Exhibit 10.12


CONSENT AND SECOND AMENDMENT TO CREDIT AGREEMENT


THIS
CONSENT AND SECOND AMENDMENT TO CREDIT AGREEMENT (this “Amendment”), is made and entered into as of March 22, 2007
(the “Effective Date”), by and
among PALACE ENTERTAINMENT
HOLDINGS, INC. (“Holdings”), FESTIVAL
FUN PARKS, LLC, the other
Borrowers signatory thereto (sometimes collectively referred to herein
as the “Borrowers” and
individually as a “Borrower”), the
other Credit Parties signatory thereto, the Lenders party to the Credit Agreement,
and GENERAL ELECTRIC CAPITAL CORPORATION, a
Delaware corporation, for itself, as a Lender, and as Agent for the Lenders
parties from time to time to the Credit Agreement described below (“Agent”).


W
I  T  N  E  S  S  E  T  H:


WHEREAS,
Holdings, the Borrowers, the Lenders and the Agent are parties to that certain
Credit Agreement, dated as of April 12, 2006 (as amended or otherwise modified
to the date hereof, the “Credit Agreement”;
capitalized terms used herein and not otherwise defined herein shall have the meanings
given such terms in the Credit Agreement), pursuant to which the Lenders have
agreed to make certain loans and other extensions of credit to Borrowers upon
the terms and conditions set forth therein; and


WHEREAS,
Holdings, Borrowers, the Lenders and the Agent desire to make certain
amendments to the Credit Agreement, and Borrowers seek the consent of Agent and
Lenders under the Credit Agreement, in each case in accordance with, and
subject to the terms and conditions set forth in, this Amendment.


NOW,
THEREFORE, in consideration of the premises, the covenants
and agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto do
hereby agree, subject to Section 7, as follows.


1.             Amendments to the Credit Agreement.  Subject to the terms and conditions of this
Amendment, the Credit Agreement shall be amended as follows:


(a)           Annex A of the Credit
Agreement shall be amended by deleting the definition of “EBITDA” its entirety
and replacing it in its entirety with the following:


“EBITDA” means, with respect to any Person for any
fiscal period, without duplication, an amount equal to (a) consolidated net
income of such Person for such period, determined in accordance with GAAP,
minus (b) the sum of (i) income tax credits, (ii) interest income, (iii) gain
from extraordinary items for such period, (iv) any aggregate net gain (but not
any aggregate net loss) during such period arising from the sale, exchange or
other disposition of capital assets by such Person (including any fixed assets,
whether tangible or intangible, all inventory sold in conjunction with the
disposition of fixed assets and all












securities), and (v) any other non-cash gains that have been added in
determining consolidated net income, in each case to the extent included in the
calculation of consolidated net income of such Person for such period in
accordance with GAAP, but without duplication, plus (c) the sum of (i) any
provision for income taxes, (ii) Interest Expense, (iii) loss from
extraordinary items for such period, (iv) depreciation and amortization for
such period, including, without limitation, any amortization of any write-up of
leases arising from purchase accounting in accordance with GAAP, (v) non-cash
amortized debt discount and lease valuation adjustments for such period, (vi)
the amount of any non-cash deduction to consolidated net income as the result
of any grant to any members of the management of such Person of any Stock,
(vii) sale-leaseback cash payments (to the extent included in the calculation
of consolidated net income of such Person for such period in accordance with
GAAP), (viii) the sum of: (A) all non-cash charges (including impairment of
goodwill and PP&E, and amortization of D&O and representations and
warranties insurance premiums); (B) payments made pursuant to the Sponsor
Management Agreement and advisory fees paid to Sponsor in connection with
acquisitions to the extent the payment of such amounts are expressly permitted
under this agreement;  (C) restructuring
charges (including but not limited to relocation expenses, temporary housing
expenses for new hires, severance payments and associated legal fees but
excluding those charges and expenses arising in connection with the Related
Transactions, which are addressed in clause (M) below), (D) non-capitalized
acquisition costs (including but not limited to fees, expenses or charges
related to any acquisition or investment, in each case, whether or not
successful, provided that such fees, expenses and charges shall be limited to
$400,000 in any Fiscal Year; (E) gain or loss on sale of assets; (F)
non-recurring costs associated with dispositions or financings (including,
without limitation, any loss arising from the acquisition of any securities or
of extinguishment of any Indebtedness); (G) impairment charges; (H) any
extraordinary and non-recurring expenses or losses (including but not limited
to one-time housing costs related to the international hiring program); (I)
cumulative effect of changes in accounting principles; (J) expenses or losses
arising out of or incurred due to hurricanes, windstorms or earthquakes to the
extent not reimbursed in such period or reimbursable with the proceeds of
insurance; (K) losses with respect to obligations under hedging agreements to
the extent such hedging agreements do not violate this Agreement; (L) proceeds
from business interruption insurance; (M) the following charges, costs,
expenses and reserves, in each case incurred in connection with the Related
Transactions (including the Acquisition and/or the transition of ownership of
the Acquired Business from Seller to Holdings on and after the Closing Date),
but solely to the extent incurred on a one-time basis during the Fiscal Year
ended 2006: (1) restructuring charges (including but not limited to relocation
expenses, temporary housing expenses for new hires and severance and related
expenses for terminated officers and employees; (2) business optimization
expenses, restructuring charges and non-recurring expenses related to Park
improvements (which, for the avoidance of doubt, shall include non-capitalized
IT system improvement costs,



