<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED: DECEMBER 31, 1996 COMMISSION FILE NUMBER: 0-28044
PENSKE MOTORSPORTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<C> <C>
DELAWARE 51-0369517
(STATE OR OTHER JURISDICTION (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
13400 WEST OUTER DRIVE
DETROIT, MI 48239-4001
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (313) 592-5258
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
COMMON STOCK, PAR VALUE $0.01 PER SHARE NASDAQ NATIONAL MARKET
</TABLE>
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 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 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. [X] YES [ ] 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 REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. [[X]]
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT WAS APPROXIMATELY $114,689,791 BASED UPON THE CLOSING SALES PRICE OF
THE REGISTRANT'S COMMON STOCK ON THE NASDAQ NATIONAL MARKET AT MARCH 21, 1997,
OF $30.50 PER SHARE. AS OF MARCH 21, 1997, 13,241,798 SHARES OF REGISTRANT'S
COMMON STOCK, $.01 PAR VALUE PER SHARE, WERE OUTSTANDING. PORTIONS OF THE
REGISTRANT'S DEFINITIVE PROXY STATEMENT TO BE FILED FOR ITS 1997 ANNUAL MEETING
OF STOCKHOLDERS ARE INCORPORATED BY REFERENCE INTO PART III OF THIS FORM 10-K.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I
Item 1. Business.................................................... 2
Item 2. Properties.................................................. 10
Item 3. Legal Proceedings........................................... 10
Item 4. Submission of Matters to a Vote of Security Holders......... 10
Supplementary Item: Executive Officers of Registrant........ 10
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters......................................... 11
Item 6. Selected Financial Data..................................... 12
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operation.................................... 13
Item 8. Financial Statements and Supplementary Data................. 18
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 30
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 30
Item 11. Executive Compensation...................................... 30
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 30
Item 13. Certain Relationships and Related Transactions.............. 30
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K......................................................... 30
Signatures............................................................. 33
</TABLE>
1
<PAGE> 3
PART I
ITEM 1: BUSINESS
Penske Motorsports, Inc. ("PMI") is a leading promoter and marketer of
professional motorsports in the United States. PMI owns and operates, through
its subsidiaries, the Michigan Speedway ("Michigan Speedway") in Brooklyn,
Michigan and the Nazareth Speedway ("Nazareth Speedway") in Nazareth,
Pennsylvania, and is constructing the California Speedway, a superspeedway near
Los Angeles, California which is expected to be completed and in operation
during the 1997 racing season ("California Speedway"). PMI also produces and
markets motorsports-related merchandise such as apparel, souvenirs and
collectibles, through its wholly-owned subsidiary, Motorsports International
Corp. ("MIC"). In addition, through its wholly-owned subsidiaries, Competition
Tire West, Inc. ("Competition Tire West") and Competition Tire South, Inc.,
("Competition Tire South" and, together with Competition Tire West, "Competition
Tire"), PMI distributes and sells Goodyear brand racing tires in the midwest and
southern regions of the United States.
Unless the context otherwise requires, references herein to the "Company"
mean Penske Motorsports, Inc. ("PMI") and its subsidiaries considered as one
enterprise. "NASCAR(R)" and "Winston Cup(R)" are registered trademarks and
service marks of the National Association for Stock Car Auto Racing, Inc.,
("NASCAR").
PMI promoted a total of nine major racing events at Michigan Speedway and
Nazareth Speedway in 1996 and expects to promote a total of fifteen major racing
events at Michigan Speedway, Nazareth Speedway, and California Speedway in 1997.
Of the nine 1996 events, six were stock car races, four of which were sanctioned
by NASCAR, two were Indy car races sanctioned by Championship Auto Racing Teams,
Inc. ("CART"), and one was a Craftsman Truck Series race sanctioned by NASCAR.
NASCAR events promoted by PMI in 1996 included two NASCAR races associated with
the Winston Cup Series, two races associated with the NASCAR Busch Grand
National Series, and one race associated with the NASCAR Craftsman Truck Series.
On June 22, 1997, PMI will promote the California Speedway's inaugural race
which will be a NASCAR Winston Cup race. PMI will also promote at the California
Speedway the season finale for the PPG CART World Series on September 28, 1997.
In addition, on October 18 and 19, 1997, PMI will promote at the California
Speedway a NASCAR Busch Grand National event and a Craftsman Truck Series
Division event. The California Speedway will have 70,948 grandstand seats, 71
terrace suites and 55 chalets. The California Speedway is located 52 miles east
of downtown Los Angeles, 15 miles west of downtown San Bernardino and 30 miles
northeast of central Orange County. The Company expects to draw spectators from
throughout southern California, an area with a total population that exceeds
17.0 million people. The California Speedway is similar in design to the
Michigan Speedway, a premier superspeedway which is the home of the fastest 500
mile auto race (the 1990 Marlboro 500 at an average winning speed of 189.727
mph) and the world Indy car speed record (Jimmy Vassar's 234.665 mph qualifying
lap at the 1996 Marlboro 500).
Management believes that spectator demand for its Winston Cup events at
Michigan Speedway exceeds existing permanent seating capacity, which was 98,276
at December 31, 1996, excluding infield capacity. Prior to the commencement of
the 1997 racing season, PMI expects to add approximately 8,500 grandstand seats
at the facility. Michigan Speedway also has 37 suites, 40 hospitality chalets
and 10 grandstand pavilions for corporate hospitality. PMI also expects to add
10,687 grandstand seats at Nazareth Speedway prior to the commencement of the
1997 racing season. Nazareth Speedway currently has permanent seating capacity
of 35,654, excluding infield capacity. In addition, PMI expects to add 36,000
new grandstand seats at the California Speedway prior to the year 2002. PMI has
received the necessary government approvals for these additional seats as well
as approval for a total capacity of 107,000 spectators at the California
Speedway.
COMPANY STRATEGY
The Company's strategy is to continue to increase revenue and profitability
by hosting premier weekend events, completing the construction of the California
Speedway, expanding its existing seating capacity and
2
<PAGE> 4
otherwise improving its facilities, increasing its sales of racing-related
merchandise and pursuing opportunities to expand into other markets. The key
elements of this strategy are as follows:
- Hosting Premier Weekend Events. The Company plans its racing events, and
designs and maintains its facilities, to create an environment which
maximizes the spectators' entertainment experience. Management believes
that associating a less prestigious race with a Winston Cup or PPG CART
World Series event helps to increase overall weekend attendance at the
Company's facilities, in part by attracting spectators traveling longer
distances. For example, in 1996, the Company hosted an ARCA-sanctioned
race on the Saturday preceding the Miller 400, which is a Winston Cup
event, and on the Saturday preceding the Marlboro 500, which is a
CART-sanctioned event. As a result of this strategy, the Company
generated virtually all of its 1996 speedway revenue in six weekends.
To maximize the spectators' entertainment experience, the Company
designs and maintains its facilities to maximize the comfort, view and
amenities offered to the spectators. To that end, upon acquiring
Michigan Speedway in 1973, management embarked upon a series of capital
improvements, including the construction of additional permanent
grandstand seating, new hospitality suites, improvements to the
concession stands and innovative corporate entertainment facilities. At
Michigan Speedway, spectators can see the entire track from the
grandstands due to the banking of the track and the absence of
obstruction in the infield. Following the purchase of Nazareth Speedway
in 1986, PMI implemented a similar strategy by converting Nazareth
Speedway from a dirt track to a one mile asphalt speedway and
constructing grandstands and corporate entertainment facilities. In
addition, in 1996 PMI constructed new food concessions and restroom
facilities at Michigan Speedway and Nazareth Speedway to increase the
comfort of race spectators. Capitalizing on its successful experience at
Michigan Speedway and Nazareth Speedway, PMI has designed the California
Speedway with state-of-the-art seating, concessions and amenities.
Expanding corporate entertainment at racing events also offers the
opportunity for increased revenue. PMI improved its corporate
entertainment facilities by expanding its corporate concourses, which
can currently entertain up to 5,000 people, and expanded and upgraded
the chalet village at Michigan Speedway for the 1996 season. PMI
currently has three full-time marketing employees who spend the majority
of their time marketing Michigan Speedway and Nazareth Speedway events
to corporate customers. In addition, PMI currently has three full-time
marketing employees who spend the majority of their time marketing the
California Speedway events to corporate customers.
No speedway promotes more than two Winston Cup races per year. In
addition, no speedway generally promotes more that one CART-sanctioned
event per year. PMI will promote two Winston Cup events at Michigan
Speedway in 1997 and one Winston Cup event at the California Speedway in
1997. In addition, PMI will promote one CART-sanctioned event at each of
Michigan Speedway, California Speedway, and Nazareth Speedway in 1997.
Management of the Company intends to seek additional racing events for
its facilities.
- Completion of Construction of the California Speedway. The California
Speedway, a two mile banked superspeedway, is built on approximately 529
acres located in the southwest portion of San Bernadino County, south of
the foothills of the San Gabriel Mountains. The Company expects the
construction of the California Speedway to be completed prior to the
scheduled inaugural race on June 22, 1997. The superspeedway is located
less than five miles from the I-15 and I-10 freeway interchange and is
approximately 52 miles east of downtown Los Angeles, 15 miles west of
downtown San Bernadino and 30 miles northeast of central Orange County.
The California Speedway is modeled after Michigan Speedway, which is a
premier superspeedway and home of the fastest 500 mile Indy car auto
race and the Indy car speed record. The California Speedway will have
70,948 grandstand seats, 71 terrace suites and 55 chalets.
The Company believes that the California Speedway will draw spectators
not only from Los Angeles, San Bernardino, Riverside and Orange
Counties, but from throughout the Southern California region. The total
population in the Southern California area exceeds 17.0 million people.
3
<PAGE> 5
- Continued Expansion of Michigan Speedway and Nazareth Speedway. Since
the acquisition of Michigan Speedway and Nazareth Speedway, PMI has
constructed more than 109,000 grandstand seats at the two facilities.
Management believes that spectator demand for its Winston Cup events
continues to exceed the Company's existing permanent grandstand seating
capacity at Michigan Speedway. PMI plans to continue to expand by adding
permanent grandstand seating and luxury suites at both of Michigan
Speedway and Nazareth Speedway. During the 1996 season, PMI added
approximately 10,000 grandstand seats at Michigan Speedway and 5,000
grandstand seats at Nazareth Speedway. In addition, during the 1996
season, PMI added eight corporate suites along the pit area on the
inside of the track at Michigan Speedway, all of which are committed to
corporate customers for terms of no less than three years. Prior to the
commencement of the 1997 racing season, PMI expects to add approximately
8,500 grandstand seats at Michigan Speedway and approximately 10,687
grandstand seats at Nazareth Speedway.
- Sales of Merchandise, Tires and Accessories. The Company sells
merchandise, such as apparel, souvenirs and collectibles, directly to
spectators both at its facilities and at other NASCAR-sanctioned and
CART-sanctioned events, to retail customers through its catalogue sales
and through direct sales to dealers. The Company also rents "show cars"
for promotional events to corporate customers. In addition to the
anticipated incremental contribution to such revenue to be generated by
the California Speedway, the Company expects to increase revenue derived
from third party merchandisers as the number of merchandisers at the
Company's races increase. The Company is also exploring additional
distribution channels, such as the Internet.
The Company also engages in the wholesale and retail sale and
distribution of Goodyear brand racing tires for various types of racing
events. The Company's strategy is to continue to increase sales of racing
tires through the favorable reputation of the Goodyear tire, as well as
capitalizing on the growing popularity of motorsports in the United
States.
- Pursuing Expansion Opportunities. The Company intends to consider
expansion opportunities as they become available, including growth by
acquisition. For example, in 1995 and 1996 the Company acquired
approximately 4.0% of the issued and outstanding common stock of North
Carolina Motor Speedway Inc. ("NCMS"), which owns and operates a
superspeedway in Rockingham, North Carolina. NCMS hosted two Winston Cup
events in the 1996 season and will host two Winston Cup events in the
1997 season. PMI and the majority shareholder of NCMS each has reciprocal
rights of first refusal on the other's shares of stock of NCMS.
4
<PAGE> 6
EVENTS AND FACILITIES
Events
PMI's operations in 1996 consisted principally of promoting racing and
related events conducted at its Michigan Speedway and Nazareth Speedway; 1997
operations will also include promotion of such events at the California
Speedway.
PMI's 1997 scheduled racing events are as follows:
<TABLE>
<CAPTION>
DATE RACE CIRCUIT FACILITY
---- ---- ------- --------
<S> <C> <C> <C>
April 27 Bosch Spark Plug Grand Prix PPG CART World Series Nazareth Speedway
Presented by Toyota
May 18 CoreStates Advantage 200 NASCAR Busch Series Grand Nazareth Speedway
National Division
June 14 Jasper Engines 200 ARCA Michigan Speedway
June 15 Miller 400 NASCAR Winston Cup Series Michigan Speedway
June 21 Auto Club 200 NASCAR Winston West Series California Speedway
June 21 IROC Round III IROC California Speedway
June 22 California 500 Presented by NASCAR Winston Cup Series California Speedway
NAPA
June 29 NAPA Auto Care 200 NASCAR Craftsman Truck Series Nazareth Speedway
July 26 ARCA 200 ARCA Michigan Speedway
July 27 IROC Series Round IV IROC Michigan Speedway
July 27 US 500 Presented by Toyota PPG CART World Series Michigan Speedway
August 16 Detroit Gasket 200 NASCAR Busch Series Grand Michigan Speedway
National Division
August 17 DeVilbiss 400 NASCAR Winston Cup Series Michigan Speedway
September 27 To Be Announced California Speedway
September 28 Marlboro 500 Presented by PPG CART World Series California Speedway
Toyota
October 18 To Be Announced NASCAR Craftsman Truck Series California Speedway
October 19 To Be Announced NASCAR Busch Series Grand California Speedway
National Division
</TABLE>
NASCAR grants sanctioning agreements on an annual basis for the next
succeeding year, while CART grants multiple year sanctioning agreements. Each
CART-sanctioned car race at PMI's facilities is scheduled through 1998. At
Michigan Speedway, the Company has hosted two Winston Cup races annually since
1973. In addition, the Company has hosted at least one CART-sanctioned event
since 1979. In addition to Michigan Speedway and Nazareth Speedway, management
has obtained a sanction agreement for an annual CART-sanctioned race at the
California Speedway through 1998 and for a NASCAR-sanctioned Winston Cup race at
the California Speedway in 1997.
Facilities
MICHIGAN SPEEDWAY. Michigan Speedway is located in Brooklyn, Michigan,
approximately 70 miles southwest of Detroit and 18 miles southeast of Jackson.
Michigan Speedway has 98,276 grandstand seats, 37 suites, a chalet village
containing 40 hospitality tents and 10 grandstand pavilions. In 1996, PMI added
approximately 10,000 grandstand seats and eight corporate suites along the pit
area on the inside track at Michigan Speedway, which suites are committed to
corporate customers for terms of not less than three years.
The speedway and all adjacent parking areas consist of approximately 977
acres, all of which is owned by PMI. Michigan Speedway is a premier
superspeedway with a full view of the track from the grandstand seats. Michigan
Speedway is the home of the fastest 500 mile auto race (the 1990 Marlboro 500 at
an average
5
<PAGE> 7
winning speed of 189.727 mph) and the world Indy car speed record (Jimmy
Vassar's 234.665 mph qualifying lap at the 1996 Marlboro 500). Michigan Speedway
is a two-mile, tri-oval with 18 degree banking in the corners, 12 degrees on the
front straightaway and five degrees on the back straightaway. The track is 73
feet wide with a 10-foot apron on the turns and 45 feet wide with a 12-foot
apron on the straightaways. The backstretch is 2,242 feet in length. The pit
road is 2,299 feet long, 50 feet wide and contains space for 44 individual pit
areas. While PMI does not charge its customers for parking, the parking areas
can accommodate 50,000 cars. The Michigan Speedway oval was resurfaced in the
spring of 1995. PMI acquired Michigan Speedway in 1973.
NAZARETH SPEEDWAY. Nazareth Speedway is located in Lower Nazareth Township,
Pennsylvania, approximately 12 miles from Allentown, 50 miles from Philadelphia
and 80 miles from New York City. Nazareth Speedway sits on approximately 107
acres and on race days uses more than 183 acres of land, some of which is
leased. Nazareth Speedway has permanent seating capacity of 35,654 (excluding
infield admission, temporary seats and general admission), including
approximately 5,000 grandstand seats which were added in 1996. The track is a
one mile speedway. Turn one is banked three degrees, turn two is banked four
degrees and turns three and four are banked six degrees. The track width varies
from 50 feet on the front stretch to 60 feet on the back stretch. Nazareth
Speedway has an elevation change of 34 feet. Nazareth Speedway also has an 18
foot wide warm up lane encompassing the entire inside of the track. This
provides a racing surface for drivers, traveling slower than race speeds, to
warm-up their engines and tires without interfering with faster cars. PMI
acquired Nazareth Speedway in 1986.
CALIFORNIA SPEEDWAY. The California Speedway will have 70,948 grandstand
seats to which PMI expects to add 36,000 grandstand seats by the year 2002. PMI
has received the necessary governmental approvals for these additional seats as
well as approval for a total capacity of 107,000 spectators. In addition to its
grandstand seats, the California Speedway will have 71 terrace suites and 55
chalets. The California Speedway is also expected to generate additional revenue
from approximately 25 billboards, its sponsors and other concession and
merchandise revenue. The California Speedway consists of a two mile, tri-oval
track and is banked in a fashion similar to the Michigan Speedway facility.
The infield area of the California Speedway contains a 44 space pit area,
100 auxiliary garages with team transport truck and motor coach parking, VIP
parking, press and team parking, restrooms, a medical care center and a helistop
for emergency medical evacuation. Each garage building has restroom and meeting
facilities. Shower facilities are also provided within the garage area for
driver and team use. Adjacent to the pit area, there is a two-story structure
housing infield suites on the upper level and work areas on the lower level. The
upper level includes 71 terrace suites, each capable of accommodating up to 40
persons to view races. Rooftop viewing areas will also be provided for the
suites. The lower level of the infield suite building is expected to house
approximately 54 units designed for miscellaneous functions.
There will also be two scoring pylons at both ends of the oval area, with a
third scoring pylon located in the center of the facility. Parking on the
infield is expected to accommodate approximately 1,500 recreation vehicles.
Grandstands are being constructed along the south side of the California
Speedway. A concourse level is planned for the grandstand structure to
facilitate exiting. Concessions will be sold from the concourse, as well as at
ground level. Entry to the grandstands will be monitored through two ticket
entry gates. Atop the center of the grandstands, a 50 foot long race control
tower is being added to accommodate press rooms for print, television and radio
personnel, and race control and race directing rooms. The race control tower is
expected to be accessed by an elevator and two sets of stairs.
The California Speedway includes a chalet village of hospitality tents with
a main kitchen/commissary facility for food services at the eastern end of the
grandstand area and a "retail midway" to the south of the main grandstand,
immediately outside of the gate entries. This midway will consist of large
concession trailers which travel the racing circuit selling clothing and
souvenirs for the various racing teams and sponsors. Four first aid stations are
located in the grandstand area.
The California Speedway also includes a 10,000 square foot, one-story
administration building which houses the corporate office for the California
Speedway. In addition, adjacent to the administration building, the California
Speedway will include a second helistop, which will serve as a base for the
helicopter providing
6
<PAGE> 8
traffic control and reporting. The California Speedway maintenance offices and
equipment are located in an 18,000 square foot maintenance building.
While PMI does not charge its customers for parking, a total of 31,250
parking spaces will surround California Speedway for those seated within the
grandstand areas. Additionally, 125 spaces have been designated for bus parking.
This equates to a ratio of slightly more than one parking space for each three
grandstand seats. The California Speedway will also accommodate a Metrolink
station in the northeastern portion of the parking area, along the Atkinson
Topeka & Santa Fe rail line adjacent to the California Speedway, which is a
passenger rail line connecting the area with downtown Los Angeles, as well as to
Oceanside/San Diego, Oxnard/Camarillo and Lancaster.
The development of the California Speedway commenced in April 1994 upon the
execution of an agreement between Michigan Speedway and Kaiser Ventures Inc.
(the "1994 Development Agreement") to pursue the development, construction and
operation of the California Speedway. Under the terms of the 1994 Development
Agreement, Penske Performance, Inc., and Kaiser Ventures Inc. ("Kaiser")
contributed funds for investigative, predevelopment and development activities
for the California Speedway.
The transactions contemplated under the 1994 Development Agreement were
consummated on November 22, 1995. At the closing of these transactions, PMI
acquired from Kaiser all of the outstanding stock of Kaiser's wholly-owned
subsidiary, Speedway Development Corporation, which owned the property on which
the California Speedway is being built. In exchange for the Speedway Development
Corporation stock, Kaiser received preferred stock of PMI, which was converted
into Common Stock in 1996. Concurrent with the Kaiser transaction, Facility
Investments, Inc., a wholly-owned subsidiary of International Speedway
Corporation, acquired a 20% interest in PSH Corp., which owns approximately 59%
of the outstanding Common Stock of the Company. The construction of the
California Speedway began in the fourth quarter of 1995 and is expected to be
completed prior to the scheduled June 1997 Winston Cup event.
COMPETITION TIRE
Two of PMI's subsidiaries, Competition Tire West and Competition Tire
South, engage in the wholesale and retail sale and distribution of Goodyear
brand racing tires for various types of racing events, excluding CART-sanctioned
events. Competition Tire West is a dealer of Goodyear brand racing tires.
