<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 1997.
( ) Transition report pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934 for the transition period ___ to ___.
Commission File No. 0-28044
PENSKE MOTORSPORTS, INC.
------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 51-0369517
- -------------------------------------------------------------- ---------------------------------
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
13400 OUTER DRIVE WEST, DETROIT, MICHIGAN 48239-4001
- -------------------------------------------------------------- ---------------------------------
(Address of principal executive offices) (including zip code)
</TABLE>
313-592-8255
------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
COMMON STOCK $0.01 PAR VALUE 14,148,340 SHARES
- ---------------------------- -----------------------------
CLASS OUTSTANDING AT AUGUST 1, 1997
This report contains 16 pages.
<PAGE> 2
Penske Motorsports, Inc. Form 10-Q (continued)
TABLE OF CONTENTS
PAGE NO.
--------
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Independent Accountants' Review Report 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 10
PART II - OTHER INFORMATION
ITEM 2. LEGAL PROCEEDINGS. 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 16
Signature 17
2
<PAGE> 3
Penske Motorsports, Inc. Form 10-Q (continued)
PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1997 1996
-------- ------------- ---------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 6,973 $ 27,862
Receivables 12,135 2,365
Inventories 4,432 2,060
Prepaid expenses 1,254 1,272
-------- --------
TOTAL CURRENT ASSETS 24,794 33,559
PROPERTY AND EQUIPMENT, net 209,771 140,402
GOODWILL, net 30,099 6,918
OTHER ASSETS 2,146 3,118
-------- --------
TOTAL $266,810 $183,997
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------
CURRENT LIABILITIES:
Current portion of long-term debt $ 13,620 $ 1,738
Accounts payable 18,026 8,223
Accrued expenses 10,661 1,715
Deferred revenue, net 25,189 14,125
-------- --------
TOTAL CURRENT LIABILITIES 67,496 25,801
LONG-TERM DEBT, less current portion 5,287 3,825
MINORITY INTEREST 2,101
DEFERRED TAXES 9,910 8,969
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, par value $ .01 share:
Authorized 50,000,000 shares
Issued and outstanding 14,148,340
shares in 1997 and 13,241,798 in 1996 141 132
Additional paid-in-capital 157,721 130,534
Retained earnings 24,154 14,736
-------- --------
TOTAL STOCKHOLDERS' EQUITY 182,016 145,402
-------- --------
TOTAL $266,810 $183,997
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE> 4
Penske Motorsports, Inc. Form 10-Q (continued)
PENSKE MOTORSPORTS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except for share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
-------------- -------------- ----------------- --------------
<S> <C> <C> <C> <C>
REVENUES:
Speedway admissions $ 19,696 $ 9,780 $ 19,696 $ 9,780
Other speedway revenue 15,699 7,658 15,750 7,694
Merchandise, tires and accessories 10,901 7,226 16,225 10,905
---------- ----------- ----------- -----------
TOTAL REVENUES 46,296 24,664 51,671 28,379
---------- ----------- ----------- -----------
EXPENSES:
Operating 14,028 6,964 16,314 8,970
Cost of sales 6,226 4,416 9,402 6,515
Depreciation and amortization 1,524 813 2,313 1,473
Selling, general and administrative 6,553 2,642 8,283 3,113
----------- ----------- ----------- -----------
OPERATING EXPENSES 28,331 14,835 36,312 20,071
----------- ----------- ----------- -----------
OPERATING INCOME 17,965 9,829 15,359 8,308
INTEREST INCOME (EXPENSE), net (48) 762 77 756
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 17,917 10,591 15,436 9,064
INCOME TAXES 6,988 3,874 6,018 3,337
----------- ----------- ----------- -----------
NET INCOME $ 10,929 $ 6,717 $ 9,418 $ 5,727
=========== =========== =========== ===========
NET INCOME PER SHARE (See Note 2) $ .80 $ .52 $ .70
=========== =========== ===========
PRO FORMA NET INCOME PER SHARE (See
Note 2) $ .51
===========
WEIGHTED AVERAGE NUMBER OF SHARES
(See Note 2) 13,670,164 12,987,500 13,457,164
=========== =========== ===========
PRO FORMA WEIGHTED AVERAGE NUMBER
OF SHARES (See Note 2) 11,232,960
===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
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Penske Motorsports, Inc. Form 10-Q (continued)
PENSKE MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
------------------------------------
1997 1996
----------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 9,418 $ 5,727
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,313 1,473
Changes in assets and liabilities which provided (used) cash:
Receivables (9,458) (4,041)
Inventories, prepaid expenses and other assets (4,059) (1,729)
Accounts payable and accrued liabilities 17,715 6,798
Deferred revenue 7,910 16
--------------- ----------------
Net cash provided by operating activities 23,839 8,244
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions of property and equipment, net (53,920) (23,839)
Acquisition of Competition Tire South, Inc. (758)
Competition Tire West, Inc. transaction (3,176)
--------------- ----------------
Net cash used in investing activities (53,920) (27,773)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock 82,803
Proceeds from issuance of debt 11,467 12,089
Repayment of debt (2,275) (12,145)
Advances to affiliates (1,254)
--------------- ----------------
Net cash provided by financing activities 9,192 81,493
--------------- ----------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (20,889) 61,964
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 27,862 4,805
--------------- ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,973 $ 66,769
=============== ================
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for interest $ 453 $ 29
Cash paid during the period for taxes 219 2,662
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES:
Stock issued in exchange for investment in subsidiary $ 27,196
Increase in debt associated with acquisitions $ 3,738
Decrease in minority interest associated with acquisitions 1,210
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
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Penske Motorsports, Inc. Form 10-Q (continued)
PENSKE MOTORSPORTS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - FINANCIAL STATEMENTS. The consolidated financial statements include
the accounts of Penske Motorsports, Inc. (the Company), its wholly-owned
subsidiaries, Michigan International Speedway, Inc., Pennsylvania International
Raceway, Inc., The California Speedway Corporation, Motorsports International
Corp., Competition Tire West, Inc. (CTW) and Competition Tire South, Inc., and
its majority-owned subsidiary, North Carolina Motor Speedway, Inc. (NCMS). All
material intercompany balances and transactions have been eliminated.
The accompanying consolidated financial statements have been prepared by
management and, in the opinion of management, contain all adjustments,
consisting of normal recurring adjustments, necessary to present fairly the
financial position of the Company as of June 30, 1997 and December 31, 1996,
and the results of operations and cash flows of the Company for the three
months and six months ended June 30, 1997 and 1996. The consolidated financial
statements should be read in conjunction with the consolidated financial
statements included in the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission.
Because of the seasonal concentration of racing events, the results of
operations for the three months and six months ended June 30, 1997 and 1996 are
not indicative of the results to be expected for the year.
NOTE 2 - EARNINGS PER SHARE. Net income per share for the three
months and six months ended June 30, 1997 reflects the weighted average number
of shares outstanding of 13,670,164 and 13,457,164, respectively. The net
income per share for the three months ended June 30, 1996 reflects the weighted
average number of shares outstanding for the period of 12,987,500. The pro
forma net income per share for the six months ended June 30, 1996 reflects the
weighted average number of shares outstanding of 11,232,960 plus the dilutive
effect of the number of shares equivalent to the $2.9 million capital
distribution which was recorded from the purchase of CTW in March 1996 (121,667
shares based on the Company's initial public offering price of $24 per share).
NOTE 3 - PROPERTY AND EQUIPMENT. Property and equipment consists of the
following :
<TABLE>
<CAPTION>
($ in thousands) June 30, December 31,
1997 1996
--------------- ---------------
<S> <C> <C>
Land and land improvements $103,015 $ 85,469
Buildings and improvements 109,134 63,685
Equipment 15,346 6,929
-------- --------
227,495 156,083
Less accumulated depreciation 17,724 15,681
-------- --------
$209,771 $140,402
======== ========
</TABLE>
6
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Penske Motorsports, Inc. Form 10-Q (continued)
The Company has completed construction of California Speedway with an estimated
total cost of $118 million.
NOTE 4 - NORTH CAROLINA MOTOR SPEEDWAY. On May 19, 1997, the Company exercised
its option to purchase the shares of the majority shareholder of NCMS in
exchange for 906,542 shares of the Company's common stock, increasing the
Company's ownership of NCMS from approximately 4.5% to approximately 70%. The
shares issued were valued at $30 per share and are reflected in the financial
statements as an increase in common stock of $9,000 and additional paid-in
capital of $27,187,000. The acquisition has been accounted for as a purchase
and NCMS has been consolidated in the financial statements since the date of
acquisition. The transaction resulted in the Company recording $23.3 million
of goodwill, which will be amortized over a period of 40 years. The minority
interest liability on the balance sheet reflects the equity of the minority
investors of NCMS.
On August 5, 1997, the Board of Directors of NCMS approved a merger and merger
agreement with the Company. The merger proposal, which offers NCMS
stockholders $19.61 per share in cash or the equivalent amount of stock of the
Company valued at the market price per share of the Company's common stock
determined during a period prior to the effective date of the merger, will be
submitted to the NCMS shareholders at a meeting expected to be held in the
third or fourth quarter of 1997. In August 1997, O. Bruton Smith sued the
Company, NCMS and certain directors of NCMS in an effort to enjoin the
completion of the merger. Should the merger not occur, the Company will be
obligated to reimburse the former majority shareholder of NCMS for any tax
consequences that result. The impact of such reimbursement could materially
increase the Company's investment in NCMS.
NOTE 5 - ACQUISITIONS. In July 1997, the Company announced that it invested
$11.8 million for a 40% interest in Homestead-Miami Speedway, LLC, the
operators of Metro-Dade Homestead Motorsports Complex. The transaction will be
recorded as an equity investment in the financial statements of the Company.
In August 1997, the Company acquired a 7% interest in Grand Prix Association of
Long Beach, Inc. (GPLB) for $3.9 million. GPLB owns and operates the Grand
Prix of Long Beach, California, Gateway International Raceway in Madison,
Illinois, and Memphis Motorsports Park in Millington, Tennessee.
NOTE 6 - NEW ACCOUNTING PRONOUNCEMENTS. The Financial Accounting Standards
Board has issued three new accounting standards which apply to the Company.
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share", which is effective for financial statements issued after December 15,
1997, requires companies to present earnings per share on the face of the
income statement in two categories called "Basic" and "Diluted" and requires
restatement of all periods presented. The Company will adopt SFAS No. 128
during the fourth quarter of 1997. The Company anticipates that the adoption
of SFAS No. 128 will not have a material impact on earnings per share.
7
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Penske Motorsports, Inc. Form 10-Q (continued)
SFAS No. 130, "Reporting Comprehensive Income", requires companies to classify
items of other comprehensive income by their nature in a financial statement
and to display the accumulated balance of other comprehensive income separately
from retained earnings and additional paid-in capital in the equity section of
a statement of financial position. This statement is effective for fiscal
years beginning after December 15, 1997. The Company will adopt SFAS No. 130
in 1998.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information", which is effective for fiscal years beginning after December 15,
1997, requires that a public business enterprise report financial and
descriptive information about its reportable operating segments. The Company
will adopt SFAS No. 131 in 1998.
8
<PAGE> 9
Penske Motorsports, Inc. Form 10-Q (continued)
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors and Stockholders
Penske Motorsports, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of
Penske Motorsports, Inc. and subsidiaries (the "Company") as of June 30, 1997
and the related condensed consolidated statements of income and of cash flows
for the three month and six month periods ended June 30, 1997 and 1996 included
in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1997. These consolidated financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and of making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is an expression of an opinion regarding the consolidated financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of the Company as of December 31,
1996, and the related consolidated statements of income, stockholders' equity
and cash flows, for the year then ended (not presented herein); and in our
report dated January 20, 1997, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth
in the condensed consolidated balance sheet at December 31, 1996 included in
the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997
is fairly stated, in all material respects, in relation to the consolidated
balance sheet from which such information has been derived.
/s/ Deloitte & Touche LLP
- -------------------------
Detroit, Michigan
August 1, 1997
9
<PAGE> 10
Penske Motorsports, Inc. Form 10-Q (continued)
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OVERVIEW
Penske Motorsports, Inc. (the Company) is a leading promoter and marketer of
professional motorsports in the United States. The Company owns and operates,
through its wholly-owned subsidiaries, Michigan Speedway in Brooklyn, Michigan,
Nazareth Speedway in Nazareth, Pennsylvania and California Speedway near
Los Angeles, California. The Company also has a 70% interest in North
Carolina Motor Speedway, Inc. (NCMS), which operates a speedway in Rockingham,
North Carolina. Subsequent to June 30, 1997 the Company acquired a 40%
ownership interest in Homestead-Miami Speedway, LLC and a 7% interest in Grand
Prix Association of Long Beach, Inc. In addition, the Company sells
motorsports related merchandise such as apparel, souvenirs and collectibles
through its subsidiary Motorsports International Corp. (MIC) and Goodyear brand
racing tires and accessories through its subsidiaries Competition Tire West,
Inc. (CTW) and Competition Tire South, Inc. (CTS) in the midwest and
southeastern regions of the United States.
The Company classifies its revenues as speedway admissions, other speedway
revenues, and merchandise, tires and accessories revenues. Speedway admissions
includes ticket sales for racing events held at the Company's speedways. Other
speedway revenues includes revenues from concessions sales, corporate
hospitality and sponsorship, broadcast revenues and billboard and program
advertising. Speedway admissions and other speedway revenues are generally
collected in advance and recorded as deferred revenues, net of deferred
expenses, until the completion of the related event. Merchandise, tires and
accessories revenues includes sales of motorsports related merchandise and
revenues from showcar appearance fees by MIC and sales of racing tires and
accessories by CTW and CTS. Revenues from sales of merchandise, tires and
accessories are 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 consists 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.
Revenues for the three months ended June 30, 1997 were $46.3 million, or 87.7%
higher than revenues of $24.7 million for the three months ended June 30, 1996.
The Company recorded net income of $10.9 million, or $.80 per share, for the
three months ended June 30, 1997, compared to net income of $6.7 million, or
$.52 per share, in 1996, an increase of 62.7%. The increase in revenues and
net income in 1997 is due primarily to increased speedway admissions and other
speedway revenues resulting from the race held in June at California Speedway.
Revenues also grew due to an increase in merchandise, tires and accessories
revenues of $3.7 million.
For the six month period ended June 30, 1997, revenues were $51.7 million, an
increase of 82% over revenues of $28.4 million for the six months ended June
30, 1996. Net income for the six months increased from $5.7 million, or $.51
per share, in 1996 to $9.4 million, or $.70
10
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Penske Motorsports, Inc. Form 10-Q (continued)
per share, in 1997, an increase of 64.4%. These increases are due primarily to
the opening of California Speedway in June.
In May, 1997, the Company exercised its option to purchase the shares of the
majority shareholder of NCMS in exchange for 906,542 shares of the Company's
common stock valued at $30 per share. The transaction, which increased the
Company's ownership of NCMS to 70%, resulted in the Company recording goodwill
of approximately $23.3 million.
On August 5, 1997, the Board of Directors of NCMS approved a merger and merger
agreement with the Company. The merger proposal, which offers NCMS
stockholders $19.61 per share or the equivalent amount of stock of the Company
valued at the market price per share of the Company's common stock determined
during a period prior to the effective date of the merger, will be submitted
to the NCMS shareholders at a meeting expected to be held in the third or
fourth quarter of 1997.
The Company announced in July 1997 that it acquired a 40% interest in
Homestead-Miami Speedway, LLC (Homestead), the operators of the 45,000 seat
Metro-Dade Homestead Motorsports Complex. This South Florida 1.5-mile oval
racing complex hosts three major racing weekends, including the opening event
of the CART PPG World Series, the Marlboro Grand Prix of Miami. The
transaction will be recorded as an equity investment in the financial
statements of the Company.
In August 1997, the Company acquired a 7% interest in Grand Prix Association of
Long Beach, Inc. (GPLB) for $3.9 million. GPLB owns and operates the Grand
Prix of Long Beach, California, Gateway International Raceway in Madison,
Illinois, and Memphis Motorsports Park in Millington, Tennessee.
RESULTS OF OPERATIONS
The percentage relationships between revenues and other elements of the
Company's Consolidated Statements of Income for the comparative reporting
periods were:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1997 1996 1997 1996
--------- --------- ------- ------
<S> <C> <C> <C> <C>
REVENUES:
Speedway admissions 42.6% 39.7% 38.1% 34.5%
Other speedway revenue 33.9 31.0 30.5 27.1
Merchandise, tires and accessories 23.5 29.3 31.4 38.4
-------- -------- ----- -----
TOTAL REVENUES 100.0 100.0 100.0 100.0
-------- -------- ----- -----
EXPENSES:
Operating 30.3 28.2 31.6 31.6
Cost of sales 13.4 17.9 18.2 23.0
Depreciation and amortization 3.3 3.3 4.5 5.2
Selling, general and administrative 14.2 10.7 16.0 11.0
-------- -------- ----- -----
TOTAL EXPENSES 61.2 60.1 70.3 70.8
-------- -------- ----- -----
OPERATING INCOME 38.8% 39.9% 29.7% 29.2%
======== ======== ===== =====
</TABLE>
11
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Penske Motorsports, Inc. Form 10-Q (continued)
SEASONALITY AND QUARTERLY RESULTS
Prior to 1997, the Company's weekend race events were held during the months
from April to August. As a result, the Company's business has historically been
highly seasonal. In 1997, in addition to the historical weekend events, the
Company will promote events at California Speedway in September and October,
North Carolina Motor Speedway in October, and Homestead in November. Due to
the seasonal nature of the Company's business, the results of operations for
the three months and six months ended June 30, 1997 and 1996 are not
indicative of the results to be expected for the year.
Set forth below is summary information with respect to the Company's
operations (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ----------------------------------- --------------------------------
FIRST SECOND FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
------- -------- ------- ------- ------- -------- ---------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES $5,375 $46,296 $3,642 $24,614 $23,962 $ 2,957 $2,862 $17,310 $19,197 $ 2,636
NET INCOME
(LOSS) (1,511) 10,929 (990) 6,717 6,499 (1,346) (1,157) 4,237 4,812 (1,118)
EVENT
WEEKENDS - 5 - 4 2 - - 3 2 -
</TABLE>
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996.
Revenues - Revenues for the three months ended June 30, 1997 were $46.3
million, an increase of $21.6 million, or 87.7% compared to the same period in
1996 due to increases in all categories of revenues. Speedway admissions
increased $9.9 million, from $9.8 million in 1996 to $19.7 million in 1997 due
to increased attendance from the addition of the 72,000-seat California
Speedway, which held its first event in June, and additional seats at
Michigan Speedway (8,500) and Nazareth Speedway (11,000). Other speedway
revenues increased $8.0 million, from $7.7 million in 1996 to $15.7
million in 1997, due primarily to the opening event at California Speedway.
Sales of merchandise, tires and accessories were $10.9 million for the quarter
ended June 30, 1997, compared to $7.2 million for the comparable period in
1996, an increase of 50.9%. This increase resulted from higher catalogue
sales, expanded product lines and strong demand for California Speedway
inaugural merchandise.
Operating Expenses - Operating expenses of $14.0 million for the three months
ended June 30, 1997 increased $7.1 million from the three months ended June 30,
1996 due primarily to the addition of operating expenses at California
Speedway.
Cost of Sales - Cost of sales for the three months ended June 30, 1997 was $6.2
million, or 57.1% of merchandise, tires and accessories revenues, compared to
$4.4 million, or 61.1% of those same revenues for the corresponding period of
1996. The decrease in cost of sales as a percentage of revenues reflects
growth in sales by MIC, especially in the higher margin trackside merchandise
at California Speedway. Sales of merchandise and collectibles are
generally at a higher margin than sales of tires and accessories.
12
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Penske Motorsports, Inc. Form 10-Q (continued)
Depreciation and Amortization - Depreciation and amortization expense of $1.5
million for the three months ended June 30, 1997 increased $.7 million compared
to the same period in 1996 due to the addition of depreciation on the
California Speedway facility, as well as additional depreciation at Michigan
and Nazareth Speedways, which each added new grandstands for the 1997 racing
season.
Selling, General and Administrative - Selling, general and administrative
expenses of $6.6 million for the three months ended June 30, 1997 increased
$3.9 million from the same period in 1996. This increase is due mainly to
promotional costs associated with the opening in June of California
Speedway.
Interest - The Company recorded net interest expense for the three months ended
June 30, 1997 of $48,000, compared to net interest income of $762,000 in 1996.
The interest income in 1996 resulted from temporarily investing the proceeds of
the Company's March 1996 initial public offering. The Company has utilized all
of the proceeds of the initial public offering and is now borrowing to finance
the final construction costs of the California Speedway.
Income Tax Expense - Income tax expense is reported during the interim
reporting periods on the basis of the Company's estimated annual effective tax
rate for the taxable jurisdictions in which the Company operates. The
effective tax rate for the three months ended June 30, 1997 is 39.0%, compared
to 36.6% in 1996, due primarily to the addition of revenues in California,
which has a higher state tax rate, and the treatment of CTW as a Subchapter S
Corporation in the first quarter of 1996.
Net Income - Net income for the three months ended June 30, 1997 was $10.9
million, an increase of $4.2 million, or 62.7%, over net income of $6.7 million
for the three months ended June 30, 1996. The increase in net income for 1997
is due primarily to increases in admissions revenues and other speedway
revenues from the opening of the California Speedway, which hosted its first
event in June, and additional seating at Michigan and Nazareth Speedways.
These increases are partially offset by increased expenses associated with the
California Speedway and reduced interest income.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996.
Revenues - Revenues for the six months ended June 30, 1997 were $51.7 million,
an increase of $23.3 million, or 82.1% compared to the same period in 1996. As
discussed above, the company experienced increases in all revenue categories
during the second quarter resulting from the opening of the California Speedway
and increased seating at Michigan Speedway and Nazareth Speedway and strong
sales of merchandise by MIC. In addition, revenues of CTS, which was acquired
late in March 1996, were included in the Company's operating results for the
entire six month period ended June 30, 1997.
Operating Expenses - Operating expenses increased from $9.0 million for the six
months ended June 30, 1996 to $16.3 million in 1997, an increase of $7.3
million, due primarily to operating costs at the California Speedway, which had
minimal expenses in 1996, and from the addition of CTS to the consolidated
financial statements for all of 1997.
13
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Penske Motorsports, Inc. Form 10-Q (continued)
Cost of Sales - Cost of sales for the six months ended June 30, 1997 was $9.4
million, or 57.9% of merchandise, tires and accessories revenues, compared to
$6.5 million, or 59.7% of those same revenues for the corresponding period of
1996. The decrease in cost of sales as a percentage of revenues reflects
growth in sales by MIC, which sells merchandise at a higher margin than the
tires and accessories business.
Depreciation and Amortization - Depreciation and amortization expense of $2.3
million for the six months ended June 30, 1997 increased $.8 million compared
to the same period in 1996 due to the addition of depreciation on the
California Speedway facility, as well as additional depreciation at Michigan
and Nazareth Speedways, each of which has depreciation expense on 1996
grandstand additions for a full six month period and has added new grandstands
for the 1997 racing season.
Selling, General and Administrative - Selling, general and administrative
expenses of $8.3 million for the six months ended June 30, 1997 increased $5.2
million from the same period in 1996. This increase is due mainly to
promotional costs associated with the opening in June of the California
Speedway.
Interest - Net interest income for the six months ended June 30, 1997 was
$77,000, a decrease of $679,000 from $756,000 in 1996. The Company invested
the proceeds of its March 1996 initial public offering temporarily while the
California Speedway was being constructed. As of June 30, 1997, these funds
had been utilized completely and the Company has borrowed on its revolving line
of credit to fund the remaining construction of California Speedway and
other capital expenditures at its other subsidiaries.
Income Tax Expense - Income tax expense is reported during the interim
reporting periods on the basis of the Company's estimated annual effective tax
rate for the taxable jurisdictions in which the Company operates. The
effective tax rate for the six months ended June 30, 1997 is 39.0%, compared to
36.8% in 1996, due primarily to the addition of revenues in California, which
has a higher state tax rate, and the treatment of CTW as a Subchapter S
Corporation in the first quarter of 1996.
Net Income - Net income for the six months ended June 30, 1997 was $9.4
million, an increase of $3.7 million, or 64.4%, over net income of $5.7 million
for the six months ended June 30, 1996. The increase in net income for 1997
reflects the opening of the California Speedway, as well as expansion and
improvements to the Company's other speedways, net of higher costs associated
with the California Speedway and lower interest income, as the Company's cash
reserves have been utilized to fund construction of the California Speedway.
14
<PAGE> 15
Penske Motorsports, Inc. Form 10-Q (continued)
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 has used all of the proceeds
of its March 1996 initial public offering to repay debt and to fund
construction of California Speedway.
During the second quarter of 1997, the Company increased its unsecured lines of
credit to $60 million. As of June 30, 1997, the Company had drawn $11.4
million on these lines of credit.