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repair and maintenance costs, labor expenses related to repair and
maintenance costs, expenses related to supplies for park improvements and
contract termination expenses); (3) executive recruiting fees; (4) severance
payments to and outplacement services fees in respect of terminated employees;
(5) property taxes in the States of California, Florida and Texas, in each case
to the extent such taxes have been reimbursed by Seller to Holdings or the
Borrower; (6) hotel costs at Destin, Florida, in each case to the extent such
taxes have been reimbursed by Seller to Holdings or the Borrower; (7) legal
fees relating to Park in Dania, in each case to the extent such fees have been
reimbursed by Seller to Holdings or the Borrower; (8) extraordinary corporate
travel and use of temporary employees; (9) expenses relating to Park level
operating labor, Park level operating expenses, Park level supplies, and Park
level repair and maintenance; (10) the impact of implemented annualized cost
savings (including but not limited to corporate staff reductions and park level
fixed labor reductions); (11) the impact of hurricane Ernesto, in each case to
the extent not covered by business interruption, property, casualty or other
insurance; (12) repair and maintenance expense at family entertainment center
Parks for appearance improvements; (13) Silver Springs Park quality of appearance
improvements; (14) the impact of market variance in footage and photographic
images; (15) excess business expenses at San Dimas Park; (16) expense relating
to foreign students at Destin, Florida Park for the 2006 season; and (17) costs
relating to change in vacation policy, provided that the total amount of all
such charges, costs, expenses and reserves in this clause (M) do not exceed in
the aggregate $5,000,000; (N) legal fees and expenses related to claims,
pending or threatened litigation and other actions, including but not limited
to the Steven Crowley complaint and legal and professional fees related to
employee and officer terminations, the condemnation proceeding relating to a
portion of real estate located at Riverside Park and other matters, provided
that the total amount of all such legal and professional expenses in this
clause (N) do not exceed in the aggregate $500,000; (O) the impact of
implemented annualized cost savings (including but not limited to corporate
staff reductions and park level fixed labor reductions), provided that such
items (1) are incurred during the Fiscal Year ended 2007, (2) relate to
terminations of specific employees as identified in a writing given by Borrower
Representative to Agent at the time of delivery of the Compliance Certificate
delivered to Agent pursuant to Annex E, and (3) do not exceed in the aggregate
$500,000; (P) business optimization expenses and non-recurring expenses related
to Park improvements (which, for the avoidance of doubt, shall include non-capitalized
IT system improvement costs, repair and maintenance costs, labor expenses
related to repair and maintenance costs, expenses related to supplies for park
improvements and contract termination expenses), provided that (1) the total
amount of such expenses in this subclause (P) do not exceed $500,000 per Fiscal
Year and (2) Borrower Representative has provided to Agent specific detail as
to such expenses and such expenses and related detail are satisfactory to
Agent; in each case (including in the case of each of subclauses (i)-(viii) of
clause (c) above) to the extent included in the calculation of consolidated net
income of such Person for such period in



