KPMG LLP
*(27) Financial Data Schedule
___________
* Filed herewith.
vi
Exhibit 3(p)
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
PREMIER PARKS INC.
--------------------
Pursuant to Section 242 of the
Delaware General Corporation Law
--------------------
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 by a
unanimous written consent 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, at the effective time of this filing, 5:30 p.m., July
24, 1998, as follows:
"The total number of shares of stock which the Corporation
shall have authority to issue is 155,000,000 shares, of which
5,000,000 shares shall be Preferred Stock with a par value of
$1.00 per share and 150,000,000 shares shall be Common Stock with
a par value of $.025 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 providing
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
<PAGE>
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 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."
RESOLVED, that at the effective time of the foregoing
Amendment each share of Common Stock of the Corporation
authorized and outstanding immediately prior to such effective
time shall be split and exchanged into two fully paid and non-
assessable shares of Common Stock.
SECOND: that such Amendment was duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law
<PAGE>
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 by its duly authorized officer this 24th
day of July, 1998.
PREMIER PARKS INC.
By: /s/ Kieran E. Burke
------------------------------------------
Kieran E. Burke
Chairman and Chief Executive Officer
Exhibit 4 (t)
EXECUTED COPY
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SIX FLAGS THEME PARKS INC.
12-1/4% Senior Subordinated Discount Notes due 2005
-----------------------------
INDENTURE
Dated as of June 23, 1995
-----------------------------
United States Trust Company of New York,
Trustee
-----------------------------------------------------------------
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<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
-------
310(a)(1) . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . 7.08;
7.10
(c) . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . 2.05
(b) . . . . . . . . . . . . . . . 12.03
(c) . . . . . . . . . . . . . . . 12.03
313(a) . . . . . . . . . . . . . . . 7.06
(b)(1) . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . 7.06
(c) . . . . . . . . . . . . . . . 12.02
(d) . . . . . . . . . . . . . . . 7.06
314(a) . . . . . . . . . . . . . . . 4.02;
4.09;
12.02
(b) . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . 12.04
(c)(2) . . . . . . . . . . . . . . . 12.04
(c)(3) . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . 12.05
(f) . . . . . . . . . . . . . . . 4.10
315(a) . . . . . . . . . . . . . . . 7.01
(b) . . . . . . . . . . . . . . . 7.05;
12.02
(c) . . . . . . . . . . . . . . . 7.01
(d) . . . . . . . . . . . . . . . 7.01
(e) . . . . . . . . . . . . . . . 6.11
316(a)(last . . . . . . . . . . . . . . . 12.06
sentence)
(a)(1)(A) . . . . . . . . . . . . . . . 6.05
(a)(1)(B) . . . . . . . . . . . . . . . 6.04
(a)(2) . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . 6.07
317(a)(1) . . . . . . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . 2.04
318(a) . . . . . . . . . . . . . . . 11.01
N.A. means Not Applicable
_________________________
Note: This Cross-Reference Table shall not, for any purpose,
be deemed to be part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
Definitions and Incorporation by Reference
------------------------------------------
SECTION 1.01. Definitions . . . . . . . . . . . . . . 1
SECTION 1.02. Other Definitions . . . . . . . . . . . 26
SECTION 1.03. Incorporation by Reference of Trust
Indenture Act . . . . . . . . . . . . 26
SECTION 1.04. Rules of Construction . . . . . . . . . 27
ARTICLE 2
The Securities
--------------
SECTION 2.01. Form and Dating . . . . . . . . . . . . 28
SECTION 2.02. Execution and Authentication . . . . . 29
SECTION 2.03. Registrar and Paying Agent . . . . . . 30
SECTION 2.04. Paying Agent To Hold Money in Trust . . 30
SECTION 2.05. Securityholder Lists . . . . . . . . . 31
SECTION 2.06. Transfer and Exchange . . . . . . . . . 31
SECTION 2.07. Replacement Securities . . . . . . . . 39
SECTION 2.08. Outstanding Securities . . . . . . . . 39
SECTION 2.09. Temporary Securities . . . . . . . . . 39
SECTION 2.10. Cancellation . . . . . . . . . . . . . 40
SECTION 2.11. Defaulted Interest . . . . . . . . . . 41
SECTION 2.12. CUSIP Numbers . . . . . . . . . . . . . 41
ARTICLE 3
Redemption
----------
SECTION 3.01. Notices to Trustee . . . . . . . . . . 42
SECTION 3.02. Selection of Securities To Be Redeemed 42
SECTION 3.03. Notice of Redemption . . . . . . . . . 42
SECTION 3.04. Effect of Notice of Redemption . . . . 43
SECTION 3.05. Deposit of Redemption Price . . . . . . 43
SECTION 3.06. Securities Redeemed in Part . . . . . . 44
ARTICLE 4
Covenants
---------
SECTION 4.01. Payment of Securities . . . . . . . . . 44
SECTION 4.02. SEC Reports . . . . . . . . . . . . . . 44
<PAGE>
SECTION 4.03. Limitation on Indebtedness . . . . . . 45
SECTION 4.04. Limitation on Restricted Payments . . . 47
SECTION 4.05. Limitation on Restrictions on
Distributions from Subsidiaries . . . 51
SECTION 4.06. Limitation on Sales of Assets and
Subsidiary Stock . . . . . . . . . . 53
SECTION 4.07. Limitation on Transactions with
Affiliates . . . . . . . . . . . . . 56
SECTION 4.08. Change of Control . . . . . . . . . . . 57
SECTION 4.09. Compliance Certificate . . . . . . . . 58
SECTION 4.10. Further Instruments and Acts . . . . . 59
SECTION 4.11. Limitation on Liens . . . . . . . . . . 59
SECTION 4.12. Limitation on Sale/Leaseback
Transactions . . . . . . . . . . . . 59
SECTION 4.13. Limitation on Lines of Business . . . . 59
SECTION 4.14. Future Note Guarantors . . . . . . . . 59
ARTICLE 5
Successor Company
-----------------
SECTION 5.01. When Company May Merge or Transfer
Assets . . . . . . . . . . . . . . . 60
ARTICLE 6
Defaults and Remedies
---------------------
SECTION 6.01. Events of Default . . . . . . . . . . . 61
SECTION 6.02. Acceleration . . . . . . . . . . . . . 63
SECTION 6.03. Other Remedies . . . . . . . . . . . . 64
SECTION 6.04. Waiver of Past Defaults . . . . . . . . 64
SECTION 6.05. Control by Majority . . . . . . . . . . 64
SECTION 6.06. Limitation on Suits . . . . . . . . . . 64
SECTION 6.07. Rights of Holders to Receive Payment . 65
SECTION 6.08. Collection Suit by Trustee . . . . . . 65
SECTION 6.09. Trustee May File Proofs of Claim . . . 65
SECTION 6.10. Priorities . . . . . . . . . . . . . . 66
SECTION 6.11. Undertaking for Costs . . . . . . . . . 66
SECTION 6.12. Waiver of Stay or Extension Laws . . . 66
ARTICLE 7
Trustee
-------
SECTION 7.01. Duties of Trustee . . . . . . . . . . . 67
-ii-
<PAGE>
SECTION 7.02. Rights of Trustee . . . . . . . . . . . 68
SECTION 7.03. Individual Rights of Trustee . . . . . 69
SECTION 7.04. Trustee's Disclaimer . . . . . . . . . 69
SECTION 7.05. Notice of Defaults . . . . . . . . . . 69
SECTION 7.06. Reports by Trustee to Holders . . . . . 69
SECTION 7.07. Compensation and Indemnity . . . . . . 70
SECTION 7.08. Replacement of Trustee . . . . . . . . 70
SECTION 7.09. Successor Trustee by Merger . . . . . . 71
SECTION 7.10. Eligibility; Disqualification . . . . . 72
SECTION 7.11. Preferential Collection of Claims
Against Company . . . . . . . . . . . 72
ARTICLE 8
Discharge of Indenture; Defeasance
----------------------------------
SECTION 8.01. Discharge of Liability on Securities;
Defeasance . . . . . . . . . . . . . 72
SECTION 8.02. Conditions to Defeasance . . . . . . . 73
SECTION 8.03. Application of Trust Money . . . . . . 75
SECTION 8.04. Repayment to Company . . . . . . . . . 75
SECTION 8.05. Indemnity for Government Obligations . 75
SECTION 8.06. Reinstatement . . . . . . . . . . . . . 75
ARTICLE 9
Amendments
----------
SECTION 9.01. Without Consent of Holders . . . . . . 75
SECTION 9.02. With Consent of Holders . . . . . . . . 77
SECTION 9.03. Compliance with Trust Indenture Act . . 78
SECTION 9.04. Revocation and Effect of Consents and
Waivers . . . . . . . . . . . . . . . 78
SECTION 9.05. Notation on or Exchange of Securities . 78
SECTION 9.06. Trustee To Sign Amendments . . . . . . 78
SECTION 9.07. Payment for Consent . . . . . . . . . . 79
ARTICLE 10
Subordination
-------------
SECTION 10.01. Agreement To Subordinate . . . . . . . 79
SECTION 10.02. Liquidation, Dissolution, Bankruptcy . 79
SECTION 10.03. Default on Senior Indebtedness . . . . 80
SECTION 10.04. Acceleration of Payment of Securities . 81
SECTION 10.05. When Distribution Must Be Paid Over . . 81
-iii-
<PAGE>
SECTION 10.06. Subrogation . . . . . . . . . . . . . . 81
SECTION 10.07. Relative Rights . . . . . . . . . . . . 82
SECTION 10.08. Subordination May Be Company or any Note
Guarantor . . . . . . . . . . . . . . 82
SECTION 10.09. Rights of Trustee and Paying Agent . . 82
SECTION 10.10. Distribution or Notice to
Representative . . . . . . . . . . . 82
SECTION 10.11. Article 10 Not To Prevent Events of
Default or Limit Right To Accelerate 83
SECTION 10.12. Trust Moneys Not Subordinated . . . . . 83
SECTION 10.13. Trustee Entitled To Rely . . . . . . . 83
SECTION 10.14. Trustee To Effectuate Subordination . . 84
SECTION 10.15. Trustee Not Fiduciary for Holders of
Senior Indebtedness . . . . . . . . . 84
SECTION 10.16. Reliance by Holders of Senior
Indebtedness on Subordination
Provisions . . . . . . . . . . . . . 84
ARTICLE 11
Note Guarantees
---------------
SECTION 11.01. Note Guarantees . . . . . . . . . . . . 84
SECTION 11.02. Limitation on Liability . . . . . . . . 86
SECTION 11.03. Successors and Assigns . . . . . . . . 87
SECTION 11.04. No Waiver . . . . . . . . . . . . . . . 87
SECTION 11.05. Modification . . . . . . . . . . . . . 87
SECTION 11.06. Execution of Supplemental Indenture for
Future Note Guarantors . . . . . . . 87
ARTICLE 12
Miscellaneous
-------------
SECTION 12.01. Trust Indenture Act Controls . . . . . 88
SECTION 12.02. Notices . . . . . . . . . . . . . . . . 88
SECTION 12.03. Communication by Holders with Other
Holders . . . . . . . . . . . . . . . 89
SECTION 12.04. Certificate and opinion as to Conditions
Precedent . . . . . . . . . . . . . . 89
SECTION 12.05. Statements Required in Certificate or
Opinion . . . . . . . . . . . . . . . 89
SECTION 12.06. When Securities Disregarded . . . . . . 90
SECTION 12.07. Rules by Trustee, Paying Agent and
Registrar . . . . . . . . . . . . . . 90
SECTION 12.08. Legal Holidays . . . . . . . . . . . . 90
SECTION 12.09. Governing Law . . . . . . . . . . . . . 90
SECTION 12.10. No Recourse Against Others . . . . . . 90
-iv-
<PAGE>
SECTION 12.11. Successors . . . . . . . . . . . . . . 90
SECTION 12.12. Multiple Originals . . . . . . . . . . 91
SECTION 12.13. Table of Contents; Headings . . . . . . 91
Exhibit A Form of Initial Note
Exhibit B Form of Exchange Note
Exhibit C Form of Transferee Letter of Representation
Exhibit D Form of Supplemental Indenture
-v-
<PAGE>
EXECUTED COPY
INDENTURE dated as of June 23, 1995,
among SIX FLAGS THEME PARKS INC., a Delaware
corporation (the "Company"); SIX FLAGS OVER
GEORGIA, INC., a Delaware corporation, SIX
FLAGS OVER TEXAS, INC., a Delaware
corporation, and S.F. Partnership
(collectively, the "Note Guarantors"); and
United States Trust Company of New York, a
New York corporation (the "Trustee").
Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the
Company's 12-1/4% Senior Subordinated Discount Notes due 2005
(the "Initial Notes") and, if and when issued in exchange for
Initial Notes, the Company's 12-1/4% Series A Senior Subordinated
Discount Notes due 2005 (the "Exchange Notes" and, together with
the Initial Notes, the "Securities"):
ARTICLE 1
Definitions and Incorporation by Reference
------------------------------------------
SECTION 1.01. Definitions.
-----------
"Accreted Value" as of any date of determination prior
to and including June 15, 1998, means the sum of (a) the initial
offering price of the Securities and (b) the portion of the
original issue discount per Security (which for this purpose
shall be deemed to be the excess of the principal amount over the
initial offering price of the Initial Notes) which shall be
amortized with respect to such Security through such date, such
original issue discount to be so amortized at the rate of 12-1/4%
per annum (such percentage being applied to the sum of the
initial offering price plus previously amortized original issue
discount) using semi-annual compounding of such rate on each June
15 and December 15, commencing December 15, 1995, from the date
of issuance of the Initial Notes through the date of
determination.
"Additional Assets" means (i) any property or assets
(other than Indebtedness and Capital Stock) to be used by the
Company or a Restricted Subsidiary in a Related Business; (ii)
the Capital Stock of a Person that becomes a Restricted
Subsidiary as a result of the acquisition of such Capital Stock
<PAGE>
by the Company or another Restricted Subsidiary; or (iii) Capital
Stock constituting a minority interest in any Person that at such
time is a Restricted Subsidiary; provided, however, that, in the
case of clauses (ii) and (iii), such Restricted Subsidiary is
primarily engaged in a Related Business.
"Affiliate" of any specified Person means (i) any other
Person, directly or indirectly, controlling or controlled by or
under direct or indirect common control with such specified
Person or (ii) any Person who is a director or executive officer
(a) of such Person, (b) of any Subsidiary of such Person or (c)
of any Person described in clause (i) above. For the purposes of
this definition, "control" when used with respect to any Person
means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the
foregoing. For purposes of Sections 4.06 and 4.07 only,
"Affiliate" shall also mean (x) any beneficial owner of shares
representing 5% or more or, for purposes of the definition of
"Affiliate Transaction" as applied in clauses (a) (ii) and (iii)
of Section 4.07, 10% or more of the total voting power of the
Voting Stock (on a fully diluted basis) of the Company or of
rights or warrants to purchase such Voting Stock (whether or not
currently exercisable) and (y) any Person who would be an
Affiliate of any such beneficial owner pursuant to the first
sentence hereof.
"Amortization Expense" means, for any period, amounts
recognized during such period as amortization of all goodwill and
other assets classified as intangible assets in accordance with
generally accepted accounting principles.
"Approved Time Warner Affiliate" shall mean (a) any
directly or indirectly wholly owned subsidiary of Time Warner
that is organized under the laws of any State of the United
States of America or the District of Columbia; (b) Time Warner
Entertainment or any directly or indirectly wholly owned
subsidiary of Time Warner Entertainment, so long as each of the
following criteria is satisfied: (i) Time Warner and/or one or
more companies controlled by (as defined in the definition of the
term "Affiliate") Time Warner constitute all the managing general
partners of Time Warner Entertainment and there have been no
amendments to Article XII of the Time Warner Entertainment
Partnership Agreement that materially adversely affect the
authority granted to the managing general partners and the Class
B Representatives (as defined in the Time Warner Entertainment
Partnership Agreement) with respect to the ownership or
management of SFEC, (ii) Time Warner owns, directly or
indirectly, a Participating Percentage Share (as defined in the
Time Warner Entertainment Partnership Agreement) of at least
43.75% until December 31, 1997, and of at least 35% thereafter,
-2-
<PAGE>
(iii) no person owns, directly or indirectly, a greater interest
in Time Warner Entertainment than that owned, directly or
indirectly, by Time Warner and (iv) the businesses owned by Time
Warner Entertainment include (subject to certain exceptions set
forth in the Time Warner Entertainment Partnership Agreement) the
filmed entertainment business owned by Time Warner Entertainment
and the programming business now owned and operated as the Home
Box Office Division of Time Warner Entertainment; and (c) any
other entity, so long as each of the following criteria is
satisfied: (i) Time Warner owns, directly or indirectly, at least
43.75% of the equity of such entity until December 31, 1997, and
at least 35% thereafter, (ii) no person owns, directly or
indirectly, a greater interest in such entity than that owned,
directly or indirectly, by Time Warner, (iii) the businesses
owned by such entity include the filmed entertainment business
owned by Time Warner Entertainment and the programming business
now owned and operated as the Home Box office Division of Time
Warner Entertainment and (iv) Time Warner and/or one or more
companies controlled by Time Warner exercise control over such
entity comparable to the control currently exercised by Time
Warner over Time Warner Entertainment.
"Asset Disposition" means any sale, lease, transfer or
other disposition (or series of related sales, leases, transfers
or dispositions) of shares of Capital Stock of a Restricted
Subsidiary (other than directors' qualifying shares), property or
other assets (each referred to for the purposes of this
definition as a "disposition") by the Company or any of its
Restricted Subsidiaries (including any disposition by means of a
merger, consolidation or similar transaction) other than (i) a
disposition by a Restricted Subsidiary to the Company or by the
Company or a Restricted Subsidiary to a Wholly Owned Subsidiary,
(ii) a disposition of inventory or obsolete property or assets at
fair market value in the ordinary course of business, (iii) the
sale, lease, transfer, assignment or other disposition of assets
of a Co-Venture Subsidiary to the relevant Co-Venture Partnership
pursuant to a Capital Expenditure of a Co-Venture Partnership at
a price and on other terms no less favorable to such Co-Venture
Subsidiary than those upon which such Co-Venture Subsidiary
acquired such assets on behalf of such Co-Venture Partnership,
(iv) transfers of certain real property located in Georgia and
having a value (at cost) not in excess of $2,500,000 by Six Flags
Over Georgia, Inc. to Six Flags Over Georgia, Ltd., in connection
with the extension of the partnership agreement of Six Flags Over
Georgia, Ltd., (v) for purposes of Section 4.06 only, a
disposition subject to Section 4.04 and (vi) the disposition of
all or substantially all the assets of the Company permitted by
Section 5.01.
"Attributable Indebtedness" in respect of a
Sale/Leaseback Transaction means, as at the time of
determination, the present value (discounted at the interest rate
-3-
<PAGE>
borne by the Securities, compounded annually) of the total
obligations of the lessee for rental payments during the
remaining term of the lease included in such Sale/Leaseback
Transaction (including any period for which such lease has been
extended).
"Average Life" means, as of the date of determination,
with respect to any Indebtedness or Preferred Stock, the quotient
obtained by dividing (i) the sum of the products of the numbers
of years from the date of determination to the dates of each
successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred
Stock multiplied by the amount of such payment by (ii) the sum of
all such payments.
"Bank Indebtedness" means any and all amounts payable under
or in respect of the Senior Bank Facility and the other Senior
Bank Documents, as amended, refinanced or replaced from time to
time, including principal, premium (if any), interest (including
interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether
or not a claim for post filing interest is allowed in such
proceedings), fees, charges, expenses, reimbursement obligations,
guarantees and all other amounts payable thereunder or in respect
thereof.
"Board of Directors" means the Board of Directors of
the Company or any committee thereof duly authorized to act on
behalf of such Board.
"Business Day" means a day other than a Saturday,
Sunday or other day on which commercial banks in New York City
are authorized or required by law to close.
"Capital Expenditures" shall mean, for purposes of
Section 4.04, the sum of (a) the aggregate of all expenditures
incurred by the Company and its Restricted Subsidiaries during
such period that, in accordance with GAAP, are or should be
included in "additions to property, plant or equipment" or
similar items reflected in the statement of cash flows of the
Company and its Restricted Subsidiaries and (b) to the extent not
covered by clause (a) above, the aggregate of all expenditures by
the Company and its Restricted Subsidiaries to acquire by
purchase or otherwise the business, property or fixed assets of,
or stock or other evidence of beneficial ownership of, any other
person; provided, however, that the term "Capital Expenditures"
shall not include expenditures of proceeds of insurance
settlements in respect of lost, destroyed or damaged assets,
equipment or other property to the extent such expenditures are
made to replace or repair such lost, destroyed or damaged assets,
equipment or other property within 12 months of receipt of such
proceeds.
-4-
<PAGE>
"Capitalized Lease Obligations" of a person means an
obligation that is required to be classified and accounted for as
a capitalized lease for financial reporting purposes in
accordance with GAAP, and the amount of Indebtedness represented
by such obligation shall be the capitalized amount of such
obligation determined in accordance with GAAP; and the Stated
Maturity thereof shall be the date of the last payment of rent or
any other amount due under such lease prior to the first date
upon which such lease may be terminated by the lessee without
payment of a penalty.
"Capital Stock" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations
or other equivalents of or interests in (however designated)
equity of such Person, including any Preferred Stock, but
excluding any debt securities convertible into such equity.
"Change of Control" means the occurrence of either of
the following events:
(i) (a) the Permitted Holders cease to be the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5
under the Exchange Act), directly or indirectly, of, in
the aggregate, 35% or more of the total voting power of
the Voting Stock of the Company, whether as a result of
issuance of securities of the Company, Holdings or
SFEC, as the case may be, any merger, consolidation,
liquidation or dissolution of the Company, Holdings or
SFEC, as the case may be, any direct or indirect
transfer of securities by any Permitted Holder or
otherwise (for purposes of this clause (i), the
Permitted Holders will be deemed to beneficially own
any Voting Stock of a corporation (the "specified
corporation") held by any other corporation (the
"parent corporation") so long as the Permitted Holders
beneficially own (as so defined), directly or
indirectly, in the aggregate a majority of the Voting
Stock of the parent corporation)); and (b) any "Person"
(as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than one or more Permitted
Holders, is or becomes the beneficial owner (as defined
in clause (a) above, except that a person shall be
deemed to have "beneficial ownership" of all shares
that any such person has the right to acquire, whether
such right is exercisable immediately or only after the
passage of time, unless such right is exercisable only
after the Stated Maturity of the Securities) directly
or indirectly, of a greater percentage of the total
voting power of the Voting Stock of the Company than
the Permitted Holders beneficially own (as defined in
clause (a) above); or
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(ii) the failure of Time Warner and Approved Time
Warner Affiliates to collectively own, directly or
indirectly, at least 20% of the outstanding Voting
Stock of SFEC.
"Code" means the Internal Revenue Code of 1986, as
amended.
Company" means Six Flags Theme Parks Inc. until a
successor replaces it and succeeds to and assumes its obligations
under this Indenture and thereafter means the successor and, for
purposes of any provision contained herein and required by the
TIA, each other obligor on the indenture securities.
"Consolidated Coverage Ratio" as of any date of
determination means the ratio of (i) the aggregate amount of
EBITDA for the period of the most recent four consecutive fiscal
quarters ending at least 45 days prior to the date of such
determination to (ii) Consolidated Interest Expense for such four
fiscal quarters; provided, however, that (1) if the Company or
any Restricted Subsidiary has Incurred any Indebtedness since the
beginning of such period that remains outstanding on such date of
determination or if the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio is an Incurrence of
Indebtedness, or both, EBITDA and Consolidated Interest Expense
for such period shall be calculated after giving effect on a pro
forma basis to such Indebtedness as if such Indebtedness had been
Incurred on the first day of such period and the discharge of any
other Indebtedness repaid, repurchased, defeased or otherwise
discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period, (2) if
since the beginning of such period the Company or any Restricted
Subsidiary shall have made any Asset Disposition or if the
transaction giving rise to the need to calculate the Consolidated
Coverage Ratio is an Asset Disposition, the EBITDA for such
period shall be reduced by an amount equal to the EBITDA (if
positive) directly attributable to the assets which are the
subject of such Asset Disposition for such period, or increased
by an amount equal to the EBITDA (if negative), directly
attributable thereto for such period, and Consolidated Interest
Expense for such period shall be reduced by an amount equal to
the Consolidated Interest Expense directly attributable to any
Indebtedness of the Company or any Restricted Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to the
Company and its continuing Restricted Subsidiaries in connection
with such Asset Disposition for such period (or, if the Capital
Stock of any Restricted Subsidiary is sold, the Consolidated
Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the
Company and its continuing Restricted Subsidiaries are no longer
liable for such Indebtedness after such sale), (3) if since the
beginning of such period the Company or any Restricted Subsidiary
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(by merger or otherwise) shall have made an Investment in any
Restricted Subsidiary (or any Person which becomes a Restricted
Subsidiary) or an acquisition of assets, including any
acquisition of assets occurring in connection with a transaction
causing a calculation to be made hereunder, which constitutes all
or substantially all of an operating unit of a business, EBITDA
and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto (including the
Incurrence of any Indebtedness) as if such Investment or
acquisition occurred on the first day of such period, and (4) if
since the beginning of such period any Person (that subsequently
became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of such
period) shall have made any Asset Disposition or any Investment
that would have required an adjustment pursuant to clause (2) or
(3) above if made by the Company or a Restricted Subsidiary
during such period, EBITDA and Consolidated Interest Expense for
such period shall be calculated after giving pro forma effect
thereto as if such Asset Disposition or Investment occurred on
the first day of such period. For purposes of this definition,
whenever pro forma effect is to be given to an acquisition of
assets, the amount of income or earnings relating thereto, and
the amount of Consolidated Interest Expense associated with any
Indebtedness Incurred in connection therewith, the pro forma
calculations shall be determined in good faith by a responsible
financial or accounting Officer of the Company. If any
Indebtedness bears a floating rate of interest and is being given
pro forma effect, the interest expense on such Indebtedness shall
be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period
(taking into account any Interest Rate Agreement applicable to
such Indebtedness if such Interest Rate Agreement has a remaining
term as of the date of determination in excess of 12 months).
"Consolidated Interest Expense" means, for any period,
the total interest expense of the Company and its consolidated
Subsidiaries, plus, to the extent Incurred by the Company and its
consolidated Subsidiaries in such period but not included in such
interest expense (i) interest expense attributable to (A)
Capitalized Lease Obligations or (B) obligations for rental
payments in respect of any lease in a Sale/Leaseback Transaction,
(ii) amortization of debt discount and debt issuance cost, (iii)
capitalized interest, (iv) noncash interest expense, (v)
commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing,
(vi) interest actually paid by the Company or any such Subsidiary
under any Guarantee of Indebtedness or other obligation of any
other Person, (vii) net costs associated with Hedging Obligations
(including amortization of fees), (viii) Preferred Stock
dividends in respect of all Preferred Stock of Subsidiaries of
the Company and Disqualified Stock of the Company held by Persons
other than the Company or a Wholly Owned Subsidiary and (ix) the
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cash contributions to any employee stock ownership plan or
similar trust to the extent such contributions are used by such
plan or trust to pay interest or fees to any Person (other than
the Company) in connection with Indebtedness Incurred by such
plan or trust; provided, however, that there shall be excluded
therefrom any such interest expense of any Unrestricted
Subsidiary to the extent the related Indebtedness is not
Guaranteed or paid by the Company or any Restricted Subsidiary.
"Consolidated Net Income" means, for any period, the
net income (loss) of the Company and its consolidated
Subsidiaries; provided, however, that there shall not be included
in such Consolidated Net Income:
(i) any net income (loss) of any Person if such
Person is not a Restricted Subsidiary, except that (A)
subject to the limitations contained in clause (iv)
below the Company's equity in the net income of any
such Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of
cash actually distributed by such Person during such
period to the Company or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of
a dividend or other distribution to a Restricted
Subsidiary, to the limitations contained in clause
(iii) below) and (B) the Company's equity in a net loss
of any such Person (other than an Unrestricted
Subsidiary) for such period shall be included in
determining such Consolidated Net Income;
(ii) any net income (loss) of any person acquired
by the Company or a Subsidiary in a pooling of
interests transaction for any period prior to the date
of such acquisition;
(iii) any net income (loss) of any Restricted
Subsidiary if such Subsidiary is subject to
restrictions, directly or indirectly, on the payment of
dividends or the making of distributions by such
Restricted Subsidiary, directly or indirectly, to the
Company, except that (A) subject to the limitations
contained in (iv) below the Company's equity in the net
income of any such Restricted Subsidiary for such
period shall be included in such Consolidated Net
Income up to the aggregate amount of cash that could
have been distributed by such Restricted Subsidiary
during such period to the Company or another Restricted
Subsidiary as a dividend (subject, in the case of a
dividend that could have been made to another
Restricted Subsidiary, to the limitation contained in
this clause) and (B) the Company's equity in a net loss
of any such Restricted Subsidiary for such period shall
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be included in determining such Consolidated Net
Income;
(iv) any gain (but not loss) realized upon the
sale or other disposition of any property, plant or
equipment of the Company or its consolidated
Subsidiaries (including pursuant to any Sale/Leaseback
Transaction) which is not sold or otherwise disposed of
in the ordinary course of business and any gain (but
not loss) realized upon the sale or other disposition
of any Capital Stock of any Person;
(v) any extraordinary gain or loss; and
(vi) the cumulative effect of a change in
accounting principles.
Notwithstanding the foregoing, for the purposes of Section 4.04
only, there shall be excluded from Consolidated Net Income any
dividends, repayments of loans or advances or other transfers of
assets from Unrestricted Subsidiaries to the Company or a
Restricted Subsidiary to the extent such dividends, repayments or
transfers increase the amount of Restricted Payments permitted
pursuant to clause (a)(3)(E) thereof.
"Consolidated Net Worth" means the total of the amounts
shown on the balance sheet of the Company and its Subsidiaries,
determined on a consolidated basis in accordance with GAAP, as of
the end of the most recent fiscal quarter of the Company ending
at least 45 days prior to the taking of any action for the
purpose of which the determination is being made, as (i) the par
or stated value of all outstanding Capital Stock of the Company
plus (ii) paid-in capital or capital surplus relating to such
Capital Stock plus (iii) any retained earnings or earned surplus
less (A) any accumulated deficit and (B) any amounts attributable
to Disqualified Stock.
"Co-Venture Partnerships" shall mean Six Flags Over
Georgia, Ltd., a Georgia Limited Partnership and Texas Flags,
Ltd., a Texas Limited Partnership.
"Co-Venture Subsidiaries" shall mean Six Flags Over
Georgia, Inc., a Delaware Corporation, and Six Flags Over Texas,
Inc., a Delaware Corporation.
"Currency Agreement" means in respect of a Person any
foreign exchange contract, currency swap agreement or other
similar agreement as to which such Person is a party or a
beneficiary.
"Default" means any event which is, or after notice or
passage of time or both would be, an Event of Default.
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"Definitive Securities" means certificated Securities
in the form of Exhibit A or Exhibit B attached hereto that do not
include the Global Securities Legend thereon.
"Depository" means, with respect to the Securities
issuable or issued in whole or in part in global form, The
Depository Trust Company, until a successor shall have been
appointed and become such pursuant to the applicable provisions
of this Indenture, and thereafter, "Depository" shall mean or
include such successor.
"Designated Senior Indebtedness" means (i) the Bank
Indebtedness and (ii) any other Senior Indebtedness which, at the
date of determination, has an aggregate principal amount
outstanding of, or under which, at the date of determination, the
holders thereof are committed to lend up to, at least $25,000,000
and is specifically designated by the Company in the instrument
evidencing or governing such Senior Indebtedness as "Designated
Senior Indebtedness" for purposes of this Indenture.
"Disqualified Stock" means, with respect to any Person,
any Capital Stock which by its terms (or by the terms of any
security into which it is convertible or for which it is
exchangeable or exercisable) or upon the happening of any event
(i) matures or is mandatorily redeemable pursuant to a sinking
fund obligation or otherwise, (ii) is convertible or exchangeable
for Indebtedness or Disqualified Stock or (iii) is redeemable at
the option of the holder thereof, in whole or in part, in each
case on or prior to the first anniversary of the Stated Maturity
of the Securities.
"EBITDA" means, for any period, (a) the sum of (i)
Consolidated Net Income for such period (but without giving
effect to extraordinary losses or gains, any gains or losses from
any Asset Dispositions, any non-cash foreign currency gains or
losses and any other non-cash charges or credits (other than any
non-cash charge to the extent that it requires an accrual of or a
reserve for cash disbursements for any future period)), plus (ii)
the following (to the extent deducted in calculating such
Consolidated Net Income): (A) Federal, state and local income and
franchise taxes, (B) Consolidated Interest Expense, (C)
depreciation expense and (D) Amortization Expense, in each case
for such period, plus (iii) any decrease in the deferred off-
season balance for such period, plus (iv) to the extent that
EBITDA is being calculated for the first or second quarter of any
fiscal year, 1.5% of revenues for the four immediately preceding
quarters, minus (b) any increase in the deferred off-season
balance for such period (it being understood that the treatment
of the Co-Venture Partnerships for purposes of determination of
EBITDA shall at all times remain consistent with the
corresponding treatment of such Co-Venture Partnership as of the
Issue Date, but giving effect to changes in allocation
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<PAGE>
percentages that may change from time to time pursuant to
negotiations among the Company or the applicable Co-Venture
Subsidiary and the limited partner or partners of such Co-Venture
Partnership). Notwithstanding the foregoing, the provision for
taxes based on the income or profits of, and the depreciation and
amortization of, a Subsidiary of the Company shall be added to
Consolidated Net Income to compute EBITDA only to the extent (and
in the same proportion) that the Net Income of such Subsidiary
was included in calculating Consolidated Net Income and only if a
corresponding amount would be permitted at the date of
determination to be paid or distributed as a dividend to the
Company by such Subsidiary without prior approval (that has not
been obtained), pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statuses,
rules and governmental regulations applicable to such Subsidiary
or its stockholders.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"GAAP" means generally accepted accounting principles
in the United States of America as in effect as of the Issue
Date, including those set forth in the opinions and
pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a
significant segment of the accounting profession. All ratios and
computations based on GAAP contained in this Indenture shall be
computed in conformity with GAAP as in effect as of the Issue
Date.
"Guarantee" means any obligation, contingent or
otherwise, of any Person directly or indirectly guaranteeing any
Indebtedness or other obligation of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness or other obligation of
such other Person (whether arising by virtue of partnership
arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into
for purposes of assuring in any other manner the obligee of such
Indebtedness or other obligation of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or
in part); provided, however, that the term "Guarantee" shall not
include endorsements for collection or deposit in the ordinary
course of business; provided further, that the amount of the
obligations of any Person with respect to an agreement to keep-
well shall be as reasonably determined in good faith by the Board
of Directors of the Company. The term "Guarantee" used as a verb
has a corresponding meaning.
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<PAGE>
"Hedging Obligations" of any Person means the
obligations of such Person pursuant to any Interest Rate
Agreement or Currency Agreement.
"Holder" or "Securityholder means the Person in whose
name a Security is registered on the Registrar's books.
"Holdings" means S.F. Holdings, Inc., a Delaware
corporation and the Company's direct parent.
"Incur" means issue, assume, Guarantee, incur or
otherwise become liable for; provided, however, that any
Indebtedness or Capital Stock of a Person existing at the time
such person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be
Incurred by such Subsidiary at the time it becomes a Subsidiary.
"Indebtedness" means, with respect to any Person on any
date of determination (without duplication):
(i) the principal of and premium (if any) in
respect of indebtedness of such Person for borrowed
money;
(ii) the principal of and premium (if any) in
respect of obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments;
(iii) all obligations of such Person in
respect of letters of credit or other similar
instruments (including reimbursement obligations with
respect thereto);
(iv) all obligations of such Person to pay the
deferred and unpaid purchase price of property or
services (except Trade Payables), which purchase price
is due more than six months after the date of placing
such property in service or taking delivery and title
thereto or the completion of such services;
(v) all Capitalized Lease Obligations and all
Attributable Indebtedness of such Person;
(vi) the amount of all obligations of such Person
with respect to the redemption, repayment or other
repurchase of any Disqualified Stock or, with respect
to any Subsidiary, any Preferred Stock (but excluding,
in each case, any accrued dividends);
(vii) all Indebtedness of other Persons
secured by a Lien on any asset of such Person, whether
or not such Indebtedness is assumed by such Person;
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<PAGE>
provided, however, that the amount of Indebtedness of
such Person shall be the lesser of (A) the fair market
value of such asset at such date of determination and
(B) the amount of such Indebtedness of such other
Persons;
(viii) all Indebtedness of other Persons to the
extent Guaranteed by such Person; and
(ix) to the extent not otherwise included in this
definition, Hedging Obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations
as described above and the maximum liability, upon the occurrence
of the contingency giving rise to the obligation, of any
contingent obligations at such date.
"Indenture" means this Indenture as amended or
supplemented from time to time.
"Interest Rate Agreement" means with respect to any
Person any interest rate protection agreement, interest rate
future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar
agreement, interest rate hedge agreement or other similar
agreement or arrangement as to which such Person is party or a
beneficiary.
"Investment" in any Person means any direct or indirect
advance, loan (other than advances to customers in the ordinary
course of business that are recorded as accounts receivable on
the balance sheet of such Person) or other extension of credit
(including by way of Guarantee or similar arrangement) or capital
contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for
the account or use of others), or any purchase or acquisition of
Capital Stock, Indebtedness or other similar instruments issued
by such Person. For purposes of the definition of "Unrestricted
Subsidiary" and Section 4.04, (i) "Investment" shall include the
portion (proportionate to the Company's equity interest in such
Subsidiary) of the fair market value of the net assets of any
Subsidiary of the Company.at the time that such Subsidiary is
designated an Unrestricted Subsidiary; provided, however, that
upon a redesignation of such Subsidiary as a Restricted
Subsidiary, the Company shall be deemed to continue to have a
permanent "Investment" in an Unrestricted Subsidiary in an amount
(if positive) equal to (x) the Company's "Investment" in such
Subsidiary at the time of such redesignation less (y) the portion
(proportionate to the Company's equity interest in such
Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time of such redesignation; and (ii) any
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<PAGE>
property transferred to or from an Unrestricted Subsidiary shall
be valued at its fair market value at the time of such transfer,
in each case as determined in good faith by the Board of
Directors.
"Issue Date" means the date on which the Initial Notes
are originally issued.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any
conditional sale or other title retention agreement or lease in
the nature thereof).
"Net Available Cash" from an Asset Disposition means
cash payments received (including any cash payments received by
way of deferred payment of principal pursuant to a note or
installment receivable or otherwise and any cash realized upon
the conversion into cash by the Company or any Restricted
Subsidiary of any securities received by the Company or any
Restricted Subsidiary from the transferee in connection with an
Asset Disposition, in either case only as and when received, but
excluding any other consideration received in the form of
assumption by the acquiring person of Indebtedness or other
obligations relating to the properties or assets that are the
subject of such Asset Disposition or received in any other
noncash form) therefrom, in each case net of (i) all legal, title
and recording tax expenses, commissions and other fees and
expenses Incurred, and all Federal, state, provincial, foreign
and local taxes required or estimated in good faith to be
required to be paid or accrued as a liability under GAAP, as a
consequence of such Asset Disposition, (ii) all payments made on
any Indebtedness which is secured by any assets subject to such
Asset Disposition, in accordance with the terms of any Lien upon
such assets, or which must by its terms, or in order to obtain a
necessary consent to such Asset Disposition, or by applicable law
be repaid out of the proceeds from such Asset Disposition, (iii)
all distributions and other payments required to be made to
minority interest holders in Subsidiaries or joint ventures as a
result of such Asset Disposition and (iv) the deduction of
appropriate amounts to be provided by the seller as a reserve, in
accordance with GAAP, against any liabilities associated with the
assets disposed of in such Asset Disposition and retained by the
Company or any Restricted Subsidiary after such Asset
Disposition.
"Net Cash Proceeds" means, with respect to any issuance
or sale of Capital Stock, the cash proceeds of such issuance or
sale net of attorneys' fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage,
consultant and other fees actually Incurred in connection with
such issuance or sale and net of taxes paid or payable as a
result thereof.
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"Non-Recourse Indebtedness" means Indebtedness (a) as
to which neither the Company nor any of its Restricted
Subsidiaries (i) provides credit support (including any
undertaking, agreement or instrument which would constitute
Indebtedness), (ii) is directly or indirectly liable or (iii)
constitutes the lender and (b) no default with respect to which
(including any rights which the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would
permit (upon notice, lapse of time or both) any holder of any
other Indebtedness of the Company or any Restricted Subsidiary to
declare a default on such other Indebtedness or cause the payment
thereof to be accelerated or payable prior to its Stated
Maturity.
"Note Guarantee" means any guarantee which may from
time to time be executed and delivered by a Subsidiary of the
Company pursuant to the terms of this Indenture. Each such Note
Guarantee will be in the form prescribed in this Indenture.
"Note Guarantor" means the parties named as such in
this Indenture and any other Subsidiary that has issued a Note
Guarantee, until a successor replaces it and thereafter, means
such successor.
"Officer" means the Chairman of the Board, the
President, any Vice President, the Treasurer or the Secretary of
the Company or the Note Guarantors, as applicable.
"Officers' Certificate" means a certificate signed by
two Officers.
"Opinion of Counsel" means a written opinion from legal
counsel which and who is acceptable to the Trustee. The counsel
may be an employee of or counsel to the Company or the Trustee.
An Opinion of Counsel may assume compliance with or satisfaction
of any financial tests, factual conditions or factual
requirements that may relate to the subject matter of such
opinion, and may state that as to factual matters counsel
rendering such opinion has relied without independent
investigation on statements contained in any Officers'
Certificate required to be delivered to the Trustee under this
Indenture or in such other officer's certificate as such counsel
may deem appropriate in connection with rendering such Opinion of
Counsel.
"Permitted Holders" means Time Warner (or any
successor, by spin-off or other corporate reorganization, to all
or substantially all of the business of Time Warner and its
wholly-owned subsidiaries) and each of Time Warner Entertainment,
Boston Ventures Limited Partnership IV, Boston Ventures Limited
Partnership IVA, Aetna Casualty and Surety Company, BancBoston
Capital Inc., Brinson Partners, Inc., Chemical Equity Associates,
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Macfadden Publishing, Inc. and Westpool Investment Trust PLC, or
any Person, directly or indirectly, controlling or controlled by
or under common control with any of the foregoing Persons.
"Permitted Investment" means an Investment by the
Company or any Restricted Subsidiary in (i) a Restricted
Subsidiary or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary; provided, however,
that the primary business of such Restricted Subsidiary is a
Related Business; (ii) another Person if as a result of such
Investment such other Person is merged or consolidated with or
into, or transfers or conveys all or substantially all its assets
to, the Company or a Restricted Subsidiary; provided, however,
that such Person's primary business is a Related Business; (iii)
Temporary Cash Investments; (iv) receivables owing to the Company
or any Restricted Subsidiary, if created or acquired in the
ordinary course of business and payable or dischargeable in
accordance with customary trade terms; provided, however, that
such trade terms may include such concessionary trade terms as
the Company or any such Restricted Subsidiary deems reasonable
under the circumstances; (v) payroll, travel and similar advances
to cover matters that are expected at the time of such advances
ultimately to be treated as expenses for accounting purposes and
that are made in the ordinary course of business; (vi) loans or
advances to employees made in the ordinary course of business
consistent with past practices of the Company or such Restricted
Subsidiary; (vii) stock, obligations or securities received in
settlement of debts created in the ordinary course of business
and owing to the Company or any Restricted Subsidiary or in
satisfaction of judgments; and (viii) Capital Stock of a
Permitted Joint Venture Entity, provided that the maximum amount
of all Investments in Permitted Joint Venture Entities made
subsequent to the Issue Date shall not exceed $50,000,000, and
provided further, however, that any subsequent issuance or
transfer of any Capital Stock or any other event which results in
any such Permitted Joint Venture Entity ceasing to be a Permitted
Joint Venture Entity shall be deemed, in each case, to constitute
the making of an Investment by the Company or applicable
Restricted Subsidiary.
"Permitted Joint Venture Entity" means a Person other
than a Subsidiary of the Company if, immediately after giving
effect to the Investment by the Company or a Restricted
Subsidiary in such Person and for so long as the Company,
directly or indirectly, shall hold such Investment (i) such
Person is engaged in, or is being organized for the purpose of
engaging in, the business of owning, operating or supplying
equipment or services to amusement or theme parks, (ii) such
Person is not a Subsidiary of any other Person, no person (as
such term is used in Sections 13(d) and 14(d) of the Exchange
Act) owns, directly or indirectly, a percentage of the Capital
Stock or Voting Stock of such Person greater than the percentage
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<PAGE>
thereof owned, directly or indirectly, by the Company, (iv) no
class or series of the Capital Stock of such Person has a
preference as to distributions or upon liquidation over the class
or series of Capital Stock held, directly or indirectly, by the
Company, (v) the governing or constitutive documents of such
Person (the "Governing Documents") provide that all shares or
units of the class or series of Capital Stock held, directly or
indirectly, by the Company are entitled to share equally and
ratably with all other shares or units of such class or series in
respect of distributions from such Person and upon liquidation
thereof, and the Company or one or more of its Restricted
Subsidiaries is entitled to receive at least annually
distributions from such Person in accordance with the Governing
Documents, and (vi) the Governing Documents of such Person may
not be amended without the consent or approval of the Company (or
the Restricted Subsidiary or Restricted Subsidiaries of the
Company that hold or holds such Capital Stock). The foregoing
notwithstanding, a Person shall not be a Permitted Joint Venture
Entity for any purpose unless, within 30 days following the later
of (x) the date of the initial Investment in such Person by the
Company or a Restricted Subsidiary of the Company, or (y) the
date as of which the Company or a Restricted Subsidiary of the
Company wish to have such Investment first treated as an
Investment in a Permitted Joint Venture Entity, the Company shall
have caused to be delivered to the Trustee an officers'
Certificate to the effect set forth in clauses (i), (ii) and
(iii) of the preceding sentence and an Opinion of Counsel to the
effect set forth in clauses (iv), (v) and (vi) of the preceding
sentence.
"Permitted Liens" means, with respect to any Person,
(a) pledges or deposits by such Person under workmen's
compensation laws, unemployment insurance laws or similar
legislation, or good faith deposits in connection with bids,
tenders, contracts (other than for the payment of Indebtedness)
or leases to which such Person is a party, or deposits to secure
public or statutory obligations of such Person or deposits or
cash or United States government bonds to secure surety or appeal
bonds to which such Person is a party, or deposits as security
for contested taxes or import duties or for the payment of rent,
in each case Incurred in the ordinary course of business; (b)
Liens imposed by law, such as carriers', warehousemen's and
mechanics' Liens, in each case for sums not yet due or being
contested in good faith by appropriate proceedings or other Liens
arising out of judgments or awards against such Person with
----
respect to which such Person shall then be proceeding with an
appeal or other proceedings for review; (c) Liens for property
taxes not yet due or payable or subject to penalties for
nonpayment and which are being contested in good faith by
appropriate proceedings; (d) Liens in favor of issuers of surety
bonds or letters of credit issued pursuant to the request of and
for the account of such Person in the ordinary course of its
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business; (e) minor survey exceptions, minor encumbrances,
easements or reservations of, or rights of others for, licenses,
rights of way, sewers, electric lines, telegraph and telephone
lines and other similar purposes, or zoning or other restrictions
as to the use of real properties or Liens incidental to the
conduct of the business of such Person Dr to the ownership of its
properties which were not Incurred in connection with
Indebtedness and which do not in the aggregate materially
adversely affect the value of said properties or materially
impair their use in the operation of the business of such Person;
(f) Liens existing on the Issue Date; (g) Liens on property or
shares of stock of a Person at the time such Person becomes a
Subsidiary; provided, however, that such Liens are not created,
incurred or assumed in connection with, or in contemplation of,
such other Person becoming a Subsidiary; provided further,
however, that any such Lien may not extend to any other property
owned by the Company or any Restricted Subsidiary; (h) Liens on
property at the time the Company or a Subsidiary acquired the
property, including any acquisition by means of a merger or
consolidation with or into the Company or any Restricted
Subsidiary; provided, however, that such Liens are not created,
incurred or assumed in connection with, or in contemplation of,
such acquisition; provided further, however, that such Liens may
not extend to any other property owned by the Company or any
Restricted Subsidiary; (i) Liens securing Indebtedness or other
obligations of a Subsidiary owing to the Company or a Wholly
Owned Subsidiary; (j) Liens securing Hedging Obligations so long
as the related Indebtedness is, and is permitted to be under this
Indenture, secured by a Lien on the same property securing such
Hedging Obligations; (k) Liens securing Senior Indebtedness; (1)
Liens to secure the payment of all or a part of the purchase
price of, or Capitalized Lease Obligations with respect to,
assets or property acquired or constructed after the Issue Date;
provided, however, that (i) the Indebtedness secured by such
Liens is otherwise permitted to be Incurred under this Indenture,
(ii) such Liens only extend to or cover such acquired or
constructed property and do not encumber any other assets or
property of the Company or any Restricted Subsidiary, (iii) such
Liens are created within 180 days of construction or acquisition
of such assets or property, (iv) the principal amount of any
Indebtedness secured by any such Lien does not exceed the cost of
assets or property so acquired or constructed and (v) the amount
of Indebtedness secured by any such Lien is not subsequently
increased; (m) Liens not giving rise to any Event of Default
arising by reason of any judgment, decree or order of any court
or arbitrator, so long as such judgment, decree or order is being
contested in good faith and any appropriate legal proceedings
which may have been duly initiated for the review of such
judgment, decree or order will not have been finally terminated
and the period within which such proceedings may be initiated
will not have expired; (n) Liens restricting the ability of a Co-
Venture Subsidiary to transfer or otherwise dispose of general
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<PAGE>
partnership interests in a Co-Venture Partnership pursuant to an
agreement between the Company (or applicable Co-Venture
Subsidiary) and the limited partner or partners of a Co-Venture
Partnership; and (o) Liens to secure any refinancing, refunding,
extension, renewal or replacement (or successive refinancings,
refundings, extensions, renewals or replacements) as a whole, or
in part, of any Indebtedness secured by any Lien referred to in
the foregoing clauses (f), (g), (h) and (1); provided, however,
that (x) such new Lien shall be limited to all or part of the
same property that secured the original Lien (plus improvements
on such property) and (y) the Indebtedness secured by such Lien
at such time is not increased to any amount greater than the sum
of (A) the outstanding principal amount or, if greater, committed
amount of the Indebtedness described under clauses (f), (g), (h)
and (1) at the time the original Lien became a Permitted Lien
under this Indenture and (B) an amount necessary to pay any fees
and expenses, including premiums, related to such refinancing,
refunding, extension, renewal or replacement. Notwithstanding
the foregoing, "Permitted Liens" will not include any Lien
described in clauses (g) and (h) above if such Lien applies to
any Additional Assets acquired directly or indirectly from Net
Available Cash pursuant to Section 4.06.
"Person" means any individual, corporation,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, government or any agency or
political subdivision thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of
any corporation, means Capital Stock of any class or classes
(however designated) which is preferred as to the payment of
dividends, or as to the distribution of assets upon any voluntary
or involuntary liquidation or dissolution of such corporation,
over shares of Capital Stock of any other class of such
corporation.
"principal" of a Security means the principal of the
Security payable at its Stated Maturity plus the premium, if any,
payable on the Security which is due or overdue or is to become
due at the relevant time.
"Public Equity Offering" means an underwritten primary
public offering of common stock (or other voting stock) of the
Company, Holdings or SFEC pursuant to an effective registration
statement (other than a registration statement on Form S-4, S-8
or any successor or similar forms) under the Securities Act.
"Public Market" means any time after (x) a Public
Equity Offering has been consummated and (y) at least 15% of the
total issued and outstanding common stock of the Company,
Holdings or SFEC (as applicable) has been distributed by means of
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an effective registration statement under the Securities Act or
sales pursuant to Rule 144 under the Securities Act.
"Qualified SFEC Replacement Notes" means any notes or
debentures of SFEC Incurred to refinance the Zero Coupon Notes;
provided, that Qualified SFEC Replacement Notes shall not include
--------
any notes or debentures Incurred in excess of the principal
amount (or if issued with original issue discount, an aggregate
issue price) required to refinance the Zero Coupon Notes
(including payment by SFEC of reasonable and customary fees and
expenses (including underwriting fees, discounts and commissions)
incurred in connection therewith) at such time as the Zero Coupon
Notes are refinanced.
"Registered Exchange Offer" shall have the meaning set
forth in the Registration Rights Agreement.
"Registration Rights Agreement" means the Exchange and
Registration Rights Agreement, dated June 23, 1995 among the
Company, the Note Guarantors and Chemical Securities Inc.
"Refinancing Indebtedness" means Indebtedness that
refunds, refinances, replaces, renews, repays or extends
(including pursuant to any defeasance or discharge mechanism)
(collectively, "refinances", and "refinanced" shall have a
correlative meaning) any Indebtedness existing on the date of
this Indenture or Incurred in compliance with this Indenture
(including Indebtedness of the Company that refinances
Indebtedness of any Restricted Subsidiary (to the extent
permitted by this Indenture) and Indebtedness of any Restricted
Subsidiary that refinances Indebtedness of another Restricted
Subsidiary (to the extent permitted by this Indenture)) including
Indebtedness that refinances Refinancing Indebtedness; provided,
however, that (i) the Refinancing Indebtedness has a Stated
Maturity no earlier than the Stated Maturity of the Indebtedness
being refinanced, (ii) the Refinancing Indebtedness has an
Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the
Indebtedness being refinanced and (iii) such Refinancing
Indebtedness is Incurred in an aggregate principal amount (or if
issued with original issue discount, an aggregate issue price)
that is equal to or less than the aggregate principal amount (or
if issued with original issue discount, the aggregate accreted
value) then outstanding of the Indebtedness being refinanced;
provided further, however, that Refinancing Indebtedness shall
not include (x) Indebtedness of a Subsidiary that refinances
Indebtedness of the Company or (y) Indebtedness of the Company or
a Restricted Subsidiary that refinances Indebtedness of an
Unrestricted Subsidiary.
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"Related Business" means any business related,
ancillary or complementary to the businesses of the Company and
the Restricted Subsidiaries on the date of this Indenture.
"Representative" means the trustee, agent or
representative (if any) for an issue of Senior Indebtedness.
"Restricted Subsidiary" means any Subsidiary of the
Company other than an Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement
relating to property now owned or hereafter acquired whereby the
Company or a Restricted Subsidiary transfers such property to a
Person and the Company or a Restricted Subsidiary leases it from
such Person.
"SEC" means the Securities and Exchange Commission.
"Securities" means, collectively, the Initial Notes
and, when and if issued as provided in the Registration Rights
Agreement, the Exchange Notes.
"Securities Custodian" means the custodian with respect
to the Global Security (as appointed by the Depository), or any
successor entity thereto and shall initially be the Trustee.
"Securities Act" means the Securities Act of 1933, as
amended.
"Senior Bank Facility" means the $600,000,000 senior
secured credit facility among the Company, the financial
institutions party thereto and Chemical Bank, as agent for such
financial institutions, as such facility is in effect on the
Issue Date.
"Senior Bank Documents" means the collective reference
to the Senior Bank Facility, the notes issued pursuant thereto
and the Guarantees thereof and the Security Documents, the
Indemnity, Subrogation and Contribution Agreement and the Pledge
Agreement (each as defined in the Senior Bank Facility and as in
effect on the Issue Date).
"Senior Indebtedness" means all Indebtedness of the
Company, including interest and fees thereon, whether outstanding
on the Issue Date or thereafter Incurred, unless in the
instrument creating or evidencing the same or pursuant to which
the same is outstanding it is provided that such obligations are
not superior in right of payment to the Securities; provided,
however, that Senior Indebtedness shall not include (1) any
obligation of the Company to any Subsidiary, (2) any liability
for Federal, state, local or other taxes owed or owing by the
Company, (3) any accounts payable or other liability to trade
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<PAGE>
creditors arising in the ordinary course of business (including
Guarantees thereof or instruments evidencing such liabilities),
(4) any Indebtedness or obligation of the Company which is
expressly subordinate or junior in any respect to any other
Indebtedness or obligation of the Company, including any Senior
Subordinated Indebtedness and any Subordinated Obligations, (5)
any obligations in respect of any Capital Stock, or (6) any
Indebtedness Incurred in violation of this Indenture. Senior
Indebtedness of any Note Guarantor shall have a correlative
meaning.
"Senior Subordinated Indebtedness" means the Securities
and any other Indebtedness of the Company that specifically
provides that such Indebtedness is to rank pari passu with the
Securities and is not subordinated by its terms to any
Indebtedness or other obligation of the Company which is not
Senior Indebtedness.
"SFEC" means Six Flags Entertainment Corporation, a
Delaware corporation, and the Company's indirect parent.
"S.F. Partnership" means the general partnership
between the Company and SFTP Inc., a Subsidiary of the Company,
which partnership, as of the Issue Date, owns a substantial
portion of the assets of the Company's theme parks located in
California, Missouri and New Jersey.
"Shelf Registration Statement" has the meaning given to
that term in the Registration Rights Agreement.
"Significant Subsidiary" means (i) any domestic
Subsidiary of the Company which at the time of determination
either (A) had assets which, as of the date of the Company's most
recent quarterly consolidated balance sheet, constituted at least
5% of the Company's total assets on a consolidated basis as of
such date, or (B) had revenues for the 12-month period ending on
the date of the Company's most recent quarterly consolidated
statement of income which constituted at least 5% of the
Company's total revenues on a consolidated basis for such period,
(ii) any foreign Subsidiary of the Company which at the time of
determination either (A) had assets which, as of the date of the
Company's most recent quarterly consolidated balance sheet,
constituted at least 5% of the Company's total assets on a
consolidated basis as of such date, in each case determined in
accordance with generally accepted accounting principles, or (B)
had revenues for the 12-month period ending on the date of the
Company's most recent quarterly consolidated statement of income
which constituted at least 5% of the Company's total revenues on
a consolidated basis for such period, or (iii) any Subsidiary of
the Company which, if merged with all Defaulting Subsidiaries of
the Company, would at the time of determination either (A) have
had assets which, as of the date of the Company's most recent
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<PAGE>
quarterly consolidated balance sheet, would have constituted at
least 10% of the Company's total assets on a consolidated basis
as of such date or (B) have had revenues for the 12-month period
ending on the date of the Company's most recent quarterly
consolidated statement of income which would have constituted at
least 10% of the Company's total revenues on a consolidated basis
for such period (each such determination being made in accordance
with generally accepted accounting principles). "Defaulting
Subsidiary" means any Subsidiary of the Company with respect to
which a Default has occurred.
"Stated Maturity" means, with respect to any security,
the date specified in such security as the fixed date on which
the payment of principal of such security is due and payable,
including pursuant to any mandatory redemption provision (but
excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening
of any contingency beyond the control of the issuer unless such
contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the
Company (whether outstanding on the Issue Date or thereafter
Incurred) which is subordinate or junior in right of payment to
the Securities pursuant to a written agreement.
"Subsidiary" of any Person means any corporation,
association, partnership or other business entity of which more
than 50% of the total voting power of shares of Capital Stock or
other interests (including partnership interests) entitled
(without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the
time owned or controlled, directly or indirectly, by (i) such
Person, (ii) such Person and one or more Subsidiaries of such
Person or (iii) one or more Subsidiaries of such Person.
"Temporary Cash Investments" means any of the
following: (i) any Investment in direct obligations of the United
States of America or any agency thereof or obligations Guaranteed
by the United States of America or any agency thereof, (ii)
Investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of
acquisition thereof issued by a bank or trust company which is
organized under the laws of the United States of America, any
state thereof or any foreign country recognized by the United
States of America having capital, surplus and undivided profits
aggregating in excess of $300,000,000 (or the foreign currency
equivalent thereof) and whose long-term debt is rated "All (or
such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organized (as defined in
Rule 436 under the Securities Act), (iii) repurchase obligations
with a term of not more than seven days for underlying securities
of the types described in clause (i) above entered into with a
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<PAGE>
bank meeting the qualifications described in clause (ii) above,
(iv) Investments in commercial paper, maturing not more than six
months after the date of acquisition, issued by a corporation
(other than an Affiliate of the Company) organized and in
existence under the laws of the United States of America or any
foreign country recognized by the United States of America with a
rating at the time as of which any investment therein is made of
"P-111 (or higher) according to Moody's Investors Service, Inc.
or "A-1" (or higher) according to Standard and Poor's
Corporation, and (v) Investments in securities with maturities of
six months or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United
States of America, or by any political subdivision or taxing
authority thereof, and rated at least "A" by Standard & Poor's
Corporation or "All by Moody's Investors Service, Inc.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
(Section) 77aaa-77bbbb) as in effect on the date of this
Indenture.
"Time Warner" means Time Warner Inc., a Delaware
corporation.
"Time Warner Entertainment" means Time Warner
Entertainment Company, L.P., a Delaware limited partnership.
"Time Warner Entertainment Partnership Agreement" means
the Agreement dated as of October 29, 1991, among C. Itoh & Co.,
Ltd., a Japanese corporation, Toshiba Corporation, a Japanese
corporation, Time Warner, Home Box Office, Inc., a Delaware
corporation, Warner Bros. Inc., a Delaware corporation, Warner
Cable Communications Inc., a Delaware corporation, and Warner
Communications Inc., a Delaware corporation, as amended.
"Trade Payables" means, with respect to any Person, any
accounts payable or any indebtedness or monetary obligation to
trade creditors created, assumed or Guaranteed by such Person
arising in the ordinary course of business in connection with the
acquisition of goods or services.
"Transfer Restricted Securities" means Securities that
bear or are required to bear the legend set forth in Section 2.06
hereof.
"Trustee" means the party named as such in this
Indenture until a successor replaces it and, thereafter, means
the successor.
"Trust officer", when used with respect to the Trustee,
means any officer within the Corporate Trust Division (or any
successor group) of the Trustee, including without limitation any
Vice President, any Assistant Vice President, any Assistant
Secretary or any other officer of the Trustee customarily
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performing functions similar to those performed by any of the
above designated officers, who shall, in any case, be responsible
for the administration of this document or have familiarity with
it, and also means, with respect to particular corporate trust
matters, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular
subject.
"Uniform Commercial Code" means the New York Uniform
Commercial Code as in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of
the Company that at the time of determination shall be designated
an Unrestricted Subsidiary by the Board of Directors in the
manner provided below and (ii) any Subsidiary of an Unrestricted
Subsidiary. The Board of Directors may designate any Subsidiary
of the Company (including any newly acquired or newly formed
Subsidiary of the Company) to be an Unrestricted Subsidiary
unless such Subsidiary or any of its Subsidiaries owns any
Capital Stock or Indebtedness of, or owns or holds any Lien on
any property of, the Company or any other Subsidiary of the
Company that is not a Subsidiary of the Subsidiary to be so
designated; provided, however, that either (A) the Subsidiary to
be so designated has total consolidated assets of $1,000 or less
or (B) if such Subsidiary has consolidated assets greater than
$1,000, then such designation would be permitted under the
provisions of Section 4.04. The Board of Directors may designate
any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided, however, that immediately after giving effect to such
designation (x) the Company could Incur $1.00 of additional
Indebtedness under Section 4.03(a) and (y) no Default shall have
occurred and be continuing. Any such designation by the Board of
Directors shall be evidenced to the Trustee by promptly filing
with the Trustee a copy of the resolution of the Board of
Directors giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the
foregoing provisions.
"U.S. Government Obligations" means direct obligations
(or certificates representing an ownership interest in such
obligations) of the United States of America (including any
agency or instrumentality thereof) for the payment of which the
full faith and credit of the United States of America is pledged
and which are not callable or redeemable at the issuer's option.
"Voting Stock" of a corporation means all classes of
Capital Stock of such corporation then outstanding and normally
entitled to vote in the election of directors.
"Wholly Owned Subsidiary" means a Restricted Subsidiary
of the Company, all the Capital Stock of which (other than
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directors' qualifying shares) is owned by the Company or another
Wholly Owned Subsidiary.
"Zero Coupon Notes" means the Zero Coupon Senior Notes
of SFEC due December 19, 1999.
SECTION 1.02. Other Definitions.
-----------------
Defined in
Term Section
---- ----------
"Affiliate Transaction" . . . . . . . . . . . 4.07
"Agent Members" . . . . . . . . . . . . . . . 2.01(b)
"Bankruptcy Law" . . . . . . . . . . . . . . 6.01
"Blockage Notice" . . . . . . . . . . . . . . 10.03
"covenant defeasance option" . . . . . . . . 8.01(b)
"Custodian" . . . . . . . . . . . . . . . . . 6.01
"Domestic Corporation" . . . . . . . . . . . 5.01
"Event of Default" . . . . . . . . . . . . . 6.01
"Global Security" . . . . . . . . . . . . . . 2.01(a)
"legal defeasance option" . . . . . . . . . . 8.01(b)
"Legal Holiday" . . . . . . . . . . . . . . . 12.08
"Non Global Purchaser" . . . . . . . . . . . 2.01(c)
"Obligations" . . . . . . . . . . . . . . . . 11.01
"Offer" . . . . . . . . . . . . . . . . . . . 4.06(b)
"Offer Amount" . . . . . . . . . . . . . . . 4.06(c)
"Offer Period" . . . . . . . . . . . . . . . 4.06(c)
"pay the Securities" . . . . . . . . . . . . 10.03
"Paying Agent" . . . . . . . . . . . . . . . 2.03(a)
"Payment Blockage Period" . . . . . . . . . . 10.03
"Purchase Agreement" . . . . . . . . . . . . 2.01(a)
"Purchase Date" . . . . . . . . . . . . . . . 4.06(c)
"QIB" . . . . . . . . . . . . . . . . . . . . 2.01(a)
"Registrar" . . . . . . . . . . . . . . . . . 2.03
"Restricted Payment" . . . . . . . . . . . . 4.04
"Rule 144A" . . . . . . . . . . . . . . . . . 2.01(a)
"Scheduled Amount" . . . . . . . . . . . . . 4.03(b)
"Successor Company" . . . . . . . . . . . . . 5.01
SECTION 1.03. Incorporation by Reference of Trust
-----------------------------------
Indenture Act. This Indenture is subject to the mandatory
---------
provisions of the TIA which are incorporated by reference in and
made a part of this Indenture. The following TIA terms have the
following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
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"indenture trustee" or "institutional trustee" means
the Trustee.
"obligor" on the indenture securities means the Company
and any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are
defined by the TIA, defined by TIA reference to another statute
or defined by SEC rule have the meanings assigned to them by such
definitions.
SECTION 1.04. Rules of Construction. Unless the
---------------------
context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has
the meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without
limitation;
(5) words in the singular include the plural and
words in the plural include the singular;
(6) unsecured Indebtedness shall not be deemed to
be subordinate or junior to secured Indebtedness merely
by virtue of its nature as unsecured Indebtedness;
(7) the principal amount of any noninterest
bearing or other discount security at any date shall be
the principal amount thereof that would be shown on a
balance sheet of the issuer dated such date prepared in
accordance with GAAP and accretion of principal on such
security shall be deemed to be the Incurrence of
Indebtedness; and
(8) the principal amount of any Preferred Stock
shall be (i) the maximum liquidation value of such
Preferred Stock or (ii) the maximum mandatory
redemption or mandatory repurchase price with respect
to such Preferred Stock, whichever is greater.
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ARTICLE 2
The Securities
--------------
SECTION 2.01. Form and Dating. The Initial Notes and
---------------
the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A, which is hereby
incorporated in and expressly made a part of this Indenture. The
Exchange Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit B, which is hereby
incorporated by reference and expressly made a part of this
Indenture. The Securities may have notations, legends or
endorsements required by law, stock exchange rule, agreements to
which the Company is subject, if any, or usage (provided that any
----
such notation, legend or endorsement is in a form acceptable to
the Company). A copy of any such legends, notations or
endorsements shall be furnished to the Trustee in writing. Each
Security shall be dated the date of its authentication. The
terms of the Securities set forth in Exhibit A and Exhibit B are
part of the terms of this Indenture.
(a) Global Securities. The Initial Notes are being
-----------------
offered and sold by the Company pursuant to a Purchase Agreement,
dated June 16, 1995, among the Company, the Note Guarantors and
Chemical Securities Inc. (the "Purchase Agreement").
Initial Notes in the form of Exhibit A hereto and the
Exchange Notes in the form of Exhibit B hereto shall be issued
initially in the form of one or more permanent global Securities
in definitive, fully registered form without interest coupons,
with the Global Securities Legend and, in the case of the Initial
Notes, the Restricted Securities Legend, as set forth in such
Exhibits (each, a "Global Security"), which shall be deposited on
behalf of the purchasers of the Initial Notes and the Exchange
Notes, as the case may be, represented thereby with the Trustee,
at its New York office, as custodian for the Depository, and
registered in the name of the Depository or a nominee of the
Depository, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The aggregate principal amount
of the Global Securities may from time to time be increased or
decreased by adjustments made on the records of the Trustee and
the Depository or its nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section 2.01(b) shall
---------------------
apply only to the Global Security deposited with or on behalf of
the Depository.
The Company shall execute and the Trustee shall, upon
receipt of an Officers' Certificate, in accordance with this
Section 2.01(b) and Section 2.02, authenticate and deliver
initially one or more Global Securities that (a) shall be
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registered in the name of the Depository for such Global Security
or Global Securities or the nominee of such Depository and (b)
shall be delivered by the Trustee to such Depository or pursuant
to such Depository's instructions or held by the Trustee as
custodian for the Depository.
Members of, or participants in, the Depository ("Agent
Members") shall have no rights under this Indenture with respect
to any Global Security held on their behalf by the Depository or
by the Trustee as the custodian of the Depository or under such
Global Security, and the Depository may be treated by the
Company, the Trustee and any agent of the Company or the Trustee
as the absolute owner of such Global Security for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company or
the Trustee from giving effect to any written certification,
proxy or other authorization furnished by the Depository or
impair, as between the Depository and its Agent Members, the
operation of customary practices of such Depository governing the
exercise of the rights of.a holder of a beneficial interest in
any Global Security.
(c) Certificated Securities. Except as provided in
-----------------------
Section 2.06(f) and 2.09, owners of beneficial interests in
Global Securities will not be entitled to receive physical
delivery of Definitive Securities.
SECTION 2.02. Execution and Authentication. Two
----------------------------
Officers shall sign the Securities for the Company by manual or
facsimile signature. The Company's seal shall be impressed,
affixed, imprinted or reproduced on the Securities and may be in
facsimile form.
If an Officer whose signature is on a Security no
longer holds that office at the time the Trustee authenticates
the Security, the Security shall be valid nevertheless.
A Security shall not be valid until an authorized
signatory of the Trustee manually signs the certificate of
authentication on the Security. The signature shall be
conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate and deliver: (1) Initial
Notes for original issue in an aggregate principal amount of
$285,000,000 and (2) Exchange Notes for issue only in a
Registered Exchange Offer, pursuant to the Registration Rights
Agreement, for Initial Notes for a like principal amount of
Initial Notes exchanged pursuant thereto, in each case upon a
written order of the Company signed by two Officers or by an
Officer and either an Assistant Treasurer or an Assistant
Secretary of the Company. Such order shall specify the amount of
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the Securities to be authenticated and the date on which the
original issue of Securities is to be authenticated and whether
the Securities are to be Initial Notes or Exchange Notes and
whether or not such notes shall bear the Restricted Securities
Legend (and if not, confirmation that a registration statement
with respect to such notes has been declared effective by the
Commission). The aggregate principal amount of Securities
outstanding at any time may not exceed that amount except as
provided in Section 2.07.
The Trustee may appoint (at the expense of the Company)
an authenticating agent reasonably acceptable to the Company to
authenticate the Securities. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture
to authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same rights as any
Registrar, Paying Agent or agent for service of notices and
demands.
SECTION 2.03. Registrar and Paying Agent. The Company
--------------------------
shall maintain an office or agency where Securities may be
presented for registration of transfer or for exchange (the
"Registrar") and an office or agency where Securities may be
presented for payment (the "Paying Agent"). The Registrar shall
keep a register of the Securities and of their transfer and
exchange. The Company may have one or more additional paying
agents. The term "Paying Agent" includes any additional paying
agent.
The Company shall enter into an appropriate agency
agreement with any Registrar or Paying Agent not a party to this
Indenture, which shall incorporate the terms of the TIA. The
agreement shall implement the provisions of this Indenture that
relate to such agent. The Company shall notify the Trustee of
the name and address of any such agent. If the Company fails to
maintain a Registrar or Paying Agent, the Trustee shall act as
such and shall be entitled to appropriate compensation therefor
pursuant to Section 7.07. The Company or any of its domestically
incorporated Wholly Owned Subsidiaries may act as Paying Agent,
Registrar or transfer agent.
The Company initially appoints the Trustee as Registrar
and Paying Agent in connection with the Securities.
SECTION 2.04. Paying Agent To Hold Money in Trust.
-----------------------------------
Prior to each due date of the principal (or Accreted Value, as
the case may be) of and any liquidated damages and interest on
any Security, the Company shall deposit with the Paying Agent a
sum sufficient to pay such principal (or Accreted Value, as the
case may be), any liquidated damages and interest when so
becoming due. The Company shall require each Paying Agent (other
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than the Trustee) to agree in writing that the Paying Agent shall
hold in trust for the benefit of Securityholders or the Trustee
all money held by the Paying Agent for the payment of principal
(or Accreted Value, as the case may be) of or any liquidated
damages or interest on the Securities and shall notify the
Trustee of any default by the Company in making any such payment.
If the Company or a Subsidiary acts as Paying Agent, it shall
segregate the money held by it as Paying Agent and hold it as a
separate trust fund. The Company at any time may require a
Paying Agent to pay all money held by it to the Trustee and to
account for any funds disbursed by the Paying Agent. Upon
complying with this Section, the Paying Agent shall have no
further liability for the money delivered to the Trustee.
SECTION 2.05. Securityholder Lists. The Trustee shall
--------------------
preserve in as current a form as is reasonably practicable the
most recent list available to it of the names and addresses of
Securityholders. If the Trustee is not the Registrar, the
Company shall furnish to the Trustee, in writing at least five
Business Days before each interest payment date and at such other
times as the Trustee may request in writing, a list in such form
and as of such date as the Trustee may reasonably require of the
names and addresses of Securityholders.
SECTION 2.06. Transfer and Exchange. (a) Transfer
--------------------- --------
and Exchange of Definitive Securities. When Definitive
-------------------------------------
Securities are presented to the Registrar with a request:
(x) to register the transfer of such Definitive
Securities; or
(y) to exchange such Definitive Securities for an
equal principal amount of Definitive Securities of other
authorized denominations,
the Registrar shall register the transfer or make the exchange as
requested if its reasonable requirements for such transaction are
met; provided, however, that the Definitive Securities
-------- -------
surrendered for transfer or exchange:
(i) shall be duly endorsed or accompanied by a
written instrument of transfer in form reasonably
satisfactory to the Company and the Registrar or
coregistrar, duly executed by the Holder thereof or his
attorney duly authorized in writing; and
(ii) in the case of Transfer Restricted Securities
that are Definitive Securities, are being transferred
or exchanged pursuant to an effective registration
statement under the Securities Act or pursuant to
clause (A), (B) or (C) below, and are accompanied by
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the following additional information and documents, as
applicable:
(A) if such Transfer Restricted Securities
are being delivered to the Registrar by a Holder
for registration in the name of such Holder,
without transfer, a certification from such Holder
to that effect (in the form set forth on the
reverse of the Security); or
(B) if such Transfer Restricted Securities
are being transferred to the Company or to a QIB
in accordance with Rule 144A under the Securities
Act, a certification to that effect (in the form
set forth on the reverse of the Security); or
(C) if such Transfer Restricted Securities
are being transferred (w) pursuant to an exemption
from registration in accordance with Rule 144 or
Regulation S under the Securities Act; or (x) to
an institutional "accredited investor" within the
meaning of Rule 501(a)(1), (2), (3) or (7) under
the Securities Act that is acquiring the security
for its own account, or for the account of such an
institutional accredited investor, in each case in
a minimum principal amount of the Securities of
$250,000 for investment purposes and not with a
view to, or for offer or sale in connection with,
any distribution in violation of the Securities
Act; or (y) in reliance on another exemption from
the registration requirements of the Securities
Act: (i) a certification to that effect (in the
form set forth on the reverse of the Security),
(ii) if the Company or Registrar so requests, an
Opinion of Counsel, certifications and/or other
information reasonably acceptable to the Company
and to the Registrar to the effect that such
transfer is in compliance with the Securities Act
and (iii) in the case of clause (x), a signed
letter substantially in the form of Exhibit C
hereto.
(b) Restrictions on Transfer of a Definitive Security
-------------------------------------------------
for a Beneficial Interest in a Global Security. A Definitive
----------------------------------------------
Security may not be exchanged for a beneficial interest in a
Global Security except upon satisfaction of the requirements set
forth below. Upon receipt by the Trustee of a Definitive
Security, duly endorsed or accompanied by appropriate instruments
of transfer, in form satisfactory to the Trustee, together with:
(i) if such Definitive Security is a Transfer
Restricted Security, certification, in the form set forth on
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<PAGE>
the reverse of the Security, that such Definitive Security
is being transferred to a QIB in accordance with Rule 144A
under the Securities Act; and
(ii) whether or not such Definitive Security is a
Transfer Restricted Security, written instructions directing
the Trustee to make, or to direct the Securities Custodian
to make, an adjustment on its books and records with respect
to such Global Security to reflect an increase in the
aggregate principal amount of the Securities represented by
the Global Security,
then the Trustee shall cancel such Definitive Security and cause,
or direct the Securities Custodian to cause, in accordance with
the standing instructions and procedures existing between the
Depository and the Securities Custodian, the aggregate principal
amount of Securities represented by the Global Security to be
increased accordingly. If no Global Securities are then
outstanding, the Company shall issue and the Trustee shall
authenticate, upon written order of the Company in the form of an
Officers' Certificate, a new Global Security in the appropriate
principal amount.
(c) Transfer and Exchange of Global Securities. The
------------------------------------------
transfer and exchange of Global Securities or beneficial
interests therein shall be effected through the Depository, in
accordance with this Indenture (including applicable restrictions
on transfer set forth herein, if any) and the procedures of the
Depository therefor.
(d) Transfer of a Beneficial Interest in a Global
---------------------------------------------
Security for a Definitive Security.
----------------------------------
(i) Subject to Section 2.01(c) any person having a
beneficial interest in a Global Security that is being
transferred or exchanged pursuant to an effective
registration statement under the Securities Act or pursuant
to clause (A),(B) or (C) below may upon request, and if
accompanied by the information specified below, exchange
such beneficial interest for a Definitive Security of the
same aggregate principal amount. Upon receipt by the
Trustee of written instructions or such other form
of.instructions as is customary for the Depository from the
Depository or its nominee on behalf of any Person having a
beneficial interest in a Global Security and upon receipt by
the Trustee of a written order or such other form of
instructions as is customary for the Depository or the
Person designated by the Depository as having such a
beneficial interest in a Transfer Restricted Security only,
the following additional information and documents (all of
which may be submitted by facsimile);
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(A) if such beneficial interest is being
transferred to the Person designated by the Depository
as being the owner of a beneficial interest in a Global
Security, a certification from such Person to that
effect (in the form set forth on the reverse of the
Security); or
(B) if such beneficial interest is being
transferred to a QIB in accordance with Rule 144A under
the Securities Act, a certification to that effect (in
the form set forth on the reverse of the Security); or
(C) if such beneficial interest is being
transferred (w) pursuant to an exemption from
registration in accordance with Rule 144 or Regulation
S under the Securities Act; or (x) to an institutional
"accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act
that is acquiring the security for its own account, or
for the account of such an institutional accredited
investor, in each case in a minimum principal amount of
the Securities of $250,000 for investment purposes and
not with a view to, or for offer or sale in connection
with, any distribution in violation of the Securities;
or (y) in reliance on another exemption from the
registration requirements of the Securities Act: (i) a
certification to that effect from the transferee or
transferor (in the form set forth on the reverse of the
Security), (ii) if the Company or Registrar so
requests, an opinion of Counsel, certifications and/or
other information from the transferee or transferor
reasonably acceptable to the Company and to the
Registrar to the effect that such transfer is in
compliance with the Securities Act, and (iii) in the
case of clause (x), a signed letter in the form of
Exhibit C hereto;
then the Trustee or the Securities Custodian, at the direction of
the Trustee, will cause, in accordance with the standing
instructions and procedures existing between the Depository and
the Securities Custodian, the aggregate principal amount of the
Global Security to be reduced on its books and records and,
following such reduction, the Company will execute and the
Trustee will authenticate and deliver to the transferee a
Definitive Security.
(ii) Definitive Securities issued in exchange for a
beneficial interest in a Global Security pursuant to this Section
2.06(d) shall be registered in such names and in such authorized
denominations as the Depository, pursuant to instructions from
its direct or indirect participants or otherwise, shall instruct
the Trustee. The Trustee shall deliver such Definitive
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<PAGE>
Securities to the persons in whose names such Securities are so
registered in accordance with the instructions of the Depository.
(e) Restrictions on Transfer and Exchange of Global
-----------------------------------------------
Securities. Notwithstanding any other provisions of this
----------
Indenture (other than the provisions set forth in subsection (f)
of this Section 2.06), a Global Security may not be transferred
as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or
another nominee of the Depository or by the Depository or any
such nominee to a successor Depository or a nominee of such
successor Depository.
(f) Authentication of Definitive Securities. If at
---------------------------------------
any time:
(i) the Depository notifies the Company that the
Depository is unwilling or unable to continue as Depository
for the Global Securities and a successor Depository for the
Global Securities is not appointed by the Company within 90
days after delivery of such notice; or
(ii) the Company, in its sole discretion, notifies the
Trustee in writing that it elects to cause the issuance of
Definitive Securities under this Indenture,
then the Company will execute, and the Trustee, upon receipt of a
written order of the Company signed by two Officers or by an
Officer and either an Assistant Treasurer or an Assistant
Secretary of the Company requesting the authentication and
delivery of Definitive Securities to the Persons designated by
the Company, will authenticate and deliver Definitive Securities,
in an aggregate principal amount equal to the principal amount of
Global Securities, in exchange for such Global Securities.
(g) Legend.
------
(i) Except as permitted by the following
paragraph (ii), each Security certificate evidencing
the Global Securities and the Definitive Securities
(and all Securities issued in exchange therefor or
substitution thereof) shall bear a legend in
substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION
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<PAGE>
IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES
TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO
THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH
IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR
ANY PREDECESSOR OF SUCH SECURITY)I ONLY (A) TO THE COMPANY,
(B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG
AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE
THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER
THE SECURITIES ACT, (E) TO AN INSTITUTIONAL ACCREDITED
INVESTOR WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR
(7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY
FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM
PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR
SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE IS
RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO
CLAUSE (D)i (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND IN THE CASE OF THE
FOREGOING CLAUSES (A)-(F), A CERTIFICATE OF TRANSFER IN THE
FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE COMPANY AND
THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST
OF THE HOLDER,AFTER THE RESALE RESTRICTION TERMINATION
DATE."
(ii) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security
represented by a Global Security) pursuant to Rule 144 under
the Securities Act or an effective registration statement
under the Securities Act:
(A) in the case of any Transfer Restricted
Security that is a Definitive Security, the Registrar
shall permit the Holder thereof to exchange such
Transfer Restricted Security for a Definitive Security
that does not bear the legend set forth above and
rescind any restriction on the transfer of such
Transfer Restricted Security; and
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<PAGE>
(B) any such Transfer Restricted Security
represented by a Global Security shall not be subject
to the provisions set forth in clause (i) of this
Section 2.06(g) (such sales or transfers being subject
only to the provisions of Section 2.06(e) hereof);
provided, however, that with respect to any request for
-------- -------
an exchange of a Transfer Restricted Security that is
represented by a Global Security for a Definitive
Security that does not bear a legend, which request is
made in reliance upon Rule 144, the Holder thereof
shall certify in writing to the Registrar that such
request is being made pursuant to Rule 144 (such
certification to be in the form set forth on the
reverse of the Security).
(h) Cancellation or Adjustment of Global Security. At
---------------------------------------------
such time as all beneficial interests in a Global Security have
either been exchanged for Definitive Securities, redeemed,
repurchased or canceled, such Global Security shall be returned
to the Depository for cancellation or retained and canceled by
the Trustee. At any time prior to such cancellation, if any
beneficial interest in a Global Security is exchanged for
Definitive Securities, redeemed, repurchased or canceled, the
principal amount of Securities represented by such Global
Security shall be reduced and an adjustment shall be made on the
books and records of the Trustee (if it is then the Securities
Custodian for such Global Security) with respect to such Global
Security, by the Trustee or the Securities Custodian, to reflect
such reduction.
(i) Obligations with Respect to Transfers and
-----------------------------------------
Exchanges of Securities.
-----------------------
(i) To permit registrations of transfers and
exchanges, the Company shall execute and the Trustee shall
authenticate Definitive Securities and Global Securities at
the Registrar's or co-registrar's request.
(ii) No service charge shall be made for any
registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer
tax, assessments, or similar governmental charge payable in
connection therewith.
(iii) The Registrar or co-registrar shall not be
required to register the transfer of or exchange of (a) any
Definitive Security selected for redemption in whole or in
part pursuant to Article III, except the unredeemed portion
of any Definitive Security being redeemed in part, or (b)
any Security for a period beginning 15 Business Days before
the mailing of a notice of an offer to repurchase or redeem
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<PAGE>
Securities or 15 Business Days before an interest payment
date.
(iv) Prior to the due presentation for registration of
transfer of any Security, the Company, the Trustee, the
Paying Agent, the Registrar or any coregistrar may deem and
treat the person in whose name a Security is registered as
the absolute owner of such Security for the purpose of
receiving payment of principal (or Accreted Value, as the
case may be) of and any liquidated damages and interest on
such Security and for all other purposes whatsoever, whether
or not such Security is overdue, and none of the Company,
the Trustee, the Paying Agent, the Registrar or any co-
registrar shall be affected by notice to the contrary.
(v) All Securities issued upon any transfer or
exchange pursuant to the terms of this Indenture shall
evidence the same debt and shall be entitled to the same
benefits under this Indenture as the Securities surrendered
upon such transfer or exchange.
(j) No Obligation of the Trustee. (i) The Trustee
----------------------------
shall have no responsibility or obligation to any beneficial
owner of a Global Security, a member of, or a participant in the
Depository or other Person with respect to the accuracy of the
records of the Depository or its nominee or of any participant or
member thereof, with respect to any ownership interest in the
Securities or with respect to the delivery to any participant,
member, beneficial owner or other Person (other than the
Depository) of any notice (including any notice of redemption) or
the payment of any amount, under or with respect to such
Securities. All notices and communications to be given to the
Holders and all payments to be made to Holders under the
Securities shall be given or made only to or upon the order of
the registered Holders (which shall be the Depository or its
nominee in the case of a Global Security). The rights of
beneficial owners in any Global Security shall be exercised only
through the Depository subject to the applicable rules and
procedures of the Depository. The Trustee may rely and shall be
fully protected in relying upon information furnished by the
Depository with respect to its members, participants and any
beneficial owners.
(ii) The Trustee shall have no obligation or duty to
monitor, determine or inquire as to compliance with any
state or federal securities laws or any restrictions on
transfer imposed under this Indenture or under applicable
law with respect to any transfer of any interest in any
Security (including any transfers between or among
Depository participants, members or beneficial owners in any
Global Security) other than (to the extent the Securities
are held in definitive or certificated form, but not with
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<PAGE>
respect to any Global Security) to require delivery of such
certificates and other documentation or evidence as are
expressly required by, and to do so if and when expressly
required by, the terms of this Indenture, and to examine the
same to determine substantial compliance as to form with the
express requirements hereof.
SECTION 2.07. Replacement Securities. If a mutilated
----------------------
Security is surrendered to the Registrar or if the Holder of a
Security claims that the Security has been lost, destroyed or
wrongfully taken, the Company shall issue and the Trustee shall
authenticate a replacement Security if the requirements of
Section 8-405 of the Uniform Commercial Code are met and the
Holder satisfies any other reasonable requirements of the
Trustee. If required by the Trustee or the Company, such Holder
shall furnish an indemnity bond sufficient in the judgment of the
Company and the Trustee to protect the Company, the Trustee, the
Paying Agent, the Registrar and any co-registrar from any loss
which any of them may suffer if a Security is replaced. The
Company and the Trustee may charge the Holder for their expenses
in replacing a Security.
Every replacement Security is an additional obligation
of the Company.
SECTION 2.08. Outstanding Securities. Securities
----------------------
outstanding at any time are all Securities authenticated by the
Trustee except for those canceled by it, those delivered to it
for cancellation and those described in this Section as not
outstanding. A Security does not cease to be outstanding because
the Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.07, it
ceases to be outstanding unless the Trustee and the Company
receive proof satisfactory to them that the replaced Security is
held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in
accordance with this Indenture, on a redemption date or maturity
date money sufficient to pay all principal (or Accreted Value, as
the case may be) and any liquidated damages and interest payable
on that date with respect to the Securities (or portions thereof)
to be redeemed or maturing, as the case may be, and the Paying
Agent is not prohibited from paying such money to the
Securityholders on that date pursuant to the terms of this
Indenture, then on and after that date such Securities (or
portions thereof) cease to be outstanding and interest on them
ceases to accrue.
SECTION 2.09. Temporary Securities. (a) Until
--------------------
Definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities.
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<PAGE>
Temporary Securities shall be substantially in the form of
Definitive Securities but may have variations that the Company
considers appropriate for temporary Securities. Without
unreasonable delay, the Company shall prepare and the Trustee
shall authenticate Definitive Securities and deliver them in
exchange for temporary Securities.
(b) A Global Security deposited with the Depository or
with the Trustee as custodian for the Depository pursuant to
Section 2.01 shall be transferred to the beneficial owners
thereof only if such transfer complies with Section 2.06 and (i)
the Depository notifies the Company that it is unwilling or
unable to continue as Depository for such Global Security or if
at any time such Depository ceases to be a "clearing agency"
registered under the Exchange Act and a successor depositary is
not appointed by the Company within 90 days of such notice, or
(ii) an Event of Default has occurred and is continuing.
(c) Any Global Security that is transferable to the
beneficial owners thereof pursuant to this Section shall be
surrendered by the Depository to the Trustee located in the
Borough of Manhattan, The City of New York, to be so transferred,
in whole or from time to time in part, without charge, and the
Trustee shall authenticate and deliver, upon such transfer of
each portion of such Global Security, an equal aggregate
principal amount of Initial Notes of authorized denominations.
Any portion of a Global Security transferred pursuant to this
Section shall be executed, authenticated and delivered only in
principal denominations of $1,000 and any integral multiple
thereof and registered in such names as the Depository shall
direct. Any Initial Note delivered in exchange for an interest
in the Global Security shall, except as otherwise provided by
Section 2.06(b), bear the Restricted Securities Legend set forth
in Exhibit A hereto.
(d) Subject to the provisions of Section 2.09(c), the
registered Holder of a Global Security may grant proxies and
otherwise authorize any Person, including Agent Members and
Persons that may hold interests through Agent Members, to take
any action which a Holder is entitled to take under this
Indenture or the Securities.
(e) In the event of the occurrence of either of the
events specified in Section 2.09(b), the Company will promptly
make available to the Trustee a reasonable supply of certificated
Securities in definitive, fully registered form without interest
coupons.
SECTION 2.10. Cancellation. The Company at any time
------------
may deliver Securities to the Trustee for cancellation. The
Registrar and the Paying Agent shall forward to the Trustee any
Securities surrendered to them for registration of transfer,
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<PAGE>
exchange or payment. The Trustee and no one else shall cancel
and destroy (subject to the record retention requirements of the
Exchange Act) all Securities surrendered for registration of
transfer, exchange, payment or cancellation and deliver a
certificate of such destruction to the Company unless the
Company, prior to such cancellation or destruction, the Trustee
receives written directions from the Company to deliver canceled
Securities to the Company. The Company may not issue new
Securities to replace Securities it has redeemed, paid or
delivered to the Trustee for cancellation.
SECTION 2.11. Defaulted Interest. If the Company
------------------
defaults in a payment of interest or liquidated damages on the
Securities, the Company shall pay defaulted interest on such
interest or liquidated damages, as the case may be (plus interest
on such defaulted interest to the extent lawful), in any lawful
manner. The Company may pay the defaulted interest to the
persons who are Securityholders on a subsequent special record
date. The Company shall fix or cause to be fixed any such
special record date and payment date to the reasonable
satisfaction of the Trustee which specified record date shall not
be less than 10 days prior to the payment date for such defaulted
interest and shall promptly mail to each Securityholder a notice
that states the special record date, the payment date and the
amount of defaulted interest to be paid. The Company shall
notify the Trustee in writing of the amount of defaulted interest
proposed to be paid on each Security and the date of the proposed
payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed
to be paid in respect of such defaulted interest or shall make
arrangements satisfactory to the Trustee for such deposit prior
to the date of the proposed payment, such money when deposited to
be held in trust for the benefit of the Person entitled to such
defaulted interest as in this subsection provided.
SECTION 2.12. CUSIP Numbers. The Company in issuing
-------------
the Securities may use "CUSIP" numbers (if then generally in use)
and, if so, the Trustee shall use "CUSIP" numbers in notices of
redemption as a convenience to Holders; provided, however, that
-------- -------
any such notice may state that no representation is made as to
the correctness of such numbers either as printed on the
Securities or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers
printed on the Securities, and any such redemption shall not be
affected by any defect in or omission of such numbers.
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<PAGE>
ARTICLE 3
Redemption
----------
SECTION 3.01. Notices to Trustee. If the Company
------------------
elects to redeem Securities pursuant to paragraph 5 of the
Securities, it shall notify the Trustee in writing of the
redemption date and the principal amount of Securities to be
redeemed.
The Company shall give each notice to the Trustee
provided for in this Section at least 60 days before the
redemption date unless the Trustee consents to a shorter period.
Such notice shall be accompanied by an Officers' Certificate and
an Opinion of Counsel from the Company to the effect that such
redemption will comply with the conditions herein.
SECTION 3.02. Selection of Securities To Be Redeemed.
--------------------------------------
If fewer than all the Securities are to be redeemed, the Trustee
shall select the Securities to be redeemed pro rata or by lot or
by a method that complies with applicable legal and securities
exchange requirements, if any, and that the Trustee considers
fair and appropriate and in accordance with methods generally
used at the time of selection by fiduciaries in similar
circumstances. The Trustee shall make the selection from
outstanding Securities not previously called for redemption. The
Trustee may select for redemption portions of the principal of
Securities that have denominations larger than $1,000.
Securities and portions of them the Trustee selects shall be in
amounts of $1,000 or a whole multiple of $1,000. Provisions of
this Indenture that apply to Securities called for redemption
also apply to portions of Securities called for redemption. The
Trustee shall notify the Company promptly of the Securities or
portions of Securities to be redeemed.
SECTION 3.03. Notice of Redemption. At least 30 days
--------------------
but not more than 60 days before a date for redemption of
Securities, the Company shall mail a notice of redemption by
first-class mail to each Holder of Securities to be redeemed.
The notice shall identify the Securities to be redeemed
and shall state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be
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<PAGE>
surrendered to the Paying Agent to collect the redemption
price;
(5) if fewer than all the outstanding Securities are
to be redeemed, the identification and principal amounts of
the particular Securities to be redeemed;
(6) that, unless the Company defaults in making such
redemption payment or the Paying Agent is prohibited from
making such payment pursuant to the terms of this Indenture,
interest or liquidated damages, if any, on Securities (or
portion thereof) called for redemption ceases to accrue and
the Accreted Value of the Securities ceases to accrete on
and after the redemption date;
(7) the CUSIP number, if any, printed on the
Securities being redeemed; and
(8) that no representation is-made as to the
correctness or accuracy of the CUSIP number, if any, listed
in such notice or printed on the Securities.
At the Company's written request, the Trustee shall
give the notice of redemption in the Company's name and at the
Company's expense. In such event, the Company shall provide the
Trustee with the information required by this Section.
SECTION 3.04. Effect of Notice of Redemption. Once
------------------------------
notice of redemption is mailed, Securities called for redemption
become due and payable on the redemption date and at the
redemption price stated in the notice. Upon surrender to the
Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued and unpaid interest, if
any, to the redemption date; provided that if the redemption date
--------
is after a regular record date and on or prior to an interest
payment date, the accrued interest and liquidated damages, if
any, shall be payable to the Securityholder of the redeemed
Securities registered on the relevant record date. Failure to
give notice or any defect in the notice to any Holder shall not
affect the validity of the notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. Prior to
---------------------------
the redemption date, the Company shall deposit with the Paying
Agent (or, if the Company or a Subsidiary is the Paying Agent,
shall segregate and hold in trust) money sufficient to pay the
redemption price of and accrued interest and liquidated damages,
if any, on all Securities to be redeemed on that date other than
Securities or portions of Securities called for redemption which
have been delivered by the Company to the Trustee for
cancellation.
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<PAGE>
SECTION 3.06. Securities Redeemed in Part. Upon
---------------------------
surrender of a Security teat is redeemed in part, the Company
shall execute and the Trustee shall authenticate for the Holder
(at the Company's expense) a new Security equal in principal
amount to the unredeemed portion of the Security surrendered.
ARTICLE 4
Covenants
---------
SECTION 4.01. Payment of Securities. The Company shall
---------------------
promptly pay the principal (or the Accreted Value, as the case
may be) of, any liquidated damages and interest on the Securities
on the dates and in the manner provided in the Securities and in
this Indenture. Principal (or the Accreted Value, as the case
may be), any liquidated damages and interest shall be considered
paid on the date due if on such date the Trustee or the Paying
Agent holds in accordance with this Indenture money sufficient to
pay all principal (or the Accreted Value, as the liquidated
damages and interest then due the Paying Agent, as the case may
be, is paying such money to the Securityholders pursuant to the
terms of this Indenture.
The Company shall pay interest on overdue principal (or
the Accreted Value, as the case may be) at the rate specified
therefor in the Securities, and it shall pay case may be), any
and the Trustee or not prohibited from on that date interest on
overdue installments of interest or liquidated damages at the
same rate to the extent lawful.
SECTION 4.02. SEC Reports. The Company shall file with
-----------
the Trustee and provide current (at their addresses as set forth
in the register of Securities), within 15 days after it files
them with the SEC, copies of its annual report and the
information, documents and other reports which the Company is
required to file with the SEC pursuant to Section 13 or 15(d) of
the Exchange Act. Notwithstanding that the Company may not be
required to remain or be subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall
provide the Trustee and current (at their addresses as set forth
in the register of Securities) and prospective Securityholders
with the annual, quarterly and other reports at the times and
containing in all material respects the information specified in
Sections 13 and 15(d) of the Exchange Act, except that the
Company shall not be required to disclose detailed management
remuneration information, such as the amount and nature of the
compensation received by individual executive officers of the
Company. The Company also shall comply with the other provisions
of TIA (Section) 314(a).
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<PAGE>
SECTION 4.03. Limitation on Indebtedness. (a) The
--------------------------
Company shall not, and shall not permit any Restricted Subsidiary
to, Incur any Indebtedness; provided, however, that the Company
-------- -------
may Incur Indebtedness if on the date thereof the Consolidated
Coverage Ratio would be greater than 2.00:1.00 if such
Indebtedness is Incurred on or prior to June 15, 1999; and
2:50:1.00 if such Indebtedness is Incurred thereafter.
(b) Notwithstanding the foregoing paragraph (a), the
Company and its Restricted Subsidiaries may Incur the following
Indebtedness:
(i) Indebtedness under the Senior Bank Facility (as
the same may be amended from time to time, without
increasing the committed amount outstanding, except as
otherwise permitted by this Section) and any Refinancing
Indebtedness with respect thereto or Indebtedness under any
other credit agreement, indenture or agreement in an
aggregate principal amount on the date of Incurrence which,
when added to all other Indebtedness Incurred pursuant to
this clause (i) and then outstanding, shall not exceed the
sum of the outstanding Indebtedness under the Senior Bank
Facility on the Issue Date and the unused commitments
thereunder on the Issue Date; provided, however, that the
-------- -------
aggregate principal amount of Indebtedness that may be
Incurred pursuant to this clause (i) may not cause the
aggregate principal amount of Indebtedness outstanding
pursuant to this clause (i) to exceed, as of the date of
such Incurrence, the Scheduled Amount. The "Scheduled
Amount" is equal to $600,000,000, as reduced from time to
time by an amount equal to (A) each scheduled principal
amortization payment and (B) each mandatory prepayment
(other than mandatory prepayments in respect of the
Company's consolidated excess cash flow) which the Company
is required to make pursuant to the terms of the Senior Bank
Facility as in effect on the Issue Date;
(ii) Indebtedness (A) of the Company owing to and held
by any Wholly Owned Subsidiary, (B) of any Restricted
Subsidiary owing to and held by the Company or any other
Wholly Owned Subsidiary, provided, however, that any
-------- -------
subsequent issuance or transfer of any Capital Stock or any
other event which results in any such Wholly Owned
Subsidiary ceasing to be a Wholly Owned Subsidiary or any
subsequent transfer of any such Indebtedness (other than to
the Company or a Wholly Owned Subsidiary) shall be deemed,
in each case, to constitute the Incurrence of such
Indebtedness by the issuer thereof;
(iii) Indebtedness represented by the Securities,
any Indebtedness (other than the Indebtedness described in
clauses (i) and (ii) above and Indebtedness of any of the
Co-Venture Subsidiaries or Co-Venture Partnerships)
-45-
<PAGE>
outstanding on the date of this Indenture and any
Refinancing Indebtedness Incurred in respect of any
Indebtedness described in this clause (iii);
(iv) Indebtedness of the Company and its Restricted
Subsidiaries (A) in respect of performance bonds, bankers'
acceptances and surety or appeal bonds provided by the
Company and the Restricted Subsidiaries to their customers
in the ordinary course of their business, and (B) under
Currency Agreements and Interest Rate Agreements entered
into in the ordinary course of business consistent with past
practices; provided, however, that in the case of Currency
-------- -------
Agreements and Interest Rate Agreements, such Currency
Agreements and Interest Rate Agreements do not increase the
Indebtedness of the Company outstanding at any time other
than as a result of fluctuations in foreign currency
exchange rates or interest rates or by reason of fees,
indemnities and compensation payable thereunder;
(v) Indebtedness of a Restricted Subsidiary issued and
outstanding on or prior to the date on which such Restricted
Subsidiary was acquired by the Company (other than
Indebtedness Incurred (A) as consideration in, or to provide
all or any portion of the funds or credit support utilized
to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary
became a Restricted Subsidiary or was acquired by the
Company or (B) otherwise in connection with, or in
contemplation of, such acquisition) and any Refinancing
Indebtedness with respect thereto;
(vi) additional Indebtedness of the Company, any of the
Co-Venture Subsidiaries or any of the Co-Venture
Partnerships in an aggregate principal amount outstanding at
any time not in excess of $30,000,000 which Indebtedness
may, but need not, be incurred under the Senior Bank
Facility or any Refinancing Indebtedness in respect thereof;
and
(vii) Indebtedness represented by the Note
Guarantees, Guarantees of Indebtedness Incurred pursuant to
clause (i) above and Guarantees of Indebtedness of the
Company Incurred pursuant to clause (vi) above.
(c) Notwithstanding any other provision of this
Section, the Company shall not Incur any Indebtedness (i) if the
proceeds thereof are used, directly or indirectly, to repay,
prepay, redeem, defease, retire, refund or refinance any
Subordinated Obligations unless such Indebtedness shall be
subordinated to the Securities to at least the same extent as
such Subordinated Obligations or (ii) if such Indebtedness is
subordinate or junior in ranking in any respect to any Senior
-46-
<PAGE>
Indebtedness unless such Indebtedness is Senior Subordinated
Indebtedness or is expressly subordinated in right of payment to
Senior Subordinated Indebtedness. In addition, the Company shall
not Incur any secured Indebtedness (other than Senior
Indebtedness) unless contemporaneously therewith effective
provision is made to secure the Securities equally and ratably
with such secured Indebtedness for so long as such secured
Indebtedness is secured by a Lien.
SECTION 4.04. Limitation on Restricted Payments. (a)
---------------------------------
The Company shall not, and shall not permit any Restricted
Subsidiary, directly or indirectly, to (i) declare or pay any
dividend or make any distribution on or in respect of its Capital
Stock (including any payment in connection with any merger or
consolidation involving the Company) except dividends or
distributions payable solely in its Capital Stock (other than
Disqualified Stock) or in options, warrants or other rights to
purchase such Capital Stock and except dividends or distributions
payable to the Company or another Restricted Subsidiary (and, if
such Restricted Subsidiary is not a Wholly owned Subsidiary, to
its other shareholders on a pro rata basis or, with respect
solely to each of the Co-Venture Partnerships, or their
successors, in such proportion and in such order of priority as
may be provided for in the respective agreements in effect from
time to time between the Company (or the applicable Co-Venture
Subsidiary) and the limited partner or partners of such Co-
Venture Partnership relating to the theme park owned as of the
Issue Date by the applicable Co-Venture Partnership), (ii)
purchase, redeem, retire or otherwise acquire for value any
Capital Stock of the Company or any Restricted Subsidiary held by
Persons other than the Company or another Restricted Subsidiary,
(iii) purchase, repurchase, redeem, defease or otherwise acquire
or retire for value, prior to scheduled maturity,.scheduled
repayment or scheduled sinking fund payment any Subordinated
Obligations (other than the purchase, repurchase or other
acquisition of Subordinated Obligations purchased in anticipation
of satisfying a sinking fund obligation, principal installment or
final maturity, in each case due with'-@n one year of the date of
acquisition) or (iv) make any Investment (other than a Permitted
Investment) in any Person (any such dividend, distribution,
purchase, redemption, repurchase, defeasance, other acquisition,
retirement or Investment being herein referred to as a
"Restricted Payment") if at the time the Company or such
Restricted Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing
(or would result therefrom);
(2) the Company could not Incur at least $1.00 of
additional Indebtedness pursuant to Section 4.03(a); or
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<PAGE>
(3) the aggregate amount of such Restricted Payment
and all other Restricted Payments (the amount so expended,
if other than in cash, to be determined in good faith by the
Board of Directors, whose determination shall be conclusive
and evidenced by a resolution of the Board of Directors)
declared or made subsequent to the Issue Date would exceed
the sum of:
(A) 50% of an amount equal to EBITDA minus
Consolidated Interest Expense, Capital Expenditures and
the cash portion of income tax expense during the
period (treated as,one accounting period) from the
Issue Date to the end of the most recent fiscal quarter
ending at least 45 days prior to the date of such
Restricted Payment (or, in case such amount shall be a
deficit, minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received by
the Company from the issue or sale of its Capital Stock
(other than Disqualified Stock) subsequent to the Issue
Date (other than an issuance or sale to a Subsidiary of
the Company or an employee stock ownership plan or
similar trust established by the Company or any of its
Restricted Subsidiaries) or voluntary cash capital
contributions made to the Company subsequent to the
Issue Date;
(C) the aggregate Net Cash Proceeds received by
the Company from the issue or sale of its Capital Stock
(other than Disqualified Stock) to an employee stock
ownership plan or similar trust established by the
Company or any of its Restricted Subsidiaries
subsequent to the Issue Date; provided, however, that
-------- -------
if such plan or trust Incurs any Indebtedness to or
Guaranteed by the Company to finance the acquisition of
such Capital Stock, such aggregate amount shall be
limited to any increase in the Consolidated Net Worth
of the Company resulting from principal repayments made
by such plan or trust with respect to Indebtedness
Incurred by it to finance the purchase of such Capital
Stock;
(D) the amount by which Indebtedness of the
Company is reduced on the Company's balance sheet upon
the conversion or exchange (other than by a Subsidiary)
subsequent to the Issue Date of any Indebtedness of the
Company into or for Capital Stock (other than
Disqualified Stock) of the Company (less the amount of
any cash or other property distributed by the Company
upon such conversion or exchange); and
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<PAGE>
(E) the amount equal to the net reduction in
Investments in Unrestricted Subsidiaries resulting from
(i) payments of dividends, repayments of loans or
advances or other transfers of assets to the Company or
any Restricted Subsidiary from Unrestricted
Subsidiaries or (ii) the redesignation of Unrestricted
Subsidiaries as Restricted Subsidiaries (valued in each
case as provided in the definition of "Investment") not
to exceed, in the case of any Unrestricted Subsidiary,
the amount of Investments previously made by the
Company or any Restricted Subsidiary in such
Unrestricted Subsidiary, which amount was included in
the calculation of the amount of Restricted Payments.
(b) The provisions of the foregoing paragraph (a)
shall not prohibit:
(i) any purchase or redemption of Capital Stock of the
Company or Subordinated Obligations of the Company made by
exchange for, or out of the proceeds of the substantially
concurrent sale of, Capital Stock of the Company (other than
Disqualified Stock and other than Capital Stock issued or
sold to a Subsidiary or an employee stock ownership plan or
similar trust established by the Company or any of its
Restricted Subsidiaries) or of a voluntary cash capital
contribution to the Company; provided, however, that (A)
-------- -------
such purchase or redemption shall be excluded in the
calculation of the amount of Restricted Payments and (B) the
Net Cash Proceeds from such sale shall be excluded from
Section 4.04(a)(3)(B);
(ii) any purchase or redemption of Subordinated
obligations made by exchange for, or out of the proceeds of
the substantially concurrent sale of, Indebtedness of the
Company which is permitted to be Incurred pursuant to
Section 4.03; provided, however, that such Indebtedness (A)
-------- -------
shall be subordinated to the Securities and shall be
subordinated to Senior Indebtedness and Senior Subordinated
Indebtedness to at least the same extent as the Subordinated
obligations so exchanged, purchased or redeemed, (B) shall
have a Stated Maturity later than the Stated Maturity of the
Securities and (C) shall have an Average Life greater than
the remaining Average Life of the Securities; provided,
--------
further, however, that such purchase or redemption shall be
excluded in the calculation of the amount of Restricted
Payments;
(iii) any purchase or redemption of Subordinated
Obligations from Net Available Cash to the extent permitted
by Section 4.06; provided, however, that such purchase or
-------- -------
redemption shall be excluded in the calculation of the
amount of Restricted Payments;
-49-
(iv) dividends paid within 60 days after the date of
declaration thereof or Restricted Payments made within 60
days after the making of a binding commitment in respect
thereof, if at such date of declaration or commitment such
dividend or other Restricted Payment would have complied
with Section 4.04(a); provided, however, that at the time of
-------- -------
payment of such dividend or other Restricted Payment, no
other Default shall have occurred and be continuing (or
would result therefrom); provided, further, however, that
-------- ------- -------
such dividend or other Restricted Payment shall be included
in the calculation of the amount of Restricted Payments;
(v) payment of dividends or other distributions by the
Company for the purposes set forth in clauses (A) and (B)
below: (A) to SFEC and/or Holdings to the extent necessary
for SFEC and Holdings to pay (x) reasonable expenses in the
ordinary course of business in connection with preparing and
distributing annual reports, proxy statements and other
financial reports as may be required by applicable law or
stock exchange regulation, (y) state corporate franchise
taxes, directors' fees and directors' meeting expenses,
directors' and officers' insurance premiums, transfer agent
fees and expenses, stock exchange listing fees and expenses
and (z) other reasonable administrative expenses actually
incurred in the ordinary course of business; provided that
--------
the amount permitted to be paid or distributed pursuant to
this clause (z) shall not exceed $1,000,000 in any fiscal
year; and (B) to SFEC or Holdings for Federal, state and
local income taxes and related expenses attributable to 'the
income of the Company and its Restricted Subsidiaries
pursuant to the tax sharing agreement as in effect on the
Issue Date;
(vi) so long as no Event of Default or Default shall
have occurred and be continuing (or would result therefrom),
the declaration and payment of dividends (or the making of
loans or advances), directly or through Holdings, to SFEC
for the purpose of and in an amount which shall not exceed
the amount necessary for the payment in cash of the interest
expense on outstanding Qualified SFEC Replacement Notes as
such interest becomes due and payable in cash;
(vii) so long as no Event of Default or Default
shall have occurred and be continuing (or would result
therefrom), the one-time declaration and payment of a
dividend (or the one-time making of a loan or advance),
directly or through Holdings, to SFEC in an amount no
greater than the amount necessary for the redemption,
repurchase, defeasance or other acquisition or retirement
for value of all outstanding Zero Coupon Notes on or prior
to their Stated Maturity and the payment by SFEC of
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<PAGE>
reasonable and customary fees and expenses incurred in
connection therewith;
(viii) so long as no Event of Default or Default
shall have occurred and be continuing (or would result
therefrom), the purchase, redemption, retirement or other
acquisition by the Company or any Restricted Subsidiary of
limited partnership interests in the limited partners in the
Co-Venture Partnerships, or their successors, in accordance
with and in the manner required by the terms of any
agreement entered into by the Company or any Restricted
Subsidiary of the Company with either such partnership in
connection with the extension beyond December 31, 1997 of
the Company's management arrangements with respect to the
theme park owned as of the Issue Date by the applicable
partnership; or
(ix) dividends or distributions made by the Company to
the extent attributable to the net proceeds of any Non-
Recourse Indebtedness Incurred by Unrestricted Subsidiaries
of the Company. Notwithstanding the foregoing, a payment
made to SFEC or Holdings for any purpose described in clause
(v)(A) of this paragraph shall be deemed to be a payment
permitted by such clause only if, not later than 180 days
following the making of such payment, SFEC or Holdings, as
the case may be, shall either have (i) actually paid the
expenses in respect of which such payment was made, or (ii)
returned to the Company any portion of such payment made in
respect of an expense that has not been paid; provided, that
--------
the return of any such amount shall not prevent the Company
from making a later payment to SFEC or Holdings pursuant to
said clause (v)(A) to the extent then required by SFEC or
Holdings to pay such expense; and, provided further, that if
--------
any amount so returned to the Company pursuant to this
sentence is in respect of a payment made to SFEC or Holdings
in order to pay an expense contemplated by clause (v)(A)(z),
then the amount so returned shall not be included in
calculating the $1,000,000 annual limitation on such
payments set forth therein.
SECTION 4.05. Limitation on Restrictions on
-----------------------------
Distributions from Subsidiaries. The Company shall not, and
-------------------------------
shall not permit any Restricted Subsidiary to, create or
otherwise cause or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to (i) pay dividends or make any other
distributions on its Capital Stock or pay any Indebtedness or
other obligation owed to the Company, (ii) make any loans or
advances to the Company or (iii) transfer any of its property or
assets to the Company, except:
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<PAGE>
(1) any encumbrance or restriction pursuant to an
agreement in effect at or entered into on the Issue Date,
including those arising under the Senior Bank Facility;
(2) any encumbrance or restriction with respect to a
Restricted Subsidiary pursuant to an agreement relating to
any Indebtedness Incurred by such Restricted Subsidiary on
or prior to the date on which such Restricted Subsidiary was
acquired by the Company (other than Indebtedness Incurred as
consideration in, or to provide all or any portion of the
funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to
which such Restricted Subsidiary became a Restricted
Subsidiary or was acquired by the Company) and outstanding
on such date;
(3) any encumbrance or restriction with respect to a
Restricted Subsidiary pursuant to an agreement effecting the
Incurrence of Refinancing Indebtedness with respect to
Indebtedness Incurred pursuant to an agreement referred to
in clause (1) or (2) of this Section or contained in any
amendment to an agreement referred to in clause (1) or (2)
of this Section; provided, however, that the encumbrances
-------- -------
and restrictions with respect to any Restricted Subsidiary
contained in any such Refinancing Indebtedness agreement or
amendment are no less favorable to the Securityholders than
encumbrances and restrictions contained in such agreements;
(4) in the case of clause (iii), any encumbrance or
restriction (A) that restricts in a customary manner the
subletting, assignment or transfer of any property or asset
that is subject to a lease, license, conveyance or contract
or similar property or asset, (B) by virtue of any transfer
of, agreement to transfer, option or right with respect to,
or Lien on, any property or assets of the Company or any
Restricted Subsidiary not otherwise prohibited by this
Indenture, (C) arising or agreed to in the ordinary course
of business and that does not, individually or in the
aggregate, detract from the value of property or assets of
the Company or any Restricted Subsidiary in any manner
material to the Company or such Restricted Subsidiary or (D)
contained in security agreements securing Indebtedness of a
Restricted Subsidiary to the extent such encumbrance or
restrictions restrict the transfer of the property subject
to such security agreements;
(5) any restriction with respect to a Restricted
Subsidiary imposed pursuant to an agreement entered into for
the sale or disposition of all or substantially all the
Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition; and
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<PAGE>
(6) any encumbrance or restriction with respect to a
Co-Venture Partnership imposed pursuant to the applicable
agreement in effect from time to time between the Company
(or the applicable Co-Venture Subsidiary) and the limited
partner or partners of each Co-Venture Partnership.
SECTION 4.06. Limitation on Sales of Assets and
---------------------------------
Subsidiary Stock. (a) The Company shall not, and shall not permit
----------------
any Restricted Subsidiary to, make any Asset Disposition unless
(i) the Company or such Restricted Subsidiary receives
consideration at the time of such Asset Disposition at least
equal to the fair market value, as determined in good faith by
the Board of Directors (including as to the value of all noncash
consideration), of the shares and assets subject to such Asset
Disposition, (ii) at least 75% of the consideration thereof
received by the Company or such Restricted Subsidiary is in the
form of cash or cash equivalents provided, however, that in
-------- -------
respect of an Asset Disposition, more than 25% of the
consideration may consist of consideration other than cash or
cash equivalents if (A) the portion of such consideration that
does not consist of cash or cash equivalents consists of assets
of a type ordinarily used in the operation of theme parks
(including Capital Stock of a Person that shall become a
Restricted Subsidiary and that holds such assets) to be used by
the Company or a Restricted Subsidiary in the conduct of the
Company's business, (B) the terms of such Asset Disposition have
been approved by a majority of the members of the Board of
Directors of the Company having no personal stake in such
transaction, and (C) the Board of Directors of the Company has
received a written opinion of a nationally recognized investment
banking firm to the effect that such Asset Disposition is fair,
from a financial point of view, to the Company and the Company
has delivered a copy of such opinion to the Trustee; provided,
--------
however, that no such opinion shall be required in connection
-------
with any such Asset Disposition unless the value of the assets
being disposed of by the Company or such Restricted Subsidiary in
such transaction (as determined in good faith by such members of
the Board of Directors of the Company) is at least $10,000,000,
and (iii) an amount equal to 100% of the Net Available Cash from
such Asset Disposition is applied by the Company (or such
Restricted Subsidiary, as the case may be) (A) first, to the
extent the Company elects (or is required by the terms of any
Senior Indebtedness or Indebtedness (other than any Preferred
Stock) of a Wholly Owned Subsidiary), to prepay, repay or
purchase Senior Indebtedness or such Indebtedness (other than any
Preferred Stock) of a Wholly Owned Subsidiary (in each case other
than Indebtedness owed to the Company or an Affiliate of the
Company (other than Indebtedness Incurred pursuant to Section
4.03(b)(i))) within one year after the later of the date of such
Asset Disposition or the receipt of such Net Available Cash; (B)
second, to the extent of the balance of Net Available Cash after
application in accordance with clause (A), to the extent the
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<PAGE>
Company elects, to invest in Additional Assets within one year
from the later of the date of such Asset Disposition or the
receipt of such Net Available Cash; (C) third, to the extent of
the balance of such Net Available Cash (which, in the case of an
Asset Disposition by a Co-Venture Partnership, shall be deemed to
be the amount of such Net Available Cash distributed to the
applicable Co-venture Subsidiary, in which case the offer to
purchase the Notes shall be made by the applicable Co-Venture
Subsidiary or the Company) after application in accordance with
clauses (A) and (B), to make an offer to purchase Securities
pursuant and subject to the conditions of this Indenture to the
Securityholders at a purchase price of 100% of the principal
amount thereof, plus accrued and unpaid interest or, prior to the
third anniversary of the Issue Date, 100% of the Accreted Value
thereof, to and including the purchase date, and (D) fourth, to
the extent of the balance of such Net Available Cash after
application in accordance with clauses (A), (B) and (C), to (x)
acquire Additional Assets (other than Indebtedness and Capital
Stock) or (y) prepay, repay or purchase Indebtedness of the
Company (other than Indebtedness owed to an Affiliate of the
Company and other than Preferred Stock of the Company) or
Indebtedness of any Restricted Subsidiary (other than
Indebtedness owed to the Company or an Affiliate of the Company),
in each case described in this clause (D) within one year from
the receipt of such Net Available Cash or, if the Company has
made an Offer pursuant to clause (C), six months from the date
such offer is consummated; provided, however, that in connection
-------- -------
with any prepayment, repayment or purchase of Indebtedness
pursuant to clause (A), (C) or (D) above, the Company or such
Restricted Subsidiary shall retire such Indebtedness and shall
cause the related loan commitment (if any) to be permanently
reduced in an amount equal to the principal amount so prepaid,
repaid or purchased.
Notwithstanding the foregoing provisions, the Company and the
Restricted Subsidiaries shall not be required (x) to comply with
the foregoing provisions relating to the application of proceeds
from Asset Dispositions consisting of sales or other dispositions
of rides and attractions (together with any related equipment) in
any fiscal year with an aggregate value not in excess of
$5,000,000; provided, however, that the aggregate amount of Asset
-------- -------
Dispositions exempted from such provisions subsequent to the
Issue Date shall not exceed $25,000,000, or (y) to apply any Net
Available Cash in accordance with this Section except to the
extent that the aggregate Net Available Cash from all Asset
Dispositions which is not applied in accordance with this Section
exceeds $500,000. The Company shall not be required to make an
Offer for Securities pursuant to this Section if the Net
Available Cash available therefor (after application of the
proceeds as provided in clauses (A) and (B) (exclusive of amounts
described in clause (x) of the preceding sentence) is less than
$5,000,000 for any particular Asset Disposition (which lesser
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amount shall be carried forward for purposes of determining
whether an Offer is required with respect to the Net Available
Cash from any subsequent Asset Disposition). Pending application
of Net Available Cash pursuant to this provision, such Net
Available Cash shall be invested in Permitted Investments.
For the purposes of this Section, the following shall
be deemed to be cash: (x) the assumption of Indebtedness of the
Company (other than Disqualified Stock of the Company) or any
Restricted Subsidiary and the release of the Company or such
Restricted Subsidiary from all liability on such Indebtedness in
connection with such Asset Disposition and (y) securities
received by the Company or any Restricted Subsidiary from the
transferee that are promptly converted by the Company or such
Restricted Subsidiary into cash.
(b) In the event of an Asset Disposition that requires
the purchase of Securities pursuant to Section 4.06(a)(iii)(C),
the Company shall be required to purchase Securities tendered
pursuant to an offer by the Company for the Securities (the
"Offer") at a purchase price of 100% of their principal amount,
plus accrued interest or, prior to the third anniversary of the
Issue Date, 100% of their Accreted Value, to and including the
purchase date in accordance with the procedures (including pro-
rationing in the event of oversubscription) set forth in this
Indenture. If the aggregate purchase price of the Securities
tendered pursuant to the offer is less than the Net Available
Cash allotted to the purchase of the Securities, the Company
shall apply the remaining Net Available Cash in accordance with
Section 4.06(a)(iii)(D).
(c) (1) Promptly, and in any event within 10 days
after the Company becomes obligated to make an Offer, the Company
shall be obligated to deliver to the Trustee and send, by first-
class mail to each Holder, a written notice stating that the
Holder may elect to have his Securities purchased by the Company
either in whole or in part (subject to prorationing as
hereinafter described in the event the Offer is oversubscribed)
in integral multiples of $1,000 of principal amount, at the
applicable purchase price. The notice shall specify a purchase
date not less than 30 days nor more than 60 days after the date
of such notice (the "Purchase Date") and shall contain such
information concerning the business of the Company which the
Company in good faith believes will enable such Holders to make
an informed decision (which at a minimum will include (i) the
most recent annual report, quarterly reports, if any, subsequent
to such annual reports and any current reports subsequent to the
most recent annual or quarterly report, as the case may be,
required to be delivered pursuant to Section 4.02 hereof, other
than current reports describing Asset Dispositions otherwise
described in the offering materials (or corresponding successor
reports), (ii) a description of material developments in the
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Company's business subsequent to the date of the latest of such
Reports, and (iii) if material, appropriate pro forma financial
information) and all instructions and materials necessary to
tender Securities pursuant to the Offer, together with the
information contained in clause (3).
(2) Not later than the date upon which written notice
of an Offer is delivered to the Trustee as provided below, the
Company shall deliver to the Trustee an Officers' Certificate as
to (i) the amount of the Offer (the "Offer Amount"), (ii) the
allocation of the Net Available Cash from the Asset Dispositions
pursuant to which such Offer is being made and (iii) the
compliance of such allocation with the provisions of Section
4.06(a). On such date, the Company shall also irrevocably deposit
with the Trustee or with a paying agent (or, if the Company is
acting as its own paying agent, segregate and hold in trust) in
Temporary Cash Investments an amount equal to the Offer Amount to
be held for payment in accordance with the provisions of this
Section. Upon the expiration of the period for which the Offer
remains open (the "Offer Period"), the Company shall deliver to
the Trustee for cancellation the Securities or portions thereof
which have been properly tendered to and are to be accepted by
the Company. The Trustee shall, on the Purchase Date, mail or
deliver payment to each tendering Holder in the amount of the
purchase price. In the event that the aggregate purchase price
of the Securities delivered by the Company to the Trustee is less
than the Offer Amount, the Trustee shall deliver the excess to
the Company immediately after the expiration of the Offer Period
for application in accordance with this Section.
(3) Holders electing to have a Security purchased will
be required to surrender the Security, with an appropriate form
duly completed, to the Company at the address specified in the
notice at least three Business Days prior to the Purchase Date.
Holders will be entitled to withdraw their election if the
Trustee or the Company receives not later than one Business Day
prior to the Purchase Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the
principal amount of the Security which was delivered for purchase
by the Holder and a statement that such Holder is withdrawing his
election to have such Security purchased. If at the expiration
of the Offer Period the aggregate principal amount of Securities
surrendered by Holders exceeds the Offer Amount, the Company
shall select the Securities to be purchased on a pro rata basis
(with such adjustments as may be deemed appropriate by the
Company so that only Securities in principal denominations of
$1,000, or integral multiples thereof, shall be purchased).
Holders whose Securities are purchased only in part will be
issued new Securities equal in principal amount to the
unpurchased portion of the Securities surrendered.
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(4) At the time the Company delivers Securities to the
Trustee which are to be accepted for purchase, the Company will
also deliver an officers' Certificate stating that such
Securities are to be accepted-by the Company pursuant to and in
accordance with the terms of this Section. A Security shall be
deemed to have been accepted for purchase at the time the
Trustee, directly or through an agent, mails or delivers payment
therefor to the surrendering Holder.
(d) The Company shall comply, to the extent
applicable, with the requirements of Section 14(e) of the
Exchange Act and any other securities laws or regulations in
connection with the repurchase of Securities pursuant to this
Section. To the extent that the provisions of any securities
laws or regulations conflict with provisions of this Section, the
Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its
obligations under this Section by virtue thereof.
SECTION 4.07. Limitation on Transactions with
-------------------------------
Affiliates. (a) The Company shall not, and shall not permit any
----------
Restricted Subsidiary to, directly or indirectly, enter into or
conduct any transaction or series of similar transactions
(including the purchase, sale, lease or exchange of any property
or the rendering of any service) with any Affiliate of the
Company (an "Affiliate Transaction") unless: (i) the terms of
such Affiliate Transaction are no less favorable to the Company
or such Restricted Subsidiary, as the case may be, than those
that could be obtained at the time of such transaction in arm's-
length dealings with a Person who is not such an Affiliate; (ii)
in the event such Affiliate Transaction involves an aggregate
amount in excess of $2,000,000, the terms of such Affiliate
Transaction have been approved by a majority of the members of
the Board of Directors having no personal stake (distinct from
the interest of the Company) in such Affiliate Transaction (and
such majority determines that such Affiliate Transaction
satisfies the criteria in (i) above); and (iii) in the event such
Affiliate Transaction involves an aggregate amount in excess of
$10,000,000, the Company has received a written opinion from an
independent investment banking firm that such transaction is fair
to the Company from a financial point of view.
(b) The provisions of Section 4.07(a) shall not
prohibit (i) any Restricted Payment permitted to be paid pursuant
to Section 4.04, (ii) any transaction between the Company and a
Wholly owned Subsidiary or between Wholly Owned Subsidiaries,
(iii) any issuance of securities, or other payments, awards or
grants in cash, securities or otherwise pursuant to, or the
funding of, employment arrangements, stock options and stock
ownership plans approved by the Board of Directors, (iv) loans or
advances to employees in the ordinary course of business in
accordance with past practices of the Company or any Restricted
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Subsidiary or (v) the payment of reasonable fees to directors of
the Company and its Subsidiaries who are not employees of the
Company or its Subsidiaries.
SECTION 4.08. Change of Control. (a) Upon a Change of
-----------------
Control, each Holder shall have the right to require that the
Company repurchase such Holder's Securities at a purchase price
in cash equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, or, prior to the third
anniversary of the Issue Date, 101% of the Accreted Value
thereof, in either case to and including the date of purchase
(subject to the right of Holders of record on a record date to
receive interest on the relevant interest payment date), in
accordance with the terms contemplated in Section 4.08(b). In the
event that at the time of such Change of Control the terms of the
Bank Indebtedness restrict or prohibit the repurchase of
Securities pursuant to this Section, then prior to the mailing of
the notice to Holders provided for in Section 4.08(b) below but
in any event within 30 days following any Change of Control, the
Company shall (i) repay in full all Bank Indebtedness or offer to
repay in full all Bank Indebtedness and repay the Bank
Indebtedness of each lender who has accepted such offer or (ii)
obtain the requisite consent under the agreements governing the
Bank Indebtedness to permit the repurchase of the Securities as
provided for in Section 4.08(b).
(b) Within 30 days following any Change of Control,
the Company shall mail a notice to each Holder with a copy to the
Trustee stating:
(1) that a Change of Control has occurred and that
such Holder has the right to require the Company to purchase
such Holder's Securities at a purchase price in cash equal
to 101% of the principal amount thereof plus accrued and
unpaid interest, if any, or, prior to the third anniversary
of the Issue Date, 101% of the Accreted Value thereof, in
either case to and including the date of purchase (subject
to the right of Holders of record on a record date to
receive interest on the relevant interest payment date);
(2) the circumstances and relevant facts regarding
such Change of Control (including information with respect
to pro forma historical income, cash flow and capitalization
after giving effect to such Change of Control);
(3) the repurchase date (which shall be no earlier
than 30 days nor later than 60 days from the date such
notice is mailed); and
(4) the instructions determined by the Company,
consistent with this Section, that a Holder must follow in
order to have its Securities purchased.
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(c) Holders electing to have a Security purchased
shall be required to surrender the Security, with an appropriate
form duly completed, to the Company at the address specified in
the notice at least three Business Days prior to the purchase
date. Holders shall be entitled to withdraw their election if
the Trustee or the Company receives not later than one Business
Day prior to the purchase date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the
principal amount of the Security which was delivered for purchase
by the Holder and a statement that such Holder is withdrawing his
election to have such Security purchased.
(d) on the purchase date, all Securities purchased by
the Company under this Section shall be delivered by the Trustee
for cancellation, and the Company shall pay the purchase price
plus accrued and unpaid interest, if any, to the Holders entitled
thereto.
(e) The Company shall comply, to the extent
applicable, with the requirements of Section 14(e) of the
Exchange Act and any other securities laws or regulations in
connection with the repurchase of Securities pursuant to this
Section. To the extent that the provisions of any securities
laws or regulations conflict with provisions of this Section, the
Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its
obligations under this Section by virtue thereof.
SECTION 4.09. Compliance Certificate. The Company and
----------------------
each Note Guarantor shall deliver to the Trustee within 120 days
after the end of each fiscal year of the Company or such Note
Guarantor (as applicable) an Officers' Certificate stating that
in the course of the performance by the signers of their duties
as Officers of the Company or such Note Guarantor, as the case
may be, they would normally have knowledge of any Default and
whether or not the signers know of any Default that occurred
during such period. If they do, the certificate shall describe
the Default, its status and what action the Company or such Note
Guarantor (as applicable) is taking or proposes to take with
respect thereto. The Company also shall comply with TIA
(Section) 314(a)(4).
SECTION 4.10. Further Instruments and Acts. Upon
----------------------------
request of the Trustee, the Company shall execute and deliver
such further instruments and do such further acts as may be
reasonably necessary or proper to carry out more effectively the
purpose of this Indenture.
SECTION 4.11 Limitation on Liens. The Company shall
-------------------
not, and shall not permit any Restricted Subsidiary to, directly
or indirectly, create or permit to exist any Lien on any of its
property or assets (including Capital Stock), whether owned on
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the date of this Indenture or thereafter acquired, securing
anyobligation other than Permitted Liens unless contemporaneously
therewith effective provision is made to secure the Securities
equally and ratably with (or on a senior basis, in the case of
Indebtedness subordinated in right of payment to the Securities)
such obligation for so long as such obligation is so secured.
SECTION 4.12. Limitation on Sale/Leaseback
----------------------------
Transactions. The Company shall not, and shall not permit any
------------
Restricted Subsidiary to, enter into a Sale/Leaseback Transaction
unless: (a)(i) the Company or such Restricted Subsidiary would be
entitled to (A) Incur Indebtedness with respect to such
Sale/Leaseback Transaction pursuant to Section 4.03 and (B)
create a Lien on the property to secure Indebtedness in an amount
at least equal to the Attributable Indebtedness in respect of
such Sale/Leaseback Transaction without equally and ratably
securing the Securities as required under Section 4.11 and (ii)
the Sale/Leaseback Transaction is permitted by, and the Company
applies the proceeds of such transaction in compliance with,
Section 4.06; or (b) the net cash proceeds received by the
Company or any Restricted Subsidiary in connection with such
Sale/Leaseback Transaction are at least equal to the fair value
(as determined by the Board of Directors) of such property, and
the Company or such Restricted Subsidiary applies an amount in
cash equal to such net proceeds to the retirement, within one
year of the effective date of any such Sale/Leaseback
Transaction, of the Securities.
SECTION 4.13. Limitation on Lines of Business. The
-------------------------------
Company shall not, and shall not permit any Restricted Subsidiary
to, engage in any business, other than those businesses in which
the Company is engaged on the date of this Indenture, the theme
park business or those businesses directly related to either.
SECTION 4.14. Future Note Guarantors. The Company
----------------------
shall cause each Restricted Subsidiary (other than a Co-Venture
Partnership or a Subsidiary thereof) which Incurs Indebtedness or
which is a guarantor of Indebtedness Incurred pursuant to Section
4.03(b)(i) (unless such Subsidiary is a Note Guarantor) to
execute and deliver to the Trustee a supplemental indenture in
the form of Exhibit D hereto, pursuant to which such Restricted
Subsidiary will Guarantee payment of the Notes, as provided in
Section 11.06.
ARTICLE 5
Successor Company
-----------------
SECTION 5.01. When Company May Merge or Transfer
----------------------------------
Assets. The Company shall not consolidate with or merge with or
------
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into, or convey, transfer or lease all or substantially all its
assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the
"Successor Company") is a corporation, partnership, limited
liability company or business trust organized and existing
under the laws of the United States of America, any State
thereof or the District of Columbia (a "Domestic Company")
and the Successor Company (if not the Company) expressly
assumes, by a supplemental indenture, executed and delivered
to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Securities and this
Indenture;
(ii) immediately after giving effect to such
transaction (and treating any Indebtedness which becomes an
obligation of the Successor Company or any Restricted
Subsidiary as a result of such transaction as having been
Incurred by the Successor Company or such Restricted
Subsidiary at the time of such transaction), no Default
shall have occurred and be continuing;
(iii) immediately after giving effect to such
transaction, the Consolidated Coverage Ratio of the
Successor Company is at least 2.00:1;
(iv) immediately after giving effect to such
transaction, the Successor Company shall have Consolidated
Net Worth in an amount which is not less than the
Consolidated Net Worth of the Company immediately prior to
such transaction; and
(v) the Company shall have delivered to the Trustee an
Officers' Certificate and an opinion of Counsel, each
stating that such consolidation, merger or transfer and such
supplemental indenture (if any) comply with this Indenture.
The Successor Company shall succeed to, and be
substituted for, and may exercise every right and power of, the
Company under this Indenture, but the predecessor Company in the
case of a lease of all or substantially all its assets shall not
be released from the obligation to pay the principal (or the
Accreted Value, as the case may be) of and interest on the
Securities.
Notwithstanding the foregoing clauses (ii), (iii) and
(iv), (1) any Restricted Subsidiary may consolidate with, merge
into or transfer all or part of its properties and assets to the
Company and (2) the Company may merge with any Affiliate which is
a Domestic Company incorporated for the purpose of
reincorporating the Company in another jurisdiction to realize
tax or other benefits.
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ARTICLE 6
Defaults and Remedies
---------------------
SECTION 6.01. Events of Default. An "Event of Default"
-----------------
occurs if:
(1) the Company defaults in any payment of interest on
any Security when the same becomes due and payable, whether
or not such payment shall be prohibited by Article 10, and
such default continues for a period of 30 days;
(2) the Company (i) defaults in the payment of the
principal (or the Accreted Value, as the case may be) of any
Security when the same becomes due and payable at its Stated
Maturity, upon redemption, upon declaration or otherwise,
whether or not such payment shall be prohibited by Article
10 or (ii) fails to redeem or purchase Securities when
required pursuant to this Indenture or the Securities,
whether or not such redemption or purchase shall be
prohibited by Article 10;
(3) the Company fails to comply with Section 5.01;
(4) the Company fails to comply with Section 4.02,
4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.11, 4.12, 4.13 or 4.14
(other than a failure to purchase Securities when required
under Section 4.06 or 4.08) and such failure continues for
30 days after the notice specified below;
(5) the Company or any Note Guarantor fails to comply
with any of its agreements in the Securities or this
Indenture (other than those referred to in (1), (2), (3) or
(4) above) and such failure continues for 60 days after the
notice specified below;
(6) Indebtedness of the Company or any Significant
Subsidiary is not paid within any applicable grace period
after final maturity or is accelerated by the holders
thereof because of a default and the total amount of such
Indebtedness unpaid or accelerated exceeds $10,000,000 or
its foreign currency equivalent at the time and such default
continues for 10 days after the notice specified below;
(7) the Company or any Significant Subsidiary pursuant
to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief
against it in an involuntary case;
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(C) consents to the appointment of a Custodian of
it or for any substantial part of its property; or
(D) makes a general assignment for the benefit of
its creditors;
or takes any comparable action under any foreign laws
relating to insolvency;
(8) a court of competent jurisdiction enters an order
or decree under any Bankruptcy Law that:
(A) is for relief against the Company or any
Significant Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any
Significant Subsidiary or for any substantial part of
its property; or
(C) orders the winding up or liquidation of the
Company or any Significant Subsidiary;
or any similar relief is granted under any foreign laws and
the order, decree or relief remains unstayed and in effect
for 60 days;
(9) any judgment or decree for the payment of money in
excess of $10,000,000 or its foreign currency equivalent at
the time is entered against the Company or any Significant
Subsidiary and is not discharged and either (A) an
enforcement proceeding has been commenced by any creditor
upon such judgment or decree or (B) there is a period of 60
days following the entry of such judgment or decree during
which such judgment or decree is not discharged, waived or
the execution thereof stayed; or
(10) any Note Guarantee shall cease to be in full force
and effect (except as contemplated by the terms thereof) or
any Note Guarantor shall deny or disaffirm its obligations
under this Indenture or any Note Guarantee and such Default
continues for 10 days.
The foregoing shall constitute Events of Default
whatever the reason for any such Event of Default and whether it
is voluntary or involuntary or is effected by operation of law or
pursuant to any judgment, decree or order of any court or any
order, rule or regulation of any administrative or governmental
body.
The term "Bankruptcy Law" means Title 11, United States
-------------
Code, or any similar Federal or state law for the relief of
----
debtors. The term "Custodian" means any receiver, trustee,
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assignee, liquidator, custodian or similar official under any
Bankruptcy Law.
A Default under clause (4), (5) or (6) is not an Event
of Default until the Trustee or the Holders of at least 25% in
principal amount of the Securities notify the Company of the
Default and the Company does not cure such Default within the
time specified after receipt of such notice. Such notice must
specify the Default, demand that it be remedied and state that
such notice is a "Notice of Default".
The Company shall deliver to the Trustee, within 30
days after the occurrence thereof, written notice in the form of
an Officers' Certificate of any Event of Default under clause
(3), (6) and (7) and any event which with the giving of notice or
the lapse of time would become an Event of Default under clause
(4), (5), (8), (9) or (10), its status and what action the
Company is taking or proposes to take with respect thereto.
SECTION 6.02. Acceleration. If an Event of Default
------------
(other than an Event of Default specified in Section 6.01(7) or
(8) with respect to the Company) occurs and is continuing, the
Trustee by notice to the Company, or the Holders of at least 25%
in principal amount of the Securities by notice to the Company
and the Trustee, may declare the principal of, or if prior to the
third anniversary of the Issue Date the Accreted Value of, and
accrued and unpaid interest, if any, on all the Securities to be
due and payable. Upon such a declaration, such principal or
Accreted Value, as the case may be, and interest shall be due and
payable immediately. If an Event of Default specified in Section
6.01(7) or (8) with respect to the Company occurs, the principal
(or Accreted Value, as the case may be) of and interest on all
the Securities shall @so facto become and be immediately due and
payable without any declaration or other act on the part of the
Trustee or any Securityholders. The Holders of a majority in
principal amount of the Securities by notice to the Trustee may
rescind an acceleration and its consequences if the rescission
would not conflict with any judgment or decree and if all
existing Events of Default have been cured or waived except
nonpayment of principal or Accreted Value, as the case may be, or
interest that has become due solely because of acceleration. No
such rescission shall affect any subsequent Default or impair any
right consequent thereto.
SECTION 6.03. Other Remedies. If an Event of Default
--------------
occurs and is continuing, the Trustee may pursue any available
remedy to collect the payment of principal (or Accreted Value, as
the case may be) of or interest on the Securities or to enforce
the performance of any provision of the Securities or this
Indenture.
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The Trustee may maintain a proceeding even if it does
not possess any of the Securities or does not produce any of them
in the proceeding. A delay or omission by the Trustee or any
Securityholder in exercising any right or remedy accruing upon an
Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default.
No remedy is exclusive of any other remedy. All available
remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of
-----------------------
a majority in principal amount to the Securities by notice to the
Trustee may waive an existing Default and its consequences except
(i) a Default in the payment of the principal (or Accreted Value,
as the case may be) of or interest on a Security or (ii) a
Default in respect of a provision that under Section 9.02 cannot
be amended without the consent of each Securityholder affected.
When a Default is waived, it is deemed cured, but no such waiver
shall extend to any subsequent or other Default or impair any
consequent right.
SECTION 6.05. Control by Majority. The Holders of a
-------------------
majority in principal amount of the Securities may direct the
time, method and place of conducting any proceeding for any
remedy available to the Trustee or of exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse
to follow any direction that conflicts with law or this Indenture
or, subject to Section 7.01, that the Trustee determines is
unduly prejudicial to the rights of other Securityholders or
would involve the Trustee in personal liability; provided,
--------
however, that the Trustee may take any other action deemed proper
-------
by the Trustee that is not inconsistent with such direction.
Prior to taking any action hereunder, the Trustee shall be
entitled to indemnification satisfactory to it in its sole
discretion against all losses and expenses caused by taking or
not taking such action.
SECTION 6.06. Limitation on Suits. A Securityholder
-------------------
may not pursue any remedy with respect to this Indenture or the
Securities unless:
(1) the Holder gives to the Trustee written notice
stating that an Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of
the Securities make a written request to the Trustee to
pursue the remedy;
(3) such Holder or Holders offer to the Trustee
reasonable security or indemnity against any loss, liability
or expense;
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(4) the Trustee does not comply with the request
within 60 days after receipt of the request and the offer of
security or indemnity; and
(5) the Holders of a majority in principal amount of
the Securities do not give the Trustee a direction
inconsistent with the request during such 60-day period.
A Securityholder may not use this Indenture to
prejudice the rights of another Securityholder or to obtain a
preference or priority over another Securityholder.
SECTION 6.07. Rights of Holders to Receive Payment.
------------------------------------
Notwithstanding any other provision of this Indenture, the right
of any Holder to receive payment of principal (or Accreted Value,
as the case may be) of and any liquidated damages and interest on
the Securities held by such Holder, on or after the respective
due dates expressed in the Securities, or to bring suit for the
enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of
such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event
--------------------------
of Default specified in Section 6.01(1) or (2) occurs and is
continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against the Company for the whole
amount then due and owing (together with interest on any unpaid
interest to the extent lawful) and the amounts provided for in
Section 7.07.
SECTION 6.09. Trustee May File Proofs of Claim. The
--------------------------------
Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the
claims of the Trustee and the Securityholders allowed in any
judicial proceedings relative to the Company, any Note Guarantor,
their respective creditors or properties and, unless prohibited
by law or applicable regulations, may vote on behalf of the
Holders in any election of a trustee in bankruptcy or other
Person performing similar functions, and any Custodian in any
such judicial proceeding is hereby authorized by each Holder to
make payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and its counsel, and any other amounts
due the Trustee under Section 7.07.
SECTION 6.10. Priorities. If the Trustee collects any
----------
money or property pursuant to this Article 6, it shall pay out
the money or property in the following order:
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FIRST: to the Trustee for amounts due under Section
7.07;
SECOND: to holders of Senior Indebtedness to the extent
required by Article 10;
THIRD: to Securityholders for amounts due and unpaid
on the Securities for principal (or Accreted Value, as the
case may be), any liquidated damages and interest, ratably,
without preference or priority of any kind, according to the
amounts due and payable on the Securities for principal (or
Accreted Value, as the case may be), any liquidated damages
and interest, respectively; and
FOURTH: to the Company.
The Trustee may fix a record date and payment date for
any payment to Securityholders pursuant to this Section. At
least 15 days before such record date, the Company shall mail to
each Securityholder and the Trustee a notice that states the
record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for
---------------------
the enforcement of any right or remedy under this Indenture or in
any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing
by any party litigant in the suit of an undertaking to pay the
costs of the suit, and the court in its discretion may assess
reasonable costs, including reasonable attorneys' fees, against
any party litigant in the suit, having due regard to the merits
and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee,
a suit by a Holder pursuant to Section 6.07 or a suit by Holders
of more than 10% in principal amount of the Securities.
SECTION 6.12. Waiver of Stay or Extension Laws.
--------------------------------
Neither the Company nor any Note Guarantor (to the extent it may
lawfully do so) shall at any time insist upon, or plead, or in
any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company and each Note
Guarantor (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and
shall not hinder, delay or impede the execution of any power
herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law had been
enacted.
ARTICLE 7
Trustee
-------
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SECTION 7.01. Duties of Trustee. (a) If an Event of Default
-----------------
has occurred and is continuing, the Trustee shall exercise the
rights and powers vested in it by this Indenture and use the same
degree of care and skill in their exercise as a prudent Person
would exercise or use under the circumstances in the conduct of
such Person's own affairs.
(b) Except during the continuance of an Event of
Default:
(1) the Trustee undertakes to.perform such duties and
only such duties as are specifically set forth in this
Indenture and no implied covenants or obligations shall be
read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this
Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for
its own negligent action, its own negligent failure to act or its
own wilful misconduct, except that:
(1) this paragraph does not limit the effect of
paragraph (b) of this Section;
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer unless it is
proved that the Trustee was negligent in ascertaining the
pertinent facts; and
(3) the Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to
Section 6.05.
(d) Every provision of this Indenture that in any way
relates to the Trustee is subject to paragraphs (a), (b),
(c) and (g) of this Section.
(e) The Trustee shall not be liable for interest on
any money received by it except as the Trustee may agree in
writing with the Company.
(f) Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by
law.
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(g) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur
financial liability in the performance of any of its duties
hereunder or in the exercise of any of its rights or powers,
if it shall have reasonable grounds to believe that
repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured to it.
(h) Every provision of this Indenture relating to the
conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions
of this Section and to the provisions of the TIA.
SECTION 7.02. Rights of Trustee. (a) The Trustee may
-----------------
rely on any document believed by it to be genuine and to have
been signed or presented by the proper person. The Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting,
it may require an Officers' Certificate or an Opinion of Counsel.
The Trustee shall not be liable for any action it takes or omits
to take in good faith in reliance on the Officers' Certificate or
opinion of Counsel.
(c) The Trustee may act through agents and shall not
be responsible for the misconduct or negligence of any agent
appointed with due care.
(d) The Trustee shall not be liable for any action it
takes or omits to take in good faith which it believes to be
authorized or within its rights or powers; provided, however,
-------- -------
that the Trustee's conduct does not constitute wilful misconduct
or negligence.
(e) The Trustee may consul@ with counsel, and the
advice or opinion of counsel with respect to legal matters
relating to this Indenture and the Securities shall be full and
complete authorization and protection from liability in respect
to any action taken, omitted or suffered by it hereunder in good
faith and in accordance with the advice or opinion of such
counsel.
(f) The Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, notice, request,
direction, consent, order, bond, debenture, or other paper or
document, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it
may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled, upon
reasonable notice to the Company, to examine the books, records,
and premises of the Company, personally or by agent or attorney.
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SECTION 7.03. Individual Rights of Trustee. The
----------------------------
Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the
Company or its Affiliates with the same rights it would have if
it were not Trustee. Any Paying Agent, Registrar, co-registrar
or co-paying agent may do the same with like rights. However,
the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall
--------------------
not be responsible for and makes no representation as to the
validity or adequacy of this Indenture or the Securities, it
shall not be accountable for the Company's use of the proceeds
from the Securities, and it shall not be responsible for any
statement of the Company in this Indenture or in any document
issued in connection with the sale of the Securities or in the
Securities other than the Trustee's certificate of
authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs
------------------
and is continuing and if it is known to the Trustee, the Trustee
shall mail to each Securityholder notice of the Default within 90
days after it occurs. Except in the case of a Default in payment
of principal (or Accreted Value, as the case may be) of or
interest on any Security (including payments pursuant to the
mandatory redemption provisions of such Security, if any), the
Trustee may withhold the notice if and so long as a committee of
its Trust officers in good faith determines that withholding the
notice is in the interests of Securityholders.
SECTION 7.06. Reports by Trustee to Holders. As
-----------------------------
promptly as practicable after each May 15 beginning with the May
15 following the date of this Indenture, and in any event prior
to July 15 in each year, the Trustee shall mail to each
Securityholder a brief report dated as of May 15 that complies
with TIA (Section) 313(a). The Trustee also shall comply with
TIA (Section) 313(b).
A copy of each report at the time of its mailing to
Securityholders shall be filed with the SEC and each stock
exchange (if any) on which the Securities are listed. The
Company agrees to notify promptly the Trustee whenever the
Securities become listed on any stock exchange and of any
delisting thereof.
SECTION 7.07. Compensation and Indemnity. The Company
--------------------------
shall pay to the Trustee from time to time reasonable
compensation for its services as the Company and the Trustee may
agree from time to time in writing. The Trustee's compensation
shall not be limited by any law on compensation of a trustee of
an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses incurred or
made by it, including costs of collection, in addition to the
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compensation for its services. Such expenses shall include the
reasonable compensation and expenses, disbursements and advances
of the Trustee's agents, counsel, accountants and experts. The
Company and each Note Guarantor, jointly and severally, shall
indemnify the Trustee against any and all loss, liability or
expense (including reasonable attorneys' fees, expenses, advances
and disbursements) incurred by it in connection with the
administration of this trust and the performance of its duties
hereunder. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to
so notify the Company shall not relieve the Company of its
obligations hereunder. The Company shall defend the claim and
the Trustee may have separate counsel and the Company shall pay
the reasonable fees and expenses of such counsel. The Company
need not reimburse any expense or indemnify against any loss,
liability or expense incurred by the Trustee through the
Trustee's own wilful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this
Section, the Trustee shall have a lien prior to the Securities on
all money or property held or collected by the Trustee other than
money or property held in trust to pay principal (or Accreted
Value, as the case may be) of and interest and any liquidated
damages on particular Securities.
The Company's payment obligations pursuant to this
Section shall survive the satisfaction or discharge of this
Indenture, any rejection or termination of this Indenture under
any bankruptcy law or the resignation or removal of the Trustee.
When the Trustee incurs expenses after the occurrence of a
Default specified in Section 6.01(7) or (8) with respect to the
Company, the expenses are intended to constitute expenses of
administration under the Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. The Trustee may
----------------------
resign at any time by so notifying the Company. The Holders of a
majority in principal amount of the Securities may remove the
Trustee by so notifying the Trustee and may appoint a successor
Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of
the Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by
the Holders of a majority in principal amount of the Securities
and such Holders do not reasonably promptly appoint a successor
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Trustee, or if a vacancy exists in the office of Trustee for any
reason (the Trustee in such event being referred to herein as the
retiring Trustee), the Company shall promptly appoint a successor
Trustee.
A successor Trustee shall deliver a written acceptance
of its appointment to the retiring Trustee and to the Company.
Thereupon the resignation or removal of the retiring Trustee
shall become effective, and the successor Trustee shall have all
the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall
promptly transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided for in Section
7.07.
If a successor Trustee does not take office within 60
days after the retiring Trustee resigns or is removed, the
retiring Trustee or the Holders of 10% in principal amount of the
Securities may petition any court of competent jurisdiction for
the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a successor
Trustee.
Notwithstanding the replacement of the Trustee pursuant
to this Section, the Company's obligations under Section 7.07
shall continue for the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. if the
---------------------------
Trustee consolidates with, merges or converts into, or transfers
all or substantially all its corporate trust business or assets
to, another corporation or banking association, the resulting,
surviving or transferee corporation without any further act shall
be the successor Trustee.
In case at the time such successor or successors by
merger, conversion or consolidation to the Trustee shall succeed
to the trusts created by this Indenture any of the Securities
shall have been authenticated but not delivered, any such
successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such
Securities so authenticated; and in case at that time any of the
Securities shall not have been authenticated, any successor to
the Trustee may authenticate such Securities either in the name
of any predecessor hereunder or in the name of the successor to
the Trustee; and in all such cases such certificates shall have
the full force which it is anywhere in the Securities or in this
Indenture provided that the certificate of the Trustee shall
have.
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SECTION 7.10. Eligibility; Disqualification. The
-----------------------------
Trustee shall at all times satisfy the requirements of TIA
(Section) 310(a). The Trustee shall have a combined capital and
surplus of at least $50,000,000 as set forth in its most recent
published annual report of condition. The Trustee shall comply
with TIA (Section) 310(b); provided, however, that there shall be
-------- -------
excluded from the operation of TIA (Section) 310(b)(1) any
indenture or indentures under which other securities or
certificates of interest or participation in other securities of
the Company are outstanding if the requirements for such
exclusion set forth in TIA (Section) 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against
-----------------------------------------
Company. The Trustee shall comply with TIA (Section) 311(a),
-------
excluding any creditor relationship listed in TIA (Section)
311(b). A Trustee who has resigned or been removed shall be
subject to TIA (Section) 311(a) to the extent indicated.
ARTICLE 8
Discharge of Indenture; Defeasance
----------------------------------
SECTION 8.01. Discharge of Liability on Securities;
------------------------------------
Defeasance. (a) When (i) the Company delivers to the Trustee all
----------
outstanding Securities (other than Securities replaced pursuant
to Section 2.07) for cancellation or (ii) all outstanding
Securities have become due and payable, whether at maturity or as
a result of the mailing of a notice of redemption pursuant to
Article 3 hereof and the Company irrevocably deposits with the
Trustee funds sufficient to pay at maturity or upon redemption
all outstanding Securities, including interest thereon to
maturity or such redemption date (other than Securities replaced
pursuant to Section 2.07), and if in either case the Company pays
all other sums payable hereunder by the Company, then this
Indenture shall, subject to Sections 8.01(c), cease to be of
further effect. The Trustee shall acknowledge satisfaction and
discharge of this Indenture on demand of the Company accompanied
by an officers' Certificate and an opinion of Counsel and at the
cost and expense of the Company.
(b) Subject to Sections 8.01(c) and 8.02, the Company
at any time may terminate (i) all its obligations under the
Securities and this Indenture ("illegal defeasance option") or
(ii) its obligations under Sections 4.02, 4.03, 4.04, 4.05, 4.06,
4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13 and 4.14 and the
operation of Section 6.01(4), 6.01(6), 6.01(7) (but only with
respect to a Significant Subsidiary), 6.01(8) (but only with
respect to a Significant Subsidiary) and 6.01(9) ("covenant
defeasance option"). The Company may exercise its legal
defeasance option notwithstanding its prior exercise of its
covenant defeasance option.
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If the Company exercises its legal defeasance option,
payment of the Securities may not be accelerated because of an
Event of Default. If the Company exercises its covenant
defeasance option, payment of the Securities may not be
accelerated because of an Event of Default specified in 6.01(4),
6.01(6), 6.01(7) (but only with respect to a Significant
Subsidiary), 6.01(8) (but only with respect to a Significant
Subsidiary) and 6.01(9) or because of the failure of the Company
to comply with clauses (iii) and (iv) of Section 5.01.
Upon satisfaction of the conditions set forth herein
and upon request of the Company, the Trustee shall acknowledge in
writing the discharge of those obligations that the Company
terminates.
(c) Notwithstanding clauses (a) and (b) above, the
Company's obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07,
7.07, 7.08, 8.04, 8.05 and 8.06 shall survive until the
Securities have been paid in full. Thereafter, the Company's
obligations in Sections 7.07, 8.04 and 8.05 shall survive.
SECTION 8.02. Conditions to Defeasance. The Company
------------------------
may exercise its regal defeasance option or its covenant
defeasance option only if:
(1) the Company irrevocably deposits in trust with the
Trustee money or U.S. Government Obligations for the payment
of principal of and interest on the Securities to maturity
or redemption, as the case may be;
(2) the Company delivers to the Trustee a certificate
from a nationally recognized firm of independent accountants
expressing their opinion that the payments of principal and
interest when due and without reinvestment on the deposited
U.S. Government Obligations plus any deposited money without
investment shall provide cash at such times and in such
amounts as shall be sufficient to pay principal and interest
when due on all the Securities to maturity or redemption, as
the case may be;
(3) 123 days pass after the deposit is made and during
the 123-day period no Default specified in Section 6.01(7)
or (8) with respect to the Company occurs which is
continuing at the end of the period;
(4) the deposit does not constitute a default under
any other agreement binding on the Company and is not
prohibited by Article 10;
(5) the Company delivers to the Trustee an opinion of
Counsel to the effect that the trust resulting from the
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<PAGE>
deposit does not constitute, or is qualified as, a regulated
investment company under the Investment Company Act of 1940;
(6) in the case of the legal defeasance option, the
Company shall have delivered to the Trustee an Opinion of
Counsel stating that (i) the Company has received from, or
there has been published by, the Internal Revenue Service a
ruling, or (ii) since the date of this Indenture there has
been a change in the applicable Federal income tax law, in
either case to the effect that, and based thereon such
Opinion of Counsel shall confirm that, the Securityholders
shall not recognize income, gain or loss for Federal income
tax purposes as a result of such defeasance and shall be
subject to Federal income tax on the same amounts, in the
same manner and at the same times as would have been the
case if such defeasance had not occurred;
(7) in the case of the covenant defeasance option, the
Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that the Securityholders shall not
recognize income, gain or loss for Federal income tax
purposes as a result of such covenant defeasance and shall
be subject to Federal income tax on the same amounts, in the
same manner and at the same times as would have been the
case if such covenant defeasance had not occurred; and
(8) the Company delivers to the Trustee an officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent to the defeasance and discharge of the
Securities as contemplated by this Article 8 have been
complied with.
Before or after a deposit, the Company may make
arrangements satisfactory to the Trustee for the redemption of
Securities at a future date in accordance with Article 3.
SECTION 8.03. Application of Trust Money. The Trustee
--------------------------
shall hold in trust money or U.S. Government obligations
deposited with it pursuant to this Article 8. It shall apply the
deposited money and the money from U.S. Government Obligations
through the Paying Agent and in accordance with this Indenture to
the payment of principal of and interest on the Securities.
Money and securities so held in trust are not subject to Article
10.
SECTION 8.04. Repayment to Company. The Trustee and
--------------------
the Paying Agent shall promptly turn over to the Company upon
written request any excess money or securities held by them at
any time.
Subject to any applicable abandoned property law, the
Trustee and the Paying Agent shall pay to the Company upon
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written request any money held by them for the payment of
principal or interest that remains unclaimed for two years, and,
thereafter, Securityholders entitled to the money must look to
the Company for payment as general creditors.
SECTION 8.05. Indemnity for Government Obligations.
------------------------------------
The Company shall pay and shall indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against deposited
U.S. Government Obligations or the principal and interest
received on such U.S. Government Obligations.
SECTION 8.06. Reinstatement. If the Trustee or Paying
-------------
Agent is unable to apply any money or U.S. Government Obligations
in accordance with this Article 8 by reason of any legal
proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise
prohibiting such application, the Company's obligations under
this Indenture and the Securities shall be revived and reinstated
as though no deposit had occurred pursuant to this Article 8
until such time as the Trustee or Paying Agent is permitted to
apply all such money or U.S. Government Obligations in accordance
with this Article 8; provided, however, that, if the Company has
-------- -------
made any payment of interest on or principal of any Securities
because of the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such
Securities to receive such payment from the money or U.S.
Government Obligations held by the Trustee or Paying Agent.
ARTICLE 9
Amendments
----------
SECTION 9.01. Without Consent of Holders. The Company,
--------------------------
the Note Guarantors and the Trustee may amend this Indenture or
the Securities without notice to or consent of any
Securityholder:
(1) to cure any ambiguity, omission, defect or
inconsistency;
(2) to comply with Article 5;
(3) to provide for uncertificated Securities in
addition to or in place of certificated Securities;
provided, however, that the uncertificated Securities are
-------- -------
issued in registered form for purposes of Section 163(f) of
the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the
Code;
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<PAGE>
(4) to make any change in Article 10 that would limit
or terminate the benefits available to any holder of Senior
Indebtedness (or Representatives therefor) under Article 10;
(5) to add guarantees with respect to the Securities
or to secure the Securities;
(6) to add to the covenants of the Company for the
benefit of the Holders or to surrender any right or power
herein conferred upon the Company;
(7) to comply with any requirements of the SEC in
connection with qualifying this Indenture under the TIA;
(8) to make any change that does not adversely affect
the rights of any Securityholder; or
(9) to provide for the issuance of the Exchange Notes,
which will have terms substantially identical in all
material respects to the Initial Notes (except that the
transfer restrictions contained in the Initial Notes will be
modified or eliminated, as appropriate), and which will be
treated, together with any outstanding Initial Notes. as a
single issue of securities.
An amendment under this Section may not make any change
that adversely affects the rights under Article 10 of any holder
of Senior Indebtedness then outstanding unless the holders of
such Senior Indebtedness (or any group or representative thereof
authorized to give a consent) consent to such change.
After an amendment under this Section becomes
effective, the Company shall mail to Securityholders a notice
briefly describing such amendment. The failure to give such
notice to all Securityholders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section.
SECTION 9.02. With Consent of Holders. The Company,
-----------------------
the Note Guarantors and the Trustee may amend this Indenture or
the Securities without notice to any Securityholder but with the
written consent of the Holders of at least a majority in
principal amount of the Securities. However, without the consent
of each Securityholder affected, an amendment may not:
(1) reduce the amount of Securities whose Holders must
consent to an amendment;
(2) reduce the rate of or extend the time for payment
of interest or any liquidated damages on any Security;
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<PAGE>
(3) reduce the principal (or Accreted Value, as the
case may be) of or extend the Stated Maturity of any
Security;
(4) reduce the premium payable upon the redemption of
any Security or change the time at which any Security may or
shall be redeemed in accordance with Article 3;
(5) make any Security payable in money other than that
stated in the Security;
(6) make any change in Article 10 that adversely
affects the rights of any Securityholder under Article 10;
(7) modify or affect in any manner adverse to the
Holders the terms and conditions of the obligation of any
Note Guarantor for the due and punctual payment of the
principal (or Accreted Value, as the case may be) of or any
liquidated damages or interest on Securities; or
(8) make any change in Section 6.04 or 6.07 or the
second sentence of this Section.
It shall not be necessary for the consent of the
Holders under this Section to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent
approves the substance thereof.
An amendment under this Section may not make any change
that adversely affects the rights under Article 10 of any holder
of Senior Indebtedness then outstanding unless the holders of
such Senior Indebtedness (or any group or representative thereof
authorized to give a consent) consent to such change.
After an amendment under this Section becomes
effective, the Company shall mail to Securityholders a notice
briefly describing such amendment. The failure to give such
notice to all Securityholders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section.
SECTION 9.03. Compliance with Trust Indenture Act.
-----------------------------------
Every amendment to this Indenture or the Securities shall comply
with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents and
-------------------------------------
Waivers. A consent to an amendment or a waiver by a Holder of a
-------
Security shall bind the Holder and every subsequent Holder of
that Security or portion of the Security that evidences the same
debt as the consenting Holder's Security, even if notation of the
consent or waiver is not made on the Security. However, any such
Holder or subsequent Holder may revoke the consent or waiver as
to such Holder's Security or portion of the Security if the
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Trustee receives the notice of revocation before the date the
amendment or waiver becomes effective. After an amendment or
waiver becomes effective, it shall bind every Securityholder.
The Company may, but shall not be obligated to, fix a
record date for the purpose of determining the Securityholders
entitled to give their consent or take any other action described
above or required or permitted to be taken pursuant to this
Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were
Securityholders at such record date (or their duly designated
proxies), and only those Persons, shall be entitled to give such
consent or to revoke any consent previously given or to take any
such action, whether or not such Persons continue to be Holders
after such record date. No such consent shall be valid or
effective for more than 120 days after such record date.
SECTION 9.05. Notation on or Exchange of Securities.
-------------------------------------
If an amendment changes the terms of a Security, the Trustee may
require the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Security
regarding the changed terms and return it to the Holder.
Alternatively, if the Company or the Trustee so determines, the
Company in exchange for the Security shall issue and the Trustee
shall authenticate a new Security that reflects the changed
terms. Failure to make the appropriate notation or to issue a
new Security shall not affect the validity of such amendment.
SECTION 9.06. Trustee To Sign Amendments. The Trustee
--------------------------
shall sign any amendment authorized pursuant to this Article 9 if
the amendment does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. If it does, the
Trustee may but need not Sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably
satisfactory to it and to receive, and (subject to Section 7.01)
shall be fully protected in relying upon, an Officers'
Certificate and an Opinion of Counsel stating that such amendment
is authorized or permitted by this Indenture and that such
amendment is the legal, valid and binding obligation of the
Company and the Note Guarantors enforceable against them in
accordance with its terms, subject to customary exceptions.
SECTION 9.07. Payment for Consent. Neither the Company
-------------------
nor any Affiliate of the Company shall, directly or indirectly,
pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder for or as an inducement
to any consent, waiver or amendment of any of the terms or
provisions of this Indenture or the Securities unless such
consideration is offered to be paid to all Holders that so
consent, waive or agree to amend in the time frame set forth in
solicitation documents relating to such consent, waiver or
agreement.
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ARTICLE 10
Subordination
-------------
SECTION 10.01. Agreement To Subordinate. The Company
------------------------
and each of the Note Guarantors agrees, and each Securityholder
by accepting a Security and the related Note Guarantees agrees,
that the Indebtedness evidenced by the Securities is subordinated
in right of payment, to the extent and in the manner provided in
this Article 10, to the prior payment of all Senior Indebtedness
and that the subordination is for the benefit of and enforceable
by the holders of Senior Indebtedness. The Securities shall in
all respects rank pari passu with all other.Senior Subordinated
---- -----
Indebtedness of the Company, the Note Guarantees shall in all
respects rank pari passu with all other Senior Subordinated
Indebtedness of the Note Guarantors and only Indebtedness of the
Company and the Note Guarantors which is Senior Indebtedness
shall rank senior to the Securities and the Note Guarantees in
accordance with the provisions set forth herein. All provisions
of this Article 10 shall be subject to Section 10.12. All
guarantees by each Note Guarantor of Senior Indebtedness of the
Company shall be deemed Senior Indebtedness of each such Note
Guarantor.
SECTION 10.02. Liquidation, Dissolution, Bankruptcy.
------------------------------------
Upon any payment or distribution of the assets of the Company or
any Note Guarantor to creditors upon a total or partial
liquidation or a total or partial dissolution of the Company or
in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to the Company or any Note Guarantor
or their respective properties:
(1) holders of Senior indebtedness shall be entitled
to receive payment in full of the Senior Indebtedness before
Securityholders shall be entitled to receive any payment of
principal (or Accreted Value, as the case may be) of or any
liquidated damages or interest on the Securities; and
(2) until the Senior Indebtedness is paid in full, any
distribution to which Securityholders would be entitled but
for this Article 10 shall be made to holders of Senior
Indebtedness as their interests may appear, except that
Securityholders may receive shares of stock and any debt
securities (a) that are subordinated to Senior Indebtedness
to at least the same extent as the Securities and (b) do not
provide for the payment of principal prior to the Stated
Maturity of all Senior Indebtedness.
SECTION 10.03. Default on Senior Indebtedness. Neither
------------------------------
the Company nor any Note Guarantor may pay the principal (or
Accreted Value, as the case may be) of or any liquidated damages
or interest on the Securities or make any deposit pursuant to
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Section 8.01 and may not repurchase, redeem or otherwise retire
any Securities (collectively, "pay the Securities") if (i) any
Senior Indebtedness is not paid when due or (ii) any other
default.on Senior Indebtedness occurs and the maturity of such
Senior Indebtedness is accelerated in accordance with its terms
unless, in either case, (x) the default has been cured or waived
and any such acceleration has been rescinded or (y) such Senior
Indebtedness has been paid in full; provided, however, that the
-------- -------
Company and any Note Guarantor may pay the Securities without
regard to the foregoing if the Company and the Trustee receive
written notice approving such payment from the Representatives of
the Designated Senior Indebtedness with respect to which either
of the events set forth in clause (i) or (ii) has occurred and is
continuing. During the continuance of any default (other than a
default described in clause (i) or (ii) of the preceding
sentence) with respect to any Designated Senior Indebtedness
pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be
required to effect such acceleration) or the expiration of any
applicable grace periods, neither the Company nor any of the Note
Guarantors may pay the Securities for a period (a "Payment
Blockage Period") commencing upon the receipt by the Trustee
(with a copy to the Company) of written notice (a "Blockage
Notice") of such default from the Representative of such
Designated Senior Indebtedness specifying an election to effect a
Payment Blockage Period and ending 179 days thereafter (or
earlier if such Payment Blockage Period is terminated (i) by
written notice to the Trustee and the Company from the Person or
Persons who gave such Blockage Notice, (ii) because the default
giving rise to such Blockage Notice is no longer continuing or
(iii) because such Designated Senior Indebtedness has been repaid
in full). Notwithstanding the provisions described in the
immediately preceding sentence (but subject to the provisions
contained in the first sentence of this Section), unless the
holders of such Designated Senior Indebtedness or the
Representative of such holders shall have accelerated the
maturity of such Designated Senior Indebtedness, the Company may
resume payments on the Securities after the end of such Payment
Blockage Period. Not more than one Blockage Notice may be given
in any consecutive 360-day period, irrespective of the number of
defaults with respect to Designated Senior Indebtedness during
such period; provided, however, that if any Blockage Notice
-------- -------
within such 360-day period is given by or on behalf of any
holders of Designated Senior Indebtedness (other than the Bank
Indebtedness), the Representative of the Bank Indebtedness may
give another Blockage Notice within such period; provided
--------
further, however, that in no event may the total number of days
------- -------
during which any Payment Blockage Period or Periods is in effect
exceed 179 days in the aggregate during any 360 consecutive day
period. For purposes of this Section, no default or event of
default which existed or was continuing on the date of the
commencement of any Payment Blockage Period with respect to the
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Designated Senior Indebtedness initiating such Payment Blockage
Period shall be, or be made, the basis of the commencement of a
subsequent Payment Blockage Period by the Representative of such
Designated Senior Indebtedness, whether or not within a period of
360 consecutive days, unless such default or event of default
shall have been cured or waived for a period of not less than 90
consecutive days.
SECTION 10.04. Acceleration of Payment of Securities. If
-------------------------------------
payment of the Securities is accelerated because of an Event of
Default, the Company or the Trustee (at the expense of the
Company) shall promptly notify the holders of the Designated
Senior Indebtedness (or their Representatives) of the
acceleration. If any Designated Senior Indebtedness is
outstanding, neither the Company nor any Note Guarantor may pay
the Securities until five Business days after the Representative
of the Designated Senior Indebtedness receives notice of such
acceleration and, thereafter, may pay the Securities only if this
Article 10 otherwise permits payments at that time.
SECTION 10.05. When Distribution Must Be Paid Over. If
-----------------------------------
a distribution is made to Securityholders that because of this
Article 10 should not have been made to them, the Securityholders
who receive the distribution shall hold it in trust for holders
of Senior Indebtedness and pay it over to them as their interests
may appear.
SECTION 10.06. Subrogation. After all Senior
-----------
Indebtedness is paid in full and until the Securities are paid in
full, Securityholders shall be subrogated to the rights of
holders of Senior Indebtedness to receive distributions
applicable to Senior Indebtedness. A distribution made under
this Article 10 to holders of Senior Indebtedness which otherwise
would have been made to Securityholders is not, as between the
Company and Securityholders, a payment by the Company on Senior
Indebtedness, or, as between any Note Guarantor and the
Securityholders, a payment by such Note Guarantor on Senior
Indebtedness.
SECTION 10.07. Relative Rights. This Article 10
---------------
defines the relative rights of Securityholders and holders of
Senior Indebtedness. Nothing in this Indenture shall:
(1) impair, as between the Company or any Note
Guarantor, as the case may be, and Securityholders, the
obligation of the Company or any Note Guarantor, as the case
may be, which is absolute and unconditional, to pay
principal (or Accreted Value, as the case may be) of and any
liquidated damages and interest on the Securities in
accordance with their terms; or
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(2) prevent the Trustee or any Securityholder from
exercising its available remedies upon a Default, subject to
the rights of holders of Senior Indebtedness to receive
distributions otherwise payable to Securityholders.
SECTION 10.08. Subordination May Not Be Impaired by
------------------------------------
Company or any Note Guarantor. No right of any holder of Senior
-----------------------------
Indebtedness to enforce the subordination of the Indebtedness
evidenced by the Securities shall be impaired by any act or
failure to act by the Company or any Note Guarantor by the
failure of any of them to comply with this Indenture.
SECTION 10.09. Rights of Trustee and Paying Agent.
----------------------------------
Notwithstanding Section 10.03, the Trustee or Paying Agent may
continue to make payments on the Securities and shall not be
charged with knowledge of the existence of facts that would
prohibit the making of any such payments unless, not less than
two Business Days prior to the date of such payment, a Trust
Officer of the Trustee receives notice satisfactory to it that
payments may not be made under this Article 10. The Company, the
Registrar or co-registrar, the Paying Agent, a Representative or
a holder of Senior Indebtedness may give the notice; provided,
--------
however, that, if an issue of Senior Indebtedness has a
-------
Representative, only the Representative may give the notice.
The Trustee in its individual or any other capacity may
hold Senior Indebtedness with the same rights it would have if it
were not Trustee. The Registrar and coregistrar and the Paying
Agent may do the same with like rights. The Trustee shall be
entitled to all the rights set forth in this Article 10 with
respect to any Senior Indebtedness which may at any time be held
by it, to the same extent as any other holder of Senior
Indebtedness; and nothing in Article 7 shall deprive the Trustee
of any of its rights as such holder. Nothing in this Article 10
shall apply to claims of, or payments to, the Trustee under or
pursuant to Section 7.07.
SECTION 10.10. Distribution or Notice to
-------------------------
Representative. Whenever a distribution is to be made or a
--------------
notice given to holders of Senior Indebtedness, the distribution
may be made and the notice given to their Representative (if
any).
SECTION 10.11. Article 10 Not To Prevent Events of
-----------------------------------
Default or Limit Right To Accelerate. The failure to make a
------------------------------------
payment pursuant to the Securities by reason of any provision in
this Article 10 shall not be construed as preventing the
occurrence of a Default. Nothing in this Article 10 shall have
any effect on the right of the Securityholders or the Trustee to
accelerate the maturity of the Securities.
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SECTION 10.12. Trust Moneys Not Subordinated.
-----------------------------
Notwithstanding anything contained herein to the contrary
payments from money or the proceeds of U.S. Government
Obligations held in trust under Article 8 by the Trustee for the
payment of principal of and interest on the Securities shall not
be subordinated to the prior payment of any Senior Indebtedness
or subject to the restrictions set forth in this Article 10, and
none of the Securityholders shall be obligated to pay over any
such amount to the Company or any holder of Senior Indebtedness
of the Company or any other creditor of the Company.
SECTION 10.13. Trustee Entitled To Rely. Upon any
------------------------
payment or distribution pursuant to this Article 10, the Trustee
and the Securityholders shall be entitled to rely (i) upon any
order or decree of a court of competent jurisdiction in which any
proceedings of the nature referred to in Section 10.02 are
pending, (ii) upon a certificate of the liquidating trustee or
agent or other Person making such payment or distribution to the
Trustee or to the Securityholders or (iii) upon the
Representatives for the holders of Senior Indebtedness for the
purpose of ascertaining the Persons entitled to participate in
such payment or distribution, the holders of the Senior
Indebtedness and other Indebtedness of the Company or any Note
Guarantor, as the case may be, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and
all other facts pertinent thereto or to this Article 10. In the
event that the Trustee determines, in good faith, that evidence
is required with respect to the right of any Person as a holder
of Senior Indebtedness to participate in any payment or
distribution pursuant to this Article 10, the Trustee may request
such Person to furnish evidence to the reasonable satisfaction of
the Trustee as to the amount of Senior Indebtedness held by such
Person, the extent to which such Person is entitled to
participate in such payment or distribution and other facts
pertinent to the rights of such Person under this Article 10,
and, if such evidence is not furnished, the Trustee may defer any
payment to such Person pending judicial determination as to the
right of such Person to receive such payment. The provisions of
Sections 7.01 and 7.02 shall be applicable to all actions or
omissions of actions by the Trustee pursuant to this Article 10.
SECTION 10.14. Trustee To Effectuate Subordination.
-----------------------------------
Each Securityholder by accepting a Security authorizes and
directs the Trustee on his behalf to take such action as may be
necessary or appropriate to acknowledge or effectuate the
subordination between the Securityholders and the holders of
Senior Indebtedness as provided in this Article 10 and appoints
the Trustee as attorney-in-fact for any and all such purposes.
SECTION 10.15. Trustee Not Fiduciary for Holders of
------------------------------------
Senior Indebtedness. The Trustee shall not be deemed to owe any
-------------------
fiduciary duty to the holders of Senior Indebtedness and shall
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not be liable to any such holders if it shall mistakenly pay over
or distribute to Securityholders or the Company or any other
Person, money or assets to which any holders of Senior
Indebtedness shall be entitled by virtue of this Article 10 or
otherwise.
SECTION 10.16. Reliance by Holders of Senior
-----------------------------
Indebtedness on Subordination Provisions. Each Securityholder by
----------------------------------------
accepting a Security acknowledges and agrees that the foregoing
subordination provisions are, and are intended to be, an
inducement and a consideration to each holder of any Senior
Indebtedness, whether such Senior Indebtedness was created or
acquired before or after the issuance of the Securities, to
acquire and continue to hold, or to continue to hold, such Senior
Indebtedness and such holder of Senior Indebtedness shall be
deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing
to hold, such Senior Indebtedness.
ARTICLE 11
Note Guarantees
---------------
SECTION 11.01. Note Guarantees. Each Note Guarantor
---------------
hereby jointly and severally unconditionally and irrevocably
guarantees on a senior subordinated basis to each Holder and to
the Trustee and its successors and assigns (a) the full and
punctual payment of principal (or Accreted Value, as the case may
be) of and interest on the Securities when due, whether at
maturity, by acceleration, by redemption or otherwise, and all
other monetary obligations of the Company under this Indenture
(including obligations to the Trustee) and the Securities and (b)
the full and punctual performance within applicable grace periods
of all other obligations of the Company under this Indenture and
the Securities (all the foregoing being hereinafter collectively
called the "Obligations"). Each Note Guarantor further agrees
that the Obligations may be extended or renewed, in whole or in
part, without notice or further assent from each such Note
Guarantor, and that each such Note Guarantor shall remain bound
under this Article 11 notwithstanding any extension or renewal of
any Obligation.
Each Note Guarantor waives presentation to, demand of,
payment from and protest to the Company of any of the Obligations
and also waives notice of protest for nonpayment. Each Note
Guarantor waives notice of any default under the Securities or
the obligations. The obligations of each Note Guarantor
hereunder shall not be affected by (a) the failure of any Holder
or the Trustee to assert any claim or demand or to enforce any
right or remedy against the Company or any other Person under
this Indenture, the Securities or any other agreement or
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<PAGE>
otherwise; (b) any extension or renewal of any thereof; (c) any
rescission, waiver, amendment or modification of any of the terms
or provisions of this Indenture, the Securities or any other
agreement; (d) the release of any security held by any Holder or
the Trustee for the Obligations or any of them; (e) the failure
of any Holder or Trustee to exercise any right or remedy against
any other guarantor of the Obligations; or (f) any change in the
ownership of such Note Guarantor, except as provided in Section
11.02(b).
Each Note Guarantor further agrees that its Note
Guarantee herein constitutes a guarantee of payment, performance
and compliance when due (and not a guarantee of collection) and
waives any right to require that any resort be had by any Holder
or the Trustee to any security held for payment of the
Obligations.
The Note Guarantee of each Note Guarantor is, to the
extent and in the manner set forth in Article 10, subordinated
and subject in right of payment to the prior payment in full of
the principal of and premium, if any, and interest on all Senior
Indebtedness of such Note Guarantor and this Note Guarantee is
made subject to such provisions of this Indenture.
The obligations of each Note Guarantor hereunder shall
not be subject to any reduction, limitation, impairment or
termination for any reason, including any claim of waiver,
release, surrender, alteration or compromise, and shall not be
subject to any defense of setoff, counterclaim, recoupment or
termination whatsoever or by reason of the invalidity, illegality
or unenforceability of the Obligations or otherwise. Without
limiting the generality of the foregoing, the obligations of each
Note Guarantor herein shall not be discharged or impaired or
otherwise affected by the failure of any Holder or the Trustee to
assert any claim or demand or to enforce any remedy under this
Indenture, the Securities or any other agreement, by any waiver
or modification of any thereof, by any default, failure or delay,
willful or otherwise, in the performance of the obligations, or
by any other act or thing or omission or delay to do any other
act or thing which may or might in any manner or to any extent
vary the risk of any Note Guarantor or would otherwise operate as
a discharge of any Note Guarantor as a matter of law or equity.
Each Note Guarantor further agrees that its Note
Guarantee herein shall continue to be effective or be reinstated,
as the case may be, if at any time payment, or any part thereof,
of principal (or Accreted Value, as the case may be) of or
interest on any Obligation is rescinded or must otherwise be
restored by any Holder or the Trustee upon the bankruptcy or
reorganization of the Company or otherwise.
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<PAGE>
In furtherance of the foregoing and not in limitation
of any other right which any Holder or the Trustee has at law or
in equity against any Note Guarantor by virtue hereof, upon the
failure of the Company to pay the principal (or Accreted Value,
as the case may be) of or interest on any Obligation when and as
the same shall become due, whether at maturity, by acceleration,
by redemption or otherwise, or to perform or comply with any
other Obligation, each Note Guarantor hereby promises to and
shall, upon receipt of written demand by the Trustee, forthwith
pay, or cause to be paid, in cash, to the Holders or the Trustee
an amount equal to the sum of (i) the unpaid principal (or
Accreted Value, as the case may be) amount of such obligations,
(ii) accrued and unpaid interest on such Obligations (but only to
the extent not prohibited by law) and (iii) all other monetary
Obligations of the Company to the Holders and the Trustee.
Each Note Guarantor agrees that it shall not be
entitled to any right of subrogation in relation to the Holders
in respect of any obligations guaranteed hereby until payment in
full of all Obligations. Each Note Guarantor further agrees
that, as between it, on the one hand, and the Holders and the
Trustee, on the other hand, (x) the maturity of the obligations
guarantied hereby may be accelerated as provided in Article 6 for
the purposes of any Note Guarantor's Note Guarantee herein,
notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any declaration of
acceleration of such obligations as provided in Article 6, such
Obligations (whether or not due and payable) shall forthwith
become due and payable by such Note Guarantor for the purposes of
this Section.
Each Note Guarantor also agrees to pay any and all
costs and expenses (including reasonable attorneys' fees)
incurred by the Trustee or any Holder in enforcing any rights
under this Section.
SECTION 11.02. Limitation on Liability. (a) Any term or
-----------------------
provision of this Indenture to the contrary notwithstanding, the
maximum, aggregate amount of the obligations guaranteed hereunder
by any Note Guarantor shall not exceed the maximum amount that
can be hereby guaranteed without rendering this Indenture, as it
relates to any Note Guarantor, voidable under applicable law
relating to fraudulent conveyance or fraudulent transfer.
(b) This Note Guarantee as to any Note Guarantor shall
terminate and be of no further force or effect upon the sale or
other transfer (i) by such Note Guarantor of all or substantially
all of its assets or (ii) by the Company of all of its stock or
other equity interests in such Note Guarantor, to a Person that
is not an Affiliate of the Company; provided, however, that such
-------- -------
sale or transfer shall be deemed to constitute an Asset
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<PAGE>
Disposition and the Company shall comply with its obligations
under Section 4.06.
SECTION 11.03. Successors and Assigns. This Article 11
----------------------
shall be binding upon each Note Guarantor and its successors and
assigns and shall enure to the benefit of the successors and
assigns of the Trustee and the Holders and, in the event of any
transfer or assignment of rights by any Holder or the Trustee,
the rights and privileges conferred upon that party in this
Indenture and in the Securities shall automatically extend to and
be vested in such transferee or assignee, all subject to the
terms and conditions of this Indenture.
SECTION 11.04. No Waiver. Neither a failure nor a
---------
delay on the part of either the Trustee or the Holders in
exercising any right, power or privilege under this Article 11
shall operate as a waiver thereof, nor shall a single or partial
exercise thereof preclude any other or further exercise of any
right, power or privilege. The rights, remedies and benefits of
the Trustee and the Holders herein expressly specified are
cumulative and not exclusive of any other rights, remedies or
benefits which either may have under this Article 11 at law, in
equity, by statute or otherwise.
SECTION 11.05. Modification. No modification,
------------
amendment or waiver of any provision of this Article 11, nor the
consent to any departure by any Note Guarantor therefrom, shall
in any event be effective unless the same shall be in writing and
signed by the Trustee, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for
which given. No notice to or demand on any Note Guarantor in any
case shall entitle such Note Guarantor to any other or further
notice or demand in the same, similar or other circumstances.
