-----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, PNH5i67nMBcfSIiA3Rf7R3aFxh5FrDwpVrlO+794G6pnbZmgaJATwuTGJzxLjADw LiUn+Pw5tTQ+labzfVsGMQ== 0001005477-01-002422.txt : 20010402 0001005477-01-002422.hdr.sgml : 20010402 ACCESSION NUMBER: 0001005477-01-002422 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIX FLAGS INC CENTRAL INDEX KEY: 0000701374 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 736137714 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-13703 FILM NUMBER: 1587936 BUSINESS ADDRESS: STREET 1: 11501 NE EXPWY CITY: OKLAHOMA CITY STATE: OK ZIP: 73131 BUSINESS PHONE: 4054752500 MAIL ADDRESS: STREET 1: 122 EAST 42ND STREET 49TH STREET CITY: NEW YORK STATE: NY ZIP: 10168 FORMER COMPANY: FORMER CONFORMED NAME: TIERCO GROUP INC/DE/ DATE OF NAME CHANGE: 19920703 10-K 1 0001.txt FORM 10-K ================================================================================ 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, 2000 ----------------- 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 SIX FLAGS, INC. ---------------- (formerly Premier Parks Inc.) (Exact name of Registrant as specified in its charter) Delaware 13-3995059 (State or other jurisdiction (I.R.S. Employer of incorporation or Identification No.) organization) 11501 Northeast Expressway, Oklahoma City, Oklahoma 73131 (Address of principal executive offices) Registrant's telephone number, including area code: (405) 475-2500 ----------------------- Securities registered pursuant to Sec. 12(b) of the Act:
Title of Class Name of Each Exchange on Which Registered - -------------------------------------------------------- ----------------------------------------------- Shares of common stock, par value $.025 per share, New York Stock Exchange with Rights to Purchase Series A Junior Preferred Stock Premium Income Equity Securities, consisting of New York Stock Exchange Depositary Shares representing 1/500 of a share of 7 1/2% Mandatorily Convertible Preferred Stock Preferred Income Equity Redeemable Shares, New York Stock Exchange representing 1/100 of a share of 7 1/4% Convertible Preferred Stock
------------------------------------- Securities registered pursuant to Sec. 12(g) of the Act: NONE ------------------------------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in the definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |_| State the aggregate market value of the voting stock held by non-affiliates (assuming, solely for the purposes of this Form, that all the directors of the Registrant are affiliates) of the Registrant: Approximately $1,598.6 million as of March 1, 2001 (based on the last sales price on such date as reported on the New York Stock Exchange). See "Item 5. -- Market for the Registrant's Common Equity and Related Stockholder Matters." Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest most practicable date: The number of shares of Common Stock of the Registrant outstanding as of March 1, 2001 was 80,079,351 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 2001, which will be filed by the Registrant within 120 days after the close of its 2000 fiscal year. ================================================================================ PART I ITEM 1. BUSINESS Introduction The Company(1) is the largest regional theme park operator in the world. The 38 parks it now operates had attendance of approximately 46.4 million in 2000. These parks include 16 of the 50 highest attendance theme parks in North America, the largest paid admission theme park in Mexico and seven theme parks in Europe. The Company is also managing the development and construction of a new theme park in Spain. The Company's theme parks serve each of the 10 largest metropolitan areas in the United States. The Company estimates that approximately two-thirds of the population of the continental United States live within a 150-mile radius of one of the Company's parks. For the year ended December 31, 2000, the Company's reported total revenue was approximately $1,007.0 million and its consolidated earnings before interest, taxes, depreciation and amortization and non-cash compensation ("EBITDA") were approximately $369.3 million. Adjusted EBITDA for the year was $402.5 million. Adjusted EBITDA includes the Company's proportionate share of the EBITDA of the parks that are less than wholly-owned by the Company and accounted for by the equity method, i.e., Six Flags Over Georgia (including Six Flags White Water Atlanta), Six Flags Over Texas and Six Flags Marine World (the "Partnership Parks"). Aggregate combined revenues and EBITDA of the Company and the Partnership Parks for 2000 were $1,215.2 million and $444.8 million, respectively. In 1998, the Company acquired the former Six Flags, which had operated regional theme parks under the Six Flags name for nearly forty years and established a nationally recognized brand name. The Company has worldwide ownership of the "Six Flags" brand name. To capitalize on this name recognition, since the commencement of the 1998 season and including the 2001 season, the Company has rebranded ten of its parks as "Six Flags" parks, including three of its international parks. The Company holds exclusive long-term licenses for theme park usage throughout the United States (except the Las Vegas metropolitan area), Canada, Europe and Latin and South America (including Mexico) of certain Warner Bros. and DC Comics characters. These characters include Bugs Bunny, Daffy Duck, Tweety Bird, Yosemite Sam, Batman, Superman and others. In addition, the Company's European and Latin and South American licenses with Warner Bros. include the Hanna-Barbera and Cartoon Network characters, including Yogi Bear, Scooby-Doo and the Flintstones.(2) The Company uses these characters to market its parks and to provide an enhanced family entertainment experience. The Company's licenses include the right to sell merchandise featuring the characters at the parks, and to use the characters in its advertising, as walk-around characters, in theming for rides, attractions and retail outlets. The Company believes using these characters promotes increased attendance, supports higher ticket prices, increases lengths-of-stay and enhances in-park spending. The Company's 38 parks are located in geographically diverse markets across North America and Europe. Each of the Company's theme parks is individually themed and provides a complete family-oriented entertainment experience. The Company's theme parks generally offer a broad selection of state-of-the-art and traditional thrill rides, water attractions, themed areas, concerts and shows, restaurants, game venues and merchandise outlets. In the aggregate, the Company's theme parks offer more than 800 rides, - -------- (1) As used in this Report, unless the context requires otherwise, "Company" or "Six Flags" refers to Six Flags, Inc. and its consolidated subsidiaries. (2) Looney Tunes, characters, names and all related indicia are trademarks of Warner Bros.(C)2001, a division of Time Warner Entertainment Company, L.P. ("TWE"). Batman and Superman and all related characters, names and indicia are copyrights and trademarks of DC Comics(C)2001, Cartoon Network and logo are trademarks of Cartoon Network(C)2001, Six Flags and all related indicia are federally registered trademarks of Six Flags Theme Parks Inc.(C)2001, a subsidiary of the Company. Fiesta Texas and all related indicia are trademarks of Fiesta Texas, Inc.(C)2001, a subsidiary of the Company. -1- including over 100 roller coasters, making the Company the leading provider of "thrill rides" in the industry. Since current management assumed control in 1989, the Company has acquired 37 parks (including its interests in the Partnership Parks), and has achieved significant internal growth. Description of Recent and Pending Acquisitions In December 2000, the Company acquired Enchanted Village and Wild Waves, a water park and children's ride park located near Seattle, Washington, which has averaged approximately 500,000 in annual attendance over the last five years. The park is located on approximately 65 acres and is the only park located within the Seattle-Tacoma metropolitan area, which is the 12th largest metropolitan area in the country. The park is primarily a water park and currently lacks a full complement of rides and revenue outlets. The park also has not benefited from significant marketing programs. As a result, the Company believes that there is an opportunity over the next several years to increase this park's revenue, attendance and cash flow, with relatively modest capital expenditures. In February 2001, the Company acquired substantially all of the assets used in the operation of Sea World of Ohio, a 230 acre marine wildlife park located adjacent to the Company's Six Flags Ohio theme park. The two parks are being combined for the 2001 season under the name "Six Flags Worlds of Adventure." The consolidation of the two parks, together with the Company's neighboring campgrounds and hotel, enable the Company to offer a very attractive regional destination experience. The Company believes that the combined facility will enable the Company to increase attendance and revenue and to increase operating efficiencies through shared expenses. In November 2000, the Company entered into a letter of intent to acquire La Ronde, a 146 acre theme park located near downtown Montreal on the former site of the 1967 Montreal World's Fair. If this acquisition is completed, the Company will acquire substantially all of the park assets for approximately U.S. $20 million and lease the site from the City of Montreal on a long-term basis. Although Six Flags expects to acquire the park prior to its 2001 season, the Company does not expect to make any investment in the facility until after that season. Since its inception, the park has been operated by a municipal authority which contracted with third parties to operate a substantial majority of the park's revenue outlets. Those third parties retained a significant portion of the revenues generated by these outlets. Most of the contracts covering these revenue outlets expire by the end of 2002. The Company also believes that it can increase the scope and effectiveness of the park's marketing programs. As a result, the Company believes that, if it acquires this park, Six Flags will be able to substantially increase the park's revenue, attendance and cash flow over the next several years. There is no assurance that the Company will be able to complete this acquisition. Description of Recent Financings In January 2001, the Company consummated the public offering of 11,500,000 Preferred Income Equity Redeemable Shares ("PIERS"), each representing one one-hundredth of a share of its 7 1/4% Convertible Preferred Stock. The Company received net proceeds from the offering of approximately $278.1 million. A portion of the proceeds was used to fund the acquisition of the former Sea World of Ohio. In January 2001, the Company also consummated an offering of $375.0 million principal amount of its 9 1/2% Senior Notes due 2009. The net proceeds of this offering ($363.8 million) were used to refinance existing indebtedness, including $124.7 principal amount of 9 3/4% Senior Notes due 2007 of Six Flags Operations Inc., the Company's principal subsidiary, and $223.0 principal amount of borrowings under the reducing multicurrency revolving portion of the Company's senior credit facility. Amounts repaid under this facility can be reborrowed. -2- Description of Domestic Parks Six Flags America Six Flags America, a combination theme and water park located in Largo, Maryland (approximately 15 miles east of Washington, D.C. and 30 miles southwest of Baltimore, Maryland) is the 40th largest theme park in North America.(3) 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 6.7 million people within 50 miles and 11.4 million people within 100 miles. Based on a copyrighted 2000 survey of television households within designated market areas ("DMAs") published by A.C. Nielsen Media Research, the Washington, D.C. and Baltimore markets are the number 8 and number 24 DMAs in the United States, respectively. The Company owns sites of 515 acres, with 131 acres currently used for park operations. The remaining 384 acres, which are fully zoned for entertainment and recreational uses, provide the Company with ample expansion opportunity, as well as the potential to develop complementary operations. Six Flags America's principal competitors are King's Dominion Park, located in Doswell, Virginia (near Richmond); Hershey Park, located in Hershey, Pennsylvania; and Busch Gardens, located in Williamsburg, Virginia. These parks are located approximately 120, 125 and 175 miles, respectively, from Six Flags America. Six Flags AstroWorld, Six Flags WaterWorld and Splashtown Six Flags AstroWorld, the 35th largest theme park in North America, and the separately gated adjacent Six Flags WaterWorld are located in Houston, Texas. In May 1999, the Company acquired Splashtown, a water park located approximately 30 miles from Six Flags AstroWorld. Splashtown is the 12th largest water park in the United States. The Houston, Texas market provides the parks with a permanent resident population of 4.5 million people within 50 miles and 5.4 million people within 100 miles. The Houston market is the number 11 DMA in the United States. The Company owns sites of approximately 85 acres used for the theme park, approximately 14 acres used for Six Flags WaterWorld and approximately 60 acres for Splashtown. Six Flags WaterWorld and Splashtown compete with each other. Six Flags AstroWorld competes with Sea World of Texas and the Company's Six Flags Fiesta Texas, both located in San Antonio, Texas, approximately 200 miles from the park. In addition, the park competes with Six Flags Over Texas, the Company's park located in Arlington, Texas, approximately 250 miles from the park. Six Flags Darien Lake & Camping Resort Six Flags Darien Lake, a combination theme and water park, is the largest theme park in the State of New York and the 39th largest theme park in North America. Six Flags Darien Lake is located off Interstate 90 in Darien Center, New York, approximately 30, 40 and 120 miles from Buffalo, Rochester and Syracuse, New York, respectively. The park's primary market includes upstate New York, western and northern Pennsylvania and southern Ontario, Canada. This market provides the park with a permanent resident population base of approximately 2.1 million people within 50 miles of the park and 3.2 million within 100 miles. The Buffalo, Rochester and Syracuse markets are the number 44, number 74 and number 80 DMAs in the United States, respectively. The Six Flags Darien Lake property consists of approximately 988 acres, including 144 acres for the theme park, 242 acres of campgrounds and 593 acres of agricultural, undeveloped and water areas. Six - -------- (3) Park rankings are based on 2000 attendance as published in Amusement Business, an industry trade publication. -3- Flags Darien Lake also has a 20,000 seat amphitheater. The Company has a long-term arrangement with a national concert promoter to lease and operate the amphitheater. Adjacent to the Six Flags Darien Lake theme park are a 163 room hotel and a camping resort, each owned and operated by the Company. The campgrounds include 1180 developed campsites, including 395 recreational vehicles (RV's) available for daily and weekly rental. The campground is the fifth largest in the United States. In 2000, approximately 333,000 people used the Six Flags Darien Lake hotel and campgrounds. Substantially all of the hotel and camping visitors visit the theme park. Six Flags Darien Lake's principal competitor is Wonderland Park located in Toronto, Canada, approximately 125 miles from Six Flags Darien Lake. In addition, Six Flags Darien Lake competes to a lesser degree with three smaller amusement parks located within 50 miles of the park. Six Flags Darien Lake is significantly larger with a more diverse complement of entertainment than any of these three smaller facilities. Six Flags Elitch Gardens Six Flags Elitch Gardens is a combination theme and water park located on approximately 67 acres in the downtown area of Denver, Colorado, next to Mile High Stadium and the Pepsi Center Arena, and close to Coors Field. Six Flags Elitch Gardens is the 42nd largest theme park in North America. The park's primary market includes the greater Denver area, as well as most of central Colorado. This market provides the park with a permanent resident population base of approximately 2.5 million people within 50 miles of the park and approximately 3.4 million people within 100 miles. The Denver area is the number 18 DMA in the United States. Six Flags Elitch Gardens has no significant direct competitors. Six Flags Fiesta Texas Six Flags Fiesta Texas, the 28th largest theme park in North America, is a combination theme and water park located on approximately 206 acres in San Antonio, Texas. The San Antonio, Texas market provides the park with a permanent resident population of approximately 1.8 million people within 50 miles and approximately 3.1 million people within 100 miles. The San Antonio market is the number 37 DMA in the United States. Six Flags Fiesta Texas' principal competitor is Sea World of Texas, also located in San Antonio. In addition, the park competes to a lesser degree with two Company parks: Six Flags AstroWorld, located in Houston, Texas, and Six Flags Over Texas located in Arlington, Texas. Six Flags Great Adventure, Six Flags Hurricane Harbor and Six Flags Wild Safari Animal Park Six Flags Great Adventure, the 12th largest theme park in North America, the separately gated adjacent Six Flags Hurricane Harbor, the 12th largest water park in the United States, and Six Flags Wild Safari Animal Park are each located in Jackson, New Jersey, approximately 70 miles south of New York City and 50 miles east of Philadelphia. The New York and Philadelphia markets provide the parks with a permanent resident population of approximately 13.3 million people within 50 miles and approximately 26.2 million people within 100 miles. The New York and Philadelphia markets are the number 1 and number 4 DMAs in the United States, respectively. The Company owns a site of approximately 2,200 acres, of which approximately 125 acres are currently used for the theme park operations, approximately 45 acres are used for the water park and approximately 350 adjacent acres are used for the wildlife safari park. Over 1,600 acres are available for future development. The animal park is home to over 1,200 exotic animals representing more than 58 species, which can be seen over a four and one-half mile drive. Six Flags Great Adventure's principal competitors are Hershey Park, located in Hershey, Pennsylvania, approximately 150 miles from the park; and Dorney Park, located in Allentown, -4- Pennsylvania, approximately 75 miles from the park. The water park competes with several other water parks in the market. Six Flags Great America Six Flags Great America, the 21st largest theme park in North America, is located in Gurnee, Illinois, between Chicago, Illinois and Milwaukee, Wisconsin. The Chicago and Milwaukee markets provide the park with a permanent resident population of approximately 8.3 million people within 50 miles and approximately 12.9 million people within 100 miles. The Chicago and Milwaukee markets are the number 3 and number 33 DMAs in the United States, respectively. The Company owns a site of approximately 440 acres of which 92 are used for the theme park operations, and approximately 106 usable acres are located in a separate parcel available for expansion and complementary uses. Six Flags Great America currently has no direct theme park competitors in the region, but does compete to some extent with Kings Island, located near Cincinnati, Ohio, approximately 350 miles from the park; Cedar Point, located in Sandusky, Ohio, approximately 340 miles from the park; and Six Flags St. Louis, the Company's park located outside St. Louis, Missouri, approximately 320 miles from the park. Six Flags Kentucky Kingdom Six Flags Kentucky Kingdom is a combination theme and water park, located on approximately 58 acres on and adjacent to the grounds of the Kentucky Fair and Exposition Center in Louisville, Kentucky. Of the 58 acres, approximately 38 acres are leased under ground leases with terms (including renewal options) expiring between 2021 and 2049, with the balance owned by the Company. Six Flags Kentucky Kingdom is the 49th largest theme park in North America. The park's primary market includes Louisville and Lexington, Kentucky, Evansville and Indianapolis, Indiana and Nashville, Tennessee. This market provides the park with a permanent resident population of approximately 1.5 million people within 50 miles and approximately 4.7 million people within 100 miles. The Louisville and Lexington markets are the number 48 and number 66 DMAs in the United States. Six Flags Kentucky Kingdom's only significant direct competitor is Kings Island, located near Cincinnati, Ohio, approximately 100 miles from the park. Six Flags Magic Mountain and Six Flags Hurricane Harbor Six Flags Magic Mountain, the 15th largest theme park in North America, and the separately gated adjacent Six Flags Hurricane Harbor are located in Valencia, California, just 30 miles north of Los Angeles. The Los Angeles, California market provides the parks with a permanent resident population of approximately 9.7 million people within 50 miles and approximately 16.1 million people within 100 miles. The Los Angeles market is the number 2 DMA in the United States. The Company owns a site of approximately 260 acres with 160 acres used for the theme park, and approximately 12 acres used for the pirate-themed water park. Six Flags Magic Mountain's principal competitors include Disneyland in Anaheim, California, located approximately 60 miles from the park, Universal Studios Hollywood in Universal City, California, located approximately 20 miles from the park, Knott's Berry Farm in Buena Park, California, located approximately 50 miles from the park, Sea World of California in San Diego, California, located approximately 150 miles from the park and Legoland in Carlsbad, California, located approximately 120 miles away from the park. In 2001, Disney's California Adventure theme park opened up next to Disneyland approximately 60 miles from the park. Six Flags Hurricane Harbor's competitors include the new Soak City USA Waterpark and Raging Waters, each located approximately 50 miles from the water park. -5- Six Flags Marine World Six Flags Marine World, a theme park which also features marine mammals and exotic land animals, is the 30th largest theme park in North America. Six Flags Marine World is located in Vallejo, California, approximately 30 miles from San Francisco, 20 miles from Oakland and 60 miles from Sacramento. This market provides the park with a permanent resident population base of approximately 5.5 million people within 50 miles and approximately 10.1 million people within 100 miles. The San Francisco/Oakland and Sacramento areas are the number 5 and number 19 DMAs in the United States, respectively. The Company manages the operations of Six Flags Marine World under a management agreement, pursuant to which the Company is entitled to receive an annual base management fee of $250,000 and up to $250,000 annually in additional fees based on park performance. In addition, the Company leases approximately 55 acres of land at the site on a long-term basis and at nominal rent, entitling the Company to receive, in addition to the management fee, 80% of the cash flow generated by the combined operations of the park after operating expenses and debt service. Finally, the Company has the option to purchase the entire park beginning in February 2002. Six Flags Marine World is located on approximately 136 acres and offers various rides and other traditional theme park attractions, as well as presentation stadiums, animal habitats and picnic areas, bordering a 55-acre man-made lake. The park provides for the shelter and care for marine mammals, land animals, sharks, birds and reptiles, tropical and cold water fish and marine invertebrates, all featured in a variety of exhibits and participatory attractions. Six Flags Marine World's principal competitors are Underwater World at Pier 39 in San Francisco, Great America in Santa Clara and Outer Bay at Monterey Bay Aquarium. These attractions are located approximately 30, 60 and 130 miles from Six Flags Marine World, respectively. The Company accounts for its interest in Six Flags Marine World under the equity method of accounting. See Note 4 to Notes to Consolidated Financial Statements. Six Flags New England Six Flags New England is a combination theme and water park, located off Interstate 91 near Springfield, Massachusetts, approximately 90 miles west of Boston. Six Flags New England is the 31st largest theme park in North America with a primary market that includes Springfield and western Massachusetts, Hartford and western Connecticut, as well as portions of eastern Massachusetts (including Boston) and eastern New York. This market provides the park with a permanent resident population base of approximately 3.1 million people within 50 miles and 15.2 million people within 100 miles. Springfield, Providence, Hartford/New Haven and Boston are the number 105, number 50, number 27 and number 6 DMAs in the United States. Six Flags New England is comprised of approximately 230 acres, with 90 acres currently used for park operations, 12 acres for a picnic grove and approximately 128 undeveloped acres. Six Flags New England's only significant competitor is Lake Compounce located in Bristol, Connecticut, approximately 50 miles from Six Flags New England. To a lesser extent, Six Flags New England competes with The Great Escape, the Company's park located in Lake George, New York, approximately 150 miles from Six Flags New England. Six Flags Over Georgia and Six Flags White Water Atlanta Six Flags Over Georgia, the 25th largest theme park in North America is located on approximately 280 acres, 10 miles outside of Atlanta, Georgia. The Atlanta, Georgia market provides the park with a permanent resident population of approximately 4.0 million people within 50 miles and approximately 6.7 million people within 100 miles. The Atlanta market is the number 10 DMA in the United States. -6- In May 1999, the partnership that owns Six Flags Over Georgia purchased White Water Atlanta, a water park and related entertainment park located approximately 20 miles from the theme park. Six Flags White Water Atlanta, which is the 10th largest water park in the United States, is located on approximately 69 acres. Approximately 12 acres remain undeveloped. Six Flags Over Georgia's primary competitors include Carowinds in Charlotte, North Carolina, located approximately 250 miles from the park, Visionland in Birmingham, Alabama, located approximately 160 miles from the park, and Dollywood in Pigeon Forge, Tennessee, located approximately 200 miles from the park. Six Flags White Water's primary competitors include Sun Valley Beach, Atlanta Beach and Lake Lanier Islands. These competitors are located approximately 15, 40 and 45 miles away from the water park, respectively. The Georgia Limited Partner (as defined below) owns the theme park site of approximately 280 acres, including approximately 85 acres of undeveloped land, all of which is leased to Six Flags Over Georgia II, L.P. (the "Georgia Partnership"). Partnership Structure. On March 18, 1997, Six Flags completed arrangements pursuant to which the Company will manage the Georgia park through 2026. Under the agreements governing the new arrangements, the Georgia park is owned (excluding real property) by the Georgia Partnership of which a Six Flags subsidiary is the managing general partner. In the second quarter of 1997, two subsidiaries of Six Flags made a tender offer for partnership interests ("LP Units") in the 99% limited partner of the Georgia Partnership (the "Georgia Limited Partner"), that valued the Georgia park at $250 million (the "Georgia Tender Offer Price"). Six Flags purchased approximately 25% of the LP Units in the 1997 tender offer at an aggregate price of $62.7 million. The key elements of the arrangements are as follows: (i) the Georgia Limited Partner (which is not affiliated with the Company except for the Company's ownership of certain LP Units) received minimum annual distributions (including rent) of $19.6 million in 2000, increasing each subsequent year in proportion to increases in the cost of living; (ii) thereafter, the Company will be entitled to receive from available cash (after provision for reasonable reserves and after capital expenditures per annum of approximately 6% of prior year's revenues) a management fee equal to 3% of the prior year's gross revenues, and, thereafter, any additional available cash will be distributed 95% to the Company and 5% to the Georgia Limited Partner; (iii) on an annual basis, the Company will offer to purchase additional LP Units at a price based on a valuation for the park equal to the greater of $250.0 million or a value derived by multiplying the weighted-average four year EBITDA of the park and, to the extent positive, Six Flags White Water Atlanta, by 8.0; (iv) in 2027, the Company will have the option to acquire all remaining interests in the Georgia park at a price based on the Georgia Tender Offer Price, increased in proportion to the increase in the cost of living between December 1996 and December 2026; and (v) the Company is required to make minimum capital expenditures at the Georgia park during rolling five-year periods, based generally on 6% of the park's revenues. The Company was not required to purchase a material number of LP Units in the 1998, 1999 and 2000 offers to purchase. Cash flow from operations at the Georgia park is used to satisfy these requirements first, before any funds are required from the Company. In addition, the Company is entitled to retain its proportionate share (based on its holdings of LP Units) of distributions made to the Georgia Limited Partner. In connection with its acquisition of the former Six Flags, the Company entered into a Subordinated Indemnity Agreement (the "Subordinated Indemnity Agreement") with certain Six Flags entities, Time Warner Inc. ("Time Warner") and an affiliate of Time Warner, pursuant to which the Company transferred to Time Warner (which has guaranteed the Six Flags obligations under these arrangements) record title to the corporations which own the entities that have purchased and will purchase LP Units, and the Company received an assignment from Time Warner of all cash flow received on such LP Units and will otherwise control such entities, except in the event of a default by the Company of its obligations under these arrangements. After all such obligations have been satisfied, Time Warner is required to retransfer to the Company such record title for a nominal consideration. In addition, the Company issued preferred stock of the managing partner of the Georgia Partnership to Time Warner which, in the event of such a default, would permit Time Warner to obtain control of such entity. -7- The Company accounts for its interests in the Georgia parks under the equity method of accounting. See Notes 2 and 4 to Notes to Consolidated Financial Statements. Six Flags Over Texas and Six Flags Hurricane Harbor Six Flags Over Texas, the 22nd largest theme park in North America, and the separately gated Six Flags Hurricane Harbor, the 6th largest water park in the United States, are located across Interstate 30 from each other in Arlington, Texas, between Dallas and Fort Worth, Texas. The Dallas/Fort Worth market provides the parks with a permanent resident population of approximately 4.8 million people within 50 miles and approximately 5.9 million people within 100 miles. The Dallas/Fort Worth market is the number 7 DMA in the United States. The Texas Limited Partner (as defined below) owns a site of approximately 200 acres used for the theme park. Six Flags Over Texas' principal competitors include Sea World of Texas and the Company's Six Flags Fiesta Texas, both located in San Antonio, Texas, approximately 285 miles from the park and Six Flags AstroWorld, approximately 250 miles from the park. The Company owns directly approximately 47 acres, of which approximately 17 acres are currently used for Hurricane Harbor and 30 acres remain undeveloped. Six Flags Hurricane Harbor has no direct competitors in the area other than a municipal water park. Partnership Structure. Six Flags Over Texas is owned (excluding real property) by Texas Flags, Ltd. (the "Texas Partnership"), a Texas limited partnership of which the 1% general partner is a wholly-owned subsidiary of Six Flags, and the 99% limited partner is Six Flags Fund II, Ltd., a Texas limited partnership (the "Texas Limited Partner") which is unaffiliated with the Company except that the Company owns certain limited partnership units in the Texas Limited Partner as described below. Six Flags Hurricane Harbor is 100% owned by the Company and is not included in these partnership arrangements. In December 1997, Six Flags completed arrangements pursuant to which the Company will manage Six Flags Over Texas through 2027. The key elements of the arrangements are as follows: (i) the Texas Limited Partner received minimum annual distribution (including rent) of $28.9 million in 2000, increasing each year thereafter in proportion to increases in the cost of living; (ii) thereafter, the Company will be entitled to receive from available cash (after provision for reasonable reserves and after capital expenditures per annum of approximately 6.0% of prior year's revenues) a management fee equal to 3% of the prior year's gross revenues, and, thereafter, any additional available cash will be distributed 92.5% to the Company and 7.5% to the Texas Limited Partner; (iii) in the first quarter of 1998, the Company made a tender offer for partnership units ("LP Units") in the Texas Limited Partner that valued the park at approximately $374.8 million (the "Texas Tender Offer Price"); (iv) commencing in 1999, and on an annual basis thereafter, Six Flags must offer to purchase LP Units at a price based on a valuation for the park equal to the greater of $374.8 million or a value derived by multiplying the weighted-average four year EBITDA of the park by 8.5; (v) in 2028 the Company will have the option to acquire all remaining interests in the park at a price based on the Texas Tender Offer Price, increased in proportion to the increase in the cost of living between December 1997 and December 2027; and (vi) the Company is required to make minimum capital expenditures at the Texas park during rolling five-year periods, based generally on 6% of such park's revenues. Cash flow from operations at the Texas park is used to satisfy these requirements first, before any funds are required from the Company. In addition, the Company is entitled to retain its proportionate share (based on its holdings of LP Units) of distributions made to the Texas Limited Partner. Pursuant to the tender offer and the 1999 and 2000 offers to purchase, the Company has purchased approximately 35% of the LP Units at an aggregate price of $132.8 million. In connection with the Subordinated Indemnity Agreement, the Company transferred to Time Warner (which has guaranteed the Six Flags obligations under these arrangements) record title to the corporations which own the entities that have purchased and will purchase LP Units and the Company received an assignment from Time Warner of all cash flow received on such LP Units and will otherwise control such entities, except in the event of a default by the Company of its obligations under these arrangements. After all such obligations have been satisfied, Time Warner is required to retransfer to the Company such record title for a nominal consideration. In addition, the -8- Company issued preferred stock of the managing general partner of the Texas Partnership to Time Warner which, in the event of such a default, would permit Time Warner to obtain control of such entity. The Company accounts for its interests in Six Flags Over Texas under the equity method of accounting. See Notes 2 and 4 to Notes to Consolidated Financial Statements. Six Flags St. Louis Six Flags St. Louis, the 33rd largest theme park in North America, is a combination theme and water park located in Eureka, Missouri, about 35 miles west of St. Louis, Missouri. The St. Louis market provides the park with a permanent resident population of approximately 2.6 million people within 50 miles and approximately 3.8 million people within 100 miles. The St. Louis market is the number 22 DMA in the United States. The Company owns a site of approximately 497 acres of which approximately 132 are used for park operations. Six Flags St. Louis competes with Kings Island, located near Cincinnati, Ohio, approximately 350 miles from the park; Worlds of Fun in Kansas City, Missouri, located approximately 250 miles from the park; Cedar Point, located in Sandusky, Ohio, approximately 515 miles from the park; Silver Dollar City, located in Branson, Missouri, approximately 250 miles from the park; and Six Flags Great America, the Company's park located near Chicago, Illinois, approximately 320 miles from the park. Six Flags Worlds of Adventure Six Flags Worlds of Adventure, a combination theme, water and marine wildlife park, represents the consolidation of Six Flags of Ohio and the adjacent park formerly known as Sea World of Ohio. The park 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 approximately 7.1 million within 100 miles. The Cleveland/Akron, Youngstown and Pittsburgh markets are the number 15, number 99 and number 20 DMAs in the United States, respectively. Adjacent to Six Flags Worlds of Adventure are a 145 room hotel and a camping resort each owned and operated by the Company. The campgrounds include 300 developed campsites, including 24 recreational vehicles (RV's) available for daily and weekly rental. In 2000, approximately 73,550 people used the Six Flags Ohio hotel and campgrounds. The 690-acre property on which Six Flags Worlds of Adventure is situated includes a 50-acre spring-fed lake. The theme park and the water park presently occupy approximately 45 acres and the marine wildlife park is located on approximately 113 acres. There are approximately 110 acres of undeveloped land that have the potential for further development). Six Flags Worlds of Adventure's principal competitors are Cedar Point in Sandusky, Ohio and Kennywood in Pittsburgh, Pennsylvania. These parks are located approximately 90 miles and 120 miles, respectively, from the park. There are also three small water parks within a 50-mile radius of Six Flags Worlds of Adventure. Enchanted Village and Wild Waves -9- Enchanted Village and Wild Waves is a water park and children's ride park located in Seattle, Washington. The facility is located on approximately 65 acres. The Seattle-Tacoma market provides the park with a permanent resident population of approximately 3.4 million people within 50 miles and approximately 4.3 million people within 100 miles. The Seattle-Tacoma is the number 12 DMA in the United States. The park is primarily a water park and currently lacks a full complement of rides and revenue outlets. As a result, the Company believes that there is an opportunity over the next several years to increase this park's revenue, attendance and cash flow, with relatively modest capital expenditures. The park does not have any significant direct competitors. Frontier City Frontier City is a western theme park located along Interstate 35 in northeast Oklahoma City, Oklahoma, approximately 100 miles from Tulsa. The park's market includes nearly all of Oklahoma and certain parts of Texas and Kansas, with its primary market in Oklahoma City and Tulsa. This market provides the park with a permanent resident population base of approximately 1.2 million people within 50 miles of the park and 2.5 million people within 100 miles. The Oklahoma City and Tulsa markets are the number 45 and number 59 DMAs in the United States, respectively The Company owns a site of approximately 109 acres, with 55 acres currently used for park operations. Frontier City's only significant competitor is the Company's Six Flags Over Texas, located in Arlington, Texas, approximately 225 miles from Frontier City. The Great Escape The Great Escape, which opened in 1954, is a combination theme and water park located off Interstate 87 in the Lake George, New York resort area, 180 miles north of New York City and 40 miles north of Albany. The park's primary market includes the Lake George tourist population and the upstate New York and western New England resident population. This market provides the park with a permanent resident population base of approximately 880,000 people within 50 miles of the park and 2.8 million people within 100 miles. According to information released by local governmental agencies, approximately 9 million tourists visited the Lake George area in 2000. The Albany market is the number 56 DMA in the United States The Great Escape is located on a site of approximately 368 acres, with 143 acres currently used for park operations. Approximately 43 of the undeveloped acres are suitable for park expansion. The Great Escape's only significant direct competitor is Six Flags New England, the Company's park located in Springfield, Massachusetts, approximately 150 miles from The Great Escape. In addition, there is a smaller water park located in Lake George. Waterworld Parks The Waterworld Parks consist of two water parks (Waterworld USA/Concord and Waterworld USA/Sacramento). Waterworld USA/Concord is located in Concord, California, in the East Bay area of San Francisco. The park's primary market includes nearly all of the San Francisco Bay area. This market provides the park with a permanent resident population base of approximately 8.0 million people within 50 miles of the park and 10.5 million people within 100 miles. The San Francisco Bay market is the number 5 DMA in the United States. Waterworld USA/Sacramento is located on the grounds of the California State Fair in Sacramento, California. The facility's primary market includes Sacramento and the immediate surrounding area. This market provides the park with a permanent resident population base of approximately 2.8 million people within 50 miles of the park and 10.1 million people within 100 miles. The Sacramento market is the number -10- 19 DMA in the United States. Both facilities are leased under long-term ground leases. The Concord site includes approximately 21 acres. The Sacramento facility is located on approximately 14 acres, all of which is used for the park. Concord's only significant direct competitor is Raging Waters located in San Jose, approximately 50 miles from that facility. Sacramento's only significant competitor is Sunsplash located in northeast Sacramento, approximately 20 miles from that facility. White Water Bay White Water Bay is a tropical themed water park situated on approximately 22 acres located along Interstate 40 in southwest Oklahoma City, Oklahoma. The park's primary market includes the greater Oklahoma City metropolitan area. Oklahoma City is the number 45 DMA in the United States. This market provides the park with a permanent resident population base of approximately 1.2 million people within 50 miles of the park and 2.5 million people within 100 miles. Wyandot Lake Wyandot Lake is mainly a water park, but also offers traditional amusement park attractions with 15 "dry" rides, games, shows and a large catering facility. It is located just outside of Columbus, Ohio, adjacent to the Columbus Zoo on property subleased from the Columbus Zoo. The park's primary market includes the Columbus metropolitan area and other central Ohio towns. This market provides the park with a permanent resident population base of approximately 2.1 million people within 50 miles of the park and approximately 6.6 million people within 100 miles. The Columbus market is the number 34 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 current lease expires in 2002, but the Company expects to exercise its available options through 2008. The land leased by Wyandot Lake consists of approximately 18 acres. The park shares parking facilities with the Columbus Zoo. Wyandot Lake's direct competitors are Kings Island, located near Cincinnati, Ohio, and Cedar Point, located in Sandusky, Ohio. Each of these parks is located approximately 100 miles from Wyandot Lake. Although the Columbus Zoo is located adjacent to the park, it is a complementary attraction, with many patrons visiting both facilities. Description of International Parks Six Flags Belgium Six Flags Belgium (formerly know as Walibi-Wavre) is a combination theme park and year-round indoor water park - called Aqualibi - near Brussels. The park is being rebranded for the 2001 season with the introduction of the Looney Tunes and other Warner Bros. characters and an expansion of the park's rides and attractions. The park is located on 120 acres. The Company estimates that approximately 8.3 million people live within a 50 mile radius of the park and approximately 23.9 million people live within 100 miles. The park's primary competitors are Bobbejaanland in Belgium, Efteling in Holland and Parc Asterix in France. These parks are located approximately 70, 100 and 200 miles from Six Flags Belgium, respectively. The park also competes with the Company's Bellewaerde Park, approximately 100 miles from Six Flags Belgium. Six Flags Holland Six Flags Holland is a theme park located on 390 acres that features over 30 rides and numerous shows, games and food venues. The park was rebranded as a "Six Flags" park for the 2000 season in -11- conjunction with a substantial capital expansion and the introduction of the Looney Tunes and other licensed characters. The park is located in the heart of the Netherlands, just west of Amsterdam. This market provides the park with a permanent resident population base of approximately 7.5 million people within a 50 mile radius of the park and approximately 28.6 million people within 100 miles. The park's primary competitor is Efteling in Holland, approximately 100 miles from the park. Six Flags Mexico In May 1999, the Company acquired Reino Aventura, the largest paid admission theme park in Mexico, which was rebranded as Six Flags Mexico for the 2000 season. The park first opened in 1982 and is located on approximately 107 acres in Mexico City, which are leased on a long-term basis from the Federal District of Mexico. More than 22 million people live within 50 miles of Six Flags Mexico. Six Flags Mexico's principal competitors are Chapultepec and Divertido, both amusement parks located in Mexico City. Bellewaerde Bellewaerde is a combination animal and theme park in Ieper, Belgium. It lies in historic Flanders, the northern area of Belgium. The park is situated on 130 acres. The Company estimates that approximately 4.3 million people live within a 50 mile radius of the park and approximately 16.8 million people live within 100 miles. The park's primary competitors are Plopsaland and Bobbejaanland, each located in Belgium. These parks are located approximately 125 and 120 miles from Bellewaerde, respectively. The park also competes with Six Flags Belgium, approximately 100 miles from Bellewaerde. Walibi Aquitaine Walibi Aquitaine is a theme park located in Southwestern France between Bordeaux and Toulouse. The park is located on approximately 74 acres. Approximately 1.0 million people live within a 50 mile radius of the park and approximately 5.2 million people live within 100 miles. The park's nearest competitor is Futuroscope in Poitiers, France which is located 250 miles from Walibi Aquitaine. Walibi Rhone-Alpes Walibi Rhone-Alpes is a combination theme and water park located in eastern France in the heart of the Lyon-Geneva-Grenoble triangle. The park is located on approximately 86 acres. Approximately 3.9 million people live within a 50 mile radius of the park and approximately 10.5 million people live within 100 miles. The park's primary competitor is Parc Asterix in France which is located approximately 310 miles away. Walibi Schtroumpf Walibi Schtroumpf is a Smurf-themed park located near Metz in northeastern France. The park is located on approximately 375 acres. The park's main markets include parts of France, Belgium, Luxembourg and Germany. These markets provide the park with a permanent resident population base of approximately 2.2 million people within a 50 mile radius of the park and approximately 4.5 million people within 100 miles. The park's primary competitors are Europa Park in Germany and Parc Asterix in France. These parks are located approximately 150 and 220 miles from the park, respectively. Warner Bros. Movie World Germany In November 1999, the Company acquired Warner Bros. Movie World Germany, a "Hollywood" -12- themed park located near Dusseldorf, Germany. The park is located on approximately 148 acres of land, most of which is leased on a long-term basis with the balance owned. Approximately 15.0 million people live within 50 miles of the park and 35.2 million people within 100 miles. The park's primary competitors are Phantasialand Park, located approximately 75 miles from the park, and Efteling, located approximately 110 miles from the park. Warner Bros. Movie World Madrid (Under Construction) The Company is managing the development of a new park to be known as Warner Bros. Movie World Madrid, near Madrid, Spain. The park, which is scheduled to open in the spring of 2002, will be located on approximately 150 acres with ample room for expansion. The park's primary market includes the metropolitan Madrid area. This market provides the park with a permanent resident population base of approximately 5 million people within a 50 mile radius of the park and approximately 10 million people within 100 miles. In addition, nearly 10 million people visit Madrid annually and thus will become part of the market potential of this park. The park's primary competitors are Parque de Atracciones in Madrid and Terra Mitica in Valencia. These parks are located approximately 20 and 230 miles from the park, respectively. The Company is paid a development fee from the owner and will manage the park on a long-term basis following its opening. The Company also holds a minority interest in the park's ownership. For additional financial and other information concerning the Company's international operations, see Note 13 to Notes to Consolidated Financial Statements. Pending Acquisition La Ronde The Company has entered into a letter of intent to acquire substantially all of the assets of La Ronde, a theme park located in the City of Montreal for Can. $30.0 million (approximately US $20.0 million using the December 31, 2000 exchange rate). Under this arrangement, the Company has agreed to invest in the park Can. $90.0 million (approximately US $60.0 million using that exchange rate) over four seasons, commencing in 2002. The park is located on the 146 acre site of the 1967 Montreal Worlds Fair. The Company will lease the land on which the park is located on a long-term basis. Montreal has a metropolitan population of approximately 3.3 million, with approximately 4.1 million people living within 50 miles, is a major tourist destination. There can be no assurance that this acquisition will be completed. Marketing and Promotion The Company attracts visitors through locally oriented multimedia marketing and promotional programs for each of its parks. These programs are tailored to address the different characteristics of their respective markets and to maximize the impact of specific park attractions and product introductions. All marketing and promotional programs are updated or completely revamped each year to address new developments. Marketing programs are supervised by the Company's Senior Vice President for Marketing, with the assistance of the Company's senior management and in-house marketing staff, as well as its national advertising agency. The Company also develops partnership relationships with well-known national and regional consumer goods companies and retailers to supplement its advertising efforts and to provide attendance incentives in the form of discounts and/or premiums. The Company has also arranged for popular local radio and television programs to be filmed or broadcast live from its parks. -13- Group sales and pre-sold tickets provide the Company with a consistent and stable base of attendance. Each park has a group sales manager and a well-trained sales staff dedicated to selling multiple group sales and pre-sold ticket programs through a variety of methods, including direct mail, telemarketing and personal sales calls. The Company has also developed effective programs for marketing season pass tickets. Season pass sales establish a solid attendance base in advance of the season, thus reducing exposure to inclement weather. Additionally, season pass holders often bring paying guests and generate "word-of-mouth" advertising for the parks. A significant portion of the Company's attendance is attributable to the sale of discount admission tickets. The Company offers discounts on multi-visit tickets, tickets for specific dates and tickets to affiliated groups such as businesses, schools and religious, fraternal and similar organizations. The increased in-park spending which results from such attendance is not offset by incremental operating expenses, since such expenses are relatively fixed during the operating season. The Company also implements promotional programs as a means of targeting specific market segments and geographic locations not reached through its group or retail sales efforts. The promotional programs utilize coupons, sweepstakes, reward incentives and rebates to attract additional visitors. These programs are implemented through direct mail, telemarketing, direct response media, sponsorship marketing and targeted multi-media programs. The special promotional offers are usually for a limited time and offer a reduced admission price or provide some additional incentive to purchase a ticket, such as combination tickets with a complementary location. Licenses Six Flags has the exclusive right on a long-term basis to theme park usage of the Warner Bros. and DC comics animated characters throughout the world except for Asia, Australia, Africa and the Las Vegas metropolitan area. In addition, the Cartoon Network and Hanna-Barbera characters are available for use by the Company at theme parks throughout Europe and Latin and South America. The Company believes that the use of the Warner Bros. characters adds a new dimension of family entertainment, helps drive attendance, lengthens visitors' stay in the parks and increases in-park spending. The Company believes the licensed characters are well known in Six Flags' non-U.S. markets. Park Operations The Company currently operates in geographically diverse markets in the United States, Europe and Mexico. Each of the Company's parks is operated to the extent practicable as a separate operating division of the Company in order to maximize local marketing opportunities and to provide flexibility in meeting local needs. Each park is managed by a general manager who reports to one of the Company's three regional Executive Vice Presidents (each of whom reports to the Chief Operating Officer) and is responsible for all operations and management of the individual park. The Company also has an Executive Vice President responsible for retail and in-park spending at all of its parks. Local advertising, ticket sales, community relations and hiring and training of personnel are the responsibility of individual park management in coordination with corporate support teams. Each of the Company's theme parks is managed by a full-time, on-site management team under the direction of the general manager. Each such management team includes senior personnel responsible for operations and maintenance, marketing and promotion, human resources and merchandising. Park management compensation structures are designed to provide incentives (including stock options and cash bonuses) for individual park managers to execute the Company's strategy and to maximize revenues and operating cash flow at each park. The Company's parks are generally open daily from Memorial Day through Labor Day. In -14- addition, most of the Company's parks are open during weekends prior to and following their daily seasons, including as a site for theme events (such as Hallowscream, Fright Fest and Oktoberfest). Certain of the parks have longer operating seasons. Typically, the parks charge a basic daily admission price, which allows unlimited use of all rides and attractions, although in certain cases special rides and attractions require the payment of an additional fee. Capital Improvements The Company regularly makes capital investments in the addition of new rides and attractions at its parks. The Company purchases both new and used rides. In addition, the Company rotates rides among its parks to provide fresh attractions. The Company believes that the introduction of new rides is an important factor in promoting the parks in order to achieve market penetration and encourage longer visits, which lead to increased attendance and in-park spending. In addition, the Company generally adds theming to acquired parks and enhances the theming and landscaping of its existing parks in order to provide a complete family oriented entertainment experience. Capital expenditures are planned on a seasonal basis with most expenditures made during the off-season. Expenditures for materials and services associated with maintaining assets, such as painting and inspecting rides are expensed as incurred and therefore are not included in capital expenditures. The Company's level of capital expenditures are directly related to the optimum mix of rides and attractions given park attendance and market penetration. These targeted expenditures are intended to drive significant attendance growth at the parks and to provide an appropriate complement of entertainment value, depending on the size of a particular market. As an individual park begins to reach an appropriate attendance penetration for its market, management generally plans a new ride or attraction every two to four years in order to enhance the park's entertainment product. The Company believes that there are ample sources for rides and other attractions, and the Company is not dependent on any single source. Certain of these manufacturers are located outside the United States. Maintenance and Inspection The Company's rides are inspected daily by maintenance personnel during the operating season. These inspections include safety checks as well as regular maintenance and are made through both visual inspection of the ride and test operation. Senior management of the Company and the individual parks evaluate the risk aspects of each park's operation. Potential risks to employees and staff as well as to the public are evaluated. Contingency plans for potential emergency situations have been developed for each facility. During the off-season, maintenance personnel examine the rides and repair, refurbish and rebuild them where necessary. This process includes x-raying and magnafluxing (a further examination for minute cracks and defects) steel portions of certain rides at high-stress points. At March 1, 2001, the Company had approximately 1,300 full-time employees who devote substantially all of their time to maintaining the parks and their rides and attractions. In addition to the Company's maintenance and inspection procedures, the Company's liability insurance carrier performs a periodic inspection of each park and all attractions and related maintenance procedures. The result of insurance inspections are written evaluation and inspection reports, as well as written suggestions on various aspects of park operations. Governmental inspectors in certain jurisdictions also conduct annual ride inspections before the beginning of each season. Other portions of each park are also subject to inspections by local fire marshals and health and building department officials. Furthermore, the Company uses Ellis & Associates as water safety consultants at its parks in order to train life guards and audit safety procedures. -15- Insurance The Company maintains insurance of the type and in amounts that it believes are commercially reasonable and that are available to businesses in its industry. The Company maintains multi-layered general liability policies that provide for excess liability coverage of up to $100.0 million per occurrence. With respect to liability claims arising out of occurrences on and after July 1, 1998, there is no self-insured retention by the Company. In addition, with respect to claims arising out of occurrences prior to July 1, 1998 at the parks purchased in the Six Flags acquisition, there is no self-insured retention. The self-insurance portion of claims arising out of occurrences prior to that date at the Company's other U.S. parks is $50,000. The Company also maintains fire and extended coverage, workers' compensation, business interruption and other forms of insurance typical to businesses in its industry. The fire and extended coverage policies insure the Company's real and personal properties (other than land) against physical damage resulting from a variety of hazards. Competition The Company's parks compete directly with other theme parks, water and amusement parks and indirectly with all other types of recreational facilities and forms of entertainment within their market areas, including movies, sports attractions and vacation travel. Accordingly, the Company's business is and will continue to be subject to factors affecting the recreation and leisure time industries generally, such as general economic conditions and changes in discretionary consumer spending habits. Within each park's regional market area, the principal factors affecting competition include location, price, the uniqueness and perceived quality of the rides and attractions in a particular park, the atmosphere and cleanliness of a park and the quality of its food and entertainment. The Company believes its parks feature a sufficient variety of rides and attractions, restaurants, merchandise outlets and family orientation to enable it to compete effectively. Seasonality The operations of the Company are highly seasonal, with more than 90% of park attendance in 2000 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 earned in the second and third quarters of each year. Environmental and Other Regulation The Company's operations are subject to increasingly stringent federal, state and local environmental laws and regulations including laws and regulations governing water discharges, air emissions, soil and groundwater contamination, the maintenance of underground storage tanks and the disposal of waste and hazardous materials. In addition, its operations are subject to other local, state and federal governmental regulations including, without limitation, labor, health, safety, zoning and land use and minimum wage regulations applicable to theme park operations, and local and state regulations applicable to restaurant operations at the park. The Company believes that it is in substantial compliance with applicable environmental and other laws and regulations and, although no assurance can be given, it does not foresee the need for any significant expenditures in this area in the near future. In addition, portions of the undeveloped areas at some parks are classified as wetlands. Accordingly, the Company may need to obtain governmental permits and other approvals prior to conducting development activities that affect these areas, and future development may be limited in some or all of these areas. -16- Employees At March 1, 2001, the Company employed 3,081 full-time employees, and the Company employed over 40,000 seasonal employees during the 2000 operating season. In this regard, the Company competes with other local employers for qualified student and other candidates on a season-by-season basis. As part of the seasonal employment program, the Company employs a significant number of teenagers, which subjects the Company to child labor laws. Approximately 7.9% of the Company's full-time and approximately 5.7% of its seasonal employees are subject to labor agreements with local chapters of national unions. These labor agreements expire in January 2003 (Six Flags Over Texas), December 2003 (Six Flags Over Georgia), December 2002 (Six Flags Great Adventure), and January 2003 (Six Flags St. Louis). The Company has not experienced any strikes or work stoppages by its employees, and the Company considers its employee relations to be good. -17- Executive Officers of the Registrant
Age as of Name March 1, 2001 Position - ---- ------------- -------- Kieran E. Burke (43) 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 (45) 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 (48) Chief Financial Officer since October 1, 1995; Director since October 1992; prior to June 1996, Managing Director of Lepercq de Neuflize & Co. Incorporated for more than five years. Hue W. Eichelberger (42) Executive Vice President since February 1, 1997; General Manager of Six Flags America from May 1992 to 1998; Park Manager of White Water Bay from February 1991 to May 1992. John E. Bement (48) Executive Vice President since May 1998; General Manager of Six Flags Over Georgia from January 1993 to May 1998. Daniel P. Aylward (48) Executive Vice President since June 1998; General Manager of Six Flags Marine World from February 1997 to June 1998; President and General Manager of Silverwood Theme Park from January 1995 to February 1997; General Manager of Old Tucson Studios for six years prior thereto. Thomas Iven (42) Executive Vice President since November, 2000; General Manager of Six Flags St. Louis since August 1998; Regional Director of Retail Operations of the Six Flags Texas region from 1996 to August 1998; Vice President of Retail Operations at Six Flags Over Texas from 1992 to 1996. Brian Jenkins (39) Senior Vice President of Finance since April, 2000; Vice President of Finance since April 1998; Regional Vice President of Finance for the former Six Flags from 1996 to 1998; Served in various financial positions with FoxMeyer Health Corporation from 1990 to 1996 most recently as Vice President of Business Development and Corporate Planning.
-18-
Age as of Name March 1, 2001 Position - ---- ------------- -------- Sherrie Bang (45) Senior Vice President of Marketing since January 2000; Regional Vice President of Marketing from May 1998 to January 2000; Vice President of Marketing of Six Flags Magic Mountain and Hurricane Harbor from July 1989 to May 1998. Richard A. Kipf (66) Secretary/Treasurer since 1975; Vice President since June 1994. James M. Coughlin (49) General Counsel since May 1998; partner, Baer Marks & Upham LLP from 1991 to 1998.
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 2001. -19- ITEM 2. PROPERTIES Set forth below is a brief description of the Company's material real estate at March 1, 2001: Six Flags America, Largo, Maryland -- 515 acres (fee ownership) Six Flags AstroWorld, Houston, Texas -- 85 acres (fee ownership) Six Flags Belgium, Brussels, Belgium -- 120 acres (fee ownership) Six Flags Darien Lake, Darien Center, New York -- 988 acres (fee ownership) Six Flags Elitch Gardens, Denver, Colorado -- 67 acres (fee ownership) Six Flags Fiesta Texas, San Antonio, Texas -- 206 acres (fee ownership) Six Flags Great Adventure, Hurricane Harbor & Wild Safari, Jackson, New Jersey - 2,200 acres (fee ownership) Six Flags Great America, Gurnee, Illinois -- 440 acres (fee ownership) Six Flags Holland, Biddinghuizen, The Netherlands -- 390 acres (fee ownership and leasehold interest) (1) Six Flags Hurricane Harbor, Arlington, Texas -- 47 acres (fee ownership) Six Flags Hurricane Harbor, Valencia, California -- 12 acres (fee ownership) Six Flags Kentucky Kingdom, Louisville, Kentucky -- 58 acres (fee ownership and leasehold interest) (2) Six Flags Magic Mountain, Valencia, California -- 260 acres (fee ownership) Six Flags Marine World, Vallejo, California -- 136 acres (long-term leasehold interest at nominal rent) Six Flags Mexico, Mexico City, Mexico - 107 acres (leasehold interest) (3) Six Flags New England, Agawam, Massachusetts -- 230 acres (substantially all fee ownership) Six Flags Over Georgia, Atlanta, Georgia -- 280 acres (leasehold interest) (4) Six Flags Over Texas, Arlington, Texas -- 200 acres (leasehold interest) (4) Six Flags St. Louis, Eureka, Missouri -- 497 acres (fee ownership) Six Flags WaterWorld, Houston, Texas -- 14 acres (fee ownership) Six Flags White Water Atlanta, Marietta, Georgia - 69 acres (fee ownership) (5) Six Flags Worlds of Adventure, Aurora, Ohio -- 690 acres (fee ownership) Bellewaerde, Ieper, Belgium -- 130 acres (fee ownership) Enchanted Village, Seattle, Washington -- 65 acres (leasehold interest) (6) Frontier City, Oklahoma City, Oklahoma -- 109 acres (fee ownership) The Great Escape, Lake George, New York -- 368 acres (fee ownership) Splashtown, Spring, Texas - 60 acres (fee ownership) Walibi Aquitaine, Roquefort, France -- 74 acres (fee ownership) Walibi Rhone-Alpes, Les Avenieres, France -- 86 acres (fee ownership) Walibi Schtroumpf, Metz, France -- 375 acres (fee ownership) Warner Bros. Movie World Germany, Bottrop, Germany - 148 acres (fee ownership and leasehold interest) (7) Waterworld/Concord, Concord, California -- 21 acres (leasehold interest) (8) Waterworld/Sacramento, Sacramento, California -- 14 acres (leasehold interest) (9) White Water Bay, Oklahoma City, Oklahoma -- 22 acres (fee ownership) Wyandot Lake, Columbus, Ohio -- 18 acres (leasehold interest) (10) - ---------------------------- (1) A substantial portion of the land is leased from a governmental agency with a term expiring in 2018. An undeveloped portion of the land is also leased on a year-to-year basis. The balance is owned. (2) Approximately 38 acres are leased under ground leases with terms (including renewal options) expiring between 2021 and 2049, with the balance owned by the Company. (3) The site is leased from the Federal District of Mexico City. The lease expires in 2017. (4) Lessor is the limited partner of the partnership that owns the park. The leases expire in 2027 and 2028, respectively, at which time the Company has the option to acquire all of the interests in the respective lessor not previously acquired. (5) Owned by the partnership that operates Six Flags Over Georgia. (6) The site is leased from the prior owner. The base term of the lease expires in 2003 and the Company has renewal options covering an additional 46 years. (7) Approximately 7% of the site is owned. The balance is leased from multiple landlords with lease terms in most cases ranging between 60 and 99 years. (8) The site is leased from the City of Concord. The lease expires in 2025 and the Company has five five-year renewal options. (9) The site is leased from the California Exposition and State Fair. The lease expires in 2015 and, subject to the satisfaction of certain conditions, may be renewed by the Company for an additional ten-year term. (10) The site is subleased from the Columbus Zoo. The lease expires in 2002 and the Company has two renewal options with an aggregate 8 year term. Acreage for this site does not include approximately 30 acres of parking which is shared with the Columbus Zoo. -20- The Company has granted to its lenders under its $1.2 billion credit agreement a mortgage on substantially all of its United States properties. In addition to the foregoing, at March 1, 2001, the Company owned certain undeveloped land in Indiana and indirectly owned real estate interests through its non-controlling general partnership interest in 229 East 79th Street Associates L.P., a limited partnership that converted to cooperative ownership a New York City apartment building. In addition, the Company leases office space and a limited number of rides and attractions at its parks. See Note 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 Company becomes subject to damages that cannot by law be insured against, such as punitive damages, there may be a material adverse effect on its operations. In December 1998, a final judgment of $197.3 million in compensatory damages was entered against Six Flags Entertainment Corporation, Six Flags Theme Parks Inc., Six Flags Over Georgia, Inc. and TWE, and a final judgment of $245.0 million in punitive damages was entered against TWE and of $12.0 million in punitive damages was entered against the referenced Six Flags entities. The compensatory damages judgment has been paid and the Company has been advised that TWE is considering an appeal to the U.S. Supreme Court of the punitive damages judgment. The judgments arose out of a case entitled Six Flags Over Georgia, LLC et al. v. Time Warner Entertainment Company, L.P. et al. based on, among other things, certain disputed partnership affairs prior to the Company's acquisition of Six Flags at Six Flags Over Georgia, including alleged breaches of fiduciary duty. The sellers in the Six Flags acquisition, including Time Warner, have agreed to indemnify the Company from any and all liabilities arising out of this litigation. On March 21, 1999, a raft capsized in the river rapids ride at Six Flags Over Texas, resulting in one fatality and injuries to ten others. As a result of the fatality, a case entitled Jerry L. Cartwright, et al. vs. Premier Parks Inc. d/b/a Six Flags Over Texas, Inc. was commenced in Tarrant County, Texas seeking unspecified damages. The Park is covered by Six Flags' multi-layered general liability policy that provides excess liability coverage of up to $100.0 million per occurrence, with no self-insured retention. The Company does not believe that this incident or the resulting lawsuit will have a material adverse effect on the Company's consolidated financial position, operations or liquidity. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. -21- PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock has been listed on the New York Stock Exchange (the "NYSE") since December 22, 1997 under the symbol "PKS." Between May 30, 1996 and December 19, 1997, the Company's Common Stock was traded on the Nasdaq National Market and quoted under the symbol "PARK." Set forth below are the high and low sales prices for the Common Stock as reported by the NYSE since January 1, 1999. Year Quarter High Low ---- ------- ---- --- 2001 First (through 22.49 16.38 March 28, 2001) 2000 Fourth 17 3/16 14 3/16 Third 24 13 1/2 Second 28 1/8 20 First 28 5/16 19 1/2 1999 Fourth 30 7/16 24 1/2 Third 40 28 7/16 Second 40 1/4 33 3/4 First 37 1/4 28 1/2 As of March 1, 2001, there were 780 holders of record of the Company's Common Stock. The Company paid no cash dividends on its Common Stock during the three years ended December 31, 2000. The Company does not anticipate paying any cash dividends on its Common Stock during the foreseeable future. The indentures relating to Six Flags, Inc.'s 9 1/2% Senior Notes Due 2009, 9 1/4% Senior Notes Due 2006, 10% Senior Discount Notes Due 2008 and 9 3/4% Senior Notes due 2007 (the "Senior Notes") limit the payment of cash dividends to common stockholders. See Note 6 to Notes to Consolidated Financial Statements. -22- ITEM 6. SELECTED FINANCIAL DATA In the fourth quarter of 1996, the Company acquired four parks. In February and November 1997, respectively, the Company acquired Six Flags New England (formerly Riverside Park) and Six Flags Kentucky Kingdom (formerly Kentucky Kingdom). In 1998, the Company acquired Six Flags and substantially all of the capital stock of Walibi. In May 1999, the Company acquired Six Flags Mexico (formerly Reino Aventura) and two water parks, one of which is owned by a Partnership Park and not consolidated. In November 1999, the Company acquired Warner Bros. Movie World Germany, the operating season of which ended prior to the acquisition. In December 2000, the Company acquired Enchanted Village. In each case the operations of acquired parks are reflected only for the periods subsequent to their respective acquisition dates. See Note 2 to Notes Consolidated Financial Statements.
