-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BKA/eMzRzBy2ruIyhm4ia91P59xSENO4syzIAKkd4XyhysovDY7+8hfzd8UrftcW vYGoUX77EOXxLfEHEqa73w== 0000950112-96-000962.txt : 19960401 0000950112-96-000962.hdr.sgml : 19960401 ACCESSION NUMBER: 0000950112-96-000962 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960329 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PREMIER PARKS INC CENTRAL INDEX KEY: 0000701374 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 736137714 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-09789 FILM NUMBER: 96541104 BUSINESS ADDRESS: STREET 1: 11501 NE EXPWY CITY: OKLAHOMA CITY STATE: OK ZIP: 73131 BUSINESS PHONE: 4054782414 MAIL ADDRESS: STREET 1: 11501 NORTHEAST EXPWY CITY: OKLAHOMA CITY STATE: OK ZIP: 73131 FORMER COMPANY: FORMER CONFORMED NAME: TIERCO GROUP INC/DE/ DATE OF NAME CHANGE: 19920703 10-K 1 PREMIER PARKS 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, 1995 ----------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to ____________ Commission File Number: 0-9789 ------ Premier Parks Inc. -------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 73-6137714 - ---------------------------------------------- --------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 11501 Northeast Expressway Oklahoma City, Oklahoma 73131 - ---------------------------------------------- ------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (405) 475-2500 ---------------------- Securities registered pursuant to Sec. 12(b) of the Act: NONE Securities registered pursuant to Sec. 12(g) of the Act: Shares of common stock, par value $.01 per share ------------------------------------------------ (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes X No __ - Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in the definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] 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 $9.5 million as of March 12, 1996 (based on the average of the closing bid and asked quotations as reported on The Pink Sheets(R) and the OTC Bulletin Board). 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 15, 1996 was 24,287,772 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 1996, which will be filed by the Registrant within 120 days after the close of its 1995 fiscal year. -2- PART I ITEM 1. BUSINESS Introduction - ------------ The Company1 is a leading theme park operator which operates six parks with an aggregate 1995 attendance of approximately 4.1 million. The parks are located in five geographically diverse markets and are designed to provide a complete family-oriented entertainment experience. They feature 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. The Company operates six parks: Adventure World, a combination theme and water park located three miles off the Beltway, between Washington, D.C. (15 miles away) and Baltimore, Maryland (30 miles away); Frontier City, a western themed park in Oklahoma City, Oklahoma; White Water Bay, a tropical themed water park also located in Oklahoma City; Geauga Lake, a combination theme and water park near Cleveland, Ohio; Darien Lake & Camping Resort, a combination theme and water park with an adjacent camping resort and amphitheater, located between Buffalo and Rochester, New York; and Wyandot Lake, a water park, which also includes "dry" rides and other attractions, located adjacent to the Columbus Zoo in Columbus, Ohio. Geauga Lake, Darien Lake and Wyandot Lake were acquired by the Company in August 1995 by virtue of the Company's acquisition by merger (the "Merger") of all of the capital stock of Funtime Parks, Inc. ("Funtime"). For additional information concerning the Merger and the financing thereof, see "Item 7 -- Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity, Capital Commitments and Resources." The Company believes that significant opportunities exist to acquire additional parks and intends to actively pursue such opportunities. Adventure World - --------------- Overview. Adventure World is a combination theme and water park -------- located in Largo, Maryland, approximately 15 miles east of Washington, D.C. and 30 miles southwest of Baltimore, Maryland. The park's primary market includes Maryland, northern Virginia, Washington, D.C. and parts of Pennsylvania and Delaware. This market provides the park with a permanent resident population base of approximately 6.5 million people within 50 miles and 10.8 million people within 100 miles. According to a copyrighted 1994 study published by A.C. Nielsen Media Research (the "Nielsen Report"), which measures the number of persons in television households within a given geographic area or so-called -------------------- 1 As used in this Report, the terms "Company" or "Premier" includes Premier Parks Inc. and its consolidated subsidiaries, unless the context otherwise indicates. -3- designated market area ("DMA"), the Washington, D.C. and Baltimore markets are the number 7 and number 23 DMAs in the United States, respectively. This market also has a substantial base of businesses, associations, schools and churches for group sales and outings, as well as a large tourist market. The Company owns a site of 515 acres, with 115 acres currently used for park operations. During the 1995 season, Adventure World had 32 adult and 14 children's rides, 29 food outlets, 15 merchandise outlets, 38 game venues and 3 theaters. In addition, picnic grounds are available for family and group outings. Adventure World also offers a complete water park, including a large wave pool, water slides, a large activity pool, a "lazy river" ride and a children's play area. Adventure World's principal competitors are King's Dominion Park, located in Doswell, Virginia (near Richmond) ; Hershey Park, located in Hershey, Pennsylvania; and Busch Gardens, located in Williamsburg, Virginia. These parks are located approximately 120, 125 and 175 miles, respectively, from Adventure World. Background. Adventure World was originally developed in the 1970s as ---------- a drive-through wild life preserve. After 1980, the park was converted by prior ownership into a combination theme and water park, with an emphasis on the water park component. Prior to the Company's acquisition of Adventure World in early 1992, the theme park component lacked sufficient rides and attractions, as well as appropriate theming. Since acquiring the park, the Company has implemented new marketing, sales and promotional programs and expanded the attractions at the park, adding ten major new rides, an elaborately themed new children's area with 14 new rides and attractions and a major new western themed area, and also upgraded and expanded the picnic/festival grounds. Strategy. The Company's strategy is to continue its capital -------- investment and marketing programs at Adventure World in order to further penetrate the densely populated Washington, D.C./Baltimore market and to achieve further growth in attendance and per capita spending. The Company anticipates making capital expenditures at Adventure World of approximately $4.0 million prior to the 1996 season to fund the development of additional rides, attractions and revenue locations, as well as general park improvements. Frontier City - ------------- Overview. Frontier City is a western theme park located along -------- Interstate 35 in northeast Oklahoma City, Oklahoma, approximately 100 miles from Tulsa. The park's market includes nearly all of Oklahoma and certain parts of Texas and Kansas, with its primary market being in Oklahoma City and Tulsa. This market provides the park with a permanent resident population base of approximately 1.2 million people within 50 miles of the park and 2.4 million people within 100 miles. According to the Nielsen Report, the Oklahoma City and Tulsa markets are the number 43 and number 59 DMAs in the United -4- States, respectively. This market also has a substantial base of businesses, associations, schools and churches for group sales and outings. The Company owns a site of approximately 90 acres, with 60 acres currently used for park operations. During the 1995 season, Frontier City had 20 adult and 10 children's rides, 26 food outlets, 21 merchandise outlets, 33 game venues and four theaters. In addition, the Company professionally produces eight live shows daily, such as country music shows, a 50's musical revue and a magic show, and holds a concert series each summer. In addition, Fort Frontier, a 12,000 square foot air-conditioned mall and main event center, contains numerous food and retail locations, an entertainment center and a 500-seat western opera house. In the off-season, the center serves as a banquet facility, accommodating groups of up to 1,500 people. Picnic grounds are also available for family picnics and group outings. Frontier City's only significant competitor is Six Flags Over Texas located in Arlington, Texas, approximately 225 miles from Frontier City. Background. Frontier City opened in 1958 as a replica of an 1880s ---------- western town and was acquired by the Company in 1982. The Company began redeveloping the park after the 1989 season with a two-year capital program to reposition and revitalize the park. In addition to extensive western theming and landscaping and general upgrading of the physical plant, capital improvements included the addition of three major rides, the expansion and improvement of the O.K. Kiddie Corral children's area (including the addition of three children's rides), the expansion and theming of the group picnic facilities and the addition of Fort Frontier. The Company has continued to add rides and attractions to Frontier City through the 1995 season. Strategy. Management believes that as a result of its capital -------- improvement program to date, Frontier City has reached an appropriate level of attractions for its market size. As a result, with maintenance-level capital expenditures and additions of new marketable attractions every two or three years, the Company believes that the park should be able to achieve moderate attendance growth, to gradually increase ticket prices and to increase in-park spending, as well as to improve operating margins as revenue increases. Because of the parks' geographic proximity, the Company seeks to take advantage of operational efficiencies and other tie-in benefits at Frontier City and White Water Bay. For example, prior to the 1995 season the Company introduced an enhanced joint marketing program for Frontier City and White Water Bay, including a revised season pass program which offers unlimited use of both facilities for a single price. White Water Bay - --------------- Overview. White Water Bay is a tropical themed water park located -------- along Interstate 40 in southwest Oklahoma City, Oklahoma. The park's primary market includes the greater Oklahoma City metropolitan area. According to the Nielsen Report, Oklahoma City is the number 43 DMA in the United States. This market provides the park with a permanent resident population base of approximately 1.2 million people within 50 miles of the park and -5- 2.4 million people within 100 miles. White Water Bay also attracts group sales from groups such as churches and other civic organizations. The Company owns a site of 22 acres, all of which are currently used for park operations. During the 1995 season, White Water Bay featured a 500,000 gallon wave pool, an eight story multiple slide ride, a 450,000 gallon activity pool, nine slides, a "lazy river" ride, a children's activity pool and four volleyball courts. White Water Bay also has a full service restaurant and two snack stands. Raft and locker rentals are also available. In addition, the park has picnic grounds for family and group outings. There are no other water parks located in Oklahoma City and, therefore, the Company's primary competition is from other outdoor water activities, such as local swimming pools. Background. White Water Bay was originally opened in 1981 and was ---------- acquired by the Company in 1991. Strategy. Stand-alone water parks are by their nature less capital -------- intensive than theme parks. As a result of the capital expenditures made in recent years, management expects that White Water Bay will require minimal ongoing capital expenditures and additions of new attractions only every three or four years. In addition, the Company plans to continue to develop special events at the park, such as youth dances. In addition, White Water Bay expects to continue to benefit from the joint marketing initiatives with Frontier City described above. Geauga Lake - ----------- Overview. Geauga Lake is a combination theme and water park, and is -------- the 44th largest theme park in the United States based on 1994 attendance of 1.1 million. Geauga Lake is located in Aurora, Ohio, 20 miles southeast of Cleveland and approximately 30, 60 and 120 miles, respectively, from Akron and Youngstown, Ohio and Pittsburgh, Pennsylvania. This market provides the park with a permanent resident population base of approximately 4.0 million people within 50 miles of the park and 7.4 million within 100 miles. According to the Nielsen Report, the Cleveland/Akron, Youngstown and Pittsburgh markets are the number 13, number 94 and number 17 DMAs in the United States, respectively. The 257-acre property on which Geauga Lake is situated includes a 55-acre spring-fed lake. The theme park presently occupies approximately 116 acres. There are approximately 87 acres of undeveloped land (of which approximately 30 acres have the potential for further development). During the 1995 season, Geauga Lake featured over 60 "wet" and "dry" attractions, a tidal wave pool, 38 game venues, 13 restaurants, 16 picnic pavilions, 25 merchandise outlets, three theatres and two arcades. Rainbow Island, the park's "dry" area for young children, featured 16 children's rides. Turtle Beach, a 1.4-acre water activity area designed exclusively for children ages two through twelve, is located adjacent to Rainbow Island. -6- Geauga Lake's principal competitors are Cedar Point located in Sandusky, Ohio and Kennywood, located in Pittsburgh, Pennsylvania. These parks are located approximately 90 miles and 120 miles, respectively, from Geauga Lake. There are also three small water parks within a 50-mile radius of Geauga Lake and Sea World, a marine park, is on the other side of Geauga Lake. While Sea World does, to some extent, compete with Geauga Lake for patrons, it is a complementary attraction, and many patrons visit both facilities. Background. Geauga Lake has been in continuous operation for over ---------- 100 years. The park was one of the first theme parks in the United States to introduce a complete water entertainment complex within a traditional theme park at no additional charge to visitors. The Company believes that this park, like the other parks acquired in the Merger, suffered under prior ownership from a lack of capital investment in marketable rides and attractions and creative marketing, which provides a significant opportunity for improved performance under the Company's management. Strategy. The Company plans to add marketable new rides and -------- attractions, improve the quality of the park's daily live shows, upgrade the quality of the merchandise outlets and restaurants, improve the park's theming, signage and landscaping, and implement more professional and creative marketing programs, with an emphasis on the park's improved product offerings. Of its capital expenditure budget for 1996, the Company anticipates spending approximately $7.5 million on Geauga Lake to fund the development of additional rides, attractions and revenue locations as well as general park improvements. In anticipation of these improvements, the Company intends to increase its marketing and sales activities for the 1996 season. Darien Lake & Camping Resort - ---------------------------- Overview. Darien Lake is a combination theme and water park, and is -------- the largest theme park in the State of New York and the 45th largest theme park in the United States based on 1994 attendance of 1.0 million. Darien Lake is located on Interstate 90 in Darien Center, New York approximately 30, 120 and 40 miles, from Buffalo, Syracuse and Rochester, New York, respectively. The park's primary market includes upstate New York, western and northern Pennsylvania and southern Ontario, Canada. This market provides the park with a permanent resident population base of approximately 2.2 million people within 50 miles of the park and 3.1 million with 100 miles. According to the Nielsen Report, the Buffalo, Syracuse and Rochester markets are the number 41, number 66 and number 71 DMAs in the United States, respectively. The Darien Lake property consists of approximately 1,000 acres, including 144 acres for the theme park, 242 acres of campgrounds, and 593 acres of agricultural, undeveloped and water areas. During the 1995 season, Darien Lake had 25 "wet" rides, 18 "dry" rides, 11 children's rides, 40 game venues, three restaurants, eight picnic pavilions, 19 merchandise outlets and five arcades. For the 1995 season, a total of 10 concerts were booked in Darien Lake's 20,000-person capacity Performing Arts Center. -7- Adjacent to the Darien Lake theme park is a camping resort owned and operated by the Company with 1,180 developed campsites, including 330 recreational vehicles available for daily and weekly rental. In addition, there are 500 other campsites available for tenting. Darien Lake is one of the few theme parks in the United States which offers a first class campground adjacent to the park. The campground is the fifth largest in the United States. Since admission to the campgrounds requires visitors to also purchase admission tickets to the theme and water park, the Company believes that substantially all of the camping visitors use the theme park. Darien Lake's principal competitor is Wonderland Park located in Toronto, Canada, approximately 125 miles from Darien Lake. In addition, Darien Lake competes to a lesser degree with three smaller amusement parks located within 50 miles of the park. Darien Lake is significantly larger with a more diverse complement of entertainment than any of these three smaller facilities. Unlike Darien Lake, none of these parks have camping facilities or large concert venues. Background. Darien Lake was opened in 1964. The Company believes ---------- that under prior ownership the park suffered from a lack of capital investment in marketable rides and attractions and creative marketing, which provides a significant opportunity for improved performance under the Company's management. Strategy. The Company plans to add marketable new rides and -------- attractions, improve the quality of the park's daily live shows, upgrade the quality of the merchandise outlets and restaurants, improve the park's theming, signage and landscaping, and implement more professional and creative marketing, sales and promotional programs which emphasize the park's improved product offerings. Of its capital expenditure budget for 1996, the Company anticipates spending approximately $7.5 million on Darien Lake to fund the development of additional rides, attractions and revenue locations as well as general park and campground improvements. Further, the Company believes there is significant potential to increase cash flow by taking further advantage of the Performing Arts Center. To this end, following the 1995 season, the Company entered into a long-term arrangement with a national concert promoter pursuant to which the promoter will fund approximately $2.5 million of capital improvements at the Center prior to the 1996 season (including a new stage, improved restroom facilities and a roof over a substantial portion of the permanent seating area) and agreed to book at the Center at least 20 concerts per season featuring nationally recognized performers. Wyandot Lake - ------------ Overview. Wyandot Lake, which had 12 water rides in the 1995 season, -------- is the 12th largest water park in the United States based on 1994 attendance of approximately 362,000. During the 1995 season, the park also had 18 "dry" rides. Wyandot Lake is located just outside of Columbus, Ohio, adjacent to the Columbus Zoo on property sub-leased from the Columbus Zoo. The park's primary market includes the Columbus metropolitan area and other central Ohio towns. This market provides the park with a permanent resident population base of approximately 2.0 million people within 50 miles of the park and -8- approximately 6.4 million people within 100 miles. The Columbus market, according to the Nielsen Report, is the number 35 DMA 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 lease expires in 1998 and the Company has two five-year renewal options. The land leased by Wyandot Lake consists of approximately 18 acres. The park shares parking facilities with the Columbus Zoo. Wyandot Lake features a variety of "wet" and "dry" attractions, including a "wet" and "dry" area for young children which includes mini-boats, a Tadpool kids area, geysers, aquatic play unit for kids, a children's ferris wheel and treehouse playground. Wyandot Lake's direct competitors are King's Island and The Beach, each located in Cincinnati, Ohio, and Cedar Point, located in Sandusky, Ohio. These three parks are each located approximately 100 miles from Wyandot Lake. Although the Columbus Zoo is located adjacent to the park, it is a complementary attraction, and many patrons visit both facilities. Background. Wyandot Lake has been in operation since 1981. The ---------- Company believes that under prior ownership the park suffered from a lack of capital investment in marketable rides and attractions and creative marketing, which provides a significant opportunity for improved performance under the Company's management. Strategy. The Company anticipates spending approximately $2.0 -------- million on Wyandot Lake, primarily to expand the water park area and add a significant, family-oriented water attraction. The Company will implement aggressive marketing and sales activities for the 1996 season to highlight these park upgrades. The Company also expects Wyandot Lake to benefit from the $75 million planned expansion of the Columbus Zoo located adjacent to the park. Marketing and Promotion - ----------------------- The Company attracts visitors through multi-media marketing and promotional programs for each of its parks. These programs are tailored to address the different characteristics of their respective markets and to maximize the impact of specific park attractions and introductions. All marketing and promotional programs are updated or completely revamped each year to address new developments. During the three years ended December 31, 1995, the Company incurred advertising expense of approximately $2.8 million, $3.7 million and $5.7 million (including approximately $1.5 million expended by Funtime after the August 15, 1995 Merger), respectively. The Company believes that the local orientation of its marketing programs is a key ingredient to successfully promoting its parks. For example, Cal Ripken, Jr., the all-star shortstop for the Baltimore Orioles, serves as official spokesperson for Adventure World, making numerous appearances in radio and television commercials. The Company also develops partnership relationships with well-known national and regional -9- sponsors to supplement its advertising efforts and to provide attendance incentives in the form of discounts and/or premiums. Group sales and pre-sold tickets provide the Company with a consistent and stable base of attendance, representing over 40% of aggregate attendance in 1995. 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. 