SECTION 11.06. Execution of Supplemental Indenture for
---------------------------------------
Future Note Guarantors. Each Subsidiary which is required to
----------------------
become a Note Guarantor pursuant to Section 4.14 shall promptly
execute and deliver to the Trustee a supplemental indenture in
the form of Exhibit D hereto pursuant to which such Subsidiary
shall become a Note Guarantor under this Article 11 and shall
guarantee the Obligations. Concurrently with the execution and
delivery of such supplemental indenture, the Company shall
deliver to the Trustee an Opinion of Counsel to the effect that
such supplemental indenture has been duly authorized, executed
and delivered by such Subsidiary and that, subject to the
application of bankruptcy, insolvency, moratorium, fraudulent
conveyance or transfer and other similar laws relating to
creditors' rights generally and to the principals of equity,
whether considered in a proceeding at law or in equity, the Note
Guarantee of such Note Guarantor is a legal, valid and binding
obligation of such Note Guarantor, enforceable against such Note
Guarantor in accordance with its terms.
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ARTICLE 12
Miscellaneous
-------------
SECTION 12.01. Trust Indenture Act Controls. If any
----------------------------
provision of this Indenture limits, qualifies or conflicts with
another provision which is required to be included in this
Indenture by the TIA, the required provision shall control.
SECTION 12.02. Notices. Any notice or communication
-------
shall be in writing and delivered in person or mailed by first-
class mail addressed as follows:
if to the Company or any Note Guarantor:
Six Flags Theme Parks Inc.
400 Interpace Parkway, Building C
Parsippany, New Jersey 07054
Attention of: General Counsel
if to the Trustee:
United States Trust Company of New York
114 W. 47th Street
New York, NY 10036
Attention of: Corporate Trust Division
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent
notices or communications.
Any notice or communication mailed to a Securityholder
shall be mailed to the Securityholder at the Securityholder's
address as it appears on the registration books of the Registrar
and shall be sufficiently given if so mailed within the time
prescribed.
Failure to mail a notice or communication to a
Securityholder or any defect in it shall not affect its
sufficiency with respect to other Securityholders. If a notice
or communication is mailed in the manner provided above, it is
duly given, whether or not the addressee receives it.
SECTION 12.03. Communication by Holders with Other
-----------------------------------
Holders. Securityholders may communicate pursuant to TIA
-------
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(Section) 312(b) with other Securityholders with respect to their
rights under this Indenture or the Securities. The Company, the
Trustee, the Registrar and anyone else shall have the protection
of TIA (Section) 312(c).
SECTION 12.04. Certificate and Opinion as to Conditions
----------------------------------------
Precedent. Upon any request or application by the Company to the
---------
Trustee to take or refrain from taking any action under this
Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate in form and substance
reasonably satisfactory to the Trustee stating that, in the
opinion of the signers, all conditions precedent, if any,
provided for in this Indenture relating to the
proposed.action have been complied with; and
(2) an opinion of Counsel in form and substance
reasonably satisfactory to the Trustee stating that, in the
opinion of such counsel, all such conditions precedent have
been complied with.
SECTION 12.05. Statements Required in Certificate or
-------------------------------------
Opinion. Each certificate or opinion with respect to compliance
-------
with a covenant or condition provided for in this Indenture shall
include:
(1) a statement that the individual making such
certificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of
the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are
based;
(3) a statement that, in the opinion of such
individual, he has made such examination or investigation as
is necessary to enable him to express an informed opinion as
to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion
of such individual, such covenant or condition has been
complied with.
SECTION 12.06. When Securities Disregarded. In
---------------------------
determining whether the Holders of the required principal amount
of Securities have concurred in any direction, waiver or consent,
Securities owned by the Company or by any Person directly or
indirectly controlling or controlled by or under direct or
indirect common control with the Company shall be disregarded and
deemed not to be outstanding, except that, for the purpose of
determining whether the Trustee shall be protected in relying on
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any such direction, waiver or consent, only Securities which the
Trustee knows are so owned shall be so disregarded. Also,
subject to the foregoing, only Securities outstanding at the time
shall be considered in any such determination.
SECTION 12.07. Rules by Trustee, Paying Agent and
----------------------------------
Registrar. The Trustee may make reasonable rules for action by
---------
or a meeting of Securityholders. The Registrar and the Paying
Agent may make reasonable rules for their functions.
SECTION 12.08. Legal Holidays. A "Legal Holiday" is a
--------------
Saturday, a Sunday or a day on which banking institutions are not
required to be open in the State of New York. If a payment date
is a Legal Holiday, payment shall be made on the next succeeding
day that is not a Legal Holiday, and no interest shall accrue for
the intervening period. If a regular record date is a Legal
Holiday, the record date shall not be affected.
SECTION 12.09. Governing Law. This Indenture and the
-------------
Securities shall be governed by, and construed in accordance
with, the laws of the State of New York but without giving effect
to applicable principles of conflicts of law to the extent that
the application of the laws of another jurisdiction would be
required thereby.
SECTION 12.10. No Recourse Against Others. A director,
--------------------------
officer, employee or stockholder, as such, of the Company shall
not have any liability for any obligations of the Company under
the Securities or this Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation.
By accepting a Security, each Securityholder shall waive and
release all such liability. The waiver and release shall be part
of the consideration for the issue of the Securities.
SECTION 12.11. Successors. All agreements of the
----------
Company and each Note Guarantor in this Indenture and the
Securities shall bind their respective successors. All
agreements of the Trustee in this Indenture shall bind its
successors.
SECTION 12.12. Multiple Originals. The parties may
------------------
sign any number of copies of this Indenture. Each signed copy
shall be an original, but all of them together represent the same
agreement. One signed copy is enough to prove this Indenture.
SECTION 12.13. Table of Contents; Headings. The table
---------------------------
of contents, cross-reference sheet and headings of the Articles
and Sections of this Indenture have been inserted for convenience
of reference only, are not intended to be considered a part
hereof and shall not modify or restrict any of the terms or
provisions hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Indenture
to be duly executed as of the date first written above.
SIX FLAGS THEME PARKS INC.,
by
/s/ Andrew J. Barkley
-------------------------------------------------------
Name: Andrew J. Barkley
Title: Senior Vice President, Finance
Treasurer and Assistant Secretary
SIX FLAGS OVER GEORGIA, INC.,
by
/s/ Paul M. McNicol
-------------------------------------------------------
Name: Paul M. McNicol
Title: Senior Vice President
Secretary and General Counsel
SIX FLAGS OVER TEXAS, INC.,
by
/s/ Paul M. McNicol
-------------------------------------------------------
Name: Paul M. McNicol
Title: Senior Vice President
Secretary and General Counsel
S.F. PARTNERSHIP by SFTP Inc.,
as General Partner
by
/s/ Andrew J. Barkley
-------------------------------------------------------
Name: Andrew J. Barkley
Title: Senior Vice President
Treasurer and Secretary
UNITED STATES TRUST COMPANY OF NEW YORK,
by
/s/ Illegible
-------------------------------------------------------
Name: Illegible
Title: Illegible
-92-
<PAGE>
EXHIBIT A
[FORM OF FACE OF INITIAL NOTE]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC)
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF
PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS
MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION
IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY,
PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION
DATE") WHICH IS THREE YEARS AFTER THE LATER OF THE ORIGINAL
ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR
ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY
(OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE
COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO
<PAGE>
RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT
OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS
ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN
EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF
$250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR
FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE
TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSES (D), (E) AND (F) TO REQUIRE THE DELIVERY
OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND IN THE CASE OF
THE FOREGOING CLAUSE (E), A CERTIFICATE OF TRANSFER IN THE
FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE COMPANY AND
THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST
OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
FOR PURPOSES OF SECTION 1273 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED (THE "CODE"), THIS SECURITY HAS
ORIGINAL ISSUE DISCOUNT. FOR FURTHER INFORMATION, PLEASE
CONTACT THE SENIOR VICE PRESIDENT, FINANCE, OF SIX FLAGS
THEME PARKS INC. AT (201) 402-8100.
-2-
<PAGE>
No. Principal Amount at Stated Maturity $285,000,000
CUSIP NO. 83001WAA2
12-1/4% Senior Subordinated Discount. Note due 2005
Six Flags Theme Parks Inc., a Delaware
corporation, promises to pay to or registered
assigns, the principal sum of Dollars on June
15, 2005.
Interest Payment Dates: June 15 and December 15
commencing December 15, 1998.
Record Dates: June 1 and December 1 commencing December
1, 1998 (whether or not a business day).
Additional provisions of this Security are set
forth on the other side of this Security.
Dated: SIX FLAGS THEME PARKS INC.,
by
--------------------------
Senior Vice President
and Secretary
---------------------------
Senior Vice President
and Treasurer
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
UNITED STATES TRUST COMPANY
OF NEW YORK
as Trustee, certifies [Seal]
that this is one of
the Securities referred to in the Indenture.
by
----------------------
Authorized Signatory
-3-
<PAGE>
[FORM OF REVERSE SIDE OF INITIAL NOTE)
12-1/4% Senior Subordinated Note due 2005
1. Interest
--------
SIX FLAGS THEME PARKS INC., a Delaware corporation
(such corporation, and its successors and assigns under the
Indenture hereinafter referred to, being herein called the
"Company"), promises to pay interest on the principal amount of
this Security at the rate per annum shown above.
The Company will pay interest semiannually on June 15
and December 15 of each year commencing December 15, 1998.
Interest on the Securities will accrue from the most recent date
to which interest has been paid on the Securities or, if no
interest has been paid, from June 15, 1998. Interest and
liquidated damages will be computed on the basis of a 360-day
year of twelve 30-day months. The Company shall pay interest on
overdue principal at the rate borne by the Securities plus 1% per
annum.
The Accreted Value of the Securities shall increase on
a daily basis at the rate of 12-1/4% per annum compounded semi-
annually on each June 15 and December 15 through and until June
15, 1998.
The Company and the Note Guarantors will use all
reasonable efforts to have the Exchange Offer Registration
Statement and, if applicable, a Shelf Registration Statement
(each a "Registration Statement") declared effective by the
Commission as promptly as practicable after the filing thereof.
If (i) the applicable Registration Statement is not filed with
the Commission on or prior to 60 days after the Issue Date, (ii)
the Exchange Offer Registration Statement is not declared
effective and the Exchange offer is not consummated on or prior
to 180 days after the Issue Date, or, as the case may be, the
Shelf Registration Statement is not declared effective within 180
days after the Issue Date, or (iii) the Shelf Registration
Statement is filed and declared effective within 180 days after
the Issue Date but shall thereafter cease to be effective (at any
time that the Company is obligated to maintain the effectiveness
thereof) without being succeeded within 60 days by an additional
Registration Statement filed and declared effective (each such
event referred to in clauses (i) through (iii), a "Registration
Default"), the Company will pay liquidated damages in respect of
all Transfer Restricted Securities, in an amount equal to 1.0%
per annum, accrued weekly, of the Accreted Value of the
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<PAGE>
Securities as of the beginning of each such week of the
Securities constituting Transfer Restricted Securities until the
applicable Registration Default is cured. Following the cure of
all Registration Defaults, the accrual of liquidated damages will
cease. The Company will pay liquidated damages, if any,
semiannually on June 15 and December 15 of each year.
2. Method of Payment
-----------------
The Company will pay interest (except defaulted
interest) on and liquidated damages, if any, in respect of the
Securities to the Persons who are registered holders of
Securities at the close of business on the June 1 or December 1,
whether or not a business day (each a "record date"), next
preceding the applicable payment date even if Securities are
cancelled after the record date and on or before the applicable
payment date. Holders must surrender Securities to a Paying
Agent to collect principal payments (or, as the case may be,
payments of the Accreted Value). The Company will pay principal
(or, as the case may be, the Accreted Value) and interest in
money of the United States that at the time of payment is legal
tender for payment of public and private debts. However, the
Company may pay principal (or, as the case may be, the Accreted
Value) and interest by check payable in such money. It may mail
an interest check to a Holder's registered.address.
3. Paying Agent and Registrar
--------------------------
Initially, United States Trust Company of New York, a
New York corporation (the "Trustee"), will act as Paying Agent
and Registrar. The Company may appoint and change any Paying
Agent or Registrar without notice. The Company or any of its
domestically incorporated Wholly Owned Subsidiaries may act as
Paying Agent or Registrar.
4. Indenture
---------
The Company issued the Securities under an Indenture
dated as of June 23, 1995 (the "Indenture"), among the Company;
Six Flags Over Georgia, Inc., Six Flags Over Texas, Inc., and
S.F. Partnership (collectively, the "Note Guarantors"); and the
Trustee. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to
the Trust Indenture Act of 1939 (15 U.S.C. (Section)(Section)
------
77aaa-77bbbb) as in effect on the date of the Indenture (the
"Act"). Capitalized terms used herein and not defined herein
have the meanings ascribed thereto in the Indenture. The
Securities are subject to all such terms, and Securityholders are
referred to the Indenture and the Act for a statement of those
terms.
-5-
<PAGE>
The Securities are general unsecured obligations of the
Company limited to $285,000,000 aggregate principal amount
(subject to Section 2.07 of the Indenture). This Security is one
of the Initial Notes referred to in the Indenture. The
Securities include the Initial Notes and any Exchange Notes
issued in exchange for the Initial Notes pursuant to the
Indenture. The Initial Notes and the Exchange Notes are treated
as a single class of securities under the Indenture. The
Indenture imposes certain limitations on the Incurrence of
Indebtedness by the Company and certain of its Subsidiaries, the
payment of dividends and other distributions on the Capital Stock
of the Company and certain of its Subsidiaries, the purchase or
redemption of Capital Stock of the Company and of certain Capital
Stock of such Subsidiaries, certain purchases or redemptions of
Subordinated Obligations, the sale or transfer of assets and
Subsidiary stock, the issuance or sale of Capital Stock of
Restricted Subsidiaries, the business activities and investments
of the Company and certain of its Subsidiaries and transactions
with Affiliates. In addition, the Indenture limits the ability
of the Company and certain of its Subsidiaries to restrict
distributions and dividends from Subsidiaries.
To secure the due and punctual payment of the principal
(or, as the case may be, the Accreted Value) and liquidated
damages and interest, if any, on the Securities and all other
amounts payable by the Company under the Indenture and the
Securities when and as the same shall be due and payable, whether
at maturity, by acceleration or otherwise, according to the terms
of the Securities and the Indenture, the Note Guarantors have
unconditionally guaranteed the obligations on a senior
subordinated basis pursuant to the terms of the Indenture.
5. Optional Redemption
-------------------
Except as set forth in this paragraph 5, the Securities
will not be redeemable prior to June 15, 2000. On and after such
date, the Securities will be redeemable, at the Company's option,
in whole or in part, upon not less than 30 nor more than 60 days'
prior notice mailed by first class mail to each Holder's
registered address, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued
interest and liquidated damages (if any) to the redemption date
(subject to the right of Holders of record on the relevant record
date to receive interest due on the relevant interest payment
date), if redeemed during the 12-month period commencing on June
15 of the years set forth below:
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<PAGE>
Year Redemption Price
---- ----------------
2000 . . . . . . . . . . . . . . 106.0%
2001 . . . . . . . . . . . . . . 104.0%
2002 . . . . . . . . . . . . . . 102.0%
2003 and thereafter . . . . . . 100.0%
Notwithstanding the foregoing, at any time and from
time to time prior to June 15, 1998, the Company may, subject to
certain requirements, redeem.in the aggregate up to 35% of the
original aggregate principal amount of the Securities with the
Net Cash Proceeds of one or more Public Equity Offerings by the
Company, Holdings or SFEC following which there is a Public
Market, at a redemption price of 112.25% of the Accreted Value of
the Securities to be redeemed as of the redemption date (subject
to the right of Holders of record on the relevant record date to
receive interest and any liquidated damages due on the relevant
interest payment date); provided, however, that at least 65% of
-------- -------
the original aggregate principal amount of the Securities must
remain outstanding after each such redemption.
6. Notice of Redemption
--------------------
Notice of redemption will be mailed at least 30 days
but not more than 60 days before the redemption date to each
Holder of Securities to be redeemed at his registered address.
Securities in denominations of principal amount larger than
$1,000 may be redeemed in part but only in whole multiples of
$1,000. If money sufficient to pay the redemption price of and
accrued interest on all Securities (or portions thereof) to be
redeemed on the redemption date is deposited with the Paying
Agent on or before the redemption date and certain other
conditions are satisfied, on and after such date interest and
liquidated damages cease to accrue on such Securities (or such
portions thereof) called for redemption.
7. Put Provisions
--------------
Upon a Change of Control, any Holder of Securities will
have the right to cause the Company to repurchase all or any part
of the Securities of such Holder at a repurchase price equal to
101% of the principal amount thereof plus accrued and unpaid
interest, if any, or prior to the third anniversary of the Issue
Date, 101% of the Accreted Value thereof, in either case to and
-7-
<PAGE>
including the date of repurchase as provided in, and subject to
the terms of, the Indenture.
8. Subordination
-------------
The Securities are subordinated to Senior Indebtedness,
as defined in the Indenture. To the extent provided in the
Indenture, Senior Indebtedness must paid before the Securities
may be paid. The Company and the Note Guarantors agree, and each
Securityholder by accepting a Security agrees, to the
subordination provisions contained in the Indenture and each
authorizes the Trustee to give them effect and appoints the
Trustee as attorney-in-fact for such purpose.
9. Denominations; Transfer; Exchange
---------------------------------
The Securities are in registered form without coupons
in denominations of principal amount of $1,000 and whole
multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar
need not register the transfer of or exchange any Securities
selected for redemption (except, in the case of a Security to,be
redeemed in part, the portion of the Security not to be redeemed)
or any Securities for a period of 15 days before a selection of
Securities to be redeemed or 15 days before an interest payment
date.
10. Persons Deemed Owners
---------------------
The registered holder of this Security may be treated
as the owner of it for all purposes.
11. Unclaimed Money
---------------
If money for the payment of principal, Accreted Value,
interest or liquidated damages remains unclaimed for two years,
the Trustee or Paying Agent shall pay the money back to the
Company at its request unless an abandoned property law
designates another person. After any such payment, Holders
entitled to the money must look only to the Company and not to
the Trustee for payment.
-8-
<PAGE>
12. Defeasance
----------
Subject to certain conditions, the Company at any time
may terminate some or all of its obligations under the Securities
and the Indenture if the Company deposits with the Trustee money
or U.S. Government Obligations for the payment of principal and
interest on the Securities to redemption or maturity, as the case
may be.
13. Amendment, Waiver
-----------------
Subject to certain exceptions set forth in the
Indenture, (i) the Indenture or the Securities may be amended
with the written consent of the Holders of at least a majority in
principal amount of the outstanding Securities and (ii) any
default or noncompliance with any provision may be waived with
the written consent of the Holders of a majority in principal
amount of the outstanding Securities. Subject to certain
exceptions set forth in the Indenture, without the consent of any
Securityholder, the Company, the Note Guarantors and the Trustee
may amend the Indenture or the Securities to cure any ambiguity,
omission, defect or inconsistency, or to comply with Article 5 of
the Indenture, or to provide for uncertificated Securities in
addition to or in place of certificated Securities, or to limit
or terminate the benefits of holders of Senior Indebtedness under
the subordination provisions of the Indenture or to add
guarantees with respect to the Securities or to secure the
Securities, or to add additional covenants or surrender rights or
powers conferred on the Company, or to comply with any
requirements of the SEC in connection with qualifying the
Indenture under the Act, or to make any change that does not
adversely affect the rights of any Securityholder, or to provide
for the issuance of Exchange Notes.
14. Defaults and Remedies
---------------------
Under the Indenture, Events of Default include (i)
default for 30 days in payment of interest on the Securities;
(ii) default in payment of principal (or, as the case may be, the
Accreted Value) on the Securities at maturity, upon redemption
pursuant to paragraph 5 of the Securities, upon required
repurchase, upon declaration or otherwise; (iii) failure by the
Company to comply with other agreements in the Indenture or the
Securities, in certain cases subject to notice and lapse of time;
(iv) certain accelerations (including failure to pay within any
grace period after final maturity) of other Indebtedness of the
Company or Subsidiaries if the amount accelerated (or so unpaid)
exceeds $10 million; (v) certain events of bankruptcy or
insolvency with respect to the Company or any Significant
Subsidiary; and (vi) certain judgments or decrees for the payment
-9-
<PAGE>
of money in excess of $10 million. If an Event of Default occurs
and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the Securities may declare all the Securities
to be due and payable immediately. Certain events of bankruptcy
or insolvency are Events of Default which will result in the
Securities being due and payable immediately upon the occurrence
of such Events of Default.
Securityholders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may
refuse to enforce the Indenture or the Securities unless it
receives reasonable indemnity or security. Subject to certain
limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Securityholders notice of
any continuing Default (except a Default in payment of principal
or interest) if it determines that withholding notice is in their
interest.
15. Trustee Dealings with the Company
---------------------------------
Subject to certain limitations imposed by the Act, the
Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may
otherwise deal with and collect obligations owed to it by the
Company or its affiliates and may otherwise deal with the Company
or its affiliates with the same rights it would have if it were
not Trustee.
16. No Recourse Against Others
--------------------------
A director, officer, employee or stockholder, as such,
of the Company or the Trustee shall not have any liability for
any obligations of the Company under the Securities or the
Indenture or for any claim based on, in respect of or by reason
of such obligations or their creation. By accepting a Security,
each Securityholder waives and releases all such liability. The
waiver and release are part of the consideration for the issue of
the Securities.
17. Authentication
--------------
This Security shall not be valid until an authorized
signatory of the Trustee (or an authenticating agent) manually
signs the certificate of authentication on the other side of this
Security.
-10-
<PAGE>
18. Abbreviations
-------------
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in
common) TEN ENT (=tenants by the entirety) JT TEN (=joint tenants
with rights of survivorship and not as tenants in common) CUST
(=custodian) and U/G/M/A (=Uniform Gift to Minors Act).
19. CUSIP Numbers
-------------
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification procedures the Company has caused
CUSIP numbers to be printed on the Securities and has directed
the Trustee to use CUSIP numbers in notices of redemption as a
convenience to Securityholders. No representation is made as to
the accuracy of such numbers either as printed on the Securities
or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
The Company will furnish to any
Securityholder upon written request and without charge
to the Securityholder a copy of the Indenture which has
in it the text of this Security in larger type.
Requests may be made to: Six Flags Theme Parks Inc.,
400 Interpace Parkway, Building C, Parsippany, New
Jersey 07054
Attention of: Secretary
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<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer
this Security on the books of the Company. The agent may
substitute another to act for him.
-----------------------------------------------------------------
Date: Your Signature:
--------------- --------------------------
Signature Guarantee:
--------------------------------------------
(Signature must be guaranteed)
-----------------------------------------------------------------
Sign exactly as your name appears on the other side of this
Security.
In connection with any transfer or exchange of any of the
Securities evidenced by this certificate occurring prior to the
date that is three years after the later of the date of original
issuance of such Securities and the last date, if any, on which
such Securities were owned by the Company or any Affiliate of the
Company, the undersigned confirms that such Securities are being:
CHECK ONE BOX BELOW:
(1) acquired for the undersigned's own account,
without transfer (in satisfaction of Section
2.06(a)(ii)(A) or Section 2.06(d)(i)(A) of
the Indenture); or
(2) transferred to the Company; or
(3) transferred pursuant to and in compliance
with Rule 144A under the Securities Act of
1933; or
(4) transferred pursuant to and in compliance
with Regulation S under the Securities Act of
1933; or
-12-
<PAGE>
(5) transferred to an institutional "accredited
investor" (as defined in Rule 501(a)(1), (2),
(3) or (7) under the Securities Act of 1933),
that has furnished to the Trustee a signed
letter containing certain representations and
agreements (the form of which letter appears
as Exhibit C to the Indenture; or
(6) transferred pursuant to another available
exemption from the registration requirements
of the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to
register any of the Securities evidenced by this certificate in
the name of any person other than the registered holder thereof;
provided, however, that if box (4), (5) or (6) is checked, the
-------- -------
Trustee or the Company may require, prior to registering any such
transfer of the Securities, in their sole discretion, such legal
opinions, certifications and other information as the Trustee or
Company has reasonably requested to confirm that such transfer is
being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act
of 1933, such as the exemption provided by Rule 144 under such
Act.
----------------------------------
Signature
Signature Guarantee:
------------------------- -----------------------------------
Signature
(Signature must be guaranteed)
-----------------------------------------------------------------
-13
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.06 or 4.08 of the Indenture, check
the box:
[ ]
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.06 or 4.08 of the
Indenture, state the amount in principal amount (must be integral
multiple of $1,000): $
Date: Your Signature
---------------- ----------------------
(Sign exactly as your name appears
on the other side of the Security)
Signature Guarantee: ------------------------------------------
(Signature must be guaranteed)
-14-
<PAGE>
EXHIBIT C
Transferee Letter of Representation
Six Flags Theme Parks Inc.
c/o United States Trust Company of New York
114 W. 47th Street
New York, NY 10036
Ladies and Gentlemen:
This certificate is delivered to request a transfer of
$ principal amount of 12-1/4% Senior Subordinated
Discount Notes due 2005 (the "Notes") of Six Flags Theme Parks
Inc. (the "Company").
Upon transfer, the Notes would be registered in the name of
the new beneficial owner as follows:
Name:
---------------------------------------
Address:
-------------------------------------
Taxpayer ID Number:
-------------------------
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act of 1933, as amended (the "Securities Act"))
purchasing for our own account or for the account of such an
institutional "accredited investor," and we are acquiring
the Notes not with a view to, or for offer or sale in
connection with, any distribution in violation of the
Securities Act. We have such knowledge and experience in
financial and business matters as to be capable of
evaluating the merits and risk of our investment in the
Notes and invest in or purchase securities similar to the
Notes in the normal course of our business. We and any
accounts for which we are acting are each able to bear the
economic risk of our or its investment.
2. We understand that the Notes have not been
registered under the Securities Act and, unless so
registered, may not be sold except as permitted in the
following sentence. We agree on our own behalf and on
<PAGE>
behalf of any investor account for which we are purchasing
Notes to offer, sell or otherwise transfer such Notes prior
to the date which is three years after the later of the date
of original issue and the last date on which the Company or
any affiliate of the Company was the owner of such Notes (or
any predecessor thereto) (the "Resale Restriction
Termination Date") only (a) to the Company, (b) pursuant to
a registration statement which has been declared effective
under the Securities Act, (c) in a transaction complying
with the requirements of Rule 144A under the Securities Act,
to a person we reasonably believe is a qualified
institutional buyer under Rule 144A (a "QIB") that purchases
for its own account or for the account of a QIB and to whom
notice is given that the transfer is being made in reliance
on Rule 144A, (d) pursuant to offers and sales that occur
outside the United States within the meaning of Regulation S
under the Securities Act, (e) to an institutional
"accredited investor" within the meaning of Rule 501(a)(1),
(2), (3) or (7) under the Securities Act that is purchasing
for its own account or for the account of such an
institutional "accredited investor", in each case in a
minimum principal amount of Notes of $250,000 or (f)
pursuant to any other available exemption from the
registration requirements of the Securities Act, subject in
each of the foregoing cases to any requirement of law that
the disposition of our property or the property of such
investor account or accounts be at all times within our or
their control and in compliance with any applicable state
securities laws. The foregoing restrictions on resale will
not apply subsequent to the Resale Restriction Termination
Date. If any resale or other transfer of the Notes is
proposed to be made pursuant to clause (e) above prior to
the Resale Restriction Termination Date, the transferor
shall deliver a letter from the transferee substantially in
the form of this letter to the Company and the Trustee,
which shall provide, among other things, that the transferee
is an institutional "accredited investor" within the meaning
of Rule 601(a)(1), (2), (3) or (7) under the Securities Act
and that it is acquiring such Notes for investment purposes
and not for distribution in violation of the Securities Act.
Each purchaser acknowledges that the Company and the Trustee
reserve the right prior to any offer, sale or other transfer
prior to the Resale Termination Date of the Notes pursuant
to clause (d), (e) or (f) above to require the delivery of
an opinion of counsel, certifications and/or other
information satisfactory to the Company and the Trustee.
TRANSFEREE:
----------------------
BY
------------------------------
-16-
<PAGE>
EXHIBIT B
(FORM OF FACE OF EXCHANGE NOTE]
[Global Securities Legend)
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC)
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF
PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS
MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
FOR PURPOSES OF SECTION 1273 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE"), THIS SECURITY HAS ORIGINAL ISSUE
DISCOUNT. FOR FURTHER INFORMATION, PLEASE CONTACT THE SENIOR
VICE PRESIDENT, FINANCE, OF SIX FLAGS THEME PARKS INC. AT (201)
402-8100.
No. Principal Amount at Stated Maturity $285,000,000
CUSIP NO. 83001WAA2
12-1/4% Series A Senior Subordinated Discount Note due 2005
Six Flags Theme Parks Inc., a Delaware corporation,
promises to pay to , or registered assigns, the
principal sum of Dollars on June 15, 2005.
Interest Payment Dates: June 15 and December 15
commencing December 15, 1998.
Record Dates: June 1 and December 1 commencing
December 1, 1998 (whether or not a business day).
Additional provisions of this Security are set forth on
the other side of this Security.
-17-
<PAGE>
Dated: SIX FLAGS THEME PARKS INC.,
by
---------------------------
Senior Vice President
and Secretary
---------------------------
Senior Vice President
and Treasurer
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
UNITED STATES TRUST COMPANY
OF NEW YORK
as Trustee, certifies [Seal]
that this is one of
the Securities referred to in the Indenture.
by
-----------------------------
Authorized Signatory
-18-
<PAGE>
[FORM OF REVERSE SIDE OF EXCHANGE NOTE]
12-1/4% Series A Senior Subordinated Note due 2005
1. Interest
--------
SIX FLAGS THEME PARKS INC., a Delaware corporation
(such corporation, and its successors and assigns under the
Indenture hereinafter referred to, being herein called the
"Company"), promises to pay interest on the principal amount of
this Security at the rate per annum shown above.
The Company will pay interest semiannually on June 15
and December 15 of each year commencing December 15, 1998.
Interest on the Securities will accrue from the most recent date
to which interest has been paid on the Securities or, if no
interest has been paid, from June 15, 1998. Interest and
liquidated damages will be computed on the basis of a 360-day
year of twelve 30-day months. The Company shall pay interest on
overdue principal at the rate borne by the Securities plus 1% per
annum.
The Accreted Value of the Securities shall increase on a
daily basis at the rate of 12-1/4% per annum compounded semi-
annually on each June 15 and December 15 through and until June
15, 1998.
The Company and the Note Guarantors will use all
reasonable efforts to have the Exchange Offer Registration
Statement and, if applicable, a Shelf Registration Statement
(each a "Registration Statement") declared effective by the
Commission as promptly as practicable after the filing thereof.
If (i) the applicable Registration Statement is not filed with
the Commission on or prior to 60 days after the Issue Date, (ii)
the Exchange Offer Registration Statement is not declared
effective and the Exchange Offer is not consummated on or prior
to 180 days after the Issue Date, or, as the case may be, the
Shelf Registration Statement is not declared effective within 180
days after the Issue Date, or (iii) the Shelf Registration
Statement is filed and declared effective within 180 days after
the Issue Date but shall thereafter cease to be effective (at any
time that the Company is obligated to maintain the effectiveness
thereof) without being succeeded within 60 days by an additional
Registration Statement filed and declared effective (each such
event referred to in clauses (i) through (iii), a "Registration
Default"), the Company will pay liquidated damages in respect of
all Transfer Restricted Securities, in an amount equal to 1.0%
per annum, accrued weekly, of the Accreted Value of the
-19-
<PAGE>
Securities as of the beginning of each such week of the
Securities constituting Transfer Restricted Securities until the
applicable Registration Default is cured. Following the cure of
all Registration Defaults, the accrual of liquidated damages will
cease. The Company will pay liquidated damages, if any,
semiannually on June 15 and December 15 of each year.
2. Method of Payment
-----------------
The Company will pay interest (except defaulted
interest) on and liquidated damages, if any, in respect of the
Securities to the Persons who are registered holders of
Securities at the close of business on the June 1 or December 1,
whether or not a business day (each a "record date"), next
preceding the applicable payment date even if Securities are
cancelled after the record date and on or before the applicable
payment date. Holders must surrender Securities to a Paying
Agent to collect principal payments (or, as the case may be,
payments of the Accreted Value). The Company will pay principal
(or, as the case may be, the Accreted Value) and interest in
money of the United States that at the time of payment is legal
tender for payment of public and private debts. However, the
Company may pay principal (or, as the case may be, the Accreted
Value) and interest by check payable in such money. It may mail
an interest check to a Holder's registered address.
3. Paying Agent and Registrar
--------------------------
Initially, United States Trust Company of New York, a
New York corporation (the "Trustee"), will act as Paying Agent
and Registrar. The Company may appoint and change any Paying
Agent or Registrar without notice. The Company or any of its
domestically incorporated Wholly Owned Subsidiaries may act as
Paying Agent or Registrar.
4. Indenture
---------
The Company issued the Securities under an Indenture
dated as of June 23, 1995 (the "Indenture"), among the Company;
Six Flags Over Georgia, Inc., Six Flags Over Texas, Inc., and
S.F. Partnership (collectively, the "Note Guarantors"); and the
Trustee. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to
the Trust Indenture Act of 1939 (15 U.S.C. (Section)(Section)
------
77aaa-77bbbb) as in effect on the date of the Indenture (the
"Act"). Capitalized terms used herein and not defined herein
have the meanings ascribed thereto in the Indenture. The
Securities are subject to all such terms, and Securityholders are
referred to the Indenture and the Act for a statement of those
terms.
-20-
<PAGE>
The Securities are general unsecured obligations of the
Company limited to $285,000,000 aggregate principal amount
(subject to Section 2.07 of the Indenture). This Security is one
of the Exchange Notes referred to in the Indenture. The
Securities include the Initial Notes and any Exchange Notes
issued in exchange for the Initial Notes pursuant to the
Indenture. The Initial Notes and the Exchange Notes are treated
as a single class of securities under the Indenture. The
Indenture imposes certain limitations on the Incurrence of
Indebtedness by the Company and certain of its Subsidiaries, the
payment of dividends and other distributions on the Capital Stock
of the Company and certain of its Subsidiaries, the purchase or
redemption of Capital Stock of the Company and of certain Capital
Stock of such Subsidiaries, certain purchases or redemptions of
Subordinated Obligations, the sale or transfer of assets and
Subsidiary stock, the issuance or sale of Capital Stock of
Restricted Subsidiaries, the business activities and investments
of the Company and certain of its Subsidiaries and transactions
with Affiliates. In addition, the Indenture limits the ability
of the Company and certain of its Subsidiaries to restrict
distributions and dividends from Subsidiaries.
To secure the due and punctual payment of the principal
(or, as the case may be, the Accreted Value) and liquidated
damages and interest, if any, on the Securities and all other
amounts payable by the Company under the Indenture and the
Securities when and as the same shall be due and payable, whether
at maturity, by acceleration or otherwise, according to the terms
of the Securities and the Indenture, the Note Guarantors have
unconditionally guaranteed the Obligations on a senior
subordinated basis pursuant to the terms of the Indenture.
5. Optional Redemption
-------------------
Except as set forth in this paragraph 5, the Securities
will not be redeemable prior to June 15, 2000. On and after such
date, the Securities will be redeemable, at the Company's option,
in whole or in part, upon not less than 30 nor more than 60 days'
prior notice mailed by first class mail to each Holder's
registered address, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued
interest and liquidated damages (if any) to the redemption date
(subject to the right of Holders of record on the relevant record
date to receive interest due on the relevant interest payment
date), if redeemed during the 12-month period commencing on June
15 of the years set forth below:
-21-
<PAGE>
Year Redemption Price
---- ----------------
2000 . . . . . . . . . . . . . . . 106.0%
2001 . . . . . . . . . . . . . . . 104.0%
2002 . . . . . . . . . . . . . . . 102.0%
2003 and thereafter . . . . . . . 100.0%
Notwithstanding the foregoing, at any time and from
time to time prior to June 15, 1998, the Company may, subject to
certain requirements, redeem in the aggregate up to 35% of the
original aggregate principal amount of the Securities with the
Net Cash Proceeds of one or more Public Equity Offerings by the
Company, Holdings or SREC following which there is a Public
Market, at a redemption price of 112.25% of the Accreted Value of
the Securities to be redeemed as of the redemption date (subject
to the right of Holders of record on the relevant record date to
receive interest and any liquidated damages due on the relevant
interest payment date); provided, however, that at least 65% of
-------- -------
the original aggregate principal amount of the Securities must
remain outstanding after each such redemption.
6. Notice of Redemption
--------------------
Notice of redemption will be mailed at least 30 days
but not more than 60 days before the redemption date to each
Holder of Securities to be redeemed at his registered address.
Securities in denominations of principal amount larger than
$1,000 may be redeemed in part but only in whole multiples of
$1,000. If money sufficient to pay the redemption price of and
accrued interest on all Securities (or portions thereof) to be
redeemed on the redemption date is deposited with the Paying
Agent on or before the redemption date and certain other
conditions are satisfied, on and after such date interest and
liquidated damages cease to accrue on such Securities (or such
portions thereof) called for redemption.
7. Put Provisions
--------------
Upon a Change of Control, any Holder of Securities will
have the right to cause the Company to repurchase all or any part
of the Securities of such Holder at a repurchase price equal to
101% of the principal amount thereof plus accrued and unpaid
interest, if any, or prior to the third anniversary of the Issue
Date, 101% of the Accreted Value thereof, in either case to and
including the date of repurchase as provided in, and subject to
the terms of, the Indenture.
-22-
<PAGE>
8. Subordination
-------------
The Securities are subordinated to Senior Indebtedness,
as defined in the Indenture. To the extent provided in the
Indenture, Senior Indebtedness must paid before the Securities
may be paid. The Company and the Note Guarantors agree, and each
Securityholder by accepting a Security agrees, to the
subordination provisions contained in the Indenture and each
authorizes the Trustee to give them effect and appoints the
Trustee as attorney-in-fact for such purpose.
9. Denominations; Transfer; Exchange
---------------------------------
The Securities are in registered form without coupons
in denominations of principal amount of $1,000 and whole
multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar
need not register the transfer of or exchange any Securities
selected for redemption (except, in the case of a Security to be
redeemed in part, the portion of the Security not to be redeemed)
or any Securities for a period of 15 days before a selection of
Securities to be redeemed or 15 days before an interest payment
date.
10. Persons Deemed Owners
---------------------
The registered holder of this Security may be treated
as the owner of it for all purposes.
11. Unclaimed Money
---------------
If money for the payment of principal, Accreted Value,
interest or liquidated damages remains unclaimed for two years,
the Trustee or Paying Agent shall pay the money back to the
Company at its request unless an abandoned property law
designates another person. After any such payment, Holders
entitled to the money must look only to the Company and not to
the Trustee for payment.
12. Defeasance
----------
Subject to certain conditions, the Company at any time
may terminate some or all of its obligations under the Securities
and the Indenture if the Company deposits with the Trustee money
-23-
<PAGE>
or U.S. Government obligations for the payment of principal and
interest on the Securities to redemption or maturity, as the case
may be.
13. Amendment, Waiver
-----------------
Subject to certain exceptions set forth in the
Indenture, (i) the Indenture or the Securities may be amended
with the written consent of the Holders of at least a majority in
principal amount of the outstanding Securities and (ii) any
default or noncompliance with any provision may be waived with
the written consent of the Holders of a majority in principal
amount of the outstanding Securities. Subject to certain
exceptions set forth in the Indenture, without the consent of any
Securityholder, the Company, the Note Guarantors and the Trustee
may amend the Indenture or the Securities to cure any ambiguity,
omission, defect or inconsistency, or to comply with Article 5 of
the Indenture, or to provide for uncertificated Securities in
addition to or in place of certificated Securities, or to limit
or terminate the benefits of holders of Senior Indebtedness under
the subordination provisions of the Indenture or to add
guarantees with respect to the Securities or to secure the
Securities, or to add additional covenants or surrender rights or
powers conferred on the Company, or to comply with any
requirements of the SEC in connection with qualifying the
Indenture under the Act, or to make any change that does not
adversely affect the rights of any Securityholder, or to provide
for the issuance of Exchange Notes.
14. Defaults and Remedies
---------------------
Under the Indenture, Events of Default include (i)
default for 30 days in payment of interest on the Securities;
(ii) default in payment of principal (or, as the case may be, the
Accreted Value) on the Securities at maturity, upon redemption
pursuant to paragraph 5 of the Securities, upon required
repurchase, upon declaration or otherwise; (iii) failure by the
Company to comply with other agreements in the Indenture or the
Securities, in certain cases subject to notice and lapse of time;
(iv) certain accelerations (including failure to pay within any
grace period after final maturity) of other Indebtedness of the
Company or Subsidiaries if the amount accelerated (or so unpaid)
exceeds $10 million; (v) certain events of bankruptcy or
insolvency with respect to the Company or any Significant
Subsidiary; and (vi) certain judgments or decrees for the payment
of money in excess of $10 million. If an Event of Default occurs
and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the Securities may declare all the Securities
to be due and payable immediately. Certain events of bankruptcy
or insolvency are Events of Default which will result in the
-24-
<PAGE>
Securities being due and payable immediately upon the occurrence
of such Events of Default.
Securityholders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may
refuse to enforce the Indenture or the Securities unless it
receives reasonable indemnity or security. Subject to certain
limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Securityholders notice of
any continuing Default (except a Default in payment of principal
or interest) if it determines that withholding notice is in their
interest.
15. Trustee Dealings with the Company
---------------------------------
Subject to certain limitations imposed by the Act, the
Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may
otherwise deal with and collect obligations owed to it by the
Company or its affiliates and may otherwise deal with the Company
or its affiliates with the same rights it would have if it were
not Trustee.
16. No Recourse Against Others
--------------------------
A director, officer, employee or stockholder, as such,
of the Company or the Trustee shall not have any liability for
any obligations of the Company under the Securities or the
Indenture or for any claim based on, in respect of or by reason
of such obligations or their creation. By accepting a Security,
each Securityholder waives and releases all such liability. The
waiver and release are part of the consideration for the issue of
the Securities.
17. Authentication
--------------
This Security shall not be valid until an authorized
signatory of the Trustee (or an authenticating agent) manually
signs the certificate of authentication on the other side of this
Security.
18. Abbreviations
-------------
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in
common) TEN ENT (=tenants by the entirety) JT TEN (=joint tenants
-25-
<PAGE>
with rights of survivorship and not as tenants in common) CUST
(=custodian) and U/G/M/A (=Uniform Gift to Minors Act).
19. CUSIP Numbers
-------------
Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification procedures the
Company has caused CUSIP numbers to be printed on the Securities
and has directed the Trustee to use CUSIP numbers in notices of
redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either
as printed on the Securities or as contained in any notice of
redemption and reliance may be placed only on the other
identification numbers placed thereon.
THE COMPANY WILL FURNISH TO ANY
SECURITYHOLDER UPON WRITTEN REQUEST AND WITHOUT CHARGE
TO THE SECURITYHOLDER A COPY OF THE INDENTURE WHICH HAS
IN IT THE TEXT OF THIS SECURITY IN LARGER TYPE.
REQUESTS MAY BE MADE TO: SIX FLAGS THEME PARKS INC.,
400 INTERPACE PARKWAY, BUILDING C, PARSIPPANY, NEW
JERSEY 07054
ATTENTION OF: SECRETARY
-26-
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer
this Security on the books of the Company. The agent may
substitute another to act for him.
-----------------------------------------------------------------
Date: Your Signature:
---------------- --------------------------
Signature Guarantee:
----------------------------------
(Signature must be guaranteed)
-----------------------------------------------------------------
Sign exactly as your name appears on the other side of this
Security.
-27-
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.06 or 4.08 of the Indenture, check
the box:
[ ]
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.06 or 4.08 of the
Indenture, state the amount in principal amount (must be integral
multiple of $1,000): $
Date: Your Signature
--------------- ------------------------
(Sign exactly as your name appears
on the other side of the Security)
Signature Guarantee:
-------------------------------------------
(Signature must be guaranteed)
-28-
<PAGE>
EXHIBIT C
Transferee Letter of Representation
Six Flags Theme Parks Inc.
c/o United States Trust Company of New York
114 W. 47th Street
New York, NY 10036
Ladies and Gentlemen:
This certificate is delivered to request a transfer of
$ principal amount of 12-1/4% Senior Subordinated Discount
Notes due 2005 (the "Notes") of Six Flags Theme Parks Inc. (the
"Company").
Upon transfer, the Notes would be registered in the name of
the new beneficial owner as follows:
Name:
------------------------------------------
Address:
--------------------------------------
Taxpayer ID Number:
----------------------------
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act of 1933, as amended (the "Securities Act"))
purchasing for our own account or for the account of such an
institutional "accredited investor," and we are acquiring
the Notes not with a view to, or for offer or sale in
connection with, any distribution in violation of the
Securities Act. We have such knowledge and experience in
financial and business matters as to be capable of
evaluating the merits and risk of our investment in the
Notes and invest in or purchase securities similar to the
Notes in the normal course of our business. We and any
accounts for which we are acting are each able to bear the
economic risk of our or its investment.
2. We understand that the Notes have not been
registered under the Securities Act and, unless so
registered, may not be sold except as permitted in the
following sentence. We agree on our own behalf and on
behalf of any investor account for which we are purchasing
Notes to offer, sell or otherwise transfer such Notes prior
-29-
<PAGE>
to the date which is three years after the later of the date
of original issue and the last date on which the Company or
any affiliate of the Company was the owner of such Notes (or
any predecessor thereto) (the "Resale Restriction
Termination Date") only (a) to the Company, (b) pursuant to
a registration statement which has been declared effective
under the Securities Act, (c) in a transaction complying
with the requirements of Rule 144A under the Securities Act,
to a person we reasonably believe is a qualified
institutional buyer under Rule 144A (a "QIB") that purchases
for its own account or for the account of a QIB and to whom
notice is given that the transfer is being made in reliance
on Rule 144A, (d) pursuant to offers and sales that occur
outside the United States within the meaning of Regulation S
under the Securities Act, (e) to an institutional
"accredited investor" within the meaning of Rule 501(a)(1),
(2), (3) or (7) under the Securities Act that is purchasing
for its own account or for the account of such an
institutional "accredited investor", in each case in a
minimum principal amount of Notes of $250,000 or (f)
pursuant to any other available exemption from the
registration requirements of the Securities Act, subject in
each of the foregoing cases to any requirement of law that
the disposition of our property or the property of such
investor account or accounts be at all times within our or
their control and in compliance with any applicable state
securities laws. The foregoing restrictions on resale will
not apply subsequent to the Resale Restriction Termination
Date. If any resale or other transfer of the Notes is
proposed to be made pursuant to clause (e) above prior to
the Resale Restriction Termination Date, the transferor
shall deliver a letter from the transferee substantially in
the form of this letter to the Company and the Trustee,
which shall provide, among other things, that the transferee
is an institutional "accredited investor" within the meaning
of Rule 501(a)(1), (2), (3) or (7) under the Securities Act
and that it is acquiring such Notes for investment purposes
and not for distribution in violation of the Securities Act.
Each purchaser acknowledges that the Company and the Trustee
reserve the right prior to any offer, sale or other transfer
prior to the Resale Termination Date of the Notes pursuant
to clause (d), (e) or (f) above to require the delivery of
an opinion of counsel, certifications and/or other
information satisfactory to the Company and the Trustee.
TRANSFEREE:
------------------
BY
--------------------------
-30-
<PAGE>
EXHIBIT D
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental
Indenture"), dated as of , between
-----------,
(the "Note Guarantor"), a subsidiary
-----------
of Six Flags Theme Parks Inc. (or its successor),
a Delaware corporation (the "Company"), and United
States Trust Company of New York, a New York
corporation, as trustee under the indenture
referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and
delivered to the Trustee an indenture (the "Indenture"), dated as
of June 23, 1995, providing for the issuance of an aggregate
principal amount of $285,000,000 of 12-1/4% Senior Subordinated
Discount Notes due 2005 (the "Initial Notes") and, if and when
issued in exchange for Initial Notes, the Company's 12-1/4%
Series A Senior Subordinated Discount Notes due 2005 (the
"Exchange Notes" and, together with the Initial Notes, the
"Securities");
WHEREAS, Section 4.14 of the Indenture provides that
under certain circumstances the Company is required to cause the
Note Guarantor to execute and deliver to the Trustee a
supplemental indenture pursuant to which the Note Guarantor shall
unconditionally guarantee all of the Company's obligations under
the Securities pursuant to a Note Guarantee on the terms and
conditions set forth herein; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the
Trustee is authorized to execute and deliver this Supplemental
Indenture;
NOW THEREFORE, in consideration of the foregoing and
for other good and valuable consideration, the receipt of which
is hereby acknowledged, the Note Guarantor and the Trustee
mutually covenant and agree for the equal and ratable benefit of
the holders of the Securities as follows:
-31-
<PAGE>
1. Definitions. (a) Capitalized terms used herein
-----------
without definition shall have the meanings assigned to them in
the Indenture.
(b) For all purposes of this Supplement, except as
otherwise herein expressly provided or unless the context
otherwise requires: (i) the terms and expressions used herein
shall have the same meanings as corresponding terms and
expressions used in the Indenture; and (ii) the words "herein,"
"hereof" and "hereby" and other words of similar import used in
this Supplement refer to this supplement as a whole and not to
any particular section hereof.
2. Agreement to Guarantee. The Note Guarantor hereby
----------------------
agrees, jointly and severally with all other Note Guarantors, to
guarantee the Company's obligations under the Securities on the
terms and subject to the conditions set forth in Section 11 of
the Indenture and to be bound by all other applicable provisions
of the Indenture. Except as expressly amended hereby, the
Indenture is in all respects ratified and confirmed and all the
terms, conditions and provisions thereof shall remain in full
force and effect. This Supplemental Indenture shall form a part
of the Indenture for all purposes, and every holder of Notes
heretofore or hereafter authenticated and delivered shall be
bound hereby.
3. Governing Law. This Supplemental Indenture shall
-------------
be governed by, and construed in accordance with, the laws of the
State of New York but without giving effect to applicable
principles of conflicts of law to the extent that the application
of the laws of another jurisdiction would be required thereby.
4. Trustee Makes No Representation. The Trustee
-------------------------------
makes no representation as to the validity or sufficiency of this
Supplemental Indenture;
5. Counterparts. The parties may sign any number of
------------
copies of this Supplemental Indenture. Each signed copy shall be
an original, but all of them together represent the same
agreement.
6. Effect of Headings. The Section headings herein
------------------
are for convenience only and shall not effect the construction
thereof.
-32-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed as of the date first
above written.
[NOTE GUARANTOR],
by
-------------------------------
Name:
Title:
SIX FLAGS THEME PARKS INC.,
by
-------------------------------
Name:
Title:
SIX FLAGS OVER GEORGIA, INC.,
by
-------------------------------
Name:
Title:
SIX FLAGS OVER TEXAS, INC.,
by
-------------------------------
Name:
Title:
S.F. PARTNERSHIP,
by SFTP Inc., as General
Partner
by
-------------------------------
Name:
Title:
UNITED STATES TRUST COMPANY OF
NEW YORK,
by
-------------------------------
Name:
Title:
-33-
Exhibit (10)(ap)
PREMIER PARKS INC.
1998 STOCK OPTION AND INCENTIVE PLAN
I. THE PLAN
There is hereby established the 1998 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 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
A maximum of four million (4,000,000) shares of the
Company's common stock may be issued under the Plan 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
the 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
<PAGE>
such increase, decrease or change is made. In addition, in the
event of any such increase, decrease or change, 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 that are first
exercisable by an individual in any calendar year under the Plan
(and under all other 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
that were granted before 1987.
III. ADMINISTRATION
(a) The Plan shall be administered by a Committee of
Directors of the Company appointed by the Board of Directors
which shall include not less than two Directors of the Company,
each of whom shall be a "Non-Employee Director" within the
meaning of Rule 16b-3 promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). 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 Committee 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 Committee shall be conclusive and binding
upon all present, past and future participants in the Plan.
(c) 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 or stock appreciation
rights shall be granted or shares shall be sold under the Plan,
-2-
<PAGE>
the number of shares which may be issued upon exercise of any
such option or which may be sold to any such participant, the
restrictions and forfeiture provisions related to any such grant
or sale, the period during which any option or stock appreciation
right may be exercised, the circumstance under which the period
of exercise may be accelerated, the exercise price of any option
or right and the purchase price of any shares, the means of
payment of the exercise price and of any withholding taxes upon
exercise of any option or for any shares, and the extent to which
any option, right or share may be transferred to family members
of the participant, trusts for the benefit of such family members
or partnerships of which such family members are the only
partners, determined in each case in accordance with the
provisions of the Plan. In addition, with respect to awards that
are intended to qualify as "qualified performance-based
compensation" under Treasury Regulation Section 1.162-27(e), the
Committee shall have full power and discretion to establish and
administer performance goals and business criteria, establish
performance periods, and to certify that performance goals have
been attained, in each case, to the extent required to comply
with Section 162(m) of the Code.
(d) 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 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 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 AND STOCK APPRECIATION
RIGHTS
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,
-3-
<PAGE>
the purchase price or prices per share to exercise the option,
and the means of payment for the shares and for any withholding
taxes imposed upon exercise of the option; 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, 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 purchase 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 purchase 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 by an employee for any purpose
under the Plan, the rules of Section 424(d) of the Code
shall apply, and the Board of Directors and the Committee
may rely on the representations of fact made to them by the
employee and believed by them to be true.
(ii) The purchase price of each share subject to a
nonqualified stock option under the Plan shall be
determined by the Committee prior to granting the option.
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 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 the shares on a
particular date shall be deemed to be the average (mean) of
the reported "high" and "low" sales prices of such shares
on the largest national securities exchange (based on the
aggregate dollar value of securities listed) on which such
-4-
<PAGE>
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 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 price of
such shares in the over-the-counter market, as reported on
the National Association of Securities Dealers Automated
Quotations System, or, if such prices are not reported
thereon, the average of the closing bid and asked prices as
so reported, or (ii) if such prices are not reported, then
the average of the 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 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, in the case of an Incentive Stock
Option, is not transferable other than by will or the laws of
descent and distribution and is exercisable during the grantee's
lifetime only by the grantee or, if the grantee is disabled, by
his guardian or legal representative or, in the case of a
nonqualified stock option, is not transferable other than by
will, the laws of descent and distribution or, to the extent and
subject to any condition provided in the Stock Option Agreement,
to immediate family members of the grantee, trusts for the
exclusive benefit of such family members or partnerships of which
such family members are the only partners.
(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 Committee.
(e) Such other terms and conditions not inconsistent with
the Plan as may be set by the Committee, including provisions
allowing acceleration of options upon a change of control of the
Company or otherwise.
(f) In the discretion of 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 the portion of the option that 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 that
number of shares. In the event the foregoing calculation would
require the issuance of a fractional share, the Company shall, in
lieu thereof, pay cash to the holder in an amount equal to the
-5-
<PAGE>
fair market value of such fractional share as of the date of
surrender.
(g) 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 to an option previously granted or to 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 the transferability of nonqualified stock options, and
to such other terms and conditions not inconsistent with the Plan
as the 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 is 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, provided further, that the
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 any successor provision in
effect at that time).
(ii) Upon exercise of the stock appreciation right and
surrender of the corresponding 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 under
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 is being exercised.
(iii) Unless otherwise provided, payment of the
amount determined under the preceding paragraph (ii) 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 Committee, in its sole
-6-
<PAGE>
discretion, may either require or allow the holder of the
stock appreciation right to elect for the 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, that cash shall, in any event,
be paid in lieu of fractional shares.
(iv) 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, during
the term of the Plan, no participant may be granted options or
other rights to purchase, including stock appreciation rights
with respect to, more than 50% 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 II
above.
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.
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 entitled to vote thereon 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
-7-
<PAGE>
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 paid by 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 accordance with and only to the
extent permitted 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 later of the date of such
stockholder approval or the date of adoption of the Plan by the
Board (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.
-8-
Exhibit (10)(ar)
[Conformed Copy]
28490-04002
===============================================================================
CREDIT AGREEMENT
dated as of
April 1, 1998
SIX FLAGS THEME PARKS INC.,
SIX FLAGS ENTERTAINMENT CORPORATION,
S.F. HOLDINGS, INC.,
THE SUBSIDIARY GUARANTORS THEREOF,
THE LENDERS PARTY HERETO,
AND
THE BANK OF NEW YORK,
as Administrative Agent
LEHMAN BROTHERS INC.,
as Advisor, Arranger,
and Syndication Agent
$472,000,000
================================================================================
[Exhibits B and C have been conformed to
appear as delivered and Exhibits E-1, E-2 and F
are photocopies of the Opinions as delivered.]
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. Definitions and Accounting Matters............................2
1.01. Certain Defined Terms.....................................2
1.02. Accounting Terms and Determinations......................24
1.03. Classes and Types of Loans...............................24
1.04. Terms Generally..........................................25
Section 2. Commitments, Loans, Notes and Prepayments....................25
2.01. Loans....................................................25
2.02. Borrowings...............................................26
2.03. Letters of Credit........................................26
2.04. Changes of Commitments...................................31
2.05. Commitment Fee...........................................31
2.06. Lending Offices..........................................31
2.07. Several Obligations; Remedies Independent................32
2.08. Notes....................................................32
2.09. Optional Prepayments and Conversions or
Continuations of Loans...................................32
2.10. Mandatory Prepayments and Reductions of
Commitments..............................................33
Section 3. Payments of Principal and Interest...........................36
3.01. Repayment of Loans.......................................36
3.02. Interest.................................................37
Section 4. Payments; Pro Rata Treatment; Computations, Etc..............38
4.01. Payments.................................................38
4.02. Pro Rata Treatment.......................................39
4.03. Computations.............................................39
4.04. Minimum Amounts..........................................39
4.05. Certain Notices..........................................40
4.06. Non-Receipt of Funds by the Administrative Agent.........40
4.07. Sharing of Payments, Etc.................................41
Section 5. Yield Protection, Etc........................................42
5.01. Additional Costs.........................................42
5.02. Limitation on Types of Loans.............................44
5.03. Illegality...............................................45
5.04. Treatment of Affected Loans..............................45
5.05. Compensation.............................................46
5.06. Additional Costs in Respect of Letters of Credit.........46
5.07. U.S. Taxes...............................................47
<PAGE>
-ii-
5.08. Replacement of Lenders...................................48
Section 6. Guarantee....................................................49
6.01. The Guarantee............................................49
6.02. Obligations Unconditional................................49
6.03. Reinstatement............................................50
6.04. Subrogation..............................................50
6.05. Remedies.................................................50
6.06. Instrument for the Payment of Money......................51
6.07. Continuing Guarantee.....................................51
6.08. Rights of Contribution...................................51
6.09. General Limitation on Guarantee Obligations..............52
Section 7. Conditions...................................................52
7.01. Initial Extension of Credit of any Class.................52
7.02. Initial and Subsequent Extensions of Credit..............55
Section 8. Representations and Warranties...............................56
8.01. Organization; Powers.....................................56
8.02. Financial Condition......................................56
8.03. Litigation...............................................57
8.04. No Breach................................................57
8.05. Action...................................................57
8.06. Approvals................................................58
8.07. Properties and Permits, Etc..............................58
8.08. Environmental Matters....................................59
8.09. Compliance with Laws and Agreements......................61
8.10. Investment Company Act...................................61
8.11. Public Utility Holding Company Act.......................61
8.12. Taxes....................................................61
8.13. ERISA....................................................61
8.14. True and Complete Disclosure.............................61
8.15. Use of Credit............................................62
8.16. Debt Agreements and Liens................................62
8.17. Capitalization...........................................62
8.18. Subsidiaries and Investments.............................63
8.19. Parks; Real Property.....................................63
8.20. Insurance................................................64
8.21. Labor Matters............................................64
8.22. Solvency...............................................64
8.23. Year 2000 Issues.......................................65
<PAGE>
-iii-
Section 9. Covenants of the Borrower....................................65
9.01. Financial Statements and Other Information...............65
9.02. Notices of Material Events...............................68
9.03. Existence, Etc...........................................69
9.04. Insurance................................................70
9.05. Prohibition of Fundamental Changes.......................72
9.06. Negative Pledge..........................................74
9.07. Indebtedness.............................................75
9.08. Investments..............................................76
9.10. Certain Financial Covenants..............................78
9.11. Subordinated Indebtedness................................80
9.12. Lines of Business........................................80
9.13. Transactions with Affiliates.............................80
9.14. Use of Proceeds, Etc.....................................80
9.15. Certain Further Assurances...............................81
9.16. Modifications of Certain Documents.......................83
Section 10. Events of Default...........................................83
Section 11. The Administrative Agent and Arranger.......................87
11.01. Appointment, Powers and Immunities......................87
11.02. Reliance by Administrative Agent........................88
11.03. Defaults................................................89
11.04. Rights as a Lender......................................89
11.05. Indemnification.........................................89
11.06. Non-Reliance on Administrative Agent, the Arranger
and Other Lenders.......................................90
11.07. Failure to Act..........................................90
11.08. Resignation or Removal of Administrative Agent..........90
11.09. Consents under Other Loan Documents.....................91
11.10. Arranger................................................91
Section 12. Other Provisions............................................91
12.01. Notices.................................................91
12.02. Waiver..................................................91
12.03. Amendments, Etc.........................................92
12.04. Expenses, Etc...........................................92
12.05. Successors and Assigns..................................94
12.06. Assignments and Participations..........................94
12.07. Survival................................................96
<PAGE>
-iv-
12.08. Counterparts............................................96
12.09. Governing Law; Submission to Jurisdiction...............97
12.10. WAIVER OF JURY TRIAL....................................97
12.11. Captions................................................97
12.12. Confidentiality.........................................97
<PAGE> -v-
EXHIBITS
Exhibit A-1 - Form of Facility A Revolving Credit Note
Exhibit A-2 - Form of Facility B Term Loan Note
Exhibit B - Form of Security Agreement
Exhibit C - Form of Pledge Agreement
Exhibit D - Form of Guarantee Assumption Agreement
Exhibit E-1 - Form of Opinion of Baer Marks & Upham LLP
Counsel to the Obligors
Exhibit E-2 - Form of Opinion of Weil, Gotshal and Manges LLP,
Counsel to the Obligors
Exhibit F - Form of Opinion of Special New York Counsel to
the Arranger
Exhibit G - Form of Assignment and Acceptance
SCHEDULES
Schedule I - Commitments
Schedule II - Debt Agreements and Liens
Schedule III - Environmental Matters
Schedule IV - Subsidiaries and Investments
Schedule V - Existing Parks and Real Property
Schedule VI - Certain Litigation
Schedule VII - Insurance
Schedule VIII - Certain EBITDA Adjustments
Schedule IX - Labor Matters
<PAGE>
CREDIT AGREEMENT dated as of April 1, 1998, between: SIX FLAGS
THEME PARKS INC., a corporation duly organized and validly existing under the
laws of the State of Delaware (the "Borrower"); SIX FLAGS ENTERTAINMENT
--------
CORPORATION, a corporation duly organized and validly existing under the laws of
the State of Delaware ("SFEC"); S. F. HOLDINGS, INC., a corporation duly
----
organized and validly existing under the laws of the State of Delaware ("SFH");
---
each of the Subsidiaries of the Borrower identified under the caption
"SUBSIDIARY GUARANTORS" on the signature pages hereto and each Subsidiary of the
Borrower that becomes a "Subsidiary Guarantor" after the date hereof pursuant to
--------------------
Section 9.15(a) (individually, a "Subsidiary Guarantor" and, collectively, the
--------------------
"Subsidiary Guarantors" and, together with the Borrower, SFEC and SFH, the
---------------------
"Obligors"); each of the lenders that is a signatory hereto identified under the
--------
caption "LENDERS" on the signature pages hereto and each lender that becomes a
"Lender" after the date hereof pursuant to Section 12.06(b) (individually, a
"Lender" and, collectively, the "Lenders"); THE BANK OF NEW YORK, as
------ -------
administrative agent for the Lenders (in such capacity, together with its
successors in such capacity, the "Administrative Agent"); and LEHMAN BROTHERS
--------------------
INC., a Delaware corporation, as advisor, arranger and syndication agent (the
"Arranger").
--------
Pursuant to the Merger Agreement (defined below) Premier Parks
Inc (which has been renamed "Premier Parks Operations Inc.") has merged with
Premier Parks Merger Corporation, a Delaware corporation (the "Premier Merger")
--------------
and a direct wholly owned subsidiary of Premier Parks Holdings Corporation
(which has been renamed "Premier Parks Inc.") and has thereby become a direct
wholly owned subsidiary of Premier Parks Inc. and following the Premier Merger,
SFEC and its Subsidiaries (including the Borrower) will merge with PPStar I,
Inc., a Delaware corporation (the "Six Flags Merger") and a direct wholly owned
----------------
subsidiary of Premier Parks Inc. and thereby become a direct wholly owned
subsidiary of Premier Parks Inc. In addition, in connection with the Six Flags
Merger, the ownership interests of the Borrower in the Georgia Partnership
Entities (defined below) and the Texas Partnership Entities (defined below)
shall be transferred to TWE (defined below) or Holdings (defined below), as the
case may be, pursuant to the Indemnity Agreement (defined below) and the Georgia
Partnership Entities and the Texas Partnership Entities will have no liabilities
or obligations under this Agreement.
In connection with the Six Flags Merger, the Borrower has
requested that the Lenders extend credit to it, under the guarantee of SFEC, SFH
and the Subsidiary Guarantors, in an aggregate principle amount of up to
$472,000,000 to refinance existing indebtedness, to enable the payment of
certain dividends to SFH and to provide funds for the working capital and other
general corporate needs of the Borrower and its Subsidiaries, and the Lenders
are prepared to extend such credit upon the terms and conditions hereof,
accordingly, the parties hereto agree as follows:
<PAGE>
-2-
Section 1. Definitions and Accounting Matters.
1.01. Certain Defined Terms.
---------------------
As used herein, the following terms shall have the following
meanings (all terms defined in this Section 1.01 or in other provisions of this
Agreement in the singular to have the same meanings when used in the plural and
vice versa and all references herein to Sections, Exhibits and Schedules shall
be construed to refer to Sections of, and Exhibits and Schedules to, this
Agreement):
"Additional Costs" has the meaning set forth in Section 5.01.
----------------
"Administrative Agent" has the meaning set forth in the
--------------------
preamble.
"Administrative Questionnaire" means an Administrative
----------------------------
Questionnaire in a form supplied by the Administrative Agent.
"Advance Date" has the meaning set forth in Section 4.06.
------------
"Affiliate" means any Person that directly or indirectly
---------
controls, or is under common control with, or is controlled by, the Borrower
and, if such Person is an individual, any member of the immediate family
(including parents, spouse, children) of such individual and any trust whose
principal beneficiary is such individual or one or more members of such
immediate family and any Person who is controlled by any such member or trust.
As used in this definition, "control" (including, with its correlative meanings,
"controlled by" and "under common control with") means possession, directly or
indirectly, of power to direct or cause the direction of management or policies
(whether through ownership of securities or partnership or other ownership
interests, by contract or otherwise), provided that, in any event, any Person
--------
that owns directly or indirectly securities having 10% or more of the voting
power for the election of directors or other governing body of a corporation or
10% or more of the partnership or other ownership interests of any other Person
(other than as a limited partner of such other Person) will be deemed to control
such corporation or other Person. Notwithstanding the foregoing, (a) no
individual shall be an Affiliate solely by reason of his or her being a
director, officer or employee of the Borrower or any of its Subsidiaries, (b)
none of the Wholly Owned Subsidiaries of the Borrower shall be Affiliates and
(c) none of the Georgia Partnership Entities or the Texas Partnership Entities
shall be Affiliates.
"ANIC" means American National Indemnity Co., a Vermont
----
corporation.
"Anniversary Date" has the meaning set forth in Section 9.04.
----------------
"Applicable Lending Office" means, for each Lender and for
-------------------------
each Type of Loan, the "Lending Office" of such Lender (or of an affiliate of
such Lender) designated for such Type of Loan in such Lender's Administrative
Questionnaire or such other office of such Lender (or of an affiliate of such
Lender) as such Lender may from time to time specify to the Administrative Agent
<PAGE>
-3-
and the Borrower as the office by which its Loans of such Type are to be made
and maintained.
"Applicable Rate" means for any day, with respect to any Base
---------------
Rate Loan or Eurodollar Loan, or with respect to the commitment fees payable
hereunder, as the case may be, the applicable rate per annum set forth below
under the caption "Base Rate Loans", "Eurodollar Loans" or "Commitment Fee", as
the case may be, based upon the Leverage Ratio as at the last day of the fiscal
quarter most recently ended as to which the Borrower has delivered financial
statements pursuant to Section 9.01:
-------------------------------------------------------------------------------
LEVERAGE FACILITY A FACILITY B
RATIO: REVOLVING LOAN TERM LOAN COMMITMENT FEE:
-------------------------------------------------
BASE RATE EURODOLLAR BASE RATE EURODOLLAR
-----------------------------------------------------------------------------
Greater than 1.25% 2.50% 1.50% 2.75% 0.50%
5.00 to 1
-----------------------------------------------------------------------------
Greater than 1.00% 2.25% 1.50% 2.75% 0.375%
4.00 to 1
but less than
or equal to
5.00 to 1
-----------------------------------------------------------------------------
Greater than 0.50% 1.75% 1.25% 2.50% 0.375%
3.00 to 1 but
less than or
equal to 4.00
to 1
-----------------------------------------------------------------------------
Less than or 0.00% 1.25% 1.25% 2.50% 0.25%
equal to 3.00
to 1
-----------------------------------------------------------------------------
Notwithstanding the foregoing, for the period beginning on the
Closing Date to the date that is six months after the Closing Date, (a) the
Applicable Rate for (i) Facility A Revolving Credit Loans shall be 1.25% in the
case of Base Rate Loans and 2.50% in the case of Eurodollar Loans and (ii)
Facility B Term Loans shall be 1.50% in the case of Base Rate Loans and 2.75% in
the case of Eurodollar Loans and (b) the Commitment Fee shall be 0.50%.
Subject to the last sentence of the immediately preceding
paragraph, each change in the "Applicable Rate" based upon any change in the
Leverage Ratio shall become effective for purposes of the accrual of interest
and commitment fees hereunder on the date three Business Days after the delivery
to the Administrative Agent and each Lender of the financial statements of the
Borrower and its Subsidiaries for the most recently ended fiscal quarter
pursuant to Section 9.01, and shall remain effective for such purpose until
three Business Days after the next delivery of such financial statements to the
Administrative Agent and each Lender hereunder, provided that, notwithstanding
--------
the foregoing, the Applicable Rate shall be the highest rates provided for in
<PAGE> -4-
the above schedule for any period during which either (i) an Event of Default
shall have occurred and be continuing or (ii) the Borrower shall be in default
of its obligation to deliver financial statements for any fiscal quarter by the
times specified in Section 9.01 (but upon the cure or waiver of any such Event
of Default or default, this proviso shall no longer be applicable until another
such Event of Default or default shall occur).
"Approved Fund" means, with respect to any Lender that is a
-------------
fund that invests in commercial loans, any other fund that invests in commercial
loans and is managed or advised by the same investment adviser as such Lender or
by an Affiliate of such investment adviser.
"Assignment and Acceptance" means an assignment and acceptance
-------------------------
entered into by a Lender and an assignee (with the consent of any party whose
consent is required by Section 12.06(b)), and accepted by the Administrative
Agent, in the form of Exhibit G or any other form approved by the Administrative
Agent.
"Bankruptcy Code" means the Federal Bankruptcy Code of 1978,
---------------
as amended from time to time.
"Base Rate" means, for any day, a rate per annum equal to the
---------
higher of (a) the Federal Funds Rate for such day plus 1/2 of 1% and (b) the
Prime Rate for such day. Each change in any interest rate provided for herein
based upon the Base Rate resulting from a change in the Base Rate shall take
effect at the time of such change in the Base Rate.
"Base Rate Loans" means Loans that bear interest at rates
---------------
based upon the Base Rate.
"Basic Documents" means the Loan Documents, the Merger
---------------
Agreement, the Indemnity Agreement and the License Agreement.
"Basle Accord" means the proposals for risk-based capital
------------
framework described by the Basle Committee on Banking Regulations and
Supervisory Practices in its paper entitled "International Convergence of
Capital Measurement and Capital Standards" dated July 1988, as amended, modified
and supplemented and in effect from time to time or any replacement thereof.
"Borrower" has the meaning set forth in the preamble.
--------
"Business Day" means any day (a) on which commercial banks are
------------
not authorized or required to close in New York City and (b) if such day relates
to a borrowing of, a payment or prepayment of principal of or interest on, a
Conversion of or into, or an Interest Period for, a Eurodollar Loan or a notice
by the Borrower with respect to any such borrowing, payment, prepayment,
Conversion or Interest Period, that is also a day on which dealings in Dollar
deposits are carried out in the London interbank market.
"Capital Expenditures" means, for any period, expenditures
--------------------
(including, without limitation, the aggregate amount of Capital Lease
Obligations incurred during such period) made by the Borrower or any of its
<PAGE>
-5-
Subsidiaries to acquire or construct fixed assets, plant and equipment
(including renewals, improvements and replacements) during such period, computed
in accordance with GAAP, but excluding (i) repairs in respect of any such assets
and (ii) the amount of any assets acquired (x) with the proceeds of any Casualty
Event (or reimbursement in whole or in part with the Net Available Proceeds
thereof) and (y) with the cash proceeds of any Disposition permitted hereunder
(or reimbursement in whole or in part with the Net Available Proceeds thereof)
and (z) pursuant to a Subsequent Acquisition; provided that, prior to SFF
becoming a Wholly Owned Subsidiary of the Borrower, the amount of its Capital
Expenditures included in calculating Capital Expenditures for the Borrower and
its Subsidiaries shall be limited to the Capital Expenditures of SFF for the
relevant period multiplied by the percentage of the aggregate ownership
interests of the Borrower and its Subsidiaries (other than SFF) in SFF.
"Capital Lease Obligations" means, for any Person, all
-------------------------
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP, and, for purposes of this
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.
"Casualty Event" means, with respect to any Property of any
--------------
Person, any loss of or damage to, or any condemnation or other taking of, such
Property for which such Person or any of its Subsidiaries receives insurance
proceeds, or proceeds of a condemnation award or other compensation.
"Class" has the meaning assigned to such term in Section 1.03.
-----
"Closing Date" means the date upon which the initial extension
------------
of credit hereunder is made.
"Code" means the Internal Revenue Code of 1986, as amended
----
from time to time.
"Collateral Account" has the meaning assigned to such term in
------------------
the Security Agreement.
"Commitment Percentage" means, with respect to any Lender, the
---------------------
ratio of (a) the aggregate amount of the Facility A Revolving Credit Commitments
of such Lender to (b) the aggregate amount of the Facility A Revolving Credit
Commitments of all of the Lenders.
"Commitments" means, collectively, the Facility A Revolving
-----------
Credit Commitments and the Facility B Term Loan Commitments.
"Common Stock Issuance" means the issuance by Holdings of
---------------------
common stock, par value $0.05 per share, in connection with the consummation of
the Merger Transactions.
<PAGE>
-6-
"Continue", "Continuation" and "Continued" refer to the
-------- ------------ ---------
continuation pursuant to Section 2.09 of a Eurodollar Loan from one Interest
Period to the next Interest Period for such Loan.
"Convert", "Conversion" and "Converted" refer to a conversion
------- ---------- ---------
pursuant to Section 2.09 of one Type of Loans into another Type of Loans, which
may be accompanied by the transfer by a Lender (at its sole discretion) of a
Loan from one Applicable Lending Office to another.
"Current Disposition" has the meaning set forth in Section
-------------------
2.10(d).
"Debt Issuance" means any issuance or sale by the Borrower or
-------------
any of its Subsidiaries after the date hereof of any debt securities other than
as permitted under Section 9.07.
"Debt Service" means, for any period, the sum, for the
------------
Borrower and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of (a) all regularly scheduled payments of
principal of any Indebtedness during such period, including the principal
component of any payments in respect of Capital Lease Obligations, but excluding
any prepayments made pursuant to Section 2.10 during such period (provided that,
prior to SFF becoming a Wholly Owned Subsidiary of the Borrower, the amount of
principal payments of SFF included in calculating Debt Service shall be limited
to the principal payments of SFF for the relevant period multiplied by the
percentage of the aggregate ownership interests of the Borrower and its
Subsidiaries (other than SFF) in SFF) plus (b) all Interest Expense for such
period.
"Default" means an Event of Default or an event that with
-------
notice or lapse of time or both would become an Event of Default.
"Discount Notes" means the 12-1/4% Senior Subordinated
--------------
Discount Notes due 2005 of the Borrower, issued pursuant to the Discount Notes
Indenture.
"Discount Notes Indenture" means the Indenture dated as of
------------------------
June 23, 1995, between the Borrower and United States Trust Company of New York,
as Trustee.
"Disposition" means any sale, assignment, transfer or other
-----------
disposition of any Property (whether now owned or hereafter acquired) by the
Borrower or any of its Subsidiaries to any other Person, excluding (a) any sale,
assignment, transfer or other disposition of any inventory or other Property
sold or disposed of in the ordinary course of business, (b) during any fiscal
year, the first $10,000,000 of sales of used equipment or other Property not
used in the business of the Borrower and its Subsidiaries, and (c) any sale,
assignment, transfer or other disposition of any Property to the Borrower or
Wholly owned Subsidiary of the Borrower. Notwithstanding the foregoing, the
consummation of the Partnership Transfers shall not constitute a "Disposition"
-----------
for purposes of Section 2.10(d) and prior to SFF becoming a Wholly Owned
Subsidiary of the Borrower the net available proceeds in respect of any
<PAGE>
-7-
Disposition affecting SFF shall be limited to the actual cash amounts (if any)
in respect of such Disposition distributed to the Borrower and its Subsidiaries
(other than SFF).
"Disposition Investment" means, with respect to any
----------------------
Disposition, any promissory notes or other evidences of indebtedness or
Investments received by the Borrower or any of its Subsidiaries in connection
with such Disposition.
"Dollars" and "$" means lawful money of the United States of
------- -
America.
"EBITDA" means, for any period, the sum, for the Borrower and
------
its Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following, in each case determined before interest
income or expense and extraordinary or unusual items (and excluding all barter
and trade transactions): (a) operating income (or loss) for such period (plus
----
cash received for such period from investments of the Borrower or any of its
Subsidiaries (other than SFF) in SFF or in any other partnership or Person for
which the investment is accounted for by the equity method), plus (b)
----
depreciation, amortization and other non-cash charges (to the extent deducted in
determining operating income) for such period. Notwithstanding the foregoing,
(i) if during any period for which EBITDA is being determined the Borrower and
its Subsidiaries shall have consummated any acquisition (including the Six Flags
Merger) or Disposition then, for all purposes of this Agreement (other than for
purposes of the definition of Excess Cash Flow), EBITDA shall be determined on a
pro forma basis as if such acquisition or Disposition had been made or
consummated on the first day of such period and (ii) when determining EBITDA for
any period on a pro forma basis as provided in the preceding clause (i) ending
after the consummation of any acquisition, there shall be added (or subtracted)
the respective amounts for such acquisition (and any other acquisitions
consummated prior to the last day of such period) set forth, in the case of the
Six Flags Merger, in Schedule VIII or, in the case of any Subsequent
Acquisition, in a supplement to Schedule VIII agreed to at the time of such
Subsequent Acquisition pursuant to Section 9.05(e)(iii)(D).
"Environmental Claim" means, with respect to any Person, any
-------------------
written notice, claim, demand or other communication (collectively, a "claim")
by any other Person alleging or asserting such Person's liability for
investigatory costs, cleanup costs, governmental response costs, damages to
natural resources or other Property, personal injuries, fines or penalties
arising out of, based on or resulting from (i) the presence, or Release into the
environment, of any Hazardous Material at any location, whether or not owned by
such Person, or (ii) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law. The term "Environmental Claim"
shall include, without limitation, any claim by any governmental authority for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and any claim by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence of Hazardous Materials or arising
from alleged injury or threat of injury to health, safety or the environment, as
a result of any of the foregoing.
"Environmental Laws" means any and all present and future
------------------
Federal, state, local and foreign laws, rules or regulations, and any orders or
decrees, in each case as now or hereafter in effect, relating to the regulation
<PAGE>
-8-
or protection of human health, safety or the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or toxic or hazardous substances or wastes into the indoor or outdoor
environment, including, without limitation, ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or toxic or
hazardous substances or wastes.
"Equity Rights" means, with respect to any Person, any
-------------
subscriptions, options, warrants, commitments, preemptive rights or agreements
of any kind (including, without limitation, any stockholders' or voting trust
agreements) for the issuance, sale, registration or voting of, or securities
convertible into, any additional shares of capital stock of any class, or
partnership or other ownership interests of any type in, such Person.
"ERISA" means the Employee Retirement Income Security Act of
-----
1974, as amended from time to time.
"ERISA Affiliate" means any corporation or trade or business
---------------
that is a member of any group of organizations (i) described in Section 414(b)
or (c) of the Code of which the Borrower is a member and (ii) solely for
purposes of potential liability under Section 302(c)(11) of ERISA and Section
412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and
Section 412(n) of the code, described in Section 414(m) or (o) of the Code of
which the Borrower is a member.
"ERISA Event" means any of the following events or conditions:
-----------
(a) any reportable event, as defined in Section 4043(c) of
ERISA and the regulations issued thereunder, with respect to a Plan, as to which
the PBGC has not by regulation waived the requirement of Section 4043(a) of
ERISA that it be notified within 30 days of the occurrence of such event
(provided that a failure to meet the minimum funding standard of Section 412 of
the Code or Section 302 of ERISA, including, without limitation, the failure to
make on or before its due date a required installment under Section 412(m) of
the Code or Section 302(e) of ERISA, shall be a reportable event regardless of
the issuance of any waivers in accordance with Section 412(d) of the Code); and
any request for a waiver under Section 412(d) of the Code for any Plan;
(b) the distribution under Section 4041 of ERISA of a notice
of intent to terminate any Plan or any action taken by the Borrower or an ERISA
Affiliate to terminate any Plan;
(c) the institution by the PBGC of proceedings under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by the Borrower or any ERISA Affiliate of a
notice from a Multiemployer Plan that such action has been taken by the PBGC
with respect to such Multiemployer Plan;
<PLAN>
-9-
(d) the complete or partial withdrawal from a Multiemployer
Plan by the Borrower or any ERISA Affiliate that results in liability under
Section 4201 or 4204 of ERISA (including the obligation to satisfy secondary
liability as a result of a purchaser default) or the receipt by the Borrower or
any ERISA Affiliate of notice from a Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or that
it intends to terminate or has terminated under Section 4041A of ERISA;
(e) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Borrower or any ERISA Affiliate to enforce
Section 515 of ERISA, which proceeding is not dismissed within 30 days; or
(f) the adoption of an amendment to any Plan that, pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA, would result in the loss
of tax-exempt status of the trust of which such Plan is a part if the Borrower
or an ERISA Affiliate fails to timely provide security to the Plan in accordance
with the provisions of such Sections.
"Eurodollar Base Rate" means, with respect to any Eurodollar
--------------------
Loan for any Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/16 of 1%) reported on the date two Business Days
prior to the first day of such Interest Period on the Dow Jones Markets Service
Page 3750 as the London Interbank Offered Rate for Dollar deposits having a term
comparable to such Interest Period and in an amount of $1,000,000 or more (or,
if said Page shall cease to be publicly available or if the information
contained on said Page, in the sole judgment of the Administrative Agent, shall
cease to accurately reflect such London Interbank Offered Rate, the Eurodollar
Base Rate means the rate reported by any publicly available source of similar
market data selected by the Administrative Agent that, in the sole judgment of
the Administrative Agent, accurately reflects such London Interbank Offered
Rate).
"Eurodollar Loans" means Loans that bear interest at rates
----------------
based on rates referred to in the definition of "Eurodollar Base Rate" in this
Section 1.01.
"Eurodollar Rate" means, for any Interest Period for any
---------------
Eurodollar Loan, a rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) determined by the Administrative Agent to be equal to the
Eurodollar Base Rate for such Interest Period divided by 1 minus the Reserve
----------
Requirement (if any) for such Interest Period.
"Event of Default" has the meaning assigned to such term in
----------------
Section 10.
"Excess Cash Flow" means, for any period, the excess of (a)
----------------
EBITDA for such period over (b) the sum of (i) the aggregate amount of Debt
----
Service for such period plus (ii) Capital Expenditures made during such period
----
(except for any such Capital Expenditures to the extent financed with the
proceeds of the capital contributions or advances to the Borrower from SFEC
after the date hereof) plus (iii) the aggregate amount paid, or required to be
----
paid, in cash in respect of income taxes for such period plus (iv) the amount
----
paid in dividends or other Restricted Payments for such period (including,
without limitation, dividends paid in respect of the SFEC Senior Notes in
accordance with Section 9.09(a) plus (v) the aggregate amount of Investments
----
<PAGE>
-10-
after the date hereof in connection with the acquisition of the ownership of
Property and/or interests of SFF and San Antonio Park GP not owned by the
Borrower and its Subsidiaries (other than SFF).
"Excess Payment" has the meaning set forth in Section 6.08.
--------------
"Excess Funding Guarantor" has the meaning set forth in
------------------------
Section 6.08.
"Existing Credit Agreement" means the Credit Agreement dated
-------------------------
June 23, 1995 among the Borrower, SFEC, S.F. Holdings, Inc., the lenders named
therein and Chemical Bank (predecessor to The Chase Manhattan Bank) as Agent and
Fronting Bank.
"Existing Parks" means those amusement and attraction parks
--------------
(excluding the parks known as Six Flags Over Georgia and Six Flags Over Texas)
listed in Part A of Schedule V.
"Facility A Revolving Credit Commitment" means, as to each
--------------------------------------
Revolving Credit Lender, the obligation of such Lender to make Revolving Credit
Loans, and to issue or participate in Letters of Credit pursuant to Section
2.03, in an aggregate principal or face amount at any one time outstanding up to
but not exceeding the amount set forth opposite the name of such Lender on
Schedule I under the caption "Revolving Credit Commitment" or, in the case of a
Person that becomes a Revolving Credit Lender pursuant to an assignment
permitted under Section 12.06(b), as specified in the respective instrument of
assignment pursuant to which such assignment is effected (in each case as the
same may be reduced or increased pursuant to an assignment permitted under
Section 12.06(b), or reduced from time to time pursuant to Section 2.04 or
2.10). The original aggregate principal amount of the Facility A Revolving
Credit Commitments is $100,000,000.
"Facility A Revolving Credit Commitment Termination Date"
-------------------------------------------------------
means the fifth anniversary of the first Quarterly Date after the Closing Date.
"Facility A Revolving Credit Loans" means the loans provided
---------------------------------
for in Section 2.01(a), which may be Base Rate Loans and/or Eurodollar Loans.
"Facility B Term Loans" means the loans provided for in
---------------------
Section 2.01(b), which may be Base Rate Loans and/or Eurodollar Loans.
"Facility B Term Loan Commitment" means, as to each Facility B
-------------------------------
Term Loan Lender, the obligation of such Lender to make Facility B Term Loans in
an aggregate principal amount up to but not exceeding the amount set opposite
the name of such Lender on Schedule I under the caption "Facility B Term Loan
Commitment" or, in the case of a Person that becomes a Facility B Term Loan
Lender pursuant to an assignment permitted under Section 12.06(b), as specified
in the respective instrument of assignment pursuant to which such assignment is
effected (as the same may be reduced from time to time pursuant to Section 2.04
or 2.10 or increased or reduced from time to time pursuant to assignments
11
<PAGE>
permitted under Section 12.06(b)). The original aggregate principal amount of
the Facility B Term Loan Commitments is $372,000,000.
"Facility B Term Loan Commitment Termination Date" means the
------------------------------------------------
Closing Date.
"Federal Funds Rate" means, for any day, the rate per annum
------------------
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (a) if the day for which such rate is to
--------
be determined is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day and (b) if such rate is not so
published for any Business Day, the Federal Funds Rate for such Business Day
shall be the average rate charged to the Administrative Agent on such Business
Day on such transactions as determined by the Administrative Agent.
"Fixed Charges" means, for any period, the sum of (a) Debt
-------------
Service for such period plus (b) the aggregate amount of all Capital
----
Expenditures made during such period (excluding (i) any Capital Expenditures to
the extent financed with the proceeds of capital contributions or advances to
the Borrower from SFEC or SFH after the consummation of the Premier Merger and
(ii) any Capital Expenditures made (x) during the period from and after
September 30, 1997 to and including September 29, 1998 in an aggregate amount up
to $50,000,000,), (y) during the period from and after September 30, 1998 to and
including September 29, 1999 in an aggregate amount up to $50,000,000 and (z)
during the period from and including the Closing Date to and including the first
anniversary thereof in an aggregate amount up to the amount of proceeds received
by the Borrower and its Subsidiaries from the Partnership Transfers) plus (c)
----
the aggregate amount paid, or required to be paid, in cash in respect of income
taxes during such period plus (d) the amount paid in dividends or other
----
Restricted Payments for such period (other than the dividend permitted under
Section 9.09(d)).
"Fixed Charges Coverage Ratio" means, as at any date, the
----------------------------
ratio of (a) EBITDA for the period of four consecutive fiscal quarters ending on
or most recently ended prior to such date to (b) the amount of Fixed Charges for
such period.
"GAAP" means generally accepted accounting principles applied
----
on a basis consistent with those that, in accordance with the last sentence of
Section 1.02(a), are to be used in making the calculations for purposes of
determining compliance with this Agreement.
"Georgia Partnership Entities" mean Six Flags Over Georgia,
----------------------------
Inc., SFOG Acquisition A Holdings, Inc., SFOG Acquisition A, Inc., SFOG
Acquisition B Holdings, Inc., SFOG Acquisition B LLC, SFOG II Employee Inc. and
SFOG II Inc.
"Guarantee" means a guarantee, an endorsement, a contingent
---------
agreement to purchase or to furnish funds for the payment or maintenance of, or
otherwise to be or become contingently liable under or with respect to, the
Indebtedness, other obligations, net worth, working capital or earnings of any
<PAGE>
-12-
Person, or a guarantee of the payment of dividends or other distributions upon
the stock or equity interests of any Person, or an agreement to purchase, sell
or lease (as lessee or lessor) Property, products, materials, supplies or
services primarily for the purpose of enabling a debtor to make payment of such
debtor's obligations or an agreement to assure a creditor against loss, and
including, without limitation, causing a bank or other financial institution to
issue a Letter of Credit or other similar instrument for the benefit of another
Person, but excluding endorsements for collection or deposit in the ordinary
course of business. The terms "Guarantee" and "Guaranteed" used as verbs have
the correlative meanings.
"Guarantee Assumption Agreement" means a Guarantee Assumption
------------------------------
Agreement substantially in the form of Exhibit D by an entity that, pursuant to
Section 9.15(a), is required to become a "Subsidiary Guarantor" hereunder in
favor of the Administrative Agent.
"Hazardous Material" means, any chemical or other material or
------------------
substance, which is now or hereafter prohibited, limited or otherwise regulated
in any way under any Environmental Law.
"Hedging Agreement" means any interest rate protection
-----------------
agreement, foreign currency exchange agreement, commodity price protection
agreement or other interest or currency exchange rate or commodity price hedging
arrangement. For purposes hereof, the "credit exposure" at any time of any
Person under an Hedging Agreement to which such Person is a party shall be
determined at such time in accordance with the standard methods of calculating
credit exposure under similar arrangements as prescribed from time to time by
the Administrative Agent, taking into account potential interest rate movements
and the respective termination provisions and notional principal amount and term
of such Hedging Agreement.
"Holdings" means Premier Parks Holdings Corporation, a
--------
Delaware corporation (to be renamed "Premier Parks Inc." upon consummation of
the Premier Merger).
"Holdings Senior Discount Notes" means the 10% Senior Discount
------------------------------
Notes due 2008 of Holdings.
"Holdings Senior Discount Notes Indenture" means the Indenture
----------------------------------------
dated as of April 1, 1998 between Holdings and The Bank of New York, as Trustee.
"Holdings Senior Notes" means the 9 1/4% Senior Notes due 2006
---------------------
of Holdings.
"Holdings Senior Notes Indenture" means the Indenture dated as
-------------------------------
of April 1, 1998 between Holdings and The Bank of New York, as Trustee.
"Inactive Subsidiary" means any Subsidiary of the Borrower
-------------------
that (a) has aggregate assets with a value not in excess of $10,000 and (b)
conducts no business or other operations.
<PAGE>
-13-
"Indebtedness" means, for any Person, without duplication: (a)
------------
obligations created, issued or incurred by such Person for borrowed money
(whether by loan, the issuance and sale of debt securities or the sale of
Property to another Person subject to an understanding or agreement, contingent
or otherwise, to repurchase such Property from such Person); (b) obligations of
such Person to pay the deferred purchase or acquisition price of Property or
services, other than trade accounts payable (other than for borrowed money)
arising, and accrued expenses incurred, in the ordinary course of business so
long as such trade accounts payable are payable within 180 days of the date the
respective goods are delivered or the respective services are rendered; (c)
Indebtedness of others secured by a Lien on the Property of such Person, whether
or not the respective indebtedness so secured has been assumed by such Person;
(d) obligations of such Person in respect of letters of credit or similar
instruments (including negotiable instruments) issued or accepted by banks and
other financial institutions for account of such Person; (e) Capital Lease
Obligations of such Person; and (f) Indebtedness of others Guaranteed by such
Person. The Indebtedness of any Person shall include the Indebtedness of any
partnership in which such Person is a general partner to the extent such
Indebtedness is recourse, provided that if such Person's liability for such
Indebtedness is contractually limited, only such Person's share thereof shall be
so included. Anything herein to the contrary notwithstanding, obligations under
Hedging Agreements shall not constitute Indebtedness.
"Indemnity Agreement" means the Subordinated Indemnity
-------------------
Agreement dated as of April 1, 1998 among Premier Parks Inc., GP Holdings, Time
Warner Inc., Time Warner Entertainment Company, L.P., TW-SPV Co., SFEC, the
Borrower, SFOG II, Inc., and SFT Holdings, Inc., as the same shall, subject to
Section 9.16, be modified and supplemented and in effect from time to time.
"Information Memorandum" means the Confidential Information
----------------------
Memorandum dated March 1998 prepared by the Borrower in connection with the
syndication of the credit facilities provided for in this Agreement.
"Interest Coverage Ratio" means, as at any date, the ratio of
-----------------------
(a) EBITDA for the period of four consecutive fiscal quarters ending on or most
recently ended prior to such date to (b) Interest Expense for such period.
"Interest Expense" means, for any period, the sum, for the
----------------
Borrower and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following: (a) all interest in
respect of Indebtedness (including, without limitation, the interest component
of any payments in respect of Capital Lease Obligations but excluding any
capitalized financing fees paid during such period that are to be charged to
future periods) accrued or capitalized during such period (whether or not
actually paid during such period) plus (b) the net amount payable (or minus the
-----
net amount receivable) under Hedging Agreements during such period (whether or
not actually paid or received during such period) minus (c) (to the extent not
-----
already deducted in computing Interest Expense) the aggregate amount of interest
income for such period; provided that, prior to SFF becoming a Wholly Owned
--------
Subsidiary of the Borrower, the amount of Interest Expense of SFF included in
calculating Interest Expense of the Borrower and its Subsidiaries shall be
limited to the Interest Expense of SFF for the relevant period multiplied by the
<PAGE>
-14-
percentage of the aggregate ownership interests of the Borrower and its
Subsidiaries (other than SFF) in SFF. Notwithstanding the foregoing, if during
any period for which Interest Expense is being determined the Borrower shall
have consummated any acquisition or Disposition then, for all purposes of this
Agreement (other than for purposes of the definition of Excess Cash Flow),
Interest Expense shall be determined on a pro forma basis as if such acquisition
or Disposition (and any Indebtedness incurred by the Borrower or any of its
Subsidiaries in connection with such acquisition or repaid as a result of such
Disposition) had been made or consummated (and such Indebtedness incurred or
repaid) on the first day of such period and as if the interest rate applicable
to any incremental Indebtedness of the Borrower and its Subsidiaries is equal to
the interest rate applicable to Indebtedness of the Borrower and its
Subsidiaries in fact outstanding during such period.
"Interest Period" means, for any Eurodollar Loan, each period
---------------
commencing on the date such Eurodollar Loan is made or Converted from a Loan of
another Type or (in the event of a Continuation) the last day of the next
preceding Interest Period for such Loan and (subject to the provisions of
Section 2.01(c)) ending on the numerically corresponding day in the first,
second, third or sixth calendar month thereafter (or such shorter periods as,
prior to the date referred to in Section 2.01(c), shall be agreed to by each
Lender), as the Borrower may select as provided in Section 4.05, except that
each Interest Period that commences on the last Business Day of a calendar month
(or on any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall (unless each of the Lenders shall
otherwise agree) end on the last Business Day of the appropriate subsequent
calendar month. Notwithstanding the foregoing: (i) each Interest Period that
would otherwise end on a day that is not a Business Day shall end on the next
succeeding Business Day (or, if such next succeeding Business Day falls in the
next succeeding calendar month, on the next preceding Business Day); and (ii)
notwithstanding clause (i) above, no Interest Period shall (except as otherwise
provided in the first sentence of this definition) have a duration of less than
one month and, if the Interest Period for any Eurodollar Loan would otherwise be
a shorter period, such Loan shall not be available hereunder for such period.
"Investment" means, for any Person: (a) the acquisition
----------
(whether for cash, Property, services or securities or otherwise) of capital
stock, bonds, notes, debentures, partnership or other ownership interests or
other securities of any other Person or any agreement to make any such
acquisition (including, without limitation, any "short sale" or any sale of any
securities at a time when such securities are not owned by the Person entering
into such sale); (b) the making of any deposit with, or advance, loan or other
extension of credit to, any other Person (including the purchase of Property
from another Person subject to an understanding or agreement, contingent or
otherwise, to resell such deposit with, or advance, loan or other extension of
credit to, any other Person (including the purchase of Property from another
Person subject to an understanding or agreement, contingent or otherwise, to
resell such Property to such Person), but excluding any such advance, loan or
extension of credit having a stated term not exceeding 90 days arising in
connection with the sale of inventory, supplies or patron services by such
Person in the ordinary course of business, and excluding also any deposit made
by such Person as an advance payment in respect of a Capital Expenditure (to the
extent the making of such Capital Expenditure will not result in a violation of
<PAGE>
-15-
any of the provisions of Section 9.10); (c) the entering into of any Guarantee
of, or other contingent obligation with respect to, Indebtedness or other
liability of any other Person and (without duplication) any amount committed to
be advanced, lent or extended to such Person; or (d) the entering into of any
Hedging Agreement.
"Issuing Lender" means The Bank of New York as the issuer of
--------------
Letters of Credit under Section 2.03, together with its successors and assigns
in such capacity.
"LCPI" means Lehman Commercial Paper Inc., a Delaware
----
corporation.
"Letter of Credit" has the meaning assigned to such term in
----------------
Section 2.03.
"Letter of Credit Documents" means, with respect to any Letter
--------------------------
of Credit, collectively, any application therefor and any other agreements,
instruments, guarantees or other documents (whether general in application or
applicable only to such Letter of Credit) governing or providing for (a) the
rights and obligations of the parties concerned or at risk with respect to such
Letter of Credit or (b) any collateral security for any of such obligations,
each as the same may be modified and supplemented and in effect from time to
time.
"Letter of Credit Interest" means, for each Lender, such
-------------------------
Lender's participation interest (or, in the case of the Issuing Lender, the
Issuing Lender's retained interest) in the Issuing Lender's liability under
Letters of Credit and such Lender's rights and interests in Reimbursement
Obligations and fees, interest and other amounts payable in connection with
Letters of Credit and Reimbursement Obligations.
"Letter of Credit Liability" means, without duplication, at
--------------------------
any time and in respect of any Letter of Credit, the sum of (a) the undrawn face
amount of such Letter of Credit plus (b) the aggregate unpaid principal amount
of all Reimbursement Obligations of the Borrower at such time due and payable in
respect of all drawings made under such Letter of Credit. For purposes of this
Agreement, a Lender (other than the Issuing Lender) shall be deemed to hold a
Letter of Credit Liability in an amount equal to its participation interest in
the related Letter of Credit under Section 2.03, and the Issuing Lender shall be
deemed to hold a Letter of Credit Liability in an amount equal to its retained
interest in the related Letter of Credit after giving effect to the acquisition
by the Lenders other than the Issuing Lender of their participation interests
under said Section 2.03.
"Leverage Ratio" means, as at any date, the ratio of (a) Total
--------------
Debt as at such date to (b) EBITDA for the period of four consecutive fiscal
quarters ending on or most recently ended prior to such date.
"License Agreement" means the Amended and Restated License
-----------------
Agreement dated as of April 1, 1998 by and between Warner Bros. Consumer
Products Division, DC Comics, Premier Parks Inc. and Six Flags Theme Parks Inc.,
as the same shall, subject to Section 9.16, be amended and supplemented and in
effect from time to time.
<PAGE>
-16-
"Lien" means, with respect to any Property, any mortgage,
----
lien, pledge, charge, security interest or encumbrance of any kind in respect of
such Property. For purposes of this Agreement and the other Loan Documents, a
Person shall be deemed to own subject to a Lien any Property that it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
(other than an operating lease) relating to such Property.
"Loan Documents" means, collectively, this Agreement, the
--------------
Notes, the Letter of Credit Documents and the Security Documents.
"Loans" means, collectively, the Facility A Revolving Credit
-----
Loans and the Facility B Term Loans.
"Majority Facility A Revolving Credit Loan Lenders" means, at
-------------------------------------------------
any time, Lenders having Facility A Revolving Credit Loans, Letter of Credit
Interests and unused Facility A Revolving Credit Commitments representing at
least 51% of the sum of the total Facility A Revolving Credit Loans, Letter of
Credit Interests and unused Facility A Revolving Credit Commitments at such
time.
"Majority Facility B Term Loan Lenders" means, at any time,
-------------------------------------
Lenders having Facility B Term Loans and unused Facility B Term Loan Commitments
representing at least 51% of the sum of the total Facility B Term Loans and
unused Facility B Term Loan Commitments at such time.
"Majority Lenders" means, at any time, Lenders having at least
----------------
51% of the sum of (a) the aggregate amount of the Facility A Revolving Credit
Commitments at such time (or, if the Facility A Revolving Credit Commitments
shall have terminated, the sum of (i) the aggregate unpaid principal amount of
the Facility A Revolving Credit Loans at such time plus (ii) the aggregate
----
amount of all Letter of Credit Liabilities at such time) and (b) the aggregate
amount of the Facility B Term Loan Commitments at such time (or, if the Facility
B Term Loan Commitments shall have terminated, the aggregate outstanding
principal amount of the Facility B Term Loans at such time).
"Margin Stock" means "margin stock" within the meaning of
------------
Regulations G, T, U and X.
"Material Adverse Effect" means a material adverse effect on
-----------------------
(a) the Property, business, operations, financial condition, prospects,
liabilities or capitalization of the Borrower and its Subsidiaries taken as a
whole, (b) the validity or enforceability of any of the Loan Documents, (c) the
rights and remedies of the Lenders and the Administrative Agent under any of the
Loan Documents or (d) the timely payment of the principal of or interest on the
Loans, Reimbursement Obligations or other amounts payable in connection
therewith.
"Merger Agreement" means the Agreement and Plan of Merger
----------------
dated as of February 9, 1998, by and among Premier Parks Inc., Premier Parks
<PAGE>
-17-
Holdings Corporation, Premier Parks Merger Corporation, PPSTAR I, Inc., the
holders of capital stock of SFEC, and SFEC, as the same shall, subject to
Section 9.16, be amended and supplemented and in effect from time to time.
"Merger Transactions" means the Premier Merger and the Six
-------------------
Flags Merger.
"Mortgage(s)" means, collectively, one or more mortgages,
-----------
deeds of trust, deeds to secure debt or similar instruments executed by the
Borrower and/or one or more of its Subsidiaries in favor of the Administrative
Agent (or a trustee, for the benefit of the Administrative Agent), covering real
Property interests of the Borrower and its Subsidiaries, in each case as the
same shall be modified and supplemented and in effect from time to time.
"Multiemployer Plan" means a multiemployer plan defined as
------------------
such in Section 3(37) of ERISA to which contributions have been made by the
Borrower or any ERISA Affiliate and that is covered by Title IV of ERISA.
"Net Available Proceeds" means:
----------------------
(i) in the case of any Disposition, the amount of Net
Cash Payments received by the Borrower or any Subsidiary in
connection with such Disposition;
(ii) in the case of any Casualty Event, the aggregate
amount of proceeds of insurance, condemnation awards and other
compensation received by the Borrower and its Subsidiaries in
respect of such Casualty Event net of (A) reasonable expenses
incurred by the Borrower and its Subsidiaries in connection
therewith and (B) contractually required repayments of
Indebtedness consisting of Capital Lease Obligations or
Purchase Money Indebtedness permitted hereunder and covering
the respective Property that is the subject of such Casualty
Event, and any income and transfer taxes payable by the
Borrower or any of its Subsidiaries in respect of such
Casualty Event; and
(iii) in the case of any Debt Issuance, the aggregate
amount of all cash received by the Borrower and its
Subsidiaries in respect of such Debt Issuance net of
reasonable expenses incurred by the Borrower and its
Subsidiaries in connection therewith.
Notwithstanding the foregoing, prior to SFF becoming a Wholly Owned Subsidiary
of the Borrower, the Net Available Proceeds in respect of any Disposition,
Casualty Event or Debt Issuance by or affecting SFF shall be limited to the
actual cash amounts (if any) in respect thereof distributed to the Borrower and
its Subsidiaries.
"Net Cash Payments" means, with respect to any Disposition,
-----------------
the aggregate amount of all cash payments received by the Borrower and its
Subsidiaries directly or indirectly in connection with such Disposition, whether
at the time of such Disposition or after such Disposition under deferred payment
arrangements or Investments entered into or received in connection with such
<PAGE>
-18-
Disposition (including, without limitation, Disposition Investments); provided
that (a) Net Cash Payments shall be net of (i) the amount of any legal, title,
transfer and recording tax expenses, commissions and other fees and expenses
payable by the Borrower and its Subsidiaries in connection with such Disposition
and (ii) any Federal, state and local income or other taxes estimated to be
payable by the Borrower and its Subsidiaries as a result of such Disposition,
but only to the extent that on the date of such Disposition the Borrower
delivers a certificate of a Responsible Officer of the Borrower setting forth a
calculation of the amount of such estimated taxes; and (b) Net Cash Payments
shall be net of any contractually-required repayments of Indebtedness consisting
of Capital Lease Obligations or Purchase Money Indebtedness permitted hereunder
and covering the respective Property that is the subject of such Disposition.
Notwithstanding the foregoing, prior to SFF becoming a Wholly Owned Subsidiary
of the Borrower, the Net Cash Payments with respect to any Disposition by SFF
shall be limited to the actual cash amounts (if any) in respect of such
Disposition distributed to the Borrower and its Subsidiaries.
"Notes" means the promissory notes provided for by Section
-----
2.08 and all promissory notes delivered in substitution or exchange therefor, in
each case as the same shall be modified and supplemented and in effect from time
to time.
"Obligors" has the meaning set forth in the preamble.
--------
"Park" means, collectively, the Existing Parks and any other
----
amusement or attraction park acquired by any of the Obligors after the date
hereof.
"Partnership Transfers" means the transfer of the Georgia
---------------------
Partnership Entities and the Texas Partnership Entities to TWE or Holdings, as
the case may be, pursuant to the Indemnity Agreement, or otherwise.
"Payor" has the meaning set forth in the Section 4.06.
-----
"PBGC" means the Pension Benefit Guaranty Corporation or any
----
entity succeeding to any or all of its functions under ERISA.
"Peril" has the meaning set forth in Section 9.04.
-----
"Permitted Investments" means: (a) direct obligations of the
---------------------
United States of America, or of any agency thereof, or obligations guaranteed as
to principal and interest by the United States of America, or of any agency
thereof, in either case maturing not more than one year from the date of
acquisition thereof; (b) certificates of deposit, time deposits and money market
deposit accounts issued by any bank or trust company organized under the laws of
the United States of America or any state thereof and having capital, surplus
and undivided profits of at least $500,000,000, maturing not more than one year
from the date of acquisition thereof; (c) securities either rated or issued by
corporations that have a rating of, A-1 or better or P-1 by Standard & Poor's
Ratings Services, a division of The McGraw Hill Companies, Inc., or Moody's
Investors Services, Inc., respectively, maturing not more than one year from the
<PAGE>
-19-
date of acquisition thereof; and (d) fully collateralized repurchase agreements
with a term of not more than one year for securities described in clause (a)
above and entered into with either financial institutions satisfying the
criteria described in clause (b) above or primary dealers in U.S. Government
securities; in each case so long as the same (x) provide for the payment of
principal and interest (and not principal alone or interest alone) and (y) are
not subject to any contingency regarding the payment of principal or interest.
"Permitted Reinvestment Transaction" means either (a) a
----------------------------------
Subsequent Acquisition permitted under Section 9.05(e)(iii) or a Capital
Expenditure permitted under Section 9.05(b), or (b) a reimbursement of the
Borrower or any Subsidiary for monies expended by the Borrower or a Subsidiary
within the previous 180 days with respect to any such acquisition or Capital
Expenditure.
"Person" means any individual, corporation, company, voluntary
------
association, partnership, limited liability company, joint venture, trust,
unincorporated organization or government (or any agency, instrumentality or
political subdivision thereof).
"Plan" means an employee benefit or other plan established or
----
maintained by the Borrower or any ERISA Affiliate and that is covered by Title
IV of ERISA, other than a Multiemployer Plan.
"Pledge Agreement" means a Pledge Agreement substantially in
----------------
the form of Exhibit C between SFH and the Administrative Agent, as the same
shall be modified and supplemented and in effect from time to time.
"Post-Default Rate" means a rate per annum equal to 2% plus
-----------------
the Base Rate as in effect from time to time plus the Applicable Rate for Base
Rate Loans, provided that, with respect to principal of a Eurodollar Loan that
--------
shall become due (whether at stated maturity, by acceleration, by optional or
mandatory prepayment or otherwise) on a day other than the last day of the
Interest Period therefor, the "Post-Default Rate" shall be, for the period from
and including such due date to but excluding the last day of such Interest
Period, 2% plus the interest rate for such Loan as provided in Section 3.02(b)
and, thereafter, the rate provided for above in this definition.
"Prime Rate" means a rate of interest per annum equal to the
----------
rate of interest publicly announced in New York City by Citibank, N.A., as
published in the Wall Street Journal, from time to time as its prime commercial
lending rate, such rate to be adjusted automatically (without notice) on the
effective date of any change in such publicly announced rate.
"Principal Office" means, initially, the office of the
----------------
Administrative Agent set forth on the signature pages hereof or such other
office that the Administrative Agent may specify to the Lenders and the Borrower
from time to time.
"Principal Payment Dates" shall mean, with respect to the
-----------------------
Facility B Term Loans, each Quarterly Date during the period from and including
the Quarterly Date falling on or nearest to November 30, 1998, through and
including the Quarterly Date falling on or nearest to November 30, 2004.
<PAGE>
-20-
"Pro Rata Share" has the meaning set forth in Section 6.08.
--------------
"Property" means any right or interest in or to property of
--------
any kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"Public Preferred Stock Issuance" means the issuance by
-------------------------------
Holdings of mandatorily convertible preferred stock in connection with the
consummation of the Merger Transactions.
"Purchase Money Indebtedness" means Indebtedness (i)
---------------------------
consisting of the deferred purchase price of Property, conditional sale
obligations under any title retention agreement and other purchase money
obligations, in each case where the maturity of such Indebtedness does not
exceed the anticipated useful life of the asset being financed, and (ii)
incurred to finance the acquisition by the Borrower or a Subsidiary of such
asset, including additions and improvements; provided, however, that any Lien
-------- -------
arising in connection with any such Indebtedness shall be limited to the
specified asset being financed or, in the case of real Property and fixtures,
including additions and improvements, the real Property on which such asset is
attached; and provided further, that such Indebtedness is incurred within 180
days after such acquisition, addition or improvement by the Borrower or
Subsidiary of such asset.
"Quarterly Dates" means the last Business Day of February,
---------------
May, August and November in each year, the first of which shall be the first
such day after the date hereof.
"Refinancing Notes" means one or more series of subordinated
-----------------
notes issued by the Borrower, the Net Proceeds of which are used by the Borrower
to redeem, repay or repurchase Senior Subordinated Notes.
"Refinancing Notes Indenture" means one or more indentures
---------------------------
pursuant to which the Refinancing Notes are issued.
"Register" has the meaning set forth in Section 12.06
--------
"Regulations A, D, G, T, U and X" means, respectively,
-------------------------------
Regulations A, D, G, T, U and X of the Board of Governors of the Federal Reserve
System (or any successor), as the same may be modified and supplemented and in
effect from time to time.
"Regulatory Change" means, with respect to any Lender, any
-----------------
change after the date hereof in Federal, state or foreign law or regulations
(including, without limitation, Regulation D) or the adoption or making after
such date of any interpretation, directive or request applying to a class of
banks including such Lender of or under any Federal, state or foreign law or
regulations (whether or not having the force of law and whether or not failure
to comply therewith would be unlawful) by any court or governmental or monetary
authority charged with the interpretation or administration thereof.
<PAGE>
-21-
"Reimbursement Obligations" means, at any date, the
-------------------------
obligations of the Borrower then outstanding, or that may thereafter arise in
respect of all Letters of Credit then outstanding, to reimburse amounts paid by
the Issuing Lender in respect of any drawings under a Letter of Credit.
"Release" means any release, threatened release, spill,
-------
emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the indoor or outdoor environment, including, without
limitation, the movement of Hazardous Materials through ambient air, soil,
surface water, ground water, wetlands, land or subsurface strata that violates
or creates any liability under any Environmental Law.
"Required Payment" has the meaning set forth in Section 4.06.
----------------
"Reserved Commitment Amount" has the meaning assigned to such
--------------------------
term in the second paragraph of Section 2.01(a).
"Reserve Requirement" means, for any Interest Period for any
-------------------
Eurodollar Loan, the average maximum rate at which reserves (including, without
limitation, any marginal, supplemental or emergency reserves) are required to be
maintained during such Interest Period under Regulation D by member banks of the
Federal Reserve System in New York City with deposits exceeding one billion
Dollars against "Eurocurrency liabilities" (as such term is used in Regulation
D). Without limiting the effect of the foregoing, the Reserve Requirement shall
include any other reserves required to be maintained by such member banks by
reason of any Regulatory Change with respect to (i) any category of liabilities
that includes deposits by reference to which the Eurodollar Base Rate for any
Interest Period for any Eurodollar Loans is to be determined as provided in the
definition of "Eurodollar Base Rate" in this Section 1.01 or (ii) any category
of extensions of credit or other assets that includes Eurodollar Loans.
"Responsible Officer" means, as to any Person, the chief
-------------------
executive officer, president, any vice president, chief financial officer or
secretary of such person.
"Restricted Payment" means dividends (in cash, Property or
------------------
obligations) on, or other payments or distributions on account of, or the
setting apart of money for a sinking or other analogous fund for, or the
purchase, redemption, retirement or other acquisition of, any shares of any
class of stock of the Borrower or of any warrants, options or other rights to
acquire the same (or to make any payments to any Person, such as "phantom stock"
payments, where the amount thereof is calculated with reference to the fair
market or equity value of the Borrower or any of its Subsidiaries), but
excluding dividends payable solely in shares of common stock of the Borrower.
"San Antonio Parks GP" means San Antonio Parks GP, LLC, a
--------------------
Delaware limited liability company and, as of the date hereof, a 1% general
partner of SFF.
"Security Agreement" means a Security Agreement substantially
------------------
in the form of Exhibit B between the Borrower, the Subsidiaries of the Borrower
<PAGE>
-22-
party thereto and the Administrative Agent, as the same shall be modified and
supplemented and in effect from time to time.
"Security Documents" means, collectively, the Pledge
------------------
Agreement, the Security Agreement, the Mortgages and all Uniform Commercial Code
financing statements required by any of such instruments to be filed with
respect to the security interests in personal Property and fixtures created
pursuant thereto.
"Senior Secured Debt" means, as at any date, the aggregate
-------------------
amount of Indebtedness of the Borrower and its Subsidiaries at such date
(determined on a consolidated basis without duplication in accordance with GAAP)
that is not Subordinated Indebtedness and is secured by the Property of the
Borrower and/or its Subsidiaries.
"Senior Secured Debt Ratio" means, at any date, the ratio of
-------------------------
(a) Senior Secured Debt as at such date to (b) EBITDA for the period of four
consecutive fiscal quarters ending on, or most recently ended prior to such
date.
"Senior Subordinated Notes" means the Discount Notes and any
-------------------------
Refinancing Notes.
"Senior Subordinated Notes Indentures" means the Discount
------------------------------------
Notes Indenture and any Refinancing Notes Indenture.
"SFEC Indentures" means the SFEC Zero Coupon Notes Indenture
---------------
and the SFEC Senior Notes Indenture.
"SFEC Notes" means the SFEC Zero Coupon Notes and the SFEC
----------
Senior Notes.
"SFEC Senior Notes" means the 8 7/8% Senior Notes due 2006 of
-----------------
SFEC, issued pursuant to the SFEC Senior Notes Indenture.
"SFEC Senior Notes Indenture" means the Indenture dated as of
---------------------------
April 1, 1998 between SFEC and The Bank of New York, as Trustee.
"SFEC Zero Coupon Notes" means the Zero Coupon Notes due 1999
----------------------
of SFEC.
"SFEC Zero Coupon Notes Indenture" means the Indenture dated
--------------------------------
as of December 16, 1992 between SFEC, Time Warner Entertainment Company, L.P.
and United States Trust Company of New York, as Trustee.
"SFF" means San Antonio Theme Park, L.P., a Delaware limited
---
partnership, which operates the Park known as Six Flags Fiesta Texas.
"SFOG" Means Six Flags Over Georgia, Ltd., a Georgia limited
----
partnership.
"SFOT" means Texas Flags, Ltd., a Texas limited partnership.
----
<PAGE>
-23-
"Six Flags San Antonio" means Six Flags San Antonio, L.P., a
---------------------
Delaware limited partnership and an indirect Wholly Owned Subsidiary of the
Borrower and, as of the date hereof, a 59% general partner of SFF.
"Subordinated Indebtedness" means Indebtedness of the Borrower
-------------------------
incurred in accordance with Section 9.07(e).
"Subsequent Acquisition" means any acquisition permitted under
----------------------
Section 9.05(e)(iii).
"Subsequent Acquisition Agreements" means each agreement
---------------------------------
pursuant to which a Subsequent Acquisition shall be consummated, as the same
shall, subject to Section 9.16, be modified and supplemented and in effect from
time to time.
"Subsidiary" means, with respect to any Person, any
----------
corporation, partnership, limited liability company or other entity domestic or
foreign of which at least a majority of the securities or other ownership
interests having by the terms thereof ordinary voting power to elect a majority
of the board of directors or other persons performing similar functions of such
corporation, partnership or other entity (irrespective of whether or not at the
time securities or other ownership interests of any other class or classes of
such corporation, partnership or other entity shall have or might have voting
power by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by such Person or one or more Subsidiaries of
such Person or by such Person and one or more Subsidiaries of such Person.
Notwithstanding anything herein to the contrary, neither the Georgia Partnership
Entities nor the Texas Partnership Entities shall be "Subsidiaries" for purposes
of this Agreement.
"Subsidiary Guarantor" has the meaning set forth in the
--------------------
preamble.
"Texas Partnership Entities" means Six Flags Over Texas, Ltd.,
--------------------------
SFOT Acquisition I Holdings, Inc., SFOT Acquisition I, Inc., SFT Holdings Inc.,
SFOT Acquisition II Holdings Inc., SFOT Acquisition II Inc. and SFOT Employee
Inc.
"TWE" means Time Warner Entertainment Company, L.P., a
---
Delaware limited partnership.
"Total Debt" means, as at any date, the aggregate amount of
----------
all Indebtedness of the Borrower and its Subsidiaries at such date (determined
on a consolidated basis without duplication in accordance with GAAP).
"Type" has the meaning assigned to such term in Section 1.03.
----
"U.S. Person" has the meaning set forth in Section 5.07.
-----------
"Wholly Owned Subsidiary" means, with respect to any Person,
any corporation, partnership, limited liability company or other entity of which
all of the equity securities or other ownership interests (other than, in the
case of a corporation, directors' qualifying shares) are directly or indirectly
<PAGE>
-24-
owned or controlled by such Person or one or more Wholly Owned Subsidiaries of
such Person.
1.02. Accounting Terms and Determinations.
-----------------------------------
(a) Except as otherwise expressly provided herein, all
accounting terms used herein shall be interpreted, and all financial statements
and certificates and reports as to financial matters required to be delivered to
the Lenders hereunder shall (unless otherwise disclosed to the Lenders in
writing at the time of delivery thereof in the manner described in paragraph (b)
of this Section 1.02) be prepared, in accordance with generally accepted
accounting principles applied on a basis consistent with those used in the
preparation of the latest financial statements furnished to the Lenders
hereunder (which, prior to the delivery of the first financial statements under
Section 9.01, means the audited financial statements as at December 31, 1997
referred to in Section 8.02). All calculations made for the purposes of
determining compliance with this Agreement shall (except as otherwise expressly
provided herein) be made by application of generally accepted accounting
principles applied on a basis consistent with those used in the preparation of
the latest annual or quarterly financial statements furnished to the Lenders
pursuant to Section 9.01 (or, prior to the delivery of the first financial
statements under Section 9.01, used in the preparation of the audited financial
statements as at December 31, 1997 referred to in Section 8.02) unless (i) the
Borrower shall have objected to determining such compliance on such basis at the
time of delivery of such financial statements or (ii) the Majority Lenders shall
so object in writing within 30 days after delivery of such financial statements,
in either of which events such calculations shall be made on a basis consistent
with those used in the preparation of the latest financial statements as to
which such objection shall not have been made (which, if objection is made in
respect of the first financial statements delivered under Section 9.01, means
the audited financial statements referred to in Section 8.02).
(b) The Borrower shall deliver to the Lenders at the same time
as the delivery of any annual or quarterly financial statement under Section
9.01 (i) a description in reasonable detail of any material variation between
the application of accounting principles employed in the preparation of such
statement and the application of accounting principles employed in the
preparation of the next preceding annual or quarterly financial statements as to
which no objection has been made in accordance with the last sentence of
paragraph (a) of this Section 1.02 and (ii) reasonable estimates of the
difference between such statements arising as a consequence thereof.
(c) To enable the ready and consistent determination of
compliance with the covenants set forth in Section 9, the Borrower will not
change the last day of its fiscal year or fiscal quarter from that in effect on
the date hereof, except that the Borrower may change the last day of its fiscal
year or fiscal quarter to the last day of the calendar year or to the last day
of each calendar quarter, as the case may be.
1.03. Classes and Types of Loans.Loans hereunder are
--------------------------
distinguished by "Class" and by "Type". The "Class" of a Loan (or of a
Commitment to make a Loan) refers to whether such Loan is a Facility A Revolving
Credit Loan or a Facility B Term Loan, each of which constitutes a Class. The
<PAGE>
-25-
"Type" of a Loan refers to whether such Loan is a Base Rate Loan or a Eurodollar
Loan, each of which constitutes a Type. Loans may be identified by both Class
and Type.
1.04. Terms Generally.The definitions of terms herein shall
---------------
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Sections, Exhibits
and Schedules shall be construed to refer to Sections of, and Exhibits and
Schedules to, this Agreement and (e) the word "asset" shall be construed to
refer to any and all tangible and intangible assets and properties, including
cash, securities, accounts, contract rights and real property.
Section 2. Commitments, Loans, Notes and Prepayments.
-----------------------------------------
2.01. Loans.
-----
(a) Facility A Revolving Credit Loans. Each Facility A
---------------------------------
Revolving Credit Loan Lender severally agrees, on the terms and conditions of
this Agreement, to make loans to the Borrower in Dollars during the period from
and including the Closing Date to but not including the Facility A Revolving
Credit Commitment Termination Date in an aggregate principal amount at any one
time outstanding up to but not exceeding the amount of the Facility A Revolving
Credit Commitment of such Lender as in effect from time to time (such Loans
being herein called "Facility A Revolving Credit Loans"), provided that in no
--------------------------------- --------
event shall the aggregate outstanding principal amount of all Facility A
Revolving Credit Loans, together with the aggregate outstanding amount of all
Letter of Credit Liabilities, exceed the aggregate amount of the Facility A
Revolving Credit Commitments as in effect from time to time. Subject to the
terms and conditions of this Agreement, during such period the Borrower may
borrow, repay and reborrow the amount of the Facility A Revolving Credit
Commitments by means of Base Rate Loans and Eurodollar Loans and may Convert
Facility A Revolving Credit Loans of one Type into Facility A Revolving Credit
Loans of another Type (as provided in Section 2.09) or Continue Facility A
Revolving Credit Loans of one Type as Facility A Revolving Credit Loans of the
same Type (as provided in Section 2.09). Anything herein to the contrary
notwithstanding, upon unanimous consent of the Lenders, the Borrower may request
and the Lenders may make Facility A Revolving Credit Loans to the Borrower on
the Closing Date regardless of whether any Facility B Term Loan shall have been
made on the Closing Date.
<PAGE>
-26-
If in the event that, as contemplated by Section 2.10(e), the
Borrower shall prepay Facility A Revolving Credit Loans from the proceeds of a
Disposition, then an amount of Facility A Revolving Credit Commitments equal to
the amount of such prepayment (herein the "Reserved Commitment Amount") shall be
--------------------------
reserved and shall not be available for borrowings hereunder except and to the
extent that the proceeds of such borrowings are to be applied to a Permitted
Reinvestment Transaction. The Borrower agrees, upon the occasion of any
borrowing of Facility A Revolving Credit Loans hereunder that is to constitute a
utilization of any Reserved Commitment Amount, to advise the Administrative
Agent in writing of such fact at the time of such borrowing, identifying the
portion of such borrowing that is to constitute such utilization and the reduced
Reserved Commitment Amount to be in effect after giving effect to such borrowing
(and the Reserved Commitment Amount shall be automatically reduced at the time
of such borrowing by an amount equal to such portion of such borrowing).
(b) Facility B Term Loans. Each Facility B Term Loan Lender
---------------------
severally agrees, on the terms and conditions of this Agreement, to make a term
loan to the Borrower in Dollars on the Closing Date in an aggregate principal
amount up to but not exceeding the amount of the Facility B Term Loan Commitment
of such Lender (such Loans being herein called the "Facility B Term Loans").
---------------------
(c) Limit on Eurodollar Loans. No more than ten separate
-------------------------
Interest Periods in respect of Eurodollar Loans of a Class from each Lender may
be outstanding at any one time.
2.02. Borrowings.The Borrower shall give the Administrative
----------
Agent notice of each borrowing hereunder as provided in Section 4.05. Not later
than 1:00 p.m. New York time on the date specified for each borrowing hereunder,
each Lender shall make available its Commitment Percentage of the amount of the
Loan or Loans to be made on such date to the Administrative Agent at the
Principal Office in Dollars in immediately available funds, for account of the
Borrower. The amount so received by the Administrative Agent shall, subject to
the terms and conditions of this Agreement, be made available to the Borrower by
depositing the same, in immediately available funds, in an account of the
Borrower at a bank in New York designated by the Borrower from time to time.
2.03. Letters of Credit.Subject to the terms and conditions of
-----------------
this Agreement, the Facility A Revolving Credit Commitments may be utilized,
upon the request of the Borrower in addition to the Facility A Revolving Credit
Loans provided for by Section 2.01(a), by the issuance by the Issuing Lender of
letters of credit (collectively, "Letters of Credit") for account of the
-----------------
Borrower and in support of an obligation of the Borrower or any of its
Subsidiaries (as specified by the Borrower), provided that in no event shall (i)
--------
the aggregate outstanding amount of all Letter of Credit Liabilities, together
with the aggregate outstanding principal amount of the Facility A Revolving
Credit Loans, exceed the aggregate amount of the Facility A Revolving Credit
Commitments as in effect from time to time, (ii) the outstanding aggregate
amount of all Letter of Credit Liabilities exceed $25,000,000 and (iii) the
expiration date of any Letter of Credit extend beyond the earlier of the
Facility A Revolving Credit Commitment Termination Date and the date fifteen
months following the issuance of such Letter of Credit, except that an automatic
renewal provision in a Letter of Credit extending such Letter of Credit (unless
<PAGE>
-27-
notice by the Issuing Lender is otherwise given) to a date not later than the
date fifteen months following the date of such extension (but not in any event
to a date later than the Facility A Revolving Credit Commitment Termination
Date), shall be permitted. The following additional provisions shall apply to
Letters of Credit:
(a) The Borrower shall give the Administrative Agent
at least five Business Days' irrevocable prior notice
(effective upon receipt) specifying the Business Day (which
shall be no later than 30 days preceding the Facility A
Revolving Credit Commitment Termination Date) each Letter of
Credit is to be issued and describing in reasonable detail the
proposed terms of such Letter of Credit (including the
beneficiary thereof) and the nature of the transactions or
obligations proposed to be supported thereby (including
whether such Letter of Credit is to be a commercial letter of
credit or a standby letter of credit). Upon receipt of any
such notice, the Administrative Agent shall advise the Issuing
Lender of the contents thereof.
(b) On each day during the period commencing with the
issuance by the Issuing Lender of any Letter of Credit and
until such Letter of Credit shall have expired or been
terminated, the Facility A Revolving Credit Commitment of each
Lender shall be deemed to be utilized for all purposes of this
Agreement in an amount equal to such Lender's Commitment
Percentage of the then undrawn face amount of such Letter of
Credit. Each Lender (other than the Issuing Lender) agrees
that, upon the issuance of any Letter of Credit hereunder, it
shall automatically acquire a participation in the Issuing
Lender's liability under such Letter of Credit in an amount
equal to such Lender's Commitment Percentage of such
liability, and each Lender (other than the Issuing Lender)
thereby shall absolutely, unconditionally and irrevocably
assume, as primary obligor and not as surety, and shall be
unconditionally obligated to the Issuing Lender to pay and
discharge when due, its Commitment Percentage of the Issuing
Lender's liability under such Letter of Credit.
(c) Upon receipt from the beneficiary of any Letter
of Credit of any demand for payment under such Letter of
Credit, the Issuing Lender shall promptly notify the Borrower
(through the Administrative Agent) of the amount to be paid by
the Issuing Lender as a result of such demand and the date on
which payment is to be made by the Issuing Lender to such
beneficiary in respect of such demand. Notwithstanding the
identity of the account party of any Letter of Credit, the
Borrower hereby unconditionally agrees to pay and reimburse
the Administrative Agent for account of the Issuing Lender for
the amount of each demand for payment under such Letter of
Credit that is in substantial compliance with the provisions
of such Letter of Credit at or prior to the date on which
payment is to be made by the Issuing Lender to the beneficiary
thereunder, without presentment, demand, protest or other
formalities of any kind.
<PAGE>
-28-
(d) Forthwith upon its receipt of a notice referred
to in paragraph (c) of this Section 2.03, the Borrower shall
advise the Administrative Agent whether or not the Borrower
intends to borrow hereunder to finance its obligation to
reimburse the Issuing Lender for the amount of the related
demand for payment and, if it does, the Borrower shall submit
a notice of such borrowing as provided in Section 4.05.
(e) Each Lender (other than the Issuing Lender) shall
pay to the Administrative Agent for account of the Issuing
Lender at the Principal Office in Dollars and in immediately
available funds, the amount of such Lender's Commitment
Percentage of any payment under a Letter of Credit upon notice
by the Issuing Lender (through the Administrative Agent) to
such Lender requesting such payment and specifying such
amount. Each such Lender's obligation to make such payment to
the Administrative Agent for account of the Issuing Lender
under this paragraph (e), and the Issuing Lender's right to
receive the same, shall be absolute and unconditional and
shall not be affected by any circumstance whatsoever,
including, without limitation, the failure of any other Lender
to make its payment under this paragraph (e), the financial
condition of the Borrower (or any other account party), the
existence of any Default or the termination of the
Commitments. Each such payment to the Issuing Lender shall be
made without any offset, abatement, withholding or reduction
whatsoever. If any Lender shall default in its obligation to
make any such payment to the Administrative Agent for account
of the Issuing Lender, for so long as such default shall
continue the Administrative Agent may at the request of the
Issuing Lender withhold from any payments received by the
Administrative Agent under this Agreement or any Note for
account of such Lender the amount so in default and, to the
extent so withheld, pay the same to the Issuing Lender in
satisfaction of such defaulted obligation.
(f) Upon the making of each payment by a Lender to
the Issuing Lender pursuant to paragraph (e) above in respect
of any Letter of Credit, such Lender shall, automatically and
without any further action on the part of the Administrative
Agent, the Issuing Lender or such Lender, acquire (i) a
participation in an amount equal to such payment in the
Reimbursement Obligation owing to the Issuing Lender by the
Borrower hereunder and under the Letter of Credit Documents
relating to such Letter of Credit and (ii) a participation in
a percentage equal to such Lender's Commitment Percentage in
any interest or other amounts payable by the Borrower
hereunder and under such Letter of Credit Documents in respect
of such Reimbursement Obligation (other than the commissions,
charges, costs and expenses payable to the Issuing Lender
pursuant to paragraph (g) of this Section 2.03). Upon receipt
by the Issuing Lender from or for account of the Borrower of
any payment in respect of any Reimbursement Obligation or any
such interest or other amount (including by way of setoff or
application of proceeds of any collateral security) the
<PAGE>
-29-
Issuing Lender shall promptly pay to the Administrative Agent
for account of each Lender entitled thereto, such Lender's
Commitment Percentage of such payment, each such payment by
the Issuing Lender to be made in the same money and funds in
which received by the Issuing Lender. In the event any payment
received by the Issuing Lender and so paid to the Lenders
hereunder is rescinded or must otherwise be returned by the
Issuing Lender, each Lender shall, upon the request of the
Issuing Lender (through the Administrative Agent), repay to
the Issuing Lender (through the Administrative Agent) the
amount of such payment paid to such Lender, with interest at
the rate specified in paragraph (j) of this Section 2.03.
(g) The Borrower shall pay to the Administrative
Agent for account of each Lender (ratably in accordance with
their respective Commitment Percentages) a letter of credit
fee in respect of each Letter of Credit in an amount per annum
equal to the Applicable Rate then in effect in respect of
Eurodollar Loans minus 1/4 of 1% of the daily average undrawn
face amount of such Letter of Credit for the period from and
including the date of issuance of such Letter of Credit (i) in
the case of a Letter of Credit that expires in accordance with
its terms, to and including such expiration date and (ii) in
the case of a Letter of Credit that is drawn in full or is
otherwise terminated other than on the stated expiration date
of such Letter of Credit, to but excluding the date such
Letter of Credit is drawn in full or is terminated (such fee
to be non-refundable, to be paid in arrears on each Quarterly
Date and on the Facility A Revolving Credit Commitment
Termination Date and to be calculated for any day after giving
effect to any payments made under such Letter of Credit on
such day).
In addition, the Borrower shall pay to the
Administrative Agent for account of the Issuing Lender a
fronting fee in respect of each Letter of Credit in an amount
equal to 1/4 of 1% per annum of the daily average undrawn face
amount of such Letter of Credit for the period from and
including the date of issuance of such Letter of Credit (i) in
the case of a Letter of Credit that expires in accordance with
its terms, to and including such expiration date and (ii) in
the case of a Letter of Credit that is drawn in full or is
otherwise terminated other than on the stated expiration date
of such Letter of Credit, to but excluding the date such
Letter of Credit is drawn in full or is terminated (such fee
to be non-refundable, to be paid in arrears on each Quarterly
Date and on the Commitment Termination Date and to be
calculated for any day after giving effect to any payments
made under such Letter of Credit on such day) plus all
commissions, charges, costs and expenses in the amounts
customarily charged by the Issuing Lender from time to time in
like circumstances with respect to the issuance of each Letter
of Credit and drawings and other transactions relating
thereto.
(h) Promptly following the end of each calendar
month, the Issuing Lender shall deliver (through the
Administrative Agent) to each Lender and the Borrower a notice
describing the aggregate amount of all Letters of Credit
<PAGE>
-30-
outstanding at the end of such month. Upon the request of any
Lender from time to time, the Issuing Lender shall deliver any
other information reasonably requested by such Lender with
respect to each Letter of Credit then outstanding.
(i) The issuance by the Issuing Lender of each Letter
of Credit shall, in addition to the conditions precedent set
forth in Section 7, be subject to the conditions precedent
that (i) such Letter of Credit shall be in such form, contain
such terms and support such transactions as shall be
satisfactory to the Issuing Lender consistent with its then
current practices and procedures with respect to letters of
credit of the same type (except that in no event shall any
Letter of Credit provide support for obligations that would
constitute "Indebtedness" under and as defined in the Senior
Subordinated Notes Indentures in an amount in excess of the
amount thereof permitted by Section 4.03(b)(ix) of the
Discount Notes Indenture and any comparable provision of any
indenture or other agreement relating to any Refinancing
Notes) and (ii) the Borrower shall have executed and delivered
such applications, agreements and other instruments relating
to such Letter of Credit as the Issuing Lender shall have
reasonably requested consistent with its then current
practices and procedures with respect to letters of credit of
the same type, provided that in the event of any conflict
--------
between any such application, agreement or other instrument
and the provisions of this Agreement or any Security Document,
the provisions of this Agreement and the Security Documents
shall control.
(j) To the extent that any Lender shall fail to pay
any amount required to be paid pursuant to paragraph (e) or
(f) of this Section 2.03 on the due date therefor, such Lender
shall pay interest to the Issuing Lender (through the
Administrative Agent) on such amount from and including such
due date to but excluding the date such payment is made at a
rate per annum equal to the Federal Funds Rate, provided that
--------
if such Lender shall fail to make such payment to the Issuing
Lender within three Business Days of such due date, then,
retroactively to the due date, such Lender shall be obligated
to pay interest on such amount at the Post-Default Rate.
(k) The issuance by the Issuing Lender of any
modification or supplement to any Letter of Credit hereunder
shall be subject to the same conditions applicable under this
Section 2.03 to the issuance of new Letters of Credit, and no
such modification or supplement shall be issued hereunder
unless either (i) the respective Letter of Credit affected
thereby would have complied with such conditions had it
originally been issued hereunder in such modified or
supplemented form or (ii) each Lender shall have consented
thereto.
The Borrower hereby indemnifies and holds harmless each Lender and the
Administrative Agent from and against any and all claims and damages, losses,
liabilities, costs or expenses that such Lender or the Administrative Agent may
incur (or that may be claimed against such Lender or the Administrative Agent by
any Person whatsoever) by reason of or in connection with the execution and
<PAGE>
-31-
delivery or transfer of or payment or refusal to pay by the Issuing Lender under
any Letter of Credit; provided that the Borrower shall not be required to
--------
indemnify any Lender or the Administrative Agent for any claims, damages,
losses, liabilities, costs or expenses to the extent, but only to the extent,
caused by (i) the willful misconduct or gross negligence of the Issuing Lender
in determining whether a request presented under any Letter of Credit complied
with the terms of such Letter of Credit or (ii) in the case of the Issuing
Lender, such Lender's failure to pay under any Letter of Credit after the
presentation to it of a request strictly complying with the terms and conditions
of such Letter of Credit. Nothing in this Section 2.03 is intended to limit the
other obligations of the Borrower, any Lender or the Administrative Agent under
this Agreement.
2.04. Changes of Commitments.
----------------------
(a) The aggregate amount of the Facility A Revolving Credit
Commitments shall be automatically reduced to zero on the Facility A Revolving
Credit Commitment Termination Date.
(b) The Borrower shall have the right at any time or from time
to time (i) so long as no Facility A Revolving Credit Loans or Letter of Credit
Liabilities are outstanding, to terminate the Facility A Revolving Credit
Commitments, and (ii) to reduce permanently the aggregate unutilized amount of
the Facility A Revolving Credit Commitments (for which purpose utilization of
the Facility A Revolving Credit Commitments shall be deemed to include the
aggregate amount of Letter of Credit Liabilities); provided that (x) the
--------
Borrower shall give notice of each such termination or permanent reduction as
provided in Section 4.05 and (y) each partial permanent reduction shall be in an
aggregate amount at least equal to $5,000,000 (or a larger multiple of
$1,000,000).
(c) Any portion of the Facility B Term Loan Commitment not
used on the Closing Date shall be automatically terminated on the Closing Date.
(d) The Commitments once terminated or permanently reduced may
not be reinstated.
2.05. Commitment Fee. The Borrower shall pay to the
--------------
Administrative Agent for account of each Lender a commitment fee on the daily
average unused amount of the respective Commitments of such Lender (for which
purpose the aggregate amount of any Letter of Credit Liabilities shall be deemed
to be a pro rata (based on the Facility A Revolving Credit Commitments) use of
each Lender's Facility A Revolving Credit Commitments) for the period from and
including the date hereof to but not including the date such Commitment is
terminated, at a rate per annum equal to the Applicable Rate. Any Reserved
Commitment Amount hereunder shall not be deemed a utilization of any Commitment.
Accrued commitment fees shall be payable on each Quarterly Date and on the date
the relevant Commitments are terminated.
2.06. Lending Offices. The Loans of each Type made by each
---------------
Lender shall be made and maintained at such Lender's Applicable Lending Office
for Loans of such Type.
<PAGE>
-32-
2.07. Several Obligations; Remedies Independent.The failure of
-----------------------------------------
any Lender to make any Loan to be made by it on the date specified therefor
shall not relieve any other Lender of its obligation to make its Loan on such
date, but neither any Lender nor the Administrative Agent shall be responsible
for the failure of any other Lender to make a Loan to be made by such other
Lender, and (except as otherwise provided in Section 4.06) no Lender shall have
any obligation to the Administrative Agent or any other Lender for the failure
by such Lender to make any Loan required to be made by such Lender. The amounts
payable by the Borrower at any time hereunder and under the Notes to each Lender
shall be a separate and independent debt and each Lender shall be entitled to
protect and enforce its rights arising out of this Agreement and the Notes, and
it shall not be necessary for any other Lender or the Administrative Agent to
consent to, or be joined as an additional party in, any proceedings for such
purposes.
2.08. Notes.
-----
(a) The Facility A Revolving Credit Loans made by each Lender
shall be evidenced by a single promissory note of the Borrower substantially in
the form of Exhibit A-1, dated the date hereof, payable to such Lender in a
principal amount equal to the amount of its Facility A Revolving Credit
Commitment as originally in effect and otherwise duly completed.
(b) The Facility B Term Loans made by each Lender shall be
evidenced by a single promissory note of the Borrower substantially in the form
of Exhibit A-2, dated the date hereof, payable to such lender in a principal
amount equal to its Facility B Term Loan Commitment as originally in effect and
otherwise duly completed.
(c) The date, amount, Type, interest rate and duration of
Interest Period (if applicable) of each Loan of each Class made by each Lender
to the Borrower, and each payment made on account of the principal thereof,
shall be recorded by such Lender on its books and, prior to any transfer of the
Note evidencing the Loans of such Class held by it, endorsed by such Lender on
the schedule attached to such Note or any continuation thereof; provided that
--------
the failure of such Lender to make any such recordation or endorsement shall not
affect the obligations of the Borrower to make a payment when due of any amount
owing hereunder or under such Note in respect of such Loans.
(d) No Lender shall be entitled to have its Notes substituted
or exchanged for any reason, or subdivided for promissory notes of lesser
denominations, except in connection with a permitted assignment of all or any
portion of such Lender's relevant Commitment, Loans and Notes pursuant to
Section 12.06 (and, if requested by any Lender, the Borrower agrees to so
exchange any Note).
2.09. Optional Prepayments and Conversions or Continuations of
--------------------------------------------------------
Loans.Subject to Section 4.04, the Borrower shall have the right to prepay
- -----
Loans, or to Convert Loans of one Type into Loans of another Type or Continue
Loans of one Type as Loans of the same Type, at any time or from time to time,
provided that:
- --------
<PAGE>
-33-
(a) the Borrower shall give the Administrative Agent
notice of each such prepayment, Conversion or Continuation as
provided in Section 4.05 (and, upon the date specified in any
such notice of prepayment, the amount to be prepaid shall
become due and payable hereunder);
(b) upon any prepayment of Eurodollar Loans other
than on the last day of an Interest Period for such Loans, the
Borrower shall pay any amounts owing under Section 5.05 as a
result of such prepayment; and
(c) any Conversion into or Continuation of Eurodollar
Loans shall be subject to the provisions of Section 2.01(d).
Notwithstanding the foregoing, and without limiting the rights and remedies of
the Lenders under Section 10, in the event that any Event of Default shall have
occurred and be continuing, the Administrative Agent may (and at the request of
the Majority Lenders shall) suspend the right of the Borrower to Convert any
Loan into a Eurodollar Loan, or to Continue any Loan as a Eurodollar Loan, in
which event all Loans shall be Converted (on the last day(s) of the respective
Interest Periods therefor) into, or Continued as, the case may be, Base Rate
Loans.
2.10. Mandatory Prepayments and Reductions of Commitments.
---------------------------------------------------
(a) Excess Cash Flow. Not later than the date 90 days after
----------------
the end of each fiscal year of the Borrower commencing with the fiscal year
ending on December 31, 1999, the Borrower shall prepay the Loans (and/or provide
cover for Letter of Credit Liabilities), and the Facility A Revolving Credit
Commitment shall be subject to automatic reduction, in an aggregate amount equal
to the excess of (A) 50% of Excess Cash Flow for such fiscal year over (B) the
aggregate amount of prepayments of Loans made during such fiscal year pursuant
to Section 2.09, such prepayment and reduction to be applied in accordance with
paragraph (e) below; provided that no such prepayment shall be required for any
--------
fiscal year to the extent that the Leverage Ratio as at the last day of such
fiscal year shall be less than 3.5 to 1.
(b) Debt Issuance. Upon any Debt Issuance, the Borrower shall
-------------
prepay the Loans (and/or provide cover for Letter of Credit Liabilities), and
the Facility A Revolving Credit Commitments shall be subject to automatic
reduction, in an aggregate amount equal to 100% of the Net Available Proceeds of
such Debt Issuance, such prepayment and reduction to be applied in accordance
with paragraph (e) below.
(c) Casualty Events. Upon the date 180 days following the
---------------
receipt by the Borrower or any of its Subsidiaries of the proceeds of insurance,
condemnation award or other compensation in respect of any Casualty Event
affecting any Property of the Borrower or any of its Subsidiaries (or upon such
earlier date as the Borrower or such Subsidiary, as the case may be, shall have
determined not to repair or replace the Property affected by such Casualty
Event), the Borrower shall prepay the Loans (and/or provide cover for Letter of
Credit Liabilities), and the Facility A Revolving Credit Commitments shall be
subject to automatic reduction, in an aggregate amount equal to 100% of the Net
Available Proceeds of such Casualty Event not theretofore applied to the repair
<PAGE>
-34-
or replacement of such Property (or to reimburse the Borrower or respective
Subsidiary for repairing or replacing such Property), such prepayment and
reduction to be applied in accordance with paragraph (e) below. Notwithstanding
the foregoing, the Borrower shall not be required to make any prepayment under
this Section 2.10(c) unless the Net Available Proceeds of a Casualty Event shall
be greater than or equal to $1,000,000.
Nothing in this paragraph (c) shall be deemed to limit any
obligation of the Borrower or any of its Subsidiaries pursuant to any of the
Security Documents to remit to a collateral or similar account maintained by the
Administrative Agent pursuant to any of the Security Documents the proceeds of
insurance, condemnation award or other compensation received in respect of any
Casualty Event or to obligate the Administrative Agent to release any of such
proceeds from such account to the Borrower for purposes of repair, replacement
or reinvestment as aforesaid upon the occurrence and during the continuance of
an Event of Default.
(d) Sale of Assets. Without limiting the obligation of the
--------------
Borrower to obtain the consent of the Majority Lenders to any Disposition not
otherwise permitted hereunder, the Borrower agrees, on or prior to the
occurrence of any Disposition (herein, the "Current Disposition"), to deliver to
the Administrative Agent a statement certified by a Responsible Officer of the
Borrower, in form and detail reasonably satisfactory to the Administrative
Agent, of the estimated amount of the Net Available Proceeds of the Current
Disposition that will (on the date of the Current Disposition) be received in
cash and, to the extent that the Net Available Proceeds of the Current
Disposition, and of all prior Dispositions as to which a prepayment has not yet
been made under this Section 2.10(d), shall exceed $1,000,000, the Borrower will
prepay the Loans (and/or provide cover for Letter of Credit Liabilities), and
the Facility A Revolving Credit Commitment shall be subject to automatic
reduction, such prepayment and deduction to be applied in accordance with
paragraph (e) below, as follows:
(i) within two days of the Current Disposition, in an
aggregate amount equal to 100% of such estimated amount of the
Net Available Proceeds of the Current Disposition to the
extent received in cash on the date of the Current
Disposition, together with 100% of the Net Available Proceeds
of all such prior Dispositions, provided that if the amount of
--------
such required prepayment (and reduction of Commitments) shall
exceed $5,000,000, then such prepayment shall be made on the
date of the Current Disposition;
(ii) thereafter, quarterly, on the date of the
delivery by the Borrower to the Administrative Agent pursuant
to Section 9.01(b) of the financial statements for each
quarterly fiscal period or (if earlier) the date 60 days after
the end of such quarterly fiscal period, to the extent the
Borrower or any of its Subsidiaries shall receive Net
Available Proceeds during such quarterly fiscal period in cash
under deferred payment arrangements or Disposition Investments
entered into or received in connection with any Disposition,
an amount equal to (A) 100% of the aggregate amount of such
Net Available Proceeds minus (B) any transaction expenses
-----
associated with Dispositions and not previously deducted in
<PAGE>
-35-
the determination of Net Available Proceeds plus (or minus, as
---- -----
the case may be) (C) any other adjustment received or paid by
the Obligors pursuant to the respective agreements giving rise
to Dispositions and not previously taken into account in the
determination of the Net Available Proceeds of Dispositions,
provided that if prior to the date upon which the Borrower
--------
would otherwise be required to make a prepayment under this
clause (ii) with respect to any quarterly fiscal period the
aggregate amount of such Net Available Proceeds (after giving
effect to the adjustments provided for in this clause (ii))
shall exceed $1,000,000, then the Borrower shall within five
Business Days make a prepayment under this clause (ii) in an
amount equal to such required prepayment.
Notwithstanding the foregoing, the Borrower shall not
be required to make a prepayment pursuant to this paragraph
(d) with respect to the Net Available Proceeds from any
Disposition in the event that the Borrower advises the
Administrative Agent at the time the Net Available Proceeds
from such Disposition are received that the Borrower or one or
more of its Subsidiaries intends to reinvest such Net
Available Proceeds pursuant to a Permitted Reinvestment
Transaction, so long as the Net Available Proceeds from any
Disposition are in fact so reinvested within twelve months of
such Disposition, it being understood that any such Net
Available Proceeds not so reinvested shall be forthwith
applied to the prepayment of Loans and reductions of
Commitments as provided above, and any Reserved Commitment
Amount that remains unutilized for more than twelve months
shall be applied to the permanent reduction of the Facility A
Revolving Credit Commitments, and the aggregate amount of Net
Available Proceeds (together with investment earnings thereon)
pending reinvestment as contemplated by this paragraph shall
not at any time exceed $10,000,000. As contemplated by Section
4.01 of the Security Agreement, nothing in this paragraph (d)
shall be deemed to obligate the Administrative Agent to
release any of such proceeds from the Collateral Account to
the Borrower for purposes of reinvestment as aforesaid upon
the occurrence and during the continuance of any Event of
Default.
(e) Application. Prepayments and reductions of Commitments
-----------
pursuant to paragraphs (a), (b), (c) and (d) of this Section 2.10 shall be
effected as follows:
(i) first, the amount of any such prepayment shall be
-----
applied to the prepayment of outstanding Facility B Term Loans
ratably to the installments thereof in accordance with the
respective principal amounts thereof;
(ii) second, following the prepayment in full of all
------
outstanding amounts of the Facility B Term Loans the amount of
any such prepayment shall be applied to the permanent
reduction of the Facility A Revolving Credit Commitments and
to the extent that the aggregate amount of the Facility A
Revolving Credit Loans together with the aggregate amount of
all Letter of Credit Liabilities shall exceed the amount of
the then existing Facility A Revolving Credit Commitments, the
<PAGE>
-36-
Borrower shall prepay the outstanding Facility A Revolving
Credit Loans in an amount equal to such excess.
(f) Cover for Letter of Credit Liabilities. In the event that
--------------------------------------
the Borrower shall be required pursuant to this Section 2.10, or pursuant to
Section 3.01(a), to provide cover for Letter of Credit Liabilities, the Borrower
shall effect the same by paying to the Administrative Agent in immediately
available funds an amount equal to the required amount, which funds shall be
retained by the Administrative Agent in the Collateral Account (as provided
therein as collateral security in the first instance for the Letter of Credit
Liabilities) until such time as the Letters of Credit shall have been terminated
and all of the Letter of Credit Liabilities paid in full.
(g) Change of Control. In the event that SFEC or the Borrower
-----------------
shall be required pursuant to the provisions of any instrument evidencing or
governing the SFEC Senior Notes or the Discount Notes or any Refinancing,
respectively, to redeem, or make an offer to redeem or repurchase, all or any
portion thereof (excluding any offer to redeem or repurchase the SFEC Zero
Coupon Notes or the Discount Notes as a result of the consummation of the Six
Flags Merger) as a result of a change of control (however defined), then,
concurrently with the occurrence of the event giving rise to such change of
control, the Borrower shall prepay the Loans (and/or provide cover for Letter of
Credit Liabilities as specified in paragraph (f) above) in full, and the
Commitments shall automatically terminate.
Section 3. Payments of Principal and Interest.
----------------------------------
3.01. Repayment of Loans.
------------------
(a) Facility A Revolving Credit Loan. The Borrower hereby
--------------------------------
promises to pay to the Administrative Agent for account of each Lender the
entire outstanding principal amount of such Lender's Facility A Revolving Credit
Loans, and each Facility A Revolving Credit Loan shall mature, on the Facility A
Revolving Credit Commitment Termination Date.
(b) Facility B Term Loan. The Borrower hereby promises to pay
--------------------
to the Administrative Agent for account of the Facility B Term Loan Lenders the
aggregate outstanding principal of the Facility B Term Loans in twenty-five
installments payable on the Principal Payment Dates as follows:
Principal Payment Date
Falling on or Nearest to: Amount of Installment ($)
------------------------ -------------------------
November 30, 1998 250,000
February 28, 1999 250,000
May 30, 1999 250,000
August 31, 1999 250,000
<PAGE>
-37-
November 30, 1999 250,000
February 29, 2000 250,000
May 30, 2000 250,000
August 31, 2000 250,000
November 30, 2000 250,000
February 28, 2001 250,000
May 30, 2001 250,000
August 31, 2001 250,000
November 30, 2001 250,000
February 28, 2002 250,000
May 30, 2002 250,000
August 31, 2002 250,000
November 30, 2002 6,250,000
February 28, 2003 6,250,000
May 30, 2003 6,250,000
August 31, 2003 6,250,000
November 30, 2003 10,000,000
February 29, 2004 10,000,000
May 30, 2004 10,000,000
August 31, 2004 10,000,000
November 30, 2004 303,000,000
3.02. Interest. The Borrower hereby promises to pay to the
--------
Administrative Agent for account of each Lender interest on the unpaid principal
amount of each Loan made by such Lender to the Borrower for the period from and
including the date of such Loan to but excluding the date such Loan shall be
paid in full, at the following rates per annum:
(a) during such periods as such Loan is a Base Rate Loan, the
Base Rate (as in effect from time to time) plus the Applicable Rate;
----
and
(b) during each Interest Period for such Loan during which
such Loan is a Eurodollar Loan, the Eurodollar Rate for such Interest
Period plus the Applicable Rate.
----
Notwithstanding the foregoing, the Borrower hereby promises to
pay to the Administrative Agent for account of each Lender interest at the
applicable Post-Default Rate on any principal of any Loan made by such Lender,
on any Reimbursement Obligation held by such Lender and on any other amount
payable by the Borrower hereunder or under the Notes held by such Lender to or
for account of such Lender, that shall not be paid in full when due (whether at
stated maturity, by acceleration, by mandatory prepayment or otherwise), for the
period from and including the due date thereof to but excluding the date the
same is paid in full.
<PAGE>
-38-
Accrued interest on each Loan shall be payable (i) in the case
of a Base Rate Loan, quarterly on the Quarterly Dates, (ii) in the case of a
Eurodollar Loan, on the last day of each Interest Period therefor and, if such
Interest Period is longer than three months, at three-month intervals following
the first day of such Interest Period, and (iii) in the case of any Loan, upon
the payment or prepayment thereof or the Conversion of such Loan to a Loan of
another Type (but only on the principal amount so paid, prepaid or Converted),
except that interest payable at the Post-Default Rate shall be payable from time
to time on demand. Promptly after the determination of any interest rate
provided for herein or any change therein, the Administrative Agent shall give
notice thereof to the Lenders to which such interest is payable and to the
Borrower.
Section 4. Payments; Pro Rata Treatment; Computations, Etc.
-----------------------------------------------
4.01. Payments.
--------
(a) Except to the extent otherwise provided herein, all
payments of principal, interest, Reimbursement Obligations and other amounts to
be made by the Borrower under this Agreement and the Notes, and, except to the
extent otherwise provided therein, all payments to be made by the Obligors under
any other Loan Document, shall be made in Dollars, in immediately available
funds, without deduction, set-off or counterclaim, to the Administrative Agent,
at the Principal Office, in immediately available funds, not later than 12:00
p.m. New York time on the date on which such payment shall become due (each such
payment made after such time on such due date to be deemed to have been made on
the next succeeding Business Day).
(b) Any Lender for whose account any such payment is to be
made may (but shall not be obligated to) debit the amount of any such payment
that is not made by such time to any ordinary deposit account of the Borrower
with such Lender (with notice to the Borrower and the Administrative Agent),
provided that such Lender's failure to give such notice shall not affect the
- --------
validity thereof.
(c) The Borrower shall, at the time of making each payment
under this Agreement or any Note for account of any Lender, specify to the
Administrative Agent (which shall so notify the intended recipient(s) thereof)
the Loans, Reimbursement Obligations or other amounts payable by the Borrower
hereunder to which such payment is to be applied (and in the event that the
Borrower fails to so specify, or if an Event of Default has occurred and is
continuing, the Administrative Agent may distribute such payment to the Lenders
for application in such manner as it or the Majority Lenders, subject to Section
4.02, may determine to be appropriate).
(d) Except to the extent otherwise provided in the last
sentence of Section 2.03(e), each payment received by the Administrative Agent
under this Agreement or any Note for account of any Lender shall be paid by the
Administrative Agent promptly to such Lender, in immediately available funds,
for account of such Lender's Applicable Lending Office for the Loan or other
obligation in respect of which such payment is made.
<PAGE>
-39-
(e) If the due date of any payment under this Agreement or any
Note would otherwise fall on a day that is not a Business Day, such date shall
be extended to the next succeeding Business Day, and interest shall be payable
for any principal so extended for the period of such extension.
4.02. Pro Rata Treatment. Except to the extent otherwise
------------------
provided herein: (a) each borrowing of Loans of a particular Class from the
Lenders under Section 2.01 shall be made from the relevant Lenders, each payment
of commitment fee under Section 2.05 in respect of Commitments of a particular
Class shall be made for account of the relevant Lenders, and each termination or
reduction of the amount of the Commitments of a particular Class under Section
2.04 shall be applied to the respective Commitments of such Class of the
relevant Lenders, pro rata according to the amounts of their respective
Commitments of such Class; (b) except as otherwise provided in Section 5.04,
Eurodollar Loans of any Class having the same Interest Period shall be allocated
pro rata among the relevant Lenders according to the amounts of their respective
Commitments (in the case of the making of Loans) or their respective Loans (in
the case of Conversions and Continuations of Loans); (c) each payment of
principal of Loans by the Borrower shall be made for account of the relevant
Lenders pro rata in accordance with the respective unpaid principal amounts of
the Loans of such Class held by them; (d) each optional prepayment of principal
of Loans by the Borrower shall be applied to the prepayment of outstanding
Facility B Term Loans, ratably in accordance with the respective principal
amounts thereof, and in each case to the installments thereof ratably in
accordance with the respective principal amounts thereof; and (e) each payment
of interest on Loans by the Borrower shall be made for account of the relevant
Lenders pro rata in accordance with the amounts of interest on such Loans then
due and payable to the respective Lenders.
4.03. Computations. Interest on Eurodollar Loans and
------------
commitment fee and letter of credit fees shall be computed on the basis of a
year of 360 days and actual days elapsed (including the first day but, except as
otherwise provided in Section 2.03(g), excluding the last day) occurring in the
period for which payable and interest on Base Rate Loans and Reimbursement
Obligations shall be computed on the basis of a year of 365 or 366 days, as the
case may be, and actual days elapsed (including the first day but excluding the
last day) occurring in the period for which payable. Notwithstanding the
foregoing, for each day that the Base Rate is calculated by reference to the
Federal Funds Rate, interest on Base Rate Loans and Reimbursement Obligations
shall be computed on the basis of a year of 360 days and actual days elapsed.
4.04. Minimum Amounts. Except for mandatory prepayments made
---------------
pursuant to Section 2.10 and Conversions or prepayments made pursuant to Section
5.04, each borrowing, Conversion and partial prepayment of principal of Base
Rate Loans shall be in an amount at least equal to $500,000 and multiples of
$100,000 and each borrowing, Conversion and partial prepayment of principal of
Eurodollar Loans shall be in an aggregate amount at least equal to $5,000,000
and multiples of $1,000,000 (borrowings, Conversions or prepayments of or into
Loans of different Types or, in the case of Eurodollar Loans, having different
Interest Periods at the same time hereunder to be deemed separate borrowings,
Conversions and prepayments for purposes of the foregoing, one for each Type or
Interest Period), provided that if any Eurodollar Loans would otherwise be in a
--------
<PAGE>
-40-
lesser principal amount for any period, such Loans shall be Base Rate Loans
during such period.
4.05. Certain Notices. Notices by the Borrower to the
---------------
Administrative Agent of terminations or reductions of the Commitments, of
borrowings, Conversions, Continuations and optional prepayments of Loans, of
Classes of Loans, of Types of Loans and of the duration of Interest Periods
shall be irrevocable and shall be effective only if received by the
Administrative Agent not later than 11:00 a.m. New York time on the number of
Business Days prior to the date of the relevant termination, reduction,
borrowing, Conversion, Continuation or prepayment or the first day of such
Interest Period specified below:
Number of
Business
Notice Days Prior
------ ----------
Termination or reduction
of Commitments 3
Borrowing or prepayment of,
or Conversions into,
Base Rate Loans 1
Borrowing or prepayment of,
Conversions into, Continuations
as, or duration of Interest
Period for, Eurodollar Loans 3
Each such notice of termination or reduction shall specify the amount and the
Class of the Commitments to be terminated or reduced. Each such notice of
borrowing, Conversion, Continuation or optional prepayment shall specify the
Class of Loans to be borrowed, Converted, Continued or prepaid and the amount
(subject to Section 4.04) and Type of each Loan to be borrowed, Converted,
Continued or prepaid and the date of borrowing, Conversion, Continuation or
optional prepayment (which shall be a Business Day). Each such notice of the
duration of an Interest Period shall specify the Loans to which such Interest
Period is to relate. The Administrative Agent shall promptly notify the Lenders
of the contents of each such notice. In the event that the Borrower fails to
select the Type of Loan, or the duration of any Interest Period for any
Eurodollar Loan, within the time period and otherwise as provided in this
Section 4.05, such Loan (if outstanding as a Eurodollar Loan) will be
automatically Converted into a Base Rate Loan on the last day of the then
current Interest Period for such Loan or (if outstanding as a Base Rate Loan)
will remain as, or (if not then outstanding) will be made as, a Base Rate Loan.
4.06. Non-Receipt of Funds by the Administrative Agent. Unless
------------------------------------------------
the Administrative Agent shall have been notified by a Lender or the Borrower
(the "Payor") prior to the date on which the Payor is to make payment to the
-----
Administrative Agent of (in the case of a Lender) the proceeds of a Loan to be
made by such Lender hereunder or (in the case of the Borrower) a payment to the
<PAGE>
-41-
Administrative Agent for account of one or more of the Lenders hereunder (such
payment being herein called the "Required Payment"), which notice shall be
----------------
effective upon receipt, that the Payor does not intend to make the Required
Payment to the Administrative Agent, the Administrative Agent may assume that
the Required Payment has been made and may, in reliance upon such assumption
(but shall not be required to), make the amount thereof available to the
intended recipient(s) on such date; and, if the Payor has not in fact made the
Required Payment to the Administrative Agent, the recipient(s) of such payment
shall, on demand, repay to the Administrative Agent the amount so made available
together with interest thereon in respect of each day during the period
commencing on the date (the "Advance Date") such amount was so made available by
------------
the Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to the Federal Funds Rate for such day (it
being understood that, in the event the Borrower is the recipient of such
payment, such interest shall be in lieu of any interest otherwise payable under
Section 3.02) and, if such recipient(s) shall fail promptly to make such
payment, the Administrative Agent shall be entitled to recover such amount, on
demand, from the Payor, together with interest as aforesaid, provided that if
--------
neither the recipient(s) nor the Payor shall return the Required Payment to the
Administrative Agent within three Business Days of the Advance Date, then,
retroactively to the Advance Date, the Payor and the recipient(s) shall each be
obligated to pay interest on the Required Payment as follows:
(i) if the Required Payment shall represent a payment
to be made by the Borrower to the Lenders, the Borrower and
the recipient(s) shall each be obligated retroactively to the
Advance Date to pay interest in respect of the Required
Payment at the Post-Default Rate (without duplication of the
obligation of the Borrower under Section 3.02 to pay interest
on the Required Payment at the Post-Default Rate), it being
understood that the return by the recipient(s) of the Required
Payment to the Administrative Agent shall not limit such
obligation of the Borrower under Section 3.02 to pay interest
at the Post-Default Rate in respect of the Required Payment,
and
(ii) if the Required Payment shall represent proceeds
of a Loan to be made by the Lenders to the Borrower, the Payor
and the Borrower shall each be obligated retroactively to the
Advance Date to pay interest in respect of the Required
Payment pursuant to whichever of the rates specified in
Section 3.02 is applicable to the Type of such Loan, it being
understood that the return by the Borrower of the Required
Payment to the Administrative Agent shall not limit any claim
the Borrower may have against the Payor in respect of such
Required Payment.
4.07. Sharing of Payments, Etc.
------------------------
(a) Each Obligor agrees that, in addition to (and without
limitation of) any right of set-off, banker's lien or counterclaim a Lender may
otherwise have, each Lender shall be entitled, at its option (to the fullest
extent permitted by law), to set off and apply any deposit (general or special,
time or demand, provisional or final), or other indebtedness, held by it for the
<PAGE>
-42-
credit or account of such Obligor at any of its offices, in Dollars or in any
other currency, against any principal of or interest on any of such Lender's
Loans, Reimbursement Obligations or any other amount payable to such Lender
hereunder, that is not paid when due (regardless of whether such deposit or
other indebtedness is then due to such Obligor), in which case it shall promptly
notify such Obligor and the Administrative Agent thereof, provided that such
--------
Lender's failure to give such notice shall not affect the validity thereof.
(b) If any Lender shall obtain from any Obligor payment of any
principal of or interest on any Loan of any Class or Letter of Credit Liability
owing to it or payment of any other amount under this Agreement or any other
Loan Document through the exercise of any right of set-off, banker's lien or
counterclaim or similar right or otherwise (other than from the Administrative
Agent as provided herein), and, as a result of such payment, such Lender shall
have received a greater percentage of the principal of or interest on the Loans
of any Class or Letter of Credit Liabilities or any other amounts then due
hereunder or thereunder by such Obligor to such Lender than the percentage
received by any other Lender, it shall promptly purchase from such other Lenders
participations in (or, if and to the extent specified by such Lender, direct
interests in) the Loans or Letter of Credit Liabilities or such other amounts,
respectively, owing to such other Lenders (or in interest due thereon, as the
case may be) in such amounts, and make such other adjustments from time to time
as shall be equitable, to the end that all the Lenders shall share the benefit
of such excess payment (net of any expenses that may be incurred by such Lender
in obtaining or preserving such excess payment) pro rata in accordance with the
unpaid principal of and/or interest on the Loans or Letter of Credit Liabilities
or such other amounts, respectively, owing to each of the Lenders. To such end
all the Lenders shall make appropriate adjustments among themselves (by the
resale of participations sold or otherwise) if such payment is rescinded or must
otherwise be restored.
(c) Each Obligor agrees that any Lender so purchasing such a
participation (or direct interest) may exercise all rights of set-off, banker's
lien, counterclaim or similar rights with respect to such participation as fully
as if such Lender were a direct holder of Loans or other amounts (as the case
may be) owing to such Lender in the amount of such participation.
(d) Nothing contained herein shall require any Lender to
exercise any such right or shall affect the right of any Lender to exercise, and
retain the benefits of exercising, any such right with respect to any other
indebtedness or obligation of any Obligor. If, under any applicable bankruptcy,
insolvency or other similar law, any Lender receives a secured claim in lieu of
a set-off to which this Section 4.07 applies, such Lender shall, to the extent
practicable, exercise its rights in respect of such secured claim in a manner
consistent with the rights of the Lenders entitled under this Section 4.07 to
share in the benefits of any recovery on such secured claim.
Section 5. Yield Protection, Etc.
---------------------
5.01. Additional Costs.
----------------
(a) The Borrower shall pay directly to each Lender from time
to time such amounts as such Lender may determine to be necessary to compensate
<PAGE>
-43-
such Lender for any costs that such Lender determines are attributable to its
making or maintaining of any Eurodollar Loans or its obligation to make any
Eurodollar Loans hereunder, or any reduction in any amount receivable by such
Lender hereunder in respect of any of such Loans or such obligation (such
increases in costs and reductions in amounts receivable being herein called
"Additional Costs"), resulting from any Regulatory Change that:
----------------
(i) shall subject any Lender (or its Applicable Lending Office
for any of such Loans) to any tax, duty or other charge in respect of
such Loans or its Notes or changes the basis of taxation of any amounts
payable to such Lender under this Agreement or its Notes in respect of
any of such Loans (excluding changes in the rate of tax on the overall
net income of such Lender or of such Applicable Lending Office by the
jurisdiction in which such Lender has its principal office or such
Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit or
similar requirements (other than the Reserve Requirement used in the
determination of the Eurodollar Rate for any Interest Period for such
Loan) relating to any extensions of credit or other assets of, or any
deposits with or other liabilities of, such Lender (including, without
limitation, any of such Loans or any deposits referred to in the
definition of "Eurodollar Base Rate" in Section 1.01), or any
commitment of such Lender (including, without limitation, the
Commitments of such Lender hereunder); or
(iii) imposes any other condition affecting this Agreement or
its Notes (or any of such extensions of credit or liabilities) or its
Commitments.
If any Lender requests compensation from the Borrower under this paragraph, the
Borrower may, by notice to such Lender (with a copy to the Administrative
Agent), suspend the obligation of such Lender thereafter to make or Continue
Eurodollar Loans, or to Convert Loans of any other Type into Eurodollar Loans,
until the Regulatory Change giving rise to such request ceases to be in effect
(in which case the provisions of Section 5.04 shall be applicable), provided
--------
that such suspension shall not affect the right of such Lender to receive the
compensation so requested.
(b) Without limiting the effect of the foregoing provisions of
this Section 5.01 (but without duplication), the Borrower shall pay directly to
each Lender from time to time on request such amounts as such Lender may
determine to be necessary to compensate such Lender (or, without duplication,
the bank holding company of which such Lender is a subsidiary) for any costs
that it determines are attributable to the maintenance by such Lender (or any
Applicable Lending Office or such bank holding company), pursuant to any law or
regulation or any interpretation, directive or request (whether or not having
the force of law and whether or not failure to comply therewith would be
unlawful) of any court or governmental or monetary authority (i) following any
Regulatory Change or (ii) implementing any risk-based capital guideline or other
requirement (whether or not having the force of law and whether or not the
failure to comply therewith would be unlawful) hereafter issued by any
government or governmental or supervisory authority implementing at the national
level the Basle Accord, of capital in respect of its Commitments or Loans (such
<PAGE>
-44-
compensation to include, without limitation, an amount equal to any reduction of
the rate of return on assets or equity of such Lender (or any Applicable Lending
Office or such bank holding company) to a level below that which such Lender (or
any Applicable Lending Office or such bank holding company) could have achieved
but for such law, regulation, interpretation, directive or request).
(c) Each Lender shall notify the Borrower of any event
occurring after the date hereof entitling such Lender to compensation under
paragraph (a) or (b) of this Section 5.01 as promptly as practicable, but in any
event within 45 days, after such Lender obtains actual knowledge thereof;
provided that (i) if any Lender fails to give such notice within 45 days after
- --------
it obtains actual knowledge of such an event, such Lender shall, with respect to
compensation payable pursuant to this Section 5.01 in respect of any costs
resulting from such event, only be entitled to payment under this Section 5.01
for costs incurred from and after the date 45 days prior to the date that such
Lender does give such notice and (ii) each Lender will designate a different
Applicable Lending Office for the Loans of such Lender affected by such event if
such designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole opinion of such Lender, be
disadvantageous to such Lender, except that such Lender shall have no obligation
to designate an Applicable Lending Office located in the United States of
America.
Each Lender will furnish to the Borrower a certificate setting
forth the basis and amount of each request by such Lender for compensation under
paragraph (a) or (b) of this Section 5.01. Determinations and allocations by any
Lender for purposes of this Section 5.01 of the effect of any Regulatory Change
pursuant to paragraph (a) of this Section 5.01, or of the effect of capital
maintained pursuant to paragraph (b) of this Section 5.01 on its costs or rate
of return of maintaining Loans or its obligation to make Loans, or on amounts
receivable by it in respect of Loans, and of the amounts required to compensate
such Lender under this Section 5.01, shall be conclusive, provided that such
--------
determinations and allocations are made on a reasonable basis.
5.02. Limitation on Types of Loans. Anything herein to the
----------------------------
contrary notwithstanding, if, on or prior to the determination of the Eurodollar
Base Rate for any Interest Period for any Eurodollar Loan;
(a) the Administrative Agent determines, which determination
shall be conclusive absent manifest error, that quotations of interest
rates for the relevant deposits referred to in the definition of
"Eurodollar Base Rate" in Section 1.01 are not being provided in the
relevant amounts or for the relevant maturities for purposes of
determining rates of interest for Eurodollar Loans as provided herein;
or
(b) the Majority Lenders determine, which determination shall
be conclusive absent manifest error, and notify the Administrative
Agent that the relevant rates of interest referred to in the definition
of "Eurodollar Base Rate" in Section 1.01 upon the basis of which the
rate of interest for Eurodollar Loans for such Interest Period is to be
determined are not likely to cover adequately the cost to such Lenders
of making or maintaining Eurodollar Loans for such Interest Period;
<PAGE>
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then the Administrative Agent shall give the Borrower and each Lender prompt
notice thereof and, so long as such condition remains in effect, the Lenders
shall be under no obligation to make additional Eurodollar Loans, to Continue
Eurodollar Loans or to Convert Loans of any other Type into Eurodollar Loans,
and the Borrower shall, on the last day(s) of the then current Interest
Period(s) for the outstanding Eurodollar Loans, either prepay such Loans or
Convert such Loans into another Type of Loan in accordance with Section 2.10.
5.03. Illegality. Notwithstanding any other provision of this
----------
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain Eurodollar
Loans hereunder (and, in the sole opinion of such Lender, the designation of a
different Applicable Lending Office would either not avoid such unlawfulness or
would be disadvantageous to such Lender), then such Lender shall promptly notify
the Borrower thereof (with a copy to the Administrative Agent) and such Lender's
obligation to make or Continue, or to Convert Loans of any other Type into,
Eurodollar Loans shall be suspended until such time as such Lender may again
make and maintain Eurodollar Loans (in which case the provisions of Section 5.04
shall be applicable).
5.04. Treatment of Affected Loans. If the obligation of any
---------------------------
Lender to make Eurodollar Loans or to Continue, or to Convert Base Rate Loans
into, Eurodollar Loans shall be suspended pursuant to Section 5.01 or 5.03, such
Lender's Eurodollar Loans shall be automatically Converted into Base Rate Loans
on the last day(s) of the then current Interest Period(s) for Eurodollar Loans
(or, in the case of a Conversion resulting from a circumstance described in
Section 5.03, on such earlier date as such Lender may specify to the Borrower
with a copy to the Administrative Agent) and, unless and until such Lender gives
notice as provided below that the circumstances specified in Section 5.01 or
5.03 that gave rise to such Conversion no longer exist:
(a) to the extent that such Lender's Eurodollar Loans have
been so Converted, all payments and prepayments of principal that would
otherwise be applied to such Lender's Eurodollar Loans shall be applied
instead to its Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued by
such Lender as Eurodollar Loans shall be made or Continued instead as
Base Rate Loans, and all Loans of such Lender that would otherwise be
Converted into Eurodollar Loans shall remain as Base Rate Loans.
If such Lender gives notice to the Borrower with a copy to the Administrative
Agent that the circumstances specified in Section 5.01 or 5.03 that gave rise to
the Conversion of such Lender's Eurodollar Loans pursuant to this Section 5.04
no longer exist (which such Lender agrees to do promptly upon such circumstances
ceasing to exist) at a time when Eurodollar Loans of the same Class made by
other Lenders are outstanding, such Lender's Base Rate Loans of such Class shall
be automatically Converted, on the first day(s) of the next succeeding Interest
Period(s) for such outstanding Eurodollar Loans, to the extent necessary so
that, after giving effect thereto, all Base Rate Loans and Eurodollar Loans of
such Class are allocated among the Lenders ratably (as to principal amounts,
<PAGE>
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Types and Interest Periods) in accordance with their respective Commitments of
such Class.
5.05. Compensation. The Borrower shall pay to the
------------
Administrative Agent for account of each Lender, upon the request of such Lender
through the Administrative Agent, such amount or amounts as shall be sufficient
(in the reasonable opinion of such Lender) to compensate it for any loss, cost
or expense that such Lender determines is attributable to:
(a) any payment, mandatory or optional prepayment or
Conversion of a Eurodollar Loan made by such Lender for any reason
(including, without limitation, the acceleration of the Loans pursuant
to Section 10) on a date other than the last day of the Interest Period
for such Loan; or
(b) any failure by the Borrower for any reason (including,
without limitation, the failure of any of the conditions precedent
specified in Section 7 to be satisfied) to borrow a Eurodollar Loan
from such Lender on the date for such borrowing specified in the
relevant notice of borrowing given pursuant to Section 2.02.
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
that otherwise would have accrued on the principal amount so paid, prepaid,
Converted or not borrowed for the period from the date of such payment,
prepayment, Conversion or failure to borrow to the last day of the then current
Interest Period for such Loan (or, in the case of a failure to borrow, the
Interest Period for such Loan that would have commenced on the date specified
for such borrowing) at the applicable rate of interest for such Loan provided
for herein over (ii) the amount of interest that otherwise would have accrued on
such principal amount at a rate per annum equal to the interest component of the
amount such Lender would have bid in the London interbank market for Dollar
deposits of leading banks in amounts comparable to such principal amount and
with maturities comparable to such period (as reasonably determined by such
Lender), or if such Lender shall cease to make such bids, the equivalent rate,
as reasonably determined by such Lender, derived from Dow Jones Markets Service
Page 3750 (British Bankers Association Settlement Rate) or other publicly
available source as described in the definition of "Eurodollar Base Rate" in
Section 1.01.
5.06. Additional Costs in Respect of Letters of Credit.
------------------------------------------------
Without limiting the obligations of the Borrower under Section 5.01 (but without
duplication), if as a result of any Regulatory Change or any risk-based capital
guideline or other requirement heretofore or hereafter issued by any government
or governmental or supervisory authority implementing at the national level the
Basle Accord there shall be imposed, modified or deemed applicable any tax,
reserve, special deposit, capital adequacy or similar requirement against or
with respect to or measured by reference to Letters of Credit issued or to be
issued hereunder and the result shall be to increase the cost to any Lender or
Lenders of issuing (or purchasing participations in) or maintaining its
obligation hereunder to issue (or purchase participations in) any Letter of
Credit hereunder or reduce any amount receivable by any Lender hereunder in
respect of any Letter of Credit (which increases in cost, or reductions in
amount receivable, shall be the result of such Lender's or Lenders, reasonable
<PAGE>
-47-
allocation of the aggregate of such increases or reductions resulting from such
event), then, upon demand by such Lender or Lenders (through the Administrative
Agent), the Borrower shall pay immediately to the Administrative Agent for
account of such Lender or Lenders, from time to time as specified by such Lender
or Lenders (through the Administrative Agent), such additional amounts as shall
be sufficient to compensate such Lender or Lenders (through the Administrative
Agent) for such increased costs or reductions in amount. A statement as to such
increased costs or reductions in amount incurred by any such Lender or Lenders,
submitted by such Lender or Lenders to the Borrower shall be conclusive in the
absence of manifest error as to the amount thereof.
5.07. U.S. Taxes.
----------
(a) The Borrower agrees to pay to each Lender that is not a
U.S. Person such additional amounts as are necessary in order that the net
payment of any amount due to such non-U.S. Person hereunder after deduction for
or withholding in respect of any U.S. Taxes imposed with respect to such payment
(or in lieu thereof, payment of such U.S. Taxes by such non-U.S. Person), will
not be less than the amount stated herein to be then due and payable, provided
that the foregoing obligation to pay such additional amounts shall not apply:
(i) to any payment to any Lender hereunder unless such Lender
is, on the date hereof (or on the date it becomes a Lender hereunder as
provided in Section 12.06(b)) and on the date of any change in the
Applicable Lending office of such Lender, either entitled to submit (A)
a Form 1001 (relating to such Lender and entitling it to a complete
exemption from withholding on all interest to be received by it
hereunder in respect of the Loans) or Form 4224 (relating to all
interest to be received by such Lender hereunder in respect of the
Loans) or (B) in the case of a Lender not treated as a bank for
regulatory, tax or other legal purposes in any jurisdiction, (1) a
certificate under penalties of perjury that such Lender is not a bank,
a holder of equity of the Borrower or a controlled foreign corporation
related to the Borrower for purposes of section 881(c)(3) of the Code
or a conduit entity within the meaning of United States Treasury
Regulations section 1.881-3 and (2) a duly completed Internal Revenue
Service Form W-8; or
(ii) to any U.S. Taxes imposed solely by reason of the failure
by such non-U.S. Person to comply with applicable certification,
information, documentation or other reporting requirements concerning
the nationality, residence, identity or connections with the United
States of America of such non-U.S. Person if such compliance is
required by statute or regulation of the United States of America as a
precondition to relief or exemption from such U.S. Taxes.
For the purposes of this paragraph, (A) "U.S. Person" means a citizen, national
or resident of the United States of America, a corporation, partnership or other
entity created or organized in or under any laws of the United States of America
or any State thereof, or any estate or trust that is subject to Federal income
taxation regardless of the source of its income, (B) "U.S. Taxes" means any
present or future tax, assessment or other charge or levy imposed by or on
<PAGE>
-48-
behalf of the United States of America or any taxing authority thereof or
therein, (C) "Form 1001" means Form 1001 (Ownership, Exemption, or Reduced Rate
Certificate) of the Department of the Treasury of the United States of America,
(D) "Form 4224" means Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States) of the Department of the Treasury of the United States of America and
(E) "Form W-8 (Certificate of Foreign Status of the Department of Treasury of
the United States of America). Each of the Forms referred to in the foregoing
clauses (C), (D), and (E) shall include such successor and related forms as may
from time to time be adopted by the relevant taxing authorities of the United
States of America to document a claim to which such Form relates.
(b) Within 30 days after paying any amount to the
Administrative Agent or any Lender from which it is required by law to make any
deduction or withholding, and within 30 days after it is required by law to
remit such deduction or withholding to any relevant taxing or other authority,
the Borrower shall deliver to the Administrative Agent for delivery to such
non-U.S. Person evidence reasonably satisfactory to such Person of such
deduction, withholding or payment (as the case may be).
5.08. Replacement of Lenders. If any of the following shall
----------------------
occur with respect to any Lender (any such Lender being herein called an
"Affected Lender"):
(a) any Lender shall request compensation pursuant to Section
5.01, 5.06 or 5.07,
(b) any Lender's obligation to make or Continue Loans of any
Type, or to Convert Loans of any Type into the other Type of Loan,
shall be suspended pursuant to Section 5.01 or 5.03 or
(c) any Lender shall default in the making of any Loan
required to be made by it pursuant to Section 2.01,
the Borrower, upon three Business Days' notice, may require that such Affected
Lender transfer all of its right, title and interest under this Agreement and
such Affected Lender's Notes to any bank or other financial institution (a
"Proposed Lender") identified by the Borrower that is reasonably satisfactory to
the Administrative Agent and the Issuing Lender (i) if such Proposed Lender
agrees to assume all of the obligations of such Affected Lender hereunder, and
to purchase all of such Affected Lender's Loans hereunder for a consideration
equal to the aggregate outstanding principal amount of such Affected Lender's
Loans, together with interest thereon to the date of such purchase, and
satisfactory arrangements are made for payment to such Affected Lender of all
other amounts payable hereunder to such Affected Lender on or prior to the date
of such transfer (including any fees accrued hereunder and any amounts that
would be payable under Section 5.05 as if all of such Affected Lender's Loans
were being prepaid in full on such date) and (ii) if such Affected Lender has
requested compensation pursuant to Section 5.01, 5.06 or 5.07, such Proposed
Lender's aggregate requested compensation, if any, pursuant to Section 5.01,
5.06 or 5.07 with respect to such Affected Lender's Loans is lower than that of
the Affected Lender. Subject to the provisions of Section 12.06(b), such
Proposed Lender shall be a "Lender" for all purposes hereunder. Without
prejudice to the survival of any other agreement of the Borrower hereunder, the
<PAGE>
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agreements of the Borrower contained in Sections 5.01, 5.06, 5.07 and 12.04
(without duplication of any payments made to such Affected Lender by the
Borrower or the Proposed Lender) shall survive for the benefit of such Affected
Lender under this Section 5.08 with respect to the time prior to such
replacement.
Section 6. Guarantee.
---------
6.01. The Guarantee. SFEC, SFH and the Subsidiary Guarantors
-------------
(namely all of the Borrower's existing and future Subsidiaries (other than ANIC,
SFF, the Texas Partnership Entities, the Georgia Partnership Entities and any
Inactive Subsidiary) and collectively with SFEC and SFH referred to in this
Section 6 as the "Guarantors") hereby jointly and severally guarantee to each
Lender and the Administrative Agent and their respective successors and assigns
the prompt payment in full when due (whether at stated maturity, by acceleration
or otherwise) of the principal of and interest on the Loans made by the Lenders
to, and the Note held by each Lender of, the Borrower and all other amounts from
time to time owing to the Lenders or the Administrative Agent by the Borrower
under this Agreement and under the Notes and by any Obligor under any of the
other Loan Documents, and all obligations of the Borrower or any of its
Subsidiaries to any Lender (or any affiliate of any Lender) in respect of any
Hedging Agreement, in each case strictly in accordance with the terms thereof
(such obligations being herein collectively called the "Guaranteed
Obligations"). The Guarantors hereby further jointly and severally agree that if
the Borrower shall fail to pay in full when due (whether at stated maturity, by
acceleration or otherwise) any of the Guaranteed Obligations, the Guarantors
will promptly pay the same, without any demand or notice whatsoever, and that in
the case of any extension of time of payment or renewal of any of the guaranteed
Obligations, the same will be promptly paid in full when due (whether at
extended maturity, by acceleration or otherwise) in accordance with the terms of
such extension or renewal.