(In thousands, except per share data) ----------------------------------- 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- Revenue........................................ $1,006,981 $926,984 $792,703 $193,904 $93,447 Depreciation and amortization.................. 179,989 154,264 109,841 19,792 8,533 Equity in operations of theme park partnerships........................... 11,833 26,180 24,054 -- -- Interest expense, net.......................... 224,767 169,441 115,849 17,775 11,121 Income tax expense ............................ 5,622 24,460 40,716 9,615 1,497 Income (loss) before extraordinary loss........ (51,959) (19,230) 35,628 14,099(1) 1,765 Extraordinary loss, net of tax effect.......... -- (11,296) (788) -- -- Net income (loss).............................. (51,959) (30,526) 34,840 14,099(1) 1,765 Net loss - pro forma .......................... N/A N/A (51,160) N/A N/A Net income (loss) applicable to common stock................................... (75,247) (53,814) 17,374 14,099(1) 1,162 Per Share: Income (loss) before extraordinary loss: Basic..................................... (.96) (.55) .27 .39 .07 Diluted................................... (.96) (.55) .26 .38 .06 Pro forma(2).............................. N/A N/A (.98) N/A N/A Extraordinary loss, net of tax effect: Basic..................................... -- (.14) (.01) -- -- Diluted................................... -- (.14) (.01) -- -- Pro forma(2).............................. N/A N/A (.01) N/A N/A Income (loss): Basic..................................... (.96) (.69) .26 .39 .07 Diluted................................... (.96) (.69) .25 .38 .06 Pro forma(2).............................. N/A N/A (.99) N/A N/A Cash Dividends -- Common Stock.............. -- -- -- -- -- Net cash provided by operating activities...... 176,161 197,349 119,010 47,150 11,331 Net cash used in investing activities.......... (337,063) (506,178) (1,664,883) (217,070) (155,149) Net cash provided by financing activities...... 66,949 49,488 1,861,098 250,165 119,074 Total assets................................... 4,191,339 4,161,572 4,052,465 611,321 304,803 Long-term debt(3).............................. 2,322,313 2,204,988 2,064,189 217,026 150,834 EBITDA(4)...................................... 369,289 319,031 235,240 54,101 22,994 Adjusted EBITDA(5)............................. 402,496 363,219 258,943 N/A N/A
- ------------------------ (1) Included in determining net income for 1997 is an $8.4 million ($5.1 million after tax effect) termination fee, net of expenses. (2) Includes results of operations of the former Six Flags and Walibi as if the acquisitions and associated financings had occurred on January 1, 1998. (3) Includes current portion. Also includes at December 31, 1998 $182.9 million of certain zero coupon notes due December 1999, which had been defeased for covenant purposes and which have since been retired. Excluding defeased notes, long-term debt was $1,877.8 million at December 31, 1998. Does not give effect at December 31, 2000 to the 2001 equity and debt offerings. See "Business - General -- Recent Financings." (4) EBITDA is defined as earnings before interest expense, net, income tax expense (benefit), noncash compensation, depreciation and amortization and other expenses, including minority interest and gain or loss on sale of assets. The Company has included information concerning EBITDA because it is used by certain investors as a measure of a company's ability to service and/or incur debt. EBITDA is not required by generally accepted accounting principles ("GAAP") and should not be considered in isolation or as an alternative to net income (loss), net cash provided by operating, investing and financing activities or other financial data prepared in accordance with GAAP or as an indicator of the Company's operating performance. This information should be read in conjunction with the Statements of Cash Flows contained in the Consolidated Financial Statements. For 1998 only, EBITDA is shown on a pro forma basis as if the former Six Flags and Walibi had been acquired on January 1, 1998. (5) Adjusted EBITDA is defined as EBITDA of the Company plus the Company's share (based on its ownership interests) of the EBITDA of the Partnership Parks, determined on a pro forma basis for 1998 only as if the former Six Flags, Walibi and the Company's interests in the Partnership Parks had been acquired on January 1, 1998. -23- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General The Company's revenue is derived from the sale of tickets for entrance to its parks (approximately 54.1%, 54.0%, and 53.4% in 2000, 1999 and 1998, respectively) and the sale of food, merchandise, games and attractions inside its parks, as well as sponsorship and other income (approximately 45.9%, 46.0% and 46.6%, in 2000, 1999 and 1998, respectively). The Company's principal costs of operations include salaries and wages, employee benefits, advertising, outside services, maintenance, utilities and insurance. The Company's expenses are relatively fixed. Costs for full-time employees, maintenance, utilities, advertising and insurance do not vary significantly with attendance, thereby providing the Company with a significant degree of operating leverage as attendance increases and fixed costs per visitor decrease. Results of operations for 2000 include the results of Enchanted Village and Wild Waves only from its acquisition in December 2000. Historical results of operations for 1999 include the results of operations of Six Flags Mexico, White Water Atlanta and Splashtown from the dates of their respective acquisitions in May 1999 and include the results of operations of Warner Bros. Movie World Germany from its acquisition in November 1999 (following its 1999 operating season). Results of Walibi and the former Six Flags are included in 1998 results only from the dates of their respective acquisitions (March 26, 1998, in the case of Walibi, and April 1, 1998, in the case of the former Six Flags). The Company believes that significant opportunities exist to acquire additional theme parks. In addition, the Company intends to continue its on-going expansion of the rides and attractions and overall improvement of its parks to maintain and enhance their appeal. Management believes this strategy has contributed to increased attendance, lengths of stay and in-park spending and, therefore, profitability. -24- Results of Operations Years Ended December 31, 2000 and 1999 Revenue. Revenue in 2000 totaled $1,007.0 million compared to $927.0 million for 1999, representing an 8.6% increase. The increase over the prior year was primarily due to increased per capita spending at the Company's domestic parks and the inclusion for the entire 2000 year of the revenues of Movie World Germany acquired in November 1999. The Company believes that revenues in 2000 were adversely affected by unusually difficult weather, particularly in June and July, in a large number of its major markets. Reported revenues from the Company's European parks as translated into U.S. dollars were adversely impacted by a decline in European currencies during the 2000. Revenue growth in 2000 would have been approximately $20.0 million higher had European currency exchange rates remained at 1999 levels. Operating expenses. Operating expenses for 2000 increased $22.3 million compared to actual expenses for 1999 but decreased $14.0 million from the prior year on a same park basis (including the pre-acquisition results for 1999 of the parks acquired in that year). The 6.3% increase in actual expenses is exclusively attributable to the inclusion for the entire year ended December 31, 2000 of two consolidated parks acquired in May 1999 and one acquired in November 1999 (the "Acquired Parks"). If the full year results of the Acquired Parks were included in both periods, as a percentage of revenues operating expenses would have been 37.4% in 2000 and 39.5% in 1999. Selling, General and Administrative; noncash compensation. Selling, general and administrative expenses (excluding noncash compensation) for 2000 increased $2.5 million compared to expenses for 1999 but decreased $12.6 million from the prior year on a same park basis. As a percentage of revenue (including the Acquired Parks for both years), selling, general and administrative expenses (excluding noncash compensation) would have been 16.5% in 2000 and 18.1% in 1999. Noncash compensation was essentially level in both years. Costs of Products Sold. Costs of products sold in 2000 increased $5.0 million compared to 1999 actual but decreased $3.8 million on a same park basis. As a percentage of theme park food, merchandise and other revenues, including the Acquired Parks in both years, costs of products sold would have been 20.7% in 2000 compared to 21.8% in 1999. Depreciation and amortization expense; interest expense, net; other income (expense). Depreciation and amortization expense for 2000 increased $25.7 million compared to 1999. The increase compared to the 1999 level was attributable to the Company's on-going capital program at the previously owned parks and from the additional expense associated with the Acquired Parks. Exclusive of the Acquired Parks, 2000 depreciation and amortization expense increased $14.8 million compared to 1999. Interest expense, net increased $55.3 million compared to the 1999 level. The increase resulted from higher average interest rates on a higher average debt and reduced interest income from lower average cash and cash equivalent balances during 2000. The $6.6 million increase in other expense in 2000 was related to the removal and disposal of rides, buildings and other assets at two parks that were substantially improved and rebranded as "Six Flags" theme parks. Equity in operations of theme parks. Equity in operations of theme park partnerships reflects the Company's share of the income or loss of Six Flags Over Texas and Six Flags Over Georgia (including Six Flags White Water Atlanta), the lease of Six Flags Marine World and the management of all four parks. The Company's ownership interests in Six Flags Over Texas (35% effective Company ownership) and Six Flags Over Georgia (25% effective Company ownership) commenced on April 1, 1998, the date of the acquisition of the former Six Flags. The Company became entitled to a share of the cash flows from the lease and management of Six Flags Marine World in 1998. Its interests in Six Flags White Water Atlanta -25- commenced with its acquisition in May 1999. The $14.3 million decrease in 2000 in the equity in operations of theme park partnerships compared to 1999 was attributable to weakened performance at certain Partnership Parks in 2000 and the absence in the 1999 results of Six Flags White Water Atlanta's pre-acquisition off-season operating expenses for the first four months of that year. See Notes 2 and 4 to Notes to Consolidated Financial Statements. Income tax expense. Income tax expense was $5.6 million for 2000 compared to a $24.5 million expense for 1999. The Company's effective tax rate is adversely affected from permanent differences associated with goodwill amortization for financial purposes and the lesser amount of amortization that is deductible for tax purposes and from nondeductible compensation expense associated with conditional stock options and restricted stock grants. At December 31, 2000, the Company estimates that it had approximately $751.5 million of net operating losses ("NOLs") carryforwards for Federal income tax purposes. The NOLs are subject to review and potential disallowance by the Internal Revenue Service upon audit of the Federal income tax returns of the Company and its subsidiaries. In addition, the use of such NOLs is subject to limitations on the amount of taxable income that can be offset with such NOLs. Some of such NOLs also are subject to a limitation as to which of the subsidiaries' income such NOLs are permitted to offset. Although no assurance can be given as to the timing or amount of the availability of such NOLs to the Company and its subsidiaries, the Company anticipates that it is more likely than not that the NOLs will be utilized prior to their expiration. See Note 8 to Notes to Consolidated Financial Statements. Net Loss. Net loss applicable to common stock reflects as a charge the preferred stock dividends on the Company's Premium Income Equity Securities ("PIES"). The PIES accrue cumulative dividends at 7 1/2% per annum (1.875% per quarter), which approximates an annual dividend requirement of $23.3 million (approximately $5.8 million per quarter). The dividend is payable in cash or shares of Common Stock at the option of the Company. During 2000 and 1999, the Company elected to pay the dividend in cash. On April 2, 2001, each PIES automatically converts into two shares of the Company's common stock. -26- Years Ended December 31, 1999 and 1998 The table below sets forth certain historical financial information with respect to the Company for the years ended December 31, 1999 and 1998 and with respect to the former Six Flags and Walibi for the three months ended March 31, 1998 (representing the pre-acquisition portion of the 1998 year).
Year Ended December 31, 1998 ------------------------------------------------------------------- Historical Historical Six Flags Walibi for for Period Period Year Ended Prior to Prior to Pro December 31, Historical April 1, March 26, Forma Company 1999 Six Flags 1998(1) 1998(2) Adjustments Pro Forma -------------- ------------ ---------- ----------- ------------ ------------- (In thousands) Revenue: Theme park admissions....... $ 500,417 $ 423,461 $ 15,047 $ 883 $ -- $ 439,391 Theme park food, merchandise and other..... 426,567 369,242 7,792 624 -- 377,658 -------------- ------------ ---------- ----------- ------------ ------------- Total revenue............. 926,984 792,703 22,839 1,507 -- 817,049 -------------- ------------ ---------- ----------- ------------ ------------- Operating costs and expenses: Operating expenses.......... 353,728 297,266 45,679 4,626 -- 347,571 Selling, general and administrative............ 163,526 126,985 19,278 3,407 -- 149,670 Noncash compensation........ 12,725 6,362 -- -- -- 6,362 Costs of products sold...... 90,699 82,127 2,193 248 -- 84,568 Depreciation and amortization.............. 154,264 109,841 17,629 3,214 6,440(3) 137,124 -------------- ------------ ---------- ----------- ------------ ------------- Total operating costs and expenses.............. 774,942 622,581 84,779 11,495 6,440 725,295 -------------- ------------ ---------- ----------- ------------ ------------- Income (loss) from operations................ 152,042 170,122 (61,940) (9,988) (6,440) 91,754 -------------- ------------ ---------- ----------- ------------ ------------- Other income (expense): Interest expense, net ...... (169,441) (115,849) (22,508) (889) (16,655)(4) (155,901) Equity in operations of theme park partnerships 26,180 24,054 -- -- (13,162)(5) 10,892 Other income (expense), including minority interest (3,551) (1,983) -- (1) -- (1,984) -------------- ------------ ---------- ----------- ------------ ------------- Total other income (expense) (146,812) (93,778) (22,508) (890) (29,817) (146,993) Income (loss) before income Taxes and extraordinary loss. 5,230 76,344 (84,448) (10,878) (36,257) (55,239) Income tax expense (benefit)... 24,460 40,716 -- (4,786) (40,009)(6) (4,079) -------------- ------------ ---------- ----------- ------------ ------------- Income (loss) before extraordinary loss.......... $ (19,230) $ 35,628 $ (84,448) $ (6,092) $ 3,752 $ (51,160) ============== ============ ========== =========== ============ ============= EBITDA(7)...................... $ 319,031 $ 286,325 $ (44,311) $ (6,774) $ -- $ 235,240 ============== ============ ========== =========== ============ ============= Adjusted EBITDA(8)............. $ 363,219 $ 321,733 $ (44,311) $ (6,774) $ (11,705)(9) $ 258,943 ============== ============ ========== =========== ============ =============
- ---------------- (1) Includes results of the former Six Flags for the period prior to April 1, 1998, the acquisition date, adjusted to eliminate (i) results of the Partnership Parks and (ii) the expense associated with certain one-time option payments resulting from the purchase. (2) Includes results of Walibi for the period prior to March 26, 1998, the acquisition date. At that time, Walibi owned six of the Company's international parks. -27- (3) Includes adjustments to eliminate the historical depreciation and amortization for the former Six Flags and Walibi and the inclusion of estimated pro forma depreciation and amortization for the three months ended March 31, 1998. (4) Includes adjustments to reflect additional interest expense associated with the indebtedness incurred to finance the Six Flags acquisition net of (a) the elimination of the historical interest expense associated with the Company and Six Flags credit facilities outstanding prior to April 1, 1998 and the long term debt of Walibi and (b) the amortization of the fair market value adjustments on certain then outstanding Six Flags indebtedness recorded in connection with the acquisition of Six Flags. Issuance costs associated with the borrowings are being amortized over their respective periods. (5) Includes adjustments to reflect the Company's share of the operations of the Partnership Parks using the equity method of accounting. (6) Includes adjustments to reflect the application of income taxes to the pro forma adjustments and to the pre-acquisition operations of Six Flags and Walibi, after consideration of permanent differences, at a rate of 38%. (7) EBITDA is defined as earnings before interest expense, net, income tax expense (benefit), noncash compensation, depreciation and amortization and other expenses, including minority interest. The Company has included information concerning EBITDA because it is a component of the Company's debt covenant ratios and is also used by certain investors as a measure of a company's ability to service and/or incur debt. EBITDA is not required by GAAP and should not be considered in isolation or as an alternative to net income (loss), net cash provided by operating, investing and financing activities or other financial data prepared in accordance with GAAP or as an indicator of the Company's operating performance. This information should be read in conjunction with the Statements of Cash Flows contained in the Consolidated Financial Statements. (8) Adjusted EBITDA is defined as EBITDA of the Company plus the Company's share (based on its ownership interests) of the EBITDA of the Partnership Parks. - ---------------------- Revenue. Revenue in 1999 totaled $927.0 million ($903.2 million without giving effect to the three Acquired Parks), compared to $792.7 million (actual) and $817.0 million (pro forma) for 1998. The $86.2 million (10.6%) increase in 1999 revenue (excluding the Acquired Parks) compared to pro forma revenue for 1998 resulted primarily from an aggregate same park attendance increase of 3.8 million (12.9%) resulting in increased admission and in-park revenues. Operating expenses. Operating expenses for 1999 increased $56.5 million ($46.4 million excluding the Acquired Parks) compared to actual expenses for 1998 and increased $6.2 million (but decreased $3.9 million excluding the Acquired Parks) compared to pro forma expenses for 1998. The decrease (excluding the Acquired Parks) compared to pro forma expenses for 1998 resulted primarily from operating efficiencies realized at the Six Flags parks subsequent to their acquisition on April 1, 1998. Comparing 1999 actual (excluding the Acquired Parks) to 1998 pro forma as a percentage of revenues, these expenses were 38.0% and 42.5% respectively. Selling, General and Administrative; noncash compensation. Selling, general and administrative expenses (excluding noncash compensation) for 1999 increased $36.5 million and $13.9 million, respectively, compared to the actual and pro forma expenses for 1998. Selling, general and administrative expenses for the Acquired Parks were $4.1 million for 1999. Advertising expenditures for 1999 increased by $23.3 million over the pro forma expense for 1998 reflecting a return to historical advertising levels of expenditures at the Six Flags parks and additional expenditures in support of the 1999 transition of four parks to the Six Flags brand. Remaining selling, general and administrative expenses in 1999 decreased by $13.5 million compared to 1998 pro forma levels primarily as a result of reduced corporate level expenditures, including staffing, related to the closing of the former Six Flags corporate office subsequent to the April 1, 1998 acquisition, as well as certain other savings, including insurance. Comparing 1999 actual (excluding the Acquired Parks) to 1998 pro forma as a percentage of revenues, selling, general and administrative expenses (excluding noncash compensation) were 17.7% and 18.3% respectively. Noncash compensation increased by $6.4 million related to the issuance of restricted stock and conditional employee stock options during 1998. -28- Costs of Products Sold. Costs of products sold in 1999 increased $8.6 million ($6.2 million excluding the Acquired Parks) and $6.1 million ($3.8 million excluding the Acquired Parks), respectively, compared to actual and pro forma expenses for 1998. As a percentage of theme park food, merchandise and other revenues, cost of products sold were 21.3% in 1999 (21.2% excluding the Acquired Parks) compared to 22.4% pro forma in 1998. Depreciation and amortization expense; interest expense, net. Depreciation and amortization expense for 1999 increased $44.4 million and $17.1 million, respectively, compared to the actual and pro forma amounts for 1998. The increase compared to the pro forma 1998 level was attributable to the Company's on-going capital program at the previously owned parks and from the additional improvements associated with the Acquired Parks. Interest expense, net increased $53.6 million compared to the actual interest expense, net for 1998 and increased $13.5 million compared to the pro forma interest expense, net for that year. The increase compared to pro forma interest expense, net for 1998 resulted from higher average interest rates on a higher average debt and reduced interest income from lower average cash and cash equivalent balances during 1999. Equity in operations of theme parks. Equity in operations of theme park partnerships reflects the Company's share of the income or loss of Six Flags Over Texas and Six Flags Over Georgia (including Six Flags White Water Atlanta), the lease of Six Flags Marine World and the management of all four parks. The Company's ownership interests in Six Flags Over Texas (34% effective Company ownership) and Six Flags Over Georgia (25% effective Company ownership) commenced on April 1, 1998, the date of the Six Flags acquisition. The Company became entitled to a share of the cash flows from the lease and management of Six Flags Marine World in 1998. Its interests in Six Flags White Water Atlanta commenced with its acquisition in May 1999. The $15.3 million increase in the equity in operations of theme park partnerships compared to the pro forma level for 1998 was attributable to improved performance at the Partnership Parks and the inclusion of the results of White Water Atlanta. See Notes 2 and 4 to Notes to Consolidated Financial Statements. Income tax expense. Income tax expense was $24.5 million for 1999 compared to a $40.7 million expense and a $4.1 million benefit for the actual and pro forma results, respectively, for 1998. The effective tax rate was adversely effected from permanent differences associated with goodwill amortization for financial purposes and the lesser amount of amortization that is deductible for tax purposes and from non deductible compensation expense associated with conditional stock options and restricted stock grants. Net Loss. Net loss applicable to common stock reflects as a charge the preferred stock dividends accrued on the Company's PIES. The PIES, which were issued in April 1998, accrue cumulative dividends at 7 1/2% per annum (1.875% per quarter), which approximates an annual dividend requirement of $23.3 million (approximately $5.8 million per quarter). The dividend is payable in cash or shares of Common Stock at the option of the Company. During 1999 and 1998, the Company has elected to pay the dividend in cash. -29- Liquidity, Capital Commitments and Resources At December 31, 2000, the Company's total debt aggregated $2,322.3 million, of which approximately $99.7 million was scheduled to mature prior to December 31, 2001. After giving effect to the January 2001 debt and equity offerings and the use of proceeds therefrom, total debt at December 31, 2000 would have been $2,259.6 million of which $2.4 million matures prior to December 31, 2001. Based on interest rates at December 31, 2000 for floating rate debt and after giving effect to such transactions and the interest rate swaps described below, annual cash interest payments for 2001 on the total debt at December 31, 2000 will aggregate approximately $149.0 million, excluding $12.8 million which has been deposited in a dedicated escrow account and classified as a restricted-use investment and excluding cash interest paid in 2001 on indebtedness repaid in the 2001 financings. In addition, annual dividend payments on the PIERS issued in January 2001 are $20.8 million, payable at the Company's option in cash or shares of Common Stock. The final dividend payment on the PIES on April 2, 2001 will be paid in Common Stock in connection with the mandatory conversion of the PIES on that date. See Notes 6 and 9 to Notes to Consolidated Financial Statements for additional information regarding the Company's indebtedness. During the year ended December 31, 2000, net cash provided by operating activities was $176.2 million. Net cash used in investing activities in 2000 totaled $337.1 million, consisting primarily of capital expenditures for the 2000 and 2001 seasons. Net cash provided by financing activities in 2000 was $66.9 million, representing primarily the net borrowings under the Company's senior credit facility, offset in part by cash dividends on the PIES. As more fully described in "Business -- Six Flags Over Georgia and Six Flags White Water Atlanta" and "-- Six Flags Over Texas and Six Flags Hurricane Harbor" and in Note 2 to Notes to Consolidated Financial Statements, in connection with the Six Flags acquisition, the Company guaranteed certain obligations relating to Six Flags Over Georgia and Six Flags Over Texas. Among such obligations are (i) minimum distributions (including rent) of approximately $50.2 million in 2001 to partners in these two Partnerships Parks (of which the Company will be entitled to receive approximately $15.4 million based on its present ownership interests) and (ii) up to approximately $99.0 million of limited partnership unit purchase obligations for 2001 with respect to both parks. The Company plans to make approximately $29.5 million of capital expenditures at these parks for the 2001 season. Cash flows from operations at the parks will be used to satisfy the annual distribution and capital expenditure requirements, before any funds are required from the Company. In addition, the Company had $75.4 million in a dedicated escrow account at December 31, 2000 (classified as a restricted-use investment) available to fund these obligations. The degree to which the Company is leveraged could adversely affect its liquidity. The Company's liquidity could also be adversely affected by unfavorable weather, accidents or the occurrence of an event or condition, including negative publicity or significant local competitive events, that significantly reduces paid attendance and, therefore, revenue at any of its theme parks. The Company believes that, based on historical and anticipated operating results, cash flows from operations, available cash and available amounts under the senior credit facility will be adequate to meet the Company's future liquidity needs, including anticipated requirements for working capital, capital expenditures, scheduled debt and PIERS requirements and obligations under arrangements relating to the Partnership Parks, for at least the next several years. The Company may, however, need to refinance all or a portion of its existing debt on or prior to maturity or to seek additional financing. -30- Market Risks and Sensitivity Analyses Like other global companies, Six Flags is exposed to market risks relating to fluctuations in interest rates and currency exchange rates. The objective of financial risk management at Six Flags is to minimize the negative impact of interest rate and foreign currency exchange rate fluctuations on the Company's operations, cash flows and equity. Six Flags does not acquire market risk sensitive instruments for trading purposes. To manage foreign currency exchange rate risks, on a limited basis Six Flags has used derivative financial instruments, exclusively foreign exchange forward contracts. These derivative financial instruments have been held to maturity and Six Flags has used non-leveraged instruments. These contracts have been entered into with major financial institutions, thereby minimizing the risk of credit loss. Six Flags has used forward contracts to "lock-in" the U.S. dollar cost of equipment to be purchased from foreign vendors or manufacturers where the contracts related thereto are denominated in foreign currency. At December 31, 2000, no such contracts were outstanding. See Note 5 to Notes to Consolidated Financial Statements for a more complete description of Six Flags' accounting policies and use of such instruments. In February 2001, the Company amended its three interest rate swap agreements that for the term of the applicable amendments (ranging from December 2002 to March 2003) effectively convert the Company's $600.0 million term loan into a fixed rate obligation. The Company's term loan borrowings bear interest at 3.25% above the LIBOR rate. The Company's interest rate swap agreements effectively "lock in" the LIBOR component at rates ranging from 5.925% to 6.07% and average 5.98%. The counterparties to these agreements are major financial institutions, which minimizes the credit risk. The following analysis presents the sensitivity of the market value, operations and cash flows of Six Flags' market-risk financial instruments to hypothetical changes in interest rates as if these changes occurred at December 31, 2000. The range of changes chosen for this analysis reflect Six Flags' view of changes which are reasonably possible over a one-year period. Market values are the present values of projected future cash flows based on the interest rate assumptions. These forward looking disclosures are selective in nature and only address the potential impacts from financial instruments. They do not include other potential effects which could impact Six Flags' business as a result of these changes in interest and exchange rates. Interest Rate and Debt Sensitivity Analysis At December 31, 2000, Six Flags had debt totaling $2,322.3 million, of which $1,337.8 million represents fixed-rate debt and the balance represents floating-rate debt. After giving effect to the January 2001 equity and debt offerings and the use of proceeds therefrom, total debt at that date would have been $2,259.6 million, of which $1,588.1 million would have represented fixed-rate debt. For fixed-rate debt, interest rate changes affect the fair market value but do not impact book value, operations or cash flows. Conversely, for floating-rate debt, interest rate changes generally do not affect the fair market value but do impact future operations and cash flows, assuming other factors remain constant. Additionally, increases and decrease in interest rates impact the fair value of the interest rate swap agreements. A decrease in thirty and ninety-day LIBOR interest rates increases the fair value liability of the interest rate swap agreements. However, over the term of the interest rate swap agreements, the economic effect of changes in interest rates is fixed as the Company will pay a fixed amount and not be subject to changes in interest rates. Assuming other variables remain constant (such as foreign exchange rates and debt levels), after giving effect to the 2001 financings and assuming an average annual balance on -31- the Company's working capital revolver, the pre-tax operations and cash flows impact resulting from a one percentage point increase in interest rates would be approximately $7.0 million ($1.0 million after giving effect to the interest rate swap agreements). Impact of Recently Issued Accounting Standards Not Yet Adopted In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires an entity to recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as a hedge. The accounting for changes in the fair value of a derivative (that is gains and losses) depends on the intended use of the derivative and the resulting designation. The Company adopted the provisions of SFAS No. 133 as of January 1, 2001. As a result of the adoption, the Company recognized a liability of approximately $5.0 million and recorded in other comprehensive income (loss) the amount (net of tax effect) as a cumulative effect of a change in accounting principle. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Reference is made to the information appearing under the subheading "Market Risks and Sensitivity Analyses" under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 31-32 of this Report. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and schedules listed in Item 14(a)(1) and (2) are included in this Report beginning on page F-1. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. -32- 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 2001. (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 2001. 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 2001. (c) Changes in Control None. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Incorporated by reference from the information captioned "Certain Transactions" included in the Company's Proxy Statement in connection with the annual meeting of stockholders to be held in June 2001. -33- 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 Six Flags, 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 Consolidated Balance Sheets-- December 31, 2000 and 1999 F-3 Consolidated Statements of Operations Years ended December 31, 2000, 1999 and 1998 F-4 Consolidated Statements of Stockholders' Equity and Other Comprehensive Income (Loss) Years ended December 31, 2000, 1999 and 1998 F-5 Consolidated Statements of Cash Flows Years ended December 31, 2000, 1999 and 1998 F-6 Notes to Consolidated Financial Statements F-8 Schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are omitted because they either are not required under the related instructions, are inapplicable, or the required information is shown in the financial statements or notes thereto. (a)(3) See Exhibit Index. (b) Reports on Form 8-K Current Report on 8-K, dated December 12, 2000. Current Report on 8-K, dated December 27, 2000. (c) Exhibits See Item 14(a)(3) above. -34- 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, 2001 SIX FLAGS, INC. By: /s/ Kieran E. Burke --------------------------------------- Kieran E. Burke Chairman of the Board and Chief Executive Officer -35- 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, 2001 - ---------------------------------------------- Executive Officer (Principal Kieran E. Burke Executive Officer) and Director /s/ Gary Story President, Chief Operating March 28, 2001 - ---------------------------------------------- Officer and Director Gary Story /s/ James F. Dannhauser Chief Financial Officer March 28, 2001 - ---------------------------------------------- (Principal Financial and Accounting James F. Dannhauser Officer) and Director /s/ Paul A. Biddelman Director March 28, 2001 - ---------------------------------------------- Paul A. Biddelman /s/ Michael E. Gellert Director March 28, 2001 - ---------------------------------------------- Michael E. Gellert /s/ Francois Letaconnoux Director March 28, 2001 - ---------------------------------------------- Francois Letaconnoux /s/ Stanley S. Shuman Director March 28, 2001 - ---------------------------------------------- Stanley S. Shuman
-36- SIX FLAGS, INC. Index to Consolidated Financial Statements Page Independent Auditors' Report F-2 Consolidated Balance Sheets - December 31, 2000 and 1999 F-3 Consolidated Statements of Operations - Years ended December 31, 2000, 1999 and 1998 F-4 Consolidated Statements of Stockholders' Equity and Other Comprehensive Income (Loss) - Years ended December 31, 2000, 1999 and 1998 F-5 Consolidated Statements of Cash Flows - Years ended December 31, 2000, 1999 and 1998 F-6 Notes to Consolidated Financial Statements F-8 Independent Auditors' Report The Board of Directors and Stockholders Six Flags, Inc.: We have audited the accompanying consolidated balance sheets of Six Flags, Inc. and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of operations, stockholders' equity and other comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2000. 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 auditing standards generally accepted in the United States of America. 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 Six Flags, Inc. and subsidiaries as of December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Oklahoma City, Oklahoma March 2, 2001 F-2 SIX FLAGS, INC. Consolidated Balance Sheets December 31, 2000 and 1999
Assets 2000 1999 --------------- --------------- Current assets: Cash and cash equivalents $ 42,978,000 138,131,000 Accounts receivable 40,771,000 29,208,000 Inventories 28,588,000 23,590,000 Prepaid expenses and other current assets 35,855,000 32,793,000 Restricted-use investment securities 12,773,000 24,430,000 --------------- --------------- Total current assets 160,965,000 248,152,000 --------------- --------------- Other assets: Debt issuance costs 46,967,000 55,540,000 Restricted-use investment securities 75,376,000 84,464,000 Deposits and other assets 56,884,000 64,472,000 --------------- --------------- Total other assets 179,227,000 204,476,000 --------------- --------------- Property and equipment, at cost 2,585,927,000 2,272,419,000 Less accumulated depreciation 328,027,000 207,680,000 --------------- --------------- 2,257,900,000 2,064,739,000 Investment in theme park partnerships 386,638,000 384,637,000 Intangible assets, principally goodwill 1,354,289,000 1,352,732,000 Less accumulated amortization 147,680,000 93,164,000 --------------- --------------- 1,206,609,000 1,259,568,000 --------------- --------------- Total assets $ 4,191,339,000 4,161,572,000 =============== =============== Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 45,315,000 37,918,000 Accrued interest payable 24,353,000 23,566,000 Accrued compensation, payroll taxes and benefits 6,963,000 19,368,000 Other accrued liabilities 64,552,000 76,395,000 Current portion of long-term debt 2,401,000 2,055,000 --------------- --------------- Total current liabilities 143,584,000 159,302,000 Long-term debt 2,319,912,000 2,202,933,000 Other long-term liabilities 37,937,000 41,761,000 Deferred income taxes 144,919,000 141,960,000 --------------- --------------- Total liabilities 2,646,352,000 2,545,956,000 --------------- --------------- Stockholders' equity: Preferred stock, $1.00 par value, 5,000,000 shares authorized; 11,500 shares issued and outstanding at December 31, 2000 and 1999 $ 12,000 12,000 Common stock, $.025 par value, 150,000,000 shares authorized; 80,068,826 and 78,350,771 shares issued and outstanding at December 31, 2000 and 1999, respectively 2,001,000 1,958,000 Capital in excess of par value 1,725,890,000 1,700,305,000 Accumulated deficit (128,928,000) (53,681,000) Deferred compensation (5,399,000) (15,255,000) Accumulated other comprehensive income (loss) (48,589,000) (17,723,000) --------------- --------------- Total stockholders' equity 1,544,987,000 1,615,616,000 --------------- --------------- Total liabilities and stockholders' equity $ 4,191,339,000 4,161,572,000 =============== ===============
See accompanying notes to consolidated financial statements. F-3 SIX FLAGS, INC. Consolidated Statements of Operations Years ended December 31, 2000, 1999 and 1998
2000 1999 1998 --------------- --------------- --------------- Theme park admissions $ 544,809,000 500,417,000 423,461,000 Theme park food, merchandise and other 462,172,000 426,567,000 369,242,000 --------------- --------------- --------------- Total revenue 1,006,981,000 926,984,000 792,703,000 --------------- --------------- --------------- Operating costs and expenses: Operating expenses 376,060,000 353,728,000 297,266,000 Selling, general and administrative 165,980,000 163,526,000 126,985,000 Noncash compensation (primarily selling, general and administrative) 12,584,000 12,725,000 6,362,000 Costs of products sold 95,652,000 90,699,000 82,127,000 Depreciation and amortization 179,989,000 154,264,000 109,841,000 --------------- --------------- --------------- Total operating costs and expenses 830,265,000 774,942,000 622,581,000 --------------- --------------- --------------- Income from operations 176,716,000 152,042,000 170,122,000 --------------- --------------- --------------- Other income (expense): Interest expense (232,336,000) (193,965,000) (149,820,000) Interest income 7,569,000 24,524,000 33,971,000 Equity in operations of theme park partnerships 11,833,000 26,180,000 24,054,000 Other income (expense) (10,119,000) (3,551,000) (1,983,000) --------------- --------------- --------------- Total other income (expense) (223,053,000) (146,812,000) (93,778,000) --------------- --------------- --------------- Income (loss) before income taxes (46,337,000) 5,230,000 76,344,000 Income tax expense 5,622,000 24,460,000 40,716,000 --------------- --------------- --------------- Income (loss) before extraordinary loss (51,959,000) (19,230,000) 35,628,000 Extraordinary loss on extinguishment of debt, net of income tax benefit of $7,530,000 in 1999 and $526,000 in 1998 -- (11,296,000) (788,000) --------------- --------------- --------------- Net income (loss) $ (51,959,000) (30,526,000) 34,840,000 =============== =============== =============== Net income (loss) applicable to common stock $ (75,247,000) (53,814,000) 17,374,000 =============== =============== =============== Weighted average number of common shares outstanding - basic 78,735,000 77,656,000 66,430,000 =============== =============== =============== Net income (loss) per average common share outstanding - basic: Income (loss) before extraordinary loss $ (0.96) (0.55) 0.27 Extraordinary loss -- (0.14) (0.01) --------------- --------------- --------------- Net income (loss) $ (0.96) (0.69) 0.26 =============== =============== =============== Weighted average number of common shares outstanding - diluted 78,735,000 77,656,000 68,518,000 =============== =============== =============== Net income (loss) per average common share outstanding - diluted: Income (loss) before extraordinary loss $ (0.96) (0.55) 0.26 Extraordinary loss -- (0.14) (0.01) --------------- --------------- --------------- Net income (loss) $ (0.96) (0.69) 0.25 =============== =============== ===============
See accompanying notes to consolidated financial statements. F-4 SIX FLAGS, INC. Consolidated Statements of Stockholders Equity and Other Comprehensive Income (Loss) Years ended December 31, 2000, 1999 and 1998
Preferred Stock Common Stock Retained --------------------------- ---------------------------- Capital in Earnings Shares Shares Excess of (Accumulated Issued Amount Issued Amount Par Value Deficit) ------------ ------------- -------------- ------------ ---------------- ---------------- Balances at December 31, 1997 -- $ -- 37,798,914 $ 944,000 354,235,000 (17,241,000) Issuance of preferred stock 11,500 12,000 -- -- 301,173,000 -- Issuance of common stock -- -- 38,742,439 969,000 985,812,000 -- Amortization of deferred compensation -- -- -- -- -- -- Retirement of treasury stock -- -- (52,692) (1,000) (688,000) -- Net income -- -- -- -- -- 34,840,000 Other comprehensive income - foreign currency translation adjustment -- -- -- -- -- -- Comprehensive income Preferred stock dividends -- -- -- -- -- (17,466,000) ------------ ------------- -------------- ------------ ---------------- ---------------- Balances at December 31, 1998 11,500 12,000 76,488,661 1,912,000 1,640,532,000 133,000 Issuance of common stock -- -- 1,862,110 46,000 53,853,000 -- Amortization of deferred compensation -- -- -- -- -- -- Stock option compensation -- -- -- -- 4,742,000 -- Tax benefit from stock options and warrants -- -- -- -- 1,178,000 -- Net loss -- -- -- -- -- (30,526,000) Other comprehensive loss - foreign currency translation adjustment -- -- -- -- -- -- Comprehensive loss Preferred stock dividends -- -- -- -- -- (23,288,000) ------------ ------------- -------------- ------------ ---------------- ---------------- Balances at December 31, 1999 11,500 12,000 78,350,771 1,958,000 1,700,305,000 (53,681,000) Issuance of common stock -- -- 1,718,055 43,000 22,857,000 -- Amortization of deferred compensation -- -- -- -- -- -- Stock option compensation -- -- -- -- 2,728,000 -- Net loss -- -- -- -- -- (51,959,000) Other comprehensive loss - foreign currency translation adjustment -- -- -- -- -- -- Comprehensive loss Preferred stock dividends -- -- -- -- -- (23,288,000) ------------ ------------- -------------- ------------ ---------------- ---------------- Balances at December 31, 2000 11,500 $ 12,000 80,068,826 $ 2,001,000 1,725,890,000 (128,928,000) ============ ============= ============== ============ ================ ================ Accumulated Other Deferred Comprehensive Treasury Compensation Income (Loss) Stock Total ------------- --------------- ------------ ---------------- Balances at December 31, 1997 (13,500,000) -- (689,000) 323,749,000 Issuance of preferred stock -- -- -- 301,185,000 Issuance of common stock (16,100,000) -- -- 970,681,000 Amortization of deferred compensation 4,489,000 -- -- 4,489,000 Retirement of treasury stock -- -- 689,000 -- Net income -- -- -- 34,840,000 Other comprehensive income - foreign currency translation adjustment -- 9,087,000 -- 9,087,000 ---------------- Comprehensive income 43,927,000 ---------------- Preferred stock dividends -- -- -- (17,466,000) ------------- --------------- ------------ ---------------- Balances at December 31, 1998 (25,111,000) 9,087,000 -- 1,626,565,000 Issuance of common stock -- -- -- 53,899,000 Amortization of deferred compensation 9,856,000 -- -- 9,856,000 Stock option compensation -- -- -- 4,742,000 Tax benefit from stock options and warrants -- -- -- 1,178,000 Net loss -- -- -- (30,526,000) Other comprehensive loss - foreign currency translation adjustment -- (26,810,000) -- (26,810,000) ---------------- Comprehensive loss (57,336,000) ---------------- Preferred stock dividends -- -- -- (23,288,000) ------------- --------------- ------------ ---------------- Balances at December 31, 1999 (15,255,000) (17,723,000) -- 1,615,616,000 Issuance of common stock -- -- -- 22,900,000 Amortization of deferred compensation 9,856,000 -- -- 9,856,000 Stock option compensation -- -- -- 2,728,000 Net loss -- -- -- (51,959,000) Other comprehensive loss - foreign currency translation adjustment -- (30,866,000) -- (30,866,000) ---------------- Comprehensive loss (82,825,000) Preferred stock dividends -- -- -- (23,288,000) ------------- --------------- ------------ ---------------- Balances at December 31, 2000 (5,399,000) (48,589,000) -- 1,544,987,000 ============= =============== ============ ================
See accompanying notes to consolidated financial statements. F-5 SIX FLAGS, INC. Consolidated Statements of Cash Flows Years ended December 31, 2000, 1999 and 1998
2000 1999 1998 -------------- -------------- -------------- Cash flows from operating activities: Net income (loss) $ (51,959,000) (30,526,000) 34,840,000 Adjustments to reconcile net income (loss) to net cash provided by operating activities (net of effects of acquisitions): Depreciation and amortization 179,989,000 154,264,000 109,841,000 Equity in operations of theme park partnerships, net of cash received 21,698,000 (8,524,000) (8,240,000) Minority interest in earnings 132,000 (6,000) 960,000 Noncash compensation 12,584,000 12,725,000 6,362,000 Interest accretion on notes payable 30,733,000 34,402,000 28,713,000 Interest accretion on restricted-use investments -- (6,182,000) (7,267,000) Extraordinary loss on early extinguishment of debt -- 18,826,000 1,314,000 Amortization of debt issuance costs 8,573,000 6,755,000 5,351,000 Loss on disposal of assets 9,987,000 3,557,000 920,000 Deferred income tax expense 2,217,000 17,146,000 38,698,000 (Increase) decrease in accounts receivable (11,558,000) 5,359,000 (17,816,000) Decrease in income tax receivable -- -- 995,000 Increase in inventories and prepaid expenses and other current assets (8,011,000) (2,191,000) (12,154,000) (Increase) decrease in deposits and other assets 7,588,000 9,416,000 (25,185,000) Decrease in accounts payable, accrued expenses and other liabilities (26,599,000) (7,966,000) (61,806,000) Increase (decrease) in accrued interest payable 787,000 (9,706,000) 23,484,000 -------------- -------------- -------------- Total adjustments 228,120,000 227,875,000 84,170,000 -------------- -------------- -------------- Net cash provided by operating activities 176,161,000 197,349,000 119,010,000 -------------- -------------- -------------- Cash flows from investing activities: Additions to property and equipment (334,226,000) (391,655,000) (205,754,000) Investment in theme park partnerships (23,699,000) (51,931,000) (60,739,000) Acquisition of theme park assets -- (34,578,000) (50,593,000) Acquisition of theme park companies, net of cash acquired 117,000 (242,954,000) (1,037,412,000) Purchase of restricted-use investments (18,214,000) -- (321,750,000) Maturities of restricted-use investments 38,959,000 214,940,000 11,365,000 -------------- -------------- -------------- Net cash used in investing activities (337,063,000) (506,178,000) (1,664,883,000) -------------- -------------- -------------- Cash flows from financing activities: Repayment of long-term debt (316,408,000) (1,291,910,000) (703,639,000) Proceeds from borrowings 403,000,000 1,391,024,000 1,361,703,000 Net cash proceeds from issuance of preferred stock -- -- 301,185,000 Net cash proceeds from issuance of common stock 3,645,000 2,801,000 955,134,000 Payment of cash dividends (23,288,000) (23,288,000) (11,644,000) Payment of debt issuance costs -- (29,139,000) (41,641,000) -------------- -------------- -------------- Net cash provided by financing activities 66,949,000 49,488,000 1,861,098,000 -------------- -------------- --------------
(Continued) F-6 SIX FLAGS, INC. Consolidated Statements of Cash Flows Years ended December 31, 2000, 1999 and 1998
2000 1999 1998 ------------- ------------- ------------- Effect of exchange rate changes on cash and cash equivalents $ (1,200,000) (3,106,000) 1,065,000 Increase (decrease) in cash and cash equivalents (95,153,000) (262,447,000) 316,290,000 Cash and cash equivalents at beginning of year 138,131,000 400,578,000 84,288,000 ------------- ------------- ------------- Cash and cash equivalents at end of year $ 42,978,000 138,131,000 400,578,000 ============= ============= ============= Supplementary cash flow information: Cash paid for interest $ 192,247,000 162,511,000 92,272,000 ============= ============= ============= Cash paid for income taxes $ 66,000 220,000 497,000 ============= ============= =============
Supplemental disclosure of noncash investing and financing activities: 2000 o The Company issued $19,255,000 of common stock (1,339,223 shares) as consideration for a water and children's ride park acquisition. 1999 o The Company issued a $40,700,000 note convertible into 1,080,000 common shares as consideration for a theme park acquisition made by a limited partnership of which the Company is the managing general partner. o The Company issued $10,435,000 of common stock (337,467 shares) as additional consideration for a theme park acquisition. 1998 o The Company issued $15,547,000 of common stock (805,954 shares) as consideration for a theme park acquisition. o The Company issued restricted common stock (920,000 shares) to certain employees valued at $16,100,000. See accompanying notes to consolidated financial statements. F-7 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998 (1) Summary of Significant Policies (a) Description of Business The Company owns and operates regional theme amusement and water parks. As of December 31, 2000, the Company and its subsidiaries own or operate 37 parks, including 29 domestic parks, one park in Mexico and seven parks in Europe. Six Flags is also managing the construction and development of a theme park in Europe. On March 24, 1998, the company then known as Premier Parks Inc. (Premier Operations) merged (the Merger) with an indirect wholly owned subsidiary thereof, pursuant to which Premier Operations became a wholly owned subsidiary of Premier Parks Holdings Corporation (Holdings) and the holders of shares of common stock of Premier Operations became, on a share-for-share basis, holders of common stock of Holdings. On the Merger date, Premier Operations' name was changed to Premier Parks Operations Inc., and Holdings' name was changed to Premier Parks Inc. On June 30, 2000, the name of Premier Parks Inc. was changed to Six Flags, Inc. and the name of Premier Operations Inc. was changed to Six Flags Operations Inc. Unless otherwise indicated, all references contained herein reflect the name change as if it occurred prior to the earliest period presented. References herein to the "Company" or "Six Flags" mean (i) for all periods or dates prior to March 24, 1998, Premier Operations and its consolidated subsidiaries and (ii) for all subsequent periods or dates, Holdings and its consolidated subsidiaries (including Six Flags Operations). As used herein, Holdings refers only to Six Flags, Inc., without regard to its subsidiaries. During December 2000, the Company purchased 100% of the capital stock of the company that owns Enchanted Village and Wild Waves, a water park and children's ride park located near Seattle, Washington. During May 1999, in separate transactions, the Company purchased 100% of the capital stock of the companies that own Reino Aventura, a theme park located in Mexico City, and purchased the assets used in the operation of Splashtown, a water park near Houston. In addition, during May 1999, the limited partnership that owns Six Flags Over Georgia purchased the assets used in the operation of White Water Atlanta, a water park and related entertainment facility near Atlanta. The consideration for this purchase was advanced to the partnership by the Company through a convertible promissory note. The Company is the managing general partner of the limited partnership and owns approximately 25% of the limited partnership units. On November 15, 1999, the Company purchased the partnership that owns Warner Bros. Movie World Germany, near Dusseldorf, Germany, and entered into a joint venture with Warner Bros. to develop and manage a new Warner Bros. Movie World theme park scheduled to open in Madrid, Spain in 2002. See Note 2. During 1998, the Company purchased approximately 97% of the outstanding capital stock of Walibi, S.A. (Walibi) and as of December 31, 2000 owns 100%. See Note 2. On April 1, 1998, the Company purchased all of the outstanding capital stock of Six Flags Entertainment Corporation, (together with its subsidiaries, SFEC) and consummated the related transactions described in Note 2. F-8 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998 The accompanying consolidated financial statements for the year ended December 31, 2000, reflect the results of Enchanted Village and Wild Waves only from its acquisition date, December 6, 2000. The accompanying consolidated financial statements for the year ended December 31, 1999 reflect the results of Reino Aventura, Splashtown, White Water Atlanta, and Movie World Germany only from their acquisition dates, May 4, 1999, May 13, 1999, May 25, 1999 and November 15, 1999, respectively. The accompanying consolidated financial statements for the year ended December 31, 1998 reflect the results of Walibi only from March 26, 1998, and of SFEC only from April 1, 1998. On February 9, 2001, Six Flags purchased substantially all of the assets used in the operations of Sea World of Ohio, a marine wildlife park located adjacent to the Company's Six Flags Ohio theme park, for a cash purchase price of $110,000,000. The Company funded the acquisition from proceeds obtained through Holding's public offering of 11,500,000 Preferred Income Equity Redeemable Shares (PIERS). See Note 9(a). The accompanying consolidated financial statements do not include the results of Sea World of Ohio for any period presented as the acquisition occurred subsequent to December 31, 2000. (b) Basis of Presentation The Company's accounting policies reflect industry practices and conform to accounting principles generally accepted in the United States of America. The consolidated financial statements include the accounts of the Company, its majority and wholly owned subsidiaries, and limited partnerships and limited liability companies in which the Company beneficially owns 100% of the interests. Intercompany transactions and balances have been eliminated in consolidation. The Company's investment in partnerships and joint ventures in which it does not own controlling interests are accounted for using the equity method. (c) Cash Equivalents Cash equivalents of $17,347,000 and $93,083,000 at December 31, 2000 and 1999, respectively, consist of short-term highly liquid investments with a remaining maturity as of purchase date of three months or less, which are readily convertible into cash. For purposes of the consolidated statements of cash flows, the Company considers all highly liquid debt instruments with remaining maturities as of their purchase date of three months or less to be cash equivalents. (d) Inventories Inventories are stated at the lower of cost (first-in, first-out) or market value and primarily consist of products for resale including merchandise and food and miscellaneous supplies. (e) Advertising Costs Production costs of commercials and programming are charged to operations in the year first aired. The costs of other advertising, promotion, and marketing programs are charged to F-9 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998 operations when incurred. The amounts capitalized at year-end are included in prepaid expenses. Advertising and promotions expense was $105,640,000, $100,175,000 and $66,141,000 during 2000, 1999 and 1998, respectively. (f) Debt Issuance Costs The Company capitalizes costs related to the issuance of debt. The amortization of such costs is recognized as interest expense under a method approximating the interest method over the life of the respective debt issue. (g) Depreciation and Amortization Rides and attractions are depreciated using the straight-line method over 5-25 years. Land improvements are depreciated using the straight-line method over 10-15 years. Buildings and improvements are depreciated over their estimated useful lives of approximately 30 years by use of the straight-line method. Furniture and equipment are depreciated using the straight-line method over 5-10 years. Maintenance and repairs are charged directly to expense as incurred, while betterments and renewals are generally capitalized as property and equipment. When an item is retired or otherwise disposed of, the cost and applicable accumulated depreciation are removed and the resulting gain or loss is recognized. (h) Investment in Theme Park Partnerships The Company manages five parks in which the Company does not currently own a controlling interest. The Company accounts for its investment in four of the parks using the equity method of accounting. The equity method of accounting recognizes the Company's share of the activity of Six Flags Over Texas, Six Flags Over Georgia, White Water Atlanta, and Six Flags Marine World in the accompanying consolidated statements of operations in the caption "equity in operations of theme park partnerships." The equity method of accounting differs from the consolidation method of accounting used for the theme parks in which the Company owns a controlling interest. In the consolidation method of accounting, the activities of the controlled parks are reflected in each revenue and expense caption rather than aggregated into one caption. The Warner Bros. Movie World theme park being constructed in Spain is not yet in operation. The Company accounts for its investment in this park at cost. (i) Intangible Assets Goodwill, which represents the excess of purchase price over fair value of net assets acquired, is amortized on a straight-line basis over the expected period to be benefited, generally 18 to 25 years. Other intangible assets are amortized over the period to be benefited, generally up to 25 years. The Company assesses the recoverability of intangible assets by determining whether the amortization of the intangible asset balance over its remaining life can be recovered through undiscounted future operating cash flows from the acquisition. The amount of goodwill impairment, if any, is measured based on projected discounted future operating F-10 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998 cash flows using a discount rate reflecting the Company's average borrowing rate. The assessment of the recoverability of goodwill will be impacted if estimated future operating cash flows are not achieved. (j) Long-Lived Assets The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or group of assets to future net cash flows expected to be generated by the asset or group of assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. (k) Interest Expense Interest on notes payable is generally recognized as expense on the basis of stated interest rates. Notes payable assumed in an acquisition are carried at amounts adjusted to impute a market rate of interest cost (when the obligations were assumed). (l) Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. United States deferred income taxes have not been provided on foreign earnings which are being permanently reinvested. (m) Income (Loss) Per Common Share Basic income (loss) per share is computed by dividing net income (loss) applicable to common stock by the weighted average number of common shares outstanding for the period. Diluted income per share in 1998 reflects the potential dilution that would occur if the Company's outstanding stock options were exercised (calculated using the treasury stock method). No adjustment for stock options were included in the 2000 and 1999 computations of diluted loss per share because the effect would have been antidilutive. Additionally, the weighted average number of shares for each of the years ended December 31, 2000, 1999 and 1998 does not include the impact of the conversion of the Company's mandatorily convertible preferred stock into a maximum of 11,500,000 shares of common stock and a minimum of 9,554,000 shares of common stock as the effect of the conversion and resulting decrease in preferred stock dividends would be antidilutive. F-11 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998 During 2000, 1999, and the last nine months of 1998, the Company's mandatorily convertible preferred stock was outstanding. Preferred stock dividends of $23,288,000, $23,288,000 and $17,466,000 were considered in determining net income (loss) applicable to common stock in 2000, 1999, and 1998, respectively. On June 9, 1998, the Company's common shareholders approved a two-for-one stock split effective July 24, 1998. The par value of the common stock was decreased to $.025 per share from $.05 per share. Additionally, the authorized common shares of the Company were increased to 150,000,000. The accompanying consolidated financial statements and notes to the consolidated financial statements reflect the stock split as if it had occurred as of the beginning of the earliest year presented. The following table reconciles the weighted average number of common shares outstanding used in the calculations of basic and diluted income (loss) per average common share outstanding for the years 2000, 1999 and 1998.