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. Management believes that incremental attendance and in-park spending generated from discount sales activities has a positive effect on operating results. The Company also implements promotional programs as a means of targeting specific market segments 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 and sponsorship marketing. The special promotional offers are usually for a limited period of time and offer a reduced admission price or provide some additional incentive to purchase a ticket. Park Operations - --------------- The Company is headquartered in Oklahoma City, Oklahoma and New York, New York and operates in five geographically diverse markets: Washington, D.C./Baltimore, Maryland; Buffalo/ Rochester, New York; Cleveland, Ohio; Columbus, Ohio; and Oklahoma City, Oklahoma. Each park is managed by a general manager who reports to the Company's Chief Operating Officer and is responsible for all operations and management of the park. Advertising, ticket sales, community relations and hiring and training of personnel are the responsibility of individual park management in coordination with corporate support teams. The Company has systems and controls in place for the daily tracking and monitoring of revenues and expenses associated with ticket sales and in-park spending. Each of the Company's parks is managed by a full-time, on-site management team under the direction of the general manager. Each such management team includes senior personnel responsible for operations and maintenance, marketing and promotion, human -10- resources and merchandising. Park management compensation structures are designed to provide incentives for individual park managers to execute the Company's strategy and to maximize revenues and profits at each park. The Company maintains a trained security force to administer the parks' crowd control policies and guest screening procedures and to enforce the parks' rules relating to behavior of guests in the parks. The specific policies and practices of the security forces are dictated on a park-by-park basis by crowd composition and operating experience. The Company's parks are generally open daily from Memorial Day through Labor Day. In addition, five of the parks are open during weekends both prior to and following their daily seasons, primarily as a site for special events, such as concerts, live entertainment and theme events (such as Hallowscream and Oktoberfest). Typically, the parks charge a basic daily admission price, which allows unlimited use of all rides and attractions, although in certain cases special rides and attractions require the payment of an additional fee. Competition - ----------- The Company's theme parks compete directly with other theme parks and amusement parks and indirectly with all other types of recreational facilities and forms of entertainment within their market areas, including movies, sports attractions and vacation travel. Accordingly, the Company's business is and will continue to be subject to factors affecting the recreation and leisure time industries generally, such as general economic conditions and changes in discretionary consumer spending habits. Within each park's regional market area, the principal factors affecting competition include location, price, the uniqueness and perceived quality of the rides and attractions in a particular park, the atmosphere and cleanliness of a park and the quality of its food and entertainment. 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. Certain of the Company's direct competitors have substantially greater financial resources than the Company. Capital Improvements - -------------------- The Company makes capital investments each year in the development and implementation of new rides and attractions. The Company believes that the introduction of new rides is an important factor in promoting each of the parks and in encouraging longer visits, which lead to increased sales of food and merchandise. Capital expenditures are planned on a seasonal basis with most expenditures made during the off-season. The Company expects to spend approximately $23.5 million for park and other improvements for the 1996 season, including the expansion of rides and attractions. These improvements will be funded from a portion of the proceeds of the Company's 1995 senior note and preferred stock issuances. See "Item 7 -- Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity, Capital Commitments and Resources." -11- Seasonality - ----------- The operations of the Company are highly seasonal, with at least 80-85% of park attendance occurring in the second and third calendar quarters and the most active period falling between Memorial Day and Labor Day. The great majority of the Company's revenues are collected in the second and third quarters of each year while most expenditures for capital improvements and significant maintenance are incurred when the parks are closed in the first and fourth quarters of each year. Government Regulation - --------------------- Operations at the parks are subject to certain local, state and federal governmental regulations including, without limitation, labor, health, safety and minimum wage regulations applicable to theme park operations, and local and state regulations applicable to restaurant operations at the park. The Company believes that it is in substantial compliance with applicable regulatory standards and, although no assurance can be given, it does not foresee the need for any significant expenditures in this area in the near future. Environmental Regulation - ------------------------ The Company's operations are subject to increasingly stringent federal, state and local environmental laws and regulations governing water discharges, air emissions, soil contamination, the maintenance of underground storage tanks and the disposal of waste and hazardous materials. The Company believes that it is in substantial compliance with all such laws and regulations. At Geauga Lake, the Company is conducting groundwater monitoring around a former on-site landfill under the supervision of the Ohio Environmental Protection Agency. The Company is awaiting administrative action on its request for curtailment of the scope and duration of this monitoring, based on the sampling results to date. The Company does not currently anticipate that it will be required to expend any material amounts in connection with the monitoring program or any other post-closure activities. Employees - --------- The Company employs approximately 200 full-time employees and approximately 4,600 seasonal employees during the operating season. In this regard, the Company competes with other local employers for qualified student and other candidates on a season-by-season basis. As part of the seasonal employment program, the Company employs a significant number of teenagers, which subjects the Company to child labor laws. None of the employees of the Company are represented by a union or other collective bargaining unit. The Company has not experienced any strikes or work stoppages by its employees, and the Company considers its employee relations to be good. -12- Other Assets of the Company - --------------------------- 229 East 79th Street Associates L.P. The Company holds a 40% general ------------------------------------ partnership interest in 229 East 79th Street Associates L.P., a limited partnership organized to own, operate and convert to cooperative ownership an 89-unit, prewar apartment building located in New York City. The partnership's operations are controlled by a managing general partner who is not affiliated with the Company. At December 31, 1995, the amount outstanding under the limited partnership's mortgage loan was $673,386, of which the Company has guaranteed 40%, approximately $270,000. However, if, at the time of any default by the partnership on the loan, the lender is paid any amounts then past due on the loan and certain other incidental amounts, the Company will be relieved of its obligation under its guaranty. During 1995, 1994 and 1993, the Company advanced $63,000, $83,200 and $113,520, respectively, to the partnership to fund the Company's 40% proportionate share of the partnership's deficit. As of December 31, 1995, 64 of the building's 89 units had been sold. The Company anticipates that a maximum of $60,000 of advances by it will be required in 1996 in order to meet its share of the partnership's debt service requirements while the sales process continues. -13- Executive Officers of the Registrant - ------------------------------------ Age as of Name March 1, 1996 Position ---- ------------- -------- Kieran E. Burke (38) 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 (40) 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 (43) Chief Financial Officer since October 1, 1995; Director since October 1992; Managing Director of Lepercq de Neuflize & Co. Incorporated for more than five years. Richard A. Kipf (61) Secretary/Treasurer since 1975; Vice President since June 1994 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 1996. ITEM 2. PROPERTIES Set forth below is a brief description of the Company's real estate at March 1, 1996: White Water Bay, Oklahoma City, Oklahoma -- 22 acres (fee ownership interest) Adventure World, Largo, Maryland -- 515 acres (fee ownership interest) Frontier City, Oklahoma City, Oklahoma -- 90 acres (fee ownership interest) Geauga Lake, Aurora, Ohio -- 258 acres (fee ownership interest) Darien Lake, Darien Center, New York -- 979 acres (fee ownership interest) Wyandot Lake, Columbus, Ohio -- 18 acres (leasehold interest)(1) In addition to the foregoing, at March 1, 1996, the Company indirectly owned real estate through its general partnership interest in 229 East 79th Street Associates L.P. - -------------------- (1) Site is subleased from the Columbus Zoo. The lease expires in 1998 and the Company has two-five year renewal options. Acreage for this site does not include approximately 30 acres of parking which is shared with Columbus Zoo. -14- The Company leases office space in New York City for which it paid approximately $136,000 in rental payments during 1995, of which Windcrest Partners, an affiliate of the Company, paid 50%. The Company also leases certain of the rides and attractions at its parks. See Notes 6 and 12 to Notes to Consolidated Financial Statements. The Company considers its properties to be well-maintained, in good condition and adequate for their present uses and business requirements. ITEM 3. LEGAL PROCEEDINGS The nature of the industry in which the Company operates tends to expose it to claims by visitors for injuries. Historically, the great majority of these claims have been minor. While the Company believes that it is adequately insured against the claims currently pending against it and any potential liability, if the number of such events resulting in liability significantly increased, or if the Company becomes subject to damages that cannot by law be insured against, such as punitive damages, there may be a material adverse effect on its operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. -15- PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS During the second quarter of 1994, The Pink Sheets(R) and the OTC Bulletin Board commenced reporting of trading in the Company's common stock under the symbol PARK. Prior to that time, the Company had been unable to obtain any reliable price quotations for its common stock since October 1989. Set forth below are the high and low bid quotations for the common stock as reported on The Pink Sheets and the OTC Bulletin Board for the periods indicated. These quotations reflect inter-dealer prices, without mark-up, mark-down or commission and may not necessarily represent actual transactions. The Company believes that the trading market for its common stock is highly illiquid and that the following pricing information should not be deemed to indicate that an established trading market exists therefor. Year Quarter High Low ---- ------- ---- --- 1996 First (through $2 5/8 $2 March 12, 1996) 1995 Fourth 2 3/4 1 5/8 Third 3 1/2 7/8 Second 1 5/16 3/8 First 1 1/8 1/2 1994 Fourth 1 3/4 Third 1 1/2 Second 3/4 1/2 As of March 1, 1996, there were 862 holders of record of the Company's common stock. The Company paid no dividends during the three years ended December 31, 1995. The Company does not anticipate paying any cash dividends during the foreseeable future. The Company's loan agreements prohibit the payment of cash dividends to its stockholders. -16- ITEM 6. SELECTED FINANCIAL DATA (In thousands, except per share data) ----------------------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- Revenue $41,496 $24,899 $21,860 $17,432 $10,774 Depreciation and amortization 3,866 1,997 1,537 1,442 1,107 Interest expense, net 5,578 2,299 1,438 1,413 858 Provision for income tax expense (benefit) (762) 68 91 427 -- Income (loss) from continuing operations (1,045) 102 1,354 (1,735) (118) Income (loss) from discontinued operations -- -- -- (2,252) (9,308) Extraordinary gain (loss), net of tax effect (140) -- -- 18,350 -- Cumulative effect of accounting change -- -- -- 2,298 -- Net Income (loss) (1,185) 102 1,354 16,661 (9,426) Per Share: Income (loss) from continuing operations (.08) .01 0.10 (0.42) (0.05) Income (loss) from discontinued operations -- -- -- (0.54) (4.09) Extraordinary gain (loss), net of tax effect (.01) -- -- 4.43 -- Cumulative effect of accounting change -- -- -- 0.56 -- Net Income (loss) (.09) .01 0.10 4.03 (4.14) Cash Dividends -- -- -- -- -- Net cash provided by operating activities 10,646 1,060 2,699 1,980 1,924 Net cash used in investing activities (74,139) (10,177) (7,698) (5,649) (6,841) Net cash provided by financing activities 90,914 7,457 2,106 8,736 5,175 Total assets 173,318 45,539 36,707 30,615 74,556 Long-term debt and capitalized lease obligations(1) $94,278 $24,108 $20,820 $15,627 $74,913 - -------------------- (1) Includes current portion. -17- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General - ------- The Company's revenue is derived principally from the sale of tickets for entrance to its parks (approximately 53% and 56% in 1995 and 1994, respectively) and the sale of food, merchandise, games and attractions inside its parks (approximately 47% and 44% in 1995 and 1994, respectively). The Company's principal costs of operations include salaries and wages, fringe benefits, advertising, outside services, maintenance, utilities and insurance. The Company's expenses are relatively fixed. Costs for 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. An important element of the Company's business strategy is the ongoing expansion of its rides and attractions and overall improvement of its parks, which management believes has contributed to increased attendance as well as increased length of stay and in-park spending. The Company intends to continue to make significant capital expenditures in order to maintain and enhance the appeal of its parks, which it expects will, in turn, increase attendance and profitability. Results of Operations - --------------------- Years Ended December 31, 1995 and 1994 - -------------------------------------- Revenue. Revenue aggregated $41.5 million in 1995, a 66.7% increase ------- over 1994 revenue of $24.9 million. A large portion of the increase ($13.5 million) resulted from the Merger on August 15, 1995. These results include the income from the acquired parks from and after that date. The 1995 results of the Company without consideration of the Merger provided an increase of 12.5% from $24.9 million in 1994 to $28.0 million in 1995. This increase in revenue is primarily attributable to the increased attendance of 14.3% from 1.4 million in 1994 to 1.6 million in 1995 at the three theme parks owned by the Company prior to the Merger. Operating Expenses. Operating expenses increased approximately $7.4 ------------------ million, or 60%, in 1995 over 1994 levels. A large portion of the increase ($6.9 million) is a result of the Merger. The 1995 results of the Company without consideration of the Merger provided an increase of 3.2% in operating expenses from $12.4 million in 1994 to $12.8 million in 1995. As a percentage of revenue, operating expenses constituted approximately 47.7% in 1995 and approximately 49.6% in 1994. Without consideration of the Merger, operating expenses constituted approximately 45.7% of revenue in 1995. Selling, General and Administrative. Selling, general and ----------------------------------- administrative expenses increased from approximately $5.5 million in 1994 to approximately $9.3 million in 1995. A large portion of the increase ($2.6 million) is a result of the Merger. The Company's selling, general and administrative expenses without consideration of the Merger increased 21.8% from $5.5 million in 1994 to $6.7 million in 1995 primarily due to a 20.3% increase in marketing and advertising expenses. Most of the increase was incurred at Adventure World as part of the advertising campaign design to promote public awareness of the new Mind Eraser suspended, looping roller coaster, -18- and a lesser portion of this increase was incurred in connection with the promotion of the new combined season pass program at Frontier City and White Water Bay. Costs of Products sold. Costs of products sold increased from $2.6 ---------------------- million in 1994 to $4.6 million in 1995. A large portion of the increase ($1.7 million) is a result of the Merger. The Company's cost of products sold without consideration of the Merger increased 11.5% from $2.6 million in 1994 to $2.9 million in 1995. This increase is a direct result of increased in-park sales at the parks. Depreciation and Amortization. Depreciation and amortization ----------------------------- expense aggregated approximately $3.9 million in 1995 and approximately $2.0 million in 1994. This 95% increase resulted primarily from the Merger. The Company's depreciation and amortization without consideration of the Merger increased 25.0% from $2.0 million in 1994 to $2.5 million in 1995, reflecting the effect of the Company's additional capital improvements. Income Taxes. The Company had an income tax benefit in 1995 of ------------ $852,000, compared to an income tax expense of $68,000 in 1994. The Company's income tax benefit in 1995 was allocated to loss before income taxes ($762,000) and an extraordinary loss ($90,000) on extinguishment of debt. The effective income tax rate for 1995 was 42.2% as compared to approximately 40% in 1994. The Company anticipates an effective tax rate of between 40% and 42% in the future since the parks acquired in the Merger are located in higher tax jurisdictions than the Company's three previous parks and due to the non-deductibility of the amortization of the goodwill that resulted from the Merger. See Note 7 to Notes to the Consolidated Financial Statements. Years Ended December 31, 1994 and 1993 - -------------------------------------- Revenue. Revenue aggregated $24.9 million in 1994, a 13.9% increase ------- over 1993 revenue of $21.9 million, resulting from a 30.1% increase in revenue at Adventure World and a 3.8% increase in revenue at Frontier City, offset in part by a 7.0% decrease in revenue at White Water Bay. Attendance at Premier's three parks in 1994 increased approximately 6.5% compared to 1993 levels primarily as a result of a 19.2% increase at Adventure World based on Premier's substantial investment in new rides and attractions and increased marketing (including the engagement of Cal Ripken, Jr. as the park's official spokesperson). The increase in attendance in 1994 was augmented by a 1.8% increase in ticket revenue per customer and a 8.4% increase in per-customer in-park spending in that year. The increased ticket revenue resulted from increased prices and a reduction in discount levels. The increased in-park spending in 1994 was primarily attributable to higher price levels, additional food and other retail outlets at the parks in that year and longer in-park stays. Of the 1994 revenues, $417,000 represents the excess of insurance proceeds received by Premier over the net book value of assets destroyed, and repair costs of assets damaged, by high winds at one of Premier parks. See Note 11 to Notes to Consolidated Financial Statements. The Company believes that the storm and the resulting damage caused a substantial loss of attendance and revenue at the affected park. The Company estimates that the storm resulted in an attendance loss of at least 20,000 customers at the park. During 1994, revenue per visitor at the affected park was approximately $20.30. -19- Operating Expenses. Operating expenses increased approximately $2.0 ------------------ million, or 18.8%, in 1994 over 1993 levels. As a percentage of revenues, operating expenses constituted approximately 49.6% in 1994 and 47.6% in 1993. The increase in operating expenses during 1994 was primarily attributable to an approximate $805,000 increase (representing a 12% increase over 1993 levels) in salaries and other compensation benefits during that year, an approximate $406,000 (65%) increase in repair and maintenance expense and a $511,000 (42%) increase in operating supplies, equipment rentals and other expense. The increase in personnel cost reflected an increase primarily at Adventure World in the number of seasonal employees (11%) required to operate additional attractions as well as longer operating hours and, to a lesser extent, changes in hourly rates paid to lifeguards and other skilled employees (6%). Salary and other compensation benefits increased $613,000 at Adventure World in 1994. Repairs and maintenance increased due largely to a $288,000 increase at Adventure World arising out of the significant expansion of that park with the addition of 14 new rides and numerous other improvements during the two years preceding the 1994 season. Operating supplies, equipment rentals and other expenses increased due to additional "live" shows presented at the parks, additional equipment rentals, particularly at Adventure World, increases in utility costs due to the additional rides and attractions at the parks, and costs associated with the preparation of group sales brochures. Selling, General and Administrative. Selling, general and ----------------------------------- administrative expenses increased from $4.8 million in 1993 to $5.4 million in 1994. Selling, general and administrative expenses (as a percentage of revenues) constituted 21.8% in each of 1994 and 1993. The increase in these expenses in 1994 was almost exclusively the result of a 37% increase in sales and advertising expense. Of this increase $578,000 represented additional marketing and advertising expense at Adventure World, which was designed to increase public awareness of the significant capital improvements made at the parks. Costs of Products Sold. Costs of products sold aggregated ---------------------- approximately $2.6 million in 1994, as compared to the 1993 level of $2.1 million. Cost of products sold (as a percentage of in-park revenue) constituted approximately 23.3% and 23.8%, during 1994 and 1993, respectively. Depreciation and Amortization. Depreciation and amortization ----------------------------- expense aggregated $2.0 million in 1994 and $1.5 million in 1993. This 33.3% increase reflected the effect of Premier's additional capital improvements. Income Taxes. Premier's provision for income taxes represented ------------ approximately 40% of 1994 earnings before income taxes compared to 6.3% of 1993 earnings before income taxes. State and local taxes were the principal reason that Premier's effective tax rate was higher than the 34% federal corporate rate. See Note 7 to Notes to Consolidated Financial Statements. Liquidity, Capital Commitments and Resources - -------------------------------------------- The operations of the Company are highly seasonal, with the majority of the operating season occurring between Memorial Day and Labor Day. Most of the Company's revenue is collected in the second and third quarters of each year while most expenditures for capital improvements and major maintenance are incurred when the parks are closed. The Company employs a substantial number of seasonal employees who are compensated on an hourly basis. -20- An increase in the federal or any applicable state minimum wage rate would result in increased compensation expense for the Company. Prior to the 1993 season, the Company began implementing a long-range capital improvement program for its parks, spending approximately $7.7 million in 1993, $10.1 million in 1994 and $10.7 million in 1995. Also, Premier acquired certain rides and attractions through leases and borrowings of $2.7 million, $570,000 and $3.3 million in 1993, 1994 and 1995, respectively. During 1995, the