Competition Tire West's area of primary responsibility includes Ohio, Indiana,
Michigan, Illinois, Wisconsin, Minnesota, North Dakota, South Dakota, Iowa,
Missouri and Kentucky. Competition Tire South is a dealer of Goodyear brand
sports car, dirt car and drag racing tires. Competition Tire South's area of
primary responsibility includes Florida, Georgia, Alabama, Tennessee, North
Carolina and South Carolina. Competition Tire South is also a dealer of Goodyear
brand sports car racing tires in Tennessee and North Carolina. Competition Tire
sells racing tires directly to end users of the tires and to retailers of the
tires and provides supplies of tires for use at racing events. Competition Tire
West and Competition Tire South distribute Goodyear brand tires pursuant to
Dealership Agreements with Goodyear which expire on December 31, 2000.
COMPETITION
Racing events compete not only with other sports and other recreational
events scheduled on the same dates, but with other racing events sanctioned by
various racing bodies such as NASCAR, CART, the United States Auto Club
("USAC"), the National Hot Rod Association ("NHRA"), Sports Car Club of America
("SCCA"), the International Motor Sports Association ("IMSA"), the Automobile
Racing Club of America ("ARCA"), the Indy Racing League ("IRL") and others.
Racing events sanctioned by different organizations are often held on the same
dates at separate tracks, in competition with the NASCAR and CART event dates.
In addition, motorsports facilities compete with one another for the patronage
of motor racing spectators, with other track owners and with other sports and
entertainment businesses, many of which have resources that exceed those of the
Company. The quality of the competition, type of racing event, caliber of the
events, sight lines, ticket pricing, location, customer conveniences, among
others, distinguish the motorsports facilities.
7
<PAGE> 9
In addition, there have been and continue to be numerous attempts by other
parties to develop a permanent speedway to serve the large Southern California
market. Currently, projects have been announced for permanent sites in Long
Beach, Victorville, Lake Elsinore, San Jose and Coachella Valley, California.
None of these announced California projects is believed to be as advanced in the
permitting, development and construction work as the California Speedway. There
can be no assurance that PMI will maintain or improve its position in light of
such competition.
MIC's principal competitors include other authorized (as well as
unauthorized) distributors and retailers of Penske Racing merchandise and
merchandise relating to its drivers. Competition Tire's principal competitors
are distributors and retailers of racing tires manufactured by companies other
than Goodyear, such as Hoosier and Firestone brand tires.
EMPLOYEES
As of December 31, 1996, the Company had 113 full-time employees. The
Company engages a small number of temporary employees to assist during the
racing season and a large number of temporary personnel to assist during periods
of peak attendance at its events. For example, Michigan Speedway may engage up
to 4,000 persons for a race weekend at Michigan Speedway, some of whom are
volunteers. None of PMI's employees are represented by a labor union. Management
believes that PMI enjoys a good relationship with its employees.
ENVIRONMENTAL MATTERS
Prior to the commencement of construction of the California Speedway,
portions of the site of the California Speedway were identified by Kaiser and
the applicable governmental agency as requiring remediation by Kaiser to comply
with applicable environmental laws. Property owned by Kaiser adjacent to the
site has also been identified as requiring remediation by Kaiser. Remediation
activities at the site, a former steel production facility, are being carried
out by Kaiser under a Consent Order between Kaiser and the California
Environmental Protection Agency, Department of Toxic Substances Control
("DTSC"), dated August 22, 1988. The primary area of potential environmental
concern at the site is an approximately 13 acre area which was the location of
Kaiser's former by-products plant and underground storage tanks. Under the
supervision of the DTSC, Kaiser has been able to undertake successful remedial
action at the site through a combination of remedial action alternatives
selected for implementation. Such remedial efforts by Kaiser at the site include
the installation of a low-permeability membrane and cap (and long-term
maintenance of this cap) in the 13 acre by-products and underground storage tank
area by Kaiser, installation of a vapor extraction system for impacted soils in
that area, excavation, treatment and off-site removal and disposal of impacted
soils and residual waste materials. Such efforts also include containment on the
site of potentially impacted soils after the DTSC considered the public health,
environmental protection, benefits derived from implementation of alternatives
and decreased levels of exposure over time.
The DTSC has determined that the combination of remedial action
alternatives presented by Kaiser meets the DTSC's remedial action objectives for
the site because they significantly reduce or eliminate the potential migration
of contaminants to ground water, surface water and air, result in removal, as
necessary, of residual waste materials and impacted soil from the site, meet
regulatory standards, and are consistent with site development plans.
Effective January 1, 1995, the California Speedway and Michigan Speedway
were released by the DTSC from various liabilities under California
environmental protection laws which might otherwise arise out of their ownership
of real estate or operations at the California Speedway site. In addition,
Kaiser has agreed to indemnify the California Speedway and Michigan Speedway
from environmental liabilities associated with the condition of the site and the
Company has obtained environmental liability insurance coverage to protect the
Company during the construction of the California Speedway and for subsequent
periods deemed to be necessary by the Company.
Nevertheless, if damage to persons or property or contamination of the
environment is determined to have been caused or exacerbated by the conduct of
the Company's business, or by pollutants, substances,
8
<PAGE> 10
contaminants or wastes used, generated or disposed of by the Company or which
may be found on the property of the Company, or should Kaiser fail to remediate
properly or not be able to honor its indemnification of the Company for such
remediation activities, there may be liability to various parties for such
damage and the Company or its subsidiaries may be required to pay the cost of
investigation or remediation, or both, of such contamination or damage caused
thereby. The amount of such liability, as to which the Company may be self-
insured or which is not subject to indemnification by Kaiser or to which Kaiser
does not financially respond, could also be material.
Changes in federal, state or local laws, regulations or requirements, or
claims asserting liabilities under federal environmental protection laws and any
other laws outside the scope of the January 1, 1995 DTSC Release, or the
discovery of theretofore unknown conditions, could require material expenditures
by the Company.
Kaiser has agreed to provide sanitary wastewater treatment services to the
California Speedway from a nearby treatment facility owned by Kaiser. The
Company has the option to purchase the facility at the fair market value at any
time. Kaiser has agreed not to voluntarily sell, lease or transfer the facility
to a third party without the Company's consent.
Treated effluent from the site of the California Speedway has been
historically utilized by an unrelated party, California Steel Industries
("CSI"), in its industrial processes under an arrangement with Kaiser. The
Company believes that this utilization will continue into the future, but there
can be no assurance in this regard. Should CSI's utilization cease and a
replacement not be found, or should federal, state or local laws or regulations
change, it might be impracticable for the sewerage treatment facility serving
the site of the California Speedway to continue in operation. The Company would
then be required to connect to the public sewerage system. This could require
material expenditures by the Company either to acquire and/or upgrade the
treatment facility or to obtain other sanitary wastewater treatment services
from a public utility.
INSURANCE
The Company, including the California Speedway, maintains insurance with
insurance companies against such risks and in such amounts, with such
deductibles, as are customarily maintained by similar businesses. Additionally,
the California Speedway presently maintains a $25 million contractor's pollution
liability policy and a pollution legal liability policy, on a shared limits,
claims made basis. The policy has a $500,000 per occurrence deductible and
generally covers the California Speedway's legal liability for bodily injury,
property damage and clean-up costs caused by pollution conditions (i) resulting
from construction activities at the site and which is not covered by the
construction contractors' policies, and (ii) which emanate from the site and
damage third parties as a result of existing conditions or on-going operations.
There can be no assurances that such policy will be sufficient to cover any
potential liability resulting from the environmental condition of the California
Speedway or from the construction of the California Speedway or that such policy
will be available in the future for the Company to purchase.
PATENTS AND TRADEMARKS
PMI has various registered and common law trademark rights to "Michigan
Speedway", "Nazareth Speedway" and "California Speedway" and related logos and
has a license from a subsidiary of Penske Corporation to use the name "Penske"
in its trade name. MIC has licenses from various drivers and businesses to use
names and logos for merchandising programs and product sales. Management's
policy is to protect its intellectual property rights zealously, through
litigation if necessary, chiefly because of their proprietary value in
merchandise and promotional sales.
9
<PAGE> 11
ITEM 2: PROPERTIES
The following table sets forth the location, track name, approximate
acreage and track length for each of the Company's speedway facilities.
<TABLE>
<CAPTION>
APPROXIMATE LENGTH
LOCATION TRACK NAME ACREAGE* OF TRACK
-------- ---------- ----------- --------
<S> <C> <C> <C>
Brooklyn, Michigan Michigan Speedway 977 2 miles
Nazareth, Pennsylvania Nazareth Speedway 183 1 mile
Fontana, California California Speedway 529 2 miles
</TABLE>
- ------------------------
* The Company owns all of the acreage listed in the table except for 77 acres of
property located near the Nazareth Speedway which is leased from others to
supply additional parking space.
Additional information concerning the Company's facilities is set forth in
Item I (Business), under the caption "Events and Facilities -- Facilities."
ITEM 3: LEGAL PROCEEDINGS
In March 1997, two purported class action companion lawsuits were filed in
the United States District Court, Northern District of Georgia, against
approximately 28 businesses, including PMI and MIC, many of which are involved
in the sale of souvenirs and merchandise at NASCAR Winston Cup races. The
lawsuits allege, in substance, that the defendants unlawfully conspired to fix
the prices of souvenirs and merchandise at these races in violation of federal
antitrust laws. The Company disputes the claims and expects to vigorously defend
itself.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1996, no matters were submitted to a vote of
security holders.
SUPPLEMENTARY ITEM: EXECUTIVE OFFICERS OF MANAGEMENT (PURSUANT TO INSTRUCTION 3
TO ITEM 401(B) OF REGULATION S-K).
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
James H. Harris............. 45 Senior Vice President and Treasurer
Gene Haskett................ 53 Executive Vice President
Robert H. Kurnick, Jr. ..... 35 Senior Vice President, General Counsel and
Secretary
Les Richter................. 66 Executive Vice President
</TABLE>
James H. Harris has been Senior Vice President and Treasurer of PMI since
January 1996 and, prior thereto, served as Controller of PMI. Mr. Harris has
also been the Controller for Penske Corporation since 1990. Prior to 1990, Mr.
Harris was with the CPA firm of Deloitte & Touche LLP.
Gene Haskett has been Executive Vice President of PMI since January 1996
and, prior thereto, was a Vice President of PMI. Mr. Haskett is the President of
Michigan Speedway and Nazareth Speedway. Prior to January 1996, he was Vice
President and General Manager of MIS and has served in such capacity since 1987.
Mr. Haskett served as Vice President and General Manager of Indy Car Grand Prix,
Inc. from 1985 until 1993.
Robert H. Kurnick, Jr. has been Senior Vice President, General Counsel and
Secretary of PMI since January 1996. Mr. Kurnick has also served as Assistant
General Counsel of Penske Corporation since January 1995 and Senior Vice
President, General Counsel and Secretary of Penske Auto Centers, Inc., which
owns and operates approximately 800 automotive service centers, since October
1995. Prior to January 1995, Mr. Kurnick was a partner in the Detroit law firm
of Honigman Miller Schwartz and Cohn.
10
<PAGE> 12
Les Richter has been Executive Vice President of PMI since July 1994. Since
1988, Mr. Richter has served as Chairman of the Board of the International Race
of Champions, Inc. and from 1992 to 1996, Mr. Richter served as Senior Vice
President - Operations of NASCAR.
PART II
ITEM 5: MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The common stock of PMI, $.01 per share (the "Common Stock"), is currently
traded on the Nasdaq National Market ("Nasdaq") under the symbol "SPWY". The
Common Stock has traded on Nasdaq since the Company's initial public offering in
March 1996. As of March 21, 1997, 13,241,798 shares of Common Stock were
outstanding and there were approximately 1,151 record holders of Common Stock.
The Company will consider the payment of cash dividends following
completion of the construction of the California Speedway. However, any
declaration and payment of dividends will be (i) dependent upon the Company's
results of operations, financial condition, cash requirements, capital
improvements and other relevant factors, (ii) subject to the discretion of the
Board of Directors of the Company and (iii) payable only out of the Company's
surplus or current net profits in accordance with the General Corporation Law of
the State of Delaware. No assurance can be given that the Company will be able
to pay such dividends following completion of the construction of the California
Speedway or at any time in the future.
The following table sets forth the high and low closing sales prices for
the Company's Common Stock, as reported by Nasdaq for each calendar quarter
during the periods indicated. Prior to March 26, 1996, the Company was privately
held and there was no public market for the Common Stock.
<TABLE>
<CAPTION>
1996 HIGH LOW
---- ---- ---
<S> <C> <C> <C> <C>
First Quarter (from March 26, 1996)......................... $40 3/4 $28 1/2
Second Quarter.............................................. $38 1/4 $24 3/4
Third Quarter............................................... $35 1/2 $23
Fourth Quarter.............................................. $35 1/2 $24 1/8
</TABLE>
11
<PAGE> 13
ITEM 6: SELECTED FINANCIAL DATA
Set forth below is selected consolidated financial data for each of the
past five fiscal years. The selected financial data should be read in
conjunction with Management's Discussion and Analysis of Financial Condition and
Results of Operations and the Company's Consolidated Financial Statements and
Notes included elsewhere in this report.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
($ IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME:
REVENUE
Speedway admissions............. $ 20,248 $ 17,375 $ 15,278 $ 13,997 $ 13,391
Other speedway revenue.......... 13,041 7,654 7,181 6,149 6,053
Merchandise, tires and
accessories................... 21,886 16,976 18,059 13,070 9,847
----------- ---------- -------- -------- --------
Total Revenue................. 55,175 42,005 40,518 33,216 29,291
EXPENSES
Operating expenses.............. 18,067 14,060 13,322 11,026 10,820
Cost of sales................... 12,834 9,672 10,169 7,573 5,358
Depreciation and amortization... 3,167 2,563 2,018 1,601 1,513
Selling, general and
administrative................ 6,185 4,631 4,632 4,420 4,124
----------- ---------- -------- -------- --------
Total Expenses................ 40,253 30,926 30,141 24,620 21,815
Operating Income................ 14,922 11,079 10,377 8,596 7,476
Interest income (expense), net..... 1,950 (895) (1,005) (875) (793)
----------- ---------- -------- -------- --------
Income before taxes................ 16,872 10,184 9,372 7,721 6,683
Income taxes....................... 5,992 3,410 3,032 2,528 753
----------- ---------- -------- -------- --------
Net income......................... $ 10,880 $ 6,774 $ 6,340 $ 5,193 $ 5,930
=========== ========== ======== ======== ========
Pro forma net income per share..... $ 0.90 $ 0.84
Pro forma weighted average shares
outstanding..................... 12,128,920 8,077,245
SELECTED OPERATING DATA:
Operating margin................ 27.0% 26.4% 25.6% 25.9% 25.5%
Number of seats
Michigan Speedway............. 98,276 88,141 77,991 72,906 66,173
Nazareth Speedway............. 35,654 30,534 30,534 26,668 24,270
Total attendance................ 599,480 518,396 448,168 414,937 362,502
Number of events
Winston Cup................... 2 2 2 2 2
CART.......................... 2 2 2 2 2
Other......................... 5 4 5 4 3
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets......................... $183,997 $73,255 $34,510 $36,407 $27,406
Total debt........................... 5,563 350 12,515 12,035 10,221
Total stockholders' equity........... 145,402 45,812 10,187 13,467 11,062
</TABLE>
12
<PAGE> 14
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Penske Motorsports, Inc. classifies its revenues as speedway admissions,
other speedway revenue, and merchandise, tires and accessories revenue. Speedway
admissions includes ticket sales for racing events held at Michigan and Nazareth
Speedways. Other speedway revenue includes revenue from concessions sales,
corporate hospitality and sponsorship, broadcast revenues and billboard and
program advertising. Speedway admissions and other speedway revenue are
generally collected in advance and recorded as deferred revenue until the
completion of the related event. Merchandise, tires and accessories revenue
includes sales of motorsports related merchandise and revenue from showcar
appearance fees by MIC and sales of racing tires and accessories by Competition
Tire. Revenue from sales of merchandise, tires and accessories is recorded as
income at the time of the sale.
The Company classifies its expenses as operating, cost of sales,
depreciation and amortization and selling, general and administrative expenses.
Operating expenses consist primarily of costs associated with conducting race
events, such as sanction fees and wages. Cost of sales relates entirely to sales
of merchandise, tires and accessories.
In March 1996, the Company completed its initial public offering of
3,737,500 shares of common stock. The initial offering price was $24 per share
with net proceeds to the Company of $82.7 million. The net proceeds were used to
repay outstanding balances on the Company's credit facilities of approximately
$10.6 million, with the remainder to be used to fund the construction of the
California Speedway.
Revenue for the year ended December 31, 1996 was $55.2 million, compared to
$42.0 million and $40.5 million, respectively, for the years ended December 31,
1995 and 1994. Net income for the year ended December 31, 1996 was $10.9
million, or $.90 per share, compared to $6.8 million, or $.84 per share, for the
year ended December 31, 1995 and $6.3 million for the year ended December 31,
1994. The increase in revenues and net income for the year ended December 31,
1996 is due primarily to increased ticket sales and increased broadcast and
concessions revenues at the speedways, an increase in sales of merchandise,
tires and accessories, including the impact of the acquisition of Competition
Tire South, and an increase in interest income from temporary investments of
proceeds from the Company's initial public offering.
The Company is currently constructing the California Speedway, a two-mile
superspeedway located near Los Angeles, California, with an estimated cost of
approximately $105 million. The Company has incurred approximately $63 million
in construction costs through December 31, 1996. Three event weekends have been
scheduled for June, September and October of 1997. During 1996, the Company
acquired approximately 54 acres of commercial property located adjacent to the
property on which the Company is building the California Speedway from a
noncontrolling shareholder of the Company for $13.4 million, which the Company
paid in cash of $5 million and through the issuance of 254,298 shares of the
Company's common stock.
During 1996, the Company acquired the stock in Pennsylvania International
Raceway (Nazareth Speedway) held by the minority shareholder in exchange for
92,500 shares of the Company's common stock. The Company also purchased all of
the outstanding common stock of Competition Tire West and Competition Tire South
during 1996. Competition Tire West was purchased for $7.4 million, of which $4.3
million was paid in cash with the balance payable over a term of five years with
interest at 8% per annum. Competition Tire West owned one-third of Competition
Tire South. The Company acquired the remaining two-thirds of Competition Tire
South for $2.2 million, paying $1.4 million in cash and issuing notes payable
over a term of five years at 8% interest per annum for the remaining $830,000.
The Company does not believe that its financial performance has been
materially affected by inflation. The Company has been able to mitigate the
effects of inflation without adversely affecting attendance.
13
<PAGE> 15
SEASONALITY AND QUARTERLY RESULTS
The Company's weekend events usually include one premier Sunday event, such
as a NASCAR Winston Cup, NASCAR Busch Series Grand National Division or CART
event, coupled with a Saturday supporting event. The Company believes that
combining the races creates a more attractive weekend racing experience than an
isolated race event. As a result of this strategy, in 1996 the Company generated
virtually all of its speedway revenue in six weekends.
The Company's weekend events are currently held between April and August.
As a result, the Company's business has been highly seasonal. In addition to the
existing weekend events, in 1997 the California Speedway will host events in
June, September and October.
Set forth below is summary information with respect to the Company's
operations for the most recent eight quarters.
<TABLE>
<CAPTION>
1996 1995
------------------------------------ -------------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
----- ------ ----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue....................... $3,642 $24,614 $23,962 $ 2,957 $ 2,862 $17,310 $19,197 $ 2,636
Net income (loss)............. (990) 6,717 6,499 (1,346) (1,157) 4,237 4,812 (1,118)
Event weekends................ 4 2 3 2
</TABLE>
RESULTS OF OPERATIONS
The percentage relationships between revenues and other elements of the
Company's Consolidated Statements of Income for the years ended December 31,
1996, 1995 and 1994 were:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
REVENUE:
Speedway admissions....................................... 36.7% 41.4% 37.7%
Other speedway revenue.................................... 23.6 18.2 17.7
Merchandise, tires and accessories........................ 39.7 40.4 44.6
----- ----- -----
TOTAL REVENUE........................................ 100.0 100.0 100.0
----- ----- -----
EXPENSES:
Operating................................................. 32.8 33.5 32.9
Cost of sales............................................. 23.3 23.0 25.1
Depreciation and amortization............................. 5.7 6.1 5.0
Selling, general and administrative....................... 11.2 11.0 11.4
----- ----- -----
TOTAL EXPENSES....................................... 73.0 73.6 74.4
----- ----- -----
OPERATING INCOME............................................ 27.0% 26.4% 25.6%
===== ===== =====
</TABLE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Revenues -- Revenues for the year ended December 31, 1996 were $55.2
million, an increase of $13.2 million, or 31.4%, compared to the same period in
1995. This improvement was due to increases in all revenue components.
Admissions revenue for the year of $20.2 million increased $2.9 million, or
16.5%, from the same period in 1995 and reflects increased attendance at the
Company's events, as well as the addition of an event at Nazareth Speedway.