The Company believes it has sufficient resources from existing cash balances and
from operating activities and, if necessary, from borrowing under its lines of
credit to satisfy ongoing cash requirements for the next twelve months,
including final construction costs at California Speedway, investments in other
speedways and other capital requirements.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
Except for the historical information contained herein, certain matters
discussed in this Form 10-Q 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
and completion of the proposed merger between the Company and NCMS, 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.
15
<PAGE> 16
Penske Motorsports, Inc. Form 10-Q (continued)
PART II - OTHER INFORMATION
ITEM 2. LEGAL PROCEEDINGS
Reference is hereby made to "ITEM 2. LEGAL PROCEEDINGS" in the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997,
for a description of legal proceedings reported for the Company's quarter ended
March 31, 1997 (the "March 10-Q"). The companion lawsuits referenced in such
section of the March 10-Q do not state the amount of damages being sought by
the claimants.
On August 4, 1997, a purported class action was commenced against NCMS
only, in the U.S. District Court in Greensboro, North Carolina seeking treble
damages under the United States and North Carolina anti-trust laws. The suit
alleges, in substance, that NCMS conspired with various persons to fix the
prices of souvenirs sold at the track during the Winston Cup and Busch race
event weekends from 1988 until 1997. The plaintiff, a Tennessee resident,
claims that he purchased souvenirs at Winston Cup and Busch races at NCMS. The
suit names various persons as alleged co-conspirators, but does not name them
(or others) as defendants, at this time. The suit alleges that price sheets
were circulated by NCMS fixing the prices of souvenirs. The suit is
substantially identical to the purported national class actions pending in the
U.S. District Court in Atlanta filed against the Company and previously
reported in the March 10-Q. That suit alleges that similar wrongful conduct
occurred at NCMS during 1991 to the present time. NCMS is not a defendant in
the Atlanta case at this time. The Company and NCMS dispute the claims and
expect to vigorously defend themselves.
In August 1997, O. Bruton Smith sued the Company, NCMS and certain
directors of NCMS in an effort to enjoin the completion of the merger of PMI
and NCMS. The suit was filed in North Carolina Superior Court in Mecklenburg
County, North Carolina. While no monetary damages are sought, in the event that
the merger does not occur or is delayed resulting in the transaction not
constituting a tax-free reorganization, the Company would be obligated to
reimburse the former majority shareholder of NCMS with whom PMI exchanged
shares for the tax-effect of such exchange. Such payment could materially
increase the amount of the Company's investment in connection with its purchase
of the NCMS shares from the former majority shareholder. The Company disputes
Mr. Smith's basis for his claim for injunctive relief and will vigorously
defend itself.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
10.1 Purchase Agreement dated July 23, 1997, among Homestead-Miami Speedway,
LLC, International Speedway Corporation, Penske Motorsports, Inc.,
Homestead Motorsports Joint Venture, Miami Motorsports Joint Venture,
Rafael A. Sanchez and Wayne Huizenga.
10.2 Stock Purchase Agreement dated as of August 8, 1997 between Penske
Motorsports, Inc. and Grand Prix Association of Long Beach, Inc.
10.3 Registration Rights Agreement dated as of August 8, 1997 between Grand
Prix Association of Long Beach, Inc. and Penske Motorsports, Inc.
10.4 Right of First Refusal Agreement dated as of August 8, 1997, among
Midwest Facility Investments, Inc., Penske Motorsports, Inc. and each of
the individuals listed on Schedule 1 (collectively the Shareholders).
15.1 Letter RE: unaudited interim financial information.
27 Financial Data Schedules
</TABLE>
(b) Reports on Form 8-K
A report on Form 8-K was filed on May 27, 1997 reporting the acquisition of
1,461,178 common shares of North Carolina Motor Speedway, Inc. (NCMS) in
exchange for 906,542 shares of the Company's common stock. This acquisition
increased the Company's ownership of NCMS to approximately 70% and is accounted
for by the equity method.
16
<PAGE> 17
Penske Motorsports, Inc. Form 10-Q (continued)
SIGNATURES
Pursuant to the requirements 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.
PENSKE MOTORSPORTS, INC.
Date: August 14, 1997 By: /s/ James H. Harris
-----------------------------------
Its: Senior Vice President and Treasurer
(Principal Financial Officer)
17
<PAGE> 18
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.1 Purchase Agreement dated July 23, 1997, among Homestead-Miami Speedway,
LLC, International Speedway Corporation, Penske Motorsports, Inc.,
Homestead Motorsports Joint Venture, Miami Motorsports Joint Venture,
Rafael A. Sanchez and Wayne Huizenga.
10.2 Stock Purchase Agreement dated as of August 8, 1997 between Penske
Motorsports, Inc. and Grand Prix Association of Long Beach, Inc.
10.3 Registration Rights Agreement dated as of August 8, 1997 between Grand
Prix Association of Long Beach, Inc. and Penske Motorsports, Inc.
10.4 Right of First Refusal Agreement dated as of August 8, 1997, among
Midwest Facility Investments, Inc., Penske Motorsports, Inc. and each of
the individuals listed on Schedule 1 (collectively the Shareholders).
15.1 Letter Re: unaudited interim financial information.
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.1
PURCHASE AGREEMENT
THIS AGREEMENT made and entered into on this 23rd day of July, 1997 by and
among Homestead-Miami Speedway, LLC, a Delaware limited liability company (the
"Company"), International Speedway Corporation, a Florida corporation ("ISC"),
Penske Motorsports, Inc., a Delaware corporation ("PMI"), Homestead Motorsports
Joint Venture, a Florida general partnership ("HMJV"), Miami Motorsports Joint
Venture, a Florida general partnership ("MMJV"), Rafael A. Sanchez ("Sanchez")
and Wayne Huizenga ("Huizenga").
WITNESSETH
WHEREAS, HMJV and MMJV have formed the Company, and
WHEREAS, simultaneously with the execution hereof, HMJV and MMJV intend to
transfer to the Company certain assets related to the Homestead Motorsports
Complex subject to certain liabilities on the terms hereinafter set forth, and
WHEREAS, ISC and PMI directly or through affiliates intend to purchase
from HMJV and MMJV certain membership interests in the Company on the terms
hereinafter set forth, and
WHEREAS, the parties hereto desire to set forth certain agreements
regarding the formation of the Company and subsequent sale of membership
interests in the Company
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
<PAGE> 2
1. FORMATION OF THE COMPANY.
Prior to the date of this Agreement, HMJV and MMJV (sometimes hereinafter
referred to individually as a "Seller" and jointly as the "Sellers") have
caused the Company to be formed as a limited liability company under the
Delaware Limited Liability Company Act by filing a Certificate of Formation in
the form attached as Exhibit A hereto. Prior to the date of this Agreement,
the Sellers as the sole members of the limited liability company have adopted
the agreement (the "Operating Agreement") attached as Exhibit B hereto as the
Operating Agreement for the Company. Such Certificate of Formation and
Operating Agreement have not been amended prior to the date hereof.
2. TRANSFER OF ASSETS.
Simultaneously with the execution hereof, Sellers shall sell, convey,
assign, transfer and deliver to the Company solely in exchange for all the
membership interests in the Company, all of Sellers' right, title and interest
in then existing properties, assets and business as a going concern (except for
the assets described on Schedule 2.0 hereto (the "Excluded Assets")) of every
kind and nature, real, personal or mixed, tangible or intangible, wherever
located, and whether on or off the books of Seller relating to the business of
Sellers (collectively, the "Transferred Assets"), including, without
limitation, the following:
2.1 The business of staging and promoting motorsports events as well as
operating the motorsports complex known as the "Homestead Motorsports Complex"
(the "Complex") including without limitation, with respect to such business,
the following: (a) Sellers' rights as the licensee of the name of the Complex,
its trademark or marks and all goodwill associated with Sellers' business; (b)
all arrangements and relationships with motorsports sanctioning bodies,
sponsors, and others with respect to Sellers' business which are not included
in the Contracts specified below; and (c) all lists
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<PAGE> 3
of ticket purchasers, correspondence and records and all copies thereof,
advertising and promotional materials, forms and other property, tangible or
intangible, owned and/or used by Sellers in connection with the operation of
Sellers' business whether or not reflected on Sellers' books of account. All
trademarks, service marks, trade names and copyrights belonging to Sellers are
identified on Schedule 2.1 hereto and are being transferred to Purchaser
hereunder (the "Proprietary Rights");
2.2 All of Sellers' furniture, fixtures, equipment, improvements,
machinery, furnishings, motor vehicles, office equipment, art work, trophies,
promotional material, programs, videos, films, office memorabilia, trade
premiums, tools and other articles of personal property, whether on or off the
books of Seller, used or usable in connection with the business of Sellers (the
"Furniture, Fixtures and Equipment"), the material items of which are described
on Schedule 2.2 hereto;
2.3 All of Sellers' right, title and interest, as lessee(s), (including
without limitation, as lessee(s) under the Agreement executed September 18,
1995 among HMJV, Sanchez and the City of Homestead relating to the Complex (the
"Homestead Lease"), which leases are described and are identified on Schedule
2.3 hereto (the "Real Property Leases");
2.4 All of Sellers' right, title and interest, as lessee(s), in any
personal property used in connection with the business of Sellers, including,
without limitation, leases for grandstand bleachers, if any, which leases are
described and are identified on Schedule 2.4 hereto (the "Equipment Leases");
2.5 All product designs, licenses, franchises, memberships, permits, trade
secrets, common law rights, privileges and general intangibles owned or used by
Sellers in connection with their business (the "Intangible Rights");
2.6 All accounts and notes receivable, contract signing bonuses and
prepaid expenses (including, without limitation, prepaid insurance premiums,
deposits,
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<PAGE> 4
advertising materials, and brochures) arising out of or relating to
events, transactions, or services occurring or scheduled to occur at the
Complex (the "Accounts Receivable");
2.7 All supplies and sundry items (the "Supplies"), including, without
limitation, telephone numbers, key and lock combinations, computer software
programs and systems, customer records, and books and records of, or relating
to and material to the operation of, the business of Sellers, the Transferred
Assets and the obligations and liabilities of Sellers transferred to the
Company (including all customer files, supplier records and records relating to
accounts payable) but excluding (i) copies of tax returns and accounting
records for the Sellers, (ii) records relating solely to executory contracts
not transferred to the Company, and (iii) records related to the Excluded
Assets;
2.8 Copies of all personnel records and payroll records for the then
current and preceding calendar years since the date of formation of the Sellers
for all persons who have worked for the business of Sellers at any time during
such period (the "Personnel Records");
2.9 All right, title and interest of Sellers in any merchandising,
concession, sponsorship, sanction agreements or other agreements, contracts
and licenses to which either of the Sellers is a party (the "Contracts"), all
the Contracts involving aggregate amounts in excess of $5,000 or which cannot
be fully terminated by Sellers upon not more than 30 days notice being listed
on Schedule 2.9;
2.10 All cash and cash equivalents ("Cash") (including but not limited to
prepayments) of Sellers;
2.11 All rights of Sellers arising under barter transaction arrangements.
All barter transaction arrangements entered into by either of the Sellers
during the twelve month period prior to the Closing involving bartered goods or
services having a fair market value in excess of $5,000 are described on
Schedule 2.11;
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<PAGE> 5
2.12 Copies of all surveys, site inspections, plans and specifications and
"as built" drawings relating to the Complex in the possession or control of the
Sellers; and
2.13 All other assets of Sellers of whatever nature or description,
whether tangible or intangible, not otherwise detailed above, including,
without limitation, all claims and causes of action against third parties,
warranties, refunds and all licenses, franchises, permits, liquor licenses and
other governmental authorizations and permits affecting or relating to the
business of Sellers, so that the Company may carry on the business of Sellers
as presently conducted after the Closing Date ("Miscellaneous Assets").
3. ASSUMPTION OF LIABILITIES.
3.1 Assumption and Payment of Certain Liabilities and Obligations.
Simultaneously with the transfer to the Company of the Transferred Assets, the
Company shall assume those liabilities and obligations of Sellers listed on
Schedule 3.1 hereto (the "Assumed Liabilities") and shall assume and agree to
perform Sellers' unexecuted obligations and liabilities under the Contracts
listed on Schedule 2.9 hereto and the Contracts which are not required to be
listed on Schedule 2.9 hereto by the terms of paragraph 2.9, the Real Property
Leases listed on Schedule 2.3 hereto and the Equipment Leases listed on
Schedule 2.4 hereto, all relating to the business of Sellers from and after the
date of this Agreement.
3.2 Nonassumption of other Liabilities. Other than the Assumed
Liabilities, the Contracts specified in paragraph 3.1, the Real Property
Leases and the Equipment Leases, the Company does not assume and shall in no
event be liable for any liabilities, debts or obligations of Sellers, whether
accrued, absolute, matured, contingent or otherwise, including, without
limitation, taxes of any kind, any liabilities for fees or expenses incident to
the preparation of this Agreement or the consummation of the transactions
contemplated hereby, including, without limitation, counsel, accountant's
-5-
<PAGE> 6
or finder's fees of Sellers, liabilities under Employee Benefit Plans (as
defined in paragraph 7.16 below), other trade payables or expenses, debt,
contracts, agreements, leases or other obligations which are not specifically
assumed hereunder. Except as listed on Schedule 3.1 hereto, the Company shall
not assume or be obligated to pay any liability or obligations of Sellers to
any affiliates of the Sellers. Notwithstanding the foregoing terms of this
paragraph 3.2, Purchasers and Sellers shall remain responsible for their
respective obligations pursuant to paragraph 17 below.
4. NON-ASSIGNABLE PURCHASED ASSETS.
Notwithstanding the foregoing, Sellers shall hold in trust for the benefit
of and account of the Company, any non-assignable Transferred Assets and all
Transferred Assets with respect to which consents to assignments shall not have
been obtained prior to the date of this Agreement and, insofar as permissible,
assign to the Company, from time to time, all of such Transferred Assets, and
remit to the Company all amounts paid to Sellers with respect thereto after the
date of this Agreement promptly upon the receipt thereof less all charges
properly allocable thereto other than charges resulting from new agreements
entered into in connection with or in contemplation of the consummation of the
transactions contemplated hereby. Schedule 4 hereto lists all consents
required to transfer the Transferred Assets to the Company . Nothing contained
herein shall relieve Sellers of their joint and several obligation hereunder
either (i) to obtain at their expense all necessary consents not disclosed on
Schedule 4 to the assignment of the Transferred Assets or (ii) to indemnify the
Company for any loss, liability or damage suffered by the Company resulting
from any failure to obtain necessary consents not disclosed on Schedule 4 to
the assignment of any of the Transferred Assets. After the date of this
Agreement, Sellers shall use their commercially reasonable efforts to obtain
all necessary consents disclosed on Schedule 4 which were not obtained by the
date of this Agreement; provided however, that Sellers
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<PAGE> 7
are not obligated to make total expenditures with respect to efforts to obtain
such consents (other than expenditures to be reimbursed by the Company) in
excess of $50,000.
5. TRANSFER OF EMPLOYEES AND EMPLOYEE BENEFITS.
5.1 Workers' Compensation. Sellers shall be responsible for any workers
compensation claims based on injuries occurring prior to the date of this
Agreement regardless of the date on which the claim was filed, and Sellers
shall jointly and severally indemnify and hold the Company harmless against any
and all losses, damages, costs and expenses (including, without limitation,
reasonable attorney's fees and related expenses) arising out of or relating to
all such claims in accordance with paragraph 13.1 hereof. The Company shall be
responsible for all such claims of its employees based on injuries occurring on
and after the date of this Agreement and shall indemnify and hold Sellers
harmless against any and all losses, damages, costs and expenses (including,
without limitation, reasonable attorneys fees and related expenses) arising out
of or relating to all such claims in accordance with paragraph 13.2 hereof.
5.2 Transfer of Employees. The Company shall employ on the date of this
Agreement, all of the present employees of the business of Sellers but the
Company shall be under no obligation to continue to do so. Company shall not
be obligated to assume the current employment contracts between Sellers and
either Jorge L. Dominicis or Robert Wild. Except for the employment rights for
Sanchez arising under the employment contract specified in paragraph 6.5(m)
below, nothing in this Agreement shall create any employment rights for any
current employees of the Sellers.
5.3 Employee Benefit Plans. The Company shall not have any liability or
obligation to continue or to make any contribution or payment with respect to
any Employee Benefit Plan (as defined in paragraph 7.16) maintained by Sellers
for employees, whether salaried or hourly. If the Company is compelled to make
any
-7-
<PAGE> 8
contribution or payment or pay any claim by a competent authority in respect of
any Employee Benefit Plan, Sellers shall severally indemnify and hold the
Company harmless against any and all losses, damages, costs, contribution
obligations and expenses (including, without limitation, reasonable attorney's
fees and related expenses arising therefrom or relating thereto) as provided in
paragraph 13.1 hereof. To the extent that either Seller shall incur liability
for withdrawal under any multi-employer pension plan to which it may be a
party, or for any other unfunded benefit liabilities, Sellers shall bear all
such liability and shall jointly and severally indemnify and hold the Company
harmless against such liability.
6. PURCHASE OF MEMBERSHIP INTERESTS AND THE CLOSING.
6.1 Purchase Of Membership Interests. On the Closing Date (as hereinafter
defined), (a) the Sellers shall each (i) sell to ISC, or at the election of
ISC, to a subsidiary or other entity wholly owned by ISC (an "ISC Affiliate"),
a twenty percent (20%) limited liability company interest in the Company (such
two twenty percent (20%) interests are referred to in the aggregate as the
"ISC Interest") and (ii) sell to PMI, or at the election of PMI, to a
subsidiary or other entity wholly owned by PMI (a "PMI Affiliate"), a twenty
percent (20%) limited liability company interest in the Company (such two
twenty percent (20%) interests are referred to in the aggregate as the "PMI
Interest"), (b) ISC or an ISC Affiliate shall purchase the ISC Interest and (c)
PMI or a PMI Affiliate shall purchase the PMI Interest. The sale of the ISC
Interest and the PMI Interest shall be on the terms and subject to the
conditions hereinafter set forth. Upon the occurrence of such sale, ISC or an
ISC Affiliate and PMI or a PMI Affiliate shall each become a member of the
Company with a forty percent (40%) limited liability company interest in the
Company. The entities acquiring the ISC Interest and the PMI Interest are
sometimes hereinafter referred to as the "Purchasers", and the ISC Interest and
the PMI Interest are sometimes referred to as the "Membership Interests."
-8-
<PAGE> 9
6.2 Purchase Price. The total purchase price for the ISC Interest shall
be $11,800,000 (the "ISC Interest Purchase Price") to be paid by ISC as
specified in paragraph 6.3 below. The total purchase price for the PMI
Interest shall be $11,800,000 (the "PMI Interest Purchase Price") to be paid
by PMI as specified in paragraph 6.3 below.
6.3 Payment of Purchase Price. Ninety-three point six four four one
percent (93.6441%) of the ISC Interest Purchase Price and the PMI Interest
Purchase Price (collectively the "Purchase Price") to be made by Purchasers
pursuant to paragraph 6.2 hereof shall be made at the Closing (as hereinafter
defined) by wire transfer for the account of Sellers. At the Closing, six
point three five five nine percent (6.3559%) of the Purchase Price shall be
paid by Purchasers into an interest bearing escrow account to be maintained
with the law firm of Black, Crotty, Sims, Hubka, Burnett, Birch and Samuels,
L.L.P. to be held and distributed in accordance into the provisions of
paragraph 13.1 below.
6.4 The Closing. The "Closing" or "Closing Date" means the time at which
Sellers effect the transfer of the ISC Interest and the PMI Interest (jointly
the "Membership Interests") in exchange for the consideration to be delivered
by Purchaser pursuant to paragraph 6.2 hereof. The Closing shall take place at
the Complex at 10:00 a.m. local time not later than July 31, 1997, unless the
parties shall in writing agree to another time and/or date.
6.5 Certain Events at Closing. At the Closing, in addition to such other
actions as may be provided for herein, the following actions shall be taken:
(a) Sellers shall deliver to Purchasers duly executed and acknowledged
assignments of the Membership Interests, in a form and substance reasonably
satisfactory to counsel for Purchasers, as Purchasers shall reasonably request
to effectively vest in them all of the right, title and interest of Sellers in
the Membership
-9-
<PAGE> 10
Interests, free and clear of all mortgages, liens and encumbrances of any kind
whatsoever.
(b) The parties hereto shall cause the Company to execute such documents
as may be necessary to permit the Company to obtain a minimum $10,000,000
credit facility (the "Facility") either from a lender selected by ISC and PMI
or, at the option of ISC and PMI, directly from ISC and PMI (or their
affiliates) on terms approved by ISC and PMI. ISC and PMI agree to guaranty
the Facility if necessary in order to obtain the Facility.
(c) The City of Homestead shall have issued a letter substantially in the
form of the letter attached as Exhibit C hereto consenting to the assignment of
the Homestead Lease, as amended, to the Company or shall have otherwise
provided its consent to the assignment by execution of an assignment and
assumption agreement in a form reasonably satisfactory to the Purchasers.
(d) The Company shall assume, or if it cannot be assumed in a timely
manner, the Company shall refinance the principal balance (which will not
exceed $18,500,000) plus accrued interest from May 31, 1997 on the $18,500,000
loan from Chase Manhattan Bank to the Sellers identified on Schedule 3.1
hereto, and ISC and PMI will guaranty such loan or refinancing if necessary to
cause Sellers, Sanchez and Huizenga to be released from liability with respect
to the loan or refinancing. At the option of ISC and PMI, they may elect to
provide short term refinancing directly to the Company on commercially
reasonable terms.
(e) The parties shall take such action as shall be necessary to cause the
Company to make a draw against the Facility sufficient to pay The H Group, Inc.
the $2,846,068 balance due from HMJV to The H Group, Inc. pursuant to the
terms of the Restated Promissory Note dated December __, 1996 (the "H Group
Note").
(f) The Sellers shall pay $600,000 to the Company (reduced by the amount
of any unreimbursed capital contributions made to Sellers after close of
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<PAGE> 11
business on June 30, 1997 (the "Effective Time") and prior to the date of this
Agreement) as an additional capital contribution to be applied against
liabilities transferred to the Company in accordance with the terms of
paragraph 3.1 above.
(g) The parties hereto shall cause the Company to reimburse the Sellers
for documented expenditures made by Sellers through the Closing Date with
respect to the turn reconfiguration project at the Complex (the "Turn Project")
provided, however, that such reimbursement amount shall in no event exceed
$8,200,000, less the total expenditures (including payment of outstanding
invoices) necessary to complete the Turn Project.
(h) Purchasers shall deliver to Sellers and the Escrow Agent the cash
payment as provided in paragraph 6.3 hereof.
(i) Sellers shall deliver to Purchasers the opinion of counsel provided
for in paragraph 10.5 hereof.
(j) Purchasers shall deliver to Sellers the opinion of counsel provided
for in paragraph 11.4 hereof.
(k) Sellers shall deliver to Purchasers the certificate provided for in
paragraph 10.2 hereof.
(l) Purchasers shall deliver to Sellers the certificate provided for in
paragraph 11.2 hereof.
(m) The Company and Sanchez shall enter into an employment contract
substantially in the form to be negotiated by the Company and Sanchez prior to
the date of this Agreement.
(n) The Company shall have repaid the H Group Note in full.
(o) Sellers shall have delivered the original H Group Note to the Company
marked "paid and satisfied."
(p) Sellers will assign and transfer to Sanchez, or an entity wholly owned
by him, a ten percent (10%) limited liability company interest in the Company.
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<PAGE> 12
(q) Sellers will assign and transfer to Huizenga, or an entity wholly
owned by him, a ten percent (10%) limited liability company interest in the
Company.
(r) Purchasers shall have delivered to the City and Sun Trust Bank,
Miami, National Association ("Sun Trust") a pro forma balance sheet for the
Company reflecting the financial condition of the Company after the Closing.
7. REPRESENTATIONS OF SELLERS
The following representations and warranties are made, jointly and
severally, by Sellers to the Purchasers in order to induce them to purchase the
Membership Interests:
7.1 Organization and Qualification. Each of the Sellers is a general
partnership duly formed and validly existing under the laws of the State of
Florida; has all requisite power and authority to own its property and to carry
on its business as now being conducted; and is duly qualified to do business in
each jurisdiction in which the character of its properties and assets owned or
leased or the nature of its business transacted, makes such qualification
necessary. Copies of the Joint Venture Agreements for each of the Sellers, as
amended to date, (the "Joint Venture Agreements") which have been delivered to
Purchasers are complete and correct, and no amendments have been made thereto
since the date hereof.
7.2 Subsidiaries and other Equity Investments. Neither Seller owns,
directly or indirectly, any shares of capital stock of any corporation or any
equity investment in any partnership, association or other business
organization.