 3
 








accordance with GAAP, but without duplication.  For purposes of this definition, the
following items shall be excluded in determining consolidated net income of a
Person: (1) the income (or deficit) of any other Person accrued prior to the
date it became a Subsidiary of, or was merged or consolidated into, such Person
or any of such Person’s Subsidiaries; (2) the income (or deficit) of any other
Person (other than a Subsidiary) in which such Person has an ownership
interest, except to the extent any such income has actually been received by
such Person in the form of cash dividends or distributions; (3) the
undistributed earnings of any Subsidiary of such Person to the extent that the
declaration or payment of dividends or similar distributions by such Subsidiary
is not at the time permitted by the terms of any contractual obligation or
requirement of law applicable to such Subsidiary; (4) any non-cash restoration
to income of any contingency reserve, except to the extent that provision for
such reserve was made out of income accrued during such period; (5) any
write-up of any asset; (6) any net gain from the collection of the proceeds of
life insurance policies; (7) any net gain arising from the acquisition of any
securities, or the extinguishment, under GAAP, of any Indebtedness, of such
Person; (8) in the case of a successor to such Person by consolidation or
merger or as a transferee of its assets, any earnings of such successor prior
to such consolidation, merger or transfer of assets; and (9) any deferred
credit representing the excess of equity in any Subsidiary of such Person at
the date of acquisition of such Subsidiary over the cost to such Person of the
investment in such Subsidiary; provided that, with respect to the Borrower and
its consolidated Subsidiaries, EBITDA shall be deemed to be the following
amounts for the following Fiscal Quarters: (1) Fiscal Quarter ended March 31,
2006, $3,530,000; (2) Fiscal Quarter ended December 31, 2005, $4,932,000; (3)
Fiscal Quarter ended September 30, 2005, $33,473,000; and (4) Fiscal Quarter
ended June 30, 2005, $6,864,000; provided further that EBITDA in respect of the
Waterworld water park in Sacramento shall be deemed to be the following amounts
for the following fiscal quarters:  (1)
Fiscal quarter ended March 31, 2006, -$700,754; (2) Fiscal Quarter ended June
20, 2006, $167,406; (3) Fiscal quarter ended September 30, 2006, $1,476,079;
(4)  Fiscal quarter ended December 31,
2006, - $420,542.  In connection with any
Permitted Acquisition, the EBITDA of the Target for the trailing twelve months
most recently ended immediately preceding the consummation of such Permitted
Acquisition shall be included on a pro forma basis solely for purposes of
determining compliance with the Financial Covenants, provided that any pro
forma adjustments to such Target EBITDA shall (1) have been reviewed by
independent certified public accountants of nationally recognized standing,
(2)  pro forma adjustments for net income
of targets to extent expressly permitted under Regulation S-X of the Securities
Act of 1933, as amended, or (3) have been found acceptable by the Agent.


(b)           Section (b) of Annex E to the
Credit Agreement shall be deleted in its entirety and shall be replaced in its
entirety by the following:



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(b)           Quarterly Financials.  To Agent, within forty-five (45) days after
the end of each Fiscal Quarter other than any Fiscal Quarter ending December 31
of any Fiscal Year, consolidated financial information regarding Holdings and
its Subsidiaries, certified by the Chief Financial Officer (or the treasurer or
any other senior executive officer of Holdings acting in such capacity as chief
financial officer) of Holdings, including (i) unaudited balance sheets as of
the close of such Fiscal Quarter and the related statements of income and cash
flow for that portion of the Fiscal Year ending as of the close of such Fiscal
Quarter and (ii) unaudited statements of income and cash flows for such Fiscal
Quarter, in each case setting forth in comparative form the figures for the
corresponding period in the prior year and the figures contained in the
Projections for such Fiscal Year, all prepared in accordance with GAAP (subject
to normal year-end adjustments and the absence of footnotes).  Such financial information shall be
accompanied by (A) a statement by the Chief Financial Officer (or the treasurer
or any other senior executive officer of Holdings acting in such capacity as
chief financial officer) of Holdings in reasonable detail (each, a “Compliance
Certificate”) showing the calculations used in determining compliance with
each of the Financial Covenants that is tested on a quarterly basis and (B) the
certification of the Chief Financial Officer of Holdings that (i) such
financial information presents fairly in all material respects in accordance
with GAAP (subject to normal year-end adjustments) the financial position,
results of operations and statements of cash flows of Holdings and its
Subsidiaries, on a consolidated basis, as at the end of such Fiscal Quarter and
for that portion of the Fiscal Year then ended, (ii) any other information
presented is true, correct and complete in all material respects and that there
was no Default or Event of Default in existence as of such time or, if a
Default or Event of Default has occurred and is continuing, describing the
nature thereof and all efforts undertaken to cure such Default or Event of
Default.  In addition, Holdings shall
deliver to Agent, within forty-five (45) days after the end of each Fiscal
Quarter other than any Fiscal Quarter ending December 31 of any Fiscal Year, to
the extent not included in a report on Form 10-Q filed by Holdings with respect
to such Fiscal Quarter, a management discussion and analysis that includes a
comparison to budget for that Fiscal Quarter and a comparison of performance
for that Fiscal Quarter to the corresponding period in the prior year.