6.02. Obligations Unconditional. The obligations of the
-------------------------
Guarantors under Section 6.01 are absolute and unconditional, joint and several,
irrespective of the value, genuineness, validity, regularity or enforceability
of the obligations of the Borrower under this Agreement, the Notes or any other
agreement or instrument referred to herein or therein, or any substitution,
release or exchange of any other guarantee of or security for any of the
Guaranteed Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor
(other than payment in full), it being the intent of this Section 6.02 that the
obligations of the Guarantors hereunder shall be absolute and unconditional,
joint and several, under any and all circumstances. Without limiting the
generality of the foregoing it is agreed that the occurrence of any one or more
of the following shall not alter or impair the liability of the Guarantors
hereunder, which shall remain absolute and unconditional as described above:
(i) at any time or from time to time, without notice to the
Guarantors, the time for any performance of or compliance with any of
the Guaranteed Obligations shall be extended, or such performance or
compliance shall be waived;
<PAGE>
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(ii) any of the acts mentioned in any of the provisions of
this Agreement or the Notes or any other agreement or instrument
referred to herein or therein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall
be accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under this
Agreement or the Notes or any other agreement or instrument referred to
herein or therein shall be waived or any other Guarantee of any of the
Guaranteed Obligations or any security therefor shall be released or
exchanged in whole or in part or otherwise dealt with; or
(iv) any Lien or security interest granted to, or in favor of,
the Administrative Agent or any Lender or Lenders as security for any
of the Guaranteed Obligations shall fail to be perfected.
The Guarantors hereby expressly waive diligence, presentment, demand of payment,
protest and all notices whatsoever, and any requirement that the Administrative
Agent or any Lender exhaust any right, power or remedy or proceed against the
Borrower under this Agreement or the Notes or any other agreement or instrument
referred to herein or therein, or against any other Person under any other
guarantee of, or security for, any of the Guaranteed Obligations.
6.03. Reinstatement. The obligations of the Guarantors under
-------------
this Section 6 shall be automatically reinstated if and to the extent that for
any reason any payment by or on behalf of the Borrower in respect of the
Guaranteed Obligations is rescinded or must be otherwise restored by any holder
of any of the Guaranteed Obligations, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise, and the Guarantors jointly and
severally agree that they will indemnify the Administrative Agent and each
Lender on demand for all reasonable costs and expenses (including, without
limitation, fees of counsel) incurred by the Administrative Agent or such Lender
in connection with such rescission or restoration, including any such costs and
expenses incurred in defending against any claim alleging that such payment
constituted a preference, fraudulent transfer or similar payment under any
bankruptcy, insolvency or similar law.
6.04. Subrogation. Each Guarantor hereby waives all rights of
-----------
subrogation or contribution, whether arising by contract or operation of law
(including, without limitation, any such right arising under the Bankruptcy
Code) or otherwise by reason of any payment by it pursuant to the provisions of
this Section 6 and further agrees with the Borrower for the benefit of its
creditors (including, without limitation, each Lender and the Administrative
Agent) that any such payment by it shall constitute a contribution of capital by
such Guarantor to the Borrower (or an investment in the equity capital of the
Borrower by such Guarantor).
6.05. Remedies. The Guarantors jointly and severally agree
--------
that, as between the Guarantors and the Lenders, the obligations of the Borrower
under this Agreement and the Notes may be declared to be forthwith due and
payable as provided in Section 10 (and shall be deemed to have become
automatically due and payable in the circumstances provided in Section 10) for
<PAGE>
-51-
purposes of Section 6.01 notwithstanding any stay, injunction or other
prohibition preventing such declaration (or such obligations from becoming
automatically due and payable) as against the Borrower and that, in the event of
such declaration (or such obligations being deemed to have become automatically
due and payable), such obligations (whether or not due and payable by the
Borrower) shall forthwith become due and payable by the Guarantors for purposes
of Section 6.01.
6.06. Instrument for the Payment of Money. Each Guarantor
-----------------------------------
hereby acknowledges that the guarantee in this Section 6 constitutes an
instrument for the payment of money, and consents and agrees that any Lender or
the Administrative Agent, at its sole option, in the event of a dispute by such
Guarantor in the payment of any moneys due hereunder, shall have the right to
bring motion-action under New York CPLR Section 3213.
6.07. Continuing Guarantee. The guarantee in this Section 6 is
--------------------
a continuing guarantee, and shall apply to all Guaranteed Obligations whenever
arising.
6.08. Rights of Contribution. The Guarantors hereby agree, as
----------------------
between themselves, that if any Guarantor shall become an Excess Funding
Guarantor (as defined below) by reason of the payment by such Guarantor of any
Guaranteed Obligations, each other Guarantor shall, on demand of such Excess
Funding Guarantor (but subject to the next sentence), pay to such Excess Funding
Guarantor an amount equal to such Guarantor's Pro Rata Share (as defined below
and determined, for this purpose, without reference to the Properties, debts and
liabilities of such Excess Funding Guarantor) of the Excess Payment (as defined
below) in respect of such Guaranteed Obligations. The payment obligation of a
Guarantor to any Excess Funding Guarantor under this Section 6.08 shall be
subordinate and subject in right of payment to the prior payment in full of the
obligations of such Guarantor under the other provisions of this Section 6 and
such Excess Funding Guarantor shall not exercise any right or remedy with
respect to such excess until payment and satisfaction in full of all of such
obligations.
For purposes of this Section 6.08, (i) "Excess Funding
--------------
Guarantor" means, in respect of any Guaranteed Obligations, a Guarantor that has
- ---------
paid an amount in excess of its Pro Rata Share of such Guaranteed Obligations,
(ii) "Excess Payment" means, in respect of any Guaranteed Obligations, the
--------------
amount paid by an Excess Funding Guarantor in excess of its Pro Rata Share of
such Guaranteed Obligations and (iii) "Pro Rata Share" means, for any Guarantor,
--------------
the ratio (expressed as a percentage) of (x) the amount by which the aggregate
present fair saleable value of all Properties of such Guarantor (excluding any
shares of stock of, or ownership interest in, any other Guarantor) exceeds the
amount of all the debts and liabilities of such Guarantor (including contingent,
subordinated, unmatured and unliquidated liabilities, but excluding the
obligations of such Guarantor hereunder and any obligations of any other
Guarantor that have been Guaranteed by such Guarantor) to (y) the amount by
which the aggregate fair saleable value of all Properties of all of the Obligors
exceeds the amount of all the debts and liabilities (including contingent,
subordinated, unmatured and unliquidated liabilities, but excluding the
obligations of the Borrower and the Guarantors hereunder and under the other
Loan Documents) of all of the Obligors, determined (A) with respect to any
<PAGE>
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Guarantor that is a party hereto on the Closing Date, as of the Closing Date,
and (B) with respect to any other Guarantor, as of the date such Guarantor
becomes a Guarantor hereunder.
6.09. General Limitation on Guarantee Obligations. In any
-------------------------------------------
action or proceeding involving any state corporate law, or any state or Federal
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of any Guarantor under Section 6.01
would otherwise, taking into account the provisions of Section 6.08, be held or
determined to be void, invalid or unenforceable, or subordinated to the claims
of any other creditors, on account of the amount of its liability under Section
6.01, then, notwithstanding any other provision hereof to the contrary, the
amount of such liability shall, without any further action by such Guarantor,
any Lender, the Administrative Agent or any other Person, be automatically
limited and reduced to the highest amount that is valid and enforceable and not
subordinated to the claims of other creditors as determined in such action or
proceeding.
Section 7. Conditions.
----------
7.01. Initial Extension of Credit of any Class. The obligation
----------------------------------------
of any Lender to make its initial extension of credit hereunder (whether by
making a Loan or issuing a Letter of Credit) is subject to the conditions
precedent that (i) there shall have been no material adverse change in
financial, banking and capital market conditions and (ii) the Arranger shall
have received the following documents, each of which shall be reasonably
satisfactory to the Arranger (and to the extent specified below, to each Lender)
in form and substance, it being understood that, to the extent a form of a
particular document is specified below, such form shall be deemed to be
satisfactory to the Arranger and the Lenders:
(a) Corporate Documents. Certified copies of the charter and
-------------------
by-laws (or equivalent documents) of each Obligor and of all corporate
or other authority for each Obligor (including, without limitation, in
the case of any corporate Obligor, board of director resolutions and
evidence of the incumbency, including specimen signatures, of officers)
with respect to the execution, delivery and performance of such of the
Basic Documents to which such Obligor is intended to be a party and
each other document to be delivered by such Obligor from time to time
in connection herewith and the extensions of credit hereunder (and the
Administrative Agent and each Lender may conclusively rely on such
certificate until it receives notice in writing from such Obligor to
the contrary).
(b) Officer's Certificate. A certificate of a Responsible
---------------------
Officer of the Borrower, dated the Closing Date, to the effect set
forth in the lettered clauses of the first sentence of Section 7.02.
(c) Business Plan. A business plan, prepared by a Responsible
-------------
Officer of the Borrower, in form and substance satisfactory to the
Arranger, consisting of financial projections for the fiscal years
ending December 31, 1998 through December 31, 2005, together with a
written analysis based thereon of the business and prospects of the
Borrower and its Subsidiaries for such fiscal years; provided that the
<PAGE>
-53-
business plan delivered in connection with the Information Memorandum
is hereby deemed satisfactory for purposes of this Section 7.01(c).
(d) Opinion of Counsel to the Obligors. An opinion, dated the
----------------------------------
Closing Date, of (i) Baer Marks & Upham LLP, counsel to the Obligors,
substantially in the form of Exhibit E-1 and (ii) Weil, Gotshal and
Manges LLP, counsel to the Obligors, substantially in the form of
Exhibit E-2, and in each case covering such other matters as the
Arranger or any Lender may reasonably request (and each Obligor hereby
instructs each counsel to deliver such opinion to the Lender and the
Arranger).
(e) Opinion of Special New York Counsel to the Arranger. An
---------------------------------------------------
opinion, dated the Closing Date, of Milbank, Tweed, Hadley & McCloy,
special New York counsel to the Arranger, substantially in the form of
Exhibit F (and the Arranger hereby instructs such counsel to deliver
such opinion to the Lenders).
(f) Notes. The Notes, duly completed and executed for each
-----
Lender.
(g) Pledge Agreement. The Pledge Agreement, duly executed and
----------------
delivered by SFH and the Administrative Agent together with the
certificates and other securities and instruments identified therein
that are to be delivered on the Closing Date, in each case endorsed in
blank or accompanied by undated stock powers executed in blank. In
addition, SFH shall have taken such other action (including, without
limitation, delivering to the Arranger, for filing, appropriately
completed and duly executed Uniform Commercial Code Financing
Statements) as the Arranger shall have requested in order to protect
the security interests created pursuant to the Pledge Agreement.
(h) Security Agreement. The Security Agreement, duly executed
------------------
and delivered by the Borrower, the Subsidiary Guarantors and the
Administrative Agent, together with the certificates and other
securities and instruments identified in Annex 1 thereto that are to be
delivered on the Closing Date, in each case endorsed in blank or
accompanied by undated stock powers executed in blank. In addition, the
Borrower and each Subsidiary Guarantor shall have taken such other
action (including, without limitation, delivering to the Arranger, for
filing, appropriately completed and duly executed Uniform Commercial
Code financing statements) as the Arranger shall have requested in
order to perfect the security interests created pursuant to the
Security Agreement.
(i) Insurance. Certificates of insurance evidencing the
---------
existence of all insurance required to be maintained by the Obligors
pursuant to Section 9.04 and the designation of the Arranger as the
loss payee or additional named insured, as the case my be, thereunder
to the extent required by Section 9.04, with respect to all tangible
real or personal Property of the Obligors, such certificates to be in
such form and contain such information as is specified in Section 9.04.
In addition, the Borrower shall have delivered a certificate of a
Responsible Officer of the Borrower setting forth the insurance
obtained by it in accordance with the requirements of Section 9.04 and
<PAGE>
-54-
stating that such insurance is in full force and effect and that all
premiums then due and payable thereon have been paid.
(j) Environmental Surveys. Copies of existing environmental
---------------------
surveys and assessments in the possession of the Borrower and its
Subsidiaries with respect to the Existing Parks.
(k) Solvency Analysis. A certificate of a Responsible Officer
-----------------
of the Borrower to the effect that, as of the Closing Date and after
giving effect to the initial Loans hereunder and to the other
transactions contemplated hereby:
(i) the aggregate value of all Properties of the
Borrower and its Subsidiaries at their present fair saleable
value (i.e., the amount that may be realized within a
reasonable time, considered to be six months to one year,
either through collection or sale at the regular market value,
conceiving the latter as the amount that could be obtained for
the Property in question within such period by a capable and
diligent businessman from an interested buyer who is willing
to purchase under ordinary selling conditions), exceed the
amount of all debts and liabilities (including contingent,
subordinated, unmatured and unliquidated liabilities) of the
Borrower and its Subsidiaries;
(ii) the Borrower and its Subsidiaries will not, on a
consolidated basis, have an unreasonably small capital with
which to conduct their business operations as heretofore
conducted; and
(iii) the Borrower and its Subsidiaries will have, on
a consolidated basis, sufficient cash flow to enable them to
pay their debts as they mature.
Such certificate shall include a statement to the effect that
the financial projections and underlying assumptions contained
in such analysis are fair and reasonable and accurately
computed.
(l) Existing Credit Agreement. Evidence that all principal of
-------------------------
and interest on the extensions of credits outstanding under, and all
other amounts owing under, the Existing Credit Agreement shall have
been (or shall be simultaneously) paid in full, and that any
commitments to extend credit under the Existing Credit Agreement shall
have been (or shall be simultaneously) canceled or terminated and that
all Guarantees in respect of, and all Liens securing, such Indebtedness
shall have been released (or arrangements for such release reasonably
satisfactory to the Arranger shall have been made).
(m) Effective Defeasance of SFEC Zero Coupon Notes. Evidence
----------------------------------------------
that all principal of and interest on, and all other amounts owing with
respect to the SFEC Zero Coupon Notes shall have been (or shall be
simultaneously) paid into an escrow account pursuant to a pledge and
escrow agreement between SFEC and the Bank of new York as Trustee
<PAGE>
-55-
executed and delivered in connection with the issuance of the SFEC
Senior Notes.
(n) Formation and Capitalization of Holdings. Evidence that
----------------------------------------
Holdings shall have been formed to consummate the Merger Transactions
and shall have received at least $1,430,000,000 in gross proceeds from
the following sources: (i) the Common Stock Issuance, (ii) the Public
Preferred Stock Issuance and (iii) the issuance of the Holdings Senior
Discount Notes and the Holdings Senior Notes, each in accordance with
and in the manner set forth in the respective, prospectus, indenture or
other agreement relating to the issuance of the foregoing equity or
debt securities.
(o) Consummation of the Merger Transactions. Evidence the
---------------------------------------
Merger Transactions shall have been consummated in all material
respects in accordance with the terms of the Merger Agreement (except
for any modifications, supplements or waivers thereof, or written
consents or determinations made by the parties thereto, that shall be
satisfactory to the Majority Lenders or that shall not result in a
Material Adverse Effect) and the Arranger shall have received a
certificate of a Responsible Officer of the Borrower to such effect and
to the effect that attached thereto are true and complete copies of the
documents delivered in connection with the closing of the Merger
Transactions pursuant to the Merger Agreement. In addition, the
Arranger shall have received copies of the legal opinions delivered to
the Borrower pursuant to the Merger Agreement in connection with the
Merger Transactions, together with a letter from each Person delivering
such opinion (or authorization within such opinion) authorizing
reliance thereon by the Administrative Agent and the Lenders and shall
be satisfied that all necessary approvals have been obtained and all
applicable waitings periods have expired.
(p) Other Documents. Such other documents as the
---------------
Administrative Agent, the Arranger or any Lender or special New York
counsel to the Arranger may reasonably request.
The obligation of any Lender to make its initial extension of
credit hereunder is also subject to the payment by the Borrower of such fees as
the Borrower shall have agreed to pay to any Lender, the Administrative Agent or
the Arranger in connection herewith, including, without limitation, the
reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy, special New
York counsel to the Arranger, in connection with the negotiation, preparation,
execution and delivery of this Agreement and the other Loan Documents and the
extensions of credit hereunder (to the extent that statements for such fees and
expenses have been delivered to the Borrower).
7.02. Initial and Subsequent Extensions of Credit. The
-------------------------------------------
obligation of the Lenders to make any Loan to the Borrower upon the occasion of
each extension of credit hereunder (including the initial extension of credit,
but excluding any Continuations or Conversion of Loans) is subject to the
conditions precedent that, both immediately prior to the making of such
extension of credit and also after giving effect thereto and to the intended use
thereof:
<PAGE>
-56-
(a) the representations and warranties made by the Borrower
SFEC and SFH in Section 8, and by each Obligor in each of the other
Loan Documents to which it is a party, shall be true and complete on
and as of the date of the making of such extension of credit with the
same force and effect as if made on and as of such date (or, if any
such representation or warranty is expressly stated to have been made
as of a specific date, as of such specific date);
(b) no Default shall have occurred and be continuing; and
(c) the Borrower shall have delivered to the Administrative
Agent a certificate of a Responsible Officer of the Borrower, in form
and substance reasonably satisfactory to the Administrative Agent and
accompanied by such appraisals, if necessary, and other showings that
shall demonstrate to the reasonable satisfaction of the Administrative
Agent that such Loans may be permissibly incurred and secured under any
tests therefor set forth in the Senior Subordinated Notes Indentures
and the SFEC Indentures.
Each notice of borrowing, or request for issuance of a Letter of Credit, by the
Borrower hereunder shall constitute a certification by the Borrower to the
effect set forth in the preceding sentence (both as of the date of such notice
or request and, unless the Borrower otherwise notifies the Administrative Agent
prior to the date of such borrowing or issuance, as of the date of such
borrowing or issuance).
Section 8. Representations and Warranties. The Borrower and,
------------------------------
to the extent expressly stated below, each of SFEC and SFH represent and warrant
to the Administrative Agent and the Lenders that:
8.01. Organization; Powers. Each of the Borrower and its
--------------------
Subsidiaries: (a) is a corporation, partnership or other entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization; and (b) is qualified to do business and is in good standing in all
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary and where failure so to qualify could (either
individually or in the aggregate) have a Material Adverse Effect.
8.02. Financial Condition. SFEC or the Borrower has
-------------------
heretofore furnished to each of the Lenders the following financial statements:
(i) the consolidated balance sheets of (a) SFEC and its
Subsidiaries, (b) SFOT and (c) SFOG (in the case of SFOT and SFOG, to
the extent available) as at December 31, 1997 and the related
consolidated statements of operations, shareholders, equity and cash
flows of (a) SFEC and its Subsidiaries, (b) SFOT and (c) SFOG (in the
case of SFOT and SFOG, to the extent available) for the fiscal year
ended December 31, 1997, with the opinion thereon of Ernst & Young LLP;
and
57
<PAGE>
(ii) the unaudited interim consolidated financial statements
of SFEC and its Subsidiaries (to the extent available) for each fiscal
month and quarter since December 31, 1997.
All such financial statements are complete and fairly present in all material
respects the consolidated financial condition of the Borrower and its
Subsidiaries, as at said respective dates and the consolidated results of their
operations for the applicable periods ended on said respective dates, all in
accordance with generally accepted accounting principles and practices (or, in
the case of the financial statements of SFOT only, based upon Federal income tax
accounting, as the case may be) applied on a consistent basis. None of the
Borrower nor any of its Subsidiaries has on the date hereof any material
contingent liabilities, liabilities for taxes, unusual forward or long-term
commitments or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in the balance
sheet of the Borrower and its Subsidiaries as at December 31, 1997. Since
December 31, 1997, there has been no material adverse change in the consolidated
financial condition, operations, business or prospects taken as a whole of (i)
the Borrower and its Subsidiaries, (ii) Premier Parks Inc. and (iii) Holdings,
in each case, from that set forth in respective audited financial statements for
the fiscal year ended December 31, 1997.
8.03. Litigation. Except as set forth in Schedule VI, there
----------
are no legal or arbitral proceedings, or any proceedings by or before any
governmental or regulatory authority or agency, now pending or (to the knowledge
of the Borrower) threatened against the Borrower or any of its Subsidiaries
that, if adversely determined, could (either individually or in the aggregate)
have a Material Adverse Effect.
8.04. No Breach. The Borrower, SFEC and SFH represent and
---------
warrant to the Administrative Agent and the Lenders that none of the execution
and delivery of this Agreement and the Notes and the other Basic Documents, the
consummation of the transactions herein and therein contemplated or compliance
with the terms and provisions hereof and thereof will conflict with or result in
a breach of, or require any consent under, the charter, by-laws or other
organizational documents of any Obligor, or any applicable material law or
regulation, or any order, writ, injunction or decree of any court or
governmental authority or agency, or any material agreement or instrument to
which any Obligor is a party (including the Senior Subordinated Notes or the
SFEC Senior Notes) or by which any of them or any of their Property is bound or
to which any of them is subject, or constitute a default under any such
agreement or instrument, or (except for the Liens created pursuant to the
Security Documents) result in the creation or imposition of any Lien upon any
Property of any Obligor pursuant to the terms of any such agreement or
instrument, except that the granting of a Lien upon contracts entered into in
the ordinary course of business by any Obligor (which contracts are not,
individually or in the aggregate, material to the operations of any Park) may
conflict with restrictions upon assignments contained in such contracts.
8.05. Action. The Borrower, SFEC and SFH represent and warrant
------
that each Obligor has all necessary corporate or other power, authority and
legal right to execute, deliver and perform its obligations under each of the
Basic Documents to which it is a party; the execution, delivery and performance
<PAGE>
-58-
by any Obligor of each of the Basic Documents to which it is a party have been
duly authorized by all necessary corporate or other action on its part
(including, without limitation, any required shareholder approvals); and this
Agreement has been duly and validly executed and delivered by each Obligor and
constitutes, and each of the Notes and the other Basic Documents to which it is
a party when executed and delivered by any Obligor (and in the case of the
Notes, for value) will constitute, its legal, valid and binding obligation,
enforceable against each Obligor in accordance with its terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or similar laws of general applicability affecting the enforcement of
creditors, rights and (b) the application of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
8.06. Approvals. The Borrower, SFEC and SFH represent and
---------
warrant that no authorizations, approvals or consents of, and no filings or
registrations with, any governmental or regulatory authority or agency, or any
securities exchange, are necessary for the execution, delivery or performance by
any Obligor of this Agreement or any of the other Basic Documents to which it is
a party or for the legality, validity or enforceability hereof or thereof,
except for filings and recordings in respect of the Liens created pursuant to
the Security Documents.
8.07. Properties and Permits, Etc.
---------------------------
(a) Each of the Borrower and its Subsidiaries has good and
insurable title to, or valid leasehold interests in, all of its material
Properties, except for Liens permitted under Section 9.06 and defects in title
that do not materially interfere with its ability to conduct its business as
currently conducted or to utilize such Properties and assets for their intended
purposes. All such material Properties are free and clear of Liens, other than
Liens permitted by Section 9.06.
(b) Each of the Borrower and its Subsidiaries has complied
with all material obligations under all material leases to which it is a party
and all such leases are in full force and effect. Each of the Borrower and its
Subsidiaries enjoys peaceful and undisturbed possession under all such material
leases.
(c) Each of the Borrower and its Subsidiaries owns, or is
licensed to use, all trademarks, tradenames, copyrights, patents and other
intellectual Property material to its business, and the use thereof by the
Borrower and its Subsidiaries does not infringe upon the rights of any other
Person, except for any such infringements that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
(d) Each of the Borrower and its Subsidiaries holds all
material permits, licenses and other governmental authorizations necessary to
enable it to operate as heretofore conducted (other than seasonal permits or
liquor licenses, which it anticipates will be obtained in the normal course),
and will, upon the consummation of any acquisition, hold all material permits,
licenses and other governmental authorizations necessary to enable it to operate
(other than seasonal permits or liquor licenses, which it anticipates will be
obtained in the normal course).
<PAGE>
-59-
8.08. Environmental Matters. Each of the Borrower and its
---------------------
Subsidiaries has obtained all environmental, health and safety permits,
licenses, registrations and other authorizations required under all
Environmental Laws to carry on its business as now being or as proposed to be
conducted, except to the extent failure to have any such permit, license,
registration or authorization would not (either individually or in the
aggregate) have a Material Adverse Effect. Each of such permits, licenses,
registrations and authorizations is in full force and effect and each of the
Borrower and its Subsidiaries is in compliance with the terms and conditions
thereof, and is also in compliance with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in any applicable Environmental Law or in any regulation,
code, plan, order, decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder, except to the extent failure to
comply therewith would not (either individually or in the aggregate) have a
Material Adverse Effect.
In addition, except as set forth in Schedule III:
(a) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint is pending, no
penalty has been assessed and no investigation or review is pending or,
to the Borrower's knowledge, threatened by any governmental entity (or
other entity with jurisdiction over the parties) with respect to any
alleged failure by the Borrower or any of its Subsidiaries to have any
environmental, health or safety permit, license, registration or other
authorization required under any Environmental Law in connection with
the conduct of the business of the Borrower or any of its Subsidiaries
or with respect to any generation, treatment, storage, recycling,
transportation, discharge or disposal, or any Release of any Hazardous
Materials generated by the Borrower or any of its Subsidiaries in each
case that (either individually or in the aggregate) which would
materially adversely affect the operations of any Park.
(b) Neither the Borrower nor any of its Subsidiaries owns,
operates or leases on the date hereof a treatment, storage or disposal
facility requiring a permit under the Resource Conservation and
Recovery Act of 1976, as amended, or under any comparable state or
local statute; and none of the conditions set forth below exists that
would (either individually or in the aggregate) materially adversely
affect the operations of any Park or have a Material Adverse Effect:
(i) no polychlorinated biphenyls (PCB's) are or have
been present at any site or facility now or previously owned,
operated or leased by the Borrower or any of its Subsidiaries;
(ii) no asbestos or asbestos-containing materials is
or has been present at any domestic site or facility now or
previously owned, operated or leased by the Borrower or any of
its Subsidiaries;
<PAGE>
-60-
(iii) there are no underground storage tanks or
surface impoundments for Hazardous Materials, active or
abandoned, at any site or facility or previously owned,
operated or leased by the Borrower or any of its Subsidiaries;
(iv) no Hazardous Materials have been Released at, on
or under any site or facility now owned, operated or leased by
the Borrower or any of its Subsidiaries in a reportable
quantity established by statute, ordinance, rule, regulation
or order; and
(v) no Hazardous Materials have been otherwise
Released at, on or under any site or facility now owned,
operated or leased by the Borrower or any of its Subsidiaries
that would (either individually or in the aggregate) have a
Material Adverse Effect.
(c) Neither the Borrower nor any of its Subsidiaries has
transported or arranged for the transportation of any Hazardous
Material to any location that is listed on the National Priorities List
("NPL") under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA"), listed for possible
inclusion on the NPL by the Environmental Protection Agency Credit
Agreement in the Comprehensive Environmental Response and Liability
Information System, as provided for by 40 C.F.R. ss. 300.5 ("CERCLIS"),
or on any similar state or local list or that is the subject of
Federal, state or local enforcement actions or other investigations
that may lead to Environmental Claims against the Borrower or any of
its Subsidiaries, in any such case that would (either individually or
in the aggregate) materially adversely affect the operations of any
Park or have a Material Adverse Effect.
(d) As of the date hereof, no Hazardous Material generated by
the Borrower or any of its Subsidiaries has been recycled, treated,
stored, disposed of or Released by the Borrower or any of its
Subsidiaries at any location other than those listed in Schedule III,
Part 2.
(e) No oral or written notification of a Release of a
Hazardous Material has been filed by or on behalf of the Borrower or
any of its Subsidiaries and no site or facility now or previously
owned, operated or leased by the Borrower or any of its Subsidiaries is
listed or to the Borrower's knowledge, proposed for listing on the NPL,
CERCLIS or any similar state list of sites requiring investigation or
clean-up, in any such case that would (either individually or in the
aggregate) materially adversely affect the operations of any Park or
have a Material Adverse Effect.
(f) No Liens have arisen under or pursuant to any
Environmental Laws on any site or facility owned, operated or leased by
the Borrower or any of its Subsidiaries, and no government action has
been taken or is in process that could subject any such site or
facility to such Liens in any case to the extent such Lien secured
obligations (or would secure obligations) in an amount in excess of
$500,000 and neither the Borrower nor any of its Subsidiaries would be
required to place any notice or restriction relating to the presence of
<PAGE>
-61-
Hazardous Materials at any site or facility owned by it in any deed to
the real Property on which such site or facility is located, which
would adversely affect the operation of any Park.
(g) All environmental investigations, studies, audits, tests,
reviews or other similar analyses conducted by or that are in the
possession of the Borrower or any of its Subsidiaries in relation to
facts, circumstances or conditions at or affecting any site or facility
now or previously owned, operated or leased by the Borrower or any of
its Subsidiaries and that could result in a Material Adverse Effect
have been made available to the Lenders, including the environmental
surveys and assessments set forth in Schedule III, Part 1.
8.09. Compliance with Laws and Agreements. The Borrower, SFEC
-----------------------------------
and SFH represent and warrant that each Obligor in compliance with all laws,
regulations and orders of any governmental authority applicable to it or its
Property and all indentures, agreements and other instruments binding upon it or
its Property, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
8.10. Investment Company Act. The Borrower, SFEC and SFH
----------------------
represent and warrant that no Obligor is an "investment company", or a company
"controlled" by an "investment company", within the meaning of the Investment
Company Act of 1940, as amended.
8.11. Public Utility Holding Company Act. The Borrower, SFEC
----------------------------------
and SFH represent and warrant that no Obligor is a "holding company", or an
"affiliate" of a "holding company" or a "subsidiary company" of a "holding
company", within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
8.12. Taxes. The Borrower, SFEC and SFH represent and warrant
-----
that the Obligors are members of an affiliated group of corporations filing
consolidated returns for Federal income tax purposes, of which the Holdings is
the "common parent" (within the meaning of Section 1504 of the Code) of such
group. Each Obligor has filed all Federal income tax returns and all other
material tax returns that are required to be filed by them and have paid all
taxes due pursuant to such returns or pursuant to any assessment received by any
Obligor. The charges, accruals and reserves on-the books of each Obligor in
respect of taxes and other governmental charges are, in the opinion of the
Borrower, SFEC and SFH, adequate.
8.13. ERISA. Each Plan, and, to the knowledge of the Borrower,
-----
each Multiemployer Plan, is in compliance in all material respects with, and has
been administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other Federal or State law, and no ERISA
Event has occurred and is continuing as to which the Borrower would be under an
obligation to furnish a report to the Lenders under Section 9.02(c).
8.14. True and Complete Disclosure. The Borrower, SFEC and SFH
----------------------------
represent and warrant that the information, reports, financial statements,
<PAGE>
-62-
exhibits and schedules furnished in writing by or on behalf of the Obligors to
the Administrative Agent or any Lender in connection with the negotiation,
preparation or delivery of this Agreement and the other Loan Documents or
included herein or therein or delivered pursuant hereto or thereto, when taken
as a whole (including the Information Memorandum) do not contain any untrue
statement of material fact or omit to state any material fact necessary to make
the statements herein or therein, in light of the circumstances under which they
were made, not misleading, provided that, with respect to projected financial
information, the Borrower represents only that such information was prepared in
good faith based upon assumptions believed to be reasonable at the time. All
written information furnished after the date hereof by any Obligor to the
Administrative Agent and the Lenders in connection with this Agreement and the
other Loan Documents and the transactions contemplated hereby and thereby will
be true, complete and accurate in every material respect, or (in the case of
projections) based on reasonable estimates, on the date as of which such
information is stated or certified. There is no fact known to the Borrower, SFEC
or SFH that could have a Material Adverse Effect that has not been disclosed
herein, in the other Loan Documents or in a report, financial statement,
exhibit, schedule, disclosure letter or other writing furnished to the Lenders
for use in connection with the transactions contemplated hereby or thereby.
8.15. Use of Credit. The Borrower, SFEC and SFH represent and
-------------
warrant that no Obligor is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose, whether
immediate, incidental or ultimate, of purchasing or carrying Margin Stock, and
no part of the proceeds of any Loan hereunder will be used to purchase or carry
any Margin Stock.
8.16. Debt Agreements and Liens.
-------------------------
(a) Part A of Schedule II is a complete and correct list of
each credit agreement, loan agreement, indenture, purchase agreement, guarantee,
letter of credit or other arrangement providing for or otherwise relating to any
Indebtedness to, or guarantee of Indebtedness by, the Borrower or any of its
Subsidiaries outstanding on the date hereof, the aggregate principal or face
amount of which equals or exceeds (or may equal or exceed) $100,000, and the
aggregate principal or face amount outstanding or that may become outstanding
under each such arrangement is correctly described in Part A of Schedule II; the
aggregate of all such Indebtedness, the principal or face amount of which is
under $100,000 and which is accordingly not so listed does not exceed $250,000.
(b) Part B of Schedule II is a complete and correct list of
each Lien securing Indebtedness of any Person outstanding on the date hereof,
the aggregate principal or face amount of which equals or exceeds (or may equal
or exceed) $100,000 and covering any Property of the Borrower or any of its
Subsidiaries, and the aggregate Indebtedness secured (or that may be secured) by
each such Lien and the Property covered by each such Lien is correctly described
in Part B of Schedule II.
8.17. Capitalization. The authorized capital stock of the
--------------
Borrower consists, on the date hereof, of an aggregate of 1,000 shares
consisting of (i) 1,000 shares of common stock, of which 755.2 shares were
<PAGE>
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issued and outstanding as of December 31, 1997 each of which shares is fully
paid and nonassessable. As of the date hereof, (x) except for (i) warrants held
by the chief executive officer of the Borrower and (ii) options issued pursuant
to employee plans, there are no outstanding Equity Rights with respect to the
Borrower and (y) there are no outstanding obligations of the Borrower or any of
its Subsidiaries to repurchase, redeem, or otherwise acquire any shares of
capital stock of the Borrower nor are there any outstanding obligations of the
Borrower or any of its Subsidiaries to make payments to any Person, such as
"phantom stock" payments, where the amount thereof is calculated with reference
to the fair market value or equity value of the Borrower or any of its
Subsidiaries.
8.18. Subsidiaries and Investments.
----------------------------
(a) Set forth in Part A of Schedule IV is a complete and
correct list of all of the Subsidiaries of the Borrower as of the date hereof
(including Inactive Subsidiaries which are listed under the heading "Inactive
Subsidiaries" but as to which the Borrower makes no other representation or
warranty under any provision of this Section 8), together with, for each such
Subsidiary, (i) the jurisdiction of organization of such Subsidiary, (ii) each
Person holding ownership interests in such Subsidiary and (iii) the nature of
the ownership interests held by each such Person and the percentage of ownership
of such Subsidiary represented by such ownership interests. Except as disclosed
in Part A of Schedule IV, as of the date hereof, (x) each of the Borrower and
its Subsidiaries owns, free and clear of Liens (other than Liens created
pursuant to the Security Documents), and has the unencumbered right to vote, all
outstanding ownership interests in each Person shown to be held by it in Part A
of Schedule IV, (y) all of the issued and outstanding capital stock of each such
Person organized as a corporation is validly issued, fully paid and
nonassessable and (z) there are no outstanding Equity Rights with respect to
such Person.
(b) Set forth in Part B of Schedule IV is a complete and
correct list of all Investments (other than Investments disclosed in Part A of
Schedule IV or of the type referred to in clauses (b), (c), (d) or (e) of
Section 9.08) held by the Borrower or any of its Subsidiaries in any Person on
the date hereof and, for each such Investment, (x) the identity of the Person or
Persons holding such Investment and (y) the nature of such Investment. Except as
disclosed in Part B of Schedule IV, each of the Borrower and its Subsidiaries
owns, free and clear of all Liens (other than Liens created pursuant to the
Security Documents), all such Investments.
(c) None of the Subsidiaries (other than Six Flags San
Antonio) of the Borrower is, on the date hereof, subject to any indenture,
agreement, instrument or other arrangement restricted in Section 9.15(c).
8.19. Parks; Real Property. Set forth in Part A of Schedule V
--------------------
is a complete and correct list of all of the amusement and attraction parks
owned by the Borrower and its Subsidiaries on the date hereof. Set forth in Part
B of Schedule V is a complete and correct list, as of the date hereof of all of
the real Property interests held by the Borrower and its Subsidiaries,
indicating in each case whether the respective Property is owned or leased, the
identity of the owner or lessee and the location of the respective Property.
<PAGE>
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8.20. Insurance. Set forth on Schedule VII is a complete and
---------
correct description of all insurance maintained by the Borrower and its
Subsidiaries as of the date hereof. As of the date hereof, all of such insurance
is in full force and effect and no premiums are past due in respect thereof.
8.21. Labor Matters. There are no strikes pending or
-------------
threatened against the Borrower or any Subsidiary other than strikes that could
not reasonably be expected to, individually or in the aggregate, result in a
Material Adverse Effect. Except as set forth on Schedule IX, the hours worked
and payment made to employees of the Borrower and each Subsidiary have not been
in violation in any respect of the Fair Labor Standards Act or any other similar
applicable law other than violations that could not reasonably be expected to,
individually or in the aggregate, result in a Material Adverse Effect. All
material payments due from the Borrower or any Subsidiary, or for which any
material claim may be made against the Borrower or any Subsidiary, on account of
wages and employee health and welfare insurance and other benefits have been
paid or accrued as a liability on the books of the Borrower or such Subsidiary.
The consummation of the transactions contemplated hereunder will not give rise
to a right of termination or right of renegotiation on the part of any union
under any collective bargaining agreement to which the Borrower or any
Subsidiary (or any predecessor) is a party or by which the Borrower or any
Subsidiary (or any predecessor) is bound, other than collective bargaining
agreements that, individually or in the aggregate, are not material to the
Borrower and the Subsidiaries taken as a whole.
8.22. Solvency. Immediately after the consummation of the
--------
transactions contemplated hereunder and immediately following the making of each
Loan made on the Closing Date and after giving effect to the application of the
proceeds of such Loans:
(i) the aggregate value of all Properties of the Borrower
and its Subsidiaries at their present fair saleable
value (i.e., the amount that may be realized within a
reasonable time, considered to be six months to one
year, either through collection or sale at the
regular market value, conceiving the latter as the
amount that could be obtained for the Property in
question within such period by a capable and diligent
businessman from an interested buyer who is willing
to purchase under ordinary selling conditions),
exceed the amount of all debts and liabilities
(including contingent, subordinated, unmatured and
unliquidated liabilities) of the Borrower and its
Subsidiaries;
(ii) the Borrower and its Subsidiaries will not, on a
consolidated basis, have an unreasonably small
capital with which to conduct their business
operations as heretofore conducted; and
(iii) the Borrower and its Subsidiaries will have, on a
consolidated basis, sufficient cash flow to enable
them to pay their debts as they mature.
<PAGE>
-65-
8.23. Year 2000 Issues. The Borrow and its Subsidiaries have
----------------
initiated a review of their operations with a view to assessing whether their
business or operations will, in the receipt, transmission, processing,
manipulation, storage, retrieval, retransmission or other utilization of data,
be vulnerable to any significant risk that computer hardware or software used in
their business or operations will not, in the case of dates or time periods
occurring after December 31, 1999, function at least as effectively as in the
case of dates or time periods occurring prior to January 1, 2000. Based on such
review, as of the date hereof, the Borrower has no reason to believe that a
Material Adverse Effect will occur with respect to such business or operations
resulting from any such risk.
Section 9. Covenants of the Borrower. The Borrower and, to the
-------------------------
extent expressly stated below, SFEC and SFH covenant and agree with the Lenders
and the Administrative Agent that, so long as any Commitment, Loan or Letter of
Credit Liability is outstanding and until payment in full of all amounts payable
by the Borrower hereunder:
9.01. Financial Statements and Other Information. The Borrower
------------------------------------------
shall deliver to each of the Lenders:
(a) as soon as available and in any event within 90 days
after the end of each fiscal year of the Borrower:
(x) consolidated statements of operations,
shareholders' equity and cash flows of the Borrower and its
Subsidiaries for such fiscal year and the related consolidated
balance sheets of the Borrower and its Subsidiaries as at the
end of such fiscal year, setting forth in each case in
comparative form the corresponding consolidated figures for
the preceding fiscal year, accompanied by an opinion thereon
of independent certified public accountants of recognized
national standing, which opinion shall state that such
consolidated financial statements fairly present the
consolidated financial condition and results of operations of
the Borrower and its Subsidiaries as at the end of, and for,
such fiscal year in accordance with generally accepted
accounting principles, and a statement of such accountants to
the effect that, in making the examination necessary for their
opinion, nothing came to their attention that caused them to
believe that the Borrower was not in compliance with Section
9.10, insofar as such Section relates to accounting matters,
(y) consolidating statements of operations of the
Borrower and its Subsidiaries for such fiscal year,
accompanied by a certificate of a Responsible Officer of the
Borrower, which certificate shall state that such
consolidating financial statements fairly present the
respective individual unconsolidated financial condition and
results of operations of the Borrower and of each of its
Subsidiaries, in each case in accordance with generally
accepted accounting principles, consistently applied, as at
the end of, and for, such fiscal year, and
<PAGE>
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(z) park-level statements of operating data
(including revenue and expense items and showing the
calculation of EBITDA, or equivalent, for the respective Park)
for such fiscal year for each of the Parks of the Borrower and
its Subsidiaries, in each case prepared in accordance with the
Borrower's internal accounting practices in form and detail
substantially similar to the corresponding statements set
forth in the Information Memorandum;
(b) as soon as available and in any event within 45 days after
the end of each quarterly fiscal period of each fiscal year of the
Borrower:
(x) consolidated statements of operations,
shareholders' equity and cash flows of the Borrower and its
Subsidiaries for such period and for the period from the
beginning of the respective fiscal year to the end of such
period, and the related consolidated balance sheets of the
Borrower and its Subsidiaries, as at the end of such period,
setting forth in each case in comparative form the
corresponding consolidated figures for the corresponding
periods in the preceding fiscal year (except that, in the case
of balance sheets, such comparison shall be to the last day of
the prior fiscal year), accompanied by a certificate of a
Responsible Officer of the Borrower, which certificate shall
state that such consolidated financial statements fairly
present the consolidated financial condition and results of
operations of the Borrower and its Subsidiaries, in each case
in accordance with generally accepted accounting principles,
consistently applied, as at the end of, and for, such period
(subject to normal year-end audit adjustments), and
(y) park-level statements of operating data
(including revenue and expense items and showing the
calculation of EBITDA, or equivalent, for the respective Park)
for the period from the beginning of such fiscal year to the
end of such fiscal quarter and setting forth in comparative
form the figures for the corresponding period in the preceding
fiscal year, in each case prepared in accordance with the
Borrower's internal accounting practices in form and detail
substantially similar to the corresponding statements set
forth in the Information Memorandum;
(c) concurrently with any delivery of financial statements
under clause (a) or (b) of this Section 9.01, a certificate of a
Responsible Officer of the Borrower (i) to the effect that no Default
has occurred and is continuing (or, if any Default has occurred and is
continuing, describing the same in reasonable detail and describing the
action that the Borrower has taken or proposes to take with respect
thereto) and (ii) setting forth in reasonable detail the computations
necessary to determine whether the Borrower was in compliance with
Sections 9.08(g), 9.08(i), 9.09 or 9.10 as of the end of the respective
quarterly fiscal period or fiscal year; provided that no such
--------
certificate shall be required to be delivered with the delivery of the
financial statements for the fiscal year and fiscal quarter ended
December 31, 1997;
<PAGE>
-67-
(d) promptly upon their becoming available, copies of all
registration statements and regular periodic reports, if any, that the
Borrower shall have filed with the Securities and Exchange Commission
(or any governmental agency substituted therefor) or any national
securities exchange;
(e) promptly upon receipt thereof, copies of any management
letters prepared by the Borrower's independent public accountants with
respect to the audit of the financial statements of the Borrower and
its Subsidiaries;
(f) within 31 days after the beginning of each fiscal year, a
detailed pro forma annual operating budget for such fiscal year in form
and detail satisfactory to the Administrative Agent;
(g) within five Business Days after the end of each of the
months of June, July, August, September and October, a performance
report detailing on a park-by-park basis attendance and revenue for the
preceding month and showing a comparison to budget and to the same
period in the prior year; and
(h) so long as financial statements are being prepared in
connection with the SFEC Notes or with respect to any other
Indebtedness of SFEC, SFEC shall deliver to each of the Lenders as soon
as available and in any event within 90 days after the end of each
fiscal year of SFEC:
(x) consolidated statements of operations,
shareholders' equity and cash flows of SFEC and its
Subsidiaries for such fiscal year and the related consolidated
balance sheets of SFEC and its Subsidiaries as at the end of
such fiscal year, setting forth in each case in comparative
form the corresponding consolidated figures for the preceding
fiscal year, accompanied by an opinion thereon of independent
certified public accountants of recognized national standing,
which opinion shall state that such consolidated financial
statements fairly present the consolidated financial condition
and results of operations of SFEC and its Subsidiaries as at
the end of, and for, such fiscal year in accordance with
generally accepted accounting principles, and
(y) consolidating statements of operations of SFEC
and its Subsidiaries for such fiscal year, accompanied by a
certificate of a Responsible Officer of SFEC, which
certificate shall state that such consolidating financial
statements fairly present the respective individual
unconsolidated financial condition and results of operations
of SFEC and of each of its Subsidiaries, in each case in
accordance with generally accepted accounting principles,
consistently applied, as at the end of, and for, such fiscal
year;
(i) so long as financial statements are being prepared in
connection with the SFEC Notes or with respect to any other
Indebtedness of SFEC, SFEC shall deliver to each of the Lenders as soon
as available and in any event within 45 days after the end of each
<PAGE>
-68-
quarterly fiscal period of each fiscal year of SFEC: consolidated
statements of operations, shareholders' equity and cash flows of SFEC
and its Subsidiaries for such period and for the period from the
beginning of the respective fiscal year to the end of such period, and
the related consolidated balance sheets of SFEC and its Subsidiaries,
as at the end of such period, setting forth in each case in comparative
form the corresponding consolidated figures for the corresponding
periods in the preceding fiscal year (except that, in the case of
balance sheets, such comparison shall be to the last day of the prior
fiscal year), accompanied by a certificate of a Responsible Officer of
SFEC, which certificate shall state that such consolidated financial
statements fairly present the consolidated financial condition and
results of operations of SFEC and its Subsidiaries, in each case in
accordance with generally accepted accounting principles, consistently
applied, as at the end of, and for, such period (subject to normal
year-end audit adjustments) provided that no such certificate shall be
--------
required to be delivered with the delivery of the financial statements
for the fiscal year and fiscal quarter ended December 31, 1997;
(j) from time to time such other information regarding the
financial condition, operations, business or prospects of the Borrower
or any of its Subsidiaries (including, without limitation, any Plan or
Multiemployer Plan and any reports or other information required to be
filed under ERISA), or compliance with the terms of this Agreement, as
any Lender or the Administrative Agent may reasonably request.
9.02. Notices of Material Events. The Borrower will furnish
--------------------------
the following to the Administrative Agent and each Lender in writing:
(a) promptly after any executive officer of the Borrower has
actual knowledge of facts that would give him or her reason to believe
that any Default has occurred, notice of such Default;
(b) as soon as any executive officer of the Borrower has
actual knowledge of the facts that would give him or her reason to know
of the occurrence thereof, prompt notice of all legal or arbitral
proceedings, and of all proceedings by or before any governmental or
regulatory authority or agency, and of any material development in
respect of such legal or other proceedings affecting the Borrower or
any of its Subsidiaries that, if adversely determined, could reasonably
be expected to result in aggregate liabilities or damages in excess of
$2,500,000.
(c) as soon as possible, and in any event within ten days
after the Borrower knows or has reason to believe that any ERISA Event
has occurred or exists, notice of the occurrence of such ERISA Event
and a copy of any report or notice required to be filed with or given
to the PBGC by the Borrower or an ERISA Affiliate with respect to such
ERISA Event, could reasonably be expected to result in aggregate
liabilities or damages in excess of $2,500,000.
<PAGE>
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(d) prompt notice of the assertion of any Environmental Claim
by any Person against, or with respect to the activities of, the
Borrower or any of its Subsidiaries and notice of any alleged violation
of or non-compliance with any Environmental Laws or any permits,
licenses or authorizations, other than any Environmental Claim or
alleged violation that, if adversely determined, would not (either
individually or in the aggregate) result in remediation costs of less
than $500,000 or adversely affect the operation of any Park; and
(e) prompt notice of any other development that results in, or
could reasonably be expected to result in, a Material Adverse Effect.
Each notice delivered under this Section 9.02 shall be accompanied by a
statement of a Responsible Officer or other executive officer of the Borrower
setting forth the details of the event or development requiring such notice and
any action taken or proposed to be taken with respect thereto.
9.03. Existence, Etc. The Borrower will, and will cause each
--------------
of its Subsidiaries to:
(a) preserve and maintain its legal existence and all material
permits, licenses and other governmental authorizations necessary to
enable it to operate each of its Parks (other than seasonal permits and
liquor licenses, which it anticipates will be obtained in the normal
course), provided that nothing in this Section 9.03 shall prohibit any
--------
transaction expressly permitted under Section 9.05;
(b) comply with the requirements of all applicable laws,
rules, regulations and orders of governmental or regulatory authorities
if failure to comply with such requirements could (either individually
or in the aggregate) have a Material Adverse Effect;
(c) pay and discharge all Federal income taxes and all other
material taxes, assessments and governmental charges or levies imposed
on it or on its income or profits or on any of its Property prior to
the date on which penalties attach thereto, except for any such tax,
assessment, charge or levy the payment of which is being contested in
good faith and by proper proceedings and against which adequate
reserves are being maintained;
(d) maintain and preserve all of its Properties material to
the conduct of the business and operations of the Borrower and its
Subsidiaries (taken as a whole) in good working order and condition;
(e) keep adequate records and books of account, in which
complete entries will be made in accordance with generally accepted
accounting principles consistently applied; and
<PAGE>
-70-
(f) permit representatives of any Lender or the Administrative
Agent, upon reasonable notice and during normal business hours, to
examine, copy and make extracts from its books and records, to inspect
any of its Properties, and to discuss its business and affairs with its
officers and the general managers of its Parks, all to the extent
reasonably requested by such Lender or the Administrative Agent (as the
case may be).
9.04. Insurance. The Borrower will, and will cause each of its
---------
Subsidiaries to, maintain insurance with financially sound and reputable
insurance companies, in amounts and against such losses and risks as the
Borrower shall from time to time reasonably determine is sufficient based upon
its experience and industry practice to protect the Borrower and its
Subsidiaries and their respective businesses, provided that the Borrower will in
any event maintain (with respect to itself and each of its Subsidiaries):
(1) Casualty Insurance--insurance against loss or damage
------------------
covering all of the tangible real and personal Property and
improvements of the Borrower and each of its Subsidiaries by reason of
any Peril (as defined below) in such amounts (subject to (x) in the
case of general liability policies, per occurrence deductibles (or
self-insurance retentions) not exceeding $250,000, and (y) in the case
of Property insurance deductibles, not exceeding $300,000 or, in each
case, such higher deductible as shall be reasonably satisfactory to the
Majority Lenders) as shall be reasonable and customary and sufficient
to avoid the insured named therein from becoming a co-insurer of any
loss under such policy but in any event in an amount (i) in the case of
fixed assets and equipment (including, without limitation, vehicles),
at least equal to 75% of the actual replacement cost of such assets
(including, without limitation, foundation, footings but excluding
excavation costs), subject to deductibles as aforesaid and (ii) in the
case of inventory, not less than the fair market value thereof, subject
to deductibles as aforesaid.
(2) Automobile Liability Insurance for Bodily Injury and
----------------------------------------------------
Property Damage--insurance against liability for bodily injury and
---------------
Property damage in respect of all vehicles (whether owned, hired or
rented by the Borrower or any of its Subsidiaries) at any time located
at, or used in connection with, its Properties or operations in such
amounts as are then customary for vehicles used in connection with
similar Properties and businesses, but in any event to the extent
required by applicable law.
(3) Comprehensive General Liability Insurance--insurance
-----------------------------------------
against claims for bodily injury, death or Property damage occurring
on, in or about the Properties (and adjoining streets, sidewalks and
waterways, but only to the extent of the legal liability of the
Borrower and its Subsidiaries therefor) of the Borrower and its
Subsidiaries, in such amounts as are then customary for Property
similar in use in the jurisdictions where such Properties are located
(subject to deductibles not exceeding $300,000, or such higher
deductible as shall be reasonably satisfactory to the Majority
Lenders).
(4) Workers' Compensation Insurance--workers, compensation
-------------------------------
insurance (including, without limitation, Employers' Liability
Insurance) to the extent required by applicable law.
<PAGE>
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(5) Product Liability Insurance--insurance against claims for
---------------------------
bodily injury, death or Property damage resulting from the use of
products sold by the Borrower or any of its Subsidiaries in such
amounts as are then customarily maintained by responsible persons
engaged in businesses similar to that of the Borrower and its
Subsidiaries (subject to deductibles not exceeding $300,000, or such
higher deductible as shall be reasonably satisfactory to the Majority
Lenders).
(6) Business Interruption Insurance--insurance against loss of
-------------------------------
operating income (in an aggregate amount not less than $40,000,000, as
to the Borrower and its Subsidiaries as a whole, and subject to a
deductible, or self-insured amount, not in excess of $300,000, or such
higher deductible as shall be reasonably satisfactory to the Majority
Lenders) by reason of any Peril.
Such insurance shall be written by financially responsible companies selected by
the Borrower and having an A. M. Best rating of "A-" or better and being in a
financial size category of VIII or larger, or by other companies reasonably
acceptable to the Majority Lenders, and (other than workers' compensation) shall
name the Administrative Agent as loss payee (to the extent covering risk of loss
or damage to tangible Property) and as an additional named insured as its
interests may appear (to the extent covering any other risk). Each policy
referred to in this Section 9.04 shall provide that it will not be canceled or
reduced, or allowed to lapse without renewal, except after not less than 30
days' notice to the Administrative Agent and shall also provide that the
interests of the Administrative Agent and the Lenders shall not be invalidated
by any act or negligence of the Borrower or any Person having an interest in any
Property covered by a mortgage in favor of the Administrative Agent nor by
occupancy or use of any such Property for purposes more hazardous than permitted
by such policy nor by any foreclosure or other proceedings relating to such
Property. The Borrower will advise the Administrative Agent promptly of any
policy cancellation, reduction or amendment.
On each date that is 10 days prior to the anniversary date
(the "Delivery Date") of any insurance policy of the Borrower or any of its
-------------
Subsidiaries (the "Anniversary Date") (commencing with the first September 15
----------------
after the date hereof), the Borrower will deliver to the Administrative Agent
certificates of insurance evidencing that all insurance required to be
maintained by the Borrower hereunder will be in effect through the next
Anniversary Date in the calendar year following the current Delivery Date,
subject only to the payment of premiums as they become due, provided that not
less than 45 days prior to such Anniversary Date the Borrower will provide
reasonable evidence to the Administrative Agent that it is in the process of
renewing such insurance policy for such period. In addition, the Borrower will
not modify any of the provisions of any policy with respect to casualty
insurance without delivering the original copy of the endorsement reflecting
such modification to the Administrative Agent accompanied by a written report of
AON Risk Services, Inc., or any other firm of independent insurance brokers of
nationally recognized standing, stating that, in their opinion, such policy (as
so modified) is in compliance with the provisions of this Section 9.04. The
Borrower will not obtain or carry separate insurance concurrent in form or
contributing in the event of loss with that required by this Section 9.04 unless
the Administrative Agent is the named insured thereunder, with loss payable as
provided herein. The Borrower will immediately notify the Administrative Agent
<PAGE>
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whenever any such separate insurance is obtained and shall deliver to the
Administrative Agent the certificates evidencing the same.
Without limiting the obligations of the Borrower under the
foregoing provisions of this Section 9.04, in the event the Borrower shall fail
to maintain in full force and effect insurance as required by the foregoing
provisions of this Section 9.04, then the Administrative Agent may, but shall
have no obligation so to do, procure insurance covering the interests of the
Lenders and the Administrative Agent in such amounts and against such risks as
the Administrative Agent (or the Majority Lenders) shall deem appropriate, and
the Borrower shall reimburse the Administrative Agent in respect of any premiums
paid by the Administrative Agent in respect thereof.
For purposes hereof, the term "Peril", means, collectively,
fire, lightning, flood, windstorm, hail, earthquake, explosion, riot and civil
commotion, vandalism and malicious mischief, damage from aircraft, vehicles and
smoke and all other perils covered by the "all-risk" endorsement then in use in
the jurisdictions where the Properties of the Borrower and its Subsidiaries are
located.
Notwithstanding the foregoing, the insurance maintained by the
Borrower and its Subsidiaries on the date hereof (as described on Schedule VII),
is deemed to be satisfactory to the Lenders, the Administrative Agent and the
Arranger, provided that upon the expiration or termination of such existing
--------
insurance the Borrower will, and will cause each of its Subsidiaries to,
maintain insurance in compliance with this Section 9.04.
9.05. Prohibition of Fundamental Changes.
----------------------------------
(a) Mergers. Neither SFEC, SFH nor the Borrower will, and the
-------
Borrower will not permit any of its Subsidiaries to, enter into any transaction
of merger or consolidation or amalgamation, or liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution, except that the Borrower may
liquidate or dissolve any Inactive Subsidiary), other than the Merger
Transactions.
(b) Restrictions on Acquisitions. The Borrower will not, nor
----------------------------
will it permit any of its Subsidiaries to, acquire any business or Property
from, or capital stock of, or be a party to any acquisition of, any Person
except for (i) purchases of inventory and other Property to be sold or used in
the ordinary course of business, (ii) Investments permitted under Sections
9.05(e) and 9.08(g) and (iii) Capital Expenditures (to the extent the making of
such Capital Expenditures will not result in a violation of any of the
provisions of Section 9.10).
(c) Restrictions on Sales. The Borrower will not, nor will it
---------------------
permit any of its Subsidiaries to consummate any Disposition.
(d) Sale and Leaseback. The Borrower will not, nor will it
------------------
permit any of its Subsidiaries to, enter into any transaction pursuant to which
it shall convey, sell, transfer or otherwise dispose of any Property and, as
part of the same transaction or series of transactions, rent or lease as lessee
<PAGE>
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or similarly acquire the right to possession or use of, such Property, or other
Property which it intends to use for the same purpose or purposes as such
Property, to the extent such transaction gives rise to Indebtedness, unless any
Indebtedness arising in connection with such transaction shall be permitted
under Section 9.07(d).
(e) Certain Permitted Transactions. Notwithstanding the
------------------------------
foregoing provisions of this Section 9.05:
(i) Intercompany Mergers. The Borrower may be merged or
--------------------
consolidated with or into SFH if the Borrower shall be the continuing
or surviving corporation and the capital stock of the Borrower will be
pledged pursuant to a pledge agreement substantially in the form of the
Pledge Agreement entered into by SFH (or an amendment to the Pledge
Agreement in form and substance satisfactory to the Administrative
Agent), and any Subsidiary of the Borrower may be merged or
consolidated with or into: (i) the Borrower if the Borrower shall be
the continuing or surviving corporation or (ii) any other Subsidiary of
the Borrower; provided that if any such transaction shall be between a
--------
Subsidiary and a Wholly Owned Subsidiary, the Wholly Owned Subsidiary
shall be the continuing or surviving corporation.
(ii) Intercompany Dispositions. The Borrower or any Subsidiary
-------------------------
of the Borrower may sell, lease, transfer or otherwise dispose of any
or all of its Property (upon voluntary liquidation or otherwise) to the
Borrower or a Wholly Owned Subsidiary of the Borrower.
(iii) Subsequent Acquisitions. The Borrower or any Wholly
-----------------------
Owned Subsidiary of the Borrower may acquire any amusement or
attraction park, and the related assets, of any other Person (whether
by way of purchase of assets or stock, by merger or consolidation or
otherwise) after the date hereof with the proceeds of issuances of
equity or equity contributions from SFEC or SFH (each, a "Subsequent
----------
Acquisition"), so long as:
-----------
(A) such Subsequent Acquisition (if by purchase of
assets, merger or consolidation) shall be effected in such
manner so that the acquired business, and the related assets,
are owned either by the Borrower or a Wholly Owned Subsidiary
of the Borrower and, if effected by merger or consolidation
involving the Borrower, the Borrower shall be the continuing
or surviving entity and, if effected by merger or
consolidation involving a Wholly Owned Subsidiary of the
Borrower, a Wholly Owned Subsidiary shall be the continuing or
surviving entity;
(B) the Borrower shall deliver to the Administrative
Agent (which shall promptly forward copies thereof to each
Lender (i) as soon as possible and in any event no later than
ten days prior to the consummation of each such Subsequent
Acquisition (or such earlier date as shall be five Business
Days after the execution and delivery thereof), copies of the
respective agreements or instruments pursuant to which such
Subsequent Acquisition is to be consummated (including,
<PAGE>
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without limitation, any related management, non-compete,
employment, option or other material agreements), any
schedules to such agreements or instruments and all other
material ancillary documents to be executed or delivered in
connection therewith and (ii), promptly following request
therefor (but in any event within three Business Days
following such request), copies of such other information or
documents (including, without limitation, environmental risk
assessments) relating to such Subsequent Acquisition as the
Administrative Agent or the Majority Lenders shall have
reasonably requested (and which is available, or obtainable
within such period by the Borrower with reasonable efforts);
(C) to the extent applicable, the Borrower shall have
complied with the provisions of Section 9.15, including,
without limitation, to the extent not theretofore delivered,
delivery to the Administrative Agent of (x) the certificates
evidencing the capital stock of any new Subsidiary formed or
acquired in connection with such Subsequent Acquisition,
accompanied by undated stock powers executed in blank, and (y)
the agreements, instruments, opinions of counsel and other
documents required under Section 9.15;
(D) to the extent requested by the Borrower, the
Borrower and the Majority Lenders shall have agreed to a
supplement to Schedule VIII setting forth pro forma
adjustments to be made in determining EBITDA after giving
effect to such Subsequent Acquisition; and
(E) immediately prior to such Subsequent Acquisition
and after giving effect thereto, no Default shall have
occurred and be continuing.
(iv) Partnership Transfers. The Borrower may consummate any of
---------------------
the Partnership Transfers.
9.06. Negative Pledge. Neither SFEC nor the Borrower will and
---------------
the Borrower will not permit any of its Subsidiaries to, create, incur, assume
or suffer to exist any Lien upon any of their respective Property, or assets
(including stock or other securities of any person, including any subsidiary)
now owned or hereafter acquired by it or on any income or rights in respect of
any thereof, except:
(a) Liens created pursuant to the Security Documents;
(b) Liens in existence on the date hereof and listed in Part B
of Schedule II and any extension, renewal or replacement thereof,
provided that such extension, renewal or replacement does not increase
--------
the outstanding principal amount of the Indebtedness secured thereby
except by the amount of any costs associated therewith;
(c) Liens imposed by any governmental authority for taxes,
assessments or charges not yet due or that are being contested in good
<PAGE>
-75-
faith and by appropriate proceedings if adequate reserves with respect
thereto are maintained on the books of the Borrower or the affected
Subsidiaries, as the case may be, in accordance with GAAP;
(d) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, landlord's or other like Liens arising in the ordinary
course of business that are not overdue for a period of more than 30
days or that are being contested in good faith and by appropriate
proceedings, and Liens securing judgments but only to the extent for an
amount and for a period not resulting in an Event of Default under
clause (j) of Section 10;
(e) pledges or deposits under workers' compensation,
unemployment insurance and other social security legislation (other
than ERISA);
(f) deposits to secure the performance of bids, trade
contracts (other than for Indebtedness), leases (including any
precautionary Uniform Commercial Code financing statements filed by a
lessor with respect to any equipment lease), statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a
like nature incurred in the ordinary course of business;
(g) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and
encumbrances consisting of zoning restrictions, easements, licenses,
restrictions on the use of Property or minor imperfections in title
thereto that, in the aggregate, are not material in amount, and that do
not in any case materially detract from the value of the Property
subject thereto or interfere in any material respect with the ordinary
conduct of the business of the Borrower or any of its Subsidiaries; and
(h) Liens securing Purchase Money Indebtedness or Capital
Lease Obligations to the extent such Indebtedness is permitted to be
incurred under Section 9.07(d).
9.07. Indebtedness. The Borrower will not, nor will it
------------
permit any of its Subsidiaries to, create, incur or suffer to exist any
Indebtedness except:
(a) Indebtedness to the Lenders hereunder;
(b) Indebtedness outstanding on the date hereof and listed in
Part A of Schedule II, and any Indebtedness incurred to refinance any
such outstanding Indebtedness, provided that such refinancing
--------
Indebtedness does not exceed the amount of Indebtedness being so
refinanced and any costs associated with such refinancing;
(c) Indebtedness of the Borrower or any Subsidiaries of the
Borrower to the Borrower or to other Subsidiaries of the Borrower, and
Guarantees by the Borrower or any of its Wholly Owned Subsidiaries of
obligations of the Borrower or any of its Wholly Owned Subsidiaries;
<PAGE>
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(d) Indebtedness consisting of Purchase Money Indebtedness and
Capital Lease Obligations incurred after the date hereof in an
aggregate amount not in excess of $35,000,000 at any time outstanding;
and
(e) Indebtedness under any Refinancing Notes in an aggregate
principal amount at any time outstanding not in excess of the aggregate
principal amount of Discount Notes outstanding on the Closing Date
(less principal repaid after the Closing Date) and costs, expenses or
premiums incurred in connection with such Refinancing Notes; so long as
(i) the effective interest rate in respect of the Refinancing Notes is
not greater than the effective interest rate in respect of the Discount
Notes, (ii) the covenants, events of default and mandatory redemption,
repurchase or prepayment provisions contained in the Refinancing Notes
Indenture are not materially more burdensome on the Borrower and its
Subsidiaries than those contained in the Discount Notes Indenture,
(iii) the Refinancing Notes are unsecured, (iv) the final maturity, and
weighted average life to maturity, of the Refinancing Notes are not
earlier than the corresponding maturity of the Discount Notes, (v) the
subordination terms applicable to such Refinancing Notes are not less
favorable to the Lenders than those contained in the Discount Notes
Indenture, (vi) none of the Subsidiaries of the Borrower are
contingently or otherwise obligated in respect thereof except to the
extent they were obligated on the original debt being refinanced, (vii)
the other provisions of the Refinancing Notes would not be materially
less favorable to the Lenders or the Administrative Agent than the
corresponding provisions of the Discount Notes, (viii) at the time of
issuance of such Refinancing Notes and after giving effect thereto and
to the application of the proceeds thereof, the Borrower shall be in
compliance with Section 9.10 (the determination of compliance with such
ratios to be calculated on a pro forma basis as if the Indebtedness
with respect to such Refinancing Notes were incurred and the proceeds
thereof were so applied, in each case, at the beginning of such period,
and the Administrative Agent shall have received a certificate of a
Responsible Officer of the Borrower to such effect setting forth in
reasonable detail the computations necessary to determine such
compliance) and (ix) immediately prior thereto and after giving effect
to the incurrence thereof, no Default shall have occurred and be
continuing, and the Administrative Agent shall have received a
certificate of a Responsible Officer of the Borrower to such effect.
9.08. Investments. The Borrower will not, nor will it permit
-----------
any of its Subsidiaries to, make or permit to remain outstanding any Investments
except:
(a) Investments outstanding on the date hereof and identified
in Part B of Schedule IV;
(b) operating deposit accounts with banks;
(c) Permitted Investments;
(d) Investments by the Borrower and its Wholly Owned
Subsidiaries in the Borrower's Wholly Owned Subsidiaries, including
Guarantees by the Borrower or any of its Wholly Owned Subsidiaries of
<PAGE>
-77-
obligations of the Borrower or any of its Wholly Owned Subsidiaries,
provided that the Borrower shall not form or acquire any Subsidiary
that is organized under the laws of a jurisdiction other than the
United States of America or any state thereof;
(e) Hedging Agreements, provided that when entering into any
--------
Hedging Agreement that at the time has, or at any time in the future
may give rise to, any credit exposure, the aggregate credit exposure
under all Hedging Agreements (including the Hedging Agreement being
entered into) shall not exceed $2,500,000;
(f) Disposition Investments received in connection with any
Disposition permitted under Section 9.05 or any Disposition to which
the Lenders shall have consented in accordance with Section 12.03;
(g) Investments consisting of acquisitions permitted under
Section 9.05(e)(iii), including, without limitation, investments in
connection with the acquisition of the Property and/or ownership
interests in SFF or San Antonio Park GP not owned by the Borrower or
any of its Subsidiaries (other than SFF); provided that, until SFF is
--------
wholly owned by the Borrower and its Subsidiaries (other than SFF),
Investments by the Borrower and its Subsidiaries (other than SFF) in
SFF and San Antonio Park GP shall not exceed $20,000,000 in the
aggregate;
(h) additional Investments up to but not exceeding $25,000,000
in the aggregate; provided that at the time of the making of such
--------
Investment, no Default shall have occurred or be continuing;
(i) loans to officers, directors and employees of the Borrower
or any of its Subsidiaries in an aggregate amount (as to all such
officers, director and employees) up to $1,000,000 at any one time
outstanding; and
(j) in connection with the Six Flags Merger, (i) a loan by the
Borrower to SFOG Acquisition A Holdings, Inc. and the dividend of such
loan receivable by the Borrower to SFH and (ii) a loan by the Borrower
to SFT Holdings Inc. and the dividend of such loan receivable to SFH.
9.09. Restricted Payments. The Borrower will not, nor will it
-------------------
permit any of its Subsidiaries to, declare or make any Restricted Payment after
the consummation of the Six Flags Merger, except that so long as at the time
thereof and after giving effect thereto no Default shall have occurred and be
continuing:
(a) the Borrower may make Restricted Payments to SFH (which in
turn shall make a dividend payment to SFEC) to enable SFEC to meet
scheduled cash interest obligations with respect to the SFEC Senior
Notes;
<PAGE>
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(b) the Borrower may make Restricted Payments to Holdings or
to SFH in cash (which in turn shall make a dividend payment to SFEC,
which in turn shall make a dividend payment to Holdings) to enable
Holdings to pay out-of-pocket accounting fees, legal fees and other
administrative expenses incurred in the ordinary course of business
pursuant to any shared services allocation agreements;
(c) the Borrower may make Restricted Payments to Holdings or
to SFH (which in turn shall make a dividend payment to SFEC, which in
turn shall make a dividend payment to Holdings) in respect of income
tax liabilities of the Borrower and its Subsidiaries in accordance with
the tax sharing agreement entered into at the time of the Six Flags
Merger;
(d) the Borrower may make a one-time Restricted Payment to SFH
(which in turn shall make a dividend payment to SFEC, which in turn
shall make a dividend payment to Holdings) not to exceed $10,000,000 on
the date of the consummation of the Six Flags Merger; and
(e) the Borrower may make the Restricted Payments permitted
under Section 9.08(j).
9.10. Certain Financial Covenants.
---------------------------
(a) Leverage Ratio. The Borrower will not permit the Leverage
--------------
Ratio to exceed the following respective ratios as at the last day of any fiscal
quarter during any of the following respective periods:
Period Ratio
------ -----
From the Closing Date
through September 29, 1999 5.50 to 1
From September 30, 1999
through September 29, 2000 5.25 to 1
From September 30, 2000
through September 29, 2001 4.50 to 1
From September 30, 2001
and at all times thereafter 4.00 to 1
(b) Senior Secured Debt Ratio. The Borrower will not permit
-------------------------
the Senior Secured Debt Ratio to exceed the following respective ratios as at
the last day of any fiscal quarter during any of the following respective
periods:
<PAGE>
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Period Ratio
------ -----
From the Closing Date
through September 29, 1999 3.75 to 1
From September 30, 1999
through September 29, 2000 3.25 to 1
From September 30, 2000
through September 29, 2001 2.75 to 1
From September 30, 2001
and at all times thereafter 2.50 to 1
(c) Interest Coverage Ratio. The Borrower will not permit the
-----------------------
Interest Coverage Ratio to be less than the following respective ratios as at
the last day of any fiscal quarter during any of the following respective
periods:
Period Ratio
------ -----
From the Closing Date
through September 29, 1999 2.00 to 1
From September 30, 1999
through September 29, 2000 2.25 to 1
From September 30, 2000
through September 29, 2001 2.50 to 1
From September 30, 2001
through September 29, 2002 2.75 to 1
From September 30, 2002
and at all times thereafter 3.00 to 1
(d) Fixed Charges Coverage Ratio. The Borrower will not permit
----------------------------
the Fixed Charges Ratio to be less than the following respective ratios as at
the last day of any fiscal quarter during any of the following respective
periods:
Period Ratio
------ -----
From the Closing Date
through September 29, 2000 1.00 to 1
From September 30, 2000
and at all times thereafter 1.10 to 1
<PAGE>
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9.11. Subordinated Indebtedness. Neither SFEC nor the Borrower
-------------------------
will, nor will the Borrower permit any of its Subsidiaries to, purchase, redeem,
retire or otherwise acquire for value, or set apart any money for a sinking,
defeasance or other analogous fund for the purchase, redemption, retirement or
other acquisition of, or make any voluntary payment or prepayment of the
principal of or interest on, or any other amount owing in respect of the SFEC
Senior Notes, the Discount Notes or the Refinancing Notes except for regularly
scheduled payments of principal and interest in respect thereof required
pursuant to the instruments evidencing the same (but in any event subject to any
applicable subordination terms set forth therein).
9.12. Lines of Business. Neither the Borrower nor SFEC will
-----------------
and the Borrower will not permit any of its Subsidiaries to, engage to any
substantial extent in any line or lines of business activity other than the
business of owning and operating amusement and attraction parks, and businesses
related, ancillary or complementary thereto.
9.13. Transactions with Affiliates. Except as expressly
----------------------------
permitted by this Agreement, the Borrower will not, nor will it permit any of
its Subsidiaries to, directly or indirectly: (a) make any Investment in an
Affiliate (other than Investments permitted under Sections 9.08(d) and 9.08(g));
(b) transfer, sell, lease, assign or otherwise dispose of any Property to an
Affiliate; (c) merge into or consolidate with or purchase or acquire Property
from an Affiliate; or (d) enter into any other transaction directly or
indirectly with or for the benefit of an Affiliate (including, without
limitation, Guarantees and assumptions of obligations of an Affiliate); provided
--------
that (w) any Affiliate who is an individual may serve as a director, officer or
employee of the Borrower or any of its Subsidiaries and receive reasonable
compensation for his or her services in such capacity , (x) the Borrower and its
Subsidiaries may enter into transactions (other than extensions of credit by the
Borrower or any of its Subsidiaries to an Affiliate) providing for the leasing
of Property, the rendering or receipt of services or the purchase or sale of
inventory and other Property in the ordinary course of business if the monetary
or business consideration arising therefrom would be substantially as
advantageous to the Borrower and its Subsidiaries as the monetary or business
consideration that would obtain in a comparable transaction with a Person not an
Affiliate, (y) the Borrower and its Subsidiaries may enter into shared services
allocation agreements and tax sharing agreements referred to in Section 9.09(c)
and 9.09(d) and (z) SFEC and its Subsidiaries may consummate the Six Flags
Merger and all related transactions (including, without limitation, the
Partnership Transfers).
9.14. Use of Proceeds, Etc. The Borrower will use the proceeds
--------------------
of the Loans hereunder to refinance existing indebtedness, to provide funds for
the payment of certain dividends permitted under Section 9.09, and to finance
general corporate purposes, including working capital and for Capital
Expenditures and acquisitions permitted hereunder (in compliance with all
applicable legal and regulatory requirements, including, without limitation,
Regulations G, T, U and X and the Securities Act of 1933 and the Securities
Exchange Act of 1934 and the regulations thereunder); provided that neither the
--------
Administrative Agent nor any Lender shall have any responsibility as to the use
of any of such proceeds.
<PAGE>
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9.15. Certain Further Assurances.
--------------------------
(a) Subsidiary Guarantors. The Borrower will take such action,
---------------------
and will cause each of its Subsidiaries to take such action, from time to time
as shall be necessary to ensure that all Subsidiaries of the Borrower (other
than ANIC, SFF and any Inactive Subsidiary) are "Subsidiary Guarantors"
----
hereunder. Without limiting the generality of the foregoing, in the event that
the Borrower or any of its Subsidiaries shall form or acquire any new Subsidiary
(other than any Inactive Subsidiary) that shall constitute a Subsidiary
hereunder or in the event that any Inactive Subsidiary shall cease to be an
Inactive Subsidiary or in the event that SFF shall become a Wholly Owned
Subsidiary, the Borrower and its Subsidiaries will, and will cause such new
Subsidiary or former Inactive Subsidiary or SFF, as the case may be, to:
(i) become a "Subsidiary Guarantor" hereunder, and a "Securing
Party" under the Security Agreement pursuant to a Guarantee Assumption
Agreement;
(ii) take such action (including, without limitation,
delivering such shares of stock, executing and delivering such Uniform
Commercial Code financing statements and executing and delivering
mortgages or deeds of trust covering the real Property (including
fixtures owned or leased) and fixtures owned or leased by such
Subsidiary) as shall be necessary to create and perfect valid and
enforceable first priority Liens on substantially all of the Property
of such Subsidiary as collateral security for the obligations of such
Subsidiary hereunder and on the capital stock or other ownership
interest of such Subsidiary under the Security Agreement; and
(iii) deliver such proof of corporate action, incumbency of
officers, opinions of counsel and other documents as is consistent with
those delivered by each Obligor pursuant to Section 7.01 or as the
Administrative Agent shall have reasonably requested.
In addition, upon the formation or acquisition of any new
Subsidiary, the Borrower and its Subsidiaries will take such action as shall be
necessary so that all shares of capital stock or other ownership interests in
such Subsidiary are pledged to the Administrative Agent under the Security
Agreement.
(b) Ownership of Subsidiaries. The Borrower will, and will
-------------------------
cause each of its Subsidiaries to, take such action from time to time as shall
be necessary to ensure that each of its Subsidiaries (other than ANIC, SFF or
----
any Inactive Subsidiary) is a Wholly Owned Subsidiary. Without limiting the
generality of the requirements of paragraph (a) above, in the event that any
additional shares of stock shall be issued by any Subsidiary, the respective
Obligor agrees forthwith to deliver to the Administrative Agent pursuant to the
Security Agreement the certificates evidencing such shares of stock, accompanied
by undated stock powers executed in blank and to take such other action as the
Administrative Agent shall request to perfect the security interest created
therein pursuant to the Security Agreement.
(c) Certain Restrictions. The Borrower will not permit any of
--------------------
its Subsidiaries to enter into, after the date hereof, any indenture, agreement,
instrument or other arrangement that, directly or indirectly, prohibits or
<PAGE>
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restrains, or has the effect of prohibiting or restraining, or imposes
materially adverse conditions upon, the incurrence or payment of Indebtedness,
the granting of Liens, the declaration or payment of dividends, the making of
loans, advances or Investments or the sale, assignment, transfer or other
disposition of Property, other than any such prohibition or restraint (i) set
forth in any agreement providing for the disposition of Property (so long as
such prohibition or restraint relates only to the Property to be disposed of),
(ii) set forth in any of the Loan Documents, (iii) set forth in the terms of the
Senior Subordinated Notes Indentures as in effect on the date hereof or in any
Refinancing Notes Indentures so long as the terms thereof are not more
restrictive than such Senior Subordinated Notes Indentures, (iv) upon the
granting of liens on the rights under the License Agreement or (v) set forth in
any real Property lease agreement, licenses or contracts entered into in the
ordinary course of business which by their terms prohibit an assignment to the
extent that such prohibition or restraint could not reasonably be expected to
result in a Material Adverse Effect.
(d) Mortgages and Title Insurance. The Borrower agrees and
-----------------------------
agrees to cause its Subsidiaries to deliver to the Administrative Agent the
following documents within 90 days after the Closing Date, each of which shall
be executed (and, where appropriate, acknowledged) by Persons satisfactory to
the Administrative Agent:
(i) Mortgages covering the real Property interests of the
Borrower and its Subsidiaries with respect to the Existing Parks (other
than the Park known as Six Flags Fiesta Texas) identified in Part B of
Schedule V, in each case duly executed and delivered by the respective
Obligor holding such interests in recordable form (in such number of
copies as the Administrative Agent shall have requested) and, to the
extent necessary with respect to any leasehold Property to be subjected
to a Mortgage, consents of the respective landlords with respect to
such Property;
(ii) one or more mortgagee policies of title insurance on
forms of and issued by First American Heritage Title Company (the
"Title Company"), insuring the validity and priority of the Liens
-------------
created under the Mortgages for and in amounts satisfactory to the
Administrative Agent, subject only to such exceptions as are
satisfactory to the Administrative Agent and, to the extent necessary
under applicable law, for filing in the appropriate county land
offices, Uniform Commercial Code financing statements covering
fixtures, in each case appropriately completed and duly executed;
(iii) if requested by the Administrative Agent, as-built
surveys of recent date of each of the facilities to be covered by the
Mortgages, showing such matters as may be required by the
Administrative Agent, which surveys shall be in form and content
acceptable to the Administrative Agent, and certified to the
Administrative Agent and to each Lender and the Title Company, and
shall have been prepared by a registered surveyor acceptable to the
Administrative Agent;
(iv) if requested by the Administrative Agent, certified
copies of permanent and unconditional certificates of occupancy (or, if
it is not the practice to issue certificates of occupancy in the
jurisdiction in which the facilities to be covered by the Mortgages are
<PAGE>
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located, then such other evidence reasonably satisfactory to the
Administrative Agent) permitting the fully functioning operation and
occupancy of the facility of the respective Obligor located on each
such real Property interest, and of such other permits necessary for
the use and operation of each such facility issued by the respective
governmental authorities having jurisdiction over each such facility;
and
(v) opinion(s), dated the date of the execution and delivery
of the relevant Mortgage, of local counsel in the respective states in
which the Properties covered by the Mortgages are located, in form and
substance satisfactory to the Administrative Agent, and covering such
matters as the Administrative Agent may reasonably request (and each
Obligor hereby instructs such counsel to deliver such opinion(s) to the
Lenders and the Administrative Agent).
In addition, the Borrower shall concurrently with the execution and delivery of
the Mortgages pay to the Title Company all expenses and premiums of the Title
Company in connection with the issuance of such policies and in addition shall
pay to the Title Company an amount equal to the recording and stamp taxes
payable in connection with recording the Mortgages in the appropriate county
land office(s).
9.16. Modifications of Certain Documents. Neither SFEC, SFH
----------------------------------
nor the Borrower will, without in each case the prior consent of the
Administrative Agent (with the approval of the Majority Lenders), consent to any
modification, supplement or waiver of:
(a) any of the provisions of any agreement,
instrument or other document evidencing or relating to Subordinated
Indebtedness;
(b) any provision of (i) the Senior Subordinated
Notes Indentures or (ii) the SFEC Senior Notes Indenture;
(c) its articles of incorporation or by-laws (other
than for purposes of reducing the authorized capital stock of
the Borrower);
(d) any provision of any real Property lease with
respect to any Park, the Merger Agreement, the Indemnity
Agreement, the License Agreement or any Subsequent Acquisition
Agreement, if (in the case of this clause (d)) such
modification, supplement or waiver would have a material
adverse effect upon the Lenders or the Administrative Agent.
Section 10. Events of Default. If one or more of the
-----------------
following events (herein called "Events of Default") shall occur and be
-----------------
continuing:
(a) the Borrower shall default in the payment when due
(whether at stated maturity or at mandatory or optional prepayment) of
any principal of any Loan or Reimbursement Obligation, or shall default
for three or more Business Days in the payment when due of any interest
<PAGE>
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on any Loan or any fee or any other amount payable by it hereunder or
under any other Loan Document;
(b) any representation, warranty or certification made or
deemed made herein or in any other Loan Document (or in any
modification or supplement hereto or thereto) by any Obligor, or any
certificate furnished to any Lender, the Administrative Agent or the
Arranger pursuant to the provisions hereof or thereof, shall prove to
have been false or misleading as of the time made or furnished in any
material respect; or any representation or warranty made in the Merger
Agreement shall prove to have been false or misleading as of the time
made or furnished, in any such case that would (either individually or
in the aggregate) materially adversely affect the operations of any
Park or have a Material Adverse Effect; provided that, to the extent
--------
that the Borrower or any of its Subsidiaries is indemnified against any
loss or liability incurred as a result of a representation or warranty
made in the Merger Agreement that proves to be false or misleading and
the party providing such indemnity agrees to indemnify the Borrower or
any of its Subsidiaries for such loss or liability, the effect of such
indemnity shall be considered in determining whether there has been a
Material Adverse Effect.
(c) the Borrower shall default in the performance of any of
its obligations under any of Sections 9.02(a), 9.05, 9.06, 9.07, 9.08,
9.09, 9.10, 9.11, 9.13, 9.14, 9.15 or 9.16 or any Obligor shall default
in the performance of any of its obligations under Section 4.02 of the
Security Agreement;
(d) any Obligor shall fail to observe or perform any covenant,
condition or agreement contained in this Agreement (other than those
specified in clause (a) or (c) of this Section 10) or any other Loan
Document and such failure shall continue unremedied for a period of 30
days after notice thereof to the Borrower by the Administrative Agent
or any Lender (through the Administrative Agent);
(e) the Borrower or any of its Subsidiaries shall default in
the payment when due of any principal of or interest on any of its
other Indebtedness aggregating $5,000,000 or more; or any Obligor shall
default in the payment when due of any amount aggregating $5,000,000 or
more under any Hedging Agreement;
(f) any event specified in any note, agreement, indenture or
other document evidencing or relating to any other Indebtedness
aggregating $5,000,000 or more of any Obligor shall occur if the effect
of such event is to cause, or (with the giving of any notice or the
lapse of time or both) to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or
holders) to cause, such Indebtedness to become due, or to be prepaid in
full (whether by redemption, purchase, offer to purchase or otherwise),
prior to its stated maturity or to have the interest rate thereon reset
to a level so that securities evidencing such Indebtedness trade at a
level specified in relation to the par value thereof; or any event
specified in any Hedging Agreement shall occur if the effect of such
event is to cause, or (with the giving of any notice or the lapse of
<PAGE>
-85-
time or both) to permit, termination or liquidation payment or payments
aggregating $5,000,000 or more to become due;
(g) a proceeding or case shall be commenced, without the
application or consent of SFEC, SFH or Borrower or any of its
Subsidiaries, in any court of competent jurisdiction, seeking (i) its
reorganization, liquidation, dissolution, arrangement or winding-up, or
the composition or readjustment of its debts, (ii) the appointment of a
receiver, custodian, trustee, examiner, liquidator or the like of the
Borrower or such Subsidiary or of all or any substantial part of its
Property, or (iii) similar relief in respect of SFEC, SFH or Borrower
or such Subsidiary under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, and
such proceeding or case shall continue undismissed, or an order,
judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of 60 or more
days; or an order for relief against SFEC, SFH or Borrower or any of
its Subsidiaries shall be entered in an involuntary case under the
Bankruptcy Code or any other applicable bankruptcy, insolvency or
similar laws;
(h) SFEC, SFH or Borrower or any of its Subsidiaries shall (i)
apply for or consent to the appointment of, or the taking of possession
by, a receiver, custodian, trustee, examiner or liquidator of itself or
of all or a substantial part of its Property, (ii) make a general
assignment for the benefit of its creditors, (iii) commence a voluntary
case under the Bankruptcy Code or any other applicable bankruptcy,
insolvency or similar laws, (iv) file a petition seeking to take
advantage of any other law relating to bankruptcy, insolvency,
reorganization, liquidation, dissolution, arrangement or winding-up, or
composition or readjustment of debts, (v) fail to controvert in a
timely and appropriate manner, or acquiesce in writing to, any petition
filed against it in an involuntary case under the Bankruptcy Code or
any other applicable bankruptcy, insolvency or similar laws or take any
corporate action for the purpose of effecting any of the foregoing;
(i) SFEC, SFH or Borrower or any of its Subsidiaries shall
admit in writing its inability to, or be generally unable to, pay its
debts as such debts become due;
(j) a final judgment or judgments for the payment of money of
$5,000,000 or more in the aggregate (exclusive of judgment amounts
fully covered by insurance) or of $15,000,000 or more in the aggregate
(regardless of insurance coverage) shall be rendered by one or more
courts, administrative tribunals or other bodies having jurisdiction
against the Borrower or any of its Subsidiaries and the same shall not
be discharged (or provision shall not be made for such discharge), or a
stay of execution thereof shall not be procured, within 60 days from
the date of entry thereof and the Borrower or the relevant Subsidiary
shall not, within such period of 60 days, or such longer period during
which execution of the same shall have been stayed, appeal therefrom
and cause the execution thereof to be stayed during such appeal;
<PAGE>
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(k) an event or condition specified in Section 9.02(c) shall
occur or exist with respect to any Plan or Multiemployer Plan and, as a
result of such event or condition, together with all other such events
or conditions, the Borrower or any ERISA Affiliate shall incur or in
the opinion of the Majority Lenders shall be reasonably likely to incur
a liability to a Plan, a Multiemployer Plan or the PBGC (or any
combination of the foregoing) that, in the determination of the
Majority Lenders, would (either individually or in the aggregate) have
a Material Adverse Effect;
(l) there shall have been asserted against the Borrower or any
of its Subsidiaries an Environmental Claim that, in the judgment of the
Majority Lenders, is reasonably likely to be determined adversely to
the Borrower or any of its Subsidiaries, and the amount thereof (either
individually or in the aggregate) is reasonably likely to have a
Material Adverse Effect (insofar as such amount is payable by the
Borrower or any of its Subsidiaries but after deducting any portion
thereof that is reasonably expected to be paid by other creditworthy
Persons liable in whole or in part therefor);
(m) any one or more of the following shall occur and be
continuing:
(i) any "Person" (as such term is used in Sections
13(d) and 14(d) of the Securities and Exchange Act of 1934
(the "Exchange Act") is or becomes the beneficial owner (as
------------
defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of more
than 35% of the voting stock of the Borrower;
(ii) during any period of two consecutive years,
individuals who at the beginning of such period constituted
the Board of Directors of the Borrower (together with any new
directors whose election by such Board of Directors or whose
nomination for election by the Borrower's shareholders was
approved by a vote of a majority of the Borrower's directors
then still in office who either were directors at the
beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to
constitute a majority of the Borrower's directors then in
office;
(iii) any change in control with respect to the
Borrower (or similar event, however denominated) shall occur
under and as defined in any indenture or other agreement in
respect of Indebtedness in an aggregate principal amount of at
least $10,000,000 to which the Borrower is a party;
(iv) Kieran E. Burke and Gary Story shall cease to be
actively involved in the day-to-day management and operation
of the Borrower and its Subsidiaries (unless Persons with
substantial knowledge and experience in the amusement and
attraction park industry reasonably acceptable to the Majority
Lenders have been appointed to replace one or both of them
within 180 days thereof);
<PAGE>
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(v) SFH or (if the Borrower shall be merged into SFH)
SFEC shall cease to own 100% of the capital stock of the
Borrower; or
(n) the Liens created by the Security Documents shall at any
time not constitute valid and perfected Liens on the collateral
intended to be covered thereby (to the extent perfection by filing,
registration, recordation or possession is required herein or therein)
in favor of the Administrative Agent, free and clear of all other Liens
(other than Liens permitted under Section 9.06 or under the respective
Security Documents), or, except for expiration in accordance with its
terms, any of the Security Documents shall for whatever reason be
terminated or cease to be in full force and effect, or the
enforceability thereof shall be contested by any Obligor;
THEREUPON: (1) in the case of an Event of Default other than one referred to in
clause (g) or (h) of this Section 10 with respect to any Obligor, the
Administrative Agent may (and, if requested by the Majority Lenders, shall), by
notice to the Borrower, terminate the Commitments and/or declare the principal
amount then outstanding of, and the accrued interest on, the Loans, the
Reimbursement Obligations and all other amounts payable by the Obligors
hereunder and under the Notes (including, without limitation, any amounts
payable under Section 5.05 or 5.06) to be forthwith due and payable, whereupon
such amounts shall be immediately due and payable without presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by each Obligor; and (2) in the case of the occurrence of an Event of
Default referred to in clause (g) or (h) of this Section 10 with respect to any
Obligor, the Commitments shall automatically be terminated and the principal
amount then outstanding of, and the accrued interest on, the Loans, the
Reimbursement Obligations and all other amounts payable by the Obligors
hereunder and under the Notes (including, without limitation, any amounts
payable under Section 5.05 or 5.06) shall automatically become immediately due
and payable without presentment, demand, protest or other formalities of any
kind, all of which are hereby expressly waived by each Obligor.
In addition, upon the occurrence and during the continuance of
any Event of Default, the Borrower agrees that it shall, if requested by the
Administrative Agent or the Majority Lenders through the Administrative Agent
(and, in the case of any Event of Default referred to in clause (g) or (h) of
this Section 10 with respect to any Obligor, forthwith, without any demand or
the taking of any other action by the Administrative Agent or any Lender)
provide cover for the Letter of Credit Liabilities by paying to the
Administrative Agent immediately available funds in an amount equal to the then
aggregate undrawn face amount of all Letters of Credit, which funds shall be
held by the Administrative Agent in the Collateral Account as collateral
security in the first instance for the Letter of Credit Liabilities and be
subject to withdrawal only as therein provided.
Section 11. The Administrative Agent and Arranger.
-------------------------------------
11.01. Appointment, Powers and Immunities. Each Lender hereby
----------------------------------
appoints and authorizes the Administrative Agent to act as its agent hereunder
and under the other Loan Documents with such powers as are specifically
delegated to the Administrative Agent by the terms of this Agreement and of the
<PAGE>
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other Loan Documents, together with such other powers as are reasonably
incidental thereto. The Administrative Agent (which term as used in this
sentence and in Section 11.05 and the first sentence of Section 11.06 shall
include reference to its affiliates and its own and its affiliates', officers,
directors, employees and agents):
(a) shall have no duties or responsibilities except those
expressly set forth in this Agreement and in the other Loan Documents,
and shall not by reason of this Agreement or any other Loan Document be
a trustee for any Lender;
(b) shall not be responsible to the Lenders for any recitals,
statements, representations or warranties contained in this Agreement
or in any other Loan Document, or in any certificate or other document
referred to or provided for in, or received by any of them under, this
Agreement or any other Loan Document, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this
Agreement, any Note or any other Loan Document or any other document
referred to or provided for herein or therein or for any failure by the
Borrower or any other Person to perform any of its obligations
hereunder or thereunder;
(c) shall not, except to the extent expressly instructed by
the Majority Lenders with respect to collateral security under the
Security Documents, be required to initiate or conduct any litigation
or collection proceedings hereunder or under any other Loan Document;
and
(d) shall not be responsible for any action taken or omitted
to be taken by it hereunder or under any other Loan Document or under
any other document or instrument referred to or provided for herein or
therein or in connection herewith or therewith, except for its own
gross negligence or willful misconduct.
The Administrative Agent may employ agents and attorneys-in-fact and shall not
be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith. The Administrative Agent may
deem and treat the payee of a Note as the holder thereof for all purposes hereof
unless and until a notice of the assignment or transfer thereof shall have been
filed with the Administrative Agent, together with the consent of the Borrower
to such assignment or transfer (to the extent required by Section 12.06(b)).
11.02. Reliance by Administrative Agent. The Administrative
--------------------------------
Agent shall be entitled to rely upon any certification, notice or other
communication (including, without limitation, any thereof by telephone,
telecopy, telegram or cable) reasonably believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or Persons,
and upon advice and statements of legal counsel, independent accountants and
other experts selected by the Administrative Agent with reasonable care. As to
any matters not expressly provided for by this Agreement or any other Loan
Document, the Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder or thereunder in accordance with
instructions given by the Majority Lenders or all of the Lenders as is required
<PAGE>
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in such circumstance, and such instructions of such Lenders and any action taken
or failure to act pursuant thereto shall be binding on all of the Lenders.
11.03. Defaults. The Administrative Agent shall not be deemed
--------
to have knowledge or notice of the occurrence of a Default unless the
Administrative Agent has received notice from a Lender or the Borrower
specifying such Default and stating that such notice is a "Notice of Default".
In the event that the Administrative Agent receives such a notice of the
occurrence of a Default, the Administrative Agent shall give prompt notice
thereof to the Lenders. The Administrative Agent shall (subject to Section
11.07) take such action with respect to such Default as shall be directed by the
Majority Lenders, provided that, unless and until the Administrative Agent shall
--------
have received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default as it shall deem advisable in the best interest of the Lenders
except to the extent that this Agreement expressly requires that such action be
taken, or not be taken, only with the consent or upon the authorization of the
Majority Lenders.
11.04. Rights as a Lender. With respect to its Commitments and
------------------
the Loans made by it, The Bank of New York (and any successor acting as
Administrative Agent) in its capacity as a Lender hereunder shall have the same
rights and powers hereunder as any other Lender and may exercise the same as
though it were not acting as the Administrative Agent, and the term "Lender" or
"Lenders" shall, unless the context otherwise indicates, include the
Administrative Agent in its individual capacity. The Bank of New York (and any
successor acting as Administrative Agent) and its affiliates may (without having
to account therefor to any Lender) accept deposits from, lend money to, make
investments in and generally engage in any kind of banking, trust or other
business with the Obligors (and any of their Subsidiaries or Affiliates) as if
it were not acting as the Administrative Agent, and The Bank of New York and its
affiliates (and any such successor) and its affiliates may accept fees and other
consideration from the Obligors for services in connection with this Agreement
or otherwise without having to account for the same to the Lenders.
11.05. Indemnification. The Lenders agree to indemnify the
---------------
Administrative Agent and the Arranger (to the extent not reimbursed under
Section 12.04, but without limiting the obligations of the Borrower under
Section 12.04) ratably in accordance with the aggregate principal amount of the
Loans and Reimbursement Obligations held by the Lenders (or, if no Loans or
Reimbursement Obligations are at the time outstanding, ratably in accordance
with their respective Commitments), for any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever that may be imposed on, incurred
by or asserted against the Administrative Agent or the Arranger (including by
any Lender) arising out of or by reason of any investigation in or in any way
relating to or arising out of this Agreement or any other Loan Document or any
other documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby (including, without limitation, the
costs and expenses that the Borrower is obligated to pay under Section 12.04,
but excluding, unless a Default has occurred and is continuing, normal
administrative costs and expenses incident to the performance of its agency
duties hereunder) or the enforcement of any of the terms hereof or thereof or of
<PAGE>
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any such other documents, provided that no Lender shall be liable for any of the
foregoing to the extent they arise from the gross negligence or willful
misconduct of the party to be indemnified.
11.06. Non-Reliance on Administrative Agent, the Arranger and
------------------------------------------------------
Other Lenders. Each Lender agrees that it has, independently and without
- -------------
reliance on the Administrative Agent, the Arranger or any other Lender, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of the Borrower and its Subsidiaries and decision to enter
into this Agreement and that it will, independently and without reliance upon
the Administrative Agent, the Arranger or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own analysis and decisions in taking or not taking action under this
Agreement or under any other Loan Document. Neither the Administrative Agent nor
the Arranger shall be required to keep itself informed as to the performance or
observance by any obligor of this Agreement or any of the other Loan Documents
or any other document referred to or provided for herein or therein or to
inspect the Properties or books of the Borrower or any of its Subsidiaries.
Except for notices, reports and other documents and information expressly
required to be furnished to the Lenders by the Administrative Agent hereunder or
under the Security Documents, neither the Administrative Agent nor the Arranger
shall have any duty or responsibility to provide any Lender with any credit or
other information concerning the affairs, financial condition or business of the
Borrower or any of its Subsidiaries (or any of their affiliates) that may come
into the possession of the Administrative Agent, the Arranger or any of their
respective affiliates.
11.07. Failure to Act. Except for action expressly required of
--------------
the Administrative Agent hereunder and under the other Loan Documents, the
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder and thereunder unless it shall receive further
assurances to its satisfaction from the Lenders of their indemnification
obligations under Section 11.05 against any and all liability and expense that
may be incurred by it by reason of taking or continuing to take any such action.
11.08. Resignation or Removal of Administrative Agent. Subject
----------------------------------------------
to the appointment and acceptance of a successor Administrative Agent as
provided below, the Administrative Agent may resign at any time by giving notice
thereof to the Lenders and the Borrower, and the Administrative Agent may be
removed at any time with or without cause by the Majority Lenders. Upon any such
resignation or removal, the Majority Lenders shall, after consultation with the
Borrower, have the right to appoint a successor Administrative Agent. If no
successor Administrative Agent shall have been so appointed by the Majority
Lenders and shall have accepted such appointment within 30 days after the
retiring Administrative Agent's giving of notice of resignation or the Majority
Lenders, removal of the retiring Administrative Agent, then the retiring
Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent, that shall be a financial institution that has an office
in New York, New York with a combined capital and surplus of at least
$500,000,000. Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
<PAGE>
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hereunder. After any retiring Administrative Agent's resignation or removal
hereunder as Administrative Agent, the provisions of this Section 11 shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as the Administrative Agent.
11.09. Consents under Other Loan Documents. Except as
-----------------------------------
otherwise provided in Section 12.03 with respect to this Agreement, the
Administrative Agent may, with the prior consent of the Majority Lenders (but
not otherwise), consent to any modification, supplement or waiver under any of
the Loan Documents, provided that, without the prior consent of each Lender, the
--------
Administrative Agent shall not (except as provided herein or in the Security
Documents) release any collateral or otherwise terminate any Lien under any
Security Document providing for collateral security, agree to additional
obligations being secured by such collateral security (unless the Lien for such
additional obligations shall be junior to the Lien in favor of the other
obligations secured by such Security Document, in which event the Administrative
Agent may consent to such junior Lien, provided that it obtains the consent of
--------
the Majority Lenders thereto), alter the relative priorities of the obligations
entitled to the benefits of the Liens created under the Security Documents,
except that at no such consent shall be required, and the Administrative Agent
is hereby authorized, to release any Lien covering Property that is the subject
of either a disposition of Property permitted hereunder or a disposition to
which the Majority Lenders have consented.
11.10. Arranger. Except as provided in this Section 11 and in
--------
Section 12.06(b), the Arranger shall not have any rights or obligations under
this Agreement or in connection with the syndication of the Commitments
hereunder, other than in its capacity as a "Lender" hereunder.
Section 12. Other Provisions.
----------------
12.01. Notices. All notices, requests and other communications
-------
provided for herein and in the Security Documents (including, without
limitation, any modifications of, or waivers or consents under, this Agreement)
shall be given or made in writing (including, without limitation, by telecopy),
delivered to the intended recipient at the "Address for Notices" specified below
its name on the signature pages hereof (below the name of the Borrower, in the
case of any Subsidiary Guarantor) or if to a Lender at its address set forth in
its Administrative Questionnaire, or, as to any party, at such other address as
shall be designated by such party in a notice to each other party. Except as
otherwise provided in this Agreement, all such communications shall be deemed to
have been duly given when transmitted by telecopier or personally delivered or,
in the case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.
12.02. Waiver. No failure on the part of the Administrative
------
Agent or any Lender to exercise and no delay in exercising, and no course of
dealing with respect to, any right, power or privilege under this Agreement or
any Note shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege under this Agreement or any Note
preclude any other or further exercise thereof or the exercise of any other
<PAGE>
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right, power or privilege. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.
12.03. Amendments, Etc. Except as otherwise expressly provided
---------------
in this Agreement, any provision of this Agreement may be modified or
supplemented only by an instrument in writing signed by the Borrower and the
Majority Lenders, or by the Borrower and the Administrative Agent acting with
the consent of the Majority Lenders, and any provision of this Agreement may be
waived by the Majority Lenders or by the Administrative Agent acting with the
consent of the Majority Lenders; provided that:
--------
(a) no modification, supplement or waiver shall,
unless by an instrument signed by all of the Lenders or by the
Administrative Agent acting with the consent of all of the
Lenders: (i) increase, or extend the term of any of the
Commitments, or extend the time or waive any requirement for
the reduction or termination of any of the Commitments, (ii)
extend the date fixed for the payment of principal of or
interest on any Loan or Reimbursement Obligation or any fee
hereunder, (iii) reduce the amount of any such payment of
principal or Reimbursement Obligation, (iv) reduce the rate at
which interest is payable thereon or any fee is payable
hereunder, (v) alter the manner in which payments or
prepayments of principal, interest or other amounts hereunder
shall be applied as between the Lenders or Types or Classes of
Loans, (vi) alter the terms of this Section 12.03, (vii)
modify the definition of the term "Majority Lenders", or
modify in any other manner the number or percentage of the
Lenders required to make any determinations or waive any
rights hereunder or to modify any provision hereof or (viii)
release any Guarantor from any of its guarantee obligations
under Section 6;
(b) any modification or supplement of Section 11, or
of any of the rights or duties of the Administrative Agent
hereunder, shall require the consent of the Administrative
Agent; and
(c) any modification or supplement of Section 6 shall
require the consent of each Subsidiary Guarantor.
Anything in this Agreement to the contrary notwithstanding, no
waiver or modification of any provision of this Agreement that has the effect
(either immediately or at some later time) of enabling the Borrower to satisfy a
condition precedent to the making of a Loan of any Class shall be effective
against the Lenders of such Class, unless the Majority Facility A Revolving
Credit Loan Lenders or Majority Facility B Term Loan Lenders (whichever of such
Class is so affected) shall have concurred with such waiver or modification.
12.04. Expenses, Etc. The Borrower agrees to pay or reimburse
-------------
each of the Lenders, the Administrative Agent and the Arranger for: (a) all
reasonable out-of-pocket costs and expenses of the Administrative Agent and the
Arranger, including the reasonable fees and expenses of special counsel to the
Arranger, in connection with (i) the negotiation, preparation, execution and
<PAGE>
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delivery of this Agreement and the other Loan Documents and the extensions of
credit hereunder and (ii) the negotiation or preparation of any modification,
supplement or waiver of any of the terms of this Agreement or any of the other
Loan Documents (whether or not consummated); (b) all reasonable out-of-pocket
costs and expenses of the Lenders and the Administrative Agent (including,
without limitation, the reasonable fees and expenses of legal counsel) in
connection with (i) any Default and any enforcement or collection proceedings
resulting therefrom, including, without limitation, all manner of participation
in or other involvement with (x) bankruptcy, insolvency, receivership,
foreclosure, winding up or liquidation proceedings, (y) judicial or regulatory
proceedings and (z) workout, restructuring or other negotiations or proceedings
(whether or not the workout, restructuring or transaction contemplated thereby
is consummated) and (ii) the enforcement of this Section 12.04; (c) all
transfer, stamp, mortgage recording, documentary or other similar taxes,
assessments or charges levied by any governmental or revenue authority in
respect of this Agreement or any of the other Loan Documents or any other
document referred to herein or therein and all costs, expenses, taxes,
assessments and other charges incurred in connection with any filing,
registration, recording or perfection of any security interest contemplated by
any Security Document or any other document referred to therein; and (d) all
costs, expenses and other charges in respect of title insurance procured with
respect to Liens created pursuant to any mortgages at any time securing any
obligations hereunder.
The Borrower hereby agrees to indemnify the Administrative
Agent, the Arranger and each Lender and their respective directors, officers,
employees, attorneys and agents (each, an "indemnified person") from, and hold
------------------
each of them harmless against, any and all losses, liabilities, claims, damages
or expenses incurred by any of them (including, without limitation, any and all
losses, liabilities, claims, damages or expenses incurred by the Administrative
Agent or the Arranger to any Lender, whether or not the Administrative Agent,
the Arranger or any Lender is a party thereto) arising out of or by reason of
any investigation or litigation or other proceedings (including any threatened
investigation or litigation or other proceedings) relating to the extensions of
credit hereunder or any actual or proposed use by the Borrower or any of its
Subsidiaries of the proceeds of any of the extensions of credit hereunder,
including, without limitation, the reasonable fees and disbursements of counsel
incurred in connection with any such investigation or litigation or other
proceedings (but excluding any such losses, liabilities, claims, damages or
expenses incurred by reason of the gross negligence or willful misconduct of the
indemnified Person). In that connection, the Borrower will not be required to
reimburse the indemnified persons for more than one counsel in any jurisdiction,
except to the extent that a particular indemnified person may have defenses that
are distinct from, or in conflict with, the defenses of other indemnified
persons.
Without limiting the generality of the provisions of the
foregoing paragraph, the Borrower will indemnify the Administrative Agent, the
Arranger and each Lender from, and hold the Administrative Agent, the Arranger
and each Lender harmless against, any losses, liabilities, claims, damages or
expenses described in the preceding paragraph (including any Lien filed against
any Property covered by any mortgages in favor of any governmental entity, but
excluding, as provided in the preceding sentence, any loss, liability, claim,
<PAGE>
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damage or expense incurred by reason of the gross negligence or willful
misconduct of the indemnified Person) arising under any Environmental Law as a
result of the past, present or future operations of the Borrower or any of its
Subsidiaries (or any predecessor in interest to the Borrower or any of its
Subsidiaries), or the past, present or future condition of any site or facility
owned, operated or leased at any time by the Borrower or any of its Subsidiaries
(or any such predecessor in interest), or any Release or threatened Release of
any Hazardous Materials at or from any such site or facility, excluding any such
Release or threatened Release that shall occur during any period when the
Administrative Agent or any Lender shall be in possession of any such site or
facility following the exercise by the Administrative Agent or any Lender of any
of its rights and remedies hereunder or under any of the Security Documents, but
including any such Release or threatened Release occurring during such period
that is a continuation of conditions previously in existence, or of practices
employed by the Borrower and its Subsidiaries, at such site or facility.
12.05. Successors and Assigns. This Agreement shall be binding
----------------------
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
12.06. Assignments and Participations.
------------------------------
(a) No Obligor may assign any of its rights or obligations
hereunder or under the Notes without the prior consent of all of the Lenders and
the Administrative Agent and the Arranger.
(b) Each Lender may assign any of its Loans, its Notes and its
Commitments and its Letter of Credit Interest (but only with the consent of the
Administrative Agent, the Arranger and the Borrower and, in the case of an
assignment of all or a portion of a Facility A Revolving Credit Commitment or
any Facility A Revolving Credit Loan Lender's obligations with respect to its
Letter of Credit Interest, the Issuing Lender, which consents shall not be
unreasonably withheld or delayed); provided that:
--------
(i) no such consent by the Borrower, the
Administrative Agent, the Arranger or the Issuing Lender shall
be required in the case of any assignment to another Lender or
an affiliate of a Lender or an Approved Fund;
(ii) no such consent by the Borrower shall be
required in the case of any assignment involving the Arranger
in its capacity as a "Lender" hereunder on or prior to the
date 120 days after the Closing Date;
(iii) except to the extent the Borrower and the
Administrative Agent shall otherwise consent, any such partial
assignment (other than to another Lender or an affiliate of a
Lender or an Approved Fund) shall be in an amount at least
equal to $5,000,000; and
(iv) any consent of the Borrower otherwise required
under this paragraph (b) shall not be required if an Event of
Default has occurred and is continuing.
<PAGE>
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Upon execution and delivery by the parties to each such assignment of an
Assignment and Acceptance pursuant to which such assignee agrees to become a
"Lender" hereunder (if not already a Lender) having the Commitments, Loans and
Reimbursement obligations specified therein, and upon consent thereto by the
Borrower, the Administrative Agent, the Arranger and/or the Issuing Lender to
the extent required above and delivery of such assignment and acceptance to the
Administrative Agent, the assignee shall have, to the extent of such assignment
(unless otherwise consented to by the Borrower, the Administrative Agent, the
Arranger and the Issuing Lender, the obligations, rights and benefits of a
Lender hereunder holding the Commitments, Loans and Reimbursement Obligations
(or portions thereof) assigned to it (in addition to the Commitments, Loans and
Reimbursement obligations, if any, theretofore held by such assignee) and the
assigning Lender shall, to the extent of such assignment, be released from the
Commitments (or portions thereof) so assigned. Upon each such assignment (other
than an assignment contemplated by Section 12.06(b)(ii)) the assigning Lender
shall pay the Administrative Agent an assignment fee of (i) $2,000 if the
assignee is a Lender, an affiliate of a Lender or an Approved Fund or (ii)
$3,500 in the case of assignments to any other Person. If such assignee shall
not be a Lender it shall deliver to the Administrative Agent on Administrative
Questionnaire.
(c) The Administrative Agent, acting for this purpose as an
agent of the Borrower, shall maintain a copy of each Assignment and Acceptance
delivered to it (and shall promptly deliver to the Borrower a copy of each such
Assignment and Acceptance) and a register for the recordation of the names and
addresses of the Lenders, and the Commitment of, and principal amount of the
Loans and Letter of Credit Interest owing to, each Lender pursuant to the terms
hereof from time to time (the "Register"). The entries in the Register shall be
--------
conclusive subject to the requirements of Section 12.06, and the Borrower, the
Administrative Agent, the Issuing Lender and the Lenders may treat each Person
whose name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The Register shall be available for inspection by the Borrower, any
Issuing Lender and any Lender, at any reasonable time and from time to time upon
reasonable prior notice.
(d) A Lender may sell or agree to sell to one or more other
Persons (each a "Participant") a participation in all or any part of any Loans
or Letter of Credit Interest held by it, or in its Commitments, provided that
--------
such Participant shall not have any rights or obligations under this Agreement
or any Note or any other Loan Document (the Participant's rights against such
Lender in respect of such participation to be those set forth in the agreements
executed by such Lender in favor of the Participant) except that such
Participant shall have the rights afforded to a Lender under Section 5 in
respect of the Loans, Letter of Credit Interest and Commitment(s) held by it as
if such Participant were a Lender hereunder. In no event shall a Lender that
sells a participation agree with the Participant to take or refrain from taking
any action hereunder or under any other Loan Document except that such Lender
may agree with the Participant that it will not, without the consent of the
Participant, agree to (i) increase or extend the term of such Lender's related
commitment or extend the amount or date of any scheduled reduction of such
Commitment pursuant to Section 2.04, (ii) extend the date fixed for the payment
<PAGE>
-96-
of principal of or interest on the related Loan or Loans or Reimbursement
Obligation or any portion of any fee hereunder payable to the Participant, (iii)
reduce the amount of any such payment of principal or Reimbursement Obligation
or (iv) reduce the rate at which interest is payable thereon, or any fee
hereunder payable to the Participant, to a level below the rate at which the
Participant is entitled to receive such interest or fee.
(e) In addition to the assignments and participations
permitted under the foregoing provisions of this Section 12.06, any Lender may
(without notice to the Borrower, the Administrative Agent, the Arranger or any
other Lender and without payment of any fee) assign and pledge all or any
portion of its Loans and its Notes to secure obligations of such Lender,
including any such assignment or pledge to a Federal Reserve Bank as collateral
security pursuant to Regulation A and any Operating Circular issued by such
Federal Reserve Bank, and such Loans and Notes shall be fully transferable as
provided therein. No such assignment shall release the assigning Lender from its
obligations hereunder or substitute any such assignee for such Lender as a party
hereto.
(f) A Lender may furnish any information concerning the
Borrower or any of its Subsidiaries in the possession of such Lender from time
to time to assignees and participants (including prospective assignees and
participants), subject, however, to the provisions of Section 12.12.
(g) Anything in this Section 12.06 to the contrary
notwithstanding, no Lender may assign or participate any interest in any Loan or
Letter of Credit Interest held by it hereunder to the Borrower or any of its
Affiliates or Subsidiaries without the prior consent of each Lender.
12.07. Survival. The obligations of the Borrower under
--------
Sections 5.01, 5.05, 5.06, 5.07 and 12.04, the obligations of each Subsidiary
Guarantor under Section 6.03, and the obligations of the Lenders under Section
11.05, shall survive the repayment of the Loans and Reimbursement Obligations
and the termination of the Commitments and, in the case of any Lender that may
assign any interest in its Commitments, Loans or Letter of Credit Interest
hereunder, shall survive the making of such assignment, notwithstanding that
such assigning Lender may cease to be a "Lender" hereunder. In addition, each
representation and warranty made, or deemed to be made by a notice of any
extension of credit, herein or pursuant hereto shall survive the making of such
representation and warranty, and no Lender shall be deemed to have waived, by
reason of making any extension of credit hereunder, any Default that may arise
by reason of such representation or warranty proving to have been false or
misleading, notwithstanding that such Lender or the Administrative Agent may
have had notice or knowledge or reason to believe that such representation or
warranty was false or misleading at the time such extension of credit was made.
12.08. Counterparts. This Agreement may be executed in any
------------
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
<PAGE>
-97-
12.09. Governing Law; Submission to Jurisdiction. This
-----------------------------------------
Agreement and the Notes shall be governed by, and construed in accordance with,
the law of the State of New York. Each Obligor hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of the Supreme Court of the State of New York sitting
in New York County (including its Appellate Division), and of any other
appellate court in the State of New York, for the purposes of all legal
proceedings arising out of or relating to this Agreement or the transactions
contemplated hereby. Each Obligor hereby irrevocably waives, to the fullest
extent permitted by applicable law, any objection that it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum.
12.10. WAIVER OF JURY TRIAL. EACH OF THE OBLIGORS, THE
--------------------
ADMINISTRATIVE AGENT AND EACH LENDER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
12.11. Captions. The table of contents and captions and
--------
section headings appearing herein are included solely for convenience of
reference and are not intended to affect the interpretation of any provision of
this Agreement.
12.12. Confidentiality. Each Lender and the Administrative
---------------
Agent agrees (on behalf of itself and each of its affiliates, directors,
officers, employees and representatives) to use reasonable precautions to keep
confidential, in accordance with their customary procedures for handling
confidential information of the same nature and in accordance with safe and
sound banking or lending practices, any non-public information supplied to it by
the Borrower pursuant to this Agreement that is identified by the Borrower as
being confidential at the time the same is delivered to the Lenders or the
Administrative Agent, provided that nothing herein shall limit the disclosure of
--------
any such information (i) after such information shall have become public (other
than through a violation of this Section 12.12), (ii) to the extent required by
statute, rule, regulation or judicial process, (iii) to counsel for any of the
Lenders or the Administrative Agent, (iv) to bank examiners (or any other
regulatory authority, including the National Association of Insurance
Commissioners, having jurisdiction over any Lender or the Agent), or to auditors
or accountants, (v) to the Agent or any other Lender, (vi) to any direct or
indirect contractual counterparty in swap agreements (or to such contractual
counterparty's professional advisor), so long as such contractual counterparty
(or such professional advisor) agrees to be bound by the provisions of this
Section 12.12, (vii) in connection with any litigation to which any one or more
of the Lenders or the Agent is a party, or in connection with the rights or
remedies hereunder or under any other Loan Document (viii) to a subsidiary or
affiliate of such Lender or (ix) subject to an agreement containing provisions
substantially the same as those of this Section pursuant to which an assignee or
participant acquires an interest in the Loans hereunder, to any assignee or
participant (or prospective assignee or participant); provided, further, that in
-------- -------
no event shall any Lender or the Administrative Agent be obligated or required
to return any materials furnished by the Borrower. The obligations of each
Lender under this Section 12.12 shall supersede and replace the obligations of
<PAGE>
-98-
such Lender under the confidentiality letter in respect of this financing signed
and delivered by such Lender to the Borrower prior to the date hereof; in
addition, the obligations of any assignee or participant that has executed an
agreement containing provisions substantially the same as those of this Section
pursuant to which such assignee or participant has acquired an interest in the
Loans hereunder the confidentiality provisions of such agreement shall be
superseded by this Section 12.12 upon the date upon which such assignee becomes
a Lender hereunder pursuant to Section 12.06(b).
<PAGE>
-99-
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the day and year first above
written.
SIX FLAGS THEME PARKS INC.
By: /s/ James F. Dannhauser
-----------------------
Name: James F. Dannhauser
Title: Chief Financial Officer
GUARANTORS
----------
SIX FLAGS ENTERTAINMENT CORPORATION
S. F. HOLDINGS, INC.
By: /s/ James F. Dannhauser
-----------------------
Name: James F. Dannhauser
Title: Chief Financial Officer
<PAGE>
-100-
SUBSIDIARY GUARANTORS
---------------------
SIX FLAGS SERVICES, INC.
SIX FLAGS SERVICES OF GEORGIA, INC.
SIX FLAGS SERVICES OF ILLINOIS, INC.
SIX FLAGS SERVICES OF MISSOURI, INC.
SIX FLAGS SERVICES OF TEXAS, INC.
SFTP, INC.
SFTP SAN ANTONIO, INC.
SFTP SAN ANTONIO GP, INC.
By: /s/ James F. Dannhauser
-----------------------
Name: James F. Dannhauser
Title: Chief Financial Officer
<PAGE>
-101-
SF PARTNERSHIP
By: SFTP, Inc. a partner
By: /s/ James F. Dannhauser
-----------------------
Name: James F. Dannhauser
Title: Chief Financial Officer
SIX FLAGS SAN ANTONIO, L.P.
By: SFTP San Antonio GP, Inc.,
its general partner
By: /s/ James F. Dannhauser
-----------------------
Name: James F. Dannhauser
Title: Chief Financial Officer
<PAGE>
-102-
LENDERS
-------
LEHMAN COMMERCIAL PAPER INC.
By: /s/ William J. Gallagher
------------------------
Name: William J. Gallagher
Title: Authorized Signatory
ADMINISTRATIVE AGENT
--------------------
THE BANK OF NEW YORK
By: /s/ Vincent L. Pacilio
----------------------
Name: Vincent L. Pacilio
Title: Senior Vice President
<PAGE>
Schedule II
NY3:#7149533v13
Schedule I
NY3:#7149533v13
SCHEDULE I
Commitments
- -------------------------------------------------------------------------------
Lender Facility A Revolving Facility B Term Total
Credit Commitment Loan Commitment Commitment
- -------------------------------------------------------------------------------
LEHMAN COMMERICIAL
PAPER INC. $100,000,000.00 $372,000,000.00 $472,000,000.00
- -------------------------------------------------------------------------------
TOTAL $100,000,000.00 $372,000,000.00 $472,000,000.00
- -------------------------------------------------------------------------------
<PAGE>
Schedule II
NY3:#7149533v13
SCHEDULE II
Debt Agreements and Liens
<PAGE>
Schedule III
NY3:#7149533v13
SCHEDULE III
Environmental Matters
<PAGE>
Schedule IV
NY3:#7149533v13
SCHEDULE IV
Subsidiaries and Investments
<PAGE>
Schedule V
NY3:#7149533v13
SCHEDULE V
Existing Parks and Real Property
<PAGE>
Schedule VI
NY3:#7149533v13
SCHEDULE VI
Certain Litigation
<PAGE>
Schedule VII
NY3:#7149533v13
SCHEDULE VII
Insurance
<PAGE>
Schedule VIII
NY3:#7149533v13
SCHEDULE VIII
Certain EBITDA Adjustments
<PAGE>
Schedule IX
NY3:#7149533v13
SCHEDULE IX
Labor Matters
Exhibit (10)(as)
[Conformed Copy]
===============================================================================
CREDIT AGREEMENT
dated as of
March 13, 1998
PREMIER PARKS INC.,
THE SUBSIDIARY GUARANTORS THEREOF,
THE LENDERS PARTY HERETO
AND
LEHMAN COMMERCIAL PAPER INC.,
as Administrative Agent
AND
LEHMAN BROTHERS INC.,
as Advisor, Arranger,
and Syndication Agent,
$300,000,000
===============================================================================
[Exhibit B has been conformed to appear as delivered and
Exhibits D and E are photocopies of the Opinions as delivered.
Amendment No. 1 has been conformed to appear as delivered
and is attached at the end.]
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Definitions and Accounting Matters...............................1
1.01. Certain Defined Terms.........................................1
1.02. Accounting Terms and Determinations..........................23
1.03. Classes and Types of Loans...................................24
1.04. Terms Generally..............................................24
Section 2. Commitments, Loans, Notes and Prepayments.......................24
2.01 Loans........................................................24
2.02. Borrowings...................................................26
2.03. Letters of Credit............................................26
2.04. Changes of Commitments.......................................31
2.05. Commitment Fee...............................................32
2.06. Lending Offices..............................................32
2.07. Several Obligations; Remedies Independent....................32
2.08. Notes........................................................32
2.09. Optional Prepayments and Conversions or Continuations
of Loans.....................................................33
2.10. Mandatory Prepayments and Reductions of Commitments..........34
Section 3. Payments of Principal and Interest..............................37
3.01. Repayment of Loans...........................................37
3.02. Interest.....................................................40
Section 4. Payments; Pro Rata Treatment; Computations, Etc.................40
4.01. Payments.....................................................40
4.02. Pro Rata Treatment...........................................41
4.03. Computations.................................................42
4.04. Minimum Amounts..............................................42
4.05. Certain Notices..............................................42
4.06. Non-Receipt of Funds by the Administrative Agent.............43
4.07. Sharing of Payments, Etc.....................................44
<PAGE>
-ii-
Section 5. Yield Protection, Etc...........................................45
5.01. Additional Costs...........................................45
5.02. Limitation on Types of Loans...............................47
5.03. Illegality.................................................47
5.04. Treatment of Affected Loans................................48
5.05. Compensation...............................................48
5.06. Additional Costs in Respect of Letters of Credit...........49
5.07. U.S. Taxes.................................................49
5.08. Replacement of Lenders.....................................50
Section 6. Guarantee.......................................................51
6.01. The Guarantee................................................51
6.02. Obligations Unconditional....................................52
6.03. Reinstatement................................................53
6.04. Subrogation..................................................53
6.05. Remedies.....................................................53
6.06. Instrument for the Payment of Money..........................53
6.07. Continuing Guarantee.........................................53
6.08. Rights of Contribution.......................................53
6.09. General Limitation on Guarantee Obligations..................54
Section 7. Conditions......................................................55
7.01. Initial Extension of Credit of any Class.....................55
7.02. Walibi Acquisition and Tender Offer Loans....................57
7.03. Initial and Subsequent Extensions of Credit..................58
Section 8. Representations and Warranties..................................59
8.01. Organization; Powers.........................................59
8.02. Financial Condition..........................................59
8.03. Litigation...................................................60
8.04. No Breach....................................................60
8.05. Action.......................................................61
8.06. Approvals....................................................61
8.07. Properties and Permits, Etc..................................61
8.08. Environmental Matters........................................62
8.09. Compliance with Laws and Agreements..........................64
8.10. Investment Company Act.......................................64
8.11. Public Utility Holding Company Act...........................64
8.12. Taxes........................................................65
8.13. ERISA........................................................65
8.14. True and Complete Disclosure.................................65
8.15. Use of Credit................................................65
<PAGE>
-iii-
8.16. Debt Agreements and Liens....................................65
8.17. Capitalization...............................................66
8.18. Subsidiaries and Investments.................................66
8.19. Parks; Real Property.........................................67
8.20. Insurance....................................................67
8.21. Labor Maters.................................................67
8.22. Solvency.....................................................68
Section 9. Covenants of the Borrower.......................................68
9.01. Financial Statements and Other Information...................68
9.02. Notices of Material Events...................................70
9.03. Existence, Etc...............................................71
9.04. Insurance....................................................72
9.05. Prohibition of Fundamental Changes...........................74
9.06. Liens........................................................77
9.07. Indebtedness.................................................78
9.08. Investments..................................................79
9.09. Restricted Payments..........................................80
9.10. Certain Financial Covenants..................................81
9.11. Subordinated Indebtedness....................................82
9.12. Lines of Business............................................83
9.13. Transactions with Affiliates.................................83
9.14. Use of Proceeds, Etc.........................................83
9.15. Certain Further Assurances...................................84
9.16. Modifications of Certain Documents...........................85
9.17. Prepayment of Certain Indebtedness...........................85
Section 10. Events of Default...............................................86
Section 11. The Administrative Agent and Arranger..........................90
11.01. Appointment, Powers and Immunities...........................90
11.02. Reliance by Administrative Agent.............................91
11.03. Defaults.....................................................91
11.04. Rights as a Lender...........................................91
11.05. Indemnification..............................................92
11.06. Non-Reliance on Administrative Agent, the Arranger
and Other Lenders............................................92
11.07. Failure to Act...............................................93
11.08. Resignation or Removal of Administrative Agent...............93
11.09. Consents under Other Loan Documents..........................93
11.10. Arranger.....................................................94
<PAGE>
-iv-
Section 12. Other Provisions...............................................94
12.01. Notices......................................................94
12.02. Waiver.......................................................94
12.03. Amendments, Etc..............................................94
12.04. Expenses, Etc................................................95
12.05. Successors and Assigns.......................................96
12.06. Assignments and Participations...............................96
12.07. Survival.....................................................98
12.08. Counterparts.................................................99
12.09. Governing Law; Submission to Jurisdiction....................99
12.10. WAIVER OF JURY TRIAL.........................................99
12.11. Captions.....................................................99
12.12. Confidentiality..............................................99
12.13. Limitation of Liability.....................................100
<PAGE>
EXHIBITS
Exhibit A-1 - Form of Facility A Revolving Credit Note
Exhibit A-2 - Form of Facility B Term Loan Note
Exhibit A-3 - Form of Facility C Term Loan Note
Exhibit B - Form of Security Agreement
Exhibit C - Form of Guarantee Assumption Agreement
Exhibit D - Form of Opinion of Counsel to the Obligors
Exhibit E - Form of Opinion of Special New York Counsel to the Arranger
Exhibit F - Form of Assignment and Acceptance
SCHEDULES
Schedule I - Commitments
Schedule II - Debt Agreements and Liens
Schedule III - Environmental Matters
Schedule IV - Subsidiaries and Investments
Schedule V - Existing Parks and Real Property
Schedule VI - Litigation
Schedule VII - Insurance
Schedule VIII - Certain EBITDA Adjustments
<PAGE>
CREDIT AGREEMENT dated as of March 13, 1998, between: PREMIER
PARKS INC., a corporation duly organized and validly existing under the laws of
the State of Delaware (the "Borrower"); each of the Subsidiaries of the Borrower
--------
identified under the caption "SUBSIDIARY GUARANTORS" on the signature pages
hereto and each Subsidiary of the Borrower that becomes a "Subsidiary Guarantor"
--------------------
after the date hereof pursuant to Section 9.15(a) (individually, a "Subsidiary
----------
Guarantor" and, collectively, the "Subsidiary Guarantors" and, together with the
- --------- ---------------------
Borrower, the "Obligors"); each of the lenders that is a signatory hereto
--------
identified under the caption "LENDERS" on the signature pages hereto and each
lender that becomes a "Lender" after the date hereof pursuant to Section
12.06(b) (individually, a "Lender") and, collectively, the "Lenders"); LEHMAN
------ -------
COMMERCIAL PAPER INC., as administrative agent for the Lenders (in such
capacity, together with its successors in such capacity, the "Administrative
--------------
Agent"); and LEHMAN BROTHERS INC., a Delaware corporation, as advisor, arranger
- -----
and syndication agent (the "Arranger").
--------
Pursuant to a Stock Purchase Agreement dated as of December 15,
1997 between Premier Parks Inc. and Centrag S.A., Karaba N.V. and Westkoi N.V.,
each a Belgian corporation, the parties thereto have agreed to effect the Walibi
Acquisition (as hereinafter defined) providing, inter alia, for the purchase by
----- ----
the Borrower of the capital stock of Walibi S.A., a Belgian corporation, so that
upon consummation of all of the transactions contemplated by the Walibi
Acquisition Agreement (as hereinafter defined) the Borrower shall own an amount
of shares of capital stock of Walibi S.A., equal to at least 49% of the number
of outstanding shares. In that connection, the Borrower has requested that the
Lenders extend credit to it, under the Guarantee of the Subsidiary Guarantors,
in an aggregate principal or face amount not exceeding $300,000,000 to finance
the Walibi Acquisition, to refinance certain existing indebtedness, to enable
certain acquisitions and capital expenditures to be made by the Obligors, and to
finance other general corporate needs of the Obligors, and the Lenders are
prepared to extend such credit upon the terms and conditions hereof.
Accordingly, the parties hereto agree as follows:
Section 1. Definitions and Accounting Matters.
1.01. Certain Defined Terms.
---------------------
As used herein, the following terms shall have the following
meanings (all terms defined in this Section 1.01 or in other provisions of this
Agreement in the singular to have the same meanings when used in the plural and
vice versa and all references herein to Sections, Exhibits and Schedules shall
be construed to refer to Sections of, and Exhibits and Schedules to, this
Agreement):
"Additional Costs" has the meaning set forth in Section 5.01.
----------------
"Administrative Agent" has the meaning set forth in the preamble.
--------------------
<PAGE>
-2-
"Administrative Questionnaire" means an Administrative
----------------------------
Questionnaire in a form supplied by the Administrative Agent.
"Advance Date" has the meaning set forth in Section 4.06.
------------
"Affiliate" means any Person that directly or indirectly
---------
controls, or is under common control with, or is controlled by, the Borrower
and, if such Person is an individual, any member of the immediate family
(including parents, spouse, children) of such individual and any trust whose
principal beneficiary is such individual or one or more members of such
immediate family and any Person who is controlled by any such member or trust.
As used in this definition, "control" (including, with its correlative meanings,
"controlled by" and "under common control with") means possession, directly or
indirectly, of power to direct or cause the direction of management or policies
(whether through ownership of securities or partnership or other ownership
interests, by contract or otherwise), provided that, in any event, any Person
--------
that owns directly or indirectly securities having 10% or more of the voting
power for the election of directors or other governing body of a corporation or
10% or more of the partnership or other ownership interests of any other Person
(other than as a limited partner of such other Person) will be deemed to control
such corporation or other Person. Notwithstanding the foregoing, (a) no
individual shall be an Affiliate solely by reason of his or her being a
director, officer or employee of the Borrower or any of its Subsidiaries and (b)
none of the Wholly Owned Subsidiaries of the Borrower, Marine World/Africa USA
in Vallejo, California or Marine World Joint Powers Authority, a joint exercise
of powers authority created under the laws of the State of California shall be
Affiliates.
"Anniversary Date" has the meaning set forth in Section 9.04.
----------------
"Applicable Lending Office" means, for each Lender and for each
-------------------------
Type of Loan, the "Lending Office" of such Lender (or of an affiliate of such
Lender) designated for such Type of Loan in such Lender's Administrative
Questionnaire or such other office of such Lender (or of an affiliate of such
Lender) as such Lender may from time to time specify to the Administrative Agent
and the Borrower as the office by which its Loans of such Type are to be made
and maintained.
"Applicable Rate" means for any day, with respect to any Base
---------------
Rate Loan or Eurodollar Loan, or with respect to the commitment fees payable
hereunder, as the case may be, the applicable rate per annum set forth bel w
under the caption "Base Rate Loans", "Eurodollar Loans" or "Commitment Fee", as
the case may be, based upon the Leverage Ratio as at the last day of the fiscal
quarter most recently ended as to which the Borrower has delivered financial
statements pursuant to Section 9.01:
<PAGE>
-3-
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
LEVERAGE RATIO: FACILITY A FACILITY C
REVOLVING LOAN TERM LOAN COMMITMENT
AND FEE:
FACILITY B
TERM LOAN
----------------------------------------------
BASE RATE EURODOLLAR BASE RATE EURODOLLAR
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Greater than or equal to 5.00 1.000% 2.250% 1.000% 2.250% 0.500%
to 1
- ------------------------------------------------------------------------------------------
Greater than or equal to
4.50 to 1 and less than 5.00 0.750% 2.000% 1.000% 2.250% 0.500%
to 1
- ------------------------------------------------------------------------------------------
Greater than or equal to
4.00 to 1 and less than 4.50 0.500% 1.750% 1.000% 2.250% 0.400%
to 1
- ------------------------------------------------------------------------------------------
Greater than or equal to
3.50 to 1 and less than 4.00 0.000% 1.250% 0.750% 2.000% 0.350%
to 1
- ------------------------------------------------------------------------------------------
Greater than or equal to
3.00 to 1 and less than 3.50 0.000% 1.000% 0.750% 2.000% 0.250%
to 1
- ------------------------------------------------------------------------------------------
Less than 3.00 to 1 0.000% 0.750% 0.750% 2.000% 0.200%
- ------------------------------------------------------------------------------------------
</TABLE>
Notwithstanding the foregoing, for the period from the Closing Date until six
months following the Syndication Completion Date, (a) the Applicable Rate for
(i) Facility A Revolving Credit Loans and Facility B Term Loans shall be 0.875%
in the case of Base Rate Loans and 2.125% in the case of Eurodollar Loans and
(ii) Facility C Term Loans shall be 1.00% in the case of Base Rate Loans and
2.250% in the case of Eurodollar Loans and (b) the Commitment Fee shall be
0.500%.
Subject to the last sentence of the immediately preceding
paragraph, each change in the "Applicable Rate" based upon any change in the
Leverage Ratio shall become effective for purposes of the accrual of interest
and commitment fees hereunder on the date three Business Days after the delivery
to the Administrative Agent and each Lender of the financial statements of the
Borrower and its Subsidiaries for the most recently ended fiscal quarter
pursuant to Section 9.01, and shall remain effective for such purpose until
three Business Days after the next delivery of such financial statements to the
Administrative Agent and each Lender hereunder, provided that, notwithstanding
--------
the foregoing, the Applicable Rate shall be the highest rates provided for in
the above schedule for any period during which either (i) an Event of Default
shall have occurred and be continuing or (ii) the Borrower shall be in default
of its obligation to deliver financial statements for any fiscal quarter by the
times specified in Section 9.01 (but upon the cure or waiver of any such Event
of Default or default, this proviso shall no longer be applicable until another
such Event of Default or default shall occur).
"Assignment and Acceptance" means an assignment and acceptance
-------------------------
entered into by a Lender and an assignee (with the consent of any party whose
consent is required by Section 12.06(b)), and accepted by the Administrative
Agent, in the form of Exhibit F or any other form approved by the Administrative
Agent.
<PAGE>
-4-
"Bankruptcy Code" means the Federal Bankruptcy Code of 1978, as
---------------
amended from time to time.
"Base Rate" means, for any day, a rate per annum equal to the
---------
higher of (a) the Federal Funds Rate for such day plus 1/2 of 1% and (b) the
Prime Rate for such day. Each change in any interest rate provided for herein
based upon the Base Rate resulting from a change in the Base Rate shall take
effect at the time of such change in the Base Rate.
"Base Rate Loans" means Loans that bear interest at rates based
---------------
upon the Base Rate.
"Basic Documents" means the Loan Documents and the Walibi
---------------
Acquisition Agreement.
"Basle Accord" means the proposals for risk-based capital
------------
framework described by the Basle Committee on Banking Regulations and
Supervisory Practices in its paper entitled "International Convergence of
Capital Measurement and Capital Standards" dated July 1988, as amended, modified
and supplemented and in effect from time to time or any replacement thereof.
"Borrower" means Premier Parks Inc. (to be renamed "Premier
--------
Parks Operations Inc." upon consummation of the Premier Merger).
"Business Day" means any day (a) on which commercial banks are
------------
not authorized or required to close in New York City and (b) if such day relates
to a borrowing of, a payment or prepayment of principal of or interest on, a
Conversion of or into, or an Interest Period for, a Eurodollar Loan or a notice
by the Borrower with respect to any such borrowing, payment, prepayment,
Conversion or Interest Period, that is also a day on which dealings in Dollar
deposits are carried out in the London interbank market.
"Capital Expenditures" means, for any period, expenditures
--------------------
(including, without limitation, the aggregate amount of Capital Lease
Obligations incurred during such period) made by the Borrower or any of its
Subsidiaries to acquire or construct fixed assets, plant and equipment
(including renewals, improvements and replacements) during such period, computed
in accordance with GAAP, but excluding (i) repairs in respect of any such assets
and (ii) the amount of any such assets acquired (x) with the proceeds of any
Casualty Event (or reimbursed in whole or in part with the Net Available
Proceeds thereof), (y) with the cash proceeds of any Disposition permitted
hereunder (or reimbursed in whole or in part with the Net Available Proceeds
thereof) and (z) pursuant to a Subsequent Acquisition.
"Capital Lease Obligations" means, for any Person, all
-------------------------
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP, and, for purposes of this
<PAGE>
-5-
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.
"Casualty Event" means, with respect to any Property of any
--------------
Person, any loss of or damage to, or any condemnation or other taking of, such
Property for which such Person or any of its Subsidiaries receives insurance
proceeds, or proceeds of a condemnation award or other compensation.
"Class" has the meaning assigned to such term in Section 1.03.
-----
"Closing Date" means the date upon which the initial extension of
------------
credit hereunder is made.
"Code" means the Internal Revenue Code of 1986, as amended from
----
time to time.
"Collateral Account" has the meaning assigned to such term in
------------------
the Security Agreement.
"Commitment Percentage" means, with respect to any Lender, the
---------------------
ratio of (a) the aggregate amount of the Commitments of such Lender to (b) the
aggregate amount of the Commitments of all of the Lenders.
"Commitments" means, collectively, the Facility A Revolving
-----------
Credit Commitments, the Facility B Term Loan Commitments, and the Facility C
Term Loan Commitments.
"Continue", "Continuation" and "Continued" refer to the
-------- ------------ ---------
continuation pursuant to Section 2.09 of a Eurodollar Loan from one Interest
Period to the next Interest Period for such Loan.
"Convert", "Conversion" and "Converted" refer to a conversion
------- ---------- ---------
pursuant to Section 2.09 of one Type of Loans into another Type of Loans, which
may be accompanied by the transfer by a Lender (at its sole discretion) of a
Loan from one Applicable Lending Office to another.
"Current Disposition" has the meaning set forth in
-------------------
Section 2.10(d).
"Debt Issuance" means any issuance or sale by the Borrower or any
-------------
of its Subsidiaries after the date hereof of any debt securities, excluding,
however, any Indebtedness incurred pursuant to Section 9.07 other than
Section 9.07(c) to the extent that the proceeds thereof are not used to make
Subsequent Acquisitions.
"Debt Service" means, for any period, the sum, for the Borrower
-----------
and its Subsidiaries (determined on a consolidated basis without duplication in
<PAGE>
-6-
accordance with GAAP), of (a) all regularly scheduled payments of principal of
any Indebtedness during such period, including the principal component of any
payments in respect of Capital Lease Obligations, but excluding any prepayments
made pursuant to Section 2.10 during such period plus (b) all Interest Expense
for such period.
"Default" means an Event of Default or an event that with notice
-------
or lapse of time or both would become an Event of Default.
"Delivery Date" has the meaning set forth in Section 9.04.
-------------
"Disposition" means any sale, assignment, transfer or other
-----------
disposition of any Property (whether now owned or hereafter acquired) by the
Borrower or any of its Subsidiaries to any other Person, excluding (a) any sale,
assignment, transfer or other disposition of any inventory or other Property
sold or disposed of in the ordinary course of business, (b) during any fiscal
year, the first $10,000,000 of sales of used equipment or other Property not
used in the business of the Borrower and its Subsidiaries, (c) any sale,
assignment, transfer or other disposition of any Property to the Borrower or a
Wholly Owned Subsidiary of the Borrower, (d) any property swap or exchange
entered into pursuant to the Marine World Agreements permitted under Section
9.05(e)(v) and (e) any sales permitted under Section 9.05(e)(vi).
"Disposition Investment" means, with respect to any Disposition,
----------------------
any promissory notes or other evidences of indebtedness or Investments received
by the Borrower or any of its Subsidiaries in connection with such Disposition.
"Dollar Equivalent" means, with respect to any Letter of Credit
-----------------
denominated in a Foreign Currency, the amount of Dollars that would be required
to purchase the aggregate undrawn face amount of such Letter of Credit in the
London foreign exchange market at approximately 11:00 a.m. London time for
delivery two Business Days later based upon the spot selling rate for such
Foreign Currency as determined by the Administrative Agent (or such Lender
designated by the Administrative Agent).
"Dollars" and "$" means lawful money of the United States of
------- -
America.
"Domestic Subsidiary" means each Subsidiary of the Borrower that
-------------------
is organized under the laws of the United States of America or any political
subdivision thereof.
"EBITDA" means, for any period, the sum, for the Borrower and its
------
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following, in each case determined before interest
income or expense and extraordinary or unusual items (and excluding all barter
and trade transactions): (a) operating income (or loss) for such period (plus
----
cash received for such period from investments of the Borrower or any of its
Subsidiaries in partnerships or any Person for which the investment is accounted
for by the equity method), plus (b) depreciation, amortization and other
----
non-cash charges (to the extent deducted in determining operating income) for
such period. Notwithstanding the foregoing, (i) if during any period for which
<PAGE>
-7-
EBITDA is being determined the Borrower and its Subsidiaries shall have
consummated any acquisition or Disposition then, for all purposes of this
Agreement (other than for purposes of the definition of Excess Cash Flow),
EBITDA shall be determined on a pro forma basis as if such acquisition or
Disposition had been made or consummated on the first day of such period and
(ii) when determining EBITDA for any period on a pro forma basis as provided in
the preceding clause (i) ending after the consummation of any acquisition, there
shall be added (or subtracted) the respective amounts for such acquisition (and
any other acquisitions consummated prior to the last day of such period) set
forth (x) in the case of the Walibi Acquisition, in Schedule VIII opposite the
last day of such period and (y) in the case of any Subsequent Acquisition, in a
supplement to Schedule VIII agreed to at the time of such Subsequent Acquisition
pursuant to Section 9.05(e)(iii)(E).
"Environmental Claim" means, with respect to any Person, any
-------------------
written notice, claim, demand or other communication (collectively, a "claim")
by any other Person alleging or asserting such Person's liability for
investigatory costs, cleanup costs, governmental response costs, damages to
natural resources or other Property, personal injuries, fines or penalties
arising out of, based on or resulting from (i) the presence, or Release into the
environment, of any Hazardous Material at any location, whether or not owned by
such Person, or (ii) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law. The term "Environmental Claim"
shall include, without limitation, any claim by any governmental authority for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and any claim by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence of Hazardous Materials or arising
from alleged injury or threat of injury to health, safety or the environment, as
a result of any of the foregoing.
"Environmental Laws" means any and all present and future
------------------
Federal, state, local and foreign laws, rules or regulations, and any orders or
decrees, in each case as now or hereafter in effect, relating to the regulation
or protection of human health, safety or the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or toxic or hazardous substances or wastes into the indoor or outdoor
environment, including, without limitation, ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or toxic or
hazardous substances or wastes.
"Equity Rights" means, with respect to any Person, any
-------------
subscriptions, options, warrants, commitments, preemptive rights or agreements
of any kind (including, without limitation, any stockholders' or voting trust
agreements) for the issuance, sale, registration or voting of, or securities
convertible into, any additional shares of capital stock of any class, or
partnership or other ownership interests of any type in, such Person.
"ERISA" means the Employee Retirement Income Security Act of
-----
1974, as amended from time to time.
<PAGE>
-8-
"ERISA Affiliate" means any corporation or trade or business that
---------------
is a member of any group of organizations (i) described in Section 414(b) or (c)
of the Code of which the Borrower is a member and (ii) solely for purposes of
potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section 302(f) of ERISA and Section 412(n)
of the Code, described in Section 414(m) or (o) of the Code of which the
Borrower is a member.
"ERISA Event" means any of the following events or conditions:
-----------
(a) any reportable event, as defined in Section 4043(c) of ERISA
and the regulations issued thereunder, with respect to a Plan, as to which the
PBGC has not by regulation waived the requirement of Section 4043(a) of ERISA
that it be notified within 30 days of the occurrence of such event (provided
--------
that a failure to meet the minimum funding standard of Section 412 of the Code
or Section 302 of ERISA, including, without limitation, the failure to make on
or before its due date a required installment under Section 412(m) of the Code
or Section 302(e) of ERISA, shall be a reportable event regardless of the
issuance of any waivers in accordance with Section 412(d) of the Code); and any
request for a waiver under Section 412(d) of the Code for any Plan;
(b) the distribution under Section 4041 of ERISA of a notice of
intent to terminate any Plan or any action taken by the Borrower or an ERISA
Affiliate to terminate any Plan;
(c) the institution by the PBGC of proceedings under Section 4042
of ERISA for the termination of, or the appointment of a trustee to administer,
any Plan, or the receipt by the Borrower or any ERISA Affiliate of a notice from
a Multiemployer Plan that such action has been taken by the PBGC with respect to
such Multiemployer Plan;
(d) the complete or partial withdrawal from a Multiemployer Plan
by the Borrower or any ERISA Affiliate that results in liability under
Section 4201 or 4204 of ERISA (including the obligation to satisfy secondary
liability as a result of a purchaser default) or the receipt by the Borrower or
any ERISA Affiliate of notice from a Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or that
it intends to terminate or has terminated under Section 4041A of ERISA;
(e) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Borrower or any ERISA Affiliate to enforce
Section 515 of ERISA, which proceeding is not dismissed within 30 days; or
(f) the adoption of an amendment to any Plan that, pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA, would result in the loss
of tax-exempt status of the trust of which such Plan is a part if the Borrower
or an ERISA Affiliate fails to timely provide security to the Plan in accordance
with the provisions of such Sections.
<PAGE>
-9-
"Eurodollar Base Rate" means, with respect to any Eurodollar Loan
--------------------
for any Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/16 of 1%) reported on the date two Business Days
prior to the first day of such Interest Period on the Dow Jones Markets Service
Page 3750 as the London Interbank Offered Rate for Dollar deposits having a term
comparable to such Interest Period and in an amount of $1,000,000 or more (or,
if said Page shall cease to be publicly available or if the information
contained on said Page, in the sole judgment of the Administrative Agent, shall
cease to accurately reflect such London Interbank Offered Rate, the Eurodollar
Base Rate means the rate reported by any publicly available source of similar
market data selected by the Administrative Agent that, in the sole judgment of
the Administrative Agent, accurately reflects such London Interbank Offered
Rate).
"Eurodollar Loans" means Loans that bear interest at rates based
----------------
on rates referred to in the definition of "Eurodollar Base Rate" in this
Section 1.01.
"Eurodollar Rate" means, for any Interest Period for any
---------------
Eurodollar Loan, a rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) determined by the Administrative Agent to be equal to the
Eurodollar Base Rate for such Interest Period divided by 1 minus the Reserve
---------- -----
Requirement (if any) for such Interest Period.
"Event of Default" has the meaning assigned to such term in
----------------
Section 10.
"Excess Cash Flow" means, for any period, the excess of
----------------
(a) EBITDA for such period over (b) the sum of (i) the aggregate amount of Debt
----
Service for such period plus (ii) Capital Expenditures made during such period
----
(except for any such Capital Expenditures to the extent financed with the
proceeds of capital contributions or advances to the Borrower from Holdings
after consummation of the Premier Merger) plus (iii) the aggregate amount paid,
----
or required to be paid, in cash in respect of income taxes for such fiscal year.
"Excess Payment" has the meaning set forth in Section 6.08.
--------------
"Excess Funding Guarantor" has the meaning set forth in
------------------------
Section 6.08.
"Existing Credit Agreement" means the Amended and Restated Credit
-------------------------
Agreement dated as of January 31, 1997 among the Borrower, the lenders named
therein, The Bank of New York as Administrative Agent, Fleet Bank as
Documentation Agent and Banque Paribas as Co-Agent.
"Existing Parks" means those amusement and attraction parks
--------------
listed in Part A of Schedule IV.
"Facility A Revolving Credit Commitment" means, as to each
--------------------------------------
Revolving Credit Lender, the obligation of such Lender to make Revolving Credit
Loans, and to issue or participate in Letters of Credit pursuant to
Section 2.03, in an aggregate principal or face amount at any one time
<PAGE>
-10-
outstanding up to but not exceeding the amount set forth opposite the name of
such Lender on Schedule I under the caption "Revolving Credit Commitment" or, in
the case of a Person that becomes a Revolving Credit Lender pursuant to an
assignment permitted under Section 12.06(b), as specified in the respective
instrument of assignment pursuant to which such assignment is effected (in each
case as the same may be reduced or increased pursuant to an assignment permitted
under Section 12.06(b), or reduced from time to time pursuant to Section 2.04 or
2.10). The original aggregate principal amount of the Facility A Revolving
Credit Commitments is $75,000,000.
"Facility A Revolving Credit Commitment Termination Date" means
-------------------------------------------------------
the fifth anniversary of the first Quarterly Date after the Closing Date.
"Facility A Revolving Credit Loans" means the loans provided for
---------------------------------
in Section 2.01(a), which may be Base Rate Loans and/or Eurodollar Loans.
"Facility B Term Loans" means the loans provided for in
---------------------
Section 2.01(b), which may be Base Rate Loans and/or Eurodollar Loans.
"Facility B Term Loan Commitment" means, as to each Facility B
-------------------------------
Term Loan Lender, the obligation of such Lender to make Facility B Term Loans in
an aggregate principal amount up to but not exceeding the amount set opposite
the name of such Lender on Schedule I under the caption "Facility B Term Loan
Commitment" or, in the case of a Person that becomes a Facility B Term Loan
Lender pursuant to an assignment permitted under Section 12.06(b), as specified
in the respective instrument of assignment pursuant to which such assignment is
effected (as the same may be reduced from time to time pursuant to Section 2.04
or 2.10 or increased or reduced from time to time pursuant to assignments
permitted under Section 12.06(b)). The original aggregate principal amount of
the Facility B Term Loan Commitments is $100,000,000.
"Facility B Term Loan Commitment Termination Date" means the
------------------------------------------------
Syndication Completion Date (subject to the second sentence of Section 2.01(b)).
"Facility C Term Loans" means the loans provided for in
---------------------
Section 2.01(c), which may be Base Rate Loans and/or Eurodollar Loans.
"Facility C Term Loan Commitment" means, as to each Facility C
-------------------------------
Term Loan Lender, the obligation of such Lender to make Facility C Term Loans in
an aggregate principal amount up to but not exceeding the amount set opposite
the name of such Lender on Schedule I under the caption "Facility C Term Loan
Commitment" or, in the case of a Person that becomes a Facility C Term Loan
Lender pursuant to an assignment permitted under Section 12.06(b), as specified
in the respective instrument of alignment pursuant to which such assignment is
effected (as the same may be reduced from time to time pursuant to Section 2.04
or 2.10 or increased or reduced from time to time pursuant to assignments
permitted under Section 12.06(b)). The original aggregate principal amount of
the Facility C Term Loan Commitments is $125,000,000.
<PAGE>
-11-
"Facility C Term Loan Commitment Termination Date" means the
------------------------------------------------
Syndication Completion Date.
"Federal Funds Rate" means, for any day, the rate per annum
------------------
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (a) if the day for which such rate is to
--------
be determined is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day and (b) if such rate is not so
published for any Business Day, the Federal Funds Rate for such Business Day
shall be the average rate charged to the Administrative Agent on such Business
Day on such transactions as determined by the Administrative Agent.
"Fixed Charges" means, for any period, the sum of (a) Debt
-------------
Service for such period plus (b) the aggregate amount of all Capital
----
Expenditures made during such period (excluding (i) any such Capital
Expenditures to the extent financed with the proceeds of capital contributions
or advances to the Borrower from Holdings after consummation of the Premier
Merger and (ii) any Capital Expenditures made (x) during the period from and
after September 30, 1997 to and including September 29, 1998 in an aggregate
amount up to $75,000,000, (y) during the period from and after September 30,
1998 to and including September 29, 1999 in an aggregate amount up $50,000,000
and (z) during the period from and after September 30, 1999 to and including
September 29, 2000, in an aggregate amount up to $40,000,000) plus (c) the
----
aggregate amount paid, or required to be paid, in cash in respect of income
taxes for such fiscal period.
"Fixed Charges Coverage Ratio" means, as at any date, the ratio
----------------------------
of (a) EBITDA for the period of four consecutive fiscal quarters ending on or
most recently ended prior to such date to (b) the amount of Fixed Charges for
such period .
"Foreign Currency" means the currency of any country in which the
----------------
Borrower or any of its Subsidiaries operates a Park, so long as such currency is
freely transferable and dealt with in the London foreign exchange market.
"Foreign Subsidiary" means any Subsidiary other than a Domestic
------------------
Subsidiary.
"GAAP" means generally accepted accounting principles applied on
----
a basis consistent with those that, in accordance with the last sentence of
Section 1.02(a), are to be used in making the calculations for purposes of
determining compliance with this Agreement.
"Guarantee" means a guarantee, an indorsement, a contingent
---------
agreement to purchase or to furnish funds for the payment or maintenance of, or
otherwise to be or become contingently liable under or with respect to, the
Indebtedness, other obligations, net worth, working capital or earnings of any
<PAGE>
-12-
Person, or a guarantee of the payment of dividends or other distributions upon
the stock or equity interests of any Person, or an agreement to purchase, sell
or lease (as lessee or lessor) Property, products, materials, supplies or
services primarily for the purpose of enabling a debtor to make payment of such
debtor's obligations or an agreement to assure a creditor against loss, and
including, without limitation, causing a bank or other financial institution to
issue a letter of credit or other similar instrument for the benefit of another
Person, but excluding endorsements for collection or deposit in the ordinary
course of business. The terms "Guarantee" and "Guaranteed" used as verbs have
the correlative meanings.
"Guarantee Assumption Agreement" means a Guarantee Assumption
------------------------------
Agreement substantially in the form of Exhibit C by an entity that, pursuant to
Section 9.15(a), is required to become a "Subsidiary Guarantor" hereunder in
favor of the Administrative Agent.
"Hazardous Material" means any chemical or other material or
------------------
substance which is now or hereafter prohibited, limited or otherwise regulated
in any way under any Environmental Law.
"Hedging Agreement" means any interest rate protection agreement,
-----------------
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.
For purposes hereof, the "credit exposure" at any time of any Person under an
Hedging Agreement to which such Person is a party shall be determined at such
time in accordance with the standard methods of calculating credit exposure
under similar arrangements as prescribed from time to time by the Administrative
Agent, taking into account potential interest rate movements and the respective
termination provisions and notional principal amount and term of such Hedging
Agreement.
"Holdings" means Premier Parks Holdings Corporation, a Delaware
--------
corporation and direct wholly owned subsidiary of the Borrower that upon
consummation of the Premier Merger will become the parent company of the
Borrower and will at such time be renamed "Premier Parks Inc.".
"Inactive Subsidiary" means any Subsidiary of the Borrower that
-------------------
(a) has aggregate assets with a value not in excess of $5,000 and (b) conducts
no business or other operations.
"Indebtedness" means, for any Person, without duplication:
------------
(a) obligations created, issued or incurred by such Person for borrowed money
(whether by loan, the issuance and sale of debt securities or the sale of
Property to another Person subject to an understanding or agreement, contingent
or otherwise, to repurchase such Property from such Person); (b) obligations of
such Person to pay the deferred purchase or acquisition price of Property or
services, other than trade accounts payable (other than for borrowed money)
arising, and accrued expenses incurred, in the ordinary course of business so
long as such trade accounts payable are payable within 180 days of the date the
respective goods are delivered or the respective services are rendered;
(c) Indebtedness of others secured by a Lien on the Property of such Person,
<PAGE>
-13-
whether or not the respective indebtedness so secured has been assumed by such
Person; (d) obligations of such Person in respect of letters of credit or
similar instruments (including negotiable instruments) issued or accepted by
banks and other financial institutions for account of such Person; (e) Capital
Lease Obligations of such Person; and (f) Indebtedness of others Guaranteed by
such Person. The Indebtedness of any Person shall include the Indebtedness of
any partnership in which such Person is a general partner to the extent such
Indebtedness is recourse, provided that if such Person's liability for such
--------
Indebtedness is contractually limited, only such Person's share thereof shall be
so included. Anything herein to the contrary notwithstanding, (i) obligations
under Hedging Agreements and (ii) obligations with respect to the payment of
taxes, fees, costs and expenses, Capital Expenditures and other payments
required to be made pursuant to the Marine World Agreements shall not constitute
Indebtedness.
"Information Memorandum" means the Confidential Information
----------------------
Memorandum dated March 1998 prepared by the Borrower in connection with the
syndication of the Commitments hereunder.
"Interest Coverage Ratio" means, as at any date, the ratio of
-----------------------
(a) EBITDA for the period of four consecutive fiscal quarters ending on or most
recently ended prior to such date to (b) Interest Expense for such period.
"Interest Expense" means, for any period, the sum, for the
----------------
Borrower and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following: (a) all interest in
respect of Indebtedness (including, without limitation, the interest component
of any payments in respect of Capital Lease Obligations but excluding any
capitalized financing fees paid during such period that are to be charged to
future periods) accrued or capitalized during such period (whether or not
actually paid during such period) plus (b) the net amount payable (or minus the
---- -----
net amount receivable) under Hedging Agreements during such period (whether or
not actually paid or received during such period) minus (c) (to the extent not
-----
already deducted in computing Interest Expense) the aggregate amount of interest
income for such period. Notwithstanding the foregoing, if during any period for
which Interest Expense is being determined the Borrower shall have consummated
any acquisition or Disposition then, for all purposes of this Agreement (other
than for purposes of the definition of Excess Cash Flow), Interest Expense shall
be determined on a pro forma basis as if such acquisition or Disposition (and
any Indebtedness incurred by the Borrower or any of its Subsidiaries in
connection with such acquisition or repaid as a result of such Disposition) had
been made or consummated (and such Indebtedness incurred or repaid) on the first
day of such period and as if the interest rate applicable to any incremental
Indebtedness of the Borrower and its Subsidiaries is equal to the interest rate
applicable to Indebtedness of the Borrower and its Subsidiaries in fact
outstanding during such period.
"Interest Period" means, for any Eurodollar Loan, each period
---------------
commencing on the date such Eurodollar Loan is made or Converted from a Loan of
another Type or (in the event of a Continuation) the last day of the next
preceding Interest Period for such Loan and (subject to the provisions of
Section 2.01(d)) ending on the numerically corresponding day in the first,
<PAGE>
-14-
second, third or sixth calendar month thereafter (or such shorter periods as,
prior to the date referred to in Section 2.01(d), shall be agreed to by each
Lender), as the Borrower may select as provided in Section 4.05, except that
each Interest Period that commences on the last Business Day of a calendar month
(or on any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall (unless each of the Lenders shall
otherwise agree) end on the last Business Day of the appropriate subsequent
calendar month. Notwithstanding the foregoing: (i) each Interest Period that
would otherwise end on a day that is not a Business Day shall end on the next
succeeding Business Day (or, if such next succeeding Business Day falls in the
next succeeding calendar month, on the next preceding Business Day); and
(ii) notwithstanding clause (i) above, no Interest Period shall (except as
otherwise provided in the first sentence of this definition) have a duration of
less than one month and, if the Interest Period for any Eurodollar Loan would
otherwise be a shorter period, such Loan shall not be available hereunder for
such period.
"Investment" means, for any Person: (a) the acquisition (whether
----------
for cash, Property, services or securities or otherwise) of capital stock,
bonds, notes, debentures, partnership or other ownership interests or other
securities of any other Person or any agreement to make any such acquisition
(including, without limitation, any "short sale" or any sale of any securities
at a time when such securities are not owned by the Person entering into such
sale); (b) the making of any deposit with, or advance, loan or other extension
of credit to, any other Person (including the purchase of Property from another
Person subject to an understanding or agreement, contingent or otherwise, to
resell such deposit with, or advance, loan or other extension of credit to, any
other Person (including the purchase of Property from another Person subject to
an understanding or agreement, contingent or otherwise, to resell such Property
to such Person), but excluding any such advance, loan or extension of credit
having a stated term not exceeding 90 days arising in connection with the sale
of inventory, supplies or patron services by such Person in the ordinary course
of business, and excluding also any deposit made by such Person as an advance
payment in respect of a Capital Expenditure (to the extent the making of such
Capital Expenditure will not result in a violation of any of the provisions of
Section 9.10); (c) the entering into of any Guarantee of, or other contingent
obligation with respect to, Indebtedness or other liability of any other Person
and (without duplication) any amount committed to be advanced, lent or extended
to such Person; or (d) the entering into of any Hedging Agreement.
"Issuing Lender" means LCPI as the issuer of Letters of Credit
--------------
under Section 2.03, together with its successors and assigns in such capacity.
"LCPI" means Lehman Commercial Paper Inc., a Delaware
----
corporation.
"Letter of Credit" has the meaning assigned to such term in
----------------
Section 2.03.
"Letter of Credit Documents" means, with respect to any Letter of
--------------------------
Credit, collectively, any application therefor and any other agreements,
instruments, guarantees or other documents (whether general in application or
applicable only to such Letter of Credit) governing or providing for (a) the
<PAGE>
-15-
rights and obligations of the parties concerned or at risk with respect to such
Letter of Credit or (b) any collateral security for any of such obligations,
each as the same may be modified and supplemented and in effect from time to
time.
"Letter of Credit Interest" means, for each Lender, such Lender's
-------------------------
participation interest (or, in the case of the Issuing Lender, the Issuing
Lender's retained interest) in the Issuing Lender's liability under Letters of
Credit and such Lender's rights and interests in Reimbursement Obligations and
fees, interest and other amounts payable in connection with Letters of Credit
and Reimbursement Obligations.
"Letter of Credit Liability" means, without duplication, at any
--------------------------
time and in respect of any Letter of Credit, the sum of (a) the Undrawn Face
Amount plus (b) the aggregate unpaid principal amount of all Reimbursement
----
Obligations of the Borrower at such time due and payable in respect of all
drawings made under such Letter of Credit. For purposes of this Agreement, a
Lender (other than the Issuing Lender) shall be deemed to hold a Letter of
Credit Liability in an amount equal to its participation interest in the related
Letter of Credit under Section 2.03, and the Issuing Lender shall be deemed to
hold a Letter of Credit Liability in an amount equal to its retained interest in
the related Letter of Credit after giving effect to the acquisition by the
Lenders other than the Issuing Lender of their participation interests under
said Section 2.03.
"Leverage Ratio" means, as at any date, the ratio of (a) Total
--------------
Debt as at such date to (b) EBITDA for the period of four consecutive fiscal
quarters ending on or most recently ended prior to such date.
"Lien" means, with respect to any Property, any mortgage, lien,
----
pledge, charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this Agreement and the other Loan Documents, a Person
shall be deemed to own subject to a Lien any Property that it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement (other than an
operating lease) relating to such Property.
"Loan Documents" means, collectively, this Agreement, the Notes,
--------------
the Letter of Credit Documents and the Security Documents.
"Loans" means, collectively, the Facility A Revolving Credit
-----
Loans, the Facility B Term Loans and the Facility C Term Loans.
"Majority Lenders" means, at any time, Lenders having at least
----------------
51% of the sum of (a) the aggregate amount of the Facility A Revolving Credit
Commitments at such time (or, if the Facility A Revolving Credit Commitments
shall have terminated, the sum of (i) the aggregate unpaid principal amount of
the Facility A Revolving Credit Loans at such time plus (ii) the aggregate
----
amount of all Letter of Credit Liabilities at such time) plus (b) the aggregate
----
amount of the Facility B Term Loan Commitments at such time (or, if the Facility
<PAGE>
-16-
B Term Loan Commitments shall have terminated, the aggregate outstanding
principal amount of the Facility B Term Loans at such time) plus (c) the
----
aggregate amount of the Facility C Term Loan Commitments at such time (or, if
the Facility C Term Loan Commitments shall have terminated, the aggregate
outstanding principal amount of the Facility C Term Loans at such time).
"Marine World Agreements" means, collectively, (a) the Parcel
-----------------------
Lease dated as of November 7, 1997 between Marine World Joint Powers Authority
("Authority"), as landlord, and Park Management Corp. ("Tenant"), as tenant, a
--------- ------
Memorandum of which was recorded on November 10, 1997, Series No. 97-76697,
official records; (b) Reciprocal Easement Agreement dated as of November 7, 1997
between Authority and Tenant; (c) Revenue Sharing Agreement dated as of
November 7, 1997 by and among Authority, Tenant and the Redevelopment Agency of
the City of Vallejo ("Agency"); (d) 1997 Management Agreement Relating to Marine
------
World entered into as of February 1, 1997 between the Authority and Tenant, as
amended by a side letter dated November 7, 1997; and (e) Purchase Option
Agreement dated as of August 29, 1997 among the City of Vallejo, the Authority,
the Agency and Tenant, together with any and all documents delivered pursuant
thereto or in connection therewith, as the same shall, subject to Section 9.16,
be modified and supplemented and in effect from time to time.
"Margin Stock" means "margin stock" within the meaning of
------------
Regulations G, T, U and X.
"Material Adverse Effect" means a material adverse effect on
-----------------------
(a) the Property, business, operations, financial condition, prospects,
liabilities or capitalization of the Borrower and its Subsidiaries taken as a
whole, (b) the validity or enforceability of any of the Loan Documents, (c) the
rights and remedies of the Lenders and the Administrative Agent under any of the
Loan Documents or (d) the timely payment of the principal of or interest on the
Loans, Reimbursement Obligations or other amounts payable in connection
therewith.
"Multiemployer Plan" means a multiemployer plan defined as such
------------------
in Section 3(37) of ERISA to which contributions have been made by the Borrower
or any ERISA Affiliate and that is covered by Title IV of ERISA.
"Net Available Proceeds" means:
----------------------
(i) in the case of any Disposition, the amount of Net Cash
Payments received by the Borrower or any Subsidiary in connection
with such Disposition;
(ii) in the case of any Casualty Event, the aggregate
amount of proceeds of insurance, condemnation awards and other
compensation received by the Borrower and its Subsidiaries in
respect of such Casualty Event net of (A) reasonable expenses
incurred by the Borrower and its Subsidiaries in connection
therewith and (B) contractually required repayments of
Indebtedness consisting of Capital Lease Obligations or Purchase
Money Indebtedness permitted hereunder and covering the
respective Property that is the subject of such Casualty Event,
<PAGE>
-17-
and any income and transfer taxes payable by the Borrower or any
of its Subsidiaries in respect of such Casualty Event; and
(iii) in the case of any Debt Issuance, the aggregate
amount of all cash received by the Borrower and its Subsidiaries
in respect of such Debt Issuance net of reasonable expenses
incurred by the Borrower and its Subsidiaries in connection
therewith.
"Net Cash Payments" means, with respect to any Disposition, the
-----------------
aggregate amount of all cash payments received by the Borrower and its
Subsidiaries directly or indirectly in connection with such Disposition, whether
at the time of such Disposition or after such Disposition under deferred payment
arrangements or Investments entered into or received in connection with such
Disposition (including, without limitation, Disposition Investments); provided
--------
that (a) Net Cash Payments shall be net of (i) the amount of any legal, title,
transfer and recording tax expenses, commissions and other fees and expenses
payable by the Borrower and its Subsidiaries in connection with such Disposition
and (ii) any Federal, state and local income or other taxes estimated to be
payable by the Borrower and its Subsidiaries as a result of such Disposition,
but only to the extent that on the date of such Disposition the Borrower
delivers a certificate of a Responsible Officer of the Borrower setting forth a
calculation of the amount of such estimated taxes; and (b) Net Cash Payments
shall be net of any contractually required repayments of Indebtedness consisting
of Capital Lease Obligations or Purchase Money Indebtedness permitted hereunder
and covering the respective Property that is the subject of such Disposition.
"New Senior Notes" means Indebtedness of the Borrower (which may
----------------
be Guaranteed by the Subsidiaries of the Borrower) evidenced by notes issued
after the date hereof in accordance with the provisions of Section 9.07(e) that
constitute senior Indebtedness of the Borrower (i.e. do not constitute
Subordinated Indebtedness).
"1995 Senior Notes" means the 12% Senior Notes due 2003 issued by
-----------------
the Borrower pursuant to the 1995 Senior Notes Indenture.
"1995 Senior Notes Indenture" means the Indenture dated as of
---------------------------
August 15, 1995 between the Borrower and The Chase Manhattan Bank (as successor
to United States Trust Company of New York), as trustee, as the same has
heretofore been modified and supplemented pursuant to a First Supplemental
Indenture dated as of November 9, 1995, a Second Supplemental Indenture dated as
of January 21, 1997, a Supplemental Indenture dated as of February 6, 1997, a
Fourth Supplemental Indenture dated as of July 31, 1997, and a Fifth
Supplemental Indenture dated as of January 30, 1998, as the same shall, subject
to Section 9.16, be further modified and supplemented and in effect from time to
time.
"1997 Senior Notes" means the 9 3/4% Senior Notes due 2007 issued
-----------------
by the Borrower pursuant to the 1997 Senior Notes Indenture.
<PAGE>
-18-
"1997 Senior Notes Indenture" means the Indenture dated as of
---------------------------
January 15, 1997, between the Borrower and The Bank of New York, as trustee, as
the same has heretofore been modified and supplemented pursuant to a
Supplemental Indenture dated as of February 6, 1997, a Second Supplemental
Indenture dated as of July 31, 1997 and a Third Supplemental Indenture dated as
of January 30, 1998, as the same shall, subject to Section 9.16, be modified and
supplemented and in effect from time to time.
"Notes" means the promissory notes provided for by Section 2.08
-----
and all promissory notes delivered in substitution or exchange therefor, in each
case as the same shall be modified and supplemented and in effect from time to
time.
"Obligor" has the meaning set forth in the preamble.
-------
"Park" means, collectively, the Existing Parks and any other
----
amusement or attraction park acquired by any of the Obligors after the date
hereof.
"Payor" has the meaning set forth in Section 4.06.
-----
"PBGC" means the Pension Benefit Guaranty Corporation or any
----
entity succeeding to any or all of its functions under ERISA.
"Peril" has the meaning set forth in Section 9.04.
-----
"Permitted Investments" means: (a) direct obligations of the
---------------------
United States of America, or of any agency thereof, or obligations guaranteed as
to principal and interest by the United States of America, or of any agency
thereof, in either case maturing not more than one year from the date of
acquisition thereof; (b) certificates of deposit, time deposits and money market
deposit accounts issued by any bank or trust company organized under the laws of
the United States of America, any state thereof or any other country which is a
member of the Organization for Economic Cooperation and Development, in each
case having capital, surplus and undivided profits of at least $500,000,000,
maturing not more than one year from the date of acquisition thereof;
(c) securities either rated or issued by corporations that have a rating of, A-1
or better or P-1 by Standard & Poor's Ratings Services, a division of The McGraw
Hill Companies, Inc., or Moody's Investors Services, Inc., respectively,
maturing not more than one year from the date of acquisition thereof; and
(d) fully collateralized repurchase agreements with a term of not more than one
year for securities described in clause (a) above and entered into with either
financial institutions satisfying the criteria described in clause (b) above or
primary dealers in U.S. Government securities; in each case so long as the same
(x) provide for the payment of principal and interest (and not principal alone
or interest alone) and (y) are not subject to any contingency regarding the
payment of principal or interest.
"Permitted Reinvestment Transaction" means either (a) a
----------------------------------
Subsequent Acquisition permitted under Section 9.05(e)(iii) or a Capital
Expenditure permitted under Section 9.05(b), or (b) a reimbursement of the
<PAGE>
-19-
Borrower or any Subsidiary for monies expended by the Borrower or a Subsidiary
within the previous 180 days with respect to any such acquisition or Capital
Expenditure.
"Person" means any individual, corporation, company, voluntary
------
association, partnership, limited liability company, joint venture, trust,
unincorporated organization or government (or any agency, instrumentality or
political subdivision thereof).
"Plan" means an employee benefit or other plan established or
----
maintained by the Borrower or any ERISA Affiliate and that is covered by
Title IV of ERISA, other than a Multiemployer Plan.
"Post-Default Rate" means a rate per annum equal to 2% plus the
-----------------
Base Rate as in effect from time to time plus the Applicable Rate for Base Rate
Loans, provided that, with respect to principal of a Eurodollar Loan that shall
--------
become due (whether at stated maturity, by acceleration, by optional or
mandatory prepayment or otherwise) on a day other than the last day of the
Interest Period therefor, the "Post-Default Rate" shall be, for the period from
and including such due date to but excluding the last day of such Interest
Period, 2% plus the interest rate for such Loan as provided in Section 3.02(b)
and, thereafter, the rate provided for above in this definition.
"Premier Merger" has the meaning set forth in Section 9.05(e)
--------------
(iv).
"Prime Rate" means a rate of interest per annum equal to the rate
----------
of interest publicly announced in New York City by Citibank, N.A., as published
in the Wall Street Journal, from time to time as its prime commercial lending
rate, such rate to be adjusted automatically (without notice) on the effective
date of any change in such publicly announced rate.
"Principal Office" means, initially, the office of the
----------------
Administrative Agent set forth on the signature pages hereof or such other
office that the Administrative Agent may specify to the Lenders and the Borrower
from time to time.
"Principal Payment Dates" shall mean, with respect to the Term
-----------------------
Loans, each Quarterly Date during the period from and including the Quarterly
Date falling on or nearest to June 30, 1998, through and including the Quarterly
Date falling on or nearest to March 31, 2006.
"Pro Rata Share" has the meaning set forth in Section 6.08.
--------------
"Property" means any right or interest in or to property of any
--------
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"Purchase Money Indebtedness" means Indebtedness (i) consisting
---------------------------
of the deferred purchase price of Property, conditional sale obligations under
any title retention agreement and other purchase money obligations, in each case
where the maturity of such Indebtedness does not exceed the anticipated useful
<PAGE>
-20-
life of the asset being financed, and (ii) incurred to finance the acquisition
by the Borrower or a Subsidiary of such asset, including additions and
improvements; provided, however, that any Lien arising in connection with any
--------
such Indebtedness shall be limited to the specified asset being financed or, in
the case of real Property and fixtures, including additions and improvements,
the real Property on which such asset is attached; and provided further, that
such Indebtedness is incurred within 180 days after such acquisition, addition
or improvement by the Borrower or Subsidiary of such asset.
"Quarterly Dates" means the last Business Day of March, June,
---------------
September and December in each year, the first of which shall be the first such
day after the date hereof.
"Regulations A, D, G, T, U and X" means, respectively,
-------------------------------
Regulations A, D, G, T, U and X of the Board of Governors of the Federal Reserve
System (or any successor), as the same may be modified and supplemented and in
effect from time to time.
"Regulatory Change" means, with respect to any Lender, any change
-----------------
after the date hereof in Federal, state or foreign law or regulations
(including, without limitation, Regulation D) or the adoption or making after
such date of any interpretation, directive or request applying to a class of
banks including such Lender of or under any Federal, state or foreign law or
regulations (whether or not having the force of law and whether or not failure
to comply therewith would be unlawful) by any court or governmental or monetary
authority charged with the interpretation or administration thereof.
"Reimbursement Obligation" means, at any date, the obligations of
------------------------
the Borrower then outstanding, or that may thereafter arise in respect of all
Letters of Credit then outstanding, to reimburse amounts paid by the Issuing
Lender in respect of any drawings under a Letter of Credit.
"Release" means any release, threatened release, spill, emission,
-------
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migration into the indoor or outdoor environment, including, without
limitation, the movement of Hazardous Materials through ambient air, soil,
surface water, ground water, wetlands, land or subsurface strata.
"Required Payment" has the meaning set forth in Section 4.06.
----------------
"Reserve Requirement" means, for any Interest Period for any
-------------------
Eurodollar Loan, the average maximum rate at which reserves (including, without
limitation, any marginal, supplemental or emergency reserves) are required to be
maintained during such Interest Period under Regulation D by member banks of the
Federal Reserve System in New York City with deposits exceeding one billion
Dollars against "Eurocurrency liabilities" (as such term is used in
Regulation D). Without limiting the effect of the foregoing, the Reserve
Requirement shall include any other reserves required to be maintained by such
member banks by reason of any Regulatory Change with respect to (i) any category
of liabilities that includes deposits by reference to which the Eurodollar Base
Rate for any Interest Period for any Eurodollar Loans is to be determined as
<PAGE>
-21-
provided in the definition of "Eurodollar Base Rate" in this Section 1.01 or
(ii) any category of extensions of credit or other assets that includes
Eurodollar Loans.
"Reserved Commitment Amount" has the meaning assigned to such
--------------------------
term in the second paragraph of Section 2.01(a).
"Responsible Officer" means, as to any Person, the chief
-------------------
executive officer, president, any vice president, chief financial officer or
secretary of such person.
"Restricted Payment" means dividends (in cash, Property or
------------------
obligations) on, or other payments or distributions on account of, or the
setting apart of money for a sinking or other analogous fund for, or the
purchase, redemption, retirement or other acquisition of, any shares of any
class of stock of the Borrower or of any warrants, options or other rights to
acquire the same (or to make any payments to any Person, such as "phantom stock"
payments, where the amount thereof is calculated with reference to the fair
market or equity value of the Borrower or any of its Subsidiaries), but
excluding dividends payable solely in shares of common stock of the Borrower.
"Security Agreement" means a Security Agreement substantially in
------------------
the form of Exhibit B between the Borrower, the Subsidiaries of the Borrower
party thereto and the Administrative Agent, as the same shall be modified and
supplemented and in effect from time to time.
"Security Documents" means, collectively, the Security Agreement
------------------
and all Uniform Commercial Code financing statements required by any of such
instruments to be filed with respect to the security interests in personal
Property and fixtures created pursuant thereto.
"Senior Notes" means, collectively, the 1995 Senior Notes, the
------------
1997 Senior Notes and the New Senior Notes.
"Senior Notes Indentures" means, collectively, the 1995 Senior
-----------------------
Notes Indenture, the 1997 Senior Notes Indenture and any indenture or other
agreement relating to, evidencing or pursuant to which the New Senior Notes are
issued.
"Senior Secured Debt" means, as at any date, the aggregate amount
-------------------
of Indebtedness of the Borrower and its Subsidiaries at such date (determined on
a consolidated basis without duplication in accordance with GAAP) that is not
Subordinated Indebtedness and is secured by the Property of the Borrower and/or
its Subsidiaries.
"Senior Secured Debt Ratio" means, at any date, the ratio of
-------------------------
(a) Senior Secured Debt as at such date to (b) EBITDA for the period of four
consecutive fiscal quarters ending on, or most recently ended prior to such
date.
<PAGE>
-22-
"Subordinated Indebtedness" means Indebtedness of the Borrower
-------------------------
incurred in accordance with Section 9.11.
"Subsequent Acquisition" means any acquisition permitted under
----------------------
Section 9.05(e)(iii).
"Subsequent Acquisition Agreements" means each agreement pursuant
---------------------------------
to which a Subsequent Acquisition shall be consummated, as the same shall,
subject to Section 9.16, be modified and supplemented and in effect from time to
time.
"Subsidiary" means, with respect to any Person, any corporation,
----------
partnership, limited liability company or other entity domestic or foreign of
which at least a majority of the securities or other ownership interests having
by the terms thereof ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions of such corporation,
partnership or other entity (irrespective of whether or not at the time
securities or other ownership interests of any other class or classes of such
corporation, partnership or other entity shall have or might have voting power
by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by such Person or one or more Subsidiaries of
such Person or by such Person and one or more Subsidiaries of such Person.
Notwithstanding anything herein to the contrary, Walibi shall be a Subsidiary
from and after the consummation of the Walibi Acquisition for all purposes of
this Agreement.
"Subsidiary Guarantor" has the meaning set forth in the preamble.
--------------------
"Syndication Completion Date" means the date reasonably
---------------------------
determined by the Arranger (which shall be promptly notified to the Borrower) on
which the general syndication of the credit facilities provided for in this
Agreement has been completed.
"Tender Offer" means the tender offer to be launched upon
------------
consummation of the Walibi Acquisition to acquire the outstanding shares of
capital stock of Walibi not acquired pursuant to the Walibi Acquisition
Agreement.
"Term Loan" means, collectively, the Facility B Term Loans and
---------
Facility C Term Loans.
"Total Debt" means, as at any date, the aggregate amount of all
----------
Indebtedness of the Borrower and its Subsidiaries at such date (determined on a
consolidated basis without duplication in accordance with GAAP).
"Type" has the meaning assigned to such term in Section 1.03.
----
"Undrawn Face Amount" means, as at any date, the sum of (i) the
-------------------
Dollar Equivalent plus (ii) with respect to any Letter of Credit denominated in
----
Dollars, the aggregate undrawn face amount of such Letter of Credit on such
date.
<PAGE>
-23-
"U.S. Person" has the meaning set forth in Section 5.07.
-----------
"Walibi" means Walibi S.A., a Belgian corporation.
------
"Walibi Acquisition" means the acquisition by the Borrower of
------------------
Walibi pursuant to the Walibi Acquisition Agreement.
"Walibi Acquisition Agreement" means the Stock Purchase Agreement
----------------------------
dated as of December 15, 1997 among the Borrower and Centrag S.A., Karaba N.V.
and Westkoi N.V., each a Belgian corporation.
"Wholly Owned Subsidiary" means, with respect to any Person, any
-----------------------
corporation, partnership, limited liability company or other entity of which all
of the equity securities or other ownership interests (other than, in the case
of a corporation, directors', qualifying shares or equity interests held by
foreign nationals, in each case to the extent mandated by applicable law) are
directly or indirectly owned or controlled by such Person or one or more Wholly
Owned Subsidiaries of such Person.
1.02. Accounting Terms and Determinations.
-----------------------------------
(a) Except as otherwise expressly provided herein, all accounting
terms used herein shall be interpreted, and all financial statements and
certificates and reports as to financial matters required to be delivered to the
Lenders hereunder shall (unless otherwise disclosed to the Lenders in writing at
the time of delivery thereof in the manner described in paragraph (b) of this
Section 1.02) be prepared, in accordance with generally accepted accounting
principles applied on a basis consistent with those used in the preparation of
the latest financial statements furnished to the Lenders hereunder (which, prior
to the delivery of the first financial statements under Section 9.01, means the
audited financial statements as at December 31, 1997 referred to in
Section 8.02). All calculations made for the purposes of determining compliance
with this Agreement shall (except as otherwise expressly provided herein) be
made by application of generally accepted accounting principles applied on a
basis consistent with those used in the preparation of the latest annual or
quarterly financial statements furnished to the Lenders pursuant to Section 9.01
(or, prior to the delivery of the first financial statements under Section 9.01,
used in the preparation of the audited financial statements as at December 31,
1997 referred to in Section 8.02) unless (i) the Borrower shall have objected to
determining such compliance on such basis at the time of delivery of such
financial statements or (ii) the Majority Lenders shall so object in writing
within 30 days after delivery of such financial statements, in either of which
events such calculations shall be made on a basis consistent with those used in
the preparation of the latest financial statements as to which such objection
shall not have been made (which, if objection is made in respect of the first
financial statements delivered under Section 9.01, means the audited financial
statements referred to in Section 8.02).
<PAGE>
-24-
(b) The Borrower shall deliver to the Lenders at the same time as
the delivery of any annual or quarterly financial statement under Section 9.01
(i) a description in reasonable detail of any material variation between the
application of accounting principles employed in the preparation of such
statement and the application of accounting principles employed in the
preparation of the next preceding annual or quarterly financial statements as to
which no objection has been made in accordance with the last sentence of
paragraph (a) of this Section 1.02 and (ii) reasonable estimates of the
difference between such statements arising as a consequence thereof.
(c) To enable the ready and consistent determination of
compliance with the covenants set forth in Section 9, the Borrower will not
change the last day of its fiscal year from December 31, or the last days of the
first three fiscal quarters in each of its fiscal years from March 31, June 30
and September 30, respectively.
1.03. Classes and Types of Loans. Loans hereunder are
--------------------------
distinguished by "Class" and by "Type". The "Class" of a Loan (or of a
Commitment to make a Loan) refers to whether such Loan is a Facility A Revolving
Credit Loan or a Facility B Term Loan, or a Facility C Term Loan each of which
constitutes a Class. The "Type" of a Loan refers to whether such Loan is a Base
Rate Loan or a Eurodollar Loan, each of which constitutes a Type. Loans may be
identified by both Class and Type.