Company generated approximately $10.6 million in net cash from operating activities. Additionally, financing activities provided approximately $90.9 million in net cash during that year, of which $90.0 million represented the proceeds of the Senior Note offering and $20 million represented the proceeds of 7% Convertible Preferred Stock offering which were consummated in connection with the Merger. These proceeds were offset in part by the Company's repayment of approximately $17.5 million of indebtedness. During 1995, the Company used $74.1 million in net cash in connection with investing activities, $63.3 million of which was employed in connection with the Merger and $10.7 million represented additions to buildings, rides and attractions at the Company's parks made in connection with its capital improvement program. As a result of these activities, the Company's property and equipment (after depreciation) at December 31, 1995 increased approximately $77.4 million over the amount at December 31, 1994, and cash and cash equivalents at December 31, 1995 increased $27.4 million as compared to the December 31, 1994 level. Liabilities at December 31, 1994 aggregated $127.4 million, representing a $100 million increase over December 31, 1994, most of which ($90 million) represented the Company's indebtedness under its Senior Notes. During 1994, the Company generated $1.0 million in net cash from operating activities. Additionally, financing activities provided approximately $7.5 million in net cash during that year, of which approximately $4.2 million represented the proceeds of a 1994 private placement of common stock and approximately $3.4 million represented net borrowings. During that year, the Company used $10.1 million in net cash in connection with investing activities, substantially all of which represented additions to buildings, rides and attractions at Premier's parks made in connection with its capital improvement program. The 1994 capital improvements were funded from cash generated from operations in 1993, and the proceeds of borrowings. As a result of these activities, the Company's property and equipment (after depreciation) at December 31, 1994 increased approximately $8.7 million over the amount at December 31, 1993, and cash and cash equivalents at 1994 year-end decreased $1.7 million as compared to the December 31, 1993 level. Liabilities at December 31, 1994 aggregated $27.4 million, representing a $3.9 million increase over December 31, 1993, substantially all of which represented increased borrowings in 1994. On August 15, 1995, the Company acquired Funtime in the Merger for approximately $60.0 million (excluding the post-closing adjustment of approximately $5.4 million paid in December 1995) and repaid in full its existing bank debt, $16.1 million. The Company funded these amounts from a portion of its simultaneous $90 million Senior Note offering and $20 million Convertible Preferred Stock offering. In addition, on that date, other indebtedness of the Company in the principal amount of $9.1 million was converted into common stock of the Company, and the Company entered into a three-year $20.0 million secured revolving credit -21- facility ("Senior Credit Facility"). The transactions described in this paragraph are collectively referred to below as the "Merger Transactions." At December 31, 1995, substantially all of the Company's indebtedness was represented by the Senior Notes, which require annual interest payments of $10.8 million. Except in the event of a change of control of the Company and certain other circumstances, no principal payment on the Senior Notes is due and payable until maturity, August 15, 2003. The annual dividend requirements on the Convertible Preferred Stock is $1.4 million, payable at the election of the Company in cash or additional shares of such stock. The Senior Credit Facility prohibits payment of cash dividends by the Company. Borrowings under the Senior Credit Facility are secured by substantially all of the Company's assets (other than real estate), including the capital stock of its subsidiaries. The Senior Credit Facility has an aggregate availability of $20.0 million, none of which had been borrowed as of March 15, 1996. Interest rates per annum thereunder are equal to Chemical Bank's Alternative Base Rate plus 0.25% or the London Interbank Offering Rate plus 3.00%. The Senior Credit Facility matures August 15, 1998. Under the Senior Credit Facility, the Company is required to repay in full the principal balance for at least 45 consecutive days during the period from July 1 to November 1 of each year. The Senior Credit Facility contains restrictive covenants that, among other things, limit the ability of the Company and its subsidiaries to dispose of assets; incur additional indebtedness or liens; pay dividends; repurchase stock; make investments; engage in mergers or consolidations; and engage in certain transactions with subsidiaries and affiliates. In addition, the Senior Credit Facility requires that the Company comply with certain specified financial ratios and tests, including cash interest expense coverage, a minimum net worth requirement and a maximum capital expenditure requirement. The Merger Transactions generated approximately $29.9 million of excess net proceeds (excluding amounts deposited in escrow or retained by the Company to fund specified Funtime liabilities under the Merger agreement). The Company expects that the excess net proceeds from the Merger Transactions, internally generated funds from 1995 and 1996 operations and borrowings under its $20.0 million Senior Credit Facility will be the Company's primary sources of liquidity, including its capital expenditure program prior to the 1996 season. The Company believes that the funds available from its sources of liquidity will be adequate to cover its currently anticipated working capital and debt service requirements. Newly Issued Accounting Standards - --------------------------------- The Financial Accounting Standards Board has issued SFAS No. 123, "Accounting for Stock-Based Compensation" ("Statement No. 123"), which establishes a fair value based method of accounting for stock-based compensation plans. Entities are encouraged to adopt all provisions of Statement No. 123 but are required only to comply with the disclosure requirements of Statement No. 123. Statement No. 123 is effective for financial statements for fiscal years beginning after December 15, 1995. The provisions of Statement No. 123 will not have a material effect on the consolidated financial condition or operating results of the Company, as the Company does not intend to adopt the optional value based measurement concept related to stock-based compensation contained in Statement No. 123. The Financial Accounting Standards Board has also issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" -22- ("Statement No. 121"). Statement No. 121 requires that long-lived assets and certain intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company periodically reevaluates the carrying amounts of its long-lived assets and the related depreciation and amortization periods as discussed in the notes to the Company's Consolidated Financial Statements, and the Company believes that the adoption of Statement No. 121 will not have a material effect on its consolidated financial statements. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and schedules listed in Item 14(a)(1) and (2) are included in this Report beginning on page F-1. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 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 1996. (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 1996. 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 1996. (c) Changes in Control None. -23- 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 1996. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a)(1) and (2) Financial Statements and Financial Statement Schedules The following consolidated financial statements of the Premier Park 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 Auditor's Report F-2 Consolidated Balance Sheets - December 31, 1995 and 1994 F-3 Consolidated Statements of Operations Years ended F-5 December 31, 1995, 1994 and 1993 Consolidated Statements of Stockholders' Equity F-6 Years ended December 31, 1995, 1994 and 1993 Consolidated Statements of Cash Flows F-7 Years ended December 31, 1995, 1994 and 1993 Notes to Consolidated Financial Statements F-9 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. -24- PREMIER PARKS INC. Index to Consolidated Financial Statements Page Independent Auditors' Report .......................................... F-2 Consolidated Balance Sheets - December 31, 1995 and 1994 .............. F-3 Consolidated Statements of Operations - Years ended December 31, 1995, 1994 and 1993 ................................................ F-5 Consolidated Statements of Stockholders' Equity - Years ended December 31, 1995, 1994 and 1993 ................................... F-6 Consolidated Statements of Cash Flows - Years ended December 31, 1995, 1994 and 1993 ................................... F-7 Notes to Consolidated Financial Statements ............................ F-9 F-1 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders Premier Parks Inc.: We have audited the consolidated financial statements of Premier Parks Inc. and subsidiaries as listed in the accompanying index. 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, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995, in conformity with generally accepted accounting principles. /s/ KPMG Peat Marwick LLP KPMG Peat Marwick LLP Oklahoma City, Oklahoma February 29, 1996 F-2 PREMIER PARKS INC. Consolidated Balance Sheets December 31, 1995 and 1994 Assets 1995 1994 ------ ---- ---- Current assets: Cash and cash equivalents $ 28,787,000 1,366,000 Accounts receivable 965,000 870,000 Inventories 2,904,000 1,018,000 Prepaid expenses 2,352,000 765,000 ----------- ----------- Total current assets 35,008,000 4,019,000 ----------- ----------- Other assets: Investment in and advances to a partnership, at equity 1,118,000 1,124,000 Deferred charges 4,839,000 428,000 Deposits and other 3,111,000 1,396,000 ----------- ----------- Total other assets 9,068,000 2,948,000 ----------- ----------- Property and equipment, at cost 125,906,000 44,842,000 Less accumulated depreciation 9,905,000 6,270,000 ----------- ----------- 116,001,000 38,572,000 Intangible assets 13,471,000 - Less accumulated amortization 230,000 - ----------- ----------- 13,241,000 - Total assets $ 173,318,000 45,539,000 =========== =========== See accompanying notes to consolidated financial statements. F-3 Liabilities and Stockholders' Equity 1995 1994 ------------------------------------ ---- ---- Current liabilities Accounts payable and accrued expenses $ 6,361,000 1,281,000 Accrued interest payable 4,158,000 102,000 Current portion of long-term debt - unrelated parties 56,000 1,239,000 Current portion of long-term debt - related parties - 200,000 Current portion of capitalized lease obligations 1,009,000 453,000 ----------- ----------- Total current liabilities 11,584,000 3,275,000 ----------- ----------- Long-term debt and capitalized lease obligations: Capitalized lease obligations 3,213,000 1,420,000 Long-term debt - unrelated parties: Senior subordinated notes - 1,240,000 Senior notes 90,000,000 11,901,000 Long-term debt - related parties: Senior subordinated notes - 5,760,000 Junior subordinated loan - 1,895,000 ------------ ----------- Total long-term debt and capitalized lease obligations 93,213,000 22,216,000 Other long-term liabilities 3,465,000 - Deferred income taxes 19,145,000 1,914,000 ----------- ----------- Total liabilities 127,407,000 27,405,000 ----------- ----------- Stockholders' equity: Preferred stock, 500,000 shares authorized at December 31, 1995 and 1994; 200,000 shares Series A, 7% cumulative convertible, $1 par value ($100 redemption value) issued and outstanding at December 31, 1995, and no shares issued and outstanding at December 31, 1994 200,000 - Common stock, $.01 par value, 45,000,000 shares authorized at December 31, 1995 and 1994, respectively; 24,419,500 and 16,992,335 shares issued and 24,287,772 and 16,860,607 shares outstanding as of December 31, 1995 and 1994, respectively 244,000 170,000 Capital in excess of par value 79,261,000 50,573,000 Accumulated deficit (33,105,000) (31,920,000) ----------- ----------- 46,600,000 18,823,000 Less 131,728 common shares of treasury stock, at cost 689,000 689,000 ----------- ----------- Total stockholders' equity 45,911,000 18,134,000 ----------- ----------- Total liabilities and stockholders' equity $ 173,318,000 45,539,000 =========== =========== F-4 PREMIER PARKS INC. Consolidated Statements of Operations Years ended December 31, 1995, 1994 and 1993 1995 1994 1993 ---- ---- ---- Revenue: Theme park admissions $ 21,863,000 13,936,000 12,874,000 Theme park food, merchandise, and other 19,633,000 10,963,000 8,986,000 ---------- ---------- ---------- Total revenue 41,496,000 24,899,000 21,860,000 ---------- ---------- ---------- Operating costs and expenses: Operating expenses 19,775,000 12,358,000 10,401,000 Selling, general and administrative 9,272,000 5,448,000 4,768,000 Costs of products sold 4,635,000 2,553,000 2,135,000 Depreciation and amortization 3,866,000 1,997,000 1,537,000 ---------- ---------- ---------- Total operating costs and expenses 37,548,000 22,356,000 18,841,000 ---------- ---------- ---------- Income from operations 3,948,000 2,543,000 3,019,000 Other income (expense): Interest expense, net (5,578,000) (2,299,000) (1,438,000) Equity in loss of partnership (69,000) (83,000) (142,000) Other income (expense) (108,000) 9,000 6,000 ---------- ---------- ---------- (5,755,000) (2,373,000) (1,574,000) ---------- ---------- ---------- Income (loss) before income taxes (1,807,000) 170,000 1,445,000 Income tax expense (benefit) (762,000) 68,000 91,000 ---------- ---------- ---------- Income (loss) before extraordinary loss (1,045,000) 102,000 1,354,000 Extraordinary loss on extinguishment of debt, net of income tax benefit of $90,000 (140,000) - - ---------- ---------- ---------- Net income (loss) $ (1,185,000) 102,000 1,354,000 ========== ========== ========== Net income (loss) applicable to common stock $ (1,714,000) 102,000 1,354,000 ========== ========== ========== Weighted average number of common shares outstanding 19,689,000 14,052,000 13,276,000 ========== ========== ========== Income (loss) per common share: Income (loss) before extraordinary loss (.08) .01 .10 Extraordinary loss (.01) - - ---- --- --- Net income (loss) (.09) .01 .10 ==== === === See accompanying notes to consolidated financial statements. F-5 PREMIER PARKS INC. Consolidated Statements of Stockholders' Equity Years ended December 31, 1995, 1994 and 1993
Series A, 7% Cumulative Convertible Preferred Stock Common Stock ----------------- -------------------- Capital in Shares Shares Excess of Accumulated Treasury Issued Amount Issued Amount Par Value Deficit Stock Total ------- -------- ---------- -------- ---------- ----------- -------- ----------- Balances at December 31, 1992 -- $ -- 13,407,825 $134,000 45,769,000 (33,376,000) (689,000) 11,838,000 Net income -- -- -- -- -- 1,354,000 -- 1,354,000 ------- -------- ---------- -------- ---------- ----------- -------- ----------- Balances at December 31, 1993 -- -- 13,407,825 134,000 45,769,000 (32,022,000) (689,000) 13,192,000 Issuance of common stock: Cash proceeds - net -- -- 3,099,073 31,000 4,154,000 -- -- 4,185,000 Exchange of debt for equity -- -- 485,437 5,000 650,000 -- -- 655,000 Net income -- -- -- -- -- 102,000 -- 102,000 ------- -------- ---------- -------- ---------- ----------- -------- ----------- Balances at December 31, 1994 -- -- 16,992,335 170,000 50,573,000 (31,920,000) (689,000) 18,134,000 Issuance of preferred stock 200,000 200,000 -- -- 19,800,000 -- -- 20,000,000 Conversion of debt to equity -- -- 7,427,165 74,000 8,888,000 -- -- 8,962,000 Net loss -- -- -- -- -- (1,185,000) -- (1,185,000) ------- -------- ---------- -------- ---------- ----------- -------- ----------- Balances at December 31, 1995 200,000 $200,000 24,419,500 $244,000 79,261,000 (33,105,000) (689,000) 45,911,000 ======= ======== ========== ======== ========== =========== ======== ===========
See accompanying notes to consolidated financial statements. F-6 PREMIER PARKS INC. Consolidated Statements of Cash Flows Years ended December 31, 1995, 1994 and 1993
1995 1994 1993 ---- ---- ---- Cash flows from operating activities: Net income (loss) $ (1,185,000) 102,000 1,354,000 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 3,866,000 1,997,000 1,537,000 Extraordinary loss on early extinguishment of debt 230,000 -- -- Amortization of discount on debt and debt issuance costs 317,000 94,000 290,000 Gain on sale of assets -- (9,000) (3,000) Equity in losses of partnerships 69,000 83,000 142,000 Decrease in escrow cash accounts -- -- 506,000 (Increase) decrease in accounts receivable 5,794,000 (496,000) (210,000) Deferred income taxes (benefit) (808,000) 24,000 91,000 Increase in inventories and prepaid expenses (455,000) (422,000) (339,000) (Increase) decrease in deposits and other assets 1,128,000 (891,000) (123,000) Increase (decrease) in accounts payable and accrued expenses (2,366,000) 511,000 (532,000) Increase (decrease) in accrued interest payable 4,056,000 67,000 (14,000) ------------ ----------- ----------- Total adjustments 11,831,000 958,000 1,345,000 ------------ ----------- ----------- Net cash provided by operating activities 10,646,000 1,060,000 2,699,000 ------------ ----------- ----------- Cash flows from investing activities: Proceeds from the sale of equipment -- 14,000 90,000 Increase in investments in and advances topartnerships (63,000) (83,000) (114,000) Additions to property and equipment (10,732,000) (10,108,000) (7,674,000) Acquisition of Funtime Parks, Inc., net of cash acquired (63,344,000) -- -- ------------ ----------- ----------- Net cash used in investing activities (74,139,000) (10,177,000) (7,698,000) Cash flows from financing activities: Repayment of debt (17,487,000) (5,079,000) (8,252,000) Proceeds from borrowings 93,500,000 8,451,000 10,758,000 Net cash proceeds from issuance of preferred stock 20,000,000 -- -- Net cash proceeds from issuance of common stock -- 4,185,000 -- Payments of debt issuance costs (5,099,000) (100,000) (400,000) ------------ ----------- ----------- Net cash provided by financing activities 90,914,000 7,457,000 2,106,000 ------------ ----------- ----------- (Decrease) increase in cash and cash equivalents 27,421,000 (1,660,000) (2,893,000) Cash and cash equivalents at beginning of year 1,366,000 3,026,000 5,919,000 ------------ ----------- ----------- Cash and cash equivalents at end of year $ 28,787,000 1,366,000 3,026,000 ============ =========== ===========
(Continued) F-7 PREMIER PARKS INC. Consolidated Statements of Cash Flows, Continued Years ended December 31, 1995, 1994 and 1993 1995 1994 1993 ---- ---- ---- Supplementary cash flow information: Cash paid for interest $ 2,018,000 2,178,000 1,433,000 ========= ========= ========= Cash paid for income taxes (refund) $ (22,000) 38,000 - ========= ========= ========= Supplemental disclosure of noncash investing and financing activities: 1995 o Common stock (7,427,165 shares) was exchanged for $9,095,000 of debt, net of $133,000 of costs (notes 3 and 9). o The Company purchased certain rides and attractions through capital leases with obligations totaling $3,259,000. 1994 o Common stock (485,437 shares) was exchanged for $655,000 of debt (note 9). o The Company entered into two separate note agreements, aggregating $570,000 for the purchase of property and equipment. 1993 o The Company purchased certain rides and attractions through capital leases with obligations totaling $2,745,000. o In connection with a term loan obtained during the year, $5,824,000 was used to retire existing notes with the same institution. See accompanying notes to consolidated financial statements. F-8 PREMIER PARKS INC. Notes to Consolidated Financial Statements December 31, 1995, 1994 and 1993 (1) Summary of Significant Policies Description of Business Premier Parks Inc. (the Company) owns and operates regional themed amusement and water parks. The Company and its subsidiaries currently own and operate six parks: Frontier City, a western theme park located in Oklahoma City, Oklahoma; White Water Bay, a tropical theme water park located in Oklahoma City, Oklahoma; Adventure World, a combination theme and water park located in Largo, Maryland; Geauga Lake, a combination theme and water park located near Cleveland, Ohio; Darien Lake & Camping Resort, a combination theme and water park with an adjacent camping resort and performing arts center, located between Buffalo and Rochester, New York; and Wyandot Lake, a water park which also includes "dry rides" located in Columbus, Ohio. Basis of Presentation The Company's accounting policies reflect industry practices and conform to generally accepted accounting principles. The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and the limited partnership (Frontier City Partners Limited Partnership) in which the Company beneficially owns 100% of the partnership interests. Intercompany transactions and accounts have been eliminated in consolidation. The Company's investment in a partnership in which it does not own a controlling interest is accounted for using the equity method. Cash Equivalents Cash equivalents of $26,728,000 at December 31, 1995, consist of short-term highly liquid investments with an original maturity of three months or less, which are readily convertible into cash. For purposes of the consolidated statements of cash flows, the Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. Inventories Inventories are stated at the lower of cost (first in, first out) or market and consist of products for resale including merchandise and food and miscellaneous supplies including repair parts for rides. Advertising Costs Production costs of commercials and programming are charged to operations in the year first aired. The costs of other advertising, promotion, and marketing programs are charged to operations in the year incurred. The amounts capitalized at year-end are included in prepaid expenses. Deferred Charges The Company capitalizes all costs related to the issuance of debt with such costs included in deferred charges in the consolidated balance F-9 PREMIER PARKS INC. Notes to Consolidated Financial Statements, Continued sheets. The capitalized debt costs at December 31, 1995 relate to the senior notes and senior credit facility and the amortization of such costs are recognized as interest expense under a method approximating the interest method over the life of the respective debt issue. Depreciation and Amortization Buildings and improvements are depreciated over their estimated useful lives of approximately 30 years by use of the straight-line method. Furniture and equipment are depreciated using the straight-line method over 5-10 years. Rides and attractions are depreciated using the straight-line method over 5-25 years. Amortization of property associated with capitalized lease obligations is included in depreciation expense in the consolidated financial statements. Maintenance and repairs are charged directly to expense as incurred, while betterments and renewals are generally capitalized in the property accounts. When an item is retired or otherwise disposed of, the cost and applicable accumulated depreciation are removed and the resulting gain or loss is recognized. Intangible Assets Goodwill, which represents the excess of purchase price over fair value of net assets acquired, is amortized on a straight-line basis over the expected period to be benefited, generally 25 years. 