Years ended December 31, ---------------------------------------- 2000 1999 1998 ---------- ---------- ---------- Weighted average number of common shares outstanding - basic 78,735,000 77,656,000 66,430,000 Dilutive effect of potential common shares issuable upon the exercise of employee stock options -- -- 2,088,000 ---------- ---------- ---------- Weighted average number of common shares outstanding - diluted 78,735,000 77,656,000 68,518,000 ========== ========== ==========
(n) Stock Options For unconditional employee stock options, the Company recognizes compensation expense over the service period, only if the current market price of the underlying stock exceeds the exercise price on the date of the grant. For employee stock options that are conditioned upon the achievement of performance goals, compensation expense, as determined by the extent that the quoted market price of the underlying stock at the time that the condition for exercise is achieved exceeds the stock option exercise price, is recognized over the service period. For stock options issued to nonemployees, the Company recognizes compensation expense at the time of issuance based upon the fair value of the options issued. Pro forma net income (loss) and net income (loss) per share for employee stock option grants made in and subsequent to 1995 as if the fair-value-based method had been applied are provided in Note 9(c). (o) Investment Securities Restricted-use investment securities at December 31, 2000 and 1999 consist of U.S. Treasury securities. The securities are restricted to provide for three years of interest payments on certain debt issued in 1998 and to provide funds to satisfy the Company's obligations under F-12 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998 certain guarantees of partnership arrangements described in Note 2. The Company classifies its investment securities in one of two categories: available-for-sale or held-to-maturity. Held-to-maturity securities are those securities in which the Company has the ability and intent to hold the security until maturity. All other securities held by the Company are classified as available-for-sale. The Company does not purchase investment securities principally for the purpose of selling them in the near term and thus has no securities classified as trading. Available-for-sale securities are recorded at fair value. As of December 31, 2000 and 1999, the fair value of the restricted-use investments classified as available-for-sale was $75,376,000 and $71,600,000 which approximated the amortized cost of the securities. Unrealized holding gains and losses, net of the related tax effect, on available-for-sale securities are excluded from earnings and are reported as a separate component of other comprehensive income until realized. Realized gains and losses from the sale of available-for-sale securities are determined on a specific identification basis. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. As of December 31, 2000 and 1999, all of the Company's restricted-use investment securities classified as available-for-sale had remaining maturities of less than one year; however, these securities are reflected as noncurrent assets as they are restricted for future use. As of December 31, 2000 and 1999, $12,773,000 and $24,430,000 of restricted-use investment securities classified as held-to-maturity had maturities and restrictions of less than one year and are reflected as current assets. As of December 31, 1999, the remaining restricted-use investment securities of $12,864,000 classified as held-to-maturity had a remaining term greater than one year. Premiums and discounts are amortized or accreted over the life of the related held-to-maturity security as an adjustment to yield using the effective interest method. Interest income is recognized when earned. (p) Comprehensive Income (Loss) Comprehensive income (loss) consists of net income (loss) and changes in the foreign currency translation adjustment, and is presented in the 2000, 1999 and 1998 consolidated statements of stockholders' equity and other comprehensive income (loss) as accumulated other comprehensive income (loss). (q) Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. F-13 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998 (r) Reclassifications Reclassifications have been made to certain amounts reported in 1999 and 1998 to conform with the 2000 presentation. (2) Acquisition of Theme Parks On December 6, 2000, the Company acquired all of the capital stock of the company operating as Enchanted Village and Wild Waves (Enchanted Village), a water park and children's ride park located near Seattle, Washington, for a purchase price of $19,255,000 paid through issuance of 1,339,223 shares of the Company's common stock. As of the acquisition date, $4,471,000 of deferred tax liabilities were recognized for the tax consequences attributable to the differences between the financial carrying amounts and the tax basis of Enchanted Village's assets and liabilities. Approximately $4,235,000 of costs in excess of the fair value of the net assets acquired were recorded as goodwill. The transaction was accounted for as a purchase. On May 4, 1999, the Company acquired all of the capital stock of the companies that own and operate Reino Aventura (subsequently renamed Six Flags Mexico), a theme park located in Mexico City, for a cash purchase price of approximately $59,600,000. The Company funded the acquisition from existing cash. Approximately $14,575,000 of costs in excess of the fair value of the net assets acquired were recorded as goodwill. The transaction was accounted for as a purchase. On May 13, 1999, the Company acquired the assets of Splashtown water park located in Houston, Texas for a cash purchase price of approximately $20,400,000. The Company funded the acquisition from existing cash. Approximately $10,530,000 of costs in excess of the fair value of the net assets acquired were recorded as goodwill. The transaction was accounted for as a purchase. On May 25, 1999, the limited partnership that owns Six Flags Over Georgia acquired the assets of White Water Atlanta water park, and adjacent American Adventures entertainment facility located near Atlanta, Georgia. In connection with the acquisition, Six Flags issued a $40,700,000 note that was converted into 1,080,000 shares of the Company's common stock. The transaction was accounted for by the limited partnership as a purchase. The Company has reflected the additional investment in the limited partnership as investment in theme park partnerships. On November 15, 1999, the Company purchased the partnership that owns Warner Bros. Movie World Germany, near Dusseldorf, Germany, and entered into a joint venture with Warner Bros. to design, develop and manage a new Warner Bros. Movie World theme park scheduled to open in Madrid, Spain in 2002. At the same time, the Company entered into a long-term license agreement for exclusive theme park usage in Europe, Mexico, South America, and Central America of the Looney Tunes, Hanna-Barbera, Cartoon Network and D.C. Comics characters. The aggregate cost of the transactions was $180,269,000, which was funded by borrowings under the Company's 1999 credit facility (the Credit Facility). See Note 6(d). Approximately $42,800,000 of the aggregate costs were allocated to goodwill and intangible assets. The transaction was accounted for as a purchase. On March 26, 1998, the Company purchased (the Private Acquisition) approximately 49.9% of the outstanding capital stock of Walibi for an aggregate purchase price of $42,300,000, of which 20% F-14 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998 was paid through issuance of 448,910 shares of common stock and 80% was paid in cash. In June 1998, the Company purchased an additional 44% of the outstanding capital stock of Walibi for an aggregate purchase price of $38,100,000, which was paid through issuance of 347,746 shares of common stock and $31,400,000 in cash. During the remainder of the year, Six Flags purchased an additional 3% of Walibi, which included the issuance of an additional 9,298 shares of common stock. During 2000 and 1999, Six Flags purchased an additional 1.1% and 2%, respectively, of Walibi and as of June 2000, owned 100% of the equity interests of Walibi. On the date of the Private Acquisition, Walibi's indebtedness aggregated $71,181,000, which indebtedness was assumed or refinanced by the Company. The Company funded the cash portion of the purchase price (and the refinancing of such indebtedness) from borrowings under a previously existing credit facility. As of the acquisition dates and after giving effect to the purchases, $11,519,000 of deferred tax liabilities were recognized for the tax consequences attributable to the differences between the financial carrying amounts and the tax basis of Walibi's assets and liabilities. Approximately $60,118,000 of costs in excess of the fair value of the net assets acquired were recorded as goodwill. As a result of 2000 revenues of Walibi exceeding levels specified in the purchase agreement, Six Flags is required to issue the former owners of Walibi additional shares of common stock in April 2001 with an approximate value of $2,266,000 (using December 31, 2000 exchange rates). The Company was not required to issue any shares as a result of the 1999 revenues. The value of the additional shares will be recorded as additional goodwill. On April 1, 1998 the Company acquired (the Six Flags Acquisition) all of the capital stock of SFEC for $976,000,000, paid in cash. In connection with the Six Flags Acquisition, the Company issued through public offerings (i) 36,800,000 shares of common stock (with gross proceeds of $993,600,000), (ii) 5,750,000 Premium Income Equity Securities (PIES) (with gross proceeds of $310,500,000), (iii) $410,000,000 aggregate principal amount at maturity of the Company's 10% Senior Discount Notes due 2008 (the Senior Discount Notes) (with gross proceeds of $251,700,000) and (iv) $280,000,000 aggregate principal amount of the Company's 9 1/4% Senior Notes due 2006 (the 1998 Senior Notes), and SFEC issued $170,000,000 aggregate principal amount of its 8 7/8% Senior Notes due 2006 (the SFEC Notes). In addition, in connection with the Six Flags Acquisition, the Company (i) assumed $285,000,000 principal amount at maturity of previously outstanding senior subordinated notes of Six Flags Theme Parks Inc. (SFTP), an indirect wholly-owned subsidiary of SFEC, which notes had an accreted value of $278,100,000 at April 1, 1998 (fair value of $318,500,000 at that date) and (ii) refinanced all outstanding SFTP bank indebtedness with the proceeds of $410,000,000 of borrowings under a $472,000,000 senior secured credit facility of SFTP. During 1999, the Company completed the determination of the value of the assets acquired and liabilities assumed. As a result of the final determination, the deferred income tax liability resulting from the acquisition and goodwill were each reduced by approximately $30,000,000. As of the acquisition date and after giving effect to the final allocation of purchase price, $35,619,000 of deferred tax liabilities were recognized for the tax consequences attributable to the differences between the financial carrying amounts and the tax basis of SFEC's assets and liabilities. Approximately $1,170,974,000 of costs in excess of the fair value of the net assets acquired were recorded as goodwill. In addition to its obligations under outstanding indebtedness and other securities issued or assumed in the Six Flags Acquisition, the Company also guaranteed in connection therewith certain contractual obligations relating to the partnerships that own two Six Flags parks, Six Flags Over F-15 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998 Texas and Six Flags Over Georgia (the Partnership Parks). Specifically, the Company guaranteed the obligations of the general partners of those partnerships to (i) make minimum annual distributions of approximately $46,300,000 (subject to annual cost of living adjustments) to the limited partners in the Partnership Parks and (ii) make minimum capital expenditures at each of the Partnership Parks during rolling five-year periods, based generally on 6% of such park's revenues. Cash flow from operations at the Partnership Parks is used to satisfy these requirements first, before any funds are required from the Company. The Company also guaranteed the obligation of its subsidiaries to purchase a maximum number of 5% per year (accumulating to the extent not purchased in any given year) of the total limited partnership units outstanding as of the date of the agreements (the Partnership Agreements) that govern the partnerships (to the extent tendered by the unit holders). The agreed price for these purchases is based on a valuation for each respective Partnership Park equal to the greater of (i) a value derived by multiplying such park's weighted-average four-year EBITDA (as defined in the Partnership Agreements) by a specified multiple (8.0 in the case of the Georgia park and 8.5 in the case of the Texas park) or (ii) $250,000,000 in the case of the Georgia park and $374,800,000 in the case of the Texas park. The Company's obligations with respect to Six Flags Over Georgia and Six Flags Over Texas will continue until 2027 and 2028, respectively. As the Company purchases units relating to either Partnership Park, it is entitled to the minimum distribution and other distributions attributable to such units, unless it is then in default under the applicable agreements with its partners at such Partnership Park. On December 31, 2000, the Company owned approximately 25% and 35%, respectively, of the limited partnership units in the Georgia and Texas partnerships. The maximum unit purchase obligations for 2001 at both parks will aggregate approximately $99,000,000. The following summarized unaudited pro forma results of operations for the years ended December 31, 1999 and 1998, assume that the SFEC, Walibi, Six Flags Mexico, White Water Atlanta, Splashtown and Movie World acquisitions, and the related transactions occurred as of January 1, 1998. The acquisition of Enchanted Village in December 2000 was not material to the Company's 2000 and 1999 financial condition or results. Therefore, the results of operations for Enchanted Village are not included in the pro forma information presented below. 1999 1998 --------------- --------------- (Unaudited) (In thousands) Total revenues $ 986,808 898,670 Loss before extraordinary loss (39,555) (66,299) Loss per common share - basic (0.81) (1.17) Loss per common share - diluted (0.81) (1.17) F-16 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998 (3) Property and Equipment Property and equipment, at cost, are classified as follows: 2000 1999 --------------- --------------- Land $ 294,215,000 293,924,000 Land improvements 299,261,000 223,068,000 Buildings and improvements 540,349,000 485,303,000 Rides and attractions 1,202,149,000 1,044,252,000 Equipment 249,953,000 225,872,000 --------------- --------------- Total 2,585,927,000 2,272,419,000 Less accumulated depreciation 328,027,000 207,680,000 --------------- --------------- $ 2,257,900,000 2,064,739,000 =============== =============== (4) Investment in Theme Park Partnerships The following reflects the summarized assets, liabilities, and equity as of December 31, 2000 and 1999, and the results of the four parks managed by the Company for the years ended December 31, 2000, 1999 and 1998, in the case of Six Flags Marine World, for the periods subsequent to April 1, 1998 (the date of the Six Flags Acquisition), in the case of the Partnership Parks and for the periods subsequent to May 25, 1999, in the case of White Water Atlanta, which was purchased on that date by the limited partnership that owns Six Flags Over Georgia.
2000 1999 --------------- --------------- Assets: Current assets $ 26,530,000 33,114,000 Property and equipment, net 254,263,000 241,522,000 Other assets 35,676,000 39,179,000 --------------- --------------- Total assets $ 316,469,000 313,815,000 =============== =============== Liabilities and equity: Current liabilities $ 47,685,000 32,851,000 Affiliate loans 91,107,000 89,607,000 Long-term debt 66,305,000 71,613,000 Equity 111,372,000 119,744,000 --------------- --------------- Total liabilities and equity $ 316,469,000 313,815,000 =============== ===============
F-17 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998
2000 1999 1998 ------------ ------------ ------------ Revenue $208,196,000 225,274,000 201,933,000 Expenses: Operating expenses 84,379,000 88,901,000 75,680,000 Selling, general and administrative 29,911,000 27,957,000 24,683,000 Costs of products sold 17,921,000 21,241,000 26,689,000 Depreciation and amortization 20,145,000 16,724,000 13,325,000 Interest expense, net 14,259,000 11,545,000 6,301,000 Other expense 841,000 532,000 1,451,000 ------------ ------------ ------------ Total 167,456,000 166,900,000 148,129,000 ------------ ------------ ------------ Net income $ 40,740,000 58,374,000 53,804,000 ============ ============ ============
The Company's share of operations of the four theme parks for the years ended December 31, 2000, 1999, and 1998 were $33,205,000, $44,187,000 and $35,408,000, prior to depreciation and amortization charges of $20,370,000, $15,826,000 and $9,763,000, and third-party interest expense and other non-operating expenses of $1,002,000, $2,181,000 and $1,591,000, respectively. A substantial difference exists between the carrying value of the Company's investment in the theme parks and the Company's share of the net book value of the theme parks. The difference is being amortized over 20 years for the Partnership Parks and over the expected useful life of the rides and equipment installed by the Company at Six Flags Marine World. Pursuant to the Partnership Agreements, the Company, as managing general partner of the Partnership Parks, can make affiliate loans to the Partnership Parks. These loans are reflected in the Company's consolidated balance sheet as an investment in theme park partnerships. As discussed in Note 2, the Company provided the consideration for a Partnership Park to acquire White Water Atlanta. The resulting note from the Partnership Park to the Company is in the form of an affiliate loan. Included in long-term debt above as of December 31, 2000 is $61,185,000 of long-term debt that is not guaranteed by the Company. That long-term debt is an obligation of the other parties that have an interest in Six Flags Marine World. The remaining long-term debt shown above consists primarily of term loan debt and capitalized lease obligations associated with rides and equipment. In April 1997, the Company became manager of Marine World (subsequently renamed Six Flags Marine World), then a marine and exotic wildlife park located in Vallejo, California, pursuant to a contract with an agency of the City of Vallejo under which the Company is entitled to receive an annual base management fee of $250,000 and up to $250,000 annually in additional management fees based on park revenues. In November 1997, the Company exercised its option to lease approximately 40 acres of land within the site for nominal rent and an initial term of 55 years (plus four ten-year and one four-year renewal options). In 2000, 1999, and 1998, the Company added theme park rides and attractions on the leased land, which is located within the existing park, in order to create one fully-integrated regional theme park at the site. The Company is entitled to receive, in addition to the management fee, 80% of the cash flow generated by the combined operations at the park, after combined operating expenses and debt service on outstanding debt F-18 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998 obligations relating to the park. The Company also has an option to purchase the entire site commencing in February 2002 at a purchase price equal to the greater of the then principal amount of certain debt obligations of the seller (expected to aggregate $52,000,000 at February 2002) or the then fair market value of the seller's interest in the park (based on a formula relating to the seller's 20% share of Marine World's cash flow). (5) Derivative Financial Instruments Prior to 2000, the Company had only limited involvement with derivative financial instruments, entering into contracts to manage the variability of foreign-currency exchange rates in connection with the purchase of rides from foreign vendors. No such contracts were in effect at December 31, 2000. In February 2000, the Company entered into three interest rate swap agreements that effectively convert the Company's $600,000,000 term loan component of the Credit Facility (see Note 6(d)) into a fixed rate obligation. The terms of the agreements, each of which has a notional amount of $200,000,000, began in March 2000 and expire from December 2001 to March 2002. The Company's term loan borrowings bear interest based upon the LIBOR rate plus a fixed margin. The Company's interest rate swap arrangements were designed to "lock-in" the LIBOR component at rates ranging from 6.615% to 6.780% depending on the applicable agreement. Two of the agreements had a feature that negated the interest rate swap for a ninety-day period if LIBOR rates exceed 7.5%, while the remaining agreement limited the interest rate swap at the 7.5% rate. The counterparties to these transactions are major financial institutions, which minimizes the credit risk. In February 2001, the Company and the counterparties amended and extended the interest rate swap agreements. The provisions that negated the interest rate swap or limited the interest rate swap were removed. The notional amounts of $200,000,000 each have been retained. Two of the agreements expire in December 2002 and the remaining agreement expires in March 2003. The fixed interest rates on the notional amounts range from 5.925% to 6.07% and average 5.98%. The Company is exposed to credit losses in the event of nonperformance by the counterparties to the agreements. The Company anticipates, however, that counterparties will fully satisfy their obligations under the contracts. The Company does not obtain collateral to support its financial instruments but monitors the credit standing of the counterparties. In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments and hedging activities. It requires that a company recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. This statement was required to be adopted by the Company in 2001. As of January 1, 2001, the fair value of the interest swap agreements was a liability of $4,996,000, which was recorded in other comprehensive income (loss) as a cumulative effect of a change in accounting principle. F-19 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998 (6) Long-Term Debt At December 31, 2000 and 1999, long-term debt consists of:
2000 1999 -------------- -------------- Long-term debt: 1997 Notes due 2007 (a) $ 125,000,000 125,000,000 Senior Discount Notes due 2008 (b) 329,275,000 298,664,000 1998 Senior Notes due 2006 (b) 280,000,000 280,000,000 SFEC Notes due 2006 (c) 170,000,000 170,000,000 Credit Facility (d) 981,000,000 892,000,000 1999 Senior Notes due 2007 (e) 429,207,000 429,085,000 Other 7,831,000 10,239,000 -------------- -------------- 2,322,313,000 2,204,988,000 Less current portion 2,401,000 2,055,000 -------------- -------------- $2,319,912,000 2,202,933,000 ============== ==============
(a) On January 31, 1997, Six Flags Operations issued $125,000,000 of senior notes due January 2007 (the 1997 Notes). The 1997 Notes are senior unsecured obligations of Six Flags Operations. The 1997 Notes bear interest at 9 3/4% per annum payable semiannually and are redeemable, at Six Flags Operations' option, in whole or in part, at any time on or after January 15, 2002, at varying redemption prices. The 1997 Notes are guaranteed on a senior, unsecured, joint and several basis by all of Six Flags Operations' principal domestic subsidiaries. Prior to the amendments described below, the indenture limited the ability of Six Flags Operations and its subsidiaries to dispose of assets; incur additional indebtedness or liens; pay dividends; engage in mergers or consolidations; and engage in certain transactions with affiliates. A portion of the proceeds were used to pay in full all amounts outstanding under Six Flags Operations' then outstanding credit facility. All obligations under the 1997 Notes and the related indenture remained as obligations of Six Flags Operations and were not assumed by Holdings after the Merger. On January 29, 2001, Six Flags Operations commenced a tender offer for all of the aggregate principal amount of the 1997 Notes. In conjunction with the tender offer, noteholder consents were solicited to effect certain amendments to the indenture governing the 1997 notes. Six Flags Operations received tenders of notes and related consents from holders of 99.8% of the outstanding notes. The tendered notes were purchased and the indenture amendments became effective on March 2, 2001. The purchase price (including consent fee) paid was approximately $1,085 for each $1,000 principal amount of notes plus accrued and unpaid interest up to, but not including, the payment date. As a result of the early extinguishment of debt, the Company will recognize a loss of approximately $8,292,000, net of tax effect. On February 2, 2001, Holdings completed an offering of $375 million 9 1/2% Senior Notes (the 2001 Senior Notes) due 2009. A portion of the proceeds of the 2001 Senior Notes was used to finance the tender offer and consent solicitation. The 2001 Senior Notes are senior unsecured obligations of Holdings, are not guaranteed by subsidiaries and rank equal to the 1999 Senior Notes, 1998 Senior Notes and Senior Discount Notes. The indenture under which the 2001 Senior Notes were issued contains F-20 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998 covenants substantially similar to those relating to the 1998 Senior Notes, the Senior Discount Notes, and the 1999 Senior Notes. (b) On April 1, 1998, Holdings issued at a discount $410,000,000 principal amount at maturity ($329,275,000 and $298,664,000 carrying value as of December 31, 2000 and 1999, respectively) of Senior Discount Notes and $280,000,000 principal amount of 1998 Senior Notes. The notes are senior unsecured obligations of Holdings and are not guaranteed by Holdings' subsidiaries. The Senior Discount Notes do not require any interest payments prior to October 1, 2003 and, except in the event of a change of control of the Company and certain other circumstances, any principal payments prior to their maturity in 2008. The Senior Discount Notes have an interest rate of 10% per annum. The 1998 Senior Notes require annual interest payments of approximately $25,900,000 (9 1/4% per annum) and, except in the event of a change of control of the Company and certain other circumstances, do not require any principal payments prior to their maturity in 2006. The notes are redeemable, at the Company's option, in whole or in part, at any time on or after April 1, 2002 (in the case of the 1998 Senior Notes) and April 1, 2003 (in the case of the Senior Discount Notes), at varying redemption prices. Approximately $70,700,000 of the net proceeds of the 1998 Senior Notes were deposited in escrow to prefund the first six semi-annual interest payments thereon, and $75,000,000 of the net proceeds of the Senior Discount Notes were invested in restricted-use securities, until April 1, 2003, to provide funds to pay certain of Six Flags' obligations to the limited partners of the Partnership Parks. See Note 2. The indentures under which the Senior Discount Notes and the 1998 Senior Notes were issued limit the ability of Holdings and its subsidiaries to dispose of assets; incur additional indebtedness or liens; pay dividends; engage in mergers or consolidations; and engage in certain transactions with affiliates. (c) On April 1, 1998, SFEC issued $170,000,000 principal amount of SFEC Notes, which are senior obligations of SFEC. The SFEC Notes are guaranteed on a fully subordinated basis by Holdings. The SFEC Notes require annual interest payments of approximately $15,100,000 (8 7/8% per annum) and, except in the event of a change of control of Six Flags Operations (successor to SFEC) and certain other circumstances, do not require any principal payments prior to their maturity in 2006. The SFEC Notes are redeemable, at Six Flags Operations' option, in whole or in part, at any time on or after April 1, 2002, at varying redemption prices. The net proceeds of the SFEC Notes, together with other funds, were invested in restricted-use securities to provide for the repayment in full on or before December 15, 1999 of pre-existing notes of SFEC (with a carrying value of $182,877,000 at December 31, 1998). The pre-existing notes of SFEC were paid in full using the restricted-use securities on December 15, 1999. The indenture under which the SFEC Notes were issued limits the ability of Six Flags Operations and its subsidiaries to dispose of assets; incur additional indebtedness or liens; pay dividends; engage in mergers or consolidations; and engage in certain transactions with affiliates. In November 1999, SFEC merged into Six Flags Operations, which assumed the obligations of SFEC under the SFEC Notes and the related indenture. F-21 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998 (d) On November 5, 1999, SFTP entered into the Credit Facility and, in connection therewith, SFEC merged into Six Flags Operations and SFTP became a direct wholly-owned subsidiary of Six Flags Operations. The Credit Facility includes a $300,000,000 five-year revolving credit facility ($90,000,000 was outstanding at December 31, 2000 and none was outstanding at December 31, 1999), a $300,000,000 five-and-one-half-year multicurrency reducing revolver facility (of which $291,000,000 and $292,000,000 was outstanding at December 31, 2000 and 1999, respectively) and a $600,000,000 six-year term loan (all of which was outstanding at December 31, 2000 and 1999). A portion of the proceeds of the 2001 Senior Notes was used in February 2001 to make a payment of $223,000,000 on the multicurrency facility and a portion of the proceeds of the PIERS was used in February 2001 to fully pay advances outstanding under the revolving facility. Borrowings under the five-year revolving credit facility (US Revolver) must be repaid in full for thirty consecutive days each year. The interest rate on borrowings under the Credit Facility can be fixed for periods ranging from one to six months. At the Company's option the interest rate is based upon specified levels in excess of the applicable base rate or LIBOR. At December 31, 2000, the weighted average interest rates for borrowings under the US Revolver, multicurrency revolver, and term loan were 9.22%, 9.19% and 9.97%, respectively. At December 31, 1999, the interest rate on the borrowings was 8.88% and 9.38% for the multicurrency revolver and term loan, respectively. The multicurrency facility permits optional prepayments and reborrowings. The committed amount reduces quarterly by 2.5% commencing on December 31, 2001, by 5.0% commencing on December 31, 2002, by 7.5% commencing on December 31, 2003 and by 20.0% commencing on December 31, 2004. Mandatory repayments are required if amounts outstanding exceed the reduced commitment amount. The term loan facility requires quarterly repayments of 0.25% of the outstanding amount thereof commencing on December 31, 2001 and 24.25% commencing on December 31, 2004. A commitment fee of .50% of the unused credit of the facility is due quarterly in arrears. The principal borrower under the facility is SFTP, and borrowings under the Credit Facility are guaranteed by Holdings, Six Flags Operations and all of Six Flags Operations' domestic subsidiaries and are secured by substantially all of Six Flags Operations' domestic assets and a pledge of Six Flags Operations' capital stock. See Note 5 regarding interest rate hedging activities. The Credit Facility contains restrictive covenants that, among other things, limit the ability of Six Flags Operations and its subsidiaries to dispose of assets; incur additional indebtedness or liens; repurchase stock; make investments; engage in mergers or consolidations; pay dividends, (except that (subject to covenant compliance) dividends will be permitted to allow Holdings to meet cash interest obligations with respect to its 1998 Senior Notes, Senior Discount Notes, 1999 Senior Notes and 2001 Senior Notes, cash dividend payments on its PIES and its Preferred Income Equity Redeemable Securities (PIERS) issued in January 2001 (see Note 9(a))) and its obligations to the limited partners in the Partnership Parks, and engage in certain transactions with subsidiaries and affiliates. In addition, the Credit Facility requires that Six Flags Operations comply with certain specified financial ratios and tests. On November 5, 1999, the Company borrowed $892,000,000 under the Credit Facility principally to repay all amounts outstanding under previously existing credit facilities and to provide funds to consummate the November 1999 transactions with Warner Bros. described in Note 2. The termination of previously existing credit facilities resulted in an extraordinary loss in respect of the debt issuance costs related thereto of $5,214,000, net of tax benefit of $3,476,000. F-22 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998 (e) On June 30, 1999, Holdings issued $430,000,000 principal amount of 9 3/4% Senior Notes (the 1999 Senior Notes). The 1999 Senior Notes are senior unsecured obligations of Holdings, are not guaranteed by subsidiaries and rank equal to the 1998 Senior Notes and the Senior Discount Notes. The 1999 Senior Notes require annual interest payments of approximately $41,900,000 (9 3/4% per annum) and, except in the event of a change in control of the Company and certain other circumstances, do not require any principal payments prior to their maturity in 2007. The 1999 Senior Notes are redeemable, at Holding's option, in whole or in part, at any time on or after June 15, 2003, at varying redemption prices. The indenture under which the 1999 Senior Notes were issued contains covenants substantially similar to those relating to the 1998 Senior Notes and the Senior Discount Notes. The net proceeds of the 1999 Senior Notes were used to fund the purchase in a tender offer of $87,500,000 of previously outstanding Six Flags Operations' 1995 Senior Notes (the 1995 Notes) and the entire $285,000,000 principal amount of SFTP Senior Subordinated Notes. The remaining $2,500,000 balance of the 1995 Notes was redeemed in August 1999. An extraordinary loss of $6,082,000, net of tax benefit of $4,054,000, was recognized from these early extinguishments. Annual maturities of long-term debt during the five years subsequent to December 31, 2000, are as follows (after giving effect to the refinancing of certain debt in February 2001): 2001 $ 2,401,000 2002 6,923,000 2003 6,760,000 2004 161,583,000 2005 and thereafter 2,144,646,000 -------------- $2,322,313,000 ============== After consideration of the issuance of the 2001 Senior Notes, use of proceeds of the PIERS, and payment of debt, the long-term debt balance as of December 31, 2000, would have been $2,259,582,000. In 1998, the Company terminated a prior credit facility, which resulted in a $788,000 extraordinary loss, net of tax benefit of $526,000. Holdings is the issuer of the notes described in (b) and (e) above and the 2001 Senior Notes. Six Flags Operations is the issuer of the notes described in (a) and (c) above. Holdings guarantees the SFEC Notes due 2006. The following information for Holdings includes the assets, liabilities and equity, results of operations, and cash flows of Holdings only and for Six Flags Operations includes the consolidated assets, liabilities and equity, results of operations, and cash flows of Six Flags Operations and its Subsidiaries. F-23 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998
Six Flags Holdings Operations Eliminations Total ------------ ------------ ------------ ------------ December 31, 2000 (In thousands) Assets: Cash and cash equivalents $ 1,028 41,950 -- 42,978 Restricted-use investment securities 12,773 -- -- 12,773 Other current assets 5,358 99,856 -- 105,214 ------------ ------------ ------------ ------------ Total current assets 19,159 141,806 -- 160,965 Intercompany receivables (payables) (4,150) 4,150 -- -- Deferred income taxes 47,492 -- (47,492) -- Other assets 99,707 79,520 -- 179,227 Investment in subsidiaries 2,108,685 -- (2,108,685) -- Investment in theme park partnerships 286,049 100,589 -- 386,638 Property and equiment, net 31,846 2,226,054 -- 2,257,900 Intangible assets, net 10,570 1,196,039 -- 1,206,609 ------------ ------------ ------------ ------------ Total assets $ 2,599,358 3,748,158 (2,156,177) 4,191,339 ============ ============ ============ ============ Liabilities and stockholders' equity: Current portion of long-term debt $ -- 2,401 -- 2,401 Other current liabilities 15,889 125,294 -- 141,183 ------------ ------------ ------------ ------------ Total current liabilities 15,889 127,695 -- 143,584 Long-term debt 1,038,482 1,281,430 -- 2,319,912 Other long-term liabilities -- 37,937 -- 37,937 Deferred income taxes -- 192,411 (47,492) 144,919 Stockholder's equity 1,544,987 2,108,685 (2,108,685) 1,544,987 ------------ ------------ ------------ ------------ Total liabilities and stockholders' equity $ 2,599,358 3,748,158 (2,156,177) 4,191,339 ============ ============ ============ ============ Revenue $ 386 1,006,595 -- 1,006,981 Operating costs and expenses: Operating expenses 172 375,888 -- 376,060 Selling, general and administrative 14,010 164,554 -- 178,564 Costs of products sold 15 95,637 -- 95,652 Depreciation and amortization 2,092 177,897 -- 179,989 ------------ ------------ ------------ ------------ Total operating costs and expenses 16,289 813,976 -- 830,265 ------------ ------------ ------------ ------------ Income (loss) from operations (15,903) 192,619 -- 176,716 ------------ ------------ ------------ ------------
F-24 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998
Six Flags Holdings Operations Eliminations Total ------------ ------------ ------------ ------------ (In thousands) Other income (expense): Interest expense $ (102,618) (129,718) -- (232,336) Interest income 5,600 1,969 -- 7,569 Equity in operations of theme park -- partnerships 7,775 4,058 -- 11,833 Other income (expense) -- (10,119) -- (10,119) ------------ ------------ ------------ ------------ Total other income (expense) (89,243) (133,810) -- (223,053) ------------ ------------ ------------ ------------ Income (loss) before income taxes taxes (105,146) 58,809 -- (46,337) Income tax expense (benefit) (36,169) 41,791 -- 5,622 ------------ ------------ ------------ ------------ Net income (loss) $ (68,977) 17,018 -- (51,959) ============ ============ ============ ============ Cash flows from operating activities: Operating cash flows $ (38,030) 214,191 -- 176,161 ------------ ------------ ------------ ------------ Cash flows from investing activities: Additions to property and equipment (1,232) (332,994) -- (334,226) Investment in theme parks partnerships (4,787) (18,912) -- (23,699) Acquisitions of theme park companies 117 -- -- 117 Investment in subsidiaries (80,703) -- 80,703 -- Purchase of restricted-use investments (18,214) -- -- (18,214) Maturities of restricted-use investments 38,959 -- -- 38,959 ------------ ------------ ------------ ------------ (65,860) (351,906) 80,703 (337,063) ------------ ------------ ------------ ------------ Cash flows from financing activities: Repayment of long-term debt -- (316,408) -- (316,408) Proceeds from borrowings -- 403,000 -- 403,000 Net cash proceeds from issuance of stock 3,645 -- -- 3,645 Capital contributions -- 80,703 (80,703) -- Advances to subsidiaries 104,441 (104,441) -- -- Payment of cash dividends (23,288) -- -- (23,288) ------------ ------------ ------------ ------------ 84,798 62,854 (80,703) 66,949 Effect of exchange rate changes on cash -- (1,200) -- (1,200) ------------ ------------ ------------ ------------ Increase (decrease) in cash and cash equivalents $ (19,092) (76,061) -- (95,153) ============ ============ ============ ============
F-25 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998
Six Flags Holdings Operations Eliminations Total ------------ ------------ ------------ ------------ December 31, 1999 (In thousands) Assets: Cash and cash equivalents $ 20,120 118,011 -- 138,131 Restricted-use investment securities 24,430 -- -- 24,430 Other current assets 21,882 63,709 -- 85,591 ------------ ------------ ------------ ------------ Total current assets 66,432 181,720 -- 248,152 Intercompany receivables (payables) 100,291 (100,291) -- -- Deferred income taxes 16,690 -- (16,690) -- Other assets 112,672 91,804 -- 204,476 Investment in subsidiaries 2,042,400 -- (2,042,400) -- Investment in theme park partnerships 292,305 92,332 -- 384,637 Property and equiment, net 12,584 2,052,155 -- 2,064,739 Intangible assets, net 6,463 1,253,105 -- 1,259,568 ------------ ------------ ------------ ------------ Total assets $ 2,649,837 3,570,825 (2,059,090) 4,161,572 ============ ============ ============ ============ Liabilities and stockholders' equity: Current portion of long-term debt $ -- 2,055 -- 2,055 Other current liabilities 25,901 131,346 -- 157,247 ------------ ------------ ------------ ------------ Total current liabilities 25,901 133,401 -- 159,302 Long-term debt 1,007,749 1,195,184 -- 2,202,933 Other long-term liabilities 571 41,760 (570) 41,761 Deferred income taxes -- 158,650 (16,690) 141,960 Stockholder's equity 1,615,616 2,041,830 (2,041,830) 1,615,616 ------------ ------------ ------------ ------------ Total liabilities and stockholders' equity $ 2,649,837 3,570,825 (2,059,090) 4,161,572 ============ ============ ============ ============ Revenue $ -- 926,984 -- 926,984 Operating costs and expenses: Operating expenses -- 353,728 -- 353,728 Selling, general and administrative 23,002 153,249 -- 176,251 Costs of products sold -- 90,699 -- 90,699 Depreciation and amortization 589 153,675 -- 154,264 ------------ ------------ ------------ ------------ Total operating costs and expenses 23,591 751,351 -- 774,942 ------------ ------------ ------------ ------------ Income (loss) from operations (23,591) 175,633 -- 152,042 ------------ ------------ ------------ ------------
(Continued) F-26 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998
Six Flags Holdings Operations Eliminations Total ------------ ------------ ------------ ------------ (In thousands) Other income (expense): Interest expense $ (78,232) (115,733) -- (193,965) Interest income 11,323 13,201 -- 24,524 Equity in operations of theme park -- partnerships 19,105 7,075 -- 26,180 Other income (expense) -- (3,551) -- (3,551) ------------ ------------ ------------ ------------ Total other income (expense) (47,804) (99,008) -- (146,812) ------------ ------------ ------------ ------------ Income (loss) before income taxes taxes (71,395) 76,625 -- 5,230 Income tax expense (benefit) (19,803) 44,263 -- 24,460 ------------ ------------ ------------ ------------ Income before extraordinary loss (51,592) 32,362 -- (19,230) Extraordinary loss on extinguishment of debt, net of income tax benefit -- (11,296) -- (11,296) ------------ ------------ ------------ ------------ Net income (loss) $ (51,592) 21,066 -- (30,526) ============ ============ ============ ============ Net income (loss) applicable to common stock $ (74,880) 21,066 -- (53,814) ============ ============ ============ ============ Cash flows from operating activities: Operating cash flows (1,506) 198,855 -- 197,349 ------------ ------------ ------------ ------------ Cash flows from investing activities: Additions to property and equipment 10,746 (402,401) -- (391,655) Investment in theme parks partnerships (23,006) (28,925) -- (51,931) Acquisitions of theme park assets -- (34,578) -- (34,578) Acquisitions of theme park companies -- (242,954) -- (242,954) Investment in subsidiaries (607,632) -- 607,632 -- Purchase of restricted-use investments -- -- -- -- Maturities of restricted-use investments 22,690 192,250 -- 214,940 ------------ ------------ ------------ ------------ (597,202) (516,608) 607,632 (506,178) ------------ ------------ ------------ ------------ Cash flows from financing activities: Repayment of long-term debt -- (1,291,910) -- (1,291,910) Proceeds from borrowings 429,024 962,000 -- 1,391,024 Capital contributions -- 607,632 (607,632) -- Advances to subsidiaries (100,291) 100,291 -- -- Net cash proceeds from issuance of stock 2,801 -- -- 2,801 Payment of cash dividends (23,288) -- -- (23,288) Payment of debt issuance costs (9,829) (19,310) -- (29,139) ------------ ------------ ------------ ------------ 298,417 358,703 (607,632) 49,488 Effect of exchange rate changes on cash -- (3,106) -- (3,106) ------------ ------------ ------------ ------------ Increase (decrease) in cash and cash equivalents $ (300,291) 37,844 -- (262,447) ============ ============ ============ ============
F-27 SIX FLAGS, INC. Notes to Consolidated Statements of Operations Years ended December 31, 2000, 1999 and 1998
Six Flags Holdings Operations Eliminations Total ------------ ------------ ------------ ------------ December 31, 1998 (in thousands) Revenue 904 791,799 -- 792,703 ------------ ------------ ------------ ------------ Operating costs and expenses: Operating expenses -- 297,266 -- 297,266 Selling, general and administrative 15,038 118,309 -- 133,347 Costs of products sold 564 81,563 -- 82,127 Depreciation and amortization 165 109,676 -- 109,841 ------------ ------------ ------------ ------------ Total operating costs and expenses 15,767 606,814 -- 622,581 ------------ ------------ ------------ ------------ Income from operations (14,863) 184,985 -- 170,122 ------------ ------------ ------------ ------------ Other income (expense): Interest expense (40,851) (108,969) -- (149,820) Interest income 20,412 13,559 -- 33,971 Equity in operations of theme park partnerships 21,002 3,052 -- 24,054 Other income (expense), including MI -- (1,983) -- (1,983) ------------ ------------ ------------ ------------ Total other income (expense) 563 (94,341) -- (93,778) ------------ ------------ ------------ ------------ Income (loss) before income taxes (14,300) 90,644 -- 76,344 Income tax expense (benefit) (5,918) 46,634 -- 40,716 ------------ ------------ ------------ ------------ Income (loss) before extraordinary loss (8,382) 44,010 -- 35,628 Extraordinary loss on extinguishment of debt, net of income tax benefit -- (788) -- (788) ------------ ------------ ------------ ------------ Net income (loss) $ (8,382) 43,222 -- 34,840 ============ ============ ============ ============ Net income (loss) applicable to common stock $ (25,848) 43,222 -- 17,374 ============ ============ ============ ============ Operating cash flows (17,859) 136,869 -- 119,010 ------------ ------------ ------------ ------------ Cash flows from investing activities: Additions to property and equipment (23,970) (181,784) -- (205,754) Investment in theme park partnerships (218,084) (50,737) 208,082 (60,739) Transfer of interests in theme park partnerships -- 208,082 (208,082) -- Acquisition of theme park assets -- (50,593) -- (50,593) Acquisition of theme park companies (981,395) (56,017) -- (1,037,412) Investment in subsidiaries (56,766) -- 56,766 -- Purchase of restricted use investments (145,675) (176,075) -- (321,750) Maturities of restricted use investments 11,365 -- -- 11,365 ------------ ------------ ------------ ------------ (1,414,525) (307,124) 56,766 (1,664,883) ------------ ------------ ------------ ------------ Cash flows from financing activities: Repayment of long-term debt -- (703,639) -- (703,639) Proceeds from borrowings 531,703 830,000 -- 1,361,703 Capital contributions -- 56,766 (56,766) -- Advances to subsidiaries -- -- -- -- Net cash proceeds from issuance of stock 1,256,319 -- -- 1,256,319 Payment of cash dividends (11,644) -- -- (11,644) Payment of debt issuance costs (23,583) (18,058) -- (41,641) ------------ ------------ ------------ ------------ 1,752,795 165,069 (56,766) 1,861,098 Effect of exchange rate changes on cash -- 1,065 -- 1,065 ------------ ------------ ------------ ------------ Increase in cash and cash equivalents $ 320,411 (4,121) -- 316,290 ============ ============ ============ ============
F-28 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998 The debt indentures and credit facility agreement generally restrict the ability of the obligors to distribute assets to parent companies or in the case of Holdings to shareholders. The following table discloses the amounts available for distribution (other than permitted payments in respect of shared administrative and other corporate expenses and tax sharing payments) at December 31, 2000 by each debt group, excluding restrictions eliminated by the indenture amendments related to the 1997 Notes, based upon the most restrictive applicable limitation. Amount available ------------- (In thousands) Holdings $201,634 Six Flags Operations 844,811 (7) Fair Value of Financial Instruments The following table and accompanying information presents the carrying amounts and estimated fair values of the Company's financial instruments at December 31, 2000 and 1999. The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties.
2000 1999 ----------------------------------- ----------------------------------- Carrying amount Fair value Carrying amount Fair value -------------- -------------- -------------- -------------- Financial assets (liabilities): Restricted-use investment securities $ 88,149,000 88,138,000 108,894,000 108,782,000 Long-term debt (2,322,313,000) (2,271,779,000) (2,204,988,000) (2,183,636,000) Foreign currency forward purchase agreements -- -- -- 59,000 Interest rate swap agreements -- (4,996,000) -- --
The carrying amounts shown in the table are included in the consolidated balance sheets under the indicated captions, except for the foreign currency forward purchase agreements and the interest rate swap agreements (Note 5) which are not reflected in the consolidated balance sheets. The following methods and assumptions were used to estimate the fair value of each class of financial instruments: o The fair value of cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximate fair value because of the short maturity of these instruments. o Restricted-use investment securities: The fair values of debt securities (both available-for-sale and held-to-maturity investments) are based on quoted market prices at the reporting date for those or similar investments. F-29 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998 o Long-term debt: The fair value of the Company's long-term debt is estimated by discounting the future cash flows of each instrument at rates currently offered to the Company for similar debt instruments of comparable maturities by the Company's investment bankers or based upon quoted market prices. o Derivative financial instruments: The fair value of the Company's derivative financial instruments is determined by the counterparty financial institution. (8) Income Taxes Income tax expense (benefit) allocated to operations for 2000, 1999 and 1998 consists of the following: Current Deferred Total ------------ ------------ ------------ 2000: U.S. federal $ (10,000) (2,211,000) (2,221,000) Foreign 3,792,000 4,388,000 8,180,000 State and local (377,000) 40,000 (337,000) ------------ ------------ ------------ $ 3,405,000 2,217,000 5,622,000 ============ ============ ============ 1999: U.S. federal $ (683,000) 18,338,000 17,655,000 Foreign 1,058,000 3,072,000 4,130,000 State and local (591,000) 3,266,000 2,675,000 ------------ ------------ ------------ $ (216,000) 24,676,000 24,460,000 ============ ============ ============ 1998: U.S. federal $ (564,000) 32,318,000 31,754,000 Foreign 1,049,000 5,146,000 6,195,000 State and local 1,007,000 1,760,000 2,767,000 ------------ ------------ ------------ $ 1,492,000 39,224,000 40,716,000 ============ ============ ============ F-30 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998 Recorded income tax expense allocated to operations differed from amounts computed by applying the U.S. federal income tax rate of 35% in 2000, 1999 and 1998 to income (loss) before income taxes as follows:
2000 1999 1998 ------------ ------------ ------------ Computed "expected" federal income tax expense (benefit) $(16,218,000) 1,830,000 26,720,000 Amortization of goodwill 13,643,000 11,973,000 9,970,000 Nondeductible compensation 3,779,000 6,786,000 656,000 Other, net 499,000 864,000 (129,000) Effect of foreign income taxes 4,145,000 1,215,000 1,645,000 Effect of state and local income taxes, net of federal tax benefit (226,000) 1,792,000 1,854,000 ------------ ------------ ------------ $ 5,622,000 24,460,000 40,716,000 ============ ============ ============
There were no extraordinary losses in 2000. An income tax benefit of $7,530,000 was allocated to extraordinary loss for 1999. The U.S. federal benefit component was $6,539,000 and the state and local benefit component was $991,000. There were no foreign extraordinary losses in 1999. An income tax benefit of $526,000 was allocated to extraordinary loss for 1998. The U.S. federal benefit component was $457,000 and the state and local benefit component was $69,000. There were no foreign extraordinary losses in 1998. Substantially all of the Company's future taxable temporary differences (deferred tax liabilities) relate to the different financial accounting and tax depreciation methods and periods for property and equipment. The Company's net operating loss carryforwards, alternative minimum tax credits, accrued insurance expenses, and deferred compensation amounts represent future income tax deductions (deferred tax assets). The tax effects of these temporary differences as of December 31, 2000 and 1999, are presented below:
2000 1999 1998 ------------ ------------ ------------ Deferred tax assets before valuation allowance $286,098,000 213,244,000 172,227,000 Less valuation allowance 1,196,000 1,196,000 1,196,000 ------------ ------------ ------------ Net deferred tax assets 284,902,000 212,048,000 171,031,000 Deferred tax liabilities 429,821,000 354,008,000 323,009,000 ------------ ------------ ------------ Net deferred tax liability $144,919,000 141,960,000 151,978,000 ============ ============ ============
The Company's deferred tax liability results from the financial carrying amounts for property and equipment being substantially in excess of the Company's tax basis in the corresponding assets. The majority of the Company's property and equipment is depreciated over a 7-year period for tax reporting purposes and a longer 20-to-25 year period for financial purposes. The faster tax depreciation has resulted in tax losses which can be carried forward to future years to offset future taxable income. Because most of the Company's depreciable assets' financial carrying amounts and tax basis difference will reverse before the expiration of the Company's net operating loss F-31 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998 carryforwards and taking into account the Company's projections of future taxable income over the same period, management believes that the Company will more likely than not realize the benefits of these net future deductions. As of December 31, 2000, the Company has approximately $751,468,000 of net operating loss carryforwards available for federal income tax purposes which expire through 2020. Included are net operating loss carryforwards of $3,400,000 which are not expected to be utilized as a result of an ownership change that occurred on October 30, 1992. A valuation allowance for the pre-October 1992 net operating loss carryforwards has been established. Additionally at December 31, 2000, the Company had approximately $7,537,000 of alternative minimum tax credits which have no expiration date. The Company has experienced ownership changes within the meaning of the Internal Revenue Code Section 382 and the regulations thereunder. The Company experienced an ownership change on June 4, 1996, as a result of the issuance of shares of common stock and the conversion of preferred stock into additional shares of common stock. This ownership change limits the amount of the Company's post-October 1992 through June 1996 net operating loss carryforwards that can be used in any year. Included in the Company's tax net operating loss carryforward amounts are approximately $249,353,000 of net operating loss carryforwards of SFEC generated prior to its acquisition by the Company. SFEC experienced an ownership change on April 1, 1998 as a result of the Six Flags Acquisition. Due to this ownership change, no more than $49,200,000 of pre-acquisition net operating loss carryforwards may be used to offset taxable income in any year; however, it is more likely than not that all of the Company's carryforwards generated subsequent to October 1992 and all of the SFEC's pre-acquisition carryfowards will be fully utilized by the Company before their expiration. During 1999, the Company reduced goodwill by approximately $1,700,000 for the tax benefit from certain reimbursed costs arising from contingencies related to the Six Flags Acquisition. (9) Preferred Stock, Common Stock and Other Stockholders' Equity (a) Preferred Stock The Company has authorized 5,000,000 shares of preferred stock, $1.00 par value per share. All shares of preferred stock rank senior and prior in right to all of the Company's now or hereafter issued common stock with respect to dividend payments and distribution of assets upon liquidation or dissolution of the Company. PIES In connection with the Company's acquisition of SFEC on April 1, 1998, the Company issued 5,750,000 PIES for gross proceeds of $310,500,000, each representing one five-hundredth of a share of the Company's mandatorily convertible preferred stock (an aggregate of 11,500 shares of preferred stock). See Note 2. The PIES accrue cumulative dividends (payable, at the Company's option, in cash or shares of common stock) at 7 1/2% per annum (approximately $23,288,000 per annum) and are mandatorily convertible into shares of common stock F-32 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998 on April 1, 2001. Holders can voluntarily convert the PIES into shares of common stock at any time prior to April 1, 2001. Prior to April 1, 2001, each of the PIES is convertible at the option of the holder into 1.6616 common shares. On April 1, 2001, the PIES will mandatorily convert into common shares based upon the average of the closing quoted market price of the common stock for the last twenty days prior to the conversion. If the average market price of the common stock is equal to or less than $27 per common share, each PIES share will convert into two shares of common stock. If the average market price of the common stock is equal to or more than $32.50 per common share, each PIES share will convert into 1.6616 common shares. If the average market price of the common stock is between $27 and $32.50 per common share, each PIES share will convert into a declining number of common shares based upon the proportional excess of the average market price over $27 per common share until the 1.6616 conversion rate is achieved at the average market price of $32.50. Any conversion is also adjusted for dividends that have accumulated, but have not yet been paid in cash or common stock. PIERS In January 2001, the Company issued 11,500,000 Preferred Income Equity Redeemable Shares (PIERS), for proceeds of $278,530,000, net of the underwriting discount of $8,970,000. See Note 1(a) for description of the use of the proceeds. Each PIERS represents one one-hundredth of a share of the Company's 7 1/4% manditorily redeemable preferred stock (an aggregate of 115,000 shares of preferred stock). The PIERS accrue cumulative dividends (payable, at the Company's option, in cash or shares of common stock) at 7 1/4% per annum (approximately $20,844,000 per annum). Holders can voluntarily convert the PIERS into shares of common stock at any time prior to August 15, 2009. Prior to August 15, 2009, each of the PIERS is convertible at the option of the holder into 1.1990 common shares (equivalent to a conversion price of $20.85 per common share), subject to adjustment in certain circumstances (the Conversion Price). At any time on or after February 15, 2004 and at the then applicable conversion rate, the Company may cause the PIERS, in whole or in part, to be automatically converted if for 20 trading days within any period of 30 consecutive trading days, including the last day of such period, the closing price of the Company's common stock exceeds 120% of the then prevailing Conversion Price. On August 15, 2009, the PIERS are manditorily redeemable in cash equal to 100% of the liquidation preference (initially $25.00 per PIERS), plus any accrued and unpaid dividends. The PIERS rank on a parity with the PIES. The PIERS are not reflected in the Company's December 31, 2000 consolidated balance sheet as the PIERS were issued on January 23, 2001. (b) Common Stock On June 9, 1998, the Company's common shareholders approved a two-for-one stock split effective July 24, 1998. The par value of the common stock was decreased to $.025 per share from $.05 per share. Additionally, the authorized common shares of the Company were increased to 150,000,000. The accompanying consolidated financial statements and notes to the consolidated financial statements reflect the stock split as if it had occurred as of January 1, 1998. F-33 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998 (c) Stock Options and Warrants Certain members of the Company's management and professional staff have been issued seven-year options to purchase common shares under the Company's 1998, 1996, 1995 and 1993 Stock Option and Incentive Plans (collectively, the Option Plans). Under the Option Plans, stock options are granted with an exercise price equal to the underlying stock's fair value at the date of grant. Except for conditional options issued in 1998, options may be exercised on a cumulative basis with 20% of the total exercisable on the date of issuance and with an additional 20% being available for exercise on each of the succeeding anniversary dates. Any unexercised portion of the options will automatically terminate upon the seventh anniversary of the issuance date or following termination of employment. There were 1,531,000 conditional stock options granted in 1998. These options have the same vesting schedule as the unconditional stock options, except that no conditional option could be exercised until after the conditions of the stock option were met. The conditions related to the exercise of these stock options were met during December 1999. In 1999 and 1998, the Company also issued to certain consultants options to purchase 40,000 and 70,000 common shares, respectively. The options have substantially the same terms and conditions as the options granted under the Option Plans. The Company has recognized the fair value of the options issued to the consultants as an expense in the accompanying 1999 and 1998 consolidated statements of operations. At December 31, 2000, there were 2,102,199 additional shares available for grant under the Option Plans. The per share weighted-average fair value of stock options granted during 2000, 1999 and 1998 was $13.65, $17.43 and $12.74, respectively, on the date of grant using the Black--Scholes option-pricing model with the following weighted-average assumptions: 2000 - expected dividend yield 0%, risk-free interest rate of 6.28%, expected volatility of 80%, and an expected life of 5 years. 1999 - expected dividend yield 0%, risk-free interest rate of 5.5%, expected volatility of 84%, and an expected life of 5 years; 1998 - expected dividend yield 0%, risk-free interest rate of 4.5%, expected volatility of 92% and an expected life of 5 years. No compensation cost has been recognized for the unconditional stock options in the consolidated financial statements. Had the Company determined compensation cost based on the fair value at the grant date for all its unconditional stock options, the Company's net income (loss) would have been as indicated below:
2000 1999 1998 -------------- -------------- -------------- Net income (loss) applicable to common stock: As reported $ (75,247,000) (53,814,000) 17,374,000 Pro forma (97,049,000) (74,617,000) 11,212,000 Net income (loss) per weighted average common share outstanding - basic: As reported (0.96) (0.69) 0.26 Pro forma (1.23) (0.96) 0.17
F-34 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998 Stock option activity during the years indicated is as follows: Weighted- Average Number of Exercise Shares Price ---------- ---------- Balance at December 31, 1997 1,559,401 $ 6.92 Granted 3,507,000 17.50 Exercised (216,485) 3.52 Forfeited -- -- Expired -- -- ---------- Balance at December 31, 1998 4,849,916 14.72 Granted 3,440,000 25.00 Exercised (354,565) 7.30 Forfeited (93,600) 17.50 Expired -- -- ---------- Balance at December 31, 1999 7,841,751 19.55 Granted 151,000 20.00 Exercised (377,501) 9.70 Forfeited (183,400) 21.52 Expired -- -- ---------- Balance at December 31, 2000 7,431,850 $ 20.11 ========== ========== At December 31, 2000, the range of exercise prices and weighted-average remaining contractual life of outstanding options was $2.50 to $25.00 and 5.04 years, respectively. At December 31, 2000, 1999 and 1998, options exercisable were 4,101,500, 3,245,800 and 1,366,700, respectively, and weighted-average exercise price of those options was $18.25, $15.23 and $9.83, respectively. In 1989, the Company's current chairman was issued a ten-year warrant to purchase 52,692 common shares at an exercise price of $.50 per share and a ten-year warrant to purchase 37,386 common shares at an exercise price of $.50 per share. The warrants were exercised during 1999 prior to their expiration. (d) Share Rights Plan On December 10, 1997, the Company's board of directors authorized a share rights plan. The plan was subsequently amended on February 4, 1998. Under the plan, stockholders have one right for each share of common stock held. The rights become exercisable ten business days after (a) an announcement that a person or group of affiliated or associated persons has acquired beneficial ownership of 15% or more of the Company's voting shares outstanding, or (b) the commencement or announcement of a person's or group's intention to commence a tender or exchange offer that could result in a person or group owning 15% or more of the voting shares outstanding. F-35 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998 Each right entitles its holder (except a holder who is the acquiring person) to purchase 1/1000 of a share of a junior participating series of preferred stock designated to have economic and voting terms similar to those of one share of common stock for $250.00, subject to adjustment. In the event of certain merger or asset sale transactions with another party or transactions which would increase the equity ownership of a stockholder who then owned 15% or more of the voting shares of the Company, each right will entitle its holder to purchase securities of the merging or acquiring party with a value equal to twice the exercise price of the right. The rights, which have no voting power, expire in 2008. The rights may be redeemed by the Company for $.01 per right until the rights become exercisable. (e) Restricted Stock Grants The Company issued 900,000 restricted common shares with an estimated aggregate value of $14,625,000 to members of the Company's senior management in July 1997. The restrictions on the stock lapse ratably over a six-year term commencing January 1, 1998, generally based upon the continued employment of the recipient. The Company issued an additional 920,000 restricted common shares with an estimated aggregate value of $16,100,000 to members of the Company's senior management in October 1998. The restrictions on the stock lapse ratably over a three-year term commencing January 1, 1999. The restrictions also lapse upon termination of the executive without cause or if a change in control of the Company occurs. Compensation expense equal to the aggregate value of the shares is being recognized as an expense over the vesting period. (10) Pension Benefits As part of the Six Flags Acquisition, the Company assumed the obligations related to the SFTP Defined Benefit Plan (the Benefit Plan). The Benefit Plan covered substantially all of SFTP's full-time employees. During 1999 the Benefit Plan was extended to cover substantially all of the Company's domestic full-time employees. The Benefit Plan permits normal retirement at age 65, with early retirement at ages 55 through 64 upon attainment of ten years of credited service. The early retirement benefit is reduced for benefits commencing before age 62. Benefit Plan benefits are calculated according to a benefit formula based on age, average compensation over the highest consecutive five-year period during the employee's last ten years of employment and years of service. Benefit Plan assets are invested primarily in common stock and mutual funds. The Benefit Plan does not have significant liabilities other than benefit obligations. Under the Company's funding policy, contributions to the Benefit Plan are determined using the projected unit credit cost method. This funding policy meets the requirements under the Employee Retirement Income Security Act of 1974. F-36 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998 The following table sets forth the aggregate funded status of the Benefit Plan and the related amounts recognized in the Company's consolidated balance sheets:
2000 1999 ------------ ------------ Change in benefit obligation: Benefit obligation, January 1 $ 72,189,000 74,658,000 Service cost 3,309,000 3,644,000 Interest cost 5,952,000 5,459,000 Plan amendments -- 2,723,000 Actuarial (gain) loss 4,872,000 (12,587,000) Benefits paid (2,009,000) (1,708,000) ------------ ------------ Benefit obligation at December 31 84,313,000 72,189,000 ------------ ------------ Change in plan assets: Fair value of assets, January 1 89,958,000 87,270,000 Actual return on plan assets 312,000 4,396,000 Benefits paid (2,009,000) (1,708,000) ------------ ------------ Fair value of assets at December 31 88,261,000 89,958,000 ------------ ------------ Plan assets in excess of benefit obligations 3,948,000 17,769,000 Unrecognized net actuarial (gain) loss 6,668,000 (5,891,000) Unrecognized prior service cost 2,203,000 2,463,000 ------------ ------------ Prepaid benefit cost (included in deposits and other assets) $ 12,819,000 14,341,000 ============ ============
Net pension expense of the Benefit Plan for each of the years ended December 31, 2000 and 1999 and the nine-month period ended December 31, 1998, included the following components:
2000 1999 1998 ----------- ----------- ----------- Service cost $ 3,309,000 3,644,000 2,444,000 Interest cost 5,952,000 5,459,000 3,808,000 Expected return on plan assets (7,999,000) (7,774,000) (5,657,000) Amortization of prior service cost 260,000 260,000 -- ----------- ----------- ----------- Net periodic benefit cost $ 1,522,000 1,589,000 595,000 =========== =========== ===========
The weighted average discount rate used in determining the actuarial present value of the projected benefit obligation in 2000, 1999 and 1998 was 7.50%, 7.75% and 6.75%, respectively. The rate of increase in future compensation levels was 4.50%, 4.75% and 4.5% in 2000, 1999 and 1998, respectively. The expected long-term rate of return on assets was 9% in each year. (11) 401(k) Plan The Company has a qualified, contributory 401(k) plan (the 401(k) Plan). All regular employees are eligible to participate in the 401(k) Plan if they have completed one full year of service and are at least 21 years old. The Company matches 100% of the first 2% and 25% of the next 6% of salary F-37 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998 contributions made by employees. The accounts of all participating employees are fully vested upon completion of four years of service. The Company recognized approximately $1,730,000, $1,874,000 and $417,000 of related expense in the years ended December 31, 2000, 1999 and 1998, respectively. As part of the acquisition of Six Flags by the Company, the Company assumed the administration of SFEC's savings plan. Under the provisions of the SFEC's savings plan, all full-time and seasonal employees of SFEC completing one year of service (minimum 1,000 hours) and attaining age 21 were eligible to participate and could contribute up to 6% of compensation as a tax deferred basic contribution. Each participant could also elect to make additional contributions of up to 10% of compensation (up to 4% tax deferred). Tax deferred contributions to the savings plan could not exceed amounts defined by the Internal Revenue Service ($10,000 for 1998). Both the basic and additional contributions were at all times vested. SFEC, at its discretion, could make matching contributions of up to 100% of its employees' basic contributions. SFEC made $743,000 in contributions for the 1998 plan year. During the first quarter of 1999, the SFEC's savings plan was merged into the Company's 401(k) Plan. (12) Commitments and Contingencies The Company leases the sites of Wyandot Lake, Enchanted Village, Six Flags Mexico, and each of the two Waterworld/USA locations. The Company also leases portions of the sites of Six Flags Kentucky Kingdom, Six Flags New England, Six Flags Holland, and Warner Bros. Movie World Germany. In certain cases rent is based upon percentage of the revenues earned by the applicable park. During 2000, 1999 and 1998, the Company recognized approximately $3,883,000, $2,045,000 and $1,002,000, respectively, of rental expense under these rent agreements. Total rental expense, including office space and park sites, was approximately $9,274,000, $7,352,000 and $7,918,000 for the years ended December 31, 2000, 1999 and 1998, respectively. Future obligations under operating leases, including site leases, at December 31, 2000, are summarized as follows (in thousands): Year ending December 31, ------------------------ 2001 $ 4,123 2002 3,769 2003 3,454 2004 3,241 2005 and thereafter 66,856 ------- $81,443 ======= In connection with the acquisition of SFEC by the Company in 1998, the Company entered into a license agreement (the License Agreement) pursuant to which it obtained the exclusive right for a term of 55 years to theme park use in the United States and Canada (excluding the Las Vegas, Nevada metropolitan area) of all animated, cartoon and comic book characters that Warner Bros. and DC Comics have the right to license for such use during the term of the License Agreement. F-38 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998 Under the License Agreement, the Company pays an annual license fee of $2,500,000 through 2005. Thereafter, the license fee will be subject to periodic scheduled increases and will be payable on a per-theme park basis. On March 21, 1999, a raft capsized in the river rapids ride at Six Flags Over Texas, one of the Company's Partnership Parks, resulting in one fatality and injuries to ten others. As a result of the fatality, a case entitled Jerry L. Cartwright, et al vs. Premier Parks, Inc. d/b/a Six Flags Over Texas, Inc. was commenced seeking unspecified damages. The Partnership Park is covered by the Company's multi-layered general liability insurance coverage of up to $100,000,000 per occurrence, with no self-insured retention. The Company does not believe that the impact of this incident or the resulting lawsuit will have a material adverse effect on the Company's consolidated financial position, operations, or liquidity. In December 1998, a final judgment of $197,300,000 in compensatory damages was entered against SFEC, SFTP, Six Flags Over Georgia, Inc. and Time Warner Entertainment Company, L.P. (TWE), and a final judgment of $245,000,000 in punitive damages was entered against TWE and $12,000,000 in punitive damages was entered against the Six Flags entities. The compensatory damages judgment has been paid and the Company has been advised that TWE is considering an appeal to the United States Supreme Court of the punitive damages judgment. The judgments arose out of a case entitled Six Flags Over Georgia, LLC et al v. Time Warner Entertainment Company, LP et al based on certain disputed partnership affairs prior to the Six Flags Acquisition at Six Flags Over Georgia, including alleged breaches of fiduciary duty. The sellers in the Six Flags Acquisition, including Time Warner, Inc., have agreed to indemnify the Company from any and all liabilities arising out of this litigation. The Company is party to various legal actions arising in the normal course of business. Matters that are probable of unfavorable outcome to the Company and which can be reasonably estimated are accrued. Such accruals are based on information known about the matters, the Company's estimates of the outcomes of such matters and its experience in contesting, litigating and settling similar matters. None of the actions are believed by management to involve amounts that would be material to the Company's consolidated financial position, operations, or liquidity after consideration of recorded accruals. (13) Business Segments The Company manages its operations on an individual park location basis. Discrete financial information is maintained for each park and provided to the Company's management for review and as a basis for decision-making. The primary performance measure used to allocate resources is earnings before interest, tax expense, depreciation, and amortization (EBITDA). All of the Company's parks provide similar products and services through a similar process to the same class of customer through a consistent method. As such, the Company has only one reportable segment - operation of theme parks. The following tables present segment financial information, a reconciliation of the primary segment performance measure to income (loss) before income taxes and a reconciliation of theme park revenues to consolidated total revenues. Park level expenses exclude all non-cash operating expenses, principally depreciation and amortization and all non- operating expenses. F-39 SIX FLAGS, INC. Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998
2000 1999 1998 ----------- ----------- ----------- (In thousands) Theme park revenues $ 1,215,177 1,152,258 994,296 Theme park cash expenses (746,841) (712,111) (612,827) ----------- ----------- ----------- Aggregate park EBITDA 468,336 440,147 381,469 Third-party share of EBITDA from parks accounted for under the equity method (41,827) (40,761) (41,064) Amortization of investment in theme park partnerships (20,370) (15,826) (9,763) Unallocated net expenses, including corporate and expenses from parks acquired after completion of the operating season (47,720) (54,625) (28,608) Depreciation and amortization (179,989) (154,264) (109,841) Interest expense (232,336) (193,965) (149,820) Interest income 7,569 24,524 33,971 ----------- ----------- ----------- Income (loss) before income taxes $ (46,337) 5,230 76,344 =========== =========== =========== Theme park revenues $ 1,215,177 1,152,258 994,296 Theme park revenues from parks accounted for under the equity method (208,196) (225,274) (201,933) Other revenues -- -- 340 ----------- ----------- ----------- Consolidated total revenues $ 1,006,981 926,984 792,703 =========== =========== ===========