1.04. Terms Generally. The definitions of terms herein shall
---------------
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Sections, Exhibits
and Schedules shall be construed to refer to Sections of, and Exhibits and
Schedules to, this Agreement and (e) the word "asset" shall be construed to
refer to any and all tangible and intangible assets and properties, including
cash, securities, accounts, contract rights and real property.
Section 2. Commitments, Loans, Notes and Prepayments.
2.01 Loans.
-----
(a) Facility A Revolving Credit Loans. Each Facility A Revolving
---------------------------------
Credit Lender severally agrees, on the terms and conditions of this Agreement,
to make loans to the Borrower in Dollars during the period from and including
<PAGE>
-25-
the Closing Date to but not including the Facility A Revolving Credit Commitment
Termination Date in an aggregate principal amount at any one time outstanding up
to but not exceeding the amount of the Facility A Revolving Credit Commitment of
such Lender as in effect from time to time (such Loans being herein called
"Facility A Revolving Credit Loans"), provided that in no event shall the
--------------------------------- --------
aggregate outstanding principal amount of all Facility A Revolving Credit Loans,
together with the aggregate outstanding amount of all Letter of Credit
Liabilities, exceed the aggregate amount of the Facility A Revolving Credit
Commitments as in effect from time to time. Subject to the terms and conditions
of this Agreement, during such period the Borrower may borrow, repay and
reborrow the amount of the Facility A Revolving Credit Commitments by means of
Base Rate Loans and Eurodollar Loans and may Convert Facility A Revolving Credit
Loans of one Type into Facility A Revolving Credit Loans of another Type (as
provided in Section 2.09) or Continue Facility A Revolving Credit Loans of one
Type as Facility A Revolving Credit Loans of the same Type (as provided in
Section 2.09). Anything herein to the contrary notwithstanding, upon unanimous
consent of the Lenders, the Borrower may request and the Lenders may make
Facility A Revolving Credit Loans to the Borrower on the Closing Date regardless
of whether any Facility B Term Loans or Facility C Term Loans shall also have
been made on the Closing Date.
If in the event that, as contemplated by Section 2.10(e), the
Borrower shall prepay Facility A Revolving Credit Loans from the proceeds of a
Disposition, then an amount of Facility A Revolving Credit Commitments equal to
the amount of such prepayment (herein the "Reserved Commitment Amount") shall be
--------------------------
reserved and shall not be available for borrowings hereunder except and to the
extent that the proceeds of such borrowings are to be applied to a Permitted
Reinvestment Transaction. The Borrower agrees, upon the occasion of any
borrowing of Facility A Revolving Credit Loans hereunder that is to constitute a
utilization of any Reserved Commitment Amount, to advise the Administrative
Agent in writing of such fact at the time of such borrowing, identifying the
portion of such borrowing that is to constitute such utilization and the reduced
Reserved Commitment Amount to be in effect after giving effect to such borrowing
(and the Reserved Commitment Amount shall be automatically reduced at the time
of such borrowing by an amount equal to such portion of such borrowing).
(b) Facility B Term Loans. Each Facility B Lender severally
---------------------
agrees, on the terms and conditions of this Agreement, to make two term loans to
the Borrower in Dollars during the period from and including the Closing Date to
and including the Facility B Term Loan Commitment Termination Date in an
aggregate principal amount up to but not exceeding the amount of the Facility B
Term Loan Commitment of such Lender (such Loans being herein called the
"Facility B Term Loans"). Notwithstanding the foregoing, on or prior to the
---------------------
Syndication Completion Date the Borrower shall borrow the maximum amount of the
Facility B Term Loans that it is permitted to incur under the Senior Notes
Indentures without regard to the provisions of Section 4.03(b) thereof (less
$1,000,000), and to the extent the Borrower shall borrow less than the full
amount of the Facility B Term Loan Commitments the remainder shall be available
to be drawn, in one or more borrowings, at any time on or prior to May 15, 1998.
<PAGE>
-26-
Notwithstanding anything herein to the contrary, no Facility B Term Loan shall
be made until the full amount of the Facility C Term Loan Commitments shall have
been used.
(c) Facility C Term Loans. Each Facility C Lender severally
---------------------
agrees, on the terms and conditions of this Agreement, to make a term loan to
the Borrower in Dollars during the period from and including the Closing Date to
and including the Facility C Term Loan Commitment Termination Date in an
aggregate principal amount up to but not exceeding the amount of the Facility C
Term Loan Commitment of such Lender (such Loans being herein called the
"Facility C Term Loans").
---------------------
(d) Limit on Eurodollar Loans. No more than ten separate Interest
-------------------------
Periods in respect of Eurodollar Loans of a Class from each Lender may be
outstanding at any one time.
2.02. Borrowings. The Borrower shall give the Administrative
----------
Agent notice of each borrowing hereunder as provided in Section 4.05. Not later
than 1:00 p.m. New York time on the date specified for each borrowing hereunder,
each Lender shall make available its Commitment Percentage of the amount of the
Loan or Loans to be made on such date to the Administrative Agent at the
Principal Office in Dollars in immediately available funds, for account of the
Borrower. The amount so received by the Administrative Agent shall, subject to
the terms and conditions of this Agreement, be made available to the Borrower by
depositing the same, in immediately available funds, in an account of the
Borrower at a bank in New York designated by the Borrower from time to time.
2.03. Letters of Credit. Subject to the terms and conditions of
-----------------
this Agreement, the Facility A Revolving Credit Commitments may be utilized,
upon the request of the Borrower in addition to the Facility A Revolving Credit
Loans provided for by Section 2.01(a), by the issuance by the Issuing Lender of
letters of credit (collectively, "Letters of Credit") for account of the
-----------------
Borrower and in support of an obligation of the Borrower or any of its
Subsidiaries (as specified by the Borrower), provided that in no event shall
--------
(i) the aggregate outstanding amount of all Letter of Credit Liabilities,
together with the aggregate outstanding principal amount of the Facility A
Revolving Credit Loans, exceed the aggregate amount of the Facility A Revolving
Credit Commitments as in effect from time to time, (ii) the outstanding
aggregate amount of all Letter of Credit Liabilities exceed (x) $50,000,000
until completion of the Tender Offer or (y) $25,000,000 at all times thereafter
and (iii) the expiration date of any Letter of Credit extend beyond the earlier
of the Facility A Revolving Credit Commitment Termination Date and the date
fifteen months following the issuance of such Letter of Credit, except that an
automatic renewal provision in a Letter of Credit extending such Letter of
Credit (unless notice by the Issuing Lender is otherwise given) to a date not
later than the date fifteen months following the date of such extension (but not
in any event to a date later than the Facility A Revolving Credit Commitment
Termination Date), shall be permitted. The following additional provisions shall
apply to Letters of Credit:
(a) The Borrower shall give the Administrative Agent at least
five Business Days' irrevocable prior notice (effective upon receipt)
specifying the Business Day (which shall be no later than 30 days
<PAGE>
-27-
preceding the Facility A Revolving Credit Commitment Termination Date)
each Letter of Credit is to be issued and describing in reasonable
detail the proposed terms of such Letter of Credit (including the
beneficiary thereof) and the nature of the transactions or obligations
proposed to be supported thereby (including whether such Letter of
Credit is to be a commercial letter of credit or a standby letter of
credit). Upon receipt of any such notice, the Administrative Agent shall
advise the Issuing Lender of the contents thereof.
(b) On each day during the period commencing with the issuance by
the Issuing Lender of any Letter of Credit and until such Letter of
Credit shall have expired or been terminated, the Facility A Revolving
Credit Commitment of each Lender shall be deemed to be utilized for all
purposes of this Agreement in an amount equal to such Lender's
Commitment Percentage of the then Undrawn Face Amount of such Letter of
Credit. Each Lender (other than the Issuing Lender) agrees that, upon
the issuance of any Letter of Credit hereunder, it shall automatically
acquire a participation in the Issuing Lender's liability under such
Letter of Credit in an amount equal to such Lender's Commitment
Percentage of such liability, and each Lender (other than the Issuing
Lender) thereby shall absolutely, unconditionally and irrevocably
assume, as primary obligor and not as surety, and shall be
unconditionally obligated to the Issuing Lender to pay and discharge
when due, its Commitment Percentage of the Issuing Lender's liability
under such Letter of Credit.
(c) Upon receipt from the beneficiary of any Letter of Credit of
any demand for payment under such Letter of Credit, the Issuing Lender
shall promptly notify the Borrower (through the Administrative Agent) of
the amount to be paid by the Issuing Lender as a result of such demand
and the date on which payment is to be made by the Issuing Lender to
such beneficiary in respect of such demand. Notwithstanding the identity
of the account party of any Letter of Credit, the Borrower hereby
unconditionally agrees to pay and reimburse the Administrative Agent for
account of the Issuing Lender for the amount of each demand for payment
under such Letter of Credit that is in substantial compliance with the
provisions of such Letter of Credit at or prior to the date on which
payment is to be made by the Issuing Lender to the beneficiary
thereunder, without presentment, demand, protest or other formalities of
any kind.
(d) Forthwith upon its receipt of a notice referred to in
paragraph (c) of this Section 2.03, the Borrower shall advise the
Administrative Agent whether or not the Borrower intends to borrow
hereunder to finance its obligation to reimburse the Issuing Lender for
the amount of the related demand for payment and, if it does, the
Borrower shall submit a notice of such borrowing as provided in
Section 4.05.
(e) Each Lender (other than the Issuing Lender) shall pay to the
Administrative Agent for account of the Issuing Lender at the Principal
Office in Dollars and in immediately available funds, the amount of such
Lender's Commitment Percentage of any payment under a Letter of Credit
upon notice by the Issuing Lender (through the Administrative Agent) to
<PAGE>
-28-
such Lender requesting such payment and specifying such amount; provided
--------
that, with respect to any Letter of Credit denominated in a Foreign
Currency, the amount payable by such Lender shall be equal to the Dollar
Equivalent of the amount of such Lender's Commitment Percentage of any
payment under such Letter of Credit as determined on the date of such
payment. Each such Lender's obligation to make such payment to the
Administrative Agent for account of the Issuing Lender under this
paragraph (e), and the Issuing Lender's right to receive the same, shall
be absolute and unconditional and shall not be affected by any
circumstance whatsoever, including, without limitation, the failure of
any other Lender to make its payment under this paragraph (e), the
financial condition of the Borrower (or any other account party), the
existence of any Default or the termination of the Commitments. Each
such payment to the Issuing Lender shall be made without any offset,
abatement, withholding or reduction whatsoever. If any Lender shall
default in its obligation to make any such payment to the Administrative
Agent for account of the Issuing Lender, for so long as such default
shall continue the Administrative Agent may at the request of the
Issuing Lender withhold from any payments received by the Administrative
Agent under this Agreement or any Note for account of such Lender the
amount so in default and, to the extent so withheld, pay the same to the
Issuing Lender in satisfaction of such defaulted obligation.
(f) Upon the making of each payment by a Lender to the Issuing
Lender pursuant to paragraph (e) above in respect of any Letter of
Credit, such Lender shall, automatically and without any further action
on the part of the Administrative Agent, the Issuing Lender or such
Lender, acquire (i) a participation in an amount equal to such payment
in the Reimbursement Obligation owing to the Issuing Lender by the
Borrower hereunder and under the Letter of Credit Documents relating to
such Letter of Credit and (ii) a participation in a percentage equal to
such Lender's Commitment Percentage in any interest or other amounts
payable by the Borrower hereunder and under such Letter of Credit
Documents in respect of such Reimbursement Obligation (other than the
commissions, charges, costs and expenses payable to the Issuing Lender
pursuant to paragraph (g) of this Section 2.03). Upon receipt by the
Issuing Lender from or for account of the Borrower of any payment in
respect of any Reimbursement Obligation or any such interest or other
amount (including by way of setoff or application of proceeds of any
collateral security) the Issuing Lender shall promptly pay to the
Administrative Agent for account of each Lender entitled thereto, such
Lender's Commitment Percentage of such payment, each such payment by the
Issuing Lender to be made in the same money and funds in which received
by the Issuing Lender. In the event any payment received by the Issuing
Lender and so paid to the Lenders hereunder is rescinded or must
otherwise be returned by the Issuing Lender, each Lender shall, upon the
request of the Issuing Lender (through the Administrative Agent), repay
to the Issuing Lender (through the Administrative Agent) the amount of
such payment paid to such Lender, with interest at the rate specified in
paragraph (j) of this Section 2.03.
(g) The Borrower shall pay to the Administrative Agent for
account of each Lender (ratably in accordance with their respective
<PAGE>
-29-
Commitment Percentages) a letter of credit fee in respect of each Letter
of Credit in an amount per annum equal to the Applicable Rate then in
effect in respect of Eurodollar Loans of the daily average Undrawn Face
Amount of such Letter of Credit for the period from and including the
date of issuance of such Letter of Credit (i) in the case of a Letter of
Credit that expires in accordance with its terms, to and including such
expiration date and (ii) in the case of a Letter of Credit that is drawn
in full or is otherwise terminated other than on the stated expiration
date of such Letter of Credit, to but excluding the date such Letter of
Credit is drawn in full or is terminated (such fee to be non-refundable,
to be paid in arrears on each Quarterly Date and on the Commitment
Termination Date and to be calculated for any day after giving effect to
any payments made under such Letter of Credit on such day).
In addition, the Borrower shall pay to the Administrative Agent
for account of the Issuing Lender a fronting fee in respect of each
Letter of Credit in an amount equal to 1/4 of 1% per annum of the daily
average Undrawn Face Amount of such Letter of Credit for the period from
and including the date of issuance of such Letter of Credit (i) in the
case of a Letter of Credit that expires in accordance with its terms, to
and including such expiration date and (ii) in the case of a Letter of
Credit that is drawn in full or is otherwise terminated other than on
the stated expiration date of such Letter of Credit, to but excluding
the date such Letter of Credit is drawn in full or is terminated (such
fee to be non-refundable, to be paid in arrears on each Quarterly Date
and on the Commitment Termination Date and to be calculated for any day
after giving effect to any payments made under such Letter of Credit on
such day) plus all commissions, charges, costs and expenses in the
amounts customarily charged by the Issuing Lender from time to time in
like circumstances with respect to the issuance of each Letter of Credit
and drawings and other transactions relating thereto.
(h) Promptly following the end of each calendar month, the
Issuing Lender shall deliver (through the Administrative Agent) to each
Lender and the Borrower a notice describing the aggregate amount of all
Letters of Credit outstanding at the end of such month. Upon the request
of any Lender from time to time, the Issuing Lender shall deliver any
other information reasonably requested by such Lender with respect to
each Letter of Credit then outstanding.
(i) The issuance by the Issuing Lender of each Letter of Credit
shall, in addition to the conditions precedent set forth in Section 7,
be subject to the conditions precedent that (i) such Letter of Credit
shall be in such form, contain such terms and support such transactions
as shall be satisfactory to the Issuing Lender consistent with its then
current practices and procedures with respect to letters of credit of
the same type (except that in no event shall any Letter of Credit
provide support for obligations that would constitute "Indebtedness"
under and as defined in the Senior Notes Indentures in an amount in
excess of the amount thereof permitted by Section 4.03(b)(ix) of the
1995 Senior Notes Indenture and the 1997 Senior Notes Indenture and any
comparable provision of any indenture or other agreement relating to New
Senior Notes) and (ii) the Borrower shall have executed and delivered
such applications, agreements and other instruments relating to such
<PAGE>
-30-
Letter of Credit as the Issuing Lender shall have reasonably requested
consistent with its then current practices and procedures with respect
to letters of credit of the same type, provided that in the event of any
--------
conflict between any such application, agreement or other instrument and
the provisions of this Agreement or any Security Document, the
provisions of this Agreement and the Security Documents shall control.
(j) To the extent that any Lender shall fail to pay any amount
required to be paid pursuant to paragraph (e) or (f) of this Section
2.03 on the due date therefor, such Lender shall pay interest to the
Issuing Lender (through the Administrative Agent) on such amount from
and including such due date to but excluding the date such payment is
made at a rate per annum equal to the Federal Funds Rate, provided that
--------
if such Lender shall fail to make such payment to the Issuing Lender
within three Business Days of such due date, then, retroactively to the
due date, such Lender shall be obligated to pay interest on such amount
at the Post-Default Rate.
(k) The issuance by the Issuing Lender of any modification or
supplement to any Letter of Credit hereunder shall be subject to the
same conditions applicable under this Section 2.03 to the issuance of
new Letters of Credit, and no such modification or supplement shall be
issued hereunder unless either (i) the respective Letter of Credit
affected thereby would have complied with such conditions had it
originally been issued hereunder in such modified or supplemented form
or (ii) each Lender shall have consented thereto.
(l) Notwithstanding anything to the contrary, if at any time one
or more Letters of Credit denominated in a Foreign Currency shall be
issued and outstanding the Administrative Agent may require by notice to
the Borrower that the then Dollar Equivalent of the Undrawn Face Amount
of each such Letter of Credit be determined at such time. Upon making
such determination, the Administrative Agent shall promptly notify the
Borrower and the Revolving Credit Lender thereof. If, on the date of
such determination, the sum of (A) the aggregate Dollar Equivalent of
such Letters of Credit, (B) the outstanding aggregate amount of all
Letter of Credit Liabilities in respect of all other Letters of Credit
and (C) the aggregate outstanding principal amount of the Facility A
Revolving Credit Loans shall exceed the aggregate amount of the Facility
A Revolving Credit Commitments as then in effect, the Borrower shall, if
requested by the Administrative Agent or any Revolving Credit Lender
(through the Administrative Agent), prepay Facility A Revolving Credit
Loans to the extent of such excess. Any such prepayment pursuant to this
paragraph (l) shall be accompanied by any amounts payable under
Sections 3.02 and 5.05.
The Borrower hereby indemnifies and holds harmless each Lender and the
Administrative Agent from and against any and all claims and damages, losses,
liabilities, costs or expenses that such Lender or the Administrative Agent may
incur (or that may be claimed against such Lender or the Administrative Agent by
any Person whatsoever) by reason of or in connection with the execution and
delivery or transfer of or payment or refusal to pay by the Issuing Lender under
<PAGE>
-31-
any Letter of Credit; provided that the Borrower shall not be required to
--------
indemnify any Lender or the Administrative Agent for any claims, damages,
losses, liabilities, costs or expenses to the extent, but only to the extent,
caused by (i) the willful misconduct or gross negligence of the Issuing Lender
in determining whether a request presented under any Letter of Credit complied
with the terms of such Letter of Credit or (ii) in the case of the Issuing
Lender, such Lender's failure to pay under any Letter of Credit after the
presentation to it of a request strictly complying with the terms and conditions
of such Letter of Credit. Nothing in this Section 2.03 is intended to limit the
other obligations of the Borrower, any Lender or the Administrative Agent under
this Agreement. Anything herein to the contrary notwithstanding (i) the Borrower
shall indemnify the Issuing Lender for any loss or shortfall resulting from the
redenomination into Dollars of Reimbursement Obligations with respect to any
Letter of Credit denominated in a Foreign Currency including, without
limitation, any loss suffered by the Issuing Lender as a result of the
reimbursement in Dollars by the Lenders under clause (e) above with respect to
any drawing of such Letter of Credit and (ii) each Lender shall automatically
acquire a participation in an amount equal to such Lender's Commitment
Percentage of such shortfall and each Lender (other than the Issuing Lender)
thereby shall absolutely, unconditionally and irrevocably assume and shall be
unconditionally obligated to the Issuing Lender to pay and discharge when due
its Commitment Percentage of such shortfall under such Letter of Credit.
2.04. Changes of Commitments.
----------------------
(a) The aggregate amount of the Facility A Revolving Credit
Commitments shall be automatically reduced to zero on the Facility A Revolving
Credit Commitment Termination Date.
(b) The Borrower shall have the right at any time or from time to
time (i) so long as no Facility A Revolving Credit Loan or Letter of Credit
Liabilities are outstanding, to terminate the Facility A Revolving Credit
Commitments, and (ii) to reduce permanently the aggregate unutilized amount of
the Facility A Revolving Credit Commitments (for which purpose utilization of
the Facility A Revolving Credit Commitments shall be deemed to include the
aggregate amount of Letter of Credit Liabilities); provided that (x) the
--------
Borrower shall give notice of each such termination or permanent reduction as
provided in Section 4.05 and (y) each partial permanent reduction shall be in an
aggregate amount at least equal to $5,000,000 (or a larger multiple of
$1,000,000).
(c) Any portion of the Facility B Term Loan Commitments not used
on or prior to the Facility B Term Loan Commitment Termination Date shall be
automatically terminated at the close of business (New York time) on the
Facility B Term Loan Commitment Termination Date (subject to the second sentence
of Section 2.01(b)).
(d) Any portion of the Facility C Term Loan Commitments not used
on or prior to the Facility C Term Loan Commitment Termination Date shall be
automatically terminated at the close of business (New York time) on the
Facility C Term Loan Commitment Termination Date.
<PAGE>
-32-
(e) The Commitments once terminated or permanently reduced may
not be reinstated.
2.05. Commitment Fee. The Company shall pay to the
--------------
Administrative Agent for account of each Lender a commitment fee on the daily
average unused amount of the respective Commitments of such Lender (for which
purpose the aggregate amount of any Letter of Credit Liabilities shall be deemed
to be a pro rata (based on the Facility A Revolving Credit Commitments) use of
each Lender's Facility A Revolving Credit Commitment), for the period from and
including the date hereof to but not including the date such Commitment is
terminated, at a rate per annum equal to the Applicable Rate. Any Reserved
Commitment Amount hereunder shall not be deemed a utilization of any Commitment.
Accrued commitment fees shall be payable on each Quarterly Date and on the date
the relevant Commitments are terminated.
2.06. Lending Offices. The Loans of each Type made by each
---------------
Lender shall be made and maintained at such Lender's Applicable Lending Office
for Loans of such Type.
2.07. Several Obligations; Remedies Independent. The failure of
-----------------------------------------
any Lender to make any Loan to be made by it on the date specified therefor
shall not relieve any other Lender of its obligation to make its Loan on such
date, but neither any Lender nor the Administrative Agent shall be responsible
for the failure of any other Lender to make a Loan to be made by such other
Lender, and (except as otherwise provided in Section 4.06) no Lender shall have
any obligation to the Administrative Agent or any other Lender for the failure
by such Lender to make any Loan required to be made by such Lender. The amounts
payable by the Borrower at any time hereunder and under the Notes to each Lender
shall be a separate and independent debt and each Lender shall be entitled to
protect and enforce its rights arising out of this Agreement and the Notes, and
it shall not be necessary for any other Lender or the Administrative Agent to
consent to, or be joined as an additional party in, any proceedings for such
purposes.
2.08. Notes.
-----
(a) The Facility A Revolving Credit Loans made by each Lender
shall be evidenced by a single promissory note of the Borrower substantially in
the form of Exhibit A-1, dated the date hereof, payable to such Lender in a
principal amount equal to the amount of its Facility A Revolving Credit
Commitment as originally in effect and otherwise duly completed.
(b) The Facility B Term Loans made by each Lender shall be
evidenced by a single promissory note of the Borrower substantially in the form
of Exhibit A-2, dated the date hereof, payable to such lender in a principal
amount equal to its Facility B Term Loan Commitment as originally in effect and
otherwise duly completed.
(c) The Facility C Term Loans made by each Lender shall be
evidenced by a single promissory note of the Borrower substantially in the form
<PAGE>
-33-
of Exhibit A-3, dated the date hereof, payable to such Lender in a principal
amount equal to its Facility C Term Loan Commitment as originally in effect and
otherwise duly completed.
(d) The date, amount, Type, interest rate and duration of
Interest Period (if applicable) of each Loan of each Class made by each Lender
to the Borrower, and each payment made on account of the principal thereof,
shall be recorded by such Lender on its books and, prior to any transfer of the
Note evidencing the Loans of such Class held by it, endorsed by such Lender on
the schedule attached to such Note or any continuation thereof; provided that
--------
the failure of such Lender to make any such recordation or endorsement shall not
affect the obligations of the Borrower to make a payment when due of any amount
owing hereunder or under such Note in respect of such Loans.
(e) No Lender shall be entitled to have its Notes substituted or
exchanged for any reason, or subdivided for promissory notes of lesser
denominations, except in connection with a permitted assignment of all or any
portion of such Lender's relevant Commitment, Loans and Notes pursuant to
Section 12.06 (and, if requested by any Lender, the Borrower agrees to so
exchange any Note).
2.09. Optional Prepayments and Conversions or Continuations of
--------------------------------------------------------
Loans. Subject to Section 4.04, the Borrower shall have the right to prepay
- -----
Loans, or to Convert Loans of one Type into Loans of another Type or Continue
Loans of one Type as Loans of the same Type, at any time or from time to time,
provided that:
- --------
(a) the Borrower shall give the Administrative Agent notice of
each such prepayment, Conversion or Continuation as provided in
Section 4.05 (and, upon the date specified in any such notice of
prepayment, the amount to be prepaid shall become due and payable
hereunder);
(b) upon any prepayment of Eurodollar Loans other than on the
last day of an Interest Period for such Loans, the Borrower shall pay
any amounts owing under Section 5.05 as a result of such prepayment; and
(c) any Conversion into or Continuation of Eurodollar Loans shall
be subject to the provisions of Section 2.01(d).
Notwithstanding the foregoing, and without limiting the rights and remedies of
the Lenders under Section 10, in the event that any Event of Default shall have
occurred and be continuing, the Administrative Agent may (and at the request of
the Majority Lenders shall) suspend the right of the Borrower to Convert any
Loan into a Eurodollar Loan, or to Continue any Loan as a Eurodollar Loan, in
which event all Loans shall be Converted (on the last day(s) of the respective
Interest Periods therefor) into, or Continued as, the case may be, Base Rate
Loans.
<PAGE>
-34-
2.10. Mandatory Prepayments and Reductions of Commitments.
---------------------------------------------------
(a) Excess Cash Flow. Not later than the date 90 days after the
----------------
end of each fiscal year of the Borrower commencing with the fiscal year ending
on December 31, 1999, the Borrower shall prepay the Loans (and/or provide cover
for Letter of Credit Liabilities as specified in paragraph (h) below), and the
Facility A Revolving Credit Commitments shall be subject to automatic reduction,
in an aggregate amount equal to the excess of (A) 50% of Excess Cash Flow for
such fiscal year over (B) the aggregate amount of prepayments of Loans made
during such fiscal year pursuant to Section 2.09, such prepayment and reduction
to be applied in accordance with paragraph (e) below; provided that no such
prepayment shall be required for any fiscal year to the extent that the Leverage
Ratio as at the last day of such fiscal year shall be less than 3.50 to 1.
(b) Debt Issuance. Upon any Debt Issuance, the Borrower shall
-------------
prepay the Loans (and/or provide cover for Letter of Credit Liabilities as
specified in paragraph (h) below), and the Facility A Revolving Credit
Commitments shall be subject to automatic reduction, in an aggregate amount
equal to 100% of the Net Available Proceeds of such Debt Issuance, such
prepayment and reduction to be applied in accordance with paragraph (e) below.
(c) Casualty Events. Upon the date 180 days following the receipt
---------------
by any Obligor of the proceeds of insurance, condemnation award or other
compensation in respect of any Casualty Event affecting any Property of the
Borrower or any of its Subsidiaries (or upon such earlier date as the Borrower
or such Subsidiary, as the case may be, shall have determined not to repair or
replace the Property affected by such Casualty Event), the Borrower shall prepay
the Loans (and/or provide cover for Letter of Credit Liabilities as provided in
paragraph (h) below), and the Facility A Revolving Credit Commitments shall be
subject to automatic reduction, in an aggregate amount equal to 100% of the Net
Available Proceeds of such Casualty Event not theretofore applied to the repair
or replacement of such Property (or to reimburse the Borrower or respective
Subsidiary for repairing or replacing such Property), such prepayment and
reduction to be applied in accordance with paragraph (e) below. Notwithstanding
the foregoing, the Borrower shall not be required to make any prepayment under
this Section 2.10(c) unless the Net Available Proceeds of a Casualty Event shall
be greater than or equal to $1,000,000.
Nothing in this paragraph (c) shall be deemed to limit any
obligation of the Borrower or any of its Subsidiaries pursuant to any of the
Security Documents to remit to a collateral or similar account maintained by the
Administrative Agent pursuant to any of the Security Documents the proceeds of
insurance, condemnation award or other compensation received in respect of any
Casualty Event or to obligate the Administrative Agent to release any of such
proceeds from such account to the Borrower for purposes of repair, replacement
or reinvestment as aforesaid upon the occurrence and during the continuance of
an Event of Default.
<PAGE>
-35-
(d) Sale of Assets. Without limiting the obligation of the
--------------
Borrower to obtain the consent of the Majority Lenders to any Disposition not
otherwise permitted hereunder, the Borrower agrees, on or prior to the
occurrence of any Disposition (herein, the "Current Disposition"), to deliver to
-------------------
the Administrative Agent a statement certified by a Responsible Officer of the
Borrower, in form and detail reasonably satisfactory to the Administrative
Agent, of the estimated amount of the Net Available Proceeds of the Current
Disposition that will (on the date of the Current Disposition) be received in
cash and, to the extent that the Net Available Proceeds of the Current
Disposition, and of all prior Dispositions as to which a prepayment has not yet
been made under this Section 2.10(d), shall exceed $1,000,000, the Borrower will
prepay the Loans (and/or provide cover for Letter of Credit Liabilities as
provided in paragraph (h) below), and the Facility A Revolving Credit Commitment
shall be subject to automatic reduction, such prepayment and deduction to be
applied in accordance with paragraph (e) below, as follows:
(i) within two days of the Current Disposition, in an aggregate
amount equal to 100% of such estimated amount of the Net Available
Proceeds of the Current Disposition, to the extent received in cash on
the date of the Current Disposition, together with 100% of the Net
Available Proceeds of all such prior Dispositions, provided that if the
--------
amount of such required prepayment (and reduction of Commitments) shall
exceed $5,000,000, then such prepayment shall be made on the date of the
Current Disposition; and
(ii) thereafter, quarterly, on the date of the delivery by the
Borrower to the Administrative Agent pursuant to Section 9.01(b) of the
financial statements for each quarterly fiscal period or (if earlier)
the date 60 days after the end of such quarterly fiscal period, to the
extent the Borrower or any of its Subsidiaries shall receive Net
Available Proceeds during such quarterly fiscal period in cash under
deferred payment arrangements or Disposition Investments entered into or
received in connection with any Disposition, an amount equal to (A) 100%
of the aggregate amount of such Net Available Proceeds minus (B) any
-----
transaction expenses associated with Dispositions and not previously
deducted in the determination of Net Available Proceeds plus (or minus,
---- -----
as the case may be) (C) any other adjustment received or paid by the
Obligors pursuant to the respective agreements giving rise to
Dispositions and not previously taken into account in the determination
of the Net Available Proceeds of Dispositions, provided that if prior to
--------
the date upon which the Borrower would otherwise be required to make a
prepayment under this clause (ii) with respect to any quarterly fiscal
period the aggregate amount of such Net Available Proceeds (after giving
effect to the adjustments provided for in this clause (ii)) shall exceed
$1,000,000, then the Borrower shall within five Business Days make a
prepayment under this clause (ii) in an amount equal to such required
prepayment.
Notwithstanding the foregoing, the Borrower shall not be required
to make a prepayment pursuant to this paragraph (d) with respect to the
Net Available Proceeds from any Disposition in the event that the
Borrower advises the Administrative Agent at the time the Net Available
<PAGE>
-36-
Proceeds from such Disposition are received that the Borrower or one or
more of its Subsidiaries intends to reinvest such Net Available Proceeds
pursuant to a Permitted Reinvestment Transaction, so long as (i) the Net
Available Proceeds from any Disposition are in fact so reinvested within
twelve months of such Disposition, it being understood that any such Net
Available Proceeds not so reinvested shall be forthwith applied to the
prepayment of Loans and reductions of Commitments as provided above, and
any Reserved Commitment Amount that remains unutilized for more than
twelve months shall be applied to the permanent reduction of the
Facility A Revolving Credit Commitments, and (ii) the aggregate amount
of Net Available Proceeds (together with investment earnings thereon)
pending reinvestment as contemplated by this sentence shall not at any
time exceed $10,000,000. As contemplated by Section 4.01 of the Security
Agreement, nothing in this paragraph (d) shall be deemed to obligate the
Administrative Agent to release any of such proceeds from the Collateral
Account to the Borrower for purposes of reinvestment as aforesaid upon
the occurrence and during the continuance of any Event of Default.
(e) Application. Prepayments and reductions of Commitments
-----------
pursuant to paragraphs (a), (b), (c) and (d) of this Section 2.10 shall be
effected as follows:
(i) first, the amount of any such prepayment shall be applied to
-----
the prepayment of outstanding Facility B Term Loans and Facility C Term
Loans, ratably in accordance with the respective principal amounts
thereof, and to the installments thereof ratably in accordance with the
respective principal amounts thereof;
(ii) second, following the prepayment in full of all outstanding
------
amounts of the Term Loans the amount of any such prepayment shall be
applied to the permanent reductions of the Facility A Revolving Credit
Commitments and to the extent that the aggregate amount of the Facility
A Revolving Credit Loans together with the aggregate amount of all
Letter of Credit Liabilities shall exceed the amount of the then
existing Facility A Revolving Credit Commitments, the Borrower shall
prepay the outstanding Facility A Revolving Credit Loans in an amount
equal to such excess.
Anything herein to the contrary notwithstanding (i) any Lender
holding a Facility C Term Loan may elect, by notice to the Administrative Agent
by telephone (confirmed by telecopy) at least one Business Day prior to the
prepayment date, to decline all or any portion of any prepayment of its
Facility C Term Loans pursuant to this Section 2.10, in which case the aggregate
amount of the prepayment that would have been applied to prepay Facility C Term
Loans but was so declined shall be applied, instead, to prepay Facility B Term
Loans as provided above and (ii) if any event described in the foregoing
paragraphs (a), (b), (c) and (d) shall have occurred and no Facility B Term
Loans and Facility C Term Loans shall be then outstanding, the amount of any
prepayment shall be applied to the reduction of the Facility B Term Loan
Commitments and Facility C Term Loan Commitments then in effect, ratably in
accordance with the respective amounts thereof.
<PAGE>
-37-
(f) Facility A Revolving Loan Clean-Up. The Borrower will from
----------------------------------
time to time prepay the Facility A Revolving Credit Loans in such amounts as
shall be necessary so that for a period of at least 30 consecutive days during
the period commencing on June 1 and ending on November 1 in each fiscal year
beginning in 1998, there shall be no Facility A Revolving Credit Loans
outstanding hereunder.
(g) Change of Control. In the event that the Borrower shall be
-----------------
required pursuant to the provisions of any instrument evidencing or governing
any Subordinated Indebtedness to redeem, or make an offer to redeem or
repurchase, all or any portion of such Subordinated Indebtedness as a result of
a change of control (however defined), then, concurrently with the occurrence of
the event giving rise to such change of control, the Borrower shall prepay the
Loans (and/or provide cover for Letter of Credit Liabilities as specified in
paragraph (h) below) in full, and the Commitments shall automatically terminate.
(h) Cover for Letter of Credit Liabilities. In the event that the
--------------------------------------
Borrower shall be required pursuant to this Section 2.10, or pursuant to
Section 3.01(a), to provide cover for Letter of Credit Liabilities, the Borrower
shall effect the same by paying to the Administrative Agent in immediately
available funds an amount equal to the required amount, which funds shall be
retained by the Administrative Agent in the Collateral Account (as provided
therein as collateral security in the first instance for the Letter of Credit
Liabilities) until such time as the Letters of Credit shall have been terminated
and all of the Letter of Credit Liabilities paid in full.
Section 3. Payments of Principal and Interest.
3.01. Repayment of Loans.
------------------
(a) Facility A Revolving Credit Loan. The Borrower hereby
--------------------------------
promises to pay to the Administrative Agent for account of each Lender the
entire outstanding principal amount of such Lender's Facility A Revolving Credit
Loans, and each Facility A Revolving Credit Loan shall mature, on the Facility A
Revolving Credit Commitment Termination Date.
(b) Facility B Term Loan. The Borrower hereby promises to pay to
--------------------
the Administrative Agent for account of the Facility B Term Loan Lenders the
aggregate outstanding principal of the Facility B Term Loans in sixteen
installments payable on the Principal Payment Dates as follows:
<PAGE>
-38-
Principal Payment Date
Falling on or Nearest to: Amount of Installment ($)
------------------------ -------------------------
June 30, 1999 2,500,000.00
September 30, 1999 2,500,000.00
December 31, 1999 2,500,000.00
March 31, 2000 2,500,000.00
June 30, 2000 6,250,000.00
September 30, 2000 6,250,000.00
December 31, 2000 6,250,000.00
March 31, 2001 6,250,000.00
June 30, 2001 7,500,000.00
September 30, 2001 7,500,000.00
December 31, 2001 7,500,000.00
March 31, 2002 7,500,000.00
June 30, 2002 8,750,000.00
September 30, 2002 8,750,000.00
December 31, 2002 8,750,000.00
March 31, 2003 8,750,000.00
(c) Facility C Term Loan. The Borrower hereby promises to pay to
--------------------
the Administrative Agent for account of the Facility C Term Loan Lenders the
aggregate outstanding principal of the Facility C Term Loans in twenty-nine
installments payable on the Principal Payment Dates as follows:
<PAGE>
-39-
Principal Payment Date
Falling on or Nearest to: Amount of Installment ($)
------------------------ -------------------------
March 31, 1999 1,000,000.00
June 30, 1999 250,000.00
September 30, 1999 250,000.00
December 31, 1999 250,000.00
March 31, 2000 250,000.00
June 30, 2000 250,000.00
September 30, 2000 250,000.00
December 31, 2000 250,000.00
March 31, 2001 250,000.00
June 30, 2001 250,000.00
September 30, 2001 250,000.00
December 31, 2001 250,000.00
March 31, 2002 250,000.00
June 30, 2002 250,000.00
September 30, 2002 250,000.00
December 31, 2002 250,000.00
March 31, 2003 250,000.00
June 30, 2003 250,000.00
September 30, 2003 250,000.00
December 31, 2003 250,000.00
March 31, 2004 250,000.00
June 30, 2004 6,250,000.00
September 30, 2004 6,250,000.00
December 31, 2004 6,250,000.00
March 31, 2005 6,250,000.00
June 30, 2005 23,500,000.00
September 30, 2005 23,500,000.00
December 31, 2005 23,500,000.00
March 31, 2006 23,500,000.00
<PAGE>
-40-
3.02. Interest. The Borrower hereby promises to pay to the
--------
Administrative Agent for account of each Lender interest on the unpaid principal
amount of each Loan made by such Lender to the Borrower for the period from and
including the date of such Loan to but excluding the date such Loan shall be
paid in full, at the following rates per annum:
(a) during such periods as such Loan is a Base Rate Loan, the
Base Rate (as in effect from time to time) plus the Applicable Rate; and
----
(b) during each Interest Period for such Loan during which such
Loan is a Eurodollar Loan, the Eurodollar Rate for such Interest Period
plus the Applicable Rate.
----
Notwithstanding the foregoing, the Borrower hereby promises to pay to the
Administrative Agent for account of each Lender interest at the applicable
Post-Default Rate on any principal of any Loan made by such Lender, on any
Reimbursement Obligation held by such Lender and on any other amount payable by
the Borrower hereunder or under the Notes held by such Lender to or for account
of such Lender, that shall not be paid in full when due (whether at stated
maturity, by acceleration, by mandatory prepayment or otherwise), for the period
from and including the due date thereof to but excluding the date the same is
paid in full.
Accrued interest on each Loan shall be payable (i) in the case of
a Base Rate Loan, quarterly on the Quarterly Dates, (ii) in the case of a
Eurodollar Loan, on the last day of each Interest Period therefor and, if such
Interest Period is longer than three months, at three-month intervals following
the first day of such Interest Period, and (iii) in the case of any Loan, upon
the payment or prepayment thereof or the Conversion of such Loan to a Loan of
another Type (but only on the principal amount so paid, prepaid or Converted),
except that interest payable at the Post-Default Rate shall be payable from time
to time on demand. Promptly after the determination of any interest rate
provided for herein or any change therein, the Administrative Agent shall give
notice thereof to the Lenders to which such interest is payable and to the
Borrower.
Section 4. Payments; Pro Rata Treatment; Computations, Etc.
4.01. Payments.
--------
(a) Except to the extent otherwise provided herein, all payments
of principal, interest, Reimbursement Obligations and other amounts to be made
by the Borrower under this Agreement and the Notes, and, except to the extent
otherwise provided therein, all payments to be made by the Obligors under any
other Loan Document, shall be made in Dollars, in immediately available funds,
without deduction, set-off or counterclaim, to the Administrative Agent, at the
Principal Office, in immediately available funds, not later than 12:00 p.m. New
York time on the date on which such payment shall become due (each such payment
made after such time on such due date to be deemed to have been made on the next
succeeding Business Day).
<PAGE>
-41-
(b) Any Lender for whose account any such payment is to be made
may (but shall not be obligated to) debit the amount of any such payment that is
not made by such time to any ordinary deposit account of the Borrower with such
Lender (with notice to the Borrower and the Administrative Agent), provided that
--------
such Lender's failure to give such notice shall not affect the validity thereof.
(c) The Borrower shall, at the time of making each payment under
this Agreement or any Note for account of any Lender, specify to the
Administrative Agent (which shall so notify the intended recipient(s) thereof)
the Loans, Reimbursement Obligations or other amounts payable by the Borrower
hereunder to which such payment is to be applied (and in the event that the
Borrower fails to so specify, or if an Event of Default has occurred and is
continuing, the Administrative Agent may distribute such payment to the Lenders
for application in such manner as it or the Majority Lenders, subject to Section
4.02, may determine to be appropriate).
(d) Except to the extent otherwise provided in the last sentence
of Section 2.03(e), each payment received by the Administrative Agent under this
Agreement or any Note for account of any Lender shall be paid by the
Administrative Agent promptly to such Lender, in immediately available funds,
for account of such Lender's Applicable Lending Office for the Loan or other
obligation in respect of which such payment is made.
(e) If the due date of any payment under this Agreement or any
Note would otherwise fall on a day that is not a Business Day, such date shall
be extended to the next succeeding Business Day, and interest shall be payable
for any principal so extended for the period of such extension.
4.02. Pro Rata Treatment. Except to the extent otherwise provided
------------------
herein: (a) each borrowing of Loans of a particular Class from the Lenders under
Section 2.01 shall be made from the relevant Lenders, each payment of commitment
fee under Section 2.05 in respect of Commitments of a particular Class shall be
made for account of the relevant Lenders, and each termination or reduction of
the amount of the Commitments of a particular Class under Section 2.04 shall be
applied to the respective Commitments of such Class of the relevant Lenders, pro
rata according to the amounts of their respective Commitments of such Class; (b)
except as otherwise provided in Section 5.04, Eurodollar Loans of any Class
having the same Interest Period shall be allocated pro rata among the relevant
Lenders according to the amounts of their respective Commitments (in the case of
the making of Loans) or their respective Loans (in the case of Conversions and
Continuations of Loans); (c) each payment of principal of Loans by the Borrower
shall be made for account of the relevant Lenders pro rata in accordance with
the respective unpaid principal amounts of the Loans of such Class held by them;
(d) each optional prepayment of principal of Loans by the Borrower shall be
applied to the prepayment of outstanding Facility B Term Loans and Facility C
Term Loans, ratably in accordance with the respective principal amounts thereof,
and in each case to the installments thereof ratably in accordance with the
respective principal amounts thereof; and (e) each payment of interest on Loans
<PAGE>
-42-
by the Borrower shall be made for account of the relevant Lenders pro rata in
accordance with the amounts of interest on such Loans then due and payable to
the respective Lenders.
4.03. Computations. Interest on Eurodollar Loans and commitment
------------
fee and letter of credit fees shall be computed on the basis of a year of 360
days and actual days elapsed (including the first day but, except as otherwise
provided in Section 2.03(g), excluding the last day) occurring in the period for
which payable and interest on Base Rate Loans and Reimbursement Obligations
shall be computed on the basis of a year of 365 or 366 days, as the case may be,
and actual days elapsed (including the first day but excluding the last day)
occurring in the period for which payable. Notwithstanding the foregoing, for
each day that the Base Rate is calculated by reference to the Federal Funds
Rate, interest on Base Rate Loans and Reimbursement Obligations shall be
computed on the basis of a year of 360 days and actual days elapsed.
4.04. Minimum Amounts. Except for mandatory prepayments made
---------------
pursuant to Section 2.10 and Conversions or prepayments made pursuant to Section
5.04, each borrowing, Conversion and partial prepayment of principal of Base
Rate Loans shall be in an amount at least equal to $500,000 and multiples of
$100,000 and each borrowing, Conversion and partial prepayment of principal of
Eurodollar Loans shall be in an aggregate amount at least equal to $5,000,000
(borrowings, Conversions or prepayments of or into Loans of different Types or,
in the case of Eurodollar Loans, having different Interest Periods at the same
time hereunder to be deemed separate borrowings, Conversions and prepayments for
purposes of the foregoing, one for each Type or Interest Period), provided that
if any Eurodollar Loans would otherwise be in a lesser principal amount for any
period, such Loans shall be Base Rate Loans during such period.
4.05. Certain Notices. Notices by the Borrower to the
---------------
Administrative Agent of terminations or reductions of the Commitments, of
borrowings, Conversions, Continuations and optional prepayments of Loans, of
Classes of Loans, of Types of Loans and of the duration of Interest Periods
shall be irrevocable and shall be effective only if received by the
Administrative Agent not later than 11:00 a.m. New York time on the number of
Business Days prior to the date of the relevant termination, reduction,
borrowing, Conversion, Continuation or prepayment or the first day of such
Interest Period specified below:
Number of
Business
Notice Days Prior
------ ----------
Termination or reduction
of Commitments 3
Borrowing or prepayment of,
or Conversions into,
Base Rate Loans 1
<PAGE>
-43-
Borrowing or prepayment of,
Conversions into, Continuations
as, or duration of Interest
Period for, Eurodollar Loans 3
Each such notice of termination or reduction shall specify the amount and the
Class of the Commitments to be terminated or reduced. Each such notice of
borrowing, Conversion, Continuation or optional prepayment shall specify the
Class of Loans to be borrowed, Converted, Continued or prepaid and the amount
(subject to Section 4.04) and Type of each Loan to be borrowed, Converted,
Continued or prepaid and the date of borrowing, Conversion, Continuation or
optional prepayment (which shall be a Business Day). Each such notice of the
duration of an Interest Period shall specify the Loans to which such Interest
Period is to relate. The Administrative Agent shall promptly notify the Lenders
of the contents of each such notice. In the event that the Borrower fails to
select the Type of Loan, or the duration of any Interest Period for any
Eurodollar Loan, within the time period and otherwise as provided in this
Section 4.05, such Loan (if outstanding as a Eurodollar Loan) will be
automatically Converted into a Base Rate Loan on the last day of the then
current Interest Period for such Loan or (if outstanding as a Base Rate Loan)
will remain as, or (if not then outstanding) will be made as, a Base Rate Loan.
4.06. Non-Receipt of Funds by the Administrative Agent. Unless
------------------------------------------------
the Administrative Agent shall have been notified by a Lender or the Borrower
(the "Payor") prior to the date on which the Payor is to make payment to the
-----
Administrative Agent of (in the case of a Lender) the proceeds of a Loan to be
made by such Lender hereunder or (in the case of the Borrower) a payment to the
Administrative Agent for account of one or more of the Lenders hereunder (such
payment being herein called the "Required Payment"), which notice shall be
----------------
effective upon receipt, that the Payor does not intend to make the Required
Payment to the Administrative Agent, the Administrative Agent may assume that
the Required Payment has been made and may, in reliance upon such assumption
(but shall not be required to), make the amount thereof available to the
intended recipient(s) on such date; and, if the Payor has not in fact made the
Required Payment to the Administrative Agent, the recipient(s) of such payment
shall, on demand, repay to the Administrative Agent the amount so made available
together with interest thereon in respect of each day during the period
commencing on the date (the "Advance Date") such amount was so made available by
------------
the Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to the Federal Funds Rate for such day (it
being understood that, in the event the Borrower is the recipient of such
payment, such interest shall be in lieu of any interest otherwise payable under
Section 3.02) and, if such recipient(s) shall fail promptly to make such
payment, the Administrative Agent shall be entitled to recover such amount, on
demand, from the Payor, together with interest as aforesaid, provided that if
--------
neither the recipient(s) nor the Payor shall return the Required Payment to the
Administrative Agent within three Business Days of the Advance Date, then,
retroactively to the Advance Date, the Payor and the recipient(s) shall each be
obligated to pay interest on the Required Payment as follows:
<PAGE>
-44-
(i) if the Required Payment shall represent a payment to be made
by the Borrower to the Lenders, the Borrower and the recipient(s) shall
each be obligated retroactively to the Advance Date to pay interest in
respect of the Required Payment at the Post-Default Rate (without
duplication of the obligation of the Borrower under Section 3.02 to pay
interest on the Required Payment at the Post-Default Rate), it being
understood that the return by the recipient(s) of the Required Payment
to the Administrative Agent shall not limit such obligation of the
Borrower under Section 3.02 to pay interest at the Post-Default Rate in
respect of the Required Payment, and
(ii) if the Required Payment shall represent proceeds of a Loan
to be made by the Lenders to the Borrower, the Payor and the Borrower
shall each be obligated retroactively to the Advance Date to pay
interest in respect of the Required Payment pursuant to whichever of the
rates specified in Section 3.02 is applicable to the Type of such Loan,
it being understood that the return by the Borrower of the Required
Payment to the Administrative Agent shall not limit any claim the
Borrower may have against the Payor in respect of such Required Payment.
4.07. Sharing of Payments, Etc.
------------------------
(a) Each Obligor agrees that, in addition to (and without
limitation of) any right of set-off, banker's lien or counterclaim a Lender may
otherwise have, each Lender shall be entitled, at its option (to the fullest
extent permitted by law), to set off and apply any deposit (general or special,
time or demand, provisional or final), or other indebtedness, held by it for the
credit or account of such Obligor at any of its offices, in Dollars or in any
other currency, against any principal of or interest on any of such Lender's
Loans, Reimbursement Obligations or any other amount payable to such Lender
hereunder, that is not paid when due (regardless of whether such deposit or
other indebtedness is then due to such Obligor), in which case it shall promptly
notify such Obligor and the Administrative Agent thereof, provided that such
--------
Lender's failure to give such notice shall not affect the validity thereof.
(b) If any Lender shall obtain from any Obligor payment of any
principal of or interest on any Loan of any Class or Letter of Credit Liability
owing to it or payment of any other amount under this Agreement or any other
Loan Document through the exercise of any right of set-off, banker's lien or
counterclaim or similar right or otherwise (other than from the Administrative
Agent as provided herein), and, as a result of such payment, such Lender shall
have received a greater percentage of the principal of or interest on the Loans
of any Class or Letter of Credit Liabilities or any other amounts then due
hereunder or thereunder by such Obligor to such Lender than the percentage
received by any other Lender, it shall promptly purchase from such other Lenders
participations in (or, if and to the extent specified by such Lender, direct
interests in) the Loans or Letter of Credit Liabilities or such other amounts,
respectively, owing to such other Lenders (or in interest due thereon, as the
case may be) in such amounts, and make such other adjustments from time to time
as shall be equitable, to the end that all the Lenders shall share the benefit
of such excess payment (net of any expenses that may be incurred by such Lender
in obtaining or preserving such excess payment) pro rata in accordance with the
<PAGE>
-45-
unpaid principal of and/or interest on the Loans or Letter of Credit Liabilities
or such other amounts, respectively, owing to each of the Lenders. To such end
all the Lenders shall make appropriate adjustments among themselves (by the
resale of participations sold or otherwise) if such payment is rescinded or must
otherwise be restored.
(c) Each Obligor agrees that any Lender so purchasing such a
participation (or direct interest) may exercise all rights of set-off, banker's
lien, counterclaim or similar rights with respect to such participation as fully
as if such Lender were a direct holder of Loans or other amounts (as the case
may be) owing to such Lender in the amount of such participation.
(d) Nothing contained herein shall require any Lender to exercise
any such right or shall affect the right of any Lender to exercise, and retain
the benefits of exercising, any such right with respect to any other
indebtedness or obligation of any Obligor. If, under any applicable bankruptcy,
insolvency or other similar law, any Lender receives a secured claim in lieu of
a set-off to which this Section 4.07 applies, such Lender shall, to the extent
practicable, exercise its rights in respect of such secured claim in a manner
consistent with the rights of the Lenders entitled under this Section 4.07 to
share in the benefits of any recovery on such secured claim.
Section 5. Yield Protection, Etc.
5.01. Additional Costs.
----------------
(a) The Borrower shall pay directly to each Lender from time to
time such amounts as such Lender may determine to be necessary to compensate
such Lender for any costs that such Lender determines are attributable to its
making or maintaining of any Eurodollar Loans or its obligation to make any
Eurodollar Loans hereunder, or any reduction in any amount receivable by such
Lender hereunder in respect of any of such Loans or such obligation (such
increases in costs and reductions in amounts receivable being herein called
"Additional Costs"), resulting from any Regulatory Change that:
----------------
(i) shall subject any Lender (or its Applicable Lending Office
for any of such Loans) to any tax, duty or other charge in respect of
such Loans or its Notes or changes the basis of taxation of any amounts
payable to such Lender under this Agreement or its Notes in respect of
any of such Loans (excluding changes in the rate of tax on the overall
net income of such Lender or of such Applicable Lending Office by the
jurisdiction in which such Lender has its principal office or such
Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit or similar
requirements (other than the Reserve Requirement used in the
determination of the Eurodollar Rate for any Interest Period for such
Loan) relating to any extensions of credit or other assets of, or any
deposits with or other liabilities of, such Lender (including, without
limitation, any of such Loans or any deposits referred to in the
definition of "Eurodollar Base Rate" in Section 1.01), or any commitment
of such Lender (including, without limitation, the Commitments of such
Lender hereunder); or
<PAGE>
-46-
(iii) imposes any other condition affecting this Agreement or its
Notes (or any of such extensions of credit or liabilities) or its
Commitments.
If any Lender requests compensation from the Borrower under this paragraph, the
Borrower may, by notice to such Lender (with a copy to the Administrative
Agent), suspend the obligation of such Lender thereafter to make or Continue
Eurodollar Loans, or to Convert Loans of any other Type into Eurodollar Loans,
until the Regulatory Change giving rise to such request ceases to be in effect
(in which case the provisions of Section 5.04 shall be applicable), provided
--------
that such suspension shall not affect the right of such Lender to receive the
compensation so requested.
(b) Without limiting the effect of the foregoing provisions of
this Section 5.01 (but without duplication), the Borrower shall pay directly to
each Lender from time to time on request such amounts as such Lender may
determine to be necessary to compensate such Lender (or, without duplication,
the bank holding company of which such Lender is a subsidiary) for any costs
that it determines are attributable to the maintenance by such Lender (or any
Applicable Lending Office or such bank holding company), pursuant to any law or
regulation or any interpretation, directive or request (whether or not having
the force of law and whether or not failure to comply therewith would be
unlawful) of any court or governmental or monetary authority (i) following any
Regulatory Change or (ii) implementing any risk-based capital guideline or other
requirement (whether or not having the force of law and whether or not the
failure to comply therewith would be unlawful) hereafter issued by any
government or governmental or supervisory authority implementing at the national
level the Basle Accord, of capital in respect of its Commitments or Loans (such
compensation to include, without limitation, an amount equal to any reduction of
the rate of return on assets or equity of such Lender (or any Applicable Lending
Office or such bank holding company) to a level below that which such Lender (or
any Applicable Lending Office or such bank holding company) could have achieved
but for such law, regulation, interpretation, directive or request).
(c) Each Lender shall notify the Borrower of any event occurring
after the date hereof entitling such Lender to compensation under paragraph (a)
or (b) of this Section 5.01 as promptly as practicable, but in any event within
45 days, after such Lender obtains actual knowledge thereof; provided that (i)
--------
if any Lender fails to give such notice within 45 days after it obtains actual
knowledge of such an event, such Lender shall, with respect to compensation
payable pursuant to this Section 5.01 in respect of any costs resulting from
such event, only be entitled to payment under this Section 5.01 for costs
incurred from and after the date 45 days prior to the date that such Lender does
give such notice and (ii) each Lender will designate a different Applicable
Lending Office for the Loans of such Lender affected by such event if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the sole opinion of such Lender, be disadvantageous to such
Lender, except that such Lender shall have no obligation to designate an
Applicable Lending Office located in the United States of America.
<PAGE>
-47-
Each Lender will furnish to the Borrower a certificate setting
forth the basis and amount of each request by such Lender for compensation under
paragraph (a) or (b) of this Section 5.01. Determinations and allocations by any
Lender for purposes of this Section 5.01 of the effect of any Regulatory Change
pursuant to paragraph (a) of this Section 5.01, or of the effect of capital
maintained pursuant to paragraph (b) of this Section 5.01 on its costs or rate
of return of maintaining Loans or its obligation to make Loans, or on amounts
receivable by it in respect of Loans, and of the amounts required to compensate
such Lender under this Section 5.01, shall be conclusive, provided that such
determinations and allocations are made on a reasonable basis.
5.02. Limitation on Types of Loans. Anything herein to the
----------------------------
contrary notwithstanding, , on or prior to the determination of the Eurodollar
Base Rate for any Interest Period for any Loan;
(a) the Administrative Agent determines, which determination
shall be conclusive absent manifest error, that quotations of interest
rates for the relevant deposits referred to in the definition of
"Eurodollar Base Rate" in Section 1.01 are not being provided in the
relevant amounts or for the relevant maturities for purposes of
determining rates of interest for Eurodollar Loans as provided herein;
or
(b) the Majority Lenders determine, which determination shall be
conclusive absent manifest error, and notify the Administrative Agent
that the relevant rates of interest referred to in the definition of
"Eurodollar Base Rate" in Section 1.01 upon the basis of which the rate
of interest for Eurodollar Loans for such Interest Period is to be
determined are not likely to cover adequately the cost to such Lenders
of making or maintaining Eurodollar Loans for such Interest Period;
then the Administrative Agent shall give the Borrower and each Lender prompt
notice thereof and, so long as such condition remains in effect, the Lenders
shall be under no obligation to make additional Eurodollar Loans, to Continue
Eurodollar Loans or to Convert Loans of any other Type into Eurodollar Loans,
and the Borrower shall, on the last day(s) of the then current Interest
Period(s) for the outstanding Eurodollar Loans, either prepay such Loans or
Convert such Loans into another Type of Loan in accordance with Section 2.09.
5.03. Illegality. Notwithstanding any other provision of this
----------
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain Eurodollar
Loans hereunder (and, in the sole opinion of such Lender, the designation of a
different Applicable Lending Office would either not avoid such unlawfulness or
would be disadvantageous to such Lender), then such Lender shall promptly notify
the Borrower thereof (with a copy to the Administrative Agent) and such Lender's
obligation to make or Continue, or to Convert Loans of any other Type into,
Eurodollar Loans shall be suspended until such time as such Lender may again
make and maintain Eurodollar Loans (in which case the provisions of Section 5.04
shall be applicable).
<PAGE>
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5.04. Treatment of Affected Loans. If the obligation of any
---------------------------
Lender to make Eurodollar Loans or to Continue, or to Convert Base Rate Loans
into, Eurodollar Loans shall be suspended pursuant to Section 5.01 or 5.03, such
Lender's Eurodollar Loans shall be automatically Converted into Base Rate Loans
on the last day(s) of the then current Interest Period(s) for Eurodollar Loans
(or, in the case of a Conversion resulting from a circumstance described in
Section 5.03, on such earlier date as such Lender may specify to the Borrower
with a copy to the Administrative Agent) and, unless and until such Lender gives
notice as provided below that the circumstances specified in Section 5.01 or
5.03 that gave rise to such Conversion no longer exist:
(a) to the extent that such Lender's Eurodollar Loans have been
so Converted, all payments and prepayments of principal that would
otherwise be applied to such Lender's Eurodollar Loans shall be applied
instead to its Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued by such
Lender as Eurodollar Loans shall be made or Continued instead as Base
Rate Loans, and all Loans of such Lender that would otherwise be
Converted into Eurodollar Loans shall remain as Base Rate Loans.
If such Lender gives notice to the Borrower with a copy to the Administrative
Agent that the circumstances specified in Section 5.01 or 5.03 that gave rise to
the Conversion of such Lender's Eurodollar Loans pursuant to this Section 5.04
no longer exist (which such Lender agrees to do promptly upon such circumstances
ceasing to exist) at a time when Eurodollar Loans of the same Class made by
other Lenders are outstanding, such Lender's Base Rate Loans of such Class shall
be automatically Converted, on the first day(s) of the next succeeding Interest
Period(s) for such outstanding Eurodollar Loans, to the extent necessary so
that, after giving effect thereto, all Base Rate Loans and Eurodollar Loans of
such Class are allocated among the Lenders ratably (as to principal amounts,
Types and Interest Periods) in accordance with their respective Commitments of
such Class.
5.05. Compensation. The Borrower shall pay to the Administrative
------------
Agent for account of each Lender, upon the request of such Lender through the
Administrative Agent, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost or
expense that such Lender determines is attributable to:
(a) any payment, mandatory or optional prepayment or Conversion
of a Eurodollar Loan made by such Lender for any reason (including,
without limitation, the acceleration of the Loans pursuant to Section
10) on a date other than the last day of the Interest Period for such
Loan; or
(b) any failure by the Borrower for any reason (including,
without limitation, the failure of any of the conditions precedent
specified in Section 7 to be satisfied) to borrow a Eurodollar Loan from
such Lender on the date for such borrowing specified in the relevant
notice of borrowing given pursuant to Section 2.02.
<PAGE>
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Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
that otherwise would have accrued on the principal amount so paid, prepaid,
Converted or not borrowed for the period from the date of such payment,
prepayment, Conversion or failure to borrow to the last day of the then current
Interest Period for such Loan (or, in the case of a failure to borrow, the
Interest Period for such Loan that would have commenced on the date specified
for such borrowing) at the applicable rate of interest for such Loan provided
for herein over (ii) the amount of interest that otherwise would have accrued on
such principal amount at a rate per annum equal to the interest component of the
amount such Lender would have bid in the London interbank market for Dollar
deposits of leading banks in amounts comparable to such principal amount and
with maturities comparable to such period (as reasonably determined by such
Lender), or if such Lender shall cease to make such bids, the equivalent rate,
as reasonably determined by such Lender, derived from Dow Jones Markets Service
Page 3750 (British Bankers Association Settlement Rate) or other publicly
available source as described in the definition of "Eurodollar Base Rate" in
Section 1.01.
5.06. Additional Costs in Respect of Letters of Credit. Without
------------------------------------------------
limiting the obligations of the Borrower under Section 5.01 (but without
duplication), if as a result of any Regulatory Change or any risk-based capital
guideline or other requirement heretofore or hereafter issued by any government
or governmental or supervisory authority implementing at the national level the
Basle Accord there shall be imposed, modified or deemed applicable any tax,
reserve, special deposit, capital adequacy or similar requirement against or
with respect to or measured by reference to Letters of Credit issued or to be
issued hereunder and the result shall be to increase the cost to any Lender or
Lenders of issuing (or purchasing participations in) or maintaining its
obligation hereunder to issue (or purchase participations in) any Letter of
Credit hereunder or reduce any amount receivable by any Lender hereunder in
respect of any Letter of Credit (which increases in cost, or reductions in
amount receivable, shall be the result of such Lender's or Lenders, reasonable
allocation of the aggregate of such increases or reductions resulting from such
event), then, upon demand by such Lender or Lenders (through the Administrative
Agent), the Borrower shall pay immediately to the Administrative Agent for
account of such Lender or Lenders, from time to time as specified by such Lender
or Lenders (through the Administrative Agent), such additional amounts as shall
be sufficient to compensate such Lender or Lenders (through the Administrative
Agent) for such increased costs or reductions in amount. A statement as to such
increased costs or reductions in amount incurred by any such Lender or Lenders,
submitted by such Lender or Lenders to the Borrower shall be conclusive in the
absence of manifest error as to the amount thereof.
5.07. U.S. Taxes.
----------
(a) The Borrower agrees to pay to each Lender that is not a U.S.
Person such additional amounts as are necessary in order that the net payment of
any amount due to such non-U.S. Person hereunder after deduction for or
withholding in respect of any U.S. Taxes imposed with respect to such payment
(or in lieu thereof, payment of such U.S. Taxes by such non-U.S. Person), will
<PAGE>
-50-
not be less than the amount stated herein to be then due and payable, provided
--------
that the foregoing obligation to pay such additional amounts shall not apply:
(i) to any payment to any Lender hereunder unless such Lender is,
on the date hereof (or on the date it becomes a Lender hereunder as
provided in Section 12.06(b)) and on the date of any change in the
Applicable Lending office of such Lender, either entitled to submit a
Form 1001 (relating to such Lender and entitling it to a complete
exemption from withholding on all interest to be received by it
hereunder in respect of the Loans) or Form 4224 (relating to all
interest to be received by such Lender hereunder in respect of the
Loans), or
(ii) to any U.S. Taxes imposed solely by reason of the failure by
such non-U.S. Person to comply with applicable certification,
information, documentation or other reporting requirements concerning
the nationality, residence, identity or connections with the United
States of America of such non-U.S. Person if such compliance is required
by statute or regulation of the United States of America as a
precondition to relief or exemption from such U.S. Taxes.
For the purposes of this paragraph, (A) "U.S. Person" means a citizen, national
-----------
or resident of the United States of America, a corporation, partnership or other
entity created or organized in or under any laws of the United States of America
or any State thereof, or any estate or trust that is subject to Federal income
taxation regardless of the source of its income, (B) "U.S. Taxes" means any
----------
present or future tax, assessment or other charge or levy imposed by or on
behalf of the United States of America or any taxing authority thereof or
therein, (C) "Form 1001" means Form 1001 (Ownership, Exemption, or Reduced Rate
---------
Certificate) of the Department of the Treasury of the United States of America
and (D) "Form 4224" means Form 4224 (Exemption from Withholding of Tax on Income
---------
Effectively Connected with the Conduct of a Trade or Business in the United
States) of the Department of the Treasury of the United States of America. Each
of the Forms referred to in the foregoing clauses (C) and (D) shall include such
successor and related forms as may from time to time be adopted by the relevant
taxing authorities of the United States of America to document a claim to which
such Form relates.
(b) Within 30 days after paying any amount to the Administrative
Agent or any Lender from which it is required by law to make any deduction or
withholding, and within 30 days after it is required by law to remit such
deduction or withholding to any relevant taxing or other authority, the Borrower
shall deliver to the Administrative Agent for delivery to such non-U.S. Person
evidence reasonably satisfactory to such Person of such deduction, withholding
or payment (as the case may be).
5.08. Replacement of Lenders. If any of the following shall occur
----------------------
with respect to any Lender (any such Lender being herein called an "Affected
--------
Lender"):
- ------
(a) any Lender shall request compensation pursuant to Section
5.01, 5.06 or 5.07,
<PAGE>
-51-
(b) any Lender's obligation to make or Continue Loans of any
Type, or to Convert Loans of any Type into the other Type of Loan, shall
be suspended pursuant to Section 5.01 or 5.03 or
(c) any Lender shall default in the making of any Loan required
to be made by it pursuant to Section 2.01,
the Borrower, upon three Business Days' notice, may require that such Affected
Lender transfer all of its right, title and interest under this Agreement and
such Affected Lender's Notes to any bank or other financial institution (a
"Proposed Lender") identified by the Borrower that is reasonably satisfactory to
---------------
the Administrative Agent and the Issuing Lender (i) if such Proposed Lender
agrees to assume all of the obligations of such Affected Lender hereunder, and
to purchase all of such Affected Lender's Loans hereunder for a consideration
equal to the aggregate outstanding principal amount of such Affected Lender's
Loans, together with interest thereon to the date of such purchase, and
satisfactory arrangements are made for payment to such Affected Lender of all
other amounts payable hereunder to such Affected Lender on or prior to the date
of such transfer (including any fees accrued hereunder and any amounts that
would be payable under Section 5.05 as if all of such Affected Lender's Loans
were being prepaid in full on such date) and (ii) if such Affected Lender has
requested compensation pursuant to Section 5.01, 5.06 or 5.07, such Proposed
Lender's aggregate requested compensation, if any, pursuant to Section 5.01,
5.06 or 5.07 with respect to such Affected Lender's Loans is lower than that of
the Affected Lender. Subject to the provisions of Section 12.06(b), such
Proposed Lender shall be a "Lender" for all purposes hereunder. Without
prejudice to the survival of any other agreement of the Borrower hereunder, the
agreements of the Borrower contained in Sections 5.01, 5.06, 5.07 and 12.04
(without duplication of any payments made to such Affected Lender by the
Borrower or the Proposed Lender) shall survive for the benefit of such Affected
Lender under this Section 5.08 with respect to the time prior to such
replacement.
Section 6. Guarantee.
---------
6.01. The Guarantee. The Subsidiary Guarantors hereby jointly and
severally guarantee to each Lender and the Administrative Agent and their
respective successors and assigns the prompt payment in full when due (whether
at stated maturity, by acceleration or otherwise) of the principal of and
interest on the Loans made by the Lenders to, and the Note held by each Lender
of, the Borrower and all other amounts from time to time owing to the Lenders or
the Administrative Agent by the Borrower under this Agreement and under the
Notes and by any Obligor under any of the other Loan Documents, and all
obligations of the Borrower or any of its Subsidiaries to any Lender (or any
affiliate of any Lender) in respect of any Hedging Agreement, in each case
strictly in accordance with the terms thereof (such obligations being herein
collectively called the "Guaranteed Obligations"). The Subsidiary Guarantors
----------------------
hereby further jointly and severally agree that if the Borrower shall fail to
pay in full when due (whether at stated maturity, by acceleration or otherwise)
any of the Guaranteed Obligations, the Subsidiary Guarantors will promptly pay
the same, without any demand or notice whatsoever, and that in the case of any
extension of time of payment or renewal of any of the Guaranteed Obligations,
<PAGE>
-52-
the same will be promptly paid in full when due (whether at extended maturity,
by acceleration or otherwise) in accordance with the terms of such extension or
renewal.
6.02. Obligations Unconditional. The obligations of the
-------------------------
Subsidiary Guarantors under Section 6.01 are absolute and unconditional, joint
and several, irrespective of the value, genuineness, validity, regularity or
enforceability of the obligations of the Borrower under this Agreement, the
Notes or any other agreement or instrument referred to herein or therein, or any
substitution, release or exchange of any other guarantee of or security for any
of the Guaranteed Obligations, and, to the fullest extent permitted by
applicable law, irrespective of any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of a surety or
guarantor (other than payment in full), it being the intent of this Section 6.02
that the obligations of the Subsidiary Guarantors hereunder shall be absolute
and unconditional, joint and several, under any and all circumstances. Without
limiting the generality of the foregoing it is agreed that the occurrence of any
one or more of the following shall not alter or impair the liability of the
Subsidiary Guarantors hereunder, which shall remain absolute and unconditional
as described above:
(i) at any time or from time to time, without notice to the
Subsidiary Guarantors, the time for any performance of or compliance
with any of the Guaranteed Obligations shall be extended, or such
performance or compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of this
Agreement or the Notes or any other agreement or instrument referred to
herein or therein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under this
Agreement or the Notes or any other agreement or instrument referred to
herein or therein shall be waived or any other Guarantee of any of the
Guaranteed Obligations or any security therefor shall be released or
exchanged in whole or in part or otherwise dealt with; or
(iv) any Lien or security interest granted to, or in favor of,
the Administrative Agent or any Lender or Lenders as security for any of
the Guaranteed Obligations shall fail to be perfected.
The Subsidiary Guarantors hereby expressly waive diligence, presentment, demand
of payment, protest and all notices whatsoever, and any requirement that the
Administrative Agent or any Lender exhaust any right, power or remedy or proceed
against the Borrower under this Agreement or the Notes or any other agreement or
instrument referred to herein or therein, or against any other Person under any
other guarantee of, or security for, any of the Guaranteed Obligations.
<PAGE>
-53-
6.03. Reinstatement. The obligations of the Subsidiary Guarantors
-------------
under this Section 6 shall be automatically reinstated if and to the extent that
for any reason any payment by or on behalf of the Borrower in respect of the
Guaranteed Obligations is rescinded or must be otherwise restored by any holder
of any of the Guaranteed Obligations, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise, and the Subsidiary Guarantors jointly
and severally agree that they will indemnify the Administrative Agent and each
Lender on demand for all reasonable costs and expenses (including, without
limitation, fees of counsel) incurred by the Administrative Agent or such Lender
in connection with such rescission or restoration, including any such costs and
expenses incurred in defending against any claim alleging that such payment
constituted a preference, fraudulent transfer or similar payment under any
bankruptcy, insolvency or similar law.
6.04. Subrogation. Each Subsidiary Guarantor hereby waives all
-----------
rights of subrogation or contribution, whether arising by contract or operation
of law (including, without limitation, any such right arising under the
Bankruptcy Code) or otherwise by reason of any payment by it pursuant to the
provisions of this Section 6 and further agrees with the Borrower for the
benefit of its creditors (including, without limitation, each Lender and the
Administrative Agent) that any such payment by it shall constitute a
contribution of capital by such Subsidiary Guarantor to the Borrower (or an
investment in the equity capital of the Borrower by such Subsidiary Guarantor).
6.05. Remedies. The Subsidiary Guarantors jointly and severally
--------
agree that, as between the Subsidiary Guarantors and the Lenders, the
obligations of the Borrower under this Agreement and the Notes may be declared
to be forthwith due and payable as provided in Section 10 (and shall be deemed
to have become automatically due and payable in the circumstances provided in
Section 10) for purposes of Section 6.01 notwithstanding any stay, injunction or
other prohibition preventing such declaration (or such obligations from becoming
automatically due and payable) as against the Borrower and that, in the event of
such declaration (or such obligations being deemed to have become automatically
due and payable), such obligations (whether or not due and payable by the
Borrower) shall forthwith become due and payable by the Subsidiary Guarantors
for purposes of Section 6.01.
6.06. Instrument for the Payment of Money. Each Subsidiary
-----------------------------------
Guarantor hereby acknowledges that the guarantee in this Section 6 constitutes
an instrument for the payment of money, and consents and agrees that any Lender
or the Administrative Agent, at its sole option, in the event of a dispute by
such Subsidiary Guarantor in the payment of any moneys due hereunder, shall have
the right to bring motion-action under New York CPLR Section 3213.
6.07. Continuing Guarantee. The guarantee in this Section 6 is a
--------------------
continuing guarantee, and shall apply to all Guaranteed Obligations whenever
arising.
6.08. Rights of Contribution. The Subsidiary Guarantors hereby
----------------------
agree, as between themselves, that if any Subsidiary Guarantor shall become an
Excess Funding Guarantor (as defined below) by reason of the payment by such
<PAGE>
-54-
Subsidiary Guarantor of any Guaranteed Obligations, each other Subsidiary
Guarantor shall, on demand of such Excess Funding Guarantor (but subject to the
next sentence), pay to such Excess Funding Guarantor an amount equal to such
Subsidiary Guarantor's Pro Rata Share (as defined below and determined, for this
purpose, without reference to the Properties, debts and liabilities of such
Excess Funding Guarantor) of the Excess Payment (as defined below) in respect of
such Guaranteed Obligations. The payment obligation of a Subsidiary Guarantor to
any Excess Funding Guarantor under this Section 6.08 shall be subordinate and
subject in right of payment to the prior payment in full of the obligations of
such Subsidiary Guarantor under the other provisions of this Section 6 and such
Excess Funding Guarantor shall not exercise any right or remedy with respect to
such excess until payment and satisfaction in full of all of such obligations.
For purposes of this Section 6.08, (i) "Excess Funding Guarantor"
------------------------
means, in respect of any Guaranteed Obligations, a Subsidiary Guarantor that has
paid an amount in excess of its Pro Rata Share of such Guaranteed Obligations,
(ii) "Excess Payment" means, in respect of any Guaranteed Obligations, the
--------------
amount paid by an Excess Funding Guarantor in excess of its Pro Rata Share of
such Guaranteed Obligations and (iii) "Pro Rata Share" means, for any Subsidiary
--------------
Guarantor, the ratio (expressed as a percentage) of (x) the amount by which the
aggregate present fair saleable value of all Properties of such Subsidiary
Guarantor (excluding any shares of stock of, or ownership interest in, any other
Subsidiary Guarantor) exceeds the amount of all the debts and liabilities of
such Subsidiary Guarantor (including contingent, subordinated, unmatured and
unliquidated liabilities, but excluding the obligations of such Subsidiary
Guarantor hereunder and any obligations of any other Subsidiary Guarantor that
have been Guaranteed by such Subsidiary Guarantor) to (y) the amount by which
the aggregate fair saleable value of all Properties of all of the Obligors
exceeds the amount of all the debts and liabilities (including contingent,
subordinated, unmatured and unliquidated liabilities, but excluding the
obligations of the Borrower and the Subsidiary Guarantors hereunder and under
the other Loan Documents) of all of the Obligors, determined (A) with respect to
any Subsidiary Guarantor that is a party hereto on the Amendment Effective Date,
as of the Amendment Effective Date, and (B) with respect to any other Subsidiary
Guarantor, as of the date such Subsidiary Guarantor becomes a Subsidiary
Guarantor hereunder.
6.09. General Limitation on Guarantee Obligations. In any action
-------------------------------------------
or proceeding involving any state corporate law, or any state or Federal
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of any Subsidiary Guarantor under
Section 6.01 would otherwise, taking into account the provisions of Section
6.08, be held or determined to be void, invalid or unenforceable, or
subordinated to the claims of any other creditors, on account of the amount of
its liability under Section 6.01, then, notwithstanding any other provision
hereof to the contrary, the amount of such liability shall, without any further
action by such Subsidiary Guarantor, any Lender, the Administrative Agent or any
other Person, be automatically limited and reduced to the highest amount that is
valid and enforceable and not subordinated to the claims of other creditors as
determined in such action or proceeding.
<PAGE>
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Section 7. Conditions.
7.01. Initial Extension of Credit of any Class. The obligation of
----------------------------------------
any Lender to make its initial extension of credit hereunder (whether by making
a Loan or issuing a Letter of Credit) is subject to the conditions precedent
that (i) there shall have been no material adverse change in financial, banking
and capital market conditions and (ii) the Administrative Agent and the Arranger
shall have received the following documents, each of which shall be reasonably
satisfactory to the Administrative Agent and the Arranger (and to the extent
specified below, to each Lender) in form and substance, it being understood
that, to the extent a form of a particular document is specified below, such
form shall be deemed to be satisfactory to the Administrative Agent and the
Arranger and the Lenders:
(a) Corporate Documents. Certified copies of the charter and
-------------------
by-laws (or equivalent documents) of each Obligor and of all corporate
or other authority for each Obligor (including, without limitation, in
the case of any corporate Obligor, board of director resolutions and
evidence of the incumbency, including specimen signatures, of officers)
with respect to the execution, delivery and performance of such of the
Basic Documents to which such Obligor, as the case may be, is intended
to be a party and each other document to be delivered by such Obligor,
as the case may be, from time to time in connection herewith and the
extensions of credit hereunder (and the Administrative Agent and each
Lender may conclusively rely on such certificate until it receives
notice in writing from such Obligor, as the case may be, to the
contrary).
(b) Officer's Certificate. A certificate of a Responsible Officer
---------------------
of the Borrower, dated the Closing Date, to the effect set forth in the
lettered clauses of the first sentence of Section 7.03.
(c) Business Plan. A business plan, prepared by a Responsible
-------------
Officer of the Borrower, in form and substance satisfactory to the
Administrative Agent, consisting of financial projections for the fiscal
years ending December 31, 1998 through December 31, 2006, together with
a written analysis based thereon of the business and prospects of the
Borrower and its Subsidiaries for such fiscal years; provided that the
business plan delivered in connection with the Information Memorandum is
hereby deemed satisfactory for purposes of this Section 7.01(c).
(d) Opinion of Counsel to the Obligors. An opinion, dated the
----------------------------------
Closing Date, of Baer Marks & Upham LLP, counsel to the Obligors,
substantially in the form of Exhibit D, and covering such other matters
as the Administrative Agent or any Lender may reasonably request (and
each Obligor hereby instructs such counsel to deliver such opinion to
the Lender and the Administrative Agent).
(e) Opinion of Special New York Counsel to the Arranger. An
---------------------------------------------------
opinion, dated the Closing Date, of Milbank, Tweed, Hadley & McCloy,
special New York counsel to the Arranger, substantially in the form of
<PAGE>
-56-
Exhibit E (and the Arranger hereby instructs such counsel to deliver
such opinion to the Lenders).
(f) Notes. The Notes, duly completed and executed for each
-----
Lender.
(g) Security Agreement. The Security Agreement, duly executed and
------------------
delivered by the Borrower, the Subsidiary Guarantors and the
Administrative Agent, together with the certificates and other
securities and instruments identified in Annex 1 thereto that are to be
delivered on the Closing Date, in each case endorsed in blank or
accompanied by undated stock powers executed in blank. In addition, the
Borrower and each Subsidiary Guarantor shall have taken such other
action (including, without limitation, delivering to the Administrative
Agent, for filing, appropriately completed and duly executed Uniform
Commercial Code financing statements) as the Administrative Agent shall
have requested in order to perfect the security interests created
pursuant to the Security Agreement.
(h) Insurance. Certificates of insurance evidencing the existence
---------
of all insurance required to be maintained by the Obligors pursuant to
Section 9.04 and the designation of the Administrative Agent as the loss
payee or additional named insured, as the case may be, thereunder to the
extent required by Section 9.04, with respect to all tangible real or
personal Property of the Obligors that constitutes collateral security
for the Loans, such certificates to be in such form and contain such
information as is specified in Section 9.04. In addition, the Borrower
shall have delivered a certificate of a Responsible Officer of the
Borrower setting forth the insurance obtained by it in accordance with
the requirements of Section 9.04 and stating that such insurance is in
full force and effect and that all premiums then due and payable thereon
have been paid.
(i) Environmental Surveys. Copies of the environmental surveys
---------------------
and assessments with respect to the Existing Parks, excluding the parks
to be purchased pursuant to the Walibi Acquisition Agreement and the
Tender Offer (to the extent available on the Closing Date), referred to
in Schedule III, Part 1.
(j) Solvency Analysis. A certificate of a Responsible Officer of
-----------------
the Borrower to the effect that, as of the Closing Date and after giving
effect to the initial Loans hereunder and to the other transactions
contemplated hereby:
(i) the aggregate value of all Properties of the Borrower
and its Subsidiaries at their present fair saleable value (i.e.,
the amount that may be realized within a reasonable time,
considered to be six months to one year, either through
collection or sale at the regular market value, conceiving the
latter as the amount that could be obtained for the Property in
question within such period by a capable and diligent businessman
from an interested buyer who is willing to purchase under
ordinary selling conditions), exceed the amount of all debts and
<PAGE>
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liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities) of the Borrower and its Subsidiaries;
(ii) the Borrower and its Subsidiaries will not, on a
consolidated basis, have an unreasonably small capital with which
to conduct their business operations as heretofore conducted; and
(iii) the Borrower and its Subsidiaries will have, on a
consolidated basis, sufficient cash flow to enable them to pay
their debts as they mature.
Such certificate shall include a statement to the effect that the
financial projections and underlying assumptions contained in such
analysis are fair and reasonable and accurately computed.
(k) Existing Credit Agreement. Evidence that all principal of and
-------------------------
interest on the extensions of credits outstanding under, and all other
amounts owing under, the Existing Credit Agreement shall have been (or
shall be simultaneously) paid in full, that any commitments to extend
credit under the Existing Credit Agreement shall have been (or shall be
simultaneously) canceled or terminated and that all Guarantees in
respect of, and all Liens securing, such Indebtedness shall have been
released (or arrangements for such release reasonably satisfactory to
the Administrative Agent shall have been made).
(l) Other Documents. Such other documents as the Administrative
---------------
Agent, the Arranger or any Lender or special New York counsel to the
Arranger may reasonably request.
The obligation of any Lender to make its initial extension of
credit hereunder is also subject to the payment by the Borrower of such fees as
the Borrower shall have agreed to pay to any Lender, the Administrative Agent or
the Arranger in connection herewith, including, without limitation, the
reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy, special New
York counsel to the Arranger, in connection with the negotiation, preparation,
execution and delivery of this Agreement and the other Loan Documents and the
extensions of credit hereunder (to the extent that statements for such fees and
expenses have been delivered to the Borrower).
7.02. Walibi Acquisition and Tender Offer Loans. The obligation
-----------------------------------------
of any Lender to make any extension of credit hereunder (whether by making a
Loan or issuing a Letter of Credit) the proceeds of which are to be applied to
finance in whole or in part the purchase price of the Walibi Acquisition and/or
the Tender Offer is subject to the conditions precedent that the Administrative
Agent and the Arranger shall have received or shall concurrently with the
consummation of the Walibi Acquisition receive the following documents, each of
which shall be reasonably satisfactory to the Administrative Agent and the
Arranger (and to the extent specified below, to each Lender) in form and
substance, it being understood that, to the extent a form of a particular
<PAGE>
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document is specified below, such form shall be deemed to be satisfactory to the
Administrative Agent and the Arranger and the Lenders:
(a) Environmental Surveys. Copies of the environmental surveys
---------------------
and assessments with respect to the parks to be purchased pursuant to
the Walibi Acquisition Agreement and the Tender Offer.
(b) Consummation of Walibi Acquisition. Evidence that (i) the
----------------------------------
purchase by the Borrower of not less than 49% of the shares of Walibi
pursuant to the Walibi Acquisition shall have been (or shall be
simultaneously) consummated in all material respects in accordance with
the terms of the Walibi Acquisition Agreement (except for any
modifications, supplements or material waivers thereof, or written
consent of determinations made by the parties thereto, that shall be
reasonably satisfactory to the Majority Lenders, but only if such
modifications, supplements, waivers or determinations could reasonably
be expected to adversely affect the interests of the Lenders) and (ii)
the Borrower shall have effective control over the board of directors of
Walibi, and the Administrative Agent shall have received a certificate
of a Responsible Officer of the Borrower to such effect and to the
effect that attached thereto are true and complete copies of the Walibi
Acquisition Agreement (including all modifications, waivers and
supplements thereto entered into prior to the Closing Date, and exhibits
and schedules). In addition, the Administrative Agent shall have
received copies of the legal opinions delivered pursuant to the Walibi
Acquisition Agreement in connection with the Walibi Acquisition.
Promptly following the consummation of the Walibi Acquisition the
Administrative Agent shall receive each of the other documents delivered
in connection with the closing of the Walibi Acquisition pursuant to the
Walibi Acquisition Agreement.
(c) Other Documents. Such other documents as the Administrative
---------------
Agent, the Arranger or any Lender or special New York counsel to the
Arranger may reasonably request.
7.03. Initial and Subsequent Extensions of Credit. The obligation
-------------------------------------------
of the Lenders to make any Loan to the Borrower upon the occasion of each
extension of credit hereunder (including the initial extension of credit and any
extension of credit the proceeds of which are used to finance in whole or in
part the Walibi Acquisition and/or the Tender Offer, but excluding any
Continuations or Conversion of Loans) is subject to the conditions precedent
that, both immediately prior to the making of such extension of credit and also
after giving effect thereto and to the intended use thereof:
(a) the representations and warranties made by the Borrower in
Section 8, and by each Obligor in each of the other Loan Documents to
which it is a party, shall be true and complete on and as of the date of
the making of such extension of credit with the same force and effect as
if made on and as of such date (or, if any such representation or
warranty is expressly stated to have been made as of a specific date, as
of such specific date);
<PAGE>
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(b) no Default shall have occurred and be continuing; and
(c) the Borrower shall have delivered to the Administrative Agent
a certificate of a Responsible Officer of the Borrower, in form and
substance reasonably satisfactory to the Administrative Agent and
accompanied by such appraisals, if necessary, and other showings that
shall demonstrate to the reasonable satisfaction of the Administrative
Agent that such Loans may be permissibly incurred and secured under any
tests therefor set forth in the Senior Notes Indentures.
Each notice of borrowing, or request for issuance of a Letter of Credit, by the
Borrower hereunder shall constitute a certification by the Borrower to the
effect set forth in the preceding sentence (both as of the date of such notice
or request and, unless the Borrower otherwise notifies the Administrative Agent
prior to the date of such borrowing or issuance, as of the date of such
borrowing or issuance).
Section 8. Representations and Warranties. The Borrower
represents and warrants to Administrative Agent and the Lenders that:
8.01. Organization; Powers. Each of the Borrower and its
--------------------
Subsidiaries (other than Inactive Subsidiaries, as to which the Borrower makes
no representation or warranty): (a) is a corporation, partnership or other
entity duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization; and (b) is qualified to do business and is
in good standing in all jurisdictions in which the nature of the business
conducted by it makes such qualification necessary and where failure so to
qualify could (either individually or in the aggregate) have a Material Adverse
Effect.
8.02. Financial Condition. The Borrower has heretofore
-------------------
furnished to each of the Lenders the following financial statements:
(i) the consolidated balance sheets of the Borrower and its
Subsidiaries as at December 31, 1997 and the related consolidated
statements of operations, shareholders, equity and cash flows of the
Borrower and its Subsidiaries for the fiscal year ended December 31,
1997, with the opinion thereon of KPMG Peat Marwick LLP;
(ii) the audited financial statements of Walibi and its
consolidated Subsidiaries for the fiscal year ended December 31, 1996,
with the opinion thereon of Coopers & Lybrand N.V.;
(iii) Park-level statements of operating data for the fiscal year
ended December 31, 1997 for Walibi; and
(iv) a pro-forma unaudited consolidated statement of operations
data of Walibi as at the fiscal year ended December 31, 1997.
<PAGE>
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All such financial statements (other than the pro forma financial statements)
are complete and fairly present in all material respects the actual consolidated
financial condition of the Borrower and its Subsidiaries and Walibi, as the case
may be, as at said respective dates and the actual consolidated results of their
operations for the applicable periods ended on said respective dates, all in
accordance with generally accepted accounting principles and practices applied
on a consistent basis. None of the Borrower nor any of its Subsidiaries nor
Walibi or any of its Subsidiaries has on the date hereof any material contingent
liabilities (other than, with respect to the Borrower and its Subsidiaries, the
Walibi Acquisition), liabilities for taxes, unusual forward or long-term
commitments or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in the balance
sheet of the Borrower and its Subsidiaries as at December 31, 1997 or of Walibi
and its Subsidiaries as at December 31, 1997. Since December 31, 1997, there has
been no material adverse change in the consolidated financial condition,
operations, business or prospects taken as a whole of Walibi or the Borrower and
its Subsidiaries, as the case may be, from that set forth in said respective
financial statements as at said date (other than, with respect to the financial
statements of the Borrower and its Subsidiaries (x) the Walibi Acquisition from
and after the consummation thereof, (y) the repayment of all amounts owing
under, and the termination of the commitments under, the Amended and Restated
Credit Agreement dated as of January 31, 1997 between the Borrower and certain
lenders party thereto and (z) the execution and delivery of the Agreement of
Merger for the Premier Merger and related transactions (including, without
limitation, the acquisition of Six Flags Theme Parks Inc. in connection
therewith) from and after the consummation thereof, neither of which (in the
case of clauses (y) and (z)) shall be deemed to constitute a material adverse
change, assuming (in the case of clause (z)) the Premier Merger and the
acquisition of Six Flags Theme Parks Inc. are consummated).
8.03. Litigation. Except as set forth in Schedule VI, there are
----------
no legal or arbitral proceedings, or any proceedings by or before any
governmental or regulatory authority or agency, now pending or (to the knowledge
of the Borrower) threatened against the Borrower or any of its Subsidiaries
that, if adversely determined, could (either individually or in the aggregate)
have a Material Adverse Effect.
8.04. No Breach. None of the execution and delivery of this
---------
Agreement and the Notes and the other Basic Documents, the consummation of the
transactions herein and therein contemplated or compliance with the terms and
provisions hereof and thereof will conflict with or result in a breach of, or
require any consent under, the charter, by-laws or other organizational
documents of any Obligor, or any applicable material law or regulation, or any
order, writ, injunction or decree of any court or governmental authority or
agency, or any material agreement or instrument to which the Borrower or any of
its Subsidiaries is a party or by which any of them or any of their Property is
bound or to which any of them is subject, or constitute a default under any such
agreement or instrument, or (except for the Liens created pursuant to the
Security Documents) result in the creation or imposition of any Lien upon any
Property of the Borrower or any of its Subsidiaries pursuant to the terms of any
such agreement or instrument, except that (i) consents have not been obtained
with respect to the assignment of contracts entered into in the ordinary course
<PAGE>
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of business by the Borrower and/or its Subsidiaries and (ii) (in the case of the
Walibi Acquisition and the Tender Offer only) where the failure to obtain such
consent could not reasonably be expected to have a Material Adverse Effect.
8.05. Action. Each Obligor has all necessary corporate or other
------
power, authority and legal right to execute, deliver and perform its obligations
under each of the Basic Documents to which it is a party; the execution,
delivery and performance by each Obligor of each of the Basic Documents to which
it is a party have been duly authorized by all necessary corporate or other
action on its part (including, without limitation, any required shareholder
approvals); and this Agreement has been duly and validly executed and delivered
by each Obligor and constitutes, and each of the Notes and the other Basic
Documents to which it is a party when executed and delivered by such Obligor (in
the case of the Notes, for value) will constitute, its legal, valid and binding
obligation, enforceable against each Obligor in accordance with its terms,
except as such enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or similar laws of general applicability affecting
the enforcement of creditors, rights and (b) the application of general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
8.06. Approvals. No authorizations, approvals or consents of, and
---------
no filings or registrations with, any governmental or regulatory authority or
agency, or any securities exchange, are necessary for the execution, delivery or
performance by any Obligor of this Agreement or any of the other Basic Documents
to which it is a party or for the legality, validity or enforceability hereof or
thereof, except for (i) filings and recordings in respect of the Liens created
pursuant to the Security Documents and (ii) the authorizations, approvals and
consents contemplated by the Walibi Acquisition Agreement, each of which will be
duly issued or obtained prior to the date on which the Walibi Acquisition shall
be consummated and each of which shall be in full force.
8.07. Properties and Permits, Etc.
---------------------------
(a) Each of the Borrower and its Subsidiaries has good and
marketable title to, or valid leasehold interests in, all of its material
Properties, except for Liens permitted under Section 9.06 and defects in title
that do not materially interfere with its ability to conduct its business as
currently conducted or to utilize such Properties and assets for their intended
purposes. All such material Properties are free and clear of Liens, other than
Liens permitted by Section 9.06.
(b) Each of the Borrower and its Subsidiaries has complied with
all material obligations under all material leases to which it is a party and
all such leases are in full force and effect. Each of the Borrower and its
Subsidiaries enjoys peaceful and undisturbed possession under all such material
leases.
(c) Each of the Borrower and its Subsidiaries owns, or is
licensed to use, all trademarks, tradenames, copyrights, patents and other
intellectual Property material to its business, and the use thereof by the
<PAGE>
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Borrower and its Subsidiaries does not infringe upon the rights of any other
Person, except for any such infringements that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
(d) Each of the Borrower and its Subsidiaries holds all material
permits, licenses and other governmental authorizations necessary to enable it
to operate as heretofore conducted (other than seasonal permits, which it
anticipates will be obtained in the normal course), and will, upon the
consummation of any acquisition (except, in the case of the Walibi Acquisition
and the Tender Offer only, where the failure to obtain such authorizations could
not reasonably be expected to have a Material Adverse Effect) hold all material
permits, licenses and other governmental authorizations necessary to enable it
to operate (other than seasonal permits or liquor licenses, which it anticipates
will be obtained in the normal course).
8.08. Environmental Matters. Each of the Borrower and its
---------------------
Subsidiaries has obtained all environmental, health and safety permits,
licenses, registrations and other authorizations required under all
Environmental Laws to carry on its business as now being or as proposed to be
conducted, except to the extent failure to have any such permit, license,
registration or authorization would not (either individually or in the
aggregate) have a Material Adverse Effect. Each of such permits, licenses,
registrations and authorizations is in full force and effect and each of the
Borrower and its Subsidiaries is in compliance with the terms and conditions
thereof, and is also in compliance with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in any applicable Environmental Law or in any regulation,
code, plan, order, decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder, except to the extent failure to
comply therewith would not (either individually or in the aggregate) have a
Material Adverse Effect.
In addition:
(a) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint is pending, no
penalty has been assessed and no investigation or review is pending or,
to the Borrower's knowledge, threatened by any governmental entity (or
other entity with jurisdiction over the Parks) with respect to any
alleged failure by the Borrower or any of its Subsidiaries to have any
environmental, health or safety permit, license, registration or other
authorization required under any Environmental Law in connection with
the conduct of the business of the Borrower or any of its Subsidiaries
or with respect to any generation, treatment, storage, recycling,
transportation, discharge or disposal, or any Release of any Hazardous
Materials generated by the Borrower or any of its Subsidiaries in each
case that (either individually or in the aggregate) which would
materially adversely affect the operations of any Park.
(b) Neither the Borrower nor any of its Domestic Subsidiaries
owns, operates or leases on the date hereof a treatment, storage or
disposal facility requiring a permit under the Resource Conservation and
Recovery Act of 1976, as amended, or, as to the Borrower and all of its
<PAGE>
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Subsidiaries, under any comparable state or local statute; and none of
the conditions set forth below exists that would (either individually or
in the aggregate) materially adversely affect the operations of any Park
or have a Material Adverse Effect:
(i) no polychlorinated biphenyls (PCB's) are or have been
present at any domestic site or facility now or previously owned,
operated or leased by the Borrower or any of its Subsidiaries;
(ii) no asbestos or asbestos-containing materials is or
has been present at any domestic site or facility now or
previously owned, operated or leased by the Borrower or any of
its Subsidiaries;
(iii) there are no underground storage tanks or surface
impoundments for Hazardous Materials, active or abandoned, at any
site or facility now operated or leased by the Borrower or any of
its Subsidiaries and, with respect to any domestic site or
facility, previously owned, operated or leased by the Borrower or
any of its Subsidiaries;
(iv) no Hazardous Materials have been Released at, on or
under any site or facility now owned, operated or leased by the
Borrower or any of its Subsidiaries and, with respect to any
domestic site or facility, previously owned, operated or leased
by the Borrower or any of its Subsidiaries, in each case, in a
reportable quantity established by statute, ordinance, rule,
regulation or order; and
(v) no Hazardous Materials have been otherwise Released
at, on or under any site or facility now owned, operated or
leased by the Borrower or any of its Subsidiaries and, with
respect to any domestic site or facility, previously owned,
operated or leased by the Borrower or any of its Subsidiaries
that, in either case, would (either individually or in the
aggregate) have a Material Adverse Effect.
(c) Neither the Borrower nor any of its Domestic Subsidiaries has
transported or arranged for the transportation of any Hazardous Material
to any location that is listed on the National Priorities List ("NPL")
---
under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), listed for possible
------
inclusion on the NPL by the Environmental Protection Agency Credit
Agreement in the Comprehensive Environmental Response and Liability
Information System, as provided for by 40 C.F.R. ss. 300.5 ("CERCLIS"),
-------
or on any similar state or local list or that is the subject of Federal,
state or local enforcement actions or other investigations that may lead
to Environmental Claims against the Borrower or any of its Subsidiaries,
in any such case that would (either individually or in the aggregate)
materially adversely affect the operations of any Park or have a
Material Adverse Effect.
(d) As of the date hereof, no Hazardous Material generated by the
Borrower or any of its Domestic Subsidiaries has been recycled, treated,
<PAGE>
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stored, disposed of or Released by the Borrower or any of its Domestic
Subsidiaries at any location other than those listed in Schedule III,
Part 2.
(e) No oral or written notification of a Release of a Hazardous
Material has been filed by or on behalf of the Borrower or any of its
Subsidiaries and no site or facility now or previously owned, operated
or leased by the Borrower or any of its Domestic Subsidiaries is listed
or, to Borrower's knowledge, proposed for listing on the NPL, CERCLIS or
any similar state list of sites requiring investigation or clean-up, in
any such case that would (either individually or in the aggregate)
materially adversely affect the operations of any Park or have a
Material Adverse Effect.
(f) No Liens have arisen under or pursuant to any Environmental
Laws on any site or facility owned, operated or leased by the Borrower
or any of its Subsidiaries, and no government action has been taken or
is in process that could subject any such site or facility to such Liens
in any such case to the extent such Lien secured obligations (or would
secure obligations) in an amount in excess of $500,000, and neither the
Borrower nor any of its Subsidiaries would be required to place any
notice or restriction relating to the presence of Hazardous Materials at
any site or facility owned by it in any deed to the real Property on
which such site or facility is located, which would adversely affect the
operation of any Park.
(g) All environmental investigations, studies, audits, tests,
reviews or other similar analyses conducted by or that are in the
possession of the Borrower or any of its Subsidiaries in relation to
facts, circumstances or conditions at or affecting any site or facility
now or previously owned, operated or leased by the Borrower or any of
its Subsidiaries and that could result in a Material Adverse Effect have
been made available to the Lenders, including the environmental surveys
and assessments set forth in Schedule III, Part 1.
8.09. Compliance with Laws and Agreements. Each of the Borrower
-----------------------------------
and its Subsidiaries is in compliance with all laws, regulations and orders of
any governmental authority applicable to it or its Property and all indentures,
agreements and other instruments binding upon it or its Property, except where
the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
8.10. Investment Company Act. Neither the Borrower nor any of its
----------------------
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
8.11. Public Utility Holding Company Act. Neither the Borrower
----------------------------------
nor any of its Subsidiaries is a "holding company", or an "affiliate" of a
"holding company" or a "subsidiary company" of a "holding company", within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
<PAGE>
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8.12. Taxes. The Borrower and its Domestic Subsidiaries are
-----
members of an affiliated group of corporations filing consolidated returns for
Federal income tax purposes, of which the Borrower is the "common parent"
(within the meaning of Section 1504 of the Code) of such group. The Borrower and
its Subsidiaries have filed all Federal income tax returns (in the case of
Domestic Subsidiaries) and all other material tax returns (in the case of all
Subsidiaries) that are required to be filed by them and have paid all taxes due
pursuant to such returns or pursuant to any assessment received by the Borrower
or any of its Subsidiaries. The charges, accruals and reserves on-the books of
the Borrower and its Subsidiaries in respect of taxes and other governmental
charges are, in the opinion of the Borrower, adequate.
8.13. ERISA. Each Plan, and, to the knowledge of the Borrower,
-----
each Multiemployer Plan, is in compliance in all material respects with, and has
been administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other Federal or State law, and no ERISA
Event has occurred and is continuing as to which the Borrower would be under an
obligation to furnish a report to the Lenders under Section 9.02(c).
8.14. True and Complete Disclosure. The information, reports,
----------------------------
financial statements, exhibits and schedules furnished in writing by or on
behalf of the Obligors to the Administrative Agent or any Lender in connection
with the negotiation, preparation or delivery of this Agreement and the other
Loan Documents or included herein or therein or delivered pursuant hereto or
thereto, when taken as a whole (including the Information Memorandum) do not
contain any untrue statement of material fact or omit to state any material fact
necessary to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading, provided that, with
--------
respect to projected financial information, the Borrower represents only that
such information was prepared in good faith based upon assumptions believed to
be reasonable at the time. All written information furnished after the date
hereof by the Borrower and its Subsidiaries to the Administrative Agent and the
Lenders in connection with this Agreement and the other Loan Documents and the
transactions contemplated hereby and thereby will be true, complete and accurate
in every material respect, or (in the case of projections) based on reasonable
estimates, on the date as of which such information is stated or certified.
There is no fact known to the Borrower that could have a Material Adverse Effect
that has not been disclosed herein, in the other Loan Documents or in a report,
financial statement, exhibit, schedule, disclosure letter or other writing
furnished to the Lenders for use in connection with the transactions
contemplated hereby or thereby.
8.15. Use of Credit. Neither the Borrower nor any of its
-------------
Subsidiaries is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose, whether immediate, incidental
or ultimate, of buying or carrying Margin Stock, and no part of the proceeds of
any Loan hereunder will be used to buy or carry any Margin Stock.
8.16. Debt Agreements and Liens.
-------------------------
(a) Part A of Schedule II is a complete and correct list of each
credit agreement, loan agreement, indenture, purchase agreement, guarantee,
letter of credit or other arrangement providing for or otherwise relating to any
<PAGE>
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Indebtedness to, or guarantee of Indebtedness by, the Borrower or any of its
Subsidiaries outstanding on the date hereof, the aggregate principal or face
amount of which equals or exceeds (or may equal or exceed) $100,000, and the
aggregate principal or face amount outstanding or that may become outstanding
under each such arrangement is correctly described in Part A of Schedule II; the
aggregate of all such Indebtedness, the principal or face amount of which is
under $100,000 and which is accordingly not so listed does not exceed $250,000.
(b) Part B of Schedule II is a complete and correct list of each
Lien securing Indebtedness of any Person outstanding on the date hereof, the
aggregate principal or face amount of which equals or exceeds (or may equal or
exceed) $100,000 and covering any Property of the Borrower or any of its
Subsidiaries, and the aggregate Indebtedness secured (or that may be secured) by
each such Lien and the Property covered by each such Lien is correctly described
in Part B of Schedule II.
8.17. Capitalization. The authorized capital stock of the
--------------
Borrower consists, on the date hereof, of an aggregate of 90,500,000 shares
consisting of (i) 90,000,000 shares of common stock, par value $.05 per share,
of which 18,873,111 shares were issued and outstanding as of December 31, 1997
(and 26,345 shares of which were held in treasury as at said date), each of
which shares is fully paid and nonassessable and (ii) 500,000 shares of
preferred stock, of which none are issued and outstanding on the date hereof
(and no shares of which were held in treasury), each of which shares is fully
paid and nonassessable. As of the date hereof, (x) except for (i) warrants held
by the chief executive officer of the Borrower, (ii) options issued pursuant to
employee plans and a Rights Plan dated January 12, 1998 with Bank One Trust Co.,
N.A., (iii) contingent earnouts payable in stock pursuant to the Walibi
Acquisition Agreement and the Stock Purchase Agreement dated as of September 26,
1997 among the Borrower, Kentucky Kingdom Inc., Hart-Lundsford Enterprises LLC
and Edward J. Hart, as amended, with respect to the Kentucky Kingdom Park and
(iv) unissued restricted shares of common stock that may be issued at the
discretion of the board of directors of the Borrower pursuant to employment
contracts with certain senior officers, there are no outstanding Equity Rights
with respect to the Borrower and (y) there are no outstanding obligations of the
Borrower or any of its Subsidiaries to repurchase, redeem, or otherwise acquire
any shares of capital stock of the Borrower nor are there any outstanding
obligations of the Borrower or any of its Subsidiaries to make payments to any
Person, such as "phantom stock" payments, where the amount thereof is calculated
with reference to the fair market value or equity value of the Borrower or any
of its Subsidiaries.
8.18. Subsidiaries and Investments.
----------------------------
(a) Set forth in Part A of Schedule IV is a complete and correct
list of all of the Subsidiaries of the Borrower as of the date hereof (other
than Inactive Subsidiaries, as to which the Borrower makes no representation or
warranty), together with, for each such Subsidiary, (i) the jurisdiction of
organization of such Subsidiary, (ii) each Person holding ownership interests in
such Subsidiary and (iii) the nature of the ownership interests held by each
<PAGE>
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such Person and the percentage of ownership of such Subsidiary represented by
such ownership interests. Except as disclosed in Part A of Schedule IV, as of
the date hereof, (x) each of the Borrower and its Subsidiaries owns, free and
clear of Liens (other than Liens created pursuant to the Security Documents),
and has the unencumbered right to vote, all outstanding ownership interests in
each Person shown to be held by it in Part A of Schedule IV, (y) all of the
issued and outstanding capital stock of each such Person organized as a
corporation is validly issued, fully paid and nonassessable and (z) there are no
outstanding Equity Rights with respect to such Person.
(b) Set forth in Part B of Schedule IV is a complete and correct
list of all Investments (other than Investments disclosed in Part A of Schedule
IV or of the type referred to in clauses (b), (c), (d), (e) or (f) of Section
9.08) held by the Borrower or any of its Subsidiaries in any Person on the date
hereof and, for each such Investment, (x) the identity of the Person or Persons
holding such Investment and (y) the nature of such Investment. Except as
disclosed in Part B of Schedule IV, each of the Borrower and its Subsidiaries
owns, free and clear of all Liens (other than Liens created pursuant to the
Security Documents), all such Investments.
(c) None of the Subsidiaries of the Borrower is, on the date
hereof, subject to any indenture, agreement, instrument or other arrangement
restricted under in Section 9.15(c).
(d) Each of the Subsidiaries of the Borrower on the date hereof
(other than certain of the Inactive Subsidiaries, Premier Parks Merger
Corporation, a Delaware corporation and PPStar I, Inc., a Delaware corporation)
is a "Restricted Subsidiary" under and as defined in the 1995 Senior Notes
Indenture and the 1997 Senior Notes Indenture.
8.19. Parks; Real Property. Set forth in Part A of Schedule V is
--------------------
a complete and correct list of all of the amusement and attraction parks owned
by the Obligors on the date hereof. Set forth in Part B of Schedule V is a
complete and correct list, as of the date hereof of all of the real Property
interests held by the Borrower and its Subsidiaries, indicating in each case
whether the respective Property is owned or leased, the identity of the owner or
lessee and the location of the respective Property.
8.20. Insurance. Set forth on Schedule VII is a complete and
---------
correct description of all insurance maintained by the Obligors as of the date
hereof. As of the date hereof, all of such insurance is in full force and effect
and no premiums are past due in respect thereof.
8.21. Labor Maters. There are no strikes pending or threatened
------------
against the Borrower or any Subsidiary other than strikes that could not
reasonably be expected to, individually or in the aggregate, result in a
Material Adverse Effect. The hours worked and payment made to employees of the
Borrower and each Subsidiary have not been in violation in any respect of the
Fair Labor Standards Act or any other similar applicable law other than
violations that could not reasonably be expected to, individually or in the
aggregate, result in a Material Adverse Effect. All material payments due from
the Borrower or any Subsidiary, or for which any material claim may be made
against the Borrower or any Subsidiary, on account of wages and employee health
and welfare insurance and other benefits have been paid or accrued as a
<PAGE>
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liability on the books of the Borrower or such Subsidiary. The consummation of
the transactions contemplated hereunder will not give rise to a right of
termination or right of renegotiation on the part of any union under any
collective bargaining agreement to which the Borrower or any Subsidiary (or any
predecessor) is a party or by which the Borrower or any Subsidiary (or any
predecessor) is bound, other than collective bargaining agreements that,
individually or in the aggregate, are not material to the Borrower and the
Subsidiaries taken as a whole.
8.22. Solvency. Immediately after the consummation of the
--------
transactions contemplated hereunder and immediately following the making of each
Loan made on the Closing Date and after giving effect to the application of the
proceeds of such Loans, (i) the aggregate value of all Properties of the
Borrower and its Subsidiaries at their present fair saleable value (i.e., the
amount that may be realized within a reasonable time, considered to be six
months to one year, either through collection or sale at the regular market
value, conceiving the latter as the amount that could be obtained for the
Property in question within such period by a capable and diligent businessman
from an interested buyer who is willing to purchase under ordinary selling
conditions), exceed the amount of all debts and liabilities (including
contingent, subordinated, unmatured and unliquidated liabilities) of the
Borrower and its Subsidiaries; (ii) the Borrower and its Subsidiaries will not,
on a consolidated basis, have an unreasonably small capital with which to
conduct their business operations as heretofore conducted; and (iii) the
Borrower and its Subsidiaries will have, on a consolidated basis, sufficient
cash flow to enable them to pay their debts as they mature.
Section 9. Covenants of the Borrower. The Borrower covenants and
-------------------------
agrees with the Lenders and the Administrative Agent that, so long as any
Commitment, Loan or Letter of Credit Liability is outstanding and until payment
in full of all amounts payable by the Borrower hereunder:
9.01. Financial Statements and Other Information. The Borrower
------------------------------------------
shall deliver to each of the Lenders:
(a) as soon as available and in any event within 90 days after
the end of each fiscal year of the Borrower:
(x) consolidated statements of operations, shareholders'
equity and cash flows of the Borrower and its Subsidiaries for
such fiscal year and the related consolidated balance sheets of
the Borrower and its Subsidiaries as at the end of such fiscal
year, setting forth in each case in comparative form the
corresponding consolidated figures for the preceding fiscal year,
accompanied by an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall
state that such consolidated financial statements fairly present
the consolidated financial condition and results of operations of
the Borrower and its Subsidiaries as at the end of, and for, such
fiscal year in accordance with generally accepted accounting
principles, and a statement of such accountants to the effect
<PAGE>
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that, in making the examination necessary for their opinion,
nothing came to their attention that caused them to believe that
the Borrower was not in compliance with Section 9.10, insofar as
such Section relates to accounting matters,
(y) consolidating statements of operations of the Borrower
and its Subsidiaries for such fiscal year, accompanied by a
certificate of a Responsible Officer of the Borrower, which
certificate shall state that such consolidating financial
statements fairly present the respective individual
unconsolidated financial condition and results of operations of
the Borrower and of each of its Subsidiaries, in each case in
accordance with generally accepted accounting principles,
consistently applied, as at the end of, and for, such fiscal
year, and
(z) park-level statements of operating data (including
revenue and expense items and showing the calculation of EBITDA,
or equivalent, for the respective Park) for such fiscal year for
each of the Parks of the Borrower and its Subsidiaries, in each
case prepared in accordance with the Borrower's internal
accounting practices in form and detail substantially similar to
the corresponding statements set forth in the Information
Memorandum;
(b) as soon as available and in any event within 45 days after
the end of each quarterly fiscal period of each fiscal year of the
Borrower:
(x) consolidated statements of operations, shareholders'
equity and cash flows of the Borrower and its Subsidiaries for
such period and for the period from the beginning of the
respective fiscal year to the end of such period, and the related
consolidated balance sheets of the Borrower and its Subsidiaries,
as at the end of such period, setting forth in each case in
comparative form the corresponding consolidated figures for the
corresponding periods in the preceding fiscal year (except that,
in the case of balance sheets, such comparison shall be to the
last day of the prior fiscal year), accompanied by a certificate
of a Responsible Officer of the Borrower, which certificate shall
state that such consolidated financial statements fairly present
the consolidated financial condition and results of operations of
the Borrower and its Subsidiaries, in each case in accordance
with generally accepted accounting principles, consistently
applied, as at the end of, and for, such period (subject to
normal year-end audit adjustments), and
(y) park-level statements of operating data (including
revenue and expense items and showing the calculation of EBITDA,
or equivalent, for the respective Park) for the period from the
beginning of such fiscal year to the end of such fiscal quarter
and setting forth in comparative form the figures for the
corresponding period in the preceding fiscal year, in each case
prepared in accordance with the Borrower's internal accounting
practices in form and detail substantially similar to the
<PAGE>
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corresponding statements set forth in the Information Memorandum;
(c) concurrently with any delivery of financial statements under
clause (a) or (b) of this Section 9.01, a certificate of a Responsible
Officer of the Borrower (i) to the effect that no Default has occurred
and is continuing (or, if any Default has occurred and is continuing,
describing the same in reasonable detail and describing the action that
the Borrower has taken or proposes to take with respect thereto) and
(ii) setting forth in reasonable detail the computations necessary to
determine whether the Borrower was in compliance with Sections 9.08(k),
9.09 or 9.10 as of the end of the respective quarterly fiscal period or
fiscal year;
(d) promptly upon their becoming available, copies of all
registration statements and regular periodic reports, if any, that the
Borrower shall have filed with the Securities and Exchange Commission
(or any governmental agency substituted therefor) or any national
securities exchange;
(e) promptly upon receipt thereof, copies of any management
letters prepared by the Borrower's independent public accountants with
respect to the audit of the financial statements of the Borrower and its
Subsidiaries;
(f) within 31 days after the beginning of each fiscal year, a
detailed pro forma annual operating budget for such fiscal year in form
and detail satisfactory to the Administrative Agent;
(g) within five Business Days after the end of each of the months
of June, July, August, September and October, a performance report
detailing on a park-by-park basis attendance and revenue for the
preceding month and showing a comparison to budget and to the same
period in the prior year; and
(h) from time to time such other information regarding the
financial condition, operations, business or prospects of the Borrower
or any of its Subsidiaries (including, without limitation, any Plan or
Multiemployer Plan and any reports or other information required to be
filed under ERISA), or compliance with the terms of this Agreement, as
any Lender or the Administrative Agent may reasonably request.
9.02. Notices of Material Events. The Borrower will furnish the
--------------------------
following to the Administrative Agent and each Lender in writing:
(a) promptly after any executive officer of the Borrower has
actual knowledge of facts that would give him or her reason to believe
that any Default has occurred, notice of such Default;
<PAGE>
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(b) as soon as any executive officer of the Borrower has actual
knowledge of the facts that would give him or her reason to know of the
occurrence thereof, prompt notice of all legal or arbitral proceedings,
and of all proceedings by or before any governmental or regulatory
authority or agency, and of any material development in respect of such
legal or other proceedings, affecting the Borrower or any of its
Subsidiaries that, if adversely determined, could reasonably be expected
to result in aggregate liabilities or damages in excess of $2,500,000;
(c) as soon as possible, and in any event within ten days after
the Borrower knows or has reason to believe that any ERISA Event has
occurred or exists, notice of the occurrence of such ERISA Event and a
copy of any report or notice required to be filed with or given to the
PBGC by the Borrower or an ERISA Affiliate with respect to such ERISA
Event, if such ERISA Event could reasonably be expected to result in
aggregate liabilities in excess of $2,500,000;
(d) prompt notice of the assertion of any Environmental Claim by
any Person against, or with respect to the activities of, the Borrower
or any of its Subsidiaries and notice of any alleged violation of or
non-compliance with any Environmental Laws or any permits, licenses or
authorizations, other than any Environmental Claim or alleged violation
that, if adversely determined, would not (either individually or in the
aggregate) result in remediation costs of less than $500,000 or
adversely affect the operation of any Park; and
(e) prompt notice of any other development that results in, or
could reasonably be expected to result in, a Material Adverse Effect.
Each notice delivered under this Section 9.02 shall be accompanied by a
statement of a Responsible Officer of the Borrower setting forth the details of
the event or development requiring such notice and any action taken or proposed
to be taken with respect thereto.
9.03. Existence, Etc. The Borrower will, and will cause each of
--------------
its Subsidiaries to:
(a) preserve and maintain its legal existence and all material
permits, licenses and other governmental authorizations necessary to
enable it to operate each of its Parks (other than seasonal permits and
liquor licenses, which it anticipates will be obtained in the normal
course), provided that nothing in this Section 9.03 shall prohibit any
--------
transaction expressly permitted under Section 9.05;
(b) comply with the requirements of all applicable laws, rules,
regulations and orders of governmental or regulatory authorities if
failure to comply with such requirements could (either individually or
in the aggregate) have a Material Adverse Effect;
<PAGE>
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(c) pay and discharge all Federal income taxes and all other
material taxes, assessments and governmental charges or levies imposed
on it or on its income or profits or on any of its Property prior to the
date on which penalties attach thereto, except for any such tax,
assessment, charge or levy the payment of which is being contested in
good faith and by proper proceedings and against which adequate reserves
are being maintained;
(d) maintain and preserve all of its Properties material to the
conduct of the business and operations of the Borrower and its
Subsidiaries (taken as a whole) in good working order and condition;
(e) keep adequate records and books of account, in which complete
entries will be made in accordance with generally accepted accounting
principles consistently applied; and
(f) permit representatives of any Lender or the Administrative
Agent, upon reasonable notice and during normal business hours, to
examine, copy and make extracts from its books and records, to inspect
any of its Properties, and to discuss its business and affairs with its
officers and the general managers of its Parks, all to the extent
reasonably requested by such Lender or the Administrative Agent (as the
case may be).
9.04. Insurance. The Borrower will, and will cause each of its
---------
Subsidiaries to, maintain insurance with financially sound and reputable
insurance companies, in amounts and against such losses and risks as the
Borrower shall from time to time reasonably determine is sufficient based upon
its experience and industry practice to protect the Borrower and its
Subsidiaries and their respective businesses, provided that the Borrower will in
--------
any event maintain (with respect to itself and each of its Domestic
Subsidiaries):
(1) Casualty Insurance -- insurance against loss or damage
------------------
covering all of the tangible real and personal Property and improvements
of the Borrower and each of its Subsidiaries by reason of any Peril (as
defined below) in such amounts (subject to (x) in the case of general
liability policies, per occurrence deductibles (or self-insurance
retentions) not exceeding $250,000, and (y) in the case of Property
insurance deductibles, not exceeding $300,000 or, in each case, such
higher deductible as shall be reasonably satisfactory to the Majority
Lenders) as shall be reasonable and customary and sufficient to avoid
the insured named therein from becoming a co-insurer of any loss under
such policy but in any event in an amount (i) in the case of fixed
assets and equipment (including, without limitation, vehicles), at least
equal to 75% of the actual replacement cost of such assets (including,
without limitation, foundation, footings but excluding excavation
costs), subject to deductibles as aforesaid and (ii) in the case of
inventory, not less than the fair market value thereof, subject to
deductibles as aforesaid.
(2) Automobile Liability Insurance for Bodily Injury and Property
-------------------------------------------------------------
Damage -- insurance against liability for bodily injury and Property
------
damage in respect of all vehicles (whether owned, hired or rented by the
<PAGE>
-73-
Borrower or any of its Subsidiaries) at any time located at, or used in
connection with, its Properties or operations in such amounts as are
then customary for vehicles used in connection with similar Properties
and businesses, but in any event to the extent required by applicable
law.
(3) Comprehensive General Liability Insurance -- insurance
-----------------------------------------
against claims for bodily injury, death or Property damage occurring on,
in or about the Properties (and adjoining streets, sidewalks and
waterways, but only to the extent of the legal liability of the Borrower
and its Subsidiaries therefor) of the Borrower and its Subsidiaries, in
such amounts as are then customary for Property similar in use in the
jurisdictions where such Properties are located (subject to deductibles
not exceeding $300,000, or such higher deductible as shall be reasonably
satisfactory to the Majority Lenders).
(4) Workers' Compensation Insurance -- workers, compensation
-------------------------------
insurance (including, without limitation, Employers' Liability
Insurance) to the extent required by applicable law.
(5) Product Liability Insurance -- insurance against claims for
---------------------------
bodily injury, death or Property damage resulting from the use of
products sold by the Borrower or any of its Subsidiaries in such amounts
as are then customarily maintained by responsible persons engaged in
businesses similar to that of the Borrower and its Subsidiaries (subject
to deductibles not exceeding $300,000, or such higher deductible as
shall be reasonably satisfactory to the Majority Lenders).
(6) Business Interruption Insurance -- insurance against loss of
-------------------------------
operating income (in an aggregate amount not less than $40,000,000, as
to the Borrower and its Subsidiaries as a whole, and subject to a
deductible, or self-insured amount, not in excess of $300,000, or such
higher deductible as shall be reasonably satisfactory to the Majority
Lenders) by reason of any Peril.
Such insurance shall be written by financially responsible companies selected by
the Borrower and having an A. M. Best rating of "A-" or better and being in a
financial size category of VIII or larger, or by other companies reasonably
acceptable to the Majority Lenders, and (other than workers' compensation) shall
name the Administrative Agent as loss payee (to the extent covering risk of loss
or damage to tangible Property) and as an additional named insured as its
interests may appear (to the extent covering any other risk). Each policy
referred to in this Section 9.04 shall provide that it will not be canceled or
reduced, or allowed to lapse without renewal, except after not less than 30
days' notice to the Administrative Agent and shall also provide that the
interests of the Administrative Agent and the Lenders shall not be invalidated
by any act or negligence of the Borrower or any Person having an interest in any
Property covered by a mortgage in favor of the Administrative Agent nor by
occupancy or use of any such Property for purposes more hazardous than permitted
by such policy nor by any foreclosure or other proceedings relating to such
Property. The Borrower will advise the Administrative Agent promptly of any
policy cancellation, reduction or amendment.
<PAGE>
-74-
On each date that is the day 10 days prior to the anniversary
date (the "Delivery Date") of any insurance policy of the Borrower or any of its
-------------
Subsidiaries (the "Anniversary Date") (commencing with the first Delivery Date
----------------
after the date hereof), the Borrower will deliver to the Administrative Agent
certificates of insurance evidencing that all insurance required to be
maintained by the Borrower hereunder will be in effect through the next
Anniversary Date in the calendar year following the current Delivery Date,
subject only to the payment of premiums as they become due, provided that not
--------
less than 45 days prior to such Anniversary Date the Borrower will provide
reasonable evidence to the Administrative Agent that it is in the process of
renewing such insurance policy for such period. In addition, the Borrower will
not modify any of the provisions of any policy with respect to casualty
insurance without delivering the original copy of the endorsement reflecting
such modification to the Administrative Agent accompanied by a written report of
AON Risk Services, Inc., or any other firm of independent insurance brokers of
nationally recognized standing, stating that, in their opinion, such policy (as
so modified) is in compliance with the provisions of this Section 9.04. The
Borrower will not obtain or carry separate insurance concurrent in form or
contributing in the event of loss with that required by this Section 9.04 unless
the Administrative Agent is the named insured thereunder, with loss payable as
provided herein. The Borrower will immediately notify the Administrative Agent
whenever any such separate insurance is obtained and shall deliver to the
Administrative Agent the certificates evidencing the same.
Without limiting the obligations of the Borrower under the
foregoing provisions of this Section 9.04, in the event the Borrower shall fail
to maintain in full force and effect insurance as required by the foregoing
provisions of this Section 9.04, then the Administrative Agent may, but shall
have no obligation so to do, procure insurance covering the interests of the
Lenders and the Administrative Agent in such amounts and against such risks as
the Administrative Agent (or the Majority Lenders) shall deem appropriate, and
the Borrower shall reimburse the Administrative Agent in respect of any premiums
paid by the Administrative Agent in respect thereof.
For purposes hereof, the term "Peril", means, collectively, fire,
lightning, flood, windstorm, hail, earthquake, explosion, riot and civil
commotion, vandalism and malicious mischief, damage from aircraft, vehicles and
smoke and all other perils covered by the "all-risk" endorsement then in use in
the jurisdictions where the Properties of the Borrower and its Subsidiaries are
located.
9.05. Prohibition of Fundamental Changes.
----------------------------------
(a) Mergers. The Borrower will not, nor will it permit any of its
-------
Subsidiaries to, enter into any transaction of merger or consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), except that the Borrower may liquidate or dissolve
any Inactive Subsidiary.
<PAGE>
-75-
(b) Restrictions on Acquisitions. The Borrower will not, nor will
----------------------------
it permit any of its Subsidiaries to, acquire any business or Property from, or
capital stock of, or be a party to any acquisition of, any Person except for (i)
purchases of inventory and other Property to be sold or used in the ordinary
course of business, (ii) Investments permitted under Sections 9.05(e) and
9.08(k), (iii) Capital Expenditures (to the extent the making of such Capital
Expenditures will not result in a violation of any of the provisions of Section
9.10) and (iv) the Walibi Acquisition and Tender Offer.
(c) Restrictions on Sales. The Borrower will not, nor will it
---------------------
permit any of its Subsidiaries to consummate any Disposition.
(d) Sale and Leaseback. The Borrower will not, nor will it permit
------------------
any of its Subsidiaries to, enter into any transaction pursuant to which it
shall convey, sell, transfer or otherwise dispose of any Property and, as part
of the same transaction or series of transactions, rent or lease as lessee or
similarly acquire the right to possession or use of, such Property, or other
Property which it intends to use for the same purpose or purposes as such
Property, to the extent such transaction gives rise to Indebtedness, unless any
Indebtedness arising in connection with such transaction shall be permitted
under Section 9.07(f).
(e) Certain Permitted Transactions. Notwithstanding the foregoing
------------------------------
provisions of this Section 9.05:
(i) Intercompany Mergers. Any Subsidiary of the Borrower may be
--------------------
merged or consolidated with or into: (i) the Borrower if the Borrower
shall be the continuing or surviving corporation or (ii) any other
Domestic Subsidiary of the Borrower; provided that if any such
transaction shall be between a Subsidiary and a Wholly Owned Subsidiary,
the Wholly Owned Subsidiary shall be the continuing or surviving
corporation.
(ii) Intercompany Dispositions. The Borrower or any Subsidiary of
-------------------------
the Borrower may sell, lease, transfer or otherwise dispose of any or
all of its Property (upon voluntary liquidation or otherwise) to the
Borrower or a Wholly Owned Subsidiary of the Borrower.
(iii) Subsequent Acquisitions. The Borrower or any Wholly Owned
-----------------------
Subsidiary of the Borrower which is a Domestic Subsidiary may acquire
any amusement or attraction park, and the related assets, of any other
Person (whether by way of purchase of assets or stock, by merger or
consolidation or otherwise) after the date hereof (each, a "Subsequent
----------
Acquisition") with the proceeds of Subordinated Indebtedness, issuances
-----------
of equity and/or the proceeds of Loans hereunder to the extent permitted
under this Agreement so long as:
(A) (i) the aggregate amount of proceeds of Subordinated
Indebtedness used to fund Subsequent Acquisitions would not
exceed $100,000,000, (ii) the Borrower shall be in compliance
<PAGE>
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with Section 9.10 at the time of and after giving pro forma
effect to any such Subsequent Acquisition, and (iii) the Borrower
shall have delivered to the Administrative Agent, at least ten
Business Days prior to the date of any such Subsequent
Acquisition, a certificate of a Responsible Officer of the
Borrower setting forth computations in reasonable detail
demonstrating satisfaction of the foregoing conditions as at the
date of such certificate;
(B) such Subsequent Acquisition (if by purchase of assets,
merger or consolidation) shall be effected in such manner so that
the acquired business, and the related assets, are owned either
by the Borrower or a Wholly Owned Subsidiary of the Borrower and,
if effected by merger or consolidation involving the Borrower,
the Borrower shall be the continuing or surviving entity and, if
effected by merger or consolidation involving a Wholly Owned
Subsidiary of the Borrower, a Wholly Owned Subsidiary shall be
the continuing or surviving entity;
(C) the Borrower shall deliver to the Administrative Agent
(which shall promptly forward copies thereof to each Lender (i)
as soon as possible and in any event no later than ten days prior
to the consummation of each such Subsequent Acquisition (or such
earlier date as shall be five Business Days after the execution
and delivery thereof), copies of the respective agreements or
instruments pursuant to which such Subsequent Acquisition is to
be consummated (including, without limitation, any related
management, non-compete, employment, option or other material
agreements), any schedules to such agreements or instruments and
all other material ancillary documents to be executed or
delivered in connection therewith and (ii) promptly following
request therefor (but in any event within three Business Days
following such request), copies of such other information or
documents (including, without limitation, environmental risk
assessments) relating to such Subsequent Acquisition as the
Administrative Agent or the Majority Lenders shall have
reasonably requested (and which is available, or obtainable
within such period by the Borrower with reasonable efforts);
(D) to the extent applicable, the Borrower shall have
complied with the provisions of Section 9.15, including, without
limitation, to the extent not theretofore delivered, delivery to
the Administrative Agent of (x) the certificates evidencing the
capital stock of any new Domestic Subsidiary formed or acquired
in connection with such Subsequent Acquisition, accompanied by
undated stock powers executed in blank, and (y) the agreements,
instruments, opinions of counsel and other documents required
under Section 9.15;
(E) to the extent requested by the Borrower, the Borrower
and the Majority Lenders shall have agreed to a supplement to
Schedule VIII setting forth pro forma adjustments to be made in
determining EBITDA after giving effect to such Subsequent
Acquisition; and
<PAGE>
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(F) immediately prior to such Subsequent Acquisition and
after giving effect thereto, no Default shall have occurred and
be continuing.
(iv) Premier Merger. The Borrower may on or before September 30,
--------------
1998, pursuant to an agreement and plan of merger and in accordance with
Section 251(g) of the Delaware General Corporation Law, merge with a
wholly owned subsidiary of Holdings whereby Borrower shall become a
wholly owned subsidiary of Holdings and be renamed "Premier Parks
Operations Inc." (the "Premier Merger"), subject to the following
--------------
conditions precedent:
(A) Holdings shall have entered into a tax sharing
agreement with each of its direct and indirect Subsidiaries on
terms reasonably satisfactory to the Administrative Agent; and
(B) the Borrower will, and will cause each of the other
Obligors to, take such action (including, but not limited to, the
execution and delivery of amendment to this Agreement) as shall
reasonably be requested by the Administrative Agent to effectuate
the purposes and objectives of the parties to this Agreement and
the surviving entity "Premier Parks Operations Inc." shall assume
all the obligations of the Borrower under this Agreement pursuant
to an instrument satisfactory to the Administrative Agent as if
it had been the Borrower on the date of this Agreement.
(v) Other Acquisitions. The Borrower or any Subsidiary of the
------------------
Borrower may acquire (whether through an acquisition, swap or exchange)
any amusement or attraction park, and the related assets thereof,
pursuant to the Marine World Agreements.
(vi) Other Sales. The Borrower or any Subsidiary of the Borrower
-----------
may sell (whether through a sale, swap or exchange) any timeshare in any
of the campground parks.
9.06. Liens. The Borrower will not, nor will it permit any of its
-----
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of
its Property, whether now owned or hereafter acquired, except:
(a) Liens created pursuant to the Security Documents;
(b) Liens in existence on the date hereof and listed in Part B of
Schedule II;
(c) Liens imposed by any governmental authority for taxes,
assessments or charges not yet due or that are being contested in good
faith and by appropriate proceedings if adequate reserves with respect
thereto are maintained on the books of the Borrower or the affected
Subsidiaries, as the case may be, in accordance with GAAP or, in the
<PAGE>
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case of any Foreign Subsidiary, generally accepted accounting principles
in effect from time to time in the jurisdiction of organization of such
Foreign Subsidiary;
(d) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, landlord's or other like Liens arising in the ordinary
course of business that are not overdue for a period of more than 30
days or that are being contested in good faith and by appropriate
proceedings, and Liens securing judgments but only to the extent for an
amount and for a period not resulting in an Event of Default under
clause (j) of Section 10;
(e) pledges or deposits under workers' compensation, unemployment
insurance and other social security legislation (other than ERISA);
(f) deposits to secure the performance of bids, trade contracts
(other than for Indebtedness), leases (including any precautionary
Uniform Commercial Code financing statements filed by a lessor with
respect to any equipment lease), statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(g) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and
encumbrances consisting of zoning restrictions, easements, licenses,
restrictions on the use of Property or minor imperfections in title
thereto that, in the aggregate, are not material in amount, and that do
not in any case materially detract from the value of the Property
subject thereto or interfere in any material respect with the ordinary
conduct of the business of the Borrower or any of its Subsidiaries;
(h) Liens securing Purchase Money Indebtedness or Capital Lease
Obligations to the extent such Indebtedness is permitted to be incurred
under Section 9.07(f); and
(i) Liens pursuant to leases or pursuant to the Marine World
Agreements entered into in the ordinary course of business by the
Borrower and its Subsidiaries that could not reasonably be expected to
have a Material Adverse Effect.
9.07. Indebtedness. The Borrower will not, nor will it permit
------------
any of its to, create, incur or suffer to exist any Indebtedness except:
(a) Indebtedness to the Lenders hereunder;
(b) Indebtedness outstanding on the date hereof and listed in
Part A of Schedule I, and any Indebtedness incurred to refinance any
such outstanding Indebtedness, provided that such refinancing
--------
Indebtedness does not exceed the amount of Indebtedness being so
refinanced and any costs associated with such refinancing;
<PAGE>
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(c) Subordinated Indebtedness of the Borrower incurred in
accordance with Section 9.11, so long as (except in the case of
Subordinated Indebtedness, the proceeds of which are used to make
Subsequent Acquisitions pursuant to Section 9.05(e)(iii)) immediately
upon receipt by the Borrower of the Net Available Proceeds thereof the
Borrower shall prepay the Loans to the extent required under Section
2.10(b);
(d) Indebtedness of the Borrower or any Subsidiaries of the
Borrower to the Borrower or to other Subsidiaries of the Borrower, and
Guarantees by the Borrower or any of its Wholly Owned Subsidiaries of
obligations of the Borrower or any of its Wholly Owned Subsidiaries;
(e) Indebtedness in respect of New Senior Notes that are either
issued in exchange for the 1995 Senior Notes or the 1997 Senior Notes or
the proceeds of which are applied to the redemption or repurchase of the
1995 Senior Notes or the 1997 Senior Notes, so long as (i) the effective
interest rate in respect of the New Senior Notes is not greater than the
effective interest rate in respect of the 1995 Senior Notes or the 1997
Senior Notes, as the case may be, (ii) the covenants, events of default
and mandatory redemption, repurchase or prepayment provisions are not
more burdensome on the Borrower and its Subsidiaries, in any case, than
the 1995 Senior Notes Indenture or the 1997 Senior Notes Indenture,
(iii) the New Senior Notes are unsecured (and such Notes may be
Guaranteed by the Subsidiaries of the Borrower) and (iv) the final
maturity, and weighted average life to maturity, of the New Senior Notes
are not earlier than the corresponding maturities of the 1995 Senior
Notes and the 1997 Senior Notes, and (v) the other provisions of the New
Senior Notes would not have a material adverse effect upon the Lenders
or the Administrative Agent; and
(f) Indebtedness consisting of Purchase Money Indebtedness and
Capital Lease Obligations incurred after the date hereof in an aggregate
amount not in excess of $25,000,000 at any time outstanding.
9.08. Investments. The Borrower will not, nor will it permit
-----------
any of its Subsidiaries, make or permit to remain outstanding any Investments
except:
(a) Investments outstanding on the date hereof and identified in
Part B of Schedule
IV;
(b) operating deposit accounts with banks;
(c) Permitted Investments;
(d) Investments by the Borrower and its Wholly Owned Subsidiaries
which are Domestic Subsidiaries in the Borrower's Wholly Owned
Subsidiaries which are Domestic Subsidiaries, including Guarantees by
the Borrower or any of its Wholly Owned Subsidiaries which are Domestic
Subsidiaries of obligations of the Borrower or any of its Wholly Owned
<PAGE>
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Subsidiaries which are Domestic Subsidiaries;
(e) Investments by the Borrower's Wholly Owned Subsidiaries which
are Foreign Subsidiaries in other Wholly Owned Subsidiaries which are
Foreign Subsidiaries, including Guarantees by such Wholly Owned
Subsidiaries which are Foreign Subsidiaries of obligations of other
Wholly Owned Subsidiaries which are Foreign Subsidiaries;
(f) Investments by the Borrower and its Wholly Owned Subsidiaries
which are Domestic Subsidiaries in the Borrower's Wholly Owned
Subsidiaries which are Foreign Subsidiaries, including Guarantees by the
Borrower and its Wholly Owned Subsidiaries which are Domestic
Subsidiaries of obligations of the Borrower's Wholly Owned Subsidiaries
which are Foreign Subsidiaries, up to but not exceeding $20,000,000 at
any one time outstanding;
(g) Hedging Agreements, provided that when entering into any
--------
Hedging Agreement that at the time has, or at any time in the future may
give rise to, any credit exposure, the aggregate credit exposure under
all Hedging Agreements (including the Hedging Agreement being entered
into) shall not exceed $2,500,000;
(h) Disposition Investments received in connection with any
Disposition permitted under Section 9.05 or any Disposition to which the
Lenders shall have consented in accordance with Section 12.03;
(i) Investments consisting of acquisitions permitted under
Section 9.05(e);
(j) Investments in an aggregate amount of up to but not exceeding
$100,000 during any fiscal year in 299 East 79th Street Associates L.P.;
(k) additional Investments up to but not exceeding $25,000,000
in the aggregate;
(l) additional Investments in Walibi in connection with the
Walibi Acquisition or the Tender Offer prior to or in connection with
the successful completion of the Tender Offer;
(m) loans to officers, directors and employees of the Borrower or
any of its Subsidiaries in an aggregate amount (as to all such officers,
director and employees) up to $1,000,000 at any one time outstanding;
and
(n) Investments pursuant to the Marine World Agreements.
9.09. Restricted Payments. The Borrower will not, nor will it
-------------------
permit any of its Subsidiaries to, declare or make any Restricted Payment,
except that so long as at the time thereof and after giving effect thereto no
<PAGE>
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Default shall have occurred and be continuing, the Borrower may from and after
the consummation of the Premier Merger:
(a) make a one-time Restricted Payment to Holdings in an amount
not to exceed $20,000,000 on the date of the consummation of the Premier
Merger;
(b) make Restricted Payments to Holdings in cash to enable
Holdings to pay out-of-pocket accounting fees, legal fees and other
administrative expenses incurred in the ordinary course of business
pursuant to any shared services allocation agreements; and
(c) make Restricted Payments to Holdings in respect of income tax
liabilities of the Borrower and its Subsidiaries in accordance with the
tax sharing agreement entered into at the time of the Premier Merger.
Nothing herein shall be deemed to prohibit the payment of
dividends by any Subsidiary of the Borrower to the Borrower or to any other
Subsidiary of the Borrower.
9.10. Certain Financial Covenants.
---------------------------
(a) Leverage Ratio. The Borrower will not permit the Leverage
--------------
Ratio to exceed the following respective ratios as at the last day of any fiscal
quarter during any of the following respective periods:
Period Ratio
------ -----
From the Closing Date
through September 29, 1999 5.75 to 1
From September 30, 1999
through September 29, 2000 5.25 to 1
From September 30, 2000
through September 29, 2001 4.75 to 1
From September 30, 2001
and at all times thereafter 4.00 to 1
(b) Senior Secured Debt Ratio. The Borrower will not permit the
-------------------------
Senior Secured Debt Ratio to exceed the following respective ratios as at the
last day of any fiscal quarter during any of the following respective periods:
<PAGE>
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Period Ratio
------ -----
From the Closing Date
through September 29, 1999 3.75 to 1
From September 30, 1999
through September 29, 2000 3.25 to 1
From September 30, 2000
through September 29, 2001 2.75 to 1
From September 30, 2001
and at all times thereafter 2.50 to 1
(c) Interest Coverage Ratio. The Borrower will not permit the
-----------------------
Interest Coverage Ratio to be less than the following respective ratios as at
the last day of any fiscal quarter during any of the following respective
periods:
Period Ratio
------ -----
From the Closing Date
through September 29, 2000 2.00 to 1
From September 30, 2000
through September 29, 2001 2.50 to 1
From September 30, 2001
through September 29, 2002 2.75 to 1
From September 30, 2002
and at all times thereafter 3.00 to 1
(d) Fixed Charges Coverage Ratio. The Borrower will not permit
----- --------------
the Fixed Charges Coverage Ratio as of any date to be less than 1.10 to 1.
9.11. Subordinated Indebtedness. The Borrower may, after the date
-------------------------
of this Agreement, incur additional Indebtedness (i) for which the Borrower is
directly and primarily liable, (ii) that is subordinated to the obligations of
the Borrower to pay principal of and interest on the Loans, Notes, Reimbursement
Obligations and other obligations hereunder on terms of subordination
satisfactory to the Majority Lenders, and pursuant to documentation containing
other terms (including, without limitation, interest, amortization, mandatory
prepayments, covenants and events of default and that the maturity thereof be at
least one year after the Commitment Termination Date) in form and substance
satisfactory to the Majority Lenders, (iii) in respect of which none of its
Subsidiaries is contingently or otherwise obligated, (iv) if at the time of
<PAGE>
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issuance of such Indebtedness and after giving effect thereto and to the
application of the proceeds thereof, the Borrower shall be in compliance with
Section 9.10 (the determination of compliance with such ratios to be calculated
on a pro forma basis as if such Indebtedness were incurred and the proceeds
thereof were so applied, in each case, at the beginning of such period, and the
Administrative Agent shall have received a certificate of a Responsible Officer
of the Borrower to such effect setting forth in reasonable detail the
computations necessary to determine such compliance) and (v) if immediately
prior thereto and after giving effect to the incurrence thereof, no Default
shall have occurred and be continuing, and the Administrative Agent shall have
received a certificate of a Responsible Officer of the Borrower to such effect.
9.12. Lines of Business. The Borrower will not, nor will it
-----------------
permit any of its Subsidiaries to, engage to any substantial extent in any line
or lines of business activity other than the business of owning and operating
amusement and attraction parks, and businesses related, ancillary or
complementary thereto.
9.13. Transactions with Affiliates. Except as expressly permitted
----------------------------
by this Agreement, the Borrower will not, nor will it permit any of its
Subsidiaries to, directly or indirectly: (a) make any Investment in an Affiliate
(other than Investments permitted under Sections 9.08(d), 9.08(e) or 9.08(f));
(b) transfer, sell, lease, assign or otherwise dispose of any Property to an
Affiliate; (c) merge into or consolidate with or purchase or acquire Property
from an Affiliate (other than pursuant to the Premier Merger); or (d) enter into
any other transaction directly or indirectly with or for the benefit of an
Affiliate (including, without limitation, Guarantees and assumptions of
obligations of an Affiliate); provided that (x) any Affiliate who is an
--------
individual may serve as a director, officer or employee of the Borrower or any
of its Subsidiaries and receive reasonable compensation for his or her services
in such capacity, (y) the Borrower and its Subsidiaries may enter into
transactions (other than extensions of credit by the Borrower or any of its
Subsidiaries to an Affiliate) providing for the leasing of Property, the
rendering or receipt of services or the purchase or sale of inventory and other
Property in the ordinary course of business if the monetary or business
consideration arising therefrom would be substantially as advantageous to the
Borrower and its Subsidiaries as the monetary or business consideration that
would obtain in a comparable transaction with a Person not an Affiliate and (z)
the Borrower and its Subsidiaries may enter into the shared services allocation
agreements and tax sharing agreements referred to in Sections 9.09(b) and
9.09(c).
9.14. Use of Proceeds, Etc. The Company will use the proceeds of
--------------------
the Loans hereunder to finance the cash portion of the Walibi Acquisition and
the Tender Offer, to pay for fees and expenses relating thereto, for general
corporate purposes, including working capital and for Capital Expenditures and
acquisitions permitted hereunder (in compliance with all applicable legal and
regulatory requirements, including, without limitation, Regulations G, T, U and
X and the Securities Act of 1933 and the Securities Exchange Act of 1934 and the
regulations thereunder); provided that neither the Administrative Agent nor any
--------
Lender shall have any responsibility as to the use of any of such proceeds.
<PAGE>
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9.15. Certain Further Assurances.
--------------------------
(a) Subsidiary Guarantors. The Borrower will take such action,
---------------------
and will cause each of its Subsidiaries (other than any Foreign Subsidiary or
any Inactive Subsidiary, unless such Inactive Subsidiary is also a "Note
Guarantor" (other than D.L. Holdings, Inc.) under the 1995 Senior Notes
Indenture, the 1997 Senior Notes Indenture or any indenture or other agreement
under which the New Senior Notes or subordinated obligations shall be issued) to
take such action, from time to time as shall be necessary to ensure that all
Subsidiaries of the Borrower (other than any Foreign Subsidiary or any Inactive
Subsidiary) are "Subsidiary Guarantors" hereunder. Without limiting the
generality of the foregoing, in the event that the Borrower or any of its
Subsidiaries shall form or acquire any new Subsidiary that shall constitute a
Subsidiary hereunder or in the event that any Inactive Subsidiary shall cease to
be an Inactive Subsidiary, the Borrower and its Subsidiaries will cause such new
Subsidiary (other than any Foreign Subsidiary) or former Inactive Subsidiary to:
(i) become a "Subsidiary Guarantor" hereunder, and a "Securing
Party" under the Security Agreement pursuant to a Guarantee Assumption
Agreement;
(ii) cause such Subsidiary to take such action (including,
without limitation, delivering such shares of stock, executing and
delivering such Uniform Commercial Code financing statements as shall be
necessary to create and perfect valid and enforceable first priority
Liens on substantially all of the Property (including fixtures owned or
leased) of such new Subsidiary as collateral security for the
obligations of such new Subsidiary hereunder; and
(iii) deliver such proof of corporate action, incumbency of
officers, opinions of counsel and other documents as is consistent with
those delivered by each Obligor pursuant to Section 7.01 or as the
Administrative Agent shall have reasonably requested.
(b) Ownership of Subsidiaries. The Borrower will, and will cause
-------------------------
each of its Subsidiaries to, take such action from time to time as shall be
necessary to ensure that (i) each of its Subsidiaries (other than Walibi and any
Inactive Subsidiary) is a Wholly Owned Subsidiary and (ii) each Foreign
Subsidiary is directly owned by a Wholly Owned Subsidiary which is either a
Domestic Subsidiary or another Foreign Subsidiary, provided that if the Borrower
--------
shall hold at least 95% of the capital stock of Walibi upon consummation of the
Tender Offer, it will use all reasonable efforts thereafter to cause Walibi to
become a Wholly Owned Subsidiary. Without limiting the generality of the
requirements of paragraph (a) above, in the event that any additional shares of
stock shall be issued by any Domestic Subsidiary, the respective Obligor agrees
forthwith to deliver to the Administrative Agent pursuant to the Security
Agreement the certificates evidencing such shares of stock, accompanied by
undated stock powers executed in blank and to take such other action as the
Administrative Agent shall request to perfect the security interest created
therein pursuant to the Security Agreement.
<PAGE>
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(c) Certain Restrictions. The Borrower will not permit any of its
--------------------
Subsidiaries to enter into, after the date hereof, any indenture), agreement,
instrument or other arrangement that, directly or indirectly, prohibits or
restrains, or has the effect of prohibiting or restraining, or imposes
materially adverse conditions upon, the incurrence or payment of Indebtedness,
the granting of Liens, the declaration or payment of dividends, the making of
loans, advances or Investments or the sale, assignment, transfer or other
disposition of Property, other than any such prohibition or restraint (i) set
forth in any agreement providing for the disposition of Property (so long as
such prohibition or restraint relates only to the Property to be disposed of),
(ii) set forth in any of the Loan Documents or in the 1995 Senior Notes
Indenture or the 1997 Senior Notes Indenture or any indenture or agreement
pursuant to which New Senior Notes are issued and (iii) set forth in any real
property lease agreement, licenses, contracts entered into in the ordinary
course of business or the Marine World Agreements otherwise permitted hereunder
to the extent that such prohibition or restraint could not reasonably be
expected to result in a Material Adverse Effect.
9.16. Modifications of Certain Documents. The Borrower will not,
----------------------------------
without in each case the prior consent of the Administrative Agent (with the
approval of the Majority Lenders), consent to any modification, supplement or
waiver of:
(a) any of the provisions of any agreement, instrument or other
document evidencing or relating to Subordinated Indebtedness;
(b) any provision of the Senior Notes Indentures;
(c) its articles of incorporation or by-laws, except in
connection with the Premier Merger;
(d) any provision of the Marine World Agreements, the Walibi
Acquisition Agreement, any Subsequent Acquisition Agreement or any lease
with respect to any Park if (in the case of this clause (d)) such
modification, supplement or waiver would have a material adverse effect
upon the Lenders or the Administrative Agent.
9.17. Prepayment of Certain Indebtedness. The Borrower will not,
----------------------------------
nor will it permit any of its Subsidiaries to, purchase, redeem, retire or
otherwise acquire for value, or set apart any money for a sinking, defeasance or
other analogous fund for the purchase, redemption, retirement or other
acquisition of, or make any voluntary payment or prepayment of the principal of
or interest on, or any other amount owing in respect of the Senior Notes or any
Subordinated Indebtedness, except for regularly scheduled payments, prepayments
or redemption's of principal and interest in respect thereof required pursuant
to the Senior Notes Indentures or pursuant to the instruments evidencing such
Subordinated Indebtedness, as the case may be. Notwithstanding the foregoing,
nothing herein shall be deemed to prohibit the Borrower from redeeming or
retiring up to an aggregate principal amount of $30,000,000 of the 1995 Senior
<PAGE>
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Notes with the proceeds of capital contributions or advances to the Borrower
from Holdings after the consummation of the Premier Merger, or from redeeming or
retiring up to an aggregate principal amount of $41,666,000 of the 1997 Senior
Notes with the proceeds of capital contributions or advances to the Borrower
from Holdings after the consummation of the Premier Merger or from effecting any
exchange of New Senior Notes for 1995 Senior Notes or 1997 Senior Notes (or
refinancing 1995 Senior Notes or 1997 Senior Notes with the proceeds of New
Senior Notes) in accordance with the provisions of Section 9.07(e).
Section 10. Events of Default. If one or more of the following
events (herein called of "Events of Default") shall occur and be continuing:
-----------------
(a) the Borrower shall default in the payment when due (whether
at stated maturity or at mandatory or optional prepayment) of any
principal of any Loan or Reimbursement Obligation, or shall default for
three or more Business Days in the payment when due of any interest on
any Loan or any fee or any other amount payable by it hereunder or under
any other Loan Document;
(b) any representation, warranty or certification made or deemed
made herein or in any other Loan Document (or in any modification or
supplement hereto or thereto) by any obligor, or any certificate
furnished to any Lender, the Administrative Agent or the Arranger
pursuant to the provisions hereof or thereof, shall prove to have been
false or misleading as of the time made or furnished in any material
respect; or any representation or warranty made in the Walibi
Acquisition Agreement shall prove to have been false or misleading as of
the time made or furnished, in any such case that would (either
individually or in the aggregate) materially adversely affect the
operations of any Park or have a Material Adverse Effect;
(c) the Borrower shall default in the performance of any of its
obligations under any of Sections 9.02(a), 9.05, 9.06, 9.07, 9.08, 9.09,
9.10, 9.11, 9.13, 9.14, 9.15, 9.16 or 9.17 or any Obligor shall default
in the performance of any of its obligations under Section 4.02 of the
Security Agreement;
(d) any Obligor shall fail to observe or perform any covenant,
condition or agreement contained in this Agreement (other than those
specified in clause (a) or (c) of this Section 10) or any other Loan
Document and such failure shall continue unremedied for a period of 30
days after notice thereof to the Borrower by the Administrative Agent or
any Lender (through the Administrative Agent);
(e) the Borrower or any of its Subsidiaries shall default in the
payment when due of any principal of or interest on any of its other
Indebtedness aggregating $5,000,000 or more; or any Obligor shall
default in the payment when due of any amount aggregating $5,000,000 or
more under any Hedging Agreement;
(f) any event specified in any note, agreement, indenture or
other document evidencing or relating to any other Indebtedness
aggregating $5,000,000 or more of any Obligor shall occur if the effect
of such event is to cause, or (with the giving of any notice or the
<PAGE>
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lapse of time or both) to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders)
to cause, such Indebtedness to become due, or to be prepaid in full
(whether by redemption, purchase, offer to purchase or otherwise), prior
to its stated maturity or to have the interest rate thereon reset to a
level so that securities evidencing such Indebtedness trade at a level
specified in relation to the par value thereof; or any event specified
in any Hedging Agreement shall occur if the effect of such event is to
cause, or (with the giving of any notice or the lapse of time or both)
to permit, termination or liquidation payment or payments aggregating
$5,000,000 or more to become due;
(g) a proceeding or case shall be commenced, without the
application or consent of the Borrower or any of its Subsidiaries, in
any court of competent jurisdiction, seeking (i) its reorganization,
liquidation, dissolution, arrangement or winding-up, or the composition
or readjustment of its debts, (ii) the appointment of a receiver,
custodian, trustee, examiner, liquidator or the like of the Borrower or
such Subsidiary or of all or any substantial part of its Property, or
(iii) similar relief in respect of the Borrower or such Subsidiary under
any law relating to bankruptcy, insolvency, reorganization, winding-up,
or composition or adjustment of debts, and such proceeding or case shall
continue undismissed, or an order, judgment or decree approving or
ordering any of the foregoing shall be entered and continue unstayed and
in effect, for a period of 60 or more days; or an order for relief
against the Borrower or any of its Subsidiaries shall be entered in an
involuntary case under the Bankruptcy Code or any other applicable
bankruptcy, insolvency or similar laws;
(h) the Borrower or any of its Subsidiaries shall (i) apply for
or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee, examiner or liquidator of itself or of all
or a substantial part of its Property, (ii) make a general assignment
for the benefit of its creditors, (iii) commence a voluntary case under
the Bankruptcy Code or any other applicable bankruptcy, insolvency or
similar laws, (iv) file a petition seeking to take advantage of any
other law relating to bankruptcy, insolvency, reorganization,
liquidation, dissolution, arrangement or winding-up, or composition or
readjustment of debts, (v) fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the Bankruptcy Code or any other
applicable bankruptcy, insolvency or similar laws or take any corporate
action for the purpose of effecting any of the foregoing;
(i) the Borrower or any of its Subsidiaries shall admit in
writing its inability to, or be generally unable to, pay its debts as
such debts become due;
(j) a final judgment or judgments for the payment of money of
$5,000,000 or more in the aggregate (exclusive of judgment amounts fully
covered by insurance) or of $15,000,000 or more in the aggregate
(regardless of insurance coverage) shall be rendered by one or more
courts, administrative tribunals or other bodies having jurisdiction
against the Borrower or any of its Subsidiaries and the same shall not
<PAGE>
-88-
be discharged (or provision shall not be made for such discharge), or a
stay of execution thereof shall not be procured, within 60 days from the
date of entry thereof and the Borrower or the relevant Subsidiary shall
not, within such period of 60 days, or such longer period during which
execution of the same shall have been stayed, appeal therefrom and cause
the execution thereof to be stayed during such appeal;
(k) an event or condition specified in Section 9.02(c) shall
occur or exist with respect to any Plan or Multiemployer Plan and, as a
result of such event or condition, together with all other such events
or conditions, the Borrower or any ERISA Affiliate shall incur or in the
opinion of the Majority Lenders shall be reasonably likely to incur a
liability to a Plan, a Multiemployer Plan or the PBGC (or any
combination of the foregoing) that, in the determination of the Majority
Lenders, would (either individually or in the aggregate) have a Material
Adverse Effect;
(l) there shall have been asserted against the Borrower or any of
its Subsidiaries an Environmental Claim that, in the judgment of the
Majority Lenders, is reasonably likely to be determined adversely to the
Borrower or any of its Subsidiaries, and the amount thereof (either
individually or in the aggregate) is reasonably likely to have a
Material Adverse Effect (insofar as such amount is payable by the
Borrower or any of its Subsidiaries but after deducting any portion
thereof that is reasonably expected to be paid by other creditworthy
Persons liable in whole or in part therefor);
(m) any one or more of the following shall occur and be
continuing:
(i) any "Person" (as such term is used in Sections 13(d)
and 14(d) of the Securities and Exchange Act of 1934 (the
"Exchange Act") is or becomes the beneficial owner (as defined in
------------
Rules 13d-3 and 13d-5 under the Exchange Act, except that a
person shall be deemed to have "beneficial ownership" of all
shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 35% of the voting
stock of the Borrower;
(ii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the
Board of Directors of the Borrower (together with any new
directors whose election by such Board of Directors or whose
nomination for election by the Borrower's shareholders was
approved by a vote of a majority of the Borrower's directors then
still in office who either were directors at the beginning of
such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a
majority of the Borrower's directors then in office;
(iii) any change in control with respect to the Borrower
(or similar event, however denominated) shall occur under and as
defined in any indenture or other agreement in respect of
<PAGE>
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Indebtedness in an aggregate principal amount of at least
$10,000,000 to which the Borrower is a party;
(iv) both Kieran E. Burke and Gary Story shall cease to be
actively involved in the day-to-day management and operation of
the Borrower and its Subsidiaries (unless Persons with
substantial knowledge and experience in the amusement and
attraction park industry reasonably acceptable to the Majority
Lenders have been appointed to replace one or both of them within
180 days thereof);
(v) from and after the consummation of the Premier Merger,
Holdings shall cease to own directly (x) 100% of the capital
stock of the Borrower owned by Holdings on the date of the
consummation of the Premier Merger or (y) at least 75% of the
outstanding voting capital stock of the Borrower; or
(vi) the Borrower shall not have acquired at least 51% of
the shares of Walibi on or prior to the date that is 60 days
after the consummation of the Walibi Acquisition;
(n) the Liens created by the Security Documents shall at any time
not constitute valid and perfected Liens on the collateral intended to
be covered thereby (to the extent perfection by filing, registration,
recordation or possession is required herein or therein) in favor of the
Administrative Agent, free and clear of all other Liens (other than
Liens permitted under Section 9.06 or under the respective Security
Documents), or, except for expiration in accordance with its terms, any
of the Security Documents shall for whatever reason be terminated or
cease to be in full force and effect, or the enforceability thereof
shall be contested by any Obligor; or
(o) from and after the consummation of the Premier Merger,
Holdings shall have created, incurred or assumed a consensual pledge or
security interest in respect of any of the capital stock of the Borrower
owned by it;
THEREUPON: (1) in the case of an Event of Default other than one referred to in
clause (g) or (h) of this Section 10 with respect to any Obligor, the
Administrative Agent may (and, if requested by the Majority Lenders, shall), by
notice to the Borrower, terminate the Commitments and/or declare the principal
amount then outstanding of, and the accrued interest on, the Loans, the
Reimbursement Obligations and all other amounts payable by the Obligors
hereunder and under the Notes (including, without limitation, any amounts
payable under Section 5.05 or 5.06) to be forthwith due and payable, whereupon
such amounts shall be immediately due and payable without presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by each Obligor; and (2) in the case of the occurrence of an Event of
Default referred to in clause (g) or (h) of this Section 10 with respect to any
Obligor, the Commitments shall automatically be terminated and the principal
amount then outstanding of, and the accrued interest on, the Loans, the
Reimbursement Obligations and all other amounts payable by the Obligors
<PAGE>
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hereunder and under the Notes (including, without limitation, any amounts
payable under Section 5.05 or 5.06) shall automatically become immediately due
and payable without presentment, demand, protest or other formalities of any
kind, all of which are hereby expressly waived by each Obligor.
In addition, upon the occurrence and during the continuance of
any Event of Default, the Borrower agrees that it shall, if requested by the
Administrative Agent or the Majority Lenders through the Administrative Agent
(and, in the case of any Event of Default referred to in clause (g) or (h) of
this Section 10 with respect to any Obligor, forthwith, without any demand or
the taking of any other action by the Administrative Agent or any Lender)
provide cover for the Letter of Credit Liabilities by paying to the
Administrative Agent immediately available funds in an amount equal to the then
aggregate Undrawn Face Amount of all Letters of Credit, which funds shall be
held by the Administrative Agent in the Collateral Account as collateral
security in the first instance for the Letter of Credit Liabilities and be
subject to withdrawal only as therein provided.
Section 11. The Administrative Agent and Arranger.
11.01. Appointment, Powers and Immunities. Each Lender hereby
----------------------------------
appoints and authorizes the Administrative Agent to act as its agent hereunder
and under the other Loan Documents with such powers as are specifically
delegated to the Administrative Agent by the terms of this Agreement and of the
other Loan Documents, together with such other powers as are reasonably
incidental thereto. The Administrative Agent (which term as used in this
sentence and in Section 11.05 and the first sentence of Section 11.06 shall
include reference to its affiliates and its own and its affiliates' officers,
directors, employees and agents):
(a) shall have no duties or responsibilities except those
expressly set forth in this Agreement and in the other Loan Documents,
and shall not by reason of this Agreement or any other Loan Document be
a trustee for any Lender;
(b) shall not be responsible to the Lenders for any recitals,
statements, representations or warranties contained in this Agreement or
in any other Loan Document, or in any certificate or other document
referred to or provided for in, or received by any of them under, this
Agreement or any other Loan Document, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this
Agreement, any Note or any other Loan Document or any other document
referred to or provided for herein or therein or for any failure by the
Borrower or any other Person to perform any of its obligations hereunder
or thereunder;
(c) shall not, except to the extent expressly instructed by the
Majority Lenders with respect to collateral security under the Security
Documents, be required to initiate or conduct any litigation or
collection proceedings hereunder or under any other Loan Document; and
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(d) shall not be responsible for any action taken or omitted to
be taken by it hereunder or under any other Loan Document or under any
other document or instrument referred to or provided for herein or
therein or in connection herewith or therewith, except for its own gross
negligence or willful misconduct.
The Administrative Agent may employ agents and attorneys-in-fact and shall not
be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith. The Administrative Agent may
deem and treat the payee of a Note as the holder thereof for all purposes hereof
unless and until a notice of the assignment or transfer thereof shall have been
filed with the Administrative Agent, together with the consent of the Borrower
to such assignment or transfer (to the extent required by Section 12.06(b)).
11.02. Reliance by Administrative Agent. The Administrative Agent
--------------------------------
shall be entitled to rely upon any certification, notice or other communication
(including, without limitation, any thereof by telephone, telecopy, telegram or
cable) reasonably believed by it to be genuine and correct and to have been
signed or sent by or on behalf of the proper Person or Persons, and upon advice
and statements of legal counsel, independent accountants and other experts
selected by the Administrative Agent. As to any matters not expressly provided
for by this Agreement or any other Loan Document, the Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting,
hereunder or thereunder in accordance with instructions given by the Majority
Lenders or all of the Lenders as is required in such circumstance, and such
instructions of such Lenders and any action taken or failure to act pursuant
thereto shall be binding on all of the Lenders.
11.03. Defaults. The Administrative Agent shall not be deemed to
--------
have knowledge or notice of the occurrence of a Default unless the
Administrative Agent has received notice from a Lender or the Borrower
specifying such Default and stating that such notice is a "Notice of Default".
In the event that the Administrative Agent receives such a notice of the
occurrence of a Default, the Administrative Agent shall give prompt notice
thereof to the Lenders. The Administrative Agent shall (subject to Section
11.07) take such action with respect to such Default as shall be directed by the
Majority Lenders, provided that, unless and until the Administrative Agent shall
--------
have received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default as it shall deem advisable in the best interest of the Lenders
except to the extent that this Agreement expressly requires that such action be
taken, or not be taken, only with the consent or upon the authorization of the
Majority Lenders.
11.04. Rights as a Lender. With respect to its Commitments and
------------------
the Loans made by it, LCPI (and any successor acting as Administrative Agent) in
its capacity as a Lender hereunder shall have the same rights and powers
hereunder as any other Lender and may exercise the same as though it were not
acting as the Administrative Agent, and the term "Lender" or "Lenders" shall,
unless the context otherwise indicates, include the Administrative Agent in its
individual capacity. LCPI (and any successor acting as Administrative Agent) and
its affiliates may (without having to account therefor to any Lender) accept
<PAGE>
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deposits from, lend money to, make investments in and generally engage in any
kind of banking, trust or other business with the Obligors (and any of their
Subsidiaries or Affiliates) as if it were not acting as the Administrative
Agent, and LCPI and its affiliates (and any such successor) and its affiliates
may accept fees and other consideration from the Obligors for services in
connection with this Agreement or otherwise without having to account for the
same to the Lenders.
11.05. Indemnification. The Lenders agree to indemnify the
---------------
Administrative Agent and the Arranger (to the extent not reimbursed under
Section 12.04, but without limiting the obligations of the Borrower under
Section 12.04) ratably in accordance with the aggregate principal amount of the
Loans and Reimbursement Obligations held by the Lenders (or, if no Loans or
Reimbursement Obligations are at the time outstanding, ratably in accordance
with their respective Commitments), for any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever that may be imposed on, incurred
by or asserted against the Administrative Agent or the Arranger (including by
any Lender) arising out of or by reason of any investigation in or in any way
relating to or arising out of this Agreement or any other Loan Document or any
other documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby (including, without limitation, the
costs and expenses that the Borrower is obligated to pay under Section 12.04,
but excluding, unless a Default has occurred and is continuing, normal
administrative costs and expenses incident to the performance of its agency
duties hereunder) or the enforcement of any of the terms hereof or thereof or of
any such other documents, provided that no Lender shall be liable for any of the
--------
foregoing to the extent they arise from the gross negligence or willful
misconduct of the party to be indemnified.
11.06. Non-Reliance on Administrative Agent, the Arranger and
------------------------------------------------------
Other Lenders. Each Lender agrees that it has, independently and without
- -------------
reliance on the Administrative Agent, the Arranger or any other Lender, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of the Borrower and its Subsidiaries and decision to enter
into this Agreement and that it will, independently and without reliance upon
the Administrative Agent, the Arranger or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own analysis and decisions in taking or not taking action under this
Agreement or under any other Loan Document. Neither the Administrative Agent nor
the Arranger shall be required to keep itself informed as to the performance or
observance by any obligor of this Agreement or any of the other Loan Documents
or any other document referred to or provided for herein or therein or to
inspect the Properties or books of the Borrower or any of its Subsidiaries.
Except for notices, reports and other documents and information expressly
required to be furnished to the Lenders by the Administrative Agent hereunder or
under the Security Documents, neither the Administrative Agent nor the Arranger
shall have any duty or responsibility to provide any Lender with any credit or
other information concerning the affairs, financial condition or business of the
Borrower or any of its Subsidiaries (or any of their affiliates) that may come
into the possession of the Administrative Agent, the Arranger or any of their
respective affiliates.
<PAGE>
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11.07. Failure to Act. Except for action expressly required of
--------------
the Administrative Agent hereunder and under the other Loan Documents, the
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder and thereunder unless it shall receive further
assurances to its satisfaction from the Lenders of their indemnification
obligations under Section 11.05 against any and all liability and expense that
may be incurred by it by reason of taking or continuing to take any such action.
11.08. Resignation or Removal of Administrative Agent. Subject to
----------------------------------------------
the appointment and acceptance of a successor Administrative Agent as provided
below, the Administrative Agent may resign at any time by giving notice thereof
to the Lenders and the Borrower, and the Administrative Agent may be removed at
any time with or without cause by the Majority Lenders. Upon any such
resignation or removal, the Majority Lenders shall, after consultation with the
Borrower, have the right to appoint a successor Administrative Agent. If no
successor Administrative Agent shall have been so appointed by the Majority
Lenders and shall have accepted such appointment within 30 days after the
retiring Administrative Agent's giving of notice of resignation or the Majority
Lenders' removal of the retiring Administrative Agent, then the retiring
Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent, that shall be a bank that has an office in New York, New
York with a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations hereunder. After any
retiring Administrative Agent's resignation or removal hereunder as
Administrative Agent, the provisions of this Section 11 shall continue in effect
for its benefit in respect of any actions taken or omitted to be taken by it
while it was acting as the Administrative Agent.
11.09. Consents under Other Loan Documents. Except as otherwise
-----------------------------------
provided in Section 12.03 with respect to this Agreement, the Administrative
Agent may, with the prior consent of the Majority Lenders (but not otherwise),
consent to any modification, supplement or waiver under any of the Loan
Documents, provided that, without the prior consent of each Lender, the
--------
Administrative Agent shall not (except as provided herein or in the Security
Documents) release any collateral or otherwise terminate any Lien under any
Security Document providing for collateral security, agree to additional
obligations being secured by such collateral security (unless the Lien for such
additional obligations shall be junior to the Lien in favor of the other
obligations secured by such Security Document, in which event the Administrative
Agent may consent to such junior Lien provided that it obtains the consent of
--------
the Majority Lenders thereto), alter the relative priorities of the obligations
entitled to the benefits of the Liens created under the Security Documents,
except that at no such consent shall be required, and the Administrative Agent
is hereby authorized, to release any Lien covering Property that is the subject
of either a disposition of Property permitted hereunder or a disposition to
which the Majority Lenders have consented.
<PAGE>
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11.10. Arranger. Except as provided in this Section 11 and in
--------
Section 12.06(b), the Arranger shall not have any rights or obligations under
this Agreement or in connection with the syndication of the Commitments
hereunder, other than in its capacity as a "Lender" hereunder.
Section 12. Other Provisions.
12.01. Notices. All notices, requests and other communications
-------
provided for herein and in the Security Documents (including, without
limitation, any modifications of, or waivers or consents under, this Agreement)
shall be given or made in writing (including, without limitation, by telecopy),
delivered to the intended recipient at the "Address for Notices" specified below
its name on the signature pages hereof (below the name of the Borrower, in the
case of any Subsidiary Guarantor) or if to a Lender at its address set forth in
its Administrative Questionnaire, or, as to any party, at such other address as
shall be designated by such party in a notice to each other party. Except as
otherwise provided in this Agreement, all such communications shall be deemed to
have been duly given when transmitted by telecopier or personally delivered or,
in the case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.
12.02. Waiver. No failure on the part of the Administrative Agent
------
or any Lender to exercise and no delay in exercising, and no course of dealing
with respect to, any right, power or privilege under this Agreement or any Note
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege under this Agreement or any Note preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The remedies provided herein are cumulative and not exclusive of any
remedies provided by law.
12.03. Amendments, Etc. Except as otherwise expressly provided in
---------------
this Agreement, any provision of this Agreement may be modified or supplemented
only by an instrument in writing signed by the Borrower and the Majority
Lenders, or by the Borrower and the Administrative Agent acting with the consent
of the Majority Lenders, and any provision of this Agreement may be waived by
the Majority Lenders or by the Administrative Agent acting with the consent of
the Majority Lenders; provided that:
--------
(a) no modification, supplement or waiver shall, unless by an
instrument signed by all of the Lenders or by the Administrative Agent
acting with the consent of all of the Lenders: (i) increase, or extend
the term of any of the Commitments, or extend the time or waive any
requirement for the reduction or termination of any of the Commitments,
(ii) extend the date fixed for the payment of principal of or interest
on any Loan or Reimbursement Obligation or any fee hereunder, (iii)
reduce the amount of any such payment of principal or Reimbursement
Obligation, (iv) reduce the rate at which interest is payable thereon or
any fee is payable hereunder, (v) alter the manner in which payments or
prepayments of principal, interest or other amounts hereunder shall be
applied as between the Lenders or Types or Classes of Loans, (vi) alter
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the terms of this Section 12.03, (vii) modify the definition of the term
"Majority Lenders", or modify in any other manner the number or
percentage of the Lenders required to make any determinations or waive
any rights hereunder or to modify any provision hereof or (viii) release
any Subsidiary Guarantor from any of its guarantee obligations under
Section 6;
(b) any modification or supplement of Section 11, or of any of
the rights or duties of the Administrative Agent hereunder, shall
require the consent of the Administrative Agent; and
(c) any modification or supplement of Section 6 shall require the
consent of each Subsidiary Guarantor.
12.04. Expenses, Etc. The Borrower agrees to pay or reimburse
-------------
each of the Lenders, the Administrative Agent and the Arranger for: (a) all
reasonable out-of-pocket costs and expenses of the Administrative Agent and the
Arranger, including the reasonable fees and expenses of special counsel to the
Arranger, in connection with (i) the negotiation, preparation, execution and
delivery of this Agreement and the other Loan Documents and the extensions of
credit hereunder and (ii) the negotiation or preparation of any modification,
supplement or waiver of any of the terms of this Agreement or any of the other
Loan Documents (whether or not consummated); (b) all reasonable out-of-pocket
costs and expenses of the Lenders and the Administrative Agent (including,
without limitation, the reasonable fees and expenses of legal counsel) in
connection with (i) any Default and any enforcement or collection proceedings
resulting therefrom, including, without limitation, all manner of participation
in or other involvement with (x) bankruptcy, insolvency, receivership,
foreclosure, winding up or liquidation proceedings, (y) judicial or regulatory
proceedings and (z) workout, restructuring or other negotiations or proceedings
(whether or not the workout, restructuring or transaction contemplated thereby
is consummated) and (ii) the enforcement of this Section 12.04; (c) all
transfer, stamp, mortgage recording, documentary or other similar taxes,
assessments or charges levied by any governmental or revenue authority in
respect of this Agreement or any of the other Loan Documents or any other
document referred to herein or therein and all costs, expenses, taxes,
assessments and other charges incurred in connection with any filing,
registration, recording or perfection of any security interest contemplated by
any Security Document or any other document referred to therein; and (d) all
costs, expenses and other charges in respect of title insurance procured with
respect to Liens created pursuant to any mortgages at any time securing any
obligations hereunder.
The Borrower hereby agrees to indemnify the Administrative Agent,
the Arranger and each Lender and their respective directors, officers,
employees, attorneys and agents (each, an "indemnified person") from, and hold
------------------
each of them harmless against, any and all losses, liabilities, claims, damages
or expenses incurred by any of them (including, without limitation, any and all
losses, liabilities, claims, damages or expenses incurred by the Administrative
Agent or the Arranger to any Lender, whether or not the Administrative Agent,
the Arranger or any Lender is a party thereto) arising out of or by reason of
any investigation or litigation or other proceedings (including any threatened
investigation or litigation or other proceedings) relating to the extensions of
<PAGE>
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credit hereunder or any actual or proposed use by the Borrower or any of its
Subsidiaries of the proceeds of any of the extensions of credit hereunder,
including, without limitation, the reasonable fees and disbursements of counsel
incurred in connection with any such investigation or litigation or other
proceedings (but excluding any such losses, liabilities, claims, damages or
expenses incurred by reason of the gross negligence or willful misconduct of the
Person to be indemnified). In that connection, the Borrower will not be required
to reimburse the indemnified persons for more than one counsel in any
jurisdiction, except to the extent that a particular indemnified person may have
defenses that are distinct from, or in conflict with, the defenses of other
indemnified persons.
Without limiting the generality of the provisions of the
foregoing paragraph, the Borrower will indemnify the Administrative Agent, the
Arranger and each Lender from, and hold the Administrative Agent, the Arranger
and each Lender harmless against, any losses, liabilities, claims, damages or
expenses described in the preceding paragraph (including any Lien filed against
any Property covered by any mortgages in favor of any governmental entity, but
excluding, as provided in the preceding sentence, any loss, liability, claim,
damage or expense incurred by reason of the gross negligence or willful
misconduct of the Person to be indemnified) arising under any Environmental Law
as a result of the past, present or future operations of the Borrower or any of
its Subsidiaries (or any predecessor in interest to the Borrower or any of its
Subsidiaries), or the past, present or future condition of any site or facility
owned, operated or leased at any time by the Borrower or any of its Subsidiaries
(or any such predecessor in interest), or any Release or threatened Release of
any Hazardous Materials at or from any such site or facility, excluding any such
Release or threatened Release that shall occur during any period when the
Administrative Agent or any Lender shall be in possession of any such site or
facility following the exercise by the Administrative Agent or any Lender of any
of its rights and remedies hereunder or under any of the Security Documents, but
including any such Release or threatened Release occurring during such period
that is a continuation of conditions previously in existence, or of practices
employed by the Borrower and its Subsidiaries, at such site or facility.
12.05. Successors and Assigns. This Agreement shall be binding
----------------------
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
12.06. Assignments and Participations.
------------------------------
(a) No Obligor may assign any of its rights or obligations
hereunder or under the Notes without the prior consent of all of the Lenders and
the Administrative Agent and the Arranger.
(b) Each Lender may assign any of its Loans, its Notes and its
Commitments and its Letter of Credit Interest (but only with the consent of the
Administrative Agent, the Arranger, the Issuing Lender and the Borrower, which
consents shall not be unreasonably withheld or delayed); provided that
--------
<PAGE>
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(i) no such consent by the Borrower, the Administrative Agent or
the Arranger shall be required in the case of any assignment to another
Lender or an affiliate of a Lender;
(ii) no such consent by the Borrower shall be required in the
case of any assignment by the Arranger in its capacity as a "Lender"
hereunder on or prior to the date 90 days after the Closing Date;
(iii) except to the extent the Borrower and the Administrative
Agent shall otherwise consent, any such partial assignment (other than
to another Lender) shall be in an amount at least equal to $5,000,000;
(iv) each such assignment by a Lender of any Loans, Notes, Letter
of Credit Interest or Commitments of any Class shall be made in such
manner so that the same portion of its Loans, Notes, Letter of Credit
Interest or Commitments of each other Class is assigned to the
respective assignee; and
(v) any consent of the Borrower otherwise required under this
paragraph (b) shall not be required if an Event of Default has occurred
and is continuing.
Upon execution and delivery by the parties to each such assignment of an
Assignment and Acceptance pursuant to which such assignee agrees to become a
"Lender" hereunder (if not already a Lender) having the Commitments, Loans and
Reimbursement obligations specified therein, and upon consent thereto by the
Borrower, the Administrative Agent, the Arranger and/or the Issuing Lender to
the extent required above and delivery of such assignment and acceptance to the
Administrative Agent, the assignee shall have, to the extent of such assignment
(unless otherwise consented to by the Borrower, the Administrative Agent, the
Arranger and the Issuing Lender, the obligations, rights and benefits of a
Lender hereunder holding the Commitments, Loans and Reimbursement Obligations
(or portions thereof) assigned to it (in addition to the Commitments, Loans and
Reimbursement obligations, if any, theretofore held by such assignee) and the
assigning Lender shall, to the extent of such assignment, be released from the
Commitments (or portions thereof) so assigned. Upon each such assignment the
assigning Lender shall pay the Administrative Agent an assignment fee of $2,000.
If such assignee shall not be a Lender it shall deliver to the Administrative
Agent an Administrative Questionnaire.
(c) A Lender may sell or agree to sell to one or more other
Persons (each a "Participant") a participation in all or any part of any Loans
or Letter of Credit Interest held by it, or in its Commitments, provided that
--------
such Participant shall not have any rights or obligations under this Agreement
or any Note or any other Loan Document (the Participant's rights against such
Lender in respect of such participation to be those set forth in the agreements
executed by such Lender in favor of the Participant) except that such
Participant shall have the rights afforded to a Lender under Section 5 in
respect of the Loans, Letter of Credit Interest and Commitment(s) held by it as
if such Participant were a Lender hereunder. In no event shall a Lender that
sells a participation agree with the Participant to take or refrain from taking
<PAGE>
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any action hereunder or under any other Loan Document except that such Lender
may agree with the Participant that it will not, without the consent of the
Participant, agree to (i) increase or extend the term of such Lender's related
commitment or extend the amount or date of any scheduled reduction of such
Commitment pursuant to Section 2.04, (ii) extend the date fixed for the payment
of principal of or interest on the related Loan or Loans or Reimbursement
Obligation or any portion of any fee hereunder payable to the Participant, (iii)
reduce the amount of any such payment of principal or Reimbursement Obligation
or (iv) reduce the rate at which interest is payable thereon, or any fee
hereunder payable to the Participant, to a level below the rate at which the
Participant is entitled to receive such interest or fee.
(d) In addition to the assignments and participations permitted
under the foregoing provisions of this Section 12.06, any Lender may (without
notice to the Borrower, the Administrative Agent, the Arranger or any other
Lender and without payment of any fee) assign and pledge all or any portion of
its Loans and its Notes to any Federal Reserve Bank as collateral security
pursuant to Regulation A and any Operating Circular issued by such Federal
Reserve Bank, and such Loans and Notes shall be fully transferable as provided
therein. No such assignment shall release the assigning Lender from its
obligations hereunder.
(e) A Lender may furnish any information concerning the Borrower
or any of its Subsidiaries in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and participants),
subject, however, to the provisions of Section 12.12.
(f) Anything in this Section 12.06 to the contrary
notwithstanding, no Lender may assign or participate any interest in any Loan or
Letter of Credit Interest held by it hereunder to the Borrower or any of its
Affiliates or Subsidiaries without the prior consent of each Lender.
12.07. Survival. The obligations of the Borrower under Sections
--------
5.01, 5.05, 5.06, 5.07 and 12.04, the obligations of each Subsidiary Guarantor
under Section 6.03, and the obligations of the Lenders under Section 11.05,
shall survive the repayment of the Loans and Reimbursement Obligations and the
termination of the Commitments and, in the case of any Lender that may assign
any interest in its Commitments, Loans or Letter of Credit Interest hereunder,
shall survive the making of such assignment, notwithstanding that such assigning
Lender may cease to be a "Lender" hereunder. In addition, each representation
and warranty made, or deemed to be made by a notice of any extension of credit,
herein or pursuant hereto shall survive the making of such representation and
warranty, and no Lender shall be deemed to have waived, by reason of making any
extension of credit hereunder, any Default that may arise by reason of such
representation or warranty proving to have been false or misleading,
notwithstanding that such Lender or the Administrative Agent may have had notice
or knowledge or reason to believe that such representation or warranty was false
or misleading at the time such extension of credit was made.
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12.08. Counterparts. This Agreement may be executed in any number
------------
of counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
12.09. Governing Law; Submission to Jurisdiction. This Agreement
-----------------------------------------
and the Notes shall be governed by, and construed in accordance with, the law of
the State of New York. Each Obligor hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of the Supreme Court of the State of New York sitting in New York
County (including its Appellate Division), and of any other appellate court in
the State of New York, for the purposes of all legal proceedings arising out of
or relating to this Agreement or the transactions contemplated hereby. Each
Obligor hereby irrevocably waives, to the fullest extent permitted by applicable
law, any objection that it may now or hereafter have to the laying of the venue
of any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
12.10. WAIVER OF JURY TRIAL. EACH OF THE OBLIGORS, THE
--------------------
ADMINISTRATIVE AGENT AND EACH LENDER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
12.11. Captions. The table of contents and captions and section
--------
headings appearing herein are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this
Agreement.
12.12. Confidentiality. Each Lender and the Administrative Agent
---------------
agrees (on behalf of itself and each of its affiliates, directors, officers,
employees and representatives) to use reasonable precautions to keep
confidential, in accordance with their customary procedures for handling
confidential information of the same nature and in accordance with safe and
sound banking practices, any non-public information supplied to it by the
Borrower pursuant to this Agreement that is identified by the Borrower as being
confidential at the time the same is delivered to the Lenders or the
Administrative Agent, provided that nothing herein shall limit the disclosure of
--------
any such information (i) after such information shall have become public (other
than through a violation of this Section 12.12), (ii) to the extent required by
statute, rule, regulation or judicial process, (iii) to counsel for any of the
Lenders or the Administrative Agent, (iv) to bank examiners (or any other
regulatory authority having jurisdiction over any Lender or the Agent), or to
auditors or accountants, (v) to the Agent or any other Lender, (vi) in
connection with any litigation to which any one or more of the Lenders or the
Agent is a party, or in connection with the rights or remedies hereunder or
under any other Loan Document (vii) to a subsidiary or affiliate of such Lender
or (viii) subject to an agreement containing provisions substantially the same
as those of this Section pursuant to which an assignee or participant acquires
an interest in the Loans hereunder, to any assignee or participant (or
prospective assignee or participant); provided, further, that in no event shall
-------- -------
<PAGE>
-100-
any Lender or the Administrative Agent be obligated or required to return any
materials furnished by the Borrower. The obligations of each Lender under this
Section 12.12 shall supersede and replace the obligations of such Lender under
the confidentiality letter in respect of this financing signed and delivered by
such Lender to the Borrower prior to the date hereof; in addition, the
obligations of any assignee or participant that has executed an agreement
containing provisions substantially the same as those of this Section pursuant
to which such assignee or participant has acquired an interest in the Loans
hereunder the confidentiality provisions of such agreement shall be superseded
by this Section 12.12 upon the date upon which such assignee becomes a Lender
hereunder pursuant to Section 12.06(b).
12.13. Limitation of Liability. Anything herein or in any of the
-----------------------
other Loan Documents to the contrary notwithstanding, the Lenders and the
Administrative Agent shall not have recourse to the assets of Holdings or any of
the Foreign Subsidiaries of the Borrower.
<PAGE>
-101-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered as of the day and year first above written.
PREMIER PARKS INC.
By: /s/ James F. Dannhauser
-----------------------------
Name: James F. Dannhauser
Title: Chief Financial Officer
Address for Notices:
122 East 42nd Street
49th Floor
New York, New York 10168
Attention: James Dannhauser
Telecopier No.: 212-949-6203
Telephone No.: 212-599-4693
with a copy to:
James M. Coughlin, Esq.