7.3 Partnership Authority. Each Seller has the full power and authority
to enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement by each Seller and the performance by
it of all obligations contemplated hereby have been duly authorized by all
requisite partnership actions including the approval of all the partners of
each Seller. This Agreement and all other agreements entered into in
connection with the transactions contemplated hereby to
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<PAGE> 13
which a Seller is a party constitute, or will constitute upon execution and
delivery, the valid and legally binding obligations of Sellers enforceable
against each Seller in accordance with their respective terms.
7.4 No Violations. Neither the execution nor delivery of this Agreement,
the consummation of any of the transactions contemplated hereby, nor the
fulfillment of any of the terms hereof except to the extent disclosed herein or
in any Schedule hereto (i) will violate or conflict with the Joint Venture
Agreements, (ii) will result in any breach of or default under any provision of
any contract or agreement of any kind to which either Seller is a party or by
which either Seller is bound or to which any property or asset of either
Seller is subject, which would have a material adverse effect on the
Transferred Assets, or (iii) will result in a violation of any statutes, laws,
ordinances, rules, regulations or requirements of governmental authorities
having jurisdiction over Sellers or the business of Sellers.
7.5 Financial Statements. Sellers have delivered to Purchasers the
combined balance sheets at December 31, 1995 and 1996 and the related combined
statements of income, partners' equity and cash flow for each of the two years
in the period ended December 31, 1996 (collectively, the "Year-End Financial
Statements"). The Year-End Financial Statements have been audited by Deloitte
& Touche LLP. The Year-End Financial Statements are correct and complete and
present fairly the financial position of Sellers at December 31, 1996 and 1995,
and the results of their operations and changes in their financial positions
for the fiscal years 1996 and 1995, in conformity with generally accepted
accounting principles applied on a basis consistent with that of the preceding
years. Sellers have also delivered to Purchasers the unaudited balance sheet
and the statement of income of Seller for the six month period ended June 30,
1997, prepared internally in accordance with generally accepted accounting
principles applied on a basis consistent with the prior periods (the "Interim
Financial Statements"). The Interim Financial Statements are correct and
complete and present
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<PAGE> 14
fairly the financial position of Sellers at June 30, 1997, and the results of
its operations and changes in the financial position for the period ended June
30, 1997 in conformity with generally accepted accounting principles applied on
a basis consistent with that of preceding periods except for normal year end
adjustments. The Year-End Financial Statements and the Interim Financial
Statements are sometimes collectively referred to herein as the "Financial
Statements". The Financial Statements are collectively attached as Exhibit D
hereto.
7.6 No Undisclosed Liabilities, Etc. Except as disclosed in the Financial
Statements or any Schedule delivered pursuant hereto, since December 31, 1996
(except (i) for the transactions contemplated by this Agreement, and (ii) as
set forth in Schedule 3.1 or elsewhere in this Agreement):
(a) Sellers have not incurred any liability or obligation (absolute,
accrued, contingent or otherwise) of any nature, other than liabilities and
obligations incurred in the ordinary course of business; and
(b) All inventories acquired by Sellers, whether reflected in the
Financial Statements or otherwise have been acquired in the ordinary course of
their business in quantities that are not materially greater or less than those
required for the current or anticipated operation of its business and except
for a reasonable allowance for defective materials and deterioration, consist
of good and serviceable items usable or salable in the ordinary course of
business.
7.7 Absence of Certain Changes. Except as disclosed in the Financial
Statements or in any Schedule delivered pursuant hereto, since December 31,
1996 (except for (i) the formation and capitalization of the Company, (ii) the
execution and delivery of this Agreement and (iii) as set forth in Schedule
7.7), neither Seller has:
(a) had any change in its condition (financial or otherwise), present
operations, business, properties, assets, or liabilities, other than changes in
the ordinary course of business, none of which has been materially adverse;
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<PAGE> 15
(b) suffered any damage, destruction or loss of physical property (whether
or not covered by insurance) materially and adversely affecting its condition
or operations;
(c) incurred or agreed to incur any indebtedness for borrowed money;
(d) paid or obligated itself to pay in excess of $25,000 in the aggregate
for fixed assets;
(e) suffered any substantial losses or waived any substantial rights of
any value in excess of $25,000;
(f) sold, transferred or otherwise disposed of, or agreed to sell,
transfer or otherwise dispose of, any assets having a fair market value at the
time of sale, transfer or disposition of $25,000 or more in the aggregate, or
cancelled, or agreed to cancel, any debts or claims in the amount of $10,000 or
more in the aggregate, other than in the ordinary course of business and
consistent with past practice;
(g) mortgaged, pledged or subjected to any charges, liens, claims or
encumbrances, or agreed to mortgage, pledge or subject to any charges, liens,
claims or encumbrances, any of its properties or assets other than construction
related liens arising in the ordinary course of business;
(h) made any distribution to its partners;
(i) increased, or agreed to increase, the compensation or bonuses or
special compensation of any kind of any of its officers, employees or agents
over the rate being paid to them on December 31, 1996, other than merit,
incentive, and/or cost-of-living increases made in the ordinary course of
business following past practice or increases in accordance with the terms of
contracts disclosed on Schedule 2.9, and no such increases are required by
written agreement, or adopted or increased any benefit under any insurance,
pension or other employee benefit plan, program or arrangement made to, for or
with any such officer, employee or agent;
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<PAGE> 16
(j) incurred any material obligation or liability (absolute or
contingent) for borrowed money, except current liabilities incurred and
obligations under contracts entered into in the ordinary course of business;
(k) discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent) other than current liabilities
reflected in the Year-End Financial Statements or incurred since December 31,
1996 in the ordinary course of business;
(l) entered into any lease of real or personal property which
provides for an annual rental in excess of $25,000 and which is of a duration
of more than one year;
(m) except for the amendment to the Homested Lease reflected on
Exhibit E hereto, made or permitted any material amendment or termination of
any material contract, agreement or license to which such Seller is a party
other than in the ordinary course of business;
(n) had any resignation or termination of employment of any of its key
officers or key employees or received written notification of any impending or
threatened resignation or resignations or termination or terminations of
employment that would have a material adverse effect on its operations or
business;
(o) had any strike, work stoppage or any other labor dispute;
(p) made any change in its accounting methods or practices with
respect to its condition, operations, business, properties, assets or
liabilities; or
(q) entered into any transaction not in the ordinary course of its
business.
7.8 Title to and Condition of Properties and Assets. Immediately prior to
the time of transfer of the Transferred Assets to the Company as contemplated
in paragraph 2 above (the "Transfer Time"), Sellers had good title to all of
their tangible personal properties including, without limitation, (i) all those
used in the business of
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<PAGE> 17
Sellers and (ii) those reflected in the Financial Statements (except as sold or
otherwise disposed of in the ordinary course of business). All tangible
personal properties are subject to no mortgage, pledge, conditional sales
contract, lien, security interest, right of possession in favor of any third
party, claim or other encumbrance, except (i) the lien of current real estate
taxes not yet due and payable, (ii) as set forth in Schedule 7.8, (iii) as
reflected in the Financial Statements, (iv) for such minor imperfections of
title, if any, as do not interfere with the present use of the property or
properties subject thereto or affected thereby in a manner materially adverse
to the business of Sellers, and (v) for liens not material in amount and
arising from the ordinary course of conduct of the business of Sellers.
Immediately prior to the Transfer Time, all such properties and assets
reflected in the Financial Statements had a fair market or realizable value
determined on a going business basis at least equal to the value thereof as
reflected herein. Subsequent to December 31, 1996, except as contemplated by
this Agreement, Sellers have not sold or disposed of any of their tangible
personal properties or assets or obligated themselves to do so except in the
ordinary course of business. Except as disclosed on Schedule 2.2, the
facilities, machinery, furniture, office and other equipment (including
computer software) of Sellers that were transferred to the Company as
contemplated in paragraph 2 above, are in good operating condition and repair,
subject only to ordinary wear and tear. Sellers have not received any written
notice from any governmental agency, board, bureau, body, department or
authority of any federal, state, municipal or foreign jurisdiction, to the
effect that Sellers or any tangible personal property or asset owned or leased
by Sellers, which was transferred to the Company as contemplated in paragraph 2
above, is in violation of any applicable ordinance, regulation or building,
zoning, environmental or other law in respect thereof, the violation of which
will have a material adverse effect on the conduct of the business or the
ownership or use of any of such properties or assets. Since December 31, 1996,
except as disclosed on Schedule 7.8, there has not been any significant
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<PAGE> 18
interruption of the operations of Sellers due to inadequate maintenance of
structures, machinery or equipment or because of computer software or data
processing failures.
7.9. Real Estate Leases.
(a) Schedule 2.3, sets forth a list of the Real Property Leases.
Sellers have furnished Purchasers with a copy of the Real Property Leases.
Each Real Property Lease is in full force and effect against the Company and is
valid and enforceable by the Company, in accordance with its terms, assuming
the due authorization, execution and delivery thereof by each of the other
parties thereto. There is not under any Real Property Lease any material
default of Sellers or the Company, or any event that with notice or lapse of
time or both would constitute such a material default with respect to which
Sellers have not taken adequate steps to prevent such default from occurring;
all of such events, if any, and the aforesaid steps taken by Sellers are set
forth in Schedule 7.9. To the knowledge of Sellers, there is not under any
Real Property Lease any default by any other party thereto or any event that
with notice or lapse of time or both would constitute such a default thereunder
by such party.
(b) Sellers have not received any written notice that the use of any
improvements to the property subject to the Real Property Leases and the
conduct of Sellers' business thereon prior to the Closing was in violation of
any law, statute, ordinance, rule or regulation of any government, governmental
body, agency or authority (federal, state, municipal, foreign or local) in any
material respect.
(c) Except as disclosed on Schedule 7.9 hereto, to the knowledge of
Sellers there are no material defects or deficiencies with respect to the
design or construction of the Complex.
7.10 Contracts. Except as set forth on Schedule 2.9 or as otherwise
disclosed in or pursuant to this Agreement, including any Schedule or
attachment hereto, immediately prior to the Transfer Time, Sellers were not a
party to any written or oral:
(i) contract with any labor union;
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<PAGE> 19
(ii) any employment contract or any consulting or other
contract not terminable on thirty days advance notice for services
involving a payment of more than $25,000 annually;
(iii) lease whether as lessor or lessee with respect to any
property, real or personal involving a payment of more than
$25,000 annually;
(iv) license agreement whether as licenser or licensee
relating to the business or any of the properties or assets of
Seller involving the payment of more than $25,000 annually;
(v) loan agreement or instrument relating to any debt
involving the payment of more than $25,000 annually;
(vi) contract of purchase or sale involving the payment of
more than $25,000 annually;
(vii) contract with any agent involving the payment of more
than $25,000 annually;
(viii) stand-by letter of credit, guarantee or performance
bond involving more than $25,000;
(ix) contract or agreement restricting the ability of the
Sellers from freely engaging in any business or competing anywhere
in the world;
(x) contract not made in the ordinary course of business
involving the payment of more than $25,000 annually;
(xi) contract with any party that to the knowledge of Sellers
is expected to result in a material loss; or
(xii) other contract or agreement, except insubstantial
contracts for supplies or services or not involving the payment of
more than $25,000 annually.
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<PAGE> 20
Except as set forth on Schedule 2.9 or otherwise herein, immediately prior
to the Transfer Time, neither Seller was a party to any material contract with
any governmental authority. Each Contract listed in Schedule 2.9 was in full
force and effect against Sellers and is valid and enforceable by Sellers, in
accordance with its terms, assuming the due authorization, execution and
delivery thereof by each of the other parties thereto. Neither of the Sellers
nor, to the knowledge of Sellers, any other party is in default in the
observance or the performance of any material term or obligation to be
performed by it under any Contract listed in said Schedule 2.9. To the
knowledge of Sellers, no other person is in default in the observance or the
performance of any material term or obligation to be performed by it under any
Contract listed in said Schedule 2.9. Sellers will provide to Purchasers prior
to the Closing Date true and complete copies of all Contracts listed in
Schedule 2.9 as in effect on the date hereof.
7.11 Certain Indebtedness. Schedule 7.11 is a correct and complete list
of all instruments, agreements and arrangements pursuant to which either Seller
has borrowed money, incurred any indebtedness or established any line of credit
which represents a liability of such Seller immediately prior to Transfer Time.
True and complete copies of all such instruments, agreements and arrangements
that are in writing and summaries of all others thereof have heretofore been
delivered to Purchasers. All of such indebtedness has been incurred for valid
business purposes of Sellers. Sellers were not in material default under any
indenture, loan agreement or any other agreement relating to borrowed money to
which either of the Sellers is a party or by which either of the Sellers or
their assets or properties are bound nor did any condition exist which, with
notice or lapse of time or both, would constitute such a default, and each such
indenture, loan agreement or other agreement was in full force and effect
against Sellers.
7.12 Litigation. Except as set forth on Schedule 7.12, immediately prior
to the Transfer Time, there were no actions, suits, proceedings or
investigations, either at law
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or in equity, or before any commission or other administrative authority in any
federal, state, municipal or foreign jurisdiction, of any kind now pending or,
to the best of knowledge of Sellers, threatened or proposed in any manner, or,
to the knowledge of Sellers, any circumstances which reasonably form the basis
of any such action, suit, proceeding or investigation, involving Sellers or any
of their properties or assets that (i) if asserted and decided adversely to
Sellers, would materially and adversely affect the operations or the business
of Sellers, or of the Company or its successors or assigns with respect to the
Transferred Assets, or (ii) questions the validity of this Agreement, or (iii)
seeks to delay, prohibit or restrict in any manner any action taken or
contemplated to be taken by Sellers under this Agreement. Except as set forth
in Schedule 7.12, there is no arbitration proceeding pending or, to the
knowledge of Sellers, threatened with respect to individual claims under any
collective bargaining agreement or other agreement which claims, individually
or in the aggregate, if adversely decided could have a material adverse effect
on the business or operations of the Company. Neither the Company nor any of
its properties or assets is subject to any judicial or administrative judgment,
order, decree or restraint. Except as set forth on Schedule 7.12, there have
been no actions, suits, proceedings or investigations, either at law or in
equity, or before any commission or other administrative authority in any
federal, state, municipal or foreign jurisdiction of any kind which were
material and were initiated against either of the Sellers and settled or
otherwise resolved prior to the date hereof.
7.13 Proprietary Rights. Except as set forth on Schedule 7.13, there are
no claims, demands or proceedings pending or, to the actual knowledge of
Sellers, threatened that pertain to or challenge the right of Sellers or the
Company to use the Proprietary Rights identified in Schedule 2.1 and no valid
basis exists for any such claim. Neither of the Sellers knows of any third
party that has infringed on any of Sellers' Proprietary Rights. Except for the
transfer to the Company contemplated by this Agreement, Sellers have not
granted any licenses or other rights with respect to the
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<PAGE> 22
Proprietary Rights and has no legally binding obligation to grant licenses or
other rights. The Proprietary Rights identified in Schedule 2.1 constitute all
trademarks, service marks, trade names and copyrights which were owned by
Sellers and which are used or are required in connection with the operation of
Sellers' business including the operation of the Complex immediately prior to
the Transfer Time. Except for the rights of the City of Homestead and Dade
County specified in the Homestead Lease, and subject to the rights granted in
the Contracts disclosed on Schedule 2.9, Sellers are the sole and exclusive
owner of, and have the sole and exclusive right to use, the Proprietary Rights
all of which were assigned to the Company free and clear of all claims, liens,
charges or any encumbrances whatsoever. Except as disclosed in Schedule 2.1,
Sellers have not allowed any material Proprietary Rights to lapse.
7.14 Compliance with Laws. Sellers and the Company have complied with
and are in compliance with all material federal, state, local and foreign
statutes, laws, ordinances, regulations, rules, permits, judgments, orders or
decrees applicable to Sellers and the Company and their properties and assets,
operations and business, and there does not exist, to the best of Sellers'
knowledge, any basis for any claim of default under or violation of any such
statute, law, ordinance, regulation, rule, judgment, order or decree. In all
material respects immediately prior to the Transfer Time, Sellers were in
compliance with (i) all applicable requirements of all United States and
foreign governmental authorities with respect to environmental protection,
including, without limitation, regulations establishing quality criteria and
standards for air, water, land and hazardous materials, and (ii) all applicable
laws and related rules and regulations of all federal, state, municipal and
foreign jurisdictions affecting sale of alcoholic beverages, public health and
safety standards, labor union activities, handicapped access for facilities,
civil rights or employment, including without limitation, the Civil Rights Act
of 1964, the Age Discrimination in Employment Act of 1967, the Equal Employment
Opportunity Act of 1972, the Employee Retirement Income Security Act of
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1974, as amended ("ERISA"), the Equal Pay Act, as amended, and the National
Labor Relations Act, as amended and to the knowledge of Sellers in all material
respects with the Americans With Disabilities Act, as amended.
7.15 Governmental Authorizations and Regulations. Schedule 7.15 lists all
licenses, franchises, permits and other governmental authorizations held by
Sellers immediately prior to the Transfer Time material to the conduct of their
business. Such licenses, franchises, permits and other governmental
authorizations were valid, and Sellers had not received any written notice that
any governmental authority intends to cancel, terminate or not renew any such
license, franchise, permit or other governmental authorization. The Company
holds all licenses, franchises, permits and other governmental authorizations
the absence of any of which would have a material adverse effect on its
business.
7.16 Employee Benefit Plans.
(a) Schedule 7.16 contains a true and complete list of all pension,
profit sharing, retirement, deferred compensation, stock purchase, stock
option, incentive, bonus, vacation, severance, disability, hospitalization,
medical insurance, life insurance and other employee benefit plans, programs or
arrangements, maintained by either Seller immediately prior to the Transfer
Time, or under which either Seller had any obligations (other than obligations
to make current wage or salary payments or sales commissions terminable on
notice of 30 days or less) in respect of, or which otherwise cover, any of the
officers or employees of either Seller, immediately prior to the Transfer Time,
or their beneficiaries (hereinafter individually referred to as a "Employee
Benefit Plan" and collectively referred to as the "Employee Benefit Plans").
Sellers have delivered or made available to Purchaser true and complete copies
of all documents, as they may have been amended to the date hereof, embodying
or relating to the Employee Benefit Plans. Except as provided therein, no
Employee Benefit Plan listed in Schedule 7.16 is funded through a trust that is
intended to be exempt from taxation
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<PAGE> 24
under Section 501(c) of the Internal Revenue Code of 1986, as amended, and any
successor thereto (the "Code").
(b) Except as set forth in Schedule 7.16, (i) Sellers have made all
payments due from it to date under or with respect to each Employee Benefit
Plan, and all amounts properly accrued to date as liabilities of Sellers under
or with respect to each Plan for the current plan years have been properly
recorded on the books of Sellers; (ii) Sellers have performed all material
obligations required to be performed by it under any Employee Benefit Plan,
and, to the knowledge of Sellers, no other party is in default thereunder or in
violation thereof; (iii) Sellers are in compliance in all material respects
with the requirements prescribed by all statutes, orders or governmental rules
or regulations applicable to the Employee Benefit Plans, including, without
limitation, ERISA and the Code; and (iv) neither of the Sellers nor, to the
knowledge of Sellers, any other "disqualified person" or "party in interest"
(as defined in Section 4975 of the Code and Section 3 of ERISA, respectively)
has engaged in any "prohibited transaction," as such term is defined in Section
4975 of the Code or Section 406 of ERISA, which would subject any Employee
Benefit Plan or its related trust, Sellers, the Company or any officer,
partner, director, member or employee of Sellers, the Company, or any trustee,
administrator or other fiduciary of any Employee Benefit Plan to any material
liability under Section 4975 of the Code or Section 502(i) of ERISA or any
material liability under Part 4 of Title I of ERISA; (v) there are no actions,
suits or claims pending (other than routine claims for benefits) or, to the
knowledge of Sellers, threatened, against any Employee Benefit Plan or against
the assets of any Plan; (vi) no Employee Benefit Plan, other than any Employee
Benefit Plan that is a multi-employer plan within the meaning of Section 3(37)
of ERISA, is subject to Part III of Subtitle B of Title I of ERISA or Section
412 of the Code; (vii) no Employee Benefit Plan, other than any Employee
Benefit Plan that is a multi-employer plan, as defined in paragraph (vi) above
is or was subject to
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Title IV of ERISA and Sellers have not incurred any liability to the Pension
Benefit Guaranty Corporation ("PBGC").
(c) Except as set forth in Schedule 7.16, there are no multi-employer
plans, within the meaning of Section 3(37) of ERISA, to which Sellers are or,
at any time since their formation, have been required to make any contributions
to under which either Seller is subject to any material liability, actual or
contingent. With respect to each multi-employer plan listed in Schedule 7.16
that is or was subject to Title IV of ERISA (i) there has been no complete
withdrawal or partial withdrawal of either Seller, as defined in Section 4201,
4203 and 4205 of ERISA and neither Seller has received any notice of withdrawal
liability pursuant to Sections 4202 or 4219 of ERISA, (ii) neither Seller has
received, nor, to the knowledge of the Sellers, has any other employer
received, any notice pursuant to Section 4242 of ERISA that the plan is in
reorganization, and (iii) there is no other material fact known to Sellers or
the Owners relating to the withdrawal liability of Sellers which has not been
disclosed on Schedule 7.16, including any material fact relating to the
existence of an accumulated funding deficiency, as defined in Section 412 of
the Code or a determination that the plan is insolvent, in reorganization or
the subject of termination proceedings. The aggregate contingent withdrawal
liability of Sellers with respect to the multi-employer plans listed in
Schedule 7.16 does not exceed, as of the date hereof, $25,000.
(d) The current value of all vested Accrued Benefits under all Employee
Benefit Plans, other than multi-employer plans, as of the date of this
Agreement, did not exceed the then Current Value of the assets of such Plans
allocable to such vested Accrued Benefits by more than $25,000. For purposes
of the representation in the preceding sentence, (i) the term "Current Value"
has the same meaning as in section 4062(b)(1) of ERISA and the term "Accrued
Benefit" has the meaning specified in Section 3 of ERISA.
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(e) Each "group health plan" (within the meaning of
Section 162(i)(3) of the Code) maintained by each of the Sellers has been
administered in compliance with the continuation coverage requirements
contained in the Consolidated omnibus Budget Reconciliation Act of 1985 and as
provided under Section 162(k) of the Code and all regulations promulgated or
proposed thereunder.
7.17 Accounts Receivable. All Accounts Receivable are listed on Schedule
7.17. The Accounts Receivable represent transactions actually made in the
ordinary course of business and relate to events, transactions or services
occurring or scheduled to occur at the Complex, and are current and collectible
without discount. Each of the Accounts Receivable listed on Schedule 7.17 will
be collected in full, without any set-off or counter claim, within 90 days
after the Closing Date (provided that the Company complies with its collection
efforts obligations under paragraph 9.2 below) except as noted on Schedule
7.17. With respect to the Accounts Receivable listed on Schedule 7.17 as
"collection doubtful within 90 days" (the "Slow Accounts"), such Slow Accounts
will be collected in full, without any set off or counterclaims, within 120
days after the Closing Date provided that the Company complies with its
collection efforts obligations under paragraph 9.2 below and subject to an
allowance of $25,000 for uncollectible Slow Accounts. Except as disclosed on
Schedule 7.17, since December 31, 1996 no Accounts Receivable of Sellers have
been written off as uncollectible.
7.18 Inventory. All inventories of Sellers reflected in the balance sheet
included with the Financial Statements consist of a quality and quantity usable
and salable in the ordinary course of business without material discount or
reduction, except for items of obsolete materials and materials of
below-standard quality, all of which have been written down on Sellers' June
30, 1997 balance sheet to realizable market value or for which adequate
reserves have been provided therein.
7.19 Taxes. Each of the Sellers has duly and timely filed, within
applicable extension periods, all tax reports and returns required to be filed
by it and Sellers have
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duly and timely paid all taxes with respect to the business of the Sellers by
federal, state, local or foreign taxing authorities (including, without
limitation, those due in respect of the tangible and intangible properties,
leasehold interests, income, franchises, licenses, sales or payrolls of
Sellers); and there are no tax liens or encumbrances upon any property or
assets of Sellers except liens for current taxes not yet due. The federal
partnership tax returns of Sellers have never been audited by the Internal
Revenue Service. Except to the extent set forth in Schedule 7.19, there are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any federal partnership tax return for any period. Copies of all
partnership tax returns for Sellers in respect of all years not barred by the
statute of limitations have heretofore been delivered by Sellers to Purchaser
and all such returns are listed in Schedule 7.19.
7.20 Insurance. Schedule 7.20 contains an accurate and complete
description of all material policies of fire, liability, workmen's
compensation, errors and omissions and other forms of insurance owned or held
by Sellers immediately prior to the Transfer Time. Immediately prior to the
Transfer Time, all such policies were in full force and effect, all premiums
due and payable with respect thereto covering all periods up to and including
the date of the Closing had been paid, and no written notice of cancellation or
termination had been received with respect to any such policy. Immediately
prior to the Transfer Time, such policies were sufficient for compliance with
all requirements of law and of all agreements to which either Seller was a
party; were valid, outstanding and enforceable policies; provide insurance
coverage customary in Sellers' industry for the assets and operations of
Sellers; will remain in full force and effect through the respective dates set
forth in Schedule 7.20 without the payment of additional premiums. Schedule
7.20 identifies all risks which Sellers designated as being self-insured.