Seven of the Company's parks are located in Europe and one is located in Mexico. The Mexico park was acquired in May 1999 and one of the European parks was acquired in November 1999. The following information reflects the Company's long-lived assets and revenues by domestic and foreign categories for 2000, 1999 and 1998: Domestic Foreign Total ---------- ---------- ---------- (In thousands) 2000: Long-lived assets $3,346,733 504,414 3,851,147 Revenues 839,251 167,730 1,006,981 1999: Long-lived assets $3,267,019 441,925 3,708,944 Revenues 830,578 96,406 926,984 1998: Long-lived assets $2,944,036 188,826 3,132,862 Revenues 725,946 66,757 792,703 F-40 (14) Quarterly Financial Information (Unaudited) Following is a summary of the unaudited interim results of operations for the years ended December 31, 2000 and 1999:
2000 --------------------------------------------------------------------------------- First Second Third Fourth Full quarter quarter quarter quarter year ---------------- ----------- ----------- ----------- ------------- Total revenue $ 30,893,000 341,079,000 547,439,000 87,570,000 1,006,981,000 Net income (loss) applicable to common stock (119,714,000) 9,932,000 128,828,000 (94,293,000) (75,247,000) Net income (loss) per weighted average common share outstanding: Basic (1.53) 0.13 1.64 (1.19) (0.96) Diluted (1.53) 0.12 1.49 (1.19) (0.96) 1999 --------------------------------------------------------------------------------- First Second Third Fourth Full quarter quarter quarter quarter year ---------------- ----------- ----------- ----------- ------------- Total revenue $ 38,580,000 314,142,000 495,404,000 78,858,000 926,984,000 Net income (loss) applicable to common stock (99,222,000) 12,273,000 125,809,000 (92,674,000) (53,814,000) Net income (loss) per weighted average common share outstanding: Basic (1.29) 0.16 1.61 (1.18) (0.69) Diluted (1.29) 0.15 1.46 (1.18) (0.69)
F-41 EXHIBIT INDEX Page ------------- ---- (3) Articles of Incorporation and By-Laws: (a) Certificate of Designation of Series A Junior Preferred Stock of Registrant -- incorporated by reference from Exhibit 2(1.C) to Registrant's Form 8-A dated January 21, 1998. (b) Restated Certificate of Incorporation of Registrant dated March 25, 1998 -- incorporated by reference from Exhibit 3 to Registrant's Current Report on Form 8-K filed on March 26, 1998. (c) Certificate of Designation, Rights and Preferences for 7 1/2% Mandatorily Convertible Preferred Stock of Registrant -- incorporated by reference from Exhibit 4(s) to Registrant's Registration Statement on Form S-3 (No. 333-45859) declared effective on March 26, 1998. (d) Certificate of Amendment of Certificate of Incorporation of Registrant dated July 24, 1998 -- incorporated by reference from Exhibit 3(p) to Registrant's Form 10-K for the year ended December 31, 1998. (e) Certificate of Amendment of Certificate of Incorporation of Registrant dated June 30, 2000 -- incorporated by reference from Exhibit 3.1 to Registrant's Form 10-Q for the quarter ended June 30, 2000. (f) Certificate of Designation, Rights and Preferences for 7 1/4% Convertible Preferred Stock of Registrant -- incorporated by reference from Exhibit 5 to Registrant's Current Report on Form 8-K filed on January 23, 2001. (g) Amended and Restated By-laws of Registrant -- incorporated by reference from Exhibit 3.2 to Registrant's Form 10-Q for the quarter ended June 30, 2000. (4) Instruments Defining the Rights of Security Holders, Including Indentures: (a) 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. (b) 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. (c) Form of Common Stock Certificate-- incorporated by reference from Exhibit 4(l) to Registrant's Registration Statement on Form S-2 (Reg. No. 333-08281) declared effective on May 28, 1996. (d) Form of Depository Receipt evidencing ownership of Registrant's Premium Income Equity Securities-- incorporated by reference from Exhibit 4(k) to Registrant's Registration Statement on Form S-3 (Reg. No. 333-45859) declared effective on March 26, 1998. (e) Indenture dated as of April 1, 1998 between Registrant and The Bank of New York, as Trustee, with respect to Registrant's 10% Senior Discount Notes due 2008 -- incorporated by reference from Exhibit 4(o) to Registrant's Registration Statement on Form S-3 (Reg. No. 333-45859) declared effective on March 26, 1998. (f) Indenture dated as of April 1, 1998 between Registrant and The Bank of New York, as Trustee, with respect to Registrant's 9 1/4% Senior Discount Notes due 2006 -- incorporated by reference from Exhibit 4(p) to Registrant's Registration Statement on Form S-3 (Reg. No. 333-45859) declared effective on March 26, 1998. (g) Indenture dated as of April 1, 1998 between Registrant and The Bank of New York, as Trustee, with respect to Registrant's 8 7/8% Senior Discount Notes due 2006 -- incorporated by reference from Exhibit 4(q) to Registrant's Registration Statement on Form S-3 (Reg. No. 333-45859) declared effective on March 26, 1998. (h) Deposit Agreement dated as of April 1, 1998 among Registrant, The Bank of New York and the holder from time to time of depositary receipts executed and delivered thereunder -- incorporated by reference from Exhibit 4(u) to Registrant's Registration Statement on Form S-3 (Reg. No. 333-45859) declared effective on March 26, 1998. (i) Indenture and First Supplemental Indenture dated as of June 30, 1999 between Registrant and The Bank of New York with respect to Registrant's 9 3/4% Senior Notes due 2007 -- incorporated by reference from Exhibits 4.1 and 4.2 to Registrant's Current Report on Form 8-K dated July 2, 1999. 99.1 *(j) Indenture dated as of February 2, 2001 between Registrant and The Bank of New York with respect to Registrant's 9 1/2% Senior Notes due 2009. (k) Form of Deposit Agreement dated as of January 23, 2001 among Registrant, The Bank of New York, as Depositary, and owners and holders of depositary receipts -- incorporated by reference from Exhibit 12 to Registrant's Form 8-A12B filed on January 23, 2001. (l) Form of Depository Receipt evidencing ownership of Registrant's Preferred Income Equity Redeemable Securities -- incorporated by reference from Exhibit 13 to Registrant's Form 8-A12B filed on January 23, 2001. (m) Form of 7 1/4% Convertible Preferred Stock Certificate -- incorporated by reference from Exhibit 14 to Registrant's Form 8-A12B filed on January 23, 2001. (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) Lease Agreement dated December 22, 1995 between Darien Lake Theme Park and Camping Resort, Inc. and The Metropolitan Entertainment Co., Inc.-- incorporated by reference from Exhibit 10(o) to Registrant's Form 10-K for the year ended December 31, 1995. (d) Consulting and Non-Competition Agreement, dated October 30, 1996, between Registrant and Arnold S. Gurtler-- incorporated by reference from Exhibit 10(u) to Registrant's Registration Statement on Form S-2 (Reg. No. 333-16573) declared effective on January 27, 1997. (e) Non-Competition Agreement, dated as of October 30, 1996 between Registrant and Ascent Entertainment Group, Inc.-- incorporated by reference from Exhibit 10(s) to Registrant's Registration Statement on Form S-2 (Reg. No. 333-16573) declared effective on January 27, 1997. (f) Consulting Agreement, dated December 4, 1996, between Registrant and Charles R. Wood -- incorporated by reference from Exhibit 10(b) to Registrant's Current Report on Form 8-K, dated December 13, 1996. (g) Non-Competition Agreement dated as of December 4, 1996 between Registrant and Charles R. Wood -- incorporated by reference from Exhibit 10(c) of Registrant's Current Report on Form 8-K, dated December 13, 1996. (h) Registrant's 1996 Stock Option and Incentive Plan -- incorporated by reference from Exhibit 10(z) to Registrant's Form 10-K for the year ended December 31, 1997. (i) 1997 Management Agreement Relating to Marine World, by and between the Marine World Joint Powers Authority and Park Management Corp, dated as of the 1st day of February, 1997 -- incorporated by reference from Exhibit 10(aa) to Registrant's Form 10-K for the year ended December 31, 1997. (j) Purchase Option Agreement among City of Vallejo, Marine World Joint Powers Authority and Redevelopment Agency of the City of Vallejo, and Park Management Corp., dated as of August 29, 1997 -- incorporated by reference from Exhibit 10(ab) to Registrant's Form 10-K for the year ended December 31, 1997. (k) Letter Agreement, dated November 7, 1997, amending 1997 Management Agreement Relating to Marine World, by and between the Marine World Joint Powers Authority and Park Management Corp., dated as of the 1st day of February, 1997 -- incorporated by reference from Exhibit 10(ac) to Registrant's Form 10-K for the year ended December 31, 1997. (l) Reciprocal Easement Agreement between Marine World Joint Powers Authority and Park Management Corp., dated as of November 7, 1997 -- incorporated by reference from Exhibit 10(ad) to Registrant's Form 10-K for the year ended December 31, 1997. (m) Parcel Lease between Marine World Joint Powers Authority and Park Management Corp., dated as of November 7, 1997 -- incorporated by reference from Exhibit 10(ae) to Registrant's Form 10-K for the year ended December 31, 1997. (n) Employment Agreement, dated as of July 31, 1997, between Premier Parks Inc. and Kieran E. Burke -- incorporated by reference from Exhibit 10(af) to Registrant's Form 10-K for the year ended December 31, 1997. (o) Employment Agreement, dated as of July 31, 1997, between Premier Parks Inc. and Gary Story -- incorporated by reference from Exhibit 10(ag) to Registrant's Form 10-K for the year ended December 31, 1997. (p) Employment Agreement, dated as of July 31, 1997, between Premier Parks Inc. and James F. Dannhauser -- incorporated by reference from Exhibit 10(ah) to Registrant's Form 10-K for the year ended December 31, 1997. (q) Rights Agreement dated as of January 12, 1998 between Premier Parks Inc. and Bank One Trust Company, N.A., as Rights Agent-- incorporated by reference from Exhibit 4.1 to Registrant's Current Report on Form 8-K dated December 15, 1997. (r) Stock Purchase Agreement dated as of December 15, 1997, between the Registrant and Centrag S.A., Karaba N.V. and Westkoi N.V.-- incorporated by reference from Exhibit 10.1 to Registrant's Current Report on Form 8-K dated December 15, 1997. (s) Agreement and Plan of Merger dated as of February 9, 1998, by and among the Registrant, Six Flags Entertainment Corporation and others -- incorporated by reference from Exhibit 10(a) to Registrant's Current Report on Form 8-K dated February 9, 1998. (t) Agreement and Plan of Merger dated as of February 9, 1998, by and among Premier Parks Inc., Premier Parks Holdings Corporation and Premier Parks Merger Corporation -- incorporated by reference from Exhibit 2.1 to Registrant's Current Report on Form 8-K dated March 25, 1998. (u) Amended and Restated Rights Agreement between Premier Parks Inc. and Bank One Trust Company, as Rights Agent -- incorporated by reference from Exhibit 4.1 to Registrant's Current Report on Form 8-K dated December 15, 1997, as amended. (v) Registrant's 1998 Stock Option and Incentive Plan -- incorporated by reference from Exhibit 10(ap) to Registrant's Form 10-K for the year ended December 31, 1998. (w) Subordinated Indemnity Agreement dated February 9, 1998 among Registrant, the subsidiaries of Registrant named therein, Time Warner Inc., the subsidiaries of Time Warner Inc. named therein, Six Flags Entertainment Corporation and the subsidiaries of Six Flags Entertainment Corporation named therein -- incorporated by reference from Exhibit 2(b) to Registrant's Registration Statement on Form S-3 (No. 333-45859) declared effective on March 26, 1998. (x) Sale and Purchase Agreement dated as of October , 1998 by and between Registrant and Fiesta Texas Theme Park, Ltd. -- incorporated by reference from Exhibit 10(at) to Registrant's Form 10-K for the year ended December 31, 1998. (y) Overall Agreement dated as of February 15, 1997 among Six Flags Fund, Ltd. (L.P.), Salkin II Inc., SFOG II Employee, Inc., SFOG Acquisition A, Inc., SFOG Acquisition B, Inc., Six Flags Over Georgia, Inc., Six Flags Series of Georgia, Inc., Six Flags Theme Parks Inc. and Six Flags Entertainment Corporation-- incorporated by reference from Exhibit 10(au) to Registrant's Form 10-K for the year ended December 31, 1998. (z) Overall Agreement dated as of November 24, 1997 among Six Flags Over Texas Fund, Ltd., Flags' Directors LLC, FD-II, LLC, Texas Flags Ltd., SFOT Employee, Inc., SFOT Parks Inc. and Six Flags Entertainment Corporation -- incorporated by reference from Exhibit 10(av) to Registrant's Form 10-K for the year ended December 31, 1998. (aa) Credit Agreement dated as of November 5, 1999 among Registrant, certain subsidiaries named therein, the Lenders from time to time party thereto, The Bank of New York, as Syndicate Agent, Bank of America, N.A. and The Bank of Nova Scotia, as Documentation Agents, Lehman Brothers Inc. and Lehman Brothers International (Europe) Inc., as Advisors, Lead Arrangers and Bank Managers, and Lehman Commerical Paper Inc., as Administrative Agent-- incorporated by reference from Exhibit 10.1 to Registrant's Form 10-Q for the quarter ended September 30, 1999. 99.2 *(bb) Stock Purchase Agreement dated as of December 6, 2000 among Registrant, EPI Realty Holdings, Inc., Enchanted Parks, Inc., and Jeffrey Stock. 99.3 *(cc) Asset Purchase Agreement dated as of January 8, 2001 between Registrant and Sea World, Inc. 99.4 *(dd) Amendment to Employment Agreement dated as of January 1, 2000 between Registrant and Kieran E. Burke. 99.5 *(ee) Amendment to Employment Agreement dated as of January 1, 2000 between Registrant and Gary Story. 99.6 *(ff) Amendment to Employment Agreement dated as of January 1, 2000 between Registrant and James F. Dannhauser. *(21) Subsidiaries of the Registrant. *(23.1) Consent of KPMG LLP. - ---------- *Filed herewith. EX-21 2 0002.txt SUBSIDIARIES OF REGISTRANT EXHIBIT 21 SUBSIDIARIES OF REGISTRANT -------------------------- Entity Name Jurisdiction - ----------- ------------ Six Flags Operations Inc. Delaware Six Flags Theme Parks Inc. Delaware Aurora Campground, Inc. Ohio Indiana Parks, Inc. Indiana Ohio Campgrounds Inc. Ohio Park Management Corp. California Premier Waterworld Concord Inc. California Premier Waterworld Sacramento Inc. California Tierco Maryland, Inc. Delaware Tierco Water Park, Inc. Oklahoma Funtime Parks, Inc. Delaware Funtime Inc. Ohio Premier Parks of Colorado Inc. Colorado Wyandot Lake, Inc. Ohio Darien Lake Theme Park and Camping Resort, Inc. New York Elitch Gardens L.P. Colorado Ohio Hotel LLC Delaware Great Escape Holding Inc. New York Great Escape Theme Park LLC New York Great Escape LLC New York Frontier City Properties, Inc. Oklahoma Frontier City Partners Limited Partnership Oklahoma Stuart Amusement Company Massachusetts Riverside Park Enterprises, Inc. Massachusetts Riverside Park Food Services, Inc. Massachusetts KKI, LLC Delaware Premier International Holdings Inc. Delaware Walibi S.A. Belgium Movie World GP GmbH Germany Movie World GmbH & Co. KG Germany Movie World Holding GmbH Germany Premier Parks Holdings Inc. Delaware Reino Aventura, S.A. de C.V. Mexico Ventas y Servicios al Consumidor S.A. de C.V. Mexico SFTP Inc. Delaware SF Partnership Delaware SFTP San Antonio GP, Inc. Delaware Six Flags San Antonio, L.P. Delaware SFTP San Antonio, Inc. Delaware San Antonio Park GP, LLC Delaware San Antonio Theme Park L.P. Delaware SFTP San Antonio II, Inc. Delaware Enchanted Parks, Inc. Washington Fiesta Texas, Inc. Delaware Flags Beverages, Inc. Texas Fiesta Texas Hospitality LLC Texas SF Splashtown GP Inc. Texas Six Flags Spashtown L.P. Delaware SF Splashtown Inc. Delaware MWM Holdings Inc. Delaware MWM Management LLC Delaware MWM Ancillary Services S.L. Spain Six Flags Events Holding Corp. Delaware Six Flags Events L.P. Delaware Six Flags Events Inc. Texas Six Flags Services, Inc. Delaware Six Flags Services of Illinois, Inc. Delaware Six Flags Services of Missouri, Inc. Delaware Six Flags Services of Texas, Inc. Delaware Six Flags Leasing Corp. Delaware PPZ Inc. Delaware GP Holdings Inc. Delaware PP Data Services Inc. Texas Premier Parks Capital LLC Delaware Six Flags Over Georgia, Inc. Delaware SFOG II, Inc. Delaware Six Flags Over Georgia II, L.P. Delaware SFOG Acquisition Company LLC Delaware SFOG II Employee, Inc. Delaware SFOT II Holdings, LLC Delaware SFT Holdings, Inc. Delaware Six Flags Over Texas, Inc. Delaware Texas Flags, Ltd. Delaware SFG Holdings, Inc. Delaware SFOT Employee, Inc. Delaware SFOG Acquisition A Holdings, Inc. Delaware SFOG Acquisition B Holdings, Inc. Delaware SFOG Acquisition A, Inc. Delaware SFOG Acquisition B, L.L.C. Delaware SFOT Acquisition I Holdings, Inc. Delaware SFOT Acquisition II Holdings, Inc. Delaware SFOT Acquisition I, Inc. Delaware SFOT Acquisition II, Inc. Delaware Spring Beverage Holding Corp. Delaware Spring Beverage, Inc. Texas EX-23.1 3 0003.txt INDEPENDENT AUDITORS' CONSENT Independent Auditors' Consent The Board of Directors Six Flags, Inc.: We consent to the incorporation by reference in the registration statements (Nos. 333-76595 and 333-51716) on Form S-3 and in the registration statement (No. 333-59249) on Form S-8 of Six Flags, Inc. of our report dated March 2, 2001, relating to the consolidated balance sheets of Six Flags, Inc. and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of operations, stockholders' equity and other comprehensive income (loss) and cash flows for each of the years in the three-year period ended December 31, 2000, which report appears in the December 31, 2000 annual report on Form 10-K of Six Flags, Inc. KPMG LLP Oklahoma City, Oklahoma March 29, 2001 EX-99.1 4 0004.txt INDENTURE SIX FLAGS, INC. $375,000,000 9 1/2% SENIOR NOTES DUE 2009 ---------- INDENTURE Dated as of February 2, 2001 ---------- ---------- THE BANK OF NEW YORK as Trustee ---------- Table of Contents Page ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE...................1 Section 1.01. Definitions............................................1 Section 1.02. Other Definitions.....................................18 Section 1.03. One Class of Securities...............................18 Section 1.04. Trust Indenture Act...................................18 Section 1.05. Rules of Construction.................................19 ARTICLE II THE NOTES..................................................19 Section 2.01. Issuance of Additional Notes..........................19 Section 2.02. Payments by Company by Wire Transfer..................19 Section 2.03. Form and Dating.......................................20 Section 2.04. Execution and Authentication..........................20 Section 2.05. Registrar and Paying Agent............................21 Section 2.06. Paying Agent to Hold Money in Trust...................21 Section 2.07. Holder Lists..........................................21 Section 2.08. Transfer and Exchange.................................21 Section 2.09. Replacement Notes.....................................35 Section 2.10. Outstanding Notes.....................................35 Section 2.11. Treasury Notes........................................35 Section 2.12. Temporary Notes.......................................36 Section 2.13. Cancellation..........................................36 Section 2.14. Defaulted Interest....................................36 Section 2.15. Cusip Numbers.........................................36 ARTICLE III REDEMPTION AND PREPAYMENT.................................37 Section 3.01. Notices to Trustee....................................37 Section 3.02. Selection of Notes to Be Redeemed.....................37 Section 3.03. Notice of Redemption..................................37 Section 3.04. Effect of Notice of Redemption........................38 Section 3.05. Deposit of Redemption Price...........................38 Section 3.06. Notes Redeemed in Part................................38 Section 3.07. Optional Redemption...................................39 Section 3.08. Mandatory Redemption..................................39 Section 3.09. Offer to Purchase by Application of Excess Proceeds...39 ARTICLE IV COVENANTS..................................................41 Section 4.01. Payment of Notes......................................41 Section 4.02. Maintenance of Office or Agency.......................41 Section 4.03. Reports...............................................42 Section 4.04. Compliance Certificate................................42 Section 4.05. Taxes.................................................43 Section 4.06. Stay, Extension and Usury Laws........................43 Section 4.07. Restricted Payments...................................43 Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries .............................46 Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock ....................................47 Section 4.10. Asset Sales...........................................49 Section 4.11. Transactions with Affiliates..........................51 Section 4.12. Liens.................................................51 Section 4.13. Line of Business......................................51 Section 4.14. Corporate Existence...................................52 Section 4.15. Offer to Repurchase Upon Change of Control............52 Section 4.16. Limitation on Sale and Leaseback Transactions.........53 Section 4.17. Payments for Consent..................................53 Section 4.18. Limitation on Leases..................................54 ARTICLE V SUCCESSORS..................................................54 Section 5.01. Merger, Consolidation, or Sale of Assets..............54 Section 5.02. Successor Corporation Substituted.....................54 ARTICLE VI DEFAULTS AND REMEDIES......................................55 Section 6.01. Events of Default.....................................55 Section 6.02. Acceleration..........................................56 Section 6.03. Other Remedies........................................57 Section 6.04. Waiver of Past Defaults...............................57 Section 6.05. Control by Majority...................................57 Section 6.06. Limitation on Suits...................................57 Section 6.07. Rights of Holders of Notes to Receive Payment.........58 Section 6.08. Collection Suit by Trustee............................58 Section 6.09. Trustee May File Proofs of Claim......................58 Section 6.10. Priorities............................................58 Section 6.11. Undertaking for Costs.................................59 ARTICLE VII TRUSTEE...................................................59 Section 7.01. Duties of Trustee.....................................59 Section 7.02. Rights of Trustee.....................................60 Section 7.03. Individual Rights of Trustee..........................61 Section 7.04. Trustee's Disclaimer..................................61 Section 7.05. Notice of Defaults....................................62 Section 7.06. Reports by Trustee to Holders of the Notes............62 Section 7.07. Compensation and Indemnity............................62 Section 7.08. Replacement of Trustee................................63 Section 7.09. Successor Trustee by Merger, etc......................64 Section 7.10. Eligibility; Disqualification.........................64 Section 7.11. Preferential Collection of Claims Against Company.....64 ARTICLE VIII LEGAL DEFEASANCE AND COVENANT DEFEASANCE.................64 Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance .........................................64 Section 8.02. Legal Defeasance and Discharge........................64 Section 8.03. Covenant Defeasance...................................65 ii Section 8.04. Conditions to Legal or Covenant Defeasance............65 Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions.......66 Section 8.06. Repayment to Company..................................67 Section 8.07. Reinstatement.........................................67 ARTICLE IX AMENDMENT, SUPPLEMENT AND WAIVER...........................68 Section 9.01. Without Consent of Holders of Notes...................68 Section 9.02. With Consent of Holders of Notes......................68 Section 9.03. Compliance with Trust Indenture Act...................70 Section 9.04. Revocation and Effect of Consents.....................70 Section 9.05. Notation on or Exchange of Notes......................70 Section 9.06. Trustee to Sign Amendments, etc.......................70 ARTICLE X MISCELLANEOUS...............................................70 Section 10.01. Trust Indenture Act Controls.........................70 Section 10.02. Notices..............................................70 Section 10.03. Communication by Holders of Notes with Other Holders of Notes ...................................71 Section 10.04. Certificate and Opinion as to Conditions Precedent...71 Section 10.05. Statements Required in Certificate or Opinion........72 Section 10.06. Rules by Trustee and Agents..........................72 Section 10.07. No Personal Liability of Directors, Officers, Employees and Stockholders..........................72 Section 10.08. Governing Law........................................72 Section 10.09. No Adverse Interpretation of Other Agreements........72 Section 10.10. Successors...........................................73 Section 10.11. Severability.........................................73 Section 10.12. Counterpart Originals................................73 Section 10.13. Table of Contents, Headings, etc.....................73 iii CROSS-REFERENCE TABLE* Trust Indenture Act Section Indenture Section - --------------- ----------------- 310(a)(1)............................................ 7.10 (a)(2)............................................ 7.10 (a)(3)............................................ N.A. (a)(4)............................................ N.A. (a)(5)............................................ 7.10 (b)............................................... 7.10 (c)............................................... N.A. 311(a)............................................... 7.11 (b)............................................... 7.11 (c)............................................... N.A. 312(a)............................................... 2.05 (b)............................................... 10.03 (c)............................................... 10.03 313(a)............................................... 7.06 (b)(1)............................................ 10.03 (b)(2)............................................ 7.06, 7.07 (c)............................................... 7.06, 10.02 (d)............................................... 7.06 314(a)............................................... 4.03, 10.02 (b)............................................... N.A. (c)(1)............................................ 10.04 (c)(2)............................................ 10.04 (c)(3)............................................ N.A. (d)............................................... N.A. (e)............................................... 10.05 (f)............................................... N.A. 315(a)............................................... 7.01 (b)............................................... 7.05, 10.02 (c)............................................... 7.01 (d)............................................... 7.01 (e)............................................... 6.11 316(a) (last sentence)............................... 2.11 (a)(1)(A)......................................... 6.05 (a)(1)(B)......................................... 6.04 (a)(2)............................................ N.A. (b)............................................... 6.07 (c)............................................... 2.14 317(a)(1)............................................ 6.08 (a)(2)............................................ 6.09 (b)............................................... 2.06 318(a)............................................... 10.01 (b)............................................... N.A. (c)............................................... 10.01 N.A. means not applicable *This Cross-Reference Table is not part of the Indenture iv INDENTURE, dated as of February 2, 2001, between Six Flags, Inc., a Delaware corporation (the "Company"), and The Bank of New York, a New York banking corporation, as trustee (the "Trustee"). The Company and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the 9 1/2% Senior Notes due 2009 (the "Initial Notes") and the 9 1/2% Senior Notes due 2009 if and when issued in the Exchange Offer (the "New Notes" and, together with the Initial Notes, the "Notes"). ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01. Definitions. "144A Global Note" means one or more global notes in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will represent the aggregate principal amount of the Notes sold in reliance on Rule 144A. "Acquired Debt" means, with respect to any specified Person, (i) Indebtedness of any other Person existing at the time such other Person is merged with or into or becomes a Subsidiary of such specified Person, including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person shall be deemed to be control. "Agent" means any Registrar, Paying Agent or co-registrar. "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange. "Asset Sale" means (i) the sale, conveyance or other disposition of any assets or rights (including, without limitation, by way of a sale and leaseback) other than sales of inventory in the ordinary course of business; provided that the sale, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole will be governed by Section 4.15 and/or Section 5.01 hereof and not by Section 4.10 hereof, and (ii) the issue or sale by the Company or any of its Restricted Subsidiaries of Equity Interests of any of the Company's Restricted Subsidiaries, in the case of either clause (i) or (ii), whether in a single transaction or a series of related transactions (a) that have a fair market value in excess of $10.0 million or (b) for net proceeds in excess of $10.0 million. Notwithstanding the preceding, the following items shall not be deemed to be Asset Sales: (i) a transfer of assets by the Company to a Restricted Subsidiary or by a Restricted Subsidiary to the Company or to another Restricted Subsidiary, (ii) an issuance of Equity Interests by a Restricted Subsidiary to the Company or to another Restricted Subsidiary, (iii) the transfer of Equity Interests in any Restricted Subsidiary pursuant to the Subordinated Indemnity Agreement or the Partnership Parks Agreements, (iv) the issuance of Equity Interests by a Restricted Subsidiary to any employee thereof or as consideration for the acquisition of all or substantially all of the assets of, or a majority of the Voting Stock of, any Person (or a business unit or division of such Person), provided that the primary business of such Person (or such unit or division) is a Permitted Business, (v) the substitution of property in accordance with the terms of the Parcel Lease, dated November 7, 1997, between Marine World and Park Management Corp. as the same may be modified or amended from time to time after the Issue Date, provided such modification or amendment does not adversely affect the interests of the Holders in any material respect, and (vi) a Restricted Payment that is permitted by Section 4.07 hereof. "Attributable Debt" in respect of a sale and leaseback transaction means, at the time of determination, the present value (discounted at the rate of interest implicit in such transaction, determined in accordance with GAAP) of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction (including any period for which such lease has been extended or may, at the option of the lessor, be extended). "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "Beneficial Share Assignment Agreement" means the Beneficial Share Assignment Agreement, dated as of April 1, 1998, between TW-SPV Co. and the Company. "Board of Directors" means the Board of Directors of the Company, or any authorized committee of the Board of Directors. "Broker-Dealer" has the meaning set forth in the Registration Rights Agreement. "Business Day" means any day other than a Legal Holiday. "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. 2 "Cash Equivalents" means (i) United States dollars or foreign currency, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than one year from the date of acquisition, (iii) certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any lender party to the Credit Facilities or with any commercial bank having capital and surplus in excess of $500.0 million and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase obligations with a term of not more than thirty days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above, (v) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each case maturing within one year after the date of acquisition, (vi) securities with maturities of six months or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory, the securities of which state, commonwealth, territory, political subdivision or taxing authority (as the case may be) are rated at least "A" by Standard & Poor's Corporation or "A" by Moody's Investors Service, Inc. and (vii) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (i) through (vi) of this definition. "Change of Control" means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act), (ii) the adoption of a plan relating to the liquidation or dissolution of the Company, (iii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" becomes the "beneficial owner" (as such terms are defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 35% of the Voting Stock of the Company, or (iv) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors. "Clearstream" means Clearstream Banking S.A. "Company" means Six Flags, Inc., and any and all successors thereto. "Consolidated Cash Flow" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period plus (i) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was included in computing such Consolidated Net Income, plus (ii) Consolidated Interest Expense of such Person and its Restricted Subsidiaries for such period, to the extent that any such expense was deducted in computing such Consolidated Net Income, plus (iii) depreciation, amortization (including any depreciation or amortization arising out of purchases by the Company or any Restricted Subsidiary of Equity Interests in the partners of the Co-Venture Partnerships and amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or 3 reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income, minus (iv) non-cash items increasing such Consolidated Net Income for such period, in each case, on a consolidated basis and determined in accordance with GAAP (other than accrual of income in the ordinary course of business in respect of a future cash payment). Notwithstanding any other provision of this Indenture to the contrary, "Consolidated Cash Flow" of the Company for any period will be deemed to include 100% of the cash distributions to the Company or any of its Restricted Subsidiaries in respect of such period from the Co-Venture Partnerships, directly or indirectly, out of the Consolidated Cash Flow of the Co-Venture Partnerships in respect of such period. "Consolidated Indebtedness" means, with respect to any Person as of any date of determination, the sum, without duplication, of (i) the total amount of Indebtedness and Attributable Debt of such Person and its Restricted Subsidiaries, plus (ii) the total amount of Indebtedness and Attributable Debt of any other Person, to the extent that the same has been guaranteed by the referent Person or one or more of its Restricted Subsidiaries, plus (iii) the aggregate liquidation value of all Disqualified Stock of such Person and all preferred stock of Restricted Subsidiaries of such Person, in each case, determined on a consolidated basis in accordance with GAAP. "Consolidated Interest Expense" means, with respect to any Person for any period, the sum of (i) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period, and (iii) any interest expense on Indebtedness or Attributable Debt of another Person that is guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries (whether or not such guarantee or Lien is called upon). The term "Consolidated Interest Expense" shall not include the consolidated interest expense of any Person with respect to (i) Indebtedness of the Co-Venture Partnerships (or the general partners thereof), except to the extent guaranteed by the Company or any Restricted Subsidiary (other than such general partners), or (ii) any obligations of the Company or any Restricted Subsidiary under the Partnership Parks Agreements, the Marine World Agreements or the Subordinated Indemnity Agreement. "Consolidated Net Income" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, and prior to any deduction in respect of dividends on any series of preferred stock of such Person, determined in accordance with GAAP; provided that (i) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or 4 distributions paid in cash to the referent Person or a Wholly Owned Restricted Subsidiary thereof, (ii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded and (iii) the cumulative effect of a change in accounting principles shall be excluded. "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Company who (i) was a member of such Board of Directors on the date of this Indenture or (ii) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. "Convertible Preferred Stock" means the 115,000 shares of the Company's 7-1/4% Convertible Preferred Stock underlying the PIERS. "Corporate Trust Office of the Trustee" shall be at the address of the Trustee specified in Section 10.02 hereof or such other address as to which the Trustee may give notice to the Company. "Co-Venture Partnerships" means (i) Six Flags Over Georgia II, L.P., a Delaware Limited Partnership and (ii) Texas Flags, Ltd., a Texas Limited Partnership. "Credit Facilities" means, with respect to the Company or any of its Restricted Subsidiaries, one or more debt facilities (including, without limitation, the Six Flags Credit Facility) or commercial paper facilities with banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time. "Currency Agreement" means in respect of a Person any foreign exchange contract, currency swap agreement or other similar agreement as to which such Person is a party or a beneficiary. "Custodian" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto. "Debt to Cash Flow Ratio" means, as of any date of determination, the ratio of (a) the Consolidated Indebtedness of the Company as of such date to (b) the Consolidated Cash Flow of the Company for the four most recent full fiscal quarters ending immediately prior to such date for which financial statements have been filed with the SEC, determined on a pro forma basis after giving effect to all acquisitions or Asset Sales made by the Company and its Restricted Subsidiaries from the beginning of such four-quarter period through and including such date of determination (including any related financing transactions) as if such acquisitions and dispositions had occurred at the beginning of such four-quarter period. In addition, for purposes of calculating the Debt to Cash Flow Ratio, (i) acquisitions that have been made by the Company or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four- quarter reference period or subsequent to such reference period and on or prior to the calculation date shall be deemed to 5 have occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period shall be calculated without giving effect to clause (ii) of the proviso set forth in the definition of Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the calculation date, shall be excluded. "Default" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default. "Definitive Note" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.08 hereof, in the form of Exhibit A hereto except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. "Depositary" means, with respect to the Notes issuable or issued in whole or in part in global form, The Depository Trust Company and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture. "Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require the Company to repurchase such Capital Stock upon the occurrence of a Change of Control or an Asset Sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 4.07 hereof. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but, without limiting the generality of the foregoing, excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Euroclear" means Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear system. "Event of Default" has the meaning specified in Section 6.01. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Notes" means the Notes issued in the Exchange Offer pursuant to Section 2.08(f) hereof. "Exchange Offer" means exchange and issuance by the Company of a principal amount of New Notes (which shall be registered pursuant to the Exchange Offer Registration 6 Statement) equal to the outstanding principal amount of Notes that are tendered by such Holders in connection with such exchange and issuance. "Exchange Offer Registration Statement" means the Registration Statement relating to the Exchange Offer, including the related Prospectus. "Existing Indebtedness" means the aggregate principal amount of Indebtedness of the Company and its Subsidiaries (other than Indebtedness under the Six Flags Credit Facility and the Notes) in existence on the Issue Date, until such amounts are repaid. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect from time to time. "Global Note Legend" means the legend set forth in Section 2.08(g)(ii), which is required to be placed on all Global Notes issued under this Indenture. "Global Notes" means, individually and collectively, each of the Restricted Global Note and the Unrestricted Global Note, in the form of Exhibit A hereto issued in accordance with Section 2.03 and 2.08 hereof. "Government Securities" means (i) direct obligations of, or obligations guaranteed by, the United States of America for the payment of which guarantee or obligations the full faith and credit of the United States of America is pledged and (ii) money market funds at least 95% of the assets of which constitute Government Securities of the kinds described in clause (i) of this definition. "guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "Hedging Obligations" means, with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "Holder" means a Person in whose name a Note is registered. "Indebtedness" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or trade payable, or representing any Hedging Obligations if and to the extent any of the foregoing (other than letters of credit and Hedging Obligations) would 7 appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all Indebtedness of others secured by a Lien on any asset of such Person (whether or not such Indebtedness is assumed by such Person) and, to the extent not otherwise included, the guarantee by such Person of any indebtedness of any other Person. The amount of any Indebtedness outstanding as of any date shall be (i) the accreted value thereof, in the case of any Indebtedness issued with original issue discount, and (ii) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness. The term "Indebtedness" shall not include (i) any obligations of the Company or any Restricted Subsidiary under the Partnership Parks Agreements, the Marine World Agreements or the Subordinated Indemnity Agreement or (ii) any Indebtedness of the Co-Venture Partnerships (or the general partners thereof), except to the extent guaranteed by the Company or any Restricted Subsidiary (other than such general partners). "Indenture" means this Indenture, as amended or supplemented from time to time. "Indirect Participant" means a Person who holds a beneficial interest in a Global Note through a Participant. "Initial Notes" is defined in the preamble hereto. "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including guarantees of Indebtedness or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees and any deposit or advance made pursuant to any contract entered into in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary of the Company (other than pursuant to the terms of the Partnership Parks Agreements or the Subordinated Indemnity Agreement) such that, after giving effect to any such sale or disposition, such Person is no longer a Restricted Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of Section 4.07 hereof. "Issue Date" means the date the first Notes are issued. "Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions in the City of New York or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue on such payment for the intervening period. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or 8 give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "Mandatorily Convertible Preferred Stock" means the Company's 7 1/2% Mandatorily Convertible Preferred Stock. "Marine World" means the Marine World Joint Powers Authority or any successor thereto. "Marine World Agreements" means: (1) the Parcel Lease, dated November 7, 1997, between Marine World and Park Management Corp. ("PMC"); (2) the Reciprocal Easement Agreement, dated November 7, 1997, between Marine World and PMC; (3) the Revenue Sharing Agreement, dated November 7, 1997, among Marine World, PMC and the Redevelopment Agency of the City of Vallejo (the "Agency"); (4) the Purchase Option Agreement, dated as of August 29, 1997, among Marine World, the Agency, the City of Vallejo and PMC; and (5) the 1997 Management Agreement, dated as of February 1, 1997, between Marine World and PMC, as amended; in each case, as the same may be modified or amended from time to time after the Issue Date, provided such modification or amendment does not adversely affect the interests of the Holders in any material respects. "Net Income" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however, (i) any gain or loss, together with any related provision for taxes on such gain or loss, realized in connection with any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions) and (ii) any extraordinary gain or loss, together with any related provision for taxes on such extraordinary gain or loss. "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the repayment of Indebtedness secured by a Lien on the asset or assets that were the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP. 9 "New Notes" is defined in the preamble hereto. "Non-Recourse Debt" means Indebtedness (i) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor or otherwise), or (c) constitutes the lender; (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (iii) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. "Notes" has the meaning assigned to it in the preamble hereto. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice President of such Person. "Officers' Certificate" means a certificate signed on behalf of the Company by two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company, that meets the requirements of Section 10.05 hereof. "Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 10.05 hereof. The counsel may be an employee of or internal or other counsel to the Company or any Subsidiary of the Company. "Participant" means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to The Depository Trust Company, shall include Euroclear and Clearstream). "Partnership Parks Agreements" means: (1) the Overall Agreement, dated as of February 15, 1997, among Six Flags Fund, Ltd. (L.P.), Salkin Family Trust, SFG, Inc., SFG-I, LLC, SFG-II, LLC, Six Flags Over Georgia, Ltd., SFOG II, Inc., SFOG II Employee, Inc., SFOG Acquisition A, Inc., SFOG Acquisition B, L.L.C., Six Flags Over Georgia, Inc., Six Flags Services of Georgia, Inc., Six Flags Theme Parks Inc. and Six Flags Entertainment Corporation and the Related Agreements (as defined therein); and 10 (2) the Overall Agreement, dated as of November 24, 1997, among Six Flags Over Texas Fund, Ltd., Flags' Directors, L.L.C., FD-II, L.L.C., Texas Flags, Ltd., SFOT Employee, Inc., SFOT Acquisition I, Inc., SFOT Acquisition II, Inc., Six Flags Over Texas, Inc., Six Flags Theme Parks Inc. and Six Flags Entertainment Corporation and the Related Agreements (as defined therein); in each case, as the same may be modified or amended from time to time after the Issue Date, provided such modification or amendment does not adversely affect the interests of the Holders in any material respect. "Permitted Business" means any business related, ancillary or complementary to the businesses of the Company and its Restricted Subsidiaries on the date of this Indenture. "Permitted Investments" means an Investment by the Company or any Restricted Subsidiary in (i) cash or Cash Equivalents, (ii) the Company, a Restricted Subsidiary or a Person which will, upon the making of such Investment, become a Restricted Subsidiary; provided, however, that the primary business of such Restricted Subsidiary is a Permitted Business; (iii) another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets (or the assets of any business unit or division of such Person) to, the Company or a Restricted Subsidiary; provided, however, that such Person's (or such unit's or division's) primary business is a Permitted Business; (iv) another Person if the aggregate amount of all Investments in all such other Persons does not exceed $25.0 million at any one time outstanding (with each Investment being valued as of the date made and without giving effect to subsequent changes in value); provided, however, that such Person's primary business is a Permitted Business; (v) promissory notes received as consideration for an Asset Sale which are secured by a Lien on the asset subject to such Asset Sale; provided that the aggregate amount of all such promissory notes at any one time outstanding does not exceed $5.0 million; (vi) non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.10 hereof; (vii) assets acquired solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; (viii) receivables owing to the Company or any Restricted Subsidiary, if created or acquired in the ordinary course of business; (ix) payroll, travel and similar advances that are made in the ordinary course of business; (x) loans or advances to employees made in the ordinary course of business consistent with past practices of the Company or such Restricted Subsidiary; (xi) stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments; and (xii) other Investments in any Person at any time outstanding (each such Investment being measured on the date each such Investment was made and without giving effect to subsequent changes in value) not to exceed $150 million. "Permitted Liens" means (a) Liens to secure Indebtedness of a Restricted Subsidiary of the Company that was permitted to be incurred under this Indenture; (b) Liens existing on the Issue Date; (c) Liens on property or shares of Capital Stock of another Person at the time such other Person becomes a Restricted Subsidiary of such Person; provided, however, that such Liens are not created, incurred or assumed in connection with, or in contemplation of, such other Person becoming such a Restricted Subsidiary; provided further, however, that such Lien may not extend to any other property owned by such Person or any of its Restricted Subsidiaries; (d) Liens on property at the time such Person or any of its Restricted Subsidiaries 11 acquires the property, including any acquisition by means of a merger or consolidation with or into such Person or a Restricted Subsidiary of such Person; provided, however, that such Liens are not created, incurred or assumed in connection with, or in contemplation of, such acquisition; provided further, however, that the Liens may not extend to any other property owned by such Person or any of its Restricted Subsidiaries; (e) Liens securing Indebtedness or other obligations of a Restricted Subsidiary of such Person owing to such Person or a Restricted Subsidiary of such Person; (f) Liens securing Hedging Obligations so long as the related Indebtedness is, and is permitted to be under this Indenture, secured by a Lien on the same type of property securing such Hedging Obligations; (g) Liens to secure any Permitted Refinancing Indebtedness; provided, however, that (x) such new Lien shall be limited to all or part of the same property that secured the original Indebtedness (plus improvements on such property) and (y) the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of (A) the outstanding principal amount or, if greater, committed amount of the Indebtedness refinanced at the time the original Lien became a Permitted Lien and (B) an amount necessary to pay any fees and expenses, including premiums, related to such refinancing, refunding, extension, renewal or replacement; (h)(i) mortgages, liens, security interests, restrictions or encumbrances that have been placed by any developer, landlord or other third party on property over which the Company or any Restricted Subsidiary of the Company has easement rights or on any real property leased by the Company or any Restricted Subsidiary of the Company and subordination or similar agreements relating thereto and (ii) any condemnation or eminent domain proceedings affecting any real property; (i) pledges or deposits by such Person under workmen's compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which such Person is a party, or deposits to secure public or statutory obligations of such Person or deposits of cash or United States government bonds to secure surety or appeal bonds to which such Person is a party, or deposits as security for contested taxes or import duties or for the payment of rent, in each case incurred in the ordinary course of business; (j) Liens imposed by law, such as carriers', warehousemen's and mechanic's Liens, in each case for sums not yet due or being contested in good faith by appropriate proceedings or other Liens arising out of judgments or awards against such Person with respect to which such Person shall then be proceeding with an appeal or other proceedings for review; (k) Liens for property taxes not yet due or payable or subject to penalties for non-payment or which are being contested in good faith and by appropriate proceedings; (l) minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, licenses, rights of way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real properties or Liens incidental to the conduct of the business of such Person or to the ownership of its properties which were not incurred in connection with Indebtedness and which do not in the aggregate materially impair the use of such properties in the operation of the business of such Person; (m) Liens securing Purchase Money Indebtedness; provided, however, that (i) the Indebtedness secured by such Liens is otherwise permitted to be incurred under this Indenture, (ii) the principal amount of any Indebtedness secured by any such Lien does not exceed the cost of assets or property so acquired or constructed and (iii) the amount of Indebtedness secured by any such Lien is not subsequently increased; (n) Liens arising out of the transactions contemplated by the Partnership Parks Agreements, the Marine World Agreements, the Subordinated Indemnity Agreement or the Six Flags Agreement; and (o) Liens incurred in the ordinary course of business of the Company or any Subsidiary of the Company with respect to obligations that do not exceed $20.0 million at any one time outstanding. 12 "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that: (i) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus accrued interest on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of reasonable expenses, including premiums, incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by the Company or by a Restricted Subsidiary. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or agency or political subdivision thereof (including any subdivision or ongoing business of any such entity or substantially all of the assets of any such entity, subdivision or business). "PIERS" means the Company's 11,500,000 Preferred Income Equity Redeemable Shares issued on January 23, 2001. "Private Placement Legend" means the legend set forth in Section 2.08(g)(i) to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture. "Prospectus" means the prospectus included in a Registration Statement at the time such Registration Statement is declared effective, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. "Public Equity Offering" means an underwritten primary public offering of Equity Interests (other than Disqualified Stock) of the Company pursuant to an effective registration statement under the Securities Act. "Purchase Money Indebtedness" means Indebtedness (i) consisting of the deferred purchase price of property, conditional sale obligations, obligation under any title retention agreement and other purchase money obligations, in each case where the maturity of such Indebtedness does not exceed the anticipated useful life of the asset being financed, and (ii) incurred to finance the acquisition by the Company or a Restricted Subsidiary of the Company of such asset, including additions and improvements; provided, however, that any Lien arising in connection with any such Indebtedness shall be limited to the specified asset being financed or, in the case of real property or fixtures, including additions and improvements, the real property 13 on which such asset is attached; and provided further, that such Indebtedness is Incurred within 180 days after such acquisition, addition or improvement by the Company or Restricted Subsidiary of such asset. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of the date hereof, among the Company, Lehman Brothers, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated, Salomon Smith Barney Inc., Allen & Company Incorporated, BNY Capital Markets, Inc., Credit Lyonnais Securities (USA) Inc. and Scotia Capital (USA) Inc. "Registration Statement" means any registration statement of the Company relating to (a) an offering of New Notes pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, in each case, (i) that is filed pursuant to the provisions of the Registration Rights Agreement and (ii) including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein. "Regulation S" means Regulation S promulgated under the Securities Act. "Regulation S Global Note" means a Global Note in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes initially sold in reliance on Rule 903 of Regulation S. "Responsible Officer" when used with respect to the Trustee, means (a) any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and (b) who shall have direct responsibility for the administration of this Indenture. "Restricted Definitive Note" means a Definitive Note bearing the Private Placement Legend. "Restricted Global Note" means a Global Note bearing the Private Placement Legend. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Period" means the 40-day period commencing on the date as of which this Indenture is dated. "Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. 14 "Rule 144" means Rule 144 promulgated under the Securities Act. "Rule 144A" means Rule 144A promulgated under the Securities Act. "Rule 903" means Rule 903 promulgated under the Securities Act. "Rule 904" means Rule 904 promulgated the Securities Act. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Senior Debt" means (i) all Indebtedness of the Company or any Restricted Subsidiary outstanding under Credit Facilities and all Hedging Obligations with respect thereto; (ii) any other Indebtedness of the Company or any Restricted Subsidiary permitted to be incurred under the terms of the Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is subordinated in right of payment to the Notes; and (iii) all Obligations with respect to the items in the preceding clauses (i) and (ii). Notwithstanding anything to the contrary in the preceding, Senior Debt will not include (1) any liability for federal, state, local or other taxes owed or owing by the Company; (2) any Indebtedness of the Company to any of its Subsidiaries or other Affiliates; (3) any trade payables; or (4) the portion of any Indebtedness that is incurred in violation of the Indenture. "Shelf Registration Statement" means the Shelf Registration Statement as defined in the Registration Rights Agreement. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date of this Indenture. "Six Flags Credit Facility" means the $1.2 billion Credit Agreement, dated as of November 5, 1999, among Six Flags, Inc., Six Flags Operations Inc., Six Flags Theme Parks Inc., and the lenders party thereto, Lehman Commercial Paper, Inc., as administrative agent, and the other agents named therein. "Specified Amount" means, as of any date, the product of (a) the Consolidated Cash Flow of the Company for the most recently ended four-quarter period for which financial statements have been filed with the SEC determined on a pro forma basis after giving effect to all acquisitions or Asset Sales made by the Company and its Restricted Subsidiaries from the beginning of such four-quarter period through and including such date of determination (including any related financing transactions) as if such acquisitions and dispositions had occurred at the beginning of such four-quarter period, times (b) 0.75. "Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. 15 "Strategic Equity Investment" means a cash contribution to the common equity capital of the Company or a purchase from the Company of common Equity Interests (other than Disqualified Stock), in either case by or from a Strategic Equity Investor and for aggregate cash consideration of at least $25.0 million. "Strategic Equity Investor" means, as of any date, any Person (other than an Affiliate of the Company) engaged in a Permitted Business which, as of the day immediately before such date, had a Total Equity Market Capitalization of at least $1.0 billion. "Subordinated Indemnity Agreement" means the Subordinated Indemnity Agreement, dated as of April 1, 1998, among the Company, Six Flags Entertainment Corporation and its subsidiaries, Time Warner Inc., Time Warner Entertainment Company, L.P. and TW-SPV Co., as the same may be modified or amended from time to time after April 1, 1998, provided such modification or amendment does not adversely affect the interests of the Holders in any material fashion. "Subsidiary" means with respect to any Person (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof); provided that, notwithstanding the foregoing, each of SFOG A Holdings, SFOG B Holdings, SFOT I Holdings and SFOT II Holdings will be deemed to be a Subsidiary of the Company for all purposes under the Indenture so long as the Subordinated Indemnity Agreement and the Beneficial Share Assignment Agreement will each be in full force and effect and no default or event of default will have occurred thereunder, and (ii) any partnership or limited liability company (a) the sole general partner or the managing general partner (or equivalent) of which is such Person or a Subsidiary of such Person; or (b) the only general partners of which are such Person or one or more Subsidiaries of such Person (or any combination thereof). "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the TIA. "Total Equity Market Capitalization" of any Person means, as of any day of determination, the sum of (i) the product of (A) the aggregate number of outstanding primary shares of (x) common stock of such Person on such day (which shall not include any options or warrants on, or securities convertible or exchangeable into, shares of common stock of such Person) and (y) preferred stock of such Person on such day (to the extent listed on a national securities exchange or the Nasdaq National Market System) multiplied by (B) the average closing price of such common stock or such preferred stock, as the case may be listed on a national securities exchange or the Nasdaq National Market System over the 20 consecutive business days immediately preceding such day, plus (ii) the liquidation value of any outstanding shares of preferred stock of such Person on such day not listed on a national securities exchange or the Nasdaq National Market System. "Trustee" means the party named as such in the preamble hereto until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. 16 "Unrestricted Definitive Note" means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend. "Unrestricted Global Note" means a permanent Global Note in the form of Exhibit A attached hereto that bears the Global Note Legend and that has the "Schedule of Exchanges of Interests in the Global Note" attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing Notes that do not bear the Private Placement Legend. "Unrestricted Subsidiary" means any Subsidiary (other than Six Flags Operations Inc. or Six Flags Theme Parks Inc. or any successor to either of them) that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution; but only to the extent that such Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (c) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (x) to subscribe for additional Equity Interests or (y) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; (d) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries; and (e) has at least one director on its board of directors that is not a director or executive officer of the Company or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of the Company or any of its Restricted Subsidiaries. Any such designation by the Board of Directors shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions and was permitted by Section 4.07 hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date (and, if such Indebtedness is not permitted to be incurred as of such date under Section 4.09 hereof, the Company shall be in default of such covenant). The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such Indebtedness is permitted under Section 4.09 hereof, calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period, and (ii) no Default or Event of Default would be in existence following such designation. "U.S. Person" means a U.S. person as defined in Rule 902(a) under the Securities Act. "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote by the holder thereof in the election of the Board of Directors (or comparable body) of such Person. 17 "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness. "Wholly Owned Restricted Subsidiary" of any Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries of such Person or by such Person and one or more Wholly Owned Restricted Subsidiaries of such Person. Section 1.02. Other Definitions. Defined in Term Section "Additional Notes" 2.01 "Affiliate Transaction" 4.11 "Asset Sale Offer" 4.10 "Authentication Order" 2.04 "Basket Period" 4.07 "Change of Control Offer" 4.15 "Change of Control Payment" 4.15 "Change of Control Payment Date" 4.15 "Covenant Defeasance" 8.03 "DTC" 2.05 "Event of Default" 6.01 "Excess Proceeds" 4.10 "incur" 4.09 "Legal Defeasance" 8.02 "Offer Amount" 3.09 "Offer Period" 3.09 "Paying Agent" 2.05 "Permitted Debt" 4.09 "Purchase Date" 3.09 "Registrar" 2.05 "Restricted Payments" 4.07 Section 1.03. One Class of Securities. The Initial Notes and the New Notes shall vote and consent together on all matters as one class and none of the Initial Notes or the New Notes shall have the right to vote or consent as a separate class on any matter. Section 1.04. Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. 18 The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes; "indenture security Holder" means a Holder of a Note; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the Notes means the Company and any successor obligor upon the Notes. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. Section 1.05. Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and in the plural include the singular; (5) provisions apply to successive events and transactions; and (6) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time. ARTICLE II THE NOTES Section 2.01. Issuance of Additional Notes. The Company may, subject to Section 4.09 hereof, issue additional Notes ("Additional Notes") under this Indenture which will have identical terms as the Notes issued on the Issue Date other than with respect to the Issue Date, issue price and first payment of interest. The Notes issued on the Issue Date and any Additional Notes subsequently issued shall be treated as a single class for all purposes under this Indenture. Section 2.02. Payments by Company by Wire Transfer. The Company shall make all interest, premium, if any, and principal payments by wire transfer to any Holder who shall have given written directions to the Company to make such payments by wire transfer pursuant to the wire transfer instructions supplied to the Company by such Holder. 19 Section 2.03. Form and Dating. The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. Notes shall be dated the date of their authentication. (a) Global Notes. Notes issued in global form shall be substantially in the form of Exhibit A attached hereto (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Note Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.08 hereof. (b) Euroclear and Clearstream Procedures Applicable. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Clearstream" and "Customer Handbook" of Clearstream shall be applicable to transfers of beneficial interests in the Regulation S Global Notes that are held by Participants through Euroclear or Clearstream. Section 2.04. Execution and Authentication. An Officer shall sign the Notes for the Company by manual or facsimile signature. If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall, upon a written order of the Company signed by an Officer (an "Authentication Order"), authenticate Notes for original issue up to the aggregate principal amount stated in paragraph 4 of the Notes. The aggregate principal amount of Notes outstanding at any time may not exceed such amount except as provided in Section 2.09 hereof. 20 The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company. Section 2.05. Registrar and Paying Agent. The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Notes may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes. The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Note Custodian with respect to the Global Notes. Section 2.06. Paying Agent to Hold Money in Trust.The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or Liquidated Damages, if any, or interest on the Notes, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes. Section 2.07. Holder Lists.The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA ss. 312(a). Section 2.08. Transfer and Exchange. (a) Transfer and Exchange of Global Notes. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the 21 Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes will be exchanged by the Company for Definitive Notes if (i) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary, (ii) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee or (iii) there shall have occurred and be continuing a Default or Event of Default with respect to the Notes. Upon the occurrence of any of the preceding events in (i), (ii) or (iii) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.09 and 2.12 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.08 or Section 2.09 or 2.12 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.08(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.08(b), (c) or (f) hereof. (b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable: (i) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Regulation S Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.08(b)(i). (ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.08(b)(i) above, the transferor of such beneficial interest must deliver to the Registrar either (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the 22 Participant account to be credited with such increase or (B) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above; provided that in no event shall Definitive Notes be issued upon the transfer or exchange of beneficial interests in the Regulation S Global Note prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates pursuant to Rule 903 under the Securities Act. Upon consummation of an Exchange Offer by the Company in accordance with Section 2.08(f) hereof, the requirements of this Section 2.08(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.08(h) hereof. (iii) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.08(b)(ii) above and the Registrar receives the following: (A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; and (B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof. (iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in an Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.08(b)(ii) above and: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the 23 Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.04 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above. Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note. 24 (c) Transfer or Exchange of Beneficial Interests in Global Notes for Definitive Notes. (i) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation: (A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a Non- U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (F) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.08(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.08(c)(i) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect 25 Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.08(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. (ii) Notwithstanding Sections 2.08(c)(i)(A) and (C) hereof, a beneficial interest in the Regulation S Global Note may not be exchanged for a Definitive Note or transferred to a Person who takes delivery thereof in the form of a Definitive Note prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Securities Act, except in the case of a transfer pursuant to an exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904. (iii) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a 26 Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iv) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.08(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.08(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.08(c)(iv) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.08(c)(iv) shall not bear the Private Placement Legend. (d) Transfer and Exchange of Definitive Notes for Beneficial Interests in Global Notes. (i) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof; (B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate 27 to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such Restricted Definitive Note is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (F) if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note, and in the case of clause (C) above, the Regulation S Global Note. (ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; 28 (C) such transfer is effected by a participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or (2) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.08(d)(ii), the Trustee shall cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. (iii) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes. If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.04 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred. (e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.08(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to 29 such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by such Holder's attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.08(e). (i) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following: (A) if the transfer will be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. (ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: 30 (1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or (2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof. (f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.04, the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes tendered for acceptance by Persons that certify in the applicable Letters of Transmittal that (x) they are not broker-dealers, (y) they are not participating in a distribution of the Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the Company, and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Notes, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company shall execute and the Trustee shall authenticate and deliver to the Persons designated by the Holders of Definitive Notes so accepted Definitive Notes in the appropriate principal amount. (g) Legends. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. 31 (i) Private Placement Legend. (A) Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form. THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS, NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THE SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT ) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 904 OF REGULATION S, (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(K) UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THE SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO SIX FLAGS, INC., (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHICH THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT SIX FLAGS, INC. AND THE TRUSTEE SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (1) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, 32 CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OR TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. (B) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) of this Section 2.08 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (ii) Global Note Legend. Each Global Note shall bear a legend in substantially the following form: UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH NOMINEE OF THE DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF A SUCCESSOR DEPOSITARY, OR ANY NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. TRANSFERS OF THE GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO., OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE, AND TRANSFERS OF PORTIONS OF THE GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. 33 (h) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.13 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. (i) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon the Company's order. (ii) No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.12, 3.06, 3.09, 4.10, 4.15 and 9.05). (iii) The Registrar shall not be required to register the transfer of or to exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (iv) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. (v) The Registrar shall not be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection or (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part. (vi) The Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, 34 and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (vii) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.04 hereof. (viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.08 to effect a registration of transfer or exchange may be submitted by facsimile. Section 2.09. Replacement Notes. If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. Section 2.10. Outstanding Notes. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in Section 2.11 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note; however, Notes held by the Company or a Subsidiary of the Company shall not be deemed to be outstanding for purposes of Section 3.07(b) hereof. If a Note is replaced pursuant to Section 2.09 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest. Section 2.11. Treasury Notes. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, shall be considered as though not 35 outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded. Section 2.12. Temporary Notes. Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of certificated Notes but may have variations that the Company considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. Section 2.13. Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall dispose of such canceled Notes (subject to the record retention requirement of the Exchange Act in its customary manner). The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. Section 2.14. Defaulted Interest. If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company shall fix or cause to be fixed each such special record date and payment date; provided that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. Section 2.15. Cusip Numbers. The Company in issuing the Notes may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee of any change in the "CUSIP" numbers. 36 ARTICLE III REDEMPTION AND PREPAYMENT Section 3.01. Notices to Trustee. If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 60 days before a redemption date, an Officers' Certificate setting forth (i) the clause of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed and (iv) the redemption price. Section 3.02. Selection of Notes to Be Redeemed. If less than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee shall select the Notes to be redeemed or purchased among the Holders of the Notes in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or in accordance with any other method the Trustee considers fair and appropriate; provided that no Notes of $1,000 or less shall be redeemed in part. In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed. Notes and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. Section 3.03. Notice of Redemption. Subject to the provisions of Section 3.09 hereof, at least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. The notice shall identify the Notes (including CUSIP numbers) to be redeemed and shall state: (a) the redemption date; (b) the redemption price; (c) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion shall be issued upon cancelation of the original Note; (d) the name and address of the Paying Agent; 37 (e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (f) that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date; (g) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (h) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; provided, however, that the Company shall have delivered to the Trustee, at least 60 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. Section 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. Section 3.05. Deposit of Redemption Price. One Business Day prior to the redemption date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and, if applicable, accrued interest on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest on, all Notes to be redeemed. If the Company complies with the provisions of the preceding paragraph, on and after the redemption date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof. Section 3.06. Notes Redeemed in Part. Upon surrender of a Note that is redeemed in part, the Company shall issue and, upon the Company's written request, the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered. 38 Section 3.07. Optional Redemption. (a) Except as set forth in clause (b) of this Section 3.07, the Company shall not have the option to redeem the Notes pursuant to this Section 3.07 prior to February 1, 2005. On or after February 1, 2005, the Company may redeem all or part of the Notes upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on February 1 of the years indicated below: Year Percentage 2005 104.750% 2006 103.167% 2007 101.583% 2008 and thereafter 100.000% (b) Notwithstanding the foregoing, at any time prior to February 1, 2004, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes (which includes Additional Notes, if any) originally issued under this Indenture at a redemption price of 109.5% of the principal amount thereof, plus accrued and unpaid interest to the redemption date, with the net cash proceeds of one or more Public Equity Offerings and/or the net cash proceeds of a Strategic Equity Investment; provided that at least 65% of the aggregate principal amount of Notes (which includes Additional Notes, if any) originally issued remains outstanding immediately after the occurrence of each such redemption (excluding the Notes held by the Company and its Subsidiaries); and provided further, that any such redemption shall occur within 60 days of the date of the closing of each such Public Equity Offering and/or Strategic Equity Investment. (c) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Section 3.01 through 3.06 hereof. (d) If the optional redemption date is on or after an interest record date and on or before the related interest payment date, the accrued and unpaid interest, if any, will be paid to the Person in whose name the Note is registered at the close of business on such record date, and no additional interest will be payable to holders whose Notes will be subject to redemption by the Company. Section 3.08. Mandatory Redemption. Except as set forth in Sections 4.10 and 4.15, the Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. Section 3.09. Offer to Purchase by Application of Excess Proceeds. In the event that, pursuant to Section 4.10 hereof, the Company shall be required to commence an offer to all Holders to purchase Notes (an "Asset Sale Offer"), it shall follow the procedures specified below. The Asset Sale Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the "Offer Period"). No later than five Business Days after the termination of the Offer Period (the "Purchase Date"), the Company shall purchase the principal amount of 39 Notes required to be purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than the Offer Amount has been tendered, all Notes tendered in response to the Asset Sale Offer. Payment for any Notes so purchased shall be made in the same manner as interest payments are made. If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Asset Sale Offer. Upon the commencement of an Asset Sale Offer, the Company shall send, by first class mail, a notice to the Trustee and each of the Holders, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice, which shall govern the terms of the Asset Sale Offer, shall state: (a) that the Asset Sale Offer is being made pursuant to this Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain open; (b) the Offer Amount, the purchase price and the Purchase Date; (c) that any Note not tendered or accepted for payment shall continue to accrue interest; (d) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest after the Purchase Date; (e) that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may only elect to have all of such Note purchased and may not elect to have only a portion of such Note purchased; (f) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Company, a Depositary, if appointed by the Company, or a paying agent at the address specified in the notice at least three days before the Purchase Date; (g) that Holders shall be entitled to withdraw their election if the Company, the Depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; (h) that, if the aggregate principal amount of Notes surrendered by Holders exceeds the Offer Amount, the Company shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that 40 only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and (i) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer). On or before the Purchase Date, the Company shall, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered, and shall deliver to the Trustee an Officers' Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.09. The Company, the Depositary or the paying agent, as the case may be, shall promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Company shall promptly issue a new Note, and the Trustee, upon written request from the Company shall authenticate and mail or deliver such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce the results of the Asset Sale Offer on the Purchase Date. Other than as specifically provided in this Section 3.09, any purchase pursuant to this Section 3.09 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. ARTICLE IV COVENANTS Section 4.01. Payment of Notes. The Company shall pay or cause to be paid the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; if applicable, it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace period) at the same rate to the extent lawful. Section 4.02. Maintenance of Office or Agency. The Company shall maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such 41 office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.05. Section 4.03. Reports. (a) Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Company shall furnish to the Holders of Notes and the Trustee (i) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were required to file such forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of the Company and its consolidated Subsidiaries (showing in reasonable detail, either on the face of the financial statements or in the footnotes thereto and in Management's Discussion and Analysis of Financial Condition and Results of Operations, the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company) and, with respect to the annual information only, a report thereon by the Company's certified independent accountants and (ii) all current reports that would be required to be filed with the SEC on Form 8-K if the Company were required to file such reports, in each case, within the time periods specified in the SEC's rules and regulations. In addition, whether or not required by the rules and regulations of the SEC, the Company shall file a copy of all such information and reports with the SEC for public availability within the time periods specified in the SEC's rules and regulations (unless the SEC will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. The Company shall at all times comply with TIA ss. 314(a). Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to conclusively rely exclusively on Officers' Certificates). Section 4.04. Compliance Certificate. (a) The Company shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant 42 contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.03(a) shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in connection with the audit for certification of such financial statements contained in such reports, nothing has come to their attention that would lead them to believe that the Company has failed to comply with any provisions of Article 4 or Article 5 hereof insofar as the provisions relate to accounting matters or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. (c) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith and in any event within five days upon any Officer becoming aware of any Default or Event of Default or an event which, with notice or the lapse of time or both, would constitute an Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. Section 4.05. Taxes. The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes. Section 4.06. Stay, Extension and Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. Section 4.07. Restricted Payments. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any other payment or distribution on account of any Equity Interests of the Company (including, without limitation, any payment in connection with any merger or 43 consolidation involving the Company) or to the direct or indirect holders of any Equity Interests of the Company in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company); (ii) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company; (iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes, except a payment of interest or principal at Stated Maturity; or (iv) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (a) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and (b) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Debt to Cash Flow test set forth in the first paragraph of Section 4.09 hereof; and (c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments declared or made after the Issue Date (excluding Restricted Payments permitted by clauses (ii) and (iii) of the next succeeding paragraph) shall not exceed, at the date of determination, the sum, without duplication, of (i) an amount equal to the Company's Consolidated Cash Flow for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after June 30, 1999 to the end of the Company's most recently ended full fiscal quarter for which financial statements have been filed with the SEC (the "Basket Period") less the product of 1.4 times the Company's Consolidated Interest Expense for the Basket Period, plus (ii) 100% of the aggregate net cash proceeds received by the Company after June 30, 1999 as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Company (other than Disqualified Stock) or from the issue or sale after June 30, 1999 of Disqualified Stock or debt securities of the Company that have been converted into such Equity Interests (other than (x) Equity Interests (or Disqualified Stock or convertible debt securities) sold to a Subsidiary of the Company and (y) any sale of Equity Interests of the Company the net cash proceeds of which are applied pursuant to clause (ii) of the immediately succeeding paragraph), plus (iii) to the extent that any Restricted Investment that was made after the Issue Date is sold for cash or otherwise liquidated or repaid for cash, the lesser of (A) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) and (B) the initial amount of such Restricted Investment, plus (iv) to the extent that any Unrestricted Subsidiary is redesignated as a Restricted Subsidiary after the Issue Date, the fair market value of the Company's or its Restricted Subsidiary's, as the case may be, Investment in such Subsidiary as of the date of such redesignation. The preceding provisions shall not prohibit: (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of this Indenture; (ii) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness or Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company) of, Equity Interests of the Company (other than Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded 44 from clause (c)(ii) of the preceding paragraph; (iii) the defeasance, redemption, repurchase or other acquisition of subordinated Indebtedness with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (iv) so long as no Default or Event of Default shall have occurred and be continuing (or would result therefrom), the purchase, redemption, retirement or other acquisition by the Company or any Restricted Subsidiary of the Company of partnership interests held by the partners in the limited partners of the Co-Venture Partnerships, the co-general partner of the Co-Venture Partnerships or, in each case, their successors, in accordance with and in the manner required or permitted by the terms of the Partnership Parks Agreements; (v) so long as no Default or Event of Default shall have occurred and be continuing (or would result therefrom), any transactions pursuant to or contemplated by, and payments made in connection with, and in accordance with the terms of, the Partnership Parks Agreements and the Marine World Agreements; (vi) so long as no Default or Event of Default shall have occurred and be continuing (or would result therefrom), any transactions pursuant to or contemplated by, and payments made in connection with, and in accordance with the terms of, the Subordinated Indemnity Agreement; (vii) so long as no Default or Event of Default shall have occurred and be continuing (or would result therefrom), the payment of dividends on the Mandatorily Convertible Preferred Stock in accordance with the terms thereof as in effect on the date of this Indenture; (viii) in the event the Company issues common stock in exchange for or upon conversion of Mandatorily Convertible Preferred Stock or PIERS (or Convertible Preferred Stock underlying the PIERS), cash payments made in lieu of the issuance of fractional shares of common stock, not to exceed $500,000 in the aggregate in any fiscal year; (ix) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company from employees, former employees, directors or former directors of the Company or any of its Restricted Subsidiaries (or permitted transferees of such employees, former employees, directors or former directors); provided, however, that the aggregate amount of such repurchases shall not exceed $5.0 million in any twelve-month period; and (x) so long as no Default or Event of Default shall have occurred and be continuing (or would result therefrom), the payment of dividends on the PIERS (or the underlying Convertible Preferred Stock) in accordance with the terms thereof as in effect on the date of this Indenture. The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if such designation would not cause a Default; provided that in no event shall the business currently operated by Six Flags Operations Inc. or Six Flags Theme Parks Inc. be transferred to or held by any Unrestricted Subsidiary. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, all outstanding Investments owned by the Company and its Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary so designated will be deemed to be Restricted Payments at the time of such designation and will reduce the amount available for Restricted Payments under the first paragraph of this covenant. All such outstanding Investments will be valued at their fair market value at the time of such designation. That designation will only be permitted if such Restricted Payment would be permitted at such time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be 45 valued by this Section 4.07 shall be determined by the Board of Directors of the Company whose resolution with respect thereto shall be delivered to the Trustee. The Board of Directors' determination shall be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if such fair market value exceeds $10.0 million. Not later than the date of making any Restricted Payment (other than any Restricted Payment permitted pursuant to clause (i) through (x) of the second preceding paragraph), the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 4.07 were computed, together with a copy of any fairness opinion or appraisal required by this Indenture. Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest or participation in, or measured by, its profits, or (b) pay any indebtedness owed to the Company or any of its Restricted Subsidiaries, (ii) make loans or advances to the Company or any of its Restricted Subsidiaries or (iii) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries. However, the preceding restrictions will not apply to encumbrances or restrictions existing under or by reason of (a) Existing Indebtedness and Indebtedness under Credit Facilities and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of Existing Indebtedness and Indebtedness under Credit Facilities, provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are no more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in the agreements governing the Existing Indebtedness and Indebtedness under Credit Facilities on the date of this Indenture, (b) the Partnership Parks Agreements, the Marine World Agreements or the Subordinated Indemnity Agreement, (c) the terms of any Indebtedness permitted by this Indenture to be incurred by any Restricted Subsidiary of the Company, (d) this Indenture and the Notes, (e) applicable law, (f) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this Indenture to be incurred, (g) customary non-assignment provisions in leases, licenses or other contracts entered into in the ordinary course of business, (h) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (iii) above on the property so acquired, (i) any agreement for the sale of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending its sale, (j) obligations otherwise permitted to be incurred pursuant to the provisions of Section 4.12 that limit the right of the obligee to dispose of the assets securing such obligations, (k) provisions with respect to the disposition or distribution of assets or property in joint venture agreements and other similar agreements entered into in the ordinary course of business and (l) restrictions 46 on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business. Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt), and the Company shall not issue any Disqualified Stock and shall not permit any of its Restricted Subsidiaries to issue any shares of preferred stock; provided, however, that the Company may incur Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock and the Company's Restricted Subsidiaries may incur Indebtedness (including Acquired Debt) or issue shares of preferred stock if the Company's Debt to Cash Flow Ratio at the time of incurrence of such Indebtedness or the issuance of such Disqualified Stock or such preferred stock, as the case may be, after giving pro forma effect to such incurrence or issuance as of such date and to the use of the proceeds therefrom as if the same had occurred at the beginning of the most recently ended four full fiscal quarter period of the Company for which financial statements have been furnished or are required to be furnished to Holders of the Notes in reports pursuant to Section 4.03 hereof, would have been no greater than 6.0 to 1. The Company shall not incur any Indebtedness that is contractually subordinated in right of payment to any other Indebtedness of the Company unless such Indebtedness is also contractually subordinated in right of payment to the Notes on substantially identical terms; provided, however, that no Indebtedness of the Company shall be deemed to be contractually subordinated in right of payment to any other Indebtedness of the Company solely by virtue of being unsecured. The provisions of the first paragraph of this Section 4.09 will not apply to the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"): (i) the incurrence by the Company and its Restricted Subsidiaries of additional Indebtedness under Credit Facilities, in an amount up to $1.2 billion; (ii) the incurrence by the Company and its Restricted Subsidiaries of additional revolving credit Indebtedness and letters of credit pursuant to Credit Facilities in an aggregate principal amount (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Restricted Subsidiaries thereunder) at any one time outstanding not to exceed the Specified Amount as of such date of incurrence; provided that the aggregate principal amount of all Indebtedness incurred pursuant to this clause (ii) is reduced to an outstanding balance of $1.0 million or less for at least 30 consecutive days in each fiscal year; (iii) the incurrence by the Company and its Restricted Subsidiaries of the Existing Indebtedness; (iv) the incurrence by the Company of Indebtedness represented by the Notes (other than any Additional Notes); 47 (v) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in the business of the Company or such Restricted Subsidiary, in an aggregate principal amount not to exceed $50.0 million at any time outstanding; (vi) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness (other than intercompany Indebtedness and Indebtedness incurred pursuant to clauses (i) and (ii) above) that was permitted by this Indenture to be incurred; (vii) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries; provided, however, that (a) if the Company is the obligor on any such Indebtedness, such Indebtedness is, if any Default or Event of Default with respect to the Company occurs and is continuing, expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes and (b)(1) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary thereof and (2) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary thereof shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (vii); (viii) the incurrence by the Company or any of its Restricted Subsidiaries of (a) Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of this Indenture to be incurred and (b) Currency Agreements that do not increase the Indebtedness of the Company and its Restricted Subsidiaries outstanding at any time other than as a result of fluctuations in foreign currency exchange rates or interest rates or by reason of fees, indemnities and compensation payable thereunder; (ix) Indebtedness in respect of performance bonds, letters of credits, surety or appeal bonds, prior to any drawing thereunder, for or in connection with pledges, deposits or payments made or given in the ordinary course of business; (x) the guarantee by the Company or any of its Restricted Subsidiaries of Indebtedness of the Company or a Restricted Subsidiary of the Company that was permitted to be incurred by another provision of this Section 4.09 (including, without limiting the generality of the foregoing, the guarantee by the Company or any Restricted Subsidiary of the Company of Existing Indebtedness); (xi) the incurrence by the Company's Unrestricted Subsidiaries of Non-Recourse Debt, provided, however, that if any such Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to constitute an incurrence of 48 Indebtedness by a Restricted Subsidiary of the Company that was not permitted by this clause (xi); and (xii) the incurrence by the Company or any of its Restricted Subsidiaries of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (xii), not to exceed $100.0 million. For purposes of determining compliance with this Section 4.09, in the event that an item of Indebtedness (including Acquired Debt) meets the criteria of more than one of the categories of Permitted Debt described in clauses (i) through (xii) above or is entitled to be incurred pursuant to the first paragraph of this Section 4.09, the Company shall, in its sole discretion, classify (or later reclassify in whole or in part, in its sole discretion) such item of Indebtedness in any manner that complies with this Section 4.09. Accrual of interest, accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on preferred stock in the form of additional shares of the same class of preferred stock will not be deemed to be an incurrence of Indebtedness or an issuance of preferred stock for purposes of this Section 4.09; provided, in each such case, that the amount thereof is included in Consolidated Indebtedness of the Company as accrued. Section 4.10. Asset Sales. The Company shall not, and shall not permit any of its Restricted Subsidiaries to consummate an Asset Sale unless (i) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value, as determined in good faith by the Board of Directors of the Company or such Restricted Subsidiary, of the assets or Equity Interests issued or sold or otherwise disposed of and (ii) at least 75% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash or Cash Equivalents. For purposes of this covenant each of the following shall be deemed to be cash: (x) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet) of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinate to the Notes) that are assumed by the transferee of any such assets that releases the Company or such Restricted Subsidiary from further liability or, in the case of the sale of Capital Stock, that are assumed by the transferee by operation of law and (y) any securities, notes or other obligations received by the Company or such Restricted Subsidiary from such transferee that are promptly (subject to ordinary settlement periods) converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received in that conversion). Notwithstanding the immediately preceding paragraph, the Company and its Restricted Subsidiaries shall be permitted to consummate an Asset Sale without complying with such paragraph if (1) the Company or the applicable Restricted Subsidiary, as the case may be, receives consideration at the time of that Asset Sale at least equal to the fair market value of the assets or other property sold, issued or otherwise disposed of (as determined in good faith by the Board of Directors of the Company or the applicable Restricted Subsidiary) and (2) at least 75% of the consideration of that Asset Sale constitutes assets or other property of a kind usable by the Company or its Restricted Subsidiaries in the business of the Company and its Restricted Subsidiaries as conducted by the Company and its Restricted Subsidiaries on the date of this 49 Indenture; provided that any consideration not constituting assets or property of a kind usable by the Company and its Restricted Subsidiaries in the business conducted by them on the date of this Indenture and received by the Company or any of its Restricted Subsidiaries in connection with any Asset Sale permitted to be consummated under this paragraph will constitute Net Proceeds subject to the provisions of the two succeeding paragraphs. Within 365 days after the receipt of any Net Proceeds from an Asset Sale, the Company or the applicable Restricted Subsidiary may apply such Net Proceeds (a) to repay Senior Debt and, if Senior Debt repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto, (b) to acquire all or substantially all of the assets of, or a majority of the Voting Stock of, another Person (or business unit or division of such Person); provided that the primary business of such Person (or unit or division) is a Permitted Business, (c) to fund obligations of the Company or any Restricted Subsidiary under the Partnership Parks Agreements or the Subordinated Indemnity Agreement, (d) to acquire Capital Stock of a Restricted Subsidiary of the Company held by Persons other than the Company or any Restricted Subsidiary, (e) to make a capital expenditure, (f) to acquire other long-term assets that are used or useful in a Permitted Business or (g) to commit to undertake any of the actions specified in clauses (b), (c), (d), (e) or (f) above, provided that such action is consummated within 90 days from the end of such 365-day period. Pending the final application of any such Net Proceeds, the Company or such Restricted Subsidiary may temporarily reduce revolving credit borrowings or otherwise invest such Net Proceeds in any manner that is not prohibited by this Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the first sentence of this paragraph will constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $20.0 million, the Company will be required to make an offer to all Holders of Notes and all holders of other Indebtedness of the Company that is pari passu with the Notes containing provisions similar to those set forth in this Indenture with respect to offers to purchase or redemptions with the proceeds of sales of assets (an "Asset Sale Offer") to purchase the maximum principal amount of Notes and such other pari passu Indebtedness of the Company that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer will be equal to 100% of the principal amount thereof plus accrued and unpaid interest thereon, if any, to the date of repurchase and will be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If the aggregate principal amount of Notes and such other Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such other Indebtedness to be purchased on a pro rata basis. Upon completion of such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with provisions of this covenant, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this covenant by virtue thereof. 50 Section 4.11. Transactions with Affiliates. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $2.5 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $10.0 million, an opinion as to the fairness to the Holders of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing. Notwithstanding the foregoing, the following items shall not be deemed to be Affiliate Transactions: (i) any employment agreement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business, or any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment or indemnification arrangements, stock options and stock ownership plans approved by the Board of Directors, or the grant of stock options or similar rights to employees and directors of the Company pursuant to plans approved by the Board of Directors, (ii) transactions between or among the Company and/or its Restricted Subsidiaries, (iii) payment of reasonable directors fees to Persons who are not otherwise employees of the Company or its Restricted Subsidiaries, (iv) loans or advances to employees in the ordinary course of business, (v) Restricted Payments that are permitted by Section 4.07 hereof, (vi) transactions pursuant to or contemplated by, and in accordance with, the terms of the Subordinated Indemnity Agreement, (vii) transactions pursuant to or contemplated by and payments in connection with, and, in each case, in accordance with, the terms of the Partnership Parks Agreements and (viii) transactions pursuant to or contemplated by, and in accordance with, the Marine World Agreements. Section 4.12. Liens. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly create, incur, assume or suffer to exist any Lien securing trade payables, Attributable Debt or Indebtedness on any asset now owned or hereafter acquired, except Permitted Liens, unless (i) in the case of Liens securing Indebtedness that is expressly subordinate or junior in right of payment to the Notes, the Notes are secured by a Lien on that property or those assets or proceeds that is senior in priority to those Liens, with the same relative priority as that subordinate or junior Indebtedness will have with respect to the Notes and (ii) in all other cases, the Notes are secured by such Lien on an equal and ratable basis. Section 4.13. Line of Business. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, engage in any business other than Permitted Businesses, except to such extent as would not be material to the Company and its Restricted Subsidiaries taken as a whole. 51 Section 4.14. Corporate Existence. Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence, and the corporate, partnership or other existence of each of its Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of the Company and its Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders of the Notes. Section 4.15. Offer to Repurchase Upon Change of Control. (a) Upon the occurrence of a Change of Control, the Company shall make an offer (a "Change of Control Offer") to each Holder of Notes to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest thereon, if any, to the date of purchase (the "Change of Control Payment"). Within 30 days following any Change of Control, the Company shall mail a notice to each Holder stating: (1) that the Change of Control Offer is being made pursuant to this Section 4.15 and that all Notes tendered will be accepted for payment; (2) the purchase price and the purchase date, which shall be no later than 30 business days from the date such notice is mailed (the "Change of Control Payment Date"); (3) that any Note not tendered will continue to accrue interest; (4) that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date; (5) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date; (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have the Notes purchased; and (7) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes as a result of a Change of Control. (b) On the Change of Control Payment Date, the Company will, to the extent lawful, (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered and (3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company. 52 The Paying Agent will promptly mail to each Holder of Notes so tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each such new Note will be in a principal amount of $1,000 or an integral multiple thereof. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. If the Change of Control Payment Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest will be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest will be payable to holders who tender in the Change of Control Offer. The Company shall fix the Change of Control Payment Date no earlier than 30 days and no later than 60 days after the Change of Control Offer is mailed as set forth above. Prior to complying with the provisions of the preceding sentence, but in any event within 90 days following a Change of Control, the Company shall either repay all of its and its Subsidiaries' outstanding Indebtedness or obtain the requisite consents, if any, under all agreements governing all such outstanding Indebtedness to the extent necessary to permit the repurchase of Notes required by this Section 4.15. Notwithstanding the foregoing, the Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.15 applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with provisions of this covenant, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section 4.15. Section 4.16. Limitation on Sale and Leaseback Transactions. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, enter into any sale and leaseback transaction; provided that the Company or a Restricted Subsidiary of the Company may enter into a sale and leaseback transaction if (i) the Company could have (a) incurred Indebtedness in an amount equal to the Attributable Debt relating to such sale and leaseback transaction pursuant to the Debt to Cash Flow Ratio test set forth in the first paragraph of Section 4.09 hereof or pursuant to clause (vi) of the third paragraph of Section 4.09 hereof and (b) incurred a Lien to secure such Indebtedness pursuant to Section 4.12 hereof, (ii) the gross cash proceeds of such sale and leaseback transaction are at least equal to the fair market value (as determined in good faith by the Board of Directors and set forth in an Officers' Certificate delivered to the Trustee) of the property that is the subject of such sale and leaseback transaction and (iii) the transfer of assets in such sale and leaseback transaction is permitted by, and the Company or such Restricted Subsidiary applies the proceeds of such transaction in compliance with, Section 4.10 hereof. Section 4.17. Payments for Consent. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration, 53 whether by way of interest, fee or otherwise, to any Holder of any Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid or is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. Section 4.18. Limitation on Leases. The Company shall not, directly or indirectly, lease all or substantially all of its assets to any Person. ARTICLE V SUCCESSORS Section 5.01. Merger, Consolidation, or Sale of Assets. The Company shall not consolidate or merge with or into (whether or not the Company is the surviving corporation), or sell, assign, transfer, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another corporation, Person or entity unless (i) either (a) the Company is the surviving corporation or the entity or (b) the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (ii) the entity or Person formed by or surviving any such consolidation or merger (if other than the Company) or the entity or Person to which such sale, assignment, transfer, conveyance or other disposition shall have been made assumes all the obligations of the Company under the Notes and this Indenture pursuant to supplemental indentures in forms reasonably satisfactory to the Trustee, as well as under the Registration Rights Agreement and the Exchange Notes; (iii) immediately after such transaction no Default or Event of Default exists; and (iv) except in the case of a merger of the Company with or into a Wholly Owned Restricted Subsidiary of the Company, the Company or the entity or Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made will, immediately after such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, either (a) be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Debt to Cash Flow Ratio test set forth in the first paragraph of Section 4.09 hereof or (b) have a Debt to Cash Flow Ratio that equals or exceeds the Debt to Cash Flow Ratio immediately prior to such transaction. Section 5.02. Successor Corporation Substituted. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the "Company" shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; provided, however, that the predecessor Company shall not be relieved from the obligation to 54 pay the principal of and interest on the Notes except in the case of a sale of all of the Company's assets that meets the requirements of Section 5.01 hereof. ARTICLE VI DEFAULTS AND REMEDIES Section 6.01. Events of Default. An "Event of Default" occurs if: (a) the Company defaults in the payment when due of interest on the Notes and such default continues for a period of 30 days; (b) the Company defaults in the payment when due of principal of or premium, if any, on the Notes when the same becomes due and payable at maturity, upon redemption (including in connection with an offer to purchase) or otherwise; (c) the Company fails to comply for (i) a period of 30 days with any of the provisions of Section 4.10 or 4.15 hereof or (ii) 30 days after notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding voting as a single class, with other provisions of Article 4 or Section 5.01 hereof; (d) the Company fails to observe or perform any other covenant, representation, warranty or other agreement in this Indenture or the Notes for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding voting as a single class; (e) the Company or any Restricted Subsidiary fails to pay Indebtedness within any applicable grace period after final maturity or the acceleration of any Indebtedness by the holders thereof because of a default and the total amount of such Indebtedness unpaid or accelerated at any time exceeds $10.0 million; (f) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of its Restricted Subsidiaries and such judgment or judgments are not paid, discharged or stayed for a period (during which execution shall not be effectively stayed) of 60 days, provided that the aggregate of all such undischarged judgments exceeds $10.0 million; (g) the Company or any Restricted Subsidiary that constitutes a Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law: (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case, (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors, or 55 (v) generally is not paying its debts as they become due; or (h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any Restricted Subsidiary that constitutes a Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary in an involuntary case; (ii) appoints a Custodian of the Company or any Restricted Subsidiary that constitutes a Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary or for all or substantially all of the property of the Company or any Restricted Subsidiary that constitutes a Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; or (iii) orders the liquidation of the Company or any Restricted Subsidiary that constitutes a Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; and the order or decree remains unstayed and in effect for 60 consecutive days. Section 6.02. Acceleration. If any Event of Default (other than an Event of Default specified in clause (g) or (h) of Section 6.01 hereof with respect to the Company, any Restricted Subsidiary that constitutes a Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary) occurs and is continuing, either the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Upon any such declaration, the Notes shall become due and payable immediately. Notwithstanding the foregoing, if an Event of Default specified in clause (g) or (h) of Section 6.01 hereof occurs with respect to the Company, any Restricted Subsidiary that constitutes a Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, all outstanding Notes shall become due and payable without further action or notice. The Holders of a majority in aggregate principal amount of the then outstanding Notes by written notice to the Trustee may on behalf of all of the Holders rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment of principal, interest or premium that has become due solely because of the acceleration) have been cured or waived. If an Event of Default occurs on or after February 1, 2005 by reason of any willful action or inaction taken or not taken by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to Section 3.07 hereof, then, upon acceleration of 56 the Notes, an equivalent premium shall also become and be immediately due and payable, to the extent permitted by law, anything in this Indenture or in the Notes to the contrary notwithstanding. If an Event of Default occurs prior to February 1, 2005 by reason of any willful action or inaction taken or not taken by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to such date, then, upon acceleration of the Notes, the premium equal to the premium specified for the twelve months commencing on such date pursuant to Section 3.07 hereof shall also become and be immediately due and payable to the extent permitted by law. Section 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. Section 6.04. Waiver of Past Defaults. Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, premium, if any, or interest on, the Notes (including in connection with an offer to purchase) (provided, however, that the Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration). Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. Section 6.05. Control by Majority. Holders of a majority in principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability. Section 6.06. Limitation on Suits. A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes only if: (a) the Holder of a Note gives to the Trustee written notice of a continuing Event of Default; (b) the Holders of at least 25% in principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; (c) such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and 57 (e) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note. Section 6.07. Rights of Holders of Notes to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. Section 6.08. Collection Suit by Trustee. If an Event of Default specified in Section 6.01(a) or (b) hereof occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium on, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. Section 6.09. Trustee May File Proofs of Claim. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 6.10. Priorities. If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: 58 First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium, if any, and interest, respectively; and Third: to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. Section 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. ARTICLE VII TRUSTEE Section 7.01. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions which by any provision hereof are specifically required to be furnished to the Trustee to determine whether or not they conform to the requirements of this Indenture but need not 59 confirm or investigate the accuracy of mathematical calculations or other facts stated therein. (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. Section 7.02. Rights of Trustee. (a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in such document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent or attorney appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. 60 (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. (g) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation. (h) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture. (i) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder. (j) The Trustee may request that the Company deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specific actions pursuant to this Indenture, which Officers' Certificate may be signed by any person authorized to sign an Officers' Certificate, including any person specified as so authorized in any such certificates. Section 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. Section 7.04. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the 61 Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. Section 7.05. Notice of Defaults. If a Default or Event of Default occurs and is continuing and if it is actually known to a Responsible Officer of the Trustee, the Trustee shall mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium on, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes. Section 7.06. Reports by Trustee to Holders of the Notes. Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA ss. 313(a) (but if no event described in TIA ss. 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA ss. 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA ss. 313(c). A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Company and filed with the SEC and each stock exchange on which the Notes are listed, if any, in accordance with TIA ss. 313(d). The Company shall promptly notify the Trustee if the Notes are listed on any stock exchange or delisted therefrom. Section 7.07. Compensation and Indemnity. The Company shall pay to the Trustee from time to time such compensation as the Company and the Trustee shall from time to time agree in writing for its acceptance of this Indenture and services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify each of the Trustee or any predecessor Trustee and their agents for, and hold them harmless against any and all losses, liabilities, damages, claims or expenses including reasonable attorneys' fees and expenses and taxes (other than taxes based upon, measured by or determined by the income of the Trustee) incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.07) and defending itself against any claim (whether asserted by the Company or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense shall have been caused by its own negligence or bad faith. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. 62 The obligations of the Company under this Section 7.07 shall survive the satisfaction and discharge of this Indenture and the resignation or removal of the Trustee. To secure the Company's payment obligations in this Section, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. The Trustee shall comply with the provisions of TIA ss. 313(b)(2) to the extent applicable. Section 7.08. Replacement of Trustee. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a Custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee (at the expense of the Company), the Company, or the Holders of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee, after written request by any Holder of a Note who has been a Holder of a Note for at least six months, fails to comply with Section 7.10, such Holder of a Note may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. 63 A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders of the Notes. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. Section 7.09. Successor Trustee by Merger, etc. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. Section 7.10. Eligibility; Disqualification. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $100 million as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA ss. 310(b). Section 7.11. Preferential Collection of Claims Against Company. The Trustee is subject to TIA ss. 311(a), excluding any creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated therein. ARTICLE VIII LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance. The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article Eight. Section 8.02. Legal Defeasance and Discharge. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from its obligations with respect to all outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the 64 Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.04 hereof, and as more fully set forth in such Section, payments in respect of the principal of, premium on, if any, and interest on such Notes when such payments are due, (b) the Company's obligations with respect to such Notes under Article 2 and Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (d) this Article Eight. Subject to compliance with this Article Eight, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof. Section 8.03. Covenant Defeasance. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from its obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17 and 4.18 hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(d) through 6.01(f) hereof shall not constitute Events of Default. Section 8.04. Conditions to Legal or Covenant Defeasance. The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Notes: In order to exercise either Legal Defeasance or Covenant Defeasance: (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in United States dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium on, if any, and interest on the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date; (b) in the case of an election under Section 8.02 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the 65 Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (c) in the case of an election under Section 8.03 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) or insofar as Sections 6.01(g) or 6.01(h) hereof is concerned, at any time in the period ending on the 91st day after the date of deposit; (e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Restricted Subsidiaries is a party or by which the Company or any of its Restricted Subsidiaries is bound; (f) the Company shall have delivered to the Trustee an Opinion of Counsel (which may be subject to customary exceptions) to the effect that on the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (g) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company; and (h) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with. Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions. Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due 66 thereon in respect of principal, premium on , if any, and interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. Anything in this Article Eight to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the written request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. Section 8.06. Repayment to Company. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium on, if any, or interest on any Note and remaining unclaimed for two years after such principal, and premium, if any, or interest has become due and payable shall be paid to the Company on its written request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as a secured creditor, look only to the Company for payment thereof, and all liability of the Trustee or such paying agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. Section 8.07. Reinstatement. If the Trustee or paying agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or paying agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium on, if any, or interest on any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or paying agent. 67 ARTICLE IX AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01. Without Consent of Holders of Notes. Notwithstanding Section 9.02 of this Indenture, the Company and the Trustee may amend or supplement this Indenture or the Notes without the consent of any Holder of a Note: (a) to cure any ambiguity, defect or inconsistency; (b) to provide for uncertificated Notes in addition to or in place of certificated Notes or to alter the provisions of Article 2 hereof (including the related definitions) in a manner that does not materially adversely affect any Holder; (c) to provide for the assumption of the Company's obligations to the Holders of the Notes by a successor to the Company pursuant to Article 5 hereof; (d) to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights hereunder of any Holder of the Note; (e) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA; Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that adversely affects its own rights, duties or immunities under this Indenture or otherwise. Section 9.02. With Consent of Holders of Notes. Except as provided below in this Section 9.02, the Company and the Trustee may amend or supplement this Indenture (including Sections 3.09, 4.10 and 4.15 hereof) and the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes). Section 2.10 hereof shall determine which Notes are considered to be "outstanding" for purposes of this Section 9.02. 68 Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture directly adversely affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. It shall not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes then outstanding voting as a single class may waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes. However, without the consent of each Holder affected, an amendment or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder): (a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (b) reduce the principal of or change the fixed maturity of any Note or alter or waive any of the provisions with respect to the redemption of the Notes except as provided above with respect to Sections 3.09, 4.10 and 4.15 hereof; (c) reduce the rate of or change the time for payment of interest, including default interest, on any Note; (d) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the then outstanding Notes and a waiver of the payment default that resulted from such acceleration); (e) make any Note payable in money other than that stated in the Notes; (f) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of or premium, if any, or interest on the Notes; (g) waive a redemption payment with respect to any Note (other than a payment required by Sections 3.09, 4.10 or 4.15 hereof); or 69 (h) make any change in Section 6.04 or 6.07 hereof or in the foregoing amendment and waiver provisions. Section 9.03. Compliance with Trust Indenture Act. Every amendment or supplement to this Indenture or the Notes shall be set forth in a amended or supplemental Indenture that complies with the TIA as then in effect. Section 9.04. Revocation and Effect of Consents. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. Section 9.05. Notation on or Exchange of Notes. The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. Section 9.06. Trustee to Sign Amendments, etc. The Trustee shall sign any amended or supplemental Indenture authorized pursuant to this Article Nine if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amendment or supplemental Indenture until the Board of Directors approves it. In executing any amended or supplemental indenture, the Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully protected in relying upon, in addition to the documents required by Section 10.04 hereof, an Officer's Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture. ARTICLE X MISCELLANEOUS Section 10.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA ss. 318(c), the imposed duties shall control. Section 10.02. Notices. Any notice or communication by the Company or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first class mail. If to the Company: Six Flags, Inc. 70 122 East 42nd Street New York, New York 10168 Attention: Chief Financial Officer Facsimile number: (212) 949-6203 Telephone number: (212) 599-4690 With a copy to: Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 Attention: David Lefkowitz, Esq. Facsimile number: (212) 310-8007 If to the Trustee: The Bank of New York 101 Barclay Street, Floor 21W New York, New York 10286 Facsimile number: (212) 815-5915 Attention: Corporate Trust Trustee Administration The Company or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be in writing and shall be deemed to have been duly given when received. Any notice or communication to a Holder shall be mailed by first class mail to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA ss. 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. Section 10.03. Communication by Holders of Notes with Other Holders of Notes. Holders may communicate pursuant to TIA ss. 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA ss. 312(c). Section 10.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 10.05 hereof) stating that, in the 71 opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 10.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. Section 10.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA ss. 314(e) and shall include: (a) a statement that the Person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. Section 10.06. Rules by Trustee and Agents. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. Section 10.07. No Personal Liability of Directors, Officers, Employees and Stockholders. No past, present or future director, officer, employee, incorporator or stockholder of the Company, as such, shall have any liability for any obligations of the Company under the Notes or this Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Section 10.08. Governing Law. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE AND THE NOTES WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. Section 10.09. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. 72 Section 10.10. Successors. All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. Section 10.11. Severability. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 10.12. Counterpart Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. Section 10.13. Table of Contents, Headings, etc. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. [Signatures on following page] 73 SIGNATURES Dated as of February 2, 2001 SIX FLAGS, INC. By: ------------------------------------- Name: Title: THE BANK OF NEW YORK By: ------------------------------------- Name: Title: 74 EXHIBIT A CUSIP [Face of Note] 9 1/2% Senior Notes due 2009 No. 001 Principal Amount $ SIX FLAGS, INC. promises to pay to CEDE & CO., or registered assigns, the principal sum of _____________________ DOLLARS ($____________________) on February 1, 2009. Interest Payment Dates: February 1 and August 1, commencing August 1, 2001 Record Dates: January 15 and July 15 Dated: February 2, 2001 SIX FLAGS, INC. By: ___________________________________ Name: James F. Dannhauser Title: Chief Financial Officer This is one of the Global Notes referred to in the within-mentioned Indenture: THE BANK OF NEW YORK, as Trustee By: ______________________________ Authorized Signatory [Back of Note] 9 1/2% Senior Notes due 2009 UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH NOMINEE OF THE DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF A SUCCESSOR DEPOSITARY, OR ANY NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO., OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE, AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT), OR ANY STATE OR OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THE SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 904 OF REGULATION S, (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(K) UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO SIX FLAGS, INC., (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS 2 THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHICH THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT SIX FLAGS, INC. AND THE TRUSTEE SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OR TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. 3 9 1/2% Senior Notes due 2009 Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. Interest. Six Flags, Inc., a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Note at 9 1/2% per annum from February 2, 2001 until maturity. The Company will pay interest semi-annually on February 1 and August 1 of each such year, or if any such day is not a business day, on the next succeeding business day (each an "Interest Payment Date"). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be August 1, 2001. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. 2. Method of Payment. The Company will pay interest on the Notes (except defaulted interest) to the Persons who are registered Holders of Notes at the close of business on the January 15 or July 15 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.14 of the Indenture with respect to defaulted interest. The Notes will be payable as to principal, premium, if any, and interest at the office or agency of the Company maintained for such purpose within or without The City and State of New York, or, at the option of the Company, payment of interest may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds will be required with respect to principal of and interest and premium on, the Global Note and all other Notes the Holders of which shall have provided wire transfer instructions to the Company or the paying agent on or prior to the applicable record date. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. Paying Agent and Registrar. Initially, The Bank of New York, the Trustee under the Indenture, will act as paying agent and registrar. The Company may change any paying agent or registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. Indenture. The Company issued the Notes under an Indenture, dated as of February 2, 2001 (the "Indenture"), between the Company and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement 1 of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are obligations of the Company initially in the aggregate principal amount of $375.0 million. Subject to compliance with Section 2.01 of the Indenture, the Company is permitted to issue Additional Notes under the Indenture in an unlimited principal amount. Any such Additional Notes that are actually issued will be treated as issued and outstanding Notes (and as the same class as the initial Notes) for all purposes of the Indenture, unless the context clearly indicated otherwise. 5. Optional Redemption. (a) Except as set forth in subparagraph (b) of this Paragraph 5, the Company shall not have the option to redeem the Notes prior to February 1, 2005. On or after February 1, 2005, the Company shall have the option to redeem the Notes, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on February 1 of the years indicated below: Year Percentage 2005 104.750% 2006 103.167% 2007 101.583% 2008 and thereafter 100.000% (b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 5, at any time prior to February 1, 2004, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes (which includes Additional Notes, if any) originally issued under the Indenture at a redemption price of 109.5% of the principal amount thereof on the redemption date with the net cash proceeds of one or more Public Equity Offerings and/or the net cash proceeds of a Strategic Equity Investment; provided that at least 65% of the aggregate principal amount of Notes (which includes Additional Notes, if any) originally issued remains outstanding immediately after the occurrence of each such redemption (excluding Notes held by the Company and its Subsidiaries); and provided further, that any such redemption shall occur within 60 days of the date of the closing of each such Public Equity Offering and/or Strategic Equity Investment. 6. Mandatory Redemption. Except as set forth in paragraph 7 below, the Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. 7. Repurchase at Option of Holder. (a) If there is a Change of Control, the Company shall be required to make an offer (a "Change of Control Offer") to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest thereon, if any, to the date of purchase (the "Change of Control Payment"). Within 30 days following any Change of Control, the Company shall mail a notice to each Holder setting forth the procedures governing the Change of Control Offer as required by the Indenture. 2 (b) If the Company or a Restricted Subsidiary consummates any Asset Sales, when the aggregate amount of Excess Proceeds exceeds $20.0 million, the Company shall commence an offer to all Holders of Notes (as "Asset Sale Offer") pursuant to Section 4.10 of the Indenture to purchase the maximum principal amount of Notes and such other Indebtedness of the Company that is pari passu with the Notes containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redemptions with the proceeds of sales of assets, that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest thereon, if any, to the date fixed for the closing of such offer, in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes and other indebtedness tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company (or such Subsidiary) may use such deficiency for any purpose not otherwise prohibited by the Indenture. If the aggregate amount of Notes and other indebtedness surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes. 8. Notice of Redemption. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption. 9. Denominations, Transfer, Exchange. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. 10. Persons Deemed Owners. The registered Holder of a Note may be treated as its owner for all purposes. 11. Amendment, Supplement and Waiver. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes voting as a single class, and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in aggregate principal amount of the then outstanding Notes voting as a single class. Without the consent of any Holder of a Note, the 3 Indenture or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's obligations to Holders of the Notes in case of a merger or consolidation or sale of all or substantially all of the Company's assets, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. 12. Defaults and Remedies. Events of Default include: (i) default for 30 days in the payment when due of interest on the Notes; (ii) default in payment when due of principal of or premium, if any, on the Notes when the same becomes due and payable, upon redemption (including in connection with an offer to purchase) or otherwise, (iii) failure by the Company to comply for (A) a period of 30 days with any of the provisions of Section 4.10 or 4.15 of the Indenture or (B) 30 days after notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding voting as a single class with any other provisions of Article 4 or Section 5.01 of the Indenture (in each case, other than a failure to purchase Notes); (iv) failure by the Company for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in principal amount of the Notes then outstanding voting as a single class to comply with certain other agreements in the Indenture or the Notes; (v) failure to pay Indebtedness within any applicable grace period after final maturity or the acceleration of such Indebtedness because of a default where the total amount of such Indebtedness unpaid or accelerated at any time exceed $10.0 million; (vi) certain final judgments for the payment of money that remain undischarged for a period of 60 days provided that the aggregate of all such undischarged judgments exceeds $10.0 million and (vii) certain events of bankruptcy or insolvency with respect to the Company or any of its Restricted Subsidiaries. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes will become due and payable without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. 13. Trustee Dealings with Company. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its 4 Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 14. No Recourse Against Others. A director, officer, employee, incorporator or stockholder, of the Company, as such, shall not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 15. Authentication. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 16. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN NET (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 17. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to: Six Flags, Inc. 122 East 42nd Street 49th Floor New York, New York 10168 Attention: General Counsel 5 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to - ------------------------------------------------------------------------------ (Insert assignee's soc. or tax I.D. no.) - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ (Print or type assignee's name, address and zip code) and irrevocably appoint_________________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. - ------------------------------------------------------------------------------ Date: ______________ Your Signature: _________________________________ (Sign exactly as your name appears on the face of this Note) Signature Guarantee. (Participant in a Recognized Signature Guarantee Medallion Program) 6 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the box below: [_] Section 4.10 [_] Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased: $___________ Date: ________________ Your Signature: _________________________________ (Sign exactly as your name appears on the face of this Note) Signature Guarantee. (Participant in a Recognized Signature Guarantee Medallion Program) 7 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE(1) The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made: Principal Amount of Amount of Amount decrease in increase of this Global Signature of Principal in Principal Note authorized Amount Amount following such officer of this Global of this Global decrease (or of Trustee or Date of Exchange Note Note increase) Note Custodian - ---------------- -------------- --------------- -------------- -------------- - --------------------------------------------- (1) Insert this table only in a Global Note. 8 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER Six Flags, Inc. 122 East 42nd Street 49th Floor New York, New York 10168 [Registrar address block] Re: 9 1/2% Senior Notes Due 2009 Reference is hereby made to the Indenture, dated as of February 2, 2001 (the "Indenture"), between Six Flags, Inc., as issuer (the "Company"), and The Bank of New York, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ______________, (the "Transferor") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $___________ in such Note[s] or interests (the "Transfer"), to __________ (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: 1. [_] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE 144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 2. [_] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE REGULATION S GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows B-1 that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note, the Temporary Regulation S Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 3. [_] Check if Transferee will take delivery of a beneficial interest in an Unrestricted Global Note or of an Unrestricted Definitive Note. (a) [_] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (b) [_] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (c) [_] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture. B-2 This certificate and the statements contained herein are made for your benefit and the benefit of the Company. -------------------------------------- [Insert Name of Transferor] By: _________________________________ Name: Title: Dated: _________, ____ B-3 ANNEX A TO CERTIFICATE OF TRANSFER 4. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] (a) [_] a beneficial interest in the : (i) [_] 144A Global Note (CUSIP _________), or (ii) [_] Regulation S Global Note (CUSIP _________), or (b) [_] a Restricted Definitive Note. 5. After the Transfer the Transferee will hold: [CHECK ONE] (a) [_] a beneficial interest in the: (i) [_] 144A Global Note (CUSIP ________), or (ii) [_] Regulation S Global Note (CUSIP ________), or (iii) [_] Unrestricted Global Note (CUSIP ________); or (b) [_] a Restricted Definitive Note; or (c) [_] an Unrestricted Definitive Note, in accordance with the terms of the Indenture. B-4 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE Six Flags, Inc. 122 East 42nd Street 49th Floor New York, New York 10168 [Registrar address block]* Re: 9 1/2% Senior Notes due 2009 (CUSIP______________) Reference is hereby made to the Indenture, dated as of February 2, 2001 (the "Indenture"), between Six Flags, Inc., as issuer (the "Company"), and The Bank of New York, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ____________, (the "Owner") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $____________ in such Note[s] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that: 1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE (d) [_] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (e) [_] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the D-1 Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (f) [_] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (g) [_] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES (h) [_] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act. (i) [_] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE] 144A Global Note, Regulation S Global Note, with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the D-2 Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ______________________________________ [Insert Name of Transferor] By: _________________________________ Name: Title: Dated: _________, ____ D-3 EX-99.2 5 0005.txt STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT BY AND AMONG SIX FLAGS, INC., EPI REALTY HOLDINGS, INC., ENCHANTED PARKS INC. AND JEFFREY STOCK DECEMBER 6, 2000 STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT ("Agreement"), dated as of December 6, 2000, by and among Six Flags, Inc., a Delaware corporation ("Buyer"), EPI Realty Holdings, Inc., a Washington corporation ("Shareholder"), Enchanted Parks, Inc, a Washington corporation (the "Company"), and Jeffrey Stock ("Stock" and, together with the Shareholder, the "Sellers"). ---------- The Shareholder owns (beneficially and of record) all of the outstanding shares of capital stock of the Company (the "Shares"), and Stock owns (beneficially and of record) all of the outstanding shares of capital stock of the Shareholder (the "Shareholder Shares" and, together with the Shares, the "Securities"), in each case, as indicated on Schedule 2.1. The Shareholder desires to sell, and Buyer desires to purchase, all of the Shares on the terms and conditions set forth herein. ---------- NOW THEREFORE, in consideration of the premises and of the mutual agreements and covenants hereinafter set forth, the parties hereto agree as follows: ARTICLE I SALE AND PURCHASE; CLOSING SECTION 1.1. Purchase and Sale of the Shares. Subject to the terms and conditions set forth herein, at the Closing, the Shareholder shall (and Stock shall cause the Shareholder to) sell, transfer and deliver to Buyer, and Buyer shall purchase and accept from the Shareholder, all of the Shares, free and clear of all Liens. SECTION 1.2. Purchase Price. (a) Subject to any adjustment provided for herein, the aggregate purchase price for the Shares (as so adjusted, the "Purchase Price") shall equal (i) Nineteen Million, Two Hundred Fifty Five Thousand Dollars ($19,255,000) (the "Closing Payment") and (ii) if the Net Working Capital Amount is a positive number, plus the amount thereof or if the Net Working Capital Amount is a negative number, minus the amount thereof. (b) The Purchase Price is payable as follows: (i) at the Closing, Buyer will pay an amount in immediately available funds (the "Debt Payment") necessary to satisfy and discharge in full the outstanding Debt of the Company that is not released by each obligee thereof on or prior to the Closing and as listed on Schedule 1.2(a) (the "Retired Debt") which Debt Payment will not exceed Two Million Dollars ($2,000,000); 2 (ii) at the Closing, Buyer shall deliver to the Sellers that number of shares of Six Flags Common Stock (the "Closing Shares") with a value (based on the Average Closing Price as of the Closing Date) equal to the sum of (i) the Closing Payment less the Debt Payment plus (ii) an amount equal to .06 multiplied by the number of Closing Shares issuable under clause (i) above (rounded to the nearest whole share of Six Flags Common Stock). At the Closing, Buyer and Sellers shall execute and deliver a registration rights agreement in the form annexed as Exhibit 1.2A (the "Registration Rights Agreement") pursuant to which Buyer will file a registration statement (the "Registration Statement") with respect to the resale of the Closing Shares with the Securities and Exchange Commission ("SEC") within five business days following the Closing. On the one hundred eightieth day following the effective date of the Registration Statement (excluding for purposes of calculating such period any day during such period on which the effectiveness of the Registration Statement has been suspended or the Sellers are not otherwise permitted to sell the Closing Shares pursuant to Section 3.4 of the Registration Rights Agreement), Buyer will deliver to Sellers an amount, if any, at Buyer's election as described below, in cash or additional shares of Six Flags Common Stock, valued at the Average Closing Price as of the date of delivery, (the "Additional Shares" and together with the Closing Shares, the "Transaction Shares") equal to (x) the product obtained by multiplying the number of Closing Shares sold by or on behalf of Sellers during such 180-day period by the Average Closing Price as of the Closing Date less (y) the total proceeds received by Sellers from all such sales of the Closing Shares (which total proceeds received will not be reduced by selling or brokerage commissions paid by Sellers in effecting such sales). The number of Additional Shares shall equal the sum of the number of shares calculated as provided in the preceding sentence plus a number of shares equal to .06 multiplied by such number of shares, provided that the number of Additional Shares shall not exceed the number of shares of Six Flags Common Stock with an aggregate value, based on the Average Closing Price as of the date of delivery, of $1,000,000. The balance, if any, of Buyer's obligation to Sellers with respect to the sale of Closing Shares described above shall be paid in immediately available funds. In the event Buyer shall deliver Additional Shares pursuant to the third preceding sentence, the Registration Rights Agreement will provide that, within two business days following the delivery of the Additional Shares, Buyer will file a registration statement with the SEC with respect to the resale of such Additional Shares. On the thirtieth day following the effectiveness of such second registration statement (excluding for purposes of calculating such period any day during such period on which the effectiveness of such second registration statement has been suspended or the Sellers are not otherwise permitted to sell the Additional Shares pursuant to Section 3.4 of the Registration Rights Agreement) Buyer will deliver to Sellers an amount, if any, in cash equal to (x) the product obtained by multiplying the number of Additional Shares sold by or on behalf of Sellers during such 30-day period multiplied by the Average Closing Price as of the date of delivery of the Additional Shares less (y) the total proceeds received by Sellers from all sales of Additional Shares (which total proceeds received will not be reduced by selling or brokerage commissions as provided above with respect to the Closing Shares). During the period in which the foregoing price guarantee is in effect, the Sellers (i) will give prior notice to Buyer (by phone or other reasonable means to the Chief Financial Officer or General Counsel of Buyer) of their intent to sell more than 75,000 Transaction Shares during any Trading Day, and will not, without the prior consent of Buyer, sell more than 125,000 Transaction Shares during any Trading Day, (ii) will provide Buyer reasonable evidence of their sales of Transaction Shares and their proceeds therefrom and (iii) without the prior written consent of Buyer, will not sell any 3 Transaction Share during the applicable periods set forth above at a price less than the then applicable bid price per share of Six Flags Common Stock on the New York Stock Exchange ("NYSE"). Sellers acknowledge that all Transaction Shares will be issued to Sellers pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), and Sellers may not transfer the Transaction Shares except in compliance with the Securities Act and the applicable rules and regulations promulgated by the SEC thereunder. The certificates evidencing the Transaction Shares issued to the Sellers will bear a legend to such effect. (c) (i) if the Closing shall occur prior to December 31, 2000, on the twentieth business day after such date, the Buyer will deliver to the Shareholder an amount in immediately available funds equal to the Net Working Capital Amount (if a positive number) or Shareholder will deliver to Buyer an amount in immediately available funds equal to the Net Working Capital Amount (if a negative number). In any event the party operating the Park on December 31, 2000 shall deliver to the other party within fifteen business days following such date an itemized statement (the "Net Working Capital Statement"), setting forth such operating party's good faith calculation of the Net Working Capital as of December 31, 2000 (the "Net Working Capital Amount"). Net Working Capital shall be calculated including the provisions of Section 4.14. (ii) Either party by written notice to the other party within (30) business days after December 31, 2000 may propose an adjustment or adjustments (each, a "Proposed Adjustment") to the Net Working Capital Amount used under Section 1.2(c)(i) above. In such event, the parties will negotiate in good faith to resolve each such Proposed Adjustment. If any such Proposed Adjustment cannot be so resolved within 60 days following December 31, 2000, either the Shareholder or Buyer by written notice to the other party delivered prior to the end of such 60-day period may elect to refer any such disputed Proposed Adjustment to the Seattle office of Deloitte & Touche (the "Nominated Accounting Firm"). The Shareholder and Buyer shall deliver to each other and the Nominated Accounting Firm in writing such party's disputed Proposed Adjustments within ten (10) days after the engagement of the Nominated Accounting Firm, which shall report in writing its determination to the Shareholder and Buyer within 30 days after such engagement. The amount of the adjustment to the Purchase Price determined by the Nominated Accounting Firm shall in no event be less than the lower of the disputed Proposed Adjustments, nor greater than the higher of the disputed Proposed Adjustments. The conclusions of the Nominated Accounting Firm shall be final and binding on the parties. The appropriate party shall pay to the other party in cash the amount of any further adjustment pursuant to this Section 1.2(c)(ii) within 10 days following the parties' agreement as to such adjustment or following receipt of the Nominated Accounting Firm's notice of its conclusions, as the case may be. The fees of the Nominated Accounting Firm shall be split equally between the parties. Until the adjustment to the Net Working Capital Amount made pursuant to this Section 1.2(c)(ii) shall have been finally determined, the Shareholder and Buyer shall afford the Nominated Accounting Firm reasonable access during business hours to all relevant books and records for the purpose of calculating or confirming the correct Net Working Capital Amount. (iii) Any adjustment to the Net Working Capital Amount made pursuant to Section 1.2(c)(ii) shall be paid to the party or parties entitled to the same with interest 4 for the period commencing on the twentieth business day after December 31, 2000 and ending on the date of payment. Interest shall be calculated at the "prime" interest rate as announced by Citibank, N.A., New York City, from time to time during such period. SECTION 1.3. Closing. Subject to the terms and conditions of this Agreement, the sale and purchase of the Shares contemplated hereby (the "Closing") shall take place at 10:00 a.m., local time, at the offices of Lane Powell Spears Lubersky LLP, on the later of (a) December 6, 2000 or (b) on a date selected by Buyer and the Shareholder not more than five (5) business days following the satisfaction or waiver of the conditions specified in Article V (other than conditions requiring the delivery of Purchase Price, certificates representing the Shares or closing certificates and other instruments and documents referred to in Section 5.2(f) or 5.3(k)), (the "Closing Date"). ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLERS Each Seller and the Company, jointly and severally, represent and warrant to Buyer that: SECTION 2.1. Status of the Securities. (a) The authorized and outstanding shares of each class of capital stock of the Company are as set forth on Schedule 2.1. Other than the Shares, at the Closing, the Company will not have outstanding any rights, warrants or options to acquire securities of the Company or any convertible or exchangeable securities of the Company and, other than pursuant to this Agreement, no person will have any right to acquire any securities of the Company. All of the Shares have been duly authorized and duly and validly issued and are fully paid and non-assessable, and none were issued in violation of any preemptive rights, rights of first refusal or other contractual or legal restrictions of any kind. (b) The outstanding shares of each class of capital stock of the Shareholder are as set forth on Schedule 2.1 and are owned (beneficially and of record) by Stock. SECTION 2.2. Title to the Shares. The Shareholder owns and holds (beneficially and of record) good and marketable title to all of the Shares free and clear of any Lien of any kind. Upon consummation of the Contemplated Transactions (as hereinafter defined) in accordance herewith, Buyer will own all of the issued and outstanding shares of capital stock of the Company, free and clear of any Lien. SECTION 2.3. Authority Relative to this Agreement. The Company and each Seller has full power, capacity and authority to execute and deliver this Agreement and each other Transaction Document to which it is a party and to consummate the transactions contemplated hereby and thereby (the "Contemplated Transactions"). The execution and delivery of this Agreement and the consummation of the Contemplated Transactions to which the 5 Company and each Seller is a party have been duly and validly authorized by the Company or such Seller and no other proceedings on the part of the Company or such Seller (or any other person) are necessary to authorize the execution and delivery by the Company or such Seller of this Agreement or to authorize the consummation of the Contemplated Transactions to which the Company or such Seller is a party. This Agreement has been, and at the Closing, the other Transaction Documents to which the Company and each Seller is a party will have been, duly and validly executed and delivered by the Company or such Seller, and (assuming the valid execution and delivery thereof by Buyer) constitutes, or will at the Closing constitute, the legal, valid and binding agreements of the Company or such Seller enforceable against the Company or such Seller in accordance with their respective terms except as such obligations and their enforceability may be limited by applicable bankruptcy and other similar Laws affecting the enforcement of creditors' rights generally and except that the availability of equitable remedies is subject to the discretion of the court before which any proceeding therefor may be brought (whether at law or in equity). SECTION 2.4. No Conflicts; Consents. The execution, delivery and performance by the Company and each Seller of this Agreement and each other Transaction Document to which any thereof is a party, the consummation of the Contemplated Transactions to which the Company and each Seller is a party or the contemplated change of control of the stock ownership of the Company, will not (i) violate any provision of the certificate of incorporation or by-laws (or comparable instruments) of the Company or the Shareholder (ii) require either Seller or the Company to obtain any consent, approval or action of or waiver from, or make any filing with, or give any notice to, any Governmental Body or any other person, except for filings required under the HSR Act and except as set forth on Schedule 2.4 (the "Sellers Required Consents"); (iii) if the Sellers Required Consents are obtained prior to Closing, violate, conflict with or result in a breach or default under (after the giving of notice or the passage of time or both), or permit the termination of, any Contract of a type required to be listed on Schedule 2.13 to which any Seller or the Company is a party or by which any of them or any of their assets may be bound or subject, or result in the creation of any Lien upon the Shares or upon any of the Assets of the Company pursuant to the terms of any such Contract; (iv) if the Sellers Required Consents are obtained prior to Closing, violate any Law or Order of any Governmental Body against, or binding upon or affecting, any Seller, the Company, the Shares, the Assets or the Business; or (v) if the Sellers Required Consents are obtained prior to Closing, violate or result in the revocation or suspension of any Permit. SECTION 2.5. Corporate Existence and Power. Each of the Shareholder and the Company is a corporation, duly organized, validly existing under the laws of its jurisdiction of organization, and the Company has all requisite powers and all material Permits required to carry on the Business as now conducted. The Company is not required to be qualified to do business in any jurisdiction, other than the State of Washington. The Company does not, directly or indirectly, own any interest or investment in any other person. SECTION 2.6. Charter Documents and Corporate Records. The Company and the Sellers have heretofore made available to Buyer true and complete copies of the articles of incorporation, by-laws and minute books, or comparable instruments, of the Company as in effect on the date hereof. The stock and stock transfer books (or comparable instruments) of the Company have been made available to Buyer for its inspection and are true and complete. SECTION 2.7. Financial Information. (a) The Company and the Sellers have previously furnished to Buyer true and complete copies of (i) the reviewed financial statements 6 of the Shareholder at and for the twelve-month period ended October 31, 1997, the two month period ended December 31, 1997 and the twelve-month periods ended December 31, 1998 and 1999 (collectively, the "Annual Statements"), (ii) the unreviewed financial statements of the Shareholder at and for each calendar month of 1999 and unreviewed consolidated financial statements of the Shareholder and the Company at and for each calendar month of 2000 through October 31, 2000 collectively, the "Interim Statements"), and (iii) all management letters, management representation letters and attorney audit response letters issued in connection with the Annual Statements. Other than rent under the Lease and interest expense related to certain Debt, all items of revenue and expenses included in the Interim Statements relate to the Company. Other than the Land and approximately $21,000 of reorganization costs, all assets and liabilities (other than certain Debt and the Skycoaster Lease) shown on Interim Statements relate to the Company. Except as provided in Schedule 2.7 the Annual Statements have been prepared in accordance with GAAP consistently applied as set forth in the notes thereto and were reviewed by Martinson, Cobean & Associates, P.S. (without "going concern" or other material qualification in the report thereof). To the knowledge of the Sellers and the Company, except as provided in Schedule 2.7 each delivered financial statement presents fairly the financial position of the Company as of its date, and its earnings, changes in stockholder's equity and cash flows for the period then ended. Each delivered balance sheet fully sets forth all Assets and Liabilities of the Company existing as of its date which, under GAAP, should be set forth therein, and each delivered statement of earnings sets forth the items of income and expense of the Company which should appear therein under GAAP. (b) Schedule 2.7 accurately sets forth the attendance (by month) at the Park during 1998, 1999 and 2000 (through October 31, 2000). (c) All financial, business and accounting books, ledgers, accounts and official and other records relating to the Company have been properly and accurately kept and completed in all material respects, and there are no material inaccuracies or discrepancies contained or reflected therein. SECTION 2.8. Liabilities. Except as and to the extent reflected in the balance sheet at December 31, 1999 (the "Latest Balance Sheet Date") referred to in Section 2.7, the Company did not have, as of the Latest Balance Sheet Date, any Liabilities or obligations that are, individually or in the aggregate, material to the Business (other than obligations of continued performance under Contracts and other commitments and arrangements entered into in the ordinary course of the Business which are either disclosed on Schedule 2.13 or are of a type not required by the provisions of Section 2.13 to be disclosed on Schedule 2.13); and except as described in Schedule 2.8 hereto, the Company has not incurred any Liabilities or obligations since the Latest Balance Sheet Date except (i) Liabilities reflected on any balance sheet included in the Interim Statements, (ii) Liabilities or obligations of continued performance under Contracts and other commitments entered into in the ordinary course of the Business, in accordance with past practice, which are either disclosed on Schedule 2.13 or are of a type not required by the provisions of Section 2.13 to be disclosed on Schedule 2.13, and (iii) current Liabilities incurred since the date of the most recent Interim Statement in the ordinary course of the Business and consistent with past practice, which are not, individually or in the aggregate, material to the Business. As of the Closing Date and after giving effect to the Closing, there will 7 exist no Debt of the Company, and no Debt of any other person secured by a Lien on any of the Assets or the Shares. SECTION 2.9. Loans; Receivables. Except for Receivables or as set forth in Schedule 2.9, the Company has not made any loan or advance to any person. Except to the extent of the amount of the reserve for doubtful accounts reflected in the balance sheet contained in the most recent Interim Statement or as set forth in Schedule 2.9, all the Receivables of the Company reflected thereon, and all Receivables that have arisen since the date of such balance sheet (except Receivables that have been collected since such date) are valid and enforceable claims (except as the same may be limited by applicable bankruptcy and other similar laws), and constitute bona fide Receivables resulting from the sale of goods and services in the ordinary course of the Business. Other than returns of unused admission tickets for credit to customer accounts, the Receivables are subject to no known defense, offsets, returns, allowances or credits of any kind. SECTION 2.10. Inventories. Schedule 2.10 sets forth a true and complete list of Inventory by category at October 31, 2000. The Inventory consists of items which are, to the knowledge of the Sellers and the Company, good and merchantable and of a kind and quantity consistent with levels maintained at comparable periods of prior years and of a quality usable and saleable in the ordinary course of the Business consistent with past practice. SECTION 2.11. Absence of Certain Changes. (a) Since the Latest Balance Sheet Date, except as explicitly set forth in this Agreement or disclosed in Schedule 2.11 or reflected in the Interim Statements, the Company has conducted the Business in the ordinary course consistent with past practice and there has not been: (i) Any material adverse change in the Condition of the Business or, to the knowledge of the Sellers or the Company, any event, occurrence or circumstance that could reasonably be expected to cause such a material adverse change except any change or event, occurrence or circumstance (x) relating to or arising from the state of the economy generally, (y) relating to or arising from the negotiation, execution or announcement of this Agreement or the performance of any obligation hereunder or (z) affecting generally all companies operating in businesses similar to that operated by the Company; (ii) Any transaction or Contract with respect to the purchase, acquisition, lease, disposition or transfer of any Assets or with respect to any capital expenditure (in each case, other than in the ordinary course of the Business in accordance with past practice); (iii) Any declaration, setting aside or payment of any dividend or other distribution with respect to any Shares; (iv) Any damage, destruction or other casualty loss (whether or not covered by insurance), condemnation or other taking affecting the Assets of the Company to the extent material to the Business; 8 (v) Any material change known to the Sellers or the Company in any method of accounting or accounting practice used by the Company; (vi) Any material increase in the compensation payable or to become payable to any officer, director, consultant, agent or full-time employee of the Company, or any alteration in the benefits payable to any thereof; (vii) Any material adverse change in the relationships of the Company with its employees, customers, suppliers and vendors; (viii) Except in the ordinary course of the Business, consistent with past practice, any payment, directly or indirectly, of any Liability of the Company before the same became due in accordance with its terms; (ix) Any payment, satisfaction or discharge of any material Claim or Liability relating to the Business, other than the payment, discharge or satisfaction in the ordinary course of the Business of Claims or Liabilities incurred in the ordinary course of the Business, consistent with past practice, or any waiver or amendment of any warranty, Claim, cause of action, guaranty or similar right of the Company pertaining to the Business or any of the Assets; or (x) Except for any changes made in the ordinary course of the Business, any material change in any of the Company's business policies relating to the Business, including pricing, purchasing, personnel, returns or budget policies, to the extent material to the Business. (b) Except as set forth on Schedule 2.11, the Company does not have any Liabilities that are, individually or in the aggregate, material to the Business and that are past due. SECTION 2.12. Properties. (a) Schedule 2.12(a) sets forth an accurate and complete list and description (by owner) of all real property leased by the Company (the "Land"). No real property is owned by the Company. The Company has a valid leasehold interest in and to the Land pursuant to the Lease, and good, marketable and insurable title to the building, fixtures and improvements thereon ("Improvements" and, together with the Land, the "Real Property"), in each case, free and clear of all Liens of any nature whatsoever, except (i) real estate Taxes (general and specific) not yet due and payable, (ii) easements, covenants, restrictions and other similar encumbrances of record listed on Schedule 2.12(a) which do not currently in the aggregate interfere in any material respect with the use of the Real Property or impair in any material respect the conduct of the Business, and which, in the case of utility easements, are not located under any Improvement or amusement ride nor materially impair the use of any Improvement or amusement ride or (iii) on the date hereof (but not on the Closing Date), Liens with respect to the Retired Debt and the Released Debt (collectively, the "Permitted Liens"). Schedule 2.12(a) also sets forth with respect to such Real Property a list of all appraisal reports (if any), surveys and environmental reports held or controlled by the Sellers or the Company, copies of which have been provided to Buyer. Except as set forth in Schedule 2.12(a), all 9 Improvements are in good operating condition (subject to normal wear and tear) with no structural or other defects known to the Sellers or the Company that could interfere in any material respect with the operation of the Business, are located within applicable boundary lines and are suitable for the purposes for which they are currently used. The Business is not in violation in any material respect of any building, zoning, anti-pollution, health, occupational safety or other Law or any Order or Permit in respect of the Real Property. Except as disclosed on Schedule 2.12(a), no person, other than the Company, has any right to occupy or possess any of the Real Property. Schedule 2.12(a) also includes a description of all water, electrical and other utilities used in the conduct of the Business which are available to the Real Property and which, as of the Closing Date, will be sufficient to permit the continued conduct of the Business substantially as it has been conducted since January 1, 1999. No portion of the Real Property lies within a wetlands area or a flood plain, and the Real Property has access to publicly dedicated roads. Except as described on Schedule 2.12(a), all of the Real Property is available for immediate use in the conduct and operations of the Business. There is no pending or, to the knowledge of Sellers or the Company, threatened condemnation or eminent domain proceedings that would adversely affect the Real Property, or any part thereof. The Company and Sellers have furnished to Buyer copies of any and all notices or reports received by any of them during the prior five years from any insurance company, engineer, or any Governmental Body with respect to any material violations (or potential material violations) of any applicable Law affecting the Real Property or otherwise requiring or recommending work be performed on or at any portion of the Real Property, and all of such violations and requirements set forth in such notices and reports have been cured or fulfilled to the satisfaction of those entities or will be cured or fulfilled as of the Closing Date or at such later date as may be agreed upon by the parties hereto at Seller's sole expense. No person has any right to purchase (including right of first refusal right of first offer) any of the Assets (other than Inventory in the ordinary course of the Business). Sellers have heretofore delivered to Buyer a true and correct copy of the Concomitant Development Agreement, dated January 30, 1998, between the Company and the City of Federal Way (the "City") as amended on June 30, 2000 (as amended, the "Development Agreement"). The Development Agreement is a valid and binding agreement of the Company and, to the knowledge of Sellers' and the Company, the City, enforceable in accordance with its terms. The Company is not in default (or alleged default) under the Development Agreement, nor, to the knowledge of the Sellers or the Company, is the City in default thereunder, nor does any condition exist that with notice or the lapse of time or both would constitute a material default (or give rise to a termination right) thereunder. The annexation of the Real Property and the grant by the City to the Company of zoning and developmental rights described in the Development Agreement have been duly implemented, and the Company is not in violation of any zoning or development right or regulation provided for (or annexed to) the Development Agreement. Schedule 2.12(a) includes a description of all actions that are required to be taken by the Company under the Development Agreement as of the date hereof, the required timing thereof and an estimate of the costs of each thereof. Prior to the Closing, Buyer will receive a letter from the City, reasonably acceptable to it, confirming the accuracy of the foregoing representations relating to the Development Agreement as they relate to the City and confirming the existence of the zoning and developmental rights described therein and the Company's compliance therewith. 10 (b) The Company has good title to (or valid leasehold interest in) all personal property used in the Business, free and clear of all Liens except as disclosed in Schedule 2.12(b). The machinery, equipment and other tangible personal property constituting a part of the Assets (whether owned or leased), to the knowledge of the Sellers and the Company, have been well-maintained, are, in the aggregate, in good condition and repair (subject to normal wear and tear) and are adequate in quantity and quality for the operation of the Business as presently conducted. To the knowledge of the Sellers and the Company, the Assets that are amusement rides have been operated and maintained in accordance in all material respects with the standards promulgated by the American Society of Testing Materials. Schedule 2.12(b) contains a list and description (by owner) of all equipment and other tangible personal property owned or leased by the Company as of October 31, 2000 with a book value (before depreciation) of $10,000 or more. Prior to the Closing Date, the Company shall acquire good title to all personal property used in the Business that, on the date hereof, is leased by the Company from any Seller or any Affiliate of the Company or any Seller. The Assets shall exclude those listed on Schedule 2.12(b) which will be transferred without warranty to Seller at the Closing. (c) Schedule 2.12(c) includes a true and correct description of all capital expenditures and other similar obligations required to be funded by the Company or from the revenues or Assets of the Business on or after the Closing pursuant to any current Contract, Law or Order. SECTION 2.13. Contracts. (a) Schedule 2.13 sets forth an accurate and complete list of all Contracts to which the Company is a party or by which it, the Business or any Assets are bound, subject or affected, except for any such Contract with persons who are not Sellers or Affiliates of the Company or the Sellers that relate to the purchase or sale of property or services by the Company in the ordinary course of the Business which (i) requires the Company to make or receive payments not in excess of $10,000 and (ii) has a remaining term (including renewal periods) of less than twelve (12) months on the date of this Agreement or is terminable by the Company without penalty during such period. True and correct copies of all written Contracts listed on such Schedule and true and complete summaries of the material provisions of all oral Contracts so listed have been delivered to Buyer. (b) All Contracts listed on Schedule 2.13 are valid, subsisting, in full force and effect and binding upon the Company and, to the knowledge of the Sellers and the Company, binding upon the other parties thereto in accordance with their terms. Except as set forth in Schedule 2.13, the Company is not in default (or alleged default) under any such Contract in any material respect, nor, to the knowledge of the Sellers or the Company, is any other party thereto in default thereunder in any material respect, nor does any condition exist that with notice or the lapse of time or both would constitute a material default (or give rise to a termination right) thereunder. To the knowledge of the Sellers and the Company, none of the other parties to any such Contract intends to terminate or materially alter the provisions thereof by reason of any knowledge of the Contemplated Transactions or otherwise. Since the Latest Balance Sheet Date, except as disclosed on Schedule 2.13, as of the date of this Agreement, the Company has not waived any material right under any such Contract, materially amended or extended any such Contract or terminated or failed to renew (or received notice of termination or failure to renew with respect to) any such Contract. 11 (c) Prior to the Closing Date, all Contracts (other than the Lease) between any Seller (or any Affiliate thereof or of the Company) on the one hand, and the Company, on the other, shall have been terminated in form and substance acceptable to Buyer and all Liabilities and obligations under all such Contracts shall have been discharged in full. SECTION 2.14. Intangible Property. Schedule 2.14 sets forth by owner all trademarks, copyrights, service marks and trade names, including, without limitation, the name "Enchanted Village" owned or used by the Company, all applications for any of the foregoing, and all permits, grants and licenses or other rights running to or from any party relating to any of the foregoing (the "Intellectual Property Rights"), and there are no other Intellectual Property Rights that are material to the Business. The Contemplated Transactions will not adversely affect the right, title and interest of the Company in and to the Intellectual Property Rights. To the Sellers' and the Company's knowledge, the Intellectual Property Rights do not infringe on or conflict with the Intellectual Property Rights of any third party. SECTION 2.15. Claims and Proceedings. To the knowledge of the Sellers or the Company, except as set forth on Schedule 2.15, there are no outstanding Orders as of the date of this Agreement of any Governmental Body against or involving any of the Company, the Assets or the Business. During the period from the date hereof through the Closing Date, no such Orders will be entered which, individually or in the aggregate, could reasonably be expected to have a material adverse effect on the condition of the Business. Except as set forth on Schedule 2.15 or as reflected in the most recent loss runs provided to Buyer under Section 2.19, there are no actions, suits, claims or counterclaims or legal, administrative or arbitral proceedings or investigations (collectively, "Claims") (whether or not the defense thereof or Liabilities in respect thereof are covered by insurance), pending or threatened on the date hereof, by, against or otherwise involving the Company, the Assets or the Business. Schedule 2.15 also indicates those Claims the defense thereof or Liabilities in respect thereof are covered by insurance. At the Closing there will be no such Claims pending or, to the knowledge of the Sellers or the Company, threatened, other than Claims that, individually or in the aggregate, could not reasonably be expected to have a material adverse effect on the Condition of the Business. Except as set forth on Schedule 2.15, to the knowledge of the Sellers and the Company, on the date hereof, there is no fact, event or circumstance that could give rise to any uninsured Claim. As of the Closing, there will exist no such fact, event or circumstance known to the Sellers or the Company that could give rise to any Claim that, if pending or threatened on the Closing Date, could, individually or in the aggregate with all pending or threatened Claims and all such other potential Claims, reasonably be expected to have a material adverse effect on the Condition of the Business. All notices required to have been given to any insurance company listed as insuring against any Claim set forth on Schedule 2.15 have been timely and duly given and, except as set forth on Schedule 2.15 or the most recent loss runs referred to above, no insurance company has asserted that any such Claim is not covered by the applicable policy relating to such Claim. SECTION 2.16. Taxes. (a) Except as set forth in Schedule 2.16, on the Closing Date: 12 (i) The Company has timely filed or, if not yet due, will timely file all Tax Returns that are required to be filed on or before the Closing Date, taking into account all extensions that are properly obtained, and all such Tax Returns are or will be true, correct and complete; (ii) The Company has timely paid in full or, if not yet due, will timely pay in full all Taxes that are required to be paid on or before the Closing Date; (iii) Buyer has received signed copies of all Tax Returns filed by the Company relating to taxable years of the Company ending on or before the Closing Date; (iv) No extension of time has been requested by, or granted to, the Company to file any Tax Return that has not yet been filed or to pay any Tax that has not yet been paid; (v) The Company has not granted any power of attorney that remains outstanding with regard to any Tax Matter; (vi) There is no pending or, to the knowledge of the Company or the Sellers, threatened examination, investigation, audit, suit, action, claim or proceeding relating to Taxes (a "Tax Audit") of Shareholder or the Company; (vii) Buyer has received copies of all audit reports and correspondence between Shareholder or the Company, on the one hand, and any Tax Authority, on the other hand, and a complete summary of all oral communications between Shareholder or the Company, on the one hand, and any Tax Authority, on the other hand, relating to any Tax Audits of Shareholder or the Company for any taxable year, including without limitation any Tax Audit that is in progress or for which a still effective extension of the statute of limitations was granted; (viii) Except to the extent described in Section 2.16(a)(ix), no notice has been given of a determination by a Tax Authority that Taxes are owed by Shareholder or the Company (such determination a "Tax Deficiency") and, to the knowledge of the Company and Sellers, no such Tax Deficiency is proposed or threatened; (ix) All Tax Deficiencies have been paid in full or finally settled, and all amounts determined by settlement to be owed have been paid; (x) There are no Liens arising from or relating to Taxes on or pending or threatened against the Company, the Assets or the Business other than statutory liens for personal property taxes that are not yet due and payable; (xi) There are no presently outstanding waivers or extensions, or requests for waiver or extension, of the time within which a Tax Deficiency may be asserted or assessed against Shareholder or the Company; 13 (xii) No issue has been raised in any Tax Audit of Shareholder or the Company which, by application of similar principles to any past, present or future period, could reasonably be expected to result in a Tax Deficiency for any period; (xiii) Neither Shareholder nor the Company has changed any accounting method during any of the seven most recent taxable years ending on or before the Closing Date; (xiv) Neither Shareholder nor the Company has been required to take into account any adjustment pursuant to Section 481 of the Internal Revenue Code of 1986, as amended (the "Code") or pursuant to a closing agreement as defined in Section 7121 of the Code, and no Tax Authority has ever made or proposed any such adjustment during any of the seven most recent taxable years; (xv) The Company does not own any property that is tax exempt use property with the meaning of Section 168(h)(1) of the Code or that is described in Section 168(f)(8) of the Internal Revenue Code as in effect prior to its amendment by the Tax Reform Act of 1986; (xvi) The Company is not a party to any arrangement to which Section 280G of the Code could under any circumstances apply; (xvii) The Company has not filed a consent pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) apply to the disposition of any asset; (xviii) Neither Shareholder nor the Company has taken a position on a Tax Return with respect to which disclosure was required to be made to the Internal Revenue Service (the "IRS") in order to avoid the imposition of a penalty, whether or not any such disclosure was made; (xix) Neither Shareholder nor the Company has participated, directly or indirectly, in a transaction which is described in the first sentence of Treasury Regulation ("Reg.") Section 1.6011-4T(b)(2) or in Reg. Section 1.6011-4T(b)(3) nor has it ever held "an interest" in a "tax shelter," as those terms are defined in Reg. Section 301.6112-1T; (xx) Shareholder and the Company have retained or will obtain from their tax advisors and provide to the Company all existing taxable years supporting and backup papers, workpapers, receipts, spreadsheets and other information that was used in the preparation of Tax Returns or that may become necessary for the preparation of Tax Returns for the seven most recent taxable years that have not yet been filed or for the defense of Tax Audits ("Tax Information"), including Tax Information relating to tax attributes that are carried forward or back to a taxable year for which the statute of limitations remains open; (xxi) The Company is not now and has never been (a) an includible member of an "affiliated group" within the meaning of Section 1504(a) of the Code, (b) a member of a consolidated, combined or unitary Tax Return filing group, (c) a party to an agreement that could obligate it to make a payment that is computed by reference to the Taxes, 14 taxable income or Tax losses of any other individual, entity or other person, (d) a personal holding company as defined in Section 542 of the Code, (e) the owner of stock in an entity that is, or is treated for any Tax purpose as, a corporation, (f) the owner of an interest in an entity that is, or is treated for any tax purpose as, a partnership, trust, regulated investment company as defined in Section 851 of the Code, real estate investment trust as defined in Section 856 of the Code or foreign personal holding company as defined in Section 552(a) of the Code, (g) a United States shareholder as defined in Section 951(b) of the Code, (h) a United States real property holding company within the meaning of Section 897(c)(2) of the Code or (i) a shareholder of a passive foreign investment company, as defined in Section 1287 of the Code; (xxii) Shareholder and the Company have collected, or will, on or before the Closing Date, collect, all sales, amusement, employment and other Taxes that are required to be collected on or prior to the Closing Date and the Company has remitted, or will, on or before the Closing Date or as soon as practicable thereafter, but in no event after the date such Taxes are required to be remitted, remit, to the appropriate Tax Authority all sales, amusement, employment and other Taxes that are collected on or before the Closing Date or that are required to be remitted on or prior to the Closing Date; (xxiii) Shareholder and the Company have been furnished and, if required, have filed, the appropriate exemption certificates for all transactions for which an exemption was claimed and have maintained in their possession the records, supporting documents and exemption certificates required by applicable sales, use, amusement and other Tax Laws to establish entitlement to exemptions which were claimed; (xxiv) Other than the Washington State Excise Tax on the Sale of Real Property, no Transfer Taxes or other Taxes (other than income Taxes) are or will be imposed on Buyer, Sellers, the Company, the Assets or the Business by virtue of the Contemplated Transactions; (xxv) No claim has ever been made by a Tax Authority of a jurisdiction in which either Shareholder or the Company does not file Tax Returns, that Shareholder, the Company or both are or may be required to file Tax Returns in such jurisdiction, or that Shareholder, the Company or both are or may be subject to Tax in such jurisdiction; (xxvi) Neither Shareholder nor the Company has requested a private ruling from a Tax Authority on any matter; (xxvii) The Company has been a C corporation continuously since its inception; (xxviii) No Seller is a foreign person within the meaning of Section 1445(f)(3) of the Code and the Treasury Regulations thereunder; and (xxix) All representations and warranties contained in this Section 2.16 apply for all federal, state, local and foreign Tax purposes and each reference to a provision of 15 the Code in this Section 2.16 shall be treated for state, local and foreign Tax purposes as a reference to analogous and similar provisions of state, local and foreign law. (b) Schedule 2.16(b) contains: (i) A schedule of the filing dates of all Tax Returns required to be filed by the Company; (ii) A description of all past Tax Audits involving Shareholder or the Company; (iii) A list of all elections made by the Company relating to Taxes; (iv) A description of the accounting methods employed by each of Shareholder and the Company and any changes in such accounting methods; (v) A schedule of the Company's Tax basis in each of its depreciable assets as of the Closing Date, and the recovery period and annual depreciation deduction for each such asset for each year of its remaining tax recovery period; (vi) A schedule of the Company's Tax basis in each of its amortizable assets as of the Closing Date, and the amortization period and annual amortization deduction for each such asset for each year of its remaining amortization period, as well as a description of the asset or other item that is subject to amortization (e.g., loan issuance costs); and (vii) A schedule of the Tax attributes of the Company (including, but not limited to, net operating losses, capital losses, investment credits, foreign tax credits and alternative minimum tax credits), together with a description of all limitations to which such Tax attributes are subject (e.g, limitations under Section 382 of the Code). Notwithstanding the foregoing, Sellers shall within ten (10) days following the Closing Date supplement and amend Schedules 2.16 and 2.16(b) with respect to sections 2.16(a)(vi), (vii), (viii), (xi), (xii), (xiii), (xiv), (xviii), (xix), (xx), (xxii), (xxiii), (xxv), (xxvi) and Sections 2.16(b)(ii), (iv), (v) and (vi) for exceptions and disclosures related to the Shareholders and for the Company's Tax basis for its depreciable and amortizable assets; and such Schedules as supplemented and amended shall constitute such Schedules for all purposes of this Agreement. SECTION 2.17. Employee Benefits Plans. (a) Except as set forth on Schedule 2.17, none of the Sellers, the Company, any Affiliate thereof, the Business, nor any portion of the Business (all of the above hereinafter individually and collectively called the "Entity"), nor any other company or entity which together with the Entity constitutes a member of the Entity's "controlled group" or "affiliated service group" (within the meaning of Sections 4001(a)(14) and/or (b) of ERISA and/or Sections 414(b), (c), (m) or (o) of the Code (such group or groups hereinafter referred to individually and collectively as the "Group")), has at any time adopted or maintained, or has any present or future obligation to contribute to or make payment under (i) any employee benefit plan (as defined in Section 3(3) of ERISA), or (ii) any other benefit 16 plan, program, Contract or arrangement of any kind whatsoever (whether for the benefit of present, former, retired or future employees, officers, directors or consultants of the Entity or the Group, or for the benefit of any other person or persons), including, without limitation, arrangements providing for contributions, benefits or payments in the event of a change of ownership or control in whole or in part of the Entity or the Group, or with respect to disability, relocation, child care, educational assistance, deferred compensation, pension, retirement, profit sharing, thrift, savings, stock ownership, stock bonus, restricted stock, health, dental, medical, life, hospitalization, stock purchase, stock option, incentive, bonus, sabbatical leave, vacation, severance or other contribution, benefit or payment of any kind, or (iii) any employment, consulting, service or comparable Contract of any kind whatsoever (all such employee benefit plans, other benefit plans, programs, Contracts or arrangements and employment, consulting, service or comparable Contracts hereinafter individually and collectively called the "Employee Benefit Plan(s)"). No Entity and no member of the Group is or has at any time been obligated to contribute to any Employee Benefit Plan subject to Title IV of ERISA. No Entity and no member of the Group has completely or partially withdrawn from any "multiemployer plan" within the meaning of Section 3(37) of ERISA. (b) Except as set forth in Schedule 2.17 hereof, (i) there have been no "prohibited transactions" within the meaning of Section 406 of ERISA or Section 4975 of the Code with respect to any of the Employee Benefit Plans; (ii) no Liability has been or is expected to be incurred by the Entity or any member of the Group under Title IV of ERISA with respect to any Employee Benefit Plan currently or formerly maintained by any of them; (iii) any and all amounts which the Entity or any member of the Group are required to pay as contributions or otherwise to, or with respect to the Employee Benefit Plans have been timely made; (iv) no Employee Benefit Plan has incurred any "accumulated funding deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code), whether or not waived, and neither Entity nor any member of the Group has provided, or is required to provide, security to any Employee Benefit Plan which is subject to Title IV of ERISA or otherwise; (v) the current value of all "benefit liabilities" within the meaning of Section 4001(a)(16) of ERISA under each Employee Benefit Plan which is subject to Title IV of ERISA or otherwise, does not exceed the current value of the assets of such Employee Benefit Plan allocable to such benefit liabilities; (vi) each of the Employee Benefit Plans has been operated and administered in accordance with all applicable Laws; (vii) each of the Employee Benefit Plans which is intended to be "qualified" within the meaning of Sections 401(a) and 501(a) of the Code has been determined by the IRS to be so qualified and continues to be so qualified; (viii) there are no pending or, to the knowledge of the Company or the Sellers, threatened or anticipated Claims involving any of the Employee Benefit Plans; (ix) the Entity and the Group have not incurred and do not expect to incur any withdrawal liability with respect to a multiemployer plan under Subtitle E of Title IV of ERISA; (x) no notice of a "reportable event" within the meaning of Section 4043 of ERISA has been required to be filed with respect to any Employee Benefit Plan; (xi) neither the Entity nor any member of the Group is a party to, or participates in, or has any Liability with respect to any multiemployer plan; (xii) neither the execution and delivery of this Agreement nor the consummation of the Contemplated Transactions will accelerate benefits or any payments under any Employee Benefit Plan; and (xiii) neither the Entity nor any member of the Group has any commitment to create any additional Employee Benefit Plan, or to amend any Employee Benefit Plan so as to increase benefits thereunder. 17 (c) Schedule 2.17 identifies all Employee Benefit Plans covering current, former or retired employees, officers, directors and consultants of the Entity and the Group (the "Entity Plans"). All Entity Plans have at all times been established and maintained in accordance with their terms. Each Entity Plan can be unilaterally terminated without penalty by the Company on no more than sixty (60) days' notice. In the case of any Entity Plan which is not in written form, an accurate description of such Entity Plan has been provided to Buyer. A true and correct copy of the most recent annual report, actuarial report, summary plan description, and IRS determination letter and/or ruling with respect to each such Entity Plan, and a current schedule of assets (and the fair market value thereof assuming liquidation of any asset which is not readily tradable) held with respect to any funded Entity Plan has been provided to Buyer, and there have been no material changes in the financial condition of the respective Entity Plans (or other information provided hereunder) from that stated in such annual report, actuarial report or schedule of assets. SECTION 2.18. Employee-Related Matters. (a) Schedule 2.18 contains a true and correct list of all employees and consultants of the Business, including any Contract relating thereto, a description of the position of, and the rate and nature of all compensation payable to, each such person. Schedule 2.18 also contains a description of all existing severance, accrued vacation policies or retiree benefits of any current or former employee or consultant (to the extent not included on Schedule 2.17) of the Company. Except as set forth on such Schedule, the employment or consulting arrangement of all such persons and all part-time employees of the Company is terminable at will. (b) Except as set forth in Schedule 2.18, (i) neither Seller nor the Company is a party to any Contract with any labor organization or other representative of the employees of the Business; (ii) there is no unfair labor practice charge or complaint pending or, to the knowledge of Sellers or the Company, threatened against Sellers or the Company relating to the Business; (iii) the Company has not experienced any labor strike, slowdown, work stoppage or similar labor controversy within the past three years; (iv) no representation question has been raised respecting any of the employees of the Business working within the past three years, nor, to the knowledge of Sellers or the Company, are there any campaigns being conducted to solicit authorization from the employees of the Business to be represented by any labor organization; (v) no Claim before any Governmental Body brought by or on behalf of any employee, prospective employee, former employee, retiree, labor organization or other representative of the employees of the Business, is pending or, to the knowledge of Sellers or the Company, threatened; (vi) neither Sellers nor the Company is a party to, or otherwise bound by, any Order relating to the employees of the Business or the Company's employment practices; and (vii) except with respect to ongoing disputes of a routine nature involving immaterial amounts, the Company has paid in full to all of the employees of the Business all wages, salaries, commissions, bonuses, benefits and other compensation due and payable to such employees. SECTION 2.19. Insurance. Schedule 2.19 sets forth a true and complete list of all insurance policies, fidelity and surety bonds and fiduciary liability policies (the "Insurance Policies") covering the Assets, the Business or the operations, employees, officers or directors of the Company, and true and complete copies of all such Insurance Policies have been delivered to 18 Buyer. Schedule 2.19 also sets forth as of the date hereof (a) with respect to each Insurance Policy, the applicable deductible amounts (including the amount of all aggregate deductibles thereunder (either on a per year or per policy term basis) that have not been exceeded) and any material limitations on coverage, (b) any letter of credit relating to any such Insurance Policy and all inspections and reports delivered to the Company or the Shareholder by any insurer with respect to such Insurance Policies, copies of which have been delivered to Buyer and (c) a true and complete list of Claims made in respect of Insurance Policies during the three years prior to the date hereof. True and correct copies of all loss runs with respect to such period have been delivered to Buyer. At the Closing Sellers shall deliver to Buyer a revised Scheduled 2.19 as of the Closing Date. Except as set forth in Schedule 2.19, there is no Claim by the Company or the Shareholder pending under any Insurance Policy as to which coverage has been questioned, denied or disputed by the underwriters of such Insurance Policies or requirement by any insurer thereunder for the Company or the Shareholder to perform work which has not been satisfied. No premiums payable under the Insurance Policies are overdue and the Company and the Shareholder is otherwise in compliance in all material respects with the terms and conditions of all such Insurance Policies. All Insurance Policies are in full force and effect and are in compliance with all material requirements of applicable Law and Contracts. None of the Sellers or the Company knows of any threatened termination of, premium increase with respect to, or uncompleted requirements under any Insurance Policy. Prior to the Closing Date, the Company will have paid all premiums under all such Insurance Policies in respect of insurance provided for periods prior to the Closing Date. Claims under all Insurance Policies are payable on an "occurrence basis" such that a claim of any type covered thereunder that arises after the Closing Date for an event that occurred prior thereto would be covered by such Insurance Policies. SECTION 2.20. Compliance with Laws. Except as set forth on Schedule 2.20, none of the Sellers or the Company is in violation in any material respect of any order, judgment, injunction, award, citation, decree, consent decree or writ (collectively, "Orders"), or any law, statute, code, ordinance, rule, regulation or other requirement, including Environmental Laws (collectively, "Laws"), of any government or political subdivision thereof, whether federal, state or local, or any agency or instrumentality of any such government or political subdivision, or any court or arbitrator (collectively, "Governmental Bodies") affecting or relating to the Assets or the Business. SECTION 2.21. Permits. The Shareholder and the Company have obtained all licenses, permits, certificates, certificates of occupancy, orders, authorizations and approvals (collectively, "Permits") of, and have made all required registrations and filings with, any Governmental Body required in connection with the ownership or use of the Assets or to the conduct of the Business. All material Permits are listed on Schedule 2.21 and are in full force and effect; no material violations are or have been recorded in respect of any Permit within the three years prior to the Closing Date; and no proceeding is pending or, to the knowledge of the Sellers or the Company, threatened to revoke or limit any Permit. Except as listed on Schedule 2.21, no Permit will terminate by reason of the Contemplated Transactions. SECTION 2.22. Environmental Matters. (a) Except as disclosed in Schedule 2.22(a), there has been, directly or indirectly, no use, manufacture, generation, refining, storage, transport, disposal or treatment of Hazardous Substances by or on behalf of any Seller, the 19 Company (or, to the knowledge of the Sellers or the Company, any predecessor in interest), or any Release at, on or under any Real Property by or on behalf of any Seller, the Company, or, to the knowledge of Sellers or the Company, by any other person, which could represent a material violation of any Environmental Law or which would require remedial action under any Environmental Law; to the Sellers' and the Company's knowledge, none of the Company nor the Sellers has contaminated the soil, ground water or surface water of such Real Property, and to the knowledge of the Sellers and the Company, none of the soil, ground water or surface water of such Real Property is or has been contaminated by any Release. (b) Except as disclosed in Schedule 2.22(b), no portion of the Real Property has ever been used as a petroleum storage, refining or distribution facility or terminal, or a gasoline station by any Seller, the Company, or any tenant or licensee of any thereof. (c) To the Sellers' and the Company's knowledge, as to the ownership or operation of the Assets or the Business, none of the Company nor the Sellers has created, suffered or permitted to exist, or has received any written notice of (i) any alleged violation with respect to any Environmental Law; or (ii) any prior, pending or threatened Regulatory Action or other Claim involving any such party or any present or former owner, lessee or operator of the Real Property. (d)(i) Except as disclosed in Schedule 2.22(d), or except in conjunction with any "Special Exceptions" as shown on Schedule B of that certain Preliminary Commitment for Title Insurance from Chicago Title Insurance Company (Order No. 581789) dated November 22, 2000 (a copy of which has been received by Buyer), to the Sellers' and the Company's knowledge, there are no incinerators, septic tanks, underground or aboveground tanks or cesspools, pipes or pipelines for the storage or transportation of Hazardous Materials, including without limitation, heating oil, fuel oil, gasoline and/or other petroleum products, whether such tanks, pipelines or pipes are in operation, closed or abandoned (the "Tanks") located, or to the knowledge of the Sellers or the Company, which have been located, on, at or under the Real Property, (ii) all sewage from the Real Property is discharged into treatment plants and reused for non-portable purposes or into a public sanitary sewer system, and (iii) there has been no Release by or on behalf of the Company or the Sellers, or to the Sellers' and the Company's knowledge, by any other party, into the atmosphere, any adjoining or adjacent body of water, or adjoining or adjacent property would could represent a material violation of Environmental Law. The Company has delivered to Buyer copies of all environmental reports and all other comparable materials held or controlled by or on behalf of it or any of the Sellers regarding the environmental matters set forth in this Section 2.22. SECTION 2.23. Finders; Fees. There is no investment banker, broker, advisor, counsel, finder or other intermediary which has been retained by or is authorized to act on behalf of any Seller or the Company who might be entitled to any fee or commission from any such person upon consummation of the Contemplated Transactions. SECTION 2.24. Depositaries; Powers of Attorney, etc. Schedule 2.24 sets forth (i) the name of each bank or similar entity in which the Company has an account, lock box or safe deposit box and the names of all persons authorized to draw thereon or to have access thereto; 20 and (ii) the name of each person holding a general or special power of attorney from the Company and a description of the terms thereof. SECTION 2.25. Ability to Conduct Business. As of the Closing Date, the Assets will be sufficient and adequate to permit the continued conduct of the Business substantially as it has been conducted since January 1, 1999 and, assuming all the Sellers Required Consents are obtained, the consummation of the Contemplated Transactions will enable Buyer to conduct the Business substantially as it has been conducted since that date. SECTION 2.26. Transaction Shares. The Transaction Shares are being acquired by the Shareholder for its own account and not with a view to the distribution, resale or other transfer thereof, except in compliance with the Securities Act and other applicable securities Laws. The Shareholder is an "accredited investor" as such term is defined in Regulation D promulgated under the Securities Act and has (i) reviewed carefully the Buyer Reports, (ii) such knowledge and experience in financial, tax and business matters so as to enable it to make an informed investment decision with respect to the Transaction Shares and (iii) overall commitments to investments which are not readily marketable as are reasonable in relation to the Shareholder's net worth. SECTION 2.27. Disclosure. Neither this Agreement, the Schedules hereto, nor any audited or unaudited financial statements, documents or certificates furnished or to be furnished to Buyer or any of its Representatives or Affiliates by or on behalf of the Sellers or the Company pursuant to this Agreement or in connection with the Contemplated Transactions contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained herein or therein not misleading. There are no facts known to the Sellers or the Company and not disclosed herein or on the Schedules hereto, which might reasonably be expected to directly and materially adversely affect the value of the Assets or the Condition of the Business. ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER Buyer represents and warrants to the Sellers that: SECTION 3.1. Authority Relative to this Agreement. Buyer has full power and authority to execute and deliver this Agreement and each other Transaction Document to which it is or, at the Closing, will be a party and to consummate the Contemplated Transactions. The execution and delivery of this Agreement and the consummation of the Contemplated Transactions to which Buyer is or, at the Closing, will be a party have been duly and validly authorized and approved by the Buyer and no other corporate proceedings on the part of Buyer are necessary to authorize the execution and delivery by Buyer of this Agreement or to authorize the consummation of the Contemplated Transactions to which it is or, at the Closing, will be a party. This Agreement has been and, at the Closing, the other Transaction Documents to which Buyer will be a party will have been duly and validly executed and delivered by Buyer and (assuming the valid execution and delivery thereof by the other parties thereto) constitutes or will 21 at the Closing constitute the legal, valid and binding agreement of Buyer, enforceable against Buyer in accordance with their respective terms, except as such obligations and their enforceability may be limited by applicable bankruptcy and other similar laws affecting the enforcement of creditors' rights generally and except that the availability of equitable remedies is subject to the discretion of the court before which any proceeding therefor may be brought (whether at law or in equity). SECTION 3.2. No Conflicts; Consents. The execution, delivery and performance by Buyer of this Agreement and each other Transaction Document to which it is or, at the Closing, will be a party and the consummation of the Contemplated Transactions to which it is or, at the Closing, will be a party do not and will not (i) violate any provision of the certificate of incorporation or by-laws of Buyer; (ii) require Buyer to obtain any consent, approval or action of or waiver from, or make any filing with, or give any notice to, any Governmental Body or any other person, except for filing, pursuant to the HSR Act ("Buyer Required Consents"); (iii) if Buyer Required Consents are obtained prior to the Closing, violate, conflict with or result in the breach or default under (after the giving of notice or the passage of time); or permit the termination of, any material Contract to which Buyer is a party or by which Buyer or its assets may be bound or subject; or (iv) if Buyer Required Consents are obtained prior to the Closing, violate any Law or Order of any Governmental Body against, or binding upon or affecting, Buyer or its assets or business. SECTION 3.3. Corporate Existence and Power. Buyer is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation and has all requisite corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. No vote or consent of the stockholders of Buyer, which has not been obtained, is required under applicable Law or under the rules of the NYSE to approve the Contemplated Transactions. SECTION 3.4. Finders; Fees. There is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of Buyer who might be entitled to any fee or commission from Buyer upon consummation of the Contemplated Transactions. SECTION 3.5. Buyer Reports. Buyer has delivered to the Sellers true and correct copies of (a) Buyer's Annual Report on Form 10-K for the year ended December 31, 1999, (b) Buyer's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 and (c) Buyer's Proxy Statement relating to its 2000 Annual Meeting of stockholders (collectively, together with the Buyer Filings and disclosure statement, if any, provided to Sellers pursuant to Section 4.16, the "Buyer Reports"). At the Closing Date, the Buyer Reports, taken as a whole, will not contain any untrue statement of a material fact, nor omit to state a material fact necessary in order to make the statements made therein not misleading. Buyer is not in default in any material respect under any lending arrangement or under any indenture or other material payment obligation with regard to any institutional debt obligation, and is also in compliance with all of its reporting obligations under applicable securities laws. 22 SECTION 3.6. Transaction Shares. The Transaction Shares have been duly authorized by Buyer and, when issued in accordance with the terms hereof, will have been duly authorized and issued, will be fully paid and non-assessable shares of Six Flags Common Stock and will be listed on the NYSE. Such shares will be issued without any violation of preemptive rights. ARTICLE IV COVENANTS AND AGREEMENTS SECTION 4.1. Conduct of the Business of the Company. (a) From the date hereof through the Closing Date, the Company agrees, and the Sellers agree to cause the Company: (i) To conduct its operations according to the ordinary and usual course of the Business consistent with past practice; to preserve intact its present business organization and structure; to use reasonable efforts to keep available the services of its present officers, agents and full-time employees; to preserve and maintain its Assets and the good will of the Business and to use reasonable efforts to preserve its relationships with customers and suppliers, and others having business dealings with it. (ii) To maintain in the ordinary course of the Business, consistent with past practice and in accordance with all Contracts, the Real Property and all Assets (other than Inventory sold in the ordinary course of the Business) in their present repair, order and condition, subject only to ordinary wear and tear. (iii) Not to incur any Liability (other than Liabilities incurred in the ordinary course of the Business, consistent with past practice, which are not in the aggregate material thereto or other than any Liability under that certain lease to be executed between the Company and the City of Federal Way, Washington, pertaining to a strip of real property adjacent to real property demised under the Lease), nor enter into any Contract of a type required to be included in any Schedule hereto. (iv) Not to incur any Debt. (v) Not to undertake (nor permit to be undertaken) any of the actions specified in Section 2.11. (vi) Not to pay, discharge or satisfy any material Claim or Liability, other than the payment, discharge or satisfaction when due and in the ordinary course of the Business of Claims or Liabilities incurred in the ordinary course of Business, consistent with past practice. (vii) Not to increase the compensation payable or to become payable to any officer, stockholder, director, consultant, agent or employee of the Company, or make any alteration in the benefits payable to any thereof. 23 (b) From the date hereof through the Closing Date, the Company and the Sellers agree to use their best efforts to conduct the affairs of the Company in such a manner so that the representations and warranties of the Company and the Sellers contained herein shall continue to be true and correct on and as of the Closing Date as if made on and as of the Closing Date. (c) From the date hereof through the Closing Date, the Company and the Sellers agree that the Company will consult with Buyer prior to any renewal, amendment, extension or termination of, waiver of any material right under, or any failure to renew, any Contract and will not take any such action if Buyer objects thereto in writing. SECTION 4.2. Corporate Examinations and Investigations. Prior to the Closing Date, the Company and the Sellers agree that Buyer shall be entitled, through its directors, officers, Affiliates, employees, attorneys, accountants and consultants (collectively, "Representatives") to make such investigation of the Assets, the Business and operations of the Company, and such examination of the books, records and financial condition of the Company, as Buyer reasonably deems necessary. Any such investigation and examination shall be conducted in a manner designed to preserve the confidentiality of the Contemplated Transactions, at reasonable times, under reasonable circumstances and upon reasonable notice, and the Company and the Sellers shall cooperate fully therein. In that connection, the Company and the Sellers shall make available to the Representatives of Buyer during such period, without however causing any unreasonable disclosure of the Contemplated Transactions or unreasonable interruption in the operations of the Company, access to the Assets and all such information and copies of such documents and records concerning the affairs of the Company as such Representatives may reasonably request, and with the prior consent of Stock, which will not be unreasonably withheld, shall permit the Representatives of Buyer access to the Company's employees, customers, suppliers, Contractors and others. The Sellers shall cause the Company's Representatives to cooperate fully in connection with such review and examination. No investigation by Buyer shall diminish or obviate any of the representations, warranties, covenants or agreements of the Company or the Sellers contained in this Agreement. SECTION 4.3. Additional Financial Statements. Prior to the Closing Date, as soon as available and in any event within fifteen (15) calendar days after the end of each monthly accounting period of the Company ending after the date of the most recent Interim Statement, the Company and the Sellers shall furnish Buyer with an unaudited financial statement of the Company for such month in form and substance comparable to the Interim Statements and with such other financial or other information routinely prepared by the Company. SECTION 4.4. Filings and Authorizations. Prior to or as soon as practicable following the date hereof, the Company and the Sellers, on the one hand, and Buyer, on the other, have filed or supplied or will file or supply, all notifications, reports and other information required to be filed with or supplied in connection with the Contemplated Transactions and which are required by Law (including, without limitation, the HSR Act) to effectuate the consummation of the Contemplated Transactions. The Company and the Sellers, on the one hand, and Buyer, on the other, shall cooperate with each other in connection with such filings, shall furnish copies thereof to each other party prior to such filing, shall not make any such filing or submission to 24 which Buyer or Stock, as the case may be, reasonably objects in writing and shall furnish to each other party any correspondence received from any Governmental Body in connection therewith. All such filings shall comply in form and content in all material respects with applicable Law. SECTION 4.5. Efforts to Consummate. Subject to the terms and conditions herein, each party hereto, without payment or further consideration, shall use its good faith efforts to take or cause to be taken all action and to do or cause to be done all things necessary, proper or advisable to consummate and make effective, as soon as reasonably practicable, the Contemplated Transactions, including, but not limited to, the obtaining of all the Sellers Required Consents, Buyer Required Consents, Permits or consents of any third party, whether private or governmental, required in connection with such party's performance of such transactions and each party hereto shall cooperate with the others in all of the foregoing. SECTION 4.6. Negotiations With Others. From and after the date hereof unless and until this Agreement shall have terminated in accordance with its terms, the Company and the Sellers agree that none of them, nor any Affiliate of the foregoing, will directly or indirectly (i) solicit, engage in discussions or engage in negotiations with any person (other than Buyer or any of its Affiliates) with respect to an Acquisition Proposal; (ii) provide information to any person (other than Buyer or any of its Representatives) in connection with an Acquisition Proposal; or (iii) enter into any transaction with any person (other than Buyer or any of its Affiliates) with respect to an Acquisition Proposal. If any Seller, the Company or any Representative thereof receives any offer or proposal to enter into discussions or negotiations relating to any of the above, the Company and the Sellers will immediately notify Buyer in writing as to the identity of the offeror or the party making any such proposal and the specific terms of such offer or proposal. SECTION 4.7. Notices of Certain Events. Prior to the Closing Date, the Company and the Sellers, on the one hand, and Buyer, on the other, shall promptly notify the other of: (a) any notice or other communication delivered or received by such party (or its Representatives) to or from any other person (other than notices or other communications solely between the parties hereto) with respect to the Contemplated Transactions (including, without limitation, any notice or other communication to or from any person objecting to, or alleging that the consent of any person is or may be required in connection with, the Contemplated Transactions); (b) any notice or other communication from any Governmental Body in connection with the Contemplated Transactions or the operation of the Business or the ownership of the Assets; (c) any notice or other communication of a material nature from any holder of any Debt of Sellers, the Company or other lender to the Business; and (d) any event, condition or circumstance occurring from the date hereof through the Closing Date that would constitute a material violation or breach of any representation or warranty herein, whether made as of the date hereof or as of the Closing Date, 25 or that would constitute a material violation or breach of any covenant of any party contained in this Agreement. The delivery of any notice under this Section 4.7 shall not be deemed to cure any such violation or breach of any representation or warranty hereunder. SECTION 4.8. Public Announcements. Prior to the Closing Date, the Company and the Sellers, on the one hand, and Buyer, on the other, will consult with each other before issuing any press release or otherwise making any public statement with respect to the Contemplated Transactions, and will not issue any such press release or make any such public statement without the prior approval of Buyer or the Shareholder, as the case may be, except as may be required by applicable Law in which event the other party shall have the right to review and comment upon (but not approve) any such press release or public statement prior to its issuance. SECTION 4.9. Expenses. Except as otherwise specifically provided in this Agreement, Buyer and the Sellers shall bear their respective expenses, and the Sellers will bear the expenses of the Company, in each respective case, incurred in connection with the preparation, execution and performance of this Agreement and the Contemplated Transaction, including, without limitation, all Transfer Taxes and all fees and expenses of their respective Representatives. Sellers shall be entitled to, and the Company hereby assigns to Sellers all of its right to receive, all refunds relating to Insurance Policies existing on the date hereof. SECTION 4.10. Tax. (a) Tax Returns. Sellers shall cause the Company to prepare and timely file with the appropriate Tax Authority (i) the Form 1120 (US Corporation Income Tax Return ) due with respect to the Company's Pre-Closing Short Year (defined below) (such Form 1120 is referred to herein as the "Pre-Closing Short Year Return") and (ii) all Company Tax Returns whose due date is on or before the Closing Date, taking into account all extensions that are properly obtained. At least ten business days prior to filing the Pre-Closing Short Year Return, Sellers shall provide Buyer with a copy thereof and shall not file such Tax Return if Buyer objects in writing, at any time within such ten day period, to the filing of such Tax Return. Buyer shall cause the Company to prepare and timely file with the appropriate Tax Authority all Company Tax Returns, except the Pre-Closing Short Year Return, which relate to taxable periods beginning on or before December 31, 2000 and whose due date is after the Closing Date, taking into account all extensions that are properly obtained. Buyer shall prepare the Interim Period Tax Return, defined below. (b) Liability for Taxes. Sellers shall be liable for (i) all Taxes which are owed for any taxable period ending on or before December 31, 2000 (except for federal income Taxes for the period covered by the Interim Period Tax Return), (ii) all Taxes (other than federal income Taxes) which are allocable to the portion of a Straddle Period up to and including December 31, 2000, and (iii) all Taxes shown on the Interim Period Tax Return (defined below) prepared in accordance with Section 4.10(c)(i)(B). (c) Allocation of Taxes. (i) Federal Income Taxes. 