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 acquired operations. The amount of goodwill impairment, if any, is measured based on projected discounted future operating cash flows using an appropriate interest rate. The assessment of the recoverability of goodwill will be impacted if estimated future operating cash flows are not achieved. Interest Expense Recognition Interest on notes payable is generally recognized as expense on the basis of stated interest rates. Notes payable and capitalized lease obligations that do not have a stated interest rate or that have interest rates considered to be lower than prevailing market rates (when the obligations were incurred) are carried at amounts discounted to impute a market rate of interest cost. Total interest expense incurred was $6,074,000, $2,341,000, and $1,481,000 in 1995, 1994 and 1993, respectively. Interest expense in the accompanying consolidated statements of operations is shown net of interest income. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. F-10 PREMIER PARKS INC. Notes to Consolidated Financial Statements, Continued Income (Loss) Per Share Income (loss) per share is computed based on income (loss) applicable to common stock divided by the weighted average number of common shares outstanding during the period. For the year ended December 31, 1995, no warrants, options, or potential shares from convertible securities were considered as the effect would be antidilutive. For the years ended December 31, 1994 and 1993, warrants and options outstanding have been excluded from the per share calculations as no active trading market existed for the Company's common stock during those periods. The Company's former senior subordinated notes were converted into common shares in 1995. For 1994 and 1993, the senior subordinated notes were considered to be potentially dilutive securities. The weighted average number of common shares attributable to the conversion feature of the notes was 5,600,000 and 2,378,000 for the years ended December 31, 1994 and 1993, respectively. The former senior subordinated notes bore interest and if the notes had been converted, the interest expense on the notes in 1994 or 1993 would not have been incurred. After consideration of the increase in income that would have occurred from the reduction in interest expense, the effect of the convertible shares on income was antidilutive. The Company issued convertible preferred stock in 1995 which is a potentially dilutive security. The 12,121,121 common shares that would result from conversion of the preferred stock are not considered in the 1995 calculation of loss per share, as the effect would be antidilutive. Accumulated, but unpaid, preferred stock dividends of $529,000 were considered in determining net loss applicable to common stock in 1995. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications Reclassifications have been made to certain amounts reported in 1994 and 1993 to conform with the 1995 presentation. (2) Fair Value of Financial Instruments The recorded amounts for cash and cash equivalents, accounts receivable, deposits, accounts payable and accrued expenses, and accrued interest payable approximate fair value because of the short maturity of these financial instruments. The fair value estimates, methods, and assumptions relating to the Company's other financial instruments are discussed in note 6. (3) Acquisition of Theme Parks Pursuant to a merger agreement, the Company acquired Funtime Parks, Inc. (Funtime), a company owning three regional theme parks, for an initial purchase price of approximately $60,000,000 in cash with an additional amount of approximately $5,400,000 paid to the former shareholders as a postclosing adjustment related to the operating cash flows of the former Funtime parks after the acquisition. The acquisition was accounted for as a purchase. The allocation of the purchase price was determined based upon estimates of fair value as determined by independent appraisal. As of the F-11 PREMIER PARKS INC. Notes to Consolidated Financial Statements, Continued acquisition date and after giving effect to the purchase, $18,030,000 of deferred tax liabilities were recognized for the tax consequences attributable to the differences between the financial statement carrying amounts and the tax basis of Funtime's assets and liabilities. Approximately $13,500,000 of cost in excess of the fair value of the net assets acquired was recorded as goodwill. To fund the acquisition, on August 15, 1995, the Company issued $90,000,000 aggregate principal amount of 12% senior notes due 2003 (the Notes) and $20,000,000 of convertible preferred stock and converted approximately $9,100,000 of previously existing indebtedness into Company common stock. Except in the case of a change of control (as defined in the indenture relating to the Notes) and certain other circumstances, no principal payment on the Notes is due prior to maturity (August 15, 2003). As part of the acquisition, $2,500,000 of the purchase price was placed into escrow as an indemnification fund. Except in limited circumstances, the indemnification fund represents the sole source of funds for indemnification claims made by the Company against the former shareholders of Funtime. The escrow is to be released in February 1997. The indemnification fund is classified in the accompanying consolidated financial statements as a deposit and as a noncurrent other liability. The accompanying 1995 consolidated statement of operations reflects the results of Funtime from the date of acquisition (August 15, 1995). The following summarized pro forma results of operations for the years ended December 31, 1995 and 1994, assumes that the acquisition and related transactions occurred as of the beginning of 1994 (in thousands): 1995 1994 ---- ---- (Unaudited) Revenue: Theme park admissions $ 37,738 34,275 Theme park food, merchandise, and other 42,301 41,319 ------- ------- Total revenue 80,039 75,594 Operating costs and expenses: Operating expenses 35,616 34,832 Selling, general and administrative 13,764 12,380 Costs of products sold 9,671 9,188 Depreciation and amortization 6,223 5,768 ------- ------- Total operating costs and expenses 65,274 62,168 Income from operations 14,765 13,426 Interest expense, net (11,022) (11,559) Equity in loss of partnership (69) (83) Other income (expense) (108) (27) ------- ------- Total other expense (11,199) (11,669) ------- ------- Income before income taxes and extraordinary loss 3,566 1,757 Income tax expense 1,666 948 ------- ------- Income before extraordinary loss $ 1,900 809 ======= ======= Income (loss) before extraordinary loss applicable to common stock $ 500 (591) ======= ======= Income (loss) before extraordinary loss per common share $ .02 (.02) ======== ======== F-12 PREMIER PARKS INC. Notes to Consolidated Financial Statements, Continued (4) Investment in and Advances to a Partnership 1995 1994 ---- ---- 40% general partner capital interest (including cumulative advances of $1,341,000 and $1,278,000 at December 31, 1995 and 1994, respectively) in 229 East 79th Street Associates LP, a limited partnership (Associates) formed in 1987 to acquire, operate, manage, and convert to cooperative ownership a residential building located at 229 East 79th Street, New York, NY. $ 1,118,000 1,124,000 ========= ========= While the Company is a general partner, the Company does not operate, manage, or control the limited partnership. Operations, management, and control are performed by the managing general partner. Under the terms of the partnership agreement, the Company funds 40% of required working capital needed by Associates. During 1995 and 1994, the Company made advances of $63,000 and $83,000, respectively. Presently, the Company expects to continue to advance funds as needed during 1996. The Company has guaranteed up to approximately $270,000 of borrowings by Associates in connection with its acquisition of real estate. However, if at the time of a default by Associates, the lender is paid amounts accrued to date, the Company will be relieved of its obligation under its guaranty. The following information summarizes the financial position of Associates and the results of its operations: December 31 -------------------------- 1995 1994 ------------ ------------ Assets $ 3,496,000 3,686,000 ========= ========= Liabilities 4,061,000 4,072,000 Partners' deficit (565,000) (386,000) --------- --------- $ 3,496,000 3,686,000 ========= ========= Year ended December 31 --------------------------------- 1995 1994 1993 ----------- --------- --------- Revenues $ 288,000 294,000 300,000 Costs and expenses 461,000 534,000 612,000 -------- -------- -------- (173,000) (240,000) (312,000) (Loss) gain on sale of co-op shares - 32,000 (43,000) --------- -------- -------- Net loss $ (173,000) (208,000) (355,000) ======== ======== ======== F-13 PREMIER PARKS INC. Notes to Consolidated Financial Statements, Continued (5) Property and Equipment Property and equipment, at cost, are classified as follows: 1995 1994 ---- ---- Theme parks: Land $ 12,230,000 5,964,000 Buildings and improvements 54,935,000 15,213,000 Rides and attractions 51,653,000 20,179,000 Equipment 7,088,000 3,486,000 ----------- ---------- Total theme parks 125,906,000 44,842,000 Less accumulated depreciation 9,905,000 6,270,000 ----------- ---------- $ 116,001,000 38,572,000 =========== ========== Included in property and equipment are costs and accumulated depreciation associated with capital leases as follows: 1995 1994 ---- ---- Cost $ 6,005,000 2,745,000 Accumulated depreciation (334,000) (165,000) --------- --------- $ 5,671,000 2,580,000 ========= ========= (6) Long-Term Debt and Capitalized Lease Obligations At December 31, 1995 and 1994, debt consists of: 1995 1994 ---- ---- Capitalized lease obligations: Capitalized lease obligations expiring 1997 through 2000, requiring aggregate annual lease payments ranging from approximately $1,172,000 to $360,000 including implicit interest at rates ranging from 9.875% to 11% and secured by equipment with a net book value of approximately $5,671,000 as of December 31, 1995 $ 4,222,000 1,873,000 Debt to unrelated parties: Senior notes (a) 90,000,000 - Senior subordinated convertible debt maturing in 2000, convertible into common stock at a conversion price of $1.25, requiring quarterly interest payments at9.5% per annum (b) - 1,240,000 Term note payable due December 1998, requiring monthly interest payments at prime plus 1% (9.5% as of December 31, 1994) and principal payments annually and borrowings under a revolving line of credit (c) - 12,451,000 Other debt 56,000 689,000 ---------- ---------- Total - debt to unrelated parties 90,056,000 14,380,000 ---------- ---------- F-14 PREMIER PARKS INC. Notes to Consolidated Financial Statements, Continued 1995 1994 ---- ---- Debt to related parties: Junior subordinated loan payable with interest at 8% per annum plus accrued interest unpaid (d) $ - 2,095,000 Senior subordinated convertible debt maturing in 2000, convertible into common stock at a conversion price of $1.25 requiring quarterly interest payments at 9.5% per annum (b) - 5,760,000 ----------- ---------- Total - debt to related parties - 7,855,000 ----------- ---------- Total $ 94,278,000 24,108,000 ========== ========== (a) The notes are senior unsecured obligations of the Company, with a $90,000,000 aggregate principal amount, and mature on August 15, 2003. The notes bear interest at 12% per annum payable semiannually on August 15 and February 15 of each year, commencing February 15, 1996. The notes are redeemable, at the Company's option, in whole or part, at any time on or after August 15, 1999, at varying redemption prices. Additionally, at any time and from time-to-time prior to August 15, 1998, the Company may redeem in the aggregate up to 33 1/3% of the original aggregate principal amount of notes with the proceeds of one or more public equity offerings at a redemption price of 110% of the principal amount. These notes are guaranteed by all of the Company's principal operating subsidiaries. The indenture under which the notes were issued places limitations on operations and sales of assets by the Company or its subsidiaries, requires maintenance of certain financial ratios, and limits the Company's ability to pay cash dividends or make other distributions to the holders of its capital stock or to redeem such stock. The indenture permits the Company, subject to certain limitations, to incur additional indebtedness, including secured senior indebtedness under its $20,000,000 senior credit facility described below. The Company is a holding company with no operations or assets other than its investment in its wholly owned direct and indirect subsidiaries and its investment in Associates. All of the Company's subsidiaries, except for one indirect wholly owned subsidiary, Funtime-Famous Recipe, Inc., are full, unconditional, and joint and several guarantors of the notes. The assets and operations of Funtime-Famous Recipe, Inc. are inconsequential to the Company and its consolidated financial condition and results of operations. Condensed financial statement information for the guarantors is not included herein, as the Company does not believe such information would be material to the understanding of the Company and its direct and indirect subsidiaries. (b) During 1993, the Company consummated a private placement of $7,000,000 of its 9.5% senior subordinated convertible notes due March 2000. The notes were funded on July 29, 1993. The notes were convertible into shares of common stock at the conversion price of $1.25 per share subject to certain antidilution adjustments. These notes were converted into 5,875,313 common shares during 1995. (c) On December 7, 1993, the Company entered into a loan agreement with a financial institution which provided for a $13,583,000 term loan facility due December 31, 1997, and a $3,500,000 revolving line of credit that was due December 31, 1995. The term loan facility was fully funded in 1994. The revolving line had a zero balance at December 31, 1994. All amounts outstanding including amounts advanced under the line of credit were repaid during 1995 in connection with F-15 PREMIER PARKS INC. Notes to Consolidated Financial Statements, Continued the issuance of the senior notes. Additionally, the line of credit was cancelled. (d) On October 30, 1992, in connection with a private placement, the Company consolidated the outstanding Windcrest Partners loans in the principal amount of $2,095,000 into a junior subordinated term loan. Under the terms of this loan agreement, interest was payable monthly at the rate of 8% per annum until maturity on December 31, 1999. The junior term loan was exchanged for common stock (1,551,852 shares) during 1995. Annual maturities of long-term debt and capitalized lease obligations during the five years subsequent to December 31, 1995, are as follows: 1996 $ 1,065,000 1997 1,473,000 1998 713,000 1999 360,000 2000 and thereafter 90,667,000 ---------- $ 94,278,000 ========== The Company's $20,000,000 senior credit facility is secured by substantially all of the Company's assets (other than real estate), including the capital stock of its subsidiaries. The facility matures in August 1998. At December 31, 1995, no advances were outstanding under the senior credit facility. Advances under the senior credit facility will bear interest at a variable rate. The senior credit facility contains restrictive covenants that, among other things, limit the ability of the Company and its subsidiaries to dispose of assets; incur additional indebtedness or liens; pay dividends; repurchase stock; make investments; engage in mergers or consolidations; engage in certain transactions with subsidiaries and affiliates; and redeem or purchase the senior notes. In addition, the senior credit facility requires that the Company comply with certain specified financial ratios and tests, including cash interest expense coverage, a minimum net worth requirement, and a maximum capital expenditure requirement. The fair value of the Company's long-term debt is estimated by using quoted bond prices or discounted cash flow analyses based on current borrowing rates for debt with similar maturities. Under the above assumptions the estimated fair value of long-term debt and capitalized lease obligations at December 31, 1995, is approximately $103,000,000. (7) Income Taxes The Company recognized an income tax benefit of $852,000 in 1995. The benefit of $762,000 was allocated to loss before income taxes and $90,000 to the extraordinary loss. F-16 PREMIER PARKS INC. Notes to Consolidated Financial Statements, Continued Income tax expense (benefit) allocated to operations for 1995, 1994 and 1993 consists of the following: Current Deferred Total ------- -------- ----- 1995: U.S. Federal $ (44,000) (508,000) (552,000) State and local - (210,000) (210,000) -------- -------- -------- $ (44,000) (718,000) (762,000) ======= ======== ======== 1994: U.S. Federal 44,000 15,000 59,000 State and local - 9,000 9,000 -------- -------- -------- $ 44,000 24,000 68,000 ======= ======== ======== 1993: U.S. Federal - 75,000 75,000 State and local - 16,000 16,000 -------- -------- -------- $ - 91,000 91,000 ======== ======== ======== Recorded income tax expense (benefit) allocated to operations differed from amounts computed by applying the U.S. federal income tax rate of 34% to pretax income approximately as follows: 1995 1994 1993 ---- ---- ---- Computed "expected" federal income tax expense (benefit) $ (614,000) 58,000 491,000 Amortization of goodwill 78,000 - - Other, net (16,000) 1,000 (6,000) Effect of state and local income taxes (210,000) 9,000 16,000 Change in the beginning-of-the-year balance of the valuation allowance for deferred tax assets - - (410,000) --------- ------- -------- $ (762,000) 68,000 91,000 ======== ====== ======== F-17 PREMIER PARKS INC. Notes to Consolidated Financial Statements, Continued Substantially all of the Company's future taxable temporary differences (deferred tax liabilities) relate to the different financial accounting and tax depreciation methods and periods for property and equipment. The Company's net operating loss carryforwards and alternative minimum tax carryforwards represent future income tax deductions (deferred tax assets). The tax effects of these temporary differences as of December 31, 1995 and 1994, are presented below: 1995 1994 ---- ---- Deferred tax assets before valuation allowance $ 7,860,000 3,161,000 Less valuation allowance - - Net deferred tax assets 7,860,000 3,161,000 Deferred tax liabilities 27,005,000 5,075,000 ---------- --------- Net deferred tax liability $ 19,145,000 1,914,000 ========== ========= The Company's deferred tax liability results from the financial carrying value for assets acquired in the Funtime acquisition, which was based upon the fair value at the acquisition date, being substantially in excess of Funtime's tax basis in the assets and from the Company's remaining depreciable assets being depreciated primarily over a 7-year period for tax reporting purposes and a longer 20- to 25-year period for financial purposes. The faster tax depreciation has resulted in tax losses which can be carried forward to offset future taxable income. Because the Company's assets' financial carrying value and tax basis difference will primarily reverse before the expiration of the net operating loss carryforwards and taking into account the Company's projections of future taxable income over the same period, management believes that it will more likely than not realize the benefits of these net future deductions. The Company experienced an ownership change within the meaning of the Internal Revenue Code Section 382 and the regulations thereunder on October 30, 1992, as a result of the issuance of 11,000,000 shares of common stock. As a result of the ownership change, net operating loss carryforwards generated before the ownership change can be deducted in subsequent periods only in certain limited situations. Accordingly, it is probable that the Company will not be able to use net operating loss carryforwards generated prior to October 30, 1992. None of the pre-October 30, 1992, net operating loss carryforwards were considered in computing the Company's available net operating loss carryforwards and deferred tax liability. Net operating loss carryforwards generated after October 30, 1992, can be utilized without restriction unless another ownership change in excess of 50% during any three-year period occurs. As of December 31, 1995, the Company has approximately $13,681,000 of unrestricted net operating loss and $4,077,000 of alternative minimum tax carryforwards available for federal income tax purposes which expire in 2008 through 2010. Additionally, the Company has $1,864,000 of alternative minimum tax credits which have no expiration date. F-18 PREMIER PARKS INC. Notes to Consolidated Financial Statements, Continued (8) Preferred Stock The Company has authorized 500,000 shares of preferred stock, $1 par value. During 1995, the Company issued 200,000 shares of Series A, 7% cumulative convertible preferred stock at $100 per share. All shares of Series A preferred stock rank senior and prior in right to all of the Company's now or hereafter issued common stock with respect to dividend payments and distribution of assets upon liquidation or dissolution of the Company, Holders of Series A preferred stock are entitled to receive cumulative dividends at an annual rate of $7 per share. At the Company's election, dividends are payable in cash and/or in additional Series A preferred stock. The terms of the Company's senior notes and senior credit facility limit the Company's ability to pay cash dividends. At the option of the holder, the Series A preferred stock may be converted into fully-paid and nonassessable shares of common stock. The number of shares of common stock deliverable upon conversion of one share of Series A preferred stock will be determined by dividing $100 by the then applicable conversion rate. The initial conversion rate was $1.65 and will be adjusted from time to time in accordance with the provisions of the Series A preferred stock. The Company has agreed to provide the preferred stockholders certain registration rights relative to the common stock issued upon conversion of the preferred stock. The Company may redeem the Series A preferred stock at any time in whole or from time to time in part at a redemption price of $100 per share provided that either certain common stock market price levels are met or that the Company will have consummated an underwritten public offering of common stock with gross proceeds of at least $15,000,000. (9) Capital Stock In October 1994, the Company issued 3,099,073 common shares in a private placement with existing stockholders for cash. In connection with this placement, Windcrest Partners also exchanged $655,000 of then existing debt for 485,437 shares of common stock. The Company has agreed to provide the stockholders certain registration rights in the future. In August 1995, the Company issued 5,875,313 common shares in full exchange for the Company's $7,000,000 senior subordinated convertible notes and 1,551,852 common shares in full exchange for the Company's $2,095,000 junior subordinated term loan. The Company has agreed to provide the stockholders certain registration rights in the future. (10) Stock Options and Warrants In 1995, 1994 and 1993, certain members of the Company's management were issued seven-year options to purchase 1,240,000, 180,000, and 766,002 shares of common stock, at an exercise price of $1.65, $1.50, and $1.00 per share, respectively, under the Company's 1993 and 1995 Stock Option and Incentive Plans. The options granted in 1995 are subject to the approval of the Company's shareholders at the 1996 annual meeting. These options may be exercised on a cumulative basis with 20% of the total exercisable on date of issuance and with an additional 20% being available for exercise on each of the succeeding anniversary dates. Any unexercised portion of the options will automatically and without notice terminate F-19 PREMIER PARKS INC. Notes to Consolidated Financial Statements, Continued upon the seventh anniversary of the issuance date or upon termination of employment. At December 31, 1995, 507,601 options were exercisable. In October 1989, the Company's current chairman was issued a ten-year warrant to purchase 131,728 shares of common stock (currently being held as treasury stock) at an exercise price of $.20 per share and a ten-year warrant to purchase 93,466 shares of common stock at an exercise price of $.20 per share. (11) Casualty Loss