Neither Seller has been refused any insurance with respect to its assets or
operations, nor has its coverage been limited, by any insurance
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carrier to which it has applied for any such insurance or with which it has
carried insurance during the last three years.
7.21 Certain Transactions. Except as set forth in Schedule 7.21, or
elsewhere set forth herein, there was no transaction or contractual
relationship relating to the Transferred Assets and existing immediately prior
to the Transfer Time, to which either Seller was a party and in which any
partner or officer of Sellers or any affiliate of Sellers had a direct or
indirect material interest.
7.22 Accounting Practices. Each Seller makes and keeps accurate books and
records reflecting its assets and operations in accordance with generally
accepted accounting principals consistently applied ("GAAP") and maintains
internal accounting controls that provide reasonable assurance that (i)
transactions are executed in accordance with proscribed policies and with
management's authorization, (ii) all valid transactions are properly valued and
timely and accurately recorded so as to permit timely preparation of financial
statements in accordance with GAAP, (iii) access to the assets of such Seller
is permitted only in accordance with proscribed policies and management's
authorization and (iv) the reported accountability of the assets of such Seller
is compared with existing assets at reasonable intervals.
7.23 Certain Disclosures. Schedule 7.23 sets forth the following
information with respect to the period immediately prior to the Transfer Time:
(i) a list of all officers and other employees and consultants
of each Seller whose current annual salary or rate of compensation
(including committed or anticipated bonus and incentive
compensation) was more than $50,000 or to whom either Seller had
loaned more than $25,000 reflecting on such list the amount and
nature of all cash and non-cash compensation;
(ii) a list of all officers and other employees and
consultants of either Seller who were receiving or are entitled to
receive any payment
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(other than salaries, expense reimbursements, bonuses, merit and
incentives compensation) indicating on such list the amount and
nature of each payment; and
(iii) a list of all vehicles owned or leased by either Seller
or which was otherwise used in connection with the operation of the
business of either Seller.
7.24 Labor Agreements and Policies. Immediately prior to the Transfer
Time, neither Seller was a party to or bound by any collective bargaining
agreement. Each Seller had complied with all applicable federal and state laws
with respect to hours worked by, working conditions and any payments made to
its employees and the classification of individuals performing services for
each Seller as an employee or independent contractor.
7.25 Schedules. All lists or other statements, information or documents
set forth in or attached to any Schedule delivered or to be delivered pursuant
to this Agreement shall be deemed to be representations and warranties of the
parties making them with the same force and effect as if such lists,
statements, information and documents were set forth herein. Any list,
statement, document or any information set forth in or attached to any Schedule
delivered or required to be delivered pursuant to this Agreement shall be
deemed to constitute disclosure for any other Schedule delivered or to be
delivered pursuant to this Agreement.
7.26 No Untrue Statements. No statement by either Seller contained in
this Agreement contains any untrue statement of a material fact, or omits to
state a material fact necessary in order to make the statements therein
contained not misleading.
7.27 Adequacy of the Transferred Assets. The Transferred Assets are all
of the property, real and personal, tangible and intangible, used by Sellers in
connection with the ownership and operation of the Complex, and are sufficient
in all material respects to operate and maintain such business in the manner it
was conducted by Sellers prior
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to the Transfer Time. Nothing contained herein shall limit Sellers' rights
with respect to the Excluded Assets.
7.28 Tickets. Included as part of the Transferred Assets are all of
Sellers' ticket inventory and ticket stock. Except as contemplated by this
Agreement or reflected on Schedule 7.28 or any other Schedule hereto, Sellers
have not issued any free tickets with respect to any motorsports or other
events scheduled to occur on or after the Closing Date. Sellers have
maintained accurate and complete records of all tickets sold prior to the
Closing Date for motorsports and other events scheduled to occur after the
Closing Date.
7.29 Grandstand Bleachers. There are currently located at the Complex
permanent grandstand bleachers which can provide seating for approximately
35,924 patrons and temporary grandstand bleachers which can provide seating for
approximately 25,000 patrons. In addition, there are grandstand bleachers
stored outside the Complex which can provide seating for 25,000 patrons and
which are available for the exclusive use of the Sellers with respect to events
to be held at the Complex. All the grandstand bleachers identified above (the
"Bleachers") are in a good state of maintenance and repair. All the Bleachers
are owned by the City of Homestead. After the Closing so long as the Company is
the lessee under the Homestead Lease, except as otherwise specified in the City
of Homestead Lease, the Company shall have the exclusive use of the Bleachers
with respect to events held at the Complex without any charge for such use.
7.30 List of Customers. Except for the transaction contemplated by this
Agreement, Sellers have not sold, rented or exchanged all or any portion of
their list of purchasers of tickets for motorsports events held or to be held
at the Complex.
7.31 Company Membership. Immediately prior to the Closing, the Sellers
shall be the sole members of the Company and, except as contemplated by this
Agreement, the limited liability company interests of each of the Sellers shall
be free and clear of any
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and all liens, claims, options, charges, pledges, security interests, voting
agreements, encumbrances or other restrictions or interests of any kind or
nature whatsoever (collectively "Claims"). Except as contemplated by this
Agreement, at the Closing there will be no outstanding options or other rights,
agreements or commitments to admit any new members to the Company or to
transfer or assign any limited liability company interests in the Company. At
the Closing the Sellers shall assign and convey to the Purchasers valid and
marketable title to the Membership Interests free and clear of any and all
Claims. At the Closing the Purchasers shall be admitted as members of the
Company.
7.32 Minimum Equity Balances. The minimum equity balance to be
transferred by Sellers to the Company shall be $8,870,370. The maximum
liabilities to be transferred by Sellers to the Company shall be (i)
$18,500,000 for the Chase Manhatten Bank loan specified in paragraph 6.5(d),
(ii) $2,846,068 for the H. Group Note specified in paragraph 6.5(e), (iii)
$8,200,000 for the Turn Project specified in paragraph 6.5(g) and (iv) other
current liabilities in an amount equal to the sum of the amount of current
assets being transferred by Sellers to the Company plus $2,100,000.
7.33 No Additional Warranties. The Sellers are not making any
representation or warranty, express or implied, of any nature whatsoever, with
respect to the Sellers or their business, except for representations or
waranties expressly set forth in this Agreement.
7.34 Conduct of Business After the Transfer Time. From the Transfer Time
until the Closing Date, except as contemplated by this Agreement or with the
prior written consent of ISC and PMI, Sellers will not permit the Company to :
(i) take any action to amend the Company's Operating Agreement from the form
attached as Exhibit B hereto; (ii) admit any new members of the Company; (iii)
incur any contractual obligation or liability (absolute or contingent) except
liabilities incurred, and obligations arising under contracts entered into in
the ordinary course of business; (iv)
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declare or make any payment or distribution to any members of the Company in
their capacity as members of the Company; (v) mortgage, pledge, or subject to
any lien, charge or any other encumbrance (except for existing floating liens
or mechanic's or similar liens) any of its assets, tangible or intangible; (vi)
sell, assign, or transfer any of its tangible or intangible assets, except in
the ordinary course of business; (vii) cancel any debts or claims, except in
the ordinary course of business; (viii) merge or consolidate with or into any
other entity; (ix) make, accrue or become liable for any bonus, profit sharing
or incentive payment except for payments or accruals under existing plans, or
increase the rate of compensation payable or to become payable by them to any
of its officers, employees or members; (x) enter into any lease, contract,
agreement or understanding other than in the ordinary course of business; (xi)
enter into any contract, employment relationship or arrangement with any agent
or consultant other than in the ordinary course of business; (xii) commence to
do business outside the State of Florida; (xiii) waive any rights of material
value; (xiv) modify, amend, alter or terminate any of its executory contracts
of a material value or which are material in amount; (xv) take any action or
fail to take any action constituting a breach or default under any material
contract, indenture or agreement by which it is bound; (xvi) fail to use its
reasonable efforts to preserve the possession and control of its assets and
business, to keep in faithful service its present officers and key employees,
to preserve the goodwill of its licensers, customers, agents, consultants and
others having business relations with them, and to keep and preserve its
business existing on the date hereof; (xvii) fail to operate its business and
maintain its books, accounts and records in the customary manner and in the
ordinary or regular course of business and maintain in good repair its business
premises, fixtures, furniture and equipment; (xviii) make any further additions
to its properties or further purchases of equipment, except in the ordinary
course of business or except to maintain such property or equipment; (xix) pay
or discharge any claim or lien, except in the ordinary course of business; (xx)
write-off
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any accounts receivable as uncollectible; (xxi) fail to preserve the
Proprietary Rights; or (xxii) change any of its current accounting practices.
8. REPRESENTATIONS OF ISC AND PMI
ISC and PMI severally, but not jointly, represent and warrant to Sellers:
8.1 Organization and Authority. Each is a corporation duly incorporated,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, each has all requisite corporate power and authority to own its
properties, to carry on its businesses as now being conducted, to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
8.2 Authorization of Agreement. The execution and delivery of this
Agreement by ISC and PMI and the consummation by each of them of all
obligations contemplated hereby have been duly authorized by all requisite
corporate action. This Agreement and any other agreements and written
obligations entered into and undertaken in connection with the transactions
contemplated hereby and thereby constitute the valid and legally binding
obligations of each of them, enforceable against it in accordance with their
respective terms.
8.3 Litigation. Except as set forth on Schedule 8.3, there are no
actions, suits, proceedings or investigations, either at law or in equity, or
before any commission or other administrative authority in any federal, state,
municipal or foreign jurisdiction, of any kind now pending or, to the best of
knowledge of either ISC or PMI, threatened or proposed in any manner, or, to
the knowledge of either ISC or PMI, any circumstances which reasonably form the
basis of any such action, suit, proceeding or investigation, involving either
of them or any of their properties or assets that (i) questions the validity of
this Agreement, or (ii) seeks to delay, prohibit or restrict in any manner any
action taken or contemplated to be taken by either ISC or PMI under this
Agreement.
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8.4 Governmental Approvals. There are no governmental approvals or
authorizations required by either ISC or PMI with respect to the performance of
their obligations under this Agreement.
8.5 No Violation. The execution, delivery and performance of this
Agreement and the transactions contemplated hereby by each of them will not,
with or without the giving of notice and/or the passage of time, violate any
provisions of law applicable to either of them or conflict with or result in
the breach or termination of any provision of, constitute a default under, or
result in the creation of any lien, charge or encumbrance upon any of the
properties or assets pursuant to any corporate charter, by-law, indenture,
mortgage, deed of trust or other agreement or instrument to which either ISC or
PMI is a party or by which it is or may be bound.
8.6 Brokers. Neither ISC nor PMI has engaged any person or entity to act
as a broker or finder with respect to the transaction contemplated by this
Agreement.
8.7 Investment Representations. ISC or the ISC Affiliate will acquire the
ISC Interest for its own account for investment and not with a view to the
resale or distribution thereof. The entity acquiring the ISC Interest will not
transfer or otherwise dispose of the ISC Interest, or any interest therein, in
such manner as to violate any provisions of the 1933 Act, or of any applicable
state securities laws regulating the disposition thereof. PMI or the PMI
Affiliate will acquire the PMI Interest for its own account for investment and
not with a view to the resale or distribution thereof. The entity acquiring
the PMI Interest will not transfer or otherwise dispose of the PMI Interest, or
any interest therein, in such manner as to violate any provisions of the 1933
Act, or of any applicable state securities laws regulating the disposition
thereof.
9. ADDITIONAL AGREEMENTS
9.1 Further Assurances. From and after the Closing Date, Sellers shall
take all such steps as may be necessary to put the Company in actual possession
and operating
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control of the Transferred Assets, and Sellers agree that at any time or from
time to time after the Closing Date, upon the request of the Company, Sellers
will execute, acknowledge and deliver such other instruments of conveyance and
transfer and take such other action as the Company may reasonably require to
vest more effectively in the Company good and marketable title to any of the
Transferred Assets and to reasonably assist and cooperate in collection of any
of the the Accounts Receivable. Without limiting the generality of the
foregoing, at the option of the Company, Sellers shall participate in taking
such action as may be necessary to substitute the Company for Sellers as
plaintiff or claimant of record in any action, suit, proceeding or claim by
Sellers with respect to or based upon or arising out of the business of Sellers
to the extent that such substitution will not materially adversely affect any
such action, suit, proceeding or claim, in which event Sellers shall remain as
plaintiff or claimant with counsel approved by the Company on behalf of and for
the benefit of the Company. In the event that Sellers remain as plaintiff or
claimant, Sellers shall remit to the Company all amounts paid to Sellers on
account of any judgment, order, settlement or payment resulting from any such
action, suit, proceeding or claim and the Company shall bear the costs and
expenses incurred by Sellers after the Closing in connection therewith. In no
event shall the Sellers be obligated to expend more than $50,000 after Closing
with respect to out-of-pocket expenses incurred in fulfilling obligations under
the terms of this paragraph 9.1. At any time or from time to time after the
Closing, the Company shall, at the request of Sellers, execute and deliver any
further instruments or documents and take all such further action as Sellers
reasonably request in order to evidence the consummation of the transactions
contemplated hereby.
9.2 Accounts Receivable Collection. The Company shall exercise its
reasonable commercial efforts to collect the Accounts Receivable but shall not
be obligated to initiate litigation as part of such collection efforts. All
payments received by the Company after the Transfer Time from third parties who
are the obligors on the
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Accounts Receivable shall be applied to the oldest remaining Accounts
Receivable for such third party unless otherwise indicated on any remittance
advice from such third party which accompanies such payment. Any Account
Receivable which remains unpaid after 90 days from the Closing (or after 120
days from the Closing with respect to the Slow Accounts), and with respect to
which the Purchasers or the Company obtain payment from Sellers under paragraph
13.1, shall be reassigned to Sellers for collection by Sellers for their own
account.
9.3 Retained Information. From and after the Closing Date, the Sellers
shall not retain any records or other documents related to the business or
operations of the Complex prior to the Effective Time (the "Transferred
Business Records") other than records or other documents which constitute part
of the Excluded Assets. For a minimum of five (5) years after the Closing, the
Company shall maintain and make available to Sellers the Transferred Business
Records for inspection and copying to the extent Sellers require access to such
records in response to tax audits or other reasonable business necessity
provided that such records shall not be used in a manner which is detrimental
to the interests of the Company. For a minimum of five (5) years after the
Closing, the Sellers shall maintain and make available to the Company the
Retained Business Records for inspection and copying to the extent the Company
requires access to such records for reasonable business necessity provided that
such records shall not be used in a manner which is detrimental to the
interests of the Sellers. Nothing contained in this paragraph 9.3 shall
restrict either Sellers or the Company from obtaining access to the Transferred
Business Records or the Retained Business Records incident to discovery in
litigation to which the Company or Sellers are parties and utilizing such
records with respect to any such litigation.
9.4 Publicity. No party to this Agreement shall make or issue, or cause
to be made or issued, any announcement or written statement concerning this
Agreement or the transactions contemplated hereby for dissemination to the
general public without
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the prior consent of the other. This provision shall not apply, however, to
any announcement or written statement required to be made by law or the
regulations of any federal, state or foreign governmental agency or any stock
exchange, except that the party required to make such announcement shall,
whenever practicable, consult with the other party concerning the timing and
content of such announcement before such announcement is made.
9.5 Special Provisions Addressing Deferred Income and Prepaid Event
Expenses.
9.5.1 The parties hereto acknowledge that inherent in the operation
of Sellers' business prior to the Effective Time was (i) the action of selling
admission tickets, sponsorships, signage, suite rentals and other revenue items
which are either specific to an event or specific to a period of time, and
typically, many of these sales are made and payment is received in advance of
the event or time period, and (ii) the necessity from time to time to prepay
certain expenses which are directly related to a future event, including, but
not necessarily limited to, advertising or promotional expenses.
9.5.2 The parties hereto also acknowledge that GAAP requires (i)
sales made in advance of a specific event or time period to be recorded on the
balance sheet as a liability, hereinafter referred to as "Deferred Income", and
(ii) material expenses paid in advance of a specific event be recorded in the
balance sheet as an asset, hereinafter referred to as "Prepaid Event Expense".
9.5.3 Sellers warrant that (i) sales made or contracts entered into
in advance of the Effective Time that relate to obligations that the Company
must perform subsequent to the Effective Time, have been recorded on the
Sellers' combined balance sheet as Deferred Income. Furthermore, Schedule 9.5
accurately lists the components of Deferred Income as of the Effective Time
and, (ii) all material expenses paid by Sellers prior to the Effective Time
that directly relate to events which are scheduled to occur
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subsequent to the Effective Time have been accounted for on the Sellers'
balance sheet as Prepaid Event Expenses. Furthermore, Sellers warrant that
Schedule 9.5 is a complete and accurate list of Prepaid Event Expenses as of
the Effective Time, and that these Prepaid Event Expenses represent direct
costs relating to scheduled events that will occur subsequent to the Effective
Time. Furthermore, Sellers warrant that the Prepaid Event Expenses listed on
Schedule 9.5 do not include any allocation of indirect expenses, including, but
not necessarily limited to, selling, general and administrative expenses.
9.6 Definition of Material. Except to the extent that different criteria
are specified with respect to a specific paragraph of this Agreement, an event,
occurrence or circumstance will be deemed to be "material" with respect to a
party if such event, occurrence or circumstance causes or is reasonably likely
to cause damage, loss or expense to such party in excess of $5,000.00.
9.7 Limitation on Transfer of Membership Interests.
9.7.1 Sanchez Membership Interest. Sanchez and the Sellers agree
that, except as is contemplated by this Agreement, they will not transfer or
permit to be transferred the Sanchez Membership Interest, as that term is
defined below, as long as the call option for the Sanchez Membership Interest
specified in paragraph 25.4 is outstanding.
9.7.1 Huizenga Membership Interest. Huizenga and the Sellers agree
that, except as is contemplated by this Agreement, they will not transfer or
permit to be transferred the Huizenga Membership Interest, as that term is
defined below, as long as the call option for the Huizenga Membership Interest
specified in paragraph 25.3 is outstanding.
9.8 Additional Capital. Additional capital requirements of the Company
arising after the Closing Date shall be determined by a Majority in Interest of
the Members, as that term is defined in the Company's Operating Agreement,
applying
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commercially reasonable business judgment and based on the reasonable business
needs of the Company. In the event that the Company is not able to satisfy its
additional capital requirements by loans from financial institutions on
commercially reasonable terms, the Members of the Company shall be required to
make additional capital contributions in proportion to their Percentage
Interests in the Company as that term is defined in the Company's Operating
Agreement. If a capital call is made on the Members of the Company prior to
the expiration of the put option for the Sanchez Membership Interest specified
in paragraph 25.2 below, ISC and PMI, upon request from Sanchez, will each
advance to the Company, on behalf of the Member owning the Sanchez Membership
Interest, one half of the cash call due from such Member until the aggregate
of the advances made by ISC and PMI (the "Advances") on behalf of such Member
total $1,000,000. The Advances will earn interest from the date of each
Advance at the floating market rate charged to the party making the Advance by
its principal lending bank. The Advances plus all accrued interest shall be
secured by the Sanchez Membership Interest. Sanchez hereby consents that any
proceeds from the sale of the Sanchez Membership Interest pursuant to the put
option set forth in paragraph 25.2 or the call option set forth in paragraph
25.4 shall be applied first to pay in full the outstanding balance of the
Advances plus all accrued interest.
9.9 Huizenga Special Use Rights. For a period of ten years from the
Closing or until the death of Huizenga, whichever shall occur first, Huizenga
or an entity controlled by him will have the right to use the Complex four days
per calendar year to entertain his employees and guests with a driving school.
Huizenga's rights under this paragraph 9.9 shall be subject to the following
limitations:
(i) During the period between January 2 and January 31 of each
calendar year, Huizenga shall request dates for the use of the Complex during
such calendar year and the Company shall approve such dates if they do not
interfere with other scheduled uses for the Complex. The Company shall be
permitted to reschedule
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any date selected by Huizenga upon written notice given to Huizenga not less
than 30 days prior to the scheduled date, for good cause as determined in the
Company's commercially reasonable judgment. An example of good cause would be
an alternative use for the Complex which would generate significant revenue for
the Company. The Company shall work with Huizenga to arrive at rescheduled
dates which are reasonably satisfactory to Huizenga and the Company. If the
Company desires to reschedule any selected date upon less than thirty days
notice, such rescheduling shall be subject to Huizenga's consent, which consent
shall not be unreasonably withheld or delayed provided such rescheduling is
necessary to permit the Company to schedule an alternative use for the Complex
which would generate significant revenue and if another proximate date is
available and reasonably satisfactory to Huizenga. No rescheduling of Huizenga
use dates shall be requested by Company within fifteen days of the scheduled
date.
(ii) Huizenga shall pay all direct costs arising out of his use
of the Complex.
(iii) Huizenga shall comply with all reasonable requirements
adopted by the Company from time to time relating to the use of the Complex
including requirements related to facility operations and required insurance
coverage.
(iv) The Company will have the right to approve on an annual
basis the driving school to be selected by Huizenga, such approval not to be
unreasonably withheld or delayed.
10. CONDITIONS TO OBLIGATIONS OF PURCHASERS.
The obligations of Purchasers under this Agreement are subject, at the
Closing Date, to the fulfillment in all respects of the following conditions
precedent, each of which may be waived in writing at the sole discretion of
Purchasers:
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10.1 Continued Truth of Representations and Warranties. Each of the
representations and warranties of Sellers in this Agreement shall be true in
all material respects on and as of the Closing Date, and Sellers shall have
performed and complied in all material respects with all of the terms,
conditions, obligations, agreements and restrictions required by this Agreement
to be performed or complied with by Sellers prior to or on the Closing Date.
10.2 Certificate. Sellers shall have delivered to Purchasers a
certificate addressed to Purchasers and executed by general partners of Sellers
dated the Closing Date in the form attached hereto as Exhibit F.
10.3 Consents of Third Parties. Sellers shall have received and delivered
in writing to the Company or the Purchasers all requisite waivers, consents and
approvals of the City of Homestead, Sun Trust with respect to the asignment to
the Company of the Homestead Lease, of all third parties set forth on Schedule
10.3 hereto, and any other third parties whose waiver, consent or approval is
required to be obtained by Sellers to consummate the transactions contemplated
hereby but which were not listed on Schedule 3 hereto, in form satisfactory to
Purchasers.
10.4 Absence of Challenge. At or prior to the Closing Date no material
action or proceeding by or before any court or other governmental body shall
have been instituted by any governmental body or person whatsoever other than
Purchasers against any of the parties hereto, or any partner, officer, employee
or other representative of Sellers with respect to this Agreement or any
transaction provided for herein or connected herewith, whether preceding the
execution and delivery of this Agreement or arising subsequently.
10.5 Opinion of Sellers' Counsel. Purchasers shall have received the
opinion dated the Closing Date of Akerman, Senterfitt & Eidson, P.A., counsel
for Sellers, substantially in the form of Exhibit G attached hereto and
otherwise in form and substance satisfactory to Purchasers.
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10.6 Litigation. No action or proceeding shall have been instituted or
threatened by any public authority prior to the Closing Date before a court or
governmental body or agency of any kind for the stated purpose or with the
probable effect of enjoining or preventing the consummation of this Agreement
and the transactions contemplated herein or to recover damages by reason
thereof. No action or proceeding shall have been instituted by any private
person prior to the Closing Date before a court or governmental body or agency
of any kind with the probable effect of enjoining or preventing the
consummation of this Agreement and the transactions contemplated hereby.
10.7 Transfer of Liquor License. The Company shall have been successful
in obtaining in the name of the Company's designated concession operator a
liquor license of the same class as is currently held by Sellers or their third
party concession operator with respect to the sale of alcoholic beverages at
the Complex.
10.8 Sanctions and Sponsorship Agreements. All material existing
sanction agreements and sponsorship agreements with respect to motorsports
events scheduled to occur at the Complex after the Closing Date shall have been
duly assigned to the Company.
10.9 Opinion of Homestead's Counsel. Sellers shall have delivered to
Purchasers an opinion of legal counsel to the City of Homestead in a form
reasonably satisfactory to Purchasers, stating that the amendment to the
Homestead Lease in the form attached as Exhibit E and the Homestead Lease have
been duly authorized by all requisite legal action by the City of Homestead and
are valid and binding legal contracts of the City of Homestead which after the
Closing will be enforceable by the Company in accordance with their terms.
10.10 Financing. The financing or refinancing specified in paragraphs
6.5(b) and 6.5(d) shall have been obtained.
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10.11 Other Actions to be Taken. All actions listed in paragraph 6.5
hereof to be performed by Sellers, Sanchez or Huizenga shall have been taken
and any necessary governmental approvals to the transactions to occur at the
Closing shall have been obtained.