Baer. Marks & Upham LLP
805 Third Avenue
New York, New York 10022
Telecopier No.: 212-702-5810 (first)
212-702-1431 (backup)
Telephone No.: 212-702-5819
<PAGE>
-102-
SUBSIDIARY GUARANTORS
---------------------
FUNTIME PARKS, INC.
TIERCO MARYLAND, INC.
TIERCO WATER PARK, INC.
FRONTIER CITY PROPERTIES, INC.
WYANDOT LAKE, INC.
DARIEN LAKE THEME PARK AND
CAMPING RESORT, INC.
FUNTIME, INC.
PREMIER WATERWORLD
CONCORD INC.
PREMIER WATERWORLD
SACRAMENTO INC.
PARK MANAGEMENT CORP.
INDIANA PARKS, INC.
AURORA CAMPGROUND, INC.
OHIO CAMPGROUNDS INC.
GREAT ESCAPE HOLDING INC.
STUART AMUSEMENT COMPANY
RIVERSIDE PARK ENTERPRISES, INC.
RIVERSIDE PARK FOOD
SERVICES, INC.
PREMIER PARKS OF COLORADO INC.
KKI, LLC
GREAT ESCAPE LLC
GREAT ESCAPE THEME PARK LLC
PREMIER INTERNATIONAL
HOLDINGS, INC.
By: /s/ James F. Dannhauser
----------------------------
Name: James F. Dannhauser
Title: Chief Financial Officer
<PAGE>
-103-
SUBSIDIARY GUARANTORS
---------------------
ELITCH GARDENS L.P.
By Premier Parks of Colorado, Inc.,
its general partner
By: /s/ James F. Dannhauser
---------------------------------
Name: James F. Dannhauser
Title: Chief Financial Officer
FRONTIER CITY PARTNERS
LIMITED PARTNERSHIP
By Frontier City Properties, Inc.
its general partner
By: /s/ James F. Dannhauser
-------------------------------
Name: James F. Dannhauser
Title: Chief Financial Officer
<PAGE>
-104-
LENDERS
-------
LEHMAN COMMERCIAL PAPER INC.
By: /s/ Dennis J. Dee
----------------------------------
Name: Dennis J. Dee
Title: Authorized Signatory
<PAGE>
-105-
ADMINISTRATIVE AGENT
--------------------
LEHMAN COMMERCIAL PAPER INC.,
as Administrative Agent
By: /s/ Dennis J. Dee
-----------------------------------
Name: Dennis J. Dee
Title: Authorized Signatory
Lending Office for all Loans:
Lehman Commercial Paper Inc.
200 Vesey Street
Tenth Floor
New York, New York 10285
Address for Notices:
Lehman Commercial Paper Inc.
200 Vesey Street
Tenth Floor
New York, New York 10285
Attention: Michele Swanson
Telecopier No.: 212-528-0819
Telephone No.: 212-526-0330
<PAGE>
SCHEDULE I
(See Section 1.01 definition of
"Facility A Revolving Credit Commitment",
"Facility B Term Loan Commitment" and
"Facility C Term Loan Commitment")
Commitments
Facility A
Revolving Facility B Facility C
Credit Term Loan Term Loan
Lender Commitment Commitment Commitment
- ------------------ ---------- ------------ -------------
Lehman Commercial
Paper Inc. $75,000,000 $100,000,000 $125,000,000
<PAGE>
SCHEDULE II
(Section Sections 8.16(a) and 8.16(b))
Debt Agreements and Liens
<PAGE>
SCHEDULE III
(See Section 8.08)
Environmental Matters
<PAGE>
SCHEDULE IV
(See Sections 8.18(a), 8.18(b) and 9.08(a))
Subsidiaries and Investments
<PAGE>
SCHEDULE V
(See Section 8.19)
Existing Parks and Real Property
<PAGE>
SCHEDULE VI
(See Section 8.03)
Litigation
<PAGE>
SCHEDULE VII
(See Section 8.20)
Insurance
<PAGE>
SCHEDULE VIII
(See Sections 1.01 definition of "EBITDA" and 9.05(e)(iii))
Certain EBITDA Adjustments
SALE AND PURCHASE AGREEMENT
THIS SALE AND PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of this 20th day of October, 1998, by and between FIESTA TEXAS THEME
PARK, LTD. a Texas limited partnership (herein referred to as "FTTP" or
"Seller") and PREMIER PARKS INC., a Delaware corporation (herein referred to as
"Purchaser").
RECITALS:
--------
1. FTTP, as Lessor, and San Antonio Theme Park, L.P. ("SATP") and Six Flags San
Antonio, L.P. ("SFSA"), entered into that certain Lease Agreement with Option to
Purchase dated effective as of March 9, 1996 ("Lease Agreement") for the theme
park known as Six Flags Fiesta Texas (the "Park"). Prior to Closing (defined
hereinafter) the obligations of FTTP as Lessor under the Lease Agreement will be
assigned to Fiesta Texas Inc. ("FTI"), a wholly-owned subsidiary of FTTP. In
addition, all of Seller's and Parent's right, title and interest in and to the
Park will be transferred to FTI prior to Closing in form and substance approved
by Purchaser.
2. SATP is an affiliate of Purchaser and has been operating the Park pursuant to
the Lease Agreement and various other agreements related thereto.
3. The Park is located within, and is and will continue to be a significant part
of, a development (currently containing approximately 1637 acres) known as La
Cantera, developed by La Cantera Development Company (hereinafter referred to as
"LCDC" or "Parent"), an affiliate of Seller.
4. Pursuant to that Agreement of Limited Partnership of San Antonio Theme Park,
L.P. effective March 9, 1996 by and between FTTP, SFSA and San Antonio Park
G.P., LLC (the "Partnership Agreement"), Seller owns a forty percent (40%)
limited partnership interest (the "Limited Partnership Interests") in SATP which
does business as "Six Flags Fiesta Texas" (hereinafter sometimes referred to as
the "Partnership"), which Limited Partnership Interests constitute all of
Seller's right, title and interest in and to the Partnership.
5. Seller is willing to sell Purchaser all of the capital stock of FTI (the
"Shares") and the Limited Partnership Interests so long as Purchaser is willing
to give certain assurances as to the future operations and maintenance of the
Park as particularly set forth in this Agreement.
6. Seller desires to sell, and Purchaser desires to purchase, the Limited
Partnership Interests.
ARTICLE I.
PURCHASE AND SALE OF SHARES
---------------------------
Subject to the terms and provisions hereof, and for the consideration
herein set forth, Seller agrees to sell, and Purchaser agrees to purchase all of
the Shares, free and clear of all Liens. Prior to or at Closing, FTI will
1
<PAGE>
acquire all of Seller's right, title and interest in and to the Park located in
the City of San Antonio, State of Texas, and containing approximately 215 acres,
situated in Bexar County, including, without limitation the property and rights
described in Sections 1.01-1.05 below. In connection with the transfer of the
Park, FTI will not assume, by Contract, any Liabilities of Seller other than
Liabilities of Seller arising under: the Transferred Contracts, the Lease
Agreement or any other document contemplated by this Agreement,or the
Contemplated Transactions from and after the date of transfer of the Park to
FTI.
1.01 Realty. All those certain tracts, pieces or parcels of land described
------
in Exhibit "A" attached hereto and made a part hereof for all purposes (herein
-----------
referred to as the "Land"), together with the buildings, structures, fixtures,
paving, curbing, trees, shrubs, plants, and other improvements and landscaping
of every kind and nature presently situated on, in, or under, or hereafter
erected or installed or used in, on, or about or in connection with the
ownership, use, and operation of the Park (herein collectively referred to as
the "Improvements"), and all and singular the rights appurtenant to that Land
and/or the Improvements, including but not limited to, all right, title and
interest, if any, of Seller in and to: (a) the bed of any street, road, avenue
or alley, open or closed, in front of or adjoining any of the Land, to the
center line thereof; (b) any easements, prescriptive easements, covenants,
rights of way, privileges, hereditaments, sewage rights and other rights
appurtenant to the "Realty" (as hereinafter defined); and (c) air, riparian and
parking rights, except as expressly provided herein (the Land, Improvements and
all of the other properties, rights and interests mentioned above are herein
collectively referred to as "Realty").
1.02 Personalty. All personal property and equipment owned or any lease
----------
interests held by Seller and used or held for use in connection with the
ownership, use, operation, repair and maintenance of the Realty, whether located
on the Realty or elsewhere (herein collectively referred to as the "Personalty")
including, but not limited to, all rides, machinery, rolling stock, signage, gas
and electric fixtures, appliances and wiring, engines, boilers, elevators,
incinerators, motors, generators, heating and air conditioning equipment, sinks,
water closets, basins, tanks, pipes, electrical systems, faucets, fire
detection, fire prevention and extinguishing apparatus, central music and public
address systems, burglar alarms, security systems and equipment, office
equipment, furniture, shades, awnings, screens, blinds, rugs, carpets and other
coverings, lamps, drapes, curtains, pictures, paintings, plants and other
furnishings and decor equipment, spare parts, materials and supplies for the
ownership, use, operation, maintenance and repair of the Realty or the
Personalty, or both, tools, supplies and spare parts and all other personal
property owned or leased by Seller which is located on and is used or held for
use in connection with the ownership, use, operation, maintenance or repair of
the Realty or the Personalty or both.
1.03 Incidental Rights. All of Seller's right, title and interest in the
------------------
following (herein collectively referred to as the "Incidental Rights"): (a)
"Transferred Contracts" (as hereinafter defined), (b) all telephone numbers
assigned to the Improvements, and (c) all "Permits" (as hereinafter defined)
with respect to or necessary for the lawful ownership, construction, use,
occupancy, and operation of the Park.
1.04 Intellectual Property Rights. All of Lessor's IP and all of Seller's
-----------------------------
interest in all Park Generated Proprietary Rights, as those terms are defined in
the Intellectual Property Rights Agreement (the "IP Agreement") dated as of
2
<PAGE>
March 9,1996 among FTTP, the Partnership and SFSA (collectively, all of the
foregoing intellectual property and ancillary rights are herein referred to as
the "Intellectual Property Rights").
1.05 Books and Records. All books, records and computer programs relating
-----------------
to the Park (except the transaction documents associated with this Agreement and
the Lease Agreement) (whether kept or maintained by Seller or any third party)
including, without limitation, the following: financial statements and expense
reports; copies of lists of customers and suppliers; admission tickets, season
passes, records with respect to costs and Personalty; 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 Seller at or in connection with
the Park; media materials and plates; sales order files; ledgers and other books
of account of Seller; plans, specifications, surveys, reports, appraisals, and
other materials relating to all or any portion of the Park and/or the operation
thereof; and all computer software programs, computer printouts, databases and
all other items related thereto, together with all corporate records of Seller
and FTI pertaining thereto, (all of which are herein collectively referred to as
the "Books and Records"). The parties acknowledge that Purchaser or an Affiliate
of Purchaser has had possession and control of the Books and Records related to
the Park since the Lease Commencement Date and Seller may retain any copies of
the Books and Records currently in its possession.
ARTICLE II
PURCHASE AND SALE
OF LIMITED PARTNERSHIP INTERESTS
--------------------------------
2.01 Purchase and Sale of Limited Partnership Interests. (a) Subject to the
terms and conditions set forth herein, Seller agrees to sell, assign, transfer
and convey, and Purchaser agrees to purchase from Seller, free and clear of all
Liens other than Permitted Exceptions, (as such term is hereinafter defined),
all of the Seller's right, title and interest in and to the Limited Partnership
Interests.
(b) The certificates, if any, representing the Limited Partnership
Interests shall be duly endorsed in blank, or accompanied by a power duly
executed in blank by Seller with all necessary transfer taxes or other revenue
stamps paid or acquired at Seller's expense, affixed and canceled, and such
certificates shall be delivered to Purchaser at the Closing, together with such
other documents of transfer and/or assignment as are described in Article VIII
below or otherwise as Purchaser may reasonably request.
The Shares and the Limited Partnership Interests are sometimes herein
referred to collectively as the "Securities"
3
<PAGE>
ARTICLE III.
PURCHASE PRICE
--------------
3.01 Total Purchase Price. The total purchase price (as adjusted in
----------------------
accordance herewith, the "Total Purchase Price") for the sale and purchase of
the Securities is the aggregate of: (a) FORTY-FIVE MILLION AND NO/100 Dollars
($45,000,000.00) and (b) the outstanding principal amount of the "Amended and
Restated Note" described in Section 3.01(b) below. The Total Purchase Price
shall be payable by Purchaser to Seller as follows:
(a) The sum of FORTY-FIVE MILLION AND NO/100 DOLLARS ($45,000,000.00),
as increased or decreased by credits, prorations, fees and adjustments made
pursuant to this Agreement, shall be paid by Purchaser to Seller in United
States currency in the form of immediately available funds on the Closing Date
(as hereinafter defined).
(b) Premier Parks Inc. and FTI shall assume and become co-obligated on
the debt represented by the Amended and Restated Note in the principal amount
equal to Three Million One Hundred Eight Thousand ($3,108,000.00) dollars, the
outstanding principal of the "Partnership Note" (as hereinafter defined), plus
all accrued interest thereunder, through the date of Closing (the "Amended and
Restated Note"), evidencing the debt owed to Seller by SATP under the
Partnership Agreement ("Partnership Note"). The Amended and Restated Note shall
have a term of seven (7) years, with an interest rate equal to the prime rate,
announced from time to time by Citibank, N.A. as its prime rate in effect at its
principal office in New York City, and provide for annual payments of interest
only during its term. The Amended and Restated Note shall be secured by the Deed
of Trust (hereinafter defined) and prepayable at Purchaser's option, in whole or
in part without penalty or premium, provided, however, any such partial
prepayment is at least $500,000.
(c) At Closing FTI and SATP, as Co-Grantors shall execute and deliver
a first lien deed of trust and other security and related agreements
(collectively "Deed of Trust") encumbering the Park and all of SATP's interest
in the Park, subject only to the Permitted Exceptions, except for any such
Permitted Exceptions arising by, through or under Purchaser or its Affiliates
("Purchaser Exceptions") unless such Purchaser Exceptions relate to easements,
covenants, restrictions, public dedications and other encumbrances arising after
the Lease Commencement Date in the ordinary course of Business that do not
secure indebtedness or other payment obligation, ("Purchaser Permitted
Exceptions"), provided, however, if a Purchaser Exception secures indebtedness
or other payment obligations, such Purchaser Exception shall be included as a
Purchaser Permitted Exception if Purchaser shall (i) use commercially reasonable
efforts to contest such Purchaser Exception, and (ii) pay any amounts adjudged
by a court of competent jurisdiction to be due, with all costs penalties, and
interest thereon promptly after the Order becomes final and non-appealable,
provided, however, any such amounts shall be paid prior to the date any Order is
issued under which the Park or any part thereof may be sold. The Deed of Trust
shall secure the payment of the Amended and Restated Note.
3.02 Deduction from Purchase Price. In the event that Seller is a "foreign
------------------------------
person" (as defined in Section 1445(f)(3) of the Code and regulations issued
thereunder) or in the event that Seller fails or refuses to deliver the
4
<PAGE>
non-foreign transferor affidavit required in Section 8.02(e) hereof, or in the
event that Purchaser receives notice from any seller-transferor's agent or
purchaser-transferee's agent (each as defined in such Section 1445(d) and the
regulations issued thereunder) that, or Purchaser has actual knowledge that,
such affidavit is false, Purchaser shall, and Seller hereby authorizes and
directs Purchaser to, deduct and withhold from the Total Purchase Price a tax
equal to ten percent (10%) thereof, as required by Code Section 1445. In the
event of any such withholding, Seller's obligation to consummate the
"Contemplated Transactions" (as hereinafter defined) and to otherwise perform
all of its obligations hereunder shall not be excused or otherwise affected.
Purchaser shall remit such withheld amount to and file the required forms with
the IRS, and in the event of any claimed over-withholding, Seller shall be
limited solely to an action against the IRS for refund (under Regulation Section
1.1464-1(a)), and hereby waives any right of action against Purchaser on account
of such withholding. The provisions of this Section 3.02 shall survive the
Closing hereunder.
3.03 Allocation of the Purchase Price. The Total Purchase Price shall be
---------------------------------
allocated among the Securities in the manner mutually determined by Purchaser
and Seller and each of the parties shall make all appropriate tax and other
filings on a basis consistent with such allocation. The parties shall exchange
drafts of any information returns required by Section 1060 of the Code, and all
similar state statutes, ten days prior to filing any such return. This Section
shall survive Closing.
ARTICLE IV.
SURVEY
------
4.01 Survey. Seller, at its sole cost and expense, has heretofore ordered
------
and delivered to the Purchaser and by execution below Purchaser approves of the
Survey except for the objections heretofore delivered to Seller in writing by
Purchaser, a current new or re-certified survey (the "Survey") of the Land
prepared by a registered public land surveyor licensed by the State of Texas
reasonably acceptable to Alamo Title Company and its underwriter (both of which
shall hereinafter be referred to as "Title Company") and Purchaser, containing a
metes and bounds description of the Land. The Survey shall be staked on the
ground, and shall show, at a minimum, the following:
(a) all title exceptions from the "Title Commitment" (as hereinafter
defined) that can reasonably be shown or locatable thereon;
(b) all Park boundary lines;
(c) all easements of record affecting any portion of the Park,
including, without limitation, appurtenant ingress and egress easements, utility
easements, easements burdening the Park and easements for the benefit of the
Park;
(d) all building setback lines;
5
<PAGE>
(e) all encroachments across Park boundary lines by Improvements
located within the Park, and all encroachments across Park boundary lines by
Improvements located on adjacent property;
(f) all Improvements or other structures within the boundary of the
Land that are located within twenty-five (25) feet of any such boundary line;
(g) all overlaps and encroachments by Park Improvements across setback
lines;
(h) all publicly dedicated streets abutting the Park and curb cuts
thereon serving the Park, as well as all points of access to and from the Park;
(i) all points of entry for utility easements serving the Park;
(j) FEMA Flood Insurance Rate Map zones and other relevant flood plain
information; and
(k) listing the number of parking spaces on the main parking lot at
the Park.
The Survey shall be prepared in accordance with "Minimum Standard Detail
Requirements for ALTA/ACSM Land Title Surveys" jointly established by the
American Land Title Association and the American Congress on Surveying and
Mapping in 1992, and shall meet the accuracy requirements of an "Urban" survey
as defined therein. The Survey shall contain a surveyor's certification
reasonably satisfactory to Purchaser and the Title Company. The metes and bounds
description set out in the Special Warranty Deed shall be the metes and bounds
description of the Land reflected in the Survey (and certified by the Surveyor)
and insured by Title Company. Without in any way limiting the foregoing, the
Survey shall be sufficient to permit the Title Company to modify, at the
Purchaser's sole cost and expense, the standard printed exception in an Owner's
Policy of Title Insurance pertaining to discrepancies in area or boundary lines,
encroachments, overlapping of improvements, or similar matters.
ARTICLE V.
TITLE REPORT AND CONDITION OF TITLE
-----------------------------------
5.01 Title Report. Seller has heretofore caused the Title Company to issue
------------
an irrevocable commitment for an Owner's Policy of Title Insurance (the "Title
Commitment") and Purchaser has heretofore ordered a UCC search (including liens,
judgments, franchise taxes, etc.) (the "UCC Search") covering the Park, Seller
and its general and limited partners and will obtain an update at Closing. At
the Closing, Seller shall furnish to Purchaser, at Seller's sole cost and
expense, except as provided in Section 4.01 with respect to payment of the cost
of the "survey deletion", an Owner's Policy of Title Insurance (the "Owner's
Policy") issued by the Title Company on the standard form in use in the State of
Texas (with the amount of the Insurance, and all reinsurance in such amounts and
from such title insurance underwriters as are reasonably acceptable to the
Purchaser), insuring good and indefeasible fee simple title to the Realty in
FTI, subject only to (i) the previously agreed to exceptions shown on Schedule
6
<PAGE>
5.01 attached hereto, (ii) any Purchaser Exceptions, (iii) the standard printed
exceptions included in the then current Title Policy form promulgated by the
Texas State Board of Insurance (with the "survey exception" and such other
exceptions as may reasonably be omitted, deleted therefrom or modified therein
at no cost to Seller) (collectively the "Permitted Exceptions"), (iv) the
Special Warranty Deed from Seller to FTI dated prior to Closing (the "Special
Warranty Deed"), (v) the Deed of Trust and other documents recorded in
connection with the transfer of the Park to FTI. Such Owner's Policy shall
include such additional endorsements and affirmative insurance as Purchaser may
request, provided however, that the Title Company must be willing to provide
such endorsements and affirmative insurance either at no cost to Seller or at a
cost to be paid by Purchaser; however, the provision of such additional
endorsements and affirmative insurance shall not be a condition to Closing.
Additionally at Closing, Title Company shall simultaneously issue a Mortgagee's
Policy of Title Insurance at Seller's sole cost and expense.
ARTICLE VI.
REPRESENTATIONS, WARRANTIES, COVENANTS
--------------------------------------
AND AGREEMENTS
--------------
6.01 Representations and Warranties. To induce Purchaser to enter into this
------------------------------
Agreement and to purchase the Securities, Seller and Parent hereby represent and
warrant to, and Seller covenants and agrees with Purchaser, the following, with
the understanding and intention that Purchaser is relying upon the accuracy of
such representations and warranties, and the agreement of Seller to comply with
and perform such covenants and agreements. The representations and warranties
shall be true and correct on the date hereof and it is a condition to Closing
that they be true and correct on the Closing Date
(a) Organization. Seller, FTI and Parent are each an entity duly
------------
organized and validly existing under the laws of the state of its organization,
and, if required, is duly qualified to do business in the State in which the
Park is located.
(b) Authorization. Seller and Parent have full legal right, power and
-------------
authority to enter into this Agreement, to execute and deliver the documents
necessary or appropriate therefor and to consummate the Contemplated
Transactions and otherwise to perform all the terms and conditions to be
performed by Seller or Parent (as applicable) under this Agreement. The
performance by Seller or Parent (as applicable) of the Contemplated Transactions
has been duly and validly authorized by all requisite governance action of
Seller or Parent (as applicable) (including any partner or Affiliate thereof),
and this Agreement has been, and the Transaction Documents shall at Closing be,
duly and validly executed and delivered by Seller and Parent. This Agreement is,
and at Closing the other Transaction Documents will be, the legal, valid and
binding obligation of Seller and Parent (as applicable), enforceable against
Seller and Parent in accordance with their terms, except as limited by
applicable bankruptcy, moratorium, insolvency or other similar laws affecting
generally the rights of creditors or by principles of equity.
(c) No Conflicts. Except as disclosed to Purchaser in writing, the
-------------
execution and delivery by Seller and Parent of this Agreement and the
consummation of the Contemplated Transactions by Seller and Parent, as the case
7
<PAGE>
may be, will not (i) result in any breach of any of the terms or conditions of,
or constitute a default under, the organizational and governance documents of
Seller or Parent, or any commitment, mortgage, note, bond, debenture, deed of
trust, contract, agreement, license or other instrument or obligation to which
Seller or Parent is a party, the breach of which would adversely affect the Park
or Securities, or Seller's or Parent's ability to perform under this Agreement;
(ii) result in any violation of any governmental requirement applicable to
Seller, FTI or Parent that would adversely affect the Park or Securities,
assuming compliance with the Hart Scott Rodino Antitrust Improvements Act of
1976, as amended ("HRS"); (iii) relieve any person of, or enable any person to
terminate, any obligation (whether contractual or otherwise) to, or any right or
benefit enjoyed by, Seller or FTI with respect to the Park other than the
termination of obligations, rights or benefits, or the exercise of other rights
which, alone or in the aggregate, would not have a material adverse impact on
the Park or its operations; or (iv) require notice to or the consent,
authorization, approval or order of any person, except such notices which have
been given or consents, authorizations, approvals or orders which have been
obtained and that required by HRS.
(d) Third Party Rights. Except for this Agreement, the Lease Agreement
------------------
and any documents executed by Seller and expressly consented to by Partnership
or Purchaser in writing or any document executed by the Partnership, there are
no leases, subleases, tenancy arrangements, service contracts, management
agreements or other agreements or Contracts in force or effect entered into, or
expressly consented to by Seller or FTI that grant to any person any right,
title, interest or benefit in or to all or any part of the Park or relating to
the use, occupancy, lease, operation, management, maintenance or repair of the
Park.
(e) The Park. (i) Exhibit A hereto sets forth a true, correct and
-------- ---------
complete legal description of the Land. As of the Lease Commencement Date,
Seller or Parent had good and indefeasible fee simple title to the Realty, and
good title to the Personalty, in each case free and clear of all Liens except
for Permitted Exceptions. With the exception of Laws, Orders and Permits the
compliance with which are the obligation of the Partnership, to the knowledge of
Seller, neither Seller, Parent nor FTI is in violation in any material respect
of any Law, Order or Permit in respect of the Realty, nor has the Seller or
Parent received notice of any such violation which was not also delivered to the
Partnership. Since the Lease Commencement Date, neither Seller, FTI nor Parent
has taken any action that would affect Seller's, Parent's or FTI's title to the
Park, except for the contemplated transfer to FTI by Seller and Parent. Neither
Seller, Parent nor FTI has granted any purchase options, rights of first refusal
or conditional sales agreements regarding the purchase and sale of all or any
portion of the Park or the Securities, other than the Lease Agreement,
Partnership Agreement and other documents delivered pursuant thereto.
(ii) The Seller is the beneficial and record owner and holder of,
and has good title to, the Limited Partnership Interests free and clear of all
Liens except for Permitted Exceptions, with full power and authority to vote,
transfer and sell the Limited Partnership Interests and consummate the
Contemplated Transactions relating thereto, in accordance with the Partnership
Agreement.
(f) The Shares. The Shares constitute all of the issued and
-----------
8
<PAGE>
outstanding shares of capital stock of FTI. Seller owns and holds good title to
the Shares free and clear of any Lien and, upon consummation of the Contemplated
Transactions in accordance herewith, at the Closing, Purchaser will own all of
the Shares. At the Closing, FTI will not have outstanding any rights, warrants
or options to acquire securities of FTI or any convertible or exchangeable
securities and, other than pursuant to this Agreement, no person will have any
right to acquire any securities of FTI. All of the Shares have been duly
authorized and duly and validly issued and are fully paid and non-assessable,
and none were issued in violation of any preemptive rights, rights of first
refusal or other contractual or legal restrictions of any kind. FTI does not own
or control any assets other than (when transferred to it) the Park and has no
Liabilities other than as provided herein and any Liabilities arising solely by
operation of Law by virtue of FTI's ownership of the Park.
(g) Contracts. (i) Since Lease Commencement Date, neither Seller, FTI
---------
nor Parent has entered into any Contracts that would be binding on the Park or
Purchaser, other than Contracts of which Purchaser or an Affiliate of Purchaser
has knowledge.
(ii) All Transferred Contracts (defined below) are valid,
subsisting, in full force and effect and binding upon Seller or FTI and, to the
knowledge of Seller, the other parties thereto in accordance with their terms.
Neither Seller nor FTI is in default, nor does Seller have notice of alleged
default under any Transferred Contracts in any material respect, nor, to the
knowledge of Seller, is any other party thereto in default thereunder in any
material respect. To Seller's knowledge, there is no condition that with notice
or the lapse of time or both would constitute a material default (or give rise
to a termination right) under any such Transferred Contract. "Transferred
Contracts" shall refer to the Contracts listed on Schedule 6.01(g).
(h) Intellectual Property Rights. Except as set forth on Schedule
------------------------------ --------
6.01(h) or as disclosed in the IP Agreement, (i) Neither Seller nor FTI has
- -------
received any written notice of invalidity, infringement or misappropriation from
any third person with respect to any Intellectual Property Rights; (ii) to the
knowledge of Seller and FTI, no third party has materially interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property Rights.
(i) Claims and Proceedings. Except as set forth on Schedule 6.01(i)
----------------------- -----------------
annexed hereto, there are no outstanding Orders of any Governmental Body against
or involving the Park or Securities or Seller's or FTI's interest therein,
except for those Orders in which Purchaser or any Affiliate thereof (including
the Partnership) is a named party or of which any such party has knowledge.
Except as set forth on such Schedule, there are no Claims (whether or not the
defense thereof or Liabilities in respect thereof are covered by insurance),
pending or to the knowledge of Seller threatened, against or involving the Park
or Securities, except for those Claims in which Purchaser or any Affiliate is a
named party or of which any such party has knowledge.
(j) Tax Matters. All income Tax returns of every nature required by
-----------
any Governmental Body to be filed by Seller or which include or should include
Seller ("Tax Returns") have been filed for all periods ending on or before the
Closing Date to the extent required to be filed by such date, (b) all income
Taxes shown to be due and payable on such Tax Returns or on any assessments
related to such Tax Returns have been paid, (c) all such Tax Returns and reports
and the information and data contained therein fairly present the information
9
<PAGE>
required to be shown therein, and reflect all income Tax liabilities of Seller
for the periods covered by such Tax Returns, (d) except as specifically
disclosed to the Purchaser in writing, Seller has no unpaid liability for any
income Taxes of any nature whatsoever for any period prior to the Closing Date,
and (e) except as Seller has specifically disclosed to the Purchaser in writing,
(i) the Tax Returns of Seller or that include Seller have not been audited, and
are not now under audit, by any Governmental Body, and (ii) there are no
agreements, waivers or other arrangements providing for an extension of time
with respect to the assessment of any income Taxes of any nature against Seller
or with respect to any Tax Return filed by Seller or that includes Seller, or
any Claims now pending or threatened against Seller with respect to any income
Taxes of any nature against Seller or with respect to any Tax Return filed by
Seller or that includes Seller, or any Claims now pending or threatened against
Seller with respect to any income Taxes or any matters under discussion with any
Governmental Body relating to any income Taxes, or any claims for additional
income Taxes asserted by any Governmental Body. Purchaser acknowledges that Tax
Returns of the constituent partners of Seller are included in a consolidated
return of their ultimate parent entity and that such Tax Returns are routinely
audited and are currently being audited by the IRS and two state departments,
and agrees that such audits are not within the scope of the representation and
warranty contained in this Section 6.01(j).
(k) Employee-Related Matters. To the knowledge of Seller, there are no
------------------------
Liens existing, or with the giving of notice or passage of time may exist,
against the Park arising under ERISA, or any other compensation or employment
related Lien or Liability that could become the responsibility of Purchaser,
which arose from or is otherwise related to Seller's employment of any person.
(l) Assessments. To Seller's knowledge, there are no public
-----------
improvements in the nature of off-site improvements or otherwise, which have
been ordered to be made and/or which have not heretofore been assessed and, to
Seller's knowledge, there are no special or general assessments currently
affecting or pending against the Park or any portion thereof by any Governmental
Body.
(m) Environmental. To the knowledge of Seller and Parent, except as
-------------
otherwise disclosed in writing by Seller or Parent to Purchaser or disclosed in
any written environmental site assessment of the 9.801 acre tract (as described
in Exhibit "A") in Seller's or Parent's possession and delivered to Purchaser,
no Hazardous Materials (as such term is defined in the Lease Agreement) is
located on, in or under the 9.801 acre tract.
6.02 Covenants and Agreements of Seller and Parent. Other than as necessary
---------------------------------------------
to accomplish the Contemplated Transactions, from the date hereof through the
Closing Date, Seller and Parent covenant, warrant and agree that they shall
(and, to the extent applicable, shall cause FTI to):
(a) Not grant any Lien upon any of the Park, nor enter into any
Contract of a type required to be included on any Schedule hereto.
(b) Consult with Purchaser prior to any renewal, amendment, extension
or termination of, waiver of any material right under, or any failure to renew,
any Transferred Contract and will not take any such action if Purchaser
reasonably objects thereto in writing.
10
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(c) With respect to Section 9.6 of the La Cantera Master Covenants and
Easements ("Master Covenants") and Sections 9.1, 9.4 and11.2 of the La Cantera
Declaration of Commercial Covenants, Conditions and Restrictions ("Commercial
Covenants"), Parent will not (and will cause its Affiliates not to) take any
actions allowed or amend or consent to the amendment of the Master Covenants or
Commercial Covenants in any manner that has a material adverse effect upon any
right of the owner of the Park.
(d) During the period commencing March 9 and ending on the Closing,
Parent and Seller did not and will not use the 9.801 acre tract (as described in
Exhibit "A") for the use, storage, generation, release, manufacture, treatment,
transportation or disposal of any Hazardous Materials (as such term is defined
in the Lease Agreement). This covenant will survive Closing for a period of
three years.
6.03 Representations and Warranties of Purchaser. (a) Organization.
----------------------------------------------- ------------
Purchaser is an entity, duly organized and validly existing under the laws of
the state of its organization, and, if different, is duly qualified to do
business in the State in which the Park is located.
(b) Authorization. Purchaser has full legal right, power and authority
-------------
to enter into this Agreement, to execute and deliver the documents necessary or
appropriate therefor and to consummate the Contemplated Transactions and
otherwise to perform all the terms and conditions to be performed by Purchaser
under this Agreement by Purchaser. The performance by Purchaser of the
Contemplated Transactions have been duly and validly authorized by all requisite
governance action of Purchaser (including any partner or Affiliate thereof), and
this Agreement has been, and the Transaction Documents shall at Closing be, duly
and validly executed and delivered by Purchaser. This Agreement is, and at
Closing the other Transaction Documents will be, the legal, valid and binding
obligation of Purchaser, enforceable against Purchaser in accordance with their
terms, except as limited by applicable bankruptcy, moratorium, insolvency or
other similar laws affecting generally the rights of creditors or by principles
of equity.
(c) No Conflicts. The execution and delivery by Purchaser of this
-------------
Agreement and the consummation of the Contemplated Transactions by Purchaser
will not (i) result in any breach of any of the terms or conditions of, or
constitute a default under, the organizational and governance documents of
Purchaser, or any commitment, mortgage, note, bond, debenture, deed of trust,
contract, agreement, license or other instrument or obligation to which
Purchaser is a party, the breach of which would adversely affect Purchaser's
ability to perform under this Agreement; (ii) result in any violation of any
governmental requirement applicable to Purchaser that would adversely affect the
Purchaser's ability to perform under this Agreement, assuming compliance with
HSR; (iii) require notice to, or the consent, authorization, approval or order
of, any person, except such notices which have been given or consents,
authorizations, approvals or orders which have been obtained and that required
by HSR.
In the event that, prior to Closing, the rights of Premier Parks Inc.
hereunder, are assigned to one or more of its Affiliates, in accordance with
Section 17.06 hereof, the foregoing representations and warranties of Purchaser
shall thereupon be deemed made by Premier Parks Inc. and each such Affiliate.
11
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6.04 Post Closing Covenant and Agreement. (a) Seller and Purchaser agree
------------------------------------
that Sections 13.1(d) Assessments, 13.4 Non-Competition by Seller and its
Affiliates Regarding Other Theme Parks, 13.6 Existing Tax Phase-In Agreements,
and 13.9 Endangered Species, of the Lease Agreement as such provisions have been
modified and set out in their entirety on Schedule 6.04 attached hereto, are
incorporated herein in their entirety and shall be binding upon the parties
hereto. As set forth in the Lease Release, these provisions are not released by
the terms of the Lease Release. This provision and the provisions set forth in
such Schedule shall survive Closing.
(b) With respect to Section 9.6 of the Master Covenants, Parent will
not (and will cause its Affiliates not to) amend or consent to the amendment of
such Master Covenants in any manner, that has a material adverse effect upon any
right of the owner of the Park. It is agreed by the parties that an amendment
pursuant to Section 9.6 (i) of the Master Covenants and any technical amendment
that is necessary to make any provision currently contained in the Master
Covenants that may be otherwise unenforceable, enforceable in accordance with
its terms will not violate this provision. This provision shall survive Closing.
(c) Purchaser, or its Affiliates shall be entitled to enforce any
right or remedy of Seller and otherwise enjoy the benefits under the Benefit
Contracts (as such term is defined in the Lease Agreement) without assuming or
otherwise being liable for any obligation thereunder. This provision shall
survive Closing.
6.05 Efforts to Consummate. Subject to the terms and conditions herein,
----------------------
each of Seller and Purchaser, without payment or further consideration, shall
use their respective good faith efforts to take or cause to be taken all action
and to do or cause to be done all things necessary, proper or advisable under
applicable Laws, Permits and Orders to consummate and make effective, as soon as
reasonably practicable, the Contemplated Transactions and each party hereto
shall cooperate with the other in all of the foregoing.
6.06 Notices of Certain Events. From the date hereof to the Closing Date,
--------------------------
Seller and Purchaser shall promptly notify the other of:
(a) any notice or other communication from any person alleging that
the consent of such person is or may be required in connection with the
Contemplated Transactions;
(b) any notice or other communication from any Governmental Body or
any third party under any Contract in connection with or otherwise affecting the
Contemplated Transactions; and
(c) any notice of an event, condition or circumstance occurring from
the date hereof through the Closing Date that would constitute a violation or
breach of any representation or warranty, whether made as of the date hereof or
as of the Closing Date, or that would constitute a violation or breach of any
covenant of any party contained in this Agreement.
6.07 INTENTIONALLY LEFT BLANK
------------------------
12
<PAGE>
6.08 Discharge of Debt. Seller shall pay, discharge or release on or prior
-----------------
to the Closing Date all Debt that is secured by a Lien upon the Park, unless
such Lien or Debt was caused by or arose through or under Purchaser or its
Affiliates.
6.09 Capital Improvements. (a) Purchaser shall invest Fifty Million
---------------------
($50,000,000.00) Dollars in additional capital improvements (all capital
improvement expenditures that are actually capitalized on the books of the Park
in accordance with GAAP will be "Capital Improvements") for the Park during the
"Investment Period" (as hereinafter defined in the following increments: at
least Ten Million ($10,000,000.00) Dollars on or before December 31, 1999; an
aggregate of at least Twenty Million ($20,000,000.00) Dollars on or before
December 31, 2000; and a total of at least Fifty Million ($50,000,000.00)
Dollars on or before December 31, 2003 (the period from the Closing Date to
December 31, 2003 being sometimes referred to as the "Investment Period").
Capital Improvements prior to December 31, 2000 shall include either (i) removal
of the Skycoaster or (ii) modification of the Skycoaster to minimize the visual
impact of the Skycoaster in a manner reasonably acceptable to LCDC. In addition
to the remedies available to Seller at law or equity, no amounts expended for
Capital Improvements prior to December 31, 2000 in excess of Ten Million
($10,000,000) Dollars, shall apply to Purchaser's requirements under this
Section should Purchaser fail to timely perform in all material respects the
Skycoaster removal or modifications required by this Agreement. Within ninety
(90) days after the end of each respective time period, Purchaser shall provide
Seller evidence of the required investment in the Capital Improvements for such
time period. In determining Purchaser's compliance with this Section 6.09, the
amounts expended prior to the Investment Period for the "Frisbee" and "Top Spin"
rides for the 1998 season and other rides and attractions not operational during
the 1998 season, but intended to be operational for the 1999 or later season
need not have been expended during the Investment Period to qualify as part of
the Capital Improvement investments. The time periods contained are not subject
to extension by reason of Force Majeure. The impact of such Force Majeure is
governed by Section 6.09 (b).
(b) If Purchaser, by reason of Force Majeure, is prohibited from
investing in Capital Improvements as required in Section 6.09 (a), Purchaser
shall, prior to the end of any applicable time period in Section 6.09 (a),
deposit an amount in cash (the "Cash Escrow"), equal to the difference between
the amount required to have been invested in Capital Improvements for such time
period and the amount actually invested (the "Deficit") in an interest bearing
escrow account with an escrow agent and pursuant to an escrow agreement mutually
acceptable to the parties. Except as otherwise provided in Section 6.09(c), the
Cash Escrow shall be used solely for the investment in the Capital Improvements
as required herein and must be fully invested in Capital Improvements within
eighteen (18) months of the expiration of the time period in which such
investment was to have been made under Section 6.09(a). The interest earned on
the Cash Escrow shall be Purchaser's unless Purchaser fails to invest the Cash
Escrow within said eighteen months, then the interest will become payable to
Seller as part of the Liquidated Damage Amount (defined below).
(c) If Purchaser fails (i) to invest in Capital Improvements as
required herein during the applicable portion of the Investment Period or (ii)
to expend the entire Cash Escrow as required herein, within eighteen (18) months
as set forth in subsection (b) above, then Purchaser shall immediately pay
Seller an amount equal to 125% of the Deficit or unused Cash Escrow (as
applicable) (the "Liquidated Damages Amount"), less such unused Cash Escrow (and
13
<PAGE>
interest thereon) that shall be paid by the escrow agent to Seller as a portion
of the Liquidated Damages Amount. It is acknowledged that the escrow agreement
shall provide for such direct payment to Seller.
(d) If Seller fails to receive any Liquidated Damage Amount on or
before thirty (30) days after receipt of written demand by Seller to Purchaser,
then Seller shall have the right to require the reconveyance of the Park to
Seller (or Seller's designee) except for Contracts to which Seller (or Seller's
designee) has a commercially reasonable objection, by special warranty deed
subject only to the Permitted Exceptions (except for Purchaser Exceptions that
are not Purchaser Permitted Exceptions) for a total consideration of Ten
($10.00) dollars. Upon such conveyance, Seller (or Seller's designee) shall pay
Purchaser the repurchase price ($10.00 dollars) in funds immediately available
in Bexar County, Texas. Ad valorem taxes and assessments shall be prorated as of
12:01 a.m. on the date of such reconveyance. If the title proposed to be
conveyed to Seller (or Seller's designee) is subject to any Lien which is not
permitted in this section, then Seller (or Seller's designee), in addition to
all other rights and remedies which it may have at law or equity, may remove any
such Lien and all the costs and expenses (including, but not limited to
reasonable attorneys' fees) incurred in connection therewith by Seller (or
Seller's designee) shall be promptly paid by Purchaser. Seller (or Seller's
designee) shall be entitled to receive, in its name, title insurance and a
survey complying with the requirements of this Agreement for the original
conveyance from Seller to Purchaser and subject to the Permitted Exceptions
(except for Purchaser Exceptions that are not Purchaser Permitted Exceptions).
All closing costs required in connection with this repurchase, including but not
limited to title insurance, shall be borne by Purchaser or its Affiliate.
Purchaser agrees that the Park to be reconveyed under this Section 6.09 and
under Section 15.02, except as otherwise provided therein, under Section 15.02
herein, shall be deemed to include any real or tangible personal property used
or held for use in connection with the ownership or operation of the Park at the
time of Seller's notice to Purchaser of its exercise of its right to require
reconveyance. This Section 6.09 shall survive Closing and shall be made of
record in the deed or in such other manner as may be reasonably acceptable to
Seller.
6.10 Demographic Information. (a) Subsequent to the Closing, Purchaser
------------------------
shall provide the following demographic information to Seller:
(i) Monthly Attendance at the Park
(ii) Per Capita spending of attendees
Additionally, Purchaser shall provide the following information, based on
statistical sampling, guest profile and attendance distribution, and the
following factors to the extent Purchaser is then gathering such information:
(iii) Income
(iv) Geographic location of attendees, including Mexico
(v) Age Distribution of Attendees
(vi) Marital status of Attendees
(vii) Average Length of stay of Attendees
Purchaser shall provide such demographic reports as requested by Seller,
14
<PAGE>
but in no event more than twice a year. Purchaser agrees to collect such
demographic information about the Park in a manner consistent with the other
theme parks owned by it and its Affiliates. If Purchaser ceases to collect such
information, Purchaser shall promptly notify Seller of its decision to cease
gathering such information and Seller may request that Purchaser resume
collecting such information as it relates to the Park and will reimburse
Purchaser for its reasonable costs incurred to gather such information.
(b) Seller acknowledges and agrees that all information provided to it
pursuant to this Section 6.10 (the "Demographic Information") will be highly
confidential, proprietary information of Purchaser. Seller will not use or
disclose to any person the Demographic Information except that such information
may be used and disclosed by Seller and its Affiliates in marketing activities
relating to La Cantera; provided that (i) the form of such use and/or disclosure
shall have been approved in writing by Purchaser, which approval shall not be
unreasonably withheld or delayed, except the form in which Purchaser provides
such information to Seller will be deemed a reasonably acceptable form and (ii)
Seller shall use commercially reasonable efforts to ensure that such information
is not given to any person which, directly or indirectly through its Affiliates,
is engaged in the ownership, operation or management of theme parks, water parks
or amusement parks. The parties agree that should Seller obtain an executed
agreement and representation in a form reasonably acceptable to Purchaser prior
to any disclosure that the party to whom Seller intends to disclose such
information will keep such information confidential, will not use or disclose
such information, and is not engaged in any activity listed in sub-paragraph
(ii) of the preceding sentence and use good faith efforts to orally notify
Purchaser prior to such disclosure, Seller shall be deemed to have used
commercially reasonable efforts to prevent disclosure unless Seller knows or
reasonably should have known the statement was untrue. The parties agree that a
violation of the provisions of this Section 6.10(b) will cause irreparable
damage to Purchaser, and Purchaser, in addition to any other remedies available
to it, shall be entitled (without any requirement of posting a bond or other
security) to an injunction enjoining and restraining Seller and its Affiliates
from violating or continuing to violate or threatening to violate this Section.
In addition to any remedies referred to in the preceding sentence, in the event
of a material, willful breach by Seller or its Affiliate of this Section 6.10
(b), the obligations of Purchaser under Section 6.10(a) shall thereupon
terminate.
The covenant contained in this Section 6.10 shall survive Closing.
6.11 Access to Books and Records. Purchaser and Seller covenant and agree
---------------------------
that each shall have reasonable access to all Books and Records (except the
transaction documents associated with this Agreement and the Lease Agreement)
related to the Park to prepare a defense of Liabilities, conduct audits or other
business related activities. If, after Closing, any party determines to destroy
any such Books and Records, it will endeavor to give to the other party at least
two months prior written notice thereof, and such other party shall have the
right to take possession of any such Books and Records. This covenant shall
survive Closing.
ARTICLE VII
CONDITIONS TO CLOSING
---------------------
15
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7.01 Conditions to the Obligations of the Parties. The obligations of
----------------------------------------------
Seller and Purchaser to consummate the Contemplated Transactions are subject to
the satisfaction of the following conditions:
(a) No Injunction. No provision of any applicable Law and no Order
--------------
shall prohibit the consummation of the Contemplated Transactions and the
applicable waiting period under HSR shall has expired.
(b) No Proceeding or Litigation. No Claim instituted by any person
-----------------------------
(other than Purchaser, Seller, or their respective Affiliates), shall have been
commenced or pending against Seller, Purchaser or any of their respective
Affiliates, officers or directors which Claim seeks to restrain, prevent, change
or delay in any material respect the Contemplated Transactions or seeks to
challenge any of the material terms or provisions of this Agreement or seeks
material damages in connection with any of such transactions.
7.02 Conditions to the Obligations of Purchaser. All obligations of
----------------------------------------------
Purchaser hereunder are subject, at the option of Purchaser, to the fulfillment
prior to or at the Closing of each of the following further conditions:
(a) Performance. Seller and Parent shall have performed and complied
-----------
with all agreements, obligations and covenants required by this Agreement to be
performed or complied with by them, at or prior to, the Closing Date, including
without limitation the delivery of the items (including the Transaction
Documents) required to be delivered by Seller and Parent under Section 8.02
below.
(b) Representations and Warranties. The representations and warranties
------------------------------
of Seller and Parent contained in this Agreement and in any certificate or other
writing delivered by Seller or Parent pursuant hereto shall be true at, and as
of, the Closing Date as if made at, and as of, such time.
7.03 Conditions to the Obligations of Seller. All obligations of Seller
----------------------------------------
hereunder are subject, at the option of Seller, to the fulfillment prior to or
at the Closing of each of the following further conditions:
(a) Performance. Purchaser shall have performed and complied with all
-----------
agreements, obligations and covenants required by this Agreement to be performed
or complied with by it at or prior to the Closing Date, including without
limitation the delivery of the items (including the Transaction Documents)
required to be delivered by Purchaser under Section 8.03 below.
(b) Representations and Warranties. The representations and warranties
------------------------------
of Purchaser (including Premier Parks Inc., and any assignee of its rights
hereunder) contained in this Agreement and in any certificate or other writing
delivered by Purchaser pursuant hereto shall be true at, and as of, the Closing
Date as if made at and as of such time.
16
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ARTICLE VIII.
CLOSING
-------
8.01 Closing Date. Unless extended as provided in this Agreement, and
------------
provided all conditions described in Article VII are satisfied or waived by
Purchaser and Seller, Purchaser and Seller shall consummate and close the
Contemplated Transactions on NOVEMBER 9, 1998 during regular business hours at a
time mutually acceptable to Seller and Purchaser in the offices of Seller in San
Antonio, Texas, unless an earlier date and time is mutually agreed to by
Purchaser and Seller or, if the conditions, other than those related to actions
to be taken at Closing, set forth in Section 7.02 and 7.03 above have not been
satisfied or waived by such date, then at such other date and time as may be
agreed upon by Purchaser and Seller which is at least five (5), and no more than
fifteen (15), days after the satisfaction or waiver of those conditions. The
date of the consummation and closing of the purchase and sale contemplated by
this Agreement is herein referred to sometimes as the "Closing Date", and the
actual consummation and closing of the purchase and sale of the Securities
contemplated by this Agreement is herein referred to sometimes as the "Closing".
8.02 Items to be Delivered by Seller on Closing Date. On the Closing
------------------------------------------------
Date, Seller shall deliver for the benefit of Purchaser the following (all of
which shall be duly executed, witnessed and notarized where appropriate and,
where appropriate, be in recordable form).
(a) Certificates representing the Shares, with stock powers duly
endorsed in blank or otherwise in suitable form for transfer by delivery.
(b) A Mortgagee's Policy of Title Insurance and Owner Policy of
Title Insurance in the face amount of $45,000,000.00, insuring in FTI good and
indefeasible fee simple title to the Realty, subject only to the Permitted
Exceptions, the Special Warranty Deed, Deed of Trust, and other documents
recorded in connection with the transfer of the Park from Seller to FTI and (i)
with the standard exception concerning shortages in area or discrepancies or
conflicts in boundary lines, or any encroachments, or any overlapping of
Improvements deleted to the maximum extent permitted by applicable title
insurance regulation; (ii) the exception concerning restrictions endorsed "None
of Record" except as may be included in the Permitted Exceptions; (iii) the
exception as to taxes limited to the year of Closing and subsequent years and
endorsed "Not Yet Due and Payable"; and (iv) the exception concerning parties in
possession limited to the tenants under the Lease Agreement.
(c) If Seller is not a "foreign person" (as defined in Code
Section 1445(f)(3) and the regulations issued thereunder), a non-foreign
transferor affidavit in recordable form containing such information as shall be
required by Code Section 1445 (b)(2) and regulations issued thereunder.
(d) A copy of the articles of incorporation or partnership
agreement of Seller, FTI and each general partner of Seller and Parent, if
applicable, with all amendments thereto, certified by an officer or a general
partner of Seller, an officer of FTI, each general partner of Seller and Parent,
to be complete, true, and correct without exception and in full force and effect
17
<PAGE>
as of the Closing Date, together with original certified (by the Secretary of
State) copies of the Certificate of Incorporation or limited partnership
certificate/agreement, as the case may be, and, where available, certificates of
good standing and qualification with respect to each of such entities dated
within 30 days of the Closing Date.
(e) Original executed counterparts of the corporate resolutions
or partnership consents of Seller, each general partner of Seller and Parent, if
and to the extent required under the relevant documentation, each limited
partner of Seller and each general and limited partner of each of the foregoing,
if applicable, or other documents as Purchaser shall reasonably request at least
five (5) days prior to the Closing Date to evidence and confirm the power and
authority of Seller to close the transaction contemplated herein.
(f) An executed Amended and Restated Note as described in Section
3.01(b) above and in the form attached hereto as Exhibit "B".
(g) An executed Release of the Guaranty and other documents
associated therewith in the form attached hereto as Exhibit "C" (together with
the Release referred to in Section 8.03(i) the "Lease Release").
(h) An executed Right of First Refusal in the form attached
hereto as Exhibit "D" (the "Right of First Refusal").
(i) An executed assignment by Seller to Purchaser of the Limited
Partnership Interests in the form attached hereto as Exhibit "E" together with
-----------
all certificates, if any, evidencing such Limited Partnership Interests, in
suitable form for transfer by delivery.
(j) A certificate, executed by an officer of Parent and of the
general partner of Seller, dated as of the Closing Date which confirms that all
of the matters set forth in Section 7.02(a) and (b) are true and correct in all
material respects, in the form annexed hereto as Exhibit "F".
-----------
(k) An executed Assignment and Assumption Agreement in the form
attached hereto as Exhibit "Q" ("Assignment and Assumption Agreement").
(l) An executed Assignment of Trademarks, Copyright and
Intellectual Property Rights the forms of which are attached hereto as Exhibit
"R-1, R-2 and R-3".
(m) An Amendment to the Replacement Cost Sharing Agreement which
includes the 9.801 acre tract under such agreement.
(n) An approval letter stating that a picnic area with pavillions
and amenities reasonably related amenities thereto is an authorized use under
the Commercial Covenants.
(o) An Assignment of Sewer Capacity for the 9.801 acre tract in
the form attached hereto as Exhibit "S" executed by Parent.
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(p) Such other documents, instruments and certificates as are
contemplated herein or otherwise required or reasonably requested to effect and
complete the Closing.
8.03 Items Delivered by Purchaser on Closing Date. On the Closing Date,
----------------------------------------------
provided all conditions set forth in Sections 4.01 and 5.01 and in Article VII
----------------------
have been fully satisfied and/or complied with, Purchaser shall deliver (or
cause FTI to deliver) for the benefit of Seller the following (all of which
shall be duly executed, witnessed, and notarized, and be in recordable form
where appropriate).
(a) The cash portion of Total Purchase Price.
(b) A copy of the articles of incorporation or partnership
agreement of Purchaser, if applicable, with all amendments thereto, certified by
an officer or a general partner of Purchaser to be complete, true, and correct
without exception and in full force and effect as of the Closing Date.
(c) Original executed counterparts of the corporate or
partnership resolutions of Purchaser, if applicable, or other documents as
Seller shall reasonably request at least five (5) days prior to the Closing Date
to evidence and confirm the power and authority of Purchaser to close the
transaction contemplated herein.
(d) An executed Amended and Restated Note.
(e) An executed Declaration of Theme Park Covenants in the form
attached hereto as Exhibit "G" and a Memorandum thereof, executed and
------------
acknowledged for recording in the Real Property Records of Bexar County, Texas
in form mutually agreeable to the parties.
(f) An easement, in the form attached hereto as Exhibit "H",
------------
granting the La Cantera Community Organization, Inc. ("LCCO") or La Cantera
Development Company ("LCDC") the right to maintain the entrance area of the
Park.
(g) An easement granting LCCO or LCDC the right at its own
expense to landscape the buffer area along the top of the quarry wall to screen
Improvements at the Park in the form attached hereto as Exhibit "I".
-----------
(h) An executed acknowledgement, in the form attached hereto as
Exhibit "J" regarding the provision of security along La Cantera Parkway during
- -----------
major events ("Security Acknowledgement").
(i) An executed Release of the Lease Agreement and other
documents associated therewith in the form attached hereto as Exhibit "K".
(j) An executed Subordination of Lease Agreement which
subordinates the Lease Agreement to the rights of Seller pursuant to this
Agreement in the form attached hereto as Exhibit "L".
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(k) An executed Right of First Refusal.
(l) An Intellectual Property Agreement, specifying the
Intellectual Property Rights to be reassigned to Seller in accordance with this
Agreement if Seller reacquires the Park in the form attached hereto as Exhibit
-------
"M" ("IP Reconveyance").
- -----------------------
(m) An executed Termination of the Option to Purchase Real
Property dated effective as of March 9, 1996 executed by LCDC and SATP in the
form attached hereto as Exhibit "N".
-----------
(n) A certificate, executed by an officer of Premier Parks Inc.,
and any assignee of its rights hereunder, dated as of the Closing Date, which
confirms that all matters set forth in Sections 7.03(a) and (b) are true and
correct in all material respects, in the form attached hereto as Exhibit "O".
(o) An executed Deed of Trust and other security agreements in
the form attached hereto as Exhibit "P".
(p) An Amendment to the Replacement Cost Sharing Agreement which
includes the 9.801 acre tract under such agreement.
(q) An executed Assignment and Assumption Agreement.
(r) Such other documents, instruments and certificates as are
contemplated herein to consummate the Contemplated Transactions.
8.04 Closing Costs and Attorneys' Fees. On the Closing Date, and except as
----------------------------------
otherwise provided for herein, Seller shall pay the cost of examining and
insuring title to the Park, as provided for herein, the cost of the Survey, the
costs of recording the Special Warranty Deed and other conveyancing documents,
the costs of clearing and/or releasing any and all exceptions to title which are
not Permitted Exceptions except for exceptions to title caused by or arising
through Purchaser or its Affiliates, Seller's attorneys' fees, fifty percent
(50%) of any escrow fees, 50% of the filing fee incurred by Purchaser to comply
with HSR, any other costs incurred by Seller, and all other costs as
specifically agreed in other parts of this Agreement. Purchaser shall pay
Purchaser's attorneys' fees, the costs of clearing and/or releasing any and all
exceptions to title which are not Permitted Exceptions and are exceptions to
title caused by or arising through Purchaser or its Affiliates, fifty percent
(50%) of any escrow fees, the cost of recording the Deed of Trust, any other
costs incurred by Purchaser and other costs as specifically agreed in other
parts of this Agreement. In the event no agreement is contained herein
respecting the payment of a particular cost or expense of Closing, such cost or
expense shall be paid equally by both parties. None of Seller's closing costs
and no other costs and expenses of Seller in complying with its covenants and
agreements under this Agreement shall be deducted from or charged against gross
income for the Park.
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8.05 Prorations. Pursuant to the Lease Agreement, Purchaser's Affiliate is
----------
responsible for all ad valorem Taxes and assessments on the Park. Purchaser
shall remain responsible for such Taxes and assessments accruing against the
Park.
ARTICLE IX
DESTRUCTION, DAMAGE, OR CONDEMNATION
------------------------------------
9.01 Risk of Loss.
------------
(a) Casualty. If the Park or any portion thereof shall be damaged or
--------
destroyed prior to the Closing, Purchaser shall have the right to terminate this
Agreement in accordance with Section 7.1 of the Lease Agreement. In the event
that Purchaser does not terminate this Agreement, then the Purchaser and Seller
shall consummate the Closing; in that event, all of Seller's and FTI's right,
title and interest in and to the claims and proceeds of any insurance covering
such damage shall be assigned to Purchaser at the Closing, and there shall be no
reduction in the Total Purchase Price. Notwithstanding any other provision of
this Agreement to the contrary, in the event that Purchaser or its Affiliate
fails to maintain insurance covering any such casualty to the extent Purchaser
(or such Affiliate) is required to do so in the Lease Agreement, if it has
otherwise become obligated to consummate this Agreement, Purchaser shall
consummate the purchase without regard to any such casualty and without
reduction in the Total Purchase Price. If Purchaser waives its right to
terminate the Agreement in the event of, and in accordance with, the foregoing,
neither Seller nor FTI shall settle or adjust any Claims relating to a casualty,
damage or destruction without Purchaser's prior written approval.
(b) Condemnation. If, prior to the Closing, any Claim is contemplated
------------
or commenced, or either party receives any written notice that any Claim may or
might be contemplated or commenced, to take any of the Park by eminent domain,
condemnation, compulsory purchase, expropriation or like proceedings or by deed
in lieu thereof, such party shall promptly deliver written notice thereof to the
other party, and Purchaser shall have the right to terminate this Agreement in
accordance with Section 7.2 of the Lease Agreement. In the event that Purchaser
does not terminate this Agreement, then the Purchaser and Seller shall
consummate the Closing; in that event, all of Seller's and FTI's rights, title
and interest in and to the award or, proceeds paid or payable with respect
thereto of the condemning authority shall be assigned without recourse to
Purchaser at the Closing, and there shall be no reduction in the Total Purchase
Price. If Purchaser, in writing, waives its right to terminate this Agreement in
the event of, and in accordance with, the foregoing, neither Seller nor FTI
shall settle or adjust any Claims relating to a condemnation without Purchaser's
prior written approval.
ARTICLE X.
REAL ESTATE COMMISSIONS
-----------------------
Seller and Parent, each warrant and represent that it has not dealt with
any real estate broker, dealer or salesman in connection with the transactions
contemplated herein, and that there are and shall be no brokerage fees,
21
<PAGE>
commissions, or other remuneration of any kind arising from the execution of
this Agreement or the Closing of the Contemplated Transactions or arising from
the Lease Agreement or the transactions contemplated thereby, as a result of
Seller's actions. Seller and Parent, each shall forever jointly and severally
indemnify and hold harmless Purchaser or FTI against and in respect of any and
all Claims, including, without limitation, reasonable attorneys' fees and court
costs, incurred by Purchaser resulting from any Claim by any broker or agent or
other person on the basis of any arrangements or agreements made or alleged to
have been made by or on behalf of Seller in respect to the transactions herein
contemplated. Purchaser warrants and represents that it has not dealt with any
real estate other broker, dealer or salesman in connection with the transactions
contemplated herein, and that there are and shall be no brokerage fees,
commissions, or other remuneration of any kind arising from the execution of
this Agreement or the Closing of the Contemplated Transactions as a result of
Purchaser's actions. Purchaser shall forever indemnify and hold harmless Seller
and Parent, each against and in respect of any and all Claims, including,
without limitation, reasonable attorney's fees and court costs, incurred by
Seller or Parent resulting from any Claim asserted against Seller or Parent by
any agent, broker or other person on the basis of any arrangement or agreements
made or alleged to be made by or on behalf of Purchaser in respect to the
transactions herein contemplated. The provisions of this Article X shall survive
the Closing Date.
ARTICLE XI.
NOTICES
-------
Any notice, demand or request that is given in connection herewith shall be
in writing and directed to Seller and Purchaser by: (a) certified mail, return
receipt requested, postage prepaid, or (b) nationally recognized overnight
carrier or personally by hand or by facsimile so long as evidence of actual
receipt is obtainable at their respective addresses set forth below. In the
event such notice or other communication is effected by personal delivery or by
an overnight express delivery courier, the date and hour of actual delivery
shall fix the time of notice. Absent a postal strike or other stoppage of the
mails, effective delivery of notice shall be determined as follows: (a) if by
registered or certified United States mail, the third business day after the
date at which the sealed envelope containing the notice is deposited in the
United States mail; and (b) if by other means permitted hereunder, the first
business day after the date delivered. Each party shall have the right to change
its address, for purposes of notice, by giving notice to the other party hereto
as provided above.
If to Seller or its Fiesta Texas Theme Parks, Ltd.
Affiliates, to: 9830 Colonnade Blvd.
Suite 600
San Antonio, Texas 78230-2239
Attn: Edward B. Kelley
with a copy to: Kenneth W. Smith
VP Real Estate Counsel
9800 Fredericksburg Road, C3W
San Antonio, Texas 78288
22
<PAGE>
If to Purchaser or Premier Parks Inc.
its Affiliates to: 122 E. 42nd Street
49th Floor
New York, New York 10168
Attn: James F. Dannhauser
Chief Financial Officer
with a copy to: Baer Marks & Upham LLP
805 Third Avenue
New York, New York 10022
Attn: Barbara E. Champoux, Esq.
The attorneys for either party may, but shall not be required to, give
notice on behalf of their respective clients in accordance herewith. The
provisions of this Article XI shall survive the Closing.
ARTICLE XII
SURVIVAL; INDEMNITY;
--------------------
12.01 Survival(a) Unless expressly provided herein, no representation,
--------
warranty, covenant or agreement contained in this agreement shall survive the
Closing but shall merge into the documents executed at Closing. Notwithstanding
any right of Purchaser fully to investigate the affairs of Seller and
notwithstanding any knowledge of facts determined or determinable by Purchaser
pursuant to such investigation or right of investigation, Purchaser has the
right to rely fully upon the representations, warranties, covenants and
agreements of Seller and Parent contained in this Agreement, or listed or
disclosed on any Schedule hereto or in any instrument delivered in connection
with or pursuant to any of the foregoing, including the Transaction Documents;
provided however, that Purchaser shall promptly advise Seller in writing of
information that comes to Purchaser's attention that leads Purchaser to conclude
that one or more of Seller's or Parent's representations or warranties are not
true.
The representations and warranties made by Seller and Parent in Sections
6.01, except the representations and warranties regarding the Realty contained
in 6.01(e) which shall not survive the Closing, shall survive the execution and
delivery of this Agreement and the Closing hereunder. Such surviving
representations and warranties shall terminate and expire on the date which is
one year after the Closing Date (the "First Anniversary Date") other than the
representation and warranty under 6.01(m) which shall terminate and expire on
the date which is three (3) years after the Closing Date, provided, however,
-------- -------
that the Liability of Seller or Parent shall not so terminate as to any specific
claim or claims of the type referred to in Section 12.02(a) hereof, whether or
not fixed as to Liability or as to liquidated amount, with respect to which
Seller has been given specific notice on or prior to the date on which such
Liability would otherwise terminate pursuant to the terms of this Section
12.01(a), and provided, further, that the termination of any such representation
-------- -------
and warranty shall not affect the ability of Purchaser to seek indemnification
in accordance with Section 12.02(b) (c) or (d) below.
23
<PAGE>
(b) All representations and warranties of Purchaser shall terminate
and expire on the First Anniversary Date; provided, however, that the Liability
-------- -------
of Purchaser shall not so terminate to any specific claim or claims of the type
referred to in Section 12.03(a) hereof, whether or not fixed as to Liability or
liquidated as to amount, with respect to which Purchaser has been given specific
notice on or prior to the date on which such liability would otherwise terminate
pursuant to the terms of this Section 12.01(b); and provided, further, that the
-------- -------
termination of any such representation and warranty shall not affect the ability
of Seller to seek indemnification in accordance with Section 12.03(b), (c), (d)
or (e) below.
12.02 Obligation of Seller and Parent to Indemnify. Seller and Parent,
----------------------------------------------
jointly and severally, agree to indemnify, defend and hold harmless Purchaser
(and its respective directors, officers, employees, Affiliates, successors and
assigns) from and against all Claims, losses, Liabilities, damages,
deficiencies, judgments, settlements, costs and investigation or other expenses
(including interest, penalties and reasonable attorneys' fees and disbursements
and expenses incurred in enforcing this indemnification) (collectively, the
"Losses") suffered or incurred by Purchaser or any of the foregoing persons
arising out of (a) any breach of the representations and warranties of Seller or
Parent contained in this Agreement or in the Schedules or any Transaction
Documents that survive the Closing, or (b) any breach of the covenants and
agreements of Seller or Parent contained in this Agreement or in the Schedules
or any Transaction Document, or (c) Liabilities for which Seller would have been
required to indemnify the Partnership Indemnitees (as such term is defined in
the Lease Agreement) pursuant to Articles 12 or 19 of the Lease Agreement (as
modified below in this Section 12.02 and by Section 12.04) if such Articles had
survived the Lease Release without regard to any subsequent amendment or
termination of the Lease Agreement, or (d) Liabilities which Seller would have
been required to indemnify the Manager or Partnership (as such terms are defined
in the IP Agreement) pursuant to Section 11.3 of the IP Agreement.
Notwithstanding the preceding, in no circumstance shall Seller's or Parent's
responsibility to indemnify Purchaser under this Section 12.02 extend to (i)
breach of a representation, warranty, covenant or agreement of Seller contained
in the Lease Agreement (other than those provisions of the Lease Agreement that
have been expressly incorporated into this Agreement , (ii) Environmental
Liabilities that arise or result from any change in Environmental Laws (as such
terms are defined in the Lease Agreement) subsequent to the effective date of
this Agreement, or (iii) Omissions Liabilities (as such term is defined in the
Lease Agreement).
12.03 Obligation of Purchaser to Indemnify. Purchaser agrees to indemnify,
------------------------------------
defend and hold harmless Seller (and any director, officer, employee, Affiliate
or successors and assigns of Seller) from and against any Losses suffered or
incurred by Seller or any of the foregoing persons arising out of (a) any breach
of the representations and warranties of Purchaser or of the covenants and
agreements of Purchaser contained in this Agreement or in the Schedules or any
Transaction Documents, or (b) any Liabilities expressly assumed by Purchaser
pursuant to this Agreement or the other Transaction Documents, or (c)
Liabilities which Purchaser (or its Affiliate) would have been required to
indemnify the Lessor Indemnitees (as such term is defined in the Lease
Agreement) pursuant to Articles 12 and 18 of the Lease Agreement (as modified
below in this Section 12.03 and by Section 12.04 hereof) if such Articles had
survived the Lease Release without regard to any subsequent amendment or
termination of the Lease Agreement or (d) any Liabilities for which Purchaser
(or its Affiliate) would have been required to indemnify the Lessor (as such
term is defined in the IP Agreement) pursuant to Section 11.2 of the IP
24
<PAGE>
Agreement, or (e) any third party Losses arising out of Seller being a limited
partner of the Partnership except for Losses arising out of the gross
negligence, willful misconduct or breach of the Partnership Agreement of, or by,
Seller. Notwithstanding the preceding, in no circumstance shall Purchaser's
responsibilities to indemnify Seller under this Section 12.03 extend to breach
of a representation, warranty, covenant or agreement of SATP contained in the
Lease Agreement (other than those provisions of the Lease Agreement that have
been expressly incorporated into this Agreement).
12.04 Lease Agreement. The parties agree that the provisions of Sections
----------------
12.2, 18.1 (excluding clauses (i)-(v) thereof) and 19.1 (excluding clauses
(i)-(v) thereof) of the Lease Agreement are hereby incorporated herein by
reference, except (i) references to the Partnership therein shall be deemed to
include Premier Parks Inc. and FTI, and (ii) reference to Lessor shall be deemed
to not include FTI and except as set forth in the last sentence of Section 12.02
and 12.03 hereof. As set forth in the Lease Release, these provisions are not
released by the terms of the Lease Release.
12.05 Notice and Opportunity to Defend Third Party Claims. (a) Promptly
------------------------------------------------------
after receipt by any party hereto (the "Indemnitee") of notice of any demand,
claim or circumstance which would or might give rise to a claim or the
commencement (or threatened commencement) of any action, proceeding or
investigation (an "Asserted Liability") that may result in a Loss, the
Indemnitee shall give prompt notice thereof (the "Claims Notice") to the party
or parties obligated to provide indemnification pursuant to Sections 12.02 or
12.03 (collectively, the "Indemnifying Party"). The Claims Notice shall describe
the Asserted Liability in reasonable detail and shall indicate the amount
(estimated, if necessary, and to the extent feasible) of the Loss that has been
or may be suffered by the Indemnitee.
(b) The Indemnifying Party may elect to defend, at its own expense and
with its own counsel, any Asserted Liability unless (i) the Asserted Liability
seeks an Order, injunction or other equitable or declaratory relief against the
Indemnitee or (ii) the Indemnitee shall have reasonably concluded that (1) there
is a conflict of interest between the Indemnitee and the Indemnifying Party in
the conduct of such defense or (2) the Indemnitee shall have one or more
defenses not available to the Indemnifying Party. If the Indemnifying Party
elects to defend such Asserted Liability, it shall within 30 days (or sooner, if
the nature of the Asserted Liability so requires) notify the Indemnitee of its
intent to do so, and the Indemnitee shall cooperate, at the expense of the
Indemnifying Party, in the defense of such Asserted Liability. If the
Indemnifying Party elects not to defend the Asserted Liability, is not permitted
to defend the Asserted Liability by reason of the first sentence of this Section
12.05, fails to notify the Indemnitee of its election as herein provided or
contests its obligation to indemnify under this Agreement with respect to such
Asserted Liability, the Indemnitee may pay, compromise or defend such Asserted
Liability at the sole cost and expense of the Indemnifying Party.
Notwithstanding the foregoing, neither the Indemnifying Party nor the Indemnitee
may settle or compromise any claim over the reasonable written objection of the
other; provided that the Indemnitee may settle or compromise any claim as to
--------
which the Indemnifying Party has failed to notify the Indemnitee of its election
under this Section 12.05 or as to which the Indemnifying Party is contesting its
indemnification obligations hereunder. In any event, the Indemnitee and the
Indemnifying Party may participate, at their own expense, in the defense of any
Asserted Liability. If the Indemnifying Party chooses to defend any Asserted
Liability, the Indemnitee shall make available to the Indemnifying Party any
25
<PAGE>
books, records or other documents within its control that are necessary or
appropriate for such defense. Any Losses of any Indemnitee for which
indemnification is available hereunder shall be paid promptly upon written
demand therefor.
12.06 Limits on Indemnification. Seller and Parent shall not be liable to
--------------------------
Purchaser for any Asserted Liability specified in Section 12.02(a) above unless
all Asserted Liabilities exceed $50,000, in which case Purchaser shall be
entitled to be indemnified for all Asserted Liabilities.
12.07 Exclusivity. The parties agree that the indemnification provisions of
-----------
this Article XII shall constitute the parties' sole and exclusive remedies for
breach of representations or warranties contained in this Agreement (other than
Claims in the nature of fraud).
This Article XII shall survive Closing.
ARTICLE XIII
TERMINATION; SPECIFIC PERFORMANCE
---------------------------------
13.01 Specific Performance. Seller and Purchaser acknowledge and agree
---------------------
that, if Seller or Purchaser wrongfully fails to proceed with the Closing in any
circumstance, Purchaser or Seller will not have adequate remedies at Law with
respect to such failure and that, in such event, Purchaser or Seller shall be
entitled, without the necessity or obligation of posting a bond or other
security, to commence a suit in equity to obtain specific performance of
Seller's or Purchaser's obligations under this Agreement. Seller and Purchaser
specifically affirm the appropriateness of such injunctive or other equitable
relief in any such action.
13.02 Termination. This Agreement may be terminated and the Contemplated
-----------
Transactions may be abandoned at any time prior to the Closing:
(a) By Purchaser, if (i) there has been a material misrepresentation
or breach of warranty on the part of the Seller or Parent in the representations
and warranties contained herein and such material misrepresentation or breach of
warranty, if curable, is not cured within 30 days after written notice thereof
from Purchaser; (ii) Seller or Parent has committed a material breach of any
covenant imposed upon it hereunder and fails to cure such breach within 30 days
after written notice thereof from Purchaser; or (iii) any condition to
Purchaser's obligations hereunder becomes incapable of fulfillment through no
fault of Purchaser and is not waived by Purchaser; provided that, in the event
of an exception to title that is not a Permitted Exception, such shall not be
deemed a misrepresentation or breach of warranty if Seller shall use
commercially reasonable efforts to remove such exception to title prior to
Closing and if unable to remove, Seller shall indemnify (or, if securing a Debt
or money obligation, to obtain a bond or other security reasonably acceptable
to, and in favor of) Purchaser against any Loss related to such title exception
and shall continue to use commercially reasonable efforts to remove such title
exception.
(b) By either Seller or Purchaser, if there shall be any Law that
makes consummation of the Contemplated Transactions illegal or otherwise
26
<PAGE>
prohibited, or if any Order enjoining Seller or Purchaser from consummating the
Contemplated Transactions is entered and such Order shall have become final and
non-appealable;
(c) By either Seller or Purchaser, if the Closing shall not have
occurred on or prior to December 31, 1998; provided that, (i) if so terminated
by Seller, Seller shall not be then in default hereunder as specified in Section
13.02(a)(i) or 13.02(a)(ii)or (ii) if so terminated by Purchaser, Purchaser
shall not be then in default hereunder as specified in Section 13.02(d)(i) or
13.02(d)(ii); or
(d) By Seller, if (i) there has been a material misrepresentation or
breach of warranty on the part of the Purchaser in the representations and
warranties contained herein and such material misrepresentation or breach of
warranty, if curable, is not cured within 30 days after written notice thereof
from Seller; (ii) Purchaser has committed a material breach of any covenant
imposed upon it hereunder and fails to cure such breach within 30 days after
written notice thereof from Seller; or (iii) any condition to Seller's
obligations hereunder becomes incapable of fulfillment through no fault of
Seller and is not waived by Seller.
13.03 Effect of Termination; Right to Proceed. (a) In the event that this
----------------------------------------
Agreement shall be terminated pursuant to Section 13.02(b) or (c), all further
obligations of the parties under the Agreement shall terminate without further
liability of any party hereunder. However, the provision contained in this
Article XIII, shall survive any termination of this Agreement and the parties
shall bear their respective costs associated herewith.
(b) In the event this Agreement shall be terminated pursuant to
Section 13.02(a) or (d), all further obligations of parties under this Agreement
shall terminate without further liability of any party hereunder except (i) to
the extent that a party has made a material misrepresentation or committed a
breach of any material covenant and agreement imposed upon it hereunder; and
(ii) to the extent that any condition to a party's obligations hereunder become
incapable of fulfillment because of the breach by the other party of its
obligations hereunder. In the event that a condition precedent to its obligation
is not met, nothing contained herein shall be deemed to require any party to
terminate this Agreement, rather than to waive such condition precedent and
proceed with the Contemplated Transactions.
ARTICLE XIV
INSURANCE
---------
14.01 Purchaser shall, or cause its Affiliates to, continue to carry
insurance on the Park generally in the form and coverages maintained for its
other theme parks; provided however, for a period of two (2) years after the
date of Closing such insurance shall also comply with the following
requirements: (i) the maximum deductible or self-insured retention shall not
exceed $100,000.00 dollars; (ii) the limits of liability shall be in excess of
$50,000,000.00 dollars; (iii) the policy of such insurance shall be an
"occurrence based" policy; (iv) the policy shall not contain an affirmative
exclusion of, or exception for, punitive damages; and (v) the policy shall have
a contractual liability endorsement in favor of Seller and its Affiliates.
Purchaser shall provide certificates of such insurance, evidencing the required
27
<PAGE>
coverages and expiration and renewal dates, to Seller upon reasonable request.
ARTICLE XV
USE RESTRICTION AND OPERATING COVENANT
--------------------------------------
15.01 Use. The Land shall be used for the development and operation of a
---
first-class, family entertainment theme park and it is hereby acknowledged that
the operating standards and practices employed at the Park since the Lease
Commencement Date meet such first-class family entertainment requirement.
Purchaser shall operate the Park as a whole, not necessarily with respect to any
specific ride, attraction or function within the Park, in accordance with the
general operations and quality philosophy currently in place at the Park which
shall include, but not be limited to items regarding safety, security,
cleanliness, maintenance and repairs. It is agreed by the parties hereto that
the restrictions set forth in this Section 15.01 shall survive the Closing, and
shall be memorialized in an instrument in recordable form, whether in the Deed
or in a separate instrument in form and substance reasonably acceptable to
Seller and Purchaser
15.02 Operating Covenant. For a period of twenty years commencing on the
-------------------
Closing Date, Purchaser shall keep the Park open for business at least ninety
(90) days each year and shall keep the Park open for at least six (6) continuous
hours on each of those ninety (90) days. Notwithstanding the foregoing or
anything to the contrary elsewhere herein, this covenant shall not be deemed to
be breached by a temporary closing of the Park arising out of Force Majeure,
during the pendency of such Force Majeure. Purchaser agrees that if Purchaser
fails to keep the Park open for the required time periods, Seller shall have the
right on five days notice to require the conveyance of the Park to Seller, or
any third party designated by Seller by special warranty deed (subject only to
the Permitted Exceptions (except for Purchaser Exceptions that are not Purchaser
Permitted Exceptions) one hundred eighty (180) days after the exercise of this
right. Seller shall have the right to require an appraisal of the Park to be
conducted in accordance with Schedule 15.02 to obtain the "Appraised Price".
Seller may then purchase the Park for the greater of the Appraised Price or
Purchaser's depreciated GAAP basis in the Park (the "Reconveyance Price"). If
Seller elects not to purchase the Park at such price, Seller may require
reconveyance of the Park subject to Purchaser's rights of removal set forth
below, by paying a price of Twenty-Two Million Five Hundred Thousand Dollars
($22,500,000.00) to Purchaser (the "Alternate Reconveyance Price"). If Seller
elects to purchase the Park for the Alternate Reconveyance Price, Purchaser may
remove any Improvements (other than buildings), Personalty, Books and Records
and Contracts thereon, provided Purchaser reasonably remediates the damage
caused to the Land and buildings thereon by such removal. Any such removal and
remediation shall be completed within one hundred eight (180) days after Seller
delivers written notice of its election to purchase the Park for the Alternate
Reconveyance Price. Upon any reconveyance pursuant to this Article XV, Seller
shall pay to Purchaser the Reconveyance Price or Alternate Reconveyance Price in
funds immediately available in Bexar County, Texas except that in the event of a
reconveyance for the Alternate Reconveyance Price, such amount will not be due
or paid to, Purchaser, until the time allowed hereunder for Purchaser to
complete the removal has expired and any required remediation of the Land and
buildings has been completed. Ad valorem taxes and assessments shall be prorated
28
<PAGE>
as of 12:01 a.m. on the date of such reconveyance. If the title proposed to be
reconveyed to Seller is subject to any Lien which is not permitted in this
Section Seller, in addition to all other rights and remedies which it may have
at law or equity may remove any such Lien, deduct all the costs and expenses
incurred in connection therewith by Seller (including, but not limited to
reasonable attorneys' fees) from the amount of the Reconveyance Price or
Alternate Repurchase Price otherwise payable as provided in this Section. Seller
shall be entitled to receive, in its name, title insurance and a survey
complying with the requirements of this Agreement for the Contemplated
Transactions. All closing costs required in connection with any reconveyance,
including but not limited to title insurance, shall be borne by Purchaser. This
provision shall survive Closing and shall be made of record in the deed or in
such other manner as may be reasonably acceptable to Seller.
ARTICLE XVI.
DISCLAIMERS
-----------
16.01 Express or Implied Warranties. Purchaser does hereby expressly
-------------------------------
acknowledge that no expressed or implied promises, representations, warranties
or agreements (whether oral or written) made by Seller or any actual or
purported agent of the Seller shall be deemed valid or binding upon Seller
unless expressly included in this Agreement or in any addendum to this Agreement
and signed by both Seller and Purchaser.
EXCEPT AS EXPRESSLY STATED HEREIN, SELLER AND PARENT DO NOT MAKE AND ARE
HEREBY RELIEVED OF ANY RESPONSIBILITY FOR ANY WARRANTY, EXPRESSED OR IMPLIED, AS
TO THE CONDITION OF THE PARK. PURCHASER AGREES FOR PURCHASER AND PURCHASER'S
SUCCESSORS IN INTEREST THAT PURCHASER IS ACQUIRING AN INDIRECT OWNERSHIP OF THE
PARK, THROUGH A PURCHASE OF THE SECURITIES, IN ITS "AS IS" CONDITION ACCEPTING
ALL FAULTS THEREOF WHETHER KNOWN OR UNKNOWN, PRESENTLY EXISTING OR THAT MAY
HEREAFTER ARISE, IF THERE BE ANY, SUBJECT TO SELLER'S AND PARENT'S OBLIGATIONS
UNDER THIS AGREEMENT AND OTHER TRANSACTION DOCUMENTS. THIS PROVISION SHALL
SURVIVE THE CLOSING.
THERE ARE NO WARRANTIES OR OTHER REPRESENTATIONS WITH RESPECT TO THE NATURE
AND QUALITY OF THE PARK EXCEPT AS SET FORTH HEREIN, AND THIS AGREEMENT AND OTHER
TRANSACTION DOCUMENTS ARE IN LIEU OF ALL OTHER WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
THIS ARTICLE XVI SHALL SURVIVE CLOSING.
29
<PAGE>
ARTICLE XVII
MISCELLANEOUS
-------------
17.01 Remedies. Unless expressly limited in this Agreement, the parties
--------
shall have all remedies available at law or equity for any breach of this
Agreement or provision contained herein.
17.02 Governing Law and Venue. This Agreement shall be governed by and
------------------------
construed and interpreted in accordance with the laws of the State of Texas. The
parties hereto expressly consent and agree that venue of any action brought
under this Agreement shall be brought in Bexar County, Texas.
17.03 Cumulative Rights. All rights, powers, and privileges conferred
------------------
hereunder upon the parties shall be cumulative and not restrictive of those
given by law.
17.04 No Waiver By Conduct. The failure of either party to exercise any
---------------------
power given such party hereunder or to insist upon strict compliance by the
other party with its obligations hereunder shall not, and no custom or practice
of the parties at variance with the terms hereof, shall constitute a waiver of
such parties rights to demand exact compliance with the terms hereof.
17.05 Entire Agreement. This Agreement and other documents executed by all
----------------
of Seller, Parent and Purchaser contemporaneously herewith, including the
Exhibits and Schedules attached hereto, constitutes the entire agreement and
understanding between the parties hereto relating to the sale and purchase of
the Securities, and supersedes all prior and other contemporaneous agreements
and undertakings of the parties in connection therewith. No statements,
agreements, covenants, understandings, representations, warranties or conditions
not expressed in this Agreement shall be binding upon the parties hereto, or
shall be effective to interpret, change, or restrict provisions of this
Agreement, unless such is in writing, signed by both parties hereto and by
reference made a part hereof. This Agreement may not be modified or amended
except by a subsequent agreement in writing signed by Seller and Purchaser.
17.06 Assignment. Purchaser or Seller may assign this Agreement and its
----------
rights hereunder to an Affiliate (who is a solvent going concern, both before
and after giving effect to the transfer by which the assignment of this
Agreement is made,) thereof without the consent of the other party. Upon such
assignment by Purchaser, Purchaser may direct Seller to convey title to all or
any part of the Securities to an Affiliate thereof; provided, however, no
assignment (whether permitted by this Agreement or not) shall operate to relieve
Premier Parks Inc. of Purchaser's obligations under this Agreement. Any
assignment by Seller shall not relieve the Parent of its obligations hereunder.
Nothing herein express or implied is intended or shall be construed to confer
upon or to give anyone other than the parties hereto and their respective heirs,
legal representatives and successors any rights or benefits under or by reason
of this Agreement and no other party shall be deemed a third party beneficiary
hereof or shall have any right to enforce any of the provisions of this
Agreement. Except as provided above, neither party may assign this Agreement
without the prior written consent of the other party. Notwithstanding the
preceding, after Closing, Seller may assigns its right, title and interest in
Section 6.09 and Section 15.02 to a third party in connection with (i) a sale of
30
<PAGE>
all, or substantially all, of the La Cantera Development and (ii) a transfer of
all or substantially all Parent's rights as "Declarant" under the Master
Covenants. A transfer of all of the securities in which control of a party
hereto is transferred shall be deemed an assignment for purposes of this
Section.
17.07 Counterparts. This Agreement may be executed in several counterparts,
------------
each of which shall be deemed an original, and all such counterparts together
shall constitute one and the same instrument.
17.08 Binding Effect. Subject to the restrictions set forth in Section
--------------- -------
17.06 hereof, this Agreement shall be binding upon and shall inure to the
- -----
benefit of the parties hereto and their respective, successors and assigns.
17.09 Time. Time is of the essence with respect to this Agreement, and the
----
respective time periods set forth herein.
17.10 Headings. The headings inserted at the beginning of each Article and
--------
Section hereof are inserted for convenience only, and do not add to or subtract
from the meaning and contents of each Article or Section.
17.11 Pronouns. Pronouns, wherever used herein, and of whatever gender,
--------
shall include natural persons and corporations and associations of every kind
and character, and the singular shall include the plural wherever and as often
as may be appropriate.
17.12 Effective Date. The term Effective Date as used herein shall mean the
--------------
date that a fully executed original counterpart of this Agreement is delivered
to and received by the Title Company.
17.13 Construction of Agreement. The terms and provisions of this Agreement
-------------------------
represent the results of negotiations between Seller, Parent and Purchaser, each
of which has been represented by counsel of its own choosing, and neither of
which has acted under duress or compulsion, whether legal, economic or
otherwise. Accordingly, the terms and provisions of this Agreement shall be
interpreted and construed in accordance with their usual and customary meanings,
and Seller, Parent and Purchaser hereby waive the application in connection with
the interpretation and construction of this Agreement of any rule of law to the
effect that ambiguous or conflicting terms or provisions contained in this
Agreement shall be interpreted or construed against the party whose attorney
prepared the executed draft or any earlier draft of this Agreement.
17.14 Invalidity. If any one or more of the provisions of this Agreement
----------
shall for any reason be held to be invalid, illegal or unenforceable in any
respect by a court of competent jurisdiction, such invalidity, illegality, or
unenforceability shall not effect any of the other provisions hereof, and this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.
17.15 Confidentiality. Each party hereto agrees that it shall keep the
---------------
principal economic terms and conditions of this Agreement and all non-public
information learned about the Park (collectively, the "Information"), including
31
<PAGE>
without limitation, the Total Purchase Price, confidential from, and shall not
disclose the same to, any third party (other than Affiliates and Representatives
(as hereinafter defined)) in any manner, including without limitation, issuing
press releases or making public statements, to any other person without the
prior written consent of the other party hereto, which consent shall not be
unreasonably withheld or delayed. Notwithstanding the foregoing, Seller, Parent
and Premier may disclose the Information: (i) as necessary to properly complete
and file regularly required reports or returns required to be filed by Seller or
its Affiliates with a Governmental Body, (ii) as necessary to exercise its
rights under the Transaction Documents, (iii) with respect to Information
regarding the Park, as necessary in connection with Claims related to acts,
events or conditions of the Park, (iv) as part of its financial statements
prepared from time to time in the ordinary course of business; (v) if and to the
extent that such disclosure shall be required or requested by any generally
recognized financial or industry rating organizations, securities analysts or
institutional investors; (vi) if and to the extent that such disclosure shall be
required by Law, in such event the other party hereto shall have the right to
review and comment upon (but not approve) any such press release, public
statement or other disclosure required by Law. Any said Information disclosed
pursuant to the foregoing sentence shall no longer be deemed confidential.
Purchaser and Seller shall also be entitled to disclose the Information to any
of its legal counsel and accounting, tax and other advisers, subject to the
foregoing restrictions. The provisions of this Section shall survive the Closing
for a period of two years. The parties acknowledge that this Section 17.15 has
no application to the confidentiality of Demographic Information because the
provisions of Section 6.10 are intended to exclusively govern the
confidentiality obligations of Seller and Parent with respect to Demographic
Information. In addition, Information shall not be deemed to include the
following: (i) Information that is or becomes generally known or available to
the public other than as a consequence of any breach of this Section 17.15 by
the party against whom the confidentiality claim is being asserted; (ii)
Information that the parties authorize in writing for release; (iii) Information
that is disclosed to either party or its Affiliates by a third party if such
third party's disclosure does not violate an obligation of confidentiality of
such third party.
This Article XVII shall survive Closing except Section 17.15 shall survive
Closing only for the period set forth in such section.
ARTICLE XVIII
DEFINITIONS
-----------
18.01 Definitions. The following terms, as used herein, shall have the
-----------
following meaning:
"Affiliate" of any person shall mean any other person directly or
---------
indirectly through one or more intermediary persons, controlling, controlled by
or under common control with such person.
"Agreement" or "this Agreement" shall mean, and the words "herein,"
---------
"hereof" and "hereunder" and words of similar import shall refer to, this
Agreement as it from time to time may be amended.
"Business" shall mean the ownership and operation of the Park.
--------
32
<PAGE>
"Claims" shall mean all actions, suits, arbitrations, claims or
------
counterclaims, and legal, administrative, governmental, arbitral or other
proceedings or investigations.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
----
"Contemplated Transactions" shall mean the transactions contemplated herein
-------------------------
(including without limitation, the transfer by Seller of the Park to FTI) and in
the Transaction Documents.
"Contract" shall mean any contract, agreement, indenture, note, bond,
--------
lease, conditional sale contract, mortgage, license, franchise, instrument,
commitment or other binding arrangement, whether written or oral, and all
modifications and amendments thereto and substitutions thereof.
The term "control," with respect to any person, shall mean the power to
-------
direct the management and policies of such person, directly or indirectly, by or
through stock ownership, agency or otherwise, or pursuant to or in connection
with an agreement, arrangement or understanding (written or oral) with one or
more other persons by or through stock ownership, agency or otherwise; and the
terms "controlling" and "controlled" shall have meanings correlative to the
----------- ----------
foregoing.
"Debt" shall mean (i) money borrowed from any person, (ii) any indebtedness
----
arising under leases required to be capitalized under GAAP or evidenced by a
note, bond, debenture or similar instrument; (iii) any indebtedness arising
under purchase money obligations or representing the deferred purchase price of
property and services (other than current trade payables incurred in the
ordinary course of the Business), (iv) any Liability secured by a Lien and (v)
and Liability under any guaranty, letter of credit (or reimbursement obligations
with respect thereto), performance credit or other agreement having the effect
of assuring a creditor against loss.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended.
"Force Majeure" shall mean delays or defaults due to war; insurrection;
--------------
strikes, lockouts and riots; floods; earthquakes; fires; casualties; acts of
God; acts of the public enemy; epidemics; quarantine restrictions; adverse
weather (to the extent consistent with past practices at the Park); compliance
with any Law, Order or Permit that such party could not reasonably anticipate or
compliance with which is beyond the control of such party due to actions
required to be taken by Governmental Bodies or other third parties; or other
causes beyond the reasonable control of the party obligated to perform (except
financial inability). Purchaser's obligations under Section 15.02, will be
suspended by Force Majeure only if Purchaser diligently and continuously uses
its best efforts to remove such Force Majeure and return to normal operations in
an expeditious manner and Purchaser does in fact return to normal operations.
"GAAP" shall mean generally accepted accounting principles in effect on the
----
date hereof as set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a significant
segment of the accounting profession of the United States.
33
<PAGE>
"Governmental Bodies" shall mean all governments or political subdivisions
-------------------
thereof, whether federal, state, local or foreign, or all agencies or
instrumentalities of any such government or political subdivision, or any court
or arbitrator.
"IRS" shall mean the Internal Revenue Service.
---
The term "knowledge' when used in connection with Seller or FTI shall mean
to the best of the knowledge of Edward B. Kelley, Glen E. Mitts, Robert G.
Kramer, Kenneth W. Smith and Scott A. Shreder.
"Law" shall mean any and all laws, statutes, codes, ordinances, rules,
---
regulations or other requirements.
"Lease Commencement Date" shall mean March 9, 1996.
-----------------------
"Liability" shall mean any direct or indirect indebtedness, liability,
---------
assessment, claim, loss, damage, deficiency, obligation or responsibility, fixed
or unfixed, choate or inchoate, liquidated or unliquidated, secured or
unsecured, accrued, absolute, actual or potential, contingent or otherwise
(including any liability under any guaranties, letters of credit, performance
credits or with respect to insurance loss accruals).
"Lien" shall mean, with respect to the Park or Securities, any mortgage,
----
lien (including mechanics, warehousemen, laborers and landlords liens), claim,
pledge, charge, security interest, preemptive right, right of first refusal,
easements, restrictions, option, judgment, title defect, or encumbrance of any
kind in respect of or affecting such Asset.
"Orders" shall mean any and all orders, judgments, injunctions, awards,
------
citations, decrees, consent decrees and writs.
"Parent" shall mean La Cantera Development Company.
------
"Permits" shall mean, with respect to the Park or Securities, all
-------
governmental licenses, approvals and conditions and variances relating to or
necessary to the lawful conduct of the Business or ownership of the Park.
The term "person" shall mean an individual, corporation, partnership, joint
------
venture, association, trust, unincorporated organization or other entity,
including a government or political subdivision or an agency or instrumentality
thereof.
"Representatives" shall mean the directors, officers and employees of the
---------------
parties hereto and their Affiliates.
"Required Consents" shall mean any and all consents, approvals and
-----------------
actions of, waivers from, filings with, and notices to, any Governmental Body or
other person which may be required in order for Seller and Purchaser to
34
<PAGE>
consummate the Contemplated Transactions in accordance herewith.
"Tax" (including, with correlative meaning, the terms "Taxes" and
---
"Taxable") shall mean (i) any net income, gross income, gross receipts, sales,
use, ad valorem, transfer, transfer gains, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, rent, recording,
occupation, premium, real or personal property, intangibles, environmental or
windfall profits tax, alternative or add-on minimum tax, customs duty or other
tax, fee, duty, levy, impost, assessment or charge of any kind whatsoever
(including but not limited to taxes assessed to real property and water and
sewer rents relating thereto), together with any interest and any penalty,
addition to tax or additional amount imposed by any Governmental Body (domestic
or foreign) (a "Tax Authority") responsible for the imposition of any such tax,
with respect to the Park (or the transfer thereof); (ii) any liability for the
payment of any amount of the type described in the immediately preceding clause
(i) as a result of Seller being a member of an affiliated or combined group with
any other corporation at any time on or prior to the Closing Date; and (iii) any
liability of Seller for the payment of any amounts of the type described in the
immediately preceding clause (i) as a result of a contractual obligation to
indemnify any other person.
"Tax Return" shall mean any return or report (including elections,
-----------
declarations, disclosures, schedules, estimates and information returns)
required to be supplied to any Tax Authority.
"Transaction Documents" shall mean, collectively, this Agreement, and each
---------------------
of the other agreements and instruments to be executed and delivered by all or
some of the parties hereto in connection with the consummation of the
Contemplated Transactions.
35
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed this Agreement on the
date shown to the left of their respective signatures.
SELLER:
FIESTA TEXAS THEME PARK, LTD.,
a Texas limited partnership
By: LA CANTERA GROUP LIMITED
PARTNERSHIP, a Texas limited
partnership, its General Partner
By: LA CANTERA DEVELOPMENT
COMPANY, a Delaware corporation,
its General Partner
By:
--------------------------
Name:
--------------------------
Title:
--------------------------
Date:
---------------------------
STATE OF TEXAS ss.
ss.
COUNTY OF BEXAR ss.
This instrument was acknowledged before me on this day of
------
by Edward B. Kelley, President of La Cantera Development
- ----------------,
Company, a Delaware corporation as general partner of LA CANTERA GROUP LIMITED
PARTNERSHIP, a Texas limited partnership, as general partner of FIESTA TEXAS
THEME PARK, LTD., a Texas limited partnership and on behalf of LA CANTERA
DEVELOPMENT COMPANY.
------------------------------
Notary Public, State of Texas
My Commission Expires:
------
Printed Name:
---------------
36
<PAGE>
La Cantera Development Company executes this Agreement solely for the purpose of
evidencing its agreement to Sections 6.01, 6.02, 6.04(b), 12.02 and 17.15 of
this Agreement.
LA CANTERA DEVELOPMENT COMPANY,
a Delaware corporation
By:
--------------------------
Name:
--------------------------
Title:
--------------------------
Date:
---------------------------
STATE OF TEXAS ss.
ss.
COUNTY OF BEXAR ss.
This instrument was acknowledged before me on this day of
-------
by Edward B. Kelley, President of La Cantera Development
- ---------------,
Company, a Delaware corporation and on behalf of LA CANTERA DEVELOPMENT COMPANY.
-----------------------------
Notary Public, State of Texas
Printed Name:
----------------
My Commission Expires:
--------------
PURCHASER:
PREMIER PARKS INC.
a Delaware corporation
By:
---------------------------
Name:
-------------------------
Title:
------------------------
Date:
--------
STATE OF ss.
-----------
ss.
COUNTY OF ss.
-----------
This instrument was acknowledged before me on this day of
-------
by of PREMIER PARKS INC., a
- ----------------, ----------------, ------------
Delaware corporation, on behalf of said corporation.
---------------------------------------
Notary Public, State of
------------
Printed Name:
-------------------------
My Commission Expires:
------------------------
37
<PAGE>
Exhibit "A" Land
Exhibit "B" Amended and Restated Note
Exhibit "C" Release of Guarantee
Exhibit "D" Right of First Refusal
Exhibit "E" Limited Partnership Assignment
Exhibit "F-1" Officer's Certificate (Seller)
Exhibit "F-2" Officer Certificate (Parent)
Exhibit "G" Declaration of Theme Park Covenants
Exhibit "H" Entry Area Easement
Exhibit "I" Buffer Area Easement
Exhibit "J" Security Acknowledgement
Exhibit "K" Release Exhibit "L" Subordination Agreement
Exhibit "M" Intellectual Property Agreement
Exhibit "N" Termination of Option to Purchase Real Property
Exhibit "O" Officer's Certificate (Purchaser)
Exhibit "P" Deed of Trust
Exhibit "Q" Assignment and Assumption Agreement
Exhibit "R-1" Trademark Assignment
Exhibit "R-2" Copyright Assignment
Exhibit "R-3" IP Assignment
Exhibit "S" Assignment of Sewer Capacity
Schedule 6.01(f) Transferred Contracts
Schedule 6.01(g) IP Notices
Schedule 6.01 (h) Claims and Proceedings
Schedule 6.04 Post Closing Covenants
Schedule 15.02 Appraisal Procedure
38
Exhibit 10(au)
================================================================================
OVERALL AGREEMENT
dated as of February 15, 1997
among
SIX FLAGS FUND, LTD. (L.P.)
SALKIN FAMILY TRUST
SFG, INC.
SFG-I, LLC
SFG-II, LLC
SIX FLAGS OVER GEORGIA, LTD.
SFOG II, INC.
SFOG II EMPLOYEE, INC.
SFOG ACQUISITION A, INC.
SFOG ACQUISITION B, L.L.C.
SIX FLAGS OVER GEORGIA, INC.
SIX FLAGS SERVICES OF GEORGIA, INC.
SIX FLAGS THEME PARKS INC.
and
SIX FLAGS ENTERTAINMENT CORPORATION
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
<S> <C>
Page
----
RECITALS......................................................................................1
ARTICLE I CERTAIN DEFINITIONS.................................................................6
ARTICLE II TENDER OFFER......................................................................18
2.1 Tender Offer......................................................................18
2.2 Tender Offer Price and Mandatory Adjustment Amount; Changes in the
Tender Offer Price; Payment of the Tender Offer Price.............................18
2.3 The Tender Offer Expiration Date..................................................20
2.4 Tender Offer Materials............................................................20
2.5 Compliance with Tender Offer Rules................................................21
2.6 No General Partner's Right of First Refusal with Respect to the Tender Offer......21
ARTICLE III LIQUIDITY PUT....................................................................21
3.1 Liquidity Put.....................................................................21
3.2 Put Price.........................................................................21
3.3 Liquidity Put Number; Proration...................................................22
3.4 General Partner's Right of First Refusal with Respect to Liquidity Put............23
3.5 Liquidity Notice Provisions.......................................................24
3.6 Exchange Act......................................................................25
3.7 Put for 2026......................................................................25
3.8 Adjustments.......................................................................26
ARTICLE IV SF AGREEMENT LAND AND BATMAN the RIDE.............................................26
4.1 Purchase of SF Agreement Land.....................................................26
4.2 Title to SF Agreement Land........................................................26
4.3 Batman the Ride and Other Capital Improvements in Progress........................27
ARTICLE V FLAGS RULPA ELECTION AND LIMITED LIABILITY
COMPANY CONVERSION..............................................................27
5.1 RULPA Election....................................................................27
5.2 Limited Liability Company Conversion..............................................27
5.3 SFOG No Longer Manager of Flags; SFG-I, LLC as Member/Manager.....................27
5.4 Flags Limited Liability Company Operating Agreement...............................28
5.5 Section 14-11-212 Certificate.....................................................28
ARTICLE VI FLAGS II..........................................................................28
6.1 The Flags II Limited Partnership Agreement........................................28
6.2 Contribution by Flags of Assets, Including the Rides and the Other
Improvements, to Flags II; Sale by Flags of the Designated Assets to
Flags II; Assumption of Liabilities; Certain Expenses.............................28
ARTICLE VII THE LEASE........................................................................29
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Page
----
ARTICLE VIII END-OF-TERM OPTION; ALTERNATIVES IF OPTION NOT
EXERCISED; SFOG II CEASING TO BE THE GENERAL
PARTNER OF FLAGS II..........................................................30
8.1 End-of-Term Option................................................................30
8.2 End-of-Term Option Price; Acquisition of General Partnership Interests
in Fund and Flags II and Manager Member's Interest in Flags.......................31
8.3 Notice of Exercise of End-of-Term Option..........................................31
8.4 Payment of End-of-Term Option Price...............................................31
8.5 Alternatives if Option Not Exercised or if SFOG II Ceases to be the
General Partner of Flags II.......................................................32
8.6 Acceleration of End-of-Term Option in the Event of Total
Condemnation or Equivalent Casualty...............................................33
ARTICLE IX REPRESENTATIONS AND WARRANTIES....................................................34
9.1 Representations and Warranties of the SFEC Entities...............................34
9.2 Representations and Warranties of Fund and Related Entities.......................36
ARTICLE X STANDSTILL.........................................................................38
10.1 Certain Rights and Obligations of Units Acquired by SFOG
Acquisition A and SFOG Acquisition B Pursuant to this Agreement...................38
10.2 Standstill........................................................................38
10.3 No Permitted Transfers............................................................39
10.4 Limited Partners' Rights Plan.....................................................39
ARTICLE XI OBLIGATIONS ABSOLUTE..............................................................39
ARTICLE XII CERTAIN AGREEMENTS..............................................................40
12.1 Changes in the Number of Outstanding Units........................................40
12.2 Prepaid Amount; No Fund Liabilities at Tender Offer Settlement Date...............40
12.3 The Claims Trust..................................................................41
12.4 Nature of SFOG II, SFOG II Employee, SFOG Acquisition A and
SFOG Acquisition B................................................................42
12.5 Non-Competition...................................................................43
12.6 Certain Real Property and Other Matters...........................................43
12.7 Affiliate and Certain Other Transactions..........................................44
12.8 Information Obligations...........................................................51
12.9 No Liability of Fund Partners or, After SFG-I, LLC Becomes the
Manager of Flags, the Manager of Flags; Additional Limitation on
Liability.........................................................................56
12.10 Indemnification...................................................................57
12.11 Expenses..........................................................................58
12.12 Six Flags Over Georgia Name.......................................................58
12.13 SF Agreement......................................................................59
12.14 Section 754 Elections; Publicly Traded Partnership................................59
12.15 SFOG's Interest in Flags..........................................................59
12.16 Certain Flags Distributions in 1997...............................................59
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Page
----
12.17 Initial Limited Partner's Fractional Unit.........................................59
12.18 EBITDA Arbitration Matters........................................................60
12.19 EBITDA Adjustment for Personal Injury Claims......................................63
12.20 Other SFEC Entities that May Own Units............................................64
12.21 Negative Pledge Covenants.........................................................64
12.22 List of Fund Limited Partners.....................................................64
ARTICLE XIII EMPLOYEE AND RELATED MATTERS....................................................65
13.1 Continuation of Employment........................................................65
13.2 Benefit Responsibilities..........................................................66
13.3 Continuation of Health Coverage Through Closing Date..............................66
13.4 Modifications.....................................................................66
13.5 Park Employees....................................................................66
13.6 End of Term.......................................................................66
13.7 Sale at End-of-Term...............................................................66
13.8 ERISA67
13.9 No Termination; No Third Party Rights.............................................67
ARTICLE XIV EXECUTION OF THIS AGREEMENT; THE CLOSING
AND CLOSING DELIVERIES.......................................................67
14.1 Execution and Delivery of This Agreement..........................................67
14.2 The Closing.......................................................................67
14.3 Conditions to the Obligations of the Parties......................................67
14.4 Effective Date Deliveries.........................................................68
14.5 Fund Limited Partners' Approval...................................................69
ARTICLE XV GENERAL PROVISIONS................................................................69
15.1 Applicable Law....................................................................69
15.2 Forum69
15.3 Injunction........................................................................69
15.4 Notices...........................................................................70
15.5 Counterparts......................................................................71
15.6 Entire Agreement..................................................................71
15.7 Modifications, Amendments and Waivers.............................................71
15.8 Interpretation....................................................................72
15.9 Severability; Invalidity of Particular Provisions.................................72
15.10 Waiver72
15.11 Third-Party Beneficiaries.........................................................72
15.12 Successors........................................................................72
15.13 No Offset; Interest...............................................................72
15.14 Further Assurances................................................................72
15.15 Non-Binding Effect of Recitals....................................................73
15.16 Payments..........................................................................73
15.17 Factors to be Considered in Determining Reasonableness of Withheld Consent........73
SIGNATURES...................................................................................74
</TABLE>
iii
<PAGE>
EXHIBITS
--------
Designation Description
- ----------- -----------
A Schematic of Relationships at the Date of the
Agreement
B Schematic of Relationships Giving Effect to the
Agreement and the Related Agreements
1.1(oo) Flags Limited Partnership Agreement
II Computation of Amounts Payable in the Tender Offer
3.2(a)(1) Computation of the Formula Amount
3.2(a)(2) Computation of Put Price for 2003
3.3(a) Computation of Liquidity Put Number
3.5(b) Notice of Election to Exercise Liquidity Put
4.1 SF Agreement
5.1 Certificate of Limited Partnership of Flags
5.4 Flags Limited Liability Company Operating Agreement
6.1.1 Flags II Limited Partnership Agreement
6.1.2 Certificate of Limited Partnership of Flags II
VII Lease
8.2 Illustration of End-of-Term Option Transaction
9.2(e) Fund Limited Partnership Agreement
12.8(a)(i)(C) Agreed-Upon Procedures Report Procedures and Items
12.8(a)(iii) Form of Monthly Financial Statements
12.8(g) Certain Information
14.1(a) TWE and TWX Guarantee
14.3(c) Opinion of Paul, Weiss, Rifkind, Wharton & Garrison
14.3(d) Opinion of Gibson, Dunn & Crutcher LLP
iv
<PAGE>
Designation Description
- ----------- -----------
14.4(a)(i) Second Amended and Restated Fund Limited
Partnership Agreement
14.4(a)(ii) SFOG Acquisition A and SFOG Acquisition B Guarantee
and Pledge Agreement
14.4(a)(iii) SFTP and SFEC Guarantee
v
<PAGE>
OVERALL AGREEMENT
This Overall Agreement (this "Agreement") is entered into as of
February 15, 1997 by and among Six Flags Fund, Ltd. (L.P.), a Georgia limited
partnership ("Fund"), the Salkin Family Trust (created by Declaration of Trust
dated May 15, 1980, as amended) ("Salkin"), SFG, Inc., a California corporation
("SFG, Inc."), SFG-I, LLC, a Georgia limited liability company ("SFG-I, LLC"),
SFG-II, LLC, a Georgia limited liability company ("SFG-II, LLC"), Six Flags Over
Georgia, Ltd., a Georgia limited partnership ("Flags"), SFOG II, Inc., a
Delaware corporation ("SFOG II"), SFOG II Employee, Inc., a Delaware corporation
("SFOG II Employee"), SFOG Acquisition A, Inc., a Delaware corporation ("SFOG
Acquisition A"), SFOG Acquisition B, L.L.C., a Delaware limited liability
company ("SFOG Acquisition B"), Six Flags Over Georgia, Inc., a Delaware
corporation ("SFOG"), Six Flags Services of Georgia, Inc., a Georgia corporation
("SFOGS"), Six Flags Theme Parks Inc., a Delaware corporation ("SFTP"), and Six
Flags Entertainment Corporation, a Delaware corporation ("SFEC"). SFOG II, SFOG
II Employee, SFOG Acquisition A, SFOG Acquisition B, SFOG, SFOGS, SFTP and SFEC
are sometimes referred to in this Agreement individually as an "SFEC Entity" and
collectively as the "SFEC Entities".
RECITALS
For the convenience of readers of this Agreement, Exhibit A to
this Agreement is a schematic representation of certain elements of the
relationships of the parties at the date of this Agreement and Exhibit B to this
Agreement is a schematic representation of certain elements of the transactions
provided for in this Agreement and the Related Agreements and the resultant
relationships of the parties.
THE PARTIES; CERTAIN OTHER MATTERS
- ----------------------------------
A. Salkin is the managing general partner of Fund. SFG, Inc. is
the co-general partner of Fund.
B. Fund is the sole limited partner of Flags. SFOG is the sole
general partner of Flags.
C. Flags is the owner of the Six Flags Over Georgia Amusement Park
in Atlanta, Georgia (the "Amusement Park").
D. Fund, SFOG, SFTP and SFEC entered into a Letter Agreement,
dated August 1, 1996 (the "SF Agreement"), a copy of which is Exhibit 4.1 to
this Agreement, relating to, among other things, the purchase by Flags and
installation in the Amusement Park of a ride ("Batman the Ride") described in
the SF Agreement and an option in favor of Fund to purchase certain real
property adjacent to the Amusement Park (the "SF Agreement Land").
E. The Restated Limited Partnership Certificate and Agreement of
Flags, as amended to date (the "Flags Limited Partnership Agreement"), states
that Flags "shall dissolve . . . on December 31, 1997, unless [Fund] shall have
delivered to [SFOG] prior thereto a written
1
<PAGE>
notice to the effect that dissolution shall not occur on such date" and further
states that, if Flags is dissolved:
"[Fund] may either (i) appoint a trustee to wind up and
terminate the business and affairs of [Flags] or (ii)
appoint another General Partner (who must be a person
having the capacity to serve as such) and continue the
business and affairs of [Flags] in accordance with the
provisions [of the Flags Limited Partnership Agreement]. If
[Fund] appoints another General Partner, the person so
appointed and [Fund] shall execute, acknowledge, swear to
and file a Certificate and Agreement of Limited Partnership
containing substantially the same provisions as those
contained [in the Flags Limited Partnership Agreement]."
The Flags Limited Partnership Agreement further provides that, if Flags is
dissolved, then:
"The trustee shall liquidate all assets of [Flags]
necessary to discharge such liabilities to creditors and,
in addition thereto, shall liquidate all remaining
intangible personal property of [Flags]. After all of such
liabilities have been discharged, the trustee shall . . .
(b) distribute to [Fund] 30% of all
remaining cash of [Flags] and distribute to [SFOG]
70% of such remaining cash; and
(c) make, execute and deliver to [Fund] such
assignments and other conveyances as may be necessary
or appropriate to vest in [Fund] all remaining
property of [Flags].
Notwithstanding any provision hereof, [SFOG] shall
not be entitled to receive by reason of the dissolution or
liquidation of [Flags] any interest in the Amusement Park
or any part of the proceeds resulting from any sale of the
Amusement Park or any interest therein in connection with
the liquidation of [Flags]."
F. SFOG II is a single-purpose corporation, wholly owned by SFEC,
formed for the purpose of being the sole managing general partner of Six Flags
Over Georgia II, L.P., a Delaware limited partnership to be formed pursuant to
this Agreement ("Flags II"). Flags will be the sole limited partner of Flags II.
SFG-II, LLC will be the sole co-general partner of, and will initially have (and
is expected to continue to have) a nominal interest in, Flags II. SFOG II
Employee is a single-purpose corporation, wholly owned by SFOG II, formed for
the purpose of employing the employees of the Amusement Park.
G. SFOG Acquisition A is a single-purpose corporation, wholly
owned by SFTP, formed for the purpose of entering into this Agreement and the
Related Agreements and performing its obligations and exercising its rights
hereunder and thereunder. SFOG Acquisition B is a single-purpose limited
liability company, formed for the purpose of entering into this Agreement and
the Related Agreements and performing its obligations and exercising its
2
<PAGE>
rights hereunder and thereunder, which is wholly owned by one or more of (i)
Time Warner Entertainment Company, L.P., a Delaware limited partnership ("TWE"),
and (ii) Boston Ventures Limited Partnership IV, Boston Ventures Limited
Partnership IVA and certain other investors (together, the "BV Investors").
H. SFEC is also wholly-owned by TWE, the BV Investors and certain
SFEC officers.
I. SFOG is a wholly-owned subsidiary of SFTP. SFTP is an indirect
wholly owned subsidiary of SFEC.
J. Time Warner Inc., a Delaware corporation ("TWX"), indirectly
owns approximately 74.5% of the residual equity of TWE.
K. SFEC directly or indirectly owns and operates, or otherwise
operates, in addition to the Amusement Park, seven amusement parks -- Six Flags
Great Adventure, Six Flags Magic Mountain, Six Flags Great America, Six Flags
Over Texas, Six Flags Astroworld, Six Flags St. Louis and Six Flags Fiesta Texas
(collectively, including any additional parks owned or operated from time to
time by SFEC, or any controlled affiliate of SFEC, but not including the
Amusement Park, the "SFEC Parks").
THIS AGREEMENT AND CERTAIN RELATED MATTERS
- ------------------------------------------
L. Pursuant to this Agreement, the parties have agreed, among
other things and as is more fully set forth in, and qualified by, this Agreement
and the Related Agreements, that:
() On the Effective Date, Flags, which is now governed by the
Georgia Uniform Limited Partnership Act, will elect to be
governed by the Georgia Revised Uniform Limited
Partnership Act, change its name to Six Flags Over
Georgia, Ltd. (L.P.) and file a Certificate of Limited
Partnership with the Georgia Secretary of State.
() Immediately after the filing of the Certificate of Limited
Partnership of Flags with the Georgia Secretary of State,
without thereby changing the economic interests or any
other rights of SFOG or Fund in Flags, Flags will convert
from a Georgia limited partnership of which SFOG is the
sole general partner and Fund is the sole limited partner
to a Georgia limited liability company of which SFOG will
be one of the two members and the sole manager and Fund
will be the other member. The name of Flags will thereupon
be changed to Six Flags Over Georgia, LLC.
() Effective immediately after the conversion of Flags from a
Georgia limited partnership to a Georgia limited liability
company: (i) SFOG shall cease to be the manager of Flags,
but shall continue to be a member of Flags with a nominal
interest in Flags (provided that SFOG's interest in tax
--------
allocations will be as set forth in the Flags Limited
Liability Company Operating Agreement) and (ii) SFG-I, LLC
shall become the sole manager and one of the three
3
<PAGE>
members of Flags. Fund shall remain the other member of
Flags. Subject to the nominal interest of SFOG, Fund will
have a 99% interest and SFG-I, LLC will have a 1% interest
in Flags, as more fully set forth in the Flags Limited
Liability Company Operating Agreement.
() Immediately thereafter on the Effective Date, Flags shall
acquire the SF Agreement Land and title to the SF
Agreement Land shall become vested in Flags.
() Immediately thereafter on the Effective Date, (i) Flags
(as limited partner), SFOG II (as sole managing general
partner) and SFG-II, LLC (as sole co-general partner)
shall enter into the Flags II Limited Partnership
Agreement.
() As is provided for in the Flags II Limited Partnership
Agreement, (i) Flags shall contribute to Flags II, in
exchange for its interest in Flags II, all of its property
and assets, including the Amusement Park rides and other
Amusement Park improvements located on the land owned by
Flags immediately prior to the Effective Date, but
excluding the Reserved Assets, and (ii) Flags will sell
the Designated Assets to Flags II in exchange for the
assumption by Flags II of certain liabilities of Flags.
SFOG II will not make any contribution to Flags II for its
interest in Flags II. SFG-II, LLC will make a contribution
of $100 to Flags II for its interest in Flags II.
() The Flags II Limited Partnership Agreement will provide
for (i) Minimum Amount distributions to Flags of $17.5
million per year, commencing with 1997 and increasing each
year in proportion to increases in the cost of living and
(ii) in 1997 only, the Additional First Year Minimum
Amount distribution. After this distribution, for each
year, SFOG II will receive, in recognition of its
management services and subject to Available Cash, a
distribution equal to 3% of the gross revenues of Flags II
for the prior year (of Flags for 1996). If not paid in any
year, the amount so distributable to SFOG II will be
carried forward to future years with interest at Prime.
Any additional distributions by Flags II will be made 95%
to SFOG II and 5% to Flags.
() At the time the Flags II Limited Partnership Agreement is
entered into, Flags will lease the land owned by it
immediately prior thereto (including the SF Agreement
Land) to Flags II for a Base Rent of $1 million per year,
commencing with 1997 and increasing each year in
proportion to increases in the cost of living.
() On or before ten Business Days after the Effective Date,
SFOG Acquisition A and SFOG Acquisition B will commence an
all-cash Tender Offer for all Units in Fund at a price,
assuming all of Fund were purchased, of $250 million.
() The Tender Offer amount will be subject to adjustment
downward for the Prepaid Amount (being prepayments of
one-half of the Minimum Amount
4
<PAGE>
distributions and Base Rent for 1997) and required
withholding taxes. If eight times the EBITDA of Flags II
for 1997 exceeds $250 million, each limited partner of
Fund whose Units were sold in the Tender Offer will
receive a supplemental payment equal to a pro rata portion
of the overage. Neither SFOG Acquisition A nor SFOG
Acquisition B will acquire certain claims in the Tender
Offer. Instead, these claims will be transferred by Fund
to a trust for the benefit of Fund partners before the
closing of the Tender Offer.
() SFOG Acquisition A and SFOG Acquisition B will provide to
the limited partners of Fund an annual Liquidity Put.
Pursuant to the Liquidity Put, but subject to limitations
on the number of Units that SFOG Acquisition A and SFOG
Acquisition B are obligated to purchase in any year and
related proration standards, Fund limited partners will
have an annual right to cause SFOG Acquisition A or SFOG
Acquisition B, as applicable, to purchase their Units. The
price at which Units are to be purchased pursuant to the
Liquidity Put will be based upon the greater of the Tender
Offer price or a formula amount based upon eight times the
weighted annual EBITDA of Flags II over the then prior
four years.
() Certain standstill arrangements will be applicable with
respect to Units acquired by SFOG Acquisition A and SFOG
Acquisition B pursuant to the Tender Offer and Liquidity
Put.
() TWX, TWE, SFEC, SFTP, SFOG Acquisition A and SFOG
Acquisition B will each unconditionally, absolutely and
irrevocably guarantee certain of the obligations of Flags
II, SFOG II, SFOG Acquisition A, SFOG Acquisition B and
SFOG II Employee under this Agreement and the Related
Agreements, provided, that the guarantee of TWE will be
--------
terminable under certain circumstances. Each of TWX, TWE,
SFEC, SFTP, SFOG Acquisition A, SFOG Acquisition B and
SFOG II will also agree to certain limited non-competition
provisions with respect to Flags II. The obligations of
SFOG Acquisition A and SFOG Acquisition B under this
Agreement (including with respect to the Liquidity Put)
and under their respective Guarantee will also be secured
by a pledge to Fund of the interests SFOG Acquisition B
holds in Fund from time to time and, as soon as such a
pledge is no longer prohibited by the terms of SFTP's bank
credit facility and the indenture governing SFTP's
publicly held debt, by a pledge of the interests SFOG
Acquisition A holds in Fund from time to time.
() SFOG Acquisition A and SFOG Acquisition B will have the
option, exercisable effective December 31, 2026, to
acquire all of the interests in Fund, Flags and Flags II
not then owned by either SFOG Acquisition A, SFOG
Acquisition B or SFOG II. The amount to be received by
the limited partners of Fund, other than SFOG
Acquisition A and SFOG Acquisition B, if this option is
exercised will be based upon the Tender Offer price
increased by increases in the cost of living from
December 31, 1996 to December 31, 2026.
5
<PAGE>
M. The parties acknowledge and agree that the Guarantees,
including especially the TWE and TWX Guarantee, (i) are a material part of the
consideration to Fund, Salkin, SFG, Inc., SFG-I, LLC and SFG-II, LLC in inducing
each of them to enter into this Agreement and the Related Agreements and to
consummate the transactions provided for herein and therein and (ii) are being
relied upon to a material degree by each of them in doing so and were relied
upon by the limited partners of Fund in giving the Fund Limited Partners'
Approval. TWE and TWX each have their executive offices in the State of New York
and the TWE and TWX Guarantee is governed by the internal law (and not the law
pertaining to choice or conflict of laws) of the State of New York. Accordingly,
the parties have elected that this Agreement be governed by the internal law
(and not the law pertaining to choice or conflict of laws) of the State of New
York.
N. The parties have determined that it is in their respective best
interests to, and they desire to, among other things, enter into and engage in
the transactions contemplated by this Agreement and the agreements provided for
in this Agreement, including the Flags Limited Liability Company Operating
Agreement, the Second Amended and Restated Fund Limited Partnership Agreement,
the Flags II Limited Partnership Agreement, the Lease and the other Related
Agreements.
* * *
The parties agree as set forth below.
ARTICLE I
CERTAIN DEFINITIONS
In addition to the other terms defined elsewhere in this
Agreement, the definitions set forth below are used in this Agreement:
(a) "Accounting Arbitrator" is defined in Section 12.18.
(b) "Affiliate Loans" has the meaning given to that term in the
Flags II Limited Partnership Agreement.
(c) "Aggregate Tender Offer Amount" means "X" divided by .99, where
"X" equals the Per Unit Tender Offer Price multiplied by the Number of Units on
the Tender Offer Settlement Date. An example of the computation of the Aggregate
Tender Offer Amount is set forth in Exhibit II to this Agreement.
(d) "Agreement" is defined in the first paragraph of this
Agreement.
(e) "Amusement Park" is defined in paragraph C of the Recitals.
(f) "Arbitrable Judgment" is defined in Section 12.18.
(g) "Available Cash" has the meaning given to that term in the
Flags II Limited Partnership Agreement.
6
<PAGE>
(h) "Bank Credit Agreement" has the meaning given to that term in
the SFOG Acquisition A and SFOG Acquisition B Guarantee and Pledge Agreement.
(i) "Bank Credit Agreement Negative Pledge Covenant" has the
meaning given to that term in the SFOG Acquisition A and SFOG Acquisition B
Guarantee and Pledge Agreement.
(j) "Base Rent" has the meaning given to that term in the Lease.
(k) "Batman the Ride" is defined in Paragraph D of the Recitals.
(l) "Beneficial Ownership" has the meaning given to that term in
Section 1(d) of Exhibit D to the Second Amended and Restated Fund Limited
Partnership Agreement.
(m) "Big Six independent accounting firm" means one of Arthur
Andersen LLP, Coopers & Lybrand L.L.P., Deloitte & Touche LLP, Ernst & Young
LLP, KPMG Peat Marwick LLP, and Price Waterhouse LLP or, if applicable, their
respective successors.
(n) "Business Day" means any day other than a Saturday, Sunday or
day when banks in any one of the State of California, Georgia or New York are
closed.
(o) "BV Investors" is defined in Paragraph G of the Recitals.
(p) "Capital Lease" means any lease that is treated as a capital
lease under GAAP.
(q) "Claims Trust" is defined in Section 12.3.
(r) "Closing" is defined in Section 14.2.
(s) "Controlled SFEC Affiliate" means (i) SFEC or any of its
successors from time to time with respect to the ownership and management of the
domestic theme park business of SFEC, (ii) each parent of any Person described
in clause (i) unless the theme park business of such parent represents less than
50% of the consolidated gross assets of such parent, (iii) any Person that at
the time directly or indirectly owns 50% or more of SFOG II and each parent of
such Person unless the theme park business of such Person or parent represents
less than 50% of its consolidated gross assets and (iv) any Person that is
directly or indirectly 50%-owned or otherwise controlled by a Person described
in any of clauses (i) through (iii).
(t) "CPI Adjustment" for any year means a fraction, the numerator
of which is the Minimum Amount for the year and the denominator of which is
$17.5 million.
(u) "Deemed Insurance Amount" is defined in Section 12.19.
(v) "Default" means an "Overall Agreement Payment Default," a
"Partnership Minimum Amount Payment Default," a "Lease Payment Default" or
"Another Material Default," as those terms are defined in the Flags II Limited
Partnership Agreement.
(w) "Default Interest" has the meaning given to that term in the
Flags II Limited Partnership Agreement.
7
<PAGE>
(x) "Default Rate" means the lesser of (i) five percentage points
above Prime and (ii) the maximum interest rate permitted by applicable law.
(y) "Designated Assets" means all current assets, construction in
progress and all rights under contracts therefor and all prepaid expenses of
Flags as of the Effective Date.
(z) "Directly Compete" is defined in Section 12.5.
(aa) "Distributions" is defined in Section 2.2(d).
(bb) "Distributions to Partners" means Additional First Year Minimum
Amount distributions (as defined in the Flags II Limited Partnership Agreement),
Minimum Amount distributions, Priority Management Fee Distributions and
Percentage Distributions.
(cc) "EBITDA" for any year means net income or loss (without giving
effect to extraordinary, non-recurring gains or losses) of Flags II for that
year determined on an accrual basis in accordance with, except as provided or
referred to below, GAAP,
PLUS
----
(A) without duplication, to the extent deducted in
calculating net income or loss, (i) interest expense
(including, for this purpose, (a) interest and Default
Interest in respect of Distributions to Partners and
Base Rent and (b) the interest component of payments or
accruals on Capital Leases), (ii) income taxes and
franchise taxes, (iii) Distributions to Partners, (iv)
Base Rent, (v) payments by Flags II to any SFEC Entity
or SFEC Affiliate to the extent Section 12.7 provides
such payments are not to reduce EBITDA, (vi)
depreciation, (vii) amortization, (viii) capital
expenditures (including (a) all other payments on and
accruals in respect of Capital Leases and (b) all
payments on and accruals in respect of Operating
Capital Asset Leases), provided that 50% of the cost of
--------
any performance or completion bond required to be
obtained pursuant to Paragraph 2(b) of Part A of
Article XVII of the Flags II Limited Partnership
Agreement shall be deemed to be a capital expenditure
and 50% thereof shall be deemed to be an expense that
is deductible in determining net income for the purpose
of calculating EBITDA, (ix) expenditures for purchases
of land (including for the payment of any deferred
portion of the purchase price thereof), (x) payments
and reserves with respect to personal injuries that
occurred after December 31, 1996 and claims for such
personal injuries, except as provided in Section 12.19,
(xi) Excluded Inventory Writedowns, (xii) reserves or
other non-cash charges on or in respect of (a) any
Capital Lease, any Operating Capital Asset Lease or any
property or assets subject to a Capital Lease or an
Operating Capital Asset Lease, (b) any other property
or asset contributed or sold by Flags to Flags II, (c)
the Lease, (d) the Land (as defined in the Lease) or
(e) the lease by Flags II of the right to use the name
"Six Flags Over Georgia" or that name and (xiii)
write-offs, reserves and allowances for
8
<PAGE>
receivables existing at January 1, 1997 to the extent,
if at all, such receivables would have been written off
or reserved against or allowances made in respect
thereof in 1996 had the policies applied for 1997
either by Flags (to the Effective Date) or by Flags II
(on or after the Effective Date) for write-offs,
reserves and allowances for receivables been in effect
prior to January 1, 1997;
MINUS
-----
(B) without duplication, to the extent included (or not
otherwise deducted, as applicable) in calculating net
income or loss, (i) net income or loss to the extent
attributable to Excluded Revenues, (ii) interest
income, (iii) the Deemed Insurance Amount, (iv) the
reserve for Uninsured Major Injury Claims, as provided
in Section 12.19(b), (v) an amount equal to the
"Management Fee" (as defined in the Flags II Limited
Partnership Agreement) for that year, whether or not
distributions are made to SFOG II in respect of the
Management Fee in that or any other year, (vi) an
amount equal to the out-of-pocket expenses of SFOG II
Employee related to the employment of the park
personnel, including the Park Employees, that are not
in excess of the expenses that would have been incurred
by Flags II if the park personnel, including the Park
Employees, had been employed directly by Flags II
(giving effect to any cost savings realized or expenses
avoided by Flags II because of SFOG II Employee being
the employer of the park personnel, including the Park
Employees) and (vii) expenses incurred by Flags II in
complying with Section 6.2(c).
For the purpose of this definition, EBITDA for 1997 shall mean EBITDA of Flags
for the period January 1, 1997 to the Effective Date and of Flags II from and
including the Effective Date through December 31, 1997. EBITDA for all other
years shall be EBITDA for the calendar year in question. EBITDA shall not be
affected by any expenses of Flags or Flags II in connection with the negotiation
and documentation, execution and delivery by Flags or Flags II of this Agreement
or the Related Agreements, the formation of Flags II or SFOG II Employee and,
except as specifically provided above in this definition of EBITDA, the
transactions to occur on or before the Effective Date. In calculating EBITDA for
any year, EBITDA shall be reduced to the extent that any income in such year is
directly attributable to a non-cash charge specified in paragraph (A) of this
definition of EBITDA taken in any prior year. (By way of example, and without
limitation, if in the year following the year in which an Excluded Inventory
Writedown occurs, the inventory affected by such Excluded Inventory Writedown is
sold, then in such subsequent year the income resulting from such sale of
inventory shall be reduced to the extent of such Excluded Inventory Writedown.)
If any asset of Flags II acquired originally or constructed by Flags II with
capital expenditures is sold by Flags II, the asset is leased back by Flags II
(except under a Capital Lease) and the proceeds of sale, net of the costs of
sale, are required to be added to required capital expenditures under Paragraph
1 of Part C of Article XVII of the Flags II Limited Partnership Agreement, then,
in calculating EBITDA: (i) payments or accruals for payments under the lease
will not be an expense until such proceeds are used for capital expenditures and
(ii) thereafter, payments or accruals for payments under the lease will be
9
<PAGE>
expenses, provided that it shall be assumed that the payments due under the
--------
lease are level monthly payments throughout the term of the lease.
Notwithstanding anything to the contrary in this definition of EBITDA above,
EBITDA shall be subject to review and adjustment as provided in Sections 12.7
and 12.18 (without duplication of any adjustments provided for in this
definition of EBITDA).
(dd) "Effective Date" means seven Business Days, or such earlier
date as Fund and SFEC may agree, after the date on which Fund notifies the SFEC
Entities that the Fund Limited Partners' Approval has been obtained.
(ee) "End-of-Term Option" is defined in Section 8.1.
(ff) "End-of-Term Option Date" is defined in Section 8.1.
(gg) "End-of-Term Option Price" is defined in Section 8.2.
(hh) "Estate" means the successor in interest to or surviving spouse
of an individual (i) who died within 24 months prior to the April 30 at which a
Liquidity Put is exercisable and (ii) whose Units (or fractions thereof) are
included in such individual's estate for federal estate tax purposes.
(ii) "Exchange Act" is defined in Section 2.5.
(jj) "Excluded Inventory Writedowns" means after December 31, 1996:
(i) all reserves, writedowns, allowances or other charges and all losses on or
in respect of any inventory sold to Flags prior to January 1, 1997 by (x) a
Controlled SFEC Affiliate, to the extent of the excess, if any, of the carrying
value of the inventory on the books of Flags at January 1, 1997 over the lesser
of (A) the depreciated or amortized cost, after reserves, writedowns, allowances
and other charges, of the selling Controlled SFEC Affiliate in such inventory
and (B) the fair market value of such inventory at the date of sale to Flags, or
(y) an SFEC Affiliate (other than a Controlled SFEC Affiliate), to the extent of
the excess, if any, of the carrying value of such inventory on the books of
Flags at January 1, 1997 over the price for such inventory that is no less
favorable than the price that would have been obtained in an arms length
transaction with an unaffiliated third party; and (ii) all reserves, writedowns,
allowances or other charges on or in respect of any inventory existing at
January 1, 1997 to the extent of such reserves, writedowns, allowances or other
charges would have reduced the income of Flags in 1996, had the "reserve,
writedown, allowance or charge policy" (or other like-purpose policy) applied by
Flags II in 1997 been applied to such inventory in 1996.
(kk) "Excluded Revenues" has the meaning given to that term in the
Flags II Limited Partnership Agreement.
(ll) "fair and consistent method of allocation" is defined in
Section 12.7(b).
(mm) "Flags" is defined in the first paragraph of this Agreement.
10
<PAGE>
(nn) "Flags Limited Liability Company Operating Agreement" means the
Limited Liability Company Operating Agreement of Flags in the form of Exhibit
5.4 to this Agreement.
(oo) "Flags Limited Partnership Agreement" means the Restated
Agreement of Limited Partnership, as amended, of Flags as in effect at the date
of this Agreement, a copy of which is Exhibit 1.1(oo) to this Agreement.
(pp) "Flags II" is defined in paragraph F of the Recitals.
(qq) "Flags II Limited Partnership Agreement" means the Limited
Partnership Agreement of Flags II, in the form of Exhibit 6.1.1 to this
Agreement, to be entered into by and between Flags, as sole limited partner,
SFOG II, as sole managing general partner, and SFG-II, LLC, as sole co-general
partner.
(rr) "Formula Amount" means 8/10 of "A", where "A" is the sum of (W)
4 multiplied by EBITDA for the year then last ended, plus (X) 3 multiplied by
EBITDA for the year immediately preceding the year in clause (W), plus (Y) 2
multiplied by EBITDA for the year immediately preceding the year in clause (X),
plus (Z) EBITDA for the year immediately preceding the year in clause (Y);
provided, however, that, for purposes of the Formula Amount, if any year in
- -------- -------
clause (X), (Y) or (Z) would, but for this proviso, be a year prior to 1997,
1997 shall be used for each such year. The Formula Amount may be illustrated by
the following formula, where "E" equals EBITDA and "Y" equals the year in which
the Liquidity Put is exercised:
8x((4xEY-1)+(3xEY-2)+(2xEY-3)+EY-4)
-----------------------------------
10
An example of the computation of the Formula Amount is set forth in Exhibit
3.2(a)(1) to this Agreement.
(ss) "Fund Limited Partners' Approval" means the approval, prior to
the date hereof, of this Agreement, the Related Agreements and the transactions
provided for herein and therein by the holders of not less than 66-2/3% of the
Units and the additional approval of this Agreement, the Related Agreements and
the transactions provided for herein and therein as modified since the date of
such initial approval, after the date of this Agreement, by the holders of not
less than 66-2/3% of the Units.
(tt) "Fund Limited Partnership Agreement" means the Amended and
Restated Agreement of Limited Partnership of Fund as in effect at the date of
this Agreement, a copy of which is Exhibit 9.2(e) to this Agreement.
(uu) "Fund" is defined in the first paragraph of this Agreement.
(vv) "GAAP" means generally accepted accounting principles, as in
effect in the United States from time to time, consistently applied. For
purposes of the calculation of EBITDA only, GAAP as applied to Flags II for 1997
shall be consistently applied only if it is consistent with
11
<PAGE>
GAAP as applied to Flags for the year ended on or about December 31, 1995 and
prior years, as reflected in the audited financial statements of Flags for those
years.
(ww) "General Partner's Right of First Refusal" is defined in
Section 2.6.
(xx) "Goldman, Sachs" means Goldman, Sachs & Co., financial advisor
to Fund with respect to this Agreement, the agreements provided for herein and
the transactions provided for herein and therein.
(yy) "GP Amount" is defined in Section 8.2(b).
(zz) "Gross Revenues" has the meaning given to that term in the
Flags II Limited Partnership Agreement.
(aaa) "Guarantees" means the SFOG Acquisition A and SFOG Acquisition
B Guarantee and Pledge Agreement, the SFTP and SFEC Guarantee and the TWE and
TWX Guarantee.
(bbb) "Hazardous Materials" has the meaning given to that term in the
Flags II Limited Partnership Agreement.
(ccc) "Indebtedness" of any Person at any date means, without
duplication, (i) all indebtedness of such Person for borrowed money (whether or
not the recourse of the lender is to the whole of the assets of such Person or
only to a portion thereof), (ii) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii) all obligations of
such Person in respect of letters of credit or other similar instruments (or
reimbursement obligations with respect thereto), other than standby letters of
credit incurred by such Person in the ordinary course of business, (iv) all
obligations of such Person with respect to hedging obligations (other than those
that fix the interest rate on indebtedness or other obligations or that fix the
exchange rate in connection with indebtedness or other obligations denominated
in a foreign currency), (v) all obligations of such Person to pay the deferred
and unpaid purchase price of property or services, except trade payables and
accrued expenses incurred in the ordinary course of business, (vi) all Capital
Lease obligations of such Person, (vii) all Indebtedness of others secured by a
lien on any asset of such Person, whether or not such Indebtedness is assumed by
such Person, and (viii) all Indebtedness of others guaranteed (whether by a
guarantee or an income maintenance, net worth maintenance, contribution or,
without limitation, other arrangement, the effect of which is to directly or
indirectly assume payment by such Person), to the extent of such guarantee.
(ddd) "Indenture" has the meaning given to that term in the SFOG
Acquisition A and SFOG Acquisition B Guarantee and Pledge Agreement.
(eee) "Indenture Negative Pledge Covenant" has the meaning given to
that term in the SFOG Acquisition A and SFOG Acquisition B Guarantee and Pledge
Agreement.
(fff) "Lease" means the Amusement Park Ground Lease to be entered
into by Flags, as Landlord, and Flags II, as Tenant, in the form of Exhibit VII
to this Agreement.
12
<PAGE>
(ggg) "Liquidity Put" is defined in Section 3.1.
(hhh) "Liquidity Put Election Date" is defined in Section 3.5(b).
(iii) "Liquidity Put Number" is defined in Section 3.3(a).
(jjj) "Liquidity Put Settlement Date" is defined in Section 3.1.
(kkk) "Minimum Amount" has the meaning given to that term in the
Flags II Limited Partnership Agreement.
(lll) "Net Worth" of any Person means, as of the date of
determination, the amount shown on the most recent accrual-basis balance sheet
or consolidated balance sheet, as the case may be, of such Person, prepared in
accordance with GAAP, as the stockholders' equity, consolidated stockholders'
equity or equivalent of such Person, but not in excess of the comparable amount
shown on the then most recent balance sheet or consolidated balance sheet, as
the case may be, of such Person that has been audited by such Person's
independent certified accountants, which shall be a firm of independent
certified public accountants of national repute, and is accompanied by an
opinion of such accountants that does not contain a so-called emphasis paragraph
with respect to stockholders' equity, consolidated stockholders' equity or the
equivalent and is not otherwise subject to qualification with respect to
stockholders' equity, consolidated stockholders' equity or the equivalent;
provided that in calculating the Net Worth of any Guarantor as of any date, 50%
- --------
of the "normal" depreciation of intangible assets and amortization of intangible
assets reflected on the income statement of such Guarantor for periods beginning
after December 31, 1996 shall be deemed not to have been charged; provided,
--------
further, that if any intangible asset is reserved against or "written down"
- -------
(other than by such "normal" depreciation or amortization), then such Net Worth
shall be calculated using the carrying value of such asset as so reserved
against or written down; provided, further, that if any intangible asset is sold
-------- -------
or otherwise disposed of (whether at a gain or loss), then such Net Worth shall
be calculated using the carrying value of the proceeds (whether cash, securities
or other assets) received by such Guarantor in such sale or disposition. By way
of illustration, if such "normal" depreciation and amortization on an intangible
asset carried at "40x" is "2x" per year, (i) in determining Net Worth, "1x"
shall be deemed not to have been charged (i.e., in four years, such "normal"
depreciation and amortization would be "8x" and "4x" will not be charged in
determining Net Worth), but (ii) if that intangible asset is, in the first
quarter of the fifth year, reserved against or written down so that its carrying
value is "20x," then in computing Net Worth, "20x" shall thereafter be used for
such intangible asset in determining Net Worth and (iii) in future periods,
assuming no further such reserves or writedowns, one-half of such then-normal
depreciation and amortization on the "20x" shall be deemed not to have been
charged.
(mmm) "Net Worth Standard" has the meaning given to that term in the
Flags II Limited Partnership Agreement.
(nnn) "Notice of Election to Exercise" means the Notice of Election
to Exercise Liquidity Put, substantially in the form of Exhibit 3.5(b) to this
Agreement.
13
<PAGE>
(ooo) "Number of Units" initially means the number of Units
outstanding on the date of this Agreement through the Tender Offer Settlement
Date, which number is 100-1/31.71 (one hundred plus one divided by thirty-one
and seventy-one hundredths) and thereafter means that number as it may be (i)
reduced from time to time, if at all, by virtue of purchases by Fund of Units
pursuant to Article XXI of the Second Amended and Restated Fund Limited
Partnership Agreement (which Units so purchased shall, upon purchase, no longer
be deemed outstanding for the purpose of calculating the Number of Units) or
pursuant to Section 12.17 of this Agreement or (ii) increased, if at all,
pursuant to Article IX, paragraph 10, of the Second Amended and Restated Fund
Limited Partnership Agreement.
(ppp) "Operating Capital Asset Lease" means (i) a lease (other than a
Capital Lease) of property or assets that are contributed by Flags to Flags II
and that were constructed or acquired by Flags with capital expenditures, or
(ii) a lease (other than a Capital Lease) contributed to Flags II by Flags that
(A) is of property or assets (other than office equipment or similar property or
assets) that were constructed or acquired by Flags with capital expenditures and
(B) was not in effect at September 30, 1996.
(qqq) "Park Employees" is defined in Section 13.1(a).
(rrr) "Past Accounting Practice" is defined in Section 12.18(a).
(sss) "Per Unit Liabilities Amount" means the amount obtained by (A)
multiplying by .99 the number, if greater than zero, obtained by subtracting
$100,000 (increased each year commencing with 1998 to $100,000 multiplied by the
CPI Adjustment for such year), provided that there shall be no such subtraction
in determining the Per Unit Liabilities Amount on the Business Day before the
Tender Offer Settlement Date or the End-of-Term Option Settlement Date, from,
without duplication, the sum of (w) all liabilities of Fund (other than
liabilities of Flags or Flags II that would otherwise be treated as liabilities
of Fund but which Fund as a separate legal entity has no legal obligation to
discharge) that are outstanding as of the close of business (Los Angeles time)
on the Business Day prior to the Tender Offer Settlement Date, the Liquidity Put
Settlement Date or the End-of-Term Option Date, as applicable, (x) all
liabilities of Flags created on or after the date Flags II assumes the
liabilities of Flags pursuant to Section 6.2(b) and the Flags II Limited
Partnership Agreement (excluding liabilities of Flags II that would otherwise be
treated as liabilities of Flags but which Flags as a separate legal entity has
no legal obligation to discharge and further excluding all liabilities of Flags
that are required by this Agreement and the Flags II Limited Partnership
Agreement to be assumed by Flags II), that are outstanding as of the close of
business (Los Angeles time) on the day prior to the Tender Offer Settlement
Date, the Liquidity Put Settlement Date or the End-of-Term Option Date, as
applicable, (y) any amounts owed by Fund to limited partners (or former limited
partners) of Fund as of the close of business (Los Angeles time) on the day
prior to the Tender Offer Settlement Date, the Liquidity Put Settlement Date or
the End-of-Term Option Date, as applicable, in respect of Units acquired by Fund
pursuant to Article XXI of the Second Amended and Restated Fund Limited
Partnership Agreement plus (z) with respect to the Tender Offer Settlement Date
only, .99 multiplied by the Prepaid Amount and (B) dividing the number so
obtained by the Number of Units. The Per Unit Liabilities Amount shall not
include any claims that the SFEC Entities may have as of the Effective Date
against Flags or Fund.
14
<PAGE>
(ttt) "Per Unit Mandatory Adjustment Amount" is defined in Section
2.2(b).
(uuu) "Per Unit Tender Offer Price" means (i) $250 million multiplied
by (ii) .99, divided by (iii) the Number of Units, as such price may be
increased pursuant to Section 2.2(c). On and after the payment of the Per Unit
Mandatory Adjustment Amount, if any, pursuant to Section 2.2(b) -- but if there
is a Per Unit Mandatory Adjustment Amount, not later than the earlier to occur
of March 30, 1998 or the day before SFOG Acquisition A or SFOG Acquisition B, as
applicable, gives written notice of the Put Price for 1998 pursuant to and as is
required by Section 3.5(a) -- the Per Unit Tender Offer Price shall mean the sum
of the amount determined in accordance with the preceding sentence plus the Per
Unit Mandatory Adjustment Amount, if any. The Per Unit Tender Offer Price shall
be rounded to the nearest whole dollar.
(vvv) "Percentage Distribution" has the meaning given to that term in
the Flags II Limited Partnership Agreement.
(www) "Person" means an individual, a trust, a partnership (including
a general partnership, limited liability partnership, limited partnership or
limited liability limited partnership), an unincorporated association, a
corporation, a limited liability company or any other entity or organization,
including a government or any agency or political subdivision thereof.
(xxx) "Prepaid Amount" is defined in Section 12.2(a).
(yyy) "Prime" means the average prime rate announced by SFTP's
principal bank lender as its prime rate for December of the then prior year or,
if Prime cannot be determined from the foregoing or for any other reason
(including, without limitation, SFTP having no borrowings or no principal bank
lender), then the average prime rate for such December of Bank of America
National Trust & Savings Association or, if Bank of America National Trust &
Savings Association does not then exist or have a prime rate, then of the three
largest domestic United States banks (measured by total assets) then announcing
a prime rate for such December.
(zzz) "Priority Management Fee Distributions" has the meaning given
to that term in the Flags II Limited Partnership Agreement.
(aaaa) "Put Price" is defined in Section 3.2(a). An example of the
computation of the Put Price is set forth in Exhibit 3.2(a)(2) to this
Agreement.
(bbbb) "Procedure Period" is defined in Section 12.18(e).
(cccc) "Related Agreements" means the Lease, the Second Amended and
Restated Fund Limited Partnership Agreement, the Flags Limited Liability Company
Operating Agreement, the Flags II Limited Partnership Agreement, the SFOG
Acquisition A and SFOG Acquisition B Guarantee and Pledge Agreement, the SFTP
and SFEC Guarantee, and the TWE and TWX Guarantee.
(dddd) "Reserved Assets" means (i) the land owned by Flags at August
1, 1996 plus any of the SF Agreement Land as has been or will be acquired by
Flags, (ii) any rights or claims that Flags may have against any SFEC Entity or
SFEC Affiliate (provided that nothing in this clause
15
<PAGE>
(ii) shall constitute an admission that there are any such rights or claims or a
waiver or release of any such rights or claims as may exist), and (iii) the
Designated Assets.
(eeee) "Retained Liabilities" has the meaning given to that term in
the Flags II Limited Partnership Agreement.
(ffff) "Salkin" is defined in the first paragraph of this Agreement.
(gggg) "Second Amended and Restated Fund Limited Partnership
Agreement" means the Second Amended and Restated Limited Partnership Agreement
of Fund, in the form of Exhibit 14.3(a)(i) to this Agreement.
(hhhh) "SF Agreement" is defined in paragraph D of the Recitals.
(iiii) "SF Agreement Land" is defined in paragraph D of the Recitals.
(jjjj) "SFEC" is defined in the first paragraph of this Agreement.
(kkkk) "SFEC Affiliate" means a Person that, by virtue of security
ownership or otherwise, controls, has the power to control, is controlled by or
is under common control with an SFEC Entity or that an SFEC Entity has the power
to control; provided that (A) neither Fund, Flags II nor, upon SFG-I, LLC
becoming the sole manager of Flags, Flags shall for any purpose be deemed to be
SFEC Affiliates and (B) without limitation, under the facts and circumstances
existing on the date of this Agreement, (i) SFOG II, SFOG II Employee, SFOG
Acquisition A, SFOG Acquisition B, SFOG, SFTP, TWE, TWX and all affiliates of
TWE and/or TWX shall, for all purposes, be deemed to be SFEC Affiliates and (ii)
the BV Investors and their affiliates shall not, by virtue of the BV Investors'
ownership interest in SFEC, for any purpose, be deemed to be SFEC Affiliates.
(llll) "SFEC Entities" and "SFEC Entity" are defined in the first
paragraph of this Agreement.
(mmmm) "SFEC Parks" is defined in paragraph K of the Recitals.
(nnnn) "SFG, Inc." is defined in the first paragraph of this
Agreement.
(oooo) "SFG-I, LLC" is defined in the first paragraph of this
Agreement.
(pppp) "SFG-II, LLC" is defined in the first paragraph of this
Agreement.
(qqqq) "SFOG" is defined in the first paragraph of this Agreement.
(rrrr) "SFOG Acquisition A" is defined in the first paragraph of this
Agreement.
(ssss) "SFOG Acquisition A and SFOG Acquisition B Guarantee and
Pledge Agreement" means the Secured General Continuing Guarantee and Pledge
Agreement of SFOG Acquisition A and SFOG Acquisition B in the form of Exhibit
14.4(a)(ii) to this Agreement.
16
<PAGE>
(tttt) "SFOG Acquisition B" is defined in the first paragraph of the
Agreement.
(uuuu) "SFOG Requirement" is defined in Section 12.15.
(vvvv) "SFOG II" is defined in the first paragraph of this Agreement.
(wwww) "SFOG II Employee" is defined in the first paragraph of this
Agreement.
(xxxx) "SFTP" is defined in the first paragraph of this Agreement.
(yyyy) "SFTP and SFEC Guarantee" means the General Continuing
Guarantee of SFTP and SFEC, in the form of Exhibit 14.4(a)(iii) to this
Agreement.
(zzzz) "Solicitation Agent" is defined in Section 2.4.
(aaaaa) "Tax" has the meaning given to that term in the Flags II
Limited Partnership Agreement.
(bbbbb) "Tender Offer" is defined in Section 2.1.
(ccccc) "Tender Offer Date" means the date on which the Tender Offer
is commenced, which date shall not be later than ten Business Days following the
Effective Date.
(ddddd) "Tender Offer Expiration Date" is defined in Section 2.3(a).
(eeeee) "Tender Offer Price" is defined in Section 2.2(b).
(fffff) "Tender Offer Settlement Date" is defined in Section 2.2(a).
(ggggg) "Texas Park" means the Six Flags Over Texas amusement park in
Arlington, Texas.
(hhhhh) "Texas Partners" means the partners of Six Flags Over Texas
Fund, Ltd.
(iiiii) "Transaction-Related Expenses" is defined in Section 12.2(b).
(jjjjj) "TWE" is defined in Paragraph G of the Recitals.
(kkkkk) "TWE and TWX Guarantee" means the General Continuing
Guarantee and Non-Competition Agreement of TWE and TWX in the form of Exhibit
14.1(a) to this Agreement.
(lllll) "TWX" is defined in Paragraph J of the Recitals.
(mmmmm) Uninsured Major Injury Claim" is defined in Section 12.19(b).
(nnnnn) "Unitholders" means the Persons holding Units of Fund at the
date of this Agreement and their transferees, successors and assigns, but
excluding any SFEC Affiliate.
17
<PAGE>
(ooooo) "Units" means the limited partnership interests in Fund, of
which there are 100-1/31.71 outstanding as of the date of this Agreement, which
Units represent 99% of the partnership interests in Fund.
ARTICLE II
TENDER OFFER
2.1 Tender Offer. On the Tender Offer Date, SFOG Acquisition A and
------------
SFOG Acquisition B jointly shall make an absolute, irrevocable and unconditional
(except as specifically provided below) tender offer (the "Tender Offer"), on
and subject to the terms set forth in this Article II, to purchase all of the
Units at a price (payable in cash), and on such other terms, described in this
Article II.
2.2 Tender Offer Price and Mandatory Adjustment Amount; Changes in
--------------------------------------------------------------
the Tender Offer Price; Payment of the Tender Offer Price.
- ---------------------------------------------------------
(a) Acceptance; Payment at the Tender Offer Settlement Date. On
----------------------------------------------------------
the date that is the later of April 2, 1997 or five Business Days after the
Tender Offer Expiration Date (the "Tender Offer Settlement Date"), SFOG
Acquisition A and/or SFOG Acquisition B, as applicable (as provided in Section
10.2(a)), shall purchase and indefeasibly pay for each Unit (or fraction
thereof) properly tendered together with a duly completed and executed letter of
transmittal (which shall be in form and substance reasonably satisfactory to
SFOG Acquisition A and SFOG Acquisition B and, in any event, shall include a
representation and warranty by the tendering Unitholder that such Unitholder has
full power and authority to tender, sell, assign and transfer the Units being
tendered and, when the same are accepted for payment by SFOG Acquisition A
and/or SFOG Acquisition B, as applicable, SFOG Acquisition A or SFOG Acquisition
B, as the case may be, will acquire good title thereto, free and clear of all
liens, restrictions, claims and encumbrances) and a duly completed and executed
substitute Form W-9 (or successor form). The amount in cash to be paid to a
Unitholder in respect of each whole Unit accepted for tender shall be equal to
(A) the Per Unit Tender Offer Price less (B) the Per Unit Liabilities Amount
less (C) any taxes required to be withheld by SFOG Acquisition A or SFOG
Acquisition B, as applicable, under applicable law. A pro rata portion of the
foregoing amount will be paid in respect of each fraction of a Unit properly
tendered to SFOG Acquisition A and/or SFOG Acquisition B in the Tender Offer.
The amount so determined shall be paid to each Unitholder of Units accepted for
purchase pursuant to the Tender Offer, without any other deduction, on the
Tender Offer Settlement Date, at the election of the Unitholder and at the
expense of SFOG Acquisition A or SFOG Acquisition B, as applicable, by cashier's
or certified check or by wire transfer to an account specified by the Unitholder
in the letter of transmittal submitted by such Unitholder (which letter of
transmittal shall provide space identified for such account number, with the
availability of wire transfer being set forth in accompanying instructions). If
the payment is made by cashier's or certified check, such check shall be sent by
overnight courier for delivery by not later than 10:30 a.m. local time at the
address of the payee specified by the Unitholder in the letter of transmittal on
the Tender Offer Settlement Date and insured for the full amount of the check.
Payments not made when required shall thereafter bear interest at the Default
Rate. The obligations of SFOG Acquisition A and SFOG Acquisition B shall be
subject to receipt of a certificate
18
<PAGE>
of Fund, executed by a general partner of Fund, by which Fund represents and
warrants that the Persons named in a list accompanying such certificate are the
record holders of the number of Units indicated on such list and, to the
knowledge of Fund, except as otherwise indicated on such list, the beneficial
owners of such Units. SFOG Acquisition A and SFOG Acquisition B shall not be
required to accept for purchase any Units tendered by any Person, unless such
Person agrees, in an agreement reasonably satisfactory to SFOG Acquisition A and
SFOG Acquisition B, to indemnify SFOG Acquisition A and SFOG Acquisition B
against any losses, liabilities or expenses arising out of such Person's failure
to own beneficially or of record such Units.
(b) Payment of Mandatory Adjustment Amount. If (i) (A) 8
-------------------------------------------
multiplied by (B) EBITDA for the year ended December 31, 1997, multiplied by (C)
.99, divided by (D) the Number of Units outstanding as of the Tender Offer
Settlement Date, exceeds (ii) what would otherwise be the Per Unit Tender Offer
Price (such excess, if any, being referred to as the "Per Unit Mandatory
Adjustment Amount"), then SFOG Acquisition A or SFOG Acquisition B, as
applicable, shall pay to each Unitholder of Units accepted for purchase pursuant
to the Tender Offer an amount in cash in respect of each whole Unit so accepted
for purchase equal to (x) the Per Unit Mandatory Adjustment Amount, less (y) any
taxes required under applicable law to be withheld by SFOG Acquisition A or SFOG
Acquisition B, as the case may be, with respect to such amount. A pro rata
portion of the foregoing amount will be paid in respect of each fraction of a
Unit purchased pursuant to the Tender Offer. The amounts required to be paid
pursuant to this Section 2.2(b) shall be payable on the day that is 10 days
after the financial statements for Flags II for the year ended December 31, 1997
are made available to Flags or Fund (but in any event, not later than April 10,
1998), at the election of the Unitholder and at the expense of SFOG Acquisition
A or SFOG Acquisition B, as applicable, by cashier's or certified check or by
wire transfer to an account specified by the Unitholder in the letter of
transmittal. If the payment is made by cashier's or certified check, such check
shall be sent by overnight courier for delivery by not later than 10:30 a.m.
local time at the address of the Unitholder specified by the Unitholder in the
letter of transmittal on such date and insured for the full amount of the check.
(c) Changes in the Tender Offer Price. At any time and from time
----------------------------------
to time prior to the Tender Offer Expiration Date, SFOG Acquisition A and SFOG
Acquisition B jointly may increase the Per Unit Tender Offer Price; provided
--------
that the amount of each such increase shall be payable only in cash and shall
not be less than 2.5% of the then immediately previous Per Unit Tender Offer
Price. From and after the date of any such increase, the "Per Unit Tender Offer
Price" shall for all purposes be the Per Unit Tender Offer Price as so
increased. Neither SFOG Acquisition A nor SFOG Acquisition B may at any time
decrease the then Per Unit Tender Offer Price.
(d) Pre-Tender Offer Settlement Date Distributions By Fund. Prior
-------------------------------------------------------
to the Tender Offer Settlement Date, Fund will distribute (the "Distributions")
to (i) the Claims Trust, all claims and litigation rights it may have against
the SFEC Entities and SFEC Affiliates and will contribute to the Claims Trust
such portion of the Prepaid Amount as is determined by Fund or Salkin and (ii)
its then partners cash equal to all of the remaining Prepaid Amount not used by
Fund to pay its Transaction-Related Expenses or other expenses and any other
cash Fund then has as a result of cash distributions from Flags and earnings on
those distributions. The Tender Offer will be for Units after the Distributions
and neither SFOG Acquisition A nor SFOG Acquisition B will, by virtue of the
purchase of Units in the Tender Offer, acquire any interest in the Distributions
or the
19
<PAGE>
Claims Trust, provided that the Per Unit Liabilities Amount at the Tender Offer
--------
Settlement Date will be increased by "x" multiplied by "y" divided by "z", where
"x" is the Prepaid Amount, "y" is .9801 and "z" is the Number of Units (thereby
effectively giving SFOG Acquisition A and SFOG Acquisition B, as applicable,
credit, against the amount they are otherwise paying in the Tender Offer, for
that portion of the Prepaid Amount that they would have received had the Prepaid
Amount been paid after the Tender Offer Settlement Date).
2.3 The Tender Offer Expiration Date.
--------------------------------
(a) The Tender Offer Expiration Date. Subject to Section 2.3(b),
---------------------------------
the Tender Offer shall expire at 12:00 midnight (Los Angeles time) on the date
(the "Tender Offer Expiration Date") that is 20 Business Days (or, if greater,
the minimum period required under applicable law) after the Tender Offer Date,
provided that if the Prepaid Amount is not paid on or before ten Business Days
- --------
after the Tender Offer Date then, if applicable, the Tender Offer Expiration
Date will be extended, if applicable, until ten Business Days after the Prepaid
Amount is paid and, for the period of the extension, interest at the Default
Rate will be paid on the amount that would have been paid on the Tender Offer
Settlement Date had there been no such extension.
(b) Changes in the Tender Offer Expiration Date. SFOG Acquisition
--------------------------------------------
A and SFOG Acquisition B jointly shall extend the Tender Offer Expiration Date
for, but only for, the minimum period required under applicable law or ten
Business Days, whichever is more, following notice to the Unitholders of any
increase in the Per Unit Tender Offer Price pursuant to Section 2.2(c). From and
after the date of any such extension, the "Tender Offer Expiration Date" shall
be, for all purposes, the Tender Offer Expiration Date as so extended.
2.4 Tender Offer Materials. If SFOG Acquisition A and SFOG
------------------------
Acquisition B elect to use a Solicitation Agent in connection with the Tender
Offer, then no later than four Business Days prior to the Tender Offer Date,
SFOG Acquisition A and SFOG Acquisition B jointly shall designate a reputable
proxy solicitation, trust company or similar firm reasonably acceptable to
Salkin to act as solicitation agent (the "Solicitation Agent") in connection
with the Tender Offer. SFOG Acquisition A and SFOG Acquisition B jointly shall,
or shall instruct the Solicitation Agent to, mail to each Unitholder at the
address or addresses of each such Unitholder provided to SFEC by Fund, (a) an
offer to purchase, setting forth the terms and conditions of the Tender Offer
and such additional disclosures, if any, as SFOG Acquisition A and SFOG
Acquisition B jointly shall elect to include, (b) a letter of transmittal to be
used in tendering Units and appropriate instructions with respect thereto and
(c) any other offering materials specified by SFOG Acquisition A and SFOG
Acquisition B, all of which, to the extent applicable, shall be furnished to the
Solicitation Agent by SFOG Acquisition A and SFOG Acquisition B. In connection
with the foregoing, Fund will cooperate with SFOG Acquisition A, SFOG
Acquisition B and the Solicitation Agent, if any, and no later than ten days
prior to the Tender Offer Date shall furnish SFEC with the name, number of Units
held of record and address of each Unitholder as set forth in the partnership
records of Fund and any additional address or addresses of any Unitholder
furnished to Fund by such Unitholder in writing and shall advise SFEC in writing
of any changes in the list so provided to SFEC prior to the Tender Offer
Settlement Date. Any offering materials mailed to any Unitholder in the manner
provided in this Section 2.4 shall, for the purposes of this Article II, be
conclusively deemed to have been delivered, whether or not such Unitholder
actually
20
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receives such offering materials. Offering materials and other documents so
mailed by the Solicitation Agent, if any, will, for the purposes of this Article
II, be deemed mailed by SFOG Acquisition A and SFOG Acquisition B on the date
mailed by the Solicitation Agent.
2.5 Compliance with Tender Offer Rules. The Tender Offer shall in
----------------------------------
all respects comply with the applicable provisions of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), including, without limitation,
Section 14(e) thereof, and the regulations promulgated thereunder, including
Regulation 14E promulgated thereunder (and to the extent, but only to the
extent, if at all, that the provisions hereof are not permitted under the
applicable provisions of the Exchange Act and the regulations thereunder, the
requirements of the Exchange Act and regulations shall prevail).
2.6 No General Partner's Right of First Refusal with Respect to
--------------------------------------------------------------
the Tender Offer. The obligation of SFOG Acquisition A and/or SFOG Acquisition B
- ----------------
to purchase Units tendered pursuant to the Tender Offer shall not be subject to
Salkin's right to purchase Units pursuant to Article IX, Section 2, of the Fund
Limited Partnership Agreement or the Second Amended and Restated Fund Limited
Partnership Agreement (the "General Partner's Right of First Refusal").
ARTICLE III
LIQUIDITY PUT
3.1 Liquidity Put. Upon the terms and subject to the conditions
--------------
set forth in this Article III, Unitholders holding Units that were not purchased
pursuant to the Tender Offer shall have a right (the "Liquidity Put"), on May
15, 1998 and on May 15 of each subsequent year through 2026 or, if earlier, the
date the End-of-Term Option Price is paid as referred to in Section 8.6 (each, a
"Liquidity Put Settlement Date") to require SFOG Acquisition A and/or SFOG
Acquisition B, as applicable (as provided in Section 10.2(a)), to purchase all
or a fraction of such Units, subject to and as determined pursuant to Section
3.3, for cash in an amount equal to the then Put Price.
3.2 Put Price.
---------
(a) Put Price. The price for each Unit purchased pursuant to the
---------
Liquidity Put (the "Put Price") shall not be less than the greatest of (i) the
Per Unit Tender Offer Price, (ii) the highest price per Unit paid by either SFOG
Acquisition A, SFOG Acquisition B or any SFEC Entity or SFEC Affiliate for any
Unit purchased by SFOG Acquisition A, SFOG Acquisition B or such SFEC Entity or
SFEC Affiliate (other than any Unit purchased (x) from an SFEC Entity or SFEC
Affiliate or (y) pursuant to the rights of SFOG Acquisition A and SFOG
Acquisition B, contained in Article IX, paragraph 2, of the Second Amended and
Restated Fund Limited Partnership Agreement, to purchase a portion of the Units,
if any, purchased pursuant to the General Partner's Right of First Refusal),
whether pursuant to the Tender Offer, the Liquidity Put or otherwise, but only
if such price was greater than the price that SFOG Acquisition A and/or SFOG
Acquisition B, as applicable, was otherwise obligated to pay (including, without
limitation, in connection with the Accelerated Put provided for in the SFOG
Acquisition A and SFOG
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Acquisition B Guarantee and Pledge Agreement) at the time of such purchase or
(iii) the Formula Amount divided by the Number of Units and multiplied by .99.
(b) Payment of the Put Price. The amount in cash payable to a
-------------------------
Unitholder in respect of each whole Unit purchased pursuant to the Liquidity Put
shall be equal to the (i) Put Price less (ii) the Per Unit Liabilities Amount
less (iii) any taxes required to be withheld under applicable law. A pro rata
portion of the foregoing amount will be paid in respect of each fraction of a
Unit purchased pursuant to the Liquidity Put. Such amount shall be paid to each
Unitholder of Units purchased pursuant to the Liquidity Put on the applicable
Liquidity Put Settlement Date, at the election of the Unitholder and at the
expense of SFOG Acquisition A or SFOG Acquisition B, by cashier's or certified
check or by wire transfer to an account specified by the Unitholder in the
Notice of Election to Exercise submitted by such Unitholder. If payment is made
by cashier's or certified check, such check shall be sent by overnight courier
for delivery by not later than 10:30 a.m. local time at the address of the payee
specified by the Unitholder in the Notice of Election to Exercise on the
applicable Liquidity Put Settlement Date and insured for the full amount of the
check. The Liquidity Put paying agent, if one is used, shall be a bank or trust
company or other responsible agent specified by SFOG Acquisition A or SFOG
Acquisition B. In addition, if by May 1 of a year in which a Liquidity Put
Settlement Date occurs, Flags has not been paid in full any of the Minimum
Amount, any Percentage Distribution or Base Rent (and any interest or Default
Interest) that is payable in respect of the prior year, then: (i) there shall be
added to the Put Price and paid by SFOG Acquisition A and/or SFOG Acquisition B,
as applicable, for each Unit or a fraction thereof then being purchased pursuant
to the Liquidity Put, the amount, if any (the "Additional Amount"), that the
Unitholder thereof would have, but has not, received prior to the Liquidity Put
Settlement Date if, prior to the Liquidity Put Settlement Date, the Minimum
Amount, Percentage Distribution, Base Rent, interest and/or Default Interest to
the Liquidity Put Settlement Date, as applicable, for the prior year had been
(x) paid in full to Flags, (y) distributed by Flags to its partners in
accordance with the Flags Limited Liability Company Operating Agreement and (z)
distributed by Fund to its partners in accordance with the Second Amended and
Restated Fund Limited Partnership Agreement; and (ii) the Additional Amount,
when actually distributed by Fund, will be paid to SFOG Acquisition A and/or
SFOG Acquisition B, as applicable. Payments not made when required shall
thereafter bear interest at the Default Rate.
3.3 Liquidity Put Number; Proration.
-------------------------------
(a) Liquidity Put Number. The number of Units or fractions thereof
--------------------
that SFOG Acquisition A and/or SFOG Acquisition B, as applicable, shall be
obligated to purchase in any year (the "Liquidity Put Number") shall be equal to
the greater of (i) 5 Units or (ii) "A" plus "B" less "C", where "A" equals the
greater of (x) 20 Units less the number of Units purchased pursuant to the
Tender Offer and (y) zero, "B" equals 5 Units multiplied by the number of full
calendar years elapsed since December 31, 1996 and, subject to the proviso in
the next sentence, "C" equals the number of Units purchased by SFOG Acquisition
A and/or SFOG Acquisition B pursuant to the Liquidity Put (but not by Salkin
pursuant to the General Partner's Right of First Refusal) in all prior years;
provided, however, that the Liquidity Put Number shall never be greater than the
- -------- -------
number of Units not previously purchased by SFOG Acquisition A or SFOG
Acquisition B. In any year or years SFOG Acquisition A and/or SFOG Acquisition
B, as applicable, may (subject to Section 10.2(a)), but are not obligated to,
purchase pursuant to the
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<PAGE>
Liquidity Put a number of Units that is greater than the Liquidity Put Number
for that year, provided that the additional number of Units so purchased will
--------
not reduce the Liquidity Put Number for any subsequent year. An example of the
computation of the Liquidity Put Number is set forth in Exhibit 3.3(a).
(b) Proration.
---------
(i) If, on any Liquidity Put Election Date, the number of
Units offered for purchase pursuant to the Liquidity Put exceeds the Liquidity
Put Number (or, if greater, the number of Units SFOG Acquisition A and/or SFOG
Acquisition B, as applicable, then elects to purchase pursuant to the Liquidity
Put), SFOG Acquisition A and/or SFOG Acquisition B, as applicable, shall: (A)
(x) as the first priority, purchase "Estate Priority Units" (defined in Section
3.3(b)(ii) below) with respect to which a properly completed Notice of Election
to Exercise was timely submitted ("put") by Estates in the prior year and not
purchased (or, if there is not sufficient availability to purchase all such
Units, given the number of Units then being purchased pursuant to the Liquidity
Put ("availability"), prorate among such Units in proportion to the number
thereof put), and (y) then, as to any remaining availability and as the second
priority, purchase Estate Priority Units (other than Estate Priority Units
covered by clause (x)) put by Estates (or, if there is not sufficient
availability to do so, prorate among such Estate Priority Units in proportion to
the number thereof put); and (B) to the extent that the number of Units
purchased pursuant to clause (A) is less than the Liquidity Put Number or such
greater number of Units SFOG Acquisition A and/or SFOG Acquisition B, as
applicable, otherwise elects to purchase pursuant to the Liquidity Put, as the
case may be, as the third priority, from the remaining Units put, select the
Units to be purchased on a pro rata basis (based on the number of such Units put
by each Unitholder). Except as provided in clause (A) of the immediately
preceding sentence, the fact that a Unit is put and not purchased in a year
shall not entitle the Unitholder to any Liquidity Put priority in any subsequent
year.
(ii) For the purposes of section 3.3(b)(i), "Estate Priority
Units" means one-half of the sum of (A) the Units included in an individual's
estate for federal estate tax purposes and (B) the Units owned by the surviving
spouse of the individual as of the date of the individual's death and not
included in the individual's estate for federal estate tax purposes.
(iii) Subject to Section 3.7, if applicable, on or before
April 22 of each year, SFOG Acquisition A and SFOG Acquisition B shall deliver
to Fund a copy of all Notices of Election to Exercise and accompanying documents
received by it for the year. If the proration provisions of this Section 3.3(b)
will be applicable, Fund shall, prior to May 15 of each year, instruct SFOG
Acquisition A and/or SFOG Acquisition B, as applicable, as to those Units that
are to be purchased pursuant to the proration provisions of this Section 3.3(b)
and SFOG Acquisition A and SFOG Acquisition B shall be protected in relying on
such instructions.
3.4 General Partner's Right of First Refusal with Respect to
Liquidity Put. The obligation of SFOG Acquisition A and SFOG Acquisition B to
purchase any Units pursuant to the Liquidity Put shall be subject to the General
Partner's Right of First Refusal with respect to one-half of the Units that
would, but for exercise of the General Partner's Right of First Refusal, be
purchased pursuant to the Liquidity Put.
23
<PAGE>
3.5 Liquidity Notice Provisions.
---------------------------
(a) Put Price Notice. SFOG Acquisition A and SFOG Acquisition B
----------------
jointly shall give Fund and the Unitholders, in accordance with Section 15.4(b)
of this Agreement, written notice of the Put Price (subject to Section 3.7, if
applicable), the Liquidity Put Number and, if different than the number required
to be purchased, the number of Units SFOG Acquisition A and/or SFOG Acquisition
B, as applicable, elects to purchase pursuant to the Liquidity Put (such
election being revocable only for the purpose and to the extent of increasing
the number of Units to be purchased by SFOG Acquisition A and/or SFOG
Acquisition B) for each year on or before, subject to Section 3.7, if
applicable, March 31 of such year. Such notice shall be accompanied by (i) a
form of Notice of Election to Exercise and Form W-9 (or successor form), (ii)
subject to Section 3.7, if applicable, a copy of the financial statements and
related information required to be delivered pursuant to Section 12.8(a)(i)(A)
and (B) of this Agreement for the then last year) and (iii) such additional
disclosures, if any, as SFOG Acquisition A and SFOG Acquisition B shall elect to
include.
(b) Liquidity Put Exercise Notice. Each Unitholder electing to
------------------------------
exercise the Liquidity Put in any year with respect to any or all of his, her or
its Units shall, on the form of Notice of Election to Exercise, give to Fund and
to one of the Liquidity Put paying agent, if any, specified in the notice given
pursuant to Section 3.5(a) or SFOG Acquisition A or SFOG Acquisition B, as
applicable, irrevocable notice, to be received on or before, subject to Section
3.7, if applicable, April 15 of such year (a "Liquidity Put Election Date"), of
such election to exercise.
(c) General Partner's Right of First Refusal Exercise Notice.
-------------------------------------------------------------
Subject to Section 3.7, if applicable, on or before May 1 of each year, Salkin
(or, if applicable, the successor to Salkin having a General Partner's Right of
First Refusal) shall give to Fund, SFOG Acquisition A and/or SFOG Acquisition B,
as applicable, and any Unitholder that has submitted a Notice of Election to
Exercise, notice of election to exercise the General Partner's Right of First
Refusal for up to one-half of the Units with respect to which Liquidity Puts
have been exercised in that year, specifying the number of Units with respect to
which the General Partner's Right of First Refusal is being exercised.
(d) Fund Liquidity Put Notices.
---------------------------
(i) Per Unit Liabilities Amount Estimate. Subject to Section
------------------------------------
3.7, if applicable, on or before March 15 of each year commencing in 1998, Fund
shall provide SFOG Acquisition A and SFOG Acquisition B with its good faith
estimate of the Per Unit Liabilities Amount as of the applicable Liquidity Put
Settlement Date and SFOG Acquisition A and SFOG Acquisition B shall include such
estimate in the written notice that they deliver to Fund and the Unitholders
pursuant to Section 3.5(a).
(ii) Fund Representation Notice. On the Business Day
-----------------------------
immediately prior to the Liquidity Put Settlement Date in each year, Fund shall
deliver to SFOG Acquisition A and SFOG Acquisition B a written notice pursuant
to which Fund shall represent and warrant that as of the close of business on
the date of such notice (x) the notice contains a correct list of the record
owners of the number of Units indicated on such list and, to the knowledge of
Fund, except as
24
<PAGE>
indicated in such notice, the beneficial owners of such Units, and (y) the Per
Unit Liabilities Amount is as specified in such notice. The obligations of SFOG
Acquisition A and SFOG Acquisition B shall be conditioned upon their receipt of
such notice, and if any representation or warranty contained in the notice
delivered pursuant to this Section 3.5(d)(ii) is incorrect, Fund will indemnify
SFOG Acquisition A and/or SFOG Acquisition B, as applicable, out of amounts
otherwise payable to its partners other than SFOG Acquisition A and SFOG
Acquisition B. SFOG Acquisition A and SFOG Acquisition B shall not be required
to accept for purchase any Units put by any Person, unless such Person agrees,
in an agreement reasonably satisfactory to SFOG Acquisition A and SFOG
Acquisition B, to indemnify SFOG Acquisition A and SFOG Acquisition B against
any losses, liabilities or expenses arising out of such Person's failure to own
beneficially or of record such Units. SFOG Acquisition A and SFOG Acquisition B,
on the one hand, and Fund, on the other hand, shall negotiate in good faith
appropriate escrow or similar arrangements if Flags or Fund has outstanding any
contingent liabilities that would increase the Per Unit Liabilities Amount as of
the applicable Liquidity Put Settlement Date. If the Per Unit Liabilities Amount
disclosed in the notice delivered pursuant to this Section 3.5(d)(ii) is greater
than that disclosed in the estimate delivered pursuant to Section 3.5(d)(i) and
the difference is material in relation to the applicable Put Price, then SFOG
Acquisition A and SFOG Acquisition B may in their exclusive judgment circulate
such revised information to the Unitholders, in which case the timing of the
Liquidity Put Settlement Date may be delayed for a reasonable period of time
(which in no event shall be shorter than the period of time required by
applicable law, if any) so that such Unitholders may review such revised
information.
3.6 Exchange Act. To the extent required by the Exchange Act and
-------------
the regulations thereunder, (i) the Liquidity Put will be conducted in
compliance with the applicable provisions of the Exchange Act and the
regulations thereunder and (ii) the foregoing provisions of Article III will be
modified to the extent necessary, and without changing in any material respect
the economic effect to Fund limited partners (other than SFOG Acquisition A and
SFOG Acquisition B), so that the Liquidity Put can be so conducted. To the
extent they may lawfully so agree, SFOG Acquisition A and SFOG Acquisition B
agree to (x) not tender any Units they own from time to time in any Liquidity
Puts or (y) adjust the proration provisions of Section 3.3(b) so that Fund
limited partners (other than SFOG Acquisition A and SFOG Acquisition B) have the
same rights to have their Units purchased as they would have had were SFOG
Acquisition A and SFOG Acquisition B lawfully permitted to so agree.
3.7 Put for 2026. If the End-of-Term Option is not exercised and
------------
if, on October 31, 2025, SFOG Acquisition A and SFOG Acquisition B together do
not own at least 50% of the Units, the following provisions will be applicable
to the Liquidity Put for 2026: (i) the notice required to be given by Fund
pursuant to Section 3.5(d)(i) will be given on or before November 1, 2025, (ii)
the notice required to be given by Section 3.5(a) for the year ended December
31, 2025 will be given on or before November 15, 2025, which notice shall
contain, in lieu of the Put Price, the good faith estimate of SFOG Acquisition A
and SFOG Acquisition B of the Put Price for 2026, based on the facts then known,
and be accompanied by the financial statements with respect to the quarter and
nine-month period ended September 30, 2025 required by Section 12.8(a)(ii) and
an estimate of the statement required by Section 12.8(a)(i)(B) (with the final
of such statement being provided with the audited financial statements for 2025
required by Section 12.8(a)(i)(A)), (iii) each Unitholder electing to exercise
the Liquidity Put for 2026 must
25
<PAGE>
give the notice required by Section 3.5(b) so that it is received on or before
December 15, 2025 and such notice must be irrevocable; (iv) the notice to be
given by Salkin (or, if applicable, the successor to Salkin having the General
Partner's Right of First Refusal) pursuant to Section 3.5(c) must be given on or
before December 31, 2025; and (v) the Put Price for Units to be purchased
pursuant to the Liquidity Put for 2026 will be determined when such Put Price
would otherwise have been determined, had the dates otherwise applicable not
been accelerated as provided in this Section 3.7, and the Liquidity Put
Settlement Date for Units purchased pursuant to that Liquidity Put shall be May
15, 2026.
3.8 Adjustments. If there are increases in any Put Price and/or
-----------
required additional puts pursuant to Section 12.7, the increased Put Price and
additional puts shall be deemed to be pursuant to this Article III for purposes
of the Guarantees.
ARTICLE IV
SF AGREEMENT LAND AND BATMAN THE RIDE
4.1 Purchase of SF Agreement Land. Immediately following the
-------------------------------
completion of the transactions referred to in Sections 5.4 and 5.5, Flags shall
purchase and pay in full for the SF Agreement Land. At the time of transfer,
SFEC shall cause the SF Agreement Land to not be subject to any lien for
indebtedness. Flags shall be entitled (but shall not be required) to pay the
purchase price of all or any portion of the SF Agreement Land by a promissory
note to each SFEC Entity that owns any SF Agreement Land or with the proceeds of
a loan made by any other SFEC Entity or SFEC Affiliate; provided that (i) such
note or loan shall have the same terms as Affiliate Loans are required to have
under the Flags II Limited Partnership Agreement and, unless such loans are
designated as Retained Liabilities, be assumed by Flags II and (ii) neither
principal nor the interest paid with respect to such note or loan shall be taken
into account in determining EBITDA. If any such notes are to be executed by
Flags after SFG-I, LLC becomes the manager of Flags, then one or more of the
SFEC Entities shall instruct Flags to execute and deliver one or more promissory
notes related to or given as all or a portion of the purchase price for the SF
Agreement Land. Nothing in this Agreement, including Section 12.10 hereof, shall
obligate Flags to indemnify any SFEC Entity against any losses, claims, damages,
liabilities or expenses any of them may incur or become subject to as a result
of Flags' compliance with such instructions or the required assumption by Flags
II of the obligations of Flags under such note or notes. Copies of the deeds
that are recorded to transfer the ownership of and title to the SF Agreement
Land will be provided to Fund on or before the date they are recorded and copies
of the deeds as recorded will be provided to Fund, with the originals being
retained by Flags, when those copies can be obtained.
4.2 Title to SF Agreement Land. The SFEC Entities jointly and
----------------------------
severally represent and warrant to Fund and Flags that, after giving effect to
the transactions described in Section 4.1, Flags will succeed to all of the
right, title and interest held by any SFEC Entity or any Person controlled by
the SFEC Entities, in each case at any time on or after August 1, 1996 to and
including the Effective Date, in any real property located within one mile of
the boundary of the Amusement Park in any direction.
26
<PAGE>
4.3 Batman the Ride and Other Capital Improvements in Progress.
-------------------------------------------------------------
The SFEC Entities jointly and severally represent and warrant to Fund that the
contract for the purchase and installation of Batman the Ride, all related work
in progress and all other capital improvements in progress at the Amusement Park
have been assigned to and/or have become the sole property of Flags.
ARTICLE V
FLAGS RULPA ELECTION AND LIMITED
LIABILITY COMPANY CONVERSION
5.1 RULPA Election. SFOG and Fund hereby determine that Flags
---------------
shall, and Flags hereby does, elect to be governed by the Georgia Revised
Uniform Limited Partnership Act ("RULPA") effective on the Effective Date. The
sole purpose of Flags making this election is so that, as soon as legally
permissible after the election, Flags may, pursuant to Section 212 of the
Georgia Limited Liability Company Act, convert to a limited liability company
governed by the Georgia Limited Liability Company Act. Notwithstanding this
election, with respect to all matters governing the relationships, rights and
claims of Fund and SFOG vis-a-vis each other and their respective affiliates
(including, as affiliates of SFOG, the other SFEC Entities and the SFEC
Affiliates), the parties agree that all of the rights, duties, liabilities and
obligations arising under or in respect of the Flags Limited Partnership
Agreement, whether prior to or after the date hereof until the conversion of
Flags into a limited liability company and SFG-I, LLC becoming the sole manager
of Flags, shall be governed and defined by the provisions of the Georgia Uniform
Limited Partnership Act, to which Flags is subject immediately prior to the
Effective Date. Upon Flags electing to be governed by RULPA, the name of Flags
shall become, and for so long as Flags is subject to RULPA, the name of Flags
shall be, Six Flags Over Georgia, Ltd. (L.P.). To effect the election to be
governed by RULPA, on the Effective Date, SFOG will sign and file the
Certificate of Limited Partnership in the form of Exhibit 5.1 hereto, provided
that the second sentence in paragraph 5(c) thereof shall, without changing the
agreement of the parties to this Agreement, not be included if so including it
precludes the election to be governed by RULPA from being effective.
5.2 Limited Liability Company Conversion. Effective immediately
-------------------------------------
after the filing of the Certificate of Limited Partnership of Flags as provided
in Section 5.1, without thereby changing the economic interests or any other
rights of SFOG or Fund in Flags, Flags will convert from a Georgia limited
partnership of which SFOG is the sole general partner and Fund is the sole
limited partner to a Georgia limited liability company of which SFOG will be one
of the two members and the sole manager and Fund will be the other member. The
name of Flags will thereupon be changed to Six Flags Over Georgia, LLC.
5.3 SFOG No Longer Manager of Flags; SFG-I, LLC as Member/Manager.
-------------------------------------------------------------
As is more fully set forth in the Flags Limited Liability Company Operating
Agreement, effective immediately after the effectiveness of the events described
in Section 5.2, (i) SFOG shall cease to be the manager of Flags, but shall
continue to be a member of Flags with a nominal interest in Flags, and (ii)
SFG-I, LLC shall become the sole manager and one of the two other members of
Flags. Fund shall remain the other member of Flags. Subject to the nominal
interest of SFOG,
27
<PAGE>
Fund will have a 99% interest and SFG-I, LLC will have a 1% interest in Flags,
as more fully set forth in the Flags Limited Liability Company Operating
Agreement.
5.4 Flags Limited Liability Company Operating Agreement. Effective
---------------------------------------------------
immediately after the filing of the Certificate of Limited Partnership of Flags
as provided in Section 5.1, Fund, SFOG and SFG-I, LLC shall execute and deliver
the Flags Limited Liability Company Operating Agreement.
5.5 Section 14-11-212 Certificate. Effective immediately after the
-----------------------------
filing of the Certificate of Limited Partnership of Flags as provided in Section
5.1, SFOG, SFG-I, LLC and, if required, Flags will execute and file with the
Georgia Secretary of State the certificate required by Section 14-11-212 of the
Georgia Limited Liability Company Act, which will be in substantially the form
attached as an exhibit to the Flags Limited Liability Company Operating
Agreement.