On July 27, 1994, high winds damaged the Company's Adventure World location. The loss was covered by insurance and the total insurance benefits recognized during 1994 were $748,000, including approximately $348,000 accrued as a receivable, which was collected subsequent to December 31, 1994. The Company spent approximately $393,000 in 1994 to replace and repair capital assets which had been destroyed or damaged. Insurance proceeds in excess of the net book value of destroyed assets and the repair costs of damaged assets were approximately $417,000 and are reflected in the 1994 consolidated statement of operations in theme parks revenue. (12) Commitments and Contingencies The Company leases office space under a lease agreement which expires April 30, 2001. The lease requires minimum monthly payments over its term and also escalation charges for proportionate share of expenses as defined in the lease. The Company may also terminate the lease during 1996 and pay a termination penalty. Windcrest Partners, an affiliate of the Company, shares office space with the Company and has agreed to pay 50% of the rental payments. Rent expense recognized by the Company (after deduction of amounts paid by Windcrest Partners) for the years ended December 1995, 1994, and 1993, aggregated $68,000, $68,000, $70,000, respectively. Future minimum lease payments (exclusive of amounts to be reimbursed by Windcrest Partners) on operating leases for the Company's office space and equipment (with initial or remaining lease terms in excess of one year), are as follows: 1996 $ 416,000 1997 336,000 1998 220,000 1999 70,000 2000 70,000 Later years 70,000 The Company is not a party to, nor is its property subject to, any pending material legal proceedings. (13) Certain Transactions In connection with the acquisition of Funtime and the issuance of the $90,000,000 senior notes, the Company paid investment banking and financial advisory fees in the amount of $800,000 and $475,000 to Lepercq, de Neuflize & Co. Incorporated (Lepercq) and Hanseatic Corporation (Hanseatic), respectively. Two directors of the Company are managing director and treasurer, respectively, of Lepercq and Hanseatic. F-20 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 28, 1996 PREMIER PARKS INC. By: /s/ Kieran E. Burke -------------------------------- Kieran E. Burke Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities 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 28, 1996 ----------------------- Kieran E. Burke Executive Officer (Principal Executive Officer) and Director /s/ Gary Story President, Chief Operating March 28, 1996 ----------------------- Gary Story Officer and Director /s/ James F. Dannhauser Chief Financial Officer March 28, 1996 ----------------------- James F. Dannhauser (Principal Financial Officer) and Director /s/ Richard R. Webb Vice President March 28, 1996 ----------------------- Richard R. Webb (Principal Accounting Officer) /s/ Paul A. Biddelman Director March 28, 1996 ----------------------- Paul A. Biddelman /s/ Michael E. Gellert Director March 28, 1996 ----------------------- Michael E. Gellert /s/ Jack Tyrrell Director March 21, 1996 ----------------------- Jack Tyrrell EXHIBIT INDEX ------------- Page ---- (3) Articles 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 -- incorporated by reference from Exhibit 3(g) to Form 10-K of Registrant for the year ended December 31, 1991. (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) 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. (c) 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. (d) 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. -ii- (e) Credit Facility, dated August 15, 1995, among the Registrant, the subsidiaries of the Registrant named therein, Chemical Bank, The Merchant Bank of New York and Chemical Bank, as agent (including forms of guarantee agreements, security agreements and pledge agreements) -- incorporated by reference from Exhibit 4(1) 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. -iii- (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. -iv- (g) Lease Agreement, dated January 18, 1993, among Registrant, Frontier City Partners Limited Partnership and Fitraco N.V. -- incorporated by reference from Exhibit 10(k) to Form 10-K of Registrant for the year ended December 31, 1992. (h) Lease Agreement, dated January 18, 1993, among Registrant, Tierco Maryland, Inc. and Fitraco N.V. -- incorporated by reference from Exhibit 10(l) to Form 10- K of Registrant for the year ended December 31, 1992. (i) Security Agreement and Conditional Sale Contract, between Chance Rides, Inc. and Tierco Maryland, Inc. and Guaranty of Registrant in favor of Chance Rides, Inc. -- incorporated by reference from Exhibit 10(m) to Form 10-K of Registrant for the year ended December 31, 1992. (j) Registrant's 1993 Stock Option and Incentive Plan -- incorporated by reference from Exhibit 10(k) to Form 10-K of Registrant for the year ended December 31, 1993. (k) Agreement and Plan of Merger, dated as of June 30, 1995 among the Registrant, Premier Parks Acquisition Inc., Funtime Parks, Inc. ("Funtime") and its shareholders -- incorporated by reference from Exhibit 10(11) to the Registration Statement. (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. -v- (11) Statement re computation of per share earnings. (21) Subsidiaries of the Registrant -- incorporated by reference from Exhibit 21 to the Registration Statement. (last page of exhibits) -vi- EX-10.(O) 2 LEASE AGREEMENT THIS LEASE AGREEMENT made as of this 22nd day of December, 1995, by and between DARIEN LAKE THEME PARK AND CAMPING RESORT, INC., a New York corporation having its principal office at 9993 Allegheny Road, Darien Center, New York 14040 (hereinafter "Darien"), and THE METROPOLITAN ENTERTAINMENT CO., INC., a New Jersey corporation having its principal office at 7 North Mountain Avenue, Montclair, New Jersey 07042 (hereinafter "Metropolitan"). _______________ Metropolitan is a promoter and sponsor of live concerts and entertainment events. Darien is the owner and operator of Darien Lake Theme Park and Camping Resort in the Town of Darien Center, New York (the "Theme Park"). The Theme Park includes approximately 12 acres of improved land more specifically described on Schedule A on which is located an outdoor amphitheater known as the Darien Lake Performance Arts Center, which land, including all improvements thereto and expansions thereof now existing or hereafter made, is hereinafter referred to as the "Center." Metropolitan desires to lease from Darien, and Darien desires to lease to Metropolitan, the Center on the terms and conditions hereof. NOW, THEREFORE, for good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, and in further consideration of the mutual covenants and agreements herein contained, the parties hereto, intending to be legally bound, hereby covenant and agree as follows: _____________________ 1. Lease of Center --------------- 1.1 Subject to all of the terms and conditions hereof, Darien hereby leases to Metropolitan the Center during each of the Seasons during the Term hereof, and Metropolitan does hereby take and lease from Darien the Center during such Seasons. Metropolitan agrees that, during such Seasons, the Center shall be used and occupied by it exclusively for the booking, promotion and production of Concerts, the performance by Metropolitan of its obligation hereunder and for no other purpose. Any other use of the Center by Metropolitan during the Term shall require the prior written consent of Darien, which may be withheld in its sole discretion. As used herein, the term "Concerts" shall mean live stage musical concerts, comedy performances, Broadway shows and other family- oriented musical shows and productions. Except as otherwise explicitly provided herein, during each Season, Metropolitan shall book, promote and produce no less than twenty Concerts featuring nationally-recognized performers or shows (the "Minimum Concerts"). 1.2 In the event that Darien receives at any time during the Term any inquiry or proposal regarding production of a Concert at the Center during any Season of the Term, Darien shall refer the party making such inquiry or proposal to Metropolitan. Darien may approach persons or entities representing performers or shows to ascertain their interest in presenting a Concert at the Center during any such Season, provided that, if any such person or entity shall indicate interest in any such Concert, Darien shall refer such party to Metropolitan. Metropolitan shall promptly notify Darien in writing as to any Concert referred to Metropolitan by Darien pursuant to this Section 1.2 that Metropolitan has determined not to produce at the Center (a "Rejected Concert"). -2- Notwithstanding any provision of this Lease, Darien shall have the right to enter and use the Center during each Season of the Term to produce at its expense any such Rejected Concert in accordance with Section 4.2, it being understood that Darien shall not contract with any third party to produce any Rejected Concert on Darien's behalf. Darien shall also have the right at its expense to produce or arrange the production of (i) magic shows, wild west shows, musical reviews, fireworks, laser light shows and other live shows and performances at the Theme Park of a type generally consistent with the type of live shows and performances then staged at the theme parks (the "Premier Parks") owned and operated by Premier Parks Inc., the parent company of Darien, or other theme parks comparable to the Premier Parks, provided that such shows or productions do not include -------- events that would constitute Concerts (as such term is defined in Section 1.1) featuring nationally-recognized performers who are then performing at Comparable Facilities, outdoor stadiums or indoor arenas with attendance capacities comparable to the Center and (ii) subject to the provisions of Section 4.2, events at the Center that do not constitute Concerts (the events listed in clauses (i) and (ii), collectively with all Rejected Concerts produced by Darien, being referred to as the "Darien Events"). Except for the Usage Fee (as hereinafter defined) with respect to Darien Events at the Center, Metropolitan shall have no interest in the revenue, income or profits generated by any Darien Event by virtue of its lease of the Center hereunder. As used herein, the term "Concert" shall not include any Darien Event. Metropolitan shall not have the right to book, promote or produce fireworks or laser light shows at the Center, provided that this -------- sentence shall not be deemed to prohibit the booking of a Concert which features fireworks as an ancillary part of such Concert. All Rejected Concerts produced by -3- Darien shall be produced in all material respects consistent with then generally prevailing industry standards in the United States ("Industry Standards") for first class amphitheaters in the United States having similar attendance capacities as the Center, located in or near metropolitan areas generally comparable in population to the population contained within a 90-mile radius of the Center, and featuring events similar to the Concerts "Comparable Facilities"). Darien shall use (and Metropolitan shall provide the use of) such number of Metropolitan employees as Darien shall request to provide production, usher and internal security services for Rejected Concerts. Metropolitan shall be solely responsible for paying the wages of such employees, withholding any taxes therefrom, maintaining required worker's compensation insurance with respect thereto and providing such employees all other benefits to which they are entitled (by operation of law or otherwise). Darien will reimburse Metropolitan for its cost of such wages, salaries and benefits with respect to periods during which Darien uses such employees. 2. Term ---- 2.1 The initial term of this Lease shall commence on the date hereof and expire on October 15, 2020, unless earlier terminated according to the provisions hereof. Thereafter, this Lease shall be automatically renewed for one additional renewal term of ten years, unless earlier terminated in accordance herewith, on the same terms and conditions as are set forth herein if the average annual paid attendance at Concerts produced by Metropolitan hereunder during the three consecutive Seasons preceding the end of such initial term shall have exceeded 140,000 persons. As used herein, "Term" shall mean the initial term and, if applicable, the renewal term. -4- 2.2 As used herein, the term "Season" means the period commencing on the earlier of (i) the first day in a calendar year on which the Theme Park is open to the public or (ii) May 15, and ending on October 15 of each calendar year. The first Season of the Term hereof will be the 1996 Season. 3. Capital Improvements -------------------- 3.1 (a) On the date hereof, Darien, Metropolitan and Baer Marks & Upham LLP, as escrow agent (the "Escrow Agent") have entered into an escrow agreement (the "Escrow Agreement") pursuant to which Metropolitan will deposit with the Escrow Agent an amount equal to $2,500,000 (the "Escrow Funds") no later than ten business days following the date hereof. If such deposit is not made prior to the close of business on such tenth business day, this Lease shall thereupon terminate and the obligations of the parties hereunder shall thereupon be of no further force or effect, other than the obligations of the parties under Section 6 hereof which shall survive such termination. The Escrow Funds will be used to pay for the hard and soft costs of the real and personal property improvements to the Center described on Exhibit A (the "Improvements") and shall be disbursed as provided in the Escrow Agreement, provided that no portion of -------- the Escrow Funds will be payable to Metropolitan or its affiliates. The Improvements shall be completed by Metropolitan prior to June 1, 1996, except to the extent that the failure to so complete the Improvements is caused by (i) delays arising out of Darien's failure to provide consents or approvals required of it hereunder or (ii) delays arising out of a Force Majeure Event (as defined below), provided, however, that the if roof -------- ------- referred to in Exhibit A and the other Improvements incorporated in the roof structure (collectively, the "Roof") shall not have been completed by June 1, 1996, but -5- all other Improvements are completed in accordance with this sentence, then Metropolitan shall not be deemed to have breached its obligations contained in this sentence if and only if, (a) Metropolitan shall have used its best efforts to complete the Roof by such date and (b) Metropolitan shall continue to use its best efforts to complete the Roof as soon as practicable following such date until the Roof is completed. Promptly following the date hereof, Metropolitan shall retain a licensed architectural firm acceptable to Darien to prepare drawings, plans and specifications (collectively, "Specifications") for the Improvements, which shall include a description, in reasonable detail, of the design and other aesthetic aspects of the Improvements and a detailed estimate of the cost of each Improvement. Immediately following its receipt thereof, Metropolitan shall deliver a copy of such Specifications to the Chairman of the Board, the President and the General Manager of Darien, it being understood that Metropolitan shall use good faith efforts to obtain such Specifications as soon as practicable after the date hereof. Darien and Metropolitan shall jointly approve in writing all aspects of the proposed Specifications. Deviation from the approved Specifications shall require the prior written approval of Darien, which shall be deemed approved by Darien if Darien does not object to such deviation within thirty days following its receipt of written notice thereof from Metropolitan. As used herein, "Force Majeure Event" shall mean an act of God, blizzard, fire, flood, explosion, war, action or inaction of governmental authority, accident, labor trouble or shortage, or any other circumstances of a similar nature beyond the reasonable control of Metropolitan, in each case arising out of reasons other than the adverse financial condition of any party (other than Darien). If a Force Majeure Event shall occur, Metropolitan shall diligently attempt to remove the cause or causes -6- thereof and shall promptly notify Darien of the existence thereof and its probable duration. (b) Prior to January 15, 1996, the parties shall jointly prepare a list of all governmental and regulatory licenses, filings, notifications, permits, authorizations and approvals (collectively, "Approvals") required or desirable in connection with the Improvements. The parties will jointly make and obtain such Approvals and, in that connection, (i) each party will provide the other party a copy of any proposed filing or submission to any governmental or regulatory bodies, agencies or authorities ("Authorities") no less than 72 hours prior to such filing or submission, and will not make any such filing or submission to which such other party objects in writing during such 72-hour period, (ii) each party shall deliver to the other party reasonable prior written notice of any proposed conferences (including scheduled telephonic conferences) with Authorities with respect to such Approvals and such other party shall have the right to be present thereat, and (iii) each party shall forthwith provide to the other party copies of any correspondence (or written summaries of any oral communications) between any Authority and such party with respect to any aspect of the Improvements. (c) At all times during the construction of the Improvements, Metropolitan shall maintain or cause to be maintained owners and contractors insurance in an amount of at least $5,000,000 (naming Darien as an additional insured party) with respect to the construction of the Improvements in form and substance acceptable to Darien. Metropolitan shall retain contractors (including one or more general contractors for Improvements, it being understood that the manufacturer/assembler of the Roof over -7- the permanent seating will act as general contractor with respect thereto) reasonably acceptable to Darien to construct the Improvements. All such contractors will maintain at all relevant times worker's compensation insurance as prescribed by the laws of the State of New York and shall deliver to Darien a certificate evidencing such insurance coverage. Metropolitan shall regularly consult with the designated representative of Darien (who, in the absence of any contrary designation, shall be Darien's Director of Maintenance) with regard to all aspects of the Improvements and shall not take any material action with respect thereto to which Darien reasonably objects in writing. Metropolitan shall deliver written reports with respect to the Improvements to Darien at least weekly prior to the completion thereof, which reports shall include a description of the progress to date, the status of Approvals, the costs incurred and any proposed deviation from the Specifications. In the event the total cost of the Improvements shall exceed the amount of the Escrow Funds, (i) the Improvements listed as Items 1 and 2 on Exhibit A shall be completed at the sole cost and expense of Metropolitan, (ii) the balance of the Improvements shall be completed out of Escrow Funds in the order in which they appear on Exhibit A, and (iii) any Improvements (other than Items 1 and 2 on Exhibit A) not completed out of the Escrow Funds shall be leased or otherwise provided by Metropolitan at its sole cost and expense. Promptly following completion of the Improvements, Metropolitan shall deliver to Darien "as built" plans and specification with respect thereto. 3.2 During the Term, Metropolitan shall, at its sole expense, make such repairs to (whether or not such repairs would constitute an ordinary or capital expense under generally accepted accounting principles), and maintenance of, the Center -8- required or desirable in order to maintain the Center at all times in good operating condition consistent with Comparable Facilities in accordance with then Industry Standards. In that connection, on or before each March 15 preceding any Season, commencing with the 1997 Season, Metropolitan shall submit to the Chairman of the Board, the President and the General Manager of Darien an operating plan, including a schedule in reasonable detail of anticipated operating expenses (the "Operating Plan") and a capital budget (the "Budget") for the Center in respect of such Season. The Budget shall include drawings, plans and specifications for any proposed capital improvements to the Center (including a detailed description of the design and other aesthetic aspects of such improvements and a detailed estimate of the cost of each such improvement). The Budget shall also include a description of any other proposed change in the appearance or use of the Center. All aspects of the Budget shall require the prior written approval of Darien, which shall not be unreasonably withheld in the case of any repairs or maintenance specified therein, provided that any such aspect as to which Darien shall not have objected in - -------- writing within 30 days following its receipt of the Budget and all supporting materials shall be deemed approved by Darien. If Metropolitan shall propose to make any improvements, repairs or maintenance not contemplated by any Budget, Metropolitan shall notify Darien in writing of such proposal and shall not take any action with respect thereto to which Darien objects (in the case of capital improvements) or reasonably objects (in the case of repairs or maintenance) in writing within seven days following its receipt of such notice (or in the case of any proposed action which Metropolitan indicates in such notice is to be taken in response to any emergency situation, within 48 hours following Darien's receipt of such notice). -9- 3.3 During the Term, Metropolitan, at its sole cost, shall provide such operating supplies, equipment and other personal property ("Metropolitan Equipment") to the Center required in order to conduct the Concerts and perform its obligations hereunder. The Metropolitan Equipment, to the extent readily movable and not otherwise affixed to the Center, shall remain the property of Metropolitan and, after the Term, Metropolitan shall be entitled to remove such Metropolitan Equipment from the Center, provided such removal will not result in any structural or other damage to the Center. 3.4 Metropolitan shall have the right to enter the Center during periods other than the Seasons, at any reasonable time after the giving of at least twenty-four hours prior written notice to Darien, to the extent reasonably required to perform its obligations under this Lease. 3.5 If Metropolitan fails to perform in any material respect any of its obligations under Section 3.2 to make repairs to, and maintenance of, the Center, upon fifteen days' prior written notice to Metropolitan by Darien, or in the case of an emergency, immediately, Darien may enter the Center, perform such obligations on Metropolitan's behalf and recover the cost of such performance, together with interest thereon at the prime rate of Chemical Bank then in effect at its principal office in New York City, as additional rent from Metropolitan, payable within thirty days of Metropolitan's receipt of an invoice therefor. 