11. CONDITIONS TO OBLIGATIONS OF SELLERS
The obligations of Sellers under this Agreement are subject, at the
Closing Date, to the fulfillment in all material respects of the following
conditions precedent, each of which may be waived in writing at the discretion
of Sellers:
11.1 Continued Truth of Representations and Warranties. The
representations and warranties made by Purchasers in this Agreement shall be
true in all material respects on and as of the Closing Date, and Purchasers
shall have performed and complied with all terms, conditions, obligations,
agreements and restrictions required by this Agreement to be performed or
complied with by it prior to or on the Closing Date.
11.2 Certificate. Purchasers shall have delivered to Sellers a
certificate addressed to Sellers and executed by an authorized officer of
Purchasers dated the Closing Date to the effect set forth in Exhibit H.
11.3 Litigation. No action or proceeding shall have been instituted or
threatened by any public authority prior to the Closing Date before a court or
governmental body or agency of any kind for the stated purpose or with the
probable effect of enjoining or preventing the consummation of this Agreement
and the transactions contemplated herein or to recover damages by reason
thereof. No action or proceeding shall have been instituted by any private
person prior to the Closing Date before a court or governmental body or agency
of any kind with the probable effect of enjoining or preventing the
consummation of this Agreement and the transactions contemplated hereby.
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11.4 Opinion Of Purchaser's Counsel. Sellers shall have received the
opinion dated the Closing Date of Black, Crotty, Sims, Hubka, Burnett, Birch
and Samuels, L.L.P., counsel for ISC and Robert H. Kurnick, Jr. Esq., counsel
for PMI, in the form attached hereto as Exhibit I and otherwise in form and
substance satisfactory to Seller.
11.5 Absence of Challenge. At or prior to the Closing Date no material
action or proceeding by or before any court or other governmental body shall
have been instituted by any governmental body or person whatsoever, other than
Sellers, against any of the parties hereto, or any partner, officer, employee
or other representative of Purchasers with respect to this Agreement or any
transaction provided for herein or connected herewith, whether preceding the
execution and delivery of this Agreement or arising subsequently.
11.6 Governmental Approvals. Any necessary governmental approvals to the
transactions to occur at the Closing shall have been obtained.
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
12.1 Survival of Sellers' Warranties. Any investigation or examination by
Purchasers of the business, properties or affairs of Sellers shall not affect
the representations and warranties of Sellers herein contained, and the
respective representations and warranties of the parties herein contained shall
survive the Closing. All such representations and warranties shall expire and
be terminated and extinguished on the second anniversary of the Closing Date,
except as to particular claims submitted in writing prior to said expiration
date, and also except as to the representations and warranties of Sellers
contained in paragraph 7.19 which shall continue in effect until the applicable
Statute of Limitations has expired.
12.2 Survival of Purchasers' Warranties. Any investigation or examination
by Sellers of the business, properties or affairs of Purchasers shall not
affect the
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representations and warranties of Purchasers herein contained, and the
respective representations and warranties of the parties herein contained
shall survive the Closing. All such representations and warranties shall
expire and be terminated and extinguished on the second anniversary of the
Closing Date.
13. INDEMNIFICATION
13.1 Indemnification by Sellers. Each Seller, Sanchez and Huizenga,
severally but not jointly, agrees to indemnify Purchasers and the Company and
hold them harmless from any loss, damage or expense (including reasonable
attorneys' fees) which Purchasers, the Company or any of their officers,
directors, parents or subsidiaries or other affiliates, actually incur (to be
offset by applicable insurance recovery obtained), suffer or become liable for
as a result of or in connection with (a) the inaccuracy or breach of any
agreement, representation or warranty of Sellers, Sanchez or Huizenga contained
in this Agreement, any Exhibit or Schedule to be delivered pursuant hereto
occurring or developing during the period of survival of such agreement,
representation or warranty including any claims by any third parties alleging
facts or circumstances which, if true, would constitute such inaccuracy or
breach; (b) failure to pay any sales or use tax liability of the Sellers for
periods through the Transfer Time; (c) any assertion against the Company or
Purchasers of any claim or liability of Sellers not expressly assumed hereunder
by the Company or Purchasers; (d) unless expressly assumed by the Company or
the Purchasers hereunder, the assertion against the Company or Purchasers by
any person, firm, governmental agency or corporation of any obligation or
liability of Sellers accruing on or prior to, or existing at, the Transfer Time
and thereafter accrued, including without limitation, tax claims or
liabilities; (e) failure of Sellers to obtain necessary consents to assignment
of any of the Transferred Assets to the extent required by this Agreement; or
(f) any and all actions, suits, proceedings, claims, demands, assessments,
judgments, costs and expenses incident to
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any of the foregoing or in enforcing this indemnity. Purchasers and the
Company shall give Sellers, Sanchez and Huizenga prompt written notice of any
claim, suit or demand which Purchasers or the Company believe will give rise
to indemnification by Sellers, Sanchez or Huizenga under this paragraph;
provided, however, that the failure to give such notice shall not affect the
liability of Sellers, Sanchez or Huizenga hereunder unless the failure to give
such notice adversely and materially affects the ability of Sellers, Sanchez or
Huizenga to defend themselves against a claim or to cure the breach or
inaccuracy giving rise to the claim for indemnification on account thereof.
Except as hereinafter provided, Sellers, Sanchez and Huizenga shall have the
right to defend and to direct the defense against any such claim, suit or
demand, in their names or in the name of Purchasers or the Company at Sellers',
Sanchez's and Huizenga's option and with counsel of Sellers', Sanchez's and
Huizenga's own choosing, which counsel shall be reasonably satisfactory to
Purchasers. Purchasers and the Company shall, at Sellers', Sanchez's and
Huizenga's expense, cooperate in the defense of any such claim, suit or demand.
If Sellers, Sanchez and Huizenga within reasonable time after notice of a
claim, fail to defend Purchasers or the Company or if, in the good faith
judgment of Purchasers, the facts giving rise to indemnification hereunder
shall involve a possible claim by Purchasers or any of their affiliates or the
Company against a third party, or the facts concern a claim constituting or
challenging any material rights or assets of Sellers acquired by the Company
pursuant to this Agreement or seeking an injunction or other equitable relief
against the Company, the Purchasers or any of their affiliates, Purchasers and
the Company shall be entitled to have separate counsel undertake the defense,
compromise or settlement of such claim at the expense of and for the account
and risk of Sellers, Sanchez and Huizenga, subject to the right of Sellers,
Sanchez and Huizenga to assume the defense of such claim at any time prior to
the settlement, compromise or final determination thereof if the only issues
remaining therein involve liability for, or the amount of, money damages to be
assessed against Purchasers or the
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Company, provided Sellers, Sanchez and Huizenga will not, without Purchaser's
written consent (not to be unreasonably withheld) settle or compromise any
claim or consent to any entry of judgment which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to
Purchasers and the Company a release from all liability in respect of such
claim. No right or remedy conferred in this paragraph is intended to be
exclusive of any other right or remedy available, now or hereafter at law or in
equity or otherwise, to the parties hereto. Any payments due to Purchasers or
the Company under the terms of this paragraph 13.1 shall be made first from the
escrow account specified in paragraph 6.3 above until the balance in the escrow
account has been exhausted. Except as specified below, any balance in the
escrow account (including any interest earned thereon) shall be distributed to
Sellers on the first anniversary of the Closing. In the event that prior to
the first anniversary of the Closing, Purchasers have given notice to Sellers
of an indemnification claim which remains outstanding on the first anniversary
of the Closing, then until such claim is finally resolved, there shall continue
to be held in escrow an amount equal to the amount of the unresolved claim, and
any excess escrow balance shall be distributed to the Sellers on the first
anniversary of the Closing.
13.2 Indemnification by Purchasers. Each Purchaser, severally and not
jointly, agrees to indemnify Sellers and hold Sellers harmless from any loss,
damage or expense (including reasonable attorneys' fees) which Sellers actually
incur (to the extent not covered by insurance recoveries obtained), suffer or
become liable for as a result of or in connection with the inaccuracy or breach
of any agreement, representation or warranty of such Purchaser contained in
this Agreement occurring or developing during the period of survival of such
agreement, representation or warranty including any claims by any third party
alleging facts and circumstances which, if true, would constitute such
inaccuracy or breach. The Company and each Purchaser, severally and not
jointly, agree to indemnify Sellers and hold Sellers harmless from any loss,
damage or expense
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(including reasonable attorneys' fees) which Sellers actually incur (to the
extent not covered by insurance recoveries obtained), suffer or become liable
for as a result of or in connection with (a) any assertion against Sellers of
any claim or liability of the Company accruing on or after the Closing Date or
arising out of the operation of the Complex after the Closing Date or arising
out of the Company's failure to satisfy the Assumed Obligations; or (b) the
assertion against Sellers by any person, firm, governmental agency or
corporation of any obligation or liability of the Company occurring after the
Closing Date and thereafter occurred, including without limitation, tax claims
or liabilities. Sellers shall give Purchasers and the Company prompt written
notice of any claim, suit or demand which they believe will give rise to
indemnification under this paragraph; provided, however, that the failure to
give such notice shall not affect the liability of the indemnifying party
hereunder unless the failure to give such notice adversely and materially
affects the ability of the indemnifying party to defend itself against a claim
or to cure the breach or inaccuracy giving rise to the claim for
indemnification on account thereof. Except as hereinafter provided, the
indemnifying party shall have the right to defend and to direct the defense
against any such claim, suit or demand, in its name or in the names of Sellers
at the indemnifying party's expense and with counsel of the indemnifying
party's own choosing, which counsel shall be reasonably satisfactory to
Sellers. Sellers shall, at the indemnifying party's expense, cooperate in the
defense of any such claim, suit or demand. If the indemnifying party, within
reasonable time after notice of a claim, fails to defend Sellers or if, in the
good faith judgment of Sellers, the facts giving rise to indemnification
hereunder shall involve a possible claim by Sellers or any of their affiliates
against a third party seeking an injunction or other equitable relief against
Sellers or any of their affiliates, Sellers shall be entitled to have separate
counsel undertake the defense, compromise or settlement of such claim at the
expense of and for the account and risk of the indemnifying party subject to
the right of the indemnifying party to assume the
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defense of such claim at any time prior to the settlement, compromise or final
determination thereof if the only issues remaining therein involve liability
for, or the amount of, money damages to be assessed against Sellers, provided
the indemnifying party will not, without Sellers' written consent (not to be
unreasonably withheld or delayed), settle or compromise any claim or consent to
any entry of judgment which does not include as an unconditional term thereof
the giving by the claimant or the plaintiff to Sellers a release from all
liability in respect of such claim. No right or remedy conferred in this
paragraph is intended to be exclusive of any other right or remedy available,
now or hereafter at law or in equity or otherwise, to the parties hereto.
13.3 Maximum Liability. The aggregate liability of the Sellers under the
terms of paragraph 13.1 shall not exceed the amount of the Purchase Price
(which amount shall be reduced dollar for dollar for any amounts paid by
Sanchez and Huizenga under paragraph 13.1), and the personal liability of
Sanchez and Huizenga under the terms of paragraph 13.1 shall be limited to
$11,800,000 for each individual; provided, however, that the limitations set
forth in this paragraph 13.3 shall not apply to losses resulting from
intentional fraud or misrepresentation. The aggregate liability of the
Company under the terms of Section 13.2 shall not exceed the amount of the
Purchase Price, and the aggregate liability of each of the Purchasers under
the terms of paragraph 13.2 shall be limited to $11,800,000; provided, however,
that such limitation set forth in this paragraph 13.3 shall not apply to
losses resulting from intentional fraud or misrepresentation.
13.4 Initial Threshold. Neither the Sellers, Sanchez and Huizenga under
the terms of paragraph 13.1 nor the Purchasers under the terms of paragraph
13.2 shall be obligated to indemnify any other party except to the extent that
the cumulative amount of all indemnifiable losses exceeds Twenty-Five Thousand
Dollars ($25,000.00) (the "Threshold"), which excess amount shall be
recoverable in accordance with the terms of
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paragraph 13.1 and paragraph 13.2 above. The Sellers' allowance for Slow
Accounts specified in paragraph 7.17 shall be in addition to the threshold
amount.
14. EFFECTIVENESS OF THIS AGREEMENT
This Agreement shall become effective upon the execution and delivery of
this Agreement (or counterpart thereof) by all parties hereto and shall not be
binding upon any party executing this Agreement (or counterpart thereof) until
executed by all parties hereto.
15. BROKERS
15.1 For Sellers. Sellers agree, jointly and severally, to indemnify and
hold harmless Purchaser against any claims or liabilities asserted against it
by any person acting or claiming to act as a broker or finder on behalf of
Sellers.
15.2 For Purchasers. Purchasers agree to indemnify and hold harmless
Sellers against any claims or liabilities asserted against any of them by any
person acting or claiming to act as a broker or finder on behalf of Purchasers.
16. EXPENSES AND ATTORNEY'S FEES
Except as may otherwise be expressly provided herein, Purchasers on the
one hand and Sellers on the other hand shall pay their own expenses in
connection with this Agreement and the transactions contemplated hereby,
including attorneys' and accountants' fees. In the event of any dispute
arising under this Agreement, the prevailing party shall be permitted to
recover its attorney's fees.
17. SALES, USE, TRANSFER AND OTHER TAXES
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Sellers and Purchasers shall each pay one half of all sales/use taxes,
transfer taxes of any nature, notarial fees, documentary tax stamps, other
taxes or surtaxes and recording fees incurred in connection with the
consummation or the transactions contemplated hereby specifically including the
transfer of the Homestead Lease to the Company. Nothing contained herein shall
limit Purchasers' obligations under paragraph 3.3 hereof.
18. COVENANT NOT TO COMPETE
Huizenga hereby covenants and agrees that for a period of five (5) years
from and after the Closing Date, he will not, except as permitted below or with
the express written consent of Purchasers, directly or indirectly engage,
participate or invest in or assist, as owner, part-owner, shareholder, partner,
director, trustee, independent contractor, agent or consultant, or in any other
capacity, in any business organization engaged in the business (a "Competitive
Business") of staging or promoting motorsports events or operating a motorsport
facility in any State where ISC or PMI or any of their affiliate operates a
motorsports facility or shall commence to operate a motorsports facility after
the Closing Date; provided, however, that the foregoing restrictions shall not
restrict Huizenga's participation in any competitive enterprise the shares of
which are publically traded through NASDAQ or on a national securities
exchange.
Huizenga covenants and agrees that for a period of five (5) years from the
Closing Date, he will not, without the express written consent of Purchasers,
hire, or attempt to hire for employment, in any business venture, any person
who was an employee of the Company on the date of termination of such
employee's employment by the Company, or within the two (2) year period
immediately preceeding such date, or attempt to influence any such person to
terminate such employment; or in any other
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manner interfere with, disrupt or attempt to disrupt the relationship,
contractual or otherwise, between the Company and any of its customers,
suppliers or employees.
In making this undertaking Huizenga understands and agrees that it is of
the essence of this Agreement and that his willingness to make and carry out
this covenant not to compete with the Company for the aforementioned period
stated therein has induced Purchaser to enter into this Agreement. Without
prejudice to the right of Purchaser or the Company to seek an award for damages
for any breach of this covenant by Huizenga, this covenant shall be
specifically enforceable by way of injunctive relief without the requirement of
posting a bond, which requirement is specifically waived by Huizenga. It is
the express opinion and intention of the parties hereto that they shall be
bound by the provisions of said covenant not to compete and the parties hereto
each agree that said covenant is reasonable and appropriate in light of the
transaction set forth herein, the consideration being paid therefor and the
purpose of this Agreement.
19. NOTICES
Any notices or other communications required or permitted hereunder shall
be sufficiently given if delivered personally or sent by registered or
certified mail, return receipt requested, postage prepaid, or transmitted by
telecopy, addressed as follows or to such other address of which the parties
may have given notice in accordance with this paragraph 19:
a. In the case of ISC:
International Speedway Corporation
1801 West Speedway Boulevard
Daytona Beach, Florida 32114-1243
Attn: W. Garrett Crotty, Esq., Corporate Counsel
Telecopy: (904) 947-6884
with a copy to:
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Miller, Cassidy, Larroca, & Lewin, L.L.P.
2555 M. Street, N.W.
Washington, D.C. 20037-1302
Attn: John Cassidy, Esq.
Telecopy: (202) 293-6610
and:
Black, Crotty, Sims, Hubka, Burnett, Birch and Samuels, L.L.P.
Sun Trust Bank
501 North Grandview Avenue, Third Floor
Daytona Beach, FL 32118
Attn: Random R. Burnett, Esq.
Telecopy: (904) 253-8198
b. In the case of PMI:
Penske Motorsports, Inc.
c/o Penske Corporation
13400 Outer Drive, West
Detroit, MI 48239-4001
Attn: Robert H. Kurnick, Jr., Esq.
Assistant General Counsel
Telecopy: (810) 614-1125
c. In the case of the Company:
Homestead-Miami Speedway LLC
1801 International Speedway Boulevard
Daytona Beach, Florida 32114
d. In the case of Sellers:
Miami Motor Sports Joint Venture
Homestead Motor Sports Joint Venture
One Speedway Boulevard
Homestead, FL 33015
Attn: Rafael A. Sanchez
Telecopy: (305) 230-5221
with a copy to:
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Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, FL 33131
Attn: Rebecca Orand, Esq.
Telecopy: (305) 579-0717
and
Akerman, Senterfitt & Eidson, P.A.
Suntrust International Center
28th Floor, One S.E. 3rd Avenue
Miami, FL 33131-1704
Attn: Stephen Roddenberry, Esq.
Telecopy: (305) 374-5095
e. In the case of Rafael A. Sanchez:
Mr. Rafael Sanchez
One Speedway Boulevard
Homestead, FL 33015
Telecopy: (305) 230-5221
with a copy to:
Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel
1221 Brickell Avenue
Miami, FL 33131
Attn: Rebecca Orand, Esq.
Telecopy: (305) 579-0717
f. The case of Wayne Huizenga
Mr. Wayne Huizenga
200 South Andrews Avenue, Sixth Floor
Ft. Lauderdale, FL 33301
Telecopy: (954) 627-5030
with a copy to:
Akerman, Senterfitt & Eidson
Suntrust International Center
28th Floor, One S.E. 3rd Avenue
Miami, FL 33131-1704
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Attn: Stephen Roddenberry, Esq.
Telecopy: (305) 374-5095
20. SUCCESSORS
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, except that
Purchasers, on the one hand, and Sellers, on the other hand, shall not assign
their respective obligations hereunder, without the prior written consent of
the other parties provided, however, that each of the Purchasers shall be
permitted to assign its rights and obligations hereunder to a subsidiary or
other entity which is wholly owned by such Purchaser. In the event a Purchaser
makes an assignment to one of its affiliates, such Purchaser shall guaranty to
Sellers the obligations of such affiliate hereunder.
21. PARAGRAPH HEADINGS
The paragraph headings are for the convenience of the parties and in no
way alter, modify, amend, limit, or restrict the contractual obligations of the
parties.
22. GOVERNING LAW; CONSENT TO SERVICE
This Agreement shall be governed by and construed in accordance with the
laws of the State of Florida applicable to agreements made and to be performed
therein (without giving effect to the conflict of law provisions of such
State). Each party hereto irrevocably consents to the jurisdiction of the
courts of the State of Florida with respect to any action, suit or proceeding
brought arising under this Agreement or any of the transactions or agreements
contemplated herein and agree further that service of process of notice in any
such action, suit or proceeding shall be effective if in writing and sent by
certified or registered mail, return receipt requested, postage prepaid, as
provided in paragraph 19 hereof.
23. ENTIRE AGREEMENT
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This Agreement, including all Schedules and Exhibits hereto, and all
agreements to be delivered by the parties pursuant hereto represent 'he entire
understanding and agreement between the parties hereto with respect to the
subject matter hereof and, therefore, supersede all prior negotiations between
such parties and cannot be amended, supplemented or changed orally, but only by
an agreement in writing which makes specific reference to this Agreement or the
agreement delivered pursuant hereto, as the case may be, and which is signed by
the party against whom enforcement of any such amendment, supplement or
modification is sought.
24. COUNTERPARTS
This Agreement may be signed in two or more counterparts, each signed by
one or more of the parties hereto so long as each party shall sign at least one
counterpart of this Agreement, all of which taken together shall constitute one
and the same instrument.
25. PUT, CALL AND TAG ALONG RIGHTS
25.1 Huizenga Put Option.
(a) Upon written demand made at any time during the period
commencing on July 1, 2001 and terminating on June 30, 2002, Huizenga shall
have the right, but not the obligation, to require ISC (directly or through its
designee) and PMI (directly or through its designee) to each purchase from him,
or from an entity wholly owned by him, one half of the ten percent (10%)
limited liability company interest in the Company owned by him or an entity
wholly owned by him (the "Huizenga Membership Interest").
(b) If during the period commencing immediately after the Closing
Date and ending on July 1, 2001, the aggregate number of Units (as that term
is defined in the Company's Operating Agreement) transferred by ISC and PMI (or
the ISC Affiliate and the PMI Affiliate) and/or sold by the Company to new
members exceeds
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fifty percent (50%) of the Units outstanding immediately after the Closing,
Huizenga shall have the right, but not the obligation, to require ISC (directly
or through its designee) and PMI (directly or through its designee) to each
purchase from him, or an entity wholly owned by him, the Huizenga Membership
Interest.
(c) The purchase price for the Huizenga Membership Interest shall be
$2,950,000, increased by the amount of any capital contributed to the Company
after the Closing Date by the owner of the Huizenga Membership Interest, and
decreased by the amount of any capital distributed by the Company to the owner
of the Huizenga Membership Interest (other than distributions pursuant to
Section 7.4 of the Company's Operating Agreement), plus interest on the
$2,950,000 as increased or decreased from time to time as specified above,
calculated from the Closing Date at the rate of seven and one half percent
(7.5%) per annum. One half of the purchase price for the Huizenga Membership
Interest shall be paid by each of the Purchasers or their designees. The
closing for the purchase of the Huizenga Membership Interest shall occur within
thirty (30) days after the demand to purchase the Huizenga Membership Interest
specified in subparagraph (a) above.
(d) The Company shall take all actions necessary or appropriate to
reflect the transfer of the Huizenga Membership Interest after the purchase has
been completed.
25.2 Sanchez Put Option.
(a) Sanchez (or his executor in the event of his death) shall have the
right, but not the obligation, to require ISC (directly or through its
designee) and PMI (directly or through its designee) to each purchase from him,
or from an entity wholly owned by him, one half of the ten percent (10%)
limited liability company interest in the Company owned by him or an entity
wholly owned by him (the "Sanchez Membership Interest"). The foregoing right
to require the purchase of the Sanchez Membership Interest may be exercised
upon a written demand (the "Sanchez Demand") made (i) at
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any time during the six month period commencing July 1, 2001, (ii) at any time
during the period commencing on January 1, 2002 and ending on September 30,
2005 provided that such demand must be made within six months after Sanchez is
no longer employed by the Company or (iii) within six months after the death of
Sanchez if he should die prior to July 1, 2005.
(b) If during the period commencing immediately after the Closing Date and
ending on July 1, 2001, the aggregate number of Units (as that term is defined
in the Operating Agreement) transferred by ISC and PMI (or the ISC Affiliate
and the PMI Affiliate) and/or sold by the Company to new members exceeds fifty
percent (50%) of the Units outstanding immediately after the Closing, Sanchez
shall have the right, but not the obligation, to require ISC (directly or
through its designee) and PMI (directly or through its designee) to each
purchase from him, or an entity wholly owned by him, the Sanchez Membership
Interest.
(c) The purchase price for the Sanchez Membership Interest shall be the
greater of $2,950,000, increased by the amount of any capital contributed to
the Company after the Closing by or on behalf of the owner of the Sanchez
Membership Interest and decreased by the amount of any capital distributed by
the Company to the owner of the Sanchez Membership Interest (other than
distributions pursuant to Section 7.4 of the Company's Operating Agreement), or
the amount calculated as follows:
(i) The Company's regular accountant will calculate the net income of
the Company for its fiscal year immediately preceding or coincident with the
date of the Sanchez Demand increased by the amount of any allocated
administrative overhead charges made by ISC, PMI or their affiliates during
such fiscal year which are in excess of commercially reasonable charges for
similar administrative services and reduced by the amount of federal, state and
local income taxes which would have applied to such income if the Company had
been taxed as a Subchapter C corporation rather than as a limited liability
company taxes as a partnership. Such adjusted net
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income is hereinafter referred to as the "Adjusted Income." All calculations
made by the Company's regular accountant shall be made utilizing generally
accepted accounting principals applied in a manner consistent with past
practices for the Company. Sanchez and his authorized representatives shall
have reasonable access to all the work papers of the accountant which
demonstrate his calculations made in accordance with the terms of this
subparagraph (i).