Other speedway revenue of $13.0 million increased $5.4 million, or 70.4%,
primarily due to incremental television broadcast revenue, increases in
concessions, hospitality and sponsorship revenue and revenue from leasing the
Michigan Speedway to CART to host the U.S. 500. Merchandise, tires and
accessories revenue of $21.9 million increased $4.9 million, or 28.9%, from the
same period in 1995, reflecting the acquisition of Competition Tire South as
well as increases in sales of race related apparel and tires and accessories.
The addition of three event weekends at the California Speedway in 1997 is
expected to result in a significant increase in speedway admissions and other
speedway revenue.
14
<PAGE> 16
Operating Expenses -- Operating expenses of $18.1 million for the year
ended December 31, 1996 increased $4.0 million, or 28.5%, from the year ended
December 31, 1995 as a result of higher sanction fees, costs associated with the
U.S. 500, the new event at Nazareth Speedway and the impact of the acquisition
of Competition Tire South. As a percentage of total revenue, operating expenses
were 32.8% for the year ended December 31, 1996 as compared to 33.5% for the
year ended December 31, 1995. The decrease in operating expenses as a percentage
of total revenue for 1996 reflects the Company's ability to add incremental
revenue without a corresponding increase in operating expenses.
Cost of Sales -- Cost of sales, which relates entirely to sales of
merchandise, tires and accessories, was $12.8 million for the year ended
December 31, 1996, or 58.6% of merchandise, tires and accessories revenues,
compared to $9.7 million, or 57.0% of those same revenues, for 1995. The
increase in cost of sales as a percent of merchandise, tires and accessories
revenue reflects an increase in wholesale merchandise sales, which have a lower
gross profit margin.
Depreciation and Amortization -- Depreciation and amortization expense of
$3.2 million for the year ended December 31, 1996 increased $.6 million, or
23.6%, compared to the year ended December 31, 1995. The increase reflects
capital improvements, primarily additional seating and repaving at the race
tracks, and the acquisition of Competition Tire South.
Selling, General and Administrative -- Selling, general and administrative
expenses of $6.2 million for the year ended December 31, 1996 increased $1.6
million, or 33.6%, from $4.6 million in 1995 due to expenses incurred in
connection with the U.S. 500 and the new event at Nazareth Speedway. As a
percentage of revenues, selling, general and administrative expenses were
comparable, 11.2% in 1996 and 11.0% in 1995.
Operating Income -- Operating income for the year ended December 31, 1996
was $14.9 million, an increase of $3.8 million, or 34.7%, from $11.1 million for
the year ended December 31, 1995. This resulted primarily from increased
speedway admissions and incremental broadcast and sponsorship revenue for
speedway events.
Interest -- The Company recorded net interest income for the year ended
December 31, 1996 of $2.0 million, compared to net interest expense of $.9
million in 1995. The interest income resulted from temporarily investing the
proceeds of the initial public offering while the reduced interest expense
reflects the repayment of existing debt with the initial public offering
proceeds. The remaining proceeds of the initial public offering will be used in
1997 to complete the construction of the California Speedway and will not be
available for investment by the Company through 1997.
Income Tax Expense -- The Company's effective tax rate for 1996 was 35.5%
compared to 33.5% in 1995. The increase primarily reflects the inclusion of
Competition Tire West in taxable income in 1996. Prior to 1996, Competition Tire
West was a Subchapter S Corporation, whereby its shareholders were taxed for
their proportionate share of the Company's taxable income.
Net Income -- Net income for the year ended December 31, 1996 was $10.9
million, an increase of $4.1 million, or 60.6%, over 1995. The increase reflects
increases in speedway admissions and other speedway revenues, higher sales of
merchandise, tires and accessories and the benefit of interest earned on
invested initial public offering proceeds.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Revenue -- Revenue of $42.0 million for the year ended December 31, 1995
increased by $1.5 million, or 3.7% from the year ended December 31, 1994. This
increase was the result of growth in speedway revenue of $2.6 million, offset by
a $1.1 million decline in revenue from merchandise, tires and accessories.
Speedway admissions revenue of $17.4 million increased by $2.1 million, or
13.7%, of which $1.5 million, or 9.8%, was attributable to increased attendance
and $.6 million, or 3.9%, was attributable to increases in ticket prices.
Merchandise, tires, and accessories revenue declined primarily due to the loss
of a license to use the "McDonald's" logo on merchandise and because Penske
Racing's Rusty Wallace Winston Cup race team experienced a less successful
season in 1995 than in 1994. This decline was partially offset by an increase in
sales of tires and accessories.
15
<PAGE> 17
Operating Expenses -- Operating expenses of $14.1 million for the year
ended December 31, 1995 increased by $.7 million, or 5.5%, from the year ended
December 31, 1994. As a percentage of total revenue, operating expenses were
33.5% for the year ended December 31, 1995 as compared to 32.9% for the year
ended December 31, 1994. The increase in operating expenses resulted primarily
from an increase in the sanction fees paid by the Company for the year ended
December 31, 1995, from the amounts paid in the year ended December 31, 1994.
Cost of Sales -- Cost of sales of $9.7 million for the year ended December
31, 1995 decreased by $.5 million, or 4.9%, from the year ended December 31,
1994, reflecting lower sales volume.
Selling, General and Administrative Expenses -- Selling, general and
administrative expenses of $4.6 million for the year ended December 31, 1995
remained comparable to that for the year ended December 31, 1994. As a
percentage of total revenue, selling, general and administrative expenses were
11.0% in the year ended December 31, 1995 as compared to 11.4% in the prior
year, reflecting the Company's ability to increase speedway revenue without a
corresponding increase in selling, general and administrative expenses.
Depreciation and Amortization -- Depreciation and amortization expense of
$2.6 million for the year ended December 31, 1995 increased by $.5 million, or
27.0%, from the year ended December 31, 1994. The increase occurred as a result
of additional seating capacity and track paving at Michigan Speedway and other
improvements made during 1995.
Operating Income -- Operating income of $11.1 million for the year ended
December 31, 1995 increased $.7 million, or 6.8%, from the year ended December
31, 1994. As a percentage of total revenue, operating income was 26.4% for the
year ended December 31, 1995 as compared to 25.6% for the year ended December
31, 1994. The increase in operating income resulted primarily from higher
revenue from a combination of increased attendance and higher ticket prices at
the speedway, partially offset by additional operating expenses associated with
promoting race events and increased depreciation expense related to capital
expansion for future growth.
Interest Expense -- Interest expense of $.9 million for the year ended
December 31, 1995 was $.1 million less than 1994 due to reduced borrowings.
Income Tax Expense -- The Company's effective tax rate was 33.5% and 32.4%
for the years ended December 31, 1995 and 1994, respectively. The effective tax
rate was less than the statutory rate primarily because Competition Tire West
was a Subchapter S Corporation.
Net Income -- Net income of $6.8 million for the year ended December 31,
1995 increased $.4 million, or 6.8% from the year ended December 31, 1994. The
increase in net income resulted primarily from higher revenue from a combination
of increased attendance and higher ticket prices at the speedways, partially
offset by additional operating expenses associated with promoting race events
and increased depreciation expense related to capital expansion for future
growth.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has relied on cash flows from operating
activities supplemented, as necessary, by bank borrowings to finance working
capital, investments and capital expenditures. The Company used a portion of the
proceeds of its initial public offering to repay debt and is using the remainder
to fund construction of the California Speedway.
For the year ended December 31, 1996, the Company generated $18.6 million
in cash flows from operating activities, an increase of $4.3 million from 1995,
primarily reflecting an increase in net income of $4.1 million and an increase
of $5.0 million in deferred revenue. For the year ended December 31, 1995 the
Company generated $14.3 million in cash flows from operating activities, an
increase of $6.2 million over operating cash flow of $8.1 million for the year
ended December 31, 1994. This improvement was primarily a reflection of the
timing of tax payments made to Penske Corporation in the year ended December 31,
1995.
During the year ended December 31, 1996, the Company used $78.5 million for
investing activities. This consisted of $73.8 million in capital expenditures,
including $56.1 million for the construction of the California
16
<PAGE> 18
Speedway and $5 million for the cash portion of the $13.4 million purchase price
of the commercial property located adjacent to the California Speedway, $4.1
million for the acquisition of Competition Tire and $.6 million for additional
investments in unconsolidated subsidiaries. Cash of $83.0 million was provided
by financing activities in 1996, primarily from the initial public offering,
which provided net cash of $82.7 million.
During the year ended December 31, 1996, the Company obtained a $20 million
unsecured revolving line of credit, all of which was available as of December
31, 1996. This line of credit will be used for general working capital needs
and, if necessary, to finance the completion of the California Speedway and
other capital expenditures.
The Company believes it has sufficient resources from existing cash
balances and from operating activities, and if necessary, from borrowing under
its line of credit to satisfy ongoing cash requirements for the next twelve
months, including construction of the California Speedway and other required
capital expenditures. The California Speedway is currently estimated to cost
approximately $105 million. The estimated construction cost has increased from
original estimates due to additional seating capacity, enhancements to customer
amenities and further upgrades to the quality of the facilities.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995
Except for the historical information contained herein, certain matters
discussed in this report are forward-looking statements which involve risks and
uncertainties, including but not limited to the Company's ability to maintain
good working relationships with the sanctioning bodies for its events, complete
on schedule the construction of the California Speedway and obtain sanctioning
agreements for events at the California Speedway, as well as other risks and
uncertainties affecting the Company's operations, such as competition,
environmental, industry sponsorships, governmental regulation, dependence on key
personnel, the Company's ability to control construction and operational costs,
the impact of bad weather at the Company's events and those other factors
discussed in the Company's filings with the Securities and Exchange Commission.
17
<PAGE> 19
PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
($ IN THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 27,862 $ 4,805
Receivables............................................... 2,365 1,708
Inventories............................................... 2,060 1,370
Prepaid expenses.......................................... 1,272 575
-------- -------
Total Current Assets................................... 33,559 8,458
Property and Equipment, net................................. 140,402 61,009
Note Receivable -- Related Party............................ 1,512
Goodwill, net............................................... 6,918 1,367
Other Assets................................................ 3,118 909
-------- -------
Total.................................................. $183,997 $73,255
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt......................... $ 1,738 $ 150
Accounts payable.......................................... 8,223 2,858
Accrued expenses.......................................... 1,715 3,790
Deferred revenue, net..................................... 14,125 8,866
-------- -------
Total Current Liabilities.............................. 25,801 15,664
Long-Term Debt, less current portion........................ 3,825 200
Advances -- Related Parties................................. 1,254
Deferred Taxes.............................................. 8,969 9,115
Minority Interest........................................... 1,210
Commitments and Contingencies
Stockholders' Equity:
Common stock, par value $ .01 share:
Authorized 50,000,000 shares
Issued and outstanding 13,241,798 shares and 9,157,500
shares in 1996 and 1995, respectively................. 132 93
Additional paid-in-capital................................ 130,534 37,446
Retained earnings......................................... 14,736 8,273
-------- -------
Total Stockholders' Equity............................. 145,402 45,812
-------- -------
Total.................................................. $183,997 $73,255
======== =======
</TABLE>
See notes to consolidated financial statements.
18
<PAGE> 20
PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
($ IN THOUSANDS EXCEPT FOR SHARE
AND PER SHARE DATA)
<S> <C> <C> <C>
REVENUE:
Speedway admissions...................................... $ 20,248 $ 17,375 $15,278
Other speedway revenue................................... 13,041 7,654 7,181
Merchandise, tires and accessories....................... 21,886 16,976 18,059
----------- ---------- -------
Total Revenue......................................... 55,175 42,005 40,518
EXPENSES:
Operating expenses....................................... 18,067 14,060 13,322
Cost of sales............................................ 12,834 9,672 10,169
Depreciation and amortization............................ 3,167 2,563 2,018
Selling, general and administrative...................... 6,185 4,631 4,632
----------- ---------- -------
Total Expenses........................................... 40,253 30,926 30,141
Operating Income........................................... 14,922 11,079 10,377
Interest Income (Expense), net............................. 1,950 (895) (1,005)
----------- ---------- -------
Income Before Income Taxes................................. 16,872 10,184 9,372
Income Taxes............................................... 5,992 3,410 3,032
----------- ---------- -------
Net Income............................................... $ 10,880 $ 6,774 $ 6,340
=========== ========== =======
Pro Forma Net Income Per Share........................... $ .90 $ .84
=========== ==========
Pro Forma Weighted Average Number of Shares.............. 12,128,920 8,077,245
=========== ==========
</TABLE>
See notes to consolidated financial statements.
19
<PAGE> 21
PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------ ---------- -------- -----
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance, January 1, 1994.............................. $ 78 $ 2,485 $10,524 $ 13,087
Net income.......................................... 6,340 6,340
Dividends........................................... (9,240) (9,240)
---- -------- ------- --------
Balance, December 31, 1994............................ 78 2,485 7,624 10,187
Net income.......................................... 6,774 6,774
Dividends........................................... (6,125) (6,125)
Capital contribution (Note 8)....................... 19,976 19,976
Stock issuance...................................... 15 14,985 15,000
---- -------- ------- --------
Balance, December 31, 1995............................ 93 37,446 8,273 45,812
Sale of common stock................................ 37 82,703 82,740
Competition Tire West, Inc. transaction (Note 3).... (28) (4,417) (4,445)
Acquisition of minority interest (Note 3)........... 2,063 2,063
Stock issuance (Note 4)............................. 2 8,350 8,352
Net income.......................................... 10,880 10,880
---- -------- ------- --------
Balance, December 31, 1996............................ $132 $130,534 $14,736 $145,402
==== ======== ======= ========
</TABLE>
See notes to consolidated financial statements.
20
<PAGE> 22
PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
($ IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 10,880 $ 6,774 $ 6,340
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 3,167 2,563 2,018
Changes in assets and liabilities which provided (used)
cash:
Receivables.......................................... (431) (75) (852)
Inventories, prepaid expenses and other assets....... (2,784) 323 (128)
Accounts payable and accrued liabilities............. 2,522 4,461 (2,364)
Deferred revenue..................................... 5,259 275 3,108
-------- -------- -------
Net cash provided by operating activities.............. 18,613 14,321 8,122
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions of property and equipment, net.................. (73,812) (14,205) (5,602)
Acquisition of Competition Tire South, Inc. (Note 3)...... (758)
Competition Tire West, Inc. transaction (Note 3).......... (3,326)
Acquisitions of minority interest in subsidiaries......... (622) (520) (200)
-------- -------- -------
Net cash used in investing activities.................. (78,518) (14,725) (5,802)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock........................ 82,740
Capital contribution...................................... 19,976
Proceeds from issuance of debt............................ 14,016 4,672 2,000
Principal payments on long-term debt...................... (12,540) (16,837) (1,520)
Distribution to Parent.................................... (3,600) (1,650)
Dividends................................................. (385) (240)
Repayment of advances - related party..................... (1,254)
-------- -------- -------
Net cash provided by (used in) financing activities.... 82,962 3,826 (1,410)
-------- -------- -------
Net Increase in Cash and Cash Equivalents................... 23,057 3,422 910
Cash and Cash Equivalents at Beginning of Period............ 4,805 1,383 473
-------- -------- -------
Cash and Cash Equivalents at End of Period.................. $ 27,862 $ 4,805 $ 1,383
======== ======== =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for interest.................. $ 133 $ 1,041 $ 1,040
======== ======== =======
Cash paid during the period for taxes..................... $ 9,279 $ 1,168 $ 2,528
======== ======== =======
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES:
Increase in debt associated with acquisitions (Note 3).... $ 3,738
========
Decrease in minority interest from acquisitions (Note
3)..................................................... $ 1,210
========
Stock issued for land purchase (Note 4)................... $ 8,352
========
</TABLE>
See notes to consolidated financial statements.
21
<PAGE> 23
PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
The consolidated financial statements include the accounts of Penske
Motorsports, Inc. (the Company) and its wholly-owned subsidiaries Michigan
International Speedway, Inc. d/b/a Michigan Speedway (MS), Pennsylvania
International Raceway, Inc. d/b/a Nazareth Speedway (NS), The California
Speedway Corporation d/b/a California Speedway (TCS), Motorsports International
Corp. (MIC), Competition Tire West, Inc. (CTW) and Competition Tire South, Inc.
(CTS). The Company is a majority-owned subsidiary of Penske Corporation (the
Parent). All material intercompany balances and transactions have been
eliminated.
Nature of Operations -- The Company generates a predominant portion of its
revenue from operating Michigan Speedway and Nazareth Speedway, and is
constructing the California Speedway, which will begin operations in 1997. The
Company also sells motorsports related merchandise and apparel and racing tires
and accessories.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents -- The Company considers all investments with a
maturity of three months or less, at purchase, as cash equivalents.
Inventories -- Inventories are stated at the lower of cost or market, with
cost determined primarily by the first in, first out (FIFO) method.
Property and Equipment and Goodwill -- Property and equipment is carried at
cost less accumulated depreciation. Depreciation is calculated using the
straight-line method over the estimated useful lives of the respective assets as
follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and Improvements.................................. 10 - 40
Equipment................................................... 2 - 15
</TABLE>
Goodwill represents the excess of the purchase price over the fair value of
net assets acquired and is being amortized primarily over a period of 40 years.
Accumulated amortization was $326,000 and $182,000 at December 31, 1996 and
1995, respectively.
The carrying values of property and equipment and goodwill are evaluated
for impairment based upon expected future undiscounted cash flows.
Investments -- The Company has a 4% ownership interest in the stock of
North Carolina Motor Speedway, Inc., which owns and operates Rockingham Motor
Speedway. This investment is recorded at cost, which was $1,131,000 as of
December 31, 1996. The Company has a right of first refusal to acquire a
controlling interest at fair market value should a sale occur.
Revenue Recognition -- Race related revenue and expenses are recognized
upon completion of an event. Deferred revenue represents advance race related
revenue, net of expenses, on future races. Revenue from the sale of merchandise,
tires and accessories is recognized at the time of sale. Operating expenses
include race-related expenses and other operating costs. Cost of sales relates
entirely to merchandise, tires and accessories sales.
Income Taxes -- Deferred taxes reflect the impact of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
Prior to the purchase of CTW by the Company in March, 1996, CTW was a
Subchapter S Corporation under the Internal Revenue Code whereby the
shareholders are taxed on the proportionate share of the Company's federal
taxable income. Therefore, no provision or liability for federal income taxes
was included in the consolidated financial statements prior to 1996 for CTW.
22
<PAGE> 24
PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results will likely differ from those which are estimated, however, such
differences are not expected to be material.
Reclassifications -- Certain reclassifications have been made to prior
period financial statements to conform with the 1996 presentation.
3. INITIAL PUBLIC OFFERING AND RELATED ACQUISITIONS
Initial Public Offering -- On March 27, 1996, the Company completed its
initial public offering (IPO) of 3,737,500 shares of common stock. The initial
offering price was $24 per share with net proceeds to the Company of $82.7
million. The net proceeds from the offering were used to repay outstanding
balances on the Company's credit facilities (approximately $10.6 million) with
the remainder to be used to fund the construction of the California Speedway
(Note 4).
Acquisition of Minority Interest in NS -- Immediately prior to the
effective date of the IPO, an investor in NS exchanged 2,557 shares of NS for
92,500 shares of common stock of the Company. This transaction resulted in
recording goodwill of approximately $2 million.
Acquisition of Minority Interest in CTW and Capital Distribution -- On
March 21, 1996, the Company acquired 100% of the common stock of CTW for $7.4
million, of which $4.3 million was paid to the two selling shareholders in cash
with the balance of $3.1 million payable over a term not to exceed five years
with interest at 8% per annum. The acquisition of the shares of the former 40%
CTW shareholder was accounted for as an acquisition of a minority interest and
resulted in recording goodwill of approximately $1.9 million. The former
controlling shareholder of CTW (60%) is also the controlling shareholder of the
Company, therefore, the excess of the amount paid for such shares over the net
book value of assets acquired (approximately $2.9 million) was recorded as a
capital distribution.
CTW was included in the consolidated balance sheet at December 31, 1995
because of common control and as a result of the aforementioned transaction.
This transaction resulted in the ownership of CTW by the Company and the
elimination of the net book value (approximately $1.4 million) of the
controlling shareholder's interest in CTW from consolidated stockholder's
equity. Also, as part of this transaction, the $1.5 million note
receivable-related party was repaid.
Acquisition of CTS Common Stock -- On March 21, 1996, the Company acquired
the common shares of CTS not owned by CTW (approximately 67%) for cash and notes
totaling approximately $2.2 million. Notes payable of approximately $830,000 are
payable over a term not to exceed five years with interest at 8% per annum. This
acquisition was accounted for using the purchase method of accounting and
resulted in recording $1.7 million of goodwill. CTS has been included in the
consolidated financial statements from the date acquired. Had the acquisition
occurred as of January 1, 1996, the pro-forma effect on revenues would have been
an increase of $1.4 million with an immaterial impact on net income and earnings
per share.
23
<PAGE> 25
PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1995
---- ----
(IN THOUSANDS)
<S> <C> <C>
Land and improvements..................................... $ 85,469 $35,976
Buildings and improvements................................ 63,685 33,337
Equipment................................................. 6,929 4,656
-------- -------
156,083 73,969
Less accumulated depreciation............................. 15,681 12,960
-------- -------
$140,402 $61,009
======== =======
</TABLE>
The Company is currently constructing the California Speedway with an
estimated cost of approximately $105 million. Construction costs in-progress
through December 31, 1996 approximated $63 million.