4. Concerts -------- 4.1 Prior to February 1 preceding each Season, Metropolitan shall provide Darien with a preliminary list of Concerts booked or tentatively booked for such -10- Season, and Darien will consult with Metropolitan in connection with the inclusion of such list in any promotional mailing done by Darien. Metropolitan shall give to each of the General Manager of the Theme Park and the Darien Coordinator, as soon as practicable, telephonic notice and written notice delivered on a business day in accordance with Section 27, of any Concert Metropolitan then proposes to book and produce at the Center and will not book or produce any such Concert with respect to which Darien has objected in writing no later than the close of business on the business day next succeeding the business day on which Metropolitan delivered such written notice. In the event Darien shall object to any such proposed Concert involving a nationally-recognized performer, performers or show, which is during the applicable Season conducting a tour involving performances in the northeastern United States and eastern Canada at amphitheaters generally comparable to the Center (which tour may also include selected performances at indoor arenas having attendance capacities at least equal to the Center and featuring events similar to the Concerts) (a "Non-approved Concert"), the number of Minimum Concerts during such Season shall be reduced by a number equal to the number of Non-approved Concerts during such Season; furthermore, if, during any Season, there shall be in excess of two Non-approved Concerts, the rent payable by Metropolitan to Darien under Section 5 hereunder shall be reduced by $25,000 for each such Non-approved Concert during such Season in excess of two. The times of all Concerts will be in accordance with Industry Standards, and no Concert shall continue beyond one calendar day. Metropolitan will use its best efforts to cause all Concerts to end prior to 11:00 P.M. Metropolitan shall provide to Darien not less than 25 complimentary tickets to each Concert. Metropolitan shall have the right to -11- provide to any party complimentary tickets to any Concert in accordance with then Industry Standards, including tickets provided to sponsors of the Concerts and performers or used in connection with the promotion of such Concert; provided that (i) Metropolitan shall not use complimentary tickets -------- to pay or otherwise discharge wages, salary or benefits of any full or part-time personnel employed by or on behalf of Metropolitan in connection with the operation of the Center and (ii) the aggregate number of complimentary tickets for any Concert used by Metropolitan to satisfy or discharge Metropolitan Concert Expenses (other than media trades) shall not exceed 500. 4.2 No later than November 1 of each year prior to each Season, commencing with the 1997 Season, Darien shall send Metropolitan written notice of the dates (which shall not exceed four calendar days) on which Kingdom Bound shall have the exclusive use of the Center (the "KB Event"). During the 1996 Season the KB Event shall have the exclusive use of the Center on August 21 - August 24, inclusive. Metropolitan shall have the right to schedule Concerts on all dates during the Season not so reserved by Darien, provided that, during any Season, Darien may schedule a Darien -------- Event for any date which is less than thirty days from the date on which written notice of such Darien Event is delivered to Metropolitan and on which no approved Concert is then scheduled. No later than thirty days following any Darien Event (other than the KB Event or any Rejected Concert), Darien shall deliver to Metropolitan an amount equal to $2,500 for each day on which such Darien Event used the Center (the "Usage Fee"). 5. Rent ---- During each year of the Term, Metropolitan shall pay annual rent to Darien in an amount equal to $250,000, adjusted as provided below, payable in five equal -12- installments on the first day of May, June, July, August and September of each such year. In addition, no later than five business days following the date of any Concert, Metropolitan shall pay to Darien as additional rent an amount equal to (i) $1.00, adjusted as provided below, for each paid attendee (which term as used in this Lease shall include all persons who paid for tickets to such Concert, whether or not attending) at such Concert, or (ii) if the aggregate number of paid attendees at all Concerts during such Season shall then exceed 100,000, $3.00, adjusted as provided below, for each paid attendee in excess of 100,000. The dollar amount of rent specified in this Section 5 (i.e., the annual rent of $250,000 and the ---- $1.00 or $3.00 per attendee rental) to be paid shall be increased (but not decreased) for each fourth season of the Term (i.e., 1999, 2002, 2005, et. ---- -- seq.) by an amount equal to the product (rounded to the nearest tenth of a - --- cent in the case of attendee rental) obtained by multiplying the amount of such rent in effect during the immediately preceding Season by the aggregate percentage increase (rounded to the nearest tenth of a percent) in the CPI during the three calendar years immediately preceding the date of such increase. For example, if the CPI for 1995, 1996, 1997 and 1998 were 140, 142, 145 and 149, the percentage increase in the CPI for the period 1996 through 1998 would equal 6.4%. Accordingly, the annual rent for the 1999 Season would equal $266,000 and the per attendee rental for that year would be $1.064 and $3.192, respectively. For the 2002 Season the annual rental of $266,000 and the per attendee rent of $1.064 and $3.190 would be similarly adjusted. The CPI shall mean the United States Department of Labor, Bureau of Labor Statistics, Consumer Price Index (All items; Buffalo-Niagara Falls, NY MSA) (1982 = 100) or if no such index -13- is so published, by any other nationally-recognized publisher of similar statistical information selected by Darien and Metropolitan. 6. Releases -------- On the date hereof the parties have executed and delivered a settlement agreement in the form annexed hereto as Exhibit B. 7. Noncompetition -------------- 7.1 During the Term, Metropolitan and its affiliates will not (i) book, promote or produce any Concerts in any outdoor amphitheater located within 90 miles of the Center, (ii) have any interest, direct or indirect, in the ownership, management or operation of any such amphitheater, provided that Ogden Corporation may provide food, beverage -------- and parking services to any such amphitheater, or (iii) book, promote or produce any Concert during any Season at any indoor arena located within such 90-mile radius if Metropolitan shall not have negotiated in good faith to book such Concert at the Center or if the amount of the guaranteed payment to be made by Metropolitan in respect of such Concert at such arena shall be in excess of the amount of the guaranteed payment offered by Metropolitan with respect to that Concert at the Center, provided that if -------- the only available date for a proposed Concert shall be a date on which (a) a Darien Event is then scheduled, Metropolitan shall so notify Darien in writing and if Darien shall not have notified Metropolitan in writing that it has rescheduled the Darien Event within two business days following its receipt of such notice from Metropolitan, or (b) a Concert is then scheduled at the Center and Metropolitan shall have failed (after using its best efforts) to reschedule either such booked Concert or such proposed Concert at the Center to avoid such conflict, then, in either case, Metropolitan shall be entitled to book, promote and -14- produce such proposed Concert on such date at an indoor arena within such radius. Metropolitan acknowledges that a breach of its obligations under this Section 7 would result in irreparable injury to Darien for which monetary damages would not be an adequate remedy. Therefore, Metropolitan consents to issuance of injunctive relief in the event of a breach of its obligations under this Section 7, in addition to any other remedies to which Darien is otherwise entitled. 7.2 During the Term, none of Darien, Premier Parks Inc. or their respective subsidiaries will have any interest, direct or indirect, in the ownership, management or operation of any outdoor amphitheater (other than the Center) located within 90 miles of the Center. 8. Advertising ----------- At its expense, Metropolitan shall provide advertising and marketing promotion for the Concerts of a type and, when aggregated with such promotions as are provided by or on behalf of the performers thereof or the shows constituting such Concerts, are in amounts consistent with advertising and marketing for events comparable to the Concerts located at Comparable Facilities in accordance with then Industry Standards. With respect to all advertising and marketing placed by or on behalf of Metropolitan, it will provide Darien with advance copies of such advertising or the story boards thereof and a description of all other material aspects of such advertising and marketing programs and will not implement any such advertising or program (or portion thereof) to which Darien reasonably objects in writing. Without limiting the foregoing, (i) all ticket outlets for any Concert shall have available for sale tickets for admission to both the Concert and the Theme Park ("Combo Tickets"), (ii) Metropolitan shall use reasonable good faith efforts to -15- cause all radio and television advertising relating to the Concert to include a tag relating to the availability of Combo Tickets, and use reasonable good faith efforts to cause such tag, in the case of radio advertising, to last at least 5 seconds during any 60 second ad (or, in the case of shorter or longer ads, a tag of proportional duration), (iii) Metropolitan shall use reasonable good faith efforts to cause all print advertising to contain at least three lines relating to the availability of Combo Tickets, and (iv) no tickets to any Concert shall be available for sale at any grocery store or chain of grocery stores other than the grocery store or chain that then sells admission tickets to the Theme Park. The provisions of clause (i) of the preceding sentence shall not be applicable at any time during which Metropolitan is prevented from complying with the provisions of such clause (i) by virtue of any agreement or arrangement entered into by Darien. 9. Third Party Agreements/Control ------------------------------ Metropolitan may enter into concession or other agreements with reputable (in Metropolitan's reasonable opinion) third parties to provide to it services required by it in order to perform its obligations hereunder, provided that (i) the term of any such agreement shall not -------- exceed the Term of this Lease and (ii) Metropolitan shall not assign to, or contract with any other party in respect of, its obligation to book, promote and produce Concerts hereunder. During the Term, Metropolitan shall not permit any person, entity or group (as such term is defined in the regulations promulgated under Section 13 of the Securities Exchange Act of 1934) (other than the shareholders of Metropolitan on the date of this Lease) to obtain or exercise "control" over Metropolitan. As used herein, the terms "control" and "affiliates" shall have the meaning ascribed to that term in the rules and regulations promulgated by the Securities and Exchange Commission. -16- 10. Other Responsibilities of Metropolitan -------------------------------------- 10.1 At all times during each Season of the Term and all other times during which Metropolitan shall have access to the Center hereunder, Metropolitan shall use and maintain the Center so as to avoid (i) unreasonable fire and health hazards, (ii) material damage to the Center, (iii) any violation (other than those existing on the date hereof) of applicable laws, statutes, ordinances, rules, regulations, judicial decisions, orders, existing recorded and enforceable covenants and restrictions and other requirements of any Authority (collectively, "Laws"), (iv) any nuisance or unsafe condition at the Center and (v) any violation of the requirements of any applicable insurance policy maintained by Metropolitan or Darien. 10.2 Without limiting any other duties and responsibilities of Metropolitan under this Lease, Metropolitan shall have the following duties and responsibilities with respect to the Concerts: (a) Contract with all talent, staging companies and contractors; and contract for all merchandise and promotion; (b) Secure any necessary financing; (c) Produce and stage the Concerts; (d) Exercise control over all aspects of the Concerts except to the extent control of any such aspect is to be exercised by Darien according to the express provisions hereof; (e) Arrange for all ticket refunds in the event of cancellation of a Concert; -17- (f) Except as otherwise provided herein, hire, supervise and coordinate all personnel required for the Concerts; (g) Conduct the day-of-the Concert settlements with the talent and other contracting parties; (h) Receive, record, pay out and account for monies, and otherwise handle Concert finances, in a business-like manner in accordance with the provisions hereof; (i) Devise plans and provide for security within the Center for the Concerts and coordinate with all appropriate Authorities with respect thereto; (j) Conduct all aspects of the Concert operation in a manner consistent with then Industry Standards for Comparable Facilities; (k) Except with respect to the limited maintenance to be specifically provided by Darien in accordance with Section 11, take such actions as are necessary to maintain the Center in good operating condition during each Season in a manner consistent with then Industry Standards for Comparable Facilities; and (l) Pay all costs and expenses incurred in connection with the presentation of the Concerts, including, but not limited to, sales taxes, fees to artists, advertising and promotional costs, insurance costs, costs of equipment and utilities (pursuant to separate meters for the Center), including power generators and other equipment leased for any Concert. -18- 11. Responsibilities of Darien -------------------------- 11.1 Without limiting any other duties and responsibilities of Darien under this Lease, Darien shall have the following duties and responsibilities with respect to the Concerts and the Center; (a) Pay all real estate and personal property taxes with respect to the Theme Park, which taxes shall not constitute Darien Expenses, as hereinafter defined, except to the extent allocable to the Center; (b) Maintain and operate the parking area specified in Schedule A (the "Concert Parking Area") and provide parking lot personnel; (c) Permit access to the Concert Parking Area in connection with the Concerts, subject to the provisions of this Lease, provided, however, no such access shall constitute an easement, right-of-way or license with respect to any part of the Theme Park; (d) Provide in a first class manner for plumbing, electric, water, sewer, garbage removal, lawn maintenance and ambulance services for the Center; (e) Select from among its management employees an individual who shall act as "Darien Coordinator," and who shall assist Metropolitan in the performance of its obligations hereunder; and (f) Maintain the Center and provide security and utilities therefor during periods other than the Seasons. 11.2 Subject to the provisions of Section 11.3, Darien shall be solely responsible for paying the wages of all Darien employees, withholding any taxes therefrom, maintaining required worker's compensation with respect thereto and -19- providing such employees all other benefits to which they are entitled (by operation of law or otherwise). 11.3 The term "Darien Expenses" shall mean all reasonable direct expenses and other expenses to the extent approved in writing by Metropolitan, in each case actually incurred by Darien in performing its duties and responsibilities hereunder, including, without limitation, wages, salaries and benefits of Darien employees payable with respect to periods during which Darien has provided Metropolitan the use thereof, excluding (i) wages, salaries and benefits of Darien's management personnel, (ii) wages, salaries and benefits of other Darien employees payable with respect to any period other than periods during which Darien has provided Metropolitan the use thereof, (iii) expenses incurred in performing Darien's obligations under Section 11.1(f) hereof, and (iv) all costs and expenses arising out of any Darien Event. Metropolitan shall reimburse Darien for all Darien Expenses within 30 days following receipt of any invoice therefor. 12. Joint Responsibilities. ---------------------- 12.1 The parties shall jointly: (a) Obtain all necessary Approvals for the Concerts; devise plans for security for areas adjacent to the Center and coordinate such plans with all appropriate Authorities; (b) Devise plans for traffic control; (c) Procure and maintain at all times during the Term all Approvals required to operate the Center. -20- 12.2 Each party shall cooperate with the other party in connection with the joint responsibilities specified in this Section 12, shall not make any filing or submission to any Authority to which the other party objects in writing, shall provide the other party an opportunity to be present at any proposed conference with Authorities and shall not take any other material action regarding items of joint responsibility to which the other party objects in writing. 13. Sponsorships ------------ Metropolitan shall not enter into any sponsorship agreements or arrangements relating to any Concert or series of Concerts except with the prior written consent of Darien, which shall not be unreasonably withheld, except that no such consent shall be required with respect to any sponsorship agreement or arrangement (i) relating to alcoholic beverages if on the date of such agreement or arrangement the Theme Park does not have any sponsorship arrangement relating to alcoholic beverages and (ii) that Metropolitan is required to enter into an order to book a Concert, which agreement or arrangement is applicable only to such Concert and provides for no payment thereunder to Metropolitan. Metropolitan shall at least thirty days prior to the execution of any sponsorship agreement provide Darien with written notice thereof, including the identity of the proposed sponsor. If any such proposed sponsor is then engaged in a business that is competitive with the business conducted by any then existing sponsor of the Theme Park, Darien shall promptly so notify Metropolitan in writing and Metropolitan will promptly provide to Darien a written description of the principal terms of such proposed agreement. Thereupon, Darien shall promptly notify in writing such existing sponsor, shall specify in such notice the principal business terms of -21- such proposed agreement and shall offer such existing sponsor the right to match the terms specified in such notice. If such existing sponsor shall agree in writing to match such terms within fifteen days following its receipt of such notice, Metropolitan shall, in lieu of entering into any such agreement with the proposed sponsor, enter into a sponsorship agreement with such existing sponsor on such terms. Notwithstanding the foregoing, Metropolitan shall not enter into any sponsorship agreement with any entity engaged in the business of owning, managing or operating grocery stores, or negotiate with any such entity in connection therewith, other than the grocery store entity that is then a sponsor of the Theme Park. 14. Food and Beverage ----------------- Metropolitan acknowledges that Darien and Canteen Corporation ("Canteen") are parties to a License and Concession Agreement, dated as of May 3, 1993, as amended (the "Canteen Agreement") pursuant to which Canteen provides food and beverage services at the Center. Darien has heretofore provided Metropolitan a true and correct copy of the Canteen Agreement. Metropolitan acknowledges that the rights of Canteen under the Canteen Agreement shall be binding upon Metropolitan in respect of any Concert. Metropolitan may agree to terminate or otherwise amend the Canteen Agreement provided that (i) any amount payable to Canteen with respect to -------- any such termination shall be borne solely by Metropolitan and (ii) no such amendment shall extend the term of the Canteen Agreement beyond the end of the Term. All amounts received by Darien under the Canteen Agreement in respect of any Concert shall be promptly delivered to Metropolitan. Upon written request of Metropolitan, Darien shall -22- use good faith efforts to cause the Canteen Agreement and the rights and obligations of Darien thereunder to be assigned by Canteen to Metropolitan. 15. Receipts; Net Receipts ---------------------- 15.1 Except as otherwise explicitly provided herein, during the Term, Metropolitan shall be entitled to all Receipts derived from the Concerts and shall bear the sole responsibility with respect to, and the economic risk of, any Shortfall. "Receipts" shall mean all receipts derived, directly or indirectly, from the following, computed on a cash basis (including receipts payable to either party). (a) Ticket sales for Concerts, excluding and deducting therefrom, however, any ride or combo charge reflected in the cost of any Combo Tickets; (b) Facility or parking charges from the Concert Parking Area for Concerts; (c) Sale of Concert merchandise; (d) Food and beverage revenues at the Center during Concerts and ticketing rebates; (e) Sponsorship fees to the extent attributable to the Center (other than any such fees attributable to a Darien Event); and (f) Any other sums received by Metropolitan with respect to a Concert or Concert series, provided, however, Receipts shall not include -------- sales taxes. Notwithstanding the foregoing, any concession items as to which either Metropolitan or Darien is entitled only to receive a percentage of the receipts shall be included in Receipts only to the extent of the amount actually paid to Metropolitan or Darien in respect thereto. -23- 15.2 The term "Net Proceeds" shall mean Receipts less Concert Expenses (as hereinbelow defined). If Receipts are less than Concert Expenses, the difference shall be referred to as the "Shortfall". 15.3 The term "Concert Expenses" shall mean the aggregate of Metropolitan Concert Expenses (as such term is hereinbelow defined) and Darien Expenses. 15.4 The term "Metropolitan Concert Expenses" shall mean all expenses actually incurred by Metropolitan in performing its obligations and responsibilities under this Lease, excluding, however, wages, salaries and other costs of Metropolitan's management employees (other than one management employee located at the Center), the amount of the Escrow Funds and all other amounts expended for capital improvements to the Center by Metropolitan pursuant to Section 3.2. 15.5 Promptly after each Concert, but in no event later than twenty-four (24) hours thereafter: (a) Metropolitan shall furnish to Darien a true and correct statement of the Receipts for and paid attendees at such Concert, which statement shall contain reasonable detail and support for all figures therein and shall be certified by the chief financial officer, or other executive officer, of Metropolitan, and shall deliver to Darien the amount of all ride or combo charges in respect of all Combo Tickets sold for such Concert; and (b) Darien shall furnish to Metropolitan a true and correct statement of the Darien Expenses for such Concert, which statement shall contain -24- reasonable detail and support for all figures therein and shall be certified by the chief financial officer, or other executive officer, of Darien. 15.6 Within thirty (30) days after the end of each Season, Metropolitan shall furnish Darien with a summary profit and loss statement relating to the operation of the Center by Metropolitan during such Season, which statement shall be certified by the chief financial officer, or other executive officer, of Metropolitan, which shall include, without limitation, aggregate totals of the following for such Season: (i) Receipts, (ii) Concert Expenses, (iii) Metropolitan Concert Expenses and (vi) Net Proceeds (or Shortfall). 15.7 Except as otherwise provided herein, all accounting terms shall have the meaning assigned to it in accordance with generally accepted accounting principles, except that the Escrow Funds will be amortized on a straight-line basis over 25 years, notwithstanding any different amortization method provided in such accounting principles. Metropolitan shall maintain its books and records and conduct its business in accordance with customary internal financial and accounting controls. 