(ii) The Adjusted Income shall be multiplied by the average
of the earnings multiple at which shares of common stock of ISC and PMI were
being publically traded (on average) during the thirty (30) day period
immediately preceding the Sanchez Demand. For purposes of calculating earnings
multiple, earnings will be deemed to be the per share earnings reflected on the
annual financial statement for the fiscal year ending prior to the date of the
Sanchez Demand and the daily trading price shall be the "closing price" for
such stock on the principal national securities exchange or the Nasdaq National
Market on which it is traded for a trading day. The calculation for a company
with more than one class of publically traded common stock, shall be made based
on the most actively publically traded class of common stock for such Company
during the applicable valuation period. If either ISC or PMI has a $0 or a
negative per share earnings reflected on the applicable financial statement,
then the earnings multiple shall be calculated with reference only to the
corporation with positive per share earnings.
(iii) The product obtained after following the procedure
specified in subparagraph (ii) above shall then be discounted by twenty percent
(20%) and such discounted balance shall be the alternative purchase price for
the Sanchez Membership Interest.
25.3 Call Option for Huizenga Membership Interest.
(a) Upon written demand made at any time during the period
commencing July 1, 2002 and ending on the tenth anniversary of such date (the
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"Huizenga Call Period"), ISC (directly or through its designee) and PMI
(directly or through its designee) shall have the right, but not the
obligation, to require Huizenga to sell or cause one of the Sellers to sell to
each of them one half of the Huizenga Membership Interest at a price equal to
the greater of $2,950,000 adjusted as set forth in paragraph 25.1(c) above or
calculated as set forth below, provided that Huizenga has not exercised his put
right under paragraph 25.1 prior to the date of such demand. The call may not
be exercised for less than the entire Huizenga Membership Interest. If during
the Huizenga Call Period, Huizenga desires to sell the Huizenga Membership
Interest in accordance with the terms of Section 8.6 of the Company's Operating
Agreement, then ISC (directly or through its designee) and PMI (directly or
through its designee) shall have thirty (30) days after receipt of the Offer
specified in Section 8.6 of the Company's Operating Agreement to exercise their
call rights specified in this paragraph 25.3; provided however, that if the
call rights are exercised, the purchase price for the Huizenga Membership
Interest shall be the lesser of the amount specified in the Offer or the price
determined as specified in the first sentence of this paragraph 25.3. If the
call rights are not timely exercised, Huizenga may proceed to sell the Huizenga
Membership Interest strictly in accordance with the terms of the Offer and, if
the sale occurs, no further call rights shall apply to the sold Huizenga
Membership Interest.
(b) Purchasers and Huizenga shall each within ten (10) days after the
demand specified above select an independent appraiser of national reputation
to make an appraisal of the fair market value of the Huizenga Membership
Interest in accordance with the methodology described below to be completed
within thirty (30) days from the date on which the Purchasers make their
demand. If a party does not designate an appraiser in a timely manner, an
appraiser shall be selected by the American Arbitration Association. Each
appraiser in making a fair market value determination shall take into account,
among other things, the income, assets, liabilities,
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replacement cost of the assets, and the future prospects of the Company. The
fair market value determination made by any appraiser shall be made as of the
end of the calendar quarter immediately preceding the calendar quarter in which
Purchasers exercise their call option as provided above. Each Appraiser shall
value the Company as a whole on an ongoing business basis. The Huizenga
Membership Interest shall then be valued at ten percent (10%) of the Company
valuation and subject to a twenty percent (20%) discount because it is a
minority interest. No other discount shall apply to the valuation of the
Huizenga Membership Interest under this paragraph 25.3.
(c) If the two fair market value determinations are within a five
percent (5%) variance of each other, the price of the Huizenga Membership
Interest shall be the average of the two appraisals. If the two appraisals
vary by more than five percent (5%), the two appraisers shall promptly select a
third appraiser, who shall make an appraisal of the fair market value of the
Huizenga Membership Interest and the price for the Huizenga Membership Interest
shall be the middle valuation of the three appraisals.
(d) The closing of the transaction shall occur on or before sixty (60)
days following the date on which the purchase price has been determined by the
appraisal process set forth above.
25.4 Call Option for Sanchez Membership Interest.
(a) Upon written demand made (the "Purchasers' Demand") at any time
during the "Sanchez Call Period", as that term is hereinafter defined, ISC
(directly or through its designees) and PMI (directly or through its designees)
shall have the right, but not the obligation, to require Sanchez (or his
executor in the event of Sanchez's death) to sell or cause one of the Sellers
to sell to each of them one half of the Sanchez Membership Interest at a price
calculated as set forth below provided that Sanchez has not exercised his put
right under paragraph 25.2 prior to the date of such demand. The call may not
be exercised for less than the entire Sanchez Membership
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Interest. If during the Sanchez Call Period, Sanchez desires to sell the
Sanchez Membership Interest in accordance with the terms of Section 8.6 of the
Company's Operating Agreement, then ISC (directly or through its designee) and
PMI (directly or through its designee) shall have thirty (30) days after
receipt of the Offer specified in Section 8.6 of the Company's Operating
Agreement to exercise their call rights specified in this paragraph 25.4;
provided however, that if the call rights are exercised, the purchase price for
the Sanchez Membership Interest shall be the lesser of the amount specified in
the Offer or the amount determined as specified below in this paragraph 25.4.
If the call rights are not timely exercised, Sanchez may proceed to sell the
Sanchez Membership Interest strictly in accordance with the terms of the Offer
and, if the sale occurs, no further call rights shall apply to the sold Sanchez
Membership Interest.
(b) The "Sanchez Call Period" shall be (i) the one year period commencing
July 1, 2005, (ii) the period commencing on January 1, 2002 and ending on June
30, 2005 provided that the demand must be made within one year after Sanchez's
employment by the Company is terminated and (iii) one year after the death of
Sanchez if he should die prior to July 1, 2005.
(c) The purchase price for the Sanchez Membership Interest shall be the
greater of $2,950,000 increased by the amount of any capital contributed to the
Company after the Closing by or on behalf of the owner of the Sanchez
Membership Interest and decreased by the amount of any capital distributed by
the Company to the owner of the Sanchez Membership Interest (other than
distributions pursuant to Section 7.4 of the Company's Operating Agreement) or
the amount calculated as follows:
(i) The Company's regular accountant will calculate the net income of
the Company for its fiscal year immediately preceding or coincident with the
date of the Purchasers' Demand increased by the amount of any allocated
administrative overhead charges made by ISC, PMI or their affiliates during
such fiscal year which are in excess of commercially reasonable charges for
similar administrative
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services and reduced by the amount of federal, state and local income taxes
which would have applied to such income if the Company had been taxed as a
Subchapter C corporation rather than as a limited liability company taxed as a
partnership. Such adjusted net income is hereinafter referred to as the
"Adjusted Income." All calculations made by the Company's regular accountant
shall be made utilizing generally accepted accounting principals applied in a
manner consistent with past practices for the Company. Sanchez and his
authorized representatives shall have reasonable access to all the work papers
of the accountant which demonstrate his calculations made in accordance with
the terms of this subparagraph (i).
(ii) The Adjusted Income shall be multiplied by the average of the
earnings multiple at which shares of common stock of ISC and PMI were being
publically traded (on average) during the thirty (30) day period immediately
preceding the Purchasers' Demand. For purposes of calculating earnings
multiple, earnings will be deemed to be the per share earnings reflected on the
annual financial statement for the most recent fiscal year ending prior to the
date of the Purchasers' Demand and the daily trading price shall be the
"closing price" for such stock on the principal national securities exchange or
the Nasdaq National Market on which it is traded for a trading day. The
calculation for a company with more than one class of publically traded common
stock, shall be made based on the most actively publically traded class of
common stock for such company during the applicable valuation period. If either
ISC or PMI has a $0 or a negative per share earnings reflected on the
applicable financial statement, then the earnings multiple shall be calculated
with reference only to the corporation with positive per share earnings.
(iii) The product obtained after following the procedure specified in
subparagraph (ii) above shall then be discounted by twenty percent (20%) and
such discounted balance shall be the alternative purchase price for the Sanchez
Membership Interest.
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25.5 Tag Along Rights. In the event that ISC, or the ISC Affiliate owning
the ISC Interest, and PMI, or the PMI Affiliate owning the PMI Interest, shall
propose to sell in any transaction or series of related transactions at least
eighty percent (80%) of their entire Member Interest (as that term is defined
in the Company's Operating Agreement) then ISC and PMI shall provide written
notice of the proposed sale to all the other Members of the Company and provide
to such other Members the opportunity to sell a proportionate share of their
entire Member Interests at the same price per Member Unit and otherwise on the
same terms and conditions upon which the ISC Interest and the PMI Interest are
to be sold.
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed by their duly authorized representatives as of the
date first above written.
HOMESTEAD-MIAMI SPEEDWAY, LLC
By: /s/ Rafael Sanchez
---------------------------
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INTERNATIONAL SPEEDWAY CORPORATION
By: /s/ H. Lee Combs
-----------------------------
PENSKE MOTORSPORTS, INC.
By: /s/ Gregory Penske
-----------------------------
HOMESTEAD MOTORSPORTS JOINT VENTURE
By: /s/ Rafael Sanchez
-----------------------------
MIAMI MOTORSPORTS JOINT VENTURE,
By: /s/ Rafael Sanchez
-----------------------------
/s/ Rafael Sanchez
---------------------------------
RAFAEL A. SANCHEZ
/s/ Wayne Huizenga
---------------------------------
WAYNE HUIZENGA
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EXHIBIT A
CERTIFICATE OF FORMATION
OF
HOMESTEAD-MIAMI SPEEDWAY, LLC
The undersigned individual, acting as sole organizer, hereby forms a
limited liability company under the Delaware Limited Liability Company Act (the
"Act") and does hereby adopt as the Certificate of Formation of such limited
liability company the following:
Article I. Name. The name of the limited liability company shall be
Homestead-Miami Speedway, LLC (the "Company").
Article 2. Duration. The period of the Company's duration shall be
perpetual from the date of filing of these Articles of Organization with the
Secretary of State of the State of Delaware, until dissolved in accordance with
the Act.
Article 3. Purpose. The Company shall have unlimited power to engage in
and do any lawful act concerning any or all lawful businesses for which limited
liability companies may be organized according to the laws of the State of
Delaware, including all powers and purposes now and hereafter permitted by law
to a limited liability company.
Article 4. Registered Office and Registered Agent.
A. The Address of the registered office of the Company in Delaware is
30 The Green, Dover, Delaware 19903.
B. The name of the registered agent of the Company at the above
registered office is CT Corporation System.
Dated: ____________________, 1997.
ORGANIZER
Name:__________________________
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Printed:_______________________
<PAGE> 68
EXHIBIT B
OPERATING AGREEMENT
FOR
HOMESTEAD-MIAMI SPEEDWAY, LLC
JULY __, 1997
<PAGE> 69
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE I PURPOSES .................................................................................... 1
ARTICLE II ORGANIZATIONAL MATTERS ..................................................................... 1
Section 2.1. Formation ........................................................................... 1
Section 2.2. Principal Place of Business ......................................................... 1
Section 2.3. Registered Office and Registered Agent .............................................. 1
Section 2.4. Duration ............................................................................ 2
ARTICLE III MEMBERS AND CAPITAL STRUCTURE ............................................................. 2
Section 3.1. Names and Addresses of Members ...................................................... 2
Section 3.2. Units Representing Membership Interests ............................................. 2
Section 3.3. Capital Contributions ............................................................... 2
Section 3.4. Additional Capital .................................................................. 3
Section 3.5. Capital Accounts .................................................................... 3
Section 3.6. No Rights of Redemption ............................................................. 3
Section 3.7. Member Loans or Services ............................................................ 3
Section 3.8. Admission of Additional Members ..................................................... 4
Section 3.9. No Member Responsible for Other Member's Commitment ................................. 4
ARTICLE IV MEETINGS OF MEMBERS ........................................................................ 4
Section 4.1. Annual Meetings ..................................................................... 4
Section 4.2. Special Meetings .................................................................... 4
Section 4.3. Notice of Meetings .................................................................. 4
Section 4.4. Waiver of Notice .................................................................... 4
Section 4.5. Voting Rights ....................................................................... 5
Section 4.6. Action by Consent ................................................................... 5
Section 4.7. Presence ............................................................................ 5
Section 4.8. Conduct of Meetings ................................................................. 5
ARTICLE V MANAGERS 5
Section 5.1. Board of Managers ................................................................... 5
Section 5.2. Powers of the Managers .............................................................. 6
Section 5.3. Meetings ............................................................................ 6
Section 5.4. Tax Matters Manager ................................................................. 6
Section 5.5. Salaries ............................................................................ 7
Section 5.6. Vacancies ........................................................................... 7
</TABLE>
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<TABLE>
<S> <C>
Section 5.7. Removal of Managers and Officers .................................................... 7
ARTICLE VI ACCOUNTING AND RECORDS ..................................................................... 8
Section 6.1. Records and Accounting .............................................................. 8
Section 6.2. Access to Accounting Records ........................................................ 8
Section 6.3. Annual Tax Information .............................................................. 8
Section 6.4. Accounting Decisions ................................................................ 8
Section 6.5. Federal Income Tax Elections ........................................................ 8
ARTICLE VII ALLOCATIONS AND DISTRIBUTIONS ............................................................. 9
Section 7.1. Allocation of Net Income, Net Loss or Capital Gains ................................. 9
Section 7.2. Special Allocations ................................................................. 9
Section 7.3. Curative Allocations ................................................................ 11
Section 7.4. Distribution of Available Cash ...................................................... 11
Section 7.5. Allocation of Income and Loss and Distributions
in Respect of Interests Transferred ......................................................... 11
ARTICLE VIII RESTRICTIONS ON WITHDRAWAL AND TRANSFERS OF INTERESTS .................................... 12
Section 8.1. Withdrawal .......................................................................... 12
Section 8.2. Basic Restrictions on Transfer ...................................................... 12
Section 8.3. Further Restrictions on Transfer .................................................... 12
Section 8.4. Status of Transferee and Transferor ................................................. 12
Section 8.5. Pledge of Interests ................................................................. 13
Section 8.6. Right of First Refusal .............................................................. 13
Section 8.7. Effect of a Permitted Transfer ...................................................... 14
Section 8.8. Effect of a Violation ............................................................... 14
ARTICLE IX DISSOCIATION OF A MEMBER ................................................................... 14
Section 9.1. Dissociation ........................................................................ 14
Section 9.2. Rights of Dissociating Member ....................................................... 15
ARTICLE X DISSOLUTION AND WINDING UP .................................................................. 15
Section 10.1. Dissolution ........................................................................ 15
Section 10.2. Winding Up ........................................................................ 15
Section 10.3. Distribution of Assets ............................................................. 16
ARTICLE XI AMENDMENTS ................................................................................. 16
Section 11.1. Proposal of Amendments ............................................................. 16
Section 11.2. Approval of Amendments ............................................................. 16
</TABLE>
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<TABLE>
<S> <C>
ARTICLE XII MISCELLANEOUS ............................................................................. 17
Section 12.1. Complete Agreement ................................................................. 17
Section 12.2. Governing Law ...................................................................... 17
Section 12.3. Binding Effect; Conflicts .......................................................... 17
Section 12.4. Headings; Interpretation ........................................................... 17
Section 12.5. Severability ....................................................................... 17
Section 12.6. Multiple Counterparts .............................................................. 17
Section 12.7. Additional Documents and Acts ...................................................... 18
Section 12.8. No Third Party Beneficiary ......................................................... 18
Section 12.9. Notices ............................................................................ 18
Section 12.10. Title to Company Property ......................................................... 18
Section 12.11. Reliance on Authority of Person Signing Agreement ................................. 18
Section 12.12. No Remedies Exclusive ............................................................. 18
Section 12.13. Advice of Counsel ................................................................. 19
Section 12.14. Other Ventures .................................................................... 19
Section 12.15. Early Termination of Membership ................................................... 19
</TABLE>
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<PAGE> 72
OPERATING AGREEMENT FOR
HOMESTEAD-MIAMI SPEEDWAY, LLC
THIS OPERATING AGREEMENT (this "Agreement") is made and entered into this
_____________ day of July, 1997, by and among the undersigned parties, as
initial members of the Homestead-Miami Speedway, LLC, a Delaware limited
liability company (the "Company"). The Company was organized as a limited
liability company under the Delaware Limited Liability Company Act, as amended,
Title 6, Chapter 18-101 et seq. (the "Act"). Certain defined terms used in
this Agreement are set forth in Schedule I (Schedule of Definitions) attached
hereto and made a part hereof. In consideration of the mutual covenants and
agreements contained in this Agreement and other good and valuable
consideration, and intending to be legally bound hereby, the undersigned
parties hereby agree as follows:
ARTICLE I
PURPOSES
As set forth in the Articles of Organization, the purposes of the Company
are to engage in and do any act in furtherance of any and all lawful businesses
for which limited liability companies may be formed under the Act.
ARTICLE II
ORGANIZATIONAL MATTERS
SECTION 2.1. FORMATION. The Company was formed pursuant to the Act upon
the filing of Articles of Organization ("Articles"). The rights and
obligations of the Members shall be as provided under the Act, the Articles and
this Agreement. The Members agree to each of the provisions of the Articles.
SECTION 2.2. PRINCIPAL PLACE OF BUSINESS. The principal place of
business of the Company shall be One Speedway Boulevard, Homestead, Florida
33015, or such other address as may be established by the Members.
SECTION 2.3. REGISTERED OFFICE AND REGISTERED AGENT. The Company's
registered office shall be 30 The Green, Dover, Delaware 19903 and the name of
its initial registered agent at such address shall be CT Corporation System.
The Company may designate another registered office or agent at any time by
following the procedures set forth in the Act.
<PAGE> 73
SECTION 2.4. DURATION. The existence of the Company shall continue in
perpetuity, unless the Company is sooner dissolved in accordance with Article
X, Section 6 of the Articles or the Act.
ARTICLE III
MEMBERS AND CAPITAL STRUCTURE
SECTION 3.1. NAMES AND ADDRESSES OF MEMBERS. All Members of the Company
and their last known business, residence or mailing address shall be listed on
the attached Exhibit A. The Members shall be required to update Exhibit A from
time to time as necessary to accurately reflect the information therein,
including the information referred to in Section 3.2 below.
SECTION 3.2. UNITS REPRESENTING MEMBERSHIP INTERESTS. The Interests of
Members in the Company are divided into and represented by Units. Each
Member's respective number of Units is set forth in Exhibit A, as the same
shall be amended from time to time to reflect any changes in the number of
Units of Members. The Members agree that each Unit shall entitle the Member
possessing such Unit to:
(a) Equal governance rights per Unit and to one vote per Unit on matters
on which the Members may vote under the Articles, this Agreement and/or the
Act;
(b) Subject to Article VII, an equal proportionate share per Unit of the
Company's net income, gains, losses, deductions and credits; and
(c) Subject to Article X, an equal proportionate share per Unit of amounts
distributed to the Members in respect of their Interests upon dissolution of
the Company.
Unless otherwise approved by the Members, the Company will not issue
certificates representing Units, but at the written request of a Member, the
Company will provide a certified statement setting forth the total number of
Units issued and outstanding and the number of Units issued to the requesting
Member, as of the date of the statement.
SECTION 3.3. CAPITAL CONTRIBUTIONS. The initial Capital Contribution to
the Company of each Member is set forth on Exhibit A. Absent approval by a
Majority in Interest of the Members, no Capital Contributions may be made other
than in cash and the Company shall not be obligated to recognize as a Capital
Contribution any transfer to the Company of property other than cash. No
interest shall be paid on any Capital Contribution.
SECTION 3.4. ADDITIONAL CAPITAL. Absent approval by a Majority in
Interest of the Members, the Members shall not be obligated to make any Capital
Contributions other than the initial Capital Contributions specified in Section
3.3. Absent approval of
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a Majority In Interest of the Members, no Member shall have the right to make
Capital Contributions beyond that Member's initial Capital Contribution as
specified in Section 3.3.
SECTION 3.5. CAPITAL ACCOUNTS.
(a) An individual capital account (the "Capital Account") shall be
established and maintained on behalf of each Member, including any Additional
Member who shall hereafter receive an Interest, in the manner provided by
Treasury Regulation Section 1.704-l(b)(2)(iv). To the extent consistent with
Treasury Regulation Section 1.704-l(b)(2)(iv), the Capital Account of each
Member shall consist of (i) the amount of cash such Member has contributed to
the Company, plus (ii) the agreed fair market value of any property such Member
has contributed to the Company, net of any liabilities assumed by the Company
or to which such property is subject, plus (iii) the amount of profits or
income (including tax-exempt income) allocated to such Member, less (iv) the
amount of losses and deductions allocated to such Member, less (v) the amount
of all cash distributed to such Member, less (vi) the fair market value of any
property distributed to such Member, net of any liability assumed by such
Member or to which such property is subject, less (vii) such Member's share of
any other expenditures which are not deductible by the Company for federal
income tax purposes or which are not allowable as additions to the basis of
Company property, and (viii) subject to such other adjustments as may be
required under the Code. The Capital Account of a Member shall not be affected
by any adjustments to basis made pursuant to Section 743 of the Code but shall
be adjusted with respect to adjustments to basis made pursuant to Section 734
of the Code to the extent provided in Treasury Regulation Section
1.704-l(b)(2)(iv)(m).
(b) Except as is specifically provided otherwise in this Agreement, no
Member shall have any liability or obligation to restore a negative or deficit
balance in such Member's Capital Account.
SECTION 3.6. NO RIGHTS OF REDEMPTION. No Member shall have the right to:
(a) have that Member's Units or Interest redeemed, (b) have that Member's
Capital Contribution returned, or (c) subject to Article VII and Article X,
otherwise receive property of the Company; even if that Member dissociates
prior to termination of the Company. Even at termination, the Member's rights
are limited to those set forth in Article X. To the extent a Member has a
right to demand a distribution or return of the Member's Capital Contributions,
the Member shall have only the right to demand and receive cash therefor.
SECTION 3.7. MEMBER LOANS OR SERVICES. Unless otherwise approved by a
Majority in Interest of the Members, loans or services by any Member to the
Company shall not be considered Capital Contributions.
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SECTION 3.8. ADMISSION OF ADDITIONAL MEMBERS. With the approval of a
Majority in Interest of the Members to the Company Additional Members who will
be entitled to participate in the rights of Members as described in Section
3.2. Additional Members shall be allocated net income, gains, losses,
deductions and credits by such method as may be provided in this Agreement, and
if no method is specified, then as may be permitted by Section 706(d) of the
Code.
SECTION 3.9. NO MEMBER RESPONSIBLE FOR OTHER MEMBER'S COMMITMENT. In the
event that any Member (or any of such Member's shareholders, partners, members,
owners, or Affiliates (collectively, the "Liable Member")) has incurred any
indebtedness or obligation prior to the date of this Agreement that relates to
or otherwise affects the Company, neither the Company nor any other Member
shall have any liability or responsibility for or with respect to such
indebtedness or obligation.
ARTICLE IV
MEETINGS OF MEMBERS
SECTION 4.1. ANNUAL MEETINGS. Annual meetings of the Members shall be
held no later than ninety (90) days following the close of the Company's fiscal
year at the principal offices of the Company, or on such other date or at such
other place as may be designated by a Majority in Interest of the Members.
SECTION 4.2. SPECIAL MEETINGS. Special meetings of the Members, for any
purpose or purposes, unless otherwise prescribed by statute, may be called by
any Member upon notice in writing to the Company of the proposed meeting and
the matters proposed to be acted upon.
SECTION 4.3. NOTICE OF MEETINGS. The Company shall deliver or mail
written notice stating the date, time and place of any Members' meeting and, in
the case of a special Members' meeting or when otherwise required by law, a
description of the purposes for which the meeting is called, to each Member of
record entitled to vote at the meeting, at such address as appears in the
records of the Company and at least five (5), but no more than sixty (60), days
before the date of the meeting.
SECTION 4.4. WAIVER OF NOTICE. A Member may waive notice of any meeting,
before or after the date and time of the meeting as stated in the notice, by
delivering a signed waiver to the Company for inclusion in the minutes. A
Member's attendance at any meeting, in person or by proxy (a) waives objection
to lack of notice or defective notice of the meeting, unless the Member at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting, and (b) waives objection to consideration of a particular
matter at the meeting that is not within the purposes described in the meeting
notice, unless the Member objects to considering the matter when it is
presented.
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SECTION 4.5. VOTING RIGHTS. Except as otherwise provided herein, on all
matters that come before the Members for a vote, each Member shall be entitled
to one vote for each Unit owned by such Member. The presence of a Majority in
Interest of the Members shall constitute a quorum for any meeting of the
Members. Except as otherwise provided in this Agreement, approval of any
action by Majority in Interest of the Members requires the approval of a
Majority in Interest of the Members.
SECTION 4.6. ACTION BY CONSENT. Any action required or permitted to be
taken at a Members' meeting may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the
Members. The written consent or consents shall be delivered to the Company for
inclusion in its minutes.