In December 1996, the Company acquired 54 acres of commercial property
located adjacent to the property on which the Company is building the California
Speedway from a noncontrolling shareholder of the Company. The purchase price
for the property was $13.4 million, which the Company paid in cash of $5 million
and by the issuance of 254,298 shares of the Company's common stock.
5. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1996 1995
---- ----
(IN THOUSANDS)
<S> <C> <C>
Notes payable through 2006, bearing interest at rates
ranging from 8.0% to 8.5%................................. $5,563 $350
Less current portion........................................ 1,738 150
------ ----
$3,825 $200
====== ====
</TABLE>
The following table presents the expected repayment of the long-term debt
(in thousands):
<TABLE>
<S> <C>
1997........................................................ $1,738
1998........................................................ 1,219
1999........................................................ 876
2000........................................................ 884
2001........................................................ 117
2002 and thereafter......................................... 729
------
$5,563
======
</TABLE>
Notes payable at December 31, 1996 include $3.1 million which is due to
related parties as a result of the purchase of CTW (see Note 3) and $1.7 million
which is secured by certain parcels of land included in property and equipment.
At December 31, 1996 the carrying value of the debt approximates fair
value.
The Company has a $20 million unsecured revolving line of credit, all of
which was available as of December 31, 1996.
24
<PAGE> 26
PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
6. EMPLOYEE BENEFIT PLANS
The Company participates in a non-contributory profit-sharing plan which
covers employees who meet certain length of service requirements. Contributions
of approximately $100,000 were made to the plan during each of the years ended
December 31, 1996, 1995 and 1994.
Employees are also covered by the Penske Corporation Savings Retirement
Plan, a defined contribution plan under Section 401(k) of the Internal Revenue
Code. The Company's expense related to this plan, which began in July 1994, was
$80,000 in 1996, $66,000 in 1995 and $20,000 in 1994.
7. TAXES
The provision for income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current..................................................... $5,753 $3,466 $3,173
Deferred.................................................... 239 (56) (141)
------ ------ ------
Total....................................................... $5,992 $3,410 $3,032
====== ====== ======
</TABLE>
A reconciliation of taxes computed at the federal statutory rate and the
consolidated effective rate is as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Income before income taxes.......................... $16,872 $10,184 $9,372
------- ------- ------
Taxes computed at statutory rate.................... $ 5,905 $ 3,463 $3,186
Earnings taxable at shareholder level - CTW......... (10) (179) (181)
Other............................................... 97 126 27
------- ------- ------
Total income tax expense............................ $ 5,992 $ 3,410 $3,032
------- ------- ------
Effective tax rate.................................. 35.5% 33.5% 32.4%
======= ======= ======
</TABLE>
Temporary differences which give rise to deferred tax (assets) and
liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Property.................................................... $8,969 $9,083
Other....................................................... 3 (350)
------ ------
Total....................................................... $8,972 $8,733
====== ======
Current..................................................... $ 3 $ (382)
Non-current................................................. 8,969 9,115
------ ------
Total....................................................... $8,972 $8,733
====== ======
</TABLE>
25
<PAGE> 27
PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
8. RELATED PARTY TRANSACTIONS
The following is a summary of significant related party balances and
transactions as of and for the years ended December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Balances included in assets and liabilities:
Accounts receivable - affiliates.................. $ 339 $ 158 $ 165
====== ======= =======
Accounts payable - affiliates..................... $1,702 $ 1,658 $ 350
====== ======= =======
Accrued expenses payable to affiliates............ $ 405
======
Other transactions:
Dividends......................................... $ 6,125 $ 9,240
Advances from affiliates.......................... (2,525) (7,590)
------- -------
Net distribution to Parent........................ $ 3,600 $ 1,650
======= =======
Sales to affiliates............................... $2,005 $ 1,786 $ 1,547
====== ======= =======
Purchases from affiliates......................... $ 587 $ 223 $ 296
====== ======= =======
</TABLE>
The Parent bills the Company for services rendered and expenses incurred by
the Parent for the benefit of the Company. During the year ended December 31,
1996, the Company paid the Parent $478,000 for general and operating expenses.
The Company also paid the Parent $1.5 million for its portion of taxes relating
to periods prior to the IPO. Prior to the IPO income taxes were charged to the
Company for its allocated share of income taxes on the basis of the Company as a
separate tax group.
The following table reflects the components of the Parent company charges
prior to 1996:
<TABLE>
<CAPTION>
GENERAL AND
INCOME OPERATING
TAXES EXPENSES TOTAL
------ ----------- -----
<S> <C> <C> <C>
1995..................................................... $3,410,000 $1,051,000 $4,461,000
1994..................................................... 3,032,000 968,000 4,000,000
</TABLE>
During 1995, the Company received a capital contribution of $19,976,000
from PSH Corp., an affiliate.
The Company has a five-year agreement with a shareholder of the Company to
provide sanitary wastewater treatment services to the California Speedway. The
agreement provides for annual payments of $88,800, adjusted annually by
increases in the Consumer Price Index. The agreement also grants an option to
the Company to purchase such shareholder's wastewater treatment facility.
The Company has an agreement to reimburse a shareholder of the Company
$1,137,500 for costs incurred by such shareholder in connection with the
preparation of the California Speedway for its development and construction. As
of December 31, 1996, $812,500 of this commitment had been paid with the balance
due in 1997.
The Company pays fees to the sanctioning bodies which conduct racing events
at its speedways, including the National Association for Stock Car Auto Racing,
Inc. (NASCAR). NASCAR is an affiliate of a significant shareholder. The Company,
through its subsidiaries, paid NASCAR sanction fees, prize money and points
funds of $3.8 million, $2.8 million and $2.3 million for the years ended
December 31, 1996, 1995 and 1994, respectively.
26
<PAGE> 28
PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
9. COMMON STOCK AND STOCK OPTIONS
Prior to the completion of the IPO, the Company effected a recapitalization
pursuant to which the Company (i) increased its authorized shares of common
stock to 50,000,000 shares, (ii) effected a 91.575-to-one share split, and (iii)
converted 15,000 shares of outstanding preferred stock to 1,373,625 shares of
common stock.
The pro forma net income per share reflects the weighted average number of
post-split shares outstanding of 12,128,920 and 8,077,245 for the years ended
December 31, 1996 and 1995, including the dilutive effect of the number of
shares issued equivalent to the $2.9 million capital distribution of 121,667
shares based on the offering price of $24 per share.
In March 1996, the stockholders of the Company approved a stock incentive
plan whereby key employees and certain outside consultants and advisors of the
Company and its subsidiaries may receive awards of stock options, stock
appreciation rights or restricted stock. A maximum of 400,000 shares of common
stock may be issued under this plan. During 1996, the Company granted options to
purchase 75,000 shares of common stock to certain officers of the Company at a
price of $24 per share, all of which were outstanding as of December 31, 1996.
These options may be exercised incrementally over a period of five years and
expire after ten years. As of December 31, 1996, 10%, or 7,500, of these options
were exercisable. The weighted average fair value of options granted during the
year is $9.90 per share.
The Company applies APB Opinion 25 and related Interpretations in
accounting for stock options. Accordingly, no compensation cost has been
recognized in the consolidated statements of operations. If the Company had
recognized compensation cost in accordance with Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation, the
Company would have reported net income of $10.8 million and earnings per share
of $.89. The Black-Sholes valuation model was used, assuming an average life of
the options of five years, a discount rate of 6.15%, no dividend payout and a
volatility of 35%.
NOTE 10 -- SELECTED QUARTERLY DATA (UNAUDITED)
The following table presents the Company's quarterly results for the most
recent eight quarters (in thousands, except per share amounts).
<TABLE>
<CAPTION>
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
----------------- ----------------- ----------------- -----------------
1996 1995 1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue....................... $ 3,642 $ 2,862 $24,614 $17,310 $23,962 $19,197 $ 2,957 $ 2,636
Operating income.............. (1,521) (1,529) 9,829 6,631 9,321 7,393 (2,707) (1,416)
Net income (loss)............. (990) (1,157) 6,717 4,237 6,499 4,812 (1,346) (1,118)
Net income (loss) per share... $ (.10) $ (.15) $ .52 $ .54 $ .50 $ .61 $ (.10) $ (.13)
</TABLE>
Net income per share for the first quarter of 1996 and for each of the
quarters in 1995 are pro forma to reflect the dilutive effect of the number of
shares issued equivalent to the $2.9 million capital distribution of 121,667
shares based on the offering price of $24 per share (see notes 3 and 9).
27
<PAGE> 29
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
Stockholders and Board of Directors
Penske Motorsports, Inc.
We have audited the accompanying consolidated balance sheets of Penske
Motorsports, Inc., and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated 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, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of December 31,
1996 and 1995, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LOGO
Detroit, Michigan
January 20, 1997
28
<PAGE> 30
REPORT OF MANAGEMENT
The consolidated financial statements of Penske Motorsports, Inc. and
subsidiaries (the Company) have been prepared by management and have been
audited by the Company's independent auditors, Deloitte & Touche LLP. Management
is responsible for the consolidated financial statements, which have been
prepared in conformity with generally accepted accounting principles and include
amounts based on management's judgments.
Management is also responsible for maintaining internal accounting control
systems designed to provide reasonable assurance, at appropriate cost, that
assets are recorded in accordance with established policies and procedures. The
Company's systems are under continuing review and are supported by, among other
things, business conduct and other written guidelines and the selection and
training of qualified personnel.
The Board of Directors is responsible for the Company's financial and
accounting policies, practices and reports. Its Audit Committee meets annually
with the independent auditors and representatives of management to discuss and
make inquiries into their activities. The independent auditors have free access
to the Audit Committee, with and without management representatives in
attendance, to discuss the results of the audit, the adequacy of internal
accounting controls, and the quality of the financial reporting.
It is management's conclusion that the system of internal accounting
controls at December 31, 1996 provides reasonable assurance that the books and
records reflect the transactions of the Company and that the Company has
complied with its established policies and procedures.
ROGER S. PENSKE
Roger S. Penske
Chairman
RICHARD J. PETERS
Richard J. Peters
President and Chief Executive Officer
January 20, 1997
29
<PAGE> 31
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding executive officers required by this Item is set forth
as a Supplementary Item at the end of Part I hereof (pursuant to Instruction 3
to Item 401(b) of Regulation S-K). Other information required by this Item will
be contained in the Company's definitive Proxy Statement for its 1997 Annual
Meeting of Stockholders, to be filed on or before April 29, 1997, and such
information is incorporated herein by reference.
ITEM 11: EXECUTIVE COMPENSATION
Information required by this Item will be contained in the Company's
definitive Proxy Statement for its 1997 Annual Meeting of Stockholders to be
filed on or before April 29, 1997, and such information is incorporated herein
by reference.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this Item will be contained in the Company's
definitive Proxy Statement for its 1997 Annual Meeting of Stockholders to be
filed on or before April 29, 1997, and such information is incorporated herein
by reference.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this Item will be contained in the Company's
definitive Proxy Statement for its 1997 Annual Meeting of Stockholders to be
filed on or before April 29, 1997, and such information is incorporated herein
by reference.
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Listing of Documents:
(1) Financial Statements. The Company's consolidated Financial Statements
included in Item 8 hereof, as required at December 31, 1996 and 1995,
and for the years ended December 31, 1996, 1995, and 1994, consist of
the following:
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Changes in Stockholder's Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules for 1996, 1995, and 1994.
None. These schedules are omitted because the information required to
be contained therein is disclosed elsewhere in the financial statements
or the amounts involved are not sufficient to require submission or the
schedule is otherwise not required to be submitted.
30
<PAGE> 32
(3) Exhibits.
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
DOCUMENT
- ------------------------------------------------------------------------
<S> <C>
(B)3.1 Amended and Restated Certificate of Incorporation of Penske
Motorsports, Inc.
(B)3.2 Amended and Restated Bylaws of Penske Motorsports, Inc.
(B)4.1 Form of Common Stock Certificate
(C)10.1 Credit Agreement dated August 16, 1996 between Penske
Motorsports, Inc., and NationsBank N.A.
(A)10.2 Purchase Agreement and Escrow Instructions dated October 8,
1996 among Kaiser Ventures, Inc., The California Speedway
Corporation and Penske Motorsports, Inc.
(A)10.3 Conditional Demand Registration Rights Agreement dated
December 12, 1996, between Penske Motorsports, Inc., and
Kaiser Ventures, Inc.
(A)10.4 Water Rights Agreement Extension dated December 11, 1996
between Kaiser Ventures Inc., and The California Speedway
Corporation
(B)10.11 Organization Agreement, dated November 22, 1995 by and among
PSH Corp., Kaiser Ventures, Inc., and Penske Motorsports,
Inc. (f/k/a Penske Speedway Holdings Corp.)
(B)10.12 Shareholders Agreement, dated November 22, 1995 by and among
PSH Corp., Kaiser Ventures, Inc., and Penske Motorsports,
Inc. (f/k/a Penske Speedway Holdings Corp.)
(B)10.13 Water Rights Agreement, dated November 21, 1995 by and
between Kaiser Ventures, Inc., and The California Speedway
Corporation (successor by merger to Speedway Development
Corporation).
(B)10.14 Access Agreement, dated as of November 22, 1995, by and
among Kaiser Ventures, Inc., Kaiser Land Development, Inc.,
and The California Speedway Corporation.
(B)10.15 Sewer Services Agreement, dated as of November 21, 1995
between Kaiser Ventures, Inc., and The California Speedway
Corporation (successor by merger to Speedway Development
Corporation).
(B)10.16* 1996 Penske Motorsports Stock Incentive Plan
(B)10.17 Lease Agreement, dated December 1, 1994, between Michigan
Speedway, Inc. f/k/a Penske Speedway Inc.) and Motorsports
International Corp.
(B)10.18 Trade Name and Trademark Agreement dated October 18, 1995,
between Penske Speedway, Inc., Penske Speedways Holding
Corp., and Penske System, Inc.
(B)10.24 Registration Rights Agreement, dated March 21, 1996, between
Penske Motorsports, Inc., and Kaiser Ventures, Inc.
(B)10.25 First Amendment to Shareholders Agreement, dated March 21,
1996, by and among PSH Corp., Kaiser Ventures, Inc., and
Penske Motorsports, Inc. (f/k/a Penske Speedways Holding
Corp.)
(B)10.26 Agreement, dated March 21, 1996, among PSH Corp., Penske
Motorsports, Inc., and Kaiser Ventures, Inc., amending the
Organization Agreement
(B)10.27 Stock Purchase Agreement, dated as of March 21, 1996, by and
among Roger S. Penske and J.W.A. Woody, Jr., and Penske
Motorsports, Inc.
(B)10.28 Stock Purchase Agreement, dated as of March 21, 1996, by and
among Competition Tire West, Inc., Competition Tire East,
Inc., Checkered Flag, Inc., and Penske Motorsports, Inc.
(B)10.29 Stock Purchase Agreement, dated as of March 6, 1996, by and
among Penske Motorsports, Inc., and James E. Williams.
(B)21.1 Subsidiaries of Penske Motorsports, Inc.
(A)23.1 Consent of Deloitte & Touche, LLP
(A)27 Financial Data Schedule
</TABLE>
31
<PAGE> 33
- ------------------------
LEGEND FOR EXHIBITS
(A) Filed herewith.
(B) Incorporated by reference from the Company's Registration Statement No.
333-692 on Form S-1, filed with the SEC on January 29, 1996, as amended.
(C) Incorporated by reference from the Company's Quarterly Report on Form 1O-Q
for the quarter ended September 30, 1996, filed with the Securities and
Exchange Commission.
* Denotes a compensatory plan, contract or arrangement.
(4) Undertakings. The Company will furnish to any stockholder a copy of the
above exhibits upon the written request of such stockholder and the payment to
the Company of the reasonable expenses incurred by the Company in furnishing
such copy.
(b) Reports on Form 8-K
The Company filed no Reports on Form 8-K with the Securities and Exchange
Commission during the quarter ended December 31, 1996.
32
<PAGE> 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 report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Detroit, State of Michigan, on the 26th day of March, 1997.
PENSKE MOTORSPORTS, INC.
By: /s/ RICHARD J. PETERS
------------------------------------
RICHARD J. PETERS
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, the
report has been signed below by the following persons in the capacities and on
the date indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATES
---------- ----- -----
<C> <S> <C>
/s/ ROGER S. PENSKE Chairman of the Board March 26, 1997
- --------------------------------------------------------
ROGER S. PENSKE
/s/ WALTER P. CZARNECKI Vice Chairman of the Board March 26, 1997
- --------------------------------------------------------
WALTER P. CZARNECKI
/s/ RICHARD J. PETERS President, Chief Executive March 26, 1997
- -------------------------------------------------------- Officer and Director
RICHARD J. PETERS (Principal executive
officer)
/s/ H. LEE COMBS Director March 26, 1997
- --------------------------------------------------------
H. LEE COMBS
/s/ GARY W. DICKINSON Director March 26, 1997
- --------------------------------------------------------
GARY W. DICKINSON
/s/ WILLIAM C. FRANCE Director March 26, 1997
- --------------------------------------------------------
WILLIAM C. FRANCE
/s/ GREGORY W. PENSKE Director March 26, 1997
- --------------------------------------------------------
GREGORY W. PENSKE
/s/ RICHARD E. STODDARD Director March 26, 1997
- --------------------------------------------------------
RICHARD E. STODDARD
/s/ JAMES E. WILLIAMS Director March 26, 1997
- --------------------------------------------------------
JAMES E. WILLIAMS
/s/ JAMES H. HARRIS Principal Financial and March 26, 1997
- -------------------------------------------------------- Accounting Officer
JAMES H. HARRIS
</TABLE>
33
<PAGE> 35
EXHIBITS
--------
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT
- ------ --------
<S> <C>
(B)3.1 Amended and Restated Certificate of Incorporation of Penske
Motorsports, Inc.
(B)3.2 Amended and Restated Bylaws of Penske Motorsports, Inc.
(B)4.1 Form of Common Stock Certificate
(C)10.1 Credit Agreement dated August 16, 1996 between Penske
Motorsports, Inc., and NationsBank N.A.
(A)10.2 Purchase Agreement and Escrow Instructions dated October 8, 1996
among Kaiser Ventures, Inc., The California
Speedway Corporation and Penske Motorsports, Inc.
(A)10.3 Conditional Demand Registration Rights Agreement dated December
12, 1996 between Penske Motorsports, Inc., and
Kaiser Ventures, Inc.
(A)10.4 Water Rights Agreement Extension dated December 11, 1996
between Kaiser Ventures Inc., and The California Speedway
Corporation
(B)10.11 Organization Agreement, dated November 22, 1995 by and among
PSH Corp., Kaiser Ventures, Inc., and Penske
Motorsports, Inc. (f/k/a Penske Speedway Holdings Corp.)
(B)10.12 Shareholders Agreement, dated November 22, 1995 by and among
PSH Corp., Kaiser Ventures, Inc., and Penske
Motorsports, Inc. (f/k/a Speedway Holdings Corp.)
(B)10.13 Water Rights Agreement, dated November 21, 1995 by and between
Kaiser Ventures, Inc., and The California Speedway Corporation
(successor by merger to Speedway Development Corporation).
(B)10.14 Access Agreement, dated as of November 22, 1995, by and among
Kaiser Ventures, Inc., Kaiser Land Development, Inc., and The
California Speedway Corporation.
(B)10.15 Sewer Services Agreement, dated as of November 21, 1995 between
Kaiser Ventures, Inc., and The California Speedway Corporation
(successor by merger to Speedway Development Corporation).
(B)10.16* 1996 Penske Motorsports Stock Incentive Plan
(B)10.17 Lease Agreement, dated December 1, 1994, between Michigan
Speedway, Inc. (f/k/a Penske Speedway Inc.) and Motorsports
International Corp.
(B)10.18 Trade Name and Trademark Agreement dated October 18, 1995,
between Penske Speedway, Inc., Penske Speedways Holding Corp.,
and Penske System, Inc.
(B)10.24 Registration Rights Agreement, dated March 21, 1996, between
Penske Motorsports, Inc. and Kaiser Ventures, Inc.
(B)10.25 First Amendment to Shareholders Agreement, dated March 21, 1996,
by and among PSH Corp., Kaiser Ventures, Inc., and Penske
Motorsports, Inc. (f/k/a Penske Speedways Holding Corp.)
(B)10.26 Agreement, dated March 21, 1996, among PSH Corp., Penske
Motorsports, Inc., and Kaiser Ventures, Inc., amending the
Organization Agreement
(B)10.27 Stock Purchase Agreement, dated as of March 21, 1996, by and
among Roger S. Penske and J.W.A. Woody, Jr., and Penske
Motorsports, Inc.
(B)10.28 Stock Purchase Agreement, dated as of March 21, 1996, by and
among Competition Tire West, Inc., Competition Tire East, Inc.,
Checkered Flag, Inc., and Penske Motorsports, Inc.
(B)10.29 Stock Purchase Agreement, dated as of March 6, 1996, by and
among Penske Motorsports, Inc., and James E. Williams.
(B)21.1 Subsidiaries of Penske Motorsports, Inc.
(A)23.1 Consent of Deloitte & Touche, LLP.
(A)27 Financial Data Schedule
- --------------
LEGEND FOR EXHIBITS
(A) Filed herewith.
(B) Incorporated by reference from the Company's Registration
Statement No. 333-692 on Form S-1, filed with the SEC on January
29, 1996, as amended.
(C) Incorporated by reference from the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1996, filed with
the SEC.