ARTICLE VI
FLAGS II
6.1 The Flags II Limited Partnership Agreement. Effective as soon
------------------------------------------
as possible on the Effective Date after the effectiveness of the events
described in Article V, Flags, as limited partner, SFOG II, as sole managing
general partner, and SFG-II, LLC, as sole co-general partner, shall enter into
the Flags II Limited Partnership Agreement in the form of Exhibit 6.1.1. SFOG II
shall timely make all filings and give all notices required to effectuate the
creation of Flags II including filing a Certificate of Limited Partnership with
the Delaware Secretary of State in substantially the form of Exhibit 6.1.2 and
all necessary documents with governmental agencies in Georgia for Flags II to be
qualified as a foreign limited partnership in Georgia.
6.2 Contribution by Flags of Assets, Including the Rides and the
-------------------------------------------------------------
Other Improvements, to Flags II; Sale by Flags of the Designated Assets to Flags
- --------------------------------------------------------------------------------
II; Assumption of Liabilities; Certain Expenses.
- -----------------------------------------------
(a) Contribution. Effective immediately after the formation of
------------
Flags II, Flags shall contribute to Flags II, in exchange for its interest in
Flags II, all of its property and assets, except the Reserved Assets, as more
fully provided in the Flags II Limited Partnership Agreement. SFOG II will not
make any contribution to Flags II for its interests in Flags II. SFG-II, LLC
will contribute $100 to Flags II for its interest in Flags II.
(b) Sale of Designated Assets and Assumption of Liabilities.
-------------------------------------------------------------
Immediately upon the contribution by Flags to Flags II pursuant to Section
6.2(a) and as more fully provided in the Flags II Limited Partnership Agreement,
Flags will sell to Flags II all of the Designated Assets, in exchange for the
assumption by Flags II of all then-existing Indebtedness, liabilities (except
(i) any liabilities Flags may have to Fund or Fund's partners, (ii) any income
tax liabilities of Flags and its members arising out of the transactions
contemplated by this Agreement and the Flags II Limited Partnership Agreement
and (iii) any Retained Liabilities) and contractual obligations of Flags
(including without limitation the obligations of Flags under the contract for
Batman the Ride and, unless they are designated as Retained Liabilities, Flags'
obligations under any notes given or
28
<PAGE>
loans made to Flags in consideration or partial consideration of, or for use in
the purchase by Flags of, the SF Agreement Land, as permitted by Section 4.1).
(c) Certain Expenses. Since Flags II will be continuing the
-----------------
business of Flags, Flags II will pay the expenses of the audit of Flags relating
to 1996, the costs of Flags for preparation of tax returns relating to 1996 and
the period January 1, 1997 to the Effective Date, any expenses of Flags for
making reports to governments or governmental agencies in respect of 1996, prior
periods and 1997 through the Effective Date and similar expenses of Flags, in
each case that are incurred after the transactions provided for in Sections
6.2(a) and (b). These expenses will be expenses of Flags II in determining
EBITDA.
(d) Savings Clause. If the valid, complete and perfected
---------------
assignment or transfer to Flags II of any of the assets to be transferred by
Flags to Flags II pursuant to Section 6.2(a) or 6.2(b), or if the valid and
complete assumption by Flags II of any of the liabilities of Flags to be assumed
by Flags II pursuant to Section 6.2(b), requires the consent, agreement or
approval of or any filing or registration with any Person, and, as a result of
the failure to obtain or make any such consent, agreement, approval, filing or
registration, such assignment, transfer or assumption, as the case may be, is
not effected as contemplated hereby despite the provisions hereof purporting to
effect such assignment, transfer or assumption, as the case may be, then, and
until such time as any impediment to the validity, completeness or perfection of
such assignment, transfer or assumption, as the case may be, shall have been
removed, nullified or waived, (i) all the benefits and burdens relating to such
assets (including, without limitation, possession, use, risk of loss, potential
for gain and dominion, control and command over such assets) are to inure from
and after the Effective Date to Flags II and (ii) all of the burdens relating to
such liabilities are to inure from and after the Effective Date to Flags II. The
parties hereto undertake and agree to use their reasonable best efforts to
obtain any consent, agreement or approval of and to make any filing or
registration with any Person that may be required or necessary for the
assignment, transfer or assumption of any of such assets and/or such
liabilities, as the case may be, to or by Flags II to be valid complete or
perfected and to promptly complete any transfer, assignment or assumption. All
expenses of Flags and Flags II incurred in complying with the preceding sentence
will be paid by Flags II and shall reduce EBITDA to the extent such expenses
would have reduced EBITDA if they had been incurred by Flags II.
ARTICLE VII
THE LEASE
Immediately after the Flags II Limited Partnership Agreement is
entered into as provided in Article VI, Flags, as landlord, and Flags II, as
tenant, shall enter into the Lease in the form of Exhibit VII, pursuant to
which, among other things, (a) Flags will lease to Flags II all of the land,
including the SF Agreement Land, then owned by it and, among other things, (b)
Flags II will pay Base Rent to Flags. Flags may cause the Lease or, at the
election of Flags, an appropriate memorandum of lease to be recorded in the land
records of the County of Fulton, State of Georgia.
29
<PAGE>
ARTICLE VIII
END-OF-TERM OPTION; ALTERNATIVES IF OPTION NOT EXERCISED;
SFOG II CEASING TO BE THE GENERAL PARTNER OF FLAGS II
8.1 End-of-Term Option. On a day that is between the third and
-------------------
eighth Business Days of 2027 designated by SFOG Acquisition B (the "End-of-Term
Option Date"), on not less than two Business Days prior notice delivered to
Fund, provided no Default (other than "Another Material Default" (as defined in
--------
the Flags II Limited Partnership Agreement)) has occurred and is then continuing
or that SFOG II has not then been removed as the General Partner of Flags II
after a Default, and on the terms provided in this Article VIII, SFOG
Acquisition B shall have the option (the "End-of-Term Option") to (i) require
Fund to redeem, for an amount in cash for each whole Unit equal to the
End-of-Term Option Price, all of the Units in Fund not then owned by SFOG
Acquisition A or SFOG Acquisition B (with each fraction of a Unit not owned by
SFOG Acquisition A and SFOG Acquisition B being redeemed for the End-of-Term
Option Price times the fraction in question) and (ii) acquire the general
partnership interests in Fund, the managing member's interest Flags and the
co-general partnership interest in Flags II. SFOG Acquisition B may assign its
rights under this Article VIII (and upon such assignment such assignee shall
have all of the rights of SFOG Acquisition B under this Article VIII) to any
Person, but without reducing its obligations under this Article VIII, provided
--------
that (i) if the Net Worth Standard is not then met, the assignee thereby agrees,
in a writing reasonably acceptable in form and substance to Fund, to become
jointly and severally liable with SFOG Acquisition B for its obligations under
this Article VIII, (ii) the assignee takes such rights subject to the provisions
of this Agreement and the Related Agreements and (iii) the Guarantors agree, in
a writing reasonably acceptable in form and substance to Fund, that their
obligations under their respective Guarantees are not diminished by the
assignment and continue undiminished with respect to the End-of-Term Option.
8.2 End-of-Term Option Price; Acquisition of General Partnership
--------------------------------------------------------------
Interests in Fund and Flags II and Managing Member's Interest in Flags.
- ----------------------------------------------------------------------
(a) End-of-Term Option Price. The End-of-Term Option price for
-------------------------
each whole Unit (the "End-of-Term Option Price") is "A" minus "B", where "A" is
(i) the greater of (x) the Aggregate Tender Offer Amount or (y) the Aggregate
Tender Offer Amount multiplied by the CPI Adjustment for the Lease were it to
continue, without other change in its terms, for the year 2027 (or, if the
End-of-Term Option is accelerated, the then next year) multiplied by (ii) .99
and divided by (iii) the Number of Units and "B" is the Per Unit Liabilities
Amount. The amount in cash to be paid to a Unitholder in respect of each Unit
redeemed pursuant to the End-of-Term Option is the End-of-Term Option Price less
any taxes required to be withheld under applicable law.
(b) Acquisition of Fund General Partnership Interest. Concurrently
------------------------------------------------
with the payment of the End-of-Term Option Price by Fund to each Unitholder
whose Units are being redeemed, SFOG Acquisition B shall acquire the general
partnership interests in Fund for an aggregate amount in cash (less any taxes
required to be withheld) equal to the product of (i) .01 multiplied by (ii) the
End-of-Term Option Price multiplied by (iii) the Number of Units and divided by
(iv) .99 (such amount, before taxes required to be withheld, is referred to in
Section 8.2(c) as the
30
<PAGE>
"GP Amount"). The allocation of this cash between Salkin and SFG, Inc. shall be
in proportion to their interest as general partners.
(c) Acquisition of Flags Managing Member's Interest. Concurrently
-----------------------------------------------
with the payment of the End-of-Term Option Price by Fund to each Unitholder
whose Units are being redeemed, SFOG Acquisition B shall acquire the interest of
SFG-I, LLC (or, if applicable, a successor to SFG-I, LLC) in Flags for an
aggregate amount in cash equal to 1.0101 multiplied by the GP Amount (less any
taxes required to be withheld).
(d) Acquisition of Co-General Partnership Interest in Flags II.
------------------------------------------------------------
Concurrently with the payment of the End-of-Term Option Price by Fund to each
Unitholder whose Units are being redeemed, SFOG Acquisition B shall acquire the
co-general partnership interest of SFG-II, LLC (or, if applicable, a successor
to SFG-II, LLC) in Flags II for $100.
(e) Illustration of End-of-Term Option Transactions. An
------------------------------------------------------
illustration of a calculation of the End-of-Term Option Price and the amounts
for which the general partnership interests in Fund and the managing member's
interest in Flags will be redeemed or acquired is set forth in Exhibit 8.2 to
this Agreement.
8.3 Notice of Exercise of End-of-Term Option. As a condition of
------------------------------------------
its right to exercise the End-of-Term Option (except as otherwise provided by
Section 8.6), SFOG Acquisition B must give Fund and, pursuant to Section 15.4,
its limited partners and Flags irrevocable written notice of its exercise of the
End-of-Term Option not later than December 31, 2024, provided that SFOG
--------
Acquisition B will lose its right to exercise the End-of-Term Option if it has
not given such notice within 30 days, time being of the essence, after notice
from Fund that it must so exercise or lose its End-of-Term Option, which notice
by Fund may be given at any time on or after December 1, 2024 (including at any
time on or after December 31, 2024).
8.4 Payment of End-of-Term Option Price.
-----------------------------------
(a) Payment of End-of-Term Option Price. On the End-of-Term Option
-----------------------------------
Date, SFOG Acquisition B shall pay to Fund as a capital contribution and in
immediately available funds the full amount of the aggregate End-of-Term Option
Price for all Units not owned by SFOG Acquisition A or SFOG Acquisition B or any
other SFEC Entity or SFEC Affiliate, which amount shall be used by Fund to
forthwith redeem and pay in full for the Units to be redeemed pursuant to the
End-of-Term Option on the End-of-Term Option Date.
(b) Percentage Distribution Adjustment. In addition to the amounts
----------------------------------
provided for above in this Article VIII, if the End-of-Term Option is exercised,
SFOG II shall cause Flags II to, and Flags II shall, pay in cash, concurrently
with the payment of the End-of-Term Option Price, to the managing member of
Flags (to be SFG-I, LLC immediately after the Effective Date), the general
partners of Fund and the limited partners of Fund other than SFOG Acquisition A
and SFOG Acquisition B or any other SFEC Entity or SFEC Affiliate, in each case
as of the close of business on December 31, 2026, the amount they would have
received, but have not then received, had the Percentage Distribution for 2026
been paid in full to Flags prior to December 15, 2026, distributed by Flags to
its partners in accordance with the Flags Limited
31
<PAGE>
Liability Company Operating Agreement and distributed by Fund to its partners in
accordance with the Second Amended and Restated Fund Limited Partnership
Agreement.
8.5 Alternatives if Option Not Exercised or if SFOG II Ceases to
-------------------------------------------------------------
be the General Partner of Flags II.
- ----------------------------------
(a) No Indebtedness, Capital Leases, Operating Capital Asset
--------------------------------------------------------------
Leases or Liabilities. If the End-of-Term Option is not exercised, or if SFOG II
- ---------------------
ceases to be the General Partner of Flags II by resignation or removal under
circumstances where Flags (as the limited partner of Flags II) was entitled to
remove the General Partner of Flags II because there was a "Default" (as defined
in the Flags II Limited Partnership Agreement), the SFEC Entities will, without
thereby causing any non-compliance with this Agreement or any Related Agreement,
jointly and severally cause Flags II to have no (i) Indebtedness (including
Capital Leases), (ii) current liabilities (excluding the current portion of any
such Indebtedness) at December 31, 2026 in excess of its current assets at
December 31, 2026 (or, in each case, such earlier date as is applicable), in
each case as determined in accordance with GAAP, or (iii) except to the extent
Fund requests to the contrary, Operating Capital Asset Leases. Excluded Revenues
may not be utilized to comply with the foregoing sentence and, in complying with
the foregoing sentence, Capital Leases shall be paid off, with Flags II
retaining the property or asset leased.
(b) Extension of Flags II Limited Partnership Agreement. If SFOG
----------------------------------------------------
Acquisition B does not timely exercise the End-of-Term Option, the parties
thereto may, but are not obligated to, extend the Flags II Limited Partnership
Agreement, renew the Lease and extend the arrangements with SFOG II Employee on
mutually agreed terms.
(c) SFOG Acquisition A and SFOG Acquisition B Own More Than 50% of
--------------------------------------------------------------
the Units. If the End-of-Term Option is not exercised and, after giving effect
- ---------
to the purchase of the Units required to be purchased by SFOG Acquisition A
and/or SFOG Acquisition B (exclusive of the Units as to which the General
Partner's Right of First Refusal has been exercised) pursuant to the Liquidity
Put for the year ended December 31, 2025, as provided in Section 3.7, SFEC
Entities and SFEC Affiliates permitted to do so own more than 50% of the Units,
(i) the Amusement Park as it then exists (including the "Land" (as defined in
the Lease) and improvements thereon) will be sold (and may, at the election of
Flags, be sold by a Person (e.g., a broker or agent) designated by Flags), (ii)
effective immediately prior to the sale, without any payment or other
consideration, SFOG II will no longer be a general partner of Flags II or have
any interest, including not having any interest in distributions (whether in
respect of Priority Management Fee Distributions or Percentage Distributions or
otherwise), including having no interest in distributions on any liquidation or
dissolution, in Flags II (except in respect of tax allocations to the time it
ceases to be a general partner), (iii) Flags II will wind up and dissolve,
distributing all of its assets in accordance with the Flags II Limited
Partnership Agreement, (iv) 100% of the proceeds of the sale of the Amusement
Park and the Land will be paid to Flags, (v) Flags will wind up and dissolve,
distributing all of its assets (including such proceeds paid to it) in
accordance with the Flags Limited Liability Company Operating Agreement, and
(vi) Fund will wind up and dissolve, distributing all of its assets (including
its 99% share of such proceeds) in accordance with the Second Amended and
Restated Fund Limited Partnership Agreement. If the Amusement Park is to be
disposed of pursuant to this Section 8.5(c), then (A) SFOG Acquisition A, SFOG
32
<PAGE>
Acquisition B and any other SFEC Entity or SFEC Affiliate shall be permitted to
bid for the Amusement Park, (B) such bid will be considered in good faith by
Flags and (C) such disposition shall be on terms (including price) no less
favorable to Fund than would be obtainable in an arms length transaction with an
unaffiliated third party.
(d) SFOG Acquisition A and SFOG Acquisition B Own Less Than 50% of
--------------------------------------------------------------
the Units. If the End-of-Term Option is not exercised and, after giving effect
- ---------
to the purchase of the Units required to be purchased by SFOG Acquisition A
and/or SFOG Acquisition B (exclusive of Units as to which the General Partner's
Right of First Refusal has been exercised) pursuant to the Liquidity Put for the
year ended December 31, 2025, as provided in Section 3.7, SFEC Entities and SFEC
Affiliates permitted to do so own 50% or less of the Units, then, upon notice by
Flags, given effective at any time on or after the close of business December
31, 2026, without any payment or other consideration, (i) SFOG II will no longer
be a general partner of Flags II or have any interest in Flags II, including
SFOG II not having any interest in distributions as provided in Section 8.5(c)
(except in respect of tax allocations to the time it ceases to be a general
partner) and (ii) Flags may, without consultation with SFOG II or any other SFEC
Entity or SFEC Affiliate, determine the manner in which the Amusement Park shall
be managed or disposed of (and if the Amusement Park is disposed of in
accordance with this Section 8.5(d), the provisions of Section 8.5(c)(i) through
(vi) shall apply). If the Amusement Park is to be disposed of pursuant to this
Section 8.5(d), then (A) SFOG Acquisition A, SFOG Acquisition B and any other
SFEC Entity or SFEC Affiliate shall be permitted to bid for the Amusement Park,
(B) such bid will be considered in good faith by Flags and (C) such disposition
shall be on terms (including price) no less favorable to Fund and its partner
than would be obtainable in an arms length transaction with an unaffiliated
third party.
(e) Purchase by SFEC Entity or SFEC Affiliate. If pursuant to
--------------------------------------------
Section 8.5(c) or 8.5(d) the Amusement Park is to be sold to any SFEC Entity or
SFEC Affiliate, then in lieu of purchasing the Amusement Park, such SFEC Entity
or SFEC Affiliate may (i) require Fund to redeem all of the Units not then owned
by SFOG Acquisition A or SFOG Acquisition B (with the aggregate redemption price
for such Units being paid by such SFEC Entity or SFEC Affiliate) and (ii)
acquire the general partner's interests in Fund, the managing member's interest
in Flags and the co-general partner's interest in Flags II, in each case at the
price such Persons would have received had such SFEC Entity or SFEC Affiliate
purchased the Amusement Park as provided in Section 8.5(c) or 8.5(d).
8.6 Acceleration of End-of-Term Option in the Event of Total
-------------------------------------------------------------
Condemnation or Equivalent Casualty. As is more fully provided in the Flags II
- ------------------------------------
Limited Partnership Agreement and the Lease, in the event of a (i) total
condemnation or condemnation(s) that renders it economically impracticable to
operate an amusement park on the land leased to Flags II under the Lease, Flags
shall be entitled to retain all condemnation or other proceeds in respect of
such condemnation and the End-of-Term Option shall be accelerated and exercised
or (ii) casualty such that it is economically impracticable to repair and
operate an amusement park on the land leased to Flags II under the Lease (such
as contamination of the land by Hazardous Materials so that it may not be safely
occupied and a clean-up or remediation is economically impossible), Flags shall
be entitled to retain all insurance proceeds with respect thereto, if any, and
at the option of either Flags or Flags II, exercised by notice to the other, the
End-of-Term Option shall be accelerated and
33
<PAGE>
exercised. SFOG Acquisition A and SFOG Acquisition B agree to be bound by the
preceding sentence. Flags shall not distribute to its partners, dispose of or
otherwise use any condemnation proceeds or insurance proceeds to which it shall
be entitled pursuant to this paragraph.
ARTICLE IX
REPRESENTATIONS AND WARRANTIES
9.1 Representations and Warranties of the SFEC Entities. In
--------------------------------------------------------
addition to other representations and warranties of the SFEC Entities contained
elsewhere in this Agreement, SFEC (as to all of the SFEC Entities and Flags),
SFTP (as to itself, SFOG, SFOGS and Flags), SFOG (as to itself and Flags), SFOGS
(as to itself), SFOG II (as to itself), SFOG II Employee (as to itself), SFOG
Acquisition A (as to itself) and SFOG Acquisition B (as to itself) further
represent and warrant to Fund, Salkin, SFG, Inc., SFG-I, LLC and SFG-II, LLC
that the following statements are true.
(a) Organization and Authority. Each of the SFEC Entities is a
----------------------------
corporation (other than SFOG Acquisition B, which is a limited liability
company) duly formed, validly existing and in good standing under the laws of
its respective state of incorporation or organization, as applicable. Flags is a
limited partnership duly formed and validly existing under the laws of the State
of Georgia. Each of the SFEC Entities has all requisite corporate or limited
liability company power and authority to execute and deliver this Agreement and
the Related Agreements to which it is a party and to perform its obligations
hereunder and thereunder. SFOG II is duly qualified and in good standing to
conduct business under the laws of the State of Georgia and has all requisite
corporate power and authority and all licenses, permits and approvals necessary
to enable it to perform its obligations under this Agreement and as the general
partner of Flags II. Flags has all requisite partnership power and authority to
execute and deliver this Agreement.
(b) Authority with Respect to this Agreement and the Related
-------------------------------------------------------------
Agreements; Enforceability. All necessary corporate or limited liability company
- --------------------------
action required to have been taken by or on behalf of any of the SFEC Entities
by applicable law or its respective charter documents has been taken to
authorize the execution and delivery by each SFEC Entity of, and performance by
each SFEC Entity of its obligations under, this Agreement and the Related
Agreements to which it is to be a party. This Agreement constitutes the legal,
valid and binding agreement of each of the SFEC Entities and Flags, and each of
the Related Agreements, when executed and delivered, will constitute the legal,
valid and binding agreement of each of the SFEC Entities party thereto,
enforceable against each of them in accordance with its terms, except insofar as
such enforceability may be limited by bankruptcy, insolvency, moratorium and
similar laws of general application relating to or affecting creditors' rights
generally and except for the limitations imposed by general principles of
equity.
(c) Consents and Approvals. No consent, approval or authorization
----------------------
of, or declaration, filing or registration with, any governmental or regulatory
authority or any other Person (either governmental or private) is required in
connection with the execution and delivery of this Agreement by any of the SFEC
Entities and Flags or the execution and delivery of the
34
<PAGE>
Related Agreements by each of the SFEC Entities to be party thereto or the
consummation by each of them of the transactions provided for herein or therein.
(d) No Breach. The execution and delivery of this Agreement by the
---------
SFEC Entities and Flags, the execution and delivery of the Related Agreements to
which it is a party by each of the SFEC Entities and the performance by each of
them of their obligations hereunder and thereunder does not and will not
violate, result in a breach of any of the terms or provisions of, constitute a
default under or conflict with any agreement to which any of the SFEC Entities
or Flags is a party, the certificate or articles of incorporation or bylaws of
any of the SFEC Entities, any law, rule or regulation applicable to any of the
SFEC Entities or Flags or any judgment, decree, order or award of any court,
governmental body or arbitrator applicable to any of the SFEC Entities or Flags
or the assets of any of them (other than any violation, breach, default or
conflict that would not have a material adverse effect on any of the SFEC
Entities or Flags or any adverse effect on the transactions contemplated by this
Agreement and the Related Agreements).
(e) Agreements Related to Texas Park. As of the opening of
------------------------------------
business on December 22, 1996, there were no agreements or understandings
between any SFEC Entity or SFEC Affiliate, on the one hand, and the Texas Park,
any limited partnership that directly or indirectly owns an interest in the
Texas Park or any of the Texas Partners that provides for any transfer of
ownership of the Texas Park or the partnership interests in Six Flags Over Texas
Fund, Ltd. or the management, beyond December 31, 1997, of the Texas Park, other
than as provided in the Amended and Restated Limited Partnership Certificate and
Agreement dated as of June 30, 1969, as amended through April 14, 1988.
(f) No Material Undisclosed Tangible Assets of Flags. To the
-----------------------------------------------------
knowledge of the SFEC Entities, there are no tangible assets of Flags that (i)
are not directly related to the operations of the Amusement Park and (ii) have a
value that is material in relation to the value of the Amusement Park.
(g) Broker's Fees. No broker, finder or investment banker is
--------------
entitled to any brokerage, finder's or other fee or commission, payable by Fund,
Flags or Flags II, in connection with the transactions contemplated by this
Agreement and the Related Agreements, based upon arrangements or agreements made
by or on behalf of any of the SFEC Entities or Flags.
(h) 1996 Distributions by and Taxable Income of Flags. During and
-------------------------------------------------
in respect of 1996, Flags made only the following distributions: $2.1 million to
Fund during and in respect of 1996 and $259,127 to Fund during 1996 in respect
of 1995 and $4,397,000 to SFOG during and in respect of 1996 and $605,466 during
1996 in respect of 1995. Flags has not made or declared any distributions in
1997. The SFEC Entities currently believe the taxable income of Flags for 1996
is approximately $5.4 million.
(i) Indenture Termination Date. The termination date of the
----------------------------
Indenture was at its initial date and is as of the date of this Agreement during
the year 2005.
(j) Inventory and Receivables at December 31, 1996; Inventory
-------------------------------------------------------------
Purchased from Affiliates. At December 31, 1996, the inventory and receivables
- --------------------------
of Flags, after giving effect to
35
<PAGE>
reserves, writedowns, allowances and charges, were approximately $2.3 million
and $400,000, respectively. Any inventory sold to Flags by a Controlled SFEC
Affiliate or an SFEC Affiliate on or after January 1, 1997 to the Effective Date
will be on the terms provided for such transactions set forth in Section
12.7(a), as if such terms applied to the sales.
(k) Good Faith. The SFEC Entities have negotiated in good faith
----------
with Fund, Salkin, SFG, Inc., SFG-I, LLC and SFG-II, LLC with respect to this
Agreement, the Related Agreements and the transactions contemplated hereby and
thereby.
9.2 Representations and Warranties of Fund and Related Entities.
------------------------------------------------------------
Fund, Salkin, SFG, Inc., SFG-I, LLC and SFG-II, LLC (each as to itself)
represents and warrants to each of the SFEC Entities that the following
statements are true.
(a) Organization and Authority. Fund is a limited partnership duly
--------------------------
organized and validly existing under the laws of the State of Georgia. SFG, Inc.
is a corporation duly organized, validly existing and in good standing under the
laws of the State of California. SFG-I, LLC and SFG-II, LLC is each a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Georgia. Fund has all requisite partnership power and
authority to execute and deliver this Agreement and the Related Agreements to
which it is to be a party and to perform its obligations hereunder and
thereunder. SFG, Inc. has all requisite corporate power and authority to execute
and deliver this Agreement, the Second Amended and Restated Fund Limited
Partnership Agreement and any other Related Agreements to which it is to be a
party and to consummate the transactions contemplated hereby and thereby. SFG-I,
LLC and SFG-II, LLC each has all requisite limited liability company power and
authority to execute and deliver this Agreement, the Flags Limited Liability
Company Operating Agreement, the Flags II Limited Partnership Agreement and any
other Related Agreements to which it is to be a party and to perform its
obligations hereunder and thereunder.
(b) Authority with Respect to this Agreement and the Related
-------------------------------------------------------------
Agreements; Enforceability. All necessary partnership action, required to have
- ---------------------------
been taken by or on behalf of Fund by applicable law, the certificate of limited
partnership of Fund or the Fund Limited Partnership Agreement (subject to
receipt of the Fund Limited Partners' Approval) has been taken to authorize the
execution and delivery by Fund of, and the performance by Fund of its
obligations under this Agreement and the Related Agreements to which it is to be
a party. All necessary corporate action, required to have been taken by or on
behalf of SFG, Inc. by applicable law, its articles of incorporation or its
bylaws has been taken to authorize the execution and delivery by SFG, Inc. of,
and the performance by SFG, Inc. of its obligations under, this Agreement and
the Related Agreements to which it is to be a party. All necessary limited
liability company action, required to have been taken by or on behalf of each of
SFG-I, LLC and SFG-II, LLC by applicable law, the articles of organization of
each of SFG-I, LLC and SFG-II, LLC or the operating agreements of SFG-I, LLC and
SFG-II, LLC has been taken to authorize the execution and delivery by each of
SFG-I, LLC and SFG-II, LLC of, and the performance by each of SFG-I, LLC and
SFG-II, LLC of its obligations under, this Agreement and the Related Agreements
to which it is to be a party. Each of this Agreement and the Related Agreements
to which it is or is to be a party constitutes, or when executed and delivered
will constitute, the legal, valid and binding agreement of Fund, Salkin, SFG,
Inc., SFG-I, LLC and SFG-II, LLC, enforceable against
36
<PAGE>
each of them in accordance with its terms, except insofar as such enforceability
may be limited by bankruptcy, insolvency, moratorium and similar laws of general
application relating to or affecting creditors' rights generally and except for
the limitations imposed by general principles of equity.
(c) Consents and Approvals. No consent, approval or authorization
----------------------
of, or declaration, filing or registration with, any governmental or regulatory
authority or any other Person (either governmental or private) is required in
connection with the execution and delivery of this Agreement and the Related
Agreements by Fund, Salkin, SFG, Inc. SFG-I, LLC or SFG-II, LLC or, subject to
receipt of the Fund Limited Partners' Approval, the consummation by each of them
of the transactions provided for herein and therein.
(d) No Breach. The execution and delivery of this Agreement by
---------
each of Fund, Salkin, SFG, Inc., SFG-I, LLC and SFG-II, LLC, the execution and
delivery of the Related Agreements to which it is a party by Fund, Salkin, SFG,
Inc., SFG-I, LLC and SFG-II, LLC and, subject to receipt of the Fund Limited
Partners' Approval, the performance by each of them of their respective
obligations hereunder and thereunder does not and will not violate, result in a
breach of any of the terms or provisions of, constitute a default under or
conflict with any agreement to which Fund, Salkin, SFG, Inc., SFG-I, LLC or
SFG-II, LLC is a party, the certificate of limited partnership of Fund, the Fund
Limited Partnership Agreement, the Second Amended and Restated Fund Limited
Partnership Agreement, the articles of incorporation or bylaws of SFG, Inc., the
articles of organization of SFG-I, LLC or of SFG-II, LLC, the operating
agreement of SFG-I, LLC or of SFG-II, LLC, any law, rule or regulation
applicable to Fund, Salkin, SFG, Inc., SFG-I, LLC or SFG-II, LLC or any
judgment, decree, order or award of any court, governmental body or arbitrator
applicable to Fund, Salkin, SFG, Inc., SFG-I, LLC or SFG-II, LLC or the assets
of any of them (other than any violation, breach, default or conflict that would
not have a material adverse effect on any of Fund, Salkin, SFG, Inc., SFG-I, LLC
or SFG-II, LLC or any adverse effect on the transactions contemplated by this
Agreement and the Related Agreements).
(e) Fund Limited Partnership Agreement. Exhibit 9.2(e) to this
------------------------------------
Agreement is a true and complete copy of the Fund Limited Partnership Agreement,
including the exhibits thereto, except exhibit "A" thereto (which is a list of
the limited partners of Fund and their interests in Fund, which list shall be
delivered to SFEC in accordance with Section 12.22).
(f) Units and Unitholders. As of the date hereof, there are
-----------------------
100-1/31.71 Units outstanding that are held of record by approximately 122
limited partners of Fund. The Units held by the limited partners of Fund
represent, in the aggregate, a 99% interest in Fund (including in its
distributions, after a management fee to an affiliate of the general partner of
Fund equal to one-half of one percent of the distributions to Fund limited
partners).
(g) Liabilities. Fund has no liabilities other than (i) current
-----------
liabilities incurred in the ordinary course of business consistent with past
practice relating to its interest in Flags and (ii) Transaction-Related Expenses
(which amounts in clauses (i) and (ii) Fund will, prior to the Tender Offer
Settlement Date, pay or cause to be assumed and discharged by the Claims Trust
or, if not, cause to be included in the Per Unit Liabilities Amount).
37
<PAGE>
(h) Broker's Fees. Except for (i) amounts already paid by Fund,
--------------
(ii) the payment by Fund to Goldman, Sachs of $1.5 million (which amount will be
paid before the Tender Offer Settlement Date or included in the Per Unit
Liabilities Amount), and (iii) the reimbursement of expenses of Goldman, Sachs
by Fund (which reimbursement obligation Fund will, prior to the Tender Offer
Settlement Date, pay or cause to be assumed and discharged by the Claims Trust
or, if not, cause to be included in the Per Unit Liabilities Amount), no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission payable by Fund, Flags, Flags II or any SFEC Entity in connection
with the transactions contemplated by this Agreement and the Related Agreements,
based upon any arrangement or agreements made by or on behalf of Fund, Salkin,
SFG, Inc., SFG-I, LLC or SFG-II, LLC.
(i) FIRPTA. Fund is not a foreign person as such term is defined
------
in Section 1445 of the Internal Revenue Code of 1986, as amended.
(j) Good Faith. Fund, Salkin, SFG, Inc., SFG-I, LLC and SFG-II,
----------
LLC have negotiated in good faith with the SFEC Entities with respect to this
Agreement, the Related Agreements and the transactions contemplated hereby and
thereby.
ARTICLE X
STANDSTILL
10.1 Certain Rights And Obligations of Units Acquired by SFOG
------------------------------------------------------------
Acquisition A and SFOG Acquisition B Pursuant to this Agreement. Each of SFOG
- -----------------------------------------------------------------
Acquisition A and SFOG Acquisition B will be admitted as a substitute special
limited partner of Fund with respect to all Units (including fractions of Units)
acquired by it in compliance with Articles II and III of this Agreement or
paragraph 2 of Article IX of the Second Amended and Restated Fund Limited
Partnership Agreement.
10.2 Standstill.
----------
(a) SFOG Acquisition A and SFOG Acquisition B. Prior to the
----------------------------------------------
End-of-Term Option Date, not more than $50 million of Units acquired by SFOG
Acquisition A and SFOG Acquisition B pursuant to the Tender Offer, the Liquidity
Put or otherwise pursuant to this Agreement or the Second Amended and Restated
Fund Limited Partnership Agreement, based on the price paid for such Units, will
be acquired by SFOG Acquisition A. All other Units required or permitted to be
acquired by SFOG Acquisition A or SFOG Acquisition B pursuant to the Tender
Offer, the Liquidity Put or otherwise pursuant to this Agreement or the Second
Amended and Restated Fund Limited Partnership Agreement will be acquired by SFOG
Acquisition B.
(b) Standstill. Prior to the End-of-Term Option Date, the SFEC
----------
Entities will not, and the SFEC Entities will cause each SFEC Affiliate to not,
do any of the following: (i) acquire Beneficial Ownership of any Units or other
limited partnership interests in Fund, other than (A) those acquired by either
SFOG Acquisition A or SFOG Acquisition B (or any other Person pursuant to
Section 12.20) pursuant to this Agreement or paragraph 2 of Article IX of the
Second Amended and Restated Fund Limited Partnership Agreement, (B) those
acquired by either SFOG
38
<PAGE>
Acquisition A or SFOG Acquisition B other than pursuant to this Agreement or
paragraph 2 of Article IX of the Second Amended and Restated Fund Limited
Partnership Agreement if the purchase price per Unit is not less than the
highest amount theretofore paid with respect to any Units pursuant to Articles
II or III, and (C) any other Units or limited partnership interests in Fund
acquired by any SFEC Entity or any SFEC Affiliate with the prior approval of
662/3% of the limited partnership interests in Fund that are not Beneficially
Owned by any SFEC Entity or SFEC Affiliate; (ii) except as permitted by the
Second Amended and Restated Fund Limited Partnership Agreement, take any action
to directly or indirectly control or exercise any control over Fund or any of
its general partners; (iii) sell, transfer or assign record or Beneficial
Ownership of any Units or rights to acquire any Units without the prior written
consent of Fund, other than sales, transfers or assignments from SFOG
Acquisition B to SFOG Acquisition A, provided the initial cost of Units held by
--------
SFOG Acquisition A, whether initially acquired by it or SFOG Acquisition B, does
not exceed $50 million; or (iv) acquire, directly or indirectly, any interest in
the Claims Trust or in the claims distributed by Fund to the Claims Trust,
without the prior written permission of the Claims Trust, which permission may
be withheld in the sole discretion of the Claims Trust.
10.3 No Permitted Transfers. Only SFOG Acquisition A and SFOG
------------------------
Acquisition B (or any other Person pursuant to Section 12.20 or Section
10.2(b)(i)(C)), and not any other SFEC Entity or SFEC Affiliate, shall own any
Units and SFOG Acquisition A and SFOG Acquisition B (and each such other Person)
shall each at all times have Beneficial Ownership of all Units it owns.
10.4 Limited Partners' Rights Plan. Without limiting the other
-------------------------------
provisions of this Agreement, each SFEC Entity is aware of and, if the Closing
occurs, agrees to the enforceability in accordance with its terms against it of
the Limited Partners' Rights Plan that is Article XIX and Exhibits D and E to
the Fund Limited Partnership Agreement and the Second Amended and Restated Fund
Limited Partnership Agreement, provided that the Limited Partners' Rights Plan
--------
and other anti-takeover provisions of the Fund Limited Partnership Agreement and
the Second Amended and Restated Fund Limited Partnership Agreement shall not
apply to any purchases of Units or other partnership interests in Fund in
compliance with this Agreement or the Second Amended and Restated Fund Limited
Partnership Agreement and any such purchase shall be deemed to have been
approved by 66-2/3% of the limited partnership interests in Fund (other than
those held by SFOG Acquisition A, SFOG Acquisition B and any other Person that
acquires Units pursuant to Section 12.20).
ARTICLE XI
OBLIGATIONS ABSOLUTE
EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT AND THE RELATED
AGREEMENTS, THE OBLIGATIONS OF THE SFEC ENTITIES, TWX AND TWE UNDER THIS
AGREEMENT AND THE RELATED AGREEMENTS TO WHICH EACH OF THEM IS A PARTY ARE
UNCONDITIONAL, ABSOLUTE AND IRREVOCABLE, IRRESPECTIVE OF ANY IMPRACTICABILITY,
IMPOSSIBILITY OR OTHER DEFENSE TO PERFORMANCE UNDER THIS AGREEMENT OR THE
RELATED AGREEMENTS AND REGARDLESS OF THE CONTINUED EXISTENCE
39
<PAGE>
OF THE AMUSEMENT PARK, THE LAND LEASED PURSUANT TO THE LEASE, THE UNITED STATES
OF AMERICA, "FORCE MAJEURE" (AS DEFINED IN THE FLAGS II LIMITED PARTNERSHIP
AGREEMENT), OR, WITHOUT LIMITATION, ANYTHING ELSE WHATSOEVER, ALL OF WHICH SHALL
BE IRRELEVANT TO SUCH OBLIGATIONS. FOR THE AVOIDANCE OF DOUBT, EXCEPT AS
EXPRESSLY PROVIDED IN THIS AGREEMENT AND THE RELATED AGREEMENTS, THE OBLIGATION
OF THE SFEC ENTITIES, TWX AND TWE UNDER THIS AGREEMENT AND THE RELATED
AGREEMENTS TO WHICH EACH OF THEM IS A PARTY ARE INTENDED AS NO EXCUSES, "HELL OR
HIGH WATER" OBLIGATIONS, WITH NO DEFENSES TO PERFORMANCE OR PAYMENT OF ANY TYPE
OR DESCRIPTION WHATSOEVER.
ARTICLE XII
CERTAIN AGREEMENTS
12.1 Changes in the Number of Outstanding Units. Fund will not
--------------------------------------------
increase or decrease the Number of Units other than (a) pursuant to Article XXI
of the Fund Limited Partnership Agreement and Article XXI of the Second Amended
and Restated Fund Limited Partnership Agreement (the estate liquidity put
provisions), in which case the Number of Units shall be reduced by the number of
Units acquired by Fund and the interests of the limited partners of Fund will be
adjusted proportionately, (b) pursuant to Article XIX of the Fund Limited
Partnership Agreement and Exhibits D and E thereto or Article XIX of the Second
Amended and Restated Fund Limited Partnership Agreement and Exhibits D and E
thereto (the Limited Partners' Rights Plan), (c) as provided in Article IX,
paragraph 10, of the Fund Limited Partnership Agreement and Article IX,
paragraph 10, in the Second Amended and Restated Fund Limited Partnership
Agreement, or (d) as provided in Section 12.17.
12.2 Prepaid Amount; No Fund Liabilities at Tender Offer
------------------------------------------------------------
Settlement Date.
- ---------------
(a) Payment of Prepaid Amount. No later than the date(s) specified
-------------------------
in the Flags II Limited Partnership Agreement and the Lease, Flags II shall
prepay to Flags (i) 50% of the Minimum Amount distributable to Flags for 1997
pursuant to the Flags II Limited Partnership Agreement plus (ii) 50% of the Base
Rent payable to Flags for 1997 pursuant to the Lease (together, the "Prepaid
Amount"). After payment of the Prepaid Amount, the Minimum Amount and the Base
Rent payable in July 1997 shall be zero.
(b) Use of Proceeds. The Prepaid Amount may be used only to: (i)
---------------
distribute to Fund partners, (ii) pay costs, fees and bonuses incurred in
connection with the solicitation, negotiation and documentation of the
transactions contemplated by this Agreement and the Related Agreements
(including expenses incurred in exploring alternatives and negotiating with
others) ("Transaction-Related Expenses") and other liabilities of Fund and (iii)
provide funds to the Claims Trust, without obligation to repay such funds by the
Claims Trust.
(c) No Fund Liabilities at the Tender Offer Settlement Date. Fund
--------------------------------------------------------
represents, warrants and covenants that it will have no Indebtedness or other
liabilities at the Tender Offer
40
<PAGE>
Settlement Date, except liabilities that have been assigned to and assumed by
the Claims Trust and that will be discharged by the Claims Trust and liabilities
of Flags or Flags II that would otherwise be treated as liabilities of Fund but
which Fund as a separate legal entity has no legal obligation to discharge. If
this representation and warranty is incorrect or this covenant is not complied
with, Fund will indemnify SFOG Acquisition A and SFOG Acquisition B for any such
Indebtedness or liabilities out of amounts otherwise payable to its partners
other than SFOG Acquisition A and SFOG Acquisition B.
12.3 The Claims Trust.
----------------
(a) Transfer of Claims to Claims Trust. The parties agree that,
-----------------------------------
without diminution of any defense existing as a result of such transfer, any
claims that Fund may have against SFOG, any other SFEC Entity or any SFEC
Affiliates (including, without limitation, TWE, TWX and their affiliates) prior
to the Tender Offer Settlement Date shall be transferred by Fund prior to the
Tender Offer Settlement Date to a trust for the benefit of the Fund partners as
of the Effective Date (the "Claims Trust"). Notwithstanding anything herein to
the contrary, neither SFOG Acquisition A nor SFOG Acquisition B shall directly
or indirectly succeed to any rights or obligations with respect to such claims
as a result of the purchase of Units pursuant to Article II or III, the exercise
of the End-of-Term Option pursuant to Article VIII or otherwise. Neither
anything in this Section 12.3 or in any other provision of this Agreement or the
Related Agreements (including the language used herein or therein), nor the
transactions provided for herein or therein, shall constitute a waiver of, or
shall in any way diminish, offset or satisfy, any claims or any other rights
with respect to any claims as may exist against SFOG, any of the other SFEC
Entities, any of the SFEC Affiliates, Fund, the partners of Fund, the Claims
Trust, SFG-I, LLC or SFG-II, LLC or any other Person.
(b) No Waiver or Admission; Waiver of Certain Claims Against
--------------------------------------------------------------
Flags. Neither anything contained in this Section 12.3 or in any other provision
- -----
of this Agreement or the Related Agreements (including the language used herein
or therein), nor the transactions provided for herein or therein, shall
constitute an admission of, or a waiver of any defenses against or any other
rights with respect to, any claims that may be asserted against SFOG, any of the
other SFEC Entities or any of the SFEC Affiliates or Fund, the partners of Fund,
the Claims Trust, SFG-I, LLC or SFG-II, LLC or any other Person. No SFEC Entity
may, nor shall any SFEC Entity permit any SFEC Affiliate to, seek contribution,
reimbursement, indemnification or the like from Flags in respect of any
obligation that such SFEC Entity or such SFEC Affiliate may have to Fund or its
limited partners in respect of matters arising prior to the Effective Date.
Effective on the date Flags converts to a limited liability company and SFG-I,
LLC becomes the manager of Flags, Fund, on the one hand, and each of the SFEC
Entities, on the other, waives all rights and claims it may have against Flags,
provided that (i) this release and waiver does not (and will not be effective to
- --------
the extent it would otherwise) diminish in any respect any rights, claims or
defenses of or against any SFEC Entity, SFEC Affiliate, Fund, the partners of
Fund or any other Person as may exist or (ii) constitute an admission by any
SFEC Entity, any SFEC Affiliate, Fund or any other Person that there are any
such rights, claims or defenses.
(c) Savings Clause. Notwithstanding the foregoing, to the extent
--------------
applicable law would prohibit the assignment of any claim or result in otherwise
unavailable defenses being
41
<PAGE>
available, (i) the claim will not be assigned and the claim shall be pursued by
Fund as the agent of the Claims Trust, (ii) the costs of pursuing the claim will
be borne solely by the Claims Trust, (iii) any recovery on the claim will be
paid to the Claims Trust or the beneficiaries thereof and (iv) all Taxes arising
out of the pursuit of such claims and any recovery resulting therefrom shall be
borne by the Claims Trust or its beneficiaries to the same extent as if such
claims had been assigned to, and pursued by, the Claims Trust as contemplated by
the first sentence of this Section 12.3.
(d) Conflict Waiver. Each SFEC Entity consents and will cause each
---------------
SFEC Affiliate to consent to Gibson, Dunn & Crutcher LLP and Steven Meiers
representing the Claims Trust in any proceeding involving any SFEC Entity or
SFEC Affiliate regardless of, without limitation, their representing Fund or,
after the Effective Date, Flags. Fund consents and will cause the Claims Trust
to consent to Paul, Weiss, Rifkind, Wharton & Garrison representing any SFEC
Entities and SFEC Affiliates in any proceeding involving the Claims Trust
regardless of, without limitation, their representing Flags and, after the
Effective Date, Flags II.
(e) Joint and Several Liability of Claims Trust. The Claims Trust
--------------------------------------------
shall be jointly and severally liable for any liabilities that Fund may have to
any SFEC Entity or SFEC Affiliate, if any, for matters arising prior to the
Effective Date; provided that the trustees of the Claims Trust from time to time
--------
shall have no liability with respect to any such liability; and provided,
--------
further, that the Claims Trust may, notwithstanding any such liability, use or
- -------
distribute the Prepaid Amount and any other cash of Fund distributed to it as
contemplated by this Agreement to its beneficiaries without any obligation of
the Claims Trust with respect to such use or distribution of such funds or any
obligation of the recipients of any such funds to return any such funds received
by them.
12.4 Nature of SFOG II, SFOG II Employee, SFOG Acquisition A and
-------------------------------------------------------------
SFOG Acquisition B.
- ------------------
(a) SFOG II. SFOG II shall, at all times from the date of this
-------
Agreement through the expiration of the Flags II Limited Partnership Agreement,
be a single-purpose entity that conducts no business other than the performance
of its obligations as a general partner of Flags II and under this Agreement and
the Related Agreements and the ownership of SFOG II Employee and take all
reasonable action so as not to incur any liabilities (other than Tax and similar
obligations imposed by law or under this Agreement or the Related Agreements).
(b) SFOG II Employee. SFOG II Employee shall, at all times from
----------------
the date of this Agreement through the expiration of the Flags II Limited
Partnership Agreement, be a single-purpose entity that conducts no business
other than performance of its obligations as the employer of the park personnel,
including the Park Employees, and under this Agreement and the Related
Agreements and take all reasonable action so as not to incur any liabilities
(other than obligations related to the employment of the park personnel,
including the Park Employees, or imposed by law or under this Agreement or the
Related Agreements).
(c) SFOG Acquisition A and SFOG Acquisition B. Each of SFOG
----------------------------------------------
Acquisition A and SFOG Acquisition B shall, at all times from the date of this
Agreement through the expiration of the Flags II Limited Partnership Agreement,
be a single-purpose entity that conducts no business other than the performance
of its obligations under this Agreement and the Related Agreements
42
<PAGE>
and take all reasonable action so as not to incur any liabilities (other than
Tax and similar obligations imposed by law or under this Agreement or the
Related Agreements).
12.5 Non-Competition.
---------------
(a) Agreement Not to Compete. If the Closing occurs and thereafter
------------------------
until December 31, 2026 or the earlier termination of the Flags II Limited
Partnership Agreement or the Lease (provided that if such earlier termination
--------
shall be as a result of a Default, until one year after the date of such earlier
termination), neither any of the SFEC Entities nor any other SFEC Affiliate
shall, and the SFEC Entities shall cause the SFEC Affiliates to not, Directly
Compete with the Amusement Park. For purposes of this Section 12.5, "Directly
Compete" shall mean (i) owning, having an interest in, operating or managing, or
having any ownership interest in any Person owning, having an interest in,
operating or managing any other amusement park or theme park of over 10 acres
(excluding parking) and containing two or more thrill rides that cost (when new)
in excess of $4 million in the aggregate and located in the State of Georgia or
(ii) a water park within 25 miles of the boundary of the Amusement Park in any
direction. For purposes of this Agreement, the term "thrill ride" means a
mechanical ride such as Viper, Batman the Ride, Dahlonega Mine Train, Mine
Bender, Georgia Cyclone, Great American Scream Machine (each of which is a ride
at or, with respect to Batman the Ride, a ride being constructed at, the
Amusement Park at the date of this Agreement) or similar rides, which provides
to the rider a thrill experience from a substantial physical structure rather
than a simulated experience.
(b) De Minimus Exception. Section 12.5(a) shall not prohibit any
---------------------
SFEC Affiliate from making a passive investment that is (i) a direct or indirect
interest in an entity that, as less than 5% of its business, has facilities that
Directly Compete with the Amusement Park, (ii) a 5% or less interest in any
entity that has a cost basis of less than $250,000 or (iii) a non-controlling
interest that represents less than 5% of any publicly traded entity.
(c) Savings Clause. It is the intention of the parties that this
---------------
Section 12.5 be given the broadest interpretation permissible under applicable
law and that the unenforceability or invalidity of any term or provision of
Section 12.5 shall not render any other term or provision contained herein
unenforceable or invalid. If the activities described in Section 12.5(a) or the
period of time or the geographical areas covered by Section 12.5(a) should be
deemed too extensive, then the parties intend that this Section 12.5 be
construed to cover the maximum scope of business activities, period of time and
geographical areas (not exceeding those specifically set forth herein) as may be
permissible under applicable law.
12.6 Certain Real Property and Other Matters.
---------------------------------------
(a) Certain Real Property. If the Closing occurs and thereafter
----------------------
for as long as the Lease shall not have expired or been terminated, no SFEC
Entity will, and each SFEC Entity shall cause each SFEC Affiliate to not,
without the prior written consent of Fund (which may be withheld by Fund in its
sole discretion), own or acquire any interest in or lease (except pursuant to
the Lease) any real property located within one mile of the then boundary of the
Amusement Park in any direction, if such real property is used in connection
with the Amusement Park, and otherwise within 500 yards of the boundary of the
Amusement Park in any direction.
43
<PAGE>
(b) SFEC Park Passes. For so long as SFEC or SFTP issue such
------------------
passes or similar passes, other than solely to full time employees, SFEC and
SFTP shall provide, at their sole cost and expense, a pass (known at the date of
this Agreement as a "Gold Card") providing unlimited admission (or, if unlimited
admission passes are not then being so provided, the maximum use pass then being
so provided) to all SFEC Parks and to any other amusement park any SFEC Entities
owns or manages, to all water parks owned or operated, directly or indirectly,
by SFEC and to the Amusement Park (or to such lesser number of attractions for
which such passes are then being so provided) to Fund for (i) each then
Unitholder of Fund (for Unitholders who are not individuals, for one individual
who is an owner, trustee or beneficiary of the Unitholder as designated by Fund)
and (ii) each of Steven Meiers, Jesse Sharf, Stephen Tolles and Debra Alligood
White. Fund will, by November 30 of each year (provided that the notice for 1997
--------
shall be given as soon as reasonable after the date of this Agreement), give
notice to SFEC and SFTP of the number of such passes required for the next year
and the names in which they are to be issued. SFEC and SFTP will deliver such
passes (or, if applicable for any year, the then most comparable passes) to Fund
when they are made available to others whom such passes are sold or otherwise
issued. Any such passes will be subject to the restrictions applicable to such
passes generally.
12.7 Affiliate and Certain Other Transactions.
----------------------------------------
(a) Affiliate Transactions.
----------------------
(i) Neither EBITDA (to the extent it would otherwise be
reduced thereby) nor cash flow of Flags II will be reduced for purposes of
determining the obligations of SFOG Acquisition A, SFOG Acquisition B or Flags
II under this Agreement or the Flags II Limited Partnership Agreement by any
charges, payments or accruals for (A) services provided through SFEC or any
Controlled SFEC Affiliate to Flags II or SFOG II Employee to the extent of the
portion of the charges therefor, if any, in excess of the out-of-pocket cost
paid by SFEC or such Controlled SFEC Affiliate to a Third Party in connection
with the provision of such services, (B) any interest on loans by SFEC or any
Controlled SFEC Affiliate to Flags II to the extent of the portion of such
interest, if any, in excess of Prime, (C) any tangible or intangible items sold
or licensed by SFEC or any Controlled SFEC Affiliate to Flags II to the extent
of the portion of the charges therefor, if any, in excess of the lesser of the
depreciated or amortized cost or the fair market value of such tangible or
intangible items or (D) any payments by Flags II to SFOG II Employee that are in
excess of the lesser of (x) the out-of-pocket costs of SFOG II Employee related
to the employment of the park personnel (to the extent they work at or for the
Amusement Park and including the Park Employees) or (y) the expenses that would
have been properly incurred by Flags II if the Park Employees had been employed
directly by Flags II, giving effect to any cost savings realized or expenses
avoided by Flags II because of SFOG II Employee being the employer of the park
personnel, including the Park Employees. EBITDA and cash flow of Flags II will
be increased for purposes of determining the obligations of SFOG Acquisition A,
SFOG Acquisition B and Flags II under this Agreement and the Flags II Limited
Partnership Agreement by the amount, if any, by which any revenue attributable
to tangible or intangible items sold or licensed by Flags II to SFEC or any
Controlled SFEC Affiliate is less than the greater of the depreciated cost to
Flags II or the fair market value of such tangible or intangible items. For
purposes of this Section 12.7(a)(i), "Third Party" means any Person other than
SFEC or any
44
<PAGE>
Controlled SFEC Affiliate; provided that, with respect to the provision of
--------
sponsorship sales, national or regional marketing services (but not actual
advertising), engineering, human resources, benefits management, ride and
theming design, risk management, property tax services, public relations,
government relations, accounting, audit, legal or financial services, "Third
Party" means any Person other than any SFEC Entity or any SFEC Affiliate. Flags
II will not, and SFOG II will cause Flags II to not, directly or indirectly,
guarantee any obligations of any SFEC Entity or SFEC Affiliate (including as a
guarantee, for this purpose, income maintenance, net worth maintenance or,
without limitation, any other arrangements the effect of which is in substance a
guarantee or assurance of payment or performance), other than a Person that is
wholly owned by Flags II. Notwithstanding anything to the contrary in this
Section 12.7(a)(i), there shall be no adjustment to EBITDA or cash flow of Flags
II for any payments received from and/or paid to a Controlled SFEC Affiliate in
respect of a loan or exchange, for a very limited period of time, on a fair
basis and consistent with past practice, of personnel and/or specialized
equipment (other than rides) among the SFEC Parks. Neither EBITDA nor cash flow
of Flags II will be reduced for compensation and related expenses associated
with persons (x) who are officers or employees of any SFEC Entity or SFEC
Affiliate (in addition to, if applicable, SFOG II Employee) and (y) whose
primary responsibilities relate to the business of one or more of the SFEC
Entities (other than SFOG II Employee) or SFEC Affiliates, rather than primarily
to SFOG II Employee or Flags II; and for the purposes of determining EBITDA and
whether cash flow of Flags II is reduced, compensation and related expenses of
personnel whose primary responsibilities relate to SFOG II Employee or Flags II
(but who also have non-SFOG II Employee or non-Flags II responsibilities) will
be apportioned on a fair and consistent basis, provided that no apportionment
will be required if the non-SFOG II Employee and non-Flags II responsibilities
are immaterial.
(ii) Neither EBITDA (to the extent it would otherwise be
reduced thereby) nor cash flow of Flags II will be reduced for purposes of
determining the obligations of SFOG Acquisition A, SFOG Acquisition B or Flags
II under this Agreement or the Flags II Limited Partnership Agreement by any
charges, payments or accruals for (A) tangible or intangible items directly or
indirectly sold or licensed or services directly or indirectly provided by any
SFEC Affiliate (other than any Controlled SFEC Affiliate) to Flags II to the
extent of the portion of the price therefor, if any, that is (in light of the
other terms of such transaction) in excess of the lesser of (1) the price that
is no less favorable to Flags II (in light of such other terms) than the price
that would have been obtainable in an arms length transaction with an
unaffiliated third party and (2) the price at which comparable tangible or
intangible items are sold or licensed or services are provided by any SFEC
Entity or SFEC Affiliate to any SFEC Park or (B) any interest on loans by any
SFEC Affiliate (other than any Controlled SFEC Affiliate) to Flags II to the
extent of the portion of such interest, if any, in excess of Prime. For purposes
of the foregoing, the license of the Warner Bros. characters on the terms set
forth in the License Agreement, dated as of June 23, 1995, shall be deemed to
comply with the requirements of clause (A) of this Section 12.7(a)(ii). EBITDA
and cash flow of Flags II will be increased for purposes of determining the
obligations of SFOG Acquisition A, SFOG Acquisition B or Flags II under this
Agreement and the Flags II Limited Partnership Agreement by any revenue for
tangible or intangible items sold or licensed or services provided by Flags II
to any SFEC Affiliate (other than a Controlled SFEC Affiliate) to the extent of
the amount, if any, by which such revenue is less than the revenue that could
have been obtained by Flags II in an arms length transaction with an
unaffiliated third party.
45
<PAGE>
(b) third-party Transaction Allocations.
-----------------------------------
(i) Neither EBITDA (to the extent it would otherwise be
reduced thereby) nor cash flow of Flags II will be reduced for purposes of
determining any obligation of SFOG Acquisition A, SFOG Acquisition B or Flags II
under this Agreement or the Flags II Limited Partnership Agreement for the
portion, if any, of any charges, payments or accruals for the following that is
in excess of the amounts that would have been charged to Flags II using a fair
and consistent method of allocation: (A) the provision to Flags II, in common
with other SFEC Parks, of property, casualty and liability insurance under
third-party policies of insurance, from unaffiliated third-party insurance
companies, permitted by the Flags II Limited Partnership Agreement or by the
Lease and unaffiliated third-party administration of employee benefits for
employees of the Amusement Park (of SFOG II Employee with respect to Park
Employees), in common with other SFEC Parks, or (B) the purchase or lease by or
licensing to Flags II, in common with other SFEC Parks, of advertising and
advertising services, rides, merchandise, intellectual property, other tangible
or intangible items or other services from or by non-affiliated third parties.
(ii) Revenues generated by the sale to third parties of any
intangible rights of Flags II, in common with other SFEC Parks, including,
without limitation, sponsorships, cross-promotions or cooperative advertising
(net of charges not otherwise precluded from being applied to reduce EBITDA)
shall be allocated to Flags II using a fair and consistent method of allocation.
(iii) The term "fair and consistent method of allocation"
means that (A) to the extent any expenses or revenues are reasonably
attributable directly to the Amusement Park or to any SFEC Park, such expenses
or revenues are charged or credited only to the Amusement Park or such SFEC Park
in question and (B) any other expenses or revenues that are not reasonably
attributable directly to the Amusement Park or any SFEC Park are allocated among
the Amusement Park and the SFEC Parks on the basis of a rational and reasonable
criterion, such as, by way of example only, the number of SFEC Parks or the
attendance, employees, revenues, net income or EBITDA of each park; provided
--------
that, if a criterion is used after December 31, 1996 for purposes of allocating
any item of expense or revenue, that same criterion shall at all times
thereafter be used for purposes of allocating the same and all similar items of
expense or revenue.
(c) EBITDA and Cash Flow Adjustments.
--------------------------------
(i) If at any time during the Procedure Period for any year
there shall be discovered or disclosed any understatement of EBITDA with respect
to such year (and, if the understatement is discovered by Fund or Flags (or
their agents or representatives), notice thereof was given by Flags to SFOG II
prior to the end of such Procedure Period) and such understatement is a result
of any transaction that failed in whole or in part to comply with Section
12.7(a)(i) or, unless the procedures set forth in Section 12.7(d) and the
agreement of the parties or the decision of the Expert referred to therein has
been complied with, Section 12.7(a)(ii), then SFEC, SFTP, SFOG Acquisition A,
SFOG Acquisition B and SFOG II shall, jointly and severally and within 30 days
after final determination of the amount involved, pay or cause to be paid to any
Unitholder whose Units or fractions thereof have previously been purchased
pursuant to the Tender Offer or any Liquidity Put and who would have received a
46
<PAGE>
greater amount had EBITDA not been so understated, an amount equal to (A) the
difference between (x) the amount which would have been received had EBITDA been
calculated as provided in Section 12.7(a)(i) and Section 12.7(a)(ii) (unless the
procedures set forth in Section 12.7(d) and the agreement of the parties or the
decision of the Expert referred to therein have been complied with) and (y) the
amount actually received plus (B) interest on such difference from the
applicable Tender Offer Settlement Date or Liquidity Put Settlement Date, as the
case may be, to the date of payment at the Default Rate.
(ii) If at any time during the Procedure Period for any year
there shall be discovered or disclosed any understatement of EBITDA for such
year (and, if the understatement is discovered by Fund or Flags (or their agents
or representatives), notice thereof is given by Flags to SFOG II prior to the
end of such Procedure Period) -- if (w) such understatement was a result of any
transaction that failed to comply with Section 12.7(a)(ii), provided that the
--------
procedure set forth in Section 12.7(d) and the agreement of the parties or the
decision of the Expert referred to therein has been complied with, (x) such
understatement was determined by agreement pursuant to Section 12.18(e), (y)
such understatement was determined by a decision of the Accounting Arbitrator
with respect to an Arbitrable Judgment pursuant to Section 12.18(g), or (z) to
the extent the understatement is not due to a matter otherwise provided for in
clauses (i) or (iii) of this Section 12.7(c) -- SFEC, SFTP, SFOG Acquisition A,
SFOG Acquisition B and SFOG II shall, jointly and severally and within 30 days
after final determination of the amount involved, pay or cause to be paid to any
Unitholder whose Units or fractions thereof have previously been purchased
pursuant to the Tender Offer or any Liquidity Put and who would have received a
greater amount had EBITDA not been so understated, an amount equal to (A) the
difference between such greater amount and the amount received plus (B) interest
on such difference from the applicable Tender Offer Settlement Date or Liquidity
Put Settlement Date, as the case may be, to the date of payment at Prime.
(iii) If at any time during the Procedure Period for any year
there shall be discovered or disclosed any understatement of EBITDA for such
year (and, if the understatement is discovered by Fund or Flags (or their agents
or representatives), notice thereof is given by Flags to SFOG II prior to the
end of such Procedure Period) and to the extent such understatement was a result
of any transaction that, to the knowledge of any SFEC Entity, any Controlled
SFEC Affiliate or SFOG II, failed to comply with Section 12.7(a) and, if
applicable, the procedures set forth in Section 12.7(d) have not been complied
with or have been complied with but the decision of the Expert or, if
applicable, the agreement of the parties referred to therein has not been
complied with, then (A) SFEC, SFTP, SFOG Acquisition A, SFOG Acquisition B and
SFOG II shall, jointly and severally and within 30 days after final
determination of the amount involved, pay or cause to be paid to any Unitholder
whose Units or fractions thereof have previously been purchased pursuant to the
Tender Offer or any Liquidity Put and who would have received a greater amount
had EBITDA not been so understated, an amount equal to (x) the difference
between such greater amount and the amount received plus (y) interest on such
difference from the applicable Tender Offer Settlement Date or Liquidity Put
Settlement Date, as the case may be, to the date of payment at the Default Rate
and (B) as liquidated damages for the EBITDA understatement (but not for any
other breach as may be involved therein or related thereto) and in recognition
of the possibility that, if one or more EBITDA understatements becomes known to
the parties, other EBITDA understatements may not have
47
<PAGE>
been discovered (with the result that EBITDA damages may be difficult or
impossible to calculate), the parties agree that EBITDA for the year in which
discovery or disclosure occurred or, if later, the year in which the amount
involved was finally determined (but not later than 2025), shall be increased by
two times the amount of the understatement(s). For the purposes of this Section
12.7(c)(iii) knowledge means "actual knowledge" of the failure to act in a
manner consistent with the standard set forth in Section 12.7, whether or not
the Person knew of that standard or its being applicable.
(iv) If there is an EBITDA understatement for 1997, then the
Per Unit Mandatory Adjustment Amount (and, if applicable, the Per Unit Tender
Offer Price) shall be adjusted using the correct EBITDA.
(v) If during the Procedure Period for any year there has been
discovered or disclosed one or more understatements of EBITDA for such year (and
if the understatement is discovered by Fund or Flags (or their agents or
representatives) notice thereof is given by Flags to SFOG II prior to the end of
such Procedure Period) (it being recognized that Procedure Periods overlap so,
in any given Procedure Period, understatements for more than one year may be
discovered or disclosed), with respect to Unitholders all of whose Units or
fractions thereof have not then been purchased pursuant to the Tender Offer or a
Liquidity Put, in addition to the adjustments provided for in Sections
12.7(c)(iii) and (iv) (but without duplication of any adjustments provided for
in Section 12.7(c)(iii)), if any, SFOG Acquisition A and/or SFOG Acquisition B,
as applicable, will (subject to the alternative set forth in the following
sentence) provide to all such Unitholders the opportunity to put such Units,
without proration, in the Liquidity Put next following the final determination
of such understatement, at a Put Price equal to the highest value for "A" minus
"B", where "A" is the Put Price at which the Units could have been put, in the
years in which the Formula Amount is affected by the EBITDA understatements, had
EBITDA not been understated, plus interest thereon at Prime (compounded
semi-annually) from the applicable Liquidity Put Settlement Date(s), and "B" is
the distributions received by the Unitholder from Fund in respect of such Units
after each such Liquidity Put Settlement Date in question, plus interest on each
such distribution at Prime (compounded semi-annually) from each such date of
distribution. Alternatively, SFOG Acquisition B may, by notice to Fund by the
then next March 15, elect to add to the EBITDA for the then immediately
preceding year, for the purpose of calculating the Formula Amount for the
Liquidity Put to be made available in the year in which such notice is given and
subsequent years, to the extent applicable for purposes of calculating the
Formula Amount in those years, an amount equal to the EBITDA understatements for
each such year, plus interest at Prime from the end of each such year, but
without duplication of adjustments then made pursuant to Section 12.7(c)(iii).
The special Liquidity Put that may be made available pursuant to the first two
sentences this Section 12.7(c)(v) ("Special Liquidity Put") shall be in addition
to the Liquidity Put otherwise to then be made available (the "Regular Liquidity
Put"), provided that (x) such Regular Liquidity Put need not be made available
--------
if the Put Price in the Special Liquidity Put is higher than the Put Price in
the Regular Liquidity Put or (y) if there is then no proration for Regular
Liquidity Puts or SFOG Acquisition A and/or SFOG Acquisition B, as applicable,
elects to purchase all Units put in the Regular Liquidity Put, in which event
only the Liquidity Put (whether Special or Regular) that yields the highest Put
Price shall be made so available.
48
<PAGE>
(vi) To the extent cash flow of Flags II is reduced, but
should not have been reduced pursuant to Sections 12.7(a)(i) or (ii) or 12.7(b),
the SFEC Entities shall, jointly and severally and within 30 days after final
determination of the amount(s) in question, pay to Flags II the amount by which
its cash flow was so reduced plus interest (A) at the Default Rate, to the
extent, if at all, interest with respect to the corresponding EBITDA
understatement is payable at the Default Rate, or (B) otherwise at Prime.
(d) Designated Affiliate Transactions. If SFOG II determines that
---------------------------------
it would be advisable for Flags II to enter into a transaction with an SFEC
Affiliate (other than a Controlled SFEC Affiliate) under Section 12.7(a)(ii),
then SFOG II may give Flags at least ten Business Days prior written notice of
its intention to enter into such transaction (a "Designated Affiliate
Transaction"), which notice shall reasonably describe the details of the
Designated Affiliate Transaction. If within ten Business Days after receipt of
such notice, Flags fails to notify SFOG II in writing that it has approved the
Designated Affiliate Transaction, then, at the request of SFOG II, the parties
will negotiate to determine the terms for such Designated Affiliate Transaction
that would comply with Section 12.7(a)(ii) and, if they are unable to reach
agreement within a 20-day period, an independent expert knowledgeable in the
relevant business (an "Expert"), designated jointly by SFOG II and Flags, shall
determine whether such Designated Affiliate Transaction complies with Section
12.7(a)(ii). If SFOG II and Flags are unable to agree upon an Expert, then such
Expert shall be selected by two other experts, one selected by SFOG II and one
selected by Flags. All such selections of the Expert shall be effected as
promptly as reasonably practicable and all fees and expenses of Expert shall be
borne by SFOG II and shall not be charged to Flags II. In making his or her
determination, the Expert will be provided solely with the written information
presented by SFOG II to Flags and, after a reasonable time after Flags receives
such information, any statement by Flags of its opposition and any information
it desires to present. If Flags II enters into a Designated Affiliate
Transaction after an Expert determination has been made that the Designated
Affiliate Transaction does not comply with Section 12.7(a)(ii), without the
terms of the transaction being changed to terms the Expert determines comply
with Section 12.7(a)(ii), the determination that the Designated Affiliate
Transaction does not meet 12.7(a)(ii) and, if applicable, the amount determined
by the Expert shall be conclusive against SFOG II, SFOG Acquisition A and SFOG
Acquisition B, EBITDA shall be adjusted as provided in Section 12.7(c) and cash
flow shall not be reduced as provided in Sections 12.7(a)(ii) and 12.7(c)(vi).
If the Expert determines that the Designated Affiliate Transaction complies with
Section 12.7(a)(ii) or that it does not comply, specifying the amount by which
it does not so comply, and the transaction is completed on the terms that the
Expert determines comply with Section 12.7(a)(ii), Flags may, in the next
arbitration after the Designated Affiliate Transaction (but not more than two
years after the Designated Affiliate Transaction), challenge whether, based on
all relevant facts with respect to the circumstances existing at the time of the
transaction, there was such compliance with Section 12.7(a)(ii) and, if Flags
prevails, there shall be an adjustment to EBITDA as provided in Section 12.7(c)
and to cash flow as provided in Section 12.7(c)(vi). Flags shall have no
obligation to, and shall have no liability with respect to any failure(s) by it
to, approve any proposed Designated Affiliate Transaction.
(e) Employee Notification. SFEC shall notify relevant SFEC and
----------------------
SFOG II Employee personnel of the existence of this Section 12.7 and shall
instruct such personnel to act in a manner
49
<PAGE>
consistent with this Section 12.7 with respect to those transactions subject to
the terms of this Section 12.7 for which such personnel has decision making
responsibility.
(f) Alternative Dispute Resolution.
------------------------------
(i) If any dispute regarding the calculation of EBITDA or
cash flow as a result of any transaction that failed or allegedly failed to
comply with Section 12.7(a) (including whether an understatement of EBITDA was
knowing and intentional), including any dispute arising or continuing after the
procedure set forth in Section 12.7(d) has been complied with, such dispute
shall be referred to the Los Angeles, California office of the American
Arbitration Association ("AAA") for confidential, binding arbitration
administered by the AAA pursuant to its Commercial Rules and Supplementary
Procedures for Large, Complex Disputes then in effect. If the parties mutually
agree in writing, the AAA Arbitration Rules and Procedures may be modified or
supplemented. The arbitrator shall be a single neutral who shall, if such a
Person is available, be a retired or former judge selected from the AAA
Commercial Large Complex Case Panel of Neutrals or, if the AAA no longer
maintains such a Panel, from the Panel that succeeds to such Panel. The
arbitrator shall be entitled, in his or her discretion, to retain an independent
accountant or accounting firm (provided such accountant or firm could serve as
--------
Accounting Arbitrator) and one or more experts qualified to act as, but who did
not act as, an Expert under Section 12.7(d). In the arbitration, the parties
shall be entitled to discovery as if the matter were pending in the California
Superior Court or the Federal District Court for the Central District of
California, as determined by the arbitrator.
(ii) With respect to the dollar amount of any alleged EBITDA
understatement only (but not any other issues, including, without limitation,
whether any understatement of EBITDA was knowing or intentional), Flags and SFOG
II shall, on the date specified by the arbitrator, present to the arbitrator
sealed contentions of the amount which should have been charged to EBITDA in
respect of the transaction(s) in question, which the arbitrator shall open. If
the higher amount is within 5% of the lower amount, the two amounts shall be
averaged and become the decision of the arbitrator on the issue in question.
Otherwise, to decide that issue, the arbitrator shall pick one of the amounts
proposed by SFOG II or Flags, but not any other amount.
(iii) The costs of the arbitration, the arbitrator and any
accounting firm, accountant or expert retained by the arbitrator, shall be borne
by SFOG II and Flags (but not by Flags II) in such proportions as the arbitrator
determines. The costs of the arbitration and of the parties to this Agreement in
connection with the arbitration will not reduce EBITDA or the cash flow of Flags
II.
(iv) The decision of the arbitrator, who shall decide the
enforceability of this Section 12.7(f), shall be final and unappealable and
judgment thereon may be entered in any court of competent jurisdiction.
50
<PAGE>
12.8 Information Obligations.
-----------------------
(a) Financial Statements, Tax Information and Related Deliveries.
-------------------------------------------------------------
SFEC and SFOG II shall deliver or cause to be delivered to Flags the financial
statements, reports, tax information and related documents set forth below in
this Section 12.8.
(i) Annual Financial Statements, Tax Information and Related
--------------------------------------------------------
Deliveries.
----------
(A) Audited Financial Statements. As soon as
-------------------------------- practicable and
in any event not later than 90 days after the end
of each year of Flags II (for 1997, not later
than 90 days after the end of the period from the
formation of Flags II through December 31, 1997
(for convenience, referred to below in this
Section 12.8 as the "Short Year")), the audited
balance sheet of Flags II and notes thereto
required by GAAP as of the end of such year (or,
if applicable, the Short Year) and the related
audited statements of operations, partners'
capital and cash flows of Flags II and the notes
thereto for such year (or, if applicable, the
Short Year, provided that, if permissible under
--------
GAAP, such related financial statements shall be
combined statements of Flags for the period
January 1, 1997 to the Effective Date and of
Flags II for the period beginning on the
Effective Date through December 31, 1997),
prepared on an accrual basis in accordance with
GAAP, which financial statements shall present
fairly, in all material respects, Flag II's
financial position and the results of its
operations and cash flows as of the date thereof
and for the period covered thereby.
(B) EBITDA Calculation. Concurrently with the
--------------------
delivery of the financial statements delivered
pursuant to Section 12.8(a)(i)(A), a statement
showing the calculation of EBITDA in accordance
with the definition of EBITDA contained in this
Agreement and the notification of initial
judgments provided for in Section 12.18(c).
(C) Auditor's Report. The financial statements and
-----------------
calculation delivered pursuant to Section
12.8(a)(i)(A) and (B) shall be accompanied by a
report thereon of an independent certified public
accountant of recognized national standing (x)
confirming that the financial statements
delivered pursuant to Section 12.8(a)(i)(A) have
been prepared as described in that Section, (y)
to the extent not precluded under the rules of
the American Institute of Certified Public
Accountants or equivalent guidelines (in the
reasonable judgment of such independent certified
public accountant), confirming that the EBITDA
statement delivered pursuant to Section
12.8(a)(i)(B) and the notification of initial
judgments have been prepared as described in that
Section and (z) to the extent not precluded under
the rules of the American Institute of Certified
Public Accountants or equivalent guidelines (in
the reasonable judgment of such independent
certified
51
<PAGE>
public accountant), an agreed-upon procedures
report in substantially the form of Exhibit
12.8(a)(i)(c). The fees and expenses of the
independent certified public accountant will be
paid by Flags II and will be an expense in
determining EBITDA.
(D) Certificate of Chief Financial Officer. The
------------------------------------------
financial statements and calculation delivered
pursuant to Sections 12.8(a)(i)(A) and (B) shall
be accompanied by a certificate of the chief
financial officer of SFOG II (w) confirming that
the financial statements delivered pursuant to
Section 12.8(a)(i)(A) have been prepared as
described in such Section, (x) confirming that
the EBITDA statement delivered pursuant to
Section 12.8(a)(i)(B) has been prepared as
described in that Section, and (y) to the effect
that he or she has reviewed the terms of this
Agreement, the Flags II Limited Partnership
Agreement and the Lease and made a review in
reasonable detail of the transactions and
condition of Flags II during the year covered by
such financial statements and that the review has
not disclosed, nor is such Person otherwise aware
of, the existence of any Default under or
noncompliance with this Agreement, the Flags II
Limited Partnership Agreement or the Lease during
or at the end of such year or, if there has been
or is such a Default or noncompliance, specifying
the nature, amount and period of existence
thereof and the action SFOG II has taken, is
taking or proposes to take with respect thereto.
(E) Tax Information. As soon as practicable but in no
---------------
event later than March 15 of each year,
commencing March 15, 1998, all information
concerning Flags II necessary for the preparation
by Flags and Fund of their returns for Tax
purposes for the prior year.
(F) EBITDA Understatement. If any SFEC Entity or SFEC
---------------------
Affiliate (or their agents or representatives)
discovers an understatement of EBITDA for any
year during the Procedure Period for such year,
the SFEC Entities shall, within ten Business Days
and in any event prior to the end of such
Procedure Period, provide to Flags notice and a
description of the nature of such understatement.
Any such notice given or required to be given
shall substitute for the notices to be given by
Flags under Section 12.7(c).
(ii) Quarterly Financial Statements and Related Deliveries.
------------------------------------------------------
As soon as practicable and in any event not later than 45 days after the end of
the first three quarters of Flags II in each year (within 45 days of the end of
the period from the date of formation of Flags II through March 31, 1998 (the
"Short Quarter")), the unaudited balance sheet of Flags II as of the end of such
quarter (or, if applicable, the Short Quarter) and the related unaudited
statements of operations, partners' capital, and cash flows of Flags II for such
quarter (or, if applicable,
52
<PAGE>
the Short Quarter, combined with such related unaudited financial statements of
Flags for the period January 1, 1997 to the beginning of the Short Quarter) and
for the year to date (or, if applicable, the Short Year, combined with such
related unaudited financial statements of Flags for the period January 1, 1997
to the beginning of the Short Year), prepared on an accrual basis in accordance
with GAAP, which financial statements shall present fairly, in all material
respects, Flags II's financial position and the results of its operations and
cash flows as of the date thereof and for the periods covered thereby (subject,
in each case, to normal year-end adjustments).
(iii) Monthly Statements. As soon as practicable and in any
-------------------
event not later than 30 days after the end of each month (or, if applicable, the
partial month period from the date of formation of Flags II, if not the first
day of a month, to the end of the month of such formation), the unaudited
balance sheet of Flags II as of the end of such month and unaudited statements
of operations and cash flows of Flags II for such month and year-to-date,
substantially in the form attached as Exhibit 12.8(a)(iii) to this Agreement.
(iv) Certain Working Papers. As soon as practicable after
------------------------
written request therefor by Flags and in any event not later than 15 days after
the latter of delivery of the financial statements delivered pursuant to Section
12.8(a)(i)(A) and the making of such request, SFEC, SFOG II and SFOG II Employee
shall make available to Flags, in Los Angeles, California, complete copies of
(A) all working papers of the independent accountants for SFOG II, Flags II,
SFOG II Employee and any Controlled SFEC Affiliates (subject to the internal
policies of such independent certified public accountants, it being agreed that
SFEC, SFOG II and SFOG II Employee shall use and cause the other SFEC Entities
and the Controlled SFEC Affiliates to use their reasonable best efforts to cause
such accountants to, including directing such accountants to, make such working
papers available) created in connection with the preparation of the financial
statements delivered pursuant to Section 12.8(a)(i)(A) or Section 12.8(a)(ii),
as applicable, (B) the general ledger of Flags II and (C) the working papers of
Flags II summarizing the calculations made in determining EBITDA.
(b) Manager Meetings. At the request of Flags, the president
-----------------
and/or general manager and chief financial officer of the Amusement Park or
Flags II and, upon the request of Flags to the president, general manager or, in
the absence of either of them, the senior-most executive at the Amusement Park,
such other Flags II, Amusement Park and SFOG II Employee management and
employees as Flags II may request will, at a mutually convenient time, meet with
Flags or its representatives at the Amusement Park to discuss matters relating
to the Amusement Park and Flags II specified by Flags or its representatives.
SFEC, SFOG II and SFOG II Employee will, and will cause Flags II to, use their
respective best efforts to cause Amusement Park management and employees to
comply with the foregoing.
(c) Other Reports. SFEC, SFOG II and SFOG II Employee shall
--------------
deliver or cause to be delivered to Flags as soon as practicable after
preparation thereof and upon the written request therefor by Flags, the final
versions (provided that any version that is provided to the board of directors
--------
(or similar body) of SFEC, SFTP or SFOG II or to any lenders to Flags II or any
SFEC Entity will be deemed final versions for this purpose) of the following:
any current year financial projections or similar studies (provided that, except
--------
as provided in Section 12.8(e), projections or similar studies for the then
current year shall be delivered only after the Liquidity Put Settlement Date for
that year), material visitor surveys, strategic plans, capital expenditure
forecasts, material industry reports and material safety reports, in each case
prepared in whole or in part by or for
53
<PAGE>
SFOG II, Flags II, SFOG II Employee or any SFEC Entity or SFEC Affiliate, but
only to the extent such information relates to Flags II or the Amusement Park
and only if it is practicable to excerpt such information from any such report.
SFEC and SFOG II will provide to Flags, with the quarterly financial statements
provided for in Section 12.8(a)(ii), a list of all documents of the type
described in this Section 12.8(c) that have been provided to the board of
directors (or similar body) of SFEC, SFTP or SFOG II or to any lenders to Flags
II or any SFEC Entity during the quarter or that have not been previously listed
and which SFEC or SFOG II believes are materially related to the Amusement Park,
plus any other category of reports that is specified by Flags (in each case of
which Flags can request a copy pursuant to this Section 12.8(c)), together with
a brief description of each of them.
(d) Information Regarding Affiliate Transactions. Without limiting
--------------------------------------------
the other information rights of Flags set forth herein, the SFEC Entities shall
make available to Flags or its representative(s), in Los Angeles, California, or
Atlanta, Georgia, at the election of Flags, within 20 Business Days after a
request by Flags therefor to SFOG II, information and complete copies of
supporting documents, including all accountants' working papers (subject to the
internal policies of such independent certified public accountant, it being
agreed that SFEC Entities shall use their reasonable best efforts to cause such
accountants to, including in each case directing such accountants to, make such
working papers available), as to all transactions, charges, payments and
accruals involving any SFEC Entity or SFEC Affiliate, on the one hand, and Flags
II or SFOG II Employee, on the other, or that are necessary or appropriate to
verify compliance with Section 12.7.
(e) Information Rights at End-of-Term. If the End-of-Term Option
----------------------------------
is not exercised, Flags and Fund shall be entitled to receive, not later than 30
days (time being of the essence) after the demand therefor, all information and
reports described in Section 12.8 and all financial projections and similar
studies for all then prospective years and, without limitation, to make such
information available to others to which the Amusement Park may be sold or with
which a transaction of the type referred to in Section 8.5(d) may be effected.
(f) Information Rights in General. Notwithstanding anything to the
-----------------------------
contrary or any words of limitation contained in this Section 12.8, Flags shall
have all rights to information related to Flags II and SFOG II Employee (as if
it were part of Flags II and not a separate entity) that are afforded to general
partners of limited partnerships under the Georgia Uniform Limited Partnership
Act (as if, for this purpose, Flags II were formed under the Georgia Uniform
Limited Partnership Act (as opposed to the Georgia Revised Uniform Limited
Partnership Act or the Delaware Revised Uniform Limited Partnership Act)).
(g) Confidentiality. Flags may provide any information relating to
---------------
the business of Flags II received by it to Fund. Except with respect to
information that Flags and Fund have the right to disseminate under Section
12.8(e), Fund and Flags shall, and shall use their reasonable best efforts to
cause their affiliates (including the limited partners of Fund) and its and
their respective agents or representatives to, keep secret and hold in
confidence any and all confidential information received pursuant to Section
12.7(d), this Section 12.8 and Section 12.18 relating to the business of Flags
II or SFOG II Employee and reasonably identified as confidential by Flags II,
other than: (i) information that has become generally available to the public
other than as a
54
<PAGE>
result of a disclosure in violation of this Agreement; (ii) information that
becomes available to them on a non-confidential basis from a third party that,
insofar as they have actual knowledge, has no obligation of confidentiality to a
party to this Agreement with respect to such information and has not itself
received such information directly or indirectly in breach of any such
obligation of confidentiality; (iii) information that is required to be
disclosed by applicable law or judicial order (provided in the case of clause
--------
(iii) that the party making such disclosure or whose affiliates, agents or
representatives are making such disclosure shall notify Flags II as promptly as
practicable (and, if possible, prior to making such disclosure) and shall, at
the expense of Flags II, use its reasonable best efforts to limit the scope of
such disclosure and seek confidential treatment of the information to be
disclosed); and (iv) financial statements, tax information and EBITDA
calculations referred to in Sections 12.8(a)(i), (ii) and (iii). Nothing in this
Section 12.8(g) shall require Fund or Flags to fail to comply with any
obligations imposed by law to disclose documents or information to its partners.
The parties agree that no disclosure of (i) information by Fund to its partners,
SFG, Inc., the directors of SFG, Inc., in connection with the Consent
Solicitation Statement, dated December 10, 1996, or in connection with the
solicitation of the Fund Limited Partners' Approval or of alternative
transactions to the transactions contemplated by this Agreement and the Related
Agreements or (ii) information specified on Exhibit 12.8(g) and received from
Flags to third parties in connection with the solicitation of alternative
transactions to the transactions contemplated by this Agreement and the Related
Agreements violated this Section 12.8(g), the Flags Limited Partnership
Agreement or any other obligation of Fund to any SFEC Entity.
(h) Information Relating to Guarantors.
----------------------------------
(i) Each of the Guarantors whose Net Worth is being
considered in determining whether the Net Worth Standard is satisfied shall
deliver to Flags the unaudited quarterly financial statements and audited annual
financial statements of such Guarantor promptly following the date such
financial statements are filed with the Securities and Exchange Commission or
otherwise become generally available and, in any event, within 50 days after the
end of each such quarter and 105 days after the end of each such year.
(ii) Concurrently with the delivery of any financial
statements pursuant to Section 12.8(h)(i), if such financial statements reflect
that the Net Worth Standard would not be met without giving effect to the
provisos set forth in the definition of Net Worth, then each Guarantor shall
deliver to Flags a certificate (A) setting forth the calculation of such
Guarantor's Net Worth in accordance with the definition thereof, (B) reconciling
such calculation with the audited financial statements of such Guarantor and (C)
setting forth any "writedown" of, reserve against or sale at a loss of any
intangible asset or any group of related intangible assets (other than normal
depreciation or amortization) of $50 million or more, or with respect to an
intangible asset or group of related intangible assets that have been
depreciated or amortized by $100 million or more since January 1, 1997; provided
--------
that TWX may deliver one certificate on behalf of and covering all such
Guarantors; and provided, further, that with respect to any "writedowns" of or
-------- -------
reserves against intangible assets that are not required to be set forth in such
certificate, such certificate may contain a single entry reflecting the
Guarantor's best estimate of the aggregate of all such "writedowns" or reserves.
55
<PAGE>
(iii) With the certificate referred to in Section
12.8(h)(ii), to the extent not prohibited by the rules of the American Institute
of Certified Public Accountants or equivalent guidelines (in the reasonable
judgment of such independent certified public accountants), each Guarantor shall
deliver a certificate of its independent accountants stating that they have
reviewed (A) the financial statements referred to in Section 12.8(h)(i) and (B)
the certificate referred to in Section 12.8(h)(ii) and that such certificate
presents fairly in all material respects the Guarantor's Net Worth as defined
herein giving effect to the last proviso of Section 12.8(h)(ii).
(i) Preparation of Financial Statements Generally. The financial
----------------------------------------------
statements of Flags II described in Sections 12.8(a)(i)(A), 12.8(a)(ii) and
12.8(a)(iii) shall be prepared by management of Flags II in accordance with GAAP
and neither such financial statements nor any financial statements of any SFEC
Entity or SFEC Affiliate shall be required, by the provisions of this Agreement
relating to the calculation of EBITDA, to be prepared in the manner in which
EBITDA is calculated.
12.9 No Liability of Fund Partners or, After SFG-I, LLC Becomes
-------------------------------------------------------------
the Manager of Flags, the Manager of Flags; Additional Limitation on Liability.
- ------------------------------------------------------------------------------
(a) Generally. Each of the SFEC Entities agrees that none of
---------
Salkin, any of its trustees or beneficiaries, SFG, Inc., any of its directors,
officers, employees or shareholders, SFG-I, LLC and SFG-II, LLC, any of their
managers, members, officers or employees or any of the limited partners of Fund
(except SFOG Acquisition A and SFOG Acquisition B) nor, upon and after SFG-I,
LLC becomes the manager of Flags, the members or manager of Flags, has or will
have any personal liability to any SFEC Entity or any SFEC Affiliate for the
obligations of Fund, Flags or Flags II, including, without limitation, under
this Agreement, the Flags II Limited Partnership Agreement or the Lease. All
liabilities of Fund and, with respect to transactions occurring after the
Effective Date, Flags, in each case under this Agreement and the Related
Agreements, shall be satisfied solely out of the assets of Fund or Flags, as the
case may be, as an entity separate and apart from its partners. With respect to
such liabilities, Fund will indemnify SFOG Acquisition A and SFOG Acquisition B
out of amounts otherwise payable to its partners other than SFOG Acquisition A
and SFOG Acquisition B (but only if the liability was owed to SFOG Acquisition A
and/or SFOG Acquisition B in their capacity as Special Limited Partners or
limited partners of Fund).
(b) First Exception. Notwithstanding Section 12.9(a), SFG, Inc.,
---------------
SFG-I, LLC and SFG-II LLC shall, after the Effective Date, each be liable to the
SFEC Entities for any losses, liabilities or expenses incurred by such SFEC
Entities arising out of the negligence or wrongful conduct of SFG, Inc., SFG-I,
LLC or SFG-II, LLC, as applicable, provided that none of SFG, Inc., SFG-I, LLC
--------
and SFG-II, LLC shall have any greater liability to any SFEC Entity in its
capacity as a limited partner of Fund than it has to any other limited partner
of Fund; and provided, further, that no shareholder, officer or director of SFG,
-------- -------
Inc. or any member or manager of SFG-I, LLC or SFG-II, LLC as such will under
any circumstances have any responsibility for any obligation or liability of
SFG, Inc., SFG-I, LLC or SFG-II, LLC under this Agreement or any Related
Agreement, any such liability being limited to the assets of SFG, Inc., SFG-I,
LLC or SFG-II, LLC as separate entities, even if the assets in question are
nominal.
56
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(c) Second Exception. Nothing in Section 12.9(a) or 12.9(b) shall
----------------
operate to insulate any Person from any obligation such Person may otherwise
have to return any money, together with any interest as provided by law, that,
under this Agreement or the Related Agreements, is wrongfully paid or
distributed to such Person. Any Person, including without limitation the SFEC
Entities, may pursue legal remedies to effectuate this Section 12.9(c).
12.10 Indemnification.
---------------
(a) Indemnification by the SFEC Entities. Each of the SFEC
---------------------------------------
Entities will jointly and severally indemnify and hold harmless (i) Fund and its
general and limited partners (except SFOG Acquisition A and SFOG Acquisition B)
and any directors, officers, employees and trustees of any of them, (ii) upon
SFG-I, LLC becoming the manager of Flags after the conversion of Flags to a
limited liability company, Flags and its members (other than SFOG) and managers,
(iii) SFG, Inc. and its directors, officers and shareholders, (iv) SFG-I, LLC
and its members and managers, (v) SFG-II, LLC and its members and managers and
(vi) Salkin and its trustees and beneficiaries against any claims, damages,
liabilities and expenses (including actual attorneys' fees, costs and charges)
that any of them may incur or become subject to as a result of any inaccuracies
in the representations and warranties of any of the SFEC Entities contained in
this Agreement, the Flags II Limited Partnership Agreement, the Lease or any
other Related Agreement or any failure by any of the SFEC Entities to comply
with any of its covenants or other obligations contained in this Agreement, the
Flags II Limited Partnership Agreement, the Lease or any other Related
Agreement.
(b) Indemnification by Fund and Flags. Fund and Flags will
------------------------------------
indemnify and hold harmless each of the SFEC Entities and, without duplication,
the SFEC Affiliates, and the general and limited partners, members, managers,
directors, officers and employees of each of them against any losses, claims,
damages, liabilities and expenses (including actual attorneys' fees, costs and
charges) that any of them may incur or become subject to as a result of any
inaccuracies in the representations and warranties of Fund, Salkin, SFG, Inc.,
SFG-I, LLC or SFG-II, LLC contained in this Agreement, any failure by Fund or,
after SFG-I becomes the manager of Flags after the conversion of Flags to a
limited liability company, by Flags to comply with its respective covenants or
other obligations contained in this Agreement, the Flags II Limited Partnership
Agreement, the Lease or any other Related Agreement to which it is a party or
any misstatement of material fact or omission to state a material fact required
or necessary to be stated in the Consent Solicitation Statement of Fund, dated
December 10, 1996, or in the materials to be sent to Fund limited partners after
the date of this Agreement in connection with the Fund Limited Partners'
Approval (in each case other than any such material misstatements or omissions
based on materials provided to Fund or its representatives or agents in writing
by any SFEC Entity or SFEC Affiliate or any representative or agent of any of
them), provided that nothing herein will obligate Flags to indemnify or hold
harmless any SFEC Entity with respect to the matters set forth in the
penultimate sentence of Section 4.1.
(c) Indemnification Procedures.
--------------------------
(i) With respect to claims against a Person entitled to
indemnification under any provision of this Agreement (for purposes of this
Section 12.10(c), each, an "Indemnified Party"),
57
<PAGE>
the Indemnified Party will give prompt written notice to the party or parties to
this Agreement obligated to provide such indemnification (for purposes of this
Section 12.10(c), each, an "Indemnifying Party") of any claim for which such
Indemnified Party seeks indemnification hereunder, but the failure to so notify
the Indemnifying Party will not relieve the Indemnifying Party from any
indemnification obligation that it may have under any provision of this
Agreement or any Related Agreement, except to the extent that it is damaged or
prejudiced by such omission or delay, or from any other obligation it may have
under this Agreement or any Related Agreement. The Indemnifying Party shall
assume the defense of any claim, lawsuit or action (collectively an "action")
for which the Indemnified Party seeks such indemnification hereunder, subject to
the provisions stated herein, with counsel of national repute reasonably
satisfactory to the Indemnified Party. After notice from the Indemnifying Party
to the Indemnified Party that it has so assumed the defense thereof is received
by the Indemnified Party in question, and so long as the Indemnifying Party
performs its indemnification obligations, the Indemnifying Party will not be
liable to the Indemnified Party for any legal or other expenses subsequently
incurred by the Indemnified Party in connection with the defense of the action.
The Indemnified Party shall have the right to employ separate counsel in any
such action and to participate in the defense thereof at such Indemnified
Party's expense; provided, that the actual fees and expenses of such separate
--------
counsel shall be at the expense of the Indemnifying Party if (x) the named
parties to any such action (including any impleaded parties) include both the
Indemnified Party and any Indemnifying Party and (y) the Indemnified Party has
reasonably concluded, based on advice of its counsel, that there may be one or
more legal defenses available to the Indemnified Party which are different from,
or in conflict with, any legal defenses which may be available to the
Indemnifying Party (in which event the Indemnifying Party shall not have the
right to assume or, if applicable, continue the defense of such action on behalf
of the Indemnified Party), it being understood, however, that the Indemnifying
Party shall not be liable for the fees and expenses of more than one separate
firm of attorneys for all Indemnified Parties in each jurisdiction in which
counsel is necessary or appropriate (plus, as applicable, local counsel). In
addition to, and without limitation of, the Indemnifying Party's other
indemnification obligations, the Indemnifying Party will pay monthly, upon
receipt of itemized statements therefor, all actual fees, costs and charges of
counsel and any experts incurred by an Indemnified Party which the Indemnified
Party is entitled to have paid or reimbursed under this Section 12.10.
(ii) No Indemnified Party shall settle any matter for which
indemnification is being provided under Section 12.10 without the prior written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld.
12.11 Expenses. Whether or not the Closing occurs, and except as
--------
otherwise provided herein, each of the parties hereto shall bear and pay all
expenses incurred by it in connection with the negotiation, execution and
delivery of this Agreement and the Related Agreements and the transactions to
occur on the Effective Date, provided that no such expenses shall be charged to
Flags II or, if EBITDA would be affected thereby, Flags.
12.12 Six Flags Over Georgia Name. SFOG, as the successor by
-----------------------------
merger to the corporation formerly known as Great Southwest Atlanta Corp., and
Fund (to the extent its consent is required) each consents to the license by
Flags to Flags II of its rights, including the rights to use the name "Six Flags
Over Georgia", under the License Agreement, dated the 31st
58
<PAGE>
day of December 1968, by and among Great Southwest Atlanta Corp. and Fund,
subject to the reservation by Flags of the right to use the words "Six Flags
Over Georgia" in its name.
12.13 SF Agreement. Paragraphs 1, 2, 3, 5, 7 and 8 of the SF
-------------
Agreement are hereby deleted. Except as specifically modified in this Agreement,
Paragraphs 4, 6 and 9 of the SF Agreement are not amended and remain in full
force and effect.
12.14 Section 754 Elections; Publicly Traded Partnership.
--------------------------------------------------
(a) Fund. Fund has in effect an election under Section 754 of the
----
Internal Revenue Code of 1986, as amended (a "Section 754 Election"). Fund will
not revoke or apply to revoke its Section 754 Election at any time during the
term of the Flags II Limited Partnership Agreement without the written consent
of SFOG Acquisition B. Fund agrees that the basis and depreciation adjustments
required pursuant to its Section 754 Election will be provided by Flags II.
(b) Flags. Flags has in effect a Section 754 Election. Flags will
-----
not revoke or apply to revoke its Section 754 Election at any time during the
term of the Flags II Limited Partnership Agreement without the written consent
of SFOG Acquisition B. Flags agrees that the basis and depreciation adjustments
required pursuant to its Section 754 Election will be provided by Flags II.
(c) Publicly Traded Partnership. The parties to this Agreement
-----------------------------
will use their reasonable best efforts to avoid any action that would cause
Fund, Flags or Flags II to be a "publicly traded partnership" within the meaning
of the Internal Revenue Code of 1986, as amended (or successor statute).
12.15 SFOG's Interest in Flags. If at any time there is any
---------------------------
requirement (the "SFOG Requirement") that there be returned to SFOG any of its
interest in Flags that is reduced or diminished as a result of the transactions
contemplated this Agreement and the Flags Limited Liability Company Operating
Agreement (or any money in respect of that reduction or diminution), other than
as a result of fraud or willful misconduct on the part of Fund or its general
partners, the SFEC Entities (other than SFOG) will, without any right of
subrogation or similar right against Flags, SFG-I, LLC, Fund or any partners of
Fund, fully discharge such requirement without the essentially 100% combined
interest of Fund and SFG-I, LLC in Flags being affected.
12.16 Certain Flags Distributions in 1997. From and after January
------------------------------------
1, 1997 and until Flags converts to a limited liability company and SFG-I, LLC
becomes the sole manager of Flags, no distributions will be made or declared by
Flags.
12.17 Initial Limited Partner's Fractional Unit. If SFOG
------------------------------------------------
Acquisition A or SFOG Acquisition B purchases, pursuant to the Tender Offer or
Liquidity Put, the 1/31.71th (one divided by thirty-one and seventy-one
hundredths) of a Unit issued to the initial limited partner of Fund (owned of
record as of the date of this Agreement by Lyn Jaeckle), SFOG Acquisition A and
SFOG Acquisition B, as the case may be, shall sell to Fund such fractional Unit
and Fund shall purchase such fractional Unit, at a price equal to the price paid
therefor pursuant to the
59
<PAGE>
Tender Offer or Liquidity Put, ten Business Days after Flags receives from Flags
II its next distribution of the Minimum Amount, after such purchase by SFOG
Acquisition A or SFOG Acquisition B, in an amount sufficient to pay the amount
to be paid under this Section 12.17. Upon such purchase by Fund, such fractional
Unit will no longer be deemed outstanding for purposes of calculating the Number
of Units.
12.18 EBITDA Arbitration Matters.
--------------------------
(a) Matters Subject to Arbitration.
------------------------------
(i) Except to the extent provided in Section 12.18(a)(iii),
to the extent GAAP or the definition of EBITDA permits different judgments to be
made in determining the amount of any item to be taken into account in the
determination of EBITDA, the judgment will be made in accordance with past
practice with respect to the Amusement Park prior to 1996 as reflected by a
"consistent pattern of material judgments" ("Past Accounting Practice") or, if
there is no relevant Past Accounting Practice, relevant Past Accounting Practice
is not determinable or GAAP as then in effect precludes the continued
utilization of Past Accounting Practice, then such judgment will be made and
finally determined for the purposes of calculating EBITDA as set forth below in
this Section 12.18. As used in the phrase "consistent pattern of material
judgments," the term "material" is intended to refer to judgments with respect
to items that either (i) were of such size that their treatment would ordinarily
be given significant consideration by financial management or independent
accountants or (ii) even if not of such size, were given significant
consideration by financial management or independent accountants.
Notwithstanding the foregoing, Past Accounting Practices with respect to
reserves, write-offs or other charges for inventory and receivables shall be the
practices applied to such items by Flags II for 1997.
(ii) Determinations as to (A) whether there is a Past
Accounting Practice with respect to a particular item, (B) if so, what that Past
Accounting Practice is, (C) whether GAAP precludes the continued utilization of
such Past Accounting Practice and (D) all judgments referred to in Section
12.18(a)(i) are referred to in this Section 12.18 as "Arbitrable Judgments." By
way of example, the types of judgments with respect to which this Section 12.18
shall apply include, without limitation, judgments with respect to recognition
of revenue or income or otherwise in respect of revenue or income, including the
amount of reserves (whether in respect of new reserves, adding to existing
reserves or reducing previously incurred reserves) and whether any expenditures
are for maintenance or are capital expenditures.
(iii) Without regard to Past Accounting Practice, (x)
expenditures that satisfy the requirement for minimum capital expenditures under
the Flags II Limited Partnership Agreement or that are financed with "Capital
Improvement Loans" (as defined in the Flags II Limited Partnership Agreement)
will be deemed capital expenditures; and (y) expenditures for the purchase and
installation of Batman the Ride or for the purchase of land will be deemed
capital expenditures.
(b) Initial Judgments. Flags II, at the reasonable direction of
------------------
SFOG II, will make the initial determinations with respect to the Arbitrable
Judgments and, for the purpose of calculating
60
<PAGE>
EBITDA, such initial determinations shall be used, subject to the arbitration
and other procedures provided for in this Section 12.18.
(c) Notification. Concurrently with the delivery of the annual
------------
financial statements delivered pursuant to Section 12.8(a)(i)(A), SFOG II will
provide to Flags written notice (x) stating that in determining EBITDA all
judgments made as to whether an expenditure was for maintenance or a capital
expenditure (except as otherwise required by Section 12.18(a)(iii)) have been
made in accordance with Past Accounting Practice or, if they have not,
identifying with reasonable specificity which judgments have not so been made
and the amount involved in each such judgment, (y) identifying non-cash
writedowns and charges and (z) identifying new reserves and additions to and
subtractions from existing reserves.
(d) Initial Flags Investigation. Within 15 days after the
-----------------------------
notification referred to in Section 12.18(c) is given or, if earlier, required
to be given, Flags II and SFOG II will provide copies to Flags in Los Angeles,
California, of all documents required to be provided pursuant to Section
12.8(a)(iv). Flags II and SFOG II will also give Flags full and prompt access to
any other documents requested by it reflecting or relating to the Arbitrable
Judgments. The inspection and information access rights provided for in this
Section 12.18 are in addition to any other inspection or access rights provided
for in this Agreement or the Related Agreements or by applicable law. Flags II,
SFOG II, SFOG II Employee and/or their respective representatives will, upon
request by Flags and at a mutually convenient time during or after this initial
inspection period, meet with Flags or its representative to explain and answer
questions about the Arbitrable Judgments.
(e) Initial Dispute Notification and Resolution Discussions. If
---------------------------------------------------------
Flags disputes any one or more Arbitrable Judgments (including as to whether
such Arbitrable Judgment was made in accordance with Past Accounting Practice),
it will give written notice of such dispute to SFOG II by June 30 of each year
(provided that the failure to give this notice timely shall not give rise to any
--------
remedy). Flags and SFOG II, or their representatives, will meet, in Los Angeles,
California, and at a mutually convenient time within 15 Business Days thereafter
and attempt to resolve the Arbitrable Judgments that are disputed by Flags. If
Flags does not give notice that it challenges any Arbitrable Judgment made with
respect to a year and reflected in the financial statements for such year
provided pursuant to Section 12.8(a)(i)(A), in the next year or the following
year then -- unless (i) Flags has not been provided with the documents required
to be provided pursuant to Section 12.18(d) within ten Business Days following
written notice by Flags to SFOG II, Flags II and SFEC or SFTP from Flags that
such documents have not been received by it within the time period provided in
Section 12.18(d), (ii) Flags has neither been provided with originals or copies
of other documents requested by it reflecting or relating to the Arbitrable
Judgment nor been given full and prompt access to such other documents, (iii)
the Arbitrable Judgment was required by clauses (y) or (z) of Section 12.18(c)
to be but was not reflected in the notice given pursuant to Section 12.18(c),
(iv) the Arbitrable Judgment was concealed, (v) Flags has not been timely
provided with the financial statements, other information and notice required by
Section 12.8(a)(i)(A)-(F), or (vi) the financial statements referred to in
Section 12.18(a)(i)(A) do not fairly present the information set forth therein
in accordance with GAAP, in the case of each of clauses (i) through (vi) to the
extent such documents or financial statements are relevant to the determination
- -- Flags will lose its right to thereafter challenge the Arbitrable Judgment.
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<PAGE>
The time period in which a challenge must be made with respect to the EBITDA
calculation for any year is called the "Procedure Period" for such year.
(f) Selection of Independent Accountant for Arbitration. If any
-----------------------------------------------------
Arbitrable Judgment items have not been resolved pursuant to Section 12.18(e)
within the time frame referred to therein (as it may be extended by mutual
agreement of Flags and SFOG II), at the request of either Flags or SFOG II the
matter will be finally resolved by (i) a Big Six independent accounting firm,
that does not perform services for Flags, Fund, Flags II, any SFEC Entity or any
SFEC Affiliate, mutually selected by Flags and SFOG II or (ii) if there is no
such Big Six independent accounting firm or no such selection is made within ten
Business Days of a request by Flags or SFOG II, by such a Big Six independent
accounting firm, if any, or, if none, an independent certified public accounting
firm of national repute that does not perform services for Flags, Fund, Flags
II, any SFEC Entity or any SFEC Affiliate that is selected jointly by the then
principal independent accountants for Flags and SFOG II. The independent
accounting firm so selected is referred to below as the "Accounting Arbitrator."
(g) Arbitration. As to each Arbitrable Judgment that has not been
-----------
resolved pursuant to Section 12.18(e) and in recognition of the fact that
different determinations and judgments are appropriate under GAAP and that SFOG
II and its affiliates, on the one hand, and Fund (which will at the time be the
99% owner of Flags) and Fund's limited partners (other than SFOG Acquisition A
and SFOG Acquisition B), on the other, may have different interests because of
the impact of such determinations and judgments on EBITDA (and, therefore, on
the Per Unit Tender Offer Price and the Put Price), (x) the Accounting
Arbitrator will decide whether the initial determination referred to in Section
12.18(b) with respect to such Arbitrable Judgment was made consistent with Past
Accounting Practice and, if not, will make the current determination using Past
Accounting Practice or (y) if there is no Past Accounting Practice, if Past
Accounting Practice is not determinable or if GAAP as then in effect precludes
the continued utilization of Past Accounting Practice, the Accounting Arbitrator
will make the determination or judgment (including, if applicable, the amount to
be used) using solely its own judgment (based on the relevant facts and
circumstances known or that should have been known existing on the date of the
report of the independent auditors on the audited financial statements for the
year in which such Arbitrable Judgment was made), in each such case even if such
initial determination was permissible under GAAP, provided that the Accounting
--------
Arbitrator is to make a determination that is permissible under GAAP. Flags and
SFOG II shall be entitled to provide whatever written documentation they desire
to the Accounting Arbitrator (but, as to documentation used in making such
initial determination or existing at the end of the year in which the judgment
was made, only if such documentation was provided or made available by SFOG II
or SFOG II Employee to Flags not later than 15 Business Days prior to
commencement of the arbitration and by Flags to SFOG II not later than 15
Business Days prior to commencement of the arbitration). Fund, Flags, Flags II,
SFOG II and SFOG II Employee will provide to the Accounting Arbitrator any other
information the Accounting Arbitrator may reasonably request; and, if requested
by the Accounting Arbitrator, Fund, Flags, Flags II, SFOG II, SFOG II Employee
and their representatives will make oral presentations and/or make their
employees and the employees of Flags II and SFOG II Employee available to be
interviewed by the Accounting Arbitrator, in such manner as it may determine.
The decision of the Accounting Arbitrator, including as to the meaning and
enforceability of this Section 12.18, will be communicated by the Accounting
62
<PAGE>
Arbitrator to Flags and SFOG II in writing and will be final and unappealable,
and judgment thereon may be entered by any court of competent jurisdiction.
Provisions for the adjustment of EBITDA based on the decision of the Accounting
Arbitrator are contained in Section 12.7(c).
(h) Fees and Expenses. Flags and Flags II will each pay its own
------------------
costs in connection with the notification, investigation and initial dispute
notification and resolution procedures set forth in this Section 12.18 and any
costs and expenses of Flags II will be deemed expenses for the purposes of
determining EBITDA. After such time as any party initiates an arbitration
procedure under Section 12.18(g), each party will pay its own costs in
connection with such arbitration procedure, including without limitation, the
fees and expenses of the Accounting Arbitrator, provided that any costs that
would be expenses of Flags II shall be borne entirely by SFOG II and will not be
expenses for the purpose of determining, and will not reduce, EBITDA or cash
flow of Flags II in any period.
(i) Management Fee Adjustment. To the extent that Flags II engages
-------------------------
in a very high volume/low margin or very high margin/low volume activity
(compared to an amusement park), which is not typical for amusement park
operations at the Amusement Park at the date of this Agreement (such as, by way
of illustration of a high volume/low margin activity, but not of limitation,
gaming or supermarket operations), then either SFOG II or Flags may demand that
the deduction from net income or loss set forth in clause (v) of paragraph (B)
of the definition of "EBITDA" in respect of the Management Fee (the "Management
Fee EBITDA Deduction") be adjusted so that the Management Fee EBITDA Deduction
will not unfairly overstate or unfairly understate the Management Fees to be
used in calculating EBITDA. If SFOG II and Flags cannot agree on such
adjustment, then the adjustment shall be determined by the Accounting Arbitrator
using its own judgment in accordance with Section 12.18(g). This Section
12.18(i) deals only with the Management Fee EBITDA Deduction as it relates to
the calculation of EBITDA and shall not affect the actual Management Fee or
Priority Management Fee Distributions to which SFOG II is entitled under the
Flags II Limited Partnership Agreement.
(j) Affiliate Transactions. Whether there has been compliance with
----------------------
the requirements of Section 12.7(a) is not an Arbitrable Judgment.
12.19 EBITDA Adjustment for Personal Injury Claims.
--------------------------------------------
(a) Generally. In calculating EBITDA for each year there will be
---------
deducted in that year an amount (the "Deemed Insurance Amount") equal to the
average of the amounts paid by Flags (for periods prior to the Effective Date)
and by Flags II and, with respect to park personnel, including Park Employees,
SFOG II Employee (for periods on and after the Effective Date) in the then prior
three years to third parties for the investigation, defense and settlement of
personal injury claims and workers' compensation claims (in each case other than
Uninsured Major Injury Claims) and payment of damages and other amounts for
personal injury claims and workers' compensation claims (in each case other than
Uninsured Major Injury Claims). In determining such average, (i) if any of the
three years is (x) 1996 or previous years, the amounts so paid in such year are
those paid by Flags, (y) 1997, the amounts so paid in such year are those paid
by Flags for the period January 1, 1997 to the Effective Date and by Flags II
and, with respect to park personnel, including Park Employees, SFOG II Employee
for the period from and including
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the Effective Date through December 31, 1997, and (z) 1998 or any subsequent
year, the amounts so paid in such year are (without duplication) those paid by
Flags II and, with respect to park personnel, including Park Employees, SFOG II
Employee and (ii) amounts paid for self insurance shall not be averaged or
otherwise considered, but amounts paid by any self-insurance "pool" to
unaffiliated third parties on behalf of Flags, Flags II or SFOG II Employee, as
the case may be, shall be included in such average. As used in this Agreement,
the term "park personnel" means individuals who work at or for the Amusement
Park, to the extent they work at or for the Amusement Park.
(b) Uninsured Major Injury Claims. With respect to Uninsured Major
-----------------------------
Injury Claims occurring on or after January 1, 1997, EBITDA shall be adjusted by
a reserve, which reserve (and additions to and reductions from such reserve)
shall be determined, in the first instance, by Flags II, subject to adjustment
as provided in Section 12.18.
(c) Definition. "Uninsured Major Injury Claims" means the
----------
uninsured (except by self insurance) portion of claims (including the portion
for which third-party insurance is provided, but for which an SFEC Entity
indemnifies such insurer against loss) or, based on actual occurrences,
anticipated claims for personal injuries (including workers' compensation
claims) that are major, unusual and/or extraordinary. Examples of such major,
unusual and/or extraordinary matters are death, injury resulting in significant
paralysis or similar massive physical injury (such as the injury in 1994 to an
employee that resulted in a reserve and/or payment, by an SFEC Entity under an
indemnified workers' compensation claim, of approximately $1 million) or
injuries to numerous people resulting from a significant ride accident or a
fire.
12.20 Other SFEC Entities That May Own Units. At the written
-----------------------------------------
request of SFEC, other Persons affiliated with SFEC will, subject to the prior
written consent of Fund, which consent will not be unreasonably withheld, be
permitted to acquire Units that SFOG Acquisition B owns or could acquire under
this Agreement and the Related Agreements, in which case appropriate amendments
shall be made to this Agreement and the Related Agreements.
12.21 Negative Pledge Covenants. The SFEC Entities will not take,
-------------------------
and will use their best efforts to cause the SFEC Affiliates not to take, any
action the result of which would be to (a) cause the term of the Bank Credit
Agreement Negative Pledge Covenant to continue after the expiration of the term
or earlier termination of the Indenture Negative Pledge Covenant, (b) to cause
the term of the Indenture to be extended beyond the termination date of the
Indenture as in effect on the date the Indenture was initially entered into
without the Indenture Negative Pledge Covenant being released with respect to
Units held from time to time by SFOG Acquisition A or (c) permit to exist any
other agreement covenant that would preclude the granting, attachment,
perfection or first priority of the security interests in such Units provided
for in the SFOG Acquisition A and SFOG Acquisition B Guarantee and Pledge
Agreement (other than such a covenant contained in SFTP's senior credit facility
from time to time, provided that such covenant is not more restrictive than the
--------
Bank Negative Pledge Covenant and does not extend beyond the term of the
Indenture).
12.22 List of Fund Limited Partners. Fund shall, within five
-------------------------------
Business Days after the Effective Date, provide to SFEC a list of the names,
addresses and Unitholdings of the limited
64
<PAGE>
partners of Fund, which list shall not, without the prior written consent of
Fund, be used by any SFEC Entity for any purpose other than to make the Tender
Offer and the Liquidity Puts.
ARTICLE XIII
EMPLOYEE AND RELATED MATTERS
13.1 Continuation of Employment.
--------------------------
(a) Offers of Employment. The SFEC Entities shall cause SFOG II
---------------------
Employee to, and SFOG II Employee shall, offer employment to all individuals
located in Georgia who are employed at the Amusement Park as permanent,
full-time employees at the date Flags II is formed, on substantially the same
terms and conditions to which such employees were subject immediately prior to
that date, subject to the provisions of this Article XIII. All such employees
who accept such offer or who are later employed by SFOG II Employee and whose
work for SFOG II Employee is, except as permitted by the last sentence of
Section 12.7(a)(i), solely work at or for the Amusement Park are referred to in
the Agreement as "Park Employees." SFOG II Employee may transfer employees to
the employ of another SFEC Park or any SFEC Affiliate, effective at any time
prior to December 31, 2023 and, if the Net Worth Standard is then met and the
End-of-Term Option has then been exercised, at any time thereafter, provided
that the president or general manager, the chief financial officer and chief
maintenance officer of the Amusement Park or, if applicable, Flags II or SFOG II
Employee shall not be so transferred, at any time after December 31, 2021,
unless the End-of-Term Option has then been exercised and the Net Worth Standard
is then met. No individual whose employment could not then be transferred to
another SFEC Park or any SFEC Affiliate pursuant to this Section 13.1(a) shall,
if that individual ceases for any reason to be employed by SFOG II Employee or
Flags II (or, after December 31, 2026, then remains employed by SFOG II Employee
or Flags II), be employed by an SFEC Entity, SFEC Affiliate or SFEC Park for the
two years, or such shorter period as may be required by applicable law, after
such employment ceases (or, if applicable, for two years or such shorter period
as may be required by applicable law after December 31, 2026), unless the
End-of-Term Option has then been exercised and the Net Worth Standard is then
met. Nothing in this Agreement shall limit the right of SFOG II Employee to
terminate the employment of any individual in its sole discretion. Effective
immediately prior to the Effective Date, all employees of Flags who do not
accept such employment (and thereby terminate their employment with Flags) shall
be terminated by Flags and, without limiting its other obligations under this
Agreement and the Related Agreements, SFOG II shall cause Flags II to assume on
the Effective Date and to thereafter discharge in full all liability, if any,
Flags may have to all Persons who are employees of Flags at any time prior to
Effective Date, including any liability that may exist by virtue of such
termination.
(b) WARN Act and Other Matters. While the parties do not believe
---------------------------
the Worker Adjustment and Retraining Notification Act ("WARN Act") applies, if
it does, SFOG II Employee (but not Flags II) shall be fully responsible for any
liability arising under the WARN Act in connection with the transactions
provided for in this Agreement, the Flags II Limited Partnership Agreement and
the Lease.
65
<PAGE>
13.2 Benefit Responsibilities. During the term of the Flags II
-------------------------
Limited Partnership Agreement, SFOG II Employee shall cause to be provided
benefits to Park Employees which are substantially comparable in the aggregate
to the benefits provided to similarly situated employees of SFEC Parks.
Notwithstanding any provision herein to the contrary, nothing in this Agreement
shall be construed to limit the right of any SFEC Entity or SFEC Affiliate to
amend or terminate any employee benefit plan, practice or arrangement covering
Park Employees at any time after the date Flags II is formed. In connection with
such benefits, SFOG II Employee shall cause to be recognized all service
performed by Park Employees under the existing welfare and benefit plans prior
to the date Flags II is formed for all purposes under such plans including, but
not limited to, eligibility, vesting, benefit accrual, retirement subsidies,
benefit commencement, and shall waive all preexisting condition exclusions not
applicable prior to the date Flags II is formed under any health insurance
plans. For purposes of this Article XIII, "comparable" shall mean benefits that
are substantially similar in type, scope, eligibility requirements and employee
cost sharing.
13.3 Continuation of Health Coverage Through Closing Date. SFOG II
----------------------------------------------------
Employee will cause to be continued the coverage of Park Employees under
existing group health benefit plans or plans which are substantially comparable
in the aggregate to the group health benefit plans provided to similarly
situated employees of Flags up to the date Flags II is formed and to cause to be
reimbursed covered Park Employees for eligible health care and other eligible
welfare expenses and services incurred up to the date Flags II is formed in
accordance with the terms of such plans. For purposes of the foregoing, an
expense or service is deemed to be incurred when the medical services are
performed or, with respect to welfare benefits other than medical or dental
benefits, when the event giving rise to such expense or service occurs.
13.4 Modifications. The employment status of each person currently
-------------
employed by Flags shall not be changed prior to the date Flags II is formed in a
manner that would promise employment for any specified term of employment.
13.5 Park Employees. The Park Employees will work at the Amusement
--------------
Park as if they were employed by the Amusement Park and Flags II will reimburse
SFOG II Employee for the cost thereof to the extent permitted by Section
12.7(a)(i).
13.6 End of Term. If SFOG Acquisition B does not exercise the
-----------
End-of-Term Option, SFOG II Employee shall use its best efforts to cause the
employment of all Park Employees involved in the day-to-day management and
operation of the Amusement Park (i) to be continued if the alternative set forth
in Section 8.5(b) is elected or (ii) at the election of Flags, to be transferred
to Flags II or to any purchaser or manager of the Amusement Park selected
pursuant to Section 8.5(c) or (d) upon completion of the sale of the Amusement
Park or effectiveness of a management agreement contemplated by such Section
8.5(c) and (d). In any event, SFOG II Employee will cooperate fully to ensure an
orderly transition.
13.7 Sale at End-of-Term. If the End-of-Term Option is not
---------------------
exercised or SFOG II is removed as the general manager of Flags II, at the
option of Flags, SFOG II will sell to Flags II, for cash in the amount of $100,
all of the then-outstanding capital stock of SFOG II Employee.
66
<PAGE>
13.8 ERISA. If there is a continuation or transfer of employment
-----
pursuant to Section 13.6 or a transfer of the stock of SFOG II Employee pursuant
to Section 13.7, the SFEC Entities will jointly and severally indemnify and hold
harmless the employer or purchaser of the stock against all liabilities, costs
and expenses imposed on or incurred by the employer or purchaser, under the
Employee Retirement Income Security Act of 1974, as amended (or successor
statute), arising at any time by reason of such continuation or transfer of
employment or transfer of stock, as the case may be, by reason of SFOG II
Employee's membership in a controlled group of employers, but not including any
such liabilities, costs or expenses directly attributable to SFOG II Employee.
13.9 No Termination; No Third Party Rights. The parties hereto
---------------------------------------
agree that, subject to the effect of Section 13.1(a), none of the transactions
contemplated by this Agreement, the Flags II Limited Partnership Agreement, the
Lease or any of the other Related Agreements shall be construed to constitute a
termination of employment of any Person employed by Flags including, without
limitation, any Park Employee. Nothing herein express or implied shall confer
upon any employee or former employee of Flags, or the beneficiary or legal
representative thereof, any right whatsoever under this Agreement, the Flags II
Limited Partnership Agreement, the Lease or any of the other Related Agreements,
including, without limitation, any right to continued employment or benefits.
ARTICLE XIV
EXECUTION OF THIS AGREEMENT;
THE CLOSING AND CLOSING DELIVERIES
14.1 Execution and Delivery of this Agreement. Concurrently with
----------------------------------------
the execution and delivery of this Agreement, the following documents shall be
executed by and delivered to the party or parties indicated:
(a) TWE and TWX Guarantee. The TWE and TWX Guarantee will be
-----------------------
executed and delivered by TWE, TWX and Fund, but its effectiveness shall be
conditioned upon the Effective Date having occurred.
(b) Fairness Opinion. Fund shall receive from Goldman, Sachs its
----------------
opinion to the effect that, as of the date of such opinion, the aggregate
financial consideration to be received by Fund and its limited partners pursuant
to this Agreement and the Related Agreements, taken as a whole, is fair to the
limited partners of Fund.
14.2 The Closing. The closing under this Agreement and the Related
-----------
Agreements (the "Closing") will occur on the Effective Date.
14.3 Conditions to the Obligations of the Parties.
--------------------------------------------
(a) Fund Limited Partners' Approval. The obligations of each of
---------------------------------
the parties and TWE and TWX under the TWE and TWX Guarantee are subject to the
condition that the Fund Limited Partners' Approval shall have been obtained not
later than April 15, 1997.
67
<PAGE>
(b) No Prohibition. The obligations of each of the parties shall
---------------
be subject to the condition that no federal, state or foreign governmental
authority or other agency or commission or court of competent jurisdiction shall
have enacted, issued or promulgated, enforced or entered any statute, rule,
regulation, injunction or other order (whether temporary, preliminary or
permanent) which remains in effect and which has the effect of making illegal or
otherwise prohibiting the consummation of the transactions provided for in this
Agreement or the Related Agreements.
(c) Conditions to Obligations of Fund. The obligations of Fund,
-----------------------------------
Salkin, SFG, Inc., SFG-I, LLC and SFG-II, LLC on the Effective Date shall be
subject to the (i) delivery to Fund of the opinion of Paul, Weiss, Rifkind,
Wharton & Garrison substantially in the form of Exhibit 14.3(c), (ii) the
representations and warranties made by the SFEC Entities being true and correct
as of the Effective Date, as if made on and as of the Effective Date (except to
the extent specifically made as of an earlier date), each of the covenants of
the SFEC Entities to be complied with prior to the Effective Date having been
complied with, and the SFEC Entities having delivered a certificate signed by an
officer of each of them confirming the foregoing and (iii) the delivery to Fund,
within five days after the date of this Agreement, of the tax opinion of Gibson,
Dunn & Crutcher LLP.
(d) Conditions to the Obligations of the SFEC Entities. The
-------------------------------------------------------
obligations of the SFEC Entities and the obligations of TWE and TWX under the
TWE and TWX Guarantee on the Effective Date shall be subject to (i) delivery to
the SFEC Entities of the opinion of Gibson, Dunn & Crutcher LLP in the form of
Exhibit 14.3(d), (ii) delivery to the SFEC Entities of a certificate of Fund to
the effect that the Fund Limited Partners' Approval has been obtained and (iii)
the representations and warranties made by Fund, Salkin, SFG, Inc., SFG-I, LLC
and SFG-II, LLC being true and correct as of the Effective Date, as if made on
and as of the Effective Date (except to the extent specifically made as of an
earlier date), each of the covenants of Fund, Salkin, SFG, Inc., SFG-I, LLC and
SFG-II, LLC to be complied with prior to the Effective Date having been complied
with, and Fund, Salkin, SFG, Inc., SFG-I, LLC and SFG-II, LLC having delivered a
certificate signed by a general partner, trustee, officer or managing member of
each of them confirming the foregoing.
14.4 Effective Date Deliveries. The following additional documents
shall be executed by and delivered to the party or parties indicated on the
Effective Date:
(a) Related Agreements. The following Related Agreements shall be
executed by and delivered to each of the parties thereto:
(i) the Second Amended and Restated Fund Limited Partnership
Agreement;
(ii) the SFOG Acquisition A and SFOG Acquisition B Guarantee
and Pledge Agreement;
(iii) the SFTP and SFEC Guarantee;
(iv) the Flags Limited Liability Company Operating
Agreement;
68
<PAGE>
(v) the Flags II Limited Partnership Agreement; and
(vi) the Lease.
(b) TWE and TWX Guarantee. The TWE and TWX Guarantee shall be
----------------------
executed and delivered by Flags.
14.5 Fund Limited Partners' Approval. As soon as practicable after
-------------------------------
the date of this Agreement, Fund shall solicit from its limited partners the
Fund Limited Partners' Approval. Salkin and the Board of Directors of SFG, Inc.
shall recommend that the limited partners of Fund approve this Agreement and,
subject to their fiduciary duties, will not withdraw such recommendation prior
to the completion of the vote of the limited partners of Fund.
ARTICLE XV
GENERAL PROVISIONS
15.1 Applicable Law. This Agreement shall be governed by and
---------------
construed under the internal laws of the State of New York in accordance with
and as is specifically provided for in Section 5-1401 of the General Obligations
Law of New York, and not the laws otherwise pertaining to choice or conflict of
law of the State of New York.
15.2 Forum. Except as otherwise provided in Sections 12.7(d),
-----
12.7(f) and 12.18(g), unless jurisdiction or venue is not available in one of
the forums specified below, the sole forums for resolving disputes under this
Agreement, the Flags II Limited Partnership Agreement, the Second Amended and
Restated Fund Limited Partnership Agreement, the Flags Limited Liability Company
Operating Agreement and the Lease will be trial level federal, California and
New York state courts located in Los Angeles, California, or New York, New York
and relevant appellate courts, Delaware State Courts or, at the election of
Fund, trial level federal or Georgia state courts located in Atlanta, Georgia,
and relevant appellate courts. Each of the parties agrees to the jurisdiction of
and venue in such courts and not to assert forum non conveniens or a similar
----- --- ----------
doctrine in opposition to the forum selection made in this Section 15.2. Service
may be made at the addresses to which notices are to be given, as provided in
Section 15.4.
15.3 Injunction. In addition to any remedies at law that may be
----------
available, the parties shall be entitled to equitable remedies, including
injunction and specific performance, for breaches or prospective breaches of
this Agreement, the Flags II Limited Partnership Agreement the Lease and the
other Related Agreements. Each of the parties hereby waives any right that it
may have to request or require that any other party post any bond with respect
to any injunctive action, provided that this sentence will not apply to any
action brought to enjoin (i) a payment or distribution to Flags, Fund or the
limited partners of Fund of or in respect of Minimum Amount or Base Rent or (ii)
the pledgeholder under the SFOG Acquisition A and SFOG Acquisition B Guarantee
and Pledge Agreement from delivering the Units it holds and the "stock powers"
held by it to or as directed by Fund, provided that if the party seeking the
--------
injunction prevails on the merits, so that the payment, distribution or delivery
should not have been made, Fund will reimburse such party for the cost of the
bond.
69
<PAGE>
15.4 Notices.
-------
(a) Notices in General. All notices, requests, demands and other
------------------
communications under or pursuant to this Agreement shall be in writing and shall
be deemed given if delivered personally or, if mailed, two days after being
mailed by certified or registered mail, postage pre-paid, return receipt
requested (if given both to the party listed below and to its counsel by such
mail and, in addition, also by facsimile transmission), or, if by facsimile,
upon receipt of a transmittal confirmation, to the parties at the following
addresses or facsimile numbers, or such other address or facsimile number as a
party may designate for itself by written notice to the other parties:
If to Fund, Salkin, SFG, Inc., SFG-I, LLC or SFG-II,
LLC or, on and after the date SFG-I, LLC becomes the
manager of Flags, to Flags, to it:
c/o Mr. Avram Salkin
9150 Wilshire Boulevard, Suite 300
Beverly Hills, California 90212
Fax: (310) 859-1430
Phone: (310) 281-3200
with a copy to:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071
Attention: Steven Meiers, Esq.
Fax: (213) 229-7520
Phone: (213) 229-7000.
If to SFOG II, SFOG II Employee, SFOG Acquisition A,
SFOG Acquisition B, SFOG, SFOGS, SFTP or SFEC or,
before the date SFG-I, LLC becomes the manager of
Flags, to Flags, to it:
c/o Six Flags Entertainment Corporation
400 Interpace Parkway
Bldg. C - Third Floor
Parsippany, New Jersey 07054
Attention: Chief Executive Officer
Attention: General Counsel
Fax: (201) 402-7741
Phone: (201) 402-8100
70
<PAGE>
with copies to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Attention: Robert B. Schumer, Esq.
Fax: (212) 757-3990
Phone: (212) 373-3097
Boston Ventures Management, Inc.
21 Custom House Street, 10th Floor
Boston, Massachusetts 02110
Attention: Ms. Martha H.W. Crowninshield
Fax: (617) 737-3709
Phone: (617) 737-3706
Warner Bros.
4000 Warner Blvd.
Burbank, California 91522
Attention: General Counsel
Fax: (818) 954-3563
Phone: (818) 954-3591.
(b) Notices to Unitholders. Whenever notice, request, demand or
----------------------
other communication is required to be given by any of the SFEC Entities to the
Unitholders under this Agreement or any Related Agreement, such notice shall be
in writing and shall be deemed given if delivered personally or, if mailed, two
days after being mailed by certified or registered mail, postage pre-paid,
return receipt requested or, if by facsimile, upon receipt of transmittal
confirmation, to each Unitholder at the address of such Unitholder set forth in
Fund's records, and, in addition, at any other address specified in writing to
Fund by any Unitholder for himself, herself or itself, in each case as from time
to time provided to SFOG II by Fund.
15.5 Counterparts. This Agreement and the Related Agreements may
------------
be executed in two or more counterparts, each of which shall be deemed an
original, but all of which will constitute one and the same document. Faxed
signatures of this Agreement or the Related Agreements shall be binding for all
purposes.
15.6 Entire Agreement. This Agreement, the Exhibits hereto and the
----------------
Related Agreements contain the entire agreement between the parties hereto with
respect to the transactions provided for herein and therein and supersede all
prior oral and written and all contemporaneous oral negotiations, commitments
and understandings relating thereto.
15.7 Modifications, Amendments and Waivers. At any time prior to
--------------------------------------
the Closing the parties may, but only in writing, amend, supplement or waive any
of the provisions of this Agreement and any such amendment, supplement or waiver
shall be effective against any party hereto that has executed such document.
71
<PAGE>
15.8 Interpretation. The headings contained in this Agreement and
--------------
the Related Agreements are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement or the Related
Agreements. The parties agree that each party and its counsel have reviewed and
revised this Agreement and the Related Agreements.
15.9 Severability; Invalidity of Particular Provisions. If any
---------------------------------------------------
term of this Agreement or the Related Agreements or the application thereof to
any Person or circumstance shall, to any extent, be invalid or unenforceable,
the remainder of this Agreement or the Related Agreements, or the application of
such term or provision to Persons or circumstances other than those to which it
is held invalid or unenforceable, shall not be affected thereby and each other
term and provision of this Agreement and the Related Agreements shall be valid
and enforceable to the fullest extent permitted by law.
15.10 Waiver. No party will be deemed to have waived any covenant,
------
obligation or performance of any other party or any condition under this
Agreement or the Related Agreements except to the extent (if any) such waiver is
expressly set out in a writing signed by such party and addressed to the other
party. One or more waivers of any matter by any party shall not be construed as
a waiver of any subsequent breach or default of the same or any other matter.
The consent or approval by any party of any act by any other party shall not be
construed to waive or render unnecessary the first party's consent or approval
of any future similar act, whether or not similar.
15.11 Third-Party Beneficiaries. The Limited Partners of Fund from
-------------------------
time to time, other than SFOG Acquisition A and SFOG Acquisition B, and the
Persons entitled to indemnification pursuant to Section 12.10 are third-party
beneficiaries of this Agreement. There are no other third-party beneficiaries of
this Agreement.
15.12 Successors. This Agreement shall be binding upon and inure
----------
to the benefit of permitted successors and assignees and be binding upon all
successor and assignees (in each case however such succession or assignment is
accomplished, including, without limitation, by assignment, merger, reverse
merger, consolidation, sale of securities or assets, conversion, bequeath,
operation of law or, without limitation, otherwise) of the parties hereto and
third-party beneficiaries hereof.
15.13 No Offset; Interest. Except as otherwise specifically
---------------------
provided in this Agreement, the Second Amended and Restated Fund Limited
Partnership Agreement or the Flags Limited Partnership Agreement, no party to
this Agreement may offset against amounts it is to pay to any other party under
this Agreement, the Flags II Limited Partnership Agreement, the Lease or any
other Related Agreement any amounts such party claims are owed to it. If any
amount is not paid when due under this Agreement, the Flags II Limited
Partnership Agreement, the Lease or any other Related Agreement, such amount
will bear interest at Prime or at the Default Rate, as provided herein or in the
Related Agreements.
15.14 Further Assurances. Each of the parties hereto will, upon
-------------------
receipt of a reasonable request that it do so, execute and deliver such further
documents as are reasonably
72
<PAGE>
necessary to effect the transactions contemplated by this Agreement, the Flags
II Limited Partnership Agreement and the Lease.
15.15 Non-Binding Effect of Recitals. The parties agree that,
--------------------------------
except for the terms defined therein and the description of the general
ownership relationship of the parties to each other, the Recitals set forth in
this Agreement are for reference purposes only and, except with respect to those
defined terms and descriptions, shall not have any binding effect or affect in
any way the meaning or interpretation of this Agreement or the Related
Agreements.
15.16 Payments. Payments required by this Agreement and the
--------
Related Agreements shall be made in the lawful currency of the United States of
America.
15.17 Factors to be Considered in Determining Reasonableness of
------------------------------------------------------------
Withheld Consent. A party being asked to give consent will not be deemed to have
- ----------------
unreasonably withheld consent by virtue of that party requiring any one or more
of the following as a condition of giving its consent: (i) the rights of such
party and any of its owners not being subject to material reduction, or to any
reduction (whether or not material) for which such party is not fully
reimbursed, including, without limitation, by virtue of a new or extended
preference or fraudulent conveyance period under any applicable bankruptcy,
insolvency, moratorium or similar law, (ii) each Guarantor under each Guarantee
consenting to the matter and agreeing, in a writing reasonably satisfactory in
form and substance to the consenting party, that its Guarantee is not affected
thereby and (iii) the reasonable out-of-pocket costs of the consenting party
incurred with prior notice in connection with the request to give consent being
paid by the party(ies) requesting consent, whether or not consent is given.
73
<PAGE>
Each of the parties has signed this Overall Agreement as of the
date first written above, thereby becoming a party to and bound by this Overall
Agreement.
SIX FLAGS FUND, LTD. (L.P.) SIX FLAGS OVER GEORGIA, LTD.
By: Salkin Family Trust By: Six Flags Over Georgia, Inc.
General Partner General Partner
By: /s/ Avram Salkin By: /s/ Larry D. Bouts
----------------------------- -----------------------------
Avram Salkin, Co-Trustee Larry D. Bouts,
Cheif Executive Officer
SALKIN FAMILY TRUST SFOG II, INC.
By: /s/ Avram Salkin By: /s/ Larry D. Bouts
--------------------------------- -----------------------------
Avram Salkin, Co-Trustee Larry D. Bouts,
Chief Executive Officer
SFG, INC. SFOG II EMPLOYEE, INC.
By: /s/ Avram Salkin By: /s/ Larry D. Bouts
--------------------------------- ----------------------------
Avram Salkin, President Larry D. Bouts,
Chief Executive Officer
SFG-I, LLC SFOG ACQUISITION A, INC.
By: /s/ Avram Salkin By: /s/ Larry D. Bouts
--------------------------------- ----------------------------------
Avram Salkin, Manager Larry D. Bouts,
Chief Executive Officer
SFG-II, LLC SFOG ACQUISITION B, L.L.C.
By: /s/ Avram Salkin, Manager By: Time Warner
--------------------------------- Entertainment Company, L.P.
Avram Salkin, Manager Manager
By: /s/ Spencer B. Hays
-----------------------------------
Spencer B. Hays, Vice President
SIX FLAGS SERVICES OF GEORGIA, INC. SIX FLAGS OVER GEORGIA, INC.
By: /s/ Andrew J. Barkley
---------------------------------- By: /s/ Larry D. Bouts
Andrew J. Barkley -----------------------------------
Senior Vice President Larry D. Bouts,
Chief Executive Officer
SIX FLAGS THEME PARKS INC. SIX FLAGS ENTERTAINMENT CORPORATION
By: /s/ Larry D. Bouts By: /s/ Larry D. Bouts
---------------------------------- ----------------------------------
Larry D. Bouts, Larry D. Bouts,
Chief Executive Officer Chief Executive Officer
74
<PAGE>
LIMITED PARTNERSHIP AGREEMENT
OF
SIX FLAGS OVER GEORGIA II, L.P.
This Limited Partnership Agreement (this "Agreement") is
entered into effective as of March 18, 1997 by and among SFOG II,
Inc., a Delaware corporation (the "General Partner"), SFG-II,
LLC, a Georgia limited liability company (the "Co-General
Partner"), and Six Flags Over Georgia, LLC, a Georgia limited
liability company (the "Limited Partner"). The General Partner,
the Co-General Partner and the Limited Partner hereby form Six
Flags Over Georgia II, L.P., a Delaware limited partnership (the
"limited partnership"), under the Delaware Revised Uniform
Limited Partnership Act and further agree as set forth below.
ARTICLE I
CERTAIN DEFINITIONS
In addition to the other terms defined elsewhere in this
Agreement, the definitions set forth below are used in this
Agreement:
(a) "Accelerated Put" has the meaning given to that
term in the SFOG Acquisition A and SFOG Acquisition B Guarantee
and Pledge Agreement.
(b) "Additional First Year Minimum Amount" is defined
in Article VI.
(c) "Affiliate Loans" means loans made to the limited
partnership by any SFEC Entity or any SFEC Affiliate that meet
the criteria set forth in this definition. To be an Affiliate
Loan, the Indebtedness must: (i) bear interest at a rate per
annum not more than Prime; (ii) be payable by its terms only to
the extent of Available Cash and, unless the Net Worth Standard
is met, only after payment of then required Minimum Amount
distributions, Base Rent, interest and Default Interest under
this Agreement and the Lease; (iii) be unsecured; (iv) be
prepayable without penalty at any time; (v) provide by its terms
that, at the earliest to occur of the dissolution of the limited
partnership, the removal of the General Partner or the General
Partner being adjudicated insolvent or bankrupt or being
dissolved or, if the End-of-Term Option is not exercised,
December 31, 2026, any then unpaid portion thereof (including any
then accrued interest thereon) will, without any further action
or any payment, be thereupon contributed to the capital of the
limited partnership and will no longer be due; and (vi) be
represented by a note, consistent with the provisions of this
definition, a copy of which is sent to the Co-General Partner
within three Business Days after having been executed, which note
contains the following provisions:
"THIS NOTE IS SUBJECT TO, AND MAY NOT BE DUE OR OWING AS PROVIDED
IN, THE LIMITED PARTNERSHIP AGREEMENT OF SIX FLAGS OVER GEORGIA
II, L.P., A COPY OF WHICH MAY BE OBTAINED FROM SFG-II, LLC, A
GEORGIA LIMITED LIABILITY COMPANY."
(d) "Alterations" is defined in Article XVII.
- ------------------------------
The Effective Date will be filled in here.
<PAGE>
(e) "Amusement Park" has the meaning given to that
term in the Overall Agreement and, in addition, in this Agreement
also includes any second gate attractions, hotel(s) and other
improvements as may in the future exist on the Land.
(f) "Another Material Default" is defined in Article
VIII.
(g) "Available Cash" means cash and cash equivalents
of the limited partnership generated by the Amusement Park and
Amusement Park assets, other than Excluded Revenues, that, in the
reasonable judgment of the General Partner (in light of
available, permitted financing), are not necessary for the
limited partnership to retain for working capital, capital
expenditures, capital improvements, debt service, maintenance,
repairs or other limited partnership business purposes or as
reserves.
(h) "Bankruptcy Code" means Title 11 of the United
States Code (11 U.S.C. Section 101 et seq.) (as amended from time
to time or any successor statute).
(i) "Base Rent" is defined in the Lease.
(j) "Base Index" is defined in Article VI.
(k) "Batman the Ride" has the meaning given to that
term in the Overall Agreement.
(l) "Business Day" has the meaning given to that term
in the Overall Agreement.
(m) "Capital Improvement Loans" means any loans to the
limited partnership or Capital Leases that: (i) are used to fund
or, within 90 days of acquisition or completion of construction,
to replace funds used for capital expenditures; (ii) have a
principal amount not greater than the capital expenditure
(including the cost of any performance or completion bond
required in connection with such capital expenditure); (iii) are
not made by an SFEC Entity or SFEC Affiliate; (iv) are due and
payable in full within ten years, but in any event no later than
December 31, 2024; (v) have level amortizing payments -- subject
to having a balloon payment of no more than the percentage of the
initial principal amount of the Capital Improvement Loan equal to
a fraction, expressed as a percentage, derived by dividing one by
the number of years over which the Capital Improvement Loan is so
amortized in full -- sufficient to pay the Capital Improvement
Loan and any interest thereon in full by the due date; (vi) are
prepayable at any time (although a commercially reasonable
prepayment penalty may be required for prepayment); (vii) bear a
commercially reasonable rate of interest; and (viii) are
unsecured, provided that any Capital Improvement Loan may be
secured by the capital improvement (and the proceeds thereof)
financed by the Capital Improvement Loan. If then existing
Capital Improvement Loans are repaid because the Net Worth
Standard is not met, as provided in clause (c) of Part B of
Article VIII, then at any time thereafter that the Net Worth
Standard is met, new Capital Improvement Loans may be incurred,
provided that such new Capital Improvement Loans are otherwise
permitted under the facts existing at the time they are incurred.
(n) "Capital Lease" has the meaning given to that term
in the Overall Agreement.
(o) "Code" means the Internal Revenue Code of 1986, as
amended.
(p) "Co-General Partner" is defined in the first
paragraph of this Agreement.
(q) "Comparable Park" means Six Flags Great Adventure,
Six Flags Magic Mountain, Six Flags Great America, Six Flags Over
Texas, Six Flags Astroworld, Six Flags St. Louis and Six Flags
Fiesta Texas (in each case only so long as directly or indirectly
owned or managed by SFEC or an affiliate of SFEC or the General
Partner) and any other amusement parks that are directly or
indirectly owned or managed by SFEC or an entity affiliated with
SFEC or the General Partner by 100% common ownership, located in
the United States, in each case of a similar type and stage of
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development to the Amusement Park and comparable in size,
attendance and number and quality of rides and attractions to the
Amusement Park.
(r) "Comparison Index" is defined in Article VI.
(s) "CPI" means the United States Department of Labor,
Bureau of Labor Statistics Consumer Price Index for the United
States City Average (All Urban Consumers, All Items) (1982-
1984=100), as in effect from time to time. If the CPI shall be
discontinued, there shall be substituted for the CPI a reasonably
reliable and comparable index or other information furnished by
the government or independent third party source, in either case
as mutually selected by the General Partner and Co-General
Partner or, in the absence of agreement between the General
Partner and the Co-General Partner, by a third party mutually
selected by the General Partner and the Co-General Partner (or,
in the absence of a mutual selection of such a Person, by
arbitration as provided in Part O, Paragraph 2, of Article XVII),
evaluating changes in the cost of living or purchasing power of
the consumer dollar in the cities of the United States.
(t) "Default" is defined in Article VIII.
(u) "Default Interest" is defined in Article VI.
(v) "Default Rate" means the lesser of (i) five
percent over Prime or (ii) the maximum interest rate permitted by
law.
(w) "Designated Assets" has the meaning given to that
term in the Overall Agreement.
(x) "EBITDA" has the meaning given to that term in the
Overall Agreement.
(y) "Effective Date" is defined in the Overall
Agreement.
(z) "End-of-Term Option" has the meaning given to that
term in the Overall Agreement.
(aa) "Environmental Laws" is defined in Article XVII.
(bb) "Equity Market Capitalization" means, with respect
to any Guarantor, without duplication, as of the date of
determination, the average of the closing price of the shares or
other units of each class of publicly traded equity securities
(excluding any such securities that are, prior to January 15,
2027, mandatorily redeemable or redeemable at the option of the
holder(s)) of such Guarantor on the national securities exchange
on which such securities are listed or, if not so listed, the
average bid and asked price of such securities reported on any
over-the-counter quotation system on which prices for such
securities are quoted, in each case for a period of 20 trading
days prior to the date of determination, multiplied by the number
of shares or units of each such class of equity securities in
question outstanding on the date of determination.
(cc) "Excluded Revenues" means revenues in respect of:
(A) receipts which are voluntary gratuities for the account of
and paid over to employees; (B) insurance, self-insurance or
condemnation proceeds; and (C) sales of property or assets,
except sales of food, beverages, goods, inventory and other items
typically held for resale to park customers in the ordinary
course of business;
(dd) "Flags Limited Liability Company Operating
Agreement" has the meaning given to that term in the Overall
Agreement.
(ee) "Force Majeure" is defined in Article XVII.
(ff) "Full Payment Date" means, with respect to any
year, the date on which the Minimum Amount for such year and all
prior years has been distributed in full, the Base Rent for such
year and all prior years has been paid in full and any interest
or Default Interest on the Minimum Amount and Base Rent for all
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<PAGE>
such years has been distributed or paid in full, provided that
there shall be no Full Payment Date if (i) there is then any
Default (or any event which, with notice or lapse of time or both
would be a Default), (ii) there is then outstanding any
Indebtedness of this limited partnership not permitted to be
outstanding by this Agreement or (iii) there is then any default
(or the General Partner has knowledge of an event which with
notice or lapse of time or both would be a default) which is a
failure to pay any Indebtedness of this limited partnership or
another default that would entitle the lender to accelerate under
any Indebtedness of this limited partnership.
(gg) "Fund" means Six Flags Fund, Ltd. (L.P.)
(hh) "GAAP" is defined in the Overall Agreement.
(ii) "General Partner" is defined in the first
paragraph of this Agreement.
(jj) "Gross Revenues" in respect of any year means all
revenues, computed on an accrual basis in accordance with GAAP,
of the limited partnership (for 1996, of the Limited Partner)
from the occupation or operation of the Amusement Park and the
Amusement Park assets. Notwithstanding the foregoing, Gross
Revenues shall not include: (A) any refunds, discounts or the
like made to, or in respect of, customers, guests or patrons of
the Amusement Park; (B) sales, admissions or other gross receipts
taxes paid on such revenues; and (C) Excluded Revenues. With
respect to concessions (including for this purpose licenses),
Gross Revenues shall include only the net amount received or
retained by the limited partnership from or in respect of the
concessionaire (or licensee). For 1997, Gross Revenues shall
mean, without duplication, Gross Revenues of the Limited Partner
for the period January 1, 1997 to the Effective Date and of the
limited partnership from and including the Effective Date through
December 31, 1997.
(kk) "Guarantees" has the meaning given to that term in
the Overall Agreement.
(ll) "Guarantor" means a Guarantor under one of the
Guarantees. As of the date hereof, the Guarantors are TWX, Time
Warner Entertainment Company, L.P., SFEC, SFTP, SFOG Acquisition
A and SFOG Acquisition B.
(mm) "Hazardous Materials" is defined in Article XVII.
(nn) "Impositions" is defined in Article XVII.
(oo) "Improvements" means any and all buildings,
structures and other improvements that may at any time be erected
or located on the Land during the term of this Agreement,
together with all rides, machinery, equipment and fixtures
attached to or located on the Land or any such buildings and
structures, regardless of whether or not such items constitute
real property, personal property or fixtures. The term
"Improvements" includes, but is not limited to: all buildings and
rides now or hereafter erected on the Land; all footings,
foundations, piping, sewers, retaining walls, landscaping,
streets and infrastructure, which are now or hereafter located
upon the Land or are a part of the buildings or rides now or
hereafter constructed thereon; all fixtures, appliances,
machinery, equipment and apparatus now or hereafter affixed or
attached to any of such buildings; and all components of the
heating, ventilating, air conditioning, plumbing, lighting,
refrigeration, cleaning, security and electrical systems of such
buildings. For purposes of this Agreement, Improvements means
any Improvements existing at the time of determination.
(pp) "indefeasibly pay", "indefeasibly make" or
"indefeasibly distribute" means a payment or distribution where
the recipient of the payment or distribution cannot be required
to return the payment or distribution in whole or in part, by
virtue of any provision of the Bankruptcy Code or any federal or
state bankruptcy, insolvency, moratorium or similar law affecting
creditors rights generally, if the recipient would not otherwise
4
<PAGE>
have been required to return the payment or distribution (or
portion thereof).
(qq) "Indebtedness" has the meaning given to that term
in the Overall Agreement and includes Working Capital Loans,
Capital Improvement Loans (including Capital Leases) and
Affiliate Loans.
(rr) "Insurance Requirements" means all present or
future requirements of any insurer of the Amusement Park or any
part thereof pursuant to insurance policies that the limited
partnership is required to maintain under this Agreement, and the
rules, orders, regulations or requirements of the national and
local Board of Fire Underwriters or any other similar body having
jurisdiction over the Amusement Park and those of any appropriate
agency, office, department, board or commission thereof.
(ss) "Land" means the land owned by the Limited Partner
at August 1, 1996 plus the SF Agreement Land.
(tt) "Lease" has the meaning given to that term in the
Overall Agreement;
(uu) "Lease Payment Default" has the meaning given to
that term in the Lease.
(vv) "Legal Requirements" means all laws, statutes,
ordinances, regulations, building codes, zoning codes and
regulations and the orders, judgments, rules, standards,
policies, regulations and requirements formally adopted by any
federal, state, local or municipal government, and the
appropriate agencies, officers, departments, boards, commissions
and courts thereof, whether now or hereafter in effect, which are
or become applicable to the Amusement Park or any part thereof or
to the use or manner of use of all or any part of the Amusement
Park or the sidewalks and curbs adjacent thereto. Without
limitation, Legal Requirements include Environmental Laws.
(ww) "Limitations" is defined in Article VIII.
(xx) "Limited Partner" is defined in the first
paragraph of this Agreement.
(yy) "limited partnership" is defined in the first
paragraph of this Agreement.
(zz) "Liquidity Put" has the meaning given to that term
in the Overall Agreement.
(aaa) "Management Fee" is defined in Article VI.
(bbb) "Measuring Period" is defined in Article
XVII.
(ccc) "Minimum Amount" is defined in Article VI.
(ddd) "Net Worth" has the meaning given to that
term in the Overall Agreement.
(eee) "Net Worth Standard" means that, at the time
of determination, either (i) the aggregate Net Worth (without
duplication) of all Guarantors who have not in any way sought to
disaffirm or to contend that they have no liability under, or
less limited liability than is provided by the terms of, their
respective Guarantee is not less than $5 billion multiplied by
the Applicable Percentage and the aggregate Equity Market
Capitalization (without duplication) of all such Guarantors is
not less than $5 billion multiplied by the Applicable Percentage
or (ii) the aggregate Net Worth (without duplication) of all
Guarantors who have not in any way sought to disaffirm or contend
that they have no liability under, or less liability than is
provided for by the terms of, their respective Guarantee is not
less than $3.5 billion multiplied by the Applicable Percentage
and the aggregate Equity Market Capitalization (without
duplication) of all such Guarantors is not less than $10 billion
multiplied by the Applicable Percentage; provided
--------
that if TWX shall cease to have outstanding publicly traded
equity securities by virtue of a "going private" or similar
5
<PAGE>
transaction, then the Net Worth Standard shall be met if the Net
Worth (without duplication) of all Guarantors is not less than $5
billion multiplied by the Applicable Percentage. For the
purposes of this definition, "Applicable Percentage" means (w) if
as of the date of determination the SFEC Entities and SFEC
Affiliates permitted to do so collectively own 25% or less of the
Number of Units (as defined in the Overall Agreement), 100%, (x)
if as of the date of determination the SFEC Entities and SFEC
Affiliates permitted to do so collectively own more than 25% but
not more than 50% of the Number of Units, 80%, (y) if as of the
date of determination the SFEC Entities and SFEC Affiliates
permitted to do so collectively own more than 50% but not more
than 75% of the Number of Units, 66-2/3%, and (z) if as of the
date of determination the SFEC Entities and SFEC Affiliates
permitted to do so collectively own more than 75% of the Number
of Units, 50%.
(fff) "Operating Leases" is defined in Part Q of
Article XVII.
(ggg) "Overall Agreement" means the Overall
Agreement, dated as of February 15, 1997, among Fund, Salkin,
SFG, Inc., the Limited Partner, the General Partner, the Co-
General Partner, SFG-I, LLC, Six Flags Over Georgia, Inc., SFTP,
SFEC, SFOG Acquisition A, SFOG Acquisition B, Six Flags Services
of Georgia, Inc. and SFOG II Employee, Inc.
(hhh) "Overall Agreement Payment Default" is
defined in Article VIII.
(iii) "partners" and "parties" means the General
Partner, the Co-General Partner and the Limited Partner (or, if
applicable, any substitute General Partner or Co-General Partner
elected upon removal of the then General Partner or Co-General
Partner).
(jjj) "Partnership Minimum Amount Distribution
Default" is defined in Article VIII.
(kkk) "Payment Prohibiting Law" means any federal
or state law that makes illegal the payment or action in
question, provided such law (i) is not of a type in existence at
--------
the Effective Date, (ii) is not similar to the Bankruptcy Code or
any other federal or state reorganization, rehabilitation,
arrangement, composition, moratorium or extension law, (iii) is
not a law passed as a result, in whole or in part, of lobbying by
any SFEC Entity or SFEC Affiliate, (iv) is a law of general
application (i.e., a law that applies to others generally in
addition to the limited partnership, the General Partner and the
Guarantors) and (v) makes illegal the payment or action in
question by each of the limited partnership, the General Partner
and each Guarantor. A law that permits non-payment of an
obligation, but does not make such payment or action illegal, is
not a Payment Prohibiting Law.
(lll) "Percentage Distribution" is defined in
Article VI.
(mmm) "Person" has the meaning given to that term
in the Overall Agreement.
(nnn) "Prepaid Amount" means the one-half of the
Minimum Amount for 1997 plus the one-half of the Base Rent for
1997 that are payable on the fifth Business Day after the date of
this Agreement (i.e., $9.25 million).
(ooo) "Prime" has the meaning given to that term in
the Overall Agreement.
(ppp) "Priority Management Fee Distribution" is
defined in Article VI.
(qqq) "Related Agreements" has the meaning given to
that term in the Overall Agreement.
(rrr) "Retained Liabilities" is defined in Article
X.
(sss) "Salkin" means the Salkin Family Trust
(formed by Declaration of Trust dated May 15, 1980, as amended).
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(ttt) "Second Amended and Restated Fund Limited
Partnership Agreement" has the meaning given to that term in the
Overall Agreement.
(uuu) "Service Standard" means the standards of an
amusement park equivalent to the average standards in the
Comparable Parks at the date of this Agreement or at the later
date in question, whichever is higher.
(vvv) "SF Agreement" has the meaning given to that
term in the Overall Agreement.
(www) "SF Agreement Land" means the land acquired
by the Limited Partner pursuant to the SF Agreement.
(xxx) "SFEC" means Six Flags Entertainment
Corporation.
(yyy) "SFEC Affiliates" has the meaning given to
that term in the Overall Agreement.
(zzz) "SFEC Entity" has the meaning given to that
term in the Overall Agreement.
(aaaa) "SFEC Park" has the meaning given that term
in the Overall Agreement.
(bbbb) "SFOG Acquisition A" means SFOG Acquisition
A, Inc.
(cccc) "SFOG Acquisition B" means SFOG Acquisition
B, L.L.C.
(dddd) "SFOG Acquisition A and SFOG Acquisition B
Guarantee and Pledge Agreement" has the meaning given to that in
the Overall Agreement.
(eeee) "SFOG Requirement" has the meaning given to
that term in the Overall Agreement.
(ffff) "SFTP" means Six Flags Theme Parks Inc.
(gggg) "Tax" is defined in Article VII.
(hhhh) "Tender Offer" has the meaning given to that
term in the Overall Agreement.
(iiii) "Treasury Regulations" means the regulations
promulgated under the Code, as such regulations may be amended
from time to time (including corresponding provisions of
succeeding regulations).
(jjjj) "TWX" means Time Warner Inc.
(kkkk) "Working Capital Loans" means short-term
borrowings by the limited partnership (or a wholly-owned
subsidiary of the limited partnership) which borrowings are made
after October 1 of a given year (including, with respect to
borrowings in 1997, October 1, 1996) or at any time thereafter
until there is regular positive cash flow in the next season and
are repaid from the first positive cash flow available for debt
repayment in the next season (after payment of Minimum Amount
distributions to the extent permitted by this Agreement), the use
of which loans is for working capital purposes (including payment
of Minimum Amount distributions as permitted hereby).
ARTICLE II
NAME AND PLACE OF BUSINESS
1. Name. The name of this limited partnership is: "Six
Flags Over Georgia II, L.P."
2. Place of Business. The principal place of business of
this limited partnership shall be 7561 Six Flags Parkway,
Austell, Georgia 30001. This limited partnership may also have
such other places of business within or without the State of
Georgia as the General Partner may deem appropriate.
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3. Registered Office or Agent. This limited partnership
shall, to the extent required by applicable law, continuously
maintain in the States of Georgia and Delaware a registered
office and a registered agent for service of process, in each
case as selected by the General Partner.
ARTICLE III
PURPOSES OF THE LIMITED PARTNERSHIP
The purposes of the limited partnership are to:
(a) Own the Amusement Park (excluding the Land) and operate
the Amusement Park and the Amusement Park assets;
(b) Execute, deliver and perform its obligations and
exercise its rights under the Lease;
(c) Borrow funds for limited partnership purposes, as
permitted by this Agreement;
(d) Comply with the Overall Agreement, as if it were party
thereto, and enforce its rights under the Overall Agreement; and
(e) Without limitation, to do all other acts, not
prohibited by this Agreement, the Lease or the Overall Agreement,
in connection with or incidental to the accomplishment of the
foregoing purposes of the limited partnership (including, without
limitation, to maintain and improve the Amusement Park and to
develop second gated attractions).
ARTICLE IV
NAMES AND ADDRESSES OF PARTNERS
1. General Partner. The name of the General Partner is
SFOG II, Inc. The address of the General Partner is 7561 Six
Flags Parkway, Austell, Georgia 30001, or such other address as
the General Partner may, by notice to the Co-General Partner and
the Limited Partner, specify from time to time.
2. Limited Partner. The name of the Limited Partner is Six
Flags Over Georgia, LLC. The address of the Limited Partner is
c/o National Registered Agents, Inc., 3761 Venture Drive, Duluth,
Georgia, or such other address as the Limited Partner may, by
notice to the General Partner and the Co-General Partner, specify
from time to time.
3. Co-General Partner. The name and address of the Co-
General Partner is SFG-II, LLC. The address of the Co-General
Partner is c/o National Registered Agents, Inc., 3761 Venture
Drive, Duluth, Georgia, or such other address as the Co-General
Partner may, by notice to the General Partner and the Limited
Partner, specify from time to time.
ARTICLE V
CAPITAL CONTRIBUTIONS
1. General Partner. Except as provided below in this
paragraph, the General Partner has not and shall not be obligated
to contribute to the limited partnership, including to its
capital, any cash or other property. The General Partner shall
contribute to the limited partnership cash in such amounts as are
necessary, after the incurrence of permissible Affiliate Loans,
Capital Improvement Loans and Working Capital Loans, to (i) make
distributions to the Limited Partner of the Minimum Amount, to
pay Base Rent under the Lease and make distributions of or pay
any interest or Default Interest due to the Limited Partner under
this Agreement or the Lease and (ii) for the limited partnership
to perform those acts to be performed by it under this Agreement,
the Lease and the Overall Agreement (including, without
limitation, Section 8.5(a) of the Overall Agreement).
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2. Limited Partner.
(a) Effective immediately after the conversion of the
Limited Partner to a limited liability company and SFG-I, LLC
becoming the sole manager and a member of the Limited Partner, in
accordance with the Overall Agreement and the Flags Limited
Liability Company Operating Agreement, the Limited Partner hereby
contributes to the capital of the limited partnership all of the
Limited Partner's then existing property and assets (including,
without limitation, all buildings, rides, all of its real
property, other than the Land, if any (for example, any rides
that may be deemed real property), all of its books and records,
its right and claims against third parties and, subject to the
next sentence, all of its goodwill), except (i) the Designated
Assets, (ii) any rights, claims or defenses the Limited Partner
may have against any SFEC Entity or SFEC Affiliate (provided that
--------
nothing in this clause (ii) is an admission that there are any
such rights or claims or a waiver or release of any such rights,
claims or defenses as may exist) and (iii) the Land. The Limited
Partner hereby licenses to the limited partnership, without
representation or warranty, its rights under the License
Agreement, dated December 31, 1968, between Great Southwest
Atlanta Corp. (now Six Flags Over Georgia, Inc.) and Fund, which
License Agreement was assigned to the Limited Partner, to use the
name "Six Flags Over Georgia", provided that (x) this license
--------
shall cease to exist and revert to the Limited Partner at the
election of the Limited Partner (i) after the occurrence of a
Default and upon notice to the limited partnership or the General
Partner or (ii) upon dissolution of the limited partnership if
the End-of-Term Option is not exercised, (y) this license, as
long as it is in effect, shall be royalty free and (z) the
Limited Partner retains the right to use the name "Six Flags Over
Georgia" in its name.
(b) The property and assets contributed by the Limited
Partner to the limited partnership pursuant to this Paragraph 2
of Article V has an agreed value of $235 million.
(c) The Limited Partner was, until the time of
contribution pursuant to Paragraph 2(a) of this Article V,
controlled by an affiliate of the General Partner, not by SFG-I,
LLC or Fund. Accordingly, notwithstanding the agreed upon value
provided for above, no representation or warranty is made by the
Limited Partner or SFG-I, LLC as to the title to or the condition
of the property or assets contributed by the Limited Partner to
the limited partnership or the liabilities of the Limited
Partners to be assumed by the limited partnership, and all such
property and assets are contributed AS IS, WHERE IS and WITH ALL
--------------- --------
FAULTS.
------
(e) The Limited Partner shall not, other than the
contribution provided for in this Article V, paragraph 2, be
obligated to contribute any cash or other property to the limited
partnership or its capital.
3. Co-General Partner. The Co-General Partner shall
contribute $100 to the capital of the limited partnership. The
Co-General Partner shall not under any circumstances be obligated
to contribute any other cash or other property to the limited
partnership or its capital.
4. Non-Interest Bearing. Contributions to the
capital of the limited partnership shall not bear interest.
ARTICLE VI
DISTRIBUTIONS
A. Order of Distributions
----------------------
Distributions by the limited partnership in each year shall
be made as set forth below; provided that no distributions,
except liquidating distributions pursuant to Article XIV of this
Agreement, shall be made after the earlier to occur of December
31, 2026 or the date to which the End-of-Term Option is
accelerated pursuant to Section 8.6 of the Overall Agreement.
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1. Minimum Amount Distributions. First, in each year
commencing with 1997, the limited partnership shall distribute to
the Limited Partner cash in the amount equal to the Minimum
Amount for that year. One-half of the Minimum Amount for 1997
shall be distributed to the Limited Partner on the fifth Business
Day after the date of this Agreement and the balance of the
Minimum Amount for 1997 shall be distributed to the Limited
Partner no later than November 17, 1997. For each year after
1997, not less than one-half of the Minimum Amount for such year
shall be distributed to the Limited Partner no later than July 15
of that year and the balance of the Minimum Amount for such year
shall be distributed to the Limited Partner no later than
November 15 of that year; provided that, if such July 15 or
--------
November 15 is not a Business Day, the amount due on such July 15
or November 15 shall be paid on or before the next Business Day
after such July 15 or November 15, as the case may be. If any of
the property or assets contributed to the limited partnership by
the Limited Partner are sold, cash in an amount equal to the
sales proceeds shall be (i) distributed to the Limited Partner,
(ii) credited against the Minimum Amount distribution for the
year of such distribution and, if necessary, (iii) credited
against the Minimum Amount distribution for the succeeding years,
with the result that the aggregate amount of the Minimum Amount
distribution for such years will not change.
2. Priority Management Fee Distribution. Second, in each
year commencing with 1997 and after, but only after, the Minimum
Amount for all years, to and including such year, Base Rent for
all years to and including such year and interest or Default
Interest, if any, on the Minimum Amount and Base Rent have each
been distributed or paid to the Limited Partner, and subject to
Part D of this Article VI, in recognition of the management
services provided by the General Partner and to the extent of
Available Cash, the limited partnership shall distribute to the
General Partner cash equal to the Priority Management Fee
Distribution.
3. Co-General Partner Distribution. Third, after, but
only after, all distributions provided for in Paragraphs 1 and 2
of this Part A of Article VI have been made in full, the limited
partnership shall, to the extent of Available Cash, distribute to
the Co-General Partner $100 per year, commencing with 1997,
cumulative but without interest to the extent not paid in then
prior years.
4. Percentage Distributions. Fourth, in each year, after,
but only after, the distributions provided for in Paragraphs 1, 2
and 3 of this Part A of Article VI have been made in full, the
limited partnership shall distribute the remaining Available
Cash, with such distributions ("Percentage Distributions") to be
made 5% to the Limited Partner and 95% to the General Partner;
provided that any Percentage Distribution due in respect of the
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year ended December 31, 2026 shall, if the End-of-Term Option is
exercised, be made no later than December 15, 2026.
5. Additional First Year Minimum Amount Distributions. In
1997 only, in addition to the other distributions provided for
herein, the limited partnership shall distribute to the Limited
Partner cash in an amount equal the Additional First Year Minimum
Amount. Such amount shall be distributed to the Limited Partner
no later than November 17, 1997, provided that such amount shall
--------
be distributed, to the extent the Limited Partner is required to
repay Retained Liabilities prior to November 17, 1997, on or
immediately prior to the date repayment is required.
B. Minimum Amount Distributions
----------------------------
1. Date and Time. Distributions of the Minimum Amount and
the Additional First Year Minimum Amount shall be made by the
date required, set forth in Part A, Paragraphs 1 and 5,
respectively, of this Article VI. Such amounts shall be paid, if
requested by the Limited Partner, by wire transfer to the Limited
Partner at such account in a bank located in the United States as
the Limited Partner may from time to time designate by notice to
the General Partner no later than two Business Days prior to the
due date thereof (provided that no notice need be given, after
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the initial notice, unless such account is changed and that the
initial notice may be given one Business Day prior to the due
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date), in immediately available funds and for wire delivery by 10
a.m. local time (and, if not received at the recipient bank by 1
p.m. local time, shall be deemed paid on the next Business Day
or, if later, the Business Day on which such payment is received
before 10:00 a.m. local time at the recipient bank). If no
notice is given as provided in the preceding sentence,
distributions of the Minimum Amount shall be paid by the date due
by delivery to the Limited Partner (at its address specified by
the Limited Partner by notice to the General Partner) prior to
noon local time of a cashier's check for the amount due.
2. Default Interest. If all or any portion of the
distribution of the Additional First Year Minimum Amount or any
Minimum Amount distribution is not distributed when required,
time being of the essence, the amount not so distributed shall be
distributed to the Limited Partner with interest thereon at the
Default Rate (at Prime to the extent provided in the last
sentence of Paragraph 4 of Part C of Article VIII) until the
distribution is made in full (such interest at the Default Rate
is referred to below as "Default Interest"). If all of the
Minimum Amount due has not then been distributed, all amounts
received by the Limited Partner in respect of the Minimum Amount,
interest or Default Interest shall, notwithstanding any legend or
endorsement on a check or similar matter, be credited first to
interest (other than Default Interest), second to Default
Interest and third to the undistributed "principal" of the
Minimum Amount(s) in question. No interest or Default Interest
paid or accrued shall reduce any Minimum Amount to be
distributed.
3. General Partner Obligations. The General Partner will
cause the limited partnership to timely make the Minimum Amount
distributions, payments of Base Rent and interest and Default
Interest distributions and payments.
C. Definitions
-----------
In addition to the other terms defined elsewhere in this
Agreement (including elsewhere in this Article VI), the
definitions set forth below are used in this Article VI.
1. Minimum Amount. The Minimum Amount for 1997 (i.e., the
period from the date of this Agreement through December 31, 1997)
is $17.5 million. For each year after 1997 the Minimum Amount
will be equal to the greater of (i) $17.5 million or (ii) if the
CPI published for the December immediately preceding the
beginning of such year (or, if no CPI is available for such
December, for the month closest to January 1 of such year) (the
"Comparison Index") exceeds the CPI published for December 1996
(the "Base Index"), an amount equal to $17.5 million multiplied
by a fraction of which the numerator is the Comparison Index for
such year and the denominator is the Base Index, provided that in
--------
no event shall the Minimum Amount for any year be less than the
Minimum Amount for the then immediately preceding year (for 1998,
not less than $17.5 million). Interest and Default Interest is
in addition to, but is not part of, any Minimum Amount.
2. Management Fee. The Management Fee for each year means
an amount equal to 3% of the Gross Revenues for the prior year.
3. Priority Management Fee Distribution. The Priority
Management Fee Distribution for each year is a distribution in an
amount equal to the Management Fee for that year plus interest
thereon at Prime from the Full Payment Date for that year until
paid; plus, to the extent a distribution of the Management Fee
was not made in any prior year, the portion of the amount equal
to the Management Fee(s) not so distributed in prior years plus
interest on the portion not so distributed at Prime (compounded
annually) from the Full Payment Date for the year in which such
Management Fee was otherwise payable but not paid.
4. Additional First Year Minimum Amount. The Additional
First Year Minimum Amount is an amount equal to the Retained
Liabilities, plus interest (and any other amounts) accruing on,
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or due in respect of, such Retained Liabilities through the date
of distribution of the Additional First Year Minimum Amount.
D. Additional Limitation on Priority Management
Fee Distributions and Percentage Distributions
----------------------------------------------
No Priority Management Fee Distribution will be made in any
year if (i) the distributions of the Minimum Amount for that year
and all prior years have not been made in full, any Base Rent for
that and all prior years has not been paid in full and all
interest and Default Interest on or in respect of the Minimum
Amount and Base Rent has not been paid in full, (ii) this limited
partnership has outstanding any Indebtedness (other than Capital
Improvement Loans and Affiliate Loans), (iii) the Net Worth
Standard is not met, this limited partnership has outstanding any
Indebtedness other than Affiliate Loans or (iv) this limited
partnership would, but for Paragraph 2 of Part C of Article XVII,
not be in compliance with the requirements of Paragraph 1 of Part
C of Article XVII. No Percentage Distribution will be made as
long as this limited partnership has outstanding any Indebtedness
(other than Affiliate Loans and, so long as the Net Worth
Standard is met, Capital Improvement Loans). No Priority
Management Fee Distributions or Percentage Distributions will be
made if, at the time of distribution, there is (x) any Default
(or any event which, with notice, lapse of time or both would be
a Default), (y) outstanding any Indebtedness of this limited
partnership not permitted to be outstanding by this Agreement or
(z) any default (or the General Partner has knowledge of an event
which with notice or lapse of time or both would be a default)
which is a failure to pay or another default that would entitle
the lender to accelerate under any Indebtedness of this limited
partnership, any failure to make a payment due under an Operating
Lease if the failure is both adverse and material to the
Amusement Park or Flags II or, until cured (including by making
any capital expenditures, in addition to those otherwise
required, in any year subsequent to the year in which such
capital expenditure was required to have been made), any failure
to comply with Part C of Article XVII. Neither this Part D of
Article VI, nor anything else in this Agreement (except a Payment
Prohibiting Law), shall affect, restrict or otherwise limit the
making of Minimum Amount distributions, payments of Base Rent or
distributions or payments of interest or Default Interest on or
in respect of Minimum Amount distributions or Base Rent, when
this Agreement or the Lease provide that such Minimum Amount
distributions, Base Rent, interest or Default Interest are to be
made or paid.
E. Cash Distributions Only; Available Cash Limitation
--------------------------------------------------
Distributions pursuant to this Article VI shall be made only
in cash and, except for the distributions provided for in
Paragraphs 1 and 5 of Part A of Article VI (and any applicable
interest or Default Interest thereon or in respect thereof),
shall be made only from and to the extent of Available Cash.
F. No Offset to Distributions to the Limited Partner
-------------------------------------------------
Distributions to the Limited Partner (including distributions
provided for in Paragraph 1 of Part A of Article VI), payments of
Base Rent and distributions or payments of interest or Default
Interest on or in respect of the distribution of the Additional
First Year Minimum Amount, Minimum Amount distributions and Base
Rent, as well as the Limited Partner's 5% share of Percentage
Distributions, shall be made without any deduction or offset
whatsoever (other than taxes required to be withheld under
applicable law).
G. Distributions May Not Be Funded By Indebtedness
-----------------------------------------------
No distributions provided for in Paragraph 1 of Part A of
Article VI or payments of Base Rent or any interest or Default
Interest under this Agreement or the Lease may be funded with
Indebtedness other than Affiliate Loans, provided that, if the
--------
Net Worth Standard is met and there is not then in existence a
Default (or an event which, with notice or the passage of time or
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both would be a Default), the Prepaid Amount and, and after 1997,
up to one-half of the Minimum Amount distribution and Base Rent
payment due on July 15 (or the next Business Day) may be funded
by a borrowing that is otherwise treated as a Working Capital
Loan, provided that (i) each such borrowing shall be repaid (x)
before any Affiliate Loans are repaid or any Priority Management
Fee Distributions or Percentage Distributions are made and (y) in
any event by August 31 of the year in which the borrowing is
made, time being of the essence, and (ii) the Full Payment Date
will not occur until such borrowing is repaid. This Part G of
Article VI does not modify in any manner the absolute and
unconditional obligations to make the distributions provided for
in Paragraph 1 of Part A of Article VI or to pay Base Rent (in
each case including any applicable interest or Default Interest
thereon or in respect thereof).
H. Application of Additional First Year Minimum Amount
---------------------------------------------------
Immediately upon receipt of payment of all or any portion of
the Additional First Year Minimum Amount distribution, the
Limited Partner shall pay the Retained Liabilities (plus interest
thereon and any amounts due in respect thereof to the creditor
accruing through the date of such receipt of all or such portion
of the Additional First Year Minimum Amount distribution) to the
extent of the amount so received. The General Partner shall
notify the Limited Partner three Business Days prior to each
distribution of all or any portion of the Additional First Year
Minimum Amount, specifying the amount thereof and the Retained
Liabilities to be repaid therefrom. In fulfilling its
obligations under this Part H of Article VI, the Limited Partner
shall rely upon the instructions provided by the General Partner
and have no liability for doing so.
ARTICLE VII
ALLOCATIONS OF INCOME AND LOSS FOR
TAX PURPOSES; CAPITAL ACCOUNTS
The parties intend that, for federal, state and local income
tax ("Tax") purposes, this limited partnership be treated as if
the property and assets contributed by the Limited Partner to
this limited partnership had been leased to the General Partner,
with (i) rent being payable to the Limited Partner in an amount
equal to the Additional First Year Minimum Amount (for 1997), the
Minimum Amount (plus any interest or Default Interest), the
Limited Partner's share of any Percentage Distributions and the
other distributions described in the first sentence of Paragraph
4 of Part A of this Article VII and (ii) the other terms hereof
being included in the lease. The remaining provisions of this
Article VII are intended to allocate items of income, gain,
deduction, credit and loss in a manner consistent with the
foregoing lease treatment.
A. Tax Allocations
---------------
For Tax purposes, income, gains, losses, deductions and
credits in each year shall be allocated as set forth below:
1. Depreciation. All depreciation from the depreciable
property contributed to the limited partnership by the Limited
Partner shall be allocated to the Limited Partner. All other
depreciation shall be allocated to the General Partner.
2. Credits. All investment tax, energy and other credits
shall be allocated to the General Partner.
3. Net Losses. Except as provided in Paragraph 5 of Part A
of this Article VII, any net losses and deductions of the limited
partnership (before taking depreciation and credits into account)
shall be allocated to the General Partner.
4. Gross Income. Except as provided in Paragraph 5 of
Part A of this Article VII, gross income of the limited
partnership shall be allocated first to the Limited Partner until
the aggregate allocation of such gross income to the Limited
Partner in all years commencing with 1997 equals in dollar amount
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<PAGE>
the aggregate amount of Additional First Year Minimum Amount
distributions, Minimum Amount distributions (including any
applicable distributions of interest or Default Interest) and
Percentage Distributions actually received by the Limited Partner
from the limited partnership in all such years (including any
amounts distributed by the limited partnership pursuant to
Section 8.4(b) of the Overall Agreement), distributions actually
received by the Limited Partner pursuant to the last sentence of
Paragraph 1 of Part A of Article VI and distributions actually
received by the Limited Partner pursuant to the last sentence of
Paragraph 1 of Part C of Article XVII less an amount equal to any
gain (other than any Special Gain), and plus an amount equal to
any loss (other than any Special Loss), allocated to the Limited
Partner pursuant to Paragraph 5 of Part A of this Article VII.
All other gross income of the limited partnership shall be
allocated (i) first, to the extent applicable, to the Co-General
Partner until the aggregate allocations of such gross income to
the Co-General Partner in all years commencing with 1997 equal
the aggregate cash distributions actually received by the Co-
General Partner from the limited partnership in all such years
and (ii) second, all such remaining gross income of the limited
partnership shall be allocated to the General Partner. "Special
Gain" or Special Loss" means gain or loss, as applicable,
resulting from (i) the receipt by the limited partnership of any
condemnation proceeds pursuant to the first sentence of Part P of
Article XVII, (ii) the receipt by the limited partnership of any
insurance proceeds from a casualty pursuant to the second
sentence of Part P of Article XVII or (iii) the sale of the
Amusement Park pursuant to Section 8.5 of the Overall Agreement
or following the removal of SFOG II, Inc. as General Partner.
5. Gain or Loss on Sale of Assets. Gain or loss on the
sale or other disposition of any property or asset contributed to
the limited partnership as well as any Special Gain or Special
Loss shall be allocated to the Limited Partner. Gain or loss on
the sale or other disposition of any other property or asset of
the limited partnership other than any Special Gain or Special
Loss shall be allocated to the General Partner.
6. Regulatory Allocations. Prior to any other allocations
under the foregoing provisions of this Part A of Article VII, the
following special allocations shall be made in the following
order:
(a) If there is a net decrease in Partnership Minimum
Gain during a taxable year, each Partner shall be allocated
items of limited partnership income and gain for such year
in accordance with Section 1.704-2(f) of the Treasury
Regulations.
(b) If there is a net decrease in Partner Nonrecourse
Debt Minimum Gain during a taxable year, each partner who
has a share of such Partner Nonrecourse Debt Minimum Gain,
determined in accordance with Section 1.704-2(i)(5) of the
Treasury Regulations, shall be specifically allocated items
of income and gain for such year (and, if necessary,
subsequent years) in accordance with Section 1.704-2(i)(4)
of the Treasury Regulations.
(c) For purposes of this Agreement (i) "Partner
Nonrecourse Debt Minimum Gain," (ii) "Nonrecourse
Deductions," (iii) "Partner Nonrecourse Deductions," (iv)
"Partner Nonrecourse Debt," and (v) "Partnership Minimum
Gain" shall have the respective meanings set forth in
Section 1.704-2 of the Treasury Regulations.
(d) In the event any partner unexpectedly receives any
adjustments, allocations or distributions described in
paragraphs (b)(2)(ii)(d)(4), (5), or (6) of Section 1.704-1
of the Treasury Regulations, there shall be specially
allocated to such partner such items of income (including
items of gross income) and gain, at such times and in such
amounts as will eliminate as quickly as possible that
portion of its deficit (if any) in its Capital Account (as
increased for this purpose by the amount which such partner
is obligated to restore (pursuant to the terms of this
Agreement or otherwise) or deemed obligated to restore
pursuant to Section 1.704-1(b)(2)(ii)(c) of the Treasury
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Regulations and the penultimate sentences in Sections 1.704-
2(g)(1) and 1.704-2(i)(5) of the Treasury Regulations)
caused or increased by such adjustments, allocations or
distributions.
(e) No allocation under this Part A of Article VII
shall be made to the Limited Partner which would cause or
increase a deficit balance in the Limited Partner's
"Projected Capital Account" (as defined below) which exceeds
the amount of the Limited Partner's Share of Partnership
Minimum Gain and Partner Nonrecourse Debt Minimum Gain. For
purposes of the foregoing, the determination as to whether
an allocation would create or increase a deficit balance in
a Limited Partner's Projected Capital Account shall be made
as of the end of the year to which such allocation relates.
As used herein, the term "Projected Capital Account" means,
with respect to the Limited Partner, the Limited Partner's
Adjusted Capital Account Balance as of the last day of any
applicable year but reduced by any applicable projected
adjustments, allocations or distributions in accordance with
the provisions of paragraphs (4), (5) and (6) of Regulation
Section 1.704-1(b)(2)(ii)(d). The foregoing definition of
Projected Capital Account is intended to comply with the
provisions of Section 1.704-1(b)(2)(ii)(d) of the Treasury
Regulations and shall be interpreted and applied
consistently therewith.
(f) For each taxable year or other period of the
limited partnership for which allocations are made, all
Nonrecourse Deductions shall be allocated to the General
Partner.
(g) Any and all Partner Nonrecourse Deductions shall
be allocated to the partner who bears the economic risk of
loss with respect to the Partner Nonrecourse Debt to which
such Partner Nonrecourse Deductions are attributable, as
determined in accordance with Section 1.704-2(i) of the
Treasury Regulations.
(h) For purposes of Section 752 of the Code and the
Treasury Regulations thereunder, excess nonrecourse
liabilities (within the meaning of Treasury Regulations
Section 1.752-3(a)(3)) shall be allocated to the General
Partner.
(i) The allocations set forth in this Paragraph 6 of
Part A of Article VIII (collectively, the "Regulatory
Allocations") are intended to comply with certain
requirements of the Treasury Regulations. It is the intent
of the partners that, to the extent possible, all Regulatory
Allocations shall be offset either with other Regulatory
Allocations or with special allocations of other items of
income, gain, loss, or deduction pursuant to this
subparagraph (i). Therefore, notwithstanding any other
provision of this Part A of Article VII (other than the
Regulatory Allocations), offsetting special allocations of
income, gain, loss or deduction shall be made such that each
partner's Capital Account balance is, to the maximum extent
possible, equal to the Capital Account balance such partner
would have had if the Regulatory Allocations were not part
of this Agreement and all items were allocated pursuant to
this Part A of Article VII (other than this Paragraph 6).
7. Section 754 Election. The General Partner is
authorized to and shall cause the limited partnership to make the
election pursuant to Section 754 of the Code with the limited
partnership's federal income tax return for 1997. In addition,
the General Partner is authorized to and shall make any similar
elections under applicable state law, to the extent such
elections are available.
B. Capital Accounts
----------------
Effective as of the commencement of the limited partnership,
a Capital Account ("Capital Account") shall be established for
each partner and maintained for each such partner in accordance
with Treasury Regulations Section 1.704(b)(2)(iv) promulgated
under Section 704(b) of the Code. As of the date of this
Agreement, after the contributions provided for in Article V and
the assumption of liabilities provided for in Article X, the
Capital Account of the Limited Partner was $235 million, the
Capital Account of SFG-II, LLC was $100 and the Capital Account
of the General Partner was zero. Each partner's Capital Account
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<PAGE>
shall be increased by (i) the amount of any other cash and the
fair market value of any other assets contributed by the partner
to the limited partnership (net of any other liabilities
transferred to the partnership in connection with such
transaction) and (ii) the partner's allocable share of items of
income or gain for Tax purposes for each year and any gain exempt
from tax. The partner's Capital Account shall be decreased by
(i) the amount of cash and the fair market value of any assets
distributed to such partner (net of any liabilities transferred
in connection with such transaction), (ii) the partner's share of
items of deduction (including depreciation) or loss for Tax
purposes for each year, and (iii) allocations to a partner of
expenditures described in Section 705(a)(2)(B) of the Code.
Nothing in this Part B of Article VII shall affect the provisions
of Paragraph 2 of Article XIV.
C. No General Partner or Co-General Partner Remuneration
-----------------------------------------------------
The General Partner shall not receive for its services to the
limited partnership, nor shall the Co-General Partner receive
from the limited partnership, any remuneration other than the
distributions made and Tax allocations provided for in Articles
VI and VII, respectively.
D. No Withdrawals
--------------
No partner will be entitled, without the consent of the other
partners, to withdraw any part of its contribution to the capital
from or any part of its Capital Account in the limited
partnership or, to the extent permitted by law, to otherwise
withdraw, resign or disassociate from the limited partnership;
provided that nothing in this paragraph affects the right of the
Limited Partner to remove the General Partner as provided in Part
D of Article VIII or the right of the General Partner to resign
at any time after December 31, 2026.