SECTION 4.7. PRESENCE. Any or all Members may participate in any annual
or special Members' meeting by, or through the use of, any means of
communication by which all Members participating may simultaneously hear each
other during the meeting. A Member so participating is deemed to be present in
person at the meeting.
SECTION 4.8. CONDUCT OF MEETINGS. At any Members' meeting, the Members
with the approval of a Majority in Interest of the Members shall appoint a
Member to preside at the meeting and shall appoint a person to act as secretary
of the meeting. The secretary of the meeting shall prepare minutes of the
meeting which shall be placed in the minute book of the Company.
ARTICLE V
MEMBER COMMITTEE
SECTION 5.1. MEMBER COMMITTEE.
(a) The day to day management and administration of the business and
affairs of the Company shall be under the direction, supervision, control and
authority of a Member Committee (the "Member Committee"). The Member Committee
shall consist of one representative from each Member for each 10 Units owned by
such Member. In addition, each Member appointing representatives to the Member
Committee shall appoint an alternate representative to serve in lieu of the
regular representative on the Member Committee. No member of the Member
Committee shall be compensated by the Company, including out-of-pocket costs.
The Member Committee shall devote such time to the Company as may be reasonably
required for the achievement of the purposes of the Company. A Member electing
a representative to the Member Committee may remove and replace such
representative at any time upon notice to the other Members.
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(b) In addition to the terms and conditions of this Operating Agreement
the Member Committee shall adopt rules and regulations governing the conduct of
the business and affairs of the Company and of the Member Committee.
(c) For as long as Miami Motorsports Joint Venture is permitted to appoint
at least one representative to the Member Committee, Wayne Huizenga shall be
appointed as a representative. For as long as Homestead Motorsports Joint
Venture is permitted to appoint at least one representative to the Member
Committee, Rafael A. Sanchez shall be appointed as a representative.
ARTICLE VI
ACCOUNTING AND RECORDS
SECTION 6.1. RECORDS AND ACCOUNTING. The books and records of the
Company shall be kept, and the financial position and the results of its
operations recorded, in accordance with generally accepted accounting
principles consistently applied ("GAAP"). The books and records of the Company
shall reflect all Company transactions and shall be appropriate and adequate
for the Company's business. The fiscal year of the Company for financial
reporting and for federal income tax purposes shall be the calendar year.
SECTION 6.2. ACCESS TO ACCOUNTING RECORDS. All books and records of the
Company shall be maintained at any office of the Company or at the Company's
principal place of business, and each Member, and his, her, or its duly
authorized representative, may inspect and copy such books and records upon
reasonable notice and request, during normal business hours.
SECTION 6.3. ANNUAL TAX INFORMATION. The Company shall use its best
efforts to deliver to each Member within 60 days after the end of each fiscal
year all information necessary for the preparation of such Member's federal and
state income tax returns. The Company shall also use its best efforts to
prepare, within 60 days after the end of each fiscal year, a financial report
of the Company for such fiscal year containing a balance sheet as of the last
day of the year then ended, an income statement for the year then ended, a
statement of sources and applications of funds, and a statement of
reconciliation of the Capital Accounts of the Members.
SECTION 6.4. ACCOUNTING DECISIONS. All decisions as to accounting
matters, except as otherwise specifically set forth in this Agreement, shall be
made by the Members. The Members may rely upon the advice of their accountants
as to whether such decisions are in accordance with GAAP.
SECTION 6.5. FEDERAL INCOME TAX ELECTIONS. The Company shall make an
election under Section 754 of the Code to adjust the basis of assets of the
Company. The
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Company may make, but is not required to make, any other elections for federal
income tax purposes including, but not limited to, any election to use an
accelerated depreciation method on any depreciable unit of the assets of the
Company to the extent permitted by law.
ARTICLE VII
ALLOCATIONS AND DISTRIBUTIONS
SECTION 7.1. ALLOCATION OF NET INCOME, NET LOSS OR CAPITAL GAINS. Except
as may be expressly provided otherwise in this Article VII, and subject to the
provisions of Sections 704(b) and 704(c) of the Code, the net income, net loss,
or capital gains of the Company for each fiscal year of the Company shall be
allocated to the Members, pro rata in accordance with their respective
Percentage Interests.
SECTION 7.2. SPECIAL ALLOCATIONS. The following special allocations
shall be made in the following order:
(a) Minimum Gain Chargeback. Except as otherwise provided in Treasury
Regulation Section 1.704-2(f), notwithstanding any other provision of this
Article VII, if there is a net decrease in Company Minimum Gain during any
fiscal year, each Member shall be specially allocated items of Company income
and gain for such fiscal year (and, if necessary, subsequent fiscal years) in
an amount equal to such Member's share of the net decrease in Company Minimum
Gain, determined in accordance with Treasury Regulation Section 1.704-2(g).
Allocations pursuant to the previous sentence shall be made in proportion to
the respective amounts required to be allocated to each Member pursuant
thereto. The items to be so allocated shall be determined in accordance with
Treasury Regulation Sections 1.704-2(f)(6) and 1.7042(j)(2). This Section
7.2(a) is intended to comply with the minimum gain chargeback requirement in
Treasury Regulation Section 1.704-2(f) and shall be interpreted consistently
therewith.
(b) Member Nonrecourse Debt Minimum Gain Chargeback. Except as otherwise
provided in Treasury Regulation Section 1.704-2(i)(4), notwithstanding any
other provision of this Article VII, if there is a net decrease in Member
Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse Debt during
any Fiscal Year, each Member who has a share of the Member Nonrecourse Debt
Minimum Gain attributable to such Member Nonrecourse Debt, determined in
accordance with Treasury Regulation Section 1.704-2(i)(5), shall be
specifically allocated items of Company income and gain for such fiscal year
(and, if necessary, subsequent fiscal years) in an amount equal to such
Member's share of the net decrease in Member Nonrecourse Debt Minimum Gain
attributable to such Member Nonrecourse Debt, determined in accordance with
Treasury Regulation Section 1.704-2(i)(4). Allocations pursuant to the
previous sentence shall be made in proportion to the respective amounts
required to be allocated to each Member pursuant thereto. The items to be so
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allocated shall be determined in accordance with Treasury Regulation Sections
1.704-2(i)(4) and 1.704-2(j)(2). This Section 7.2(b) is intended to comply
with the minimum gain chargeback requirement in Treasury Regulation Section
1.704-2(i)(4) and shall be interpreted consistently therewith.
(c) Qualified Income Offset. In the event any Member unexpectedly
receives any adjustments, allocations, or distributions described in Treasury
Regulation Sections 1.7041(b)(2)(ii)(d)(4),1.704-1(b)(2)(ii)(d)(5) or
1.704-l(b)(2)(ii)(d)(6), items of Company income and gain shall be specially
allocated to each such Member in an amount and manner sufficient to eliminate,
to the extent required by the Treasury Regulations, the Adjusted Capital
Account Deficit of such Member as quickly as possible, provided that an
allocation pursuant to this Section 7.2(c) shall be made only if and to the
extent that such Member would have an Adjusted Capital Account Deficit after
all other allocations provided for in this Article VII have been tentatively
made as if this Section 7.2(c) were not in the Agreement.
(d) Gross Income Allocation. In the event any Member has a deficit
Capital Account at the end of any fiscal year which is in excess of the sum of
(i) the amount such Member is obligated to restore pursuant to any provision of
this Agreement, and (ii) the amount such Member is deemed to be obligated to
restore pursuant to the penultimate sentences of Treasury Regulation Sections
1.704-2(g)(1) and 1.704-2(i)(5), each such Member shall be specially allocated
items of Company income and gain in the amount of such excess as quickly as
possible, provided that an allocation pursuant to this Section 7.2(d) shall be
made only if and to the extent that such Member would have a deficit Capital
Account in excess of such sum after all other allocations provided for in this
Article VII have been made as if Section 7.2(c) hereof and this Section 7.2(d)
were not in the Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal year
shall be specifically allocated among the Members in proportion to their
Percentage Interests.
(f) Member Nonrecourse Deductions. Any Member Nonrecourse Deductions for
any fiscal year shall be specially allocated to the Member who bears the
economic risk of loss with respect to the Member Nonrecourse Debt to which such
Member Nonrecourse Deductions are attributable in accordance with Treasury
Regulation Section 1.704-2(i)(1).
(g) Section 754 Adjustments. To the extent an adjustment to the adjusted
tax basis of any Company asset pursuant to Section 734(b) or Section 743(b) of
the Code is required pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(m)(2) or 1.704-l(b)(2)(iv)(m)(4) to be taken into account in
determining Capital Accounts as the result of a distribution to a Member in
complete liquidation of the Member's Interest in the Company, the amount of
such adjustment to Capital Accounts shall be treated as an
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item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis), and such gain or loss shall be specially
allocated to the Members in accordance with their Interests in the Company in
the event Treasury Regulation Section 1.704(b)(2)(iv)(m)(2) applies, or to the
Member to whom such distribution was made in the event Treasury Regulation
Section 1.704-1(b)(2)(iv)(m)(4) applies.
SECTION 7.3. CURATIVE ALLOCATIONS. The allocations set forth in Sections
7.2(a) through 7 2(g) hereof (the "Regulatory Allocations") are intended to
comply with certain requirements of the Treasury Regulations. It is the intent
of the Members that, to the extent possible, all Regulatory Allocations shall
be offset either with other Regulatory Allocations or with special allocations
of other items of Company income, gain, loss or deduction pursuant to this
Section 7.3. Therefore, notwithstanding any other provision of this Article
VII (other than the Regulatory Allocations), the Members shall make such
offsetting special allocations of Company income, gain, loss, or deduction so
that, after such offsetting allocations are made, each Member's Capital Account
balance is, to the extent possible, equal to the Capital Account balance such
Member would have had if the Regulatory Allocations were not part of the
Agreement and all Company items were allocated pursuant to Section 7.1.
SECTION 7.4. DISTRIBUTION OF AVAILABLE CASH. Subject to Sec. 18-607 of
the Act, within 90 days after the end of each calendar year, Available Cash, if
any, shall be distributed to the Members, pro rata in accordance with their
respective Percentage Interests, in an amount equal to the product of (a) the
Company's taxable income (as determined by the Company's accountant) for such
calendar year, multiplied by (b) the highest combined federal and state
marginal income tax rate applicable to a Member and in effect from time to
time. Additional distributions may be made at the discretion of a Majority in
Interest of the Members.
SECTION 7.5. ALLOCATION OF INCOME AND LOSS AND DISTRIBUTIONS IN RESPECT
OF INTERESTS TRANSFERRED.
(a) If any Interest is transferred, or is increased or decreased by reason
of the admission of an Additional Member or otherwise, during any fiscal year
of the Company, each item of net income, gain, loss, deduction, or credit of
the Company for such fiscal year shall be assigned pro rata to each day in the
particular period of such fiscal year to which such item is attributable (i.e.,
the day on or during which it is accrued or otherwise incurred), and the amount
of each such item so assigned to any such day shall be allocated to the Member
based upon the Member's respective Percentage Interest at the close of such
day.
(b) Authorized distributions of Company assets in respect of an Interest
shall be made only to the Members who, according to the books and records of
the Company, are the holders of record of the Interests in respect of which
such distributions are made on the actual date of distribution. Neither the
Company nor any
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Member shall incur any liability for making distributions in accordance with the
provisions of the preceding sentence, whether or not the Company or the Member
has knowledge or notice of any transfer or purported transfer of ownership of an
Interest which has not met the requirements of Article VIII. Notwithstanding
any provision above to the contrary, gain or loss of the Company realized in
connection with a sale or other disposition of any of the assets of the Company
shall be allocated solely to the parties owning Interests as of the date such
sale or other disposition occurs.
ARTICLE VIII
RESTRICTIONS ON WITHDRAWAL AND TRANSFERS OF INTERESTS
SECTION 8.1. WITHDRAWAL. No Member shall withdraw from the Company or
otherwise voluntarily cause an Event of Dissociation as to that Member except
upon not less than sixty (60) calendar days prior written notice to the
remaining Members. Upon any such withdrawal or other voluntarily caused Event
of Dissociation, the Member shall be an Assignee as to the Member's Units, but
shall not be entitled to have the Member's Interest redeemed or to otherwise
receive any distribution or other payment on account of the Member's withdrawal
or other voluntarily caused Event of Dissociation. The Company may recover
damages for breach of this Section 8.1 and may offset the Company's damages
against any amount owed to a Member for distributions or otherwise.
SECTION 8.2. BASIC RESTRICTIONS ON TRANSFER. None of the Units
(Interest) of a Member or any portion thereof shall be the subject of a
Transfer, unless the Member has either obtained the prior written consent of a
Majority in Interest of the Members or has fully complied with the provisions
of Section 8.6 and then only in strict accordance with Section 8.6. Any
Transfer or purported Transfer not in compliance with this Article VIII shall
be null and void. Except with the prior written consent of all Members, no
Member shall be permitted to transfer less than all of the Member's Interest.
SECTION 8.3. FURTHER RESTRICTIONS ON TRANSFER. In addition to the
restrictions set forth in Section 9.2, no Member shall Transfer all or any part
of the Member's Interest: (a) without registration under applicable state
securities laws, unless an exemption therefrom applies and, if requested by the
Company, the Member delivers an opinion of counsel satisfactory to the Company,
that registration under any such laws is not required; or (b) if the Interest
or portion thereof, when added to the total of all other Interests sold or
exchanged in the preceding 12 consecutive months prior thereto, would result in
the termination of the Company for tax purposes under Section 708 of the Code.
SECTION 8.4. STATUS OF TRANSFEREE AND TRANSFEROR. Notwithstanding
anything contained in this Agreement to the contrary, any transferee or
recipient of a Unit or Units (or any portion thereof) subject to an effective
Transfer shall be an Assignee and
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shall have no right to (a) vote any Units or portion thereof subject to the
Transfer or to otherwise participate in the management of the business or
affairs of the Company, (b) become a Substitute Member or otherwise exercise any
rights of a Member, or (c) have access to the Company records; unless the
remaining Members, in their sole and absolute discretion approve the admission
of the Assignee as a Substitute Member, and the Assignee executes documentation
satisfactory to the remaining Members accepting and adopting the terms of this
Agreement. The Assignee shall pay all reasonable expenses of the Company in
connection with his or her admission as a Substitute Member. The transferor in
a Transfer of the transferor's entire Interest to an Assignee shall cease to be
a Member and shall not have any power to exercise any rights of a Member;
provided, however, that such transferor is not released from any unpaid
contributions or other liability.
SECTION 8.5. PLEDGE OF INTERESTS. The pledge or granting of a security
interest, lien or other encumbrance in or against all or any portion of a
Member's Interest shall be a Transfer subject to the restrictions of this
Article VIII; provided, that, in any event, the foreclosure of or exercise of
other secured party remedies with respect to such pledge, security interest,
lien or other encumbrance resulting in a Transfer of any such Interest shall
nonetheless be a Transfer subject to the restrictions of this Article VIII.
SECTION 8.6. RIGHT OF FIRST REFUSAL. Subject to other applicable
restrictions set forth in this Article VIII:
(a) A Member or Assignee which desires to sell all (but not less than all)
of its Units to a third party ("Transferor") shall first obtain from such third
party a bona fide written offer to purchase all such Units, stating the terms
and conditions upon which the purchase is to be made and the consideration
offered therefor (the "Offer"). The Transferor shall give notice to the
remaining Member of its intention to sell, furnishing a copy of the Offer and
any proposed documentation for the transaction. No member shall be permitted
to sell less than all its Units except as otherwise permitted by this Agreement
without the consent of a Majority in Interest of the Members.
(b) The remaining Members (not Assignees), shall have the right to
purchase all (but not less than all) of the Units proposed to be sold upon the
same terms and conditions stated in the Offer, by giving notice to the
Transferor of its intention to do so within 30 days after receiving notice from
the Transferor. If the remaining Members do not notify the Transferor of an
intention to exercise this right of first refusal within the 30 day period, the
right of first refusal with respect to the Offer shall terminate and the
Transferor shall be entitled to consummate the proposed sale of its Units,
provided that such sale is (i) on substantially the same terms as the Offer and
(ii) consummated within 45 days of the expiration of the right of first
refusal. In the event the remaining Members give written notice to the
Transferor of their intention to exercise this right of first refusal and to
purchase all of the Transferor's Units on the terms and conditions stated in
the Offer, the remaining Members shall have the right to designate the time,
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date and place of closing, provided that the date of closing shall be within 45
days after receipt of written notification from the Transferor of the Offer.
If the remaining Members collectively indicate a desire to purchase more Units
than are proposed to be sold, and do not agree among themselves as to an
allocation of the Units, the remaining Member shall have the right to each
purchase their proportionate share of the Units to be sold.
A transferee of an Interest shall have the right to become a Substitute
Member only if: (a) the requirements of this Article VIII, specifically
including, but not limited to, Section 8.4, are met, (b) the transferee
executes an instrument satisfactory as determined by the Board of Managers, not
including the transferee, accepting and adopting the terms and provisions of
this Agreement, and (c) the transferee pays any and all expenses in connection
with admission as a Member.
SECTION 8.7. EFFECT OF A PERMITTED TRANSFER. Unless the parties to a
transfer and the Company expressly agree otherwise, any permitted transfer of a
Member's Interest in the Company will take effect as of the end of the month in
which consummation of the transfer has occurred. Any transferee of an Interest
in the Company shall take the Interest subject to the restrictions on transfer
imposed by this Agreement.
SECTION 8.8. EFFECT OF A VIOLATION. Any attempted or purported transfer
of a Member's Interest in the Company in violation of this Agreement shall be
void and of no force or effect.
Without limiting the preceding sentence in any way, if the transferee of any
such attempted or purported transfer is nonetheless found to have rights in the
subject Interest, the Transferee shall be an Assignee with rights limited to
those set forth in Section 8.4.
ARTICLE IX
DISSOCIATION OF A MEMBER
SECTION 9.1. DISSOCIATION. A person ceases to be a Member upon the
occurrence of any of the following events (each an "Event of Dissociation"):
(a) The Member withdraws from membership in the Company, including any
retirement or resignation from membership in the Company (as opposed to
retirement or resignation merely from employment with the Company or any
position as an officer of the Company);
(b) The Member transfers its Interest, whether or not the Assignee is
admitted as a Substitute Member;
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(c) In the case of a Member who is a Member by virtue of being a trustee
of a trust, the termination of the trust, but not merely the substitution of a
new trustee;
(d) In the case of a Member that is a partnership, limited partnership,
limited liability partnership or limited liability company, the dissolution and
commencement of winding up of the partnership, limited partnership, limited
liability partnership or limited liability company;
(e) In the case of a Member that is a corporation, the dissolution of the
corporation;
(f) In the case of a Member that is an estate, the distribution by the
fiduciary of the estate's entire Interest in the Company;
(g) Bankruptcy of the Member; or
(h) Expulsion of a Member.
SECTION 9.2. RIGHTS OF DISSOCIATING MEMBER. Upon an Event of
Dissociation as to a Member:
(a) If the Event of Dissociation causes a dissolution and winding up of
the Company under Article X, the Member shall be entitled to participate in the
winding up of the Company to the same extent as any other Member, except that
if the Event of Dissociation is a breach of this Agreement, any distributions
to which the Member would have been entitled shall be reduced by any damages
sustained by the Company as a result of the dissolution and winding up; and
(b) If the Event of Dissociation does not cause a dissolution and winding
up of the Company under Article X, the Member shall not be entitled to any
distribution solely by reason of the Member's dissociation, and thereafter
shall only be entitled to participate as an Assignee in the Company. The
Member shall not be entitled to a redemption of the Member's Interest or
otherwise receive the value of the Member's Interest until such time, and in
the manner, provided under Article X for the dissolution and winding up of the
Company.
ARTICLE X
DISSOLUTION AND WINDING UP
SECTION 10.1. DISSOLUTION. The Company shall be dissolved and its
affairs wound up on the first of the following to occur:
(a) A unanimous determination by the Members that the Company shall be
dissolved;
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(b) An Event of Dissociation occurs, unless the remaining Members elect to
continue the business of the Company within 90 days after the remaining Members
are notified in writing of the Event of Dissociation; or
(c) At such earlier time as may be provided by applicable law.
SECTION 10.2. WINDING UP. Upon dissolution, the Members shall proceed to
wind up and liquidate the business and affairs of the Company, and the Company
may only carry on business that is appropriate to wind up and liquidate the
business and affairs of the Company, including the following: (a) collecting
the Company's assets, (b) disposing of properties that will not be distributed
in kind to Members, (c) discharging or making provision for discharging
liabilities, (d) distributing the remaining property among the Members, and (e)
doing every other act necessary to wind up and liquidate the business and
affairs of the Company. The Members shall follow the procedure for disposing
of known claims set forth in the Act and shall publish notice of the
dissolution of the Company pursuant to the Act.
SECTION 10.3. DISTRIBUTION OF ASSETS. Upon the winding up of the
Company, the assets shall be distributed as follows:
(a) To creditors, including Members who are creditors to the extent
permitted by law, in the order of priority as provided by law to satisfy the
liabilities of the Company whether by payment or by the establishment of
adequate reserves, excluding liabilities for distributions to Members pursuant
to Article VII;
(b) To Members to repay any loans to the Company or to satisfy any
liabilities for distributions pursuant to Article VII which remain unpaid;
(c) To Members of the Company in respect of their share of the profits and
other compensation by way of income on their Capital Contributions to the
extent each such Member has a positive balance in his Capital Account as
provided in Treasury Regulation Section 1.704-1(b)(2)(ii)(b)(2); and
(d) To Members of the Company in respect of their Capital Contributions to
the extent each such Member has a positive balance in his Capital Account as
provided in Treasury Regulation Section 1.704-l(b)(2)(ii)(b)(2).
ARTICLE XI
AMENDMENTS
SECTION 11.1. PROPOSAL OF AMENDMENTS. Amendments to the Articles and
this Agreement may be proposed in writing by any Member. If any such proposed
amendment could adversely affect the classification of the Company as a
partnership for federal income tax purposes, the proposed amendment must be
accompanied by an
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opinion of counsel as to the legality and effect on the Company and the
Members. Copies of any amendments proposed to be made pursuant to this
Section 11.1 shall be sent to the Members.
SECTION 11.2. APPROVAL OF AMENDMENTS. A proposed amendment shall be
voted upon at either an annual meeting or a special meeting of the Members duly
called for the purpose of voting on the amendment. Such votes shall be
exercised as provided in Article IV, and such amendment shall be approved by a
unanimous vote of the Members.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1. COMPLETE AGREEMENT. This Agreement and the Articles
constitute the complete and exclusive statement of agreement among the Members
with respect to its subject matter. This Agreement and the Articles replace
and supersede all prior agreements by and among the Members or any of them.
This Agreement and the Articles supersede all prior written and oral
statements, and no representation, statement, or condition or warranty not
contained in this Agreement or the Articles will be binding on the Members or
have any force or effect whatsoever.
SECTION 12.2. GOVERNING LAW. This Agreement and the rights of the
parties under this Agreement will be governed by, interpreted, and enforced in
accordance with the laws of the State of Delaware.
SECTION 12.3. BINDING EFFECT: CONFLICTS. Subject to the provisions of
this Agreement relating to transferability, this Agreement will be binding upon
and inure to the benefit of the Members and their respective distributees,
successors and assigns. This Agreement is subject to, and governed by, the Act
and the Articles. In the event of a direct conflict between the provisions of
this Agreement and the mandatory provisions of the Act or the provisions of the
Articles, the provisions of the Act or the Articles, as the case may be, will
be controlling.
SECTION 12.4. HEADINGS: INTERPRETATION. All headings herein are inserted
only for convenience and ease of reference and are not to be considered in the
construction or interpretation of any provision of this Agreement. The
singular shall include the plural, and the masculine gender shall include the
feminine and neuter, and vice versa, as the context requires.
SECTION 12.5. SEVERABILITY. If any provision of this Agreement is held
to be illegal, invalid, unreasonable, or unenforceable under the present or
future laws effective during the term of this Agreement, such provision will be
fully severable; this Agreement will be construed and enforced as if such
illegal, invalid, unreasonable, or
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unenforceable provision had never comprised a part of this Agreement; and the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid, unreasonable, or unenforceable
provision or by its severance from this Agreement. Furthermore, in lieu of such
illegal, invalid, unreasonable, or unenforceable provision, there will be added
automatically as a part of this Agreement a provision as similar in terms to
such illegal, invalid, unreasonable, or unenforceable provision as may be
possible and be legal, valid, reasonable, and enforceable.
SECTION 12.6. MULTIPLE COUNTERPARTS. This Agreement may be executed in
several counterparts, each of which will be deemed an original but all of which
will constitute one and the same instrument. However, in making proof with
respect to this Agreement it will be necessary to produce only one copy hereof
signed by the party to be charged.