26 (A) As required by Reg. Section 1.1502- 76(b)(1)(ii)(A)(1), Sellers and Buyer agree to cause the Company to file its federal income Tax Returns on the basis that the Company has (I) a short taxable year which ends on the Closing Date (the "Pre-Closing Short Year"), during which the Company will be taxed as a corporation under Subchapter C of the Code and (II) a second short taxable year which begins on the day after the Closing Date and ends on December 31, 2000, during which the Company will be taxed as a corporation under Subchapter C of the Code which is a member of Buyer's affiliated group (the "Post-Closing Short Year"). To the extent the Company is required to end a taxable period because of the Closing, it shall, whenever permitted or elective, end the taxable period on the Closing Date and begin a new taxable period on the day after the Closing Date, so as to conform with the treatment prescribed by this paragraph. (B) The Company's items of income, gain, loss, deduction and credit shall be allocated between the Company's Pre-Closing Short Year and its Post-Closing Short Year on the basis of a closing of the books. The Company's federal income Tax for the Pre-Closing Short Year shall be calculated based on this allocation. Buyer shall cause the Company to prepare a hypothetical tax return for the Company's Post-Closing Short Year (the "Interim Period Tax Return"). The Interim Period Tax Return shall be based on the allocation prescribed by this paragraph and shall be prepared as though the Company were not a member of an affiliated group (as defined in Section 1504 of the Code). The tax shown on the Interim Period Tax Return shall be calculated using a flat fifteen percent (15%) tax rate. (ii) Other Taxes. Except as provided above, any Taxes owed by the Company for a taxable period that begins on or before and ends after December 31, 2000 (a "Straddle Period"), shall be allocated between the portion of the Straddle Period up to and including December 31, 2000 and the portion of the Straddle Period after December 31, 2000, on the basis of a "closing of the books" by allocating to each such portion of the Straddle Period: (A) sales Taxes in proportion to the Taxable sales which take place in each portion of the Straddle Period, (B) use Taxes in proportion to the Taxable purchases which take place in each portion of the Straddle Period, (C) the Washington State Business and Occupation Tax and other Taxes based on gross receipts in proportion to the gross receipts accrued in each portion of the Straddle Period, (D) Taxes which accrue over time (including without limitation, property Taxes) in proportion to the number of days in each portion of the Straddle Period and (E) in the case of all other Taxes, on a reasonable basis that gives effect to a "closing of the books." (d) Payment of Tax for Which Sellers Are Liable. With respect to Taxes for which Sellers are liable under Section 4.10(b), which are not paid in cash by Sellers or the Company on or before December 31, 2000, and which are not subtracted in calculating Net Working Capital: (i) In the case of the Interim Period Tax Return, Buyer shall deliver to Sellers a completed copy of the Interim Period Tax Return no later than August 15, 2001. Sellers shall have ten calendar days from the date they receive such Tax Return to deliver to 27 Buyer any written objections to such Tax Return. If the Sellers do not deliver any such written objections, the Sellers immediately shall pay Buyer the amount of Tax shown on the Interim Period Tax Return, in immediately available funds. If the Sellers deliver written objections to Buyer by the end of the tenth calendar day following the date on which they received the Interim Period Tax Return, the Sellers and Buyer shall have five calendar days to negotiate in good faith to resolve the written objections. If any written objections cannot be resolved by the end of the fifth day, such written objections shall be referred to the Nominated Accounting Firm for resolution. The Sellers and Buyer shall deliver to each other and to the Nominated Accounting Firm, in writing, such parties' positions as to the correct resolution of the written objections. The Nominated Accounting Firm shall report in writing its determination to the Sellers and Buyer no later than September 14, 2001. The Nominated Accounting Firm's conclusions shall be final and binding. Immediately after the Nominated Accounting Firm's decision is rendered, Buyer shall complete the Interim Period Tax Return in accordance with the conclusions of the Nominated Accounting Firm and immediately following delivery of such Tax Return to the Sellers, the Sellers shall pay Buyer the amount of Tax shown on such Tax Return, in immediately available funds. The fees of the Nominated Accounting Firm shall be split equally between the parties. Until the Nominated Accounting Firm shall have reached a final conclusion regarding any disputed written objections, the Sellers and Buyer shall afford the Nominated Accounting Firm reasonable access during business hours to all relevant books and records for the purpose of determining the correct disposition of the disputed written objections. (ii) In the case of Taxes other than federal income Taxes, Sellers shall pay Buyer the amount of such Taxes, immediately following Buyer's demand therefor, in immediately available funds, except to the extent the following clause (iii) applies; (iii) In the case of a Tax Return that is prepared in a manner inconsistent with its preparation in past periods, Buyer shall deliver to Sellers a completed copy of such Tax Return no later than thirty (30) calendar days before the due date of such Tax Return, taking into account all extensions that are properly obtained. In the event that the Sellers object to such Tax Return, the Buyer and the Sellers shall resolve any disputes utilizing the procedures described in Section 4.10(d)(i), except that, if a written objection to such Tax Return has been referred to the Nominated Accounting Firm, such Firm shall report in writing its determination to the Sellers and the Buyer no later than three (3) calendar days before the due date of such Tax Return, taking into account all extensions that were properly obtained and the relevant Tax Return shall be filed in accordance with the conclusions of the Nominated Accounting Firm. (iv) In the event any Taxes for which the Sellers are liable under Section 4.10(b) or any Tax Return preparation expenses which the Sellers caused the Company to incur pursuant to Section 4.10(a), are not paid by the Company on or before December 31, 2000 and are not subtracted in determining Net Working Capital, Sellers shall pay Buyer, immediately upon Buyer's demand, the amount of such Taxes and expenses, in immediately available funds. (e) Cooperation. With respect to all Tax Returns, Taxes, Tax Audits and Tax Deficiencies for any taxable period, Sellers, the Company and Buyer shall reasonably cooperate, 28 and shall cause their Representatives and agents reasonably to cooperate, in the preparation of Tax Returns, the payment of Taxes and the resolution of Tax Audits and Tax Deficiencies, including maintaining and making available to each other all records necessary in connection therewith. (f) Withholding Certificates. Sellers shall provide Buyer with all clearance certificates and similar documents that are required by any jurisdiction in order to relieve Buyer of any obligation to withhold any portion of the Purchase Price. (g) FIRPTA Clearance. At the Closing, each Seller shall deliver to Buyer an affidavit certifying that such Seller is not a foreign person within the meaning of Section 1445(f)(3) of the Code and the Treasury Regulations thereunder, failing which, Buyer shall withhold such sums from the Purchase Price, and pay over such sums to the IRS, as are required by Law. Sellers hereby indemnify and hold harmless Buyer from and against all Losses arising from such withholding or from the falsity of any certification or other documentation delivered to Buyer pursuant to this Section 4.10(g). Such indemnity shall survive the Closing Date. SECTION 4.11. Confidentiality. Prior to the Closing Date, Buyer shall hold in strict confidence, and shall cause all its Representatives to agree in writing to hold in strict confidence, unless compelled to disclose by judicial or administrative process, or by other requirements of Law, all information concerning the Sellers and the Company which it has obtained from the Company, the Sellers or their Representatives prior to, on or after the date hereof in connection with the Contemplated Transactions, and, prior thereto, Buyer shall not use or disclose to others, or permit the use or disclosure of, any such information so obtained, except to its Representatives who need to know such information in connection with this Agreement and who shall be advised of the provisions of this Section 4.11. The foregoing provision shall not apply to any such information to the extent (i) known by Buyer prior to the date such information was provided to such party in connection with the Contemplated Transactions, (ii) made known to Buyer from a third party not known by Buyer to be in breach of any confidentiality requirement or (iii) made public through no fault of Buyer or any of its Representatives. SECTION 4.12. Certain Renewals. With respect to each Permit which may expire prior to the Closing Date or within sixty (60) days thereafter, the Company shall (i) timely file with the appropriate Governmental Bodies applications for renewal of each such Permit (the "Applications"), (ii) deliver to Buyer true and complete copies of such Applications, (iii) diligently prosecute such Applications to conclusion and (iv) cooperate fully with all Governmental Bodies in the processing of such Applications. SECTION 4.13. Covenant Not-to-Compete. (a) In consideration of $50,000 being paid to Sellers by Buyer included as part of the Purchase Price, during the period commencing on the Closing Date and ending five (5) years thereafter (the "Term"): (i) In order to preserve the Business and goodwill of the Company, Stock agrees that he will not, directly or indirectly, as a partner, officer, employee, director, stockholder, proprietor, consultant, representative, agent or otherwise become or be interested in, or associate with or render assistance to, any person engaged in the ownership, operation and/or 29 management of any recreational park, amusement park, theme park or water park located within the Territory. The foregoing provisions shall not, however, prohibit the ownership by any Seller of not more than five percent (5%) of any class of outstanding equity securities listed for trading on a national securities exchange or publicly traded in the over-the-counter market which engages in any of such businesses. For the purposes of this Agreement, "Territory" shall mean the area within a 150 mile radius of the Park. (ii) Each Seller agrees that he will not, directly or indirectly, during the Term, for his own benefit or for the benefit of any other person, solicit the professional services of any Representative, employee, agent or consultant of the Company or otherwise interfere with the relationship between the Company and any of such persons. (b) After the date hereof, the Sellers will not directly or indirectly, use, disclose or make available to anyone (other than Buyer) any confidential information concerning the ownership and/or operation of the Park (the "Confidential Information"). The Confidential Information includes, without limitation, the business practices, financial information, customer and prospective customers' names, leads and account information, suppliers and prospective suppliers' names, leads and account information, mailing lists, computer programs, advertising campaigns (including, without limitation, displays, drawings, memoranda, designs, styles or devices), employee names, compensation and benefit information pertaining to the Park and the Business. (c) The parties agree that a violation of the foregoing agreements not to compete or disclose, or any provision thereof, will cause irreparable damage to Buyer, and Buyer shall be entitled (without any requirement of posting a bond or other security), in addition to any other rights and remedies which it may have, at law or in equity, to an injunction enjoining and restraining the Sellers from doing or continuing to do any such act or any other violations or threatened violations of this Section 4.13. (d) If one or more of the provisions contained in this Section 4.13 (or any portion of any such provision) shall for any reason be finally held by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Section 4.13 (or any portion of any such provision), but this Section shall be construed as if such invalid, illegal or unenforceable provision (or portion thereof) had not been contained in this Agreement. If, for any reason, any of the restrictions or covenants contained in this Section 4.13 is finally held by such a court to cover a geographic area or to be for a length of time that is not permitted by applicable Law, or in any way construed to be too broad or to any extent invalid, such provision shall not be determined to be null, void or of no effect, but to the extent it is or would be valid or enforceable under applicable Law, it shall be construed and interpreted to provide for a covenant having the maximum enforceable geographic area, time period and other provisions (not greater than those contained in this Section) as shall be valid and enforceable under such applicable Law. (e) Sellers and Buyer agree to allocate $50,000 of the Purchase Price to the agreements of Sellers set forth in this Section 4.13 and will not file any Tax return or make any other filing inconsistent therewith. 30 SECTION 4.14. Operation of Business. If the Closing occurs prior to December 31, 2000, during the period commencing with the Closing and ending on such date, the Buyer will cause the Company not to make any distribution of Cash or Receivables to Buyer and to operate the Business in the ordinary course, consistent with past practice. If during such period, the Company incurs operating expenses in excess of $415,220, the Net Working Capital Amount shall be calculated for all purposes as if such excess expenses had not been incurred. SECTION 4.15. Discharge of Potential Liabilities. Sellers agree to pay and discharge when due all claims of creditors of the Business or relating to the Assets with respect to periods prior to the Closing that may be asserted against Buyer, except to the extent the same were deducted in the calculation of Net Working Capital. Buyer will pay and discharge when due all such claims that were so deducted. SECTION 4.16. Buyer Filings. During the period prior to the Closing, Buyer shall deliver to Sellers a true and correct copy of each report, information statement and other document ("Buyer Filings") filed by Buyer with the SEC under the Securities Exchange Act of 1934, as amended. Prior to the Closing Date, Buyer (i) will provide Sellers' with a reasonable opportunity to ask questions and receive answers from Representatives of Buyer concerning Sellers' purchase of Transaction Shares, and (ii) may, in its discretion, provide to each Seller a disclosure statement containing such information as Buyer shall deem necessary to comply with the representation and warranty contained in the last sentence of Section 3.5. SECTION 4.17. Mortgage. During the term of the Lease (as amended and restated as contemplated by Section 5.3(h) hereof) Sellers will not permit to exist Debt (other than Debt in the aggregate principal amount of $15,815,000 held by U.S. Bank National Association (the "Mortgage Debt") to the extent provided in the subordination, attornment and nondisturbance agreement annexed as Exhibit 5.3.A), that is secured by a Lien on the Sellers' ownership interest in the Real Property unless such Debt is expressly subordinated to the Lease on terms reasonably acceptable to Buyer. The Sellers' acknowledge that the provisions of this Section 4.17 are intended to bind all successors and assigns of Sellers' or other subsequent owners of the Real Property, and Sellers' will execute and deliver at Closing any document reasonably required to be recorded in order to effect the foregoing. ARTICLE V CONDITIONS TO CLOSING SECTION 5.1. Conditions to the Obligations of the Parties. The obligations of the Sellers, on the one hand, and Buyer, on the other, to consummate the Contemplated Transactions are subject to the satisfaction of the following conditions, which in the case of the condition specified in Section 5.1(c) may be waived by Buyer and Stock: (a) HSR Act. Any applicable waiting period under the HSR Act relating to the Contemplated Transactions shall have expired. 31 (b) No Injunction. No provision of any applicable Law and no Order shall prohibit the consummation of the Contemplated Transactions. (c) No Proceeding or Litigation. No Claim instituted by any person (other than Buyer, Company, Sellers or their respective Affiliates) shall have been commenced or be pending against Buyer, Company, Sellers or any of their respective Affiliates, officers or directors, which Claim seeks to restrain, prevent, change or delay in any material respect the Contemplated Transactions or seeks to challenge any of the material terms or provisions of this Agreement or seeks material damages in connection with any of such transactions. SECTION 5.2. Conditions to the Obligations of the Sellers. The obligations of the Sellers hereunder to consummate the Contemplated Transactions are subject, at the option of the Shareholder, to the fulfillment prior to or at the Closing of each of the following further conditions: (a) Performance. Buyer shall have performed and complied with all agreements, obligations and covenants required by this Agreement to be performed or complied with by it at or prior to the Closing Date. (b) Representations and Warranties. The representations and warranties of Buyer contained in this Agreement and in any certificate or other writing delivered by Buyer pursuant hereto shall be true at and as of the Closing Date as if made at and as of such time. (c) Purchase Price. The Purchase Price (or, if the Closing occurs prior to December 31, 2000, the Closing Payment) shall have been delivered in accordance with Section 1.2(b)(ii), including delivery of certificates representing the Closing Shares, registered in the name of the Shareholder. (d) Debt Payment. Buyer shall have made or provided for the Debt Payment as contemplated by Section 1.2(b)(i). (e) Buyer Required Consents. All Buyer Required Consents shall have been obtained. (f) Documentation. There shall have been delivered to the Shareholder the following: (i) A certificate, dated the Closing Date, of the Chairman of the Board, the President, Chief Financial Officer or General Counsel and Vice President of Buyer confirming the matters set forth in Sections 5.2(a) and (b) hereof. (ii) A certificate, dated the Closing Date, of the Secretary or Assistant Secretary of Buyer certifying, among other things, that attached or appended to such certificate (A) is a true and correct copy of its certificate of incorporation and all amendments if any thereto as of the date thereof; (B) is a true and correct copy of its by-laws as of the date thereof; (C) is a true copy of all corporate actions taken by it, including resolutions of its board of directors (or 32 the executive committee thereof) authorizing the execution, delivery and performance of this Agreement, and each other Transaction Document to be delivered by Buyer pursuant hereto; and (D) are the names and signatures of its duly elected or appointed officers who are authorized to execute and deliver this Agreement and any certificate, document or other instrument in connection herewith. (iii) Evidence of the good standing and corporate existence of Buyer in its state of organization. (iv) A signed opinion of Buyer's general counsel (who may rely upon Foster, Pepper & Shefelman PLLC as to matters of Washington law), dated the Closing Date and addressed to the Sellers, substantially in the form annexed hereto as Exhibit 5.2A. (v) An executed copy of the Registration Rights Agreement. (vi) Copies of all Buyer Required Consents. SECTION 5.3. Conditions to the Obligations of Buyer. All obligations of Buyer to consummate the Contemplated Transactions hereunder are subject, at the option of Buyer, to the fulfillment prior to or at the Closing of each of the following further conditions: (a) Performance. Each of the Company and the Sellers shall have performed and complied with all agreements, obligations and covenants required by this Agreement to be performed or complied with by it at or prior to the Closing Date. (b) Representations and Warranties. The representations and warranties of each of the Company and each Seller contained in this Agreement and in any certificate or other writing delivered by the Company or any Seller pursuant hereto shall be true at and as of the Closing Date as if made at and as of such time. (c) Sellers Required Consents. All Sellers Required Consents shall have been obtained and copies thereof delivered to Buyer. (d) Debt. Buyer shall have received a release reasonably satisfactory to it in favor of the Company from all obligees in respect of the Released Debt, together with evidence reasonably satisfactory to Buyer of the discharge of all Liens on the Shares and/or the Assets in respect of the Released Debt. At the Closing, Buyer shall have received an executed subordination, attornment and nondisturbance agreement in the form annexed hereto as Exhibit 5.3A from the holder of the Mortgage Debt. (e) Liens. All Liens on the Shares and the Assets (other than Permitted Liens on the Assets) shall have been released and discharged in form and substance acceptable to Buyer. 33 (f) Releases. The Sellers and all Affiliates of the Sellers shall have delivered to Buyer executed copies of releases in favor of the Company, substantially in the form of Exhibit 5.3B hereto. (g) Shares. Buyer shall have received certificates representing the Shares, duly endorsed to Buyer or its designee and in suitable form for transfer by delivery. (h) Amended Lease. Buyer shall have received an Amended and Restated Lease, executed by the Shareholder, in the form annexed hereto as Exhibit 5.3C. (i) Title Insurance. Buyer shall have procured at Buyer's expenses a lessee's or owner's title insurance insuring Buyer's interest (acquired hereunder) in and to the Real Property, which insurance shall be in form reasonably acceptable to Buyer and shall be subject only to Permitted Liens and with all other standard printed exceptions deleted on the title insurance policy, from a nationally recognized title insurance company qualified to do business in the State of Washington reasonably satisfactory to Buyer. (j) Environmental Matters. Buyer shall have received from Buyer's environmental consultant environmental reports on the Real Property reasonably acceptable to Buyer. (k) Documentation. There shall have been delivered to Buyer the following: (i) A certificate, dated the Closing Date, of the Company and each Seller, confirming the matters set forth in Sections 5.3(a) and (b). (ii) A certificate, dated the Closing Date, of the Secretary or Assistant Secretary of the Shareholder certifying, among other things, that attached or appended to such certificate (A) is a true and correct copy of its articles of incorporation and by-laws (or comparable instruments) and all amendments if any thereto as of the date thereof; and (B) is a true copy of all actions (if any) taken by it, including resolutions of its board of directors (or comparable governing body) authorizing the execution, delivery and performance of this Agreement and each other Transaction Document to be delivered by such Shareholder pursuant hereto. (iii) A certificate, dated the Closing Date, of the Secretary or Assistant Secretary of the Company certifying, among other things, that attached or appended to such certificate (A) is a true and correct copy of the certificate of incorporation and by-laws (or comparable instruments) of the Company and all amendments, if any, thereto as of the date thereof; (B) is a true copy of all corporate actions taken by the board of directors of the Company authorizing the execution, delivery and performance of this Agreement and each other Transaction Document to be delivered by the Company pursuant hereto; and (C) are the names and signatures of its duly elected or appointed officers who are authorized to execute and deliver this Agreement and any certificate, document or other instrument in connection herewith. 34 (iv) Resignations of each director of the Company and evidence of the due election of the directors thereof designated by Buyer. (v) A signed opinion of the Company's and the Sellers' counsel (which may be more than one firm), dated the Closing Date, addressed to Buyer, substantially in the form annexed as Exhibit 5.3D. (vi) Evidence, reasonably satisfactory to Buyer, of the payment by Sellers in full of the real estate transfer tax imposed on the Contemplated Transactions by the State of Washington. (vii) An executed copy of the Registration Rights Agreement. (viii) Possession and control of the Assets of the Company (including all books, seals, bank accounts, records and documents). ARTICLE VI INDEMNIFICATION SECTION 6.1. Survival of Representations and Warranties. (a) Notwithstanding any right of Buyer fully to investigate the affairs of the Company and notwithstanding any knowledge of facts determined or determinable by Buyer pursuant to such investigation or right of investigation or pursuant to any notice delivered to Buyer under Section 4.7 or otherwise, Buyer has the right to rely fully upon the representations, warranties, covenants and agreements of the Company and the Sellers contained in this Agreement, or listed or disclosed on any Schedule hereto or in any instrument delivered in connection with or pursuant to any of the foregoing. All such representations, warranties, covenants and agreements shall survive the execution and delivery of this Agreement and the Closing hereunder. Notwithstanding the foregoing, all representations and warranties of the Company and the Sellers contained in this Agreement, on any Schedule hereto or in any instrument delivered in connection with or pursuant to this Agreement shall terminate and expire twenty-four (24) months after the Closing Date, except that the representations and warranties in Sections 2.1, 2.2, the third sentence of Section 2.12(a) and the first sentence of Section 2.12(b) shall survive indefinitely and the representations and warranties contained in Sections 2.16 and 2.22, the indemnification obligations under Section 6.2(iii) with respect to any Retained Tax Liabilities and the indemnification obligations under Section 6.2(ii) with respect to breaches of covenants and agreements of the Company or the Sellers shall survive until the expiration of all applicable statutes of limitation with respect thereto, including extensions; provided, however, that the liability of the Sellers shall not terminate as to any specific claim, whether or not fixed as to liability or liquidated as to amount, with respect to which the Sellers have been given specific notice in accordance with Section 6.4 on or prior to the date on which such liabilities would otherwise terminate pursuant to the terms of this Section 6.1(a). In addition, Buyer shall not be entitled to deliver any Claims Notice under Section 6.4 seeking indemnification under Section 6.2(iv) with respect to any Retained Litigation Claim for which indemnification had not previously been sought under Section 6.4 at any time after December 31, 2003. The termination 35 of the ability of Buyer to seek indemnification under any of clauses (i)-(iv), inclusive, of Section 6.2 shall not affect the ability of Buyer to seek indemnification under any other clause of Section 6.2 with respect to which Buyer's ability to indemnification has not been terminated. (b) All representations and warranties of Buyer shall terminate and expire twenty-four (24) months after the Closing Date; provided, however, that the liability of Buyer shall not terminate as to any specific claim or claims of the type referred to in Section 6.3 hereof, whether or not fixed as to liability or liquidated as to amount, with respect to which Buyer has been given specific notice on or prior to the date on which such liability would otherwise terminate pursuant to the terms of this Section 6.1(b). SECTION 6.2. Obligation of the Sellers to Indemnify. The Sellers jointly and severally agree to indemnify, defend and hold harmless Buyer (and its respective directors, officers, employees, Affiliates, successors and assigns) from and against all Claims, losses, Liabilities, damages, deficiencies, judgments, settlements, costs of investigation or other expenses (including interest, penalties and reasonable attorneys' fees and disbursements and expenses incurred in connection therewith or in enforcing this indemnification) (collectively, the "Losses") suffered or incurred by Buyer, the Company or any of the foregoing persons arising out of (i) any breach of the representations and warranties of the Company or the Sellers contained in this Agreement or in the Schedules or any Transaction Document; (ii) any breach of the covenants and agreements of the Company or the Sellers contained in this Agreement or in the Schedules or any Transaction Document; (iii) any Retained Tax Liabilities or (iv) any Retained Litigation Claims, provided, that with respect to any representation or warranty or covenant that is limited by material, materiality, knowledge, known (or similar terms), or material adverse change in the Condition of the Business, the amount of the Loss arising out of a misrepresentation or breach of representation, warranty or covenant (but not the existence of a misrepresentation or breach of representation, warranty or covenant) for purposes of this Section 6.2 shall be determined as if "material," "materiality," "knowledge," "known" (or similar terms) or material adverse change in the Condition of the Business were not included therein. SECTION 6.3. Obligation of Buyer to Indemnify. Buyer agrees to indemnify, defend and hold harmless each Seller (and any director, officer, employee, Affiliate or successors and assigns of any thereof) from and against any Losses suffered or incurred by such Seller or any of the foregoing persons arising out of any breach of the representations and warranties of Buyer or of the covenants and agreements of Buyer contained in this Agreement or in the Schedules or any Transaction Document. SECTION 6.4. Notice and Opportunity to Defend Third Party Claims. (a) Promptly after receipt by any party hereto (the "Indemnitee") of notice of any demand, claim or circumstance from any third party or parties which would or might give rise to a claim or the commencement (or threatened commencement) of any action, proceeding or investigation (an "Asserted Liability") that may result in a Loss, the Indemnitee shall give notice thereof (the "Claims Notice") to the party or parties obligated to provide indemnification pursuant to Section 6.2 or 6.3 (collectively, the "Indemnifying Party") no later than five (5) business days after an executive officer of the Indemnitee became aware of such Asserted Liability, it being agreed that the failure to give such notice on a timely basis shall affect the obligations of the Indemnifying 36 Party hereunder only to the extent it is actually prejudiced thereby. The Claims Notice shall describe the Asserted Liability in reasonable detail and shall indicate the amount (estimated, if necessary, and to the extent feasible) of the Loss that has been or may be suffered by the Indemnitee. (b) The Indemnifying Party may elect to defend, at its own expense and with counsel reasonably acceptable to the Indemnitee, any Asserted Liability. Notwithstanding the foregoing, if (i) the Asserted Liability seeks an Order, injunction or other equitable or declaratory relief against the Indemnitee (or, if the Indemnity is the Buyer, the Company) or (ii) the Indemnitee shall have reasonably concluded that (x) there is actual conflict of interest between the Indemnitee and the Indemnifying Party in the conduct of such defense or (y) the Indemnitee shall have one or more defenses not available to the Indemnifying Party, the Indemnitee may elect to defend such Asserted Liability, at the Indemnifying Party's expense and with counsel reasonably acceptable to the Indemnifying Party. If the Indemnifying Party elects to defend such Asserted Liability, it shall within thirty (30) days (or sooner, if the nature of the Asserted Liability so requires) notify the Indemnitee of its intent to do so with counsel reasonably acceptable to the Indemnifying Party, and the Indemnitee shall cooperate, at the expense of the Indemnifying Party, in the defense of such Asserted Liability. If the Indemnifying Party elects not to defend the Asserted Liability, is not permitted to defend the Asserted Liability by reason of the second sentence of this Section 6.4(b), fails to notify the Indemnitee of its election as herein provided or contests its obligation to indemnify under this Agreement with respect to such Asserted Liability, the Indemnitee may pay, compromise or defend such Asserted Liability at the sole cost and expense of the Indemnifying Party. Notwithstanding the foregoing, neither the Indemnifying Party nor the Indemnitee may settle or compromise any claim over the reasonable written objection of the other; provided that the Indemnitee may settle or compromise any claim as to which the Indemnifying Party has failed to notify the Indemnitee of its election under this Section 6.4(b) or as to which the Indemnifying Party is contesting its indemnification obligations hereunder. In any event, the Indemnitee and the Indemnifying Party may participate, at their own expense, in the defense of any Asserted Liability. Each party shall make available to the other party any books, records or other documents within its control that are necessary or appropriate for such defense. Any Losses of any Indemnitee for which indemnification is available hereunder shall be paid upon written demand therefor. The Sellers acknowledge and agree that Stock shall have full power and authority to take, in the name and on behalf of the Sellers, any and all actions required or permitted to be taken by the Sellers under this Section 6.4. SECTION 6.5. Limits on Indemnification. (a) Notwithstanding anything to the contrary herein, the Sellers shall not be liable to indemnify Buyer (or its respective directors, officers, employers, Affiliates, successors and assigns) pursuant to Section 6.2(i) or (iv) hereof with respect to any Losses specified therein unless and until Buyer and the Company shall have incurred aggregate Losses under such Sections in an amount in excess of $250,000 in which event Buyer shall be entitled to be indemnified for all Losses under such Sections in excess of $250,000. Except for claims based on fraud or intentional misrepresentation, Sellers' liability under Article VI or otherwise under this Agreement shall not exceed the Purchase Price in the aggregate. 37 (b) In computing the amount of any Losses as to which any Indemnified Party shall be entitled to indemnification hereunder, the following shall apply: (i) the Indemnifying Party shall not be required to indemnify the Indemnitee for consequential or incidental damages suffered by the Indemnitee, but shall be obligated to indemnify to the extent provided herein the Indemnitee for consequential or incidental damages of any third party asserted against the Indemnitee; (ii) the Indemnitee shall cooperate, at the Indemnifying Party's expense, in the investigation and defense of any Claim and shall use reasonable efforts to mitigate Losses. (iii) If the Indemnitee shall be entitled to seek payment in respect of any Loss from any person in addition to the Indemnifying Party, the Indemnitee shall not be entitled to receive an aggregate amount in excess of such Loss from all such persons and the Indemnifying Party. SECTION 6.6. Adjustment. It is the intent of the parties that any amounts paid under Section 6.2 or 6.3 shall represent an adjustment of the Purchase Price and the parties will report such payments consistent with such intent. SECTION 6.7. Exclusive Remedy. Except as otherwise explicitly provided in Section 4.13(c) and Section 7.1 this Agreement or any other Transaction Document, the parties agree that the indemnification provisions of this Article VI shall constitute the parties' sole and exclusive remedies in respect of this Agreement and the Contemplated Transactions (other than Claims in the nature of fraud). ARTICLE VII SPECIFIC PERFORMANCE; TERMINATION SECTION 7.1. Specific Performance; Liquidated Damages. The parties acknowledge and agree that, if either the Buyer or the Sellers fail to proceed with the Closing in any circumstance other than those described in clauses (a), (b), (d) or (e) of Section 7.2 below, the nondefaulting party will not have adequate remedies at Law with respect to such breach and that, in such event, the nondefaulting party shall be entitled, without the necessity or obligation of posting a bond or other security, to commence a proceeding to obtain specific performance of the defaulting party's obligations under this Agreement. SECTION 7.2. Termination. This Agreement may be terminated and the Contemplated Transactions may be abandoned at any time prior to the Closing: (a) By mutual written consent of Shareholder and Buyer; (b) By Shareholder if (i) there has been a material misrepresentation or breach of warranty on the part of Buyer in the representations and warranties contained herein and such 38 material misrepresentation or breach of warranty, if curable, is not cured within thirty (30) days after written notice thereof from Shareholder; (ii) Buyer has committed a material breach of any covenant imposed upon it hereunder and fails to cure such breach within thirty (30) days after written notice thereof from the Agents; or (iii) any condition to the Sellers' obligations hereunder becomes incapable of fulfillment through no fault of the Sellers and is not waived by Shareholder; provided that, on the date of termination, all conditions to Buyer's obligations specified in Section 5.3 shall have been satisfied (other than those specified in clauses (d), (e) and (k) thereof, subject in the case of clauses (d) and (e), to Buyer's receipt of written notice from the obligees of the Debt and the holders of the Liens referred to therein indicating their willingness to then consummate in accordance with the terms of such clauses the transactions contemplated thereby), and the Sellers shall then be otherwise ready, willing and able to proceed with the Closing hereunder; (c) By Buyer, if (i) there has been a material misrepresentation or breach of warranty on the part of the Company or the Sellers in the representations and warranties contained herein and such material misrepresentation or breach of warranty, if curable, is not cured within thirty (30) days after written notice thereof from Buyer; (ii) the Company or any Seller has committed a material breach of any covenant imposed upon it hereunder and fails to cure such breach within thirty (30) days after written notice thereof from Buyer; or (iii) any condition to Buyer's obligations hereunder becomes incapable of fulfillment through no fault of Buyer and is not waived by Buyer; provided that, on the date of termination, all conditions to the Sellers' obligations hereunder specified in Sections 5.2(a), (b) and (e) shall have been satisfied and Buyer shall then be otherwise ready, willing and able to proceed with the Closing hereunder; (d) By Shareholder or by Buyer, if there shall be any Law that makes consummation of the Contemplated Transactions illegal or otherwise prohibited, or if any Order enjoining the Company, any Seller or Buyer from consummating the Contemplated Transactions is entered and such Order shall have become final and nonappealable; and (e) By either the Shareholder or Buyer if the Closing shall not have occurred on or prior to December 31, 2000; provided that (i) if so terminated by the Shareholder, the conditions specified in the proviso of Section 7.2(b) shall have been satisfied on the date of termination and the Sellers shall be then otherwise ready, willing and able to proceed with the Closing, or (ii) if so terminated by Buyer, the conditions specified in the proviso of Section 7.2(c) shall have been satisfied on the date of termination and Buyer shall be then otherwise ready, willing and able to proceed with the Closing. SECTION 7.3. Effect of Termination; Right to Proceed. Subject to the provisions of Section 7.1 hereof, in the event that this Agreement shall be terminated pursuant to Section 7.2, all further obligations of the parties under the Agreement shall terminate without further liability of any party hereunder except (i) to the extent that a party has made a material misrepresentation hereunder or committed a breach of any material covenant and agreement imposed upon it hereunder; (ii) to the extent that any condition to a party's obligations hereunder became incapable of fulfillment because of the breach by a party of its obligations hereunder; and (iii) that the agreements contained in Sections 4.8, 4.9, and 4.11, Article VI and this Section 7.3 shall survive the termination hereof. In the event that a condition precedent to its obligation is 39 not met, nothing contained herein shall be deemed to require any party to terminate this Agreement, rather than to waive such condition precedent and proceed with the Contemplated Transactions. ARTICLE VIII MISCELLANEOUS SECTION 8.1. Notices. (a) Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally by hand or by recognized overnight courier, telecopied or mailed (by registered or certified mail, postage prepaid) as follows: (vii) If to Buyer, one copy to: Six Flags, Inc. 122 East 42nd Street, 49th Floor New York, New York 10168 Telecopier: (212) 949-6203 Attn: Kieran E. Burke, Chairman and CEO and James M. Coughlin, General Counsel with a copy to: Foster Pepper & Shefelman PLLC 1111 Third Avenue, #3400 Seattle, WA 98101-3299 Telecopier: (206) 447-9700 Attn: Gary E. Fluhrer (viii) If to the Company or either Seller, one copy to: EPI Realty Holdings, Inc. 36201 Enchanted Parkway S. Federal Way, WA 98003 Telecopier: (206) 661-8099 Attn: Jeffrey W. Stock, President with a copy to: Lane Powell Spears Lubersky LLP 1420 5th Avenue, Suite 4100 Seattle, WA 98101 Telecopier: (206) 223-7107 Attn: Michael E. Morgan 40 (b) Each such notice or other communication shall be effective (i) if given by telecopier, when such telecopy is transmitted to the telecopier number specified in Section 8.1(a) (with confirmation of transmission); or (ii) if given by any other means, when delivered at the address specified in Section 8.1(a). Any party by notice given in accordance with this Section 8.1 to the other parties may designate another address (or telecopier number) or person for receipt of notices hereunder. Notices by a party may be given by counsel to such party. SECTION 8.2. Entire Agreement. This Agreement (including the Schedules and Exhibits hereto) and the other Transaction Documents executed in connection with the consummation of the Contemplated Transactions contain the final and entire agreement among the parties with respect to the subject matter hereof and the Contemplated Transactions and supersede all prior agreements, written or oral, with respect thereto. SECTION 8.3. Waivers and Amendments; Non-Contractual Remedies; Preservation of Remedies. This Agreement may be amended, superseded, cancelled, renewed or extended only by a written instrument signed by Stock and Buyer. The provisions hereof may be waived in writing by Stock and Buyer. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any such right, power or privilege, nor any single or partial exercise of any such right, power or privilege, preclude any further exercise thereof or the exercise of any other such right, power or privilege. Except as otherwise provided herein, the rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies that any party may otherwise have at law or in equity. SECTION 8.4. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Washington without regard to the conflict of laws provisions thereof. SECTION 8.5. Binding Effect; No Assignment. This Agreement and all of its provisions, rights and obligations shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors, heirs and legal representatives. This Agreement may not be assigned (including by operation of Law) by any party hereto without the express written consent of Buyer (in the case of assignment by the Company or any Seller) or the Shareholder (in the case of assignment by Buyer) and any purported assignment, unless so consented to, shall be void and without effect; provided, however, without obtaining such consent, Buyer may assign its rights hereunder (but not its obligations) to any of its Affiliates. SECTION 8.6. Exhibits. All Exhibits and Schedules attached hereto are hereby incorporated by reference into, and made a part of, this Agreement. SECTION 8.7. Severability. If any provision of this Agreement for any reason shall be held to be illegal, invalid or unenforceable, such illegality shall not affect any other provision of this Agreement, but this Agreement shall be construed as if such illegal, invalid or unenforceable provision had never been included herein. 41 SECTION 8.8. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. SECTION 8.9. Third Parties. Except as specifically set forth or referred to herein, nothing herein express or implied is intended or shall be construed to confer upon or give to any person other than the parties hereto and their permitted successors or assigns, any rights or remedies under or by reason of this Agreement or the Contemplated Transactions. SECTION 8.10. Further Assurances. At any time and from time to time after the Closing Date, upon the request of Buyer, the Sellers will do, execute, acknowledge and deliver, or cause to be done, executed, acknowledged or delivered, all such further documents, instruments or assurances, as may be necessary, desirable or proper to carry out the intent and accomplish the purposes of this Agreement. The Sellers and Buyer will each, respectively, bear their or its own costs and expenses incurred in compliance with the first sentence of this Section 8.10. In addition, at the cost of Buyer, the Sellers will, at any time and from time to time after the Closing Date, cooperate with Buyer in obtaining all financial information regarding the Company for periods prior to the Closing Date required to be filed or made publicly available by Buyer under federal securities laws. ARTICLE IX DEFINITIONS SECTION 9.1. Definitions. The following terms, as used herein, have the following meanings: "Acquisition Proposal" shall mean any proposal involving, directly or indirectly, (i) the acquisition of, or merger or other business combination involving the Company, (ii) the sale or other transfer of any capital stock (or other equity interests) of the Company, (iii) the sale, lease, transfer or management of the Business, (iv) the sale, lease or other transfer of any Assets (except in the ordinary course) and (v) any other transaction inconsistent with the Contemplated Transaction or which would render any of them impossible or impracticable to consummate. "Affiliate" of any person means any other person directly or indirectly through one or more intermediary persons, controlling, controlled by or under common control with such person. "Agreement" or "this Agreement" shall mean, and the words "herein," "hereof" and "hereunder" and words of similar import shall refer to, this agreement as it from time to time may be amended. "Assets" shall mean all properties, rights, interests and assets of every kind, real, personal or mixed, tangible and intangible, used or useful in the Business. 42 "Average Closing Price" shall mean the numerical average of the closing sales price (regular way) per share of Six Flags Common Stock (or, in case no such reported sale takes place on any applicable day the average of the closing bid and asked prices) on the NYSE for each of the five consecutive Trading Days ending two Trading Days prior to the date of determination thereof. "Business" shall mean the ownership and operation of the Assets comprising the business operations of Enchanted Village (the "Park"). "Business Day" shall mean any day other than a Saturday, Sunday or any day on which banks in the State of Washington are not required to conduct business. "Cash" shall mean cash and cash equivalents (including short term investment grade investments with initial maturities of less than thirty (30) days) of the Company. "Condition of Business" shall mean the condition (financial or otherwise), prospects or the results of operations of the Park. "Contract" shall mean any contract, agreement, indenture, note, bond, lease, conditional sale contract, mortgage, license, franchise, instrument, commitment or other binding arrangement, whether written or oral. The term "control," with respect to any person, shall mean the power to direct the management and policies of such person, directly or indirectly, by or through stock ownership, agency or otherwise, or pursuant to or in connection with an agreement, arrangement or understanding (written or oral) with one or more other persons by or through stock ownership, agency or otherwise; and the terms "controlling" and "controlled" shall have meanings correlative to the foregoing. "Debt" of any person shall mean (i) money borrowed by such person from any other person; (ii) any indebtedness of such person arising under leases required to be capitalized under GAAP or evidenced by a note, bond, debenture or similar instrument; (iii) any indebtedness of such person arising under purchase money obligations or representing the deferred purchase price of property and services (other than current trade payables incurred in the ordinary course of the Business); (iv) any indebtedness of any other person secured by a Lien on any asset of such person; (v) all obligations of such person under leases of personal property which are not required to be capitalized under GAAP; and (vi) any Liability of such person under any guaranty, letter of credit, performance credit or other agreement having the effect of assuring a creditor against loss. "Environmental Laws" shall mean any and all Laws (including common law), Orders, Permits, Contracts or any other requirement or restriction promulgated, imposed, enacted or issued by any federal, state, local and foreign Governmental Bodies relating to human health or the environment, including the emission, discharge or Release of pollutants, contaminants, 43 Hazardous Substances or wastes into the environment (which includes, without limitation, ambient air, surface water, ground water, or land), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, Hazardous Substances or wastes or the clean-up or other remediation thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "GAAP" shall mean generally accepted accounting principles in effect on the date hereof in the United States as set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such entities as may be approved by a significant segment of the accounting profession of the United States. "Hazardous Substances" shall mean any dangerous, toxic, radioactive, caustic or otherwise hazardous material, pollutant, contaminant, chemical, waste or substance defined, listed or described as any of such in or governed by any Environmental Law, including but not limited to urea-formaldehyde, polychlorinated biphenyls, asbestos or asbestos-containing materials, radon, explosives, known carcinogens, petroleum and its derivatives, petroleum products, or any substance which might cause any injury to human health or safety or to the environment or might subject the owner or operator of the Real Property to any Regulatory Actions or Claims. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Inventory" shall mean, as of any date, collectively, all inventories of prize materials, food, beverages (alcoholic and nonalcoholic), merchandise, and other products owned by the Company and held for resale or for distribution, together with packaging and samples thereof, operating supplies and spare or maintenance parts owned by the Company as of such date. The term "knowledge" with respect to (a) any individual shall mean actual knowledge after due inquiry and (b) any corporation shall mean the actual knowledge of the directors and the executive officers of such corporation; and "knows" has a correlative meaning. "Lease" shall mean the Ground Lease by and between Shareholder, as lessor, and the Company, as lessee, dated January 1, 2000, as amended and restated at Closing as provided herein. "Liability" shall mean any direct or indirect indebtedness, liability, assessment, claim, loss, damage, deficiency, obligation or responsibility, fixed or unfixed, choate or inchoate, liquidated or unliquidated, secured or unsecured, accrued, absolute, actual or potential, contingent or otherwise (including any liability under any guaranties, letters of credit, performance credits or with respect to insurance loss accruals). 44 "Lien" shall mean, with respect to any asset or Shares, any mortgage, lien (including mechanics, warehousemen, laborers and landlords liens), claim, pledge, charge, security interest, preemptive right, right of first refusal, option, judgment, title defect, or encumbrance of any kind in respect of or affecting such asset or Shares, and in the case of Shares, shall also include any restriction on the right to vote, sell or otherwise dispose of such securities or any ownership interest therein. The term "person" shall mean an individual, corporation, partnership, joint venture, association, trust, unincorporated organization or other entity, including a government or political subdivision or an agency or instrumentality thereof. "Net Working Capital" shall mean an amount determined in accordance with GAAP except to the extent otherwise explicitly provided in this Agreement equal to (a) the sum of (i) Cash of the Company as of the close of business on December 31, 2000 (ii) prepaid expenses of the Company as of the close of business on such date (other than any such expenses relating to insurance or any such expenses not usable or useful in the operation of the Business after December 31, 2000) and (iii) the book value of the Receivables (after deduction of a reserve for doubtful account consistent with the reserve reflected in the most recent Interim Statement) as of the close of business on such date (other than any Receivables generated in respect of the 2001 or subsequent operating season of the Park) less (b) the sum of (i) all liabilities of the Company that would be required to be included on a balance sheet prepared in accordance with GAAP (other than Debt, Taxes, accrued vacation and the items set forth on Schedule 2.7 as being exceptions to GAAP) incurred in respect of the 2000 operating season of the Park (or any previous season) and outstanding as of the close of business on December 31, 2000 (whether classified as a liability, an accrual, a provision or a reserve), including without limitation, all payables, all utilities and similar charges, all bonuses, other compensation or benefits payable (ii) all Taxes for which the Sellers are liable under Section 4.10(b), which were not paid in cash by the Sellers or the Company on or before December 31, 2000 and which are ascertainable by the date on which the Net Working Capital Statement is delivered, determined in accordance with the relevant Tax Laws (rather than in accordance with GAAP) and (iii) the Prepaid Deposits as of the close of business on such date. Net Working Capital shall be calculated including the provisions in Sections 4.14. "Prepaid Deposits" shall mean all proceeds from the sale of season passes, any other pre-sold tickets and any sponsorship or promotional payments received, in each case, with respect to the 2001 season of the Park or any subsequent season thereof. "Receivables" shall mean as of any date any trade accounts receivable, notes receivable, sales representative advances and other miscellaneous receivables of any Company arising in the ordinary course of the Business. "Regulatory Actions" shall mean any Claim, demand, action, suit, summons, citation, directive, investigation, litigation, inquiry, enforcement action, Lien, encumbrance, restriction, settlement, remediation, response, clean-up or closure arrangement or other remedial obligation or proceeding brought or instigated by any Governmental Body in connection with any Environmental Law, including, without limitation, the listing of the Real Property on any list of 45 contaminated or potentially contaminated sites or potential or verified Hazardous Waste sites under any Environmental Law, or any civil, criminal and/or administrative proceedings, whether or not seeking costs, damages, penalties or expenses. "Release" shall mean the intentional or unintentional, spilling, leaking, disposing, discharging or disturbance of, or emitting, depositing, injecting, leaching, escaping, or any other release or threatened release to or from, however defined, any Hazardous Substance in violation of any Environmental Law. "Released Debt" shall mean all Debt of the Company and all Debt of any other person secured by any Lien on the Shares and/or the Assets (other than the Retired Debt). "Retained Tax Liabilities" shall mean any and all Liabilities for Taxes (other than income Tax Liabilities arising out of the Contemplated Transactions that are payable by Buyer) that are payable by any Seller or the Company pursuant to the terms of this Agreement or pursuant to Law arising out of events, transactions, facts or circumstances occurring or existing on or prior to the Closing Date. "Retained Litigation Claims" shall mean any and all Claims against or affecting the Company, the Assets or the Business (other than Claims asserting the breach or default by the Company under any Contract listed on Schedule 2.13), whether asserted prior to or after the Closing Date, arising out of events, transactions, facts or circumstances occurring on or prior to the Closing Date. "Six Flags Common Stock" means the shares of Common Stock, par value $.025 per share, of Six Flags, Inc. as the same exist on the date hereof. "Tax" (including, with correlative meaning, the terms "Taxes" and "Taxable") shall mean (i)(A) any net income, gross income, business and occupation, admissions, gross receipts, sales, use, value added, ad valorem, transfer, transfer gains, franchise, profits, license, withholding, payroll, employment, excise, severance, stamp, rent, recording, occupation, premium, real or personal property, intangibles, environmental or windfall profits tax, alternative or add-on minimum tax, customs duty or other tax, fee, duty, levy, impost, assessment or charge of any kind whatsoever (including but not limited to taxes assessed to or on real property and water and sewer rents relating thereto), together with (B) any interest and any penalty, addition to tax or additional amount imposed by any Governmental Body (domestic or foreign) (a "Tax Authority") responsible for the imposition of any such tax, with respect to the Company, the Business or the Assets (or the transfer thereof); (ii) any liability for the payment of any amount of the type described in the immediately preceding clause (i) as a result of the Company being a member of an affiliated, unitary or combined group with any other corporation at any time prior to the Closing Date; and (iii) any liability of the Company for the payment of any amount of the type described in the immediately preceding clause (i) as a result of any transferee or similar liability or as a result of a contractual obligation to any other person. 46 "Tax Return" shall mean any return or report (including elections, declarations, disclosures, schedules, estimates and information returns) required to be supplied to or filed with any Tax Authority. "Trading Day" means any day on which the NYSE is open. "Transaction Documents" shall mean, collectively, this Agreement, and each of the other agreements and instruments to be executed and delivered by all or some of the parties hereto in connection with the consummation of the Contemplated Transactions. "Transfer Taxes" means all excise, sales, value added, use, registration, stamp, transfer and similar taxes (including without limitation, any real estate transfer taxes relating to the Real Property or any personal property transfer or sales Taxes relating to the Assets), incurred in connection with the transfer of the Shares to Buyer, or otherwise in connection with the Contemplated Transactions. SECTION 9.2. Interpretation. Unless the context otherwise requires, the terms defined in Section 9.1 shall have the meanings herein specified for all purposes of this Agreement, applicable to both the singular and plural forms of any of the terms defined herein. All accounting terms defined in Section 9.1, and those accounting terms used in this Agreement not defined in Section 9.1, except as otherwise expressly provided herein, shall have the meanings customarily given thereto in accordance with GAAP. When a reference is made in this Agreement to Sections, such reference shall be to a Section of this Agreement unless otherwise indicated. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." 47 IN WITNESS WHEREOF, the undersigned have executed this Stock Purchase Agreement as of the date set forth above. SIX FLAGS, INC. By: --------------------------------------- EPI REALTY HOLDINGS, INC. By: --------------------------------------- Name: Jeffrey W. Stock Title: President ENCHANTED PARKS, INC. By: --------------------------------------- Name: Jeffrey W. Stock Title: President By: --------------------------------------- JEFFREY STOCK 48 EX-99.3 6 0006.txt ASSET PURCHASE AGREEMENT ASSET PURCHASE AGREEMENT BETWEEN SEA WORLD, INC. AND SIX FLAGS, INC. TABLE OF CONTENTS PAGE 1. Purchase and Sale 1.1 The Assets..........................................................1 1.2 Excluded Assets.....................................................2 1.3 Assumed Liabilities.................................................3 1.4 Purchase Price......................................................3 1.5 Closing Date........................................................3 1.6 Closing Prorations..................................................4 1.7 Pre-Paid Revenue....................................................5 1.8 Tax Allocation......................................................5 2. Representations and Warranties of Seller 2.1 Organization and Standing of Seller.................................6 2.2 Corporate Power and Authority.......................................6 2.3 Conflicts, Consents and Approvals...................................6 2.4 Existence of and Title to Properties; Liens and Encumbrances; Etc...6 2.5 Condition of Properties.............................................7 2.6 No Litigation; Compliance with Law.................................7 2.7 Brokerage and Finder's Fees.........................................7 2.8 Environmental Matters...............................................7 2.9 Warranty Limitations................................................9 i 2.10 Seller's Knowledge..................................................9 2.11 Taxpayer Identification.............................................9 2.12 Financial Information...............................................9 2.13 Absence of Certain Changes.........................................10 2.14 Contracts..........................................................10 2.15 Tax Matters........................................................11 2.16 Employee Related Matters...........................................11 2.17 Insurance..........................................................12 2.18 Permits............................................................12 3. Representations and Warranties of Buyer 3.1 Organization and Standing of Buyer.................................12 3.2 Corporate Power and Authority......................................12 3.3 Conflicts, Consents and Approvals..................................13 3.4 No Litigation; Compliance with Law.................................13 3.5 Broker and Finder's Fees...........................................13 3.6 Buyer's Knowledge..................................................13 3.7 Taxpayer Identification............................................13 4. Pre-Closing Covenants of Seller 4.1 Access; Cooperation................................................13 4.2 Management of the Assets...........................................14 4.3 Consents and Approvals.............................................15 4.4 Communications.....................................................15 4.5 Announcements......................................................15 4.6 Title Insurance....................................................15 ii 4.7 Survey.............................................................16 4.8 Software License...................................................16 5. Covenants of Seller 5.1 Further Assurances.................................................16 5.2 Removal of Excluded Assets.........................................16 5.3 Film License.......................................................17 5.4 Facilities License.................................................17 5.5 Covenant Not-to-Compete............................................17 6. Pre-Closing Covenants of Buyer 6.1 Consents and Approvals.............................................17 6.2 Communications.....................................................18 6.3 Announcements......................................................18 7. Covenants of Buyer 7.1 Further Assurances.................................................18 7.2 Sea World Drive....................................................18 7.3 Access to Tax and Other Information................................18 8. Conditions Precedent 8.1 Mutual Conditions Precedent........................................19 8.2 Conditions Precedent of Buyer......................................19 8.3 Conditions Precedent of Seller.....................................21 9. Survival and Indemnity 9.1 Survival of Representations and Warranties.........................22 iii 9.2 Indemnity of Seller................................................22 9.3 Indemnity of Buyer.................................................23 9.4 Claims Procedure...................................................23 10. Employee Matters 10.1 Employees..........................................................23 10.2 Accrued Vacation...................................................24 10.3 Interviews.........................................................25 10.4 Severance..........................................................25 10.5 COBRA Continuation Payments........................................26 10.6 Employee Benefit Termination.......................................26 10.7 Health Insurance...................................................26 10.8 ERISA..............................................................26 11. Termination 11.1 Termination........................................................26 11.2 Effect of Termination..............................................27 12. Miscellaneous 12.1 Expenses...........................................................27 12.2 Entire Agreement...................................................27 12.3 Assignment; Binding Effect.........................................27 12.4 Modification, Waiver and Extensions...............................28 12.5 Notices............................................................28 12.6 Bulk Sales Waiver..................................................28 12.7 Schedules..........................................................29 iv 12.8 Captions...........................................................29 12.9 Counterparts.......................................................29 12.10 Severability.......................................................29 12.11 Arm's Length Contract..............................................29 12.12 Time...............................................................29 12.13 Choice of Law......................................................29 12.14 Confidentiality Agreement..........................................29 12.15 No Third Party Beneficiaries.......................................30 v ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into as of the 8th day of January, 2001, by and between SEA WORLD, INC, a Delaware corporation ("Seller"), and SIX FLAGS, INC., a Delaware corporation ("Buyer"). PRELIMINARY STATEMENTS A. Buyer desires to acquire certain real and personal property relating to Seller's facility known as "Sea World of Ohio" situated at 1100 Sea World Drive, Aurora, Ohio 44202 (the "Facility"). B. Seller and Buyer entered into a certain confidentiality letter agreement dated October 18, 2000 (the "Confidentiality Agreement"). C. Seller desires to sell to Buyer the Assets on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants, promises and undertakings set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller hereby agree as follows: Article 1 Purchase and Sale 1.1 The Assets. Subject to all of the terms, conditions and provisions of this Agreement, and for the consideration herein set forth, Seller hereby agrees to sell, and Buyer hereby agrees to buy, free and clear of all liens, pledges, security interests, easements, and encumbrances of any kind or nature whatsoever, or any agreement to give any of the foregoing (collectively, "Liens"), other than the Permitted Exceptions as defined in Section 2.4 hereof, all of Seller's right, title and interest in the following (which are collectively referred to herein as the "Assets"): (a) Real Property. All parcels of real property owned by Seller and located in the counties of Geauga and Portage, Ohio and more specifically described on Schedule 1.1(a) attached hereto (which Schedule shall be based on the title commitment and survey pursuant to Sections 4.6 and 4.7 respectively), together with all easements, rights of way, appurtenances, mineral and water rights and other rights and benefits running with such parcels of real property and all buildings, improvements and fixtures constructed thereon (collectively, the "Real Property"); (b) Animal Assets. All animals located at the Facility which are not "Excluded Assets", including the animals listed on Schedule 1.1(b) attached hereto (collectively, the "Animal Assets"); (c) Tangible Personal Property. All vehicles, furniture, fixtures, machinery, equipment, inventory that does not contain any of Seller's Intellectual Property (except where the Intellectual Property can be removed from the inventory without causing material damage thereto), and all other tangible personal property, wherever located, primarily used or held for use in the Facility and owned by Seller (collectively, the "Tangible Personal Property"). (d) Records and Manuals. All customer lists, manuals, drawings, imprints, engineering and design information, service and parts records, warranty records, maintenance and repair records, records of all employees hired by Buyer (provided employee consents are obtained) and medical records relating to the Assets (collectively, the "Records and Manuals"); (e) Permits. To the extent assignable, all licenses, certificates, variances, permits, consents, authorizations and approvals issued to Seller as of the Closing Date by any governmental or quasi-governmental agency relating to or affecting the ownership or operation of the Assets, all of which material Permits (whether or not assignable) are listed on Schedule 1.1(e) attached hereto (collectively, the "Permits"). (f) Real Property Leases. To the extent assignable, all real property leases described on Schedule 1.1(f) attached hereto (the "Real Property Leases"). (g) Personal Property Leases. To the extent assignable, all personal property leases described on Schedule 1.1(g) attached hereto (the "Personal Property Leases"). (h) Contracts and Agreements. To the extent assignable, all contracts and agreements described on Schedule 1.1(h) attached hereto (collectively, the "Contracts and Agreements"). 1.2 Excluded Assets. Notwithstanding anything to the contrary set forth in Section 1.1 above, the term "Assets" shall specifically not include (i) 3 Killer whales, 4 Commerson dolphins, 6 Bottlenose dolphins, 11 Emperor penguins, and 33 Magellanic penguins located at the Facility; (ii) all intellectual property rights of Seller and its affiliates including without limitation, the names "Anheuser-Busch", "Anheuser-Busch Adventure Parks", "Budweiser" and other malt beverage brand names produced or distributed by Seller or its affiliates, "SeaWorld", "SeaWorld Ohio", "SeaWorld Cleveland", "Shamu", "Dolly Dolphin", and "Clyde and Seamore", "Patagonia Passage", and "Mission: Bermuda Triangle", all names of all shows, attractions, restaurants and other facilities which contain any of the foregoing names, or as listed on Schedule 1.2(a), or which contain a tradename or trademark of Seller or its affiliates, the show name "Fools with Tools", and all signs, merchandise, stationery and other material bearing the identification of Seller or its affiliates or containing any trademark, 2 tradename, servicemark, slogan or logo of Seller or its affiliates (collectively, "Seller's Intellectual Property"); (iii) any Volkswagen "Shamu Bug" vehicles; (iv) all market research or proprietary information; (v) all advertising, marketing, promotional and point of sale materials; (vi) all insurance policies respecting the Seller or the Assets; (vii) all cash and cash equivalents, accounts receivable, notes receivable and other receivables; (viii) all non-assignable computer software and all computer software which is proprietary to Seller including without limitation, the Anheuser-Busch Environmental Quality Manual software and the software listed on Schedule 1.2(b) (which exclusion does not include data relating to the Facility); (ix) any warranties, guaranties or other contractual agreements which are non-assignable and for which consents to assignment are not obtained; (x) all claims and causes of action against third parties respecting the Assets which relate to the period of time prior to the Closing Date including without limitation, any proceeds from real estate tax protests or utility refunds but not including claims relating to the condition of the Assets; (xi) all employment records of Seller's Retained Employees (as defined in Section 10.1); (xii) all income tax returns of Seller and its affiliates and all worksheets related thereto; (xiii) multi-park sponsorship agreements; (xiv) computer systems located in St. Louis, Missouri connected to computers and equipment at the Facility and all associated software (which exclusion does not include data relating to the Facility and stored in such computer systems); and (xv) any assets set forth on Schedule 1.2(c) hereto (collectively, the "Excluded Assets"). 1.3 Assumed Liabilities. (a) Buyer shall assume, pay, fulfill, perform or otherwise discharge the liabilities and obligations of Seller arising and to be performed after the Closing under the Permits, Real Property Leases, Personal Property Leases, and Contracts and Agreements (the "Assumed Liabilities"). (b) Other than the Assumed Liabilities or as otherwise expressly set forth in this Agreement, Buyer shall not assume or be bound by or otherwise be responsible for, any duties, responsibilities, obligations or liabilities of any kind or nature, whether known, unknown, contingent or otherwise, of Seller (the "Excluded Liabilities"). 