(c)           Clause
(i) of paragraph (d) of Annex E to the Credit Agreement shall be deleted
in its entirety and shall be replaced in its entirety by the following:


(i)  a
Compliance Certificate showing the calculations used in determining compliance
with the Financial Covenants tested for the Fiscal Quarter and Fiscal Year
ended December 31.


2.             Consent.  Subject to the terms and conditions of
this Agreement, and not withstanding Section 6.13 of the Credit
Agreement, the Agent and the undersigned Lenders hereby grant their consent to
allow Borrowers to make one or more stock repurchases, in



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connection with the termination of employees of
Borrowers, provided that (i) no Default or Event of Default exists at
the time thereof or would result therefrom (after giving effect to this
Agreement and the consent and amendments provided for herein) and (ii) such
repurchases do not violate the terms of the Senior Unsecured Note Indenture as
in effect on the Closing Date, provided, however, that Borrower
may repurchase up to Two Million Dollars ($2,000,000) in Fiscal Year 2007
irrespective of whether such repurchase is permitted under the Senior Unsecured
Note Indenture so long as no Default or Event of Default exists at the time
hereof or would result therefrom.


3.             No Other Amendments.  Except for the amendments and consent
expressly set forth and referred to in Section 1 and 2 hereof, the
Credit Agreement shall remain unchanged and in full force and effect.  Nothing in this Amendment is intended or
shall be construed to be a waiver or novation of any Obligations or any part of
the Credit Agreement or any of the other Loan Documents or to affect, modify or
impair the continuity or perfection of the Agent’s Liens under the Collateral
Documents.


4.             Representations and
Warranties.  To induce the
Lenders and the Agent to enter into this Amendment, Holdings and each of the
Borrowers hereby warrants, represents and covenants to and with to the Lenders
and the Agent that: (a) Holdings and each of the Borrowers has the corporate or
organizational power and authority (i) to enter into this Amendment and (ii) to
do all acts and things as are required or contemplated hereunder to be done,
observed and performed by it; (b) this Amendment has been duly authorized,
executed and delivered by Holdings and each Borrower; (c) after giving effect
to this Amendment, no Default or Event of Default has occurred and is
continuing as of this date; and (d) after giving effect to this Amendment, all
of the representations and warranties made by the Credit Parties in the Credit
Agreement are true and correct in all material respects on and as of the date
of this Amendment (except to the extent that any such representations or
warranties expressly referred to a specific prior date and except for changes
therein expressly permitted or expressly contemplated by the Credit Agreement
or the other Loan Documents).  Any breach
in any material respect by Holdings or any Borrower of any of its
representations, warranties and covenants contained in this Section 4
shall be an Event of Default under the Credit Agreement.


5.             Ratification and
Acknowledgment.  Each of
the Holdings and Borrowers hereby ratifies and reaffirms each and every term,
covenant and condition set forth in the Credit Agreement and all other Loan
Documents executed or delivered by such Credit Party.


6.             Waiver, Release and
Disclaimer.  To induce the
Lenders and the Agent to enter into this Amendment, each of Holdings and the
Borrowers hereby waives and releases any claim, defense, demand, action or suit
of any kind or nature whatsoever against the Lenders or the Agent or their
respective Affiliates, and each such Persons’ respective officers, directors,
partners, trustees, shareholders, agents, attorneys, advisors and employees,
arising on or prior to the date of this Amendment in connection with the Credit
Agreement or any of the other Loan Documents, or any of the transactions
contemplated thereunder, except that this Section 5 shall not waive or
release any of the Lenders’ or Agent’s contractual obligations under the Credit
Agreement or any of the other Loan Documents.