16. Condemnation ------------ If any part of the Center is condemned or otherwise taken under the power of eminent domain, or conveyed in lieu of condemnation, and the condemnation or taking materially and adversely affects Metropolitan's use of the Center, Metropolitan shall have the right to terminate this Lease by written notice to Darien delivered within 90 days after such condemnation or taking. In such event, Metropolitan shall forthwith pay to Darien all rent and other amounts payable in respect of any period prior to the date of such termination, and Darien shall not be required to pay Metropolitan any -25- amount except as provided in this Section 16. In the event of such a termination, the parties shall jointly select an investment banking firm or other entity which is regularly engaged in the valuation of businesses (the "Appraiser"). Using generally accepted methods of valuation, the Appraiser shall deliver a written report to the parties specifying the value as of the date of (but without giving effect to) such termination of each party's interest in the Center, and any award that may be paid in connection with such condemnation or taking shall be divided between the parties in proportion to the respective value of the parties' interests in the Center as specified in the report of the Appraiser. If part of the Center is condemned or taken, and Metropolitan does not elect to terminate this Lease, this Lease shall be unaffected thereby, Metropolitan shall pay all rent and other amounts payable hereunder and Darien shall not have any obligation to repair or restore any part of the Center. If the Center is temporarily condemned or taken, this Lease shall be suspended for such period, and Metropolitan shall have no obligation to pay rent and other amounts payable under this Lease during such period, provided, however, -------- ------- that in such case, Metropolitan shall not be entitled to receive any portion of any award that represents compensation for the use or occupancy of the Center during any applicable portion of any Season. 17. Assignment and Subletting ------------------------- 17.1 The terms and conditions in this Lease were offered solely by Darien to Metropolitan as an inducement to lease and use the Center as provided herein. Metropolitan acknowledges and agrees that Darien would not necessarily lease the Center to another party on such terms and conditions, and Darien is specifically relying on the experience, reputation and expertise of Metropolitan in booking Concerts in -26- agreeing to the provisions of this Lease. Therefore, Metropolitan shall not voluntarily, involuntarily, or by operation of law, without the prior written consent of Darien: (i) sublet all or any part of the Center or, except as explicitly permitted hereunder, allow it to be sublet, occupied or used by any person or entity other than Metropolitan; (ii) assign Metropolitan's interest under this Lease; or (iii) amend or modify an assignment, sublease or other transfer that has been previously approved by Darien. 17.2 Any action taken or proposed to be taken pursuant to Section 17.1 shall be collectively referred to as an Assignment, and any third party succeeding to, or proposed to succeed to, all or a portion of Metropolitan's interest under this Lease shall be referred to as an Assignee. Any transfer of control of Metropolitan, by means of any transfer or transfers of stock, assets or otherwise, shall be deemed an Assignment. In the event of an Assignment arising out of any such transfer of control of Metropolitan or any transfer of all or a substantial portion of its assets, Darien shall not withhold its consent thereto if, in light of the financial condition, business reputation, business experience and prospects of the proposed assignee, the withholding thereof would be deemed unreasonable. No Assignment shall be effective until Metropolitan has delivered to Darien an executed counterpart of the document evidencing the Assignment in form and substance satisfactory to Darien. 17.3 Notwithstanding any other provision of this Lease, Metropolitan may assign this Lease to Ogden Corporation ("Ogden"), any subsidiary of Metropolitan or Ogden or any entity controlled by Metropolitan then engaged in the business of -27- producing Concerts, in each case without the consent of Darien. Metropolitan shall give Darien 60 days' prior written notice of any such Assignment. As used herein, the term "controlled" shall have the meaning provided in the rules and regulations of the Securities and Exchange Commission. 17.4 Except as provided in Section 17.3, any attempted Assignment without Darien's consent shall constitute an Event of Default and shall be voidable at Darien's option. Darien's consent to any one Assignment shall not constitute a waiver of its rights hereunder with respect to any subsequent Assignment or a consent to any subsequent Assignment. ANY ASSIGNMENT, SUBLETTING, OCCUPANCY, OR USE WITHOUT THE PRIOR WRITTEN CONSENT OF DARIEN OR WITHOUT FULL COMPLIANCE HEREWITH SHALL BE VOID AND SHALL CONSTITUTE AN EVENT OF DEFAULT UNDER THIS LEASE. 18. Change in Laws -------------- If any applicable Authority shall adopt any Law that prohibits Concerts at the Center or that, by means of regulating maximum noise levels, renders performance of Concerts at the Center impossible, Metropolitan shall have the right, exercisable by written notice to Darien delivered within 90 days following the date of such adoption, to terminate this Lease. In such event, Metropolitan shall forthwith pay to Darien all rent and other amounts payable in respect of any period prior to the date of such termination, and Darien shall not be required to pay Metropolitan any portion of the Unamortized Escrow Funds as of the date of such termination. 19. Termination ----------- -28- 19.1 Either party may terminate this Lease by written notice to the other party either (i) without Cause or (ii) with Cause. Any termination notice will specify whether the termination is with or without Cause. Any termination without Cause shall be effective 60 days following the date termination notice is given, provided, however, no notice of such termination without Cause given during a Season or less than six months prior to the first day of a Season shall be effective before the last day of that Season. Any termination with Cause shall be effective on the date termination notice is given. 19.2 "Cause" shall mean the occurrence of any Event of Default by or relating to the non-terminating party under the provisions of Section 25 hereof. 19.3 (a) In the event this Lease is terminated with Cause by Metropolitan or terminated without Cause by Darien, the parties agree that the following shall constitute the sole remedy of Metropolitan in respect of such termination: (i) Darien shall forthwith pay to Metropolitan an amount equal to the Unamortized Escrow Funds as of the effective date of such termination. (ii) Darien shall forthwith pay to Metropolitan an amount equal to two times the average of the annual Net Proceeds from Concerts during the three full Seasons preceding such termination (or, if the termination shall occur prior to the end of the 1998 Season, the average annual Net Proceeds for each full Season during the Term), it being understood that such average will be determined by subtracting any Shortfall for any applicable Season; and (iii) Darien shall not book, promote or produce any Concerts, or enter into any agreement with respect to the booking, promotion or -29- production of any Concerts, in each case, at the Center during the Season in which such termination occurs and the three Seasons following such termination, it being acknowledged that Darien shall continue to have the right to book, promote and produce during such period the KB Event and Darien Events that would not constitute Concerts as such term is defined in Section 1.1. (b) In the event this Lease is terminated with Cause by Darien or without Cause by Metropolitan, the following shall constitute the sole remedy of Darien (except as otherwise provided in Section 7) in respect of such termination: (i) Darien shall have no obligation to pay to Metropolitan any portion of the Unamortized Escrow Funds as of the effective date of such termination; (ii) the provisions of Section 7 hereof shall remain in full force and effect during the Season in which such termination occurs and the three Seasons following such termination; and (iii) In the case of a termination with Cause by Darien, Metropolitan shall forthwith pay to Darien an amount equal to two times the average annual amount received by Darien under Section 5 hereof (including rent based on paid attendees) for the three full Seasons preceding such termination (or, if the termination shall occur prior to the end of the 1998 Season, the average annual payment thereunder for each full Season during the Term). (c) The "Unamortized Escrow Funds" as of any date shall mean an amount equal to the product obtained by multiplying the amount of the Escrow Funds by a fraction, (i) the numerator of which shall equal 25 less the number of full Seasons in - ---- -30- the period commencing on the date of this Lease and ending on the effective date of any termination hereof and (ii) the denominator shall equal 25. 19.4 Upon any termination of this Lease, Metropolitan shall, on or before the effective date of such termination, vacate any part of the Center used and/or occupied by Metropolitan, and subject to Section 3.3 and, except in the case of a termination under Section 26, surrender the Center to Darien in a condition consistent with the then Industry Standards for Comparable Facilities. Except as otherwise provided in Section 3.3, upon any such termination, the Center, including the Improvements and other capital and other improvements thereto made by Metropolitan, shall be the sole and exclusive property of Darien. Metropolitan shall indemnify Darien against any loss or liability resulting from any delay by Metropolitan in surrendering the Center as provided in this Section 19.4, including, without limitation, any claims made by any succeeding tenant, losses to Darien arising out of lost opportunities to lease the Center or Darien's inability to use the Center or any portion thereof for its own account. 19.5 The parties acknowledge and agree that in the event of a termination of this Lease, damages will be difficult to ascertain and that the payments and other remedies specified in this Section 19 constitute a good faith estimate of liquidated damages, and shall not constitute a penalty imposed upon any party. 19.6 The provisions of this Section 19 (other than Section 19.4) shall not be applicable to any termination of this Lease pursuant to Sections 16, 18 or 26 hereof. 20. Metropolitan Records -------------------- All records of Metropolitan pertaining to this Lease shall be kept on file by Metropolitan at its main office for a period of eight (8) years from the date the record is -31- made, and Metropolitan shall, upon reasonable notice, give Darien and/or its authorized representatives the right at reasonable times to inspect, examine, audit and copy, during normal business hours, such of Metropolitan's business books and records that are directly relevant to determining and/or calculating Receipts, or are reasonably necessary in order to determine whether Metropolitan has complied with the provisions of this Lease. The cost of such inspection, examination, audit and copying shall be at the sole expense of Darien and such inspection, examination, audit and copying shall be conducted at Metropolitan's principal office. The provisions of this Section 20 shall survive any termination of this Lease except for a termination pursuant to Section 3.1(a). 21. Darien Records -------------- All records of Darien pertaining to this Lease shall be kept on file by Darien at its main office for a period of eight (8) years from the date the record is made; and Darien shall, upon reasonable notice, give Metropolitan and/or its authorized representatives the right at reasonable times to inspect, examine, audit and copy, during normal business hours, such of Darien's business books and records that are directly relevant to determining and/or calculating Darien Expenses or are reasonably necessary in order to determine whether Darien has complied with the provisions of this Lease. The cost of such inspection, examination, audit and copying shall be at the sole expense of Metropolitan and such inspection, examination, audit and copying shall be conducted at the Darien location where said records are normally maintained. The provisions of this Section 21 shall survive any termination of this Lease, except for a termination pursuant to Section 3.1(a). -32- 22. Indemnification; Insurance -------------------------- 22.1 Metropolitan shall indemnify and hold Darien, its officers, directors, affiliates, agents, employees and shareholders harmless from and against any loss, liability, damage, injury, death, cost or expense, including, without limitations attorneys' fees and disbursements (including those incurred in establishing liability under the indemnification), in all cases, after giving effect to the receipt of any insurance proceeds ("Losses"), arising out of or resulting from (i) any Concert, or other event produced by Metropolitan at the Center or any contract or other agreement entered into by Metropolitan with respect to any such Concert or other event (including, without limitation, nonappearance by any performer and injury to any person at any Concert), (ii) noncompliance by Metropolitan with all applicable Laws and Approvals or (iii) the breach of any agreement, duty or obligation of Metropolitan contained in this Lease; provided, however, that nothing contained herein shall require Metropolitan - -------- ------- to indemnify any party under this Section 22.1 for Losses arising out of the willful misconduct or gross negligence of Darien, its employees (except to the extent then under the direction of Metropolitan) or its agents. 22.2 Darien shall indemnify and hold Metropolitan, its officers, directors, affiliates, agents, employees and shareholders harmless from and against any Loss arising out of or resulting from (i) any Darien Event or any contract or other agreement entered into by Darien with respect to such Darien Event (including nonappearance by any performance and injury to any person at any Darien Event), (ii) noncompliance by Darien with all applicable Laws and Approvals or (iii) the breach of any agreement, duty or obligation of Darien contained in this Lease; provided, however, that -------- ------- nothing contained -33- herein shall require Darien to indemnify any party under this Section 22.2 for Losses arising out of the willful misconduct or gross negligence of Metropolitan, its employees (except to the extent then under the direction of Darien) or its agents. 22.3 (a) Promptly after receipt by any indemnified party 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, such indemnified party shall give prompt notice thereof (the "Claims Notice") to 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 indemnified party. (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 injunction or other equitable or declaratory relief against any indemnified party, (ii) any indemnified party shall have reasonably concluded that there is a conflict of interest between such indemnified party and the indemnifying party in the conduct of such defense or (iii) any indemnified party shall have reasonably concluded that the Asserted Liability may adversely affect, or result in an adverse effect upon, the business, operations or prospects of such indemnified party. If the indemnifying party elects to defend such Asserted Liability, it shall within thirty days (or sooner, if the nature of the Asserted Liability so requires) notify the indemnified party or parties of its intent to do so, and the indemnified party or parties shall cooperate, at the expense of the indemnifying party, in the defense of such Asserted Liability. If the indemnifying party elects not to -34- defend the Asserted Liability, is not permitted to defend the Asserted Liability by reason of the first sentence of this Section, fails to notify the indemnified party or parties of its election as herein provided or contests its obligation to indemnify under this Lease with respect to such Asserted Liability, the indemnified party or parties may pay, compromise or defend such Asserted Liability at the sole cost and expense of the indemnifying party. Notwithstanding the foregoing, neither party may settle or compromise any claim over the reasonable written objection of the other, provided that any indemnified party may settle or compromise any -------- claim as to which the indemnifying party has failed to notify such indemnified party of its election under this Section, as to which the indemnifying party is contesting its indemnification obligations hereunder or involving an Asserted Liability of the type described in clause (iii) of the first sentence of this Section. In any event, each party may participate, at its own expense, in the defense of any Asserted Liability. If the indemnifying party chooses to defend any Asserted Liability, each indemnified party shall make available to the indemnifying party any books, records or other documents within its control that are necessary or appropriate for such defense. Any Losses of any indemnified party for which indemnification is available hereunder shall be paid within 30 days following written demand therefor. The provisions of Sections 22.1 - 22.3 shall survive the termination of this Lease. (c) Each indemnified party acknowledges and agrees that Losses shall be determined after giving effect to the receipt by such indemnified party of any insurance proceeds covering all or any portion of any Loss and that such party irrevocably waives any indemnification rights it might otherwise have under this Section 22 in respect of any portion of any Loss to the extent of such insurance proceeds. No -35- person or entity (including, without limitation, any insurance carrier) shall have any rights (including by way of subrogation) to receive any payment from the indemnifying party in respect of the portion of any Loss covered by such insurance proceeds. (d) As used in Section 22, the term "Losses" as it applies to the nonappearance by any performer at a Concert shall not include any damages of Darien arising out of any loss of attendance at the Theme Park caused by such nonappearance. 22.4 During the Term, Metropolitan shall procure or cause to be procured and maintain at all times the following insurance with insurers reasonably acceptable to Darien: (a) Worker's Compensation insurance as prescribed by the laws of the State of New York; and (b) Comprehensive general, automobile, fire and legal liability insurance (including dramshop liability) with combined single limits of not less than $1,000,000 for any one occurrence in which bodily injury or property damage is alleged, provided, however, that Metropolitan shall maintain at all times during the Term of this Lease an umbrella insurance policy in an amount of at least $5,000,000 per occurrence with respect to each type of claim for bodily injury or property damage referred to in this Section. 22.5 Metropolitan shall furnish Darien copies of all applicable insurance policies (which shall be reasonably acceptable in form and substance to Darien) and Certificates of Insurance evidencing such coverage which shall name Darien as an additional insured on each such policy (other than worker's compensation polices) and -36- which will provide that such insurance would not be cancelled or modified without at least thirty (30) days' prior written notice to Darien. 23. Relationship ------------ It is understood and agreed by the parties that only a landlord/tenant relationship is established under the terms and conditions of this Lease, that the parties are not partners or joint venturers; that employees of Metropolitan are not, nor shall they be deemed to be, employees of Darien, and that, except as otherwise provided herein, employees of Darien are not, nor shall they be deemed to be, employees of Metropolitan, and that neither party shall have the power or right to make or create any representations, warranties, promises, obligations, liabilities, commitments or agreements, whether orally or in writing, on behalf of the other party, and, without limiting the foregoing, neither party shall contract or attempt to contract on behalf of or in the name of the other party or otherwise seek to bind the other party or render the other party liable or responsible for the performance of any agreement or other obligation. Each party shall pay, as and when due, all of its own obligations and liabilities with respect to the Concerts, the Center and this Lease. 24. Representations and Warranties ------------------------------ Each party warrants and represents to the other that it has the corporate right and authority to enter into this Lease and perform its obligations hereunder; that this Lease has been duly authorized, executed and delivered and constitutes its legal, valid and binding obligations in accordance with its terms. The execution, delivery and performance of this Lease does not and will not conflict with, or constitute a default -37- under, any agreement to which such party is a party or by which it or its assets may be bound. 25. Events of Default ----------------- The following shall constitute Events of Default under this Lease: (a) If a party shall default in the making of a payment as and when due hereunder and such default shall not be cured within fifteen (15) days after the giving of written notice thereof by the other party; (b) If Metropolitan shall fail to produce a number of Concerts featuring nationally-recognized performers or shows during any three consecutive Seasons equal to the sum of the Minimum Concerts for such Seasons; (c) If Metropolitan shall default in the performance of, or otherwise fail to comply with, the provisions of Section 17 hereof; (d) If a party shall default in the performance of, or otherwise fail to comply with, any other term or condition of this Lease and such default or failure shall continue uncured for more than thirty (30) days after the giving of written notice thereof by the other party; provided, however, that if such default or failure is curable and if the cure thereof shall have been commenced within such 30-day period and the party in default shall be diligently and continuously prosecuting such cure, the cure period shall be extended for the period reasonably required for such cure but not to exceed an additional ninety (90) days; (e) If a decree or order is rendered by a court having jurisdiction (i) adjudicating a party as bankrupt or insolvent, or (ii) approving as properly filed a petition seeking reorganization, readjustment, arrangement composition or similar relief -38- for a party under the federal bankruptcy laws or any similar state law, and such decree or order continues undischarged for a period of sixty (60) days; (f) If a decree or order is rendered by a court having jurisdiction (i) for the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of a party or of a substantial part or its property or for the winding up or liquidation of its affairs, and such decree or order remains in force undischarged and unstayed for a period of sixty (60) days, or (ii) for the sequestration or attachment of any substantial part of the property of a party without its return to the possession of such party or its release from such sequestration or attachment within thirty (30) days thereafter; or (g) If a party (i) institutes proceedings to be adjudicated a voluntary bankrupt or an insolvent, or (ii) consents to the filing of a bankruptcy proceeding against it, or (iii) files a petition or answer seeking reorganization, readjustment, arrangement, composition or similar relief under the federal bankruptcy laws or any other similar law or practice, or (iv) consents to the filing of any such petition or to the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency or such party or a substantial part of its properties; or (v) makes an assignment for the benefit of creditors, or (vi) is unable to or admits in writing its inability to pay its debts generally as they become due, or (vii) takes action in furtherance of any of the aforesaid. 