- --------------
*Denotes a compensatory plan, contract or arrangement.
</TABLE>
<PAGE> 1
EXHIBIT 10.2
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
AMONG
KAISER VENTURES INC.
(SELLER),
THE CALIFORNIA SPEEDWAY CORPORATION.
(BUYER)
AND
PENSKE MOTORSPORTS, INC.
(PMI)
DATED: OCTOBER 8, 1996
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
ITEM PAGE NO.
- --------- --------
<S> <C> <C>
ARTICLE 1 RECITALS................................................... 1
1.1 ........................................................... 1
1.2 ........................................................... 1
ARTICLE 2 AGREEMENT OF PURCHASE AND SALE............................. 1
2.1 Purchase Price............................................. 1
2.2 Payment of Purchase Price.................................. 2
2.3 Conditional Demand Registration Rights Agreement........... 3
ARTICLE 3 ESCROW..................................................... 3
3.1 Opening of Escrow.......................................... 3
3.2 Delivery of Documents to Escrow............................ 3
3.3 Close of Escrow............................................ 4
ARTICLE 4 REVIEW OF CONDITION OF TITLE............................... 4
ARTICLE 5 ADDITIONAL COVENANTS AND AGREEMENTS........................ 5
5.1 Cooperation................................................ 5
5.2 Federal and State Withholding Requirements................. 6
5.3 Shareholder's Agreement.................................... 6
5.4 Registration Rights Agreement.............................. 6
ARTICLE 6 POST AGREEMENT AND POST CLOSING OBLIGATIONS................ 6
6.1 Improvements............................................... 6
6.2 Buyer's Compliance with Environmental Laws and
Indemnification for Noncompliance.......................... 8
6.3 Sewer Service.............................................. 9
6.4 Covenant to Cooperate, Easement and Access................. 9
6.5 Hazardous Materials........................................ 10
ARTICLE 7 ACKNOWLEDGMENTS, REPRESENTATIONS AND WARRANTIES............ 14
7.1 Buyer's Acknowledgments, Representations and Warranties.... 14
7.2 Seller's Acknowledgments, Representations and Warranties... 17
ARTICLE 8 THE CLOSE OF ESCROW........................................ 18
8.1 Conditions and Close of Escrow............................. 18
8.2 Termination Based on Failure to Close by Closing Date...... 20
8.3 Prorations................................................. 21
8.4 Seller's Fees and Costs.................................... 21
8.5 Buyer's Fees and Costs..................................... 21
ARTICLE 9 REMEDIES................................................... 21
9.1 Seller's Remedies.......................................... 21
</TABLE>
i
<PAGE> 3
INDEX - CONTINUED
ITEM PAGE NO.
- -------- -------
9.2 Buyers Remedies............................................ 21
9.3 Right of First Refusal After Seller's Default.............. 21
9.4 Dispute Resolution......................................... 23
ARTICLE 10 GENERAL PROVISIONS........................................ 24
10.1 PMI as a Party to this Agreement........................... 24
10.2 Time of the Essence and Strict Construction................ 24
10.3 Notice and Demands......................................... 24
10.4 Captions for Convenience................................... 25
10.5 Severability............................................... 25
10.6 Governing Law.............................................. 25
10.7 No Oral Amendment or Modification.......................... 25
10.8 Relationship of Seller and Buyer........................... 26
10.9 Attorneys' Fees............................................ 26
10.10 Amended and Successor Statutes and Regulations............. 26
10.11 Entire Agreement........................................... 26
10.12 Exhibits and Schedules..................................... 26
10.13 Successors and Assigns..................................... 26
10.14 Eminent Domain............................................. 27
10.15 Recordation................................................ 27
10.16 Resolution of Any Claim for Payment by One Party to Another 27
10.17 Counterparts............................................... 27
EXHIBIT "A" Conditional Demand Registration Rights Agreement (Section 3.2.3)
EXHIBIT "B" Grant Deed (Section 3.2)
EXHIBIT "C" Investor Representation Certificate (Section 3.2)
ii
<PAGE> 4
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
This PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS ("AGREEMENT") is made and
entered into effective the 8th day of October, 1996 ("EFFECTIVE DATE"), by and
among Kaiser Ventures Inc., a Delaware corporation ("SELLER"), The California
Speedway Corporation, a Delaware corporation("BUYER"), and Penske Motorsports,
Inc., a Delaware corporation ("PMI"), to the limited extent expressly provided
herein, with reference to the facts set forth below. Buyer and Seller are
sometimes referred to herein collectively as the "PARTIES" or individually as a
"PARTY."
ARTICLE 1
RECITALS
1.1 Seller is the owner of that certain real property, situated in the
County of San Bernardino, State of California, described as Parcels 1, 2 and 3
of Parcel Map No 14723, as per map recorded in Book 179 of Parcel Maps, pages 9
through 13 inclusive of Maps in the office of the County Recorder of said
county (the "PROPERTY").
1.2 Buyer is a wholly owned subsidiary of PMI. PMI is a party to this
Agreement only to the extent expressly specified herein.
1.3 Seller desires to sell the Property to Buyer upon the terms and
conditions set forth in this Agreement and Buyer desires to purchase the
Property as set forth herein.
NOW THEREFORE, in consideration of the mutual agreements set forth herein
and for other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:
ARTICLE 2
AGREEMENT OF PURCHASE AND SALE
2.1 PURCHASE PRICE. Subject to the terms and conditions of this
Agreement, Buyer hereby agrees to purchase the Property from Seller and Seller
hereby agrees to sell the Property
1
<PAGE> 5
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
to Buyer. The purchase price ("PURCHASE PRICE") for the Property is Thirteen
Million, Three Hundred Fifty-Two Thousand One Hundred Seventy Dollars
($13,352,170.00). The Purchase Price shall be in the form of Five Million
Dollars ($5,000,000.00) in cash and Eight Million, Three Hundred Fifty-Two
Thousand One Hundred Seventy Dollars ($8,352,170.00) in the $.01 par value
common stock of PMI. The number of shares of PMI's common stock to be issued
to Seller shall be determined by taking the average of the Bid and Ask Price
for the thirty calendar days prior to October 7, 1996, and determining an
average per share price for said thirty (30) day period and dividing such
average per share price into Eight Million Three Hundred Fifty-Two Thousand One
Hundred Seventy Dollars ($8,352,170.00) rounded to the nearest whole share (the
"PMI STOCK").
2.2 PAYMENT OF PURCHASE PRICE. The cash portion of the Purchase Price
shall be paid in good funds and other consideration in accordance with the
provisions set forth herein. The portion of the Purchase Price payable in PMI
Stock shall be satisfied by the delivery of a stock certificate in the name of
Seller denominated in the number of shares of PMI Stock computed in accordance
with Section 2.1. Seller acknowledges and agrees the PMI Stock shall be
restricted stock and subject to the restrictions, and restrictive legends,
described in Section 5.3 below and elsewhere in this Agreement and as provided
on the stock certificates for PMI shares currently held by Seller.
2.2.1 DEPOSIT. Upon the opening of escrow in accordance with Section
3.1 below, Buyer shall deposit into Escrow (as defined below) the amount of
Fifty Thousand Dollars ($50,000.00) (the "CASH DEPOSIT"). The Cash Deposit
shall be credited and applied to the cash portion of the Purchase Price at the
Close of Escrow.
2.2.2 BALANCE OF PAYMENT. On or before one business day prior to the
Closing Date, Buyer shall deposit the balance of the cash portion of the
Purchase Price in the amount of Four Million, Nine Hundred Fifty Thousand
Dollars ($4,950,000.00) into Escrow, which shall be released to Seller
immediately on the Close of Escrow. On or before one business day prior to the
Closing Date, Buyer or PMI shall also deposit into Escrow a stock certificate
in the name of Seller for the PMI Stock, as determined in Section 2.1, which
shall also be released to Seller immediately on the Close of Escrow.
2
<PAGE> 6
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
2.3 CONDITIONAL DEMAND REGISTRATION RIGHTS AGREEMENT. As additional
consideration for the sale of the Property, on or before one business day prior
to the Closing Date, PMI agrees to enter into and deposit into Escrow a
Conditional Demand Registration Rights Agreement in the form attached hereto as
Exhibit "A", which shall be released to Seller immediately on the Close of
Escrow.
ARTICLE 3
ESCROW
3.1 OPENING OF ESCROW. Within two business days after the Effective Date
of this Agreement, Buyer, Seller and PMI shall open escrow (the "ESCROW") by
depositing with Chicago Title Insurance Company, San Bernardino office ("ESCROW
AGENT") a fully executed original of this Agreement for use as escrow
instructions and Escrow Agent shall execute the consent of Escrow Agent which
appears at the end of this Agreement and deliver a fully executed consent to
Buyer, Seller and PMI. If Escrow Agent requires additional instructions, the
parties agree to deliver into Escrow any such deletions, substitutions and
additions which do not materially alter the terms of this Agreement. If there
is any conflict between the provisions of this Agreement and any additional or
supplementary Escrow instructions, the terms of this Agreement shall control.
3.2 DELIVERY OF DOCUMENTS TO ESCROW.
3.2.1 DEPOSIT OF GRANT DEED. On or before one business day prior to
the Close of Escrow, Seller shall sign, acknowledge and deposit into Escrow a
grant deed in the form attached hereto as Exhibit "B" and incorporated herein
(the "GRANT DEED") conveying the property to Buyer. Provided that all terms
and conditions of this Agreement have been satisfied, on the Close of Escrow,
Escrow Agent shall immediately record the Grant Deed on behalf of Buyer.
3.2.2 DEPOSIT OF INVESTOR REPRESENTATION CERTIFICATE. On or before
one day prior to the Close of Escrow, Seller shall also deposit into Escrow the
Investor Representation
3
<PAGE> 7
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
Certificate in the form attached hereto as Exhibit "C" and incorporated herein
which shall be released to Buyer immediately on Close of Escrow.
3.2.3 DEPOSIT OF CONDITIONAL DEMAND REGISTRATION RIGHTS AGREEMENT. On
or before one day prior to the Close of Escrow, PMI shall sign and deposit into
Escrow two originals of the Conditional Demand Registration Rights Agreement
in the form attached hereto as Exhibit "A" and incorporated herein. On the
Close of Escrow, Seller shall execute the Conditional Demand Registration
Rights Agreements and one shall be immediately delivered to Seller and the
other shall be immediately delivered to Buyer.
3.2.4. DEPOSIT OF OTHER DOCUMENTS. On or before one day prior to the
Close of Escrow, Seller, PMI and/or Buyer shall execute, acknowledge,
deliver, and deposit into Escrow, as applicable, any document required by the
Escrow Agent in order to convey title to Buyer as contemplated herein and to
otherwise carry out the terms of this Agreement.
3.3 CLOSE OF ESCROW. Unless the parties mutually agree in writing upon a
different Closing Date, Escrow shall close on or before December 31, 1996 (the
"CLOSE OF ESCROW" or the "CLOSING DATE"), subject to the satisfaction or waiver
of the conditions described in Section 8.1.
ARTICLE 4
REVIEW OF CONDITION OF TITLE
Seller shall within ten (10) days after the Effective Date deliver to
Buyer a copy of a Preliminary Title Report ("PRELIMINARY REPORT"), prepared by
Chicago Title Insurance Company (the "TITLE COMPANY") with respect to the
Property containing such exceptions as the Title Company would specify in the
title policy, along with copies of all recorded documents, and other matters,
referenced in the Preliminary Report and platted easements. Buyer shall
deliver notice of disapproval of any exception or other title matter to Seller
in writing on or before the end of a twenty-one (21) day period ("REVIEW
PERIOD") commencing with the later of the Effective Date or receipt of the
Preliminary Report and a copy of all recorded documents referenced in the
Preliminary Report. If Buyer fails to notify Seller within the Review Period
that Buyer disapproves of any such exceptions to title, Buyer shall be deemed
to have approved the condition of title to the Property. If Buyer objects to
any exception(s) to title, and such
4
<PAGE> 8
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
exception is capable of being removed by the payment of money by Seller
("CURABLE EXCEPTION"), except as noted below, Seller shall have ten (10)
calendar days after receipt of Buyer's objection to any exception to title, to
notify Buyer in writing that Seller shall either (a) cause any disapproved
exception(s) to be removed from title by the Closing of Escrow, or (b) obtain,
at Seller's expense, an endorsement to the Title Policy insuring Buyer against
loss by reason of such disapproved exception, acceptable to Buyer in Buyer's
sole and absolute discretion (in which case, Seller may extend the Closing of
Escrow for such period as shall be required to effect such cure or the issuance
of such title endorsement, but not beyond ten (10) calendar days).
Notwithstanding the foregoing, however, Seller shall not be obligated to cause,
or pay a total amount in excess of One Hundred Thousand Dollars ($100,000) for,
the removal or cure of any disapproved exception(s) to title or the obtaining
of any endorsements to the Title Policy. If any title exception disapproved by
Buyer is not a Curable Exception or is a Curable Exception but the total
cumulative amount to cure the Curable Exception(s) exceeds One Hundred
Thousand Dollars ($100,000), Buyer shall have ten (10) calendar days after
Seller informs Buyer in writing that any disapproved exception is not a
Curable Exception or will cost more than a total of One Hundred Thousand
Dollars ($100,000) in which to notify Seller that (i) Buyer revokes its
disapproval of such exception(s) and will proceed with the purchase without any
reduction in the Purchase Price and take title to the Property subject to such
exception(s) or (ii) Buyer will terminate this Agreement without liability to
Seller. As used herein, "PERMITTED EXCEPTIONS" means those exceptions
specified in the Preliminary Report and which Buyer has, in its discretion,
accepted in accordance with the foregoing procedure.
ARTICLE 5
ADDITIONAL COVENANTS AND AGREEMENTS
5.1 COOPERATION. Buyer, Seller and PMI acknowledge that it may be
necessary to execute documents other than those specifically referred to herein
in order to complete the acquisition of the Property on the terms and
conditions contemplated by this Agreement. Buyer, Seller and PMI hereby agree
to cooperate with each other by executing, acknowledging, delivering, and
recording such other documents or taking such other action as may be reasonably
necessary or appropriate to complete this transaction in accordance with the
intent of the parties as evidenced in this Agreement.
5
<PAGE> 9
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
5.2 FEDERAL AND STATE WITHHOLDING REQUIREMENTS. The parties agree to
comply with the requirements of Section 1445 of the Internal Revenue Code,
California withholding requirements, and any regulations promulgated
thereunder.
5.3 SHAREHOLDER'S AGREEMENT. Each of PMI and Seller agree that they have
each executed and delivered a Shareholder's Agreement dated as of November 22,
1995, as amended (the "SHAREHOLDERS AGREEMENT"), which, Shareholders Agreement
contains among other things, certain restrictions on the shares of PMI's common
stock owned by each of PMI and Seller. PMI and Seller hereby agree that the
Shareholders' Agreement is amended so that the defined term "STOCK" in the
Shareholder's Agreement includes for all purposes the PMI Stock issued by PMI
to Seller pursuant to this Agreement. In addition, the first portion of the
second sentence of Section 1.2 of the Shareholders Agreement shall be amended
to read "In addition, there shall be no restriction on a Party pledging its
Stock to a bona fide third party as collateral for a loan, bond, financial
assurance or other similar borrowing, potential borrowing, or obligation;
provided ..." A bona fide party shall be a party other than Seller or an
affiliate or Seller.
5.4 REGISTRATION RIGHTS AGREEMENT. Each of PMI and Seller agree that they
have each executed and delivered a Registration Rights Agreement dated as of
March 21, 1996, which Registration Rights Agreement grants among other things,
Seller certain "piggyback" registration rights with regard to PMI's common
stock owned by Seller. PMI and Seller hereby agree that the Registration
Rights Agreement is amended so that the defined term "SHARES" in the
Registration Rights Agreement includes for all purposes the PMI Stock issued by
PMI to Seller pursuant to this Agreement.
ARTICLE 6
POST AGREEMENT AND POST CLOSING OBLIGATIONS
6.1 IMPROVEMENTS. Seller shall have no liability or responsibility for
improvements on-site or off-site (except for agreed upon sewer improvements and
the costs related thereto as is more particularly set forth in Section 6.3) for
the benefit of the Property after the Effective Date; provided, however, Seller
shall have the continuing obligation to remediate or remove Hazardous Materials
on the Property, if any, as described in Section 6.5.
6
<PAGE> 10
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
6.1.1 BUYER'S IMPROVEMENTS. Buyer desires to commence construction of
certain improvements associated with The California Speedway project on or
adjoining the Property ("BUYER'S IMPROVEMENTS") prior to the Closing Date. As
of the Effective Date Seller hereby grants Buyer an irrevocable license until
January 1, 1997, to construct and maintain Buyer's Improvements on or
associated with the Property. No fee shall be payable by Buyer for the
license. Buyer's Improvements will be constructed and maintained at Buyer's
sole cost and expense. Should Seller not consummate the sale of the Property
to Buyer as provided herein on or before December 31, 1996, the license shall
be revocable by Seller in whole or in part, but shall continue until such time
as Seller in good faith reasonably determines that a removal of all or any
portion of Buyer's Improvements is desirable to market or develop all or any
portion of the Property. Accordingly, in the event the sale of the Property to
Buyer is not consummated on or before midnight, December 31, 1996, should
Seller so determine, upon Seller's written notice to Buyer, Buyer, at its
expense, shall immediately remove Buyer's Improvements as necessary or
appropriate and restore the Property to substantially its condition prior to
the installation of Buyer's Improvements. During the period of the license,
Buyer shall maintain insurance covering the Buyer's Improvements, including
liability insurance, in amounts and from carriers as reasonably requested by
Seller naming Seller as an additional insured. Buyer shall promptly pay all
contractors and subcontractors involved in the construction or maintenance of
the Buyer's Improvements except that Buyer may in good faith dispute any
portion of any bill or invoice associated with the construction or maintenance
of the Buyer's Improvements. Buyer shall permit no liens or encumbrances to be
placed on the Property (unless Buyer provides to Seller or the Title Company
payment bonds covering the same and pending the outcome of the dispute).
Buyer shall indemnify, defend, and hold Seller and its officers, directors,
shareholders, partners, employees, affiliates, and assigns (collectively the
"SELLER INDEMNIFIED PARTIES") harmless from and against all liability,
obligations, claims, damages, penalties, losses, causes of action, costs, and
expenses (including attorneys' fees, expert witness fees, consulting and other
professional fees) imposed upon, incurred by or asserted against the Seller
Indemnified Parties as a result of Buyer's Improvements including, without
limitation, the construction and/or maintenance Buyer's Improvement, or
Buyer's, its agents or other third party actions on the Property.
7
<PAGE> 11
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
6.1.2 FEES. Except as otherwise expressed or provided herein and if
the Property is sold to Buyer as provided, herein, from and after the Effective
Date, Buyer shall be responsible for and obligated to pay all fees, assessments,
special taxes or in-lieu fees encumbering or other use related to the Property
or required by any governmental agency, assessment district, community
facilities district, fee district or any other similar entity for or in
connection with the improvement of the Property.
6.1.3 NO OBLIGATION FOR OTHER IMPROVEMENTS. Seller is not obligated
in any way to construct any improvements on the Property. Buyer shall have the
sole responsibility for processing approvals and construction of any and all
improvements on the Property. All expenses, responsibilities, and conditions
associated with governmental approvals for the development of the Property shall
be assumed by and be the sole responsibility of Buyer from and after the Closing
Date; provided, however, that all such expenses prior to the Closing Date shall
also be the responsibility of Buyer to the extent they are imposed directly as a
result of the construction and maintenance of Buyer's Improvements.
6.2 BUYER'S COMPLIANCE WITH ENVIRONMENTAL LAWS AND INDEMNIFICATION FOR
NONCOMPLIANCE. During the term of the license granted in Section 6.1.1, Buyer
specifically covenants and agrees to timely and fully comply with all
applicable Environmental Laws (as defined in Section 6.5.2), and shall not
allow the contamination of the Property (including, but not limited to, any
building, surrounding property, the surface, subsurface, water and air) with
Hazardous Materials. Furthermore, Buyer shall not, nor shall it allow any of
its agents to, use, store, handle or treat Hazardous Materials on the Property
except in full compliance with Environmental Laws. Buyer shall indemnify,
defend, and hold the Seller Indemnified Parties harmless from and against all
liability, obligations, claims, damages, penalties, losses, causes of action,
costs, and expenses (including attorneys' fees, expert witness fees, consulting
and other professional fees) imposed upon incurred by or asserted against the
Seller Indemnified Parties as a result of any violation or asserted violation
of or failure to timely or fully comply with Environmental Laws by Buyer, or
its agents or as a result of any contamination to the Property or other
property (including, but not limited to, improvements, surface, subsurface
water and air) or any allegations related thereto.