ARTICLE VIII
MANAGEMENT
A. Management Generally
--------------------
1. General Partner. The General Partner shall, subject to
the limitations set forth in this Agreement (including without
limitation in Part B of this Article VIII) (the "Limitations"),
have the exclusive control of the management of the business and
affairs of the limited partnership, including the power and
authority to obligate and bind the limited partnership in all
matters involving the business of the limited partnership. The
General Partner shall cause the limited partnership to do those
acts it is to do under this Agreement. Subject to the
Limitations, the execution and delivery of any agreement or
instrument by the General Partner shall be sufficient to bind the
limited partnership. The General Partner shall execute and file
with the Delaware Secretary of State a Certificate of Limited
Partnership for the limited partnership, shall procure for the
limited partnership a certificate of authority to transact
business in Georgia and shall cause such other filings to be made
and such offices and agents for service of process to be
maintained in Delaware, Georgia and other jurisdictions where
required for the limited partnership to be registered or
qualified as such and to protect the limited liability of the
Limited Partner.
2. Time and Effort of General Partner. The General Partner
shall devote all of its time and effort to the business of the
limited partnership and shall not have any other business.
3. No Resignation; Effect of Removal. Without the prior
written consent of the Limited Partner, the General Partner may
not, prior to December 31, 2026, resign or withdraw as the
General Partner of the limited partnership, disassociate from the
limited partnership or, except for removal as provided in Part C
of this Article VIII, take any other action so that it is not the
General Partner of the limited partnership. If the General
Partner ceases to be the General Partner of the limited
partnership in a manner not permitted by this Agreement or by
removal, in addition to any other liability or damages for which
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the General Partner or any other Person may be liable (none of
which are released or compromised hereby), (i) all amounts due
from this limited partnership to the General Partner and all
borrowings of this limited partnership from the General Partner,
any SFEC Entity or any SFEC Affiliate shall, without any further
action, be thereupon contributed to the capital of the limited
partnership and no longer be due and the General Partner and the
other SFEC Entities shall comply with Section 8.5(a) of the
Overall Agreement, (ii) the General Partner's right to
distributions, including distributions in liquidation, shall be
extinguished, (iii) the General Partner will have no rights with
respect to any positive balance in its Capital Account, and (iv)
allocations for Tax purposes shall be made to the General Partner
to the date it ceased to be the General Partner and for so long
thereafter as is necessary for Tax allocations attributable to
the transactions provided for in clauses (i) through (iii) of
this sentence to be made to the General Partner. The immediately
preceding sentence shall supersede any provisions of this
Agreement that are inconsistent therewith.
4. Limited Partner. The Limited Partner as such shall not
participate in the control of the business or affairs of the
limited partnership, transact any business on behalf or in the
name of the limited partnership or have any power or authority to
bind or obligate the limited partnership.
5. Tax Matters Partner. The General Partner shall be the
Tax Matters Partner of the limited partnership. However, the
General Partner shall not, without the prior written consent of
the Limited Partner: (i) take any action that would require the
payment of proposed tax deficiencies by the Limited Partner, Fund
or the limited partners of Fund prior to a judicial determination
that such taxes are owing, to the extent such a judicial
determination can be obtained prior to payment of such proposed
tax deficiencies, or (ii) initiate any judicial proceeding
relating to federal income tax in any court other than the United
States Tax Court if the outcome of such proceeding could (x)
increase, or affect the timing of, any tax payable by and (y) be
binding upon the Limited Partner, Fund or the limited partners of
Fund. The General Partner shall give notice to the Limited
Partner, within no less than ten Business Days, of all
proceedings as to which it is acting as the Tax Matters Partner
and shall afford the Limited Partner the right to participate in
such proceedings. The General Partner shall provide to the Co-
General Partner and the Limited Partner copies of any agreement
extending the statute of limitation for Tax purposes within ten
Business Days of each such agreement being entered into. Except
as required by applicable law, the General Partner shall take no
position for income tax purposes inconsistent with the treatment
of this limited partnership as a lease for income tax purposes
with respect to the property and assets contributed by the
Limited Partner. The General Partner may file an election or
protective election under Treasury Regulations section 301.7701-3
and applicable state law in the form attached as Exhibit A to
have the partnership classified as a partnership, which election
or form of election may be amended only in form and substance
reasonably satisfactory to the Limited Partner.
6. Co-General Partner; Certain Successor General Partner
Provisions. As long as SFOG II, Inc. is the General Partner, the
Co-General Partner shall not participate in the control of the
business or affairs of the limited partnership, transact any
business on behalf or in the name of the limited partnership or
have any power or authority to bind or obligate the limited
partnership. Upon SFOG II, Inc. ceasing for any reason to be the
General Partner without a substitute general partner being
selected, the Limited Partner shall have the exclusive right to
designate Fund or any entity 99% or more owned by the Limited
Partner or Fund or another Person permitted by the Second Amended
and Restated Fund Limited Partnership Agreement to act as the
general partner of the limited partnership and such substitute
general partner, upon execution of a counterpart of this
Agreement, will thereupon succeed to all of the rights (including
the right to distributions) and powers of the General Partner, be
admitted as a substitute General Partner and thereafter be the
General Partner. Until such designation is made, but for not in
excess of 90 days, the Co-General Partner will succeed to all
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such rights and powers of the General Partner, but shall not have
any obligation to make any contribution to the limited
partnership or its capital.
B. Certain Limitations
-------------------
Without first obtaining the written consent of the Limited
Partner, neither the limited partnership nor the General Partner
shall take, or have any power to take, any of the following
actions on behalf or in the name of the limited partnership:
(a) Execute or deliver any assignment for the benefit
of the creditors of the limited partnership or file any petition
in bankruptcy or for reorganization, rehabilitation, arrangement,
composition or extension under the Bankruptcy Code or under any
other federal or state law or fail to use their best efforts to
cause to be dismissed within 45 days of the filing thereof
against the limited partnership any involuntary petition in
bankruptcy or for reorganization, rehabilitation, arrangement,
composition or extension under the Bankruptcy Code or under any
other federal or state law, or do any act similar to any of the
foregoing; or
(b) Sell or lease to another Person all, substantially
all or any substantial part of the assets of the limited
partnership (except sales of food, beverages, goods and inventory
in the ordinary course of business); sell any property or asset
of the limited partnership having a value in excess of 10% of the
then Minimum Amount and Base Rent without the prior written
consent of the Limited Partner, which consent will not be
unreasonably withheld; if the aggregate sales of properties and
assets of the limited partnership in any year (other than sales
of food, beverages, goods, inventory and other items typically
held for resale to park customers in the ordinary course of
business) exceed 15% of the Minimum Amount and Base Rent for that
year, make any further sales of such property or assets without
the prior written consent of the Limited Partner, which consent
will not be unreasonably withheld; issue or agree to issue to any
Person any limited partnership interests, general partnership
interest (except as provided in Part A, Paragraph 6, of this
Article VIII) or any other direct or indirect equity interest in
the limited partnership, merge with or into or consolidate with
or convert into any other entity or do any other act which would
have essentially the same effect as any of the foregoing; or
(c) Incur or permit to exist any Indebtedness
(including Capital Leases) of the limited partnership except:
(i) Working Capital Loans made to the limited partnership prior
to 2026; (ii) Capital Leases of the Limited Partner at December
31, 1995 that are contributed to the limited partnership by the
Limited Partner; (iii) so long as the Net Worth Standard is met,
Capital Improvement Loans (including Capital Leases); (iv)
Affiliate Loans; and (v) borrowings permitted by the proviso in
the first sentence of Part G of Article VI, but only for so long
as such borrowings are permitted to be outstanding.
Notwithstanding the foregoing, the limited partnership shall not,
without the prior written consent of the Limited Partner, incur
any Indebtedness (other than (x) interest on then existing
Indebtedness, (y) Affiliate Loans and (z) Working Capital Loans)
(A) if the Net Worth Standard is not then met or (B) whether or
not the Net Worth Standard is then met, if (I) there is any
Default (or any event which, with notice or lapse of time or both
would be a Default), (II) there is outstanding any Indebtedness
of this limited partnership not permitted to be outstanding by
this Agreement or (III) there is any default (or the General
Partner has knowledge of an event which with notice or lapse of
time or both would be a default) which is a failure to pay any
Indebtedness of this limited partnership or another default that
would entitle the lender to accelerate any Indebtedness of this
limited partnership. No later than ten Business Days after the
date on which the Net Worth Standard is not met, the General
Partner (i.e., SFOG II, Inc.) shall cause all outstanding Capital
---
Improvement Loans to be repaid out of funds that are the proceeds
of Affiliate Loans or capital contributions by the General
Partner; or
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(d) Incur or permit to exist any mortgage, pledge or
security interest in or claim, lien, encumbrance or charge on any
of the assets of the limited partnership, except for Capital
Improvement Loans (including Capital Leases) that are secured to
the extent provided in the definition of Capital Improvement
Loans, Capital Leases permitted by clause (ii) of subparagraph
(c) of this part B of Article VII that are secured solely by the
assets leased, and liens for taxes and assessments not yet due;
provided, however, that the limited partnership may incur and
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permit statutory liens and other non-consensual liens of an
immaterial nature to exist, provided that (and only for so long
--------
as) good faith efforts are being made to remove or cause the
removal of such statutory or other liens; or
(e) Loan to any Person (other than to an employee of
the limited partnership or of SFOG II Employee, Inc. in
circumstances that are ordinary course, consistent with past
practice and in an amount that is in the aggregate immaterial to
the limited partnership) any of the funds of the limited
partnership, or directly or indirectly guarantee any obligation
of any other Person (including as guarantees for this purpose any
income maintenance, net worth maintenance or, without limitation,
other arrangement the effect of which is in substance to
guarantee payment or performance), in each case other than a
Person that is wholly-owned by the limited partnership; or
(f) Acquire any real property (except the property
located at the intersection of Riverside Drive and South Service
Road that is occupied by a "Sam's Warehouse" at the date of this
Agreement, but only if a phase I environmental study indicating
no significant environmental issues with respect thereto is
received by the limited partnership), provided that this
--------
provision will not preclude the leasing of the Land by this
limited partnership under the Lease.
C. Removal of General the Partner
------------------------------
1. General Rule. The General Partner may be removed only
as provided in this Part C of Article VIII.
2. Removal. The General Partner may be removed by the
Limited Partner, upon notice being sent to the General Partner at
any time after an Overall Agreement Payment Default, a
Partnership Minimum Amount Distribution Default, a Lease Payment
Default or Another Material Default (each, a "Default"). Once
notice of removal is entitled to be and is sent after a Default,
there shall be no right to cure without the prior written consent
of the Limited Partner (which consent may be withheld in its sole
discretion and with or without reason) and the General Partner
shall be removed. Subject to Paragraph 7 of this Part C of
Article VIII, removal will not release any SFEC Entity or SFEC
Affiliate from any obligations they may have under this
Agreement, the Overall Agreement or any other Related Agreement.
3. Overall Agreement Payment Default. An "Overall
Agreement Payment Default" is any of (i) a failure by SFOG
Acquisition A and/or SFOG Acquisition B to (x) make the Tender
Offer when and as required (time being of the essence) or to pay
when due any amount to be paid by it pursuant to the Tender
Offer, (y) perform its obligations to make available the
Liquidity Put or Accelerated Put when and as required (time being
of the essence) or to pay when due the amounts to be paid by it
pursuant to the Liquidity Put (time being of the essence);
provided that for this purpose an amount that is disputed shall
--------
not be deemed to be due until such amount is determined pursuant
to the procedure set forth in Section 12.18 of the Overall
Agreement or (z) make all of the payments it is required to make
if the End-of-Term Option is exercised, or (ii) an SFOG
Requirement, but, in each case in clauses (i) and (ii), which
failure continues without being remedied by SFOG Acquisition A
and/or SFOG Acquisition B or a Guarantor or which SFOG
Requirement is not fully discharged by a Guarantor, without any
right of subrogation or similar right against the Limited
Partner, SFG-I, LLC, Fund or any partners of Fund, in each case
within ten Business Days (time being of the essence) after
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written notice of such failure or requirement is given by any one
of Fund, Salkin or SFG, Inc. to SFOG Acquisition A and/or SFOG
Acquisition B and one of SFEC or SFTP. If a payment by SFOG
Acquisition A and/or SFOG Acquisition B pursuant to the Tender
Offer, the Liquidity Put or the End-of-Term Option is paid or
made and is later determined to not have been indefeasibly paid
or indefeasibly made in whole or in part, an Overall Agreement
Payment Default will exist if such payment, together with Default
Interest on the amount returned or required to be returned
(including any interest included in such amount) from the date
such amount is returned or required to be returned, is not made
by a Guarantor within ten Business Days (time being of the
essence) after written notice by one or more of the Limited
Partner, Fund, the Co-General Partner, Salkin or SFG, Inc. to one
or both of SFEC or SFTP that any recipient(s) under the Tender
Offer, Liquidity Put, Accelerated Put or End-of-Term Option has
been required to return all or any portion of such distribution
because it was not indefeasibly paid. Notwithstanding anything
in this Paragraph 3 to the contrary, an Overall Agreement Payment
Default will not result if making the Tender Offer or providing
the Liquidity Put or Accelerated Put or payment of the amount due
with respect to any of them is not permissible under a Payment
Prohibiting Law, provided the Tender Offer is commenced, the
Liquidity Put is made, the Accelerated Put is made or payment is
made, with interest at Prime from the original date due, within
ten Business Days after such action or payment is not prohibited
by a Payment Prohibiting Law.
4. Partnership Minimum Amount Distribution Default. A
Partnership Minimum Amount Distribution Default is (x) a failure
by the limited partnership to make the distribution of the
Additional First Year Minimum Amount or any Minimum Amount
distributions (including for this purpose any interest or Default
Interest) when due or to repay any borrowing made pursuant to the
proviso in the first sentence of Part G of Article VI, or (y) a
failure of the General Partner to cause all then outstanding
Capital Improvement Loans to be repaid as provided in Paragraph
(c) of Part B of Article VIII, if the Net Worth Standard is not
met, in each case if such failure continues without being
remedied by the limited partnership, the General Partner or any
Guarantor within ten Business Days (time being of the essence)
after written notice of such failure is given by any one or more
of the Limited Partner, the Co-General Partner, Fund, Salkin or
SFG, Inc. to the General Partner and one or both of SFEC or SFTP.
If the Additional First Year Minimum Amount distribution or any
Minimum Amount distribution is made or such borrowing is repaid
and is later determined to not have been indefeasibly made or
repaid in whole or in part, a Minimum Amount Payment Default will
exist if such distribution (including any interest included in
such amount), together with Default Interest from the date such
amount is returned or required to be returned, or such repayment
is not paid by a Guarantor within ten Business Days (time being
of the essence) after written notice by one or more of the
Limited Partner, Fund, the Co-General Partner, Salkin or SFG,
Inc. to one or both of SFEC or SFTP that any recipient(s) has
been required to return all or any portion of such distribution
or repayment because it was not indefeasibly made or paid.
Notwithstanding anything in this Paragraph 4 to the contrary, a
Partnership Minimum Amount Distribution Default will not result
if distribution or repayment of the amount due is not permissible
under a Payment Prohibiting Law, provided the distribution or
repayment is made, with interest at Prime from the original date
due, within ten Business Days after distribution is not
prohibited by a Payment Prohibiting Law.
5. Another Material Default. "Another Material Default"
means any other failure by any SFEC Entity or SFEC Affiliate or
this limited partnership to perform or comply in full with the
obligations (i) under Article X or (ii) referred to Paragraph 1
of Part O of Article XVII or to pay when due any Indebtedness of
the limited partnership or any amounts due under Operating
Leases, provided that, with respect to clause (i) of this
--------
sentence, such failure continues without being remedied by the
limited partnership or a Guarantor within 20 Business Days, time
being of the essence, after written notice thereof is given by
any one of Fund, Salkin, the Limited Partner, the Co-General
Partner or SFG, Inc. to the General Partner and one of SFEC or
SFTP and, provided, further, that with respect to clause (ii) of
-------- -------
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this sentence, such failure is not remedied in full within 30
Business Days (or such longer period as may be specified by the
arbitrator provided for therein), time being of the essence,
after the arbitrator referred to in Paragraph 1 of Part O of
Article XVII determines that the failure to perform or comply has
or will have an adverse effect on the benefits to be received by
the Limited Partner or the partners of Fund (other than SFOG
Acquisition A and SFOG Acquisition B) or on the Amusement Park,
in any such case that is material in relation to the value of the
Amusement Park.
6. Notices; No Waiver. Notices under this Agreement,
including this Part C of Article VIII, shall be given as provided
in Section 15.4 of the Overall Agreement and shall be deemed
given as provided therein. Neither the Co-General Partner nor
the Limited Partner shall have any obligation to remove the
General Partner if entitled to do so. No waiver of any right to,
or failure by the Co-General Partner or the Limited Partner
having such a right to, remove the General Partner will
constitute a waiver of any other right to remove the General
Partner, even if such other right or remedy arises from matters
similar or identical to those as to which a right to remove was
waived or otherwise not exercised.
7. Effect of Removal. The removal of the General Partner
upon a Default shall be without prejudice to the rights of the
Limited Partner to recover any damages it may incur from any such
Default and, without limitation, shall not release the General
Partner or the limited partnership from any obligations they may
have under this Agreement or the Lease with respect to the making
of Minimum Amount distributions, paying Base Rent and paying
interest or Default Interest on both), any Guarantors from their
respective obligations under the Guarantees or any of the other
obligations of the SFEC Entities under the Overall Agreement and
the other Related Agreements (including in each case obligations
with respect to the Liquidity Puts provided for in the Overall
Agreement), provided that any obligations to make then future
--------
required minimum capital expenditures will terminate effective
upon removal. If the General Partner is removed or resigns, the
Limited Partner may elect a substitute General Partner. Upon and
after the removal of the General Partner, the Limited Partner
shall (i) operate the Amusement Park in a commercially reasonable
manner, (ii) sell the Amusement Park on commercially reasonable
terms or (iii) enter into a commercially reasonable arrangement
with a third party to operate the Amusement Park and cause to be
distributed to the Limited Partner its share of all Available
Cash generated by such operations, and any Available Cash so
distributed to the Limited Partner (as well as, to the extent
applicable, any proceeds received by the Limited Partner or Fund
with respect of any sale or other disposition of the Amusement
Park or a substantial portion of the assets relating thereto)
shall, net of appropriate costs incurred in connection therewith,
offset the obligation of the limited partnership, the General
Partner and the Guarantors, after such removal, to pay or cause
to be paid, as applicable, then future Minimum Amount
distributions, then future Base Rent and interest or Default
Interest on both. In any dispute, in determining whether and the
extent to which such future Minimum Rent, Base Rent and interest
or Default Interest obligations are so offset, the General
Partner shall have the burden of proving by a preponderance of
the evidence that any operation of the Amusement Park by the
Limited Partner, the sale of the Amusement Park or any
arrangement with a third party to operate the Amusement Park is
not commercially reasonable. Following the removal of SFOG II,
Inc. (or its successor) as the General Partner, for purposes of
calculating the Put Price in accordance with Article III of the
Overall Agreement, EBITDA shall continue to be calculated in the
manner described in the Overall Agreement and the operator of the
Amusement Park shall be bound by the covenants and limitations
contained in this Agreement as they relate to the operation of
the Amusement Park to the same extent as SFOG II, Inc. and Flags
II were bound by such provisions prior to SFOG II, Inc. (or its
successor) ceasing to be the General Partner.
8. End-of-Term Option Not Exercised. The General Partner
will no longer be the General Partner to the extent it ceases to
be the General Partner pursuant to Section 8.5 of the Overall
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Agreement. If the General Partner so ceases to be the General
Partner, the Limited Partner may elect a substitute General
Partner.
D. Removal of Co-General Partner
-----------------------------
The Co-General Partner may be removed at any time by the
Limited Partner and, upon such removal, the Limited Partner may
elect in its place any Person it could, under the Second Amended
and Restated Fund Limited Partnership Agreement, elect as Co-
General Partner.
ARTICLE IX
NO ASSIGNMENTS OR SUBSTITUTIONS
1. No Assignments. No partner shall sell, assign, pledge
or otherwise transfer to any Person its interest in the limited
partnership or any portion thereof.
2. No Substitutions. No Person shall be admitted to the
limited partnership as a substitute General Partner, Co-General
Partner or Limited Partner without the prior written consent of
all partners, which consent may be withheld by any partner in its
sole and absolute discretion and with or without reason; provided
--------
that a substitute General Partner selected upon removal of the
General Partner and a substitute Co-General Partner selected upon
removal of the Co-General Partner will be admitted as a
substitute General Partner or substitute Co-General Partner, as
the case may be. This Article IX does not restrict the issuance
or transfer of securities or membership interests issued by the
General Partner, Co-General Partner or Limited Partner or the
removal or election of directors, officers or managers of the
General Partner, the Co-General Partner or the Limited Partner.
ARTICLE X
SALE OF THE DESIGNATED ASSETS; ASSUMPTION
OF LIABILITIES OF THE LIMITED PARTNER
1. Sale of the Designated Assets. The Limited Partner
hereby sells, transfers, conveys and assigns to the limited
partnership the Designated Assets in exchange for the assumption
of Indebtedness, liabilities and obligations provided for in
Paragraph 2 of this Article X.
2. Assumption of the Liabilities of the Limited Partner.
As the purchase price for the Designated Assets, the limited
partnership hereby assumes and agrees to discharge in full when
due, and the General Partner will cause the limited partnership
to so assume, defend and hold the Limited Partner harmless
against and discharge in full when due, all Indebtedness,
liabilities and contractual obligations of the Limited Partner
existing at the date of this Agreement (including without
limitation the obligations of the Limited Partner under the
contract for Batman the Ride and the Limited Partner's
obligations under any notes given by the Limited Partner in
consideration or partial consideration of the purchase by the
Limited Partner of the SF Agreement Land or any borrowings made
by the Limited Partner to purchase the SF Agreement Land), except
only (a) those liabilities and obligations, if any, that were so
created by actions of SFG-I, LLC as the manager of the Limited
Partner and were not specifically permitted to be taken by the
Overall Agreement or the Related Agreements (provided that any
--------
and all borrowings made by the Limited Partner to purchase the SF
Agreement Land and notes given by the Limited Partner in
consideration or partial consideration of the purchase of the SF
Agreement Land, even if such borrowings were made or notes signed
by actions of SFG-I, LLC as the manager of the Limited Partner,
will be conclusively deemed to have been specifically permitted
to be made and given by the Overall Agreement and the Related
Agreements), (b) any income tax liabilities of the Limited
Partner and holders of interests therein arising out of the
transactions provided for by this Agreement and the Overall
Agreement, and (c) any Retained Liabilities. The Limited Partner
was, until date of this Agreement, controlled by an affiliate of
the General Partner, not by SFG-I, LLC or Fund. Accordingly, no
representation or warranty is made by the Limited Partner or SFG-
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I, LLC as to the liabilities of the Limited Partner. As used
above in this Article X, the term "liabilities" includes all
liabilities and obligations of any kind or description (whether
in contract, tort, arising by operation of law or, without
limitation, otherwise), in each case whether absolute or
contingent, known, suspected, unsuspected, unknown or, without
limitation, otherwise; provided that notwithstanding anything to
--------
the contrary in this Article X, the limited partnership shall not
assume and shall not be liable for any claims that accrued prior
to the date of this Agreement that Fund or its partners may have
or purport to have against the Limited Partner. As used above in
this Article X, the term "Retained Liabilities" means
Indebtedness identified by the General Partner in a notice (in
the form of Exhibit B) given to the Limited Partner on the date
hereof having a principal amount equal to the lesser of (i) $8.7
million and (ii) the excess, if any, of all outstanding
liabilities of Flags as of the Effective Date (other than
contingent liabilities) over the tax basis of the Designated
Assets as of the Effective Date.
ARTICLE XI
OVERALL AGREEMENT
The limited partnership shall comply, and the General
Partner shall cause the limited partnership to comply, with the
provisions of the Overall Agreement to be complied with by the
limited partnership, as if it were a party thereto.
ARTICLE XII
BOOKS OF ACCOUNT, FINANCIAL
STATEMENTS AND FISCAL MATTERS
1. Books of Account. The General Partner shall keep
adequate books of account of the limited partnership. Such books
of account shall be kept at the principal place of business of
the limited partnership, and the Limited Partner and the Co-
General Partner and their respective authorized representatives
shall have, at all times, free access to and the right to inspect
and copy such books of account and all other records of the
limited partnership.
2. Financial Statements. The General Partner shall
deliver to the Limited Partner the financial statements and tax
and other information provided for in Section 12.8 of the Overall
Agreement, as and when required thereby.
3. Fiscal Year. The fiscal year of the limited
partnership shall be the calendar year.
4. Funds. The funds of the limited partnership shall be
deposited in such bank(s) or other financial institution(s) or
invested in obligations of United States government, United
States government agencies, States of the United States or
agencies thereof or in mutual fund(s) that invest substantially
all of their assets in one or more of such obligations and in
obligations of municipalities in any States, in each case as the
General Partner shall from time to time deem appropriate. Such
funds shall be withdrawn only by the General Partner or the
General Partner's duly authorized agents. The limited
partnership shall not commingle its funds with the funds of any
other Person.
ARTICLE XIII
DURATION AND COMMENCEMENT OF BUSINESS
The term of the limited partnership commenced, and the
limited partnership commenced business, on the date of this
Agreement. The term of the limited partnership shall end upon
the dissolution and winding up of the limited partnership as
provided in Article XIV.
ARTICLE XIV
DISSOLUTION AND LIQUIDATION
1. Dissolution. Subject to the last sentence of this
paragraph 1, the limited partnership shall dissolve upon the
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earliest to occur of the following events:
(a) December 31, 2026 (January 15, 2027 if the End-of-Term
Option is exercised);
(b) the General Partner shall have been removed,
adjudicated insolvent or bankrupt or dissolved and no successor
general partner has been selected pursuant to Part A, Paragraph
6, of Article VIII within 90 days thereafter; or
(c) as provided in Section 8.5 of the Overall Agreement.
Notwithstanding clause (a) of this paragraph 1, by the written
consent of the General Partner, the Co-General Partner and the
Limited Partner, the date in clause (a) may be extended once
during any decade by up to an additional ten years.
2. Liquidation. Upon the dissolution of the limited
partnership by reason of Paragraphs 1(b) or 1(c) of this Article
XIV, the Limited Partner may appoint the Co-General Partner or a
trustee to wind up and terminate the business and affairs of the
limited partnership. The Co-General Partner or trustee, if
applicable, or otherwise the Limited Partner, shall promptly wind
up and terminate the business and affairs of the limited
partnership and cause it to discharge all of its liabilities to
its creditors. Upon the dissolution of the limited partnership
for any other reason, the General Partner shall, as trustee,
promptly wind up and terminate the business and affairs of the
limited partnership and discharge all of the liabilities of the
limited partnership to its creditors. The trustee, the Co-
General Partner or the Limited Partner, as applicable, shall,
subject to Paragraph 3 of Part A of Article VIII and Section
8.5(a) of the Overall Agreement, liquidate all assets of the
limited partnership necessary to discharge such liabilities to
creditors and, in addition, may liquidate all remaining
intangible personal property of the limited partnership. After
all of such liabilities have been discharged, the limited
partnership, the trustee or the Limited Partner, shall, subject
to Section 8.5 of the Overall Agreement, in the following order:
(a) distribute to the Limited Partner all remaining cash of
the limited partnership up to an amount equal to the amount, if
any, by which the cumulative Minimum Amounts, interest and
Default Interest exceeds the aggregate amount of Minimum Amounts,
interest and Default Interest distributions theretofore
distributed to the Limited Partner; and
(b) distribute to the Limited Partner all remaining
property and assets of the limited partnership.
The obligation of the General Partner and the other SFEC Entities
to comply with Section 8.5(a) of the Overall Agreement is not
diminished by the provisions of this Part 2 of Article XIV.
Notwithstanding any provision hereof or any positive balance in
the General Partner's Capital account at any time, the General
Partner shall not be entitled to receive, by reason of
dissolution or liquidation of the limited partnership, any
interest in the Amusement Park or any part of the proceeds
resulting from the sale of the Amusement Park or any of the other
assets of the Amusement Park or the limited partnership in
connection with the liquidation of the limited partnership.
ARTICLE XV
END-OF-TERM OPTION
As is set forth in Article VIII of the Overall Agreement and
subject to the conditions set forth therein, SFOG Acquisition B
shall have the right to acquire the interest of the Co-General
Partner (or any successor Co-General Partner) in the limited
partnership. SFOG Acquisition B is a third party beneficiary of
this Article XV. If the End-of-Term Option is not exercised by
SFOG Acquisition B, then Section 8.5 of this Overall Agreement
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will be applicable as if set forth in full herein and, to the
extent inconsistent therewith, will supersede Article XIV of this
Agreement.
ARTICLE XVI
LITIGATION
The General Partner shall, in the name of the limited
partnership, prosecute and defend such actions at law or in
equity as may be necessary to enforce or protect the interests of
the limited partnership. The limited partnership and the General
Partner shall respond to any final decree, judgment or decision
of any court, board or authority having jurisdiction.
ARTICLE XVII
CERTAIN AGREEMENTS REGARDING
OPERATION OF THE AMUSEMENT PARK
The parties have structured certain of the transactions
contemplated by this Agreement as a limited partnership instead
of a lease; however the parties to this Agreement intend that,
for income tax purposes, this Agreement shall be treated as a
lease. In addition, the parties intend that the provisions of
this Agreement be those that would be included in a lease. In
addition to other provisions in this Agreement, the parties agree
to the terms set forth below in this Article XVII.
A. Improvements
------------
1. Permits. The limited partnership shall obtain and
maintain all permits, licenses and other governmental approvals
and authorizations ("Permits") which are required for the
construction, ownership, use, operation or occupancy of the
Amusement Park (including the Improvements) and the Land (except
any Permit the failure of which to be obtained or maintained
would not have an adverse effect on the Amusement Park or an
adverse effect on the General Partner's ability to satisfy and to
cause the limited partnership to satisfy their respective
obligations under this Agreement).
2. Demolition; Performance and Payment Bonds; Certain
Property or Asset Sales.
(a) Prior the demolition of any rides, the
amphitheater in the Amusement Park or any other Improvements with
a value or replacement cost in excess of 10% of the then Minimum
Amount, the limited partnership must secure the Co-General
Partner's prior written consent and, if requested by the Limited
Partner, the limited partnership shall at its expense retain a
consultant, reasonably satisfactory to the Co-General Partner,
which shall monitor and certify as to the desirability of and
proper demolition of such Improvements, provided that no such
--------
consent shall be required prior to December 31, 2021 if the Net
Worth Standard is met.
(b) If the Net Worth Standard is not met, before the
commencement of construction or installation of any building,
structure, ride or other Improvement in the Amusement Park with a
cost of construction and installation in excess of 50% of the
then Minimum Amount, if requested by the Limited Partner, the
limited partnership at its expense shall, if such bond or bonds
are available on commercially reasonable terms, deliver or cause
to be delivered to the Co-General Partner a performance bond and
labor and material payment bond issued by a surety authorized to
do business in the State of Georgia, guaranteeing full
performance of construction and/or installation of the
Improvements in accordance with the plans for the Improvements
and payment to all claimants for labor and materials used or
reasonably required for use in the performance of construction or
installation of the Improvements in accordance with the plans, in
the form satisfactory to the Co-General Partner and with a surety
approved by the Co-General Partner, which approvals shall not be
unreasonably withheld. Each such bond shall name the General
Partner and the Co-General Partner as a joint obligee with the
limited partnership. Each performance bond shall remain in
effect until the date on which the bonded obligations are
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satisfied by the principal or by the surety's performance in
accordance with the terms of the bond. Each payment bond shall
remain in effect until the expiration of the period for filing a
claim of lien as provided by law, or if a claim of lien is filed,
the expiration of the period for filing an action to foreclose
such lien, or until the Amusement Park and, if applicable, the
Land is freed from the effect of such claim of lien and any
action brought to foreclose such lien or the lien is otherwise
discharged. For the purpose of calculating EBITDA and for the
purpose of determining compliance with Paragraph 1 of Part C of
this Article XVII, one-half of the cost of the bond or bonds
required by this Section 2(b) shall be deemed to be a capital
expenditure and one-half shall be deemed to be an expense.
3. Performance of Demolition, Construction and
Installation Work.
(a) Any and all demolition, construction and
installation work shall be done diligently, in conformity with
all Legal Requirements, including, without limitation, the
Building Code of the County of Fulton, and all Insurance
Requirements, in a good and workmanlike manner (except where
failure to conform to Legal Requirements or Insurance
Requirements would not have an adverse effect on the General
Partner or on the Amusement Park or an adverse effect on the
General Partner's ability to satisfy and to cause the limited
partnership to satisfy its respective obligations under this
Agreement).
(b) Upon the completion of Improvements with a
replacement cost or value of 5% or more of the then Minimum
Amount, the General Partner shall promptly deliver to the Co-
General Partner as-built plans and specifications for such
Improvements.
B. Use and Occupancy
-----------------
1. Use and Occupancy. Subject to the occurrence of a
Force Majeure, at all times during the term of this Agreement,
the limited partnership shall operate an amusement park
comparable to the Amusement Park or a Comparable Park, with such
park operating for an average of ten hours per day and 150 days
per year (in each case, subject to local school calendar
changes).
2. Other Parks. Subject to the occurrence of a Force
Majeure, an entity that directly or indirectly owns at least a
majority of the equity securities of the General Partner shall,
at all times during the term of this Agreement, own and operate
or manage at least five Comparable Parks (including the Amusement
Park) in the United States.
3. No Ride Rotation. No rides will be rotated to other
amusement parks without the prior written consent of Co-General
Partner.
4. Licenses and Concessions. The limited partnership may
grant licenses and concessions, provided that such licenses and
concessions are granted in the ordinary course consistent with
past practice or practice in the Comparable Parks, are not of a
material part of the Amusement Park, are not made to SFEC
Entities or SFEC Affiliates and expire, unless the End-of-Term
Option is exercised, on or before December 31, 2026.
C. Minimum Capital Expenditures
----------------------------
1. Minimum Capital Expenditures. SUBJECT TO PARAGRAPH 2
OF THIS PART C OF ARTICLE XVII, THE LIMITED PARTNERSHIP SHALL
EXPEND A MINIMUM AMOUNT ON CAPITAL EXPENDITURES IN THE AMUSEMENT
PARK DURING EACH ROLLING PERIOD OF FIVE CONSECUTIVE YEARS
COMMENCING JANUARY 1, 1998 (EACH SUCH FIVE-YEAR PERIOD BEING A
"MEASURING PERIOD") IN AN AMOUNT EQUAL TO SIX PERCENT OF THE
AGGREGATE GROSS REVENUES DURING THE FIVE CONSECUTIVE YEAR PERIOD
ENDING TWO YEARS BEFORE THE EXPIRATION OF THE APPLICABLE
MEASURING PERIOD AND IN ANY EVENT CONSISTENT WITH THE AMOUNT
SPENT ON CAPITAL EXPENDITURES IN THE COMPARABLE PARKS DURING THE
MEASURING PERIOD. NO NEW RIDES OR OTHER ATTRACTIONS WILL BE
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PURCHASED OR OTHER MAJOR CAPITAL EXPENDITURES MADE FOR RIDES OR
OTHER ATTRACTIONS UNLESS SUCH RIDES OR OTHER ATTRACTIONS OR RIDES
OR ATTRACTIONS COMPARABLE IN ALL MATERIAL RESPECTS THERETO HAVE
BEEN SUCCESSFULLY INTRODUCED AT A COMPARABLE PARK. PURCHASES OF
LAND AND EXPENDITURES MADE ON IMPROVEMENTS WHICH REPLACE
IMPROVEMENTS THAT ARE DAMAGED OR DESTROYED, IF THE DAMAGE OR
DESTRUCTION WAS REQUIRED TO BE INSURED AGAINST BY THIS AGREEMENT,
SHALL BE IN ADDITION TO THE CAPITAL EXPENDITURES REQUIRED
PURSUANT TO THIS PARAGRAPH 1 OF PART C OF ARTICLE XVII. IF ANY
IMPROVEMENTS ARE SOLD, AN AMOUNT EQUAL TO THE PROCEEDS OF SALE
(INCLUDING AS PROCEEDS THE AMOUNT REPRESENTED BY ANY NOTES), NET
OF THE COSTS OF SALE, SHALL BE ADDED TO THE REQUIRED CAPITAL
EXPENDITURES IN THE 12 MONTHS AFTER THE SALE TAKES PLACE.
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS PARAGRAPH 1 OF
PART C OF ARTICLE XVII, IF SFOG ACQUISITION B EXERCISES THE END-
OF-TERM OPTION PURSUANT TO ARTICLE VIII OF THE OVERALL AGREEMENT,
CAPITAL EXPENDITURES BY THE LIMITED PARTNERSHIP FROM AND AFTER
THE DATE OF EXERCISE OF THAT OPTION WILL NOT, WITHOUT THE LIMITED
PARTNER'S PRIOR WRITTEN CONSENT, EXCEED IN ANY YEAR 120% OF THE
YEARLY AVERAGE ANNUAL AMOUNT OF CAPITAL EXPENDITURES DURING THE
FOUR-YEAR PERIOD PRECEDING SUCH EXERCISE, UNLESS AN AMOUNT EQUAL
TO 5% OF SUCH EXCESS IS DISTRIBUTED TO THE LIMITED PARTNER.
2. Exception. The limited partnership shall not be
required to expend and shall not be deemed to be in Default
solely by reason of its failing to expend the amount on capital
expenditures required by Paragraph 1 of this Part C of Article
XVII if (i) the Net Worth Standard is not met; (ii) the limited
partnership has requested in writing that the Limited Partner
consent to the incurrence of additional Capital Improvement Loans
in order to permit the limited partnership to expend the amount
so required, specifying the type and terms of the Indebtedness it
proposes to incur and the lender(s), and (iii) the Limited
Partner has failed to consent to the incurrence of such
additional Indebtedness (it being understood that nothing in this
paragraph shall restrict the ability of the General Partner to
cause the limited partnership to make capital expenditures out of
the proceeds of Affiliate Loans).
D. Alterations
-----------
The limited partnership may (i) make alterations, additions
and renovations to the Improvements and (ii) replace any
destroyed Improvements (collectively, "Alterations"), but only in
compliance with all applicable Legal Requirements and Insurance
Requirements.
E. Repairs and Maintenance
-----------------------
1. Standards. Subject to the occurrence of a Force
Majeure, the limited partnership shall establish and maintain the
Amusement Park (including, without limitation, the Improvements)
in good repair and condition, and shall, at its sole cost and
expense, timely make all necessary structural and non-structural
repairs to the Amusement Park. All repairs of the Improvements
shall be made to the Service Standard.
2. Repairs and Maintenance. Subject to the occurrence of
a Force Majeure, the limited partnership shall at all times keep
the Amusement Park in a manner such that it otherwise meets the
Service Standard and shall keep all portions of the Amusement
Park in a safe, attractive and clean condition. The limited
partnership shall keep the parking areas, sidewalks and other
common areas abutting the Amusement Park clean.
F. Compliance with Legal Requirements
----------------------------------
1. Compliance with Legal Requirements. THE LIMITED
PARTNERSHIP SHALL, CONSISTENT WITH INDUSTRY STANDARDS FOR
COMPARABLE AMUSEMENT PARKS, COMPLY WITH ALL MATERIAL LEGAL
REQUIREMENTS ON OR WITH RESPECT TO OWNERSHIP, USE, OCCUPATION OR
OPERATION OF THE AMUSEMENT PARK, INCLUDING, WITHOUT LIMITATION,
THE LEGAL REQUIREMENTS RELATING TO PUBLIC SAFETY AND TO NON-
DISCRIMINATION, AND WITH ANY DIRECTION MADE PURSUANT TO LAW BY
ANY PUBLIC OFFICER OR OFFICERS REGARDING THE AMUSEMENT PARK, OR
THE OWNERSHIP, USE, CONDITION OR OCCUPATION THEREOF, WHETHER OR
NOT SUCH COMPLIANCE INVOLVES STRUCTURAL REPAIRS OR CHANGES OR
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SHALL BE REQUIRED ON ACCOUNT OF ANY PARTICULAR USE TO WHICH THE
AMUSEMENT PARK OR ANY PART THEREOF MAY BE PUT AND WITHOUT REGARD
TO WHETHER ANY SUCH LEGAL REQUIREMENT OR ORDER BE OF A KIND NOW
WITHIN THE CONTEMPLATION OF THE PARTNERS.
2. Contest of Legal Requirements. The limited partnership
may in good faith contest any Legal Requirement, provided that
such contest does not result in a lien, charge, encumbrance or
liability against and that is material to the Amusement Park and
noncompliance therewith shall not constitute a crime or offense
punishable by fine or imprisonment. The limited partnership's
good faith noncompliance with such Legal Requirement during such
contest shall not be deemed a breach of this Agreement.
G. Insurance
---------
1. Compliance with Insurance Requirements. The limited
partnership shall not do or permit to be done any act or thing
upon the Amusement Park which will invalidate the terms of any
fire and casualty insurance policies covering the Amusement Park
and the fixtures and property therein. The limited partnership
shall comply with all present and future Insurance Requirements
and shall not do or permit to be done in or upon the Amusement
Park or the Land or bring or keep anything therein or thereon or
use the same in a manner which could result in the denial of such
fire and casualty insurance coverage.
2. Insurance Requirements. The limited partnership shall
throughout the term of this Agreement:
(a) Keep the Improvements, and fixtures and contents
on, in and appurtenant thereto insured against loss or damage by
fire, lightning and the additional perils included in the
standard extended coverage endorsement as well as those included
in the "all risk" policy and "difference in conditions" ("DIC")
endorsement, including but not limited to loss or damage caused
by windstorm (including hurricanes), hail, explosion, riot, riot
attending a strike, civil commotion, aircraft, vehicle, smoke,
vandalism, malicious mischief, collapse, earthquake, flood and
water damage other than by sprinkler leakage, in an amount (other
than for DIC perils) equal to 100% of the full replacement cost
thereof (as the same may from time to time increase) without
diminution of such replacement cost for depreciation or
obsolescence, and in an amount for DIC perils equal to $50
million, in each case by policies written with a "deductible" (or
self-insurance limits) not to exceed $750,000. The replacement
cost and total value of the Improvements, equipment, fixtures and
contents shall be determined from time to time (but not more
frequently than once in any calendar year (unless a major change
is made to or occurs at the Amusement Park) or less frequently
than once every three calendar years) by a manufacturer of
amusement park rides, contractor, appraiser or insurance company
generally used in the industry or acceptable to the insurers of
the Amusement Park. During periods of substantial construction
of the Improvements, including Alterations thereto, the limited
partnership shall keep in effect all-risk builder's risk
insurance, including coverage against collapse, written on a
completed value basis;
(b) Keep in effect comprehensive general liability
insurance against claims for bodily injury, personal injury, or
death and property damage occurring upon, in or about the
Amusement Park, and on, in or about the adjoining streets,
sidewalks and passageways, providing coverage in the sum of not
less than $10 million combined single limit per occurrence and
not less than $20 million aggregate liability coverage or cause
the Amusement Park to participate in a self-insurance program
with Comparable Parks providing comparable coverage. These
coverage limitations shall be increased from time to time
throughout the term of this Agreement to conform to the liability
coverage then customarily maintained for the Comparable Parks;
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(c) Subject to the Net Worth Standard, keep in effect
use-and-occupancy insurance, rental interruption insurance and
business interruption insurance in an aggregate amount not less
than the total of two times the then Minimum Amount plus two
times the then Base Rent;
(d) To the extent applicable, keep in effect
appropriate amount elevator insurance, boiler and machinery
insurance, water damage insurance (direct and legal liability),
sprinkler leakage insurance (direct and legal liability) and, in
the event of war or threatened hostilities, appropriate forms of
war damage or war risk insurance if issued by the federal
government or any agency thereof;
(e) Keep in effect workers' compensation insurance as
required by state law, including employer's liability insurance
with a limit of not less than $2 million; and
(f) Keep in effect such other insurance in such
amounts as may from time to time be customary in the industry or
in effect at the Comparable Parks. Dollar amounts for insurance
provided in Paragraphs 2(a), (b) and (e) of this Part G of
Article XVII shall be increased or decreased every three years in
proportion to increases or decreases in the CPI, if any, during
that period, but shall not be decreased at any time from their
initial amounts set forth therein.
3. Insurance Carriers; Policies. All such insurance
required shall be under valid and enforceable policies issued by
(a) insurers providing such insurance with respect to Comparable
Parks at least 50% owned (directly or indirectly) by entities
under 50% or greater common ownership with the General Partner
(the "Comparably Insured Parks") or (b) insurers having a rating
in the current property-casualty edition of Best's Key Rating
Guide published by A.M. Best Company ("Best's Guide") of A or
better and being in a financial size category of V or greater in
Best's Guide (or a comparable rating and financial category in
Best's Guide if Best's rating system or financial classification
changes, or in any similar insurance guide selected if Best's
Guide is no longer published) and, to the extent required for
such insurance to be valid, licensed to do and doing business in
the State of Georgia. The limited partnership shall also furnish
to the Co-General Partner from time to time upon the Co-General
Partner's request, a certificate of insurance containing a
statement of insurance of the limited partnership pursuant to
this Agreement then in force and stating that the insurance then
in force complies with the provisions of this Agreement and that
the premiums thereon have been paid. The General Partner shall
promptly notify the Co-General Partner of the cancellation or
change of the terms of any such insurance policy.
4. Required Provisions. The limited partnership's
insurance policies shall be for a term of not less than one year
and, to the extent the following coverages are contained in the
insurance for the Comparably Insured Parks, shall provide:
(a) That the full amount of any losses sustained shall
be payable notwithstanding any act, omission or negligence
of the limited partnership which might otherwise result in
forfeiture of such insurance;
(b) For a waiver of all right of subrogation against
the partners;
(c) That such policies shall not be invalidated should
the insured waive, prior to a loss, any or all rights of
recovery against any party for losses covered by such
policies;
(d) Coverage on a "primary" basis with respect to the
Limited Partner and its manager(s) and members, and the
members, partners, officers, agents, employees and
volunteers of each of them, regardless of the requirement
that such Persons be named, for some purposes, as additional
insured on the insurance policies of the limited
partnership;
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<PAGE>
(e) That such policies shall not be suspended, voided,
canceled, reduced in coverage or in limits or materially
changed without at least ten days prior written notice to
each insured named therein, including, without limitation,
the Co-General Partner;
(f) That the insurance shall apply separately to each
insured against whom a claim is made or suit is brought,
except with respect to the limits of the insurer's
liability; and
(g) That with respect to all liability insurance
coverages, the partners shall be additional insured.
Such insurance policies shall contain no special limitations on
the scope of protection afforded to the partners. The references
to the partners and to the Limited Partner above include the
Limited Partner in its capacity as the landlord under the lease.
H. Force Majeure
-------------
"Force Majeure" means by events beyond the reasonable control
of the General Partner such as acts of God, acts of public enemy,
fire, earthquake, floods, explosion, actions of the elements,
war, invasion, insurrection, riot, mob violence, sabotage,
failure of transportation, total or partial condemnation,
requisition, or orders of government or civil or military
authorities, but excluding, however, the inability to obtain
monies, that may preclude or make impossible performance in whole
or in part.
I. No Abatement
------------
None of any Legal Requirements, Force Majeure or anything else
whatsoever is an excuse with respect to or will abate the
obligations, which are absolute and unconditional, to timely make
the Additional First Year Minimum Amount distribution, to make
Minimum Amount distributions and pay Base Rent (including in each
case any applicable interest and Default Interest), subject to
Paragraph 7 of Part C of Article VIII, or to timely discharge the
liabilities assumed under Article X, provided that the
--------
obligations to make then future Minimum Amount distributions and
then future Base Rent shall be extinguished upon the End-of-Term
Option having been accelerated and exercised, as provided in Part
P of this Article XVII, and the payments to be made pursuant to
the End-of-Term Option having been made.
J. Impositions
-----------
1. Payment of Impositions. The limited partnership shall
pay and discharge all Impositions at least ten days before the
first day on which a penalty or interest may accrue or be
assessed thereon for non-payment (or, if no penalty or interest
thereon may accrue or be assessed, then before such Impositions
become delinquent or past due).
2. Contest. The limited partnership shall have the right
to contest the amount or validity, in whole or in part, of any
Imposition by appropriate proceedings promptly initiated and
diligently conducted in good faith, but only after payment of
such Imposition, unless such payment would operate as a bar to
the contest or interfere materially with the prosecution thereof,
in which event, notwithstanding the provisions hereof, the
limited partnership may, upon giving written notice to the
Limited Partner (in its capacity as Landlord under the Lease),
postpone or defer payment of such Imposition, provided that none
of the Amusement Park or the Land, or any part of either of them,
would by reason of such postponement or deferment be in danger of
being forfeited, sold or foreclosed for nonpayment of such
Impositions. Upon the termination of any such proceedings, the
limited partnership shall pay the amount of such Imposition or
part thereof as shall be finally determined in such proceedings
to be payable (after exhaustion of any rights of appeal), the
payment of which may have been deferred during the prosecution of
such proceedings, together with any costs, fees, interest,
penalties or other liabilities in connection therewith.
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<PAGE>
3. Impositions. "Impositions" means real estate, ad
--
valorem and other taxes or assessments, possessory interest
-------
taxes, transient occupancy taxes, water and sewer charges,
license, permit and inspection fees, gross receipts and sales
taxes, and governmental impositions and charges of every kind or
nature whatsoever which may at any time be charged, assessed or
imposed upon, or becomes a lien upon, or arise in connection with
the ownership, operation, use, occupancy or possession of the
Amusement Park or the Land, regardless of whether assessed or
levied upon or payable by the Limited Partner (including its
capacity as Landlord under the Lease) or the limited partnership
(including in its capacity as Tenant under the Lease), provided,
--------
however, that Impositions shall not include any income, excess
-------
profits, franchise, transfer, inheritance, capital stock or other
similar tax imposed on the Limited Partner unless, due to a
future change in the method of taxation, an income, excess
profits, franchise, transfer, inheritance, capital stock or other
tax shall be levied against the Limited Partner which is clearly
and demonstrably in lieu of or in substitution for any tax or
increase therein which would otherwise constitute an Imposition,
in which event such income, excess profits, franchise, transfer,
inheritance, capital stock or other tax shall be deemed to be an
Imposition.
K. No Adverse Possession
---------------------
The limited partnership will not permit any portion of the
Amusement Park to be used in such a manner as might make possible
a claim of adverse use, adverse possession, prescription or other
similar claims.
L. Hazardous Material
------------------
1. General Provision. The limited partnership, including
in its capacity as Tenant under the Lease, will not cause any
Hazardous Material to be located, used or disposed of, on or at
the Amusement Park or on or under the Land, or disposed of or
discharged from the Amusement Park or the Land into or on any
land, the atmosphere or any watercourse, body of water or
wetlands and will use its best effort to not permit any of the
foregoing, in each case except to the extent placed or used on
the Land or at the Amusement Park in the manner permitted by
applicable Legal Requirements (including Environmental Laws).
2. Hazardous Material. "Hazardous Material" means any
hazardous or toxic substance, material or waste which is or
becomes regulated by any local governmental authority, the State
of Georgia or the United States government, or any material or
substance defined as a hazardous, toxic or dangerous substance,
waste, or material in any federal, state or local statute, law,
ordinance, code, rule, regulation, order or decree regulating,
relating to, or imposing liability or standards of conduct
concerning any hazardous, toxic or dangerous waste, substance or
material, as now or at any time in the future in effect
(collectively, "Environmental Laws").
M. Encroachments
-------------
If any building, structure or other improvement on or
constructed on the Land encroaches upon any property, street, or
right of-way adjoining or adjacent to Land, or violates the
agreements or conditions contained in any restrictive covenant
affecting the Land or any part thereof, or hinders or obstructs
any easement or right-of-way, then, (i) in the case of any
encroachment, promptly after written request of any Person
affected by such encroachment, or (ii) otherwise, promptly after
written request of the Limited Partner or of any person affected
by such violation, hindrance, obstruction or impairment, the
limited partnership shall, at is sole cost and expense, either
(A) obtain valid and effective waivers or settlements of all
claims, liabilities and damages resulting from each such
encroachment, violation, hindrance, obstruction or impairment, or
(B) make such changes to the Improvements and take such other
action as shall be necessary to remove such encroachments,
hindrances or obstructions and to end such violations or
impairments, including, if necessary, the alteration or removal
of any building, structure or other improvements.
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N. Remedies Cumulative
-------------------
Any right or remedy of the Limited Partner in the Overall
Agreement, this Agreement or any other Related Agreement and any
other right or remedy it may have at law or equity upon breach of
any covenant, agreement, term, provision or condition in the
Overall Agreement, this Agreement or any other Related Agreement
shall be distinct, separate and cumulative rights or remedies,
and no one of them, whether exercised by the Limited Partner or
not, shall be deemed to be in exclusion of any other.
O. Certain Matters; Arbitration; Another Material Default
------------------------------------------------------
1. Certain Matters. This Part O of Article XVII shall
apply to all Paragraphs of Parts B, C, E, F, G, J, K, L and Q of
this Article XVII and to Paragraphs 2 through 5 of Article V,
inclusive, of the Lease.
2. Arbitration. If the Limited Partner contends that this
limited partnership has failed to perform or comply with any of
the obligations specified in Paragraph 1 of this Part O of
Article XVII and that such failure has continued for a period of
30 days after notice of such failure from the Limited Partner to
the General Partner, the Limited Partner shall be entitled to
seek confidential, binding arbitration of the matter in
accordance with this Paragraph 2 of Part O of Article XVII. Any
such arbitration shall be conducted, at the option of the Limited
Partner, in the State of California, Georgia or New York. The
arbitration shall be conducted by a single arbitrator, selected
by the General Partner and the Limited Partner or, if they do not
so select an arbitrator within 20 Business Days after a request
to do so by either the General Partner or the Limited Partner,
by the president of the American Arbitration Association ("AAA")
(or, if applicable, a similar or successor entity of the AAA), or
his or her designee, upon application by the General Partner or
the Limited Partner. If the arbitration is in Los Angeles, or,
if elsewhere, to the extent provided in the location of the
arbitration, the arbitration shall be administered by the AAA
pursuant to its Commercial Rules and Supplementary Procedures for
Large, Complex Disputes, provided that the parties shall be
entitled to discovery as if the matter were being litigated in
federal court. The arbitrator shall be a single neutral who
shall be, if such an individual is available, a retired or former
judge selected from the AAA Commercial Large Complex Case Panel
of Neutrals or, if the AAA no longer maintains such a Panel, from
the Panel that succeeds to the responsibilities of such Panel.
The decision of the arbitrator, who shall determine the validity
of this arbitration provision if it is challenged, shall be final
and unappealable and judgment thereon may be entered in any court
of competent jurisdiction. The fees of the arbitrator shall be
borne by the General Partner, the limited partnership and/or the
Limited Partner in such proportions as are determined by the
arbitrator. The decision of the arbitrator shall be whether
there is Another Material Default, but shall be without prejudice
to any other rights the Limited Partner may have if there is a
failure to perform or comply that is not of sufficient
materiality to be Another Material Default, provided that the
--------
decisions of the arbitrator and its findings of fact shall be res
judicata in any other proceeding.
3. Another Material Default. As set forth in Paragraph 5
of Part C of Article VIII, if the arbitrator selected pursuant to
Paragraph 2 of this Part O determines that the failure of the
limited partnership to perform or comply with any of the
obligations specified in Paragraph 1 of this Part O will have an
adverse effect on the benefits to be received by the Limited
Partner, the limited partners of Fund or on the Amusement Park
that is in the aggregate material in relation to the value of the
Amusement Park and such failure to perform or comply continues
for a period of 30 Business Days (or such longer period as may be
specified by the arbitrator) after such determination by the
arbitrator, then such failure shall constitute Another Material
Default.
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P. Total Condemnation/Equivalent Casualty
--------------------------------------
In the event of a total condemnation of the Land or a
condemnation of so much of the Land that it is economically
impractical to operate an amusement park thereon, with all
appeals of such condemnation decision having been finally
exhausted or the time for appeal having passed, the Limited
Partner shall be entitled to all condemnation proceeds, the End-
of-Term Option shall be accelerated (with the CPI Adjustment for
the End-of-Term Option Price, provided for in the Overall
Agreement, being based on the Minimum Amount for the then next
year) and shall be exercised or deemed exercised as of 30 days
after the date of the condemnation. In the event of a casualty
such that it is not possible to repair and operate an amusement
park thereon (such as contamination of the Land by Hazardous
Material so that it may not be safely occupied and a clean-up or
remediation is economically impossible), the Limited Partner
shall be entitled to all insurance proceeds, if any, resulting
from such casualty, and at the option of either the Limited
Partner or the General Partner, exercised by notice to the other,
the End-of-Term Option shall be accelerated (with the CPI
Adjustment for End-of-Term Option Price provided for in the
Overall Agreement, being based on the Minimum Amount for the then
next year) and so exercised or deemed exercised, at the End-of-
Term Option Price so determined, as of 30 days after the date of
casualty. The Limited Partner shall not, without the consent of
the General Partner, distribute to its partners, dispose of or
otherwise use any condemnation proceeds or insurance proceeds to
which it shall be entitled pursuant to this paragraph. In the
event of any condemnation of any portion of the Land and/or
Improvements not covered by the foregoing, the limited
partnership shall be entitled to all condemnation proceeds. In
the event of any casualty not covered by the foregoing, the
limited partnership shall be entitled to all insurance proceeds.
Notwithstanding anything to the contrary herein, the Minimum
Amount and Base Rent for the year in which the End-of Term
Option, as accelerated, is exercised shall be prorated through
the date on which the End-of-Term Option Price is paid. The End-
of-Term Option Price will be increased or decreased to reflect
any underpayment or overpayment the Minimum Amount or Base Rent
with respect to such year as calculated in accordance with the
immediately preceding sentence.
Q. Operating Lease Limitation
--------------------------
The limited partnership shall not enter into any lease
(other than a Capital Lease) (an "Operating Lease") if after
giving effect thereto the aggregate lease or rental payments that
the limited partnership would be required to make in any year
with respect to (a) Operating Leases of rides (including any
virtual reality or "simulator" - type rides) or other attractions
(including restaurants and stores) would exceed (i) for 1997, $6
million and (ii) for each year after 1997, the greater of $6
million or $6 million multiplied by the CPI Adjustment (as
defined in the Overall Agreement) or (b) all Operating Leases,
including the Operating Leases referred to in clause (a) of this
sentence, would exceed (i) for 1997, $8 million and (ii) for each
year after 1997, the greater of $8 million or $8 million
multiplied by the CPI Adjustment. The limited partnership shall
use commercially reasonable efforts to negotiate Operating Leases
that will not terminate on a change of control of the limited
partnership or of the General Partner or a change in the General
Partner (each a "change in control provision"), provided that, if
--------
such leases nevertheless cannot be obtained without a change in
control provision on commercially reasonable terms, the limited
partnership may enter Operating Leases that have a change in
control provision if the aggregate lease and rental payments on
all such leases does not exceed (i) for 1997, $2.5 million and
(ii) for each year after 1997, the greater of $2.5 million or
$2.5 million multiplied by the CPI Adjustment, provided, further,
-------- -------
that the fact that a lease without a change in control provision
has a higher but commercially reasonable lease or rental rate
than a lease with a change in control provision does not mean
that the lease without the change in control provision is not
obtainable on commercially reasonable terms.
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ARTICLE XVIII
LIMITATION ON CERTAIN LIABILITIES
1. Co-General Partner. Neither the Co-General Partner
nor its member(s) or managers from time to time shall under any
circumstances have (i) any responsibility, whether to the Limited
Partner or the General Partner, for any obligation or liability
of the limited partnership or (ii) any obligation to contribute
to the General Partner for any contributions made from time to
time by the General Partner to the capital of the limited
partnership or otherwise to the limited partnership or for any
losses or expenses incurred by the General Partner from time to
time including, without limitation, in respect of the limited
partnership, any obligations or liabilities the limited
partnership or the General Partner may have under this Agreement
or, without limitation, otherwise. This limitation on liability
is in addition to any other limitation on liability in favor of
the Co-General Partner and its members and manager(s) as may
exist from time to time, whether at law or, without limitation,
otherwise. The General Partner will indemnify, hold harmless and
defend the Co-General Partner and its manager(s) and members from
time to time against all obligations and liabilities of the
limited partnership.
2. Manager of Limited Partner. Neither the manager(s) of
the Limited Partner from time to time (initially SFG-I, LLC), nor
the manager(s) or members from time to time of the manager(s) of
the Limited Partner (i.e., initially, the manager and members of
SFG-I, LLC) will under any circumstances have any responsibility
for any obligations or liabilities of the Limited Partner,
whether under this Agreement, the Lease or, without limitation,
otherwise, any such responsibility as may exist being limited to
the assets of the Limited Partner from time to time. This
limitation on liability in favor of the manager(s) of the Limited
Partner from time to time (and the manager(s) and member(s) from
time to time of the manager(s) of the Limited Partner) is in
addition to any other limitation on liability that may exist from
time to time in favor of any of them, whether at law or, without
limitation, otherwise.
ARTICLE XIX
GENERAL PROVISIONS
1. Delaware Law. This Agreement has been executed and made
in accordance with the Delaware Revised Uniform Limited
Partnership Act and is to be construed, enforced and governed in
accordance therewith.
2. Amendments. Except as otherwise specifically provided
herein, this Agreement may be amended only by the written
agreement of the General Partner and the Limited Partner;
provided that no amendment that increases the obligations of the
--------
Co-General Partner shall be effective without the prior written
consent of the Co-General Partner.
3. Binding. This Agreement shall be binding upon and inure
to the benefit of the limited partnership and the parties hereto
and, except to the extent limited herein, their legal
representatives, administrators, successors and assigns, whether
such succession or assignment is effected by a sale, transfer,
sale of securities or assets, merger, reverse merger,
consolidation, conversion, operation of law or, without
limitation, otherwise.
4. Severability. If any provision, or portion of a
provision, of this Agreement shall be unenforceable or not legal
in any circumstance, the balance of this Agreement and, to the
extent not unenforceable or not illegal, the balance of such
provision or portion thereof shall not be affected thereby.
5. No Certificate for Limited Partnership Interest. The
interest of the partners in this limited partnership are not
represented by certificates.
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6. Notices; Waivers. Provisions for notices and for
waivers are contained in Paragraph 6 of Part C of Article VIII.
7. Overall Agreement. Certain provisions of Article XV of
the Overall Agreement are by their terms applicable to the
Agreement and are to that extent incorporated in this Agreement.
8. Savings Clause. If the valid, complete and perfected
assignment or transfer to the limited partnership of any of the
assets to be transferred by the Limited Partner to the limited
partnership pursuant to Article V or X, or if the valid and
complete express assumption by the limited partnership of any of
the liabilities of the Limited Partner to be assumed by the
limited partnership pursuant to Article X, requires the consent,
agreement or approval of or any filing or registration with any
Person, and as a result of the failure to obtain or make any such
consent, agreement, approval, filing or registration such
assignment, transfer or assumption, as the case may be, is not
effected as contemplated hereby despite the provisions hereof
purporting to effect such assignment, transfer or assumption, as
the case may be, then, and until such time as any impediment to
the validity, completeness or perfection of such assignment,
transfer or assumption, as the case may be, shall have been
removed, nullified or waived, (i) all the benefits and burdens
relating to such assets (including, without limitation,
possession, use, risk of loss, potential for gain and dominion,
control and command over such assets) are to inure from and after
the date hereof to the limited partnership and (ii) all of the
burdens relating to such liabilities are to inure from and after
the date hereof to the limited partnership. The parties hereto
undertake and agree to use their reasonable best efforts to
obtain any consent, agreement or approval of and to make any
filing or registration with any Person that may be required or
necessary for the assignment, transfer or assumption of any of
such assets and/or such liabilities, as the case may be, to or by
the limited partnership to be valid, complete or perfected and to
promptly complete any transfer, assignment or assumption.
35
<PAGE>
This Limited Partnership Agreement of Six Flags Over Georgia
II, L.P. is executed and delivered as of the date first written
above.
SFOG II, INC., General Partner SIX FLAGS OVER GEORGIA, LLC
Limited Partner
By By SFG-I, LL
----------------------------- Manager of Six Flags Over Georgia,
Name: LLC
Title:
SFG-II, LLC, Co-General Partner By
-------------------------------
Avram Salkin, Manager of SFG-I,
By LLC
------------------------------
Avram Salkin, Manager
36
<PAGE>
EXHIBIT A GOES HERE
<PAGE>
EXHIBIT B
NOTICE OF RETAINED LIABILITIES
------------------------------
To: Six Flags Over Georgia, LLC
In accordance with Paragraph 2 of Article X of the Limited
Partnership Agreement of Six Flags Over Georgia II, L.P., dated
as of the date hereof (the "Flags II LPA"), SFOG II, Inc. hereby
notifies Six Flags Over Georgia, LLC that the Retained
Liabilities (as defined in the Flags II LPA) shall consist of the
indebtedness described below.
[Describe Retained Liabilities]
Date: SFOG II, Inc.
----------------------------
By:
--------------------
Name:
Title:
Exhibit 10(av)
CONFIDENTIAL
ATTORNEY-CLIENT PRIVILEGE
ATTORNEY WORK PRODUCT
================================================================================
OVERALL AGREEMENT
dated as of November 24, 1997
among
SIX FlAGS OVER TEXAS FUND, LTD.
FLAGS' DIRECTORS, L.L.C.
FD-II, L.L.C.
TEXAS FLAGS, LTD.
SFOT EMPLOYEE, INC.
SFOT ACQUISITION I, INC.
SFOT ACQUISITION II, INC.
SIX FLAGS OVER TEXAS, INC.
SIX FLAGS THEME PARKS INC.
and
SIX FLAGS ENTERTAINMENT CORPORATION
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
RECITALS ...........................................................................................1
ARTICLE I CERTAIN DEFINITIONS........................................................................5
ARTICLE II TENDER OFFER..............................................................................15
2.1 Tender Offer.................................................................................15
2.2 Tender Offer Price and Mandatory Adjustment Amount, Changes in the Tender
Offer Price; Payment of the Tender Offer Price...............................................16
2.3 The Tender Offer Expiration Date.............................................................17
2.4 Tender Offer Materials.......................................................................18
2.5 Compliance with Tender Offer Rules...........................................................18
2.6 Right of First Refusal with Respect to the Tender Offer......................................18
ARTICLE III LIQUIDITY PUT.............................................................................19
3.1 Liquidity Put................................................................................19
3.2 Put Price....................................................................................19
3.3 Liquidity Put Number; Proration..............................................................20
3.4 Liquidity Notice Provisions..................................................................21
3.5 Exchange Act.................................................................................22
3.6 Put for 2027.................................................................................22
3.7 Adjustments..................................................................................23
3.8 General Partner's Right of First Refusal with Respect to Liquidity Put......................23
3.9 Release from Unitholders Exercising Puts.....................................................23
ARTICLE IV RIDE AGREEMENT; 1998 IMPROVEMENTS; THE MEGA RIDES.........................................23
4.1 Ride Agreement...............................................................................23
4.2 Mega Rides; 1998 Improvements................................................................23
ARTICLE V FUND II; RESTRUCTURE OF FLAGS.............................................................23
5.1 Formation of Six Flags Fund II, Ltd..........................................................23
5.2 The Flags II Limited Partnership Agreement...................................................24
5.3 TRLPA Election...............................................................................24
ARITCLE VI THE LEASE.................................................................................24
6.1 Distribution of the Land.....................................................................24
6.2 The Lease....................................................................................24
i
<PAGE>
TABLE OF CONTENTS
(continued)
ARTICLE VII END-OF-TERM OPTION; ALTERNATIVES IF OPTION NOT EXERCISED; SFOT II CEASING TO BE
THE MANAGING GENERAL PARTNER OF FLAGS II..................................................24
7.1 End-of-Term Option...........................................................................24
7.2 End-of-Term Option Price, Acquisition of General Partner Interests in Fund and
Flags II.....................................................................................25
7.3 Notice of Exercise of End-of-Term Option.....................................................25
7.4 Payment of End-of-Term Option Price..........................................................26
7.5 Alternatives if End-of-Term Option Not Exercised or if SFOT II Ceases to be
the Managing General Partner of Flags II.....................................................26
7.6 Acceleration of End-of-Term Option in the Event of Total Condemnation or
Equivalent Casualty..........................................................................27
7.7 Acceleration of End-of-Term Option in the Event of Acquisition of All Units..................28
ARTICLE VIII REPRESENTATIONS AND WARRANTIES............................................................28
8.1 Representations and Warranties of the SFEC Entities..........................................28
8.2 Representations and Warranties of Fund and Related Entities..................................30
ARTICLE IX STANDSTILL................................................................................32
9.1 Certain Rights And Obligations of Units Acquired by SFOT Acquisition I and
SFOT Acquisition II Pursuant to this Agreement...............................................32
9.2 Standstill...................................................................................32
ARTICLE X OBLIGATIONS ABSOLUTE......................................................................33
ARTICLE XI CERTAIN AGREEMENTS........................................................................33
11.1 Changes in the Number of Outstanding Units...................................................33
11.2 Prepaid Amount, No Fund Liabilities at Tender Offer Settlement Date..........................34
11.3 The Texas Transition Trust Release of Claims.................................................34
11.4 Nature of SFOT II, SFOT Employee, SFOT Acquisition I and SFOT
Acquisition II...............................................................................35
11.5 Non-Competition..............................................................................36
11.6 Certain Real Property and Other Matters......................................................36
11.7 Affiliate and Certain Other Transactions.....................................................37
11.8 Information Obligation.......................................................................43
11.9 No Liability of Fund Partners, Knox (individually, or as general partner of
Fund), Flags' Directors, L.L.C. or FD-II; Additional Limitation on Liability.................47
ii
<PAGE>
TABLE OF CONTENTS
(continued)
11.10 Indemnification..............................................................................48
11.11 Expenses.....................................................................................49
11.12 Six Flags Over Texas Name....................................................................50
11.13 Section 754 Elections; Publicly Traded Partnership...........................................50
11.14 List of Fund Limited Partners................................................................50
11.15 Certain Flags II Distributions in 1998.......................................................50
11.16 EBITDA Arbitration Matters...................................................................50
11.17 EBITDA Adjustment for Personal Injury Claims.................................................53
11.18 Other SFEC Entities That May Own Units.......................................................54
11.19 Negative Pledge Covenants....................................................................54
ARTICLE XII EMPLOYEE AND RELATED MATTERS..............................................................55
12.1 Continuation of Employment...................................................................55
12.2 Benefit Responsibilities.....................................................................56
12.3 Continuation of Health Coverage Through Closing Date.........................................56
12.4 Modifications................................................................................56
12.5 Park Employees...............................................................................56
12.6 End of Term..................................................................................56
12.7 Sale at End-of-Term..........................................................................56
12.8 ERISA........................................................................................56
12.9 No Termination; No Third Party Rights........................................................57
ARTICLE XIII EXECUTION OF THIS AGREEMENT; THE CLOSING AND CLOSING DELIVERIES...........................57
13.1 Execution and Delivery of this Agreement.....................................................57
13.2 The Closing..................................................................................57
13.3 Conditions to the Obligations of the Parties.................................................57
13.4 Effective Date Deliveries....................................................................58
13.5 Solicitation of Fund Limited Partners' Approval; Termination Fee.............................59
ARTICLE XIV GENERAL PROVISIONS........................................................................59
14.1 Applicable Law...............................................................................59
14.2 Forum........................................................................................59
14.3 Injunction...................................................................................60
iii
<PAGE>
TABLE OF CONTENTS
(continued)
14.4 Notices......................................................................................60
14.5 Counterparts.................................................................................62
14.6 Entire Agreement.............................................................................62
14.7 Modifications, Amendments and Waivers........................................................62
14.8 Interpretation...............................................................................62
14.9 Severability; Invalidity of Particular Provisions............................................62
14.10 Waiver.......................................................................................62
14.11 Third-Party Beneficiaries....................................................................62
14.12 Successors...................................................................................63
14.13 No Offset; Interest..........................................................................63
14.14 Further Assurances...........................................................................63
14.15 Non-Binding Effect of Recitals...............................................................63
14.16 Payments.....................................................................................63
14.17 Factors to be Considered in Determining Reasonableness of Withheld Consent...................63
</TABLE>
<PAGE>
Exhibits
--------
Designation Description
- ----------- -----------
A Schematic of Relationships at the Date of the Agreement
B Schematic of Relationships Giving Effect to the Agreement
and the Related Agreements
1.1(ll) Flags Limited Partnership Agreement
II Computation of Amounts Payable in the Tender Offer
3.2(a)(1) Computation of the Formula Amount
3.2(a)(2) Computation of Put Price for 2003
3.3 (a) Computation of Liquidity Put Number
3.4(b) Form of Notice of Election to Exercise Liquidity Put
4.1 Ride Aareement
5.1.1 Flags II Limited Partnership Agreement
5.1.2 Certificate of Limited Partnership of Flags II
5.4.1 Fund II Limited Partnership Agreement
5.4.2 Certificate of Limited Partnership of Fund II
6.1 Land Deed
6.2 The Lease
7.2 Illustration of End-of-Term Option Transaction
8.2(c) Fund Limited Partnership Agreement
11.2(a) Transition Note
11.3(a) Release of Claims by Fund et al.
11.3(b) Release of Claims by SFEC Entities and SFEC Affiliates
11.8(a)(i)(C) Agreed-Upon Procedures Report, Procedures and Items
v
<PAGE>
Designation Description
- ----------- -----------
11.8(a)(iii) Form of Monthly Financial Statements
13.3(c)(i) Opinion of Paul, Weiss, Rifkind, Wharton & Garrison
13.3(d) Opinion of Jones, Day, Reavis & Pogue
13.4(a)(i) Second Amended and Restated Limited Partnership Agreement
of Fund
13.4(a)(ii) SFOT Acquisition I and SFOT Acquisition II Guarantee
13.4(a)(iii) SFTP and SFEC Guarantee
13.4(a)(v) TWE and TIAIX Guarantee
vi
<PAGE>
Exhibit 10 (av)
OVERALL AGREEMENT
This Overall Agreement (this "Agreement") is entered into as of
November 24, 1997 by and among Six Flags Over Texas Fund, Ltd., a Texas limited
partnership ("Fund"), Flags' Directors, L.L.C., a Texas limited liability
company ("Flags' Directors, L.L.C."), FD-II, L.L.C., a Texas limited liability
company ("FD-II"), Texas Flags, Ltd., a Texas limited partnership ("Flags II"),
SFOT Employee, Inc., a Delaware corporation ("SFOT Employee"), SFOT Acquisition
I, Inc., a Delaware corporation ("SFOT Acquisition I"), SFOT Acquisition II,
Inc., a Delaware corporation ("SFOT Acquisition II"), Six Flags Over Texas,
Inc., a Delaware corporation ("SFOT II"), Six Flags Theme Parks Inc., a Delaware
corporation ("SFTP"), and Six Flags Entertainment Corporation, a Delaware
corporation ("SFEC"). SFOT II, SFOT Employee, SFOT Acquisition I, SFOT
Acquisition II, SFTP and SFEC are sometimes referred to in this Agreement
individually as an "SFEC Entity" and collectively as the "SFEC Entities".
RECITALS
For the convenience of readers of this Agreement, Exhibit A to this
Agreement is a schematic representation of certain elements of the relationships
of the parties at the date of this Agreement and Exhibit B to this Agreement is
a schematic representation of certain elements of the transactions provided for
in this Agreement and the Related Agreements and the resultant relationships of
the parties.
The Parties; Certain Other Matters
- ----------------------------------
A. Jack D. Knox is the sole general partner of Fund, and solely in
his capacity as the general partner of Fund, is a signatory hereto ("Knox").
B. Fund is the sole limited partner of Flags II. SFOT II is the sole
general partner of Flags II.
C. Flags II is the owner and operator of the "Six Flags Over Texas"
Amusement Park, located in Arlington, Texas (the "Amusement Park").
D. Fund, SFOT II and SFTP entered into an agreement dated May 3,
1996(the "Ride Agreement"), a copy of which is Exhibit 4.1 to this Agreement,
relating to, among other things, 1996 and 1997 capital expenditures and the
purchase by Flags II and installation in the Amusement Park of a ride described
in the Ride Agreement, which ride was later substituted by the Mr. Freeze ride,
a thrill ride powered by linear induction motors that was installed in the
Amusement Park in 1997, but did not become fully operational during the regular
season ("Mr. Freeze").
E. The Restated Limited Partnership Certificate and Agreement of
Flags II, as amended to date (the "Flags Limited Partnership Agreement"), states
that Flags II "shall dissolve . . . on December 31, 1997, unless [Fund] shall
have delivered to [SFOT II] prior thereto a written notice to the effect that
dissolution shall not occur on such date" and further states that, if Flags II
is dissolved:
"[Fund] may either (i) appoint a trustee to wind up and terminate
the business and affairs of [Flags II] or (ii) appoint another
General Partner (who must be a person having the capacity to
serve as such) and continue the business and affairs of
[Flags II] in accordance with the provisions [of the Flags
Limited Partnership Agreement]. If [Fund] appoints another
1
<PAGE>
General Partner, the person so appointed and [Fund] shall
execute, acknowledge, swear to and file a Certificate and
Agreement of Limited Partnership containing substantially the
same provisions as those contained [in the Flags Limited
Partnership Agreement]."
The Flags Limited Partnership Agreement further provides that, if Flags II is
dissolved, then:
"Notwithstanding any provision hereof, the General Partner
[SFOT II] shall not be entitled to receive by reason of the
dissolution or liquidation of the limited partnership any
interest in the Amusement Park or any part of the proceeds
resulting from any sale of the Amusement Park or any interest
therein in connection with the liquidation of the limited
partnership."
F. SFOT II is a single-purpose corporation, wholly owned by SFTP.
SFOT Employee is a single-purpose corporation, wholly owned by SFOT II, formed
for the purpose of employing the employees of the Amusement Park.
G. SFOT Acquisition I is a single-purpose corporation, wholly owned
by SFTP, formed for the purpose of entering into this Agreement and certain of
the Related Agreements and performing its obligations and exercising its rights
hereunder and thereunder. SFOT Acquisition II is a single-purpose corporation
formed for the purpose of entering into this Agreement and certain of the
Related Agreements and performing its obligations and exercising its rights
hereunder and thereunder, and is indirectly wholly owned by SFEC.
H. SFEC is wholly-owned by Time Warner Entertainment Company, L.P.,
a Delaware limited partnership ("TWE"), Boston Ventures Limited Partnership IV,
Boston Ventures Limited Partnership IVA and certain other investors and certain
SFEC officers (together, the "BV Investors").
I. SFTP is an indirect wholly-owned subsidiary of SFEC.
J. Time Warner Inc., a Delaware corporation ("TWX"), indirectly owns
approximately 74.5% of the residual equity of TWE.
K. SFEC directly or indirectly owns and operates, or otherwise
operates, in addition to the Amusement Park, seven amusement parks -- Six Flags
Great Adventure, Six Flags Magic Mountain, Six Flags Great America, Six Flags
Over Georgia, Six Flags Astroworld, Six Flags St. Louis and Six Flags Fiesta
Texas (collectively, including any additional parks owned or operated from time
to time by SFEC, or any controlled affiliate of SFEC, but not including the
Amusement Park, the "SFEC Parks").
This Agreement and Certain Related Matters
- ------------------------------------------
L. Pursuant to this Agreement, the parties have agreed, among other
things and as is more fully set forth in, and qualified by, this Agreement and
the Related Agreements, that:
() At the request of Fund immediately prior to the execution
and delivery of this Agreement, SFEC or an affiliate of SFEC
will loan to Fund the sum of $10.725 million, to be used by
2
<PAGE>
Fund to satisfy its obligations to Premier Parks Inc.
("Premier") pursuant to the Overall Agreement, dated
October 9, 1997, between Fund and Premier, which loan shall
be credited against the Prepaid Amount and canceled when the
Prepaid Amount is paid or shall be repaid in accordance with
the terms of the Transition Note.
() On the Effective Date, Fund and Flags' Directors, L.L.C.
will form Six Flags Fund II, Ltd. as a Texas limited
partnership pursuant to an agreement of limited partnership
substantially in the form of Exhibit 5.4.1. Fund shall
contribute its interest in Flags II to Six Flags Fund II,
Ltd. and shall become the sole limited partner thereof.
Flags' Directors, L.L.C. shall become the sole general
partner of Six Flags Fund II, Ltd. Fund will have a 99%
interest in Six Flags Fund II, Ltd. and Flags' Directors,
L.L.C. will have a 1% interest in Six Flags Fund II, Ltd. As
used herein, the term "Fund II" shall, with respect to any
period from and after the Effective Date, refer to Six Flags
Fund II, Ltd.
() Immediately thereafter on the Effective Date, Fund II (as
limited partner), SFOT II (as sole managing general partner)
and FD-II (as sole co-general partner) shall enter into an
amended and restated limited partnership agreement governing
Flags II substantially in the form of Exhibit 5.1.1 (the
"Flags II Limited Partnership Agreement"). FD-II will make a
contribution of $100 to Flags II for its co-general partner
interest in Flags II.
() Immediately following the execution and delivery of the
Flags II Limited Partnership Agreement, Flags II will
distribute the Land to Fund II by executing and delivering a
special warranty deed (the "Land Deed") to the Land in the
form of the deed attached to this Agreement as Exhibit 6.1,
and immediately thereafter Fund II will lease the Land to
Flags II pursuant to the Lease for a Base Rent of $1 million
per year, commencing with 1998, and increasing each year in
proportion to increases in the cost of living.
() The Flags II Limited Partnership Agreement will provide for
(i) Minimum Amount distributions to Fund II of $26,731,500
per year, commencing with 1998, and increasing each year
thereafter in proportion to increases in the cost of living.
After these distributions, for each year (commencing in
1998), SFOT II will receive, in recognition of its
management services and subject to Available Cash, a
distribution equal to 3% of the Gross Revenues of Flags II
for the prior year. If not paid in any year, the amount so
distributable to SFOT II will be carried forward to future
years with interest at Prime. Any additional distributions
by Flags II will be made out of Available Cash, 92.5% to
SFOT II and 7.5% to Fund II.
() SFOT II will agree (i) to use all commercially reasonable
efforts to cause the Mr. Freeze ride to be open and
operative at the opening of the Amusement Park in 1998 and
(ii) to install two additional "mega rides" at the Amusement
Park, the first in 1999 and the second in 2000, each of
which shall have an installed and themed cost of not less
than $10 million.
3
<PAGE>
() On or before ten Business Days after the Effective Date,
SFOT Acquisition I and SFOT Acquisition II will commence an
all-cash Tender Offer for all Units in Fund at a price,
assuming all of Fund were purchased, of S374.750 million.
() The Tender Offer amount will be subject to adjustment
downward for the Prepaid Amount and required withholding
taxes. If 8.5 times the EBITDA of Flags II for 1998 exceeds
$374.750 million, each Limited Partner of Fund whose Units
were sold in the Tender Offer will receive a supplemental
payment equal to a pro rata portion of the overage. Neither
SFOT Acquisition I nor SFOT Acquisition II will acquire any
interest in the Texas Transition Trust.
() SFOT Acquisition I and SFOT Acquisition II will provide to
the Limited Partners of Fund an annual Liquidity Put
commencing in 1999. Pursuant to the Liquidity Put, but
subject to limitations on the number of Units that SFOT
Acquisition I and SFOT Acquisition II are obligated to
purchase in any year and related proration standards, Fund
Limited Partners will have an annual right to cause SFOT
Acquisition I or SFOT Acquisition II, as applicable, to
purchase their Units. The price at which Units are to be
purchased pursuant to the Liquidity Put will be based upon
the greater of the Tender Offer price or a formula amount
based upon 8.5 times the weighted annual EBITDA of Flags II
over the then prior four years.
() Certain standstill arrangements will be applicable with
respect to Units acquired by SFOT Acquisition I and SFOT
Acquisition II pursuant to the Tender Offer and Liquidity
Put.
() TWX, TWE, SFEC, SFTP, SFOT Acquisition I and SFOT
Acquisition II will each unconditionally, absolutely and
irrevocably guarantee certain of the obligations of Flags
II, SFOT II, SFOT Acquisition I, SFOT Acquisition II and
SFOT Employee under this Agreement and the Related
Agreements, provided that, the guarantee of TWE will be
-------- ----
terminable under certain circumstances. Each of TWX, TWE,
SFEC, SFTP, SFOT Acquisition I, and SFOT Acquisition II will
also agree to certain limited noncompetition provisions with
respect to Flags II. The obligations of SFOT Acquisition I
and SFOT Acquisition II under this Agreement (including with
respect to the Liquidity Put) and under their respective
Guarantee will also be secured by a pledge to Fund of the
interests SFOT Acquisition I and SFOT Acquisition II hold in
Fund from time to time as soon as such a pledge is no longer
prohibited by the terms of SFTP's bank credit facility and
the indenture governing SFTP's publicly held debt.
() SFOT Acquisition II will have the option, exercisable
effective December 31, 2027, to acquire all of the interests
in Fund and Flags II not then owned by either SFOT
Acquisition I, SFOT Acquisition II or any other SFEC
Affiliate permitted to own units pursuant to Section 11.18.
The amount to be received by the Limited Partners of Fund,
other than SFOT Acquisition I and SFOT Acquisition II, if
this option is exercised will be based upon the Tender Offer
Price increased by increases in the cost of living from
December 1, 1997 to December 31, 2027.
4
<PAGE>
M. The parties acknowledge and agree that the Guarantees, including
especially the TWE and TWX Guarantee, (i) are a material part of the
consideration to Fund and Flags' Directors, L.L.C. in inducing each of them to
enter into this Agreement and the Related Agreements and to consummate the
transactions provided for herein and therein and (ii) are being relied upon to a
material degree by each of them in doing so, and were relied upon by the limited
partners of Fund in giving the Fund Limited Partners' Approval. TWE and TWX each
have their executive offices in the State of New York, and the TWE and TWX
Guarantee is governed by the internal law (and not the law pertaining to choice
or conflict of laws) of the State of New York. Accordingly, the parties have
elected that this Agreement be governed by the internal law (and not the law
pertaining to choice or conflict of laws) of the State of New York.
N. The parties have determined that it is in their respective best
interests to, and they desire to, among other things, enter into and engage in
the transactions contemplated by this Agreement and the agreements provided for
in this Agreement, including the Second Amended and Restated Fund Limited
Partnership Agreement, the Flags II Limited Partnership Agreement and the other
Related Agreements.
* * *
The parties agree as set forth below.
ARTICLE I
CERTAIN DEFINITIONS
In addition to the other terms defined elsewhere in this Agreement,
the definitions set forth below are used in this Agreement:
(a) "Accounting Arbitrator" is defined in Section 11.16.
(b) "Affiliate Loans" has the meaning given to that term in the
Flags II Limited Partnership Agreement.
(c) "Aggregate Tender Offer Amount" means "X" divided by .9995,
where "X" equals the Per Unit Tender Offer Price multiplied by the Number of
Limited Partner Units on the Tender Offer Settlement Date. An example of the
computation of the Aggregate Tender Offer Amount is set forth in Exhibit II to
this Agreement.
(d) "Agreement" is defined in the first paragraph of this Agreement.
(e) "Amusement Park" is defined in paragraph C of the Recitals.
(f) "Arbitrable Judgment" is defined in Section 11.16.
(g) "Available Cash" has the meaning given to that term in the
Flags II Limited Partnership Agreement.
(h) "Bank Credit Agreement" has the meaning given to that term in the
SFOT Acquisition I and SFOT Acquisition II Guarantee.
5
<PAGE>
(i) "Bank Credit Agreements Negative Pledge Covenant" has the meaning
given to that term in the SFOT Acquisition I and SFOT Acquisition II Guarantee.
(j) "Base Rent" has the meaning given to that term in the Lease.
(k) "Beneficial Owner" and "Beneficial Ounership" has the meaning
given to that term in the Fund Limited Partnership Agreement.
(l) "Big Six independent accounting firm" means one of Arthur
Andersen LLP, Coopers & Lybrand L.L.P., Deloitte & Touche LLP, Ernst & Young
LLP, KPMG Peat Marwick LLP, and Price Waterhouse LLP or, if applicable, their
respective successors.
(m) "Business Day" means any day other than a Saturday, Sunday or day
when banks in either of the States of Texas or New York are closed.
(n) "BV Investors" is defined in Paragraph H of the Recitals.
(o) "Capital Lease" means any lease that is treated as a capital
Lease under GAAP.
(p) "Closing" is defined in Section 13.2.
(q) "Code" means the Internal Revenue Code of 1986, as amended.
(r) "Controlled SFEC Affiliate" means (i) SFEC or any of its
successors from time to time with respect to the ownership and management of the
domestic theme park business of SFEC, (ii) each parent of any Person described
in clause (i) unless the theme park business of such parent represents less than
50% of the consolidated gross assets of such parent, (iii) any Person that at
the time directly or indirectly owns 50% or more of SFOT II and each parent of
such Person unless the theme park business of such Person or parent represents
less than 50% of its consolidated gross assets and (iv) any Person that is
directly or indirectly 50%-owned or otherwise controlled by a Person described
in any of clauses (i) through (iii).
(s) "CPI Adjustment" for any year means a fraction, the numerator of
which is the Minimum Amount for the year and the denominator of which is
$26,731,500.
(t) "Deemed Insurance Amount" is defined in Section 11.17(a).
(u) "Default" means an "Overall Agreement Payment Default," a
"Partnership Minimum Amount Distribution Default", a "Lease Payment Default" or
"Another Matenial Default", as those terms are defined in the Flags II Limited
Partnership Agreement.
(v) "Default Interest" has the meaning given to that term in the
Flags II Limited Partnership Agreement.
(w) "Default Rate" means the lesser of (i) five percentage points
above Prime or (ii) the maximum interest rate permitted by applicable law.
(x) "Directly Compete" is defined in Section 11.5.
6
<PAGE>
(y) "Distributions" is defined in Section 2.2(d).
(z) "Distributions to Partners" means Minimum Amount distributions,
Priority Management Fee Distributions and Percentage Distributions.
(aa) "EBITDA" for any year means net income or loss (without giving
effect to extraordinary, non-recurring gains or losses) of Flags II for that
year determined on an accrual basis in accordance with, except as provided or
referred to below, GAAP,
PLUS
----
(A) without duplication, to the extent deducted in
calculating net income or loss, (i) interest expense
(including, for this purpose, (a) interest and Default
Interest in respect of Distributions to Partners and
(b) the interest component of payments or accruals on
Capital Leases), (ii) income taxes and franchise taxes,
(iii) Distributions to Partners, (iv) payments by Flags
II to any SFEC Entity or SFEC Affiliate to the extent
Section 11.7 provides such payments are not to reduce
EBITDA, (v) depreciation, (vi) amortization,
(vii) capital expenditures (including (a) all other
payments on and accruals in respect of Capital Leases
and (b) all payments on and accruals in respect of
Operating Capital Asset Leases), provided that, 50% of
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the cost of any performance or completion bond required
to be obtained pursuant to Paragraph 2(b) of Part A
of Article XVII of the Flags II Limited
Partnership Agreement shall be deemed to be a
capital expenditure and 50% thereof shall be
deemed to be an expense that is deductible in
determining net income for the purpose of
calculating EBITDA, (viii) expenditures for
purchases of land (including for the payment of
any deferred portion of the purchase price
thereof), (ix) payments and reserves with respect
to personal injuries that occurred after
December 31, 1997 and claims for such personal
injuries, except as provided in Section 11.16, (x)
Excluded Inventory Writedowns, (xi) reserves or
other non-cash charges on or in respect of (a) any
Capital Lease, any Operating Capital Asset Lease
or any property or assets subject to a Capital
Lease or an Operating Capital Asset Lease, (b) any
other property or asset owned by Flags II as of
the Effective Date, (c) the Land, or (e) the
license by Flags II of the right to use the name
"Six Flags Over Texas" or that name, and (xii)
writeoffs, reserves and allowances for receivables
existing at January 1, 1998 to the extent, if at
all, such receivables would have been written off
or reserved against or allowances made in respect
thereof in 1997 had the policies applied for 1998
by Flags II for writeoffs, reserves and allowances
for receivables been in effect prior to January 1,
1998;
MINUS
(B) without duplication, to the extent included (or not,
otherwise deducted, as applicable) in calculating net
income or loss, (i) net income or loss to the extent
attributable to Excluded Revenues, (ii) interest
7
<PAGE>
income, (iii) the Deemed Insurance Amount, (iv) the
reserve for Uninsured Major Injury Claims, as provided
in Section 11.16(b), (v) an amount equal to the
"Management Fee" (as defined in the Flags II Limited
Partnership Agreement) for that year, whether or not
distributions are made to SFOT II in respect of the
Management Fee in that or any other year, (vi) an
amount equal to the out-of-pocket expenses of SFOT
Employee related to the employment of the park
personnel, including the Park Employees, that are not
in excess of the expenses that would have been incurred
by Flags II if the park personnel, including the Park
Employees, had been employed directly by Flags II
(giving effect to any cost savings realized or expenses
avoided by Flags II because of SFOT Employee being the
employer of the park personnel, including the Park
Employees) and (vii) and expenses incurred by Flags II
in complying with Section 5.2(c).
EBITDA shall not be affected by any expenses of Flags II in connection with the
negotiation and documentation, execution and delivery by Flags II of this
Agreement or the Related Agreements, the formation of SFOT Employee and, except
as specifically provided above in this definition of EBITDA, the transactions to
occur on or before the Effective Date. In calculating EBITDA for any year,
EBITDA shall be reduced to the extent that any income in such year is directly
attributable to a non-cash charge specified in paragraph (A) of this definition
of EBITDA taken in any prior year. (By way of example, and without limitation,
if in the year following the year in which an Excluded Inventory Writedown
occurs, the inventory affected by such Excluded Inventory Writedown is sold,
then in such subsequent year the income resulting from such sale of inventory
shall be reduced to the extent of such Excluded Inventory Writedown.) If any
asset of Flags II acquired originally or constructed by Flags II with capital
expenditures is sold by Flags II, the asset is leased back by Flags II (except
under a Capital Lease) and the proceeds of sale, net of the costs of sale, are
required to be added to required capital expenditures under Paragraph 1 of Part
C of Article XVII of the Flags II Limited Partnership Agreement, then, in
calculating EBITDA: (i) payments or accruals for payments under the lease will
not be an expense until such proceeds are used for capital expenditures and (ii)
thereafter, payments or accruals for payments under the lease will be expenses,
provided that, it shall be assumed that the payments due under the lease are
level monthly payments throughout the term of the lease. Notwithstanding
anything to the contrary in this definition of EBITDA above, EBITDA shall be
subject to review and adjustment as provided in Sections 11.7 and 11.15 (without
duplication of any adjustments provided for in this definition of EBITDA).
(bb) "Effective Date" means the later of January 6, 1998 and seven
Business Days, or such earlier date as Fund and SFEC may agree, after the date
on which Fund notifies the SFEC Entities that the Fund Limited Partners'
Approval has been obtained.
(cc) "End-of-Term Option" is defined in Section 7.1.
(dd) "End-of-Term Option Date" is defined in Section 7.1.
(ee) "End-of-Term Option Price" is defined in Section 7.2.
(ff) "Estate" means the successor in interest to or surviving spouse
of an individual (i) who died within 24 months prior to the April 30 at which a
Liquidity Put is exercisable and (ii) whose Units or Units owned by a grantor
8
<PAGE>
trust (or fractions thereof) are included in such individual's estate for
federal estate tax purposes.
(gg) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(hh) "Excluded Inventory Writiedowns" means after December 31, 1997:
(i) all reserves, writedowns, allowances or other charges on or in respect of
any inventory sold to Flags II prior to January 1, 1998 by (x) a Controlled SFEC
Affiliate, to the extent of the excess, if any, of the carrying value of the
inventory on the books of Flags II at January 1, 1998 over the lesser of (A) the
depreciated or amortized cost, after reserves, writedowns, allowances and other
charges, of the selling Controlled SFEC Affiliate in such inventory and (B) the
fair market value of such inventory at the date of sale to Flags II, or (y) an
SFEC Affiliate (other than a Controlled SFEC Affiliate), to the extent of the
excess, if any, of the carrying value of such inventory on the books of Flags II
at January 1, 1998 over the price for such inventory that is no less favorable
than the price that would have been obtained in an arms length transaction with
an unaffiliated third party; and (ii) all reserves, writedowns, allowances or
other charges on or in respect of any inventory existing at January 1, 1998 to
the extent such reserves, writedowns, allowances or other charges would have
reduced the income of Flags II in 1997, had the "reserve, writedown, allowance
or charge policy" (or other like-purpose policy) applied by Flags II in 1998
been applied to such inventory in 1997.
(ii) "Excluded Revenues" has the meaning given to that term in the
Flags II Limited Partnership Agreement.
(jj) "fair and consistent method of allocation" is defined in
Section 11.7(b).
(kk) "Flags' Directors, L.L.C." is defined in the first Paragraph of
this Agreement.
(ll) "Flags Limited Partnership Agreement" means the Restated
Agreement of Limited Partnership, as amended, of Flags II as in effect at the
date of this Agreement, a copy of which is Exhibit 1.1(ll) to this Agreement.
(mm) "Flags II" is defined in the first paragraph of this Agreement.
(nn) "Flags II Limited Partnership Agreement" means the Second Amended
and Restated Limited Partnership Agreement of Flags II, in the form of
Exhibit 5.1.1 to this Agreement, to be entered into by and between Fund II, as
sole limited partner, SFOT II, as sole managing general partner, and FD-II, as
sole co-general partner.
(oo) "Formula Amount" means 8.5/10 of "A", where "A" is the sum of
(w) four multiplied by EBITDA for the year then last ended, plus (x) three
multiplied by EBITDA for the year immediately preceding the year in clause (w),
plus (y) two multiplied by EBITDA for the year immediately preceding the year in
clause (x), plus (z) EBITDA for the year immediately preceding the year in
clause (y); provided, however, that, for purposes of the Formula Amount, if any
-------- -------
year in clause (x), (y) or (z) would, but for this proviso, be a year prior to
1997, 1997 shall be used for each such year. The Formula Amount may be
illustrated by the following formula, where "E" equals EBITDA and "Y" equals the
year in which the Liquidity Put is exercised:
9
<PAGE>
Y-1 Y-2 Y-3 Y-4
8.5 x ((4 x E ) + (3 x E ) + (2 x E ) + E )
---------------------------------------------------
10
An example of the computation of the Formula Amount is set forth in
Exhibit 3.2(a)(1) to this Agreement.
(pp) "Fund" is defined in the first paragraph of this Agreement.
(qq) "Fund Limited Partners' Approval" means the approval, on or
before December 30, 1997, of this Agreement, the Related Agreements and the
transactions provided for herein and therein by the holders of Fund Limited
Partners holding a limited partner percentage aggregating not less than 66-2/3%.
(rr) "Fund Limited Partnership Agreement" means the Amended and
Restated Agreement of Limited Partnership of Fund as in effect at the date of
this Agreement, a copy of which is Exhibit 8.2(c) to this Agreement.
(ss) "Fund II" is defined in paragraph L of the Recitals.
(tt) "Fund II Limited Partnership Agreement" means the limited
partnership agreement of Six Flags Fund II, Ltd., in the form of Exhibit 5.4.1
hereto, to be entered into between Flags' Directors, L.L.C. and Fund.
(uu) "GAAP" means generally accepted accounting principles, as in
effect in the United States from time to time, consistently applied. For
purposes of the calculation of EBITDA only, GAAP as applied to Flags II for 1998
shall be consistently applied only if it is consistent with GAAP as applied to
Flags II for the year ended on or about December 31, 1997 and prior years, as
reflected in the audited financial statements of Flags II for those years.
(vv) "General Partner's Right of First Refusal" shall mean the right
of first refusal granted to the general partner of Fund pursuant to Section 3.8
hereof.
(ww) "Gross Revenues" has the meaning given to that term in the
Flags II Limited Partnership Agreement.
(xx) "Guarantees" means the SFOT Acquisition I and SFOT Acquisition II
Guarantee, the SFTP and SFEC Guarantee and the TWE and TWX Guarantee.
(yy)"Guarantor" has the meaning given to that term in the Flags II
Limited Partnership Agreement.
(zz) "Hazardous Materials" has the meaning given to that term in the
Flags II Limited Partnership Agreement.
(aaa) "Indebtedness" of any Person at any date means, without
duplication, (i) all indebtedness of such Person for borrowed money (whether or
not the recourse of the lender is to the whole of the assets of such Person or
only to a portion thereof), (ii) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii) all obligations of
such Person in respect of letters of credit or other similar instruments (or
10
<PAGE>
reimbursement obligations with respect thereto), other than standby letters of
credit incurred by such Person in the ordinary course of business, (iv) all
obligations of such Person with respect to hedging obligations (other than those
that fix the interest rate on indebtedness or other obligations or that fix the
exchange rate in connection with indebtedness or other obligations denominated
in a foreign currency), (v) all obligations of such Person to pay the deferred
and unpaid purchase price of property or services, except trade payables and
accrued expenses incurred in the ordinary course of business, (vi) all Capital
Lease obligations of such Person, (vii) all Indebtedness of others secured by a
lien on any asset of such Person, whether or not such Indebtedness is assumed by
such Person, and (viii) all Indebtedness of others guaranteed (whether by a
guarantee or an income maintenance, net worth maintenance, contribution or,
without limitation, other arrangement, the effect of which is to directly or
indirectly assume payment by such Person), to the extent of such guarantee.
(bbb) "Indenture" has the meaning given to that term in the SFOT
Acquisition I and SFOT Acquisition II Guarantee.
(ccc) "Indenture Negative Pledge Covenant" has the meaning given to
that term in the SFOT Acquisition I and SFOT Acquisition Il Guarantee.
(ddd) "Land" has the meaning given to that term in the Lease.
(eee) "Lease" means the Amusement Park Ground Lease in the form of
Exhibit VI to this Agreement.
(fff) "Liquidity Put" is defined in Section 3.1.
(ggg) "Liquidity Put Election Date" is defined in Section 3.4(b).
(hhh) "Liquidity Put Number" is defined in Section 3.3(a).
(iii) "Liquidity Put Settlement Date" is defined in Section 3.1.
(jjj) "Minimum Amount" has the meaning given to that term in the
Flags II Limited Partnership Agreement.
(kkk) "Mr. Freeze" is defined in Paragraph D of the Recitals.
(lll) "Net Worth" of any Person means, as of the date of
determination, the amount shown on the most recent accrual-basis balance sheet
or consolidated balance sheet, as the case may be, of such Person, prepared in
accordance with GAAP, as the stockholders' equity, consolidated stockholders'
equity or equivalent of such Person, but not in excess of the comparable amount
shown on the then most recent balance sheet or consolidated balance sheet, as
the case may be, of such Person that has been audited by such Person's
independent certified accountants, which shall be a firm of independent
certified public accountants of national repute, and is accompanied by an
opinion of such accountants that does not contain a so-called emphasis paragraph
with respect to stockholders' equity, consolidated stockholders' equity or the
equivalent and is not otherwise subject to qualification with respect to
stockholders' equity, consolidated stockholders' equity or the equivalent;
provided that, in calculating the Net Worth of any Guarantor as of any date, 50%
of the "normal" depreciation of intangible assets and amortization of intangible
assets reflected on the income statement of such Guarantor for periods beginning
11
<PAGE>
after December 31, 1997 shall be deemed not to have been charged; provided,
further, that if any intangible asset is reserved against or "written down"
(other than by such "normal" depreciation or amortization), then such Net Worth
shall be calculated using the carrying value of such asset as so reserved
against or written down; provided, further, that if any intangible asset is sold
or otherwise disposed of (whether at a gain or loss), then such Net Worth shall
be calculated using the carrying value of the proceeds (whether cash, securities
or other assets) received by such Guarantor in such sale or disposition. By way
of illustration, if such "normal" depreciation and amortization on an intangible
asset carried at "40x" is "2x" per year, (i) in determining Net Worth, "1x"
shall be deemed not to have been charged (i.e., in four years, such "normal"
depreciation and amortization would be "8x" and "4x" will not be charged in
determining Net Worth), but (ii) if that intangible asset is, in the first
quarter of the fifth year, reserved against or written down so that its carrying
value is "20x," then in computing Net Worth, "20x" shall thereafter be used for
such intangible asset in determining Net Worth and (iii) in future periods,
assuming no further such reserves or writedowns, one-half of such then-normal
depreciation and amortization on the "20x" shall be deemed not to have been
charged.
(mmm) "Net Worth Standard" has the meaning given to that term in the
Flags II Limited Partnership Agreement.
(nnn) "Notice of Election to Exercise" means the Notice of Election to
Exercise Liquidity Put, substantially in the form of Exhibit 3.4(b) to this
Agreement.
(ooo) "Number of Limited Partner Units" means 240.32422.
(ppp) "Operating Capital Asset Lease" means (i) a lease (other than a
Capital Lease) of property or assets that are owned by Flags II on the Effective
Date and that were constructed or acquired by Flags II with capital
expenditures, or (ii) a lease (other than a Capital Lease) owned by Flags II
that (A) is of property or assets (other than office equipment or similar
property or assets) that were constructed or acquired by Flags II with capital
expenditures, and (B) was not in effect on the date of this Agreement.
(qqq) "Park Employees" is defined in Section 12.1(a).
(rrr) "Past Accounting Practice" is defined in Section 11.16(a).
(sss) "Per Unit Liabilities Amount" means the amount obtained by
(A) multiplying by .9995 the number, if greater than zero, obtained by
subtracting $100,000 (increased each year commencing with 1999 to $100,000
multiplied by the CPI Adjustment for such year), provided that there shall be no
such subtraction in determining the Per Unit Liabilities Amount on the Business
Day before the Tender Offer Settlement Date or the End-of-Term Option Date,
from, without duplication, the sum of (w) all liabilities of Fund, including,
without limitation, any liabilities due to Premier and to Allen & Company (other
than liabilities of Fund II or Flags II that would otherwise be treated as
liabilities of Fund but which Fund as a separate legal entity has no legal
obligation to discharge) that are outstanding as of the close of business
(Central Standard Time) on the Business Day prior to the Tender Offer Settlement
Date, the Liquidity Put Settlement Date or the End-of-Term Option Date, as
applicable, (x) all liabilities of Fund II (excluding liabilities of Flags II
that would otherwise be treated as liabilities of Fund II but which Fund II as a
separate legal entity has no legal obligation to discharge), that are
outstanding as of the close of business (Central Standard Time) on the day prior
to the Tender Offer Settlement Date, the Liquidity Put Settlement Date or the
End-of-Term Option Date, as applicable, plus (y) with respect to the Tender
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<PAGE>
Offer Settlement Date only, .9995 multiplied by the Prepaid Amount and (B)
dividing the number so obtained by the Number of Limited Partner Units. The Per
Unit Liabilities Amount shall not include any claims that the SFEC Entities may
have as of the Effective Date against Fund II or Fund, all of which are being
released pursuant to Section 11.3(b).
(ttt) "Per Unit Mandatory Adjustment Amount" is defined in
Section 2.2(b).
(uuu) "Per Unit Tender Offer Price" means (i) $374.750 million
multiplied by (ii) .9995, divided by (iii) the Number of Limited Partner Units,
as such price may be increased pursuant to Section 2.2(c). The Per Unit Tender
Offer Price shall be adjusted to reflect any fraction of a Unit that is tendered
by a Fund limited partner pursuant to the Tender Offer. On and after the payment
of the Per Unit Mandatory Adjustment Amount, if any, pursuant to Section 2.2(b)
- -- but if there is a Per Unit Mandatory Adjustment Amount, not later than the
earlier to occur of March 30, 1999 or the day before SFOT Acquisition I or SFOT
Acquisition II, as applicable, gives written notice of the Put Price for 1999
pursuant to and as is required by Section 3.4(a) -- the Per Unit Tender Offer
Price shall mean the sum of the amount determined in accordance with the
preceding sentence plus the Per Unit Mandatory Adjustment Amount, if any. The
Per Unit Tender Offer Price shall be rounded to the nearest whole dollar.
(vvv) "Percentage Distribution" has the meaning given to that term in
the Flags II Limited Partnership Agreement.
(www) "Permitted Team Texas Arrangements" means the management,
organizational, operating, marketing and maintenance arrangements relating to
the Amusement Park and the other SFEC Parks located in the State of Texas,
including the sharing of executive personnel, equipment, marketing programs,
promotions and sales organizations, which arrangements shall be permitted
provided that all of the following conditions shall be met: (i) such
arrangements are implemented for the purpose of achieving operating and/or
management efficiencies, economies or benefits for the Amusement Park, (ii) such
arrangements are implemented in good faith, (iii) the number of personnel
constituting Team Texas does not at any time exceed 15, or such greater number
to which the general partner of Fund may agree; and (iv) the costs and expenses
related to such arrangements shall be allocated to Flags II in direct proportion
to the ratio that the paid attendance at the Amusement Park bears to the total
paid attendance at all SFEC Parks plus the paid attendance at the Amusement
Park; provided, however, if at any time in the future this formula of allocation
is deemed by Fund to be unfair to Flags II, SFEC will negotiate in good faith
with Fund to modify this formula.
(xxx) "Person" means an individual, a trust, a partnership (including
a general partnership, limited liability partnership, limited partnership or
limited liability limited partnership), an unincorporated association, a
corporation, a limited liability company or any other entity or organization,
including a government or any agency or political subdivision thereof.
(yyy) "Prepaid Amount" is defined in Section 11.2(b).
(zzz) "Prime" means the average prime rate announced by SFTP's
principal bank lender as its prime rate for December of the then prior year or,
if Prime cannot be determined from the foregoing or for any other reason
(including, without limitation, SFTP having no borrowings or no principal bank
lender), then the average prime rate for such December of Bank of America
National Trust & Savings Association or, if Bank of America National Trust &
Savings Association does not then exist or have a prime rate, then of the three
13
<PAGE>
largest domestic United States banks (measured by total assets) then announcing
a prime rate for such December.
(aaaa) "Priority, Management Fee Distributions" has the meaning given
to that term in the Flags II Limited Partnership Agreement.
(bbbb) "Procedure Period" is defined in Section 11.16(e).
(cccc) "Put Price" is defined in Section 3.2(a). An example of the
computation of the Put Price is set forth in Exhibit 3.2(a)(2) to this
Agreement.
(dddd) "Related Agreements" means the Second Amended and Restated Fund
Limited Partnership Agreement, the Fund II Limited Partnership Agreement, the
Flags II Limited Partnership Agreement, the SFOT Acquisition I and SFOT
Acquisition II Guarantee, the SFTP and SFEC Guarantee, the TWE and TWX
Guarantee, the Lease, the Release of Claims by Fund and Related Parties and the
Release of Claims by SFEC and SFEC Affiliates.
(eeee) "Ride Agreement" is defined in Paragraph D of the Recitals.
(ffff) "Second Amended and Restated Fund Limited Partnership
Agreement" means the Second Amended and Restated Limited Partnership Agreement
of Fund, in the form of Exhibit 13.4(a)(i) to this Agreement.
(gggg) "SFEC" is defined in the first paragraph of this Agreement.
(hhhh) "SFEC Affiliate" means a Person that, by virtue of security
ownership or otherwise, controls, has the power to control, is controlled by or
is under common control with an SFEC Entity or that an SFEC Entity has the power
to control; provided that, (A) neither Fund, Fund II or Flags II shall for any
purpose be deemed to be SFEC Affiliates and (B) without limitation, under the
facts and circumstances existing on the date of this Agreement, (i) SFOT II,
SFOT Employee, SFOT Acquisition I, SFOT Acquisition II, SFTP, TWE, TWX and all
affiliates of TWE and/or TWX shall, for all purposes, be deemed to be SFEC
Affiliates, and (ii) the BV Investors and their affiliates shall not, by virtue
of the BV Investors' ownership interest in SFEC, for any purpose, be deemed to
be SFEC Affiliates.
(iiii) "SFEC Entities" and "SFEC Entity" are defined in the first
paragraph of this Agreement.
(jjjj) "SFEC Parks" is defined in Paragraph K of the Recitals.
(kkkk) "SFOT Acquisition I" is defined in the first paragraph of this
Agreement.
(llll) "SFOT Acquisition I and SFOT Acquisition II Guarantee" means
the General Continuing Guarantee of SFOT Acquisition I and SFOT Acquisition II
in the form of Exhibit 13.4(a)(ii) to this Agreement.
(mmmm) "SFOT Acquisition II" is defined in the first paragraph of the
Agreement.
(nnnn)"SFOT Employee" is defined in the first paragraph of this
Agreement.
(oooo) "SFTP"is defined in the first paragraph of this Agreement.
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<PAGE>
(pppp) "SFTP and SFEC Guarantee"means the General Continuing Guarantee
of SFTP and SFEC, in the form of Exhibit 13.4(a)(iii) to this Agreement.
(qqqq) "Solicitation Agent" is defined in Section 2.4.
(rrrr) "Special Limited Partners" has the meaning given to that term
in the Second Amended and Restated Fund Limited Partnership Agreement.
(ssss) "Tax" has the meaning given to that term in the Flags II
Limited Partnership Agreement.
(tttt) "Tender Offer" is defined in Section 2.1.
(uuuu) "Tender Offer Date" means the date on which the Tender Offer is
commenced, which date shall not be later than ten Business Days following the
Effective Date.
(vvvv) "Tender Offer Expiration Date" is defined in Section 2.3(a).
(wwww) "Tender Offer Settlement Date" is defined in Section 2.2(a).
(xxxx) "Texas Transition Trust" is defined in Section 11.3.
(yyyy) "Transaction-Related Expenses" is defined in Section 11.2(c).
(zzzz) "TWE" is defined in Paragraph H of the Recitals.
(aaaaa)"TWE and TWX Guarantee" means the General Continuing Guarantee
and NonCompetition Agreement of TWE and TWX in the form of Exhibit 13.4(a)(v) to
this Agreement.
(bbbbb)"TWX" is defined in Paragraph J of the Recitals.
(ccccc)"Uninsured Major Injury Claim" is defined in Section 11.16(c).
(ddddd)"Unitholders" means the Persons holding Units of Fund at the
date of this Agreement and their transferees, successors and assigns, but
excluding any SFEC Affiliate.
(eeeee)"Units" or "Limited Partner Units" means the limited
partnership interests in Fund, of which there are an aggregate of 240.32422
outstanding as of the date of this Agreement, which Units in the aggregate
represent 99.95% of the partnership interests in Fund.
ARTICLE II
TENDER OFFER
2.1 Tender Offer. On the Tender Offer Date, SFOT Acquisition I and
------------
SFOT Acquisition II Jointly shall make an absolute, irrevocable and
unconditional (except as specifically provided below) tender offer (the "Tender
Offer"), on and subject to the terms set forth in this Article II, to purchase
all of the Units at a price (payable in cash), and on such other terms,
described in this Article II.
15
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2.2 Tender Offer Price and Mandatory Adjustment Amount, Changes in
--------------------------------------------------------------
the Tender Offer Price; Payment of the Tender Offer Price.
- ---------------------------------------------------------
(a) Acceptance, Payment at the Tender Offer Settlement Date. On the
-------------------------------------------------------
date that is the later of February 25, 1998 or five Business Days after the
Tender Offer Expiration Date (the "Tender Offer Settlement Date"), SFOT
Acquisition I and/or SFOT Acquisition II, as applicable (as provided in Section
9.2(a)), shall purchase and indefeasibly pay for each Unit (or fraction thereof)
properly tendered together with a duly completed and executed letter of
transmittal (which shall be in form and substance reasonably satisfactory to
SFOT Acquisition I and SFOT Acquisition II and, in any event, shall include a
representation and warranty by the tendering Unitholder that such Unitholder has
full power and authority to tender, sell, assign and transfer the Units being
tendered and, when the same are accepted for payment by SFOT Acquisition I
and/or SFOT Acquisition II, as applicable, SFOT Acquisition I or SFOT
Acquisition II, as the case may be, will acquire good title thereto, free and
clear of all liens, restrictions, claims and encumbrances) and a duly completed
and executed substitute Form W-9 (or successor form). The amount in cash to be
paid to a Unitholder in respect of each whole Unit accepted for tender shall be
equal to (A) the Per Unit Tender Offer Price, less (B) the Per Unit Liabilities
Amount, less (C) any taxes required to be withheld by SFOT Acquisition I or SFOT
Acquisition II, as applicable, under applicable law. A pro rata portion of the
foregoing amount will be paid in respect of each fraction of a Unit properly
tendered to SFOT Acquisition I and/or SFOT Acquisition II in the Tender Offer.
The amount so determined shall be paid to each Unitholder of Units accepted for
purchase pursuant to the Tender Offer, without any other deduction, on the
Tender Offer Settlement Date, at the election of the Unitholder and at the
expense of SFOT Acquisition I or SFOT Acquisition II, as applicable, by
cashier's or certified check or by wire transfer to an account specified by the
Unitholder in the letter of transmittal submitted by such Unitholder (which
letter of transmittal shall provide space identified for such account number,
with the availability of wire transfer being set forth in accompanying
instructions). If the payment is made by cashier's or certified check, such
check shall be sent by ovemight courier for delivery by not later than
10:30 a.m. local time at the address of the payee specified by the Unitholder in
the letter of transmittal on the Tender Offer Settlement Date and insured for
the full amount of the check. Payments not made when required shall thereafter
bear interest at the Default Rate. The obligations of SFOT Acquisition I and
SFOT Acquisition II shall be subject to receipt of a certificate of Fund dated
the Tender Offer Settlement Date, executed by the general partner of Fund, by
which Fund represents and warrants that the Persons named in a list accompanying
such certificate are the record holders of the number of Units indicated on such
list and, to the knowledge of Fund, except as otherwise indicated on such list,
the beneficial owners of such Units. The obligations of SFOT Acquisition I and
SFOT Acquisition II to purchase the Units of any Unitholder shall also be
subject to the receipt by SFEC of a release from such Unitholder substantially
in the form of Exhibit 11.3(a). SFOT Acquisition I and SFOT Acquisition II shall
not be required to accept for purchase any Units tendered by any Person, unless
such Person agrees, in an agreement reasonably satisfactory to SFOT
Acquisition I and SFOT Acquisition II, to indemnify SFOT Acquisition I and SFOT
Acquisition II against any losses, liabilities or expenses arising out of such
Person's failure to own beneficially or of record such Units.
(b) Payment of Mandatory Adjustment Amount. If (i) (A) 8.5
--------------------------------------
multiplied by (B) EBITDA for the year ended December 31, 1998, multiplied by
(C) .9995, divided by (D) the Number of Limited Partner Units outstanding as of
the Tender Offer Settlement Date, exceeds (ii) what would otherwise be the Per
Unit Tender Offer Price (such excess, if any, being referred to as the "Per Unit
Mandatory Adjustment Amount"), then SFOT Acquisition I or SFOT Acquisition II,
as applicable, shall pay to each Unitholder of Units accepted for purchase
pursuant to the Tender Offer an amount in cash in respect of each whole Unit so
16
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accepted for purchase equal to (x) the Per Unit Mandatory Adjustment Amount,
less (y) any taxes required under applicable law to be withheld by SFOT
Acquisition I or SFOT Acquisition II, as the case may be, with respect to such
amount. A pro rata portion of the foregoing amount will be paid in respect of
each fraction of a Unit purchased pursuant to the Tender Offer. The amounts
required to be paid pursuant to this Section 2.2(b) shall be payable on the day
that is 10 days after the financial statements for Flags II for the year ended
December 31, 1998 are made available to Fund II or Fund (but in any event, not
later than April 10, 1999), at the election of the Unitholder and at the expense
of SFOT Acquisition I or SFOT Acquisition II, as applicable, by cashier's or
certified check or by wire transfer to an account specified by the Unitholder in
the letter of transmittal. If the payment is made by cashier's or certified
check, such check shall be sent by overnight courier for delivery by not later
than 10:30 a.m. local time at the address of the Unitholder specified by the
Unitholder in the letter of transmittal on such date and insured for the full
amount of the check.
(c) Changes in the Tender Offer Price. At any time and from time to
---------------------------------
time prior to the Tender Offer Expiration Date, SFOT Acquisition I and SFOT
Acquisition II jointly may increase the Per Unit Tender Offer Price, provided
that, the amount of each such increase shall be payable only in cash and shall
not be less than 2.5% of the then immediately previous Per Unit Tender Offer
Price. From and after the date of any such increase, the "Per Unit Tender Offer
Price" shall for all purposes be the Per Unit Tender Offer Price as so
increased. Neither SFOT Acquisition I nor SFOT Acquisition II may at any time
decrease the then Per Unit Tender Offer Price.
(d) Pre-Tender Offer Settlement Date Distributions By Fund. Prior to
------------------------------------------------------
the Tender Offer Settlement Date, Fund will distribute (the "Distributions") to
(i) the Texas Transition Trust such portion of the Prepaid Amount as is
determined by the general partner of Fund and (ii) its then partners cash equal
to all of the remaining Prepaid Amount not used by (or reserved for) Fund to pay
its Transaction-Related Expenses or other normal expenses and any other cash
Fund then has as a result of cash distributions from Flags II and earnings on
those distributions. The Tender Offer will be for Units after the Distributions
and neither SFOT Acquisition I nor SFOT Acquisition II will, by virtue of the
purchase of Units in the Tender Offer, acquire any interest in the Distributions
or the Texas Transition Trust, provided that, the Per Unit Liabilities Amount at
-------- ----
the Tender Offer Settlement Date will be increased by "x" multiplied by "y"
divided by "z," where "x" is the Prepaid Amount, "y" is .9995 and "z" is the
Number of Limited Partner Units (thereby effectively giving SFOT Acquisition I
and SFOT Acquisition II, as applicable, credit, against the amount they are
otherwise paying in the Tender Offer, for that portion of the Prepaid Amount
that they would have received had the Prepaid Amount been paid after the Tender
Offer Settlement Date).
2.3 The Tender Offer Expiration Date.
--------------------------------
(a) The Tender Offer Expiration Date. Subject to Section 2.3(b), the
--------------------------------
Tender Offer shall expire at 12:00 midnight (Pacific Coast time) on the date
(the "Tender Offer Expiration Date") that is 20 Business Days (or, if greater,
the minimum period required under applicable law) after the Tender Offer Date,
provided that, if the Prepaid Amount is not paid on or before seven Business
- -------- ----
Days before the Tender Offer Expiration Date then, if applicable, the Tender
Offer Expiration Date will be extended, if applicable, until ten Business Days
after the Prepaid Amount is paid and, for the period of the extension, interest
at the Default Rate will be paid on the amount that would have been paid on the
Tender Offer Settlement Date had there been no such extension.
17
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(b) Changes in the Tender Offer Expiration Date. SFOT Acquisition I
-------------------------------------------
and SFOT Acquisition II jointly shall extend the Tender Offer Expiration Date
for, but only for, the minimum period required under applicable law or ten
Business Days, whichever is more, following notice to the Unitholders of any
increase in the Per Unit Tender Offer Price pursuant to Section 2.2(c). From and
after the date of any such extension, the "Tender Offer Expiration Date" shall
be, for all purposes, the Tender Offer Expiration Date as so extended.
2.4 Tender Offer Materials. If SFOT Acquisition I and SFOT
----------------------
Acquisition II elect to use a solicitation agent in connection with the Tender
Offer, then no later than four Business Days prior to the Tender Offer Date,
SFOT Acquisition I and SFOT Acquisition II jointly shall designate a reputable
proxy solicitation, trust company or similar firm reasonably acceptable to Knox
(solely in his capacity as general partner of Fund) to act as solicitation agent
(the "Solicitation Agent") in connection with the Tender Offer. SFOT
Acquisition I and SFOT Acquisition II jointly shall, or shall instruct the
Solicitation Agent to, mail to each Unitholder at the address or addresses of
each such Unitholder provided to SFEC by Fund, (a) an offer to purchase, setting
forth the terms and conditions of the Tender Offer and such additional
disclosures, if any, as SFOT Acquisition I and SFOT Acquisition II jointly shall
elect to include, (b) a letter of transmittal to be used in tendering Units and
appropriate instructions with respect thereto, and (c) any other offering
materials specified by SFOT Acquisition I and SFOT Acquisition II, all of which,
to the extent applicable, shall be furnished to the Solicitation Agent by SFOT
Acquisition I and SFOT Acquisition II. In connection with the foregoing, Fund
will cooperate with SFOT Acquisition I, SFOT Acquisition II and the Solicitation
Agent, if any, and no later than ten days prior to the Tender Offer Date shall
furnish SFEC with the name, number of Units held of record and address of each
Unitholder as set forth in the partnership records of Fund and any additional
address or addresses of any Unitholder furnished to Fund by such Unitholder in
writing and shall furnish to SFEC the certificate referred to in Section 2.2(a)
on the Tender Offer Settlement Date. Any offering materials mailed to any
Unitholder in the manner provided in this Section 2.4 shall, for the purposes of
this Article II, be conclusively deemed to have been delivered, whether or not
such Unitholder actually receives such offering materials. Offering materials
and other documents so mailed by the Solicitation Agent, if any, will, for the
purposes of this Article II, be deemed mailed by SFOT Acquisition I and SFOT
Acquisition II on the date mailed by the Solicitation Agent.
2.5 Compliance with Tender Offer Rules. The Tender Offer shall in
----------------------------------
all respects comply with the applicable provisions of the Exchange Act,
including, without limitation, Section 14(e) thereof, and the regulations
promulgated thereunder, including Regulation 14E promulgated thereunder (and to
the extent, but only to the extent, if at all, that the provisions hereof are
not permitted under the applicable provisions of the Exchange Act and the
regulations thereunder, the requirements of the Exchange Act and regulations
shall prevail).
2.6 Right of First Refusal with Respect to the Tender Offer. The
-------------------------------------------------------
obligation of SFOT Acquisition I and/or SFOT Acquisition II to purchase Units
tendered pursuant to the Tender Offer shall not be subject to the General
Partner's Right of First Refusal to purchase Units set forth and described in
Article IX, Section 2, of the Second Amended and Restated Fund Limited
Partnership Agreement.
18
<PAGE>
ARTICLE III
LIQUIDITY PUT
3.1 Liquidity Put. Upon the terms and subject to the conditions set
-------------
forth in this Article III, Unitholders holding Units that were not purchased
pursuant to the Tender Offer shall have a right (the "Liquidity Put"), on May
15, 1999 and on May 15 of each subsequent year through 2027 or, if earlier, the
date the End-of-Term Option Price is paid as referred to in Section 7.6 (each, a
"Liquidity Put Settlement Date") to require SFOT Acquisition I and/or SFOT
Acquisition II, as applicable (as provided in Section 7.2(a)), to purchase all
or a fraction of such Units, subject to and as determined pursuant to
Section 3.3, for cash in an amount equal to the then Put Price.
3.2 Put Price.
---------
(a) Put Price. The price for each Unit purchased pursuant to the
---------
Liquidity Put (the "Put Price") shall not be less than the greatest of (i) the
Per Unit Tender Offer Price, (ii) the highest price per Unit paid by either SFOT
Acquisition I, SFOT Acquisition II or any SFEC Entity or SFEC Affiliate for any
Unit purchased by SFOT Acquisition I, SFOT Acquisition II or such SFEC Entity or
SFEC Affiliate (other than any Unit purchased (x) from an SFEC Entity or SFEC
Affiliate or (y) pursuant to the rights of SFOT Acquisition I and SFOT
Acquisition II contained in Article IX, Paragraph 2, of the Second Amended and
Restated Fund Limited Partnership Agreement), whether pursuant to the Tender
Offer, the Liquidity Put or otherwise, but only if such price was greater than
the price that SFOT Acquisition I and/or SFOT Acquisition II, as applicable, was
otherwise obligated to pay (including, without limitation, in connection with
the Accelerated Put provided for in the SFOT Acquisition I and SFOT Acquisition
II Guarantee) at the time of such purchase or (iii) the Formula Amount divided
by the Number of Limited Partner Units and multiplied by .9995.
(b) Payment of the Put Price. The amount in cash payable to a
------------------------
Unitholder in respect of each whole Unit purchased pursuant to the Liquidity Put
shall be equal to the (i) Put Price, less (ii) the Per Unit Liabilities Amount,
less (iii) any taxes required to be withheld under applicable law. A pro rata
portion of the foregoing amount will be paid in respect of each fraction of a
Unit purchased pursuant to the Liquidity Put. Such amount shall be paid to each
Unitholder of Units purchased pursuant to the Liquidity Put on the applicable
Liquidity Put Settlement Date, at the election of the Unitholder and at the
expense of SFOT Acquisition I or SFOT Acquisition II, by cashier's or certified
check or by wire transfer to an account specified by the Unitholder in the
Notice of Election to Exercise submitted by such Unitholder. If payment is made
by cashier's or certified check, such check shall be sent by overnight courier
for delivery by not later than 10:30 a.m. local time at the address of the payee
specified by the Unitholder in the Notice of Election to Exercise on the
applicable Liquidity Put Settlement Date and insured for the full amount of the
check. The Liquidity Put paying agent, if one is used, shall be a bank or trust
company or other responsible agent specified by SFOT Acquisition I or SFOT
Acquisition II. In addition, if by May 1 of a year in which a Liquidity Put
Settlement Date occurs, Fund II has not been paid in full any of the Minimum
Amount or Percentage Distribution or Base Rent (and any interest or Default
Interest) that is payable in respect of the prior year, then: (i) there shall be
added to the Put Price and paid by SFOT Acquisition I and/or SFOT
Acquisition II, as applicable, for each Unit or a fraction thereof then being
purchased pursuant to the Liquidity Put, the amount, if any (the "Additional
Amount"), that the Unitholder thereof would have, but has not, received prior to
the Liquidity Put Settlement Date if, prior to the Liquidity Put Settlement
Date, the Minimum Amount, Percentage Distribution, Base Rent, interest and/or
Default Interest to the Liquidity Put Settlement Date, as applicable, for the
19
<PAGE>
prior year had been (x) paid in full to Fund II, (y) distributed by Fund II to
its partners in accordance with the Fund II Limited Partnership Agreement and
(z) distributed by Fund to its partners in accordance with the Second Amended
and Restated Fund Limited Partnership Agreement; and (ii) the Additional Amount,
when actually distfibuted by Fund, will be paid to SFOT Acquisition I and/or
SFOT Acquisition II, as applicable. Payments not made when required shall
thereafter bear interest at the Default Rate.
3.3 Liquidity Put Number; Proration.
-------------------------------
(a) Liquidity Put Number. The number of Units or fractions thereof
--------------------
that SFOT Acquisition I and/or SFOT Acquisition II, as applicable, shall be
obligated to purchase in any year (the "Liquidity Put Number") shall be equal to
the greater of (i) 12 Units or (ii) "A" plus "B" less "C", where "A" equals the
greater of (x) 48 Units less the number of Units purchased pursuant to the
Tender Offer and (y) zero, "B" equals 12 Units multiplied by the number of full
calendar years elapsed since December 31, 1997 and, subject to the proviso in
the next sentence, "C" equals the number of Units purchased by SFOT Acquisition
I and/or SFOT Acquisition II pursuant to the Liquidity Put (but not by Knox
pursuant to the General Partner's Right of First Refusal) in all prior years;
provided, however, that the Liquidity Put Number shall never be greater than the
- -------- -------
number of Units not previously purchased by SFOT Acquisition I or SFOT
Acquisition II. In any year or years SFOT Acquisition I and/or SFOT
Acquisition II, as applicable, may (subject to Section 7.2(a)), but are not
obligated to, purchase pursuant to the Liquidity Put a number of Units that is
greater than the Liquidity Put Number for that year, provided that, the
additional number of Units so purchased will not reduce the Liquidity Put Number
for any subsequent year. An example of the computation of the Liquidity Put
Number is set forth in Exhibit 3.3(a).
(b) Proration.
---------
(i) If, on any Liquidity Put Election Date, the number of
Units offered for purchase pursuant to the Liquidity Put exceeds the Liquidity
Put Number (or, if greater, the number of Units SFOT Acquisition I and/or SFOT
Acquisition II, as applicable, then elects to purchase pursuant to the Liquidity
Put), SFOT Acquisition I and/or SFOT Acquisition II, as applicable, shall:
(A) (x) as the first priority, purchase "Estate Priority Units" (defined in
Section 3.3.(b)(ii) below) with respect to which a properly completed Notice of
Election to Exercise was timely submitted ("put") by Estates in the prior year
and not purchased (or, if there is not sufficient availability to purchase all
such Units, given the number of Units then being purchased pursuant to the
Liquidity Put ("availability"), prorate among such Units in proportion to the
number thereof put), and (y) then, as to any remaining availability and as the
second priority, purchase Estate Pniority Units (other than Estate Priority
Units covered by clause (x)) put by Estates (or, if there is not sufficient
availability to do so, prorate among such Estate Priority Units in proportion to
the number thereof put), and (B) to the extent that the number of Units
purchased pursuant to clause (A) is less than the Liquidity Put Number or such
greater number of Units SFOT Acquisition I and/or SFOT Acquisition II, as
applicable, otherwise elects to purchase pursuant to the Liquidity Put, as the
case may be, as the third priority, from the remaining Units put, select the
Units to be purchased on a pro rata basis (based on the number of such Units put
by each Unitholder). Except as provided in clause (A) of the immediately
preceding sentence, the fact that a Unit is put and not purchased in a year
shall not entitle the Unitholder to any Liquidity Put priority in any subsequent
year.
(ii) For the purposes of Section 3.3(b)(i), "Estate Priority
Units" means one-half of the sum of (A) the Units included in an individual's
estate (whether the owner of the Unit(s) or the grantor of a grantor trust that
owns the Unit(s)) for federal estate tax purposes and (B) the Units owned by the
20
<PAGE>
surviving spouse of the individual as of the date of the individual's death and
not included in the individual's estate for federal estate tax purposes.
(iii) Subject to Section 3.6, if applicable, on or before
April 22 of each year, SFOT Acquisition I and SFOT Acquisition II shall deliver
to Fund a copy of all Notices of Election to Exercise and accompanying documents
received by it for the year. If the proration provisions of this Section 3.3(b)
will be applicable, Fund shall, prior to May 15 of each year, instruct SFOT
Acquisition I and/or SFOT Acquisition II, as applicable, as to those Units that
are to be purchased Pursuant to the proration provisions of this Section 3.3(b)
and SFOT Acquisition I and SFOT Acquisition II shall be protected in relying on
such instructions.
3.4 Liquidity Notice Provisions.
---------------------------
(a) Put Price Notice. SFOT Acquisition I and SFOT Acquisition II
----------------
jointly shall give Fund and the Unitholders, in accordance with Section 14.4(b)
of this Agreement, written notice of the Put Price (subject to Section 3.6, if
applicable), the Liquidity Put Number and, if different than the number required
to be purchased, the number of Units SFOT Acquisition I and/or SFOT
Acquisition II, as applicable, elects to purchase pursuant to the Liquidity Put
(such election being revocable only for the purpose and to the extent of
increasing the number of Units to be purchased by SFOT Acquisition I and/or SFOT
Acquisition II) for each year on or before, subject to Section 3.6, if
applicable, March 31 of such year. Such notice shall be accompanied by (i) a
form of Notice of Election to Exercise and Form W-9 (or successor form), (ii)
subject to Section 3.6, if applicable, a copy of the financial statements and
related information required to be delivered pursuant to Section 11.8(a)(i)(A)
and (B) of this Agreement for the then last year and (iii) such additional
disclosures, if any, as SFOT Acquisition I and SFOT Acquisition II shall elect
to include.
(b) Liquidity Put Exercise Notice. Each Unitholder electing to
-----------------------------
exercise the Liquidity Put in any year with respect to any or all of his, her or
its Units shall, on the form of Notice of Election to Exercise, give to Fund and
to one of the Liquidity Put paying agents, if any, specified in the notice given
pursuant to Section 3.4(a) or SFOT Acquisition I or SFOT Acquisition II, as
applicable, irrevocable notice, to be received on or before, subject to
Section 3.6, if applicable, April 15 of such year (a "Liquidity Put Election
Date"), of such election to exercise.
(c) General Partner's Right of First Refusal Exercise Notice.
--------------------------------------------------------
Subject to Section 3.7, if applicable, on or before May 1 of each year, Knox
(or, if applicable, the successor to Knox having a General Partner's Right of
First Refusal) shall give to Fund, SFOT Acquisition I and/or SFOT
Acquisition II, as applicable, and any Unitholder that has submitted a Notice of
Election to Exercise, notice of election to exercise the General Partner's Right
of First Refusal for up to onehalf of the Units with respect to which Liquidity
Puts have been exercised in that year, specifying the number of Units with
respect to which the General Partner's Right of First Refusal is being
exercised.
(d) Fund Liquidity Put Notices.
--------------------------
(i) Per Unit Liabilities Amount Estimate. Subject to
------------------------------------
Section 3.6, if applicable, on or before March 15 of each year commencing in
1999, Fund shall provide SFOT Acquisition I and SFOT Acquisition II with its
good faith estimate of the Per Unit Liabilities Amount as of the applicable
Liquidity Put Settlement Date and SFOT Acquisition I and SFOT Acquisition II
shall include such estimate in the written notice that they deliver to Fund and
the Unitholders pursuant to Section 3.4(a).
21
<PAGE>
(ii) Fund Representation Notice. On the Business Day
--------------------------
immediately prior to the Liquidity Put Settlement Date in each year, Fund shall
deliver to SFOT Acquisition I and SFOT Acquisition II a written notice pursuant
to which Fund shall represent and warrant that as of the close of business on
the date of such notice (x) the notice contains a correct list of the record
owners of the number of Units indicated on such list and, to the knowledge of
Fund, except as indicated in such notice, the beneficial owners of such Units,
and (y) the Per Unit Liabilities Amount is as specified in such notice. The
obligations of SFOT Acquisition I and SFOT Acquisition II shall be conditioned
upon their receipt of such notice, and if any representation or warranty
contained in the notice delivered pursuant to this Section 3.4(d)(ii) is
incorrect, Fund will indemnify SFOT Acquisition I and/or SFOT Acquisition II, as
applicable, out of amounts otherwise payable to its partners other than SFOT
Acquisition I and SFOT Acquisition II. SFOT Acquisition I and SFOT
Acquisition II shall not be required to accept for purchase any Units put by any
Person, unless such Person agrees, in an agreement reasonably satisfactory to
SFOT Acquisition I and SFOT Acquisition II, to indemnify SFOT Acquisition I and
SFOT Acquisition II against any losses, liabilities or expenses arising out of
such Person's failure to own beneficially or of record such Units. SFOT
Acquisition I and SFOT Acquisition II, on the one hand, and Fund, on the other
hand, shall negotiate in good faith appropriate escrow or similar arrangements
if Fund II or Fund has outstanding any contingent liabilities that would
increase the Per Unit Liabilities Amount as of the applicable Liquidity Put
Settlement Date. If the Per Unit Liabilities Amount disclosed in the notice
delivered pursuant to this Section 3.4(d)(ii) is greater than that disclosed in
the estimate delivered pursuant to Section 3.4(d)(i) and the difference is
material in relation to the applicable Put Price, then SFOT Acquisition I and
SFOT Acquisition II may in their exclusive judgment circulate such revised
information to the Unitholders, in which case the timing of the Liquidity Put
Settlement Date may be delayed for a reasonable period of time (which in no
event shall be shorter than the period of time required by applicable law, if
any) so that such Unitholders may review such revised information.
3.5 Exchange Act. To the extent required by the Exchange Act and
------------
the regulations thereunder, (i) the Liquidity Put will be conducted in
compliance with the applicable provisions of the Exchange Act and the
regulations thereunder and (ii) the foregoing provisions of Article III will be
modified to the extent necessary, and without changing in any material respect
the economic effect to Fund limited partners (other than SFOT Acquisition I and
SFOT Acquisition II), so that the Liquidity Put can be so conducted. To the
extent they may lawfully so agree, SFOT Acquisition I and SFOT Acquisition II
agree to (x) not tender any Units they own from time to time in any Liquidity
Puts or (y) adjust the proration provisions of Section 3.3(b) so that Fund
limited partners (other than SFOT Acquisition I and SFOT Acquisition II) have
the same rights to have their Units purchased as they would have had were SFOT
Acquisition I and SFOT Acquisition II lawfully permitted to so agree.
3.6 Put for 2027. If the End-of-Term Option is not exercised and
------------
if, on October 31, 2026, SFOT Acquisition I and SFOT Acquisition II together do
not own at least 50% of the Units, the following provisions will be applicable
to the Liquidity Put for 2027: (i) the notice required to be given by Fund
pursuant to Section 3.4(d)(i) will be given on or before November 1, 2026,
(ii) the notice required to be given by Section 3.4(a) for the year ended
December 31, 2026 will be given on or before November 15, 2026, which notice
shall contain, in lieu of the Put Price, the good faith estimate of SFOT
Acquisition I and SFOT Acquisition II of the Put Price for 2027, based on the
facts then known, and be accompanied by the financial statements with respect to
the quarter and nine-month period ended September 30, 2026 required by
Section 11.8(a)(ii) and an estimate of the statement required by
Section 11.8(a)(i)(B) (with the final of such statement being provided with the
audited financial statements for 2026 required by Section 11.8(a)(i)(A)) (iii)
each Unitholder electing to exercise the Liquidity Put for 2027 must give the
22
<PAGE>
notice required by Section 3.4(b) so that it is received on or before
December 15, 2026 and such notice must be irrevocable; (iv) the notice to be
given by Knox (or, if applicable, the successor to Knox having the General
Partner's Right of First Refusal) pursuant to Section 3.5(c) must be given on or
before December 31, 2026; and (v) the Put Price for Units to be purchased
pursuant to the Liquidity Put for 2027 will be determined when such Put Price
would otherwise have been determined, had the dates otherwise applicable not
been accelerated as provided in this Section 3.6, and the Liquidity Put
Settlement Date for Units purchased pursuant to that Liquidity Put shall be
May 15, 2027.
3.7 Adjustments. If there are increases in any Put Price and/or
-----------
required additional puts pursuant to Section 11.7, the increased Put Price and
additional puts shall be deemed to be pursuant to this Article III for purposes
of the Guarantees.
3.8 General Partner's Right of First Refusal with Respect to
--------------------------------------------------------
Liquidity Put. The obligation of SFOT Acquisition I and SFOT Acquisition II to
- -------------
purchase any Units pursuant to the Liquidity Put shail be subject to the General
Partner's Right of First Refusal with respect to onehalf of the Units that
would, but for exercise of the General Partner's Right of First Refusal, be
purchased pursuant to the Liquidity Put.
3.9 Release from Unitholders Exercising Puts. The obligations of
----------------------------------------
SFOT Acquisition I and SFOT Acquisition II to purchase the Units of any
Unitholder pursuant to this Article III shall be subject to the receipt by SFEC
of a release from such Unitholder substantially in the form of Exhibit 11.3(a).
ARTICLE IV
RIDE AGREEMENT; 1998 IMPROVEMENTS; THE MEGA RIDES
4.1 Ride Agreement. On the Effective Date, the Ride Agreement shall
--------------
terminate and be of no further force and effect. SFOT II shall use all
commercially reasonable efforts to cause Mr. Freeze to be open and operative at
the opening of the Amusement Park in 1998.
4.2 Mega Rides; 1998 Improvements. SFOT II will install mega rides
-----------------------------
in the Amusement Park in 1999 and 2000, and SFOT II will use all commercially
reasonable efforts to assure that the first such ride will be open for the full
season in 1999 and the second such ride will be open for the full season in
2000. Each Mega Ride shall have an installed and themed cost of not less than
$10 million; in addition, SFOT II shall cause Flags II to expend at least $3
million on capital improvements to the Amusement Park in 1998, including
expenditures relating to refurbishing and making Mr. Freeze fully operational.
ARTICLE V
FUND II; RESTRUCTURE OF FLAGS
5.1 Formation of Six Flags Fund II, Ltd. On the Effective Date,
-----------------------------------
Fund, as limited partner, and Flags' Directors, L.L.C., as general partner,
shall enter into an agreement of limited partnership substantially in the form
of Exhibit 5.4.1, providing for the formation of Fund II as a Texas limited
partnership, and pursuant to such agreement of limited partnership, Fund shall
contribute to Fund II its interest in Flags II. Fund shall have a 99% interest
in Fund II and Flags' Directors, L.L.C. shall have a 1% in Fund II. Flags'
23
<PAGE>
Directors, L.L.C. shall timely make all filings and give all notices required to
effectuate the creation of Fund II, including filing a Certificate of Limited
Partnership and all other necessary documents with the Texas Secretary of State
in substantially the form of Exhibit 5.1.2.
5.2 The Flags II Limited Partnership Agreement. Fund II, as limited
------------------------------------------
partner, SFOT II, as sole managing general partner, and FD-II, L.L.C., as sole
co-general partner, shall enter into the Flags II Limited Partnership Agreement
in the form of Exhibit 5.1.1.
5.3 TRLPA Election. To the extent necessary, and contemporaneously
--------------
with the execution of the Flags II Limited Partnership Agreement, Flags II will
adopt and agree to be governed by the provisions of the Texas Revised Limited
Partnership Act.
ARTICLE VI
THE LEASE
6.1 Distribution of the Land. Immediately following the actions
------------------------
contemplated by Article V, Flags II will distribute the Land to Fund II by
executing and delivering the Land Deed.
6.2 The Lease. Immediately after the distribution of the Land
---------
pursuant to Section 6.1, Fund II as landlord, and Flags II, as tenant, shall
enter into the Lease in the form of Exhibit 6.2, pursuant to which, among other
things, (a) Fund II will lease to Flags II all of the Land, and (b) Flags II
will pay the Base Rent to Fund II. Fund II may cause the Lease or, at the
election of Fund II, an appropriate memorandum of lease to be recorded in the
land records of the County of Tarrant, State of Texas.
ARTICLE VII
END-OF-TERM OPTION; ALTERNATIVES IF OPTION NOT EXERCISED;
SFOT II CEASING TO BE THE MANAGING GENERAL PARTNER OF FLAGS II
7.1 End-of-Term Option. On a day that is between the third and
------------------
eighth Business Day of 2028 designated by SFOT Acquisition II (the "End-of-Term
Option Date"), on not less than two Business Days prior notice delivered to
Fund, provided no Default (other than "Another Material Default" (as defined in
--------
the Flags II Limited Partnership Agreement)) has occurred and is then continuing
or that SFOT II has not then been removed as the managing general partner of
Flags II after a Default, and on the terms provided in this Article VII, SFOT
Acquisition II shall have the option (the "End-of-Term Option") to (i) require
Fund to redeem, for an amount in cash for each whole Unit equal to the
End-of-Term Option Price, all of the Units in Fund not then owned by SFOT
Acquisition I, SFOT Acquisition II, or any other SFEC Affiliate that owns any
Units as permitted by Section 11.18 (with each fraction of a Unit not owned by
SFOT Acquisition I and SFOT Acquisition II being redeemed for the End-of-Term
Option Price times the fraction in question) and (ii) acquire the co-general
partner's interest in Flags II, the general partner's general partner interest
in Fund and Flags' Directors, L.L.C.'s general partner interest in Fund II, SFOT
Acquisition II may assign its rights under this Article VII (and upon such
assignment such assignee shall have all of the rights of SFOT Acquisition II
under this Article VII) to any Person, but without reducing its obligations
under this Article VII, provided that, (i) if the Net Worth Standard is not then
-------- ----
met, the assignee thereby agrees, in a writing reasonably acceptable in form and
substance to Fund, to become jointly and severally liable with SFOT Acquisition
II for its obligations under this Article VII, (ii) the assignee takes such
rights subject to the provisions of this Agreement and the Related Agreements,
24
<PAGE>
and (iii) the Guarantors agree, in a writing reasonably acceptable in form and
substance to Fund, that their obligations under their respective Guarantees are
not diminished by the assignment and continue undiminished with respect to the
End-of-Term Option.
7.2 End-of-Term Option Price, Acquisition of General Partner
--------------------------------------------------------
Interests in Fund and Flags II.
- ------------------------------
(a) End-of-Term Option Price. The End-of-Term Option price for each
------------------------
whole Unit (the "End-of-Term Option Price") is "A" minus "B", where "A" is
(i) the greater of (x) the Aggregate Tender Offer Amount or (y) the Aggregate
Tender Offer Amount multiplied by the CPI Adjustment for the year 2028 (or, if
the End-of-Term Option is accelerated, the then next year) multiplied by (ii)
.9995 and divided by (iiii) the Number of Limited Partner Units, and "B" is the
Per Unit Liabilities Amount. The amount in cash to be paid to a Unitholder in
respect of each Unit redeemed pursuant to the End-of-Term Option is the
End-of-Term Option Price less any taxes required to be withheld under applicable
law.
(b) Acquisition of General Partner Interest in Fund. Concurrently
-----------------------------------------------
with the payment of the End-of-Term Option Price to each Unitholder whose Units
are being redeemed, SFOT Acquisition II shall acquire from Knox (or, if
applicable, any successors of Knox) the general partner interest in Fund for an
aggregate amount in cash (less any taxes required to be withheld) equal to the
product of (i) .0005 multiplied by (ii) the End-of-Term Option Price, multiplied
(iii) the Number of Limited Partner Units and divided by (iv) .9995.
(c) Acquisition of General Partner Interest in Fund II.
--------------------------------------------------
Concurrently with the payment of the End-of-Term Option Price by Fund to each
Unitholder whose Units are being redeemed, SFOT Acquisition II shall acquire the
general partner interest of Flags' Directors, L.L.C. (or, if applicable, any
successor to Flags' Directors, L.L.C.), and Flags' Directors, L.L.C. agrees to
transfer to SFOT Acquisition II its general partner interest in Fund II for an
aggregate amount in cash (less any taxes required to be withheld) equal to
1.0101 multiplied by the End-of-Term Option Price multiplied by 2.40444 (which
is the number of Units equal to 1% of Fund).
(d) Acquisition of Co-General Partner's Interest in Flags II.
--------------------------------------------------------
Concurrently with the payment of the End-of-Term Option Pnice to each Unitholder
whose Units are being redeemed, SFOT Acquisition II shall acquire the co-general
partner interest of FD-II in Flags II for $100.
(e) Illustration of End-of-Term Option Transactions. An
-----------------------------------------------
illustration of a calculation of the End-of-Term Option Price and the amounts
for which the general partner interest in Fund and the general partner's
interest in Fund II will be redeemed or acquired is set forth in Exhibit 7.2 to
this Agreement.
7.3 Notice of Exercise of End-of-Term Option. As a condition of its
----------------------------------------
right to exercise the End-of-Term Option (except as otherwise provided by
Section 7.6), SFOT Acquisition II must give Fund and, pursuant to Section 14.4,
its limited partners irrevocable written notice of its exercise of the
End-of-Term Option not later than December 31, 2025, provided that, SFOT
Acquisition II will lose its right to exercise the End-of-Term Option if it has
not given such notice within 30 days, time being of the essence, after notice
from Fund that it must so exercise or lose its End-of-Term Option, which notice
by Fund may be given at any time on or after December 1, 2025.
25
<PAGE>
7.4 Payment of End-of-Term Option Price.
-----------------------------------
(a) Payment of End-of-Term Option Price. On the End-of-Term, Option
-----------------------------------
Date, SFOT Acquisition II shall pay to Fund as a capital contribution and in
immediately available funds the full amount of the aggregate End-of-Term Option
Price for all Units not then owned by SFOT Acquisition I or SFOT Acquisition II
or any other SFEC Entity or SFEC Affiliate, which amount shall be used by Fund
to forthwith redeem and pay in full for the Units to be redeemed pursuant to the
End-of-Term Option on the End-of-Term Option Date.
(b) Percentage Distribution Adjustment. In addition to the amounts
----------------------------------
provided for above in this Article VII, if the End-of-Term Option is exercised,
SFOT II shall cause Flags II to, and Flags II shall, pay in cash, concurrently
with the payment of the End-of-Term Option Price, to Flags' Directors, L.L.C.,
the general partner of Fund II, and the limited partners of Fund other than SFOT
Acquisition I and SFOT Acquisition II or any other SFEC Entity or SFEC
Affiliate, in each case as of the close of business on December 31, 2027, the
amount they would have received, but have not then received, had the Percentage
Distribution for 2027 been paid in full to Fund II prior to December 15, 2027,
distributed by Fund II to its partners in accordance with the Fund II Limited
Partnership Agreement, and distributed by Fund to its partners in accordance
with the Second Amended and Restated Fund Limited Partnership Agreement.
7.5 Alternatives if End-of-Term Option Not Exercised or if SFOT II
--------------------------------------------------------------
Ceases to be the Managing General Partner of Flags II.
- -----------------------------------------------------
(a) No Indebtedness; Capital Leases; Operating Capital Asset Leases
---------------------------------------------------------------
or Liabilities. If the End-of-Term Option is not exercised, or if SFOT II
- --------------
ceases to be the managing general partner of Flags II by resignation or removal
under circumstances where Fund II (as the limited partner of Flags II) was
entitled to remove the managing general partner of Flags II because there was a
"Default" (as defined in the Flags II Limited Partnership Agreement), the SFEC
Entities will, without thereby causing any non-compliance with this Agreement or
any Related Agreement, jointly and severally cause Flags II to have no
(i) Indebtedness (including Capital Leases), (ii) current liabilities (excluding
the current portion of any such Indebtedness) at December 31, 2027 in excess of
its current assets at December 31, 2027 (or, in each case, such earlier date as
is applicable), in each case as determined in accordance with GAAP, or (iii)
except to the extent Fund requests to the contrary, Operating Capital Asset
Leases. Excluded Revenues may not be utilized to comply with the foregoing
sentence and, in complying with the foregoing sentence, Capital Leases shall be
paid off, with Flags II retaining the property or asset leased.
(b) Extension of Flags II Limited Partnership Agreement. If SFOT
---------------------------------------------------
Acquisition II does not timely exercise the End-of-Term Option, FD-II, SFOT II
and Fund Il may, but are not obligated to, extend the Flags II Limited
Partnership Agreement and extend the arrangements with SFOT Employee on mutually
agreed terms.
(c) SFOT Acquisition I and SFOT Acquisition II Own More Than 50% of
---------------------------------------------------------------
the Units. If the End-of-Term Option is not exercised and, after giving effect
- ---------
to the purchase of the Units required to be purchased by SFOT Acquisition I
and/or SFOT Acquisition Il (exclusive of the Units as to which the General
Partner's Right of First Refusal has been exercised) pursuant to the Liquidity
Put for the year ended December 31, 2026, as provided in Section 3.6, SFEC
Entities and SFEC Affiliates permitted to do so own more than 50% of the Units,
(i) the Amusement Park as it then exists (including the Land) will be sold (and
may, at the election of Fund II, be sold by a Person (e.g., a broker or agent)
26
<PAGE>
designated by Fund II), (ii) effective immediately prior to the sale, without
any payment or other consideration, SFOT II will no longer be a general partner
of Flags II or have any interest, including not having any interest in
distributions (whether in respect of Priority Management Fee Distributions or
Percentage Distributions or otherwise), including having no interest in
distributions on any liquidation or dissolution, in Flags II (except in respect
of tax allocations to the time it ceases to be a general partner),
(iii) Flags II will wind up and dissolve, distributing all of its assets in
accordance with the Flags II Limited Partnership Agreement, (iv) 100% of the
proceeds of the sale of the Amusement Park will be paid to Fund II, (v) Fund II
will wind up and dissolve, distributing all of its assets (including such
proceeds paid to it) in accordance with the Fund II Limited Partnership
Agreement, and (vi) Fund will wind up and dissolve, distributing all of its
assets (including its 99% share of such proceeds) in accordance with the Second
Amended and Restated Fund Limited Partnership Agreement. If the Amusement Park
is to be disposed of pursuant to this Section 7.5(c), then (A) SFOT
Acquisition I, SFOT Acquisition II and any other SFEC Entity or SFEC Affiliate
shall be permitted to bid for the Amusement Park, (B) such bid will be
considered in good faith by Fund II, and (C) such disposition shall be on terms
(including price) no less favorable to Fund than would be obtainable in an arms
length transaction with an unaffiliated third party.
(d) SFOT Acquisition I and SFOT Acquisition II Own Less Than 50% of
---------------------------------------------------------------
the Units. If the End-of-Term Option is not exercised and, after giving effect
- ---------
to the purchase of the Units required to be purchased by SFOT Acquisition I
and/or SFOT Acquisition II (exclusive of Units as to which the General Partner's
Right of First Refusal has been exercised) pursuant to the Liquidity Put for the
year ended December 31, 2026, as provided in Section 3.6, SFEC Entities and SFEC
Affiliates permitted to do so own 50% or less of the Units, then, upon notice by
Fund II, given effective at any time on or after the close of business
December 31, 2027, without any payment or other consideration, (i) SFOT II will
no longer be the managing general partner of Flags II or have any interest in
Flags II, including any interest in distributions as provided in Section 7.5(c)
(except in respect of tax allocations to the time it ceases to be a general
partner) and (ii) Fund II may, without consultation with SFOT II or any other
SFEC Entity or SFEC Affiliate, determine the manner in which the Amusement Park
shall be managed or disposed of (and if the Amusement Park is disposed of in
accordance with this Section 7.5(d), the provisions of Section 7.5(c)(i) through
(vi) shall apply). If the Amusement Park is to be disposed of pursuant to this
Section 7.5(d), then (A) SFOT Acquisition I, SFOT Acquisition II and any other
SFEC Entity or SFEC Affiliate shall be permitted to bid for the Amusement Park,
(B) such bid will be considered in good faith by Fund II and (C) such
disposition shall be on terms (including price) no less favorable to Fund and
its partner than would be obtainable in an arms length transaction with an
unaffiliated third party.
(e) Purchase by SFEC Entity or SFEC Affiliate. If pursuant to
------------------------------------------
Section 7.5(c) or 7.5(d) the Amusement Park is to be sold to any SFEC Entity or
SFEC Affiliate, then in lieu of purchasing the Amusement Park, such SFEC Entity
or SFEC Affiliate may (i) require Fund to redeem all of the Units not then owned
by SFOT Acquisition I or SFOT Acquisition II (with the aggregate redemption
price for such Units being paid by such SFEC Entity or SFEC Affiliate) and (ii)
acquire the general partner's interest in Fund and the general partner's
interest in Fund II and the co-general partner's interest in Flags II, in each
case at the price such Persons would have received had such SFEC Entity or SFEC
Affiliate purchased the Amusement Park as provided in Section 7.5(c) or 7.5(d).
7.6 Acceleration of End-of-Term Option in the Event of Total
--------------------------------------------------------
Condemnation or Equivalent Casualty. As is more fully provided in the Flags II
- -----------------------------------
Limited Partnership Agreement and the Lease, in the event of a (i) total
condemnation or condemnation(s) that renders it economically impracticable to
operate the Amusement Park on the Land, Fund II shall be entitled to retain all
27
<PAGE>
condemnation or other proceeds in respect of such condemnation and the
End-of-Term Option shall be accelerated and exercised or (ii) casualty such that
it is economically impracticable to repair and operate the Amusement Park on the
Land (such as contamination of the Land by Hazardous Materials so that it may
not be safely occupied and a clean-up or remediation is economically
impossible), Fund II shall be entitled to retain all insurance proceeds with
respect thereto, if any, and at the option of either Fund II or Flags II,
exercised by notice to the other, the End-of-Term Option shall be accelerated
and exercised. SFOT Acquisition I and SFOT Acquisition II agree to be bound by
the preceding sentence. Fund II shall not distribute to its partners, dispose of
or otherwise use any condemnation proceeds or insurance proceeds to which it
shall be entitled pursuant to this paragraph.
7.7 Acceleration of End-of-Term Option in the Event of Acquisition
--------------------------------------------------------------
of All Units.
- ------------
(a) If at any time the SFEC Entities shall have acquired all of the
Limited Partner Units, SFOT Acquisition II shall have the right to accelerate
the End-of-Term Option and to purchase the general partner interest in Fund and
Fund II and the co-general partner interest in Flags II. The purchase price for
the general partner interest in Fund shall equal (i) the Aggregate Tender Offer
Amount multiplied by the CPI Adjustment for the then next year, multiplied
by (ii) .0005.
(b) The purchase price for the general partner interest in Fund II
shall be equal to (a) (i) the Aggregate Tender Offer Amount multiplied by the
CPI Adjustment for the then next year, multiplied by (ii) .9995, divided by
(iii) the Number of Limited Partner Units, multiplied by (iv) 1.0101, multiplied
by (v) 2.40444, plus (b) the present value (at a discount rate equal to then
current Prime) of the anticipated cash distributions from the Minimum Amount
distributions and Base Rent (plus an assumed 3% annual CPI adjustment) which
would have been made by Fund II to the general partner of Fund II during the
remaining period of this Agreement from the date of the exercise of option
granted in this Section 7.7 through December 31, 2027.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
8.1 Representations and Warranties of the SFEC Entities. In
---------------------------------------------------
addition to other representations and warranties of the SFEC Entities contained
elsewhere in this Agreement, SFEC (as to all of the SFEC Entities), SFTP (as to
itself, SFOT II, and Flags II), SFOT II (as to itself), SFOT Employee (as to
itself), SFOT Acquisition I (as to itself) and SFOT Acquisition II (as to
itself) further represent and warrant to Fund, Fund II and Flags' Directors,
L.L.C. that the following statements are true:
(a) Organization and Authority. Each of the SFEC Entities is a
--------------------------
corporation duly formed, validly existing and in good standing under the laws of
its respective state of incorporation, as applicable. Flags II is a limited
partnership duly formed and validly existing under the laws of the State of
Texas. Each of the SFEC Entities has all requisite corporate power and authority
to execute and deliver this Agreement and the Related Agreements to which it is
a party and to perform its obligations hereunder and thereunder. As of the
Effective Date, SFOT II will be duly qualified and in good standing to conduct
business under the laws of the State of Texas and has all requisite corporate
power and authofity and all licenses, permits and approvals necessary to enable
it to perform its obligations under this Agreement and as the managing general
partner of Flags II.
28
<PAGE>
(b) Authority with Respect to this Agreement and the Related
--------------------------------------------------------
Agreements Enforceability. All necessary corporate action required to have been
- -------------------------
taken by or on behalf of any of the SFEC Entities by applicable law or its
respective charter documents has been taken to authorize the execution and
delivery by each SFEC Entity of, and performance by each SFEC Entity of its
obligations under, this Agreement and the Related Agreements to which it is to
be a party. This Agreement constitutes the legal, valid and binding agreement of
each of the SFEC Entities and Flags II, and each of the Related Agreements, when
executed and delivered, will constitute the legal, valid and binding agreement
of each of the SFEC Entities party thereto, enforceable against each of them in
accordance with its terms, except insofar as such enforceability may be limited
by bankruptcy, insolvency, moratorium and similar laws of general application
relating to or affecting creditors' rights generally and except for the
limitations imposed by general principles of equity.
(c) Consents and Approvals. No consent, approval or authorization
----------------------
of or declaration, filing or registration with, any government or regulatory
authority or any other Person (either governmental or private) is required in
connection with the execution and delivery of this Agreement by any of the SFEC
Entities and Flags II or the execution and delivery of the Related Agreements by
each of the SFEC Entities to be party thereto or the consummation by each of
them of the transactions provided for herein or therein.
(d) No Breach. The execution and delivery of this Agreement by the
---------
SFEC Entities and Flags II, the execution and delivery of the Related Agreements
by each of the SFEC Entities to which it is a party and the performance by each
of them of their obligations hereunder and thereunder does not and will not
violate, result in a breach of any of the terms or provisions of, constitute a
default under or conflict with any apareement to which any of the SFEC Entities
is a party, the certificate of incorporation, bylaws or operating agreement of
any of the SFEC Entities, any law, rule or regulation applicable to any of the
SFEC Entities or any judgment, decree, order or award of any court, governmental
body or arbitrator applicable to any of the SFEC Entities or Flags II or the
assets of any of them (other than any violation, breach, default or conflict
that would not have a matefial adverse effect on any of the SFEC Entities or
Flags II or any adverse effect on the transactions contemplated by this
Agreement and the Related Agreements).
(e) Broker's Fees. No broker, finder or investment banker is
-------------
entitled to any brokerage, finder's or other fee or commission, payable by Fund,
Fund II, or Flags II, in connection with the transactions contemplated by this
Agreement and the Related Agreements, based upon arrangements or agreements made
by or on behalf of any of the SFEC Entities or Fund II.
(f) 1997 Distributions by and Taxable Income of Flags II. During
----------------------------------------------------
1997, Flags II made only the following distributions: $7,551,434.03 to Fund and
$17,620,012.75 to SFOT II, of which the January 1997 distribution in respect of
December 1996 was $37,818.39 to Fund and $88,242.91 to SFOT II. Flags II does
not expect to make any further distfibutions prior to the end of 1997. The SFEC
Entities currently believe the taxable income of Flags II for 1997 will be
approximately $22 million.
(g) No Material Undisclosed Tanigible Assets of Flags II. To the
----------------------------------------------------
knowledge of the SFEC Entities, there are no tangible assets of Flags II that
(i) are not directly related to the operations of the Amusement Park and (ii)
have a value that is material in relation to the Amusement Park.
(h) Indenture Termination Date. The termination date of the
--------------------------
Indenture was at its initial date and is as of the date of this Agreement during
the year 2005.
29
<PAGE>
(i) Inventory and Receivables at December 31, 1997; Inventory
---------------------------------------------------------
Purchased from Affliates. At December 31, 1997, the inventory and receivables of
- ------------------------
Flags II, after giving effect to reserves, writedowns, allowances and charges,
are expected to be approximately $1.9 million and approximately $700,000,
respectively. Any inventory sold to Flags II by a Controlled SFEC Affiliate or
an SFEC Affiliate on or after January 1, 1998 to the Effective Date will be on
the terms provided for such transactions set forth in Section 11.7(a).
(j) Good Faith. The SFEC Entities have negotiated in good faith with
----------
Fund and Flags' Directors, L.L.C. with respect to this Agreement, the Related
Agreements and the transactions contemplated hereby and thereby.
(k) TWE and TWX Guarantee. The TWX board of directors has approved
---------------------
the execution and delivery of the TWE and TWX Guarantee.
8.2 Representations and Warranties of Fund and Related Entities.
-----------------------------------------------------------
Fund (as to itself), Knox (solely in his capacity as general partner of Fund),
Flags' Directors, L.L.C. (as to itself), and FD-II (as to itself), represents
and warrants to each of the SFEC Entities that the following statements are
true:
(a) Organization and Authority. Fund is a limited partnership duly
--------------------------
organized and valid1y existing under the laws of the State of Texas. Each of
Flags' Directors, L.L.C. and FD-II is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Texas. Fund has all requisite partnership power and authority to execute and
deliver this Agreement and the Related Agreements to which it is to be a party
and to perform its obligations hereunder and thereunder. Subject to receipt of
the Fund Limited Partners Approval, Flags' Directors, L.L.C. and FD-II each has
all requisite power and authority to execute and deliver this Agreement, the
Flags II Limited Parinership Agreement and any other Related Agreements to which
it is to be a party and to perform its obligations hereunder and thereunder.
(b) Authority with Respect to this Agreement and the Related
--------------------------------------------------------
Agreements; Enforceability. All necessary partnership action, required to have
- --------------------------
been taken by or on behalf of Fund by applicable law, the certificate of limited
partnership of Fund or the Fund Limited Partnership Agreement (subject to
receipt of the Fund Limited Partners' Approval) has been taken to authorize the
execution and delivery by Fund of, and the performance by Fund of its
obligations under, this Agreement and the Related Agreements to which it is to
be a party. All necessary action, required to have been taken by or on behalf of
each of Flags' Directors, L.L.C. and FD-II by applicable law or its respective
operating agreement has been taken to authorize the execution and delivery by
Flags' Directors, L.L.C. and FD-II, and the performance by Flags' Directors,
L.L.C. and FD-II of its obligations under this Agreement and the Related
Agreements to which it is to be a party. Each of this Agreement and the Related
Agreements to which it is or is to be a party constitutes, or when executed and
delivered will constitute, the legal, valid and binding agreement of Fund,
Flags' Directors, L.L.C., and FD-II enforceable against each of them in
accordance with its terms, except insofar as such enforceability may be limited
by bankruptcy, insolvency, moratorium and similar laws of general application
relating to or affecting creditors' rights generally and except for the
limitations imposed by general principles of equity.
(c) Fund Limited Partnership Agreement. Exhibit 8.2(c) to this
----------------------------------
Agreement is a true and complete copy of the Fund Limited Partnership Agreement,
including exhibits (if any), as amended. There are no other amendments or
modifications to the Fund Limited Partnership Agreement.
30
<PAGE>
(d) Consents and Approvals. No consent, approval or authorization of
----------------------
or declaration, filing or registration with, any governmental or regulatory
authority or any other Person (either governmental or private) is required in
connection with the execution and delivery of this Agreement and the Related
Agreements by Fund, Knox (solely in his capacity as general partner of Fund),
Flags' Directors, L.L.C. or FD-II, or, subject to receipt of the Fund Limited
Partners' Approval, the consummation by each of them of the transactions
provided for herein and therein.
(e) No Breach. The execution and delivery of this Agreement by each
---------
of Fund, Knox (solely in his capacity as general partner of Fund), Flags'
Directors, L.L.C. and FD-II, the execution and delivery of the Related
Agreements to which it is a party by Fund, Knox (solely in his capacity as
general partner of Fund), Flags' Directors, L.L.C., and FD-II, and, subject to
receipt of the Fund Limited Partners' Approval, the performance by each of them
of their respective obligations hereunder and thereunder, does not and will not
violate, result in a breach of any of the terms or provisions of, constitute a
default under or conflict with any agreement to which Fund, Knox (solely in his
capacity as general partner of Fund), Flags' Directors, L.L.C. or FD-II is a
party, the certificate of limited partnership of Fund, the Fund Limited
Partnership Agreement, the Second Amended and Restated Fund Limited Partnership
Agreement, the operating agreements of each of Flags' Directors, L.L.C. and
FD-II, any law, rule or regulation applicable to Fund, Knox (solely in his
capacity as general partner of Fund), Flags' Directors, L.L.C. or FD-II, or any
judgment, decree, order or award of any court, governmental body or arbitrator
applicable to Fund, Knox (solely in his capacity as general partner of Fund),
Flags' Directors, L.L.C., or FD-II or the assets of any of them (other than any
violation, breach, default or conflict that would not have a material adverse
effect on any of Fund, Knox (solely in his capacity as general partner of Fund),
Flags' Directors, L.L.C., or FD-II or any adverse effect on the transactions
contemplated by this Agreement and the Related Agreements).
(f) Units and Unitholders. As of the date hereof, there are
---------------------
240.32422 Units outstanding that are held of record by approximately 240 limited
partners of Fund. The Units held by the limited partners and by Jack D. Knox, as
the special limited partner of Fund, represent, in the aggregate, a 99.95%
interest in Fund.
(g) Liabilities. Fund has no liabilities other than (i) current
-----------
liabilities incurred in the ordinary course of business consistent with past
practice relating to its interest in Flags II and (ii) Transaction-Related
Expenses (which amounts in clauses (i) and (ii) Fund will, prior to the Tender
Offer Settlement Date, pay or cause to be assumed and discharged by the Texas
Transition Trust or, if not, cause to be included in the Per Unit Liabilities
Amount).
(h) Broker's Fees. Except for (i) amounts already paid by Fund, (ii)
-------------
the payment by Fund to Allen & Company of an agreed fee (which amount will be
paid before the Tender Offer Settlement Date or included in the Per Unit
Liabilities Amount), and (iii) the reimbursement of expenses of Allen & Company
by Fund (which reimbursement obligation Fund will, prior to the Tender Offer
Settlement Date, pay or cause to be assumed and discharged by the Texas
Transition Trust or, if not, cause to be included in the Per Unit Liabilities
Amount), no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission payable by Fund, Fund II, Flags II or any
SFEC Entity in connection with the transactions contemplated by this Agreement
and the Related Agreements, based upon any arrangement or agreements made by or
on behalf of Fund, Knox (solely in his capacity as general partner of Fund),
Flags' Directors, L.L.C. or FD-II.
31
<PAGE>
(i) FIRPTA. Fund is not a foreign person as such term is defined in
------
Section 1445 of the Code.
(j) Good Faith. Fund, Knox (solely in his capacity as general
----------
partner of Fund), Flags' Directors, L.L.C., and FD-II have negotiated in good
faith with the SFEC Entities with respect to this Agreement, the Related
Agreements and the transactions contemplated hereby and thereby.
(k) Other Agreements. Fund has furnished to SFEC or its
----------------
representatives a true, correct and complete copy of the Overall Agreement,
dated as of October 9, 1997, as amended to date, including all side letters and
opinions given in connection therewith (the "Premier Agreement"), among Fund and
its Affiliates and Premier and its Affiliates, as in effect immediately prior to
the date hereof (except the letter agreement between Fund, et al. and Premier,
et al., dated November 6, 1997, which shall be furnished immediately after the
Effective Date). Immediately preceding the execution of this Agreement, the
Premier Agreement is being terminated by Fund in accordance with its terms.
Except for the Premier Agreement, Fund has not entered into any agreement (other
than with respect to the engagement and indemnification of members of Fund's
Transition Team) with respect to the ownership or operation of the Amusement
Park.
(l) Title Insurance. Flags II has received an owner policy of title
---------------
insurance covering the Land in the insured amount of $70 million, and a copy of
such policy has been delivered to SFEC.
ARTICLE IX
STANDSTILL
9.1 Certain Rights And Obligations of Units Acquired by SFOT
--------------------------------------------------------
Acquisition I and SFOT Acquisition II Pursuant to this Agreement. Each of SFOT
- ----------------------------------------------------------------
Acquisition I and SFOT Acquisition II will be admitted as a substitute special
Limited Partner of Fund with respect to all Units (including fractions of Units)
acquired by it in compliance with Anicles II and III of this Agreement or
paragraph 2 of Article IX of the Second Amended and Restated Fund Limited
Partnership Agreement.
9.2 Standstill.
----------
(a) SFOT Acquisition I and SFOT Acquisition II. Except as permitted
------------------------------------------
in Section 11.18, all Units required or permitted to be acquired by SFOT
Acquisition I or SFOT Acquisition II pursuant to the Tender Offer, the Liquidity
Put or otherwise pursuant to this Agreement or the Second Amended and Restated
Fund Limited Partnership Agreement will be acquired by SFOT Acquisition I or
SFOT Acquisition II.
(b) Standstill. Except as permitted in Section 11.18, prior to the
----------
End-of-Term Option Date, the SFEC Entities will not, and the SFEC Entities will
cause each SFEC Affiliate to not, do any of the following: (i) acquire
Beneficial Ownership of any Units or other limited partnership interests in
Fund, other than (A) those acquired by either SFOT Acquisition I or SFOT
Acquisition II (or any other Person pursuant to Section 11.18) pursuant to this
Agreement or paragraph 2 of Article IX of the Second Amended and Restated Fund
Limited Partnership Agreement, (B) those acquired by either SFOT Acquisition I
or SFOT Acquisition II (or any other Person pursuant to Section 11.18) other
than pursuant to this Agreement or paragraph 2 of Article IX of the Second
Amended and Restated Fund Limited Partnership Agreement if the purchase price
per unit is not less than the highest amount theretofore paid with respect to
32
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any Units pursuant to Articles II or III, and (C) any other Units or limited
partnership interests in Fund acquired by any SFEC Entity or any SFEC Affiliate
with the prior approval of 66-2/3% of the limited partnership interests in Fund
that are not beneficially owned by any SFEC Entity or SFEC Affillate, (ii)
except as pemitted by the Second Amended and Restated Fund Limited Partnership
Agreement, take any action to directly or indirectly control or exercise any
control over Fund or its general partner; (iii) sell, transfer or assign record
or Beneficial Ownership of any Units or rights to acquire any Units without the
prior written consent of Fund, other than sales, transfers or assignments among
Persons permitted to own Units pursuant to Section 11.18; or (iv) acquire,
directly or indirectly, any interest in the Texas Transition Trust, without the
prior written permission of the Texas Transition Trust, which permission may be
withheld in the sole discretion of the Trustee for the Texas Transition Trust.
(c) No Permitted Transfers. Except as provided in Section 11.18,
----------------------
only SFOT Acquisition I and SFOT Acquisition II (or any other Person pursuant to
Section 11.18 or Section 92(b)(i)(C), and not any other SFEC Entity or SFEC
Affiliate, shall own any Units and SFOT Acquisition I and SFOT Acquisition II
(and each such other Person) shall each at all times have Beneficial Ownership
of all Units it owns.
ARTICLE X
OBLIGATIONS ABSOLUTE
EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT AND THE RELATED
AGREEMENTS, THE OBLIGATIONS OF THE SFEC ENTITIES, TWX AND TWE UNDER THIS
AGREEMENT AND THE RELATED AGREEMENTS TO WHICH EACH OF THEM IS A PARTY ARE
UNCONDITIONAL, ABSOLUTE AND IRREVOCABLE, IRRESPECTIVE OF ANY IMPRACTICABILITY,
IMPOSSIBILITY OR OTHER DEFENSE TO PERFORMANCE UNDER THIS AGREEMENT OR THE
RELATED AGREEMENTS AND REGARDLESS OF THE CONTINUED EXISTENCE OF THE AMUSEMENT
PARK, THE UNITED STATES OF AMERICA, "FORCE MAJEURE" (AS DEFINED IN THE FLAGS II
LIMITED PARTNERSHIP AGREEMENT), OR, WITHOUT LIMITATION, ANYTHING ELSE
WHATSOEVER, ALL OF WHICH SHALL BE IRRELEVANT TO SUCH OBLIGATIONS. FOR THE
AVOIDANCE OF DOUBT, EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT AND THE
RELATED AGREEMENTS, THE OBLIGATION OF THE SFEC ENTITIES, TWX AND TWE UNDER THIS
AGREEMENT AND THE RELATED AGREEMENTS TO WHICH EACH OF THEM IS A PARTY ARE
INTENDED AS NO EXCUSES, "HELL OR HIGH WATER" OBLIGATIONS, WITH NO DEFENSES TO
PERFORMANCE OR PAYMENT OF ANY TYPE OR DESCRIPTION WHATSOEVER.
ARTICLE XI
CERTAIN AGREEMENTS
11.1 Changes in the Number of Outstanding Units. Fund will not
------------------------------------------
increase or decrease the Number of Units.
33
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11.2 Prepaid Amount, No Fund Liabilities at Tender Offer Settlement
--------------------------------------------------------------
Date.
- ----
(a) Transition Loan. At the request of Fund, immediately prior to
---------------
the execution and delivery of this Agreement, SFEC will loan to Fund the sum of
$10.725 million (the "Transition Loan") to be used by Fund to pay the "break-up"
fee payable to Premier pursuant to the overall agreement entered into between
Fund, Flags' Directors, L.L.C. and Premer, et al., dated October 9 , 1997, as
amended thereafter. The Transition Loan will be evidenced by Fund's promissory
note (the "Transition Note") in the form of Exhibit 11.2(a) hereto, and shall be
repayable without interest and otherwise as provided therein.
(b) Payment of Prepaid Amount. No later than the earlier of (x)
-------------------------
seven days prior to the Tender Offer Expiration Date or (y) February 15, 1998,
Flags II shall prepay to Fund II an amount equal to the sum of (i) $10.725
million, (ii) 50% of the Minimum Amount distributable to Fund II for 1998
pursuant to the Flags II Limited Partnership Agreement, plus (iii) 50% of the
Base Rent payable to Fund II for 1998 pursuant to the Lease (together the
"Prepaid Amount"). The Transition Loan made by SFEC to Fund in the amount of
$10.725 million shall be deemed a credit against the Prepaid Amount, and the
Transition Note shall be canceled and marked "paid in full." After payment of
the Prepaid Amount, the Minimum Amount and the Base Rent payable in July 1998
shall be zero, and the balance of the Minimum Amount and the Base Rent payable
in November 1998 shall be $2,640,750 and $500,000, respectively.
(c) Use of Proceeds. The Prepaid Amount may be used only to: (i)
---------------
distribute to Fund partners, (ii) pay the "break-up fee" to Premier Parks Inc.,
(iii) pay costs, fees and bonuses incurred in connection with the solicitation,
negotiation and documentation of the transactions contemplated by this Agreement
and the Related Agreements (including expenses incurred in exploring
alternatives and negotiating with others) ("Transaction-Related Expenses") and
other liabilities of Fund, and (iv) provide funds to the Texas Transition Trust,
without obligation to repay such funds by the Texas Transition Trust.
(d) No Fund Liabilities at the Tender Offer Settlement Date. Fund
-------------------------------------------------------
represents, warrants and covenants that neither Fund nor Fund II will have any
Indebtedness or other liabilities (including liabilities to Premier and/or Allen
& Company) at the Tender Offer Settlement Date, except liabilities that have
been assigned to and assumed by the Texas Transition Trust and that will be
discharged by the Texas Transition Trust and liabilities of Flags II that would
otherwise be treated as liabilities of Fund but which Fund as a separate legal
entity has no legal obligation to discharge. If this representation and warranty
is incorrect or this covenant is not complied with, Fund and the Texas
Transition Trust will indemnify SFOT Acquisition I and SFOT Acquisition II for
any such Indebtedness or liabilities out of amounts otherwise payable to its
partners other thar, SFOT Acquisition I and SFOT Acquisition II.
11.3 The Texas Transition Trust Release of Claims.
--------------------------------------------
(a) Release of Claims by Fund and Others. Contemporaneously with the
------------------------------------
Effective Date, Knox (on behalf of himself and the limited partners of Fund),
Fund, Flags II and certain affiliates of Fund shall release and relinquish all
claims that any of such entities may have against any SFEC Entity or SFEC
Affiliate, which release shall be in the form of Exhibit 11.3(a) hereto.
(b) Release of SFEC Claims. Contemporaneously with the Effective
----------------------
Date, each SFEC Entity and SFEC Affiliate shall release and relinquish all
claims that any of such entities may have against Fund, Knox, the limited
partners of Fund, and certain members of Fund's transition team from any action
34
<PAGE>
occurring prior to the date of this Agreement, which release shall be in the
form of Exhibit 11.3(b). Each SFEC Entity and SFEC Affiliate will also release
and relinquish all claims that any such entities may have against Jim Prager and
Dennis Speigel, provided that, the SFEC Entities and SFEC Affiliates receive
cross releases from each of such persons.
(c) Joint and Several Liability of Texas Transition Trust. The Texas
-----------------------------------------------------
Transition Trust shall be formed by Fund and Jack D. Knox, L.L.C., as trustee,
for the benefit of the limited partners of Fund (the "Texas Transition Trust").
The Texas Transition Trust shall be jointly and severally liable for liabilities
that Fund may have to any SFEC Entity or SFEC Affiliate, if any, for matters
arising prior to the Effective Date, provided that, the trustee of the Texas
Transition Trust ftom time to time shall have no liability with respect to any
such liability, and provided further, that the Texas Transition Trust may,
notwithstanding any such liability, use or distribute the Prepaid Amount and any
other cash of Fund distributed to it as contemplated by this Agreement to its
beneficiafies without any obligation of the Texas Transition Trust with respect
to such use or distribution of such funds or any obligation of the recipients of
any such funds to return any such funds received by them.
(d) Ft. Worth Litigation. Fund will, upon obtaining the Fund Limited
--------------------
Partner's Approval, file a notice of non-suit without prejudice with respect to
Fund's claims or causes of action, the litigation styled Six Flags Over Texas
--------------------
Fund, Ltd., Plaintiff v. Time Warner Entertainment Company, L.P., et al.,
- ------------------------------------------------------------------------
Defendants, pending in the 48th Judicial District Court, Tarrant County, Texas,
- ----------
Cause No. 48-171131-97, and TWE and the other defendants therein will likewise
dismiss without prejudice all counterclaims, if any, alleged by them in such
cause.
11.4 Nature of SFOT II, SFOT Employee, SFOT Acquisition I and SFOT
-------------------------------------------------------------
Acquisition II.
- --------------
(a) SFOT II. SFOT II shall, at all times from the date of this
-------
Agreement through the expiration of the Flags II Limited Partnership Agreement,
be a single-purpose entity that conducts no business other than the performance
of its obligations as managing general partner of Flags II and under this
Agreement and the Related Agreements to which it is a party and the ownership of
SFOT Employee and take all reasonable action so as not to incur any liabilities
(other than Tax and similar obligations imposed by law or under this Agreement
or the Related Agreements or such amounts not to exceed $10.725 million in order
to fund the Transition Loan to Fund).
(b) SFOT Employee. SFOT Employee shall, at all times from the date
-------------
of this Agreement through the expiration of the Flags II Limited Partnership
Agreement, be a single purpose entity that conducts no business other than
performance of its obligations as the employer of the park personnel, including
the Park Employees, and under this Agreement and the Related Agreements to which
it is a party and take all reasonable action so as not to incur any liabilities
(other than obligations related to the employment of the park personnel,
including the Park Employees, or imposed by law or under this Agreement or the
Related Agreements).
(c) SFOT Acquisition I and SFOT Acquisition II. Each of SFOT
------------------------------------------
Acquisition I and SFOT Acquisition II shall, at all times from the date of this
Agreement through the expiration of the Flags II Limited Partnership Agreement,
be a single-purpose entity that conducts no business other than the performance
of its obligations under this Agreement and the Related Agreements to which it
is a party and take all reasonable action so as not to incur any liabilities
(other than Tax and similar obligations imposed by law or under this Agreement
or the Related Agreements).
35
<PAGE>
11.5 Non-Competition.
---------------
(a) Agreement Not to Compete. If the Closing occurs and thereafter
------------------------
until December 31, 2027 or the earlier termination of the Flags II Limited
Partnership Agreement or the Lease (provided that if such earlier termination
shall be as a result of a Default, until one year after the date of such earlier
termination), neither any of the SFEC Entities nor any other SFEC Affiliate
shall, and the SFEC Entities shall cause the SFEC Affiliates to not Directly
Compete with the Amusement Park. For purposes of this Section 11.5, "Directly
Compete" shall mean owning, having an interest in, operating or managing, or
having any ownership interest in any Person owning, having an interest in,
operating or managing (i) any other amusement park or theme park (except
Seaworld and Schlitterbaun in San Antonio, Texas; Six Flags Astroworld
(including Six Flags Waterworld), and Six Flags Fiesta Texas, including any
successors thereto) of over 10 acres (excluding parking) and containing two or
more thrill rides that cost (when new) in excess of $4 million in the aggregate
and located in the State of Texas or (ii) a water park within 25 miles of the
boundary of the Amusement Park in any direction (other than Hurricane Harbor
across 1-30 from the Amusement Park). For purposes of this Agreement, the term
"thrill ride" means a mechanical ride such as Mr. Freeze, Batman the Ride, Great
American Scream Machine, Runaway Mine Train or Texas Giant (each of which is a
ride at or, with respect to Mr. Freeze, a ride being constructed at, the
Amusement Park or the Six Flags Over Georgia Amusement Park at the date of this
Agreement) or similar rides, which provides to the rider a thrill experience
from a substantial physical structure rather than a simulated experience.
(b) De Minimis Exception. Section 11.5(a) shall not prohibit any
--------------------
SFEC Affiliate from making a passive investment that is (i) a direct or indirect
interest in an entity that, as less than 5% of its business, has facilities that
Directly Compete with the Amusement Park, (ii) a 5% or less interest in any
entity that has a cost basis of less than $250,000, or (iii) a non-controlling
interest that represents less than 5% of any publicly traded entity that
Directly Competes with the Amusement Park.