SECTION 12.7. ADDITIONAL DOCUMENTS AND ACTS. Each Member agrees to
promptly execute and deliver to the Company such additional documents,
statements of interest and holdings, designations, powers of attorney, and
other instruments, and to perform such additional acts, as the Company may
determine to be necessary, useful or appropriate to complete the organization
of the Company, effectuate, carry out and perform all of the terms, provisions,
and conditions of this Agreement and the transactions contemplated by this
Agreement, and to comply with all applicable laws, rules and regulations.
SECTION 12.8. NO THIRD PARTY BENEFICIARY. This Agreement is made solely
and specifically among and for the benefit of the Members and their respective
successors and assigns subject to the express provisions of this Agreement
relating to successors and assigns. This Agreement is expressly not intended
for the benefit of any creditor of the Company or any other third party. No
creditor or other third party will have any rights, interest, or claims under
the Agreement or be entitled to any benefits under or on account of this
Agreement as a third party beneficiary or otherwise.
SECTION 12.9. NOTICES. Any notice to be given or to be served upon the
Company or any Member in connection with this Agreement must be in writing and
will be deemed to have been given and received when delivered to the address
specified by the party to receive the notice. Such notices will be given to a
Member at the address specified on Exhibit A. Any Member or the Company may,
at any time by giving five days' prior written notice to the other Members and
the Company, designate any other address in substitution of the foregoing
address to which such notice will be given.
SECTION 12.10. TITLE TO COMPANY PROPERTY. Legal title to all property of
the Company will be held and conveyed in the name of the Company.
SECTION 12.11. RELIANCE ON AUTHORITY OF PERSON SIGNING AGREEMENT. In the
event that a Member is not a natural person, neither the Company nor any Member
will
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(a) be required to determine the authority of the individual signing this
Agreement to make any commitment or undertaking on behalf of such Person or to
determine any fact or circumstance bearing upon the existence of the authority
of such individual, or (b) be required to see to the application or
distribution of proceeds paid or credited to individuals signing this Agreement
on behalf of such Entity.
SECTION 12.12. NO REMEDIES EXCLUSIVE. To the extent any remedies are
provided herein for a breach of this Agreement, the Articles or the Act, such
remedies shall not be exclusive of any other remedies the aggrieved party may
have, at law or in equity.
SECTION 12.13. ADVICE OF COUNSEL. Each person signing this Agreement:
(a) understands that this Agreement contains legally binding provisions,
(b) is advised, and has had the opportunity, to consult with that person's
own attorney, and
(c) has either consulted with the person's own attorney or consciously
decided not to consult with the person's own attorney.
SECTION 12.14. OTHER VENTURES. Subject to any separate noncompetition
agreements to which a Member may be a party, each of the Members may engage,
directly or indirectly, in any other business venture or ventures of any nature
and description, independently or with others, including, without limitation,
the motorsports business in all its aspects, which shall include, without
limitation, the ownership, construction, operation, management and development
of motorsports facilities (whether or not competitive with the business of the
Company) and neither the Company nor any of the Members shall have any rights
in and to any such business ventures or the income or profits derived
therefrom. The provisions of this Section 12.14 shall apply to a Member both
during the period of its membership in the Company and after withdrawal from
membership in the Company.
IN WITNESS WHEREOF, the Members have executed this Agreement on the date
set forth opposite their signatures, to be effective on the Effective Date.
Miami Motorsports Joint Venture
Date: By:______________________________________
Homestead Motorsports Joint Venture
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Date: by __________________________________
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SCHEDULE I
TO OPERATING AGREEMENT
(SCHEDULE OF DEFINITIONS)
The terms used in this Agreement with their initial letters capitalized
shall have, unless the context otherwise requires or unless otherwise expressly
provided in this Agreement, the meanings specified in this Schedule I. Any
term used but not defined in this Agreement shall have the meanings set forth
in the Act. The singular shall include the plural, and the masculine gender
shall include the feminine and neuter, and vice versa, as the context requires.
When used in this Agreement, the following terms shall have the meanings set
forth below:
"ACT" means the Delaware Limited Liability Company Act, as the same is
amended from time to time.
"ADDITIONAL MEMBER" means any individual or Entity admitted as a Member
pursuant to Section 3.8.
"ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any Member, the
deficit balance, if any, in such Member's Capital Account as of the end of the
relevant fiscal year, after giving effect to the following adjustments:
Credit to such Capital Account any amounts which such Member is
obligated to restore pursuant to any provision of this Agreement or is
deemed to be obligated to restore pursuant to the penultimate sentences
of Treasury Regulation Sections 1.7042(g)(1) and 1.704-2(i)(5); and
Debit to such Capital Account the items described in Treasury
Regulation Sections 1.704-1 (b)(2)(ii)(d)(4), 1. 704-1 (b)(2)(ii)(d)(5)
and 1. 704-1 (b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Treasury Regulation Section 1.704-l(b)(2)(ii)(d)
and shall be applied in a manner consistent with such intent.
"AFFILIATE" means any individual, partnership, corporation, limited
liability company, trust, or other Entity directly or indirectly, through one
or more intermediaries, controlling, controlled by, or under common control
with a Member. The term "control," as used in the immediately preceding
sentence, means, with respect to a corporation the right to exercise, directly
or indirectly, more than 50% of the voting rights attributable to the
controlled corporation, and, with respect to any individual, partnership, trust
or other Entity, the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies thereof.
Schedule I - 1
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"AGREEMENT" means this Operating Agreement of the Company, as originally
executed, including all Schedules and Exhibits, and all of which may be amended
from time to time.
"ASSIGNEE" means any "assignee" as that term is used in the Act, and
includes any transferee or recipient of a Transfer of any Unit or Units, or any
portion thereof.
"AVAILABLE CASH" means all cash funds of the Company on hand from time to
time (other than cash funds obtained as contributions to the capital of the
Company by the Members and cash funds obtained from loans to the Company) after
payment or provision for (i) all operating expenses of the Company as of such
time, (ii) all outstanding and unpaid current obligations of the Company as of
such time, (iii) a working capital reserve and (iv) any other reserves
established by a Majority in Interest of the Members.
"BANKRUPTCY" means, and a Member shall be deemed a "Bankrupt Member" upon,
(i) the entry of a decree or order for relief against the Member by a court of
competent jurisdiction in any involuntary case brought against the Member under
any bankruptcy, insolvency or other similar law (collectively, "Debtor Relief
Laws") generally affecting the rights of creditors and relief of debtors now or
hereafter in effect, (ii) the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator or other similar agent under applicable Debtor
Relief Laws for the Member or for any substantial part of its assets or
property, (iii) the ordering of the winding up or liquidation of the Member's
affairs, (iv) the filing of a petition in any such involuntary bankruptcy case,
which petition remains undismissed for a period of 180 days or which is not
dismissed or suspended pursuant to Section 303 of the Federal Bankruptcy Code
(or any corresponding provision of any future United States bankruptcy laws),
(v) the commencement by the Member of a voluntary case under any applicable
Debtor Relief Laws now or hereafter in effect, (vi) the consent by the Member
to the entry of an order for relief in an involuntary case under any such laws
or to the appointment of or the taking of possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar agent under any
applicable Debtor Relief Laws for the Member or for any substantial part of its
assets or property, or (vii) the making by a Member of any general assignment
for the benefit of its creditors.
"CAPITAL ACCOUNT" means the individual accounts established and maintained
pursuant to Section 3.5(a) and in the manner provided by Treasury Regulation
Section 1.704-(b)(2)(iv), as amended from time to time.
"CAPITAL CONTRIBUTION" means the total value of cash and agreed fair
market value of property contributed and agreed to be contributed to the
Company by each Member, as shown on Exhibit A, as the same may be amended from
time to time. Any reference in this Agreement to the Capital Contribution of a
current Member shall include a Capital Contribution previously made by any
prior Member for the interest of
Schedule I - 2
<PAGE> 92
such current Member, reduced by any distribution to such prior Member in return
of "Capital Contribution" as contemplated in this Agreement. Additional Capital
Contributions may be made by a Member only with the consent of a Majority in
Interest of the Members.
"CAPITAL INTEREST" means an interest that would give the holder a share of
the proceeds if the Company's assets were sold at fair market value and then
the proceeds were distributed in a complete liquidation and dissolution of the
Company. A Member's Capital Interest may be calculated by dividing the balance
of the Member's Capital Account by the sum of the balances of all the Members'
Capital Accounts.
"CODE" means the Internal Revenue Code of 1986, as amended. All
references in this Agreement to sections of the Code shall include any
corresponding provision or provisions of any succeeding law.
"COMPANY" means Homestead-Miami Speedway, LLC.
"COMPANY MINIMUM GAIN" has the meaning set forth in Treasury Regulation
Sections 1.704-2(b)(2) and 1.704-2(d) with respect to "partnership minimum
gain," substituting the word "member" for "partner" and "company" for
"partnership" wherever they appear.
"ENTITY" means any association, corporation, general partnership, limited
partnership, limited liability partnership, limited liability company, joint
stock association, joint venture, firm, trust, business trust, cooperative, or
foreign associations of like structure.
"EVENT OF DISSOCIATION" means any of the events listed in Section 9.1 upon
which one ceases to be a Member.
"INTEREST" means the entire ownership interest of a Member in the Company
at any particular time, including the right of such Member to any and all
benefits to which a Member may be entitled as provided in this Agreement and
under the Act, together with the obligations of such Member to comply with all
of the terms and provisions of this Agreement.
"MAJORITY IN INTEREST OF THE MEMBERS" means the Member(s) who hold a
majority of the outstanding Units. "Majority in Interest of the remaining
Members" means those Members holding a majority of the outstanding Units,
excluding the Member in question and that Member's Units. In this regard,
Unit(s) or any portion thereof that are the subject of an effective Transfer to
an Assignee not a Substitute Member shall not be considered outstanding Units.
"MEMBER" OR "MEMBERS" refers to the parties to this Agreement as indicated
on Exhibit A, and any Additional Members or Substitute Members.
Schedule I - 3
<PAGE> 93
"MEMBER NONRECOURSE DEBT" has the meaning set forth in Treasury Regulation
Section 1.704-2(b)(4) with respect to "partner nonrecourse debt," substituting
the word "member" for "partner" and "company" for "partnership" wherever they
appear.
"MEMBER NONRECOURSE DEBT MINIMUM GAIN" means an amount, with respect to
each Member Nonrecourse Debt, equal to the Company Minimum Gain that would
result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Treasury Regulation Section 1.704-2(i)(3).
"MEMBER NONRECOURSE DEDUCTIONS" has the meaning set forth in Treasury
Regulation Sections 1.704-2(i)(1) and 1.704-2(i)(2) with respect to "partner
nonrecourse deductions," substituting the word "member" for "partner" and
"company" for "partnership" wherever they appear.
"NONRECOURSE DEDUCTIONS" has the meaning set forth in Treasury Regulation
Section 1.704-2(b)(1).
"NONRECOURSE LIABILITY" has the meaning set forth in Treasury Regulation
Section 1.7042(b)(3).
"OPERATING AGREEMENT" means this Agreement.
"PERCENTAGE INTEREST" means the percentage obtained by dividing the number
of Units of a Member by the total number of outstanding Units of all Members.
"PRINCIPAL OFFICE" means the principal place of business specified in
Section 2.2.
"PROFITS INTEREST" means an Interest other than a Capital Interest.
"SUBSTITUTE MEMBER" means any individual or entity admitted as a Member
pursuant to Section 8.4.
"TRANSFER" means any "assignment" as that term is used in the Act, and
includes any gift, sale, exchange, assignment, conveyance, alienation or other
transfer, whether voluntary or involuntary, and includes any Transfer to a
receiver, bankruptcy trustee, judgment creditor, lienholder, holder of a
security interest, pledge or other encumbrance, and Transfer upon judicial
order or other legal process (such as a Transfer in connection with divorce
proceedings).
"UNIT" refers to a unit of measurement of a Member's Interest as
established in Section 3.2. Whenever reference is made to "Percentage
Interest, " a Unit may be converted into the same by dividing a Member's number
of Units by the total of all Units outstanding. For voting and other
governance purposes, Unit(s) or any portion thereof that are the subject of an
effective Transfer to an Assignee not a Substitute Member shall not be
considered outstanding Units.
Schedule I - 4
<PAGE> 94
EXHIBIT A
TO OPERATING AGREEMENT
NAMES AND ADDRESSES OF MEMBERS; CAPITAL
CONTRIBUTIONS, AND UNITS OF MEMBERS
(AS OF FEBRUARY _, 1997)
<TABLE>
<CAPTION>
Initial Current Current
Capital Capital Number
Member Contribution Contribution of Units
- ------ ------------ ------------ --------
<S> <C> <C> <C>
Miami Motorsports Joint Venture
One Speedway Boulevard
Homestead, Florida 33015 $4,735,185* -- 100
Homestead Motorsports Joint
Venture
One Speedway Boulevard
Homestead, Florida 33015 $4,735,185* -- 100
</TABLE>
*This amount represents one half of (i) equity transferred by the
Members to the Company as detailed in the Asset Purchase Agreement
dated July __, 1997 to which the Company and the initial Members are
parties and (ii) an additional $600,000 cash contribution.
<PAGE> 95
EXHIBIT B
TO OPERATING AGREEMENT
BOARD OF MANAGERS
Indianapolis Motor Speedway Corporation
Anton H. George
Jeffrey G. Belskus
International Speedway Corporation
H. Lee Combs
Lesa D. Kennedy
Menard, Inc.
John Menard
_________________
<PAGE> 96
FIRST REVISED
EXHIBIT A
TO OPERATING AGREEMENT
NAMES AND ADDRESSES OF MEMBERS; CAPITAL
CONTRIBUTIONS, AND UNITS OF MEMBERS
(AS OF JULY __, 1997)
<TABLE>
<CAPTION>
INITIAL CAPITAL CURRENT CAPITAL CURRENT NUMBER OF
MEMBER CONTRIBUTION CONTRIBUTION UNITS
- ------ --------------- --------------- -----------------
<S> <C> <C> <C>
Mr. Rafael A. Sanchez
One Speedway Boulevard
Homestead, Florida 33015 3,250,000 -- 20
Mr. Wayne Huizenga
200 South Andrews Ave., 6th Floor
Ft. Lauderdale, FL 33301 3,250,000 -- 20
Penske Motorsports, Inc.
c/o Penske Corporation
13400 Outer Drive West
Detroit, MI 48239-4001 11,800,000 -- 80
Miami Speedway Corp.
c/o International Speedway Corporation
1801 W. International Speedway Blvd.
Daytona Beach, Florida 32114-1243 11,800,000 -- 80
</TABLE>
<PAGE> 97
TRANSFER OF MEMBERSHIP UNITS
APPROVAL OF ASSIGNEES AS SUBSTITUTE MEMBERS
ACCEPTANCE OF OPERATING AGREEMENT
This Agreement made and entered into on this 23rd day of July, 1997 by and
among Miami Speedway Corp. ("MSC"), Penske Motorsports, Inc. ("PMI"), Homestead
Motorsports Joint Venture ("HMJV"), Miami Motorsports Joint Venture ("MMJV"),
Rafael A. Sanchez ("Sanchez") and Wayne Huizenga ("Huizenga").
RECITAL
HMJV and MMJV are the sole members of Homestead-Miami Speedway, LLC (the
"Company"). HMJV, MMJV and the other parties hereto desire to acknowledge
their consent and agreement to the transactions set forth below.
1. HMJV and MMJV hereby each transfer to MSC a twenty percent
(20%) limited liability company interest in the Company and consent
that upon execution of this document MSC shall be a "Substitute
Member" of the Company as that terms is defined in the Company's
Operating Agreement.
2. HMJV and MMJV hereby each transfer to PMI a twenty percent
(20%) limited liability company interest in the Company and consent
that upon execution of this document PMI shall be a "Substitute
Member" of the Company as that term is defined in the Company's
Operating Agreement.
3. HMJV and MMJV hereby each transfer to Sanchez a five percent
(5%) limited liability company interest in the Company and consent
that upon execution of this document Sanchez shall be a "Substitute
Member" of the Company as that term is defined in the Company's
Operating Agreement.
4. HMJV and MMJV hereby each transfer to Huizenga a five percent
(5%) limited liability company interest in the Company and consent
that upon execution of this document Huizenga shall be a "Substitute
Member" of the Company as that term is defined in the Company's
Operating Agreement.
5. MSC, PMI, Sanchez and Huizenga each hereby accept and adopt
the terms of the Company's Operating Agreement.
6. The parties hereto agree that from the date of this document,
Exhibit A to the Company's Operating Agreement shall be amended as
set forth on the First Revised Exhibit A attached hereto.
<PAGE> 98
IN WITNESS WHEREOF, this document has been executed on the day and year
hereinabove written.
MIAMI SPEEDWAY CORP.
By: /s/ H. Lee Combs
------------------------
PENSKE MOTORSPORTS, INC.
By: /s/ Gregory Penske
------------------------
HOMESTEAD MOTORSPORTS JOINT VENTURE
By: /s/ Rafael A. Sanchez
------------------------
MIAMI MOTORSPORTS JOINT VENTURE
By: /s/ Rafael A. Sanchez
------------------------
/s/ Rafael A. Sanchez
----------------------------
RAFAEL A. SANCHEZ
/s/ Wayne Huizenga
----------------------------
WAYNE HUIZENGA
<PAGE> 99
Exhibit F
SELLERS' CERTIFICATE OF
CONTINUED TRUTH OF REPRESENTATIONS
THE UNDERSIGNED HEREBY CERTIFIES, in his capacity as President of Miami
Motorsports, Inc. (the "Corporation"), a general partner of both Miami
Motorsports Joint Venture and Homestead Motorsports Joint Venture (the
"Sellers"), in connection with the Closing of the Purchase Agreement dated July
__, 1997, by and among Sellers, Homestead-Miami Speedway, LLC (the "Company"),
International Speedway Corporation ("ISC") and Penske Motorsports,Inc. ("PMI")
as follows:
1. The undersigned is the duly elected and qualified President of the
Corporation.
2. The representations and warranties made by the Corporation in the
Agreement to the Company, ISC and PMI are true in all material respects on and
as of the date of this Certificate as though such representations and
warranties were made on and as of this date, except for any changes permitted
by the terms of the Agreement or consented to in writing by the party or
parties to which such representations and warranties were made.
3. Sellers have performed and complied with all terms, conditions,
obligations, agreements and restrictions required by the Agreement to be
performed or complied with by Sellers prior to or on the date of this
Certificate.
Dated: July ____, 1997
MIAMI MOTORSPORTS, INC.
By: ______________________________
Rafael A. Sanchez, President
<PAGE> 100
Exhibit G
[DRAFT OPINION OF SELLERS' COUNSEL]
July __, 1997
International Speedway Corporation
1801 West Speedway Boulevard
Daytona Beach, FL 32114-1243
Penske Motorsports, Inc.
13400 Outer Drive, West
Detroit, MI 48239-4001
Gentlemen:
We have acted as counsel to Miami Motorsports Joint Venture, a Florida
general partnership ("MMJV") and Homestead Motorsports Joint Venture, a Florida
general partnership (HMJV") (MMJV and HMJV jointly referred to as the
"Sellers") and Rafael A. Sanchez ("Sanchez") and Wayne Huizenga ("Huizenga") in
connection with (i) the transfer by Sellers of substantially all their assets
to Homestead-Miami Speedway, LLC (the "Company") and (ii) the sale by MMJV and
HMJV of limited liability company interests in the Company pursuant to a
Purchase Agreement dated July __, 1997 (the "Agreement") among Sellers, the
Company, International Speedway Corporation ("ISC") and Penske Motorsports,
Inc. ("PMI"), Sanchez and Huizenga. This opinion is being delivered pursuant
to the Agreement. All capitalized terms used herein shall, unless otherwise
defined herein, have the meanings set forth in the Agreement.
For purposes of expressing the opinions set forth below, we have examined
originals, or copies certified to our satisfaction, of all records of the
Sellers and the Company and other agreements, certificates and documents and
have made all such investigations of law as we have deemed relevant and
necessary as the basis for such opinions.
For the purposes of this opinion, we have assumed, with respect to all
documents examined by us, the accuracy of the matters contained therein, the
genuineness of all signatures, the authenticity of all documents submitted to
us as originals and the conformity to authentic original documents of all
documents submitted to us as certified, conformed, telecopies or photocopied
copies. We have also relied upon certificates of Sanchez, Huizenga and of
officers of the corporate partners of Sellers with respect to the accuracy of
certain factual matters relevant to the opinions expressed herein. While we
have not performed any independent verification of such
<PAGE> 101
Miami/Homestead
July __, 1997
Page 2
factual matters, other than as set out in this opinion, nothing has come to our
attention during our representation of the Sellers, Sanchez or Huizenga with
respect to the Agreement which leads us to believe that such certificates are
inaccurate.
Based upon the foregoing, we are of the opinion that:
1. The Sellers are general partnerships duly organized and validly
existing under the laws of the State of Florida. Each of the Sellers has full
power and authority to own its properties and carry on its business as it is
now being conducted.
2. The Company is a limited liability company duly organized and validly
existing under the laws of the State of Delaware. The Company has full power
and authority to own property and carry on its business as now being conducted.
3. Each of the Sellers and the Company has full power and authority to
execute, deliver and perform its obligations under the Agreement. The
execution and delivery by Sellers and the Company of the Agreement and each of
the other documents and instruments contemplated therein and the performance by
Sellers and the Company of all the transactions contemplated by the Agreement
have been duly authorized by all requisite partnership and limited liability
company action. Sanchez and Huizenga have duly executed the Agreement in
their individual capacity.
4. The Agreement and the documents, agreements and instruments executed
and delivered in connection with the consummation of the transactions
contemplated by the Agreement by Sellers constitute or will constitute the
legal, valid and binding obligations of the Sellers, enforceable in accordance
with their respective terms, except as may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights. The enforceability of the Sellers' obligations under the
agreement is subject to general principles of equity, including without
limitation concepts of materiality, reasonableness, good faith and fair
dealing, and the possible unavailability of specific performance or injunctive
relief, regardless of whether considered in a proceeding in equity or at law.
The Sellers are not parties to any contract or subject to any other legal
restrictions that would prevent or restrict complete fulfillment of any of the
terms and conditions of the Agreement or compliance with their obligations
thereunder.
5. Except to the extent disclosed in the Agreement, or in any Schedule
thereto, neither the execution and delivery of the Agreement or the documents,
agreements and instruments executed thereunder nor the performance by Sellers
of the various terms and provisions thereof will violate the partnership
agreement of either of the Sellers or, to our best knowledge, result in a
breach or violation of any term or
<PAGE> 102
Miami/Homestead
July __, 1997
Page 3
provision of, or constitute a default (with or without notice, lapse of time or
the happening or occurrence of any other event) under any material indenture,
lease or any other agreement or instrument to which either of the Sellers is a
party, or by which any of their assets and properties may be bound or affected,
or result in a violation of any law, statute, ordinance, rule, regulation,
order, writ, injunction, decree or award of any court or government authority
or body having jurisdiction over Sellers or of their assets and operations.
6. The Agreement and the documents, agreements and instruments executed
and delivered in connection with the consummation of the transactions
contemplated by the Agreement by the Company constitute or will constitute the
legal, valid and binding obligations of the Company, enforceable in accordance
with their respective terms, except as may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights. The enforceability of the Company's obligations under the
agreement is subject to general principles of equity, including without
limitation concepts of materiality, reasonableness, good faith and fair
dealing, and the possible unavailability of specific performance or injunctive
relief, regardless of whether considered in a proceeding in equity or at law.
The Company is not a party to any contract or subject to any other legal
restrictions that would prevent or restrict complete fulfillment of any of the
terms and conditions of the Agreement or compliance with their obligations
thereunder.
7. Except to the extent disclosed in the Agreement, or in any Schedule
thereto, neither the execution and delivery of the Agreement or the documents,
agreements and instruments executed thereunder nor the performance by the
Company of the various terms and provisions thereof will violate the
Certificate of Formation or Operating Agreement of the Company or, to our best
knowledge, result in a breach or violation of any term or provision of, or
constitute a default (with or without notice, lapse of time or the happening or
occurrence of any other event) under any material indenture, lease or any other
agreement or instrument to which the Company is a party, or by which any of its
assets and properties may be bound or affected, or result in a violation of any
law, statute, ordinance, rule, regulation, order, writ, injunction, decree or
award of any court or government authority or body having jurisdiction over the
Company or of it assets and operations.
8. To our knowledge, neither the Sellers nor the Company is in default or
breach under any material contracts, agreements or instruments respecting the
Transferred Assets by which any such entities are bound.
9. To our knowledge, there is no agreement, contract or undertaking of any
kind or nature which prohibits the Sellers, the Company, Huizenga or Sanchez
from
<PAGE> 103
Miami/Homestead
July __, 1997
Page 4
executing the Agreement or any other documents, instruments or agreements
contemplated thereunder, or from performing any of their obligations
thereunder, except to the extent disclosed