8
<PAGE> 12
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
6.3 SEWER SERVICE. Seller, or a wholly owned subsidiary of Seller, will
provide sewer service to the Property subject to and in accordance with that
certain Sewer Services Agreement dated November 21, 1995, between Seller and
Speedway Development Corporation (which corporation merged into The California
Speedway Corporation), except that the charge for such service shall be
determined by mutual agreement at the time Buyer's development plans for the
Property have been completed and prior to the start of construction of the
improvements contemplated in the development plans. The Sewer Services
Agreement shall be deemed amended to include the obligations specified in this
Section 6.3. In the event Buyer and Seller are unable to reach a mutual
agreement on the additional sewer service charges, Buyer and Seller shall
submit such dispute to the dispute resolution procedures specified in Section
9.4. For example, if the Property is used for parking to serve the seating
currently planned for Phase 1 for The California Speedway (approximately 70,000
seats), there will be no anticipated increase in sewer usage. However, if a
museum is placed on the Property, there may be increased usage of the sewer
service resulting in the need to negotiate a new sewer service charge. Should
the sewer plant existing at that time not serve or have enough capacity to
serve the Property, and Buyer determines it wants the service provided by
Seller, Buyer shall pay all costs necessary to serve and increase the capacity
of the sewer system and plant and its ability to handle the resulting influent
and effluent. In the event Buyer should at any time modify the development on
the Property or increase its use so that the sewer system and plant may be
impacted, the Parties shall again in good faith negotiate the charge for sewer
service in accordance with the procedures set forth in this Section 6.3.
6.4 COVENANT TO COOPERATE, EASEMENTS AND ACCESS. Seller and Buyer
acknowledge that each owns property other than the Property within the area
that is generally known as the former Kaiser Mill Site. Seller and Buyer agree
to cooperate with each other to effect the development of their respective
properties so long as that cooperation does not materially adversely affect the
cooperating Party's property, in the reasonable determination of the
cooperating Party. The Property, at no cost to Seller, shall be burdened with
appropriate access and right of way easements for the benefit of Seller and its
subsidiaries, as and if such easements shall be mutually agreed upon by Buyer
and Seller. In addition, Seller and its subsidiaries shall have the right,
without cost, to use any existing or future easement on or adjoining the
Property dedicated for any utility use (i.e., a use related to water, sewer,
gas,
9
<PAGE> 13
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
electricity, telephone, fiber optics, etc., but public access or a street would
not be a utility use) provided that Seller shall be responsible for all the
costs of restoring the Property in substantially the same condition as prior to
the use of any utility easement. In no event shall Seller's exercise of any
utility easement materially interfere with Buyer's use of the Property.
Seller, its subsidiaries and their authorized representatives shall have
access across or on the Property for the limited purposes of installing,
maintaining or monitoring any utilities, the water system, the By-Products Area
Cap, groundwater monitoring wells or any other similar item and such other
items as may be mutually agreed upon by Seller and Buyer.
6.5 HAZARDOUS MATERIALS.
6.5.1 HAZARDOUS MATERIALS DEFINED. For the purposes of this
Agreement, "Hazardous Materials" shall mean and refer to any material or
substance which as of the Closing Date is (i) defined or listed as a "hazardous
waste", "extremely hazardous waste", "restrictive hazardous waste", "hazardous
substance", "hazardous material", "hazardous chemical", "extremely hazardous
substance", "toxic substance", "toxic pollutant", "pollutant", "pollution",
"regulated substance", "pesticide", "contaminant", "hazardous air pollutant", or
words of similar import, or considered a waste, condition of pollution, or
nuisance, pursuant to the laws of California and/or the United States; (ii)
gasoline, diesel fuel, oil, used oil, petroleum, or a petroleum product or
fraction thereof; (iii) asbestos and asbestos-containing construction materials
as defined by federal or state law, by weight, of asbestos; (iv) substances
known by the State of California or the United States to cause cancer and/or
reproductive toxicity; (v) toxic, corrosive, flammable, infectious, radioactive,
mutagenic, explosive or otherwise hazardous substances which are or become
regulated by any governmental agency or instrumentality of the United States, or
any state or any political subdivision thereof; (vi) polychlorinated biphenyls
(PCBs); (vii) urea formaldehyde foam insulation; (viii) all hazardous air
pollutants or materials known to cause serious health effects (including,
without limitation, volatile hydrocarbons, pesticides, herbicides and industrial
solvents); and/or (ix) substances which constitute a material health, safety or
environmental risk to any Person or property. It is the intent of the Parties
hereto to construe the term "Hazardous Materials" in its broadest sense.
10
<PAGE> 14
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
6.5.2 ENVIRONMENTAL LAWS DEFINED. For purpose of this Agreement the
term Environmental Law means any Federal, State or local law, statute,
ordinance or regulation pertaining to health, industrial hygiene or
environmental conditions existing as of the Closing Date, including, but not by
way of limitation, (a) the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 ("CERCLA"), (b) the Resource Conservation and
Recovery Act of 1976 ("RCRA"), (c) California Health and Safety Code Sections
25100 et seq., (d) the Safe Drinking Water and Toxic Enforcement Act of 1986,
(e) the Federal Water Pollution Control Act, (f) the Porter-Cologne Water
Quality Control Act, (g) California Civil Code Sections 3479 et seq., and (h)
Federal and State Occupational Safety and Health Acts and the regulations and
administrative codes applicable thereto.
6.5.3 SELLER'S OBLIGATION TO REMOVE. Seller has previously entered
into a Consent Order dated August 22, 1988 (the "CONSENT ORDER") with the State
of California Department of Health Services, now known as the California
Department of Toxic Substances Control ("DTSC"). Pursuant to the Consent Order
and under the supervision of the DTSC, Seller has remediated what is known as
Operable Unit No. 2, which operable unit includes most of the Property. Seller
has received a clearance letter from the DTSC dated September 26, 1995, stating
that no further remediation is necessary with respect to Operable Unit No. 2
and a site certification dated October 26, 1995, from the DTSC regarding
completion of remedial action plans for such Operable Unit. However, during
the construction of The California Speedway and during the remediation of
impacted soils on property formerly leased to a bankrupt tenant of Seller, a
limited amount of soils impacted by Hazardous Materials were discovered,
removed, and stockpiled on the Property (the "IMPACTED SOILS"). The Impacted
Soils will be removed in accordance with all applicable laws and without
causing contamination of any kind to the Property or the property of third
parties by Seller, at its sole cost and expense, as soon as reasonably possible
but no later than prior to the Close of Escrow. In addition, and subject to
the limitations described below, Seller shall assume liability (including
indemnifying and holding Buyer harmless) ("SELLER'S ENVIRONMENTAL
RESPONSIBILITIES") for claims by any third party (including, without
limitation, any order or
11
<PAGE> 15
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
directive of any governmental agency), whether such claim is made against Buyer
or Seller, for or relating to (a) any violation of any Environmental Laws
occurring at the Property during Seller's ownership of the Property (except any
violation of Environmental Laws committed by Buyer, or its agents); or (b) any
environmental contamination or conditions occurring at the Property during
Seller's ownership of the Property requiring remediation, unless such
environmental contamination or conditions were as a result of Buyer's, or its
agents activities or conduct or, including, without limitation, subject to the
before described exceptions in all cases: (1) contamination or conditions that
originated at the Property during Seller's ownership of the Property; and (2)
contamination or conditions that originated at any location on the Property
during Seller's ownership of the Property and that migrated from the Property
prior or subsequent to Closing; and (3) contamination or conditions originating
off the Property that have come to be located at the Property during Seller's
ownership of the Property and that migrate from the Property prior or
subsequent to the Close of Escrow. Seller shall have the exclusive right at
all times to defend, settle, appeal, compromise, arbitrate or negotiate any
claim and action and any remedial measures proposed or required by any
governmental entity or other third party and to take or cause to be taken any
such remedial measures ultimately determined to be required with respect to
Seller's Environmental Responsibilities. Such remedial measures may include,
without limitation: (a) sampling, laboratory testing and analysis of
environmental media; (b) contracting for and monitoring of remedial work; (c)
preparation and filing of all documents required by local, state and federal
environmental agencies having jurisdiction; and/or (d) the reasonable
restriction on use as described herein; provided, however all such remedial
measures shall be deemed to include the restoration of the Property in all
material respects to its condition (excluding the condition requiring remedial
work) immediately preceding such remedial work. Buyer agrees that Buyer shall
not intervene, interfere with, or participate in any of the foregoing
activities without Seller's express written consent, which consent shall not be
unreasonably withheld or delayed; provided, however, that if Seller fails to
timely engage in such activities, Buyer may reasonably defend, settle, appeal,
compromise, arbitrate or negotiate any remedial measures proposed or required
by any governmental entity and to take or cause to be taken any such remedial
measures ultimately determined to be required with respect to Seller's
Environmental Responsibilities following written notice by Buyer to Seller (if
circumstances reasonably permit such written notice) and Seller fails to timely
undertake such activities in accordance with a schedule acceptable to the
12
<PAGE> 16
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
appropriate regulatory agency or third party. Buyer agrees, however, to
cooperate reasonably in any such activities at the request of Seller, including
without limitation, (x) joining in the execution of any documents required by
governmental authorities to be executed by Buyer as the owner of the Property
(unless Buyer reasonably objects to the contents of any such documents); and
(y) allowing Seller and Seller's agents, subcontractors and designees to have
access to and across the Property at reasonable times in order to carry out
Seller's Environmental Responsibilities hereunder, provided that Seller and any
such agents, subcontractors, and designees provide evidence of adequate general
liability insurance prior to entering the Property.
Notwithstanding the foregoing, Seller shall only be obligated to
remediate any Hazardous Materials on the Property existing on the Closing Date,
except those attributable to Buyer, its agents, and their activities, to
industrial standards and not residential standards as reasonably determined by
the DTSC. In connection therewith, if the reasonable estimated cost for
remediation and restoration of the Property or any portion thereof will exceed
Five Hundred Thousand Dollars ($500,000) on a cumulative basis, upon Seller's
and Buyer's mutual agreement, Buyer will execute, acknowledge and deliver to
the DTSC a "Covenant to Restrict Use of Property" which is a deed restriction
which provides generally that the Property or a portion thereof can not be used
for the following purposes: (i) a residence, including any mobile home or
factory-built housing, constructed or installed for use as permanently occupied
residential human habitation; (ii) a long-term care hospital for humans,
provided that nothing therein shall restrict use of the Property for any
infirmary, medical aid station or emergency medical care facility where there
is no intent for any patient to remain in such facility for more than 24 hours;
(iii) a traditional public or private school for persons under 21 years of age,
provided that nothing therein shall restrict the use of the Property for any
specialized training programs related to then-existing facilities on the
Property; or (iv) a day-care center for children, and containing such other
terms and conditions typically required by the DTSC, and such additional terms
and conditions that do not materially adversely interfere with the development
of the Property. Buyer shall not unreasonably withhold its agreement or
consent to Seller's request for a "Covenant to Restrict Use of Project" as
provided herein; provided, however, Buyer shall not be deemed to have
unreasonably withheld its consent or agreement if any restriction that would be
imposed pursuant to the "Covenant to Restrict Use of Property"
13
<PAGE> 17
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
would prohibit or unreasonably interfere with a use of the Property that is
reasonably related to the development and operation of a motorsports speedway.
Should Buyer not agree to provide an executed and acknowledged "Covenant to
Restrict Use of Project" upon Seller's request, the Parties shall use the
dispute resolution procedures described in Section 9.4 of this Agreement to
resolve such dispute.
6.5.4 SELLER'S RIGHT TO TERMINATE. Should any Seller Environmental
Responsibilities, other than the removal of the Impacted Soil, be discovered
prior to the Close of Escrow which would cause Seller to be liable for or incur
expenses on a cumulative basis in excess of Five Hundred Thousand Dollars
($500,000), Seller shall have the right to terminate this Agreement, and except
for each Party's obligations to indemnify the other as provided herein and
except for the license to construct and maintain the Buyer's Improvements as
specified in Section 6.1.1, the respective rights, duties and obligations of
Buyer and Seller under this Agreement shall forthwith terminate without further
liability. A termination under this Section 6.5.4 shall not be considered a
default by Seller.
6.5.5 SELLER'S ENVIRONMENTAL INDEMNITY. Seller shall indemnify, defend,
and hold Buyer and its officers, directors, shareholders, partners, employees,
affiliates, and assigns (collectively the "BUYER INDEMNIFIED PARTIES") harmless
from and against all liability, obligations, claims, damages, penalties,
losses, causes of action, costs, and expenses (including attorneys' fees,
expert witness fees, consulting and other professional fees) imposed upon
incurred by or asserted against the Buyer Indemnified Parties as a result of
any violation or asserted violation of, or failure to timely or fully comply
with Environmental Laws, or as a result of any contamination of the Property or
other property (including, but not limited to, other improvements, surface,
subsurface water and air) or any allegations related thereto by Hazardous
Materials which occurred or relates to activity occurring prior to the Closing
Date, except for any contamination caused by Buyer, its agents, or as a result
of their activities.
ARTICLE 7
ACKNOWLEDGMENTS, REPRESENTATIONS AND WARRANTIES
7.1 BUYER'S ACKNOWLEDGMENTS, REPRESENTATIONS AND WARRANTIES.
14
<PAGE> 18
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
7.1.1 PURCHASE "AS IS". Buyer is relying solely upon its own
inspections, investigations and analyses of the Property in entering into this
Agreement and is not relying in any way upon any representations, statements,
agreements, warranties, studies, reports, descriptions, guidelines or other
information or material furnished by Seller or its representatives, whether oral
or written, express or implied, of any nature whatsoever regarding any such
matters except as provided in Section 7.2, the Investor Representation
Certificate and the deed for the Property. Buyer acknowledges that it is
familiar with the Property. Buyer has made such independent investigations and
analyses as Buyer deems necessary or appropriate concerning Buyer's proposed
use, development and sale of the Property. Buyer is buying the Property on an
"as is-all faults" basis, except as to Hazardous Materials as set forth in
Section 6.5 and the other obligations of Seller as set forth in this Agreement.
Nothing is this Section 7.1.1 shall be deemed to supersede any obligation
of Seller set forth in this Agreement or in any other written agreement between
Buyer, or any affiliate of Buyer and Seller. In the event of a conflict
between this Section and any other term or provision of this Agreement or any
other written agreement between Buyer, or any affiliate of Buyer and Seller
pertaining to the Property, such other terms and provisions shall control.
7.1.2 BUYER'S AUTHORITY. Buyer and PMI and the individuals executing
this Agreement for Buyer and PMI have the legal power, right and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby.
7.1.3 FULL DISCLOSURE. Buyer and PMI represent and warrant that they
have made full and accurate disclosure to Seller of all material matters
concerning Buyer, PMI and the PMI Stock. Buyer and PMI shall continue to keep
Seller informed as to all material matters affecting Buyer, PMI and the PMI
Stock until the Close of Escrow.
7.1.4 PMI STOCK. The PMI Stock when issued and delivered to Seller
shall have been validly issued in compliance with applicable laws and PMI's
organizational documents, fully paid and non-assessable and such shares shall be
free and clear of all pledges,
15
<PAGE> 19
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
security interests, charges, encumbrances, equity claims, and options except
those imposed by state and federal securities laws and subject to that certain
Shareholder's Agreement by and among PSH Corp., Seller, and PMI dated November
22, 1995, as amended to date.
7.1.5 NO FINDERS. No finder, broker or other intermediary has been used
by Buyer in connection with the transactions contemplated by this Agreement and
no person will be entitled to a finder's fee or brokerage commission upon
consummation of such transactions or otherwise in connection therewith. Buyer
agrees to indemnify and hold harmless Seller from and against any finder's fees
or brokerage commission arising out of the conduct of Buyer.
7.1.6 LITIGATION. To the best of Buyer's and PMI's knowledge, (except as
disclosed in writing by Buyer and/or PMI to Seller or Seller's counsel) neither
Buyer nor PMI has received written notice of any threatened or pending
litigation against Buyer or PMI which would materially and adversely affect the
Property or Buyer's or PMI's obligations pursuant to this Agreement.
7.1.7 NO CONFLICT. To the best of Buyer's and PMI's knowledge, neither
Buyer's nor PMI's execution of this Agreement nor performance by Buyer or PMI
of any of their respective obligations hereunder including, without limitation,
the purchase of the Property on the terms and conditions contemplated by this
Agreement (a) violates or shall violate any written or oral contract, agreement
or instrument to which Buyer or PMI is a party or is bound or which affects the
PMI Stock or Property or any part of it, or (b) shall constitute or result in
violation or breach by Buyer or PMI of any judgment, order, writ, injunction,
or decree issued or imposed upon Buyer or PMI, or result in violation of any
applicable laws; and no approval, consent, order, authorization, designation,
filling (other than recording), required in conjunction with Buyer's execution
of this Agreement and performance of its obligations hereunder.
7.1.8 NO KNOWLEDGE OF A RELEASE ON THE PROPERTY. To the best of Buyer's
knowledge, neither Buyer, nor its respective agents have deposited or released
any amount of Hazardous Materials on the Property or on other property owned by
them that has migrated or may migrate to the Property.
16
<PAGE> 20
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
7.2 SELLER'S ACKNOWLEDGMENTS, REPRESENTATIONS AND WARRANTIES.
7.2.1 SELLER'S AUTHORITY. Seller and the individuals executing this
Agreement for Seller have the legal right and authority to enter into this
Agreement and to consummate the transactions contemplated hereby.
7.2.2 OWNERSHIP OF THE PROPERTY. Seller is the owner of the Property
and the Property as of the Closing Date shall be free and clear of all liens,
restrictions, easements, leases, tenancies, assessments, charges, rights of use
or possession of any other title objections except the Permitted Exceptions and
except for those obligations imposed in connection with any future development
of the Property and as provided in Section 6.1 of the Organization Agreement
dated November 22, 1995, by and among PSH Corp., Seller and PMI which, as to
Seller, shall be extinguished upon the transfer of title to the Property to
Buyer.
7.2.3 NO FINDERS. No finder, broker or other intermediary has been
used by Seller in connection with the transactions contemplated by this
Agreement and no person will be entitled to a finder's fee or brokerage
commission upon consummation of such transactions or otherwise in connection
therewith. Seller agrees to indemnify and hold harmless Buyer from and against
any finder's fee or brokerage commission arising out of the conduct of Seller.
7.2.4 EMINENT DOMAIN. To the best of Seller's knowledge, Seller has
received no written notice from any governmental authority that eminent domain
proceedings for the condemnation of the Property or any part in thereof are
pending.
7.2.5 LITIGATION. To the best of Seller's knowledge, (except as
disclosed in writing by Seller to Buyer or Buyer's counsel) Seller has received
no written notice of any threatened or pending litigation against Seller which
would materially and adversely affect the Property or Seller's obligations
pursuant to this Agreement.
7.2.6 NO CONFLICT. To the best of Seller's knowledge, neither
Seller's execution of this Agreement nor performance by Seller of any of its
obligations hereunder including,
17
<PAGE> 21
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
without limitation, the transfer, assignment and sale of the Property
contemplated by this Agreement (a) violates or shall violate any written or
oral contract, agreement or instrument to which Seller is a party or is bound
or which affects the Property or any part of it, or (b) shall constitute or
result in violation or breach by Seller of any judgment, order, writ,
injunction, or decree issued or imposed upon Seller, or result in violation of
any applicable laws; and no approval, consent, order, authorization,
designation, filling (other than recording), required in conjunction with
Seller's execution of this Agreement and performance of its obligations
hereunder.
7.2.7 PROPERTY WITHIN OPERABLE UNIT NO. 2. All of the Property is
located within DTSC Operable Unit No. 2 under the Consent Order except for
approximately the West one-half of Parcel 1 of Parcel Map 14723 which is located
within the former boundaries of what is known as the "Koppers Property."
ARTICLE 8
THE CLOSE OF ESCROW
8.1 CONDITIONS AND CLOSE OF ESCROW. Escrow Agent shall close the Escrow
(the "CLOSE OF ESCROW") on or before the Closing Date WHEN AND ONLY WHEN each
of the following conditions has been, satisfied or waived in writing by the
appropriate Party:
8.1.1 SUPPLEMENTS TO PRELIMINARY REPORT. If any title exceptions are
recorded against the Property before the Close of Escrow in addition to the
Permitted Exceptions or instruments disclosed in this Agreement, Buyer shall
have the same rights of approval or disapproval with respect to each exception
as set forth in Article IV approved such exceptions within three (3) business
days after receipt of a supplemental report showing such exceptions or this
Agreement shall terminate.
8.1.2 TITLE POLICY. Seller shall be unconditionally committed to
procure from the Title Company, at Seller's expense, an ALTA form B (latest
edition) Owner's policy of title insurance for real property, a CLTA joint
protection policy of title insurance (the "TITLE POLICY") together with such
endorsements as Buyer may reasonably request including ALTA Endorsements numbers
100 (modified), 100.b, 103.1, 103.7, 116.1, and 116.4 with a liability limit
18
<PAGE> 22
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
in the amount of the Purchase Price and insuring fee title vested in Buyer free
and clear of any liens, encumbrances and interests except: (i) the Permitted
Exceptions; (ii) those rights, interests and easements reserved by Seller if
any in Seller's Grant Deed; (iii) the matters described in the printed form
portion of the Title Policy; and (iv) any items caused by the acts or omissions
of Buyer or permitted to be placed of record by Buyer as of the Close of
Escrow.
8.1.3 DEPOSIT OF PURCHASE PRICE. Buyer shall have deposited the full
Purchase Price in Escrow including a stock certificate for the PMI Stock in
Seller's name. Upon the Close of Escrow, the full Purchase Price shall be
delivered to Seller.
8.1.4 DEPOSIT OF CONDITIONAL DEMAND REGISTRATION RIGHTS AGREEMENT.
Buyer shall have deposited into Escrow two executed copies of the Conditional
Demand Registration Rights Agreement. With the Close of Escrow, Seller shall
execute both copies of the Conditional Demand Registration Rights Agreement and
Escrow Agent shall deliver one to Buyer and the other to Seller.
8.1.5 BUYER'S PERFORMANCE, REPRESENTATIONS AND WARRANTIES. Buyer shall
have duly performed each and every undertaking and agreement to be performed by
it hereunder and under the terms and conditions of this Agreement, and Buyer's
representations and warranties shall be true and correct in all respects at and
as of the Close of Escrow. Buyer shall deposit into Escrow for the benefit of
Seller a certificate signed by an officer of Buyer stating that all the
representations and warranties of Buyer are true and correct as of the Closing
Date. Upon the Close of Escrow, Buyer's certificate shall be delivered to
Seller.
8.1.6 DEED TO THE PROPERTY. Seller shall deposit into Escrow the
executed Grant Deed for the Real Property in recordable form. Upon the Close
of Escrow, the Title Company shall record the deed on behalf of Seller.
8.1.7 SELLER'S INVESTMENT REPRESENTATION. Seller shall deposit into
Escrow its executed Investment Representation Certificate dated as of the
Closing Date which shall be delivered to Buyer's upon the Close of Escrow.
19
<PAGE> 23
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
8.1.8 SELLER'S PERFORMANCE. Seller shall have duly performed each and
every undertaking and agreement to be performed by it hereunder and under the
terms and conditions of this Agreement including, but not limited to, the
removal of the Impacted Soil, and Seller's representations and warranties shall
be true and correct in all respects at and as of the Close of Escrow. Seller
shall deposit into Escrow for the benefit of Buyer a certificate signed by an
officer or Seller stating that all the representations and warranties of Seller
are true and correct as of the Closing Date. Upon the Close of Escrow, Seller's
Certificate shall be delivered to Buyer.
8.1.9 LITIGATION. Neither PMI, Buyer nor Seller shall be subject to
any judgment, order, decree, or injunction of a court of competent jurisdiction
which would impose any limitation on the ability of either Party to consummate
the transactions contemplated herein.
8.1.10 LOT-LINE ADJUSTMENT. After receipt of a letter from the DTSC
stating that no further remedial action is necessary for what is known as the
A&C Parcel (other than disposal of any Impacted Soils) or receipt of other
similar environmental documentation satisfactory to Buyer, Seller shall have
caused to have recorded the lot-line adjustment between Parcels 3 and 4 of
Parcel Map 14723, identified as the County of San Bernardino file number
LLA/95-0053/W133-89/W96-0012.
8.2 TERMINATION BASED ON FAILURE TO CLOSE BY CLOSING DATE. If Escrow
fails to close by the Closing Date for any reason other than Buyer's or
Seller's default, then, except for each Party's obligations to indemnify the
other as provided herein and except for the license to construct and maintain
the Improvements as specified in Section 6.1.1, the respective rights, duties
and obligations of Buyer and Seller under this Agreement shall forthwith
terminate without further liability. The Parties shall immediately thereafter
sign such instructions and other instruments as may be necessary to effect the
cancellation of this Escrow, and each Party shall pay its respective share (if
any) of escrow cancellation charges. Upon cancellation, Escrow Agent shall
immediately return the funds, less applicable escrow cancellation charges, and
documents to the parties that furnished them and Escrow Holder shall return the
Deposit to Buyer less any cancellation fees. Notwithstanding the provisions of
this paragraph, the Parties
20
<PAGE> 24
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
may extend the Closing Date by their mutual written agreement in which
event the provisions of this Paragraph shall apply to the extended closing date
with the same force and effect as the Closing Date.
8.3 PRORATIONS. Property taxes, special assessments, utility charges and
other similar amounts with respect to the Property shall be prorated as of the
Closing Date by the Escrow Agent, in accordance with the Escrow Agent's
standard practices and as shall be mutually agreed upon by Buyer and Seller
prior to the Close of Escrow. All such adjustments shall be against the cash
portion of the Purchase Price.
8.4 SELLER'S FEES AND COSTS. Seller will pay (i) the fee for the Title
Policy; (ii) one-half of Escrow Agent's escrow fee; and (iii) usual Seller's
document-drafting review and recording charges.
8.5 BUYER'S FEES AND COSTS. Buyer will pay (i) County Documentary
Transfer Tax in the amount Escrow Agent determines to be required by law, (ii)
one-half of Escrow Agent's escrow fee, and (iii) usual Buyer's
document-drafting and recording charges.
ARTICLE 9
REMEDIES
9.1 SELLER'S REMEDIES. If Escrow fails to close due to Buyer's default
under this Agreement, Seller shall have the right to, with or without notice or
demand, pursue all legal remedies against Buyer and PMI, including the right to
specific performance.
9.2 BUYER'S REMEDIES. If Escrow fails to close due to Seller's default
under this Agreement, Buyer shall have the right to, with or without notice or
demand, pursue all legal remedies against Seller, including the right to
specific performance.
9.3 RIGHT OF FIRST REFUSAL AFTER SELLER'S DEFAULT. If Escrow fails to
close solely due to: (i) Seller's default; (ii) Seller's inability to convey
acceptable title as stated in Article 4; (iii) Seller's failure to remove the
Impacted Soils from the Site Property; (iv) failure to record the lot line
adjustment described in Section 8.1.10; or (v) because of Seller's exercise of
its rights
21
<PAGE> 25
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
pursuant to Section 6.5.4 under this Agreement, Buyer shall
thereafter have until and including December 31, 2001, the right of first
refusal to acquire the Property or any portion thereof upon the terms and
conditions provided below. If Escrow fails to close for any reason other than
stated in this Paragraph, Buyer shall not obtain the right of first refusal
provided below.
(a) If Seller wishes to sell the Property or any portion thereof for
consideration to a third person, Buyer shall have the first option to purchase
all, and only all, of the Property or portion thereof offered for sale, which
option shall be exercised by it, if at all, by giving written notice to Seller
on or before twenty-one (21) days after receipt of the notice specified in
Section 9.3(b) below. The purchase price and sales terms for the Property, or
any portion thereof to be purchased by the Buyer shall be the same price and
same terms as set forth in the notice of proposed sale. However, if any of the
consideration specified in the notice is property other than cash, Buyer may
substitute cash in an amount equivalent to the fair market value of the
non-cash consideration, unless such consideration shall be securities in an
operating company, in which event Buyer shall provide the identical non-cash
consideration offered by the proposed purchaser. If no closing date for the
sale is specified, the closing shall occur no later than sixty (60) days after
receipt by the Buyer of the notice required by Section 9.3(b).
(b) If Seller wishes to sell, transfer, or otherwise dispose of all or a
portion of the Property for consideration to a third person, Seller shall first
give Buyer and Seller at least twenty-one (21) days advance written notice of
its desire to do so. The notice shall specify the Property or portion thereof
to be sold, the price, the proposed terms and the name, address and phone
number of the proposed purchaser. Along with the notice required pursuant to
this Section 9.3(b), Seller shall furnish to Buyer any proposed sale agreement
with the proposed purchaser unless the proposed purchaser requires the
non-disclosure of such agreement in which event Seller shall fully summarize
the material terms of the proposed sale agreement.
(c) Notwithstanding the provisions of this Section 9.3, Seller may
transfer all or any portion of Property to an affiliate provided such affiliate
becomes a party to this agreement for purposes of this Section 9.3. In
addition, there shall be no restrictions on a Seller pledging the Property or
any portion thereof as collateral for any bona fide loan, bond, financial
assurance, guaranty or other obligation.
22
<PAGE> 26
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
(d) After compliance with the terms of this provision of this Section
9.3, if applicable, and if Buyer fails to exercise their right of first
refusal, Seller shall be free to sell or otherwise transfer the Property or any
portion thereof to the identified proposed purchaser. In the event if any
material change in the proposed terms and conditions, Seller shall again comply
with the provisions of this Section 9.3 except that Buyer shall then only have
ten (10) days in which to exercise their right of first refusal, as provided
herein.
(e) The right of first refusal provided herein shall be personal to
Buyer and it may not assign its rights, if any, under this Section 9.3 to any
party. Any attempt to assign any rights under this 9.3 shall be void and of no
effort.
9.4 DISPUTE RESOLUTION. If any dispute arises relating to the
interpretation or performance of this Agreement which the parties are unable to
resolve between themselves, they agree to use the following as their sole
method of resolving the dispute:
(a) Seller and Buyer agree to jointly select a judicial officer who is
affiliated with the Judicial Arbitration and Mediation Service, or such other
equivalent organization as Seller and Buyer may mutually select, to act as the
trier of fact and judicial officer in such dispute resolution;
(b) If Seller and Buyer are unable to agree upon a particular judicial
officer, then the decision shall be made by the chief executive officer of the
Judicial Arbitration and Mediation Service, after consulting with Seller and
Buyer.
(c) Seller and Buyer shall have the same rights of discovery as if the
dispute were being resolved in the Superior Court of the State of California.
However, the judicial officer shall, on his own motion, or the request of either
Seller or Buyer, have the authority to extend or reduce the time periods
therefor; and
(d) The judicial officer serving hereunder shall be designated as a
referee under the provisions of Title VIII, Chapter 6 of the California Code of
Civil Procedure (Sections
23
<PAGE> 27
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
638 through 645.1, inclusive). Payment for the services of the judicial
officer and the rights and procedure of appeal, and/or other review of the
decision, shall be made as provided in such sections.
The Parties acknowledge and agree that the aforementioned method of
dispute resolution shall relate only to disputes with respect to the
interpretation or performance of any provision of this Agreement and shall not
apply to the enforcement of any provision with respect to which there is no
dispute over interpretation or performance or with respect to which any
previous dispute over interpretation or performance has been resolved.
Furthermore, the dispute resolution procedures provided herein shall not apply
to any action in which injunctive relief is sought.
ARTICLE 10
GENERAL PROVISIONS
10.1 PMI AS A PARTY TO THIS AGREEMENT. PMI is a Party to this Agreement
but only for the purpose and obligations expressly provided for in this
Agreement.
10.2 TIME OF THE ESSENCE AND STRICT CONSTRUCTION. Time is of the essence
pursuant to this Agreement for the performance and observance of all
obligations of Seller and Buyer hereunder and all provisions of this Agreement
shall be strictly construed.
10.3 NOTICE AND DEMANDS. All notices or demands required or permitted
pursuant to this Agreement shall be in writing, signed by the Party giving the
same, and shall be deemed properly given and received when personally served or
upon the earlier of (i) receipt or (ii) rejection, if sent by registered or
certified mail, postage prepaid or by nationally recognized overnight courier
service, such as Federal Express, and addressed to the intended recipient at
its address as set forth below or at any other address of which such Party
gives the other Party notice in accordance with the provisions of this Section
10.2.
IF TO BUYER: Penske Motorsports, Inc.
3270 W. Big Beaver Road, Suite 130
Troy, MI 48084
ATTN.: Richard J. Peters, President & CEO
24
<PAGE> 28
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
WITH A COPY TO: Penske Motorsports, Inc.
3270 W. Big Beaver Road, Suite 130
Troy, MI 48084
ATTN.: Robert Kurnick Jr., General Counsel
IF TO SELLER: Kaiser Ventures Inc.
3633 E. Inland Empire Blvd., Suite 850
Ontario, CA 91764
ATTN.: Gerald A. Fawcett, President & COO
WITH A COPY TO: Kaiser Ventures Inc.
3633 E. Inland Empire Blvd., Suite 850
Ontario, CA 91764
ATTN.: Terry L. Cook, General Counsel
10.4 CAPTIONS FOR CONVENIENCE. The headings and captions of this
Agreement are for convenience and reference only and shall not be considered in
interpreting the provisions hereof.
10.5 SEVERABILITY. Any provision in this Agreement which is illegal,
invalid or unenforceable in any jurisdiction, shall, as to such jurisdiction,
be ineffective to the extent of such illegality, invalidity or unenforceability
without invalidating the remaining provisions hereof or affecting the legality,
validity or enforceability of such provision in any other jurisdiction. Seller
and Buyer shall negotiate in good faith to replace any illegal, invalid or
unenforceable provision of this Agreement with a legal, valid and enforceable
provision that, to the extent possible, will preserve the economic bargain of
this Agreement, or shall otherwise amend this Agreement, including the
provision relating to choice of law, to achieve such result.
10.6 GOVERNING LAW. This Agreement shall be interpreted and enforced
according to the laws of the State of California.
10.7 NO ORAL AMENDMENT OR MODIFICATION. No provision of this Agreement
may be amended or modified except to the extent any such amendment or
modification is expressly set forth in a written instrument executed by the
Party against whom the amendment or modification is sought.
25
<PAGE> 29
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
10.8 RELATIONSHIP OF SELLER AND BUYER. Nothing contained in this
Agreement shall be deemed or construed as creating the relationship of
principal and agent, partnership, or joint venture and no provision in this
Agreement and no act of Seller or Buyer shall be deemed to create any
relationship other than that of Seller and Buyer. Without limiting the
generality of the foregoing, all obligations of Seller and Buyer with respect
to third parties shall be independent.
10.9 ATTORNEYS' FEES. If it becomes necessary for Seller or Buyer to
bring an action (including any form of dispute resolution), either at law or in
equity, to enforce or interpret the provisions of this Agreement, the
prevailing Party in such action shall be entitled to recover its reasonable
attorneys' fees and other professional fees and costs of all types, as a part
of any judgment therein, in addition to any other award which may be granted.
10.10 AMENDED AND SUCCESSOR STATUTES AND REGULATIONS. All references in
this Agreement to a statute or regulation or section of same, shall include
future amendments and successor statutes, regulations, or sections thereof, as
applicable, and all references in this Agreement to any local, state or federal
government commission, department or agency or instrumentality or court shall
include their successors.
10.11 ENTIRE AGREEMENT. This Agreement and the exhibits attached hereto
contains all of the agreements and understanding with respect to the matters
covered hereby, and no prior agreements, oral or written, or understandings,
representations, or warranties of any nature or kind what so ever pertaining to
such matters shall be effective for any purpose unless expressly incorporated
into the provisions of this Agreement or the exhibits attached hereto.
10.12 EXHIBITS AND SCHEDULES. All exhibits and schedules which are
referred to in this Agreement are incorporated into this Agreement as though
fully set forth herein.
10.13 SUCCESSORS AND ASSIGNS. Neither Seller nor Buyer may, voluntarily
or by operation of law, assign or otherwise transfer any of its rights or
obligations under this Agreement without obtaining the prior written consent of
the other Party, which consent may be withheld in such Party's sole and
absolute discretion. Subject to the restrictions and
26
<PAGE> 30
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
prohibitions on assignment each and all of the covenants and conditions of this
Agreement shall inure to the benefit of and shall be binding upon the
successors in interest of Seller, and, subject to the restrictions on transfers
herein provided, the successors, heirs, representatives and assigns of Buyer.
10.14 EMINENT DOMAIN. If, prior to the Close of Escrow, all or any
portion of the Property is taken or appropriated by any public or quasi-public
authority under the power of eminent domain or such an eminent domain action is
threatened pursuant to a resolution of intention to condemn filed by any public
entity, and if such taking will, in Buyer's good faith determination,
materially and adversely affect the Property, then Buyer may terminate this
Agreement without further liability hereunder and receive a refund of its
Deposit and documents deposited herein. If Buyer does not timely terminate
this Agreement or if a partial taking of the Property which does not materially
and adversely affect the Property occurs, then this Agreement shall remain in
full force and effect and upon the Closing Date Buyer shall receive from Seller
any award paid for that portion of the Property taken or the right to an award
if not paid as of the Closing Date. Buyer must elect to terminate or maintain
the Agreement by notice in writing to Seller with ten (10) days after written
notice by Seller of a threatened taking or it shall be deemed that Buyer has
elected not to terminate this Agreement.
10.15 RECORDATION. This Agreement may be recorded at the request and
expense of any party hereto. The party requesting recordation shall pay all
the expenses of the recordation of this Agreement.
10.16 RESOLUTION OF ANY CLAIM FOR PAYMENT BY ONE PARTY TO ANOTHER. Buyer
and Seller agree to mutually negotiate in good faith the resolution of any
amounts claimed to be owed by one party to another with regard to grading,
excavation, By-Products Area cap monitoring and related expenses, and other
similar items.
10.17 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
27
<PAGE> 31
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be
executed by their respective duly authorized representative as of the day and
year first above written.
"SELLER" "PMI"
KAISER VENTURES INC. PENSKE MOTORSPORTS, INC.
a California corporation a Delaware corporation
By:/s/ Gerald A. Fawcett By:/s/ Richard J. Peters
---------------------------- ----------------------------
Gerald A. Fawcett, President & Richard J. Peters, President &
Chief Operating Officer Chief Executive Officer
"BUYER"
THE CALIFORNIA SPEEDWAY CORPORATION
a Delaware corporation
By:/s/ Richard J. Peters
---------------------------
Richard J. Peters, President &
Chief Executive Officer
CONSENT BY PSH CORP.
PSH Corp. is a party to the Shareholders Agreement dated as of November
22, 1996, as amended, among Penske Motorsports, Inc., PSH Corp. and Kaiser
Ventures Inc. PSH Corp. hereby consents to the amendment of the Shareholders
Agreement as provided in Section 5.3 of this Agreement.
PSH CORP.
By:/s/ Richard J. Peters
------------------------------
Richard J. Peters, President
28
<PAGE> 32
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
STATE OF MICHIGAN )
) ss.
COUNTY OF WAYNE )
On this the 9th day of October 1996, before me, Sandra Nieman, the
undersigned Notary Public, personally appeared Richard J. Peters, President and
Chief Executive Officer of The California Speedway Corporation, personally
known to me (or proved to me on the basis of satisfactory evidence), to be the
person whose name is subscribed to the within instrument, and acknowledged that
he executed it.
Witness my hand and official seal.
/s/ Sandra Nieman
---------------------
[SEAL] Notary's Signature
STATE OF MICHIGAN )
) ss.
COUNTY OF WAYNE )
On this the 9th day of October 1996, before me, Sandra Nieman, the
undersigned Notary Public, personally appeared Richard J. Peters, President and
Chief Executive Officer of Penske Motorsports, Inc., personally known to me (or
proved to me on the basis of satisfactory evidence), to be the person whose
name is subscribed to the within instrument, and acknowledged that he executed
it.
Witness my hand and official seal.
/s/ Sandra Nieman
-----------------------
[SEAL] Notary's Signature
29
<PAGE> 33
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
STATE OF MICHIGAN )
) ss.
COUNTY OF WAYNE )
On this the 9th day of October 1996, before me, Sandra Nieman, the
undersigned Notary Public, personally appeared Richard J. Peters, President of
PSH Corp., personally known to me (or proved to me on the basis of satisfactory
evidence), to be the person whose name is subscribed to the within instrument,
and acknowledged that he executed it.
Witness my hand and official seal.
/s/ Sandra Nieman
-------------------------
[SEAL] Notary's Signature
STATE OF CALIFORNIA )
) ss.
COUNTY OF SAN BERNARDINO )
On this the 8th day of October 1996, before me, Patricia M. Williams, the
undersigned Notary Public, personally appeared Gerald A. Fawcett, President and
Chief Operating Officer of Kaiser Ventures Inc., personally known to me
(or proved to me on the basis of satisfactory evidence), to be the person whose
name is subscribed to the within instrument, and acknowledged that he executed
it.
Witness my hand and official seal.
/s/ Patricia M. Williams
-------------------------
[SEAL] Notary's Signature
30
<PAGE> 34
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
EXHIBITS
EXHIBIT "A" Conditional Demand Registration Rights Agreement (Section 3.2.3)
EXHIBIT "B" Grant Deed (Section 3.2)
EXHIBIT "C" Investor Representation Certificate (Section 3.2)
31
<PAGE> 35
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
EXHIBIT "C"
INVESTOR REPRESENTATION CERTIFICATE
OF
KAISER VENTURES INC.
This Investor Representation Certificate is given by Kaiser Ventures Inc.,
a Delaware corporation (the "INVESTOR") to Penske Motorsports, Inc., a Delaware
corporation ("COMPANY") as of December 12, 1996.
RECITALS
A. As a portion of the consideration for its purchase of certain real
property from the Investor, as described in the Purchase Agreement and Escrow
Instructions by and between Company and Investor dated October 8, 1996, (the
"REAL ESTATE TRANSACTION"), Company has agreed to issue a certain number of
shares of its $.01 par common stock (the "PMI STOCK") to Investor.
B. In order to show its compliance with the Securities Act of 1933, as
amended (the "1933 ACT"), and the applicable provisions of California
Corporations Code Section 25102(f), the Company has requested, and the Investor
has agreed to give, certain representations and warranties as provided herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Investor hereby acknowledges,
represents and warrants to the Company the following:
1. PURCHASE FOR INVESTOR'S ACCOUNT. Investor hereby confirms that the PMI
Stock to be received by it as a part of the Real Estate Transaction will be
acquired for investment for its own account, not as a nominee or agent, and not
with a view to the sale or distribution of any part thereof, and that it has no
present intention of selling, granting participation in, or otherwise
distributing the same, but subject, nevertheless, to any requirement of law
that the disposition of its property shall at all times be within its control.
By executing this Agreement,
32
<PAGE> 36
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
Investor further represents that it does not have any contract, undertaking,
agreement, or arrangement with any person to sell, transfer, or grant
participations to such person, or to any third person, with respect to the PMI
Stock.
2. PMI STOCK NOT REGISTERED. Investor understands that the PMI Stock is
not registered under the 1933 Act or qualified under the California Corporate
Securities law on the ground that the issuance of the PMI Stock provided for
pursuant to the Real Estate Transaction is exempt from registration under the
1933 Act and from qualification under the California Corporate Securities law
and that the Company's reliance on such exemption is, among other things,
predicated on Investor's representations set forth herein.
3. SOPHISTICATED INVESTOR. Investor represents and warrants that it
and/or its representatives are experienced in evaluating and investing in
companies such as the Company, Investor is able to fend for itself, has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of its investment and protecting its interests,
and has the ability to bear the economic risks of its investment.
4. ACCREDITED INVESTOR. Investor represents and warrants that it is an
existing shareholder of the Company and is an "accredited" investor as that
term is defined in Regulation D promulgated pursuant to the 1933 Act.
5. RESTRICTIONS ON RESALE. Investor understands that the PMI Stock may
not be sold, transferred, or otherwise disposed of without registration under
the 1933 Act and qualification under the California Corporate Securities law or
an exemption therefrom.
6. LEGENDS ON THE STOCK CERTIFICATE. All certificates for shares of the
PMI shall bear a legend in substantially the following form:
"These securities have not been registered under the Securities Act of
1933 or qualified under the California Corporate Securities law. They may not
be sold, offered for sale, pledged or hypothecated in the absence of an
effective registration statement as to the securities
33
<PAGE> 37
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
under said Act and/or qualification under said Corporate Securities law or an
opinion of counsel satisfactory to the Company that such registration and/or
qualification is not required."
7. STOCK TRANSFER BOOKS. In addition to the legend requirement to be
placed on the stock certificates, the Company shall make a notation regarding
the restrictions on transfer of the PMI Stock in its books, and shares of
common stock shall be transferred on the books of the Company only if
transferred or sold pursuant to and in compliance with the provisions of this
Agreement.
IN WITNESS WHEREOF, Investor, through a duly authorized officer, hereby
duly executes this Certificate to be effective as of the date first set forth
above.
"INVESTOR"
KAISER VENTURES INC.
a California corporation
By:
---------------------------------
Gerald A. Fawcett, President &
Chief Operating Officer
34
<PAGE> 1
EXHIBIT 10.3
CONDITIONAL DEMAND REGISTRATION RIGHTS AGREEMENT
This CONDITIONAL DEMAND REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT")
is made as of December 12, 1996 between Penske Motorsports, Inc., a Delaware
corporation (the "COMPANY") and Kaiser Ventures Inc., a Delaware corporation
("KAISER").
RECITALS
A. Kaiser is currently the owner of 1,373,625 shares of the common stock
of the Company, $.0l par value share, and will acquire an additional 254,298
shares of the Company's common stock upon the consummation of a proposed real
estate transaction (collectively the "SHARES"), as set forth in a Purchase
Agreement and Escrow among the Company, Kaiser and The California Speedway
Corporation ("TCSC").
B. The Company, Kaiser and PSH Corp., a Delaware corporation ("PENSKE"),
are parties to a Shareholders Agreement, dated November 22, 1995, as amended
pursuant to a First Amendment to Shareholders Agreement, dated March 21, 1996
(the "SHAREHOLDERS AGREEMENT").
C. In order to accommodate those person or entities that may accept the
pledge of all or any portion of the Shares as collateral for a loan, bond,
financial assurance or other similar obligation, Kaiser desires to obtain, and
the Company is willing to grant, certain registration rights for the Shares in
the event a holder of a security interest in the Shares should foreclose on the
Shares and then be required to sell all or any portion of such Shares to
satisfy all or a portion of Kaiser's indebtedness to such lender.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the Company and Kaiser agree as
follows:
1. CONFIRMATION OF ABILITY TO PLEDGE THE SHARES. The Company hereby
agrees that Kaiser shall have the right to pledge all or any part of the shares
to a third party as collateral for a loan, bond, financial assurance or other
similar borrowing, potential borrowing, or obligation (hereafter a "SECURED
LENDER" and collectively "SECURED LENDERS") subject to the terms and
conditions of this Agreement, the Shareholders Agreement, the Lock-up Agreement
between Kaiser and CS First Boston dated March 21, 1996, and any restrictions
imposed by applicable law.
2. DEMAND REGISTRATION RIGHTS.
(a) Subject to the terms and conditions of this Agreement, upon
written demand to the Company by a Secured Lender who is the beneficial owner of
a majority of the Registrable Securities (as defined below) pledged to Secured
Lenders (a "MAJORITY HOLDER"), the Company shall undertake all reasonable
efforts to effect the registration of all or any portion of the Registrable
Securities (as defined below) owned by the Secured Lenders under the Securities
Act of 1933, as amended (the "SECURITIES ACT") and pursuant to applicable state
"blue sky" laws ("DEMAND REGISTRATION"). The term "REGISTRABLE SECURITIES"
means those shares beneficially owned by a Secured Lender and acquired from
Kaiser through foreclosure or through a transfer in lieu of foreclosure, and as
a result of a default by Kaiser under the terms of
1
<PAGE> 2
CONDITIONAL DEMAND REGISTRATION RIGHTS AGREEMENT
any security or pledge agreement which grants to such Secured Lender a
security interest in, or pledge of, all or any part of the Shares together with
all the Shares deemed Registrable Securities pursuant to Section 2(b) below.
The terms "beneficial owner" or "beneficial ownership" as used in this
Agreement shall mean ownership in accordance with Rule 13d-3 promulgated
pursuant to the Securities Exchange Act of 1934, as amended.
(b) Each request for a Demand Registration shall specify the approximate
number of Registrable Securities requested to be registered. Within ten (10)
days after receipt of any such request, the Company will give written notice of
such requested registration to all Secured Lenders known to the Company and
will include in such registration all Shares with respect to which the Company
has received written requests for inclusion therein within fifteen (15) days
after the receipt of Company's notice. All of such Shares shall thereafter be
deemed Registrable Securities for purposes of this Agreement.
(c) The holders of Registrable Securities are entitled to request two
Demand Registrations, an initial Demand Registration and a second Demand
Registration pursuant to Paragraph 3(c) below. The Secured Lenders will pay
all Registration Expenses (as defined in Paragraph 6 below) pro-rata on the
basis of the amount of securities being sold by each such holder participating
in the Demand Registration. No party has any rights under this Agreement to
request Demand Registrations except as provided in this Agreement. A
registration will not count as a permitted Demand Registration until it has
become effective, (unless such Demand Registration has not become effective due
solely to the fault of the holders requesting such registration). The Demand
Registrations shall be underwritten registrations.
(d) Subject to the restrictions below, the Company may include in the
Demand Registration any securities which are not Registrable Securities. If a
Demand Registration is an underwritten offering and the managing underwriters
advise the Company in writing that in their opinion the number of Registrable
Securities and the additional securities requested to be included in such
offering, if any, exceeds the number of securities that can be reasonably sold
in such offering without adversely affecting the marketability of the offering,
the Company will include in such registration, prior to the inclusion of any
additional securities which are not Registrable Securities, the number of
Registrable Securities requested to be included that in the opinion of such
underwriters can be sold without adversely affecting the marketability of the
offering. In such event, the amount of Registrable Securities to be registered
shall be first allocated to all those Shares requested by a Majority Holder
with the balance of the Registrable Securities to be included in the Demand
Registration allocated pro-rata among the other respective holders of such
Registrable Securities on the basis of the amount of Registrable Securities,
excluding the Majority Holder, owned by each other holder; but in no event
shall the number of shares registered in the initial Demand Registration be
less than 850,000 Shares of Registrable Securities unless agreed upon in
writing by the Company and the Secured Lenders.
(e) The Company will not be obligated to effect any Demand Registration
within nine (9) months after the effective date of a previous registration
statement filed by the Company under the Securities Act of 1933. The Company
may postpone for up to three (3) months the filing or the effectiveness of a
registration statement for the Demand Registration if the Company in its
reasonable good faith judgment, determines that such Demand Registration
2
<PAGE> 3
CONDITIONAL DEMAND REGISTRATION RIGHTS AGREEMENT
would reasonably be expected to have an adverse effect on any then existing
proposal or plan by the Company or of its Subsidiaries to engage in any
acquisition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer, issuance and selling of additional stock
whether through a public offering or otherwise, or any similar transaction;
provided that in such event, the holders of Registrable Securities initially
requesting such Demand Registration will be entitled to withdraw such request
and, if such request is withdrawn, such Demand Registration will not count as a
Demand Registration under this Agreement. Notwithstanding the foregoing, in
the event the Company has filed or intends to file a registration statement
within three (3) months and such filing or intent to file precludes the Secured
Lenders from registering their Registrable Securities such Secured Lenders
shall have "piggyback" registration rights in accordance with, and subject to
the terms and conditions of the Registration Rights Agreement, dated as of
March 21, 1996, by and between the Company and Kaiser (the "REGISTRATION RIGHTS
AGREEMENT"), as if such Registrable Securities are "Shares" thereunder.
3. CONDITIONS OF OBLIGATION TO REGISTER SHARES. The obligation of the
Company under this Agreement to register any of the Shares owned by a Secured
Lender are subject to each of the following conditions:
(a) The amount of Registrable Securities being registered on behalf of
the Majority Holder must be beneficially owned by the Majority Holder. Any
Secured Lender other than the Majority Holder need not be the owner of Shares to
participate in a Demand Registration, but in no event shall Kaiser or an
affiliate of Kaiser be deemed a Secured Lender hereunder.
(b) Prior to the commencement of the registration of the Registrable
Securities, the Secured Lender shall have first offered the Registrable
Securities to the Company, in accordance with the procedures and on the terms
and conditions set forth in Section 1.3 of the Shareholders Agreement. If the
Company elects not to purchase the Registrable Securities, then the Secured
Lenders shall offer the Registrable Securities to PSH Corp., in accordance with
the procedures and on the terms and conditions set forth in Section 1.3 of the
Shareholders Agreement except that PSH Corp. shall have ten (10) days in which
to exercise its option purchase shares. If PSH Corp., elects not to purchase
the Registrable Securities, then the Secured Lenders shall offer the Registrable
Securities to Penske Performance, Inc. in accordance with the procedures and on
the terms and conditions set forth in Section 1.3 of the Shareholders Agreement,
except that Penske Performance, Inc. shall have ten (10) days in which to
exercise its option to purchase such shares. If Penske Performance, Inc.,
elects not to purchase the Registrable Securities, then the Secured Lenders
shall offer the Registrable Securities to International Speedway Corporation in
accordance with the procedures and on the terms and conditions set forth in
Section 1.3 of the Shareholders Agreement, except that International Speedway
shall have ten (10) days in which to exercise its option to purchase such
Registrable Securities. If International Speedway Corporation elects not to
purchase the Registrable Securities then the Secured Lenders may exercise the
Demand Registration rights hereunder.
(c) The Company shall not be required to include in any Registration
statement more than 850,000 Shares of the Registrable Securities on behalf of
the Secured Lenders. However, after a twelve (12) month period after the
effective date of the initial
3
<PAGE> 4
CONDITIONAL DEMAND REGISTRATION RIGHTS AGREEMENT
registration statement, the Secured Lenders may by written demand to the
Company require the registration of the balance of the Registrable Securities
not previously registered.
(d) During such time as Secured Lender may be engaged in a
distribution of the Shares that are registered, such holder will comply with
Rules 10b-7 promulgated under the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), and pursuant thereto, Secured Lender will, among other
things, cause to be furnished to each broker through whom Registration
Securities may be offered, or to the offeree if an offer is not made through a
broker, such copies of the prospectus covering the Shares that are registered
and any amendment or supplement thereto and documents incorporated by reference
therein as may be required by law and the Secured Party shall not bid for or
purchase any shares of the Company or attempt to induce any other person to
purchase any securities of the Company other than as permitted under Exchange
Act.
(e) To the extent not inconsistent with applicable law, each Secured
Lender will agree not to effect any public sale or distribution (including sales
pursuant to Rule 144) of equity securities of the Company, or any securities
convertible into or exchangeable or exercisable for such securities during the
seven (7) days prior to, and the 180-day period beginning on the effective date
of the underwritten Demand Registration, unless the underwriter managing the
registered public offering otherwise agrees.
(f) Each Secured Lender participating in a Demand Registration shall
furnish to the Company a written undertaking that such Secured Lender is bound
by and will abide by the terms of this Agreement.
4. SECURED LENDER'S COOPERATION. The Secured Lender will cooperate with
the Company in connection with the preparation of the registration statement,
and for so long as the Company is obligated to file and keep effective the
registration statement, will provide to the Company, in writing, for use in the
registration statement, all information regarding Secured Party as may be
necessary to enable the Company to prepare the registration statement and
prospectus covering the Registrable Securities, to maintain the currency and
the currency and effectiveness thereof and otherwise to comply with all
applicable requirements of law in connection therewith.
5. EXERCISE OF PIGGYBACK REGISTRATION RIGHTS. In the event a Secured
Lender makes a written demand for registration pursuant to the terms of this
Agreement, Kaiser shall not have any "piggyback" registration rights pursuant
to the Registration Rights Agreement for such registration statement. However,
Kaiser's inability to participate in a registration shall not otherwise affect
its "piggyback" registration rights under the Registration Rights Agreement nor
shall it count as an offering in which Kaiser declined to participate.
6. REGISTRATION EXPENSES.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, and fees and
disbursements of counsel for the Company and all independent certified public
accountants, underwriters and other Persons retained by the
4
<PAGE> 5
CONDITIONAL DEMAND REGISTRATION RIGHTS AGREEMENT
Company (all such expenses being herein called "REGISTRATION EXPENSES"),
will be borne by Secured Lenders unless such registration shall be deemed an
exercise of Kaiser's "piggyback" pro-rata on the basis of the amount of the
securities being sold by each such holder, registration rights under the
Registration Rights Agreement in which case the allocation of Registration
Expenses provided in the Registration Rights Agreement shall be applicable.
(b) Notwithstanding Paragraph 6(a) above, if the Company should also
register securities pursuant to the same registration statement as for all or
any portion of the Shares being registered on behalf of a Secured Lender, the
Registration Expenses shall be allocated and paid pro rata among all such
persons, including the Company, on the amount of securities being sold by each
such person.
7. INDEMNIFICATION.
(a) The Company agrees to indemnify, to the extent permitted by law,
the Secured Lenders, their respective officers, directors, counsel and each
Person who controls Secured Lenders (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by Kaiser or the Secured Lenders
for use therein or by Kaiser's or the Secured Lenders failure to deliver a copy
of the registration statement or prospectus or any amendments or supplements
thereto after the Company has furnished the Secured Lenders with a sufficient
number of copies of the same.
(b) In connection with any registration statement in which Secured
Lenders are participating, the Secured Lenders and Kaiser will furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law each of the Secured Lenders and
Kaiser, will indemnify the Company, its directors, officers, counsel,
accountants and each Person who controls the Company (within the meaning of the
Securities Act) against all losses, claims, damages, liabilities and expenses
resulting from any untrue or alleged untrue statement of material fact contained
in the registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but only to the extent that such untrue statement or
omission is contained in any information or affidavit so furnished in writing by
any of the Secured Lenders or Kaiser. No Secured Party or Kaiser shall be
responsible for the information furnished by the other.
(c) Any Person entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying
5
<PAGE> 6
CONDITIONAL DEMAND REGISTRATION RIGHTS AGREEMENT
party will not be subject to any liability for any settlement made by the
indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or
elects not to, assume the defense of a claim will not be obligated to pay the
fees and expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to
such claim.
(d) The indemnification provided for under this Agreement will remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and will survive the transfer of securities.
8. TERMINATION. This Agreement shall automatically terminate and be of no
further force or effect upon the twentieth (20th) anniversary date of this
Agreement.
9. THIRD PARTY BENEFICIARY. Kaiser and the Company agree that any Secured
Lender (as defined herein) shall have the right to enforce the terms and
conditions of this Agreement as if they were originally a party to this
Agreement. This Agreement is for the benefit of each Secured Lender.
10. MISCELLANEOUS.
(a) DEFINITION OF PERSON. "PERSON" means any individual, corporation,
partnership, limited liability company, limited liability partnership, firm,
joint venture, association, joint-stock company, trust or un-incorporated
organization.
(b) AMENDMENTS AND WAIVERS. Except as otherwise provided herein, the
provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company and Kaiser and any Secured Lender.
(c) SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement.
(d) COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together will constitute
one and the same Agreement.
(e) DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
(f) GOVERNING LAW. The corporate law of Delaware will govern all
issues concerning the relative rights of the Company and its stockholders. All
other questions concerning the construction, validity and interpretation of this
Agreement and the exhibits and schedules hereto will be governed by the internal
law, and not the law of conflicts, of Michigan.
6
<PAGE> 7
CONDITIONAL DEMAND REGISTRATION RIGHTS AGREEMENT
(g) NOTICES. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, sent to the recipient by reputable express courier service (charges
prepaid) or mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices, demand and other
communications will be sent to the addresses indicated below:
TO: Penske Motorsports, Inc.
13400 Outer Drive West
Detroit, Michigan 48239
Attention: President
WITH A COPY TO: Robert H. Kurnick, Jr.
c/o Penske Auto Centers, Inc.
3270 W. Big Beaver Road, Suite 130
Troy, Michigan 48084
TO: Kaiser Ventures Inc.
3633 E. Inland Empire Boulevard, Suite 850
Ontario, California 91764
Attention: President
WITH A COPY TO: Terry Cook
c/o Kaiser Ventures Inc.
3633 E. Inland Empire Boulevard, Suite 850
Ontario, California 91764
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
"COMPANY"
PENSKE MOTORSPORTS, INC.
By:/s/ Richard J. Peters
------------------------------
Richard J. Peters, President &
Chief Executive Officer
"KAISER"
KAISER VENTURES INC.
By:/s/ Gerald A. Fawcett
------------------------------
Gerald A. Fawcett, President &
Chief Operating Officer
7
<PAGE> 1
EXHIBIT 10.4
December 11, 1996
Robert H. Kurnick, Jr., Esq.
Sr. Vice President and General Counsel
Penske Motorsports, Inc.
3270 W. Big Beaver Rd.
Suite 130
Troy, Michigan 48084
RE: THE CALIFORNIA SPEEDWAY/KAISER VENTURES
Dear Rob:
This letter will confirm our agreement that in connection with the
transfer of certain real property from Kaiser Ventures Inc., ("KAISER") to The
California Speedway Corporation, ("TCS") pursuant to a Purchase Agreement and
Escrow Instructions (the "PURCHASE AGREEMENT"), dated October 8, 1996, we have
agreed to amend the defined term "SDC PROPERTY" as used in the Water Rights
Agreement (the "WATER RIGHTS AGREEMENT") between Kaiser and TCS (formerly
Speedway Development Corporation), dated November 21, 1995. Kaiser and TCS
hereby amend the Water Rights Agreement by adding to the definition of SDC
Property contained therein all of the "PROPERTY" transferred from Kaiser to TCS
pursuant to the Purchase Agreement. Except for the inclusion of the additional
property in the definition of SDC Property, the Water Rights Agreement is not
being amended in any other respect.
If the foregoing accurately reflects your understanding, please so
indicate by executing where provided for below.
Sincerely, Agreed and Accepted:
Kaiser Ventures Inc. The California Speedway Corporation
By: /s/ Gerald A. Fawcett By: /s/ Robert H. Kurnick, Jr.
----------------------- --------------------------------
Its: President Its: Senior Vice President
------------------- -------------------------------
Dated: December 12, 1996 Dated: December 12, 1996
------------------- -----------------------------
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-10171 of Penske Motorsports, Inc. on Form S-8 of our report dated
January 20, 1997 appearing in this Annual Report on Form 10-K of Penske
Motorsports, Inc. for the year ended December 31, 1996.
/s/ Deloitte Touche LLP
Detroit, Michigan
March 27, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 27,862
<SECURITIES> 0
<RECEIVABLES> 2,365
<ALLOWANCES> 0
<INVENTORY> 2,060
<CURRENT-ASSETS> 33,559
<PP&E> 156,083
<DEPRECIATION> 15,681
<TOTAL-ASSETS> 183,997
<CURRENT-LIABILITIES> 25,801
<BONDS> 3,825
0
0
<COMMON> 132
<OTHER-SE> 145,270
<TOTAL-LIABILITY-AND-EQUITY> 183,997
<SALES> 21,886
<TOTAL-REVENUES> 55,175
<CGS> 12,834
<TOTAL-COSTS> 40,253
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,950)
<INCOME-PRETAX> 16,872
<INCOME-TAX> 5,992
<INCOME-CONTINUING> 10,880
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,880
<EPS-PRIMARY> .90
<EPS-DILUTED> .90
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 27,862
<SECURITIES> 0
<RECEIVABLES> 2,365
<ALLOWANCES> 0
<INVENTORY> 2,060
<CURRENT-ASSETS> 33,559
<PP&E> 156,083
<DEPRECIATION> 15,681
<TOTAL-ASSETS> 183,997
<CURRENT-LIABILITIES> 25,801
<BONDS> 3,825
0
0
<COMMON> 132
<OTHER-SE> 145,270
<TOTAL-LIABILITY-AND-EQUITY> 183,997
<SALES> 2,905
<TOTAL-REVENUES> 2,957
<CGS> 1,564
<TOTAL-COSTS> 5,541
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (368)
<INCOME-PRETAX> (2,216)
<INCOME-TAX> (870)
<INCOME-CONTINUING> (1,346)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,346)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