26. Destruction of the Center. ------------------------- If all or any portion of the Center shall be damaged by fire or other casualty, and such damage materially and adversely affects Metropolitan's use of the Center (a "Material Destruction"), Darien may elect to repair and rebuild the Center by -39- delivery of written notice to Metropolitan within 90 days after Darien determines the amount of insurance proceeds available to it arising out of the Material Destruction. If Darien elects not to repair and rebuild the Center, this Lease shall terminate. In such event, Metropolitan shall forthwith pay to Darien all rent and other amounts payable in respect of any period prior to the date of such termination, and Darien shall not be required to pay Metropolitan any amounts except as provided in this Section 26. In the event of such a termination, the parties shall jointly select an Appraiser. Using then generally accepted methods of valuation, the Appraiser shall deliver a written report to the parties specifying the value as of the date of such termination (but without giving effect thereto) of each party's interest in the Center, and any proceeds from fire or other casualty insurance maintained by Darien shall be divided between the parties in proportion to the respective value of the parties' interests in the Center as specified in the report of the Appraiser. If Darien elects to repair and rebuild the Center following a Material Destruction, (i) Darien shall so repair and rebuild the Center to its condition immediately prior to the Material Destruction, (ii) the rebuilding and repair of the Center shall be completed within one year following such election by Darien, provided that such one-year period will be extended by -------- the duration of any Force Majeure Event (as so extended, the "Rebuilding Period"), (iii) the rebuilding shall be funded by the proceeds of fire or other casualty insurance maintained by Darien and, to the extent such proceeds are insufficient to complete such rebuilding, by Darien and (iv) the rights and obligations of the parties under this Lease will be suspended during the Rebuilding Period and the Term hereof will be extended by a period equal to the duration of the Rebuilding Period. During the Term, Darien shall maintain fire and other casualty insurance in respect of the -40- Center. As used in this Section 26, the term "Force Majeure Event" shall have the meaning provided in Section 3.1(a) except that references to Metropolitan in such definition shall be deemed to be references to Darien and references therein to Darien shall be deemed to be references to Metropolitan. 27. Notices ------- Any notice under or with respect to this Lease shall be in writing and shall be personally delivered or sent by overnight courier service, or by telecopy to the following addresses (or such other addresses of which notice has been given in accordance with the provisions of this Section): If to Metropolitan: The Metropolitan Entertainment Co., Inc. 7 North Mountain Avenue Montclair, New Jersey 07042 Attention: Mr. James Koplik Fax #: (201) 744-5090 With a simultaneous copy to: The Metropolitan Entertainment Co., Inc. Two Pennsylvania Plaza, 26th Floor New York, New York 10121 Attention: John Scher Fax #: (212) 868-5714 and Ogden Services Corp. Two Pennsylvania Plaza, 25th Floor New York, New York 10121 Attention: General Counsel Fax #: (212) 868-5714 -41- If to Darien: Darien Lake Theme Park and Camping Resort, Inc. 9993 Allegany Road Darien Center, New York 14040 Attention: General Manager Fax #: (716) 599-4053 With a simultaneous copy to: (i) Premier Parks Inc. 122 East 42nd Street 49th Floor New York, New York 10168 Attention: Chief Executive Officer Fax #: (212) 949-6203 and (ii) Baer Marks & Upham LLP 805 Third Avenue New York, New York 10022 Attention: James M. Coughlin, Esq. Fax #: (212) 702-5810 Any notice sent by overnight courier service shall be effective on the business day on which delivery is made or transmitted by telecopier, on the date confirmation of receipt thereof is received by the party giving such notice. Any notice may be given by Darien's attorney on behalf of Darien and by Metropolitan's attorney on behalf of Metropolitan. 28. General ------- 28.1 This Lease sets forth the entire agreement and understanding of the parities in respect to the transactions contemplated hereby and supersedes all prior agreements, arrangements, and understandings relating to the subject matter hereof. 28.2 All the terms and conditions of this Lease shall be binding upon, and inure to the benefit of, and be enforceable by, the parties and their respective -42- successors. This Lease and the rights and obligations hereunder shall not be assignable by either party, without the prior written consent of the non-assigning party, except: (a) As provided in Section 17; (b) Darien shall have the absolute right to assign this Lease and all rights and obligations hereunder to any wholly-owned subsidiary of Premier Parks Inc. or any subsequent owner and/or operator of the Theme Park, including, without limitation, any joint venture of which Darien is a venturer; and (c) No assignment referred to hereinabove shall be binding upon or effective against the non-assigning party unless and until notice of such assignment, with all relevant detail, is given to the non-assigning party by the assigning party. 28.3 Darien and its agents may enter the Center during any Season at any reasonable time after giving at least twenty-four (24) hours' prior written notice to Metropolitan, or immediately in the case of any emergency, for the purpose of: (i) inspecting the Center; (ii) posting notices of non-responsibility; (iii) supplying any service to be provided by Darien to Metropolitan hereunder; (vi) staging any Darien Event in accordance with the terms hereof; (v) making improvements, repairs or maintenance in the event of a default with respect thereto by Metropolitan; or (vi) responding to an emergency. Darien shall have the right to use any means it reasonably deems necessary and proper to enter the Center in an emergency. Any entry into the Center by Darien in accordance with this Section shall not be a forcible or unlawful entry into, or a detainer of, the Center, or an eviction, actual or constructive, of Metropolitan from the Center. Darien shall use reasonable efforts to avoid damage to -43- Metropolitan's property when entering the Center, and shall not unreasonably interfere with Metropolitan's business or operations. 28.4 Darien reserves the right to grant easements, rights, and dedications that Darien reasonably deems necessary or desirable, and to record parcel maps and restrictions, so long as such easements, rights, dedications, maps and restrictions do not interfere in any material respect with or restrict in any material respect Metropolitan's use or operation of the Center or the Parking Area or increase in any material respect Metropolitan's obligations or limit in any material respect Metropolitan's rights hereunder. 28.5 Except as otherwise provided in this Lease, Darien shall not be liable to Metropolitan, nor shall Metropolitan be entitled to terminate this Lease or to any abatement of rent, for any damage to the Center, any injury to Metropolitan or any of its employees, agents or invitees, or any loss to Metropolitan's business arising out of any cause. 28.6 As long as Metropolitan pays the rent and other amounts as specified in this Lease and performs all its obligations under this Lease, Darien will not disturb Metropolitan's peaceful and quiet enjoyment of the Center during each Season of the Term. 28.7 If Metropolitan does not vacate the Center at the end of the Term, the holding over shall constitute a month-to-month tenancy, and not a renewal of this Lease, with rent payable equal to two (2) times the rent in effect immediately prior to the holding over. -44- 28.8 Both parties represent and warrant to each other that they have not incurred or caused to be incurred any liability for real estate brokerage commissions or finder's fees in connection with the execution of this Lease. Each party agrees to indemnify, defend and hold the other, its officers, directors, employees, agents and affiliated entities harmless from and against any and all loss, cost, claim and expense incurred as a result of the breach of this warranty. 28.9 All obligations of either party which by their nature involve performance after the end of the Term, or which cannot be ascertained to have been fully performed until after the end of the Term, shall survive the expiration or sooner termination of this Lease. 28.10 The failure of either party at any time or times to require performance of any provisions hereof shall in no manner affect the right of such party to enforce the same at a later time. No waiver by either party of any condition, or of the breach of any provision contained in this Lease, whether by conduct or otherwise, in any one or more instances shall be deemed to be or construed as a further or continuing waiver of any such condition or breach or a waiver of any other condition or breach of any other term of this Lease. 28.11 This Lease may be amended, modified, superseded or canceled, and any of the terms and conditions hereof may be waived, only by a written instrument duly executed by both parties hereto or, in the case of a waiver, by the party making the waiver. 28.12 The validity, interpretation and legal effect of this Lease shall be governed by, and the rights and liabilities of the parties hereto shall be determined in -45- accordance with the law of the State of New York (without regard to conflict of laws principles applied in such State). 28.13 No consent or approval given by Darien under this Lease shall be effective unless given in writing by the General Manager of the Theme Park or by the Chairman of the Board or President of Darien. 28.14 During the Term, Metropolitan and Darien shall execute and deliver such other appropriate agreements, instruments and documents, and take such other action, as shall be necessary or desirable to carry out the intent and accomplish the purposes of this Lease. 28.15 (a) Any dispute, controversy or claim between the parties arising out of or in connection with this Lease, any amendment hereof or the performance hereof (collectively, the "Arbitrable Claims"), shall be determined and settled by arbitration in New York, New York by a panel of three arbitrators selected as provided below in accordance with the rules of the American Arbitration Association. The Arbitrable Claims shall be submitted to three arbitrators who are listed on the commercial panel of the American Arbitration Association, one arbitrator being selected by Darien, one arbitrator being selected by Metropolitan and the third being selected by the two arbitrators so selected. In the event that either party, within ten days after any notification of any demand for arbitration hereunder, shall not have selected its arbitrator and given notice thereof to the other, such arbitrator shall be selected by the American Arbitration Association. The written decision of a majority of such arbitrators shall be binding, final and conclusive upon the parties, such decision may provide for equitable relief and judgment may be entered on any such decision in any federal or state court -46- having jurisdiction. Unless the arbitrators determine otherwise, the party against whom any such award is issued shall pay the expenses of the arbitration, including, but not limited to, attorneys' fees and expenses incurred by the prevailing party. (b) No action at law or suit in equity based upon any Arbitrable Claim shall be instituted by any party in any court except (i) an action to compel arbitration pursuant to this Section; (ii) an action to enforce the arbitration award rendered in accordance with this Section; or (iii) an action brought in aid of arbitration pursuant to Article 75 of New York's Civil Practice Law and Rules. -47- IN WITNESS WHEREOF, the parties have duly executed this Lease as of the date first above written. DARIEN LAKE THEME PARK AND CAMPING RESORT, INC. By: ------------------------------------- Kieran E. Burke, Chairman of the Board and Chief Executive Officer THE METROPOLITAN ENTERTAINMENT CO., INC. By: ------------------------------------- John Scher, Chief Executive Officer -48- STATE OF NEW YORK ) ) ss: COUNTY OF NEW YORK ) On this ______ day of December, 1995, before me personally came Kieran E. Burke, to me known, who being by me duly sworn, did depose and say that he is the Chairman of the Board and Chief Executive Officer of DARIEN LAKE THEME PARK AND CAMPING RESORT, INC., the corporation described in and which executed the foregoing instrument, that he has been duly authorized by the Board of Directors of said corporation to execute the foregoing instrument on behalf of said corporation and that he executed the foregoing instrument by order of said corporation for the purposes and uses therein described. ----------------------------------- Notary Public STATE OF NEW YORK ) ) ss: COUNTY OF NEW YORK ) On this ______ day of December, 1995, before me personally came John Scher, to me known, who being by me duly sworn, did depose and say that he is the Chief Executive Officer of THE METROPOLITAN ENTERTAINMENT CO., INC., the corporation described in and which executed the foregoing instrument, that he has been duly authorized by the Board of Directors of said corporation to execute the foregoing instrument on behalf of said corporation and that he executed the foregoing instrument by order of said corporation for the purposes and uses therein described. ----------------------------------- Notary Public -49- Exhibit A I. Tensile Roof over permanent seating II. Permanent bathrooms III. Dressing rooms IV. Support areas V. Stage VI. Sound delay system Exhibit B SETTLEMENT AGREEMENT The Settlement Agreement, dated as of December 20, 1995, by and among Metropolitan Entertainment Co., Inc., a New Jersey corporation ("Metropolitan"), Darien Lake Theme Park and Camping Resort, Inc., a New York corporation ("Darien") and Funtime, Inc., an Ohio corporation ("Funtime"). -------------------- In November 1994, Metropolitan commenced an action (the "Action") in the United States District Court for the Western District of New York (the "Court") entitled Metropolitan Entertainment Co., Inc. v. Darien Lake Theme --------------------------------------------------------- Park & Camping Resort, Inc. and Funtime, Inc. - --------------------------------------------- On the date hereof Metropolitan and Darien have entered into a Lease Agreement (the "Lease Agreement") with respect to the Darien Lake Performance Art Center. In consideration of the execution and delivery of the Lease Agreement, the parties hereto, represented by their separate respective counsel in the Action, desire to settle amicably and resolve all claims (including counterclaims) that have been or might have been asserted in the Action or otherwise against one another, except for those expressly preserved in Sections 3 and 4 hereof. -------------------- NOW THEREFORE, the parties, intending to be legally bound, agree as follows: 1. On the date hereof, Darien has paid to Metropolitan $50,000, representing payment of outstanding amounts owed to Metropolitan under the agreements between Metropolitan and Darien referred to in clause 14 of the Complaint relating to the Action. 2. Effective as of the date of this Settlement Agreement, the parties agree to discontinue the Action with prejudice. To this end, the parties agree to cause a Stipulation of Discontinuance with respect to the Action to be executed by their respective counsel on the date of this Settlement Agreement and to be filed with the Clerk of the Court no later than three (3) days following the date of this Settlement Agreement, so that such stipulation may be "so ordered" by a judge of that Court. 3. Metropolitan hereby releases and discharges Darien, Funtime and their respective officers, directors, employees, shareholders, affiliates, agents, successors and assigns (collectively, the "Darien Releasees") from and against all claims, actions, causes of action, claims for relief, damages, liabilities, rights, accountings, reckonings, obligations, costs and demands, known and unknown, of every nature and kind whatsoever, against the Darien Releasees, which Metropolitan and its successors or assigns ever had, now have or hereafter can, shall or may have, for, upon or by reason of any matter, cause or thing whatsoever, from the beginning of the world up to and including the date hereof, excluding those arising out of the obligations of any Darien Releasee under the Lease Agreement. 4. Each of Darien and Funtime hereby releases and discharges Metropolitan and its officers, directors, employees, shareholders, affiliates, agents, successors and assigns (collectively, the "Metropolitan Releasees") from and against all claims, actions, causes of action, claims for relief, damages, liabilities, rights, accountings, reckonings, obligations, costs and demands, known and unknown, of every nature and kind whatsoever, against the Metropolitan Releasees, which Darien, Funtime and their respective successors or assigns ever had, now have or hereafter can, shall or may have, for, upon or by reason of any matter, cause or thing whatsoever, from the beginning of the world up to and including the date hereof, excluding those arising out of the obligations of any Metropolitan Releasee under the Lease Agreement. 5. All notices and other communications hereunder shall be given in accordance with Section 27 of the Lease Agreement, provided that any notice -------- to be sent to Funtime shall be sent to it in care of Darien at the addresses indicated in the Lease Agreement. 6. Each party to this Settlement Agreement warrants and represents to each other party to this Settlement Agreement as follows: (a) Each party to this Settlement Agreement has made such investigation, evaluation and analysis of the facts pertaining to the settlement and this Settlement Agreement and the releases contained herein and of all matters pertaining thereto as it deems necessary and appropriate. (b) A responsible officer of each party has read this Settlement Agreement and understands the contents thereof. (c) There has been no assignment, subrogation, encumbrance, hypothecation, sale, conveyance, relinquishment, limitation upon, or any other complete or partial transfer or disposition of all or any interest in (nor does any third party assert or possess any lien against, any interest in, or any right to) any claim, right, act, damage, demand, debt, liability, accounting, reckoning, obligation, cost, right of action, claim for relief or cause of action released or settled hereby. (d) Each party is legally authorized and entitled to enter into this Settlement Agreement, and this Settlement Agreement has been duly authorized, executed and delivered by such party and constitutes legal, valid, binding and enforceable obligations of such party. 7. Each party will promptly execute all further and additional documents, and undertake such further acts, as shall be reasonable, convenient, necessary or desirable to carry out the provisions of this Settlement Agreement. -2- 8. This Settlement Agreement shall be interpreted, enforced and governed by the laws of the State of New York (without regard for the conflict of laws principles applied by the courts of the State of New York). 9. This Settlement Agreement may be executed in counterparts, and each counterpart shall be deemed an original and, when taken together with other signed counterparts, shall constitute one agreement which shall be binding and effective as to all parties hereto. 10. This Settlement Agreement may not be amended orally, nor shall any purported oral amendment or modification (even if accompanied by partial or complete performance in accordance therewith) be of any legal force or effect or constitute an amendment or modification of this Settlement Agreement, but rather this Settlement Agreement may be amended or modified only by an agreement in writing signed by all parties hereto. 11. Should any provision of this Settlement Agreement become legally unenforceable, no other provision of this Settlement Agreement shall thereby be affected, and this Settlement Agreement shall be construed as if the Settlement Agreement had never included the unenforceable provision. 12. Each party shall bear its own attorneys' fees, costs of suit and other expenses relating to the disputes referred to herein and to the negotiation, preparation, execution, delivery and performance of this Settlement Agreement. -3- IN WITNESS WHEREOF the parties have hereto signed their names as of the ________ day of December, 1995. THE METROPOLITAN ENTERTAINMENT CO., INC. By: -------------------------------- Name: Title: DARIEN LAKE THEME PARK AND CAMPING RESORT, INC. By: -------------------------------- Kieran E. Burke Chairman of the Board FUNTIME, INC. By: -------------------------------- Kieran E. Burke Chairman of the Board -4- STATE OF _________________ ) ) ss.: COUNTY OF ______________ ) On this day of December, 1995, before me came to me known and known to me to be the of Metropolitan Entertainment Co., Inc. and who executed the foregoing Settlement Agreement, and he duly acknowledged to me that he executed the same and that he is authorized by Metropolitan Entertainment Co., Inc. to execute the foregoing settlement Agreement on behalf of that corporation. ----------------------------------- Notary Public STATE OF _________________ ) ) ss.: COUNTY OF ______________ ) On this day of December, 1995, before me came Kieran E. Burke to me known and known to me to be the Chairman of the Board of Darien Lake Theme Park and Camping Resort, Inc. and who executed the foregoing Settlement Agreement, and he duly acknowledged to me that he executed the same and that he is authorized by Darien Lake Theme Park and Camping Resort, Inc. to execute the foregoing settlement Agreement on behalf of that corporation. ----------------------------------- Notary Public STATE OF _________________ ) ) ss.: COUNTY OF ______________ ) On this day of December, 1995, before me came Kieran E. Burke to me known and known to me to be the Chairman of the Board of Funtime, Inc. and who executed the foregoing Settlement Agreement, and he duly acknowledged to me that he executed the same and that he is authorized by Funtime, Inc. to execute the foregoing settlement Agreement on behalf of that corporation. ----------------------------------- Notary Public -5- EX-11 3 Exhibit 11 ---------- Premier Parks Inc. Statement re computation of income (loss) per share For the year ended December 31, 1995 Primary income (loss) per common share: Net income (loss) .......................................... $ (1,185,000) Preferred stock dividend ................................... (529,000) ------------ Net income (loss) applicable to common stock ............... $ (1,714,000) ============ Weighted average number of common shares outstanding ........................................ 18,689,000 Primary income (loss) per common share ..................... $ (0.09) ============ Fully diluted income (loss) per common share: Net income (loss) .......................................... $ (1,185,000) Interest on converted senior subordinated debt, net of tax effect .................................. 250,000 ------------ Net income (loss), as adjusted ............................. $ (935,000) ============ Weighted average number of common shares outstanding ........................................ 18,689,000 Effect of converting senior subordinated debt, as of beginning of year ............................ 3,500,000 Effect of converting preferred shares into common as of issuance .............................. 12,121,000 ------------ Weighted average number of common shares outstanding ........................................ 34,310,000 ------------ Fully diluted income (loss) per common share ............... $ (0.03) ============ This computation is submitted as an exhibit to the Company's Form 10-K in accordance with Regulation S-K item 601 (b) (11), although presenting the computation is not in accordance with paragraph 30 of APB Opinion 15 because the computation produces an antidilutive result. -----END PRIVACY-ENHANCED MESSAGE-----