(c) Savings Clause. It is the intention of the parties that this
--------------
Section 11.5 be given the broadest interpretation permissible under applicable
law and that the unenforceability or invalidity of any term or provision of
Section 11.5 shall not render any other term or provision contained herein
unenforceable or invalid. If the activities described in Section 11.5(a) or the
period of time or the geographical areas covered by Section 11.5(a) should be
deemed too extensive, then the parties intend that this Section 11.5 be
construed to cover the maximum scope of business activities, period of time and
geographical areas (not exceeding those specifically set forth herein) as may be
permissible under applicable law.
11.6 Certain Real Property and Other Matters.
---------------------------------------
(a) Certain Real Property. If the Closing occurs and thereafter for
---------------------
as long as the Flags II Limited Partnership Agreement shall not have expired or
been terminated, no SFEC Entity will, and each SFEC Entity shall cause each SFEC
Affiliate to not, without the prior written consent of Fund (which may be
withheld by Fund in its sole discretion), own or acquire any interest in or
lease (except pursuant to the Lease) any real property located within one mile
of the then boundary of the Amusement Park in any direction, if such real
property is used in connection with the Amusement Park, and otherwise within 500
yards of the boundary of the Amusement Park in any direction.
(b) SFEC Park Passes. For so long as SFEC or SFTP issue such passes
----------------
or similar passes, other than solely to full time employees, SFEC and SFTP shall
provide, at their sole cost and expense, a pass (known at the date of this
36
<PAGE>
Agreement as a "Gold Card") providing unlimited admission (or, if unlimited
admission passes are not then being so provided, the maximum use pass then being
so provided) to all SFEC Parks and to any other amusement park any SFEC Entities
owns or manages, to all water parks owned or operated, directly or indirectly,
by SFEC and to the Amusement Park (or to such lesser number of attractions for
which such passes are then being so provided) to Fund for each then Unitholder
of Fund (for Unitholders who are not individuals, for one individual who is an
owner, trustee or beneficiary of the Unitholder as designated by Fund). Fund
will, by November 30 of each year (provided that, the notice for 1998 shall be
given as soon as reasonable after the date of this Agreement), give notice to
SFEC and SFTP of the number of such passes required for the next year and the
names in which they are to be issued. SFEC and SFTP will deliver such passes
(or, if applicable for any year, the then most comparable passes) to Fund when
they are made available to others to whom such passes are sold or otherwise
issued. Any such passes will be subject to the restrictions applicable to such
passes generally.
11.7 Affiliate and Certain Other Transactions.
----------------------------------------
(a) Affiliate Transactions.
----------------------
(i) Neither EBITDA (to the extent it would otherwise be reduced
thereby) nor cash flow of Flags II will be reduced for purposes of determining
the obligations of SFOT Acquisition I, SFOT Acquisition II or Flags II under
this Agreement or the Flags II Limited Partnership Agreement by any charges,
payments or accruals for (A) services provided through SFEC or any Controlled
SFEC Affiliate to Flags II or SFOT Employee to the extent of the portion of the
charges therefor, if any, in excess of the out-of-pocket cost paid by SFEC or
such Controlled SFEC Affiliate to a Third Party in connection with the provision
of such services, (B) any Interest on loans by SFEC or any Controlled SFEC
Affiliate to Flags II to the extent of the portion of such interest, if any, in
excess of Prime, (C) any tangible or intangible items sold or licensed by SFEC
or any Controlled SFEC Affiliate to Flags II to the extent of the portion of the
charges therefor, if any, in excess of the lesser of the depreciated or
amortized cost or the fair market value of such tangible or intangible items or
(D) any payments by Flags II to SFOT Employee that are in excess of the lesser
of (x) the out-of-pocket costs of SFOT Employee related to the employment of the
park personnel (to the extent they work at or for the Amusement Park and
including the Park Employees) or (y) the expenses that would have been properly
incurred by Flags II if the Park Employees had been employed directly by Flags
II, giving effect to any cost savings realized or expenses avoided by Flags II
because of SFOT Employee being the employer of the park personnel, including the
Park Employees. EBITDA and cash flow of Flags II will be increased for purposes
of determining the obligations of SFOT Acquisition I, SFOT Acquisition II and
Flags II under this Agreement and the Flags II Limited Partnership Agreement by
the amount, if any, by which any revenue attributable to tangible or intangible
items sold or licensed by Flags II to SFEC or any Controlled SFEC Affiliate is
less than the greater of the depreciated cost to Flags II or the fair market
value of such tangible or intangible items. For purposes of this Section 11.7,
"Third Party" means any Person other than SFEC or any Controlled SFEC Affiliate;
provided that, with respect to the provision of sponsorship sales, national or
- -------- ----
regional marketing services (but not actual advertising), engineering, human
resources, benefits management, ride and theme design, risk management, property
tax services, public relations, government relations, accounting, audit, legal
or financial services, "Third Party" means any Person other than any SFEC Entity
or any SFEC Affiliate. Flags II will not, and SFOT II will cause Flags II to
not, directly or indirectly guarantee any obligations of any SFEC Entity or SFEC
Affiliate (including as a guarantee, for this purpose, income maintenance, net
worth maintenance or, without linuitation, any other arrangements the effect of
which is in substance a guarantee or assurance of payment or performance), other
37
<PAGE>
than a Person that is wholly owned by Flags II. Notwithstanding anything to the
contrary in this Section 11.7(a)(i), there shall be no adjustment to EBITDA or
cash flow of Flags II for any payments received from and/or paid to a Controlled
SFEC Affiliate in respect of a loan or exchange, for a very limited period of
time, on a fair basis and consistent with past practice, of personnel and/or
specialized equipment (other than rides) among the SFEC Parks. Neither EBITDA
nor cash flow of Flags II will be reduced for compensation and related expenses
associated with persons (x) who are officers or employees of any SFEC Entity or
SFEC Affiliate (in addition to, if applicable, SFOT Employee) and (y) whose
primary responsibilities relate to the business of one or more of the SFEC
Entities (other than SFOT Employee) or SFEC Affiliates, rather than primarily to
SFOT Employee or Flags II; and for the purposes of determining EBITDA and
whether cash flow of Flags II is reduced, compensation and related expenses of
personnel whose primary responsibilities relate to SFOT Employee or Flags II
(but who also have non-SFOT Employee or non-Flags II responsibilities) will be
apportioned on a fair and consistent basis, provided that no apportionment will
be required if the non-SFOT Employee and non-Flags II responsibilities are
immaterial. Notwithstanding anything to the contrary contained in this Section
11.7, there shall be no adjustment to EBITDA pursuant to this Section 11.7 for
any charges, payments or accruals in connection with the Permitted Team Texas
Arrangements, it being understood that such arrangements are expressly permitted
by this Agreement.
(ii) Neither EBITDA (to the extent it would otherwise be reduced
thereby) nor cash flow of Flags II will be reduced for purposes of determining
the obligations of SFOT Acquisition I, SFOT Acquisition II or Flags II under
this Agreement or the Flags II Limited Partnership Agreement by any charges,
payments or accruals for (A) tangible or intangible items directly or indirectly
sold or licensed or services directly or indirectly provided by any SFEC
Affiliate (other than any Controlled SFEC Affiliate) to Flags II to the extent
of the portion of the price therefor, if any, that is (in light of the other
terms of such transaction) in excess of the lesser of (x) the price that is no
less favorable to Flags II (in light of such other terms) than the price that
would have been obtainable in an arms length transaction with an unaffiliated
third party and (y) the price at which comparable tangible or intangible items
are sold or licensed or services are provided by any SFEC Entity or SFEC
Affiliate to any SFEC Park or (B) any interest on loans by any SFEC Affiliate
(other than any Controlled SFEC Affiliate) to Flags II to the extent of the
portion of such interest, if any, in excess of Prime. For purposes of the
foregoing, the license of the Warner Bros. characters on the terms set forth in
the License Agreement, dated as of June 23, 1995, shall be deemed to comply with
the requirements of clause (A) of this Section 11.7(a)(ii). EBITDA and cash flow
of Flags II will be increased for purposes of determining the obligations of
SFOT Acquisition I, SFOT Acquisition II or Flags II under this Agreement and the
Flags II Limited Partnership Agreement by any revenue for tangible or intangible
items sold or licensed or services provided by Flags II to any SFEC Affiliate
(other than a Controlled SFEC Affiliate) to the extent of the amount, if any, by
which such revenue is less than the revenue that could have been obtained by
Flags II in an arms length transaction with an unaffiliated Third Party.
(b) Third-Party Transaction Allocations.
-----------------------------------
(i) Neither EBITDA (to the extent it would otherwise be reduced
thereby) nor cash flow of Flags II will be reduced for purposes of determining
any obligation of SFOT Acquisition I, SFOT Acquisition II or Flags II under this
Agreement or the Flags II Limited Partnership Agreement for the portion, if any,
of any charges, payments or accruals for the following that is in excess of the
amounts that would have been charged to Flags II using a fair and consistent
method of allocation: (A) the provision to Flags II, in common with other SFEC
Parks, of property, casualty and liability insurance under third-party policies
of insurance, from unaffiliated third-party insurance companies, permitted by
38
<PAGE>
the Flags II Limited Partnership Agreement or by the Lease and unaffiliated
third-party administration of employee benefits for employees of the Amusement
Park (of SFOT Employee with respect to Park Employees), in common with other
SFEC Parks, or (B) the purchase or lease by or licensing to Flags II, in common
with other SFEC Parks, of advertising and advertising services, rides,
merchandise, intellectual property, other tangible or intangible items or other
services from or by non-affiliated Third Parties.
(ii) Revenues generated by the sale to Third Parties of any
intangible rights of Flags II in common with other SFEC Parks, including,
without limitation, sponsorships, crosspromotions or cooperative advertising
(net of charges not otherwise precluded from being applied to reduce EBITDA)
shall be allocated to Flags II using a fair and consistent method of allocation.
(iii) The term "fair and consistent method of allocation" means
that (A) to the extent any expenses or revenues are reasonably attributable
directly to the Amusement Park or to any SFEC Park, such expenses or revenues
are charged or credited only to the Amusement Park or such SFEC Park in question
and (B) any other expenses or revenues that are not reasonably attributable
directly to the Amusement Park or any SFEC Park are allocated among the
Amusement Park and the SFEC Parks on the basis of a rational and reasonable
criterion, such as, by way of example only, the number of SFEC Parks or the
attendance, employees, revenues, net income or EBITDA of each park, provided
that, if a criterion is used after December 31, 1997 for purposes of allocating
any item of expense or revenue, that same criterion shall at all times
thereafter be used for purposes of allocating the same and all similar items of
expense or revenue.
(c) EBITDA and Cash Flow Adjustments.
--------------------------------
(i) If at any time during the Procedure Period for any year
there shall be discovered or disclosed any understatement of EBITDA with respect
to such year (and, if the understatement is discovered by Fund or Fund II (or
its agents or representatives), notice thereof was given by Fund or Fund II to
SFOT II prior to the end of such Procedure Period) and such understatement is a
result of any transaction that failed in whole or in part to comply with Section
11.7(a)(i) or, unless the procedures set forth in Section 11.7(d) and the
agreement of the parties or the decision of the Expert referred to therein has
been complied with, Section 11.7(a)(ii), then SFEC, SFTP, SFOT II, SFOT
Acquisition I and SFOT Acquisition II shall, jointly and severally and within 30
days after final determination of the amount involved, pay or cause to be paid
to any Unitholder whose Units or fractions thereof have previously been
purchased pursuant to the Tender Offer or any Liquidity Put and who would have
received a greater amount had EBITDA not been so understated, an amount equal to
(A) the difference between (x) the amount which would have been received had
EBITDA been calculated as provided in Section 11.7(a)(i) and Section 11.7(a)(ii)
(unless the procedures set forth in Section 11.7(d) and the agreement of the
parties or the decision of the Expert referred to therein have been complied
with) and (y) the amount actually received plus (B) interest on such difference
from the applicable Tender Offer Settlement Date or Liquidity Put Settlement
Date, as the case may be, to the date of payment at the Default Rate.
(ii) If at any time during the Procedure Period for any year
there shall be discovered or disclosed any understatement of EBITDA for such
year (and, if the understatement is discovered by Fund or Fund II (or its agents
or representatives), notice thereof is given by Fund or Fund II to SFOT II prior
to the end of such Procedure Period) -- (w) and such understatement was a result
of any transaction that failed to comply with Section 11.7(a)(ii), provided
that, the procedure set forth in Section 11.7(d) and the agreement of the
parties or the decision of the Expert referred to therein has been complied
39
<PAGE>
with, (x) such understatement was determined bv agreement pursuant to Section
11.16(e), (y) such understatement was determined by a decision of the Accounting
Arbitrator with respect to an Arbitrable Judgment pursuant to Section 11.16(g),
or (z) to the extent the understatement is not due to a matter otherwise
provided for in clauses (i) or (iii) of this Section 11.7(c), SFEC, SFTP, SFOT
II, SFOT Acquisition I and SFOT Acquisition II shall, jointly and severally and
within 30 days after final determination of the amount involved, pay or cause to
be paid to any Unitholder whose Units or fractions thereof have previously been
purchased pursuant to the Tender Offer or any Liquidity Put and who would have
received a greater amount had EBITDA not been so understated, an amount equal to
(A) the difference between such greater amount and the amount received plus (B)
interest on such difference from the applicable Tender Offer Settlement Date or
Liquidity Put Settlement Date, as the case may be, to the date of payment at
Prime.
(iii) If at any time during the Procedure Period for any year
there shall be discovered or disclosed any understatement of EBITDA for such
year (and, if the understatement is discovered by Fund, Flags' Directors, L.L.C.
or Fund II (or their agents or representatives), notice thereof is given by
Fund, Flags' Directors, L.L.C. or Fund II to SFOT II prior to the end of such
Procedure Period) and to the extent such understatement was a result of any
transaction that, to the knowledge of any SFEC Entity, any Controlled SFEC
Affiliate or SFOT II, failed to comply with Section 11.7(a) and, if applicable,
the procedures set forth in Section 11.7(d) have not been complied with or have
been complied with but the decision of the Expert or, if applicable, the
agreement of the parties referred to therein has not been complied with, then
(A) SFEC, SFTP, SFOT Acquisition I, SFOT Acquisition II and SFOT II shall,
jointly and severally and within 30 days after final determination of the amount
involved, pay or cause to be paid to any Unitholder whose Units or fractions
thereof have previously been purchased pursuant to the Tender Offer or any
Liquidity Put and who would have received a greater amount had EBITDA not been
so understated, an amount equal to (x) the difference between such greater
amount and the amount received plus (y) interest on such difference from the
applicable Tender Offer Settlement Date or Liquidity Put Settlement Date, as the
case may be, to the date of payment at the Default Rate and (B) as liquidated
damages for the EBITDA understatement (but not for any other breach as may be
involved therein or related thereto) and in recognition of the possibility that,
if one or more EBITDA understatements becomes known to the parties, other EBITDA
understatements may not have been discovered (with the result that EBITDA
damages may be difficult or impossible to calculate), the parties agree that
EBITDA for the year in which discovery or disclosure occurred or, if later, the
year in which the amount involved was finally determined (but not later than
2026), shall be increased by two times the amount of the understatement(s). For
the purposes of this Section 11.7(c)(iii) knowledge means "actual knowledge" of
the failure to act in a manner consistent with the standard set forth in
Section 11.7, whether or not the Person knew of that standard or its being
applicable.
(iv) If there is an EBITDA understatement for 1998, then the Per
Unit Mandatory, Adjustment Amount (and, if applicable, the Per Unit Tender Offer
Price) shall be adjusted using the correct EBITDA.
(v) If during the Procedure Period for any year there has been
discovered or disclosed one or more understatements of EBITDA for such year
(and if the understatement is discovered by Fund, Flags' Directors, L.L.C. or
Fund II (or their agents or representatives) notice thereof is given by Fund,
Flags' Directors, L.L.C. or Fund II to SFOT II prior to the end of such
procedure Period) (it being recognized that Procedure Periods overlap so, in any
given Procedure Period, understatements for more than one year may be discovered
or disclosed), with respect to Unitholders all of whose Units or fractions
thereof have not then been purchased pursuant to the Tender Offer or a Liquidity
40
<PAGE>
Put, in addition to the adjustments provided for in Sections 11.7(c)(iii) and
(iv) (but without duplication of any adjustments provided for in Section 11.7(c)
(iii)), if any, SFOT Acquisition I and/or SFOT Acquisition II, as applicable,
will (subject to the alternative set forth in the following sentence) provide to
all such Unitholders the opportunity to put such Units, without proration, in
the Liquidity Put next following the final determination of such understatement,
at a Put Price equal to the highest value for "A" minus "B", where "A" is the
Put Price at which the Units could have been put, in the years in which the
Formula Amount is affected by the EBITDA understatements, had EBITDA not been
understated, plus interest thereon at Prime (compounded semi-annually) from the
applicable Liquidity Put Settlement Date(s), and "B" is the distributions
received by the Unitholder from Fund in respect of such Units after each such
Liquidity Put Settlement Date in question, plus interest on each such
distribution at Prime (compounded semi-annually) from each such date of
distribution. Alternatively, SFOT Acquisition II may, by notice to Fund by the
then next March 15, elect to add to the EBITDA for the then immediately
preceding year, for the purpose of calculating the Formula Amount for the
Liquidity Put to be made available in the year in which such notice is given and
subsequent years, to the extent applicable for purposes of calculating the
Formula Amount in those years, an amount equal to the EBITDA understatements for
each such year, plus interest at Prime ftom the end of each such year, but
without duplication of adjustments then made pursuant to Section 11.7(c)(iii).
The special Liquidity Put that may be made available pursuant to the first two
sentences this Section 11.7(c)(v) ("Special Liquidity Put") shall be in addition
to the Liquidity Put otherwise to then be made available (the "Regular Liquidity
Put"), provided that (x) such Regular Liquidity Put need not be made available
if the Put Price in the Special Liquidity Put is higher than the Put Price in
the Regular Liquidity Put or (y) if there is then no proration for Regular
Liquidity Puts or SFOT Acquisition I and/or SFOT Acquisition II, as applicable,
elects to purchase all Units put in the Regular Liquidity Put, in which event
only the Liquidity Put (whether Special or Regular) that yields the highest Put
Price shall be made so available.
(vi) To the extent cash flow of Flags II is reduced, but should
not have been reduced pursuant to Sections 11.7(a)(i) or (ii) or 11.7(b), the
SFEC Entities shall, jointly and severally and within 30 days after final
determination of the amount(s) in question, pay to Flags Il the amount by which
its cash flow was so reduced plus interest (A) at the Default Rate, to the
extent, if at all, interest with respect to the corresponding EBITDA
understatement is payable at the Default Rate, or (B) otherwise at Prime.
(d) Designated Affiliate Transactions. If SFOT II determines that it
---------------------------------
would be advisable for Flags II to enter into a transaction with an SFEC
Affiliate (other than a Controlled SFEC Affiliate) under Section 11.7(a)(ii),
then SFOT II may give Fund II at least ten Business Days prior written notice of
its intention to enter into such transaction (a "Designated Affiliate
Transaction"), which notice shall reasonably describe the details of the
Designated Affiliate Transaction. If within ten Business Days after receipt of
such notice, Fund II fails to notify, SFOT II in writing that it has approved
the Designated Affiliate Transaction, then, at the request of SFOT II, the
parties will negotiate to determine the terms for such Designated Affiliate
Transaction that would comply with Section 11.7(a)(ii) and, if they are unable
to reach agreement within a 20-day period, an independent expert knowledgeable
in the relevant business (an "Expert"), designated jointly by SFOT II and Fund
II, shall determine whether such Designated Affiliate Transaction complies with
Section 11.7(a)(ii). If SFOT II and Fund II are unable to agree upon an Expert,
then such Expert shall be selected by two other experts, one selected by SFOT II
and one selected by Fund II. All such selections of the Expert shall be effected
as promptly as reasonably practicable and all fees and expenses of Expert shall
be borne by SFOT II and shall not be charged to Flags II. In making his or her
determination, the Expert will be provided solely with the written information
presented by SFOT II to Fund II and, after a reasonable time after Fund II
41
<PAGE>
receives such information, any statement by Fund II of its opposition and any
information it desires to present. If Flags II enters into a Designated
Affiliate Transaction after an Expert determination has been made that the
Designated Affiliate Transaction does not comply with Section 11.7(a)(ii),
without the terms of the transaction being changed to terms the Expert
determines comply with Section 11.7(a)(ii), the determination that the
Designated Affiliate Transaction does not meet 11.7(a)(ii) and, if applicable,
the amount determined by the Expert shall be conclusive against SFOT II, SFOT
Acquisition I and SFOT Acquisition II, EBITDA shall be adjusted as provided in
Section 11.7(c) and cash flow shall not be reduced as provided in Sections
11.7(a)(ii) and 11.7(c)(vi). If the Expert determines that the Designated
Affiliate Transaction complies with Section 11.7(a)(ii) or that it does not
comply, specifying the amount by which it does not so comply, and the
transaction is completed on the terms that the Expert determines comply with
Section 11.7(a)(ii), Fund II may, in the next arbitration after the Designated
Affiliate Transaction (but not more than two years after the Designated
Affiliate Transaction), challenge whether, based on all relevant facts with
respect to the circumstances existing at the time of the transaction, there was
such compliance with Section 11.7(a)(ii) and, if Fund II prevails, there shall
be an adjustment to EBITDA as provided in Section 11.7(c) and to cash flow as
provided in Section 11.7(c)(vi). Fund II shall have no obligation to, and shall
have no liability with respect to any failure(s) by it to, approve any proposed
Designated Affiliate Transaction.
(e) Employee Notification. SFEC shall notify relevant SFEC and
---------------------
SFOT Employee personnel of the existence of this Section 11.7 and shall instruct
such personnel to act in a manner consistent with this Section 11.7 with respect
to those transactions subject to the terms of this Section 11.7 for which such
personnel has decision making responsibility.
(f) Alternative Dispute Resolution.
------------------------------
(i) If any dispute regarding the calculation of EBITDA or cash
flow as a result of any transaction that failed or allegedly failed to comply
with Section 11.7(a) (including whether an understatement of EBITDA was knowing
and intentional), including any dispute arising or continuing after the
procedure set forth in Section 11.7(d) has been complied with, such dispute
shall be referred to the Dallas, Texas office of the American Arbitration
Association ("AAA") for confidential, binding arbitration administered by the
AAA pursuant to its Commercial Rules and Supplementary Procedures for Large,
Complex Disputes then in effect. If the parties mutually agree in writing, the
AAA Arbitration Rules and Procedures may be modified or supplemented. The
arbitrator shall be a single neutral who shall, if such a Person is available,
be a retired or former judge selected from the AAA Commercial Large Complex Case
Panel of Neutrals or, if the AAA no longer maintains such a Panel, from the
Panel that succeeds to such Panel. The arbitrator shall be entitled, in his or
her discretion, to retain an independent accountant or accounting firm
(provided, such accountant or firm could serve as Accounting Arbitrator) and one
or more experts qualified to act as, but who did not act as, an Expert under
Section 11.7(d). In the arbitration, the parties shall be entitled to discovery
as if the matter were pending in the State District Court or the Federal
District Court for the Northern District of Texas, as determined by the
arbitrator.
(ii) With respect to the dollar amount of any alleged EBITDA
understatement only (but not any other issues, including, without limitation,
whether any understatement of EBITDA was knowing or intentional), Fund and SFOT
II shall, on the date specified by the arbitrator, present to the arbitrator
sealed contentions of the amount which should have been charged to EBITDA in
respect of the transaction(s) in question, which the arbitrator shall open. If
the higher amount is within 5% of the lower amount, the two amounts shall be
averaged and become the decision of the arbitrator on the issue in question.
42
<PAGE>
Otherwise, to decide that issue, the arbitrator shall pick one of the amounts
proposed by SFOT II or Fund II, but not any other amount.
(iii) The costs of the arbitration, the arbitrator and any
accounting firm, accountant or expert retained by the arbitrator, shall be borne
by SFOT II and Fund II (but not by Flags II) in such proportions as the
arbitrator determines. The costs of the arbitration and of the parties to this
Agreement in connection with the arbitration will not reduce EBITDA or the cash
flow of Flags II.
(iv) The decision of the arbitrator, who shall decide the
enforceability of this Section 11.7(f), shall be final and unappealable and
judgment thereon may be entered in any court of competent jurisdiction.
11.8 Information Obligation.
----------------------
(a) Financial Statements; Tax Information and Related Deliveries.
------------------------------------------------------------
SFEC and SFOT II shall deliver or cause to be delivered to Fund II the financial
statements, reports, tax information and related documents set forth below in
this Section 11.8.
(i) Annual Financial Statements; Tax Information and Related
Deliveries.
(A) Audited Financial Statements. As soon as
----------------------------
practicable and in any event not later than 90
days after the end of each fiscal year of Flags
II, the audited balance sheet of Flags II and
notes thereto required by GAAP as of the end of
such year and the related audited statements of
operations, partners' capital and cash flows of
Flags II and the notes thereto for such year
prepared on an accrual basis in accordance with
GAAP, which financial statements shall present
fairly, in all material respects, Flag II's
financial position and the results of its
operations and cash flows as of the date thereof
and for the period covered thereby.
(B) EBITDA Calculation. Concurrently with the
------------------
delivery of the financial statements
delivered pursuant to Section 11.8(a)(i)(A),
a statement showing the calculation of
EBITDA in accordance with the definition of
EBITDA contained in this Agreement and the
notification of initial judgments provided
for in Section 11.16(c).
(C) Auditor's Report. The financial statements and
----------------
calculation delivered pursuant to Section 11.8(a)
(i)(A) and (B) shall be accompanied by a report
thereon of an independent certified public
accountant of recognized national standing
(x) confirming that the financial statements
delivered pursuant to Section 11.8(a)(i)(A) have
been prepared as described in that Section, (y)
to the extent not precluded under the rules of the
American Institute of Certified Public Accountants
or equivalent guidelines (in the reasonable
judgment of such independent certified public
accountant), confirming that the EBITDA statement
delivered pursuant to Section 11.8(a)(i)(B) and
the notification of initial judgment's have been
prepared as described in that section and (z) to
the extent not precluded under the rules of the
American Institute of Certified Public Accountants
43
<PAGE>
or equivalent guidelines (in the reasonable
judgment of such independent certified public
accountant), an agreed-upon procedures report in
substantially the form of Exhibit 11.8(a)(i)(C).
The fees and expenses of the independent certified
public accountant will be paid by Flags II and
will be an expense in determining EBITDA.
(D) Certificate of Chief Financial Officer. The
--------------------------------------
financial statements and calculation delivered
pursuant to Sections 11.8(a)(i)(A) and (B) shall
be accompanied by a certificate of the chief
financial officer of SFOT II (w) confirming that
the financial statements delivered pursuant to
Section 11.8(a)(i)(A) have been prepared as
described in such section, (x) confirming that the
EBITDA statement delivered pursuant to Section
11.8(a)(i)(B) has been prepared as described in
that section, and (y) to the effect that he or she
has reviewed the terms of this Agreement, the
Flags II Limited Partnership Agreement and the
Lease and made a review in reasonable detail of
the transactions and condition of Flags II during
the year covered by such financial statements and
that the review has not disclosed, nor is such
Person otherwise aware of, the existence of any
Default under or noncompliance with this
Agreement, the Flags II Limited Partnership
Agreement during or at the end of such year or, if
there has been or is such a Default or
noncompliance, specifying the nature, amount
and period of existence thereof and the action
SFOT II has taken, is taking or proposes to take
with respect thereto.
(E) Tax Information. As soon as practicable but
---------------
in no event later than March 15 of each
year, commencing March 15, 1999, all
information concerning Flags II necessary
for the preparation by Fund II and Flags'
Directors, L.L.C. of their returns for Tax
purposes for the prior year.
(F) EBITDA Understatement. If any SFEC Entity or SFEC
---------------------
Affiliate (or their agents or representatives)
discovers an understatement of EBITDA for any
year during the Procedure Period for such year,
the SFEC Entities shall, within ten Business Days
and in any event prior to the end of such
Procedure Period, provide to Fund II notice and a
description of the nature of such understatement.
Any such notice given or required to be given
shall substitute for the notices to be given by
Flags II under Section 11.7(c).
(ii) Quarterly Financial Statements and Related Deliveries.
-----------------------------------------------------
As soon as practicable and in any event not later than 45 days after the end of
the first three quarters of Flags II in each year, the unaudited balance sheet
of Flags II as of the end of such quarter and the related unaudited statements
of operations, partners' capital, and cash flows of Flags II for such quarter,
prepared on an accrual basis in accordance with GAAP, which financial statements
shall present faifly, in all material respects, Flags II's financial position
and the results of its operations and cash flows as of the date thereof and for
the periods covered thereby (subject, in each case, to normal year-end
adjustments).
44
<PAGE>
(iii) Monthly Statements. As soon as practicable and in any
------------------
event not later than 30 days after the end of each month (or, if applicable, the
partial month period from the date of formation of Flags II, if not the first
day of a month, to the end of the month of such formation), the unaudited
balance sheet of Flags II as of the end of such month and unaudited statements
of operations and cash flows of Flags II for such month and year-to-date,
substantially in the form attached as Exhibit 11.8(a)(iii) to this Agreement.
(iv) Certain Working Papers. As soon as practicable after
----------------------
written request therefor by Fund and in any event not later than 15 days after
the latter of delivery of the financial statements delivered pursuant to Section
11.8(a)(i)(A) and the making of such request, SFEC, SFOT II and SFOT Employee
shall make available to Fund II, in Dallas, Texas, complete copies of (A) all
working papers of the independent accountants for SFOT II, Flags II, SFOT
Employee and any Controlled SFEC Affiliates (subject to the internal policies of
such independent certified public accountants, it being agreed that SFEC,
SFOT II and SFOT Employee shall use and cause the other SFEC Entities and the
Controlled SFEC Affiliates to use their reasonable best efforts to cause such
accountants to, including directing such accountants to, make such working
papers available) created in connection with the preparation of the financial
statements delivered pursuant to Section 11.8(a)(i)(A) or Section 11.8(a)(ii),
as applicable, (B) the general ledger of Flags II and (C) the working papers of
Flags II summarizing the calculations made in determining EBITDA.
(b) Manager Meetings. At the request of Fund II, the
----------------
president and/or general manager and chief financial officer of the Amusement
Park or Flags II and, upon the request of Fund II to the president, general
manager or, in the absence of either of them, the senior-most executive at the
Amusement Park, such other Flags II, Amusement Park and SFOT Employee management
and employees as Flags Il may request will, at a mutually convenient time, meet
with Fund II or its representatives at the Amusement Park to discuss matters
relating to the Amusement Park and Flags II specified by Fund or its
representatives. SFEC, SFOT II and SFOT Employee will, and will cause Flags II
to, use their respective best efforts to cause Amusement Park management and
employees to comply with the foregoing.
(c) Other Reports. SFEC, SFOT II and SFOT Employee shall
-------------
deliver or cause to be delivered to Fund II as soon as practicable after
preparation thereof and upon the written request therefor by Fund II, the final
versions (provided that any version that is provided to the board of directors
(or similar body) of SFEC, SFTP cr SFOT II or to any lenders to Flags II or any
SFEC Entity will be deemed final versions for this purpose) of the following:
any current year financial projections or similar studies (provided that, except
as provided in Section 11.8(e), projections or similar studies for the then
current year shall be delivered only after the Liquidity Put Settlement Date for
that year), material visitor surveys, strategic plans, capital expenditure
forecasts, material industry reports and material safety reports, in each case
prepared in whole or in part by or for SFOT II, Flags II, SFOT Employee or any
SFEC Entity or SFEC Affiliate, but only to the extent such information relates
to Flags II or the Amusement Park and only if it is practicable to excerpt such
information from any such report. SFEC and SFOT II will provide to Fund II, with
the quarterly financial statements provided for in Section 11.8(a)(ii), a list
of all documents of the type described in this Section 11.8(c) that have been
provided to the board of directors (or similar body) of SFEC, SFTP or SFOT II or
to any lenders to Flags II or any SFEC Entity during the quarter or that have
not been previously listed and which SFEC or SFOT II believes are materially
related to the Amusement Park, plus any other category of reports that is
specified by Fund (in each case of which Fund can request a copy pursuant to
this Section 11.8(c)), together with a brief description of each of them.
45
<PAGE>
(d) Information Regarding Affiliate Transactions. Without
--------------------------------------------
limiting the other information rights of Fund set forth herein, the SFEC
Entities shall make available to Fund II or its representative(s), in Dallas,
Texas, at the election of Fund II, within 20 Business Days after a request by
Fund II therefor to SFOT II, information and complete copies of supporting
documents, including all accountants' working papers (subject to the intemal
policies of such independent certified public accountant, it being agreed that
SFEC Entities shall use their reasonable best efforts to cause such accountants
to, including in each case directing such accountants to, make such working
papers available), as to all transactions, charges, payments and accruals
involving any SFEC Entity or SFEC Affiliate, on the one hand, and Flags II or
SFOT Employee, on the other, or that are necessary or appropriate to verify
compliance with Section 11.7.
(e) Information Rights at End-of-Term. If the End-of-Term
---------------------------------
Option is not exercised, Fund II shall be entitled to receive, not later than 30
days (time being of the essence) after the demand therefor, all information and
reports described in Section 11.8 and all financial projections and similar
studies for all then prospective years and, without limitation, to make such
information available to others to which the Amusement Park may be sold or with
which a transaction of the type preferred to in Section 7.5(d) may be effected.
(f) Information Rights in General. Notwithstanding anything
-----------------------------
to the contrary or any words of limitation contained in this Section 11.8, Fund
II shall have all rights to information related to Flags II and SFOT Employee
(as if it were part of Flags II and not a separate entity) that are afforded to
general partners of limited partnerships under the Delaware Revised Uniform
Limited Partnership Act.
(g) Confidentiality. Flags' Directors, L.L.C. may provide
---------------
any information relating to the business of Flags II received by It to Fund II
or to Fund. Except with respect to information that Fund II or Fund has the
right to disseminate under Section 11.8(d), Fund II and Fund shall, and shall
use its reasonable best efforts to cause its affiliates (including the limited
partners of Fund) and its and their respective agents or representatives to,
keep secret and hold in confidence any and all confidential information received
pursuant to Section 11.7(d), this Section 11.8 and Section 11.16 relating to the
business of Flags II or SFOT Employee and reasonably identified as confidential
by Flags II, other than (i) information that has become generally available to
the public other than as a result of a disclosure in violation of this
Agreement; (ii) information that becomes available to them on a non-confidential
basis from a third party that, insofar as they have actual knowledge, has no
obligation of confidentiality to a party to this Agreement with respect to such
information and has not itself received such information directly or indirectly
in breach of any such obligation of confidentiality information that is required
to be disclosed by applicable law or judicial order (provided, in the case of
clause (iii), that the party making such disclosure or whose affiliates, agents
or representatives are making such disclosure shall notify Flags II as promptly
as practicable (and, if possible, prior to making such disclosure) and shall, at
the expense of Flag II, use its reasonable best efforts to limit the scope of
such disclosure and seek , confidential treatment of the information to be
disclosed); and (iv) financial statements, tax information and EBITDA
calculations referred to in Sections 11.8(a)(i), (ii) and (iii). Nothing in this
Section 11.8(g) shall require Fund II or Fund to fail to comply with any
obligations imposed by law to disclose documents or information to its partners.
The parties agree that no disclosure of information by Fund to its partners in
connection with the Consent Solicitation Statement or other similar information
to be provided to Fund's limited partners in connection with the solicitation of
the Fund Limited Partners' Approval to the transactions contemplated by this
Agreement and the Related Agreements violates this Section 11.8(g), the Flags
Limited Partnership Agreement or any other obligation of Fund II or Fund to any
SFEC Entity.
46
<PAGE>
(h) Information Relating to Guarantors.
----------------------------------
(i) Each of the Guarantors whose Net Worth is being
considered in determining whether the Net Worth Standard is satisfied shall
deliver to Fund II the unaudited quarterly financial statements and audited
annual financial statements of such Guarantor promptly following the date such
financial statements are filed with the Securities and Exchange Commission or
otherwise become generally available and, in any event, within 50 days after the
end of each such quarter and 105 days after the end of each such year.
(ii) Concurrently with the delivery of any financial
statements pursuant to Section 11.8(h)(i), if such financial statements reflect
that the Net Worth Standard would not be met without giving effect to the
provisos set forth in the definition of Net Worth, then each Guarantor shall
deliver to Fund a certificate (A) setting forth the calculation of such
Guarantor's Net Worth in accordance with the definition thereof, (B) reconciling
such calculation with the audited financial statements of such Guarantor and (C)
setting forth any "writedown" of, reserve against or sale at a loss of anv
intangible asset or any group of related intangible assets (other than normal
depreciation or amortization) of $50 million or more, or with respect to an
intangible asset or group of related intangible assets that have been
depreciated or amortized by $100 million or more since January 1, 1998; provided
that, TWX may deliver one certificate on behalf of and covering all such
Guarantors, and provided further, with respect to any "writedowns" of or
reserves against intaneible assets that are not required to be set forth in such
certificate, such certificate may contain a single entry reflecting the
Guarantor's best estimate of the aggregate of all such "writedowns" or reserves.
(iii) With the certificate referred to in Section
11.8(h)(ii), to the extent not prohibited by the rules of the American Institute
of Certified Public Accountants or equivalent guidelines (in the reasonable
judgment of such independent certified public accountants), each Guarantor shall
deliver a certificate of its independent accountants stating that they have
reviewed (A) the financial statements referred to in Section 11.8(h)(i) and (B)
the certificate referred to in Section 11.8(h)(ii) and that such certificate
presents fairly in all material respects the Guarantor's Net Worth giving effect
to the last proviso of Section 11.8(h)(ii).
(i) Preparation of Financial Statements Generally. The
---------------------------------------------
financial statements of Flags II described in Sections 11.8(a)(i)(A),
11.8(a)(ii) and 11.8(a)(iii) shall be prepared by management of Flags II in
accordance with GAAP and neither such financial statements nor any financial
statements of any SFEC Entity or SFEC Affiliate shall be required, by the
provisions of this Agreement relating to the calculation of EBITDA, to be
prepared in the manner in which EBITDA is calculated.
11.9 No Liability of Fund Partners, Knox (individually, or as general
----------------------------------------------------------------
partner of Fund), Flags' Directors, L.L.C. or FD-II; Additional Limitation on
- -----------------------------------------------------------------------------
Liability.
- ---------
(a) Generally. Each of the SFEC Entities agrees that none of Knox
---------
(individually or as general partner of Fund), Flags' Directors, L.L.C., FD-II or
any of their respective members or managers, or any of the limited partners of
Fund (except SFOT Acquisition I and SFOT Acquisition II) has or will have any
personal liability to any SFEC Entity or any SFEC Affiliate for the obligations
of Fund, Fund II or Flags II, including, without limitation, under this
Agreement, the Flags II Limited Partnership Agreement or other Related
Agreements. All liabilities of Fund and, with respect to transactions occurring
after the Effective Date, Fund II, in each case under this Agreement and the
Related Agreements, shall be satisfied solely out of the assets of Fund or Fund
II, as the case may be, as an entity separate and apart from its respective
47
<PAGE>
partners. With respect to such liabilities, Fund will indemnify SFOT Acquisition
I and SFOT Acquisition II out of amounts otherwise payable to its partners other
than SFOT Acquisition I and SFOT Acquisition II (but only if the liability was
owed to SFOT Acquisition I and/or SFOT Acquisition II in their capacity as
Special Limited Partners of Fund).
(b) First Exception. Notwithstanding Section 11.9(a), Flags'
---------------
Directors, L.L.C. and FD-II shall, after the Effective Date, be liable to the
SFEC Entities for any losses, liabilities or expenses incurred by such SFEC
Entities arising out of the negligence or wrongful conduct of Flags' Directors,
L.L.C. or FD-II, as applicable, provided that, Flags' Directors, L.L.C. or FD-II
shall not have any greater liability to any SFEC Entity in its capacity as a
limited partner of Fund than it has to any other limited partner of Fund, and
provided, further, that no member or manager of Flags' Directors, L.L.C. or
FD-II as such will under any circumstances have any responsibility for any
obligation or liablilty of Flags' Directors, L.L.C. or FD-II under this
Agreement or any Related Agreement, anv such liability being limited to the
assets of Flags' Directors, L.L.C. or FD-II, as applicable, as a separate
entity, even if the assets in question are nominal.
(c) Second Exception. Nothing in Section 11.9(a) or 11.9(b) shall
----------------
operate to insulate any Person from any obligation such Person may otherwise
have to return any money, together with any interest as provided by law, that,
under this Agreement or any Related Agreement, is wrongfully paid or distributed
to such Person. Any Person, including without limitation the SFEC Entities, may
pursue legal remedies to effectuate this Section 11.9(c).
11.10 Indemnification.
---------------
(a) Indemnification by the SFEC Entities. Each of the SFEC Entities
------------------------------------
will jointly and severally, indemnify and hold harmless (i) Fund and its general
and limited partners (except SFOT Acquisition I and SFOT Acquisition II) and any
directors, officers, employees and trustees of any of them, (ii) upon Flags'
Directors, L.L.C. becoming the general partner of Fund II, Flags' Directors,
L.L.C. and its members and managers, (iii) FD-II upon becoming the co-general
partner of Flags II, and (iv) Knox (individually or as general partner of Fund)
against any claims, damages, liabilities and expenses (including actual
attorneys' fees, costs and charges) that any of them may incur or become subject
to as a result of any inaccuracies in the representations and warranties of any
of the SFEC Entities contained in this Agreement, the Flags II Limited
Partnership Agreement, the Lease or any other Related Agreement or any failure
by any of the SFEC Entities to comply with any of its covenants or other
obligations contained in this Agreement, the Flags II Limited Partnership
Agreement, the Lease or any other Related Agreement.
(b) Indemnification by Fund. Fund and Fund II will indemnify and
-----------------------
hold harmless each of the SFEC Entities and, without duplication, the SFEC
Affiliates, and the general and limited partners, members, managers, directors,
officers and employees of each of them against any losses, claims, damages,
liabilities and expenses (including actual attorneys' fees, costs and charges)
that any of them may incur or become subject to as the result of any
inaccuracies in the representations and warranties of Fund, Knox (individually
or as general partner of Fund), Flags' Directors, L.L.C., or FD-II contained in
this Agreement, any failure by Fund, Knox (individually, or as general partner
of Fund), Flags' Directors, L.L.C., or FD-II to comply with their respective
covenants or other obligations contained in this Agreement, the Flags II Limited
Partnership Agreement or any other Related Agreement to which they are a party
or any misstatement of material fact or omission to state a material fact
required or necessary to be stated in the Consent Solicitation Statement of Fund
48
<PAGE>
or in the other materials to be submitted to Fund limited partners after the
date of this Agreement in connection with the Fund Limited Partners' Approval
(in each case other than any such material misstatements or omissions based on
materials provided to Fund or its representatives or agents in writing by any
SFEC Entity or SFEC Affiliate or any representative or of any of them).
(c) Indemnification Procedures.
--------------------------
(i) With respect to claims against a Person entitled to
indemnification under any provision of this Agreement (for purposes of this
Section 11.10(c), each, an "Indemnified Party"), the Indemnified Party will give
prompt written notice to the party or parties to this Agreement obligated to
provide such indemnification (for purposes of this Section 11.10(c), each, an
"Indemnifying Party") of any claim for which such Indemnified Party seeks
indemnification hereunder, but the failure to so notify the Indemnifying Party
will not relieve the Indemnifying Party from any indemnification obligation that
it may have under any provision of this Agreement or any Related Agreement,
except to the extent that it is damaged or prejudiced by such omission or delay,
or from any other obligation it may have under this Agreement or any Related
Agreement. The Indemnifying Party shall assume the defense of any claim, lawsuit
or action (collectively an "action") for which the Indemnified Party seeks such
indemnification hereunder, subject to the provisions stated herein, with counsel
of national repute reasonably satisfactory to the Indemnified Party. After
notice from the Indemnifying Party to the Indemnified Party that it has so
assumed the defense thereof is received by the Indemnified Party in question,
and so long as the Indemnifying Party performs its indemnification obligations,
the Indemnifying Party will not be liable to the Indemnified Party for any legal
or other expenses subsequently incurred bythe Indemnified Party in connection
with the defense of the action. The Indemnified Party shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof at such Indemnified Party's expense; provided that, the actual fees and
expenses of such separate counsel shall be at the expense of the Indemnifying
Party if (x) the named parties to any such action (including any impleaded
parties) include both the Indemnified Party and any Indemnifying Party and (y)
the Indemnified Party has reasonably concluded, based on advice of its counsel,
that there may be one or more legal defenses available to the Indemnified Party
which are different from, or in conflict with, any legal defenses which may be
available to the Indemnifying Party (in which event the Indemnifying Party shall
not have the right to assume or, if applicable, continue the defense of such
action on behalf of the Indemnified Party), it being understood, however, that
the Indemnifying Party shall not be liable for the fees and expenses of more
than one separate firm of attorneys for all Indemnified Parties in each
jurisdiction in which counsel is necessary or appropriate (plus, as applicable,
local counsel). In addition to, and without limitation of, the Indemnifying
Party's other indemnification obligations, the Indemnifying Party will pay
monthly, upon receipt of itemized statements therefor, all actual fees, costs
and charges of counsel and any experts incurred by an Indemnified Party which
the Indemnified Party is entitled to have paid or reimbursed under this Section
11.10.
(ii) No Indemnified Party shall settle any matter for which
indemnification is being provided under Section 11.10 without the prior written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld.
11.11 Expenses. Whether or not the Closing occurs, and except as
--------
otherwise provided herein, each of the parties hereto shall bear and pay all
expenses incurred by it in connection with the negotiation, execution and
delivery of this Agreement and the Related Agreements and the transactions to
occur on the Effective Date, provided that, no such expenses shall be charged to
Flags II or, if EBITDA would be affected thereby, Fund II.
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11.12 Six Flags Over Texas Name. Fund II and Fund (to the extent its
-------------------------
consent is required) each consents to the license by Fund II to Flags II of its
rights, including the rights to use the name "Six Flags Over Texas," under the
License Agreement, dated June 10, 1969, by and among Great Southwest Corporation
and Fund.
11.13 Section 754 Elections; Publicly Traded Partnership.
--------------------------------------------------
(a) Fund. Fund has in effect an election under Section 754 of the
----
Code (a "Section 754 Election"). Fund will not revoke or apply to revoke its
Section 754 Election at any time during, the term of the Flags II Limited
Partnership Agreement without the written consent of SFOT Acquisition II. Fund
agrees that the basis and depreciation adjustments required pursuant to its
Section 754 Election will be provided by Flags II.
(b) Fund II. Fund II will make a Section 754 Election. Fund II will
-------
not revoke or apply to revoke its Section 754 Election at any time during the
term of the Flags II Limited Partnership Agreement without the written consent
of SFOT Acquisition II. Fund II agrees that the basis and depreciation
adjustments required pursuant to its Section 754 Election will be provided by
Flags II.
(c) Publicly Traded Partnership. The parties to this Agreement will
---------------------------
use their reasonable best efforts to avoid any action that would cause Fund,
Fund II or Flags II to be a "publicly traded partnership" within the meaning of
the Code (or successor statute).
11.14 List of Fund Limited Partners. Fund shall, within five Business
-----------------------------
Days after the Effective Date, provide to SFEC a list of the names, addresses
and unitholdings of the limited partners of Fund, which list shall not, without
the prior written consent of Fund, be used by any SFEC Entity or SFEC Affiliate
for any purpose other than to make the Tender Offer and consummate the Liquidity
Puts.
11.15 Certain Flags II Distributions in 1998. From and after January
--------------------------------------
1, 1998 and until FD-II becomes the co-general partner of Flags II, no
distributions will be made or declared by Flags II.
11.16 EBITDA Arbitration Matters.
--------------------------
(a) Matters Subject to Arbitration.
------------------------------
(i) Except to the extent provided in Section 11.16(a)(iii), to
the extent GAAP or the definition of EBITDA permits different judgments to be
made in determining the amount of any item to be taken into account in the
determination of EBITDA, the judgment will be made in accordance with past
practice with respect to the Amusement Park prior to 1997 as reflected by a
consistent pattern of material judgments" ("Past Accounting Practice") or, if
there is no relevant Past Accounting Practice, relevant Past Accounting Practice
is not determinable or GAAP as then in effect precludes the continued
utilization of Past Accounting Practice, then such judgment will be made and
finally determined for the purposes of calculating EBITDA as set forth below in
this Section 11.16. As used in the phrase "consistent pattern of material
judgments," the term "material" is intended to refer to judgments with respect
to items that either (i) were of such size that their treatment would ordinarily
be given significant consideration by financial management or independent
accountants or (ii) even if not of such size, were given significant
consideration by financial management or independent accountants.
Notwithstanding the foregoing, Past Accounting Practices with respect to
reserves, write-offs or other charges for inventory and receivables shall be the
practices applied to such items by Flags II for 1998.
50
<PAGE>
(ii) Determinations as to (A) whether there is a Past Accounting
Practice with respect to a particular item, (B) if so, what that Past Accounting
Practice is, (C) whether GAAP precludes the continued utilization of such Past
Accounting Practice and (D) all judgments referred to in Section 11.16(a)(1) are
referred to in this Section 11.16 as "Arbitrable Judgments." By way of example,
the types of judgments with respect to which this Section 11.16 shall apply
include, without limitation, with respect to recognition of revenue or income or
otherwise in respect of revenue or income, including the amount of reserves
(whether in respect of new reserves, adding to existing reserves or reducing
previously incurred reserves) and whether any expenditures are for maintenance
or are capital expenditures.
(iii) Without regard to Past Accounting Practice, (x)
expenditures that satisfy the requirement for minimum capital expenditures under
the Flags II Limited Partnership Agreement or that are financed with "Capital
Improvement Loans" (as defined in the Flags II Limited Partnership Agreement)
will be deemed capital expenditures; and (y) expenditures for the purchase and
installation of Mr. Freeze or for the purchase of land, will be deemed capital
expenditures.
(iv) The allocation to Flags II of expenses attributable to
Permitted Team Texas Arrangements.
(b) Initial Judgments. Flags II, at the reasonable direction of SFOT
-----------------
II, will make the initial determinations with respect to the Arbitrable
Judgments and, for the purpose of calculating EBITDA, such initial
determinations shall be used, subject to the arbitration and other procedures
provided for in this Section 11.16.
(c) Notification. Concurrently with the delivery of the annual
------------
financial statements delivered pursuant to Section 11.8(a)(i)(A), SFOT II will
provide to Fund II written notice (x) stating that in determining EBITDA all
judgments made as to whether an expenditure was for maintenance or a capital
expenditure (except as otherwise required by Section 11.16(a)(iii)) have been
made in accordance with Past Accounting Practice or, if they have not,
identifying with reasonable specificity which judgments have not so been made
and the amount involved in each such judgment, (y) identifying non-cash
writedowns and charges and (z) identifying new reserves and additions to and
subtractions from existing reserves.
(d) Initial Fund II Investigation. Within 15 days after the
-----------------------------
notification referred to in Section 11.16(c) is given or, if earlier, required
to be given, Flags II and SFOT II will provide copies to Fund II and Fund in
Dallas, Texas, of all documents required to be provided pursuant to Section
11.8(a)(iv). Flags II and SFOT II will also give Fund II and Fund full and
prompt access to any other documents requested by it reflecting or relating to
the Arbitrable Judgments. The inspection and information access rights provided
for in this Section 11.16 are in addition to any other inspection or access
rights provided for in this Agreement or the Related Agreements or by applicable
law. Flags II, SFOT II, SFOT Employee and/or their respective representatives
will, upon request by Fund and at a mutually convenient time during or after
this initial inspection period, meet with Fund or its representative to explain
and answer questions about the Arbitrable Judgments.
(e) Initial Dispute Notification and Resolution Discussions. If Fund
-------------------------------------------------------
II disputes any one or more Arbitrable Judgments (including as to whether such
Arbitrable Judgment was made in accordance with Past Accounting Practice), it
will give written notice of such dispute to SFOT II by June 30 of each year
(provided that, the failure to give this notice timely shall not give rise to
-------- ----
51
<PAGE>
any remedy). Fund II and SFOT II, or their representatives, will meet, in
Dallas, Texas, and at a mutually convenient time within 15 Business Days
thereafter and attempt to resolve the Arbitrable Judgments that are disputed by
Fund II. If Fund II does not give notice that it challenges any Arbitrable
Judgment made with respect to a year and reflected in the financial statements
for such year provided pursuant to Section 11.8(a)(1)(A), in the next year or
the following year then -- unless (i) Fund II has not been provided with the
documents required to be provided pursuant to Section 11.16(d) within ten
Business Days following written notice by Fund II to SFOT II, Flags II and SFEC
or SFTP that such documents have not been received by it within the time period
provided in Section 11.16(d), (ii) Fund II has neither been provided with
originals or copies of other documents requested by it reflecting or relating to
the Arbitrable Judgment nor been given full and prompt access to such other
documents, (iii) the Arbitrable Judgment was required by clauses (y) or (z) of
Section 11.16(c) to be but was not reflected in the notice given pursuant to
Section 11.16(c), (iv) the Arbitrable Judgment was concealed, (v) Fund II has
not been timely provided with the financial statements, other information and
notice required by Section 11.8(a)(1)(A)-(F), or (vi) the financial statements
referred to in Section 11.16(a)(i)(A) do not fairly present the information set
forth therein in accordance with GAAP, in the case of each of clauses (i)
through (vi) to the extent such documents or financial statements are relevant
to the determination -- Fund II will lose its right to thereafter challenge the
Arbitrable Judgment. The time period in which a challenge must be made with
respect to the EBITDA calculation for any year is called the "Procedure Period"
for such year.
(f) Selection of Independent Accountant for Arbitration. If any
---------------------------------------------------
Arbitrable Judgment items have not been resolved pursuant to Section 11.16(e)
within the time frame referred to therein (as it may be extended by mutual
agreement of Fund II and SFOT II), at the request of either Fund II or SFOT II
the matter will be finally resolved by (i) a Big Six independent accounting
firm, that does not perform services for Fund II, Fund, Flags II, any SFEC
Entity or any SFEC Affiliate, mutually selected by Fund II and SFOT II or (ii)
if there is no such Big Six independent accounting firm or no such selection is
made within ten Business Days of a request by Fund II or SFOT II, by such a Big
Six independent accounting firm, if any, or, if none, an independent certified
public accounting firm of national repute that does not perform services for
Fund II, Fund, Flags II, any SFEC Entity or any SFEC Affiliate that is selected
jointly by the then principal independent accountants for Fund II and SFOT II.
The independent accounting firm so selected is referred to below as the
"Accounting Arbitrator."
(g) Arbitration. As to each Arbitrable Judgment that has not been
-----------
resolved pursuant to Section 11.16(e) and in recognition of the fact that
different determinations and judgments are appropriate under GAAP and that SFOT
II and its affiliates, on the one hand, and Fund (which will at the time be the
99% owner of Fund II), Fund II, and Fund's limited partners (other than SFOT
Acquisition I and SFOT Acquisition II), on the other, may have different
interests because of the impact of such determinations and judgments on EBITDA
(and, therefore, on the Per Unit Tender Offer Price and the Put Price), (x) the
Accounting Arbitrator will decide whether the Initial determination referred to
in Section 11.16(b) with respect to such Arbitrable Judgment was made consistent
with Past Accounting Practice and, if not, will make the current determination
using Past Accounting Practice or (y) if there is no Past Accounting Practice,
if Past Accounting Practice is not determinable or if GAAP as then in effect
precludes the continued utilization of Past Accounting Practice, the Accounting
Arbitrator will make the determination or judgment (including, if applicable,
the amount to be used) using solely its own judgment (based on the relevant
facts and circumstances known or that should have been known existing on the
date of the report of the independent auditors on the audited financial
statements for the year in which such Arbitrable Judgment was made), in each
such case even if such initial determination was permissible under GAAP,
provided that, the Accounting Arbitrator is to make a determination that is
52
<PAGE>
permissible under GAAP. Fund II, Fund and SFOT II shall be entitled to provide
whatever written documentation they desire to the Accounting Arbitrator (but, as
to documentation used in making such initial determination or existing at the
end of the year in which the judgment was made, only if such documentation was
provided or made available by SFOT II or SFOT Employee to Fund II not later than
15 Business Days prior to commencement of the arbitration and by Fund II to SFOT
II not later than 15 Business Days prior to commencement of the arbitration).
Fund II, Flags II, SFOT II and SFOT Employee will provide to the Accounting
Arbitrator any other information the Accounting Arbitrator may reasonably
request; and, if requested by the Accounting Arbitrator, Fund II, Flags II, SFOT
II, SFOT Employee and their representatives will make oral presentations and/or
make their employees and the employees of Flags II and SFOT Employee available
to be interviewed by the Accounting Arbitrator, in such manner as it may
determine. The decision of the Accounting Arbitrator, including as to the
meaning and enforceability of this Section 11.16, will be communicated by the
Accounting Arbitrator to Fund II and SFOT II in writing and will be final and
unappealable, and judgment thereon may be entered by any court of competent
jurisdiction. Provisions forthe adjustment of EBITDA based on the decision of
the Accounting Arbitrator are contained in Section 11.7(c).
(h) Fees and Expenses. Fund II and Flags II will each pay its own
-----------------
costs in connection with the notification, investigation and initial dispute
notification and resolution procedures set forth in this Section 11.16 and any
costs and expenses of Flags II will be deemed expenses for the purposes of
determining EBITDA. After such time as any party initiates an arbitration
procedure under Section 11.16(g), each party will pay its own costs in
connection with such arbitration procedure, including without limitation, the
fees and expenses of the Accounting Arbitrator, provided that, any costs that
would be expenses of Flags II shall be borne entirely by SFOT II and will not be
expenses for the purpose of determining, and will not reduce, EBITDA or cash
flow of Flags II in any period.
(i) Management Fee Adjustment. To the extent that Flags II engages
-------------------------
in a very high volume/low margin or very high margin/low volume activity
(compared to an amusement park), which is not typical for amusement park
operations at the Amusement Park at the date of this Agreement (such as, by way
of illustration of a high volume/low margin activity, but not of limitation,
gaming or supermarket operations), then either SFOT II or Fund II may demand
that the deduction from net income or loss set forth in clause (v) of paragraph
(B) of the definition of "EBITDA" in respect of the Management Fee (the
"Management Fee EBITDA Deduction") be adjusted so that the Management Fee EBITDA
Deduction will not unfairly overstate or unfairly understate the Management Fees
to be used in calculating EBITDA. If SFOT II and Fund II cannot agree on such
adjustment, then the adjustment shall be determined by the Accounting Arbitrator
using its own judgment in accordance with Section 11.16(g). This Section
11.16(i) deals only with the Management Fee EBITDA Deduction as it relates to
the calculation of EBITDA and shall not affect the actual Management Fee or
Priority Management Fee Distributions to which SFOT II is entitled under the
Flags II Limited Partnership Agreement.
(j) Affiliate Transactions. Whether there has been compliance with
----------------------
the requirements of Section 11.7(a) is not an Arbitrable Judgment.
11.17 EBITDA Adjustment for Personal Injury Claims.
--------------------------------------------
(a) Generally. In calculating EBITDA for each year there will be
---------
deducted in that year an amount (the "Deemed Insurance Amount") equal to the
average of the amounts paid by Flags II and, with respect to park personnel,
including Park Employees, SFOT Employee in the then prior three years to third
parties for the investigation, defense and settlement of personal injury claims
53
<PAGE>
and workers' compensation claims (in each case other than Uninsured Major Injury
Claims) and payment of damages and other amounts for personal injury claims and
workers' compensation claims (in each case other than Uninsured Major Injury
Claims). In determining such average, amounts paid for self insurance shall not
be averaged or otherwise considered, but amounts paid by any self-insurance
"pool" to unaffiliated third parties on behalf of Flags II or SFOT Employee, as
the case may be, shall be included in such average. As used in this Agreement,
the term "park personnel" means individuals who work at or for the Amusement
Park, to the extent they work at or for the Amusement Park.
(b) Uninsured Major Injury Claims. With respect to Uninsured Major
-----------------------------
Injury Claims occurring on or after January 1, 1998, EBITDA shall be adjusted by
a reserve, which reserve (and additions to and reductions from such reserve)
shall be determined, in the first instance, by Flags II, subject to adjustment
as provided in Section 11.16.
(c) Definition. "Uninsured Major Injury Claims" means the uninsured
----------
(except by self insurance) portion of claims (including the portion for which
third-party insurance is provided, but for which an SFEC Entity indemnifies such
insurer against loss) or, based on actual occurrences, anticipated claims for
personal injuries (Including workers' compensation claims) that are major,
unusual and/or extraordinary. Examples of such major, unusual and/or
extraordinary matters are death, injury resulting in significant paralysis or
similar massive physical injury or injuries to numerous people resulting from a
significant ride accident or a fire.
11.18 Other SFEC Entities That May Own Units. Notwithstanding anything
--------------------------------------
to the contrary contained herein, the obligations of SFOT Acquisition I and SFOT
Acquisition II to effect the Tender Offer and the purchase of Units pursuant to
the Liquidity Puts under this Agreement and the Related Agreements may at the
election of SFEC be assigned to not more than two additional SFEC Affiliates,
provided that, all of the conditions set forth hereinafter are satisfied on a
timely basis: (1) SFEC gives notice to Fund II and Fund of its election to
exercise the right provided herein not later than 30 days prior to the date of
such assignment, (ii) the assignee is and will be a single purpose entity, a
Delaware corporation, a limited partnership or a limited liability company, and
a wholly-owned, direct or indirect, subsidiary of SFEC, Time Warner Inc. or Time
Warner Entertainment Company, L.P.; (iii) the intended assignee executes
contemporaneously with the assignment (x) an agreement pursuant to which it
expressly agrees to be bound by the provisions of the Overall Agreement as if it
were a signatory party thereto, and (y) a form of a Guarantee identical to the
Guarantees executed by SFOT Acquisition I and SFOT Acquisition II (other than
the name); (iv) each Guarantor executes an agreement reconfirming its Guarantees
and, furthermore, guaranteeing under the Overall Agreement and the Related
Agreement in similar fashion the obligations of the intended assignee, (v) at no
time will the number of such subsidiaries that own Units exceed four; (vi) each
SFEC Entity will execute or deliver such other documents, including opinions of
counsel, as Fund may reasonably request, and (vii) the introduction of other
SFEC Entities pursuant hereto shall never in any way diminish the financial
interests or adversely impact or reduce, impair or limit the legal interests of
Fund or the Limited Partners under the Overall Agreement or the Related
Agreements.
11.19 Negative Pledge Covenants. The SFEC Entities will not take, and
-------------------------
will use their best efforts to cause the SFEC Affiliates not to take, any action
the result of which would be to (i) cause the term of the Bank Credit Agreement
Negative Pledge Covenant to continue after the expiration of the term or earlier
termination of the Indenture Negative Pledge Covenant, (ii) to cause the term of
the Indenture to be extended beyond the termination date of the Indenture as in
effect on the date the Indenture was initially entered into without the
Indenture Negative Pledge Covenant being released with respect to Units held
54
<PAGE>
from time to time by SFOT Acquisition I or (iii) permit to exist any other
agreement covenant that would preclude the granting, attachment, perfection or
first priority of the security interests in such Units provided for in the SFOT
Acquisition I and SFOT Acquisition II Guarantee (other than such a covenant
contained in SFTP's senior credit facility from time to time, provided that,
such covenant is not more restrictive than the Bank, Credit Negative Pledge
Covenant and does not extend beyond the term of the Indenture).
ARTICLE XII
EMPLOYEE AND RELATED MATTERS
12.1 Continuation of Employment.
--------------------------
(a) Offers of Employment. The SFEC Entities shall cause SFOT
Employee to, and SFOT Employee shall, offer employment to all individuals
located in Texas who are employed by Flags II (or to the extent legally
permissible, by SFOT II and its affiliates (other than Flags II)) at the
Amusement Park as permanent, full-time employees who work at the Amusement Park
on the Effective Date, on substantially the same terms and conditions to which
such employees were subject immediately prior to that date, subject to the
provisions of this Article XII. All such employees who accept such offer or who
are later employed by SFOT Employee and whose work for SFOT Employee is, except
as permitted by the last sentence of Section 11.7(a)(i), solely work at or for
the Amusement Park are referred to in the Agreement as "Park Employees." SFOT
Employee may transfer employees to the employ of another SFEC Park or any SFEC
Affiliate, effective at any time prior to December 31, 2024 and, if the Net
Worth Standard is then met and the End-of-Term Option has then been exercised,
at any time thereafter, provided that the president or general manager, the
chief financial officer and chief maintenance officer of the Amusement Park or,
if the applicable, Flags II or SFOT Employee shall not be so transferred, at any
time after December 31, 2022, unless the End-of-Term Option has then been
exercised and the Net Worth Standard is then met. No individual whose employment
could not then be transferred to another SFEC Park or any SFEC Affiliate
pursuant to this Section 12.1 (a) shall, if that individual ceases for any
reason to be employed by SFOT Employee or Flags II or, after December 31, 2027,
then remains employed by SFOT Employee or Flags II be employed by an SFEC
Entity, SFEC Affiliate or SFEC Park for the two years, or such shorter period as
may be required by applicable law, after such employment ceases (or, if
applicable, for two years or such shorter period as may be required by
applicable law after December 31, 2027), unless the End-of-Term Option has then
been exercised and the Net Worth Standard is then met. Nothing in this Agreement
shall limit the right of SFOT Employee to terminate the employment of any
individual in its sole discretion. Effective immediately prior to the Effective
Date, all employees of Flags II who do not accept such employment (and thereby
terminate their employment with Flags II) shall be terminated by Flags II and,
without limiting its other obligations under this Agreement and the Related
Agreements, SFOT II shall cause Flags II to discharge in full all liability,
if any, Flags II may have to all Persons who are employees of Flags II at any
time prior to Effective Date, including any liability that may exist by virtue
of such termination.
(b) WARN Act and Other Matters. While the parties do not believe the
--------------------------
Worker Adjustment and Retraining Notification Act ("WARN Act") applies, if it
does, SFOT Employee (but not Flags II) shall be fully responsible for any
liability arising under the WARN Act in connection with the transactions
provided for in this Agreement and the Flags II Limited Partnership Agreement.
55
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12.2 Benefit Responsibilities. During the term of the Flags II
------------------------
Limited Partnership Agreement, SFOT Employee shall cause to be provided benefits
to Park Employees which are substantially comparable in the aggregate to the
benefits provided to similarly situated employees of SFEC Parks. Notwithstanding
any provision herein to the contrary, nothing in this Agreement shall be
construed to limit the right of any SFEC Entity or SFEC Affiliate to amend or
terminate any employee benefit plan, practice or arrangement covering Park
Employees at any time after the Effective Date. In connection with such
benefits, SFOT Employee shall cause to be recognized all service performed by
Park Employees under the existing welfare and benefit plans prior to the
Effective Date for all purposes under such plans including, but not limited to,
eligibility, vesting, benefit accrual, retirement subsidies, benefit
commencement, and shall waive all preexisting condition exclusions not
applicable prior to the Effective Date under any health insurance plans.
For purposes of this Article XII, "comparable" shall mean benefits that are
substantially similar in type, scope, eligibility requirements and employee cost
sharing.
12.3 Continuation of Health Coverage Through Closing Date. SFOT
----------------------------------------------------
Employee will cause to be continued the coverage of Park Employees under
existing group health benefit plans or plans which are substantially comparable
in the aggregate to the group health benefit plans provided to similarly
situated employees of Flags II up to the Effective Date and to cause to be
reimbursed covered Park Employees for eligible health care and other eligible
welfare expenses and services incurred up to the Effective Date in accordance
with the terms of such plans. For purposes of the foregoing, an expense or
service is deemed to be incurred when the medical services are performed or,
with respect to welfare benefits other than medical or dental benefits, when the
event giving rise to such expense or service occurs.
12.4 Modifications. The employment status of each person currently
-------------
employed by Flags II shall not be changed prior to the Effective Date in a
manner that would promise employment for any specified term of employment.
12.5 Park Employees. The Park Employees will work at the Amusement
--------------
Park as if they were employed by the Amusement Park and Flags II will reimburse
SFOT Employee for the cost thereof to the extent permitted by Section
11.7(a)(i).
12.6 End of Term. If SFOT Acquisition II does not exercise the
-----------
End-of-Term Option, SFOT Employee shall use its best efforts to cause the
employment of all Park Employees involved in the day-to-day management and
operation of the Amusement Park (i) to be continued if the alternative set forth
in Section 7.5(b) is elected or (ii) at the election of Fund II, to be
transferred to Fund II or to any purchaser or manager of the Amusement Park
selected pursuant to Section 7.5(c) upon completion of the sale of the Amusement
Park or effectiveness of a management agreement contemplated by such Section
7.5(c). In any event, SFOT Employee will cooperate fully to ensure an orderly
transition.
12.7 Sale at End-of-Term. If the End-of-Term Option is not exercised
-------------------
or SFOT II is removed as the managing general partner of Flags II, at the option
of Fund, SFOT II will sell on December 31, 2027 to Flags II, for cash in the
amount of $100, all of the then-outstanding capital stock of SFOT Employee.
12.8 ERISA. If SFOT Employee is a member of a group under common
-----
control or treated as a single employer under Section 414 of the Code, and there
is a continuation or transfer of employment pursuant to Section 12.6 or a
transfer of the stock of SFOT Employee pursuant to Section 11.7, the SFEC
56
<PAGE>
Entities will Jointly and severally indemnify and hold harmless the employer or
purchaser of the stock against all liabilities, costs and expenses imposed on or
incurred by the employer or purchaser, under Title IV of the Employee Retirement
Income Security Act of 1974, as amended (or successor statute), arising at any
time by reason of such continuation or transfer of employment or transfer of
stock, as the case may be, by reason of SFOT Employee's membership in such group
of employers, but not including any such liabilities, costs or expenses directly
attributable to SFOT Employee.
12.9 No Termination; No Third Party Rights. The parties hereto agree
-------------------------------------
that, subject to the effect of Section 12.1 (a), none of the transactions
contemplated by this Agreement, the Flags II Limited Partnership Agreement or
any of the other Related Agreements shall be construed to constitute a
termination of employment of any Person employed by Flags II including, without
limitation, any Park Employee. Nothing herein express or implied shall confer
upon any employee or former employee of Flags II, or the beneficiary or legal
representative thereof, any right whatsoever under this Agreement, the Flags II
Limited Partnership Agreement or any of the other Related Agreements, including,
without limitation, any right to continued employment or benefits.
ARTICLE XIII
EXECUTION OF THIS AGREEMENT;
THE CLOSING AND CLOSING DELIVERIES
13.1 Execution and Delivery of this Agreement. Concurrently with the
----------------------------------------
execution and delivery, of this Agreement, the following documents shall be
executed by and delivered to the party or parties indicated:
(a) TWE and TW Guarantee. The TWE and TWX Guarantee will be executed
--------------------
and delivered by TWE, TWX, Fund, Fund II and Flags' Directors, L.L.C., but its
effectiveness shall be conditioned upon the Effective Date having occurred.
(b) Fairness Opinion. Fund shall receive from Allen & Company its
----------------
opinion to the effect that, as of the date of such opinion, the aggregate
financial consideration to be received by Fund and its limited partners pursuant
to this Agreement and the Related Agreements, taken as a whole, is fair to the
limited partners of Fund.
13.2 The Closing. The closing under this Agreement and the Related
-----------
Agreements (the "Closing") will occur on the Effective Date.
13.3 Conditions to the Obligations of the Parties.
--------------------------------------------
(a) Fund Limited Partners' Approval. The obligations of each of the
-------------------------------
parties to this Agreement and the Related Agreements and TWE and TWX under the
TWE and TWX Guarantee are subject to the condition that the Fund Limited
Partners' Approval shall have been obtained not later than December 30, 1997.
(b) No Prohibition. The obligations of each of the parties shall be
--------------
subject to the condition that no federal, state or foreign governmental
authority or other agency or commission or court of competent jurisdiction shall
have enacted, issued or promulgated, enforced or entered any statute, rule,
regulation, injunction or other order (whether temporary, preliminary or
57
<PAGE>
permanent) which remains in effect and which has the effect of making illegal or
otherwise prohibiting the consummation of the transactions provided for in this
Agreement or the Related Agreements.
(c) Conditions to Obligations of Fund. The obligations of Fund, Knox
(solely in his capacity as general partner of Fund), Flags' Directors, L.C.C.,
and FD-II on the Effective Date shall be subject to the (i) delivery to Fund of
the opinion of Paul, Weiss, Rifkind, Wharton & Garrison substantially in the
form of Exhibit 13.3(c)(i), (ii) delivery to Fund of the opinion of Fulbright &
Jaworski, or another Texas law firm satisfactory to Fund in its reasonable
judgment, substantially in the form of Exhibit 13.3(c)(i), relative to the
legal, valid and binding nature of the Flags II Limited Partnership Agreement
and its enforceability against each of the parties thereto in accordance with
its terms, (iii) the representations and warranties made by each of the SFEC
Entities being true and correct as of the Effective Date, as if made on and as
of the Effective Date (except to the extent specifically made as of an earlier
date), each of the covenants of each of the SFEC Entities to be complied with
prior to the Effective Date having been complied with, and each of the SFEC
Entities having delivered a certificate signed by an officer of each of them
confirming the foregoing and (iv) the delivery to Fund, within 5 days following
the date hereof, of the tax opinion of Jones, Day, Reavis & Pogue.
(d) Conditions to the Obligations of the SFEC Entities. The
--------------------------------------------------
obligations of the SFEC Entities and the obligations of TWE and TWX under the
TWE and TWX Guarantee on the Effective Date shall be subject to (i) delivery to
the SFEC Entities of the opinion of Jones, Day, Reavis & Pogue substantially in
the form of Exhibit 13.3(d), (ii) delivery to the SFEC Entities of a certificate
of Fund to the effect that the Fund Limited Partners' Approval has been obtained
and (iii) the representations and warranties made by Fund, Knox (solely in his
capacity as general partner of Fund), Flags' Directors, L.L.C., and FD-II being
true and correct as of the Effective Date, as if made on and as of the Effective
Date (except to the extent specifically made as of an earlier date), each of the
covenants of Fund, Knox (solely in his capacity as general partner of Fund),
Flags' Directors, L.L.C., and FD-II to be complied with prior to the Effective
Date having been complied with, and Fund, Knox (solely in his capacity as
general partner of Fund), Flags' Directors, L.L.C., and FD-II having delivered a
certificate signed by a general partner, trustee, officer or managing member of
each of them confirming the foregoing.
13.4 Effective Date Deliveries. The following additional documents
-------------------------
shall be executed by and delivered to the party or parties indicated on the
Effective Date:
(a) Related Agreements. The following Related Agreements and other
------------------
agreements shall be executed by and delivered to each of the parties thereto:
(i) the Second Amended and Restated Fund Limited Partnership
Agreement;
(ii) the SFOT Acquisition I and SFOT Acquisition II
Guarantee;
(iii) the SFTP and SFEC Guarantee;
(iv) the Flags II Limited Partnership Agreement;
(v) the TWE and TWX Guarantee;
(vi) the Fund II Limited Partnership Agreement;
58
<PAGE>
(vii) the Land Deed;
(viii) the Lease;
(ix) the Release of Claims by Knox, Fund, Flags II, Flags
Directors' L.L.C. and certain Affiliates; and
(x) the Release of Claims by SFEC Entities and SFEC Affiliates.
13.5 Solicitation of Fund Limited Partners' Approval; Termination
------------------------------------------------------------
Fee. As soon as practicable after the date of this Agreement, Fund shall solicit
- ---
from its limited partners pursuant to a Consent Solicitation Statement the Fund
Limited Partners' Approval. Knox (as general partner of Fund) shall recommend
that the limited partners of Fund approve this Agreement and, subject to his
fiduciary duties, will not withdraw such recommendation prior to the completion
of the vote of the limited partners of Fund. Fund shall mail separately to the
Fund Limited Partners a timely request for a non-binding indication of each
limited partner's intention with respect to whether and to what extent such
limited partner will participate in the Tender Offer. The obligations of each of
the parties to this Agreement and the Related Agreements and TWE and TWX under
the TWE and TWX Guarantee are subject to the condition that the Fund Limited
Partners' Approval shall have been obtained not later than December 30, 1997.
Knox shall notify SFEC in writing promptly following the date on which the Fund
Limited Partners' Approval shall have been obtained. In the event that the Fund
Limited Partners' Approval shall not have been obtained by December 30, 1997,
this Agreement shall be deemed to have terminated. If following termination of
this Agreement, the Fund limited partners approve a transaction with a third
party pursuant to an agreement entered into within 18 months following such
termination, Fund will pay to SFEC in cash (without set-off or deduction of any
kind whatsoever) immediately after such action by the Fund Limited Partners a
"termination" fee of $15 million, plus actual out-of-pocket expenses incurred in
connection with this Agreement, as liquidated damages and in complete discharge
of all the obligations of Fund, Flags' Directors, L.L.C., FD-II, Knox and the
Fund limited partners hereunder (provided that such fee shall be in addition to
any other remedies available to SFEC in respect of any breach by Knox, Fund or
the respective Affiliates of their obligations under this Section 13.5).
ARTICLE XIV
GENERAL PROVISIONS
14.1 Applicable Law. This Agreement shall be governed by and
--------------
construed under the internal laws of the State of New York in accordance with
and as is specifically provided for in Section 5-1401 of the General Obligations
Law of New York, and not the laws otherwise pertaining to choice or conflict of
law of the State of New York.
14.2 Forum. Except as otherwise provided in Sections 11.7(d), 11.7(f)
-----
and 11.1 5(g) unless jurisdiction or venue is not available in one of the forums
specified below, the sole forums for resolving disputes under this Agreement,
the Flags II Limited Partnership Agreement, the Second Amended and Restated Fund
Limited Partnership Agreement, the Fund II Limited Partnership Agreement, the
Lease, and the Related Agreements will be trial level federal, Texas and New
York state courts located in Dallas, Texas, or New York, New York and relevant
appellate courts. Each of the parties agrees to the jurisdiction of and venue in
such courts and not to assert forum non conveniens or a similar doctrine in
----- --- ----------
59
<PAGE>
opposition to the forum selection made in this Section 14.2. Service may be made
at the addresses to which notices are to be given, as provided in Section 14.4.
14.3 Injunction. In addition to any remedies at law that may be
----------
available, the parties shall be entitled to equitable remedies, including
injunction and specific performance, for breaches or prospective breaches of
this Agreement, the Flags II Limited Partnership Agreement, the Lease, and the
other Related Agreements. Each of the parties hereby waives any right that it
may have to request or require that any other party post any bond with respect
to any injunctive action, provided that, this sentence will not apply to any
action brought to enjoin (i) a payment or distribution to Fund II or the limited
partners of Fund of or in respect of any Minimum Amount or Base Rent or (ii) the
pledgeholder under the SFOT Acquisition I and SFOT Acquisition II Guarantee from
delivering the Units it holds and the "stock powers" held by it to or as
directed by Fund, provided that, if the party seeking the injunction prevails on
the merits, so that the payment, distribution or delivery should not have been
made, Fund will reimburse such party for the cost of the bond.
14.4 Notices.
(a) Notices in General. All notices, requests, demands and other
------------------
communications under or pursuant to this Agreement shall be in writing and shall
be deemed given if delivered personally or, if mailed, two days after being
mailed by certified or registered mail, postage prepaid, return receipt
requested (if given both to the party listed below and to its counsel by such
mail and, in addition, also by facsimile transmission), or, if by facsimile,
upon receipt of a transmittal confirmation, to the parties at the following
addresses or facsimile numbers, or such other address or facsimile number as a
party may designate for itself by written notice to the other parties:
If to Fund, Knox, Flags' Directors L.L.C. or FD-II:
Six Flags Over Texas Fund, Ltd.
c/o Mr. Jack D. Knox
Crescent Court, Suite 1630
Dallas, Texas 75201
Fax: (214) 855-8808
Phone: (214) 855-8801
with copies to its designated counsel, currently:
Jones, Day, Reavis & Pogue
2001 Ross Avenue, Suite 2300
Dallas, Texas 75201
Attention: Richard A. Freling, Esq.
Fax: (214) 969-5100
Phone: (214) 969-4835
60
<PAGE>
and
Haynes and Boone, L.L.P.
901 Main Street, Suite 3100
Dallas, Texas 75202
Attention: C. Ted Raines, Esq.
Fax: (214) 651-5940
Phone: (214) 651-5536
If to SFOT II, SFOT Acquisition I, SFOT Acquisition II, SFOT Employee,
SFTP or SFEC:
c/o Six Flags Entertainment Corporation
400 Interpace Parkway
Bldg. C -Third Floor
Parsippany, New Jersey 07054
Attention: Chief Executive Officer
Attention: General Counsel
Fax: (201) 402-7741
Phone: (201) 402-8100
with copies to its designated counsel, currently:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Attention: Robert B. Schumer, Esq.
Fax: (212) 757-3990
Phone: (212) 373-3097
and also to:
Boston Ventures Management, Inc.
21 Custom House Street, 10th Floor
Boston, Massachusetts 02110
Attention: Ms. Martha H.W. Crownshield
Fax: (617) 737-3709
Phone: (617) 737-3706
Warner Bros.
4000 Warner Blvd.
Burbank, California 91522
Attention: General Counsel
Fax: (818) 954-3563
Phone: (818) 954-3591.
(b) Notices to Unitholders. Whenever notice, request, demand or
----------------------
other communication is required to be given by any of the SFEC Entities to the
Unitholders under this Agreement or any Related Agreement, such notice shall be
61
<PAGE>
in writing and shall be deemed given if delivered personally or, if mailed, two
days after being mailed by certified or registered mail, postage pre-paid,
return receipt requested or, if by facsimile, upon receipt of transmittal
confirmation, to each Unitholder at the address of such Unitholder set forth in
Fund's records, and, in addition, at any other address specified in writing to
Fund by any Unitholder for himself, herself or itself in each case as from time
to time provided to SFOT II by Fund.
14.5 Counterparts. This Agreement and the Related Agreements may be
------------
executed in two or more counterparts, each of which shall be deemed an original,
but all of which will constitute one and the same document. Faxed signatures of
this Agreement or the Related Agreements shall be binding for all purposes. 14.6
Entire Agreement. This Agreement, the Exhibits hereto and the Related Agreements
contain the entire agreement between the parties hereto with respect to the
transactions provided for herein and therein and supersede all prior oral and
written and all contemporaneous oral negotiations, commitments and
understandings relating thereto.
14.7 Modifications, Amendments and Waivers. At any time prior to the
-------------------------------------
Closing the parties may, but only in writing, amend, supplement or waive any of
the provisions of this Agreement and any such amendment, supplement or waiver
shall be effective against any party hereto that has executed such document.
14.8 Interpretation. The headings contained in this Agreement and the
--------------
Related Agreements are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement or the Related Agreements.
The parties agree that each party and its counsel have reviewed and revised this
Agreement and the Related Agreements
14.9 Severability; Invalidity of Particular Provisions. If any term
-------------------------------------------------
of this Agreement or the Related Agreements or the application thereof to any
Person or circumstance shall, to any extent, be invalid or unenforceable, the
remainder of this Agreement or the Related Agreements, or the application of
such term or provision to Persons or circumstances other than those to which it
is held invalid or unenforceable, shall not be affected thereby and each other
term and provision of this Agreement and the Related Agreements shall be valid
and enforceable to the fullest extent permitted by law.
14.10 Waiver. No party will be deemed to have waived any covenant,
------
obligation or performance of any other party or any condition under this
Agreement or the Related Agreements except to the extent (if any) such waiver is
expressly set out in a writing signed by such party and addressed to the other
party. One or more waivers of any matter by any party shall not be construed as
a waiver of any subsequent breach or default of the same or any other matter.
The consent or approval by any party of any act by any other party shall not be
construed to waive or render unnecessary the first party's consent or approval
of any future similar act, whether or not similar.
14.11 Third-Party Beneficiaries. The limited partners of Fund from
-------------------------
time to time, other than SFOT Acquisition I and SFOT Acquisition II, and the
Persons entitled to indemnification pursuant to Section 11.10 are third-party
beneficiaries of this Agreement. There are no other third-party beneficiaries of
this Agreement.
62
<PAGE>
14.12 Successors. This Agreement shall be binding upon and inure to
----------
the benefit of permitted successors and assignees and be binding upon all
successor and assignees (in each case however such succession or assignment is
accomplished, including, without limitation, by assignment, merger, reverse
merger, consolidation, sale of securities or assets, conversion, bequeath,
operation of law or, without limitation, otherwise) of the parties hereto and
third-party beneficiaries hereof.
14.13 No Offset; Interest. Except as otherwise specifically provided
-------------------
in this Agreement, the Second Amended and Restated Fund Limited Partnership
Agreement or the Fund II Limited Partnership Agreement, no party to this
Agreement may offset against amounts it is to pay to any other party under this
Agreement, the Flags II Limited Partnership Agreement, the Lease or any other
Related Agreement any amounts such party claims are owed to it. If any amount is
not paid when due under this Agreement, the Flags II Limited Partnership
Agreement, the Lease or any other Related Agreement, such amount will bear
interest at Prime or at the Default Rate, as provided herein or in the Related
Agreements.
14.14 Further Assurances. Each of the parties hereto will, upon
------------------
receipt of a reasonable request that it do so, execute and deliver such further
documents as are reasonably necessary, to effect the transactions contemplated
by this Agreement, the Flags II Limited Partnership Agreement and the Lease. In
particular, and without limiting the generality of the foregoing, the parties
hereto acknowledge that at the request of SFEC, Fund and Flags' Directors,
L.L.C. have agreed to certain changes in the structure and format of the
transactions described in this Overall Agreement, and in various of the Related
Agreements, in order to accommodate the SFEC Entities. Consequently, SFEC and
each of its Affiliates that is a party to this Overall Agreement or any of the
Guarantees agrees, upon the request of Fund no later than five Business Days
prior to the Effective Date, to make such amendments, modifications or changes
to the Overall Agreement and the Related Agreements or make other contractual
arrangements as may be necessary to assure that Fund and the Limited Partners of
Fund enjoy, without diminution or disadvantage, the full benefits (economic,
legal and from a tax standpoint) that they would have enjoyed had the structure
and format originally contemplated among the parties been implemented in this
Overall Agreement and Related Agreements.
14.15 Non-Binding Effect of Recitals. The parties agree that, except
------------------------------
for the terms defined therein and the description of the general ownership
relationship of the parties to each other, the Recitals set forth in this
Agreement are for reference purposes only and, except with respect to those
defined terms and descriptions, shall not have any binding effect or affect in
any way the meaning or interpretation of this Agreement or the Related
Agreements.
14.16 Payments. Payments required by this Agreement and the Related
--------
Agreements shall be made in the lawful currency of the United States of America.
14.17 Factors to be Considered in Determining Reasonableness of
---------------------------------------------------------
Withheld Consent. A party being asked to give consent will not be deemed to have
- ----------------
unreasonably withheld consent by virtue of that party requiring any one or more
of the following as a condition of giving its consent: (i) the rights of such
party and any of its owners not being subject to material reduction, or to any
reduction (whether or not material) for which such party is not fully
reimbursed, including, without limitation, by virtue of a new or extended
preference or fraudulent conveyance period under any applicable bankruptcy,
insolvency, moratorium or similar law, (ii) each Guarantor under each Guarantee
consenting to the matter and agreeing, in a writing reasonably satisfactory in
form and substance to the consenting party, that its Guarantee is not affected
thereby and (iii) the reasonable out-of-pocket costs of the consenting party
63
<PAGE>
incurred with prior notice in connection with the request to give consent being
paid by the party(ies) requesting consent, whether or not consent is given.
64
<PAGE>
Each of the parties has signed this Overall Agreement as of the date
first written above, thereby becoming a party to and bound by this Overall
Agreement.
SIX FLAGS OVER TEXAS FUND, LTD. TEXAS FLAGS, LTD.
By: Six Flags Over Texas, Inc.
General Partner
By: By:
----------------------------------- -----------------------------------
Jack D. Knox, General Partner Larry D. Bouts
Chief Executive Officer
FLAGS' DIRECTOR, L.L.C. SFOT EMPLOYEE, INC.
By: By:
----------------------------------- ------------------------------------
Jack D. Knox Larry D. Bouts
Manager Chief Executive Officer
FD-II, L.L.C. SFOT ACQUISITION I, INC.
By: By:
----------------------------------- ------------------------------------
Jack D. Knox Larry D. Bouts
Manager Chief Executive Officer
SFOT ACQUISITION II, INC.
By:
------------------------------------
Larry D. Bouts
Chief Executive Officer
SIX FLAGS OVER TEXAS, INC.
By:
------------------------------------
Larry D. Bouts
Chief Executive Officer
65
<PAGE>
SIX FLAGS THEME PARKS, INC.
By:
------------------------------------
Larry D. Bouts
Chief Executive Officer
SIX FLAGS ENTERTAINMENT
CORPORATION
By:
------------------------------------
Larry D. Bouts
Chief Executive Officer
66
<PAGE>
Exhibit 5.1.1
LIMITED PARTNERSHIP AGREEMENT
OF
TEXAS FLAGS II, LTD.
This Limited Partnership Agreement (this "Agreement") is
entered into and effective as of (1), 1997 by and among
---------
Six Flags Over Texas, Inc., a Delaware corporation (the "General
Partner"), FD-II, L.L.C., a Texas limited liability company (the
"Co-General Partner"), and Six Flags Fund II, Ltd., a Texas
-----------------------
limited partnership (the "Limited Partner"). The General
Partner, the Co-General Partner and the Limited Partner hereby
continue Texas Flags, Ltd., a Texas limited partnership (the
"limited partnership"), under the Texas Revised Limited
Partnership Act, and further amend and restate the Texas Flags,
Ltd. Limited Partnership Certificate and Agreement dated June
30, 1969, as previously amended and restated on June 15, 1971,
and amended on November 1, 1982 and April 14, 1988.
ARTICLE I
CERTAIN DEFINITIONS
In addition to the other terms defined elsewhere in this
Agreement, the definitions set forth below are used in this
Agreement:
(a) "Accelerated Put" has the meaning given to that term in
the SFOT Acquisition I and SFOT Acquisition II Guarantee.
(b) "Affiliate Loans" means loans made to the limited
partnership by any SFEC Entity or any SFEC Affiliate that meet
the criteria set forth in this definition. To be an Affiliate
Loan, the Indebtedness must: (i) bear interest at a rate per
annum not more than Prime; (ii) be payable by its terms only to
the extent of Available Cash and, unless the Net Worth Standard
is met, only after payment of then required Minimum Amount
distributions, Base Rent, interest and Default Interest under
this Agreement and the Lease; (iii) be unsecured; (iv) be pre-
payable without penalty at any time; (v) provide by its terms
that, at the earliest to occur of the dissolution of the limited
partnership, the removal of the General Partner or the General
Partner being adjudicated insolvent or bankrupt or being
dissolved or, if the End-of-Term Option is not exercised,
December 31, 2027, any then unpaid portion thereof (including any
then accrued interest thereon) will, without any further action
or any payment, be thereupon contributed to the capital of the
limited partnership and will no longer be due; and (vi) be
represented by a note, consistent with the provisions of this
definition, a copy of which is sent to the Co-General Partner
within three Business Days after having been executed, which note
shall contain the following legend:
"THIS NOTE IS SUBJECT TO, AND MAY NOT BE DUE OR OWING AS
PROVIDED IN, THE LIMITED PARTNERSHIP AGREEMENT OF TEXAS
--------------------------
(1) The Effective Date will be filled in here.
<PAGE>
FLAGS, LTD., A COPY OF WHICH MAY BE OBTAINED FROM FD-II,
L.L.C., A TEXAS LIMITED LIABILITY COMPANY."
(c) "Alterations" is defined in Article XVII.
(d) "Amusement Park" has the meaning given to that term in
the Overall Agreement and, in addition, in this Agreement also
includes any second gate attractions, hotel(s) and other
improvements as may in the future exist on the Land.
(e) "Another Material Default" is defined in Article VIII.
(f) "Available Cash" means cash and cash equivalents of the
limited partnership generated by the Amusement Park and Amusement
Park assets, other than Excluded Revenues, that, in the
reasonable judgment of the General Partner (in light of
available, permitted financing), are not necessary for the
limited partnership to retain for working capital, capital
expenditures, capital improvements, debt service, maintenance,
repairs or other limited partnership business purposes or as
reserves.
(g) "Bankruptcy Code" means Title 11 of the United States
Code (11 U.S. C. Section 101 et seq.) (as amended from time to
time or any successor statute).
(h) "Base Rent" is defined in the Lease.
(i) "Base Index" is defined in Article VI.
(j) "Business Day" has the meaning given to that term in
the Overall Agreement.
(k) "Capital Improvement Loans" means any loans to the
limited partnership or Capital Leases that: (i) are used to fund
or, within 90 days of acquisition or completion of construction,
to replace funds used for capital expenditures; (ii) have a
principal amount not greater than the capital expenditure
(including the cost of any performance or completion bond
required in connection with such capital expenditure); (iii) are
not made by an SFEC Entity or SFEC Affiliate; (iv) are due and
payable in full within ten years, but in any event no later than
December 31, 2025; (v) have level amortizing payments -subject to
having a balloon payment of no more than the percentage of the
initial principal amount of the Capital Improvement Loan equal to
a fraction, expressed as a percentage, derived by dividing one by
the number of years over which the Capital Improvement Loan is so
amortized in full -- sufficient to pay the Capital Improvement
Loan and any interest thereon in full by the due date; (vi) are
pre-payable at any time (although a commercially reasonable
prepayment penalty may be required for prepayment), (vii) bear a
commercially reasonable rate of interest; and (viii) are
unsecured, provided that any Capital Improvement Loan may be
secured by the capital improvement (and the proceeds thereof)
financed by the Capital Improvement Loan. If then existing
Capital Improvement Loans are repaid because the Net Worth
Standard is not met, as provided in clause (c) of Part B of
Article VII, then at any time thereafter that the Net Worth
Standard is met, new Capital Improvement Loans may be incurred,
-2-
<PAGE>
provided that such new Capital Improvement Loans are otherwise
permitted under the facts existing at the time they are incurred.
(l) "Capital Lease" has the meaning given to that term in
the Overall Agreement.
(m) "Code" means the Internal Revenue Code of 1986, as
amended.
(n) "Co-General Partner" is defined in the first paragraph
of this Agreement.
(o) "Comparable Park" means Six Flags Great Adventure, Six
Flags Magic Mountain, Six Flags Great America, Six Flags Over
Georgia, Six Flags Astroworld, Six Flags St. Louis and Six Flags
Fiesta Texas (in each case only so long as directly or indirectly
owned or managed by SFEC or an affiliate of SFEC or the General
Partner) and any other amusement parks that are directly or
indirectly owned or managed by SFEC or an entity affiliated with
SFEC or the General Partner by 100% common ownership, located in
the United States, in each case of a similar type and stage of
development to the Amusement Park and comparable in size,
attendance and number and quality of rides and attractions to the
Amusement Park.
(p) "Comparison Index" is defined in Article VI.
(q) "CPI" means the United States Department of Labor,
Bureau of Labor Statistics Consumer Price Index for the United
States City Average (All Urban Consumers, All Items) (1982-
1984=100), as in effect from time to time. If the CPI shall be
discontinued, there shall be substituted for the CPI a reasonably
reliable and comparable index or other information furnished by
the government or independent third party source, in either case
as mutually selected by the General Partner and Co-General
Partner or, in the absence of agreement between the General
Partner and the Co-General Partner, by a third party mutually
selected by the General Partner and the Co-General Partner (or,
in the absence of a mutual selection of such a Person, by
arbitration as provided in Part O, Paragraph 2, of Article XVII),
evaluating changes in the cost of living or purchasing power of
the consumer dollar in the cities of the United States.
(r) "Default" is defined in Article VIII.
(s) "Default Interest" is defined in Article VI.
(t) "Default Rate" means the lesser of (i) five percent
over Prime or (ii) the maximum interest rate permitted by law.
(u) "EBITDA" has the meaning given to that term in the
Overall Agreement.
(v) "Effective Date" is defined in the Overall Agreement.
(w) "End-of-Term Option" has the meaning given to that term
in the Overall Agreement.
-3-
<PAGE>
(x) "Environmental Laws" is defined in Article XVII.
(y) "Equity Market Capitalization" means, with respect to
any Guarantor, without duplication as of the date of
determination, the average of the closing price of the shares or
other units of each class of publicly traded equity securities
(excluding any such securities that are, prior to January 15,
2028, mandatorily redeemable or redeemable at the option of the
holder(s)) of such Guarantor on the national securities exchange
on which such securities are listed or, if not so listed, the
average bid and asked price of such securities reported on any
over-the-counter quotation system on which prices for such
securities are quoted, in each case for a period of 20 trading
days prior to the date of determination, MULTIPLIED BY the number
of shares or units of each such class of equity securities in
question outstanding on the date of determination.
(z) "Excluded Revenues" means revenues in respect of (A)
receipts which are voluntary gratuities for the account of and
paid over to employees; (B) judgment, settlement, insurance,
self-insurance or condemnation proceeds; and (C) sales of
property or assets, except sales of food, beverages, goods,
inventory and other items typically held for resale to park
customers in the ordinary course of business;
(aa) "Flags' Directors, L.L. C" means Flags' Directors, L.L.
C., a Texas limited liability company.
(bb) "Flags Limited Partnership Agreement" has the meaning
given to that term in the Overall Agreement.
(cc) "Force Majeure" is defined in Article XVII.
(dd) "Full Payment Date" means, with respect to any year,
the date on which the Minimum Amount for such year and all prior
years has been distributed in full, the Base Rent for such year
and all prior years has been paid in fall and any interest or
Default Interest on the Minimum Amount and Base Rent for all such
years has been distributed or paid in full, provided that there
shall be no Full Payment Date if (i) there is then any Default
(or any event which, with notice or lapse of time or both would
be a Default), (ii) there is then outstanding any Indebtedness of
this limited partnership not permitted to be outstanding by this
Agreement or (iii) there is then any default (or the General
Partner has knowledge of an event which with notice or lapse of
time or both would be a default) which is a failure to pay any
Indebtedness of this limited partnership or another default that
would entitle the lender to accelerate under any Indebtedness of
this limited partnership.
(ee) "Fund" means Six Flags Over Texas Fund, Ltd., a Texas
limited partnership.
(ff) "GAAP" is defined in the Overall Agreement
(gg) "General Partner" is defined in the first paragraph of
this Agreement.
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(hh) "Gross Revenues" in respect of any year means all
revenues, computed on an accrual basis in accordance with GAAP,
of the limited partnership from the occupation or operation of
the Amusement Park and the Amusement Park assets.
Notwithstanding the foregoing, Gross Revenues shall not include:
(A) any refunds, discounts or the like made to, or in respect of,
customers, guests or patrons of the Amusement Park; (B) sales,
admissions or other gross receipts taxes paid on such revenues;
and (C) Excluded Revenues. With respect to concessions
(including for this purpose licenses), Gross Revenues shall
include only the net amount received or retained by the limited
partnership from or in respect of the concessionaire (or
licensee).
(ii) "Guarantees" has the meaning given to that term in the
Overall Agreement.
(jj) "Guarantor" means a Guarantor under one of the
Guarantees. As of the date hereof, the Guarantors are TWX, Time
Warner Entertainment Company, L.P., SFEC, SFTP, SFOT Acquisition
I, Inc. and SFOT Acquisition II, Inc.
(kk) "Hazardous Materials" is defined in Article XVII.
(ll) "Impositions" is defined in Article XVII.
(mm) "Improvements" means any and all buildings, structures
and other improvements that may at any time be erected or located
on the Land during the term of this Agreement, together with all
rides, machinery, equipment and fixtures attached to or located
on the Land or any such buildings and structures, regardless of
whether or not such items constitute real property, personal
property or fixtures. The term "Improvements" includes, but is
not limited to: all buildings and rides now or hereafter erected
on the Land; all footings, foundations, piping, sewers, retaining
walls, landscaping, streets and infrastructure, which are now or
hereafter located upon the Land or are a part of the buildings or
rides now or hereafter constructed thereon; all fixtures,
appliances, machinery, equipment and apparatus now or hereafter
affixed or attached to any of such buildings; and all components
of the heating, ventilating, air conditioning, plumbing,
lighting, refrigeration, cleaning, security and electrical
systems of such buildings. For purposes of this Agreement,
Improvements means any Improvements existing at the time of
determination.
(nn) "indefeasibly pay", "indefeasibly make" or
"indefeasibly distribute "means a payment or distribution where
the recipient of the payment or distribution cannot be required
to return the payment or distribution in whole or in part, by
virtue of any provision of the Bankruptcy Code or any federal or
state bankruptcy, insolvency, moratorium or similar law affecting
creditors rights generally, if the recipient would not otherwise
have been required to return the payment or distribution (or
portion thereof).
(oo) "Indebtedness" has the meaning given to that term in
the Overall Agreement and includes Working Capital Loans, Capital
Improvement Loans (including Capital Leases) and Affiliate Loans.
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(pp) "Insurance Requirements" means all present or future
requirements of any insurer of the Amusement Park or any part
thereof pursuant to insurance policies that the limited
partnership is required to maintain under this Agreement, and the
rules, orders, regulations or requirements of the national and
local Board of Fire Underwriters or any other similar body having
jurisdiction over the Amusement Park and those of any appropriate
agency, office, department, board or commission thereof.
(qq) "Land" has the meaning given that term in the Lease.
(rr) "Lease" has the meaning given to that term in the
Overall Agreement.
(ss) "Lease Payment Default" has the meaning given to that
term in the Lease.
(tt) "Legal Requirements" means all laws, statutes,
ordinances, regulations, building codes, zoning codes and
regulations and the orders, judgments, rules, standards,
policies, regulations and requirements formally adopted by any
federal, state, local or municipal government, and the
appropriate agencies, officers, departments, boards, commissions
and courts thereof, whether now or hereafter in effect, which are
or become applicable to the Amusement Park or any part thereof or
to the use or manner of use of all or any part of the Amusement
Park or the sidewalks and curbs adjacent thereto. Without
limitation, Legal Requirements include Environmental Laws.
(uu) "Limitations" is defined in Article VII.
(vv) "Limited Partner" is defined in the first paragraph of
this Agreement.
(ww) "Limited partnership" is defined in the first paragraph
of this Agreement.
(xx) "Liquidity Put" has the meaning given to that term in
the Overall Agreement.
(yy) "Management Fee" is defined in Article VI.
(zz) "Measuring Period" is defined in Article XVII.
(aaa) Minimum Amount" is defined in Article VI
(bbb) "Mr. Freeze" has the meaning given to that term
in the Overall Agreement.
(ccc) "Net Worth" has the meaning given to that term in
the Overall Agreement.
(ddd) "Net Worth Standard" means that, at the time of
determination, either (i) the aggregate Net Worth (without
duplication) of all Guarantors who have not in any way sought to
disaffirm or to contend that they have no liability under, or
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less limited liability than is provided by the terms of, their
respective Guarantee is not less than $5 billion MULTIPLIED BY
the Applicable Percentage and the aggregate Equity Market
Capitalization (without duplication) of all such Guarantors is
not less than $5 billion MULTIPLIED BY the Applicable Percentage
or (ii) the aggregate Net Worth (without duplication) of all
Guarantors who have not in any way sought to disaffirm or contend
that they have no liability under, or less liability than is
provided for by the terms of, their respective Guarantee is not
less than $3.5 billion multiplied by the Applicable Percentage
and the aggregate Equity Market Capitalization (without
duplication) of all such Guarantors is not less than $1O billion
multiplied by the Applicable Percentage; provided that, if TWX
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shall cease to have outstanding publicly traded equity securities
by virtue of a going private" or similar transaction, then the
Net Worth Standard shall be met if the Net Worth (without
duplication) of all Guarantors is not less than $5 billion
MULTIPLIED BY the Applicable Percentage. For the purposes of
this definition, "Applicable Percentage" means (w) if as of the
date of determination the SFEC Entities and SFEC Affiliates
permitted to do so collectively own 25% or less Number of Limited
Partner Units (as defined in the Overall Agreement), 100%, (x) if
as of the date of determination the SFEC Entities and SFEC
Affiliates permitted to do so collectively own more than 25% but
not more than 50% of the Number of Limited Partner Units, 80%,
(y) if as of the date of determination the SFEC Entities and SFEC
Affiliates permitted to do so collectively own more than 50% but
not more than 75% of the Number of Limited Partner Units, 66
2/3%, and (z) if as of the date of determination the SFEC
Entities and SFEC Affiliates permitted to do so collectively own
more than 75% of the Number of Limited Partner Units, 50%.
(eee) "Operating Leases" is defined in Part Q of Article
XVII.
(fff) "Overall Agreement" means the Overall Agreement,
dated as of November 1997, among Fund, Flags' Directors,
L.L.C., the General Partner, the Co-General Partner, SFTP, SFEC,
SFOT Acquisition I, Inc., SFOT Acquisition III, Inc. and SFOT
Employee, Inc.
(ggg) "Overall Agreement Payment Default" is defined in
Article VIII.
(hhh) "Partners" and "Parties" means the General
Partner, the Co-General Partner and the Limited Partner (or, if
applicable, any substitute General Partner or Co-General Partner
elected upon removal of the then General Partner or Co-General
Partner).
(iii) "Partnership Minimum Amount Distribution Default"
is defined in Article VII.
(jjj) "Payment Prohibiting Law" means any federal or
state law that makes illegal the payment or action in question;
provided, such law (i) is not of a type in existence at the
--------
Effective Date, (ii) is not similar to the Bankruptcy Code or any
other federal or state reorganization, rehabilitation,
arrangement, composition, moratorium or extension law, (iii) is
not a law passed as a result, in whole or in part, of lobbying by
any SFEC Entity or SFEC Affiliate, (iv) is a law of general
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application (i.e., a law that applies to others generally in
addition to the limited partnership, the General Partner and the
Guarantors) and (v) makes illegal the payment or action in
question by each of the limited partnership, the General Partner
and each Guarantor. A law that permits non-payment of an
obligation but does not make such payment or action illegal, is
not a Payment Prohibiting Law
(kkk) "Percentage Distribution" defined in Article VI.
(lll) "Permitted Team Texas Arrangements" has the
meaning given to that term in the Overall Agreement.
(mmm) "Person" has the meaning given to that term in the
Overall Agreement.
(nnn) "Prepaid Amount" means the sum of(i) $10,725,000,
(ii) one-half of the Minimum Amount for 1998, and (iii) one-half
of the Base Rent for 1998 that are payable in accordance with
paragraph I of Part A of Article VI (i.e., $24,590,750).
(ooo) "Prime" has the meaning given to that term in the
Overall Agreement.
(ppp) "Priority Management Fee Distribution" is defined
in Article VI.
(qqq) "Related Agreements" has the meaning given to that
term in the Overall Agreement.
(rrr) "Ride Agreement" has the meaning given to that
term in the Overall Agreement.
(sss) "Second Amended and Restated Fund Limited
Partnership Agreement" has the meaning given to that term in the
Overall Agreement.
(ttt) "Service Standard" means the standards of an
amusement park equivalent to the average standards in the
Comparable Parks at the date of this Agreement or at the later
date in question whichever is higher.
(uuu) "SFEC" means Six Flags Entertainment Corporation,
a Delaware corporation.
(vvv) "SFEC Affiliates" has the meaning given to that
term in the Overall Agreement.
(www) "SFEC Entity" has the meaning given to that ten-n
in the Overall Agreement.
(xxx) "SFOT Acquisition I" means SFOT Acquisition I,
Inc., a Delaware corporation.
(yyy) "SFOT Acquisition I and SFOT Acquisition II
Guarantee " has the meaning given to that in the Overall
Agreement.
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(zzz) "SFOT Acquisition II" means SFOT Acquisition II,
Inc, a Delaware corporation.
(aaa) "SFOT Requirement" has the meaning given to that
term in the Overall Agreement.
(bbb) "SFTP" means Six Flags Theme Parks Inc., a
Delaware corporation.
(ccc) "Tax" is defined in Article VII.
(ddd) "Tender Offer" has the meaning given to that term
in the Overall corporation.
(eeee) "Treasury Regulations" means the regulations
promulgated under the Code, as such regulations may be amended
from time to time (including corresponding provisions of
succeeding regulations).
(fff) "TWX" means Time Warner Inc., a Delaware
corporation.
(gggg) "Working Capital Loans" means short-term
borrowings by the limited partnership (or a wholly-owned
subsidiary of the limited partnership) -which borrowings are made
after October 1, 1998 or after October 1 in any subsequent year
until there is regular positive cash flow in the next season and
are repaid from the first positive cash flow available for debt
repayment in the next season (after payment of Minimum Amount
distributions and Base Rent to the extent permitted by this
Agreement), the use of which loans is for working capital
purposes (including payment of Minimum Amount distributions and
Base Rent as permitted hereby).
ARTICLE II
NAME AND PLACE OF BUSINESS
1. Name. The name of this limited partnership is: "Texas
Flags, Ltd."
2. Place of Business. The principal place of business of
this limited partnership shall be 2201 Road to Six Flags, P.O.
Box 191, Arlington, Texas 76010. This limited partnership may
also have such other places of business within or without the
State of Texas as the General Partner may deem appropriate.
3. Registered Office or Agent. This limited partnership
shall, to the extent required by applicable law, continuously
maintain in the State of Texas a registered office and a
registered agent for service of process, in each case as selected
by the General Partner.
ARTICLE III
PURPOSES OF THE LIMITED PARTNERSHIP
The purposes of the limited partnership are to:
(a) Own the Amusement Park (excluding the Land) and operate
the Amusement Park and the Amusement Park assets;
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(b) Execute, deliver and perform its obligations and
exercise its rights under the Lease;
(c) Borrow funds for limited partnership purposes, as
permitted by this Agreement;
(d) Comply with the Overall Agreement, as if it were party
thereto, and enforce its rights under the Overall Agreement; and
(e) Without limitation, to do all other acts, not
prohibited by this Agreement, the Lease or the Overall Agreement,
in connection with or incidental to the accomplishment of the
foregoing purposes of the limited partnership (including, without
limitation, to maintain and improve the Amusement Park and to
develop second gated attractions).
ARTICLE IV
NAMES AND ADDRESSES OF PARTNERS
1. General Partner. The name of the General Partner is
Six Flags Over Texas, Inc. The address of the General Partner is
2201 Road to Six Flags, P.O. Box 191, Arlington, Texas 76010, or
such other address as the General Partner may, by notice to the
Co-General Partner and the Limited Partner, specify from time to
time.
2. Limited Partner. The name of the Limited Partner is
Six Flags Fund II, Ltd. The address of the Limited Partner is
300 Crescent Court, Suite 1630, Dallas, Texas 75201, or such
other address as the Limited Partner may, by notice to the
General Partner and the Co-General Partner, specify from time to
time.
3. Co-General Partner. The name and address of the Co-
General Partner is FD-II, L.L.C. The address of the Co-General
Partner is 300 Crescent Court, Suite 1630, Dallas, Texas 75201,
or such other address as the Co-General Partner may, by notice to
the General Partner and the Limited Partner, specify from time to
time.
ARTICLE V
CAPITAL CONTRIBUTIONS
1. General Partner. Except as provided in this paragraph
1, the General Partner has not and shall not be obligated to
contribute to the limited partnership, including to its capital,
any cash or other property. The General Partner shall contribute
to the limited partnership cash in such amounts as are necessary,
after the incurrence of permissible Affiliate Loans, Capital
Improvement Loans and Working Capital Loans, to (i) make
distributions to the Limited Partner of the Minimum Amount, to
pay Base Rent under the Lease and make distributions of or pay
any interest or Default Interest due to the Limited Partner under
this Agreement or the Lease and (ii) for the limited partnership
to perform those acts to be performed by it under this Agreement,
the Lease and the Overall Agreement (including, without
limitation, Section 7.5(a) of the Overall Agreement).
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2. Limited Partner.
(a) Effective June 30, 1969, Fund contributed to the
limited partnership, the entire interest of Fund in and to the
Amusement Park, and all assets relating thereto, including
without limitation, its right to use the name "Six Flags Over
Texas" pursuant to a License Agreement, dated June 30, 1969,
between Great Southwest Corporation and Fund.
(b) Immediately prior to the execution and delivery of this
Agreement, Fund contributed its entire interest in the limited
partnership to the Limited Partner.
(c) The limited partnership was, until the date of this
Agreement, controlled by an affiliate of the General Partner, not
by FD-H, L.L.C. or Fund. Accordingly, no representation or
warranty is made by the Limited Partner or FD-II, L.L.C. as to
the title to or the condition of the property or assets
contributed by Fund to the limited partnership and all such
property and assets are contributed AS IS, WHERE IS and WITH ALL
--------------- --------
FAULTS.
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(e) The Limited Partner shall not be obligated to
contribute any cash or other property to the limited partnership
or its capital,
3. Co-General Partner. The Co-General Partner shall
contribute $100 to the capital of the limited partnership. The
Co-General Partner shall not under any circumstances be obligated
to contribute any other cash or other property to the limited
partnership or its capital.
4. Non-Interest Bearing. Contributions to the capital of
the limited partnership shah not bear interest.
ARTICLE VI
DISTRIBUTIONS
A. Order of Distributions
Distributions by the limited partnership in each year shall
be made as set forth below, no distributions, except liquidating
distributions pursuant to Article XIV of this Agreement, shall be
made after the earlier to occur of December 31, 2027 or the date
to which the End-of-Term Option is accelerated pursuant to
Section 7.6 of the Overall Agreement.
1. Minimum Amount Distributions. First, in each year
commencing with 1998, the limited partnership shall distribute to
the Limited Partner cash in the amount equal to the Minimum
Amount for that year. The Minimum Amount for 1998 shall be
distributed as follows: (a) $10.725 million was loaned to Fund
immediately prior to the execution and delivery of the Overall
Agreement and in accordance with Section 11.2(b) thereof, and
such amount shall be deemed a credit against the Minimum Amount
as of the Effective Date, (b) one-half of the Minimum Amount for
1998 (i.e., $13,365,750) shall be distributed to the Limited
Partner on the earlier of (i) seven days prior to the Tender
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Offer Expiration Date, or (ii) February 15, 1998, and (c) the
balance of the Minimum Amount for 1998 (i.e., $2,640,750) shall
be distributed to the Limited Partner no later than November 17,
1998. For each year after 1998, not less than one half of the
Minimum Amount for such year shall be distributed to the Limited
Partner no later than July 15 of that year and the balance of the
Minimum Amount for such year shall be distributed to the Limited
Partner no later than November 15 of that year; provided that, if
-------- ----
such July 15 or November 15 is not a Business Day, the amount due
on such July 15 or November 15 shall be paid on or before the
next Business Day after such July 15 or November 15, as the case
may be. If any of the property or assets owned by the limited
partnership on the Effective Date of this Agreement (other than
food, beverages, goods, inventory and other items typically held
for sale in the ordinary course) are sold, cash in an amount
equal to the sales proceeds shall be (i) distributed to the
Limited Partner, (ii) credited against the Minimum Amount
distribution for the year of such distribution and, if necessary,
(iii) credited against the Minimum Amount distribution for the
succeeding years, with the result that the aggregate amount of
the Minimum Amount distribution for such years will not change.
2. Priority Management Fee Distribution. Second, in each
year commencing with 1998 and after, but only after, the Minimum
Amount for all years, to and including such year, Base Rent for
all years to and including such year and interest or Default
Interest, if any, on the Minimum Amount and Base Rent have each
been distributed or paid to the Limited Partner, and subject to
Part D of this Article VI, in recognition of the management
services provided by the General Partner and to the extent of
Available Cash, the limited partnership shall distribute to the
General Partner cash equal to the Priority Management Fee
Distribution.
3. Co-General Partner Distribution. Third, after, but
only after, all distributions provided for in Paragraphs 1 and 2
of this Part A of Article VI have been made in full, the limited
partnership shall, to the extent of Available Cash, distribute to
the Co-General Partner $100 per year, commencing with 1998,
cumulative but without interest to the extent not paid in then
prior years.
4. Percentage Distributions. Fourth, in each year, after,
but only after, the distributions provided for in Paragraphs 1, 2
and 3 of this Part A of Article VI have been made in full, the
limited partnership shall distribute the remaining Available
Cash, with such distributions ("Percentage Distributions") to be
made 7.5% to the Limited Partner and 92.5% to the General
Partner; provided that, any Percentage Distribution due in
respect of the year ended December 31, 2027 shall, if the End-
of-Term Option is exercised, be made no later than December 15,
2027.
B. Minimum Amount Distributions
1. Date and Time. Distributions of the Minimum Amount
shall be made by the date required, set forth in Part A,
Paragraph 1 of this Article VI. Such amounts shall be paid, if
requested by the Limited Partner, by wire transfer to the Limited
Partner at such account in a bank located in the United States as
the Limited Partner may from time to time designate by notice to
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the General Partner no later than two Business Days prior to the
due date thereof (provided that, no notice need be given, after
the initial notice, unless such account is changed and that the
initial notice may be given one Business Day prior to the due
date), in immediately available funds and for wire delivery by 10
a.m. local time (and, if not received at the recipient bank by 1
p.m. local time, shall be deemed paid on the next Business Day
or, if later, the Business Day on which such payment is received
before 10:00 a.m. local time at the recipient bank). If no
notice is given as provided in the preceding sentence,
distributions of the Minimum Amount shall be paid by the date due
by delivery to the Limited Partner (at its address specified by
the Limited Partner by notice to the General Partner) prior to
noon local time of a cashiers check for the amount due.
2. Default Interest. If all or any portion of the
distribution of the Minimum Amount distribution is not
distributed when required, time being of the essence, the amount
not so distributed shall be distributed to the Limited Partner
with interest thereon at the Default Rate (at Prime to the extent
provided in the last sentence of Paragraph 4 of Part C of Article
VIII) until the distribution is made in full (such interest at
the Default Rate is referred to below as "Default Interest"). If
all of the Minimum Amount due has not then been distributed, all
amounts received by the Limited Partner in respect of the Minimum
Amount, interest or Default Interest shall, notwithstanding any
legend or endorsement on a check or similar matter, be credited
first to interest (other than Default Interest), second to
Default Interest and third to the undistributed "principal" of
the Minimum Amount(s) in question. No interest or Default
Interest paid or accrued shall reduce any Minimum Amount to be
distributed.
3. General Partner Obligations. The General Partner will
cause the limited partnership to timely make the Minimum Amount
distributions, payments of Base Rent and interest and Default
Interest distributions and payments.
C. Definitions
In addition to the other terms defined elsewhere in this
Agreement (including elsewhere in this Article VI), the
definitions set forth below are used in this Article VI.
1. Minimum Amount. The Minimum Amount for 1998 (i.e., the
period from the date of this Agreement through December 3 1,
1998) is $26,731,500. For each year after 1998 the Minimum
Amount will be equal to the greater of (i) $26,731,500 or (ii) if
the CPI published for the December immediately preceding the
beginning of such year (or, if no CPI is available for such
December, for the month closest to January I of such year) (the
"Comparison Index") exceeds the CPI published for December 1997
(the "Base Index"), an amount equal to $26,731,500 multiplied by
a fraction of which the numerator is the Comparison Index for
such year and the denominator is the Base Index, provided that,
--------
in no event shall the Minimum Amount for any year be less than
the Minimum Amount for the then immediately preceding year (for
1998, not less than $26,731,500). Interest and Default Interest
is in addition to, but is not part of, any Minimum Amount.
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2. Management Fee. The Management Fee for each year means
an amount equal to 3% of the Gross Revenues for the prior year.
3. Priority Management Fee Distribution. The Priority
Management Fee Distribution for each year is a distribution in an
amount equal to the Management Fee for that year plus interest
thereon at Prime from the Full Payment Date for that year until
paid; plus, to the extent a distribution of the Management Fee
was not made in any prior year, the portion of the amount equal
to the Management Fee(s) not so distributed in prior years plus
interest on the portion not so distributed at Prime (compounded
annually) from the Full Payment Date for the year in which such
Management Fee was otherwise payable but not paid.
D. Additional Limitation on Priority Management
Fee Distributions and Percentage Distributions
No Priority Management Fee Distribution will be made in any
year if (i) the distributions of the Minimum Amount for that year
and all prior years have not been made in full, any Base Rent for
that and all prior years has not been paid in full and all
interest and Default Interest on or in respect of the Minimum
Amount and Base Rent has not been paid in full, (H) this limited
partnership has outstanding any Indebtedness (other than Capital
Improvement Loans and Affiliate Loans), (iii) if the Net Worth
Standard is not met, this limited partnership has outstanding any
Indebtedness other than Affiliate Loans or (iv) this limited
partnership would, but for Paragraph 2 of Part C of Article XVII,
not be in compliance with the requirements of Paragraph 1 of Part
C of Article XVII. No Percentage Distribution will be made as
long as this limited partnership has outstanding any Indebtedness
(other than Affiliate Loans and, so long as the Net Worth
Standard is met, Capital Improvement Loans). No Priority
Management Fee Distributions or Percentage Distributions will be
made if, at the time of distribution, there is (x) any Default
(or any event which, with notice, lapse of time or both would be
a Default), (y) outstanding any Indebtedness of this limited
partnership not permitted to be outstanding by this Agreement or
(z) any default (or the General Partner has knowledge of an event
which with notice or lapse of time or both would be a default)
which is a failure to pay or another default that would entitle
the lender to accelerate under any Indebtedness of this limited
partnership, any failure to make a payment due under an Operating
Lease if the failure is both adverse and material to the
Amusement Park or the limited partnership or, until cured
(including by making any capital expenditures, in addition to
those otherwise required, in any year subsequent to the year in
which such capital expenditure was required to have been made),
any failure to comply with Part C of Article XVII. Neither this
Part D of Article VI nor anything else in this Agreement (except
a Payment Prohibiting Law), shall affect, restrict or otherwise
limit the making of Minimum Amount distributions, payments of
Base Rent or distributions or payments of interest or Default
Interest on or in respect, of Minimum Amount distributions or
Base Rent, when this Agreement or the Lease provide that such
Minimum Amount distributions, Base Rent, interest or Default
Interest are to be made or paid.
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E. Cash Distributions Only: Available Cash Limitation
Distributions pursuant to this Article VI shall be made only
in cash and, except for the distributions provided for in
Paragraphs I and 5 of Part A of this Article VI (and any
applicable interest or Default Interest thereon or in respect
thereof, shall be made only from and to the extent of Available
Cash.
F. No Offset to Distributions to the Limited Partner
Distributions to the Limited Partner (including
distributions provided for in Paragraph 1 of Part A of this
Article VI), payments of Base Rent and distributions or payments
of interest or Default Interest on or in respect of the Minimum
Amount distributions and Base Rent, as well as the Limited
Partner's 7.5% share of Percentage Distributions, shall be made
without any deduction or offset whatsoever (other than taxes
required to be withheld under applicable law).
G. Distributions May Not Be Funded By Indebtedness
No distributions provided for in Paragraph 1 of Part A of
this Article VI or payments of Base Rent or any interest or
Default Interest under this Agreement or the Lease may be funded
with Indebtedness other than Affiliate Loans, provided that, if
the Net Worth Standard is met and there is not then in existence
a Default or an event which, with notice or the passage of time
or both would be a Default, the Prepaid Amount and, and after
1998, the Minimum Amount distribution and Base Rent payment due
on July 15 (or the next Business Day) may be funded by a
borrowing that is otherwise treated as a Working Capital Loan,
provided that (i) each such borrowing shall be repaid (x) before
any Affiliate Loans are repaid or any Priority Management Fee
Distributions or Percentage Distributions are made and (y) in any
event by August 31 of the year in which the borrowing is made,
time being of the essence, and (ii) the Full Payment Date will
not occur until such borrowing is repaid. This Part G of Article
VI does not modify in any manner the absolute and unconditional
obligations to make the distributions provided for in Paragraph 1
of Part A of this Article VI or to pay Base Rent (in each case
including any applicable interest or Default Interest thereon or
in respect thereof).
ARTICLE VII
ALLOCATIONS OF INCOME AND LOSS FOR
TAX PURPOSES; CAPITAL ACCOUNTS
The parties intend that, for federal, state and local income
tax ("Tax") purposes, this limited partnership be treated as if
the property and assets owned by this limited partnership on the
date of this Agreement (other than the Land which is leased to
the limited partnership pursuant to the Lease) had been leased to
the General Partner, with (i) rent being payable to the Limited
Partner in an amount equal to the Minimum Amount (plus any
interest or Default Interest) and the Limited Partner's share of
any Percentage Distributions and (ii) the other terms hereof
being included in the lease. The parties hereto shall report
consistently with the lease characterization described above for
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federal income tax purposes both with respect to the Land and any
other property and assets owned by the limited partnership.
Notwithstanding the foregoing, the General Partner shall make
or preserve a protective election on behalf of the limited
partnership pursuant to Section 754 of the Code. In addition,
the General Partner is authorized to and shall make any similar
elections under applicable state law, to the extent such
elections are available. However, no such election shall be
deemed or construed as negating the provisions of this Article
VII.
A. No General Partner or Co-General Partner
The General Partner shall not receive for its services to the
limited partnership, nor shall the Co-General Partner receive
from the limited partnership, any remuneration other than the
distributions made and Tax allocations provided for in Articles
VI and VII, respectively.
B. No Withdrawals
No partner will be entitled, without the consent of the other
partners, to withdraw any part of its contribution to the capital
from or any part of its capital account in the limited
partnership or,,to the extent permitted by law, to otherwise
withdraw, resign or disassociate from the limited partnership
provided that nothing in this paragraph affects the right of the
Limited Partner to remove the General Partner as provided in Part
C of Article VIII or the right of the General Partner to resign
at any time after December 31, 2027.
ARTICLE VIII
MANAGEMENT
A. Management Generally
1. General Partner. The General Partner shall, subject to
the limitations set forth in this Agreement (including without
limitation in Part B of this Article VIII) (the "Limitations")
have the exclusive control of the management of the business and
affairs of the limited partnership, including the power and
authority to obligate and bind the limited partnership in all
matters involving the business of the limited partnership. The
General Partner shall cause the limited partnership to do those
acts it is to do under this Agreement. Subject to the
Limitations, the execution and delivery of any agreement or
instrument by the General Partner shall be sufficient to bind the
limited partnership. The General Partner shall execute and file
with the Texas Secretary of State a Certificate of Limited
Partnership for the limited partnership and shall cause such
other filings to be made and such offices and agents for service
of process to be maintained in Texas and other jurisdictions
where required for the limited partnership to be registered or
qualified as such and to protect the limited liability of the
Limited Partner.
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2. Time and Effort of General Partner. The General
Partner shall devote all of its time and effort to the business
of the limited partnership and shall not have any other business.
3. No Resignation; Effect of Removal Without the prior
written consent of the Limited Partner, the General Partner may
not, prior to December 31, 2027, resign or withdraw as the
General Partner of the limited partnership, disassociate from the
limited partnership or, except for removal as provided in Part C
of this Article VII, take any other action so that it is not the
General Partner of the limited partnership. If the General
Partner ceases to be the General Partner of the limited
partnership in a manner not permitted by this Agreement or by
removal, in addition to any other liability or damages for which
the General Partner or any other Person may be liable (none of
which are released or compromised hereby), (i) all amounts due
from this limited partnership to the General Partner and all
borrowings of this limited partnership from the General Partner,
any SFEC Entity or any SFEC Affiliate shall, without any further
action, be there upon contributed to the capital of the limited
partnership and no longer be due and the General Partner and the
other SFEC Entities shall comply with Section 7.5(a) of the
Overall Agreement and (ii) the General Partner's right to
distributions, including distributions in liquidation, shall be
extinguished.
4. Limited Partner. The Limited Partner as such shall not
participate in the control of the business or affairs of the
limited partnership, transact any business on behalf or in the
name of the limited partnership or have any power or authority to
bind or obligate the limited partnership.
5. Tax Matters Partner. The General Partner shall be the
Tax Matters Partner of the limited partnership. However, the
General Partner shall not, without the prior written consent of
the Limited Partner: (i) take any action that would require the
payment of proposed tax deficiencies by the Limited Partner, Fund
or the limited partners of Fund prior to a judicial determination
that such taxes are owing, to the extent such a judicial
determination can be obtained prior to payment of such proposed
tax deficiencies, or (ii) initiate any judicial proceeding
relating to federal income tax in any court other than the United
States Tax Court if the outcome of such proceeding could (x)
increase, or affect the timing of, any tax payable by and (y) be
binding upon the Limited Partner, Fund or the limited partners of
Fund. The General Partner shall give notice to the Limited
Partner, within no less than ten Business Days, of all
proceedings as to which it is acting as the Tax Matters Partner
and shall afford the Limited Partner the right to participate in
such proceedings. The General Partner shall provide to the Co-
General Partner and the Limited Partner copies of any agreement
extending the statute of limitation for Tax purposes within ten
Business Days of each such agreement being entered into. Except
as required by applicable law, the General Partner shall take no
position for income tax purposes inconsistent with the treatment
of this limited partnership as a lease for income tax purposes
with respect to the property and assets contributed by the
Limited Partner. The General Partner may file a protective
election under Treasury Regulations Section 301.7701-3 and
applicable state law in the form attached as Exhibit A to have
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the partnership classified as a partnership, which election or
form of election may be amended only in form and substance
reasonably satisfactory to the Limited Partner.
6. Co-General Partner; Certain Successor General Partner
Provisions. As long as Six Flags Over Texas, Inc. is the General
Partner, the Co-General Partner shall not participate in the
control of the business or affairs of the limited partnership,
transact any business on behalf or in the name of the limited
partnership or have any power or authority to bind or obligate
the limited partnership. Upon Six Flags Over Texas, Inc. ceasing
for any reason to be the General Partner without a substitute
general partner being selected, the Limited Partner shall have
the exclusive right to designate Fund or any entity 99% or more
owned by the Limited Partner or Fund or another Person permitted
by the Second Amended and Restated Fund Limited Partnership
Agreement to act as the general partner of the limited
partnership and such substitute general partner, upon execution
of a counterpart of this Agreement, will thereupon succeed to all
of the rights (including the right to distributions) and powers
of the General Partner, be admitted as a substitute general
partner and thereafter be the general partner. Until such
designation is made, but for not in excess of 90 days, the Co-
General Partner will succeed to all such rights and powers of the
General Partner, but shall not have any obligation to make any
contribution to the limited partnership or its capital.
B. Certain Limitations
Without first obtaining the written consent of the Limited
Partner, neither the limited partnership nor the General Partner
shall take, or have any power to take, any of the following
actions on behalf or in the name of the limited partnership:
(a) Execute or deliver any assignment for the benefit of
the creditors of the limited partnership or file any petition in
bankruptcy or for reorganization, rehabilitation, arrangement,
composition or extension under the Bankruptcy Code or under any
other federal or state law or fail to use their best efforts to
cause to be dismissed within 45 days of the filing thereof
against the limited partnership any involuntary petition in
bankruptcy or for reorganization, rehabilitate ion, arrangement,
composition or extension under the Bankruptcy Code or under any
other federal or state law, or do any act similar to any of the
foregoing; or
(b) Sell or lease to another Person all, substantially all
or any substantial part of the assets of the limited partnership
(except sales of food, beverages, goods and inventory in the
ordinary course of business); sell any property or asset of the
limited partnership having a value in excess of 10% of the then
Minimum Amount and Base Rent without the prior written consent of
the Limited Partner, which consent will not be unreasonably
withheld; if the aggregate sales of proper-ties and assets of the
limited partnership in any year (other than sales of food,
beverages, goods, inventory and other items typically held for
resale to park customers in the ordinary course of business)
exceed 15% of the Minimum Amount and Base Rent for that year,
make any further sales of such property or assets without the
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prior written consent of the Limited Partner, which consent will
not be unreasonably withheld; issue or agree to issue to any
Person any limited partnership interests, general partnership
interest (except as provided in Part A, Paragraph 6, of this
Article VII) or any other direct or indirect equity interest in
the limited partnership, merge with or into or consolidate with
or convert into any other entity or do any other act which would
have essentially the same effect as any of the foregoing; or
(c) Incur or permit to exist any Indebtedness (including
Capital Leases) of the limited partnership except: (i) Working
Capital Loans made to the limited partnership prior to 2027; (ii)
Capital Leases of the limited partnership existing at December
31, 1997 (including any extensions or renewals thereof; (iii) so
long as the Net Worth Standard is met, Capital Improvement Loans
(including Capital Leases); (iv) Affiliate Loans; and (v)
borrowings permitted by the proviso in the first sentence of Part
G of Article VI, but only for so long as such borrowings are
permitted to be outstanding. Notwithstanding the foregoing, the
limited partnership shall not, without the prior written consent
of the Limited Partner, incur any Indebtedness (other than ( x)
interest on then existing Indebtedness, (y) Affiliate Loans and
(z) Working Capital Loans) (A) if the Net Worth Standard is not
then met or (B) whether or not the Net Worth Standard is then
met, if (I) there is any Default (or any event which, with notice
or lapse of time or both would be a Default), (II) there is
outstanding any Indebtedness of this limited partnership not
permitted to be outstanding by this Agreement or (III) there is
any default (or the General Partner has knowledge of an event
which with notice or lapse of time or both would be a default)
which is a failure to pay any Indebtedness of this limited
partnership or another default that would entitle the lender to
accelerate any Indebtedness of this limited partnership. No
later than ten Business Days after the date on which the Net
Worth Standard is not met, the General Partner shall cause all
outstanding Capital Improvement Loans to be repaid out of funds
that are the proceeds of Affiliate Loans or.capital contributions
by the General Partner; or
(d) Incur or permit to exist any mortgage, pledge or
security interest in or claim lien, encumbrance or charge on any
of the assets of the limited partnership, except for Capital
Improvement Loans (including Capital Leases) that are secured to
the extent provided in the definition of Capital Improvement
Loans, Capital Leases permitted by clause (ii) of subparagraph
(c) of this part B of Article VII that are secured solely by the
assets leased, and liens for taxes and assessments not yet due;
provided, however, that the limited partnership may incur and
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permit statutory liens and other non-consensual liens of an
immaterial nature to exist, provided that (and only for so long
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as) good faith efforts are being made to remove or cause the
removal of such statutory or other liens; or
(e) Loan to any Person (other than to an employee of the
limited partnership or of SFOT Employee, Inc. in circumstances
that are ordinary course, consistent with past practice and in an
amount that is in the aggregate immaterial to the limited
partnership) any of the funds of the limited partnership, or
directly or indirectly guarantee any obligation of any other
Person (including as guarantees for this purpose any income
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maintenance, net worth maintenance or, without limitations other
arrangement the effect of which is in substance to guarantee
payment or performance), in each case other than a Person that is
wholly-owned by the limited partnership; or
(f) Acquire any real property, provided that, this
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provision will not preclude the leasing of the Land by this
limited partnership under the Lease, or the acquisition of land
as permitted pursuant to the Overall Agreement.
C. Removal of the General Partner
1. General Rule. The General Partner may be removed only
as provided in this Part C of Article VIII.
2. Removal. The General Partner may be removed by the
Limited Partner, upon notice being sent to the General Partner at
any time after an Overall Agreement Payment Default, a
Partnership Minimum Amount Distribution Default, a Lease Payment
Default or Another Material Default (each, a "Default"). Once
notice of removal is entitled to be and is sent after a Default,
there shall be no right to cure without the prior written consent
of the Limited Partner (which consent may be withheld in its sole
discretion and with or without reason) and the General Partner
shall be removed. Subject to Paragraph 7 of this Part C of
Article VIII, removal will not release any SFEC Entity or SFEC
Affiliate from any obligations they may have under this
Agreement, the Overall Agreement or any other Related Agreement.
3. Overall Agreement Payment Default. An "Overall
Agreement Payment Default" is any of a failure by SFOT
Acquisition I and/or SFOT Acquisition II to (x) make the Tender
Offer when and as required (time being of the essence) or to pay
when due any amount to be paid by it pursuant to the Tender
Offer, (y) perform its obligations to make available the
Liquidity Put or Accelerated Put when and as required (time being
of the essence) or to pay when due the amounts to be paid by it
pursuant to the Liquidity Put (time being of the essence);
provided, for this purpose an amount that is disputed shall not
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be deemed to be due until such amount is determined pursuant to
the procedure set forth in Section 11.16 of the Overall Agreement
or (z) make all of the payments it is required to make if the
End-of-Term Option is exercised, or in case of each of clauses
(x), (y) and (z), which failure continues without being remedied
by SFOT Acquisition I and/or SFOT Acquisition II, or a Guarantor,
without any right of subrogation or similar right against the
Limited Partner, FD-II, L.L.C., Flags' Directors, L.L.C., Fund or
any partners of Fund, for ten Business Days (time being of the
essence) after written notice of such failure or requirement is
given by any one of Fund, Flags' Directors, L.L.C. or the Limited
Partner to SFOT Acquisition I and/or SFOT Acquisition II and one
of SFEC or SFTP. If a payment by SFOT Acquisition I and/or SFOT
Acquisition II pursuant to the Tender Offer, the Liquidity Put or
the End-of-Term Option is paid or made and is later determined to
not have been indefeasibly paid or indefeasibly made in whole or
in part, an Overall Agreement Payment Default will exist if such
payment, together with Default Interest on the amount returned or
required to be returned (including any interest included in such
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amount) from the date such amount is returned or required to be
returned, is not made by a Guarantor within ten Business Days
(time being of the essence) after written notice by one or more
of the Limited Partner, Fund, the Co-General Partner or Flags'
Directors, L.L.C. to SFOT Acquisition I and/or SFOT Acquisition
II and to one of SFEC or SFTP that any recipient(s) under the
Tender Offer, Liquidity Put, Accelerated Put or End-of-Term
Option has been required to return all or any portion of such
distribution because it was not indefeasibly paid.
Notwithstanding anything in this Paragraph 3 to the contrary, an
Overall Agreement Payment Default will not result if making the
Tender Offer or providing the Liquidity Put or Accelerated Put or
payment of the amount due with respect to any of them is not
permissible under a Payment Prohibiting Law, provided the Tender
Offer is commenced, the Liquidity Put is made, the Accelerated
Put is made or payment is made, with interest at Prime from the
original date due, within ten Business Days after such action or
payment is not prohibited by a Payment Prohibiting Law.
4. Partnership Minimum Amount Distribution Default. A
Partnership Minimum Amount Distribution Default is a failure by
the limited partnership to make any Minimum Amount distributions
(including for this purpose any interest or Default Interest)
when due or to repay any borrowing made pursuant to the proviso
in the first sentence of Part G of Article VI, or (y) a failure
of the General Partner to cause all then outstanding Capital
Improvement Loans to be repaid as provided in Paragraph (c) of
Part B of Article VII, if the Net Worth Standard is not met, in
each case if such failure continues without being remedied by the
limited partnership, the General Partner or any Guarantor within
ten Business Days (time being of the essence) after written
notice of such failure is given by any one or more of the Limited
Partner, the Co-General Partner, Fund or Flags' Directors, L.L.C.
to the General Partner and one or both of SFEC or SFTP. If any
Minimum Amount distribution is made or such borrowing is repaid
and is later determined to not have been indefeasibly made or
repaid in whole or in part, a Partnership Minimum Amount Payment
Default will exist if such distribution (including any interest
included in such amount), together with Default Interest from the
date such amount is returned or required to be returned, or such
repayment is not paid by a Guarantor within ten Business Days
(time being of the essence) after written notice by one or more
of the Limited Partner, Fund, the Co-General Partner or Funds'
Directors, L.L.C. to the General Partner and to one or both of
SFEC or SFTP that any recipient(s) has been required to return
all or any portion of such distribution or repayment because it
was not indefeasibly made or paid. Notwithstanding anything in
this Paragraph 4 to the contrary, a Partnership Minimum Amount
Distribution Default will not result if distribution or repayment
of the amount due is not permissible under a Payment Prohibiting
Law, provided the distribution or repayment is made, with
interest at Prime from the original date due, within ten Business
Days after distribution is not prohibited by a Payment
Prohibiting Law.
5. Another Material Default. Another Material Default
means any other failure by any SFEC Entity or SFEC Affiliate or
this, limited partnership to perform or comply in full with the
obligations (i) under Article X or (ii) referred to Paragraph 1
of Part O of Article XVII or to pay when due any Indebtedness of
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the limited partnership or any amounts due under Operating
Leases, provided that, with respect to clause (i) of this
--------
sentence, such failure continues without being remedied by the
limited partnership or a Guarantor within 20 Business Days, time
being of the essence, after written notice thereof is given by
any one of Fund, Flags' Directors, L.L.C., the Limited Partner or
the Co-General Partner to the General Partner and one of SFEC or
SFTP and, provided, further, that with respect to clause (ii) of
-----------------
this sentence, such failure is not remedied in full within 30
Business Days (or such longer period as may be specified by the
arbitrator provided for therein), time being of the essence,
after the arbitrator referred to in Paragraph 2 of Part O of
Article XVII determines that the failure to perform or comply has
or will have an adverse effect on the benefits to be received by
the Limited Partner or the partners of Fund (other than SFOT
Acquisition I and SFOT Acquisition II) or on the Amusement Park,
in any such case that is material in relation to the value of the
Amusement Park.
6. Notices; No Waiver. Notices under this Agreement,
including this Part C of Article VIII, shall be given as provided
in Section 14.4 of the Overall Agreement and shall be deemed
given as provided therein. Neither the Co-General Partner nor
the Limited Partner shall have any obligation to remove the
General Partner if entitled to do so. No waiver of any right to,
or failure by the Co-General Partner or the Limited Partner
having such a right to, remove the General Partner will
constitute a waiver of any other right to remove the General
Partner, even if such other right or remedy arises from matters
similar or identical to those as to which a right to remove was
waived or otherwise not exercised.
7. Effect of Removal. The removal of the General Partner
upon a Default shall be without prejudice to the rights of the
Limited Partner to recover any damages it may incur from any such
Default and, without limitations shall not release the General
Partner or the limited partnership from any obligations they may
have under this Agreement or the Lease with respect to the making
of Minimum Amount distributions, paying Base Rent and paying
interest or Default Interest on both, any Guarantors from their
respective obligations under the Guarantees or any of the other
obligations of the SFEC Entities under the Overall Agreement and
the other Related Agreements (including in each case obligations
with respect to the Liquidity Puts provided for in the Overall
Agreement), provided, that, any obligations to make then future
--------
required minimum capital expenditures will terminate effective
upon removal. If the General Partner is removed or resigns, the
Limited Partner may elect a substitute general partner. Upon and
after the removal of the General Partner, the Limited Partner
shall (i) operate the Amusement Park in a commercially reasonable
manner, (ii) sell the Amusement Park on commercially reasonable.
terms or (iii) enter into a commercially reasonable arrangement
with a third party to operate the Amusement Park and cause to be
distributed to the Limited Partner its share of all Available
Cash generated by such operations, and any Available Cash so
distributed to the Limited Partner (as well as, to the extent
applicable, any proceeds received by the Limited Partner or Fund
with respect of any sale or other disposition of the Amusement
Park or a substantial portion of the assets relating thereto)
shall, net of appropriate costs incurred in connection therewith,
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offset the obligation of the limited partnership, the General
Partner and the Guarantors, after such removal, to pay or cause
to be paid, as applicable, then future Minimum Amount
distributions, then future Base Rent and interest or Default
Interest on both. In any dispute, in determining whether and the
extent to which such future Minimum Rent, Base Rent and interest
or Default Interest obligations are so offset, the General
Partner shall have the burden of proving by a preponderance of
the evidence that any operation of the Amusement Park by the
Limited Partner, the sale of the Amusement Park or any
arrangement with a third party to operate the Amusement Park is
not commercially reasonable. Following the removal of Six Flags
Over Texas, Inc. (or its successor) as General Partner, for
purposes of calculating the Put Price in accordance with Article
III of the Overall Agreement, EBITDA shall continue to be
calculated in the manner described in the Overall Agreement and
the operator of the Amusement Park shall be bound by the
covenants and limitations contained in this Agreement as they
relate to the operation of the Amusement Park to the same extent
as Six Flags Over Texas, Inc. and the limited partnership were
bound by such provisions prior to Six Flags Over Texas, Inc.'s
(or its successors) ceasing to be the General Partner.
8. End-of-Term Option Not Exercised. The General Partner
will no longer be the General Partner to the extent it ceases to
be the General Partner pursuant to Section 7.5 of the Overall
Agreement. If the General Partner so ceases to be the General
Partner, the Limited
Partner may elect a substitute general partner.
D. Removal of Co-General Partner.
The Co-General Partner may be removed at any time by the
Limited Partner and, upon such removal, the Limited Partner may
elect in its place any Person it could, under the Second Amended
and Restated Fund Limited Partnership Agreement, elect as co-
general partner.
ARTICLE IX
NO ASSIGNMENTS OR SUBSTITUTIONS
1. No Assignments. No partner shall sell, assign, pledge
or otherwise transfer to any Person its interest in the limited
partnership or any portion thereof
2. No Substitutions. No Person shall be admitted to the
limited partnership as a substitute general partner, co-general
partner or limited partner without the prior written consent of
all partners, which consent may be withheld by any partner in its
sole and absolute discretion and with or without reason; provided
--------
that, a substitute general partner selected upon removal of the
General Partner and a substitute co-general partner selected upon
removal of the Co-General Partner will be admitted as a
substitute general partner or substitute co-general partner, as
the case may be. This Article IX does not restrict the issuance
or transfer of securities or membership interests issued by the
General Partner, Co-General Partner or Limited Partner or the
removal or election of directors, officers or managers of the
General Partner, the Co-General Partner or the Limited Partner.
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ARTICLE X
OWNERSHIP OF ASSETS; CONTINUED
LIABILITIES OF THE LIMITED PARTNER
1. Assets. The limited partnership shall continue to own
all of the assets (of whatever kind or character) owned by the
limited partnership as of the date of this Agreement other than
the Land, which shall have been distributed to the Limited
Partner and then leased to the limited partnership pursuant to
the Lease.
2. Liabilities of the Limited Partner. The limited
partnership will continue to be liable for, and the General
Partner will cause the limited partnership to defend and hold the
Limited Partner harmless against and discharge in full when due,
all Indebtedness, liabilities and contractual obligations of the
limited partnership existing at the date of this Agreement. The
limited partnership was until the date of this Agreement,
controlled by an affiliate of the General Partner, not by Flags'
Directors, L.L.C. or Fund. Accordingly, no representation or
warranty is made by the Limited Partner or Flags' Directors,
L.L.C. as to the liabilities of the limited partnership. As used
above in this Article X, the term "liabilities" includes all
liabilities and obligations of any kind or description (whether
in contract, tort, arising by operation of law or, without
limitation, otherwise), in each case whether absolute or
contingent, known, suspected, unsuspected, unknown or, without
limitation otherwise; provided, that, notwithstanding anything to
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the contrary in this Article X, the limited partnership shall not
assume and shall not be liable for any claims that accrued prior
to the date of this Agreement that Fund or its partners may have
or purport to have against the Limited Partner all of which will
be released and relinquished in accordance with the Overall
Agreement.
ARTICLE XI
OVERALL AGREEMENT
The limited partnership shall comply, and the General Partner
shall cause the limited partnership to comply, with the
provisions of the Overall Agreement to be complied with by the
limited partnership, as if it were a party thereto.
ARTICLE XII
BOOKS OF ACCOUNT, FINANCIAL
STATEMENTS AND FISCAL MATTERS
1. Books of Account. The General Partner shall keep
adequate books of account of the limited partnership. Such books
of account shall be kept at the principal place of business of
the limited partnership, and the Limited Partner and the Co-
General Partner and their respective authorized representatives
shall have, at all times, free access to and the right to inspect
and copy such books of account and all other records of the
limited partnership.
2. Financial Statements. The General Partner shall
deliver to the Limited Partner the financial statements and tax
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and other information provided for in Section 11.8 of the Overall
Agreement, as and when required thereby.
3. Fiscal Year. The fiscal year of the limited
partnership shall be the calendar year.
4. Funds. The funds of the limited partnership shall be
deposited in such bank(s) or other financial institution(s) or
invested in obligations of United States government, United
States government agencies, States of the United States or
agencies thereof or in mutual fund(s) that invest substantially
all of their assets in one or more of such obligations and in
obligations of municipalities in any States, in each case as the
General Partner shall from time to time deem appropriate. Such
funds shall be withdrawn only by the General Partner or the
General Partner's duly authorized agents. The limited
partnership shall not commingle its funds with the funds of any
other Person.
ARTICLE XIII
DURATION AND COMMENCEMENT OF BUSINESS
The term of the limited partnership commenced, and the
limited partnership commenced business as of June 30, 1969. The
term of the limited partnership shall end upon the dissolution
and winding up of the limited partnership as provided in Article
XIV.
ARTICLE XIV
DISSOLUTION AND LIQUIDATION
1. Dissolution Subject to the last sentence of this
Paragraph 1, the limited partnership shall dissolve upon the
earliest to occur of the following events:
(a) December 31, 2027 (January 15, 2028 if the End-of-
Term Option is exercised);
(b) the General Partner shall have been removed,
adjudicated insolvent or bankrupt or dissolved and no
successor general partner has been selected pursuant to Part A,
Paragraph 6, of Article VIII within 90 days thereafter; or
(c) as provided in Section 7.5 of the Overall
Agreement.
Notwithstanding clause (a) of this Paragraph 1, by the
written consent of the General Partner, the Co-General Partner
and the Limited Partner, the date in clause (a) may be extended
once during any decade by up to an additional ten years.
2. Liquidation. Upon the dissolution of the limited
partnership by reason of Paragraphs l(b) or l(c) of this Article
XIV, the Limited Partner may appoint the Co-General Partner or a
trustee to wind up and terminate the business and affairs of the
limited partnership, The Co-General Partner or trustee, if
applicable, or otherwise the Limited Partner, shall promptly wind
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up and terminate the business and affairs of the limited
partnership and cause it to discharge all of its liabilities to
its creditors. Upon the dissolution of the limited partnership
for any other reason, the General Partner shall, as trustee,
promptly wind up and terminate the business and affairs of the
limited partnership and discharge all of the liabilities of the
limited partnership to its creditors. The trustee, the Co-
General Partner or the Limited Partner, as applicable, shall,
subject to Paragraph 3 of Part A of Article VIII and Section
7.5(a) of the Overall Agreement, liquidate all assets of the
limited partnership necessary to discharge such liabilities to
creditors and, in addition, may liquidate all remaining
intangible personal property of the limited partnership. After
all of such liabilities have been discharged, the limited
partnership, the trustee or the Limited Partner, shall, subject
to Section 7.5 of the Overall Agreement in the following order:
(a) distribute to the Limited Partner all remaining cash of
the limited partnership up to an amount equal to the amount, if
any, by which the cumulative Minimum Amounts, interest and
Default Interest exceeds the aggregate amount of Minimum Amounts,
interest and Default Interest distributions theretofore
distributed to the Limited Partner; and
(b) distribute to the Limited Partner all remaining
property and assets of the limited partnership.
The obligation of the General Partner and the other SFEC Entities
to comply with Section 7.5(a) of the Overall Agreement is not
diminished by the provisions of this Part 2 of Article XIV.
Notwithstanding any provision hereof or any positive balance in
the General Partner's capital account at any time, the General
Partner shall not be entitled to receive, by reason of
dissolution or liquidation of the limited partnership, any
interest in the Amusement Park or any part of the proceeds
resulting from the sale of the Amusement Park or any of the other
assets of the Amusement Park or the limited partnership in
connection with the liquidation of the limited partnership.
ARTICLE XV
END-OF-TERM OPTION
As is set forth in Article VII of the Overall Agreement and
subject to the conditions set forth therein SFOT Acquisition II
(or its permitted assigns) shall have the right to acquire the
interest of the Co-General Partner (or any successor co-general
partner) in the limited partnership. SFOT Acquisition II is a
third party beneficiary of this Article XV. If the End-of-Term
Option is not exercised by SFOT Acquisition II, then Section 7.5
of the Overall Agreement will be applicable as if set forth in
full herein and, to the extent inconsistent therewith, will
supersede Article XIV of this Agreement.
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ARTICLE XVI
LITIGATION
The General Partner shall, in the name of the limited
partnership, prosecute and defend such actions at law or in
equity as may be necessary to enforce or protect the interests of
the limited partnership. The limited partnership and the General
Partner shall respond to any final decree, judgment or decision
of any court, board or authority having jurisdiction.
ARTICLE XVII
CERTAIN AGREEMENTS REGARDING
OPERATION OF THE AMUSEMENT PARK
The parties have structured certain of the transactions
contemplated by this Agreement as a limited partnership instead
of a lease; however, the parties to this Agreement intend that,
for income tax purposes, this Agreement shall be treated as a
lease. In addition, the parties intend that the provisions of
this Agreement be those that would be included in a lease. In
addition to other provisions in this Agreement, the parties agree
to the terms set forth below in this Article XVII.
A. Improvements
1. Permits. The limited partnership shall obtain and.
maintain all permits, licenses and other governmental approvals
and authorizations ("Permits") which are required for the
construction, ownership, use, operation or occupancy of the
Amusement Park (including the Improvements) and the Land (except
any Permit the fa-lure of which to be obtained or maintained
would not have an adverse effect on the Amusement Park or an
adverse effect on the General Partner's ability to satisfy and to
cause the limited partnership to satisfy their respective
obligations under this Agreement)
2. Demolition Performance and Payment Bonds; Certain
Property or Asset Sales.
(a) Prior the demolition of any rides, the amphitheater in
the Amusement Park or any other Improvements with a value or
replacement cost in excess of 10% of the then Minimum Amount, the
limited partnership must secure the Co-General Partner's prior
written consent and, if requested by the Limited Partner, the
limited partnership shall at its expense retain a consultant,
reasonably satisfactory to the Co-General Partner, which shall
monitor and certify as to the desirability of and proper -
demolition of such Improvements, provided that, no such consent
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shall be required prior to December 31, 2022 if the Net Worth
Standard is met.
(b) If the Net Worth Standard is not met, before the
commencement of construction or installation of any building,
structure, ride or other Improvement in the Amusement Park with a
cost of construction and installation in excess of 50% of the
then Minimum Amount, if requested by the Limited Partner, the
limited partnership at its expense shall, if such bond or bonds
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are available on commercially reasonable terms, deliver or cause
to be delivered to the Co-General Partner a performance bond and
labor and material payment bond issued by a surety authorized to
do business in the State of Texas, guaranteeing full performance
of construction and/or installation of the Improvements in
accordance with the plans for the Improvements and payment to all
claimants for labor and materials used or reasonably required for
use in the performance of construction or installation of the
Improvements in accordance with the plans, in the form
satisfactory to the Co-General Partner and with a surety approved
by the Co-General Partner, which approvals shall not be
unreasonably withheld. Each such bond shall name the General
Partner and the Co-General Partner as a joint obligee with the
limited partnership. Each performance bond shall remain in
effect until the date on which the bonded obligations are
satisfied by the principal or by the surety's performance in
accordance with the terms of the bond. Each payment bond shall
remain in effect until the expiration of the period for filing a
claim of lien as provided by law, or if a claim of lien is filed,
the expiration of the period for filing an action to foreclose
such lien, or until the Amusement Park and, if applicable, the
Land is freed from the effect of such claim of lien and any
action brought to foreclose such lien or the lien is otherwise
discharged. For the purpose of calculating EBITDA and for the
purpose of determining compliance with Paragraph 1 of Part C of
this Article XVII, one-half of the cost of the bond or bonds
required by this Section 2(b) shall be deemed to be a capital
expenditure and one-half shall be deemed to be an expense.
3. Performance of Demolition, Construction and
Installation Work
(a) Any and all demolition, construction and installation
work shall be done diligently, in conformity with all Legal
Requirements, including, without limitation, the Building Code of
the County of Tarrant, and all Insurance Requirements, in a good
and workmanlike manner (except where failure to conform to Legal
Requirements or Insurance Requirements would not have an adverse
effect on the General Partner or on the Amusement Park or an
adverse effect on the General Partner's ability to satisfy and to
cause the limited partnership to satisfy its respective
obligations under this Agreement).
(b) Upon the completion of Improvements with a replacement
cost or value of 5% or more of the then Minimum Amount, the
General Partner shall promptly deliver to the Co-General Partner
as-built plans and specifications for such Improvements.
B. Use and Occupancy
1. Use and Occupancy. Subject to the occurrence of a
Force Majeure, at all times during the term of this Agreement,
the limited partnership shall operate an amusement park
comparable to the Amusement Park or a Comparable Park, with such
park operating for an average of ten hours per day and 150 days
per year (in each case, subject to local school calendar
changes).
2. Other Parks. Subject to the occurrence of a Force
Majeure, an entity that directly or indirectly owns at least a
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majority of the equity securities of the General Partner shall,
at all times during the term of this Agreement, own and operate
or manage at least five Comparable Parks (including the Amusement
Park) in the United States.
3. No Ride Rotation. No rides will be rotated to other
amusement parks without the prior written consent of Co-General
Partner.
4. Licenses and Concessions. The limited partnership may
grant licenses and concessions provided that such licenses and
concessions are granted in the ordinary course consistent with
past practice or practice in the Comparable Parks are not of a
material part of the Amusement Park, are not made to SFEC
Entities or SFEC Affiliates and expire, unless the End-of-Term
Option is exercised, on or before December 31, 2027.
C. Minimum Capital Expenditures
1. Minimum Capital Expenditures. Subject to Paragraph 2
of this Part C of Article XVII, the limited partnership shall
expend a minimum amount on capital expenditures in the Amusement
Park during each rolling period of five consecutive years
commencing January 1, 1998 (each such five-year period being a
"Measuring Period") in an amount equal to six percent of the
aggregate Gross Revenues during the five consecutive year period
ending two years before the expiration of the applicable
Measuring Period and in any event consistent with the amount
spent on capital expenditures in the Comparable Parks during the
Measuring Period. Specifically, and without limiting the
foregoing, the General Partner will use all commercially
reasonable efforts to (i) have Mr. Freeze open and fully
operative by the opening of the Amusement Park season in 1998,
and (ii) install and have fully operative in each of the 1999 and
2000 seasons, a "Mega Ride" having an installed and themed cost
of not less than $10 million. The expenditures for the Mega
Rides in each of 1999 and 2000 shall count toward the minimum
capital expenditures required by this Paragraph 1 of Part C of
Article XVII. No new rides or other attractions will be
purchased or other major capital expenditures made for rides or
other attractions unless such rides or other attractions or rides
or attractions comparable in all material respects thereto have
been successfully introduced at a Comparable Park. Purchases of
land and expenditures made on Improvements which replace
Improvements that are damaged or destroyed, if the damage or
destruction was required to be insured against by this Agreement,
shall be in addition to the capital expenditures required
pursuant to this Paragraph 1 of Part C of this Article XVII. If
any Improvements are sold, an amount equal to the proceeds of
sale (including as proceeds the amount represented by any notes),
net of the costs of sale, shall be added to the required capital
expenditures in the 12 months after the sale takes place.
Notwithstanding anything to the contrary in this Paragraph 1 of
Part C of Article XVII, if SFOT Acquisition II exercises the End-
of-Term Option pursuant to Article VII of the Overall Agreement,
capital expenditures by the limited partnership from and after
the date of exercise of that option will not, without the Limited
Partner's prior written consent, exceed in any year 120% of the
yearly average annual amount of capital expenditures during the
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four-year period preceding such exercise, unless an amount equal
to 5% of such excess is distributed to the Limited Partner.
2. Exception. The limited partnership shall not be
required to expend and shall not be deemed to be in Default
solely by reason of it failing to expend the amount on capital
expenditures required by Paragraph 1 of this Part C of Article
XII if (i) the Net Worth Standard is not met; (ii) the limited
partnership has requested in writing that the Limited Partner
consent to the incurrence of additional Capital Improvement Loans
in order to permit the limited partnership to expend the amount
so required, specifying the type and terms of the Indebtedness it
proposes to incur and the lender(s) and (iii) the Limited Partner
has failed to consent to the incurrence of such additional
Indebtedness (it being understood that nothing in this paragraph
shall restrict the ability of the General Partner to cause the
limited partnership to make capital expenditures out of the
proceeds of Affiliate Loans).
D. Alterations
The limited partnership may (i) make alterations, additions,
renovations to the Improvements and (ii) replace any destroyed
Improvements (collectively, "Alterations"), but only in
compliance with all applicable Legal Requirements and Insurance
Requirements.
E. Repairs and Maintenance
1. Standards. Subject to the occurrence of a Force
Majeure, the limited partnership shall establish and maintain the
Amusement Park (including, without limitation, the Improvements)
in good repair and condition, and shall, at its sole cost and
expense, timely make all necessary structural and non-structural
repairs to the Amusement Park. All repairs of the Improvements
shall be made to the Service Standard.
2. Repairs and Maintenance. Subject to the occurrence of
a Force Majeure, the limited partnership shall at all times keep
the Amusement Park in a manner such that it otherwise meets the
Service Standard and shall keep all portions of the Amusement
Park in a safe, attractive and clean condition. The limited
partnership shall keep the parking areas, sidewalks and other
common areas abutting the Amusement Park clean.
F. Compliance with Legal Requirements
1. Compliance with Legal Requirements. The limited
partnership shall, consistent with industry standards for
comparable amusement parks, comply with all material Legal
Requirements on or with respect to ownership, use, occupation or
operation of the Amusement Park, including, without limitations
the Legal Requirements relating to public safety and to non-
discrimination, and with any direction made pursuant to law by
any public officer or officers regarding the Amusement Park, or
the ownership, use, condition or occupation thereof, whether or
not such compliance involves structural repairs or changes or
shall be required on account of any particular use to which the
Amusement Park or any part thereof may be put and without regard
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to whether any such Legal Requirements or order be of a kind now
within the contemplation of the partners.
2. Contest of legal Requirements. The limited partnership
may in good faith contest any Legal Requirements, provided that
such contest does not result in a lien, charge, encumbrance or
liability against and that is material to the Amusement Park and
noncompliance therewith shall not constitute a crime or offense
punishable by fine or imprisonment. The limited partnership's
good faith noncompliance with such Legal Requirements during such
contest shall not be deemed A breach of this Agreement.
G. Insurance
1. Compliance with Insurance Requirement The limited
partnership shall not do or permit to be done any act or thing
upon the Amusement Park which will invalidate the terms of any
fire and casualty insurance policies covering the Amusement Park
and the fixtures and property therein. The limited partnership
shall comply with all present and future Insurance Requirements
and shall not do or permit to be done in or upon the Amusement
Park or the Land or bring or keep anything therein or thereon or
use the same in a manner which could result in the denial of such
fire and casualty insurance coverage.
2. Insurance Requirements. The limited partnership shall
throughout the term of this Agreement:
(a) Keep the Improvements, and fixtures and contents on, in
and appurtenant thereto insured against loss or damage by fire,
lightning and the additional perils included in the standard
extended coverage endorsement as well as those included in the
"all risk" policy and "difference in conditions" ("DIC")
endorsement, including but not limited to loss or damage caused
by windstorm (including hurricanes), hail, explosion, riot, riot
attending a strike, civil commotion, aircraft, vehicle, smoke,
vandalism, malicious mischief, collapse, earthquake, flood and
water damage other than by sprinkler leakage, in an amount (other
than for DIC perils) equal to 100% of the full replacement cost
thereof (as the same may from time to time increase) without
diminution of such replacement cost for depreciation or
obsolescence, and in an amount for DIC perils equal to $50
million, in each case by policies written with a "deductible" (or
self-insurance limits) not to exceed $750,000. The replacement
cost and total value of the Improvements, equipment, fixtures and
contents shall be determined from time to time (but not more
frequently than once in any calendar year (unless a major change
is made to or occurs at the Amusement Park) or less frequently
than once every three calendar years) by a manufacturer of
amusement park rides. contractor, appraiser or insurance company
generally used in the industry or acceptable to the insurers of
the Amusement Park. During periods of -substantial construction
of the Improvements, including Alterations thereto, the limited
partnership shall keep in effect all-risk builder's risk
insurance, including coverage against collapse, written on a
completed value basis;
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(b) Keep in effect comprehensive general liability
insurance against claims for bodily injury. personal injury, or
death and property damage occurring upon in or about the
Amusement Park, and on, in or about the adjoining streets,
sidewalks and passageways, providing coverage in the sum of not
less than $10 million combined single limit per occurrence and
not less than $20 million aggregate liability coverage or cause
the Amusement Park to participate in a self-insurance program
with Comparable Parks providing comparable coverage. These
coverage limitations shall be increased from time to time
throughout the term of this Agreement to conform to the liability
coverage then customarily maintained for the Comparable Parks;
(c) Subject to the Net Worth Standard, keep in effect use
and occupancy insurance, rental interruption insurance and
business interruption insurance in an aggregate amount not less
than the total of two times the then Minimum Amount plus two
times the then Base Rent;
(d) To the extent applicable, keep in effect appropriate
amount elevator insurance, boiler and machinery insurance, water
damage insurance (direct and legal liability), sprinkler leakage
insurance (direct and legal liability) and, in the event of war
or threatened hostilities, appropriate forms of war damage or war
risk insurance if issued by the federal government or any agency
thereof,
(e) Keep in effect workers compensation insurance as
required by state law, including employees liability insurance
with a limit of not less than $2 Million; and
(f) Keep in effect such other insurance in such amounts as
may from time to time be customary in the industry or in effect
at the Comparable Parks.
Dollar amounts for insurance provided in Paragraphs 2(a), (b) and
(e) of this Part G of Article XVII shall be increased or
decreased every three years in proportion to increases or
decreases in the CPI, if any, during that period, but shall not
be decreased at any time from their initial amounts set forth
therein.
3. Insurance Carriers; Policies. All such insurance
required shall be under valid and enforceable policies issued by
(a) insurers providing such insurance with respect to Comparable
Parks at least 50% owned (directly or indirectly) by entities
under 50% or greater common ownership with the General Partner
(the "Comparably Insured Parks") or (b) insurers having a rating
in the current property-casualty edition of Best's Key Rating
Guide published by A.M. Best Company ("Best's Guide") of A or
better and being in a financial size category of V or greater in
Best's Guide (or a comparable rating and financial category in
Best's Guide if Best's rating system or financial classification
changes, or in any similar insurance guide selected if Best's
Guide is no longer published) and, to the extent required for
such insurance to be valid, licensed to do and doing business in
the State of Texas. The limited partnership shall also furnish
to the Co-General Partner from time to time upon the Co-General
Partner's request, a certificate of insurance containing a
statement of insurance of the limited partnership pursuant to
this Agreement then in force and stating that the insurance then
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in force complies with the provisions of this Agreement and that
the premiums thereon have been paid. The General Partner shall
promptly notify the Co-General Partner of the cancellation or
change of the terms of any such insurance policy.
4. Required Provisions. The limited partnership's
insurance policies shall be for a term of not less than one year
and, to the extent the following coverages are contained in the
insurance for the Comparably Insured Parks, shall provide:
(a) That the full amount of any losses sustained shall be
payable notwithstanding any act. omission or negligence of the
limited partnership which might otherwise result in forfeiture of
such insurance;
(b) For a waiver of all right of subrogation against the
partners;
(c) That such policies shall not be invalidated should the
insured waive, prior to a loss, any or all rights of recovery
against any party for losses covered by such policies.
(d) Coverage on a "primary" basis with respect to the
Limited Partner and its manager(s) and members, and the members,
partners, officers. agents, employees and volunteers of each of
them, regardless of the requirement that such Persons be named,
for some purposes. as additional insured on the insurance
policies of the limited partnership;
(e) That such policies shall not be suspended, voided,
canceled, reduced in coverage or in limits or materially changed
without at least ten days prior written notice to each insured
named therein, including, without limitation, the Co-General
Partner;
(f) That the insurance shall apply separately to each
insured against whom a claim is made or suit is brought, except
with respect to the limits of the insurees liability; and
(g) That with respect to all liability insurance coverages,
the partners shall be additional insured.
Such insurance policies shall contain no special
limitations on the scope of protection afforded to the partners.
The references to the partners and to the Limited Partner above
include the Limited Partner in its capacity as the landlord under
the lease.
H. Force Majeure
"Force Majeure" means by events beyond the reasonable control
of the General Partner such as acts of God, acts of public enemy,
fire, earthquake, floods, explosion actions of the elements, war,
invasion, insurrection, riot, mob violence, sabotage, failure of
transportation, total or partial condemnation, requisition, or
orders of government or civil or military authorities, but
excluding, however, the inability to obtain monies, that may
preclude or make impossible performance in whole or in part.
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I. No Abatement
None of any Legal Requirements, Force Majeure or anything
else whatsoever is an excuse with respect to or will abate the
obligations, which are absolute and unconditional, to timely make
Minimum Amount distributions and pay Base Rent (including in each
case any applicable interest and Default Interest), subject to
Paragraph 7 of Part C of Article VIII, or to timely discharge the
liabilities assumed under Article X provided, that, the
--------
obligations to make then future Minimum Amount distributions and
then future Base Rent shall be extinguished upon the End-of-Term
Option having been accelerated and exercised, as provided in Part
P of this Article XVII, and the payments to be made pursuant to
the End-of-Term Option having been made.
J. Impositions
1. Payment of Impositions. The limited partnership shall
pay and discharge all Impositions at least ten days before the
first day on which a penalty or interest may accrue or be
assessed thereon for non-payment (or, if no penalty or interest
thereon may accrue or be assessed, then before such Impositions
become delinquent or past due).
2. Contest. The limited partnership shall have the right
to contest the amount or validity, in whole or in part, of any
Imposition by appropriate proceedings promptly initiated and
diligently conducted in good faith, but only after payment of
such Imposition unless such payment would operate as a bar to the
contest or interfere materially with the prosecution thereof, in
which event, notwithstanding the provisions hereof, the limited
partnership may, upon giving written notice to the Limited
Partner (in its capacity as Landlord under the Lease), postpone
or defer payment of such Imposition provided that none of the
Amusement Park or the Land, or any part of either of them, would
by reason of such postponement or deferment be in danger of being
forfeited, sold or foreclosed for nonpayment of such Impositions.
Upon the termination of any such proceedings, the limited
partnership shall pay the amount of such Imposition or part
thereof as shall be finally determined in such proceedings to be
payable (after exhaustion of any rights of appeal), the payment
of which may have been deferred during the prosecution of such
proceedings, together with any costs, fees, interest penalties or
other liabilities in connection therewith.
3. Impositions. "Impositions" means real estate, ad
valorem and other taxes or assessments. possessory interest
taxes, transient occupancy taxes, water and sewer charges,
license, permit and inspection fees, gross receipts and sales
taxes, and governmental impositions and charges of every kind or
nature whatsoever which may at any time be charged, assessed or
imposed upon, or becomes a lien upon, or arise in connection with
the ownership, operation, use, occupancy or possession of the
Amusement Park or the Land, regardless of whether assessed or
levied upon or payable by the Limited Partner (including its
capacity as Landlord under the Lease) or the limited partnership
(including in its capacity as Tenant under the Lease), provided,
--------
however, that Impositions shall not include any income excess
-------
profits, franchise, transfer, inheritance, capital stock or other
similar tax imposed on the Limited Partner unless, due to a
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future change in the method of taxation, an income, excess
profits franchise, transfer, inheritance, capital stock or other
tax shall be levied against the Limited Partner witch is clearly
and demonstrably in lieu of or in substitution for any tax or
increase therein which would otherwise constitute an Imposition,
in which event such income, excess profits, franchise, transfer,
inheritance, capital stock or other tax shall be deemed to be an
Imposition.
K. No Adverse Possession
The limited partnership will not permit any portion of the
Amusement Park to be used in such a manner as might make possible
a claim of adverse use, adverse possession, prescription or other
similar claims.
L. Hazardous Material
1. General Provision. The limited partnership, including
in its capacity as Tenant under the Lease, will not cause any
Hazardous Material to be located, used or disposed of, on or at
the Amusement Park or on or under the Land, or disposed of or
discharged from the Amusement Park or the Land into or on any
land, the atmosphere or any watercourse, body of water or wetlands
and will use its best effort to not permit any of the foregoing,
in each case except to the extent placed or used on the Land or
at the Amusement Park in the manner permitted by applicable Legal
Requirements (including Environmental Laws).
2. Hazardous Materia. "Hazardous Material" means any
hazardous or toxic substance, material or waste which is or
becomes regulated by any local governmental authority, the State
of Texas or the United States government, or any material or
substance defined as a hazardous, toxic or dangerous substance,
waste or material in any federal, state or local statute, law,
ordinance, code, rule. regulation, order or decree regulating,
relating to, or imposing liability or standards of conduct
concerning any hazardous, toxic or dangerous waste, substance or
material, as now or at any time in the future in effect
(collectively, 'Environmental Laws").
M. Encroachments
If any building, structure or other improvement on or
constructed on the Land encroaches upon any property, street, or
right of-way adjoining or adjacent to Land, or violates the
agreements or conditions contained in any restrictive covenant
affecting the Land or any part thereof, or hinders or obstructs
any easement or right-of-way, then, (i) in the case of any
encroachment, promptly after written request to any Person
affected by such encroachment, or (ii) otherwise, promptly after
written request of the Limited Partner or of any person affected
by such violation, hindrance, obstruction or impairment, the
limited partnership shall, at is sole cost and expense, either
(A) obtain valid and effective waivers or settlements of all
claims, liabilities and damages resulting from each such
encroachment, violation, hindrance, obstruction or impairment, or
(B) make such changes to the Improvements and take such other
action as shall be necessary to remove such encroachments,
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hindrances or obstructions and to end such violations or
impairments, including, if necessary, the alteration or removal
of any building, structure or other improvements.
N. Remedies Cumulative
Any right or remedy of the Limited Partner in the Overall
Agreement, this Agreement or any other Related Agreement and any
other right or remedy it may have at law or equity upon breach of
any covenant, agreement, term, provision or condition in the
Overall Agreement, this Agreement or any other Related Agreement
shall be distinct, separate and cumulative rights or remedies,
and no one of them, whether exercised by the Limited Partner or
not, shall be deemed to be in exclusion of any other.
O. Certain Matters; Arbitration: Another Material Default
1. Certain Matters. This Part O of Article XVII shall
apply to all Paragraphs of Parts B, C, E. F, G, J, K, L and Q of
this Article XVII and to Paragraphs 2 through 5 of Article V,
inclusive, of the Lease.
2. Arbitration. If the Limited Partner contends that this
limited partnership has failed to perform or comply with any of
the obligations specified in Paragraph 1 of this Part O of
Article XVII and that such failure has continued for a period of
30 days after notice of such failure from the Limited Partner to
the General Partner, the Limited Partner shall be entitled to
seek confidential, binding arbitration of the matter in
accordance with this Paragraph 2 of Part O of Article XVII. Any
such arbitration shall be conducted, at the option of the Limited
Partner, in the State of Texas or New York. The arbitration
shall be conducted by a single arbitrator, selected by the
General Partner and the Limited Partner or, if they do not so
select an arbitrator within 20 Business Days after a request to
do so by either the General Partner or the Limited Partner, by
the president of the American Arbitration Association ("AAA")
(or, if applicable, a similar or successor entity of the AAA), or
his or her designee, upon application by the General Partner or
the Limited Partner. To the extent provided in the location of
the arbitration, the arbitration shall be administered by the AAA
pursuant to its Commercial Rules and Supplementary Procedures for
Large, Complex Disputes, provided that the parties shall be
entitled to discovery as if the matter were being litigated in
federal court. The arbitrator shall be a single neutral who
shall be, if such an individual is available, a retired or former
judge selected from the AAA Commercial Large Complex Case Panel
of Neutrals or, if the AAA no longer maintains such a Panel, from
the Panel that succeeds to the responsibilities of such Panel.
The decision of the arbitrator, who shall determine the validity
of this arbitration provision if it is challenged, shall be final
and unappealable and judgment thereon may be entered in any court
of competent jurisdiction. The fees of the arbitrator shall be
borne by the General Partner, the limited partnership and/or the
Limited Partner in such proportions as are determined by the
arbitrator. The decision of the arbitrator shall be whether
there is Another Material Default, but shall be without prejudice
to any other rights the Limited Partner may have if there is a
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failure to perform or comply that is not of sufficient
materiality to be Another Material Default, provided, that the
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decisions of the arbitrator and its findings of fact shall be res
judicata in any other proceeding.
3. Another Material Default. As set forth in Paragraph 5
of Part C of Article VIII, if the arbitrator selected pursuant to
Paragraph 2 of this Part O determines that the failure of the
limited partnership to perform or comply with any of the
obligations specified in Paragraph 1 of this Part O will have an
adverse effect on the benefits to be received by the Limited
Partner, the limited partners of Fund or on the Amusement Park
that is in the aggregate material in relation to the value of the
Amusement Park and such failure to perform or comply continues
for a period of 30 Business Days (or such longer period as may be
specified by the arbitrator) after such determination by the
arbitrator, then such failure shall constitute Another Material
Default.
P. Total Condemnation/Equivalent Casualty
In the event of a total condemnation of the Land or a
condemnation of so much of the Land that it is economically
impractical to operate an amusement park thereon with all appeals
of such condemnation decision having been finally exhausted or
the time for appeal having passed, the Limited Partner shall be
entitled to all condemnation proceeds, the End-of-Term Option
shall be accelerated (with the CPI Adjustment for the End-of-Term
Option Price, provided for in the Overall Agreement, being based
on the Minimum Amount for the then next year) and shall be
exercised or deemed exercised as of 30 days after the date of the
condemnation. In the event of a casualty such that it is not
possible to repair and operate an amusement park thereon (such as
contamination of the Land by Hazardous Materials so that it may
not be safely occupied and a clean-up or remediation is
economically impossible), the Limited Partner shall be entitled
to all insurance proceeds, if any, resulting from such casualty,
and at the option of either the Limited Partner or the General
Partner, exercised by notice to the other, the End-of-Term Option
shall be accelerated (with the CPI Adjustment for End-of-Term
Option Price provided for in the Overall Agreement, being based
on the Minimum Amount for the then next year) and so exercised or
deemed exercised, at the End-of-Term Option Price so determined,
as of 30 days after the date of casualty. The Limited Partner
shall not, without the consent of the General Partner, distribute
to its partners, dispose of or otherwise use any condemnation
proceeds or insurance proceeds to which it shall be entitled
pursuant to this paragraph. In the event of any condemnation of
any portion of the Land and/or Improvements not covered by the
foregoing, the limited partnership shall be entitled to all
condemnation proceeds. In the event of any casualty not covered
by the foregoing, the limited partnership shall be entitled to
all insurance proceeds. Notwithstanding anything to the contrary
herein, the Minimum Amount and Base Rent for the year in which
the End-of-Term Option, as accelerated, is exercised shall be
prorated through the date on which the End-of-Term Option Price
is paid. The End-of-Term Option Price will be increased or
decreased to reflect any underpayment or overpayment the Minimum
-37-
<PAGE>
Amount or Base Rent with respect to such year as calculated in
accordance with the immediately preceding sentence.
Q. Operating Lease Limitation
The limited partnership shall not enter into any lease (other
than a Capital Lease) (an "Operating Lease") if after giving
effect thereto the aggregate lease or rental payments that the
limited partnership would be required to make in any year with
respect to (a) Operating Leases of rides (including any virtual
reality or "simulator" - type rides) or other attractions
(including restaurants and stores) would exceed (i) for 1998, $6
million and (ii) for each year after 1998, the greater of $6
million or $6 million multiplied by the CPI Adjustment (as
defined in the Overall Agreement) or (b) all Operating Leases,
including the Operating Leases referred to in clause (a) of this
sentence, would exceed (i) for 1998, $8 million and (H) for each
year after 1998, the greater of $8 million or $8 million
multiplied by the CPI Adjustment. The limited partnership shall
use commercially reasonable efforts to negotiate Operating Leases
that will not terminate on a change of control of the limited
partnership or of the General Partner or a change in the General
Partner (each a "change in control provision"), provided that, if
-------- ----
such leases nevertheless cannot be obtained without a change in
control provision on commercially reasonable terms, the limited
partnership may enter Operating Leases that have a change in
control provision if the aggregate lease and rental payments on
all such leases does not exceed (i) for 1998, $2.5 million and
(ii) for each year after 1998, the greater of $2.5 million or
$2.5 million multiplied by the CPI Adjustment, provided, further,
-----------------
that the fact that a lease without a change in control provision
has a higher but commercially reasonable lease or rental rate
than a lease with a change. in control provision does not mean
that the lease without the change in control provision is not
obtainable on commercially reasonable terms.
ARTICLE XVIII
LIMITATION ON CERTAIN LIABILITIES
1. Co-General Partner. Neither the Co-General Partner nor
its members or manager(s) from time to time shall under any
circumstances have (i) any responsibility, whether to the Limited
Partner or the General Partner, for any obligation or liability
of the limited partnership or (ii) any obligation to contribute
to the General Partner for any contributions made from time to
time by the General Partner to the capital of the limited
partnership or otherwise to the limited partnership or for any
losses or expenses incurred by the General Partner from time to
time including, without limitation, in respect of the limited
partnership, any obligations or liabilities the limited
partnership or the General Partner may have under this Agreement
or, without limitation, otherwise. This limitation on liability
is in addition to any other limitation on liability in favor of
the Co-General Partner and its members and manager(s) as may
exist from time to time, whether at law or, without limitation,
otherwise. The General Partner will indemnify, hold harmless and
defend the Co-General Partner and its and members and manager(s)
from time to time against all obligations and liabilities of the
limited partnership.
-38-
<PAGE>
2. Manager of Limited Partner. Neither the general
partner of the Limited Partner from time to time (initially
Flags' Directors, L.L.C.), nor the manager(s) or members from
time to time of the general partner of the Limited Partner (i.e.,
initially, the manager and members of Flags' Directors, L.L.C.)
will under any circumstances have any responsibility for any
obligations or liabilities of the Limited Partner, whether under
this Agreement, the Lease or, without limitation, otherwise, any
such responsibility as may exist being limited to the assets of
the Limited Partner from time to time. This limitation on
liability in favor of the manager(s) of the Limited Partner from
time to time (and the manager(s).and member(s) from time to time
of the manager(s) of the Limited Partner) is in addition to any
other limitation on liability that may exist from time to time in
favor of any of them, whether at law or, without limitation,
otherwise.
ARTICLE XIX
GENERAL PROVISIONS
1. Texas Law. This Agreement has been executed and made
in accordance with the Texas Revised Limited Partnership Act and
is to be construed, enforced and governed in accordance
therewith.
2. Amendments. Except as otherwise specifically provided
herein, this Agreement may be amended only by the written
agreement of the General Partner and the Limited Partner;
provided, that, no amendment that increases the obligations of
-------- ----
the Co-General Partner shall be effective without the prior
written consent of the Co-General Partner.
3. Binding. This Agreement shall be binding upon and
inure to the benefit of the limited partnership and the parties
hereto and, except to the extent limited herein, their legal
representatives, administrators, successors and assigns, whether
such succession or assignment is effected by a sale, transfer,
sale of securities or assets, merger, reverse merger,
consolidation, conversion, operation of law or, without
limitation, otherwise.
4. Severability. If any Provision, or portion of a
provision, of this Agreement shall be unenforceable or not legal
in any circumstance, the balance of this Agreement and, to the
extent not unenforceable or not illegal, the balance of such
provision or portion thereof shall not be affected thereby.
5. No Certificate for Limited Partnership Interest. The
interest of the partners in this limited partnership are not
represented by certificates.
6. Notices; Waivers. Provisions for notices and for
waivers are contained in Paragraph 6 of Part C of Article VIII.
7. Overall Agreement. Certain provisions of Article XIV of
the Overall Agreement are by their terms applicable to this
Agreement and are to that extent incorporated in this Agreement.
-39-
<PAGE>
This Limited Partnership Agreement of Texas Flags, Ltd. is
executed and delivered as of the date first written above.
SIX FLAGS OVER TEXAS, INC., SIX FLAGS FUND II, LTD.
General Partner Limited Partner
By: Flags' Directors, L.L.C.,
General Partner
By: /s/
--------------------
Name:
Title:
By: /s/ Jack D. Knox
------------------------
Jack D. Knox, Manager
FD-II, L.L.C., Co-General Partner
By: /s/ Jack D. Knox
-----------------------
Jack D. Knox, Manager
-40-
<PAGE>
EXHIBIT A
FORM 8832, Department of the Treasury, Entity Classification
Election
-41-
The following is a list of the subsidiaries of Premier Parks
Inc.:
Aurora Campground, Inc., an Ohio corporation
Ohio Hotel LLC, a Delaware limited liability company
Funtime, Inc., an Ohio corporation
Funtime Parks, Inc., a Delaware corporation
Darien Lake & Camping Resort, Inc., a New York corporation
Wyandot Lake, Inc., an Ohio corporation
Tierco Maryland, Inc., a Delaware corporation
Tierco Water Park, Inc., an Oklahoma corporation
Frontier City Partners Limited Partnership, an Oklahoma limited
partnership
Frontier City Properties, Inc., an Oklahoma corporation
Great Escape Theme Park LLC, a New York limited liability company
Great Escape LLC, a New York limited liability company
Great Escape Holding Inc., a New York corporation
Elitch Gardens L.P., a Colorado limited partnership
Premier Parks of Colorado, Inc., a Colorado corporation
Premier Parks Operations, Inc., a Delaware corporation
Premier International Holdings Inc., a Delaware corporation
Premier Parks Holdings Inc., a Delaware corporation
Premier Parks Capital LLC, a Delaware limited liability company
Premier Waterworld Concord Inc., a California corporation
Premier Waterworld Sacramento Inc., a California corporation
Stuart Amusement Company, a Massachusetts corporation
Riverside Park Food Services, Inc., a Massachusetts corporation
Riverside Park Enterprises, Inc., a Massachusetts corporation
Park Management Corp., a California corporation
KKI, LLC, a Delaware limited liability company
SF Holdings, Inc., a Delaware corporation
SFT Holdings, Inc., a Delaware corporation
Six Flags Entertainment Corporation, a Delaware corporation
Six Flags Theme Parks Inc., a Delaware corporation
SFTP Inc., a Delaware corporation
San Antonio Theme Park, L.P., a Delaware limited partnership
SFTP San Antonio GP, Inc., a Delaware corporation
SFTP San Antonio, Inc., a Delaware corporation
SF Partnership, a Delaware general partnership
San Antonio Park GP, LLC, a Delaware limited liability company
S.F. Sponsorship Services, Inc., a Delaware corporation
Flags Beverages, Inc., a Texas corporation
Fiesta Texas Hospitality LLC, a Texas limited liability company
SFTP San Antonio II, Inc., a Delaware corporation
Fiesta Texas, Inc., a Delaware corporation
Six Flags Events L.P., a Delaware limited partnership
Six Flags Events Holdings Corp., a Delaware corporation
Six Flags Events Inc., a Texas corporation
G.P. Holdings, Inc., a Delaware corporation
SFOG II Employee, Inc., a Delaware corporation
SFOT Employee, Inc., a Delaware corporation
SFOT II Holdings, LLC, a Delaware limited liability company
Six Flags Over Texas, Inc., a Delaware corporation
Six Flags San Antonio, L.P. a Delaware limited partnership
SFOT Acquisition II, Inc., a Delaware corporation
SFOT Acquisition I, Inc., a Delaware corporation
SFOG II, Inc., a Delaware corporation
SFOG Acquisition B, LLC, a Delaware limited liability company
SFOG Acquisition A, Inc., a Delaware corporation
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Premier Parks Inc.:
We consent to incorporation by reference in the registration statement
(No. 333-56075) on Form S-3 and in the registration statement (No. 333-
59249) on Form S-8 of Premier Parks Inc. of our report dated March 22, 1999,
relating to the consolidated balance sheets of Premier Parks Inc. and
subsidiaries as of December 31, 1998 and 1997, 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, 1998, which report
appears in the December 31, 1998, annual report of Form 10-K of Premier Parks
Inc.
/s/ KPMG LLP
KPMG LLP
Oklahoma City, Oklahoma
March 30, 1999
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<FISCAL-YEAR-END> DEC-31-1998
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