1.4 Purchase Price. The purchase price for the Assets is One Hundred Ten Million Dollars ($110,000,000), plus or minus any prorations or adjustments made pursuant to this Agreement (the "Purchase Price"). The Purchase Price shall be paid at the Closing by wire transfer of federal funds to a bank account designated by Seller with notification of receipt of funds by Seller's bank on the Closing Date. 1.5 Closing Date. The closing of the purchase and sale of the Assets and the other transactions contemplated by this Agreement (the "Closing") will take place at One Busch Place, in St. Louis, Missouri, in the offices of the corporate parent of Seller, Anheuser-Busch Companies, Inc. at 9:00 a.m. local time on February 3 9, 2001, or at such other place or on such other date as is mutually agreeable to the parties; provided, however, that if any of the conditions to Closing set forth in Section 8.1 of this Agreement have not been satisfied or waived by both parties hereto on or before such date and time, then the Closing will occur at the foregoing place and time on the third business day after such condition has been satisfied or waived, but in no event shall the Closing occur after April 30, 2001. The date and time of the Closing are herein referred to as the "Closing Date." 1.6 Closing Prorations: The following shall be prorated between the parties based on a 365 day year as of 11:59 p.m. of the Closing Date: (a) Real Estate Taxes. If, on the date of the Closing, the real estate tax rate and/or the assessed valuation is fixed for the then current tax year, real estate taxes (including general and special assessments and water and sewerage charges) shall be apportioned on the basis of such tax rate and/or such assessed valuation. If, on the date of the Closing, the real estate tax rate and/or the assessed valuation is not fixed for the then current tax year, real estate taxes (including general and special assessments and water and sewerage charges) shall be apportioned upon the basis of the tax rate and/or the assessed valuation for the preceding tax year (unless otherwise required by Title Company to omit the lien of such taxes for the period prior to the Closing Date from the title policy), but such taxes shall be readjusted at the written request of Seller or Buyer as soon as the applicable rate and assessed valuation are fixed by the appropriate governmental authority. The provisions of this Section shall survive the Closing for a period of eighteen (18) months. (b) Utilities. Seller shall endeavor to have all meters read and final bills rendered for all utilities servicing the Facility including, without limitation, water, sewer, gas and electricity, for the period to and including the day immediately preceding the Closing Date. Seller shall pay all bills for such utilities for the period to and including the day immediately preceding the Closing Date by the due dates thereof. The provisions of this Section shall survive the Closing for a period of one (1) year. (c) Title and Survey. Seller and Buyer each agree to pay one-half of the cost of obtaining the Survey, title insurance commitments and Buyer's and Seller's basic owner A.L.T.A. title insurance policies respecting the Real Property; provided, however, that if either Seller or Buyer desires to obtain any title endorsement(s) extending such title insurance coverage beyond that contemplated herein, then the party requesting such endorsement(s) shall be solely responsible for the cost thereof. (d) Real Property Transfer Taxes and Recording Fees. Seller and Buyer shall each pay one-half of any transfer taxes and recording fees respecting the conveyance of the Real Property at Closing. 4 (e) Sales Taxes. Buyer shall be responsible for all sales, use, or other taxes resulting from the transfer of the Assets. (f) Pre-Paid Expenses. Seller shall receive a credit at Closing for any prepaid expenses or deposits paid by Seller respecting the Assets which are attributable to the period of time after the Closing Date (e.g. taxes, earnest or utility deposits). (g) Contracts. Seller and Buyer shall make such prorations and adjustments under the Contracts and Agreements, Permits, Real Property Leases, and Personal Property Leases as shall be reasonably necessary to reflect Seller's responsibility thereunder for the period of time prior to the Closing Date, and Buyer's responsibility thereunder for the period of time after the Closing Date. (h) Severance. At Closing, Buyer shall pay Seller the Closing Severance Payment and Seller and Buyer shall further adjust severance payments as described in Sections 10.4(c) and 10.5. (i) Other. Any other items of income and expense that arise in transactions of this nature, not specifically addressed in this Agreement, shall be pro rated as customarily done in the location of the Facility. (j) Errors. If any errors or omissions are made at the Closing regarding adjustments or prorations, the parties shall make the appropriate corrections promptly after the discovery thereof. The provisions of this Section shall survive the Closing for a period of one (1) year. 1.7 Pre-Paid Revenue. Schedule 1.7 contains a list of all pre-paid revenues and deposits received by Seller prior to the date hereof, including all group reservation deposits, payments under sponsorship agreements for the Facility (excluding Seller's multi-park sponsorship agreements) relating to post-Closing periods and season pass payments relating to post-Closing periods (collectively, the "Pre-Paid Revenues"). At Closing, Seller shall furnish Buyer with an updated list of all Pre-Paid Revenues and deposits received by Seller prior to the Closing Date. Buyer shall receive a credit at Closing for all of such Pre-Paid Revenues. In the event any party submitting such Pre-Paid Revenue desires a refund, then Buyer shall promptly refund the monies to such party. Buyer shall be responsible for all performance obligations relating to the Pre-Paid Revenues and shall indemnify and hold Seller harmless from the same. The provisions of this Section 1.7 shall survive the Closing and shall not be subject to the Allowance described in Section 9.3 hereof. 1.8 Tax Allocation. The parties agree to allocate the Purchase Price (and all other capitalizable costs) among the Assets for all tax purposes in accordance with Schedule 1.8 hereto; provided, however, that Seller and Buyer agree to allocate not less than fifty percent (50%) of the Purchase Price to goodwill. 5 Buyer shall deliver to Seller at Closing a duly completed and executed IRS Form 8594 (the "Asset Acquisition Statement"). Article 2 Representations and Warranties of Seller In order to induce Buyer to enter into this Agreement, Seller hereby represents, warrants, and agrees as follows: 2.1 Organization and Standing of Seller. Seller is a duly organized and validly existing corporation, in good standing under the laws of the State of Delaware, and has all requisite power and authority, corporate and otherwise, to own, lease, use and operate its properties as now conducted. Seller is duly qualified to do business and is in good standing as a foreign corporation in the State of Ohio. 2.2 Corporate Power and Authority. Seller has full power and authority, corporate and otherwise, to execute and deliver this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Seller. No other corporate acts or proceedings on the part of Seller or any other Person are necessary to authorize this Agreement or the consummation of the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Seller and, when duly executed and delivered by the Buyer, this Agreement will constitute a valid and legally binding obligation of, and will be enforceable against, Seller in accordance with its terms, except as enforceability may be affected by principles of equity, bankruptcy, insolvency, or creditors' rights. 2.3 Conflicts, Consents and Approvals. Except as specifically set forth on Schedule 2.3 hereto, neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, nor compliance by Seller with any of the provisions hereof, will: (i) result in the creation of any Lien upon any of the Assets; (ii) violate any order, writ, injunction, decree, or any statute, rule or regulation applicable to Seller or any of the Assets; (iii) violate any provision of the Certificate of Incorporation or Bylaws of Seller, or (iv) require any action or consent or approval of, or review by, or registration with any third party, court, or governmental body or other agency, instrumentality, or authority, other than as required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") and consents for the assignment of the Permits, Real Property Leases, Personal Property Leases and Contracts and Agreements described herein by the other contracting or issuing parties thereto. 2.4 Existence of and Title to Properties; Absence of Liens and Encumbrances; Etc. Except as set forth on Schedule 2.4 hereto and the Permitted Exceptions respecting the Real Property, Seller owns and has good, valid and marketable title to the Assets, free and clear of any Liens. The term "Permitted Exceptions" shall mean (a) all items set forth in the title commitment and Survey as described in Section 4.6 and Section 4.7 hereof, and the ground 6 lease with Ameritech described in Schedule 2.5 hereof, which do not, and are not reasonably expected to, in the aggregate, interfere in any material respect with the use of the Real Property as currently used by Seller or impair in any material respect the conduct of the Facility as currently conducted by Seller, and which in the case of utility easements to Seller's knowledge will not materially impair any attraction or structure at the Facility; (b) zoning, subdivision, building, and other governmental restrictions; and (c) all real estate taxes and assessments not due and payable as of the Closing Date, or the validity of which are being contested in good faith by appropriate proceedings. 2.5 Condition of Properties. Except as set forth on Schedule 2.5 hereto, all of the Assets material to the operation of the Facility are in good condition, reasonable wear and tear excepted, and conform to all applicable codes, ordinances, regulations and building, zoning or other laws pertaining thereto, and the Assets constitute all of the assets and properties (other than the Excluded Assets) utilized in or necessary to carry on the business and operations of the Facility as presently conducted in all material respects. Except as set forth on Schedule 2.5, no Person has a right to purchase or lease (including right of first refusal and right of first offer) any of the Assets. 2.6 No Litigation; Compliance with Law. Except as set forth herein or on Schedule 2.6 hereto, (i) Seller is not presently engaged in or aware of any situation which could subject Seller or Buyer to any litigation, arbitration, order, condemnation proceeding, claim or other legal proceeding or governmental investigation relating to the Assets, and (ii) Seller has neither received notice nor has knowledge that any Asset or Seller's use of the same is in violation of any applicable law, statute, rule, regulation, ordinance, order, judgment, writ, injunction or decree of any federal, state, or local government or instrumentality or agency thereof. 2.7 Brokerage and Finder's Fees. Seller has not and will not incur any brokerage, finder's or similar fee in connection with the transactions contemplated by this Agreement. 2.8 Environmental Matters. (a) For the purpose of this Section 2.8: (i) "Environmental Laws" shall be defined as all federal, state, and local laws, statutes, rules, regulations, ordinances, and other requirements of any governmental entity now in effect relating to the regulation and protection of the environment including without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste Amendments of 1984, the Clean Air Act, the Federal Water Pollution Control Act, the Emergency Planning Community Right to Know Act, the Toxic Substances Control Act, the Federal Insecticide, 7 Fungicide, and Rodenticide Act and the Hazardous Materials Transportation Act and applicable state laws, all as amended from time to time. (ii) "Hazardous Materials" shall be defined as all chemicals, materials, substances, or wastes (A) now designated or defined or included in any definition under any Environmental Law as "hazardous", "toxic", "pollutant," or "contaminant," and (B) the handling, use of, disposal of or exposure to which is now prohibited, limited or regulated by any Environmental Law. (iii) "Environmental Actions" shall be defined as all actions or causes of action, suits, liabilities, losses, litigations, arbitrations, proceedings, executory or consent decrees, judgments, penalties, fees, costs, expenses, demands, demand letters, orders, claims, encumbrances, notices of noncompliance or violation, relating to compliance or noncompliance with any Environmental Law, or arising from the presence or release (or alleged presence or release) into the environment of any Hazardous Materials. (b) Except as set forth herein or on Schedule 2.8(b) hereto: (i) No parcel of Real Property is listed on the National Priority List established by the United States Environmental Protection Agency (the "EPA"); (ii) The Seller and, to its knowledge, its predecessors and affiliates, have complied and are in compliance with all Environmental Laws, except where such non-compliance would not have a material adverse effect on the ownership or operation of the Assets. (iii) During Seller's ownership of the Real Property and, to its knowledge, at all other times, Hazardous Materials have not been managed, manufactured, produced or generated by, used in, treated or stored on, transported to or from, any parcel of Real Property, other than in the ordinary course of operating the Facility; (iv) During Seller's ownership of the Real Property and, to its knowledge, at all other times, Hazardous Materials have not been released, treated, deposited, emitted, discharged or disposed of, on or from any of the Real Property, in a manner inconsistent with the requirements of any applicable Environmental Laws; (v) There are no pending, or, to the knowledge of Seller, threatened Environmental Actions including, without limitation any existing investigation by any federal, state or local governmental entity, against or concerning Seller or any Real Property nor has Seller received notice of any of the foregoing which have not been resolved; 8 (vi) Seller has not received notice of any unauthorized release or discharge of any Hazardous Materials in, on, under, or affecting any Real Property which has not been remedied; (vii) To the knowledge of Seller, there are no facts which may prevent or interfere with the use of the Real Property or the operation of the Assets in full compliance with applicable Environmental Laws and (viii) No lien or encumbrance has been created on any of the Real Property under Environmental Laws. 2.9 Warranty Limitations. (a) Except as expressly set forth in this Agreement, Seller does not make, nor has Seller authorized any other party to make, any representations or warranties of any kind concerning the Assets or their condition. SELLER MAKES NO EXPRESS OR IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE concerning the Assets. (b) The parties acknowledge and agree that not all Schedules to this Agreement will be completed as of the date of execution of this Agreement. Seller and Buyer agree to cooperate with each other and to promptly prepare and/or update all Schedules as soon as practicable after the requisite information becomes available and to deliver the same to the other party promptly after the preparation thereof. All such updated Schedules shall be delivered not less than two (2) business days prior to Closing and shall be subject to the approval rights of the parties set forth as closing conditions in Sections 8.2 and 8.3 hereof. Except as otherwise provided in any Schedule hereto, neither Seller nor Buyer shall have any liability to the other for any matters clearly disclosed on any Schedule hereto, as the same may be updated. 2.10 Seller's Knowledge. The phrase "to the knowledge of Seller" or similar language, as used in this Agreement and all Exhibits and Schedules hereto, shall mean that the statement is based on, and limited to, the current actual knowledge of the executive officers of Seller who have been involved in the transaction covered by this Agreement and no others. Seller has no knowledge of any inaccuracy in any of Buyer's representations or warranties hereunder. A disclosure of any matter on any schedule hereto shall be deemed to be a disclosure of such matter on all other schedules hereto. 2.11 Taxpayer Identification. The taxpayer identification number of Seller is 13-2873726. 2.12 Financial Information. 9 (a) Seller has previously furnished to Buyer true and complete copies of the divisional financial statements of the Facility (the "Divisional Statements") at and for the periods ended December 31, 1998, December 31, 1999 and November 30, 2000. To Seller's knowledge, the Divisional Statements present fairly the financial position of the Facility as of their respective dates and the Facility's earnings and cash flow for the respective periods then ended, but have not been audited, prepared or presented in accordance with generally accepted accounting principles. (b) Schedule 2.12 accurately sets forth the attendance (by month) at the Facility during 1998, 1999 and 2000. 2.13 Absence of Certain Changes. Since November 30, 2000, except as disclosed in Schedule 2.13, Seller has conducted its business at the Facility in the ordinary course of business consistent with past practices and to Seller's knowledge there has not been: (a) Any material adverse change in the Assets or any material adverse change in the condition (financial or otherwise), results of operations or prospects of the Facility or any event, occurrence or circumstance that could reasonably be expected to cause such a material adverse change; (b) Any material damage, destruction or other casualty loss (whether or not covered by insurance), condemnation or other taking affecting the Assets or the Facility; (c) Except for customary salary and wage increases as of January 1, 2001, and except as set forth in Schedule 2.13, any material increase in the compensation payable or to become payable to any employee of the Seller whose primary duties are at the Facility, or any material alteration in the benefits payable to any such employee. 2.14 Contracts. (a) Schedule 1.1(h) sets forth an accurate and complete list of all material Contracts and Agreements and Schedule 1.1(f) sets forth an accurate and complete list of all material Real Property Leases relating to the Facility or the Assets, copies of which have been or will be made available to Buyer in accordance with the terms hereof. (b) All of the Contracts and Agreements and Real Property Leases so listed are valid, subsisting, in full force and effect and binding upon Seller and, to the knowledge of Seller, the other parties thereto in accordance with their terms. Seller is not in default (or alleged default) under any such Contract or Agreement or any such Real Property Lease in any material respect, nor, to the knowledge of Seller, is any other party thereto in default thereunder in any material respect. 10 2.15 Tax Matters. All amounts required to be withheld from employees of Seller whose primary duties are at the Facility for income taxes, social security and payroll taxes have been collected and withheld, and, to the extent due and payable or required to be deposited, have been paid or deposited to or with the respective governmental agencies or tax authorities or, to the extent not yet due and payable, Seller has adequate cash funds for such purpose. Except for sales taxes which result from the consummation of the transactions contemplated hereby, Seller has paid, or has collected and remitted, to the appropriate tax authority (i) all sales and use or similar taxes relating to the Facility that are required to have been paid or that are required to have been collected, and (ii) all withholding taxes relating to the Facility that are required to have been withheld on or prior to the Closing Date. Except as set forth on Schedule 2.15, neither Seller nor any of its predecessors is a party to, nor has any of them received any notice with respect to, any proposed or pending examination, investigation, audit, action or claim by any tax authority with respect to taxes relating to the Facility (including any power of attorney or request for extension of any period within which a tax may be assessed ), nor are any of them a party to any dispute or, to Seller's knowledge, threatened dispute with respect thereto and no claim for assessment or collection of taxes relating to the Facility has been made upon Seller. 2.16 Employee-Related Matters. (a) Schedule 2.16(a) contains a true and correct list of all non-seasonal employees of the Seller whose primary duties are at the Facility, including any employment contract relating thereto, and a description of the rate and nature of all compensation payable to each such person. (b) Except as set forth in Schedule 2.16(b), (i) Seller is not a party to any contract with any labor organization or other representative of the employees of Seller whose primary duties are at the Facility; (ii) there is no unfair labor practice charge or complaint pending or, to the knowledge of Seller, threatened against Seller relating to the Facility; (iii) Seller has not experienced any labor strike, slowdown, work stoppage or similar labor controversy within the past three years relating to the Facility; and (iv) no representation question has been raised respecting any of the employees of the Facility working within the past three years, nor, to the knowledge of Seller, are there any campaigns being conducted to solicit authorization from the employees of the Facility to be represented by any labor organization. (c) The maximum aggregate amount of all severance payments payable to employees of Seller whose primary duties are at the Facility due to the circumstances described in Section 10.4(a) for which Buyer will ultimately be responsible for is not greater than Three Million Dollars ($3,000,000). 11 2.17 Insurance. Except as set forth in Schedule 2.17, there is no claim with respect to the Facility pending under any of Seller's insurance policies (the "Insurance Policies") as to which coverage has been questioned, denied or disputed by the underwriters of such Insurance Policies or any requirement by any insurer to perform work which has not been satisfied. Schedule 2.17 also sets forth a true and complete list of claims pertaining to the Facility made in respect of the Insurance Policies for the period from January 1, 1998 to November 30, 2000. All premiums payable on or before the Closing Date under all Insurance Policies have been paid and Seller and the Facility are otherwise in compliance in all material respects with the terms and conditions of all such Insurance Policies. All Insurance Policies are in full force and effect. Except as provided in Schedule 2.17, claims under all Insurance Policies are payable on an "occurrence basis" such that a claim of any type covered thereunder that is asserted after the Closing Date for an event that occurred prior thereto would be covered by such Insurance Policies. 2.18 Permits. All material Permits are listed on Schedule 1.1(e) and are in full force and effect; no material violations are or have been recorded in respect of any such Permit within the three years prior to the Closing Date; and no proceeding is pending or, to the knowledge of Seller, threatened to revoke any such Permit. To Seller's knowledge and without any investigation or review by Seller, no such Permit will terminate by reason of the transactions contemplated hereby. Article 3 Representations and Warranties of Buyer In order to induce Seller to enter into this Agreement, Buyer hereby represents, warrants, and agrees as follows: 3.1 Organization and Standing of Buyer. Buyer is a duly organized and validly existing corporation, in good standing under the laws of the State of Delaware, and has all requisite power and authority, corporate and otherwise, to own, lease, use and operate its properties as now conducted. Buyer (or a wholly-owned subsidiary of Buyer that is designated by Buyer pursuant to Section 12.3 to carry out all or part of the transactions contemplated hereby) is duly qualified to do business and is in good standing as a foreign corporation in the State of Ohio. 3.2 Corporate Power and Authority. Buyer has full power and authority, corporate and otherwise, to execute and deliver this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Buyer. No other corporate acts or proceedings on the part of Buyer or its stockholders are necessary to authorize this Agreement or the consummation of the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Buyer and, when duly executed and delivered by the Seller, this Agreement will constitute a valid 12 and legally binding obligation of, and will be enforceable against, Buyer in accordance with its terms, except as enforceability may be affected by principles of equity, bankruptcy, insolvency, or creditor's rights. 3.3 Conflicts, Consents and Approvals. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, nor compliance by Buyer with any of the provisions hereof will (i) violate any order, writ, injunction, decree, or any statute, rule or regulation applicable to Buyer; (ii) violate any provision of the Certificate of Incorporation or Bylaws of Buyer; or (iii) require any action or consent or approval of, or review by, or registration with any third party, court, or governmental body or another agency, instrumentality or authority, other than as required by the HSR Act and consents for the assignment of the permits, contracts and leases described herein by the other contracting parties thereto. 3.4 No Litigation; Compliance with Law. Except as set forth herein or on Schedule 3.4 hereto, Buyer is not presently engaged in or aware of any situation which could subject Seller or Buyer to any litigation, arbitration, order, condemnation proceeding, claim or other legal proceeding or governmental investigation relating to the Assets or arising out of this Agreement in any way. 3.5 Broker and Finder's Fees. Buyer has not and will not incur any brokerage, finder's or similar fee in connection with the transactions contemplated by this Agreement. 3.6 Buyer's Knowledge. The phrase "to the knowledge of Buyer" or similar language, as used in this Agreement and all Exhibits and Schedules hereto, shall mean that the statement is based on and limited to the current actual knowledge of the executive officers of Buyer who have been involved in the transaction covered by this Agreement and no others. Buyer has no knowledge of any inaccuracy in any of Seller's representations or warranties hereunder. A disclosure of any matter on any Schedule hereto shall be deemed to be a disclosure of such matter on all other Schedule's hereto. 3.7 Taxpayer Identification. The taxpayer identification number of Buyer is 13-3995059. Article 4 Pre-Closing Covenants of Seller Seller agrees that, subsequent to the date hereof and prior to the Closing Date: 4.1 Access; Cooperation. Commencing upon the earlier of approval of Seller or January 29, 2001, and up to the day which is two (2) days before the Closing Date, and subject to the terms of the Confidentiality Agreement, Seller will afford to the authorized representatives of Buyer, reasonable access to the Assets and to representatives of Seller to discuss matters relating to the Assets, and Seller shall make available to Buyer all title, survey, environmental and engineering 13 reports in Seller's possession with respect to the Assets, as well as all employment records of all employees of the Seller whose primary duties are at the Facility (other than Retained Employees) provided such employees consent thereto, and all records relating to the payment of sales taxes by Seller in connection with operation of the Facility. Buyer and Buyer's agents will be given the right to perform and conduct any and all necessary physical, engineering, environmental and other inspections of the Assets and all other relevant agreements and documents relating to the Assets as Buyer may reasonably request. Copies of all title, survey, environmental and engineering reports prepared by or on behalf of Buyer (other than those relating to Buyer's planned operation of the Facilities) with respect to the Assets shall be provided promptly to Seller. To the extent Buyer, as a result of these investigations, becomes aware of any claim it may have against Seller, Buyer will promptly give Seller detailed written notice thereof and such notice shall be given to Seller at least two (2) days prior to the Closing Date. Buyer shall perform all such investigations at its sole cost and expense except as expressly provided herein and shall not unreasonably interfere with any continuing operations of Seller. Buyer shall restore the Assets to a condition substantially similar to the condition such Assets were in prior to any such testing. Buyer shall indemnify, defend, and hold Seller harmless against any third party claim arising from Buyer's activities pursuant to this Section including without limitation, reasonable attorneys' fees and court costs. The parties hereby agree that such on-site inspections and investigations shall only be conducted with the consent of and coordination by Seller. The terms of this Section 4.1 shall survive the expiration or termination of this Agreement and the contemplated Closing hereunder, and shall not be subject to the Allowance described in Section 9.3 hereof. 4.2 Management of the Assets. (a) Except as expressly provided in this Agreement, between the date hereof and the Closing Date, Seller shall: (i) conduct the operations of the Facility in the ordinary course of business consistent with past practice, preserve intact the present business organization and structure of the Facility, use its reasonable best efforts to keep available the services of the full-time employees of Seller whose primary duties are at the Facility, use its reasonable best efforts to preserve and maintain the Assets in a manner consistent with their historical use and use its reasonable best efforts to preserve its relationships with vendors, suppliers and others having business dealings with the Facility. (ii) not enter into any Contract or Agreement of a type required to be included on any Schedule hereto except Contracts and Agreements entered into in the ordinary course of business and except Contracts and Agreements approved by Buyer, which approval shall not be unreasonably withheld or delayed. 14 (b) Between the date hereof and the Closing Date, Seller agrees that it will use its reasonable best efforts to conduct the business of the Facility in such a manner so that the representations and warranties of Seller contained herein shall continue to be true and correct on and as of the Closing Date as if made on and as of the Closing Date. 4.3 Consents and Approvals. Seller shall use its reasonable best efforts to obtain all licenses, consents or other approvals required to be obtained by it from any appropriate governmental agency or authority or other person in connection with the consummation of the transactions contemplated by this Agreement, including without limitation (a) securing, whether before or after the Closing, all third party consents to the assignment of the Permits, Real Property Leases, Personal Property Leases, and Contracts and Agreements, and (b) filing under the HSR Act, furnishing all requested materials throughout the HSR process (including any "second request"), and cooperating with all governmental agencies and authorities. Seller shall pay fifty percent (50%) of the HSR filing fee. 4.4 Communications. Prior to the Closing Date, Seller shall promptly notify Buyer of: (a) any notice or other communication delivered or received by Seller (or its representatives) to or from any third party (other than notices or other communications solely among Seller representatives or between Seller and Buyer) with respect to the transactions contemplated hereby (including, without limitation, any notice or other communication to or from any third party objecting to, or alleging that the consent of any person is or may be required in connection with, the transactions contemplated hereby); (b) any event, condition or circumstance occurring from the date hereof through the Closing Date that would constitute a violation or breach of any Seller representation or warranty, whether made as of the date hereof or as of the Closing Date, or that would constitute a violation or breach of any covenant of any party contained in this Agreement. 4.5 Announcements. Seller will not, without the prior consent of Buyer, make any announcement to the public generally concerning the transactions contemplated by this Agreement, except as may be permitted by the Confidentiality Agreement. 4.6 Title Insurance. As soon as practical following the execution of this Agreement, Seller shall obtain a commitment for an A.L.T.A. title insurance policy respecting the Real Property prepared by a national title insurance company (the "Title Company"). A duplicate copy of the title commitment in favor of Buyer shall be furnished to Buyer. Seller and Buyer shall obtain simultaneously issued A.L.T.A. owner's policies of title insurance in an amount 15 equal to the allocated value of the Real Property in Schedule 1.8 hereof, insuring good marketable fee title to the Real Property free and clear of all Liens, other than Permitted Exceptions. 4.7 Survey. Promptly after Seller's disclosure of this sale to the public, Seller shall obtain (with a duplicate original to Buyer) a survey of the Real Property prepared by a licensed surveyor (the "Survey"). The surveyor shall certify the Survey in favor of Seller, Buyer, and the Title Company. Subject to approval of the Survey by Seller, Buyer and the Title Company, the legal description of the Real Property contained in the title commitment and the Survey, shall be the description of the Real Property used in Schedule 1.1(a) and the Deeds (as hereinafter defined). 4.8 Software License. Seller agrees to cooperate with Buyer and reasonably assist Buyer, both before and for a reasonable period of time after Closing, in securing all necessary software used solely for the operation of the Facility, as reasonably requested by Buyer. In particular, Seller shall use best efforts to negotiate a mutually acceptable one (1) year software license with Buyer for such Facility operating software owned by Seller, which license shall apply solely to the Facility. In addition, Seller shall assist Buyer in obtaining consents or licenses from third party owners of such Facility operating software which is licensed to Seller. Notwithstanding anything to the contrary, in no event shall the terms of this Section 4.8 be construed to apply to any software used by Seller to analyze or evaluate Facility performance or demographics, or which is deemed by Seller to give it a competitive advantage over other park operators. Article 5 Covenants of Seller 5.1 Further Assurances. Seller agrees that subsequent to the Closing, at the reasonable request of Buyer, it will execute and deliver, or cause to be executed and delivered to Buyer, or Buyer's designee, such further instruments of transfer and conveyance, and take such other actions as may be necessary to carry out and consummate the transactions contemplated by this Agreement. 5.2 Removal of Excluded Assets. Within thirty (30) days after the Closing, Seller shall, at its sole cost and expense (including with respect to any material damage to the Assets), remove all Excluded Assets and may remove from the Facility or eliminate by painting over or similar actions, all signs, renderings or other materials bearing any of Seller's Intellectual Property; provided, however, that Seller shall not be responsible for replacing any such signs, renderings or other materials bearing any of Seller's Intellectual Property. At all times during such removal, Buyer shall have the right to have a representative present. To the extent not removed by Seller, Buyer shall, at a reasonable cost and expense to be paid by Seller, remove all such signs and materials prior to commencing its 2001 operating season. 16 5.3 Film License. For a period of five (5) years after the Closing Date with respect to the "Pirates!" 3-D film and for a period of ten (10) years after the Closing Date with respect to the "Mission Bermuda Triangle" film, Seller shall provide Buyer with royalty-free licenses for exhibition of such films solely at the Facility in accordance with the Film License Agreement attached as Exhibit F hereto; provided, however, that (i) such films shall be edited by Buyer to remove all references to Seller and to Seller's Intellectual Property; (ii) the "Pirates" film shall be edited by Buyer to remove the Rodney Dangerfield portion thereof; and (iii) Seller shall have received all third party consents required for such licenses to Buyer (which consents Seller shall use best efforts to obtain as soon as reasonably practicable). 5.4 Facilities License. For a period of one (1) year after the Closing Date, Seller shall provide Buyer with a royalty-free license to publicize that the Facility was formerly known as "SeaWorld Ohio" or "SeaWorld Cleveland" in accordance with and to the extent provided by the Facility License Agreement attached as Exhibit G hereto. 5.5 Covenant Not-to-Compete. In order to preserve the value of the Assets being acquired by Buyer hereunder, Seller agrees that it will not, and will cause its affiliates not to, for a period of three (3) years from the Closing Date, directly or indirectly, as a partner, officer, employee, director, stockholder, investor, lender, proprietor, consultant, representative, agent or otherwise, become or be interested in, or associate with or render assistance to, any person (other than Buyer) engaged in the ownership, operation and/or management of any "Sea World" or similar marine zoological park facility located within one hundred fifty (150) miles of the Facility. The foregoing provisions shall not, however, (i) affect in any way the conduct by Seller or its affiliates of any other facility owned by them outside of such restricted area, or (ii) prohibit the ownership by any person of not more than two percent (2%) of any class of outstanding equity securities listed for trading on a national securities exchange or publicly traded in the over-the-counter market of any person (other than Buyer) which engages in any such business. Article 6 Pre-Closing Covenants of Buyer Buyer agrees that, subsequent to the date hereof and prior to the Closing Date: 6.1 Consents and Approvals. Buyer shall use its reasonable best efforts to obtain all licenses, consents or other approvals required to be obtained by it from any appropriate governmental agency or authority or other person in connection with the consummation of the transactions contemplated by this Agreement, including without limitation (a) securing all third party consents to the assignment of the Permits, Real Property Leases, Personal Property Leases, and Contracts and Agreements, and (b) filing under the HSR Act, furnishing all requested materials throughout the HSR process (including any "second request"), and 17 cooperating with all governmental agencies and authorities. Buyer shall pay fifty percent (50%) of the HSR filing fee. 6.2 Communications. Prior to the Closing Date, Buyer shall promptly notify Seller of: (a) any notice or other communication delivered or received by Buyer (or its representatives) to or from any third party (other than notices or other communications solely among Buyer representatives or between Buyer and Seller) with respect to the transactions contemplated hereby (including, without limitation, any notice or other communication to or from any third party objecting to, or alleging that the consent of any person is or may be required in connection with, the transactions contemplated hereby); (b) any event, condition or circumstance occurring from the date hereof through the Closing Date that would constitute a violation or breach of any Buyer representation or warranty, whether made as of the date hereof or as of the Closing Date, or that would constitute a violation or breach of any covenant of any party contained in this Agreement. 6.3 Announcements. Buyer will not, without the prior consent of Seller, make any announcement to the public generally concerning the transactions contemplated by this Agreement, except as may be permitted by the Confidentiality Agreement. Article 7 Covenants of Buyer 7.1 Further Assurances. Buyer agrees that subsequent to the Closing, at the reasonable request of Seller, it will execute and deliver, or cause to be executed and delivered to Seller, or Seller's designee, such further instruments of transfer and conveyance, and take such other actions as may be necessary to carry out and consummate the transactions contemplated by this Agreement. 7.2 Sea World Drive. Buyer, at its sole cost and expense, shall immediately after Closing petition all appropriate governmental authorities to change the name of the public road known as "Sea World Drive" to remove "SeaWorld" from the name thereof. Buyer shall diligently use its reasonable best efforts to cause such name change to be effectuated as soon as practicable after Closing. 7.3 Access to Tax and Other Information. For a period of three (3) years after the Closing Date or the expiration of all statutes of limitation, whichever is longer (the "Review Period"), upon the request of Seller, Buyer hereby grants to Seller and Seller's employees, agents and representatives the right, upon forty-eight (48) hours' notice and during normal business hours, to inspect and copy the books, records and other documents of Buyer and to consult with the employees, agents and representatives of Buyer in connection with (i) any claim 18 or investigation by the Internal Revenue Service or any state, local or foreign taxing authority, (ii) the prosecution or defense of any other claim or suit, which is made by or against Seller, (iii) the substantiation that no payments (including money, property, services, and all other forms of consideration) have been made by or on behalf of Buyer or for the benefit of any employee or agent of Seller who may be reasonably expected to influence Seller's decision to enter into this Agreement, or (iv) for any other reasonable business purpose. Article 8 Conditions Precedent 8.1 Mutual Conditions Precedent. The obligations of Seller, on the one hand, and of Buyer, on the other hand, to consummate the transactions contemplated herein shall be subject, in each instance, to the fulfillment or written waiver, of each of the following conditions at or prior to the Closing: (a) Premerger Notification. The parties hereto shall have made all filings and furnished all materials required by the HSR Act with respect to the transactions contemplated hereby, and all waiting periods (as may be extended by any governmental agency request) under the HSR Act shall have expired or been terminated without the institution of a proceeding challenging the transactions contemplated hereby by the Federal Trade Commission or the United States Department of Justice. (b) Legal Action. No temporary restraining order, preliminary injunction or permanent injunction or other order preventing the consummation of the transactions contemplated hereby shall have been issued by any federal or state court and remain in effect, and, with respect to litigation by any governmental or quasi-governmental agency, no litigation seeking the issuance of such an order or injunction, or seeking the imposition against Seller, or Buyer of damages if the purchase and sale contemplated hereby is consummated, shall be pending which has a reasonable probability of resulting in such order, injunction or damages. 8.2 Conditions Precedent of Buyer. The obligations of Buyer hereunder to consummate the transactions contemplated herein shall be subject, in each instance, to the following conditions: (a) Accuracy of Warranties. All of the representations and warranties of Seller contained in this Agreement, and in any document or instrument delivered in connection with this Agreement, or the transactions contemplated hereby, shall be true, complete and correct in all material respects at and as of the Closing Date as though such representations and warranties were made as of the Closing Date, and Seller shall have performed all obligations and complied with all covenants and conditions required by this Agreement at or prior to the Closing Date. 19 (b) Seller Closing Documents. Delivery by Seller to Buyer at the Closing of the following documents, each dated the Closing Date unless otherwise specified. (i) Limited Warranty Deeds in the forms of Exhibit A-1 (Geauga County) and Exhibit A-2 (Portage County) attached hereto (the "Deeds") conveying the Real Property, duly executed and acknowledged by Seller and in recordable form, conveying to Buyer title to the Real Property, subject only to the Permitted Exceptions; (ii) A bill of sale duly executed by Seller respecting the Animal Assets, Tangible Personal Property, and Records and Manuals in the form of Exhibit B attached hereto (the "Bill of Sale"); (iii) An assignment and assumption agreement duly executed by Seller respecting the Permits (if any) in the form of Exhibit C attached hereto (the "Permit Assignment"); (iv) An assignment and assumption agreement duly executed by Seller respecting the Real Property Leases in the form of Exhibits D-1 and D-2 attached hereto (the "Real Property Lease Assignment"), together with all required landlord consents thereto (the "Landlord Consents"). (v) An assignment and assumption agreement duly executed by Seller respecting the Contracts and Agreements and Personal Property Leases in the form of Exhibit E attached hereto (the "Contracts Assignment"). (vi) The Film License Agreement duly executed by Seller in the form of Exhibit F attached hereto. (vii) The Facility License Agreement duly executed by Seller in the form of Exhibit G attached hereto. (viii) An affidavit, duly executed by Seller, stating under penalty of perjury, Seller's United States taxpayer identification number and that Seller is not a "foreign person" as defined in Section 1445(f)(3) of the Code and otherwise in the form prescribed by the Internal Revenue Service; (ix) A certificate, duly executed by a Vice-President or the President of Seller certifying, to Seller's actual knowledge, that except as specifically stated therein the representations and warranties made in this Agreement by Seller are true and correct as of the Closing Date with the same effect as if made at and as of such time, and that Seller waives all conditions to Closing. 20 (x) Copies of the resolutions, certified by the Secretary or an Assistant Secretary of Seller as being in full force and effect on the Closing Date, duly adopted by the Board of Directors of Seller evidencing the approval and authorization of the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the taking of all necessary corporate action to enable Seller to comply with all of the terms of this Agreement. (xi) An affidavit of title in the form required by the Title Company in order to issue the title policies contemplated hereunder. (xii) A certificate of good standing of Seller, certified by the Secretary of State of Delaware dated within ten (10) days prior to the Closing. (c) Approval of Seller Schedules. Buyer's approval of all schedules which are added or modified by Seller after the date of execution of this Agreement. 8.3 Conditions Precedent of Seller. The obligations of Seller hereunder to consummate the transactions contemplated herein shall be subject, in each instance, to the following conditions: (a) Accuracy of Warranties. All of the representations and warranties of Buyer contained in this Agreement, and in any document or instrument delivered in connection with this Agreement, or the transactions contemplated hereby, shall be true, complete and correct in all material respects at and as of the Closing Date as though such representations and warranties were made as of the Closing Date and Buyer shall have performed all obligations and complied with all covenants and conditions required by this Agreement at or prior to the Closing Date. (b) Buyer Closing Documents. Delivery by Buyer to Seller at the Closing of the following documents, each dated the Closing Date unless otherwise specified: (i) Two (2) Real Property Conveyance Fee Statement of Value and Receipts duly executed by Buyer for each of the Deeds (one for Geauga County and one for Portage County); (ii) The Permits Assignment, if any, duly executed by Buyer; (iii) The Real Property Lease Assignment duly executed by Buyer. (iv) The Contracts Assignment duly executed by Buyer; (v) The Film License Agreement duly executed by Buyer; (vi) The Facility License Agreement duly executed by Buyer; 21 (vii) A certificate duly executed by a Vice President or the President of Buyer, certifying, to Buyer's actual knowledge, that except as specifically stated therein the representations and warranties made by Buyer in this Agreement are true and correct as of the Closing Date with the same effect as if made at and as of such time and that Buyer is satisfied with the results of its inspections and investigations and waives all conditions to Closing; (viii) A certificate of good standing of Buyer, certified by the Secretary of State of Delaware dated within ten (10) days prior to the Closing; and (ix) Copies of the resolutions, certified by the Secretary or an Assistant Secretary of Buyer as being in full force and effect on the Closing Date, evidencing that the Board of Directors of Buyer have approved and authorized the execution of this Agreement, the consummation of the transactions contemplated hereby and thereby and the taking of all necessary corporate action to enable them to comply with all of the terms of this Agreement. (x) Duly completed and executed Asset Acquisition Statement as described in Section 1.8 hereof. (c) Approval of Buyer Schedules. Seller's approval of all schedules which are added or modified by Buyer after the date of execution of this Agreement Article 9 Survival and Indemnity 9.1 Survival of Representations and Warranties. The representations and warranties made by the parties hereto and contained herein or in any other document or agreement delivered in connection herewith shall survive the Closing and continue for a period of eighteen months from and after the Closing Date, and thereafter no claims (for indemnification or otherwise) may be brought with respect to such representations and warranties except to the extent that a party shall have notified the other party of any such breach or failure to perform prior to such termination or expiration date; provided, however, that the representations and warranties in Section 2.8 and the obligation to indemnify in respect thereof shall survive for a period of two (2) years, and the representations and warranties in Sections 2.2, 2.4, 2.7, 3.2 and 3.5 and the obligation to indemnify in respect thereof shall survive indefinitely. 9.2 Indemnity by Seller. Subject to the survival periods set forth in Section 9.1 and the claim procedures set forth in Section 9.4 hereof, and subject further to the provisions of Section 2.9(b), Seller agrees to indemnify Buyer and hold it harmless against any loss, liability, damage or expense (including reasonable attorneys fees, legal expenses and costs) which Buyer may suffer, sustain or become subject to, as the result of (a) a breach of any representation or warranty 22 by Seller contained in this Agreement or the other agreements to be delivered in connection with the closing of this transaction; (b) a breach of the covenants and agreements of Seller contained in this Agreement or the other agreements to be delivered in connection with the closing of this transaction; or (c) any Excluded Liabilities; provided, however, that Seller will not be liable for any such loss, claim, damage, liability or expense described in (a) above (other than for a breach of Sections 2.2, 2.4 and 2.7), unless the aggregate amount of all such losses, claims, damages, liabilities and expenses resulting to Buyer from all such breaches or claims exceeds $1,000,000 (the "Allowance"), and then Seller shall be liable for all such amounts (starting from the first dollar). 9.3 Indemnity by Buyer. Subject to the survival periods set forth in Section 9.1 and the claim procedures set forth in Section 9.4 hereof, Buyer agrees to indemnify Seller and hold it harmless against any loss, liability, damage or expense (including reasonable attorneys fees, legal expenses and costs) which Seller may suffer, sustain or become subject to, as the result of (a) a breach of any representation or warranty by Buyer contained in this Agreement or the other agreements to be delivered in connection with the Closing of this transaction (b) a breach of the covenants and agreements of Buyer contained in this Agreement or the other agreements to be delivered in connection with the closing of this transaction, or (c) any Assumed Liabilities provided, however, that Buyer will not be liable for any such loss, claim, damage, liability or expense described in (a) above (other than for a breach of Sections 3.2 and 3.5), unless the aggregate amount of all such losses, claims, damages, liabilities and expenses resulting to Seller from all such breaches or claims exceeds the Allowance set forth in Section 9.2, and then Buyer shall be liable for all such amounts (starting from the first dollar). 9.4 Claims Procedure. If any claim is made or litigation is commenced against a party to this Agreement in respect of which indemnity may be sought hereunder, the party seeking indemnification (the "Aggrieved Party") shall, upon being legally served with, or otherwise notified of, such claim or litigation, promptly notify the party from whom indemnity is sought (the "Indemnifying Party") thereof in writing, and the Indemnifying Party shall thereupon fulfill its obligation to defend the Aggrieved Party against any such claim or litigation. Time is of the essence with respect to such notice provided, however, that the failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party from (i) any liability under this Section 9, except to the extent that it has been prejudiced in any material respect by such failure; or (ii) any liability it may have otherwise. The Aggrieved Party's counsel may participate in the defense of any such claim or litigation, provided that the Indemnifying Party shall direct and control the defense of any such claim or litigation. Any such participation by the Aggrieved Party shall be at the Aggrieved Party's expense. Article 10 Employee Matters 10.1 Employees. 23 (a) Seller, at its election, shall be entitled to retain up to ten (10) of Seller's employees whose primary duties are at the Facility and who are listed on Schedule 10.1 hereto (the "Retained Employees.") All other employees of Seller whose primary duties are at the Facility (the "Terminated Employees") shall be terminated from employment as of the Closing Date; provided, however, that the General Manager and Vice President/General Curator may resign rather than be terminated by Seller, but such persons shall be considered as "Terminated Employees" for the purposes of this Agreement. (b) Buyer understands and agrees that, to the extent Buyer fails to hire fifty (50) or more Terminated Employees and such failure without any other action by Seller (other than any action by Seller contemplated under this Agreement) causes Seller liability pursuant to the Worker Adjustment and Retraining Notification Act and similar state and local statutes ("WARN"), Buyer shall be responsible for, assume all liability for and indemnify, defend and hold harmless Seller for such WARN liability and all WARN obligations, including all notices. (c) Buyer also agrees that it will make decisions on which Terminated Employees it will hire as soon as practical under the circumstances. In any event, Buyer agrees that any Terminated Employees who accepts employment with Buyer will be placed on Buyer's payroll effective as of the day following the Closing Date. (d) Buyer agrees to provide to Seller notice of the names of all Terminated Employees who accept employment with Buyer. Upon receipt of such notice, Seller agrees that it will transfer to Buyer the employment records for the Terminated Employees who accept such employment (assuming employee consents have been obtained). (e) Seller shall be entitled at any time to re-hire any former employee of Seller (i) who is not hired by Buyer, (ii) who is hired by Buyer, but is subsequently terminated by Buyer, or (iii) after 12 months of such employment, voluntarily leaves the employ of Buyer. (f) For a period of two (2) years after the Closing Date, Seller shall not solicit for hire any of the Terminated Employees hired by Buyer, except for those employees that (i) are subsequently terminated by Buyer, or (ii) after 12 months of such employment, voluntarily leave the employ of Buyer. 10.2 Accrued Vacation. Seller shall be responsible for paying to the Terminated Employees all accrued but unused vacation benefit pay due to such Terminated Employees under Seller's vacation policy for the period up to and including the Closing Date. 24 10.3 Interviews. Commencing upon the earlier of approval of Seller or January 29, 2001, Seller and Buyer shall make mutually acceptable arrangements for Buyer to interview the employees of Seller whose primary duties are at the Facility and to review employee files with the prior written consent of the subject employee. Until such condition has been satisfied, Buyer agrees not to contact any of such employees without the prior written consent of Seller. 10.4 Severance. Buyer agrees that it will reimburse Seller for severance payments payable to Seller's employees in accordance with Seller's severance plan attached as Schedule 10.4 hereto, and as supplemented by and in accordance with the terms hereof, under the following circumstances: (a) if Buyer fails to make a "qualified offer" contemporaneously with Closing to any Terminated Employee; and also if Buyer does make a "qualified offer" contemporaneously with Closing and a Terminated Employee accepts employment with Buyer, but is later terminated by Buyer (for a reason other than willful misconduct, voluntary resignation or retirement) within one (1) year after the Closing Date. Severance reimbursement payments due from Buyer to Seller under this Section 10.4(a) will be that amount that would have been payable to the Terminated Employee at Closing if the employee had not been made a qualified offer. (b) A "qualified offer" is defined as one that includes a rate of pay that is at least ninety percent (90%) of such Terminated Employee's base pay in effect on the Closing Date and with non-cash benefits commensurate with a similar position at Buyer's Six Flags Ohio operation. (c) At Closing, Buyer shall pay to Seller an amount equal to the severance cost (the "Closing Severance Payment") Seller will become obligated to pay to Terminated Employees who will not receive a "qualified offer" by Buyer as described in this Section 10.4 (the "Unoffered Terminated Employees"). Seller shall be responsible for making all payments to the Unoffered Terminated Employees in accordance with Seller's severance plan and the terms of this Agreement. With respect to Terminated Employees who accept employment with Buyer but are terminated by Buyer within one (1) year after the Closing Date (for a reason other than willful misconduct, voluntary resignation or retirement) as described in Section 10.4(a) above (the "Transferred Employees"), Buyer shall promptly notify Seller in writing of such persons and Buyer shall make all payments due such Transferred Employees in accordance with Seller's Severance Plan and the terms hereof, but in no event shall such payment be less than an amount equal to twelve (12) weeks of wage continuation (the "Transferred Employees Severance Payments"). In the event the foregoing twelve (12) week minimum wage continuation payment is more than the amount otherwise due to the Transferred Employee pursuant to 25 Seller's Severance Plan and the terms hereof, then Seller shall reimburse Buyer for the incremental difference. Promptly after the one (1) year anniversary date of the Closing, Buyer shall provide Seller with a list of the names and addresses of all such Transferred Employees terminated by Buyer within said one year period and the amounts paid to such persons, including the incremental amounts of any Transferred Employee Severance Payment, and Seller shall promptly reimburse Buyer for the incremental portion of such Transferred Employees Severance Payments. 10.5 COBRA Continuation Payments. With respect to any Transferred Employee terminated by Buyer within one (1) year after the Closing Date as described above, Buyer shall pay on behalf of such Transferred Employee the premiums due for a period of three (3) months for continuation of health care coverages pursuant to the Consolidated Omnibus Reconciliation Act of 1985 ("COBRA"). Promptly after the one (1) year anniversary date of the Closing, Buyer shall provide Seller with a list of the names and addresses of such Transferred Employees and the amount paid by Buyer for each such Transferred Employee for such COBRA continuation coverage, and Seller shall promptly reimburse Buyer for such amount. 10.6 Employee Benefit Termination. Participation of Seller's employees in all of the employee benefit plans in which they participate shall terminate at 11:59 p.m. on the Closing Date unless otherwise specifically provided in the applicable plan document. 10.7 Health Insurance. All employees accepting employment with Buyer who are covered under any group health plan maintained by Seller on the Closing Date shall be covered under a group health plan maintained by Buyer as of 12:00 a.m. on the day following the Closing Date, and their dependents shall also be so covered to the extent dependent coverage is currently provided by Seller and such election has been properly made by the respective employee under Seller's group health plan. Buyer's group health plan or plans shall be responsible for any expenses covered thereunder that are incurred after the Closing Date without any preexisting condition limitations or exclusions. 10.8 ERISA. Seller will be responsible for satisfying obligations under Section 601 et seq. of ERISA and Section 4980B of the Code to provide continuation coverage (commonly referred to as "COBRA coverage") to or with respect to any of its employees on account of any "qualifying event" that occurs on or before the Closing Date. Buyer will be responsible for satisfying such obligations to or with respect to any employee of Buyer on account of any "qualifying event" which occurs following the Closing Date. Article 11 Termination 11.1 Termination. This Agreement may be terminated prior to the Closing: 26 (a) by mutual written consent of Seller and Buyer; or (b) by the non-defaulting party if the other party (i) fails to timely perform or satisfy its obligations or covenants hereunder following written notice of such failure and the expiration of not less than ten (10) business days opportunity to cure any such failure or (ii) is in material breach of a representation or warranty and such breach, if curable, is not cured within thirty (30) days of written notice thereof. 11.2 Effect of Termination. In the event of termination of this Agreement by either Seller or Buyer as provided above, this Agreement will forthwith become void and there will be no liability on the part of either Buyer or Seller to the other party or any third party, except for (i) material breaches of this Agreement prior to the time of such termination; (iii) any provisions hereof which expressly provide for survival after termination; and (iii) the parties' continuing obligations under the Confidentiality Agreement. Article 12 Miscellaneous 12.1 Expenses. Unless otherwise expressly provided herein, each of the parties hereto shall bear the expenses incurred by that party incident to this Agreement and the transactions contemplated hereby including without limitation, all fees and disbursements of counsel, experts and accountants retained by such party, whether or not the transactions contemplated hereby shall be consummated. 12.2 Entire Agreement. This Agreement and the Schedules and Exhibits attached hereto, together with the Confidentiality Agreement, contain the entire understanding of the parties hereto with respect to the transactions contemplated hereby and may be amended, modified, supplemented or altered only by a writing duly executed by all of the parties hereto, and any prior agreements, representations, warranties or understandings, whether oral or written, are entirely superseded thereby. All Schedules and Exhibits attached hereto are hereby incorporated by reference herein and made a part hereof as if fully set forth herein. All Schedules and Exhibits not attached hereto at the time of execution hereof shall be incorporated herein and made a part hereof at the time of their attachment. 12.3 Assignment; Binding Effect. This Agreement shall inure to the benefit of and shall be binding upon the parties hereto and their respective heirs, successors and permitted assigns. This Agreement shall not, however, be assignable or transferable, in whole or in part, by any party hereto except upon the express prior written consent of the other party hereto. Any attempt to assign or otherwise transfer this Agreement or any rights or obligations hereunder in violation of the foregoing shall be void. Notwithstanding the foregoing, the parties agree that Buyer may cause one or more wholly-owned subsidiaries of Buyer designated by it to carry out all or part of the transactions contemplated 27 hereby to be carried out by Buyer, provided that any such assignment shall not relieve the Buyer of its obligations hereunder. Nothing contained in this Agreement is intended to confer upon any person, other than the parties hereto and their respective successors and permitted assigns, any rights, remedies or obligations under, or by reason of, this Agreement. 12.4 Modification; Waiver and Extensions. Buyer, on the one hand, and Seller, on the other hand, may, by written instrument, extend the time for the performance of any of the obligations or other acts of the other, waive any inaccuracies of the other in the representations and warranties contained herein or in any document delivered pursuant to this Agreement, waive compliance with any of the covenants of the other contained in this Agreement, and waive the other's performance of any of the obligations set out in this Agreement. No modification, waiver or extension of any of the provisions of this Agreement and no consent by Buyer, on the one hand, or Seller, on the other hand, to any departure therefrom by the other shall be effective unless such modification, waiver or extension shall be in writing and signed by the party or parties to be bound, and the same shall then be effective only for the period and on the conditions and for the specific instances and purposes specified in such writing. No notice to or demand on any of the parties hereto in any case shall entitle it, them or any of them to any other or further notice or demand in similar or other circumstances. 12.5 Notices. All notices, demands, consents or other communications required or permitted hereunder shall be in writing and shall be deemed to have been given when personally delivered or sent by reputable overnight air courier or registered or certified mail, return receipt requested, postage prepaid, addressed as follows: if to Seller c/o Busch Entertainment Corporation 231 South Bemiston, Suite 600, Clayton, Missouri 63105, Attention: Andrew P. Fichthorn; with a copy to Anheuser-Busch Companies, Inc., One Busch Place, Legal Department, 202-6, St. Louis, Missouri 63118 Attention: Royce J. Estes; and, if to Buyer to Six Flags, Inc., 122 East 42nd Street, 49th Floor, New York, New York 10168, Attention: Kieran E. Burke, Chairman and CEO and James M. Coughlin, General Counsel, with a copy to Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153, Attention: Howard Chatzinoff or to such other addresses as may hereafter be furnished in writing which is given in the manner required above. Any notice, demand, consent or communication given hereunder in the manner required above shall be deemed to have been effected and received as of the date hand delivered, as of the date received if sent by overnight air courier, or, if mailed, five (5) days after the date so mailed. 12.6 Bulk Sales Waiver. Seller and Buyer each waive compliance by the other with any bulk sales or similar laws that may be applicable to the transactions contemplated by this Agreement. 28 12.7 Schedules. The parties agree that the disclosure of any matter on any particular Exhibit or Schedule to this Agreement shall constitute disclosure of such matter on all other Exhibits or Schedules to this Agreement. 12.8 Captions. The captions of the various articles and sections of this Agreement have been inserted for the purpose of convenience of reference only, and such captions are not a part of this Agreement and shall not be deemed in any manner to modify, explain, enlarge or restrict any of the provisions of this Agreement. 12.9 Counterparts. This Agreement may be executed by the parties hereto individually or in any combination, in one or more counterparts, each of which shall be an original and all of which shall together constitute one and the same agreement. This Agreement may be executed by facsimile signature and upon such facsimile execution shall be deemed tantamount to an original execution. 12.10 Severability. If any provision or provisions of this Agreement or of any of the documents or instruments delivered pursuant hereto, or any portion of any provision hereof or thereof, shall be deemed invalid or unenforceable pursuant to a final determination of any court of competent jurisdiction, or as a result of future legislative action, such determination or action shall be construed so as not to affect the validity or enforceability hereof or thereof and shall not affect the validity or effect of any other portion hereof or thereof, unless, as a result of such determination or action, the consideration to be received or enjoyed by any party hereto would be materially impaired or reduced. 12.11 Arm's Length Contract. This Agreement has been negotiated "at arm's length" by the parties hereto, each represented by counsel of its choice and each having an equal opportunity to participate in the drafting of the provisions hereof. Accordingly, in construing the provisions of this Agreement neither party shall be presumed or deemed to be the "drafter" or "preparer" of the same. 12.12 Time. Time is of the essence of all obligations of the parties under this Agreement. 12.13 Choice of Law. This Agreement, and all instruments delivered pursuant hereto or incorporated herein, unless otherwise expressly provided therein, shall in all respects be construed in accordance with and governed by the substantive laws of the State of Delaware without giving effect to the conflicts of laws principles thereof, and venue of all actions arising under or related to this Agreement shall be in the courts of that state. 12.14 Confidentiality Agreement. Seller and Buyer hereby ratify and confirm their respective obligations under the Confidentiality Agreement. Exhibit B to the Confidentiality Agreement is hereby amended to add Paul B. Powers, Attorney, and G. Anthony Taylor, Attorney to the end thereof. 29 12.15 No Third Party Beneficiaries. Nothing herein express or implied is intended or shall be construed to confer upon or give to any person other than the parties hereto and their permitted successors or assigns, any rights or remedies under or by reason of this Agreement or the transactions contemplated hereby. IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written. SEA WORLD, INC. SIX FLAGS, INC. By: /s/ Andrew P. Fichthorn By: /s/ James M. Coughlin --------------------------- --------------------------- Andrew P. Fichthorn James M. Coughlin Vice President - Vice President Planning and Development 30 EX-99.4 7 0007.txt AMENDMENT TO EMPLOYMENT AGREEMENT Amendment to Employment Agreement --------------------------------- Amendment, dated as of January 1, 2000 ("Amendment") to Employment Agreement, dated as of July 31, 1997 (the "Employment Agreement") between Premier Parks Inc. (the "Company") and Kieran E. Burke (the "Executive"). --------------------------------------------- The Company and the Executive are parties to the Employment Agreement and wish to extend the Term thereof and make certain other amendments thereto. Capitalized terms used and not defined herein shall have the meanings ascribed to them in the Employment Agreement. NOW, THEREFORE, the parties, intending to be legally bound, agree as follows. 1. Section 3 of the Employment Agreement is hereby amended in its entirety to read as follows: "3. Term. Unless sooner terminated in accordance with the provisions of Section 10 hereof, the term of the Executive's employment under this Agreement shall commence on the date hereof and shall end on December 31, 2003 (the "Term")." 2. The first sentence of Section 5(a) of the Employment Agreement is hereby amended in its entirety to read as follows: "The Company shall pay or cause to be paid to the Executive a base salary (the "Base Salary") of (i) during the year ending December 31, 2000, $800,000 per annum, and (ii) during each succeeding calendar year (or portion thereof) during the Term an amount per annum equal to $40,000 plus the Base Salary in effect at the end of the immediately preceding calendar year." 3. The second sentence of Section 5(b) of the Employment Agreement is hereby amended to read in its entirety as follows: "The Bonus will be payable with respect to each of the Company's fiscal years ending on or prior to December 31, 2003 and, except as provided in Section 5(c), will be payable as follows: (i) 75% of the estimated Bonus will be paid to the Executive in the immediately succeeding January; and (ii) the remaining amount of the bonus over the amount previously paid in January of that year will be paid to the Executive not later than 120 days after the end of the preceding year." 4. Except as specifically amended by this Amendment, the Employment Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the Company has caused this Amendment to be duly executed in its corporate name, and the Executive has manually signed his name hereto, all as of the day and year first above written. PREMIER PARKS INC. By: --------------------------- Paul A. Biddelman Chairman of the Compensation Committee --------------------------- KIERAN E. BURKE EX-99.5 8 0008.txt AMENDMENT TO EMPLOYMENT AGREEMENT Amendment to Employment Agreement --------------------------------- Amendment, dated as of January 1, 2000 ("Amendment") to Employment Agreement, dated as of July 31, 1997 (the "Employment Agreement") between Premier Parks Inc. (the "Company") and Gary Story (the "Executive"). --------------------------------------------- The Company and the Executive are parties to the Employment Agreement and wish to extend the Term thereof and make certain other amendments thereto. Capitalized terms used and not defined herein shall have the meanings ascribed to them in the Employment Agreement. NOW, THEREFORE, the parties, intending to be legally bound, agree as follows. 1. Section 3 of the Employment Agreement is hereby amended in its entirety to read as follows: "3. Term. Unless sooner terminated in accordance with the provisions of Section 10 hereof, the term of the Executive's employment under this Agreement shall commence on the date hereof and shall end on December 31, 2003 (the "Term")." 2. The first sentence of Section 5(a) of the Employment Agreement is hereby amended in its entirety to read as follows: "The Company shall pay or cause to be paid to the Executive a base salary (the "Base Salary") of (i) during the year ending December 31, 2000, $600,000 per annum, and (ii) during each succeeding calendar year (or portion thereof) during the Term an amount per annum equal to $40,000 plus the Base Salary in effect at the end of the immediately preceding calendar year." 3. The second sentence of Section 5(b) of the Employment Agreement is hereby amended to read in its entirety as follows: "The Bonus will be payable with respect to each of the Company's fiscal years ending on or prior to December 31, 2003 and, except as provided in Section 5(c), will be payable as follows: (i) 75% of the estimated Bonus will be paid to the Executive in the immediately succeeding January; and (ii) the remaining amount of the bonus over the amount previously paid in January of that year will be paid to the Executive not later than 120 days after the end of the preceding year." 4. Except as specifically amended by this Amendment, the Employment Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the Company has caused this Amendment to be duly executed in its corporate name, and the Executive has manually signed his name hereto, all as of the day and year first above written. PREMIER PARKS INC. By: --------------------------- Paul A. Biddelman Chairman of the Compensation Committee --------------------------- GARY STORY EX-99.6 9 0009.txt AMENDMENT TO EMPLOYMENT AGREEMENT Amendment to Employment Agreement --------------------------------- Amendment, dated as of January 1, 2000 ("Amendment") to Employment Agreement, dated as of July 31, 1997 (the "Employment Agreement") between Premier Parks Inc. (the "Company") and James F. Dannhauser (the "Executive"). --------------------------------------------- The Company and the Executive are parties to the Employment Agreement and wish to extend the Term thereof and make certain other amendments thereto. Capitalized terms used and not defined herein shall have the meanings ascribed to them in the Employment Agreement. NOW, THEREFORE, the parties, intending to be legally bound, agree as follows. 1. Section 3 of the Employment Agreement is hereby amended in its entirety to read as follows: "3. Term. Unless sooner terminated in accordance with the provisions of Section 10 hereof, the term of the Executive's employment under this Agreement shall commence on the date hereof and shall end on December 31, 2003 (the "Term")." 2. The first sentence of Section 5(a) of the Employment Agreement is hereby amended in its entirety to read as follows: "The Company shall pay or cause to be paid to the Executive a base salary (the "Base Salary") of (i) during the year ending December 31, 2000, $475,000 per annum, and (ii) during each succeeding calendar year (or portion thereof) during the Term an amount per annum equal to $40,000 plus the Base Salary in effect at the end of the immediately preceding calendar year." 3. The second sentence of Section 5(b) of the Employment Agreement is hereby amended to read in its entirety as follows: "The Bonus will be payable with respect to each of the Company's fiscal years ending on or prior to December 31, 2003 and, except as provided in Section 5(c), will be payable as follows: (i) 75% of the estimated Bonus will be paid to the Executive in the immediately succeeding January; and (ii) the remaining amount of the bonus over the amount previously paid in January of that year will be paid to the Executive not later than 120 days after the end of the preceding year." 4. Except as specifically amended by this Amendment, the Employment Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the Company has caused this Amendment to be duly executed in its corporate name, and the Executive has manually signed his name hereto, all as of the day and year first above written. PREMIER PARKS INC. By: --------------------------- Paul A. Biddelman Chairman of the Compensation Committee --------------------------- JAMES F. DANNHAUSER -----END PRIVACY-ENHANCED MESSAGE-----