 6
 








7.             Conditions to
Effectiveness.  The
amendments and consent of the Credit Agreement set forth in Section 1 and 2
of this Amendment shall not become effective unless and until the Agent has
received one or more counterparts of this Amendment, duly executed, completed
and delivered by Holdings, each Borrower, the other Credit Parties, the
Requisite Lenders and the Agent.


8.             Reimbursement of
Expenses.  The Borrowers
hereby jointly and severally agree to reimburse the Agent on demand for all
reasonable fees and reasonable out-of-pocket costs and expenses (including
without limitation the reasonable and actual fees and expenses of its counsel)
incurred by the Agent in connection with the negotiation, documentation and
consummation of this Amendment and the other documents executed in connection
herewith and the transactions contemplated hereby.


9.             Governing Law.  THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK FOR CONTRACTS
TO BE PERFORMED ENTIRELY WITHIN SAID STATE AND ANY APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA.


10.           Severability
of Provisions.  Any
provision of this Amendment which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.  To the extent
permitted by applicable law, each Credit Party hereby waives any provision of
law that renders any provision hereof prohibited or unenforceable in any
respect.


11.           Counterparts.  This Amendment may be executed in any number
of several counterparts, all of which shall be deemed to constitute but one
original and shall be binding upon all parties, their successors and permitted
assigns.


12.           Entire
Agreement.  The Credit
Agreement as amended through this Amendment embodies the entire agreement
between the parties hereto relating to the subject matter thereof and
supersedes all prior agreements, representations and understandings, if any,
relating to the subject matter thereof.


13.           No
Strict Construction.  The
parties hereto have participated jointly in the negotiation and drafting of
this Amendment.  In the event an
ambiguity or question of intent or interpretation arises, this Amendment shall
be construed as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Amendment.


[Signature pages
follow]



 7















IN
WITNESS WHEREOF, the parties have caused this Consent and
Second Amendment to Credit Agreement to be duly executed by their respective
officers or representatives thereunto duly authorized, as of the date first
above written.


	
  

  	
  HOLDINGS:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  PALACE
  ENTERTAINMENT HOLDINGS, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ James Burk

  
	
   

  	
  Name:

  	
   James Burk

  
	
   

  	
  Title:

  	
   CFO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  BORROWERS:

  
	
   

  	
   

  
	
   

  	
  FESTIVAL
  FUN PARKS, LLC

  
	
   

  	
  SPLISH
  SPLASH AT ADVERTURELAND, INC.

  
	
   

  	
  FAMILY
  FUN CENTER HOLDINGS, LLC

  
	
   

  	
  SMARTPARKS
  — SAN JOSE, INC.

  
	
   

  	
  SMARTPARKS
  — RIVERSIDE, INC.

  
	
   

  	
  SMARTPARKS
  — SAN DIMAS, INC.

  
	
   

  	
  RAGING
  WATERS GROUP, INC.

  
	
   

  	
  SMARTPARKS
  — CAROLINA, INC.

  
	
   

  	
  SMARTPARKS
  — FLORIDA, INC.

  
	
   

  	
  SMARTPARKS
  — SILVER SPRINGS, INC.

  
	
   

  	
  PALACE
  MANAGEMENT COMPANY, LLC

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Todd Wulffson

  
	
   

  	
  Name:

  	
   Todd Wulffson

  
	
   

  	
  Title:

  	
   General Counsel & Corp. Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  AGENT:

  
	
   

  	
   

  
	
   

  	
  GENERAL
  ELECTRIC CAPITAL

  
	
   

  	
  CORPORATION,
  as a Lender and

  
	
   

  	
  as Agent

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Jason A. Soto

  
	
   

  	
  Name:

  	
   Jason A. Soto

  
	
   

  	
   

  	
  Its Duly
  Authorized Signatory

  
								



 


[Signature Page to Second
Amendment to Credit Agreement]













The following Persons are signatories to this Agreement in their
capacity as Credit Parties and not as Borrowers.


	
  

  	
  PALACE
  FINANCE, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Todd Wulffson

  
	
   

  	
  Name:

  	
   Todd Wulffson

  
	
   

  	
  Title:

  	
   General Counsel & Corp. Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WET
  ‘N WILD NEVADA, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Todd Wulffson

  
	
   

  	
  Name:

  	
   Todd Wulffson

  
	
   

  	
  Title:

  	
   General Counsel & Corp. Secretary

  
					



 


[Signature Page to Second
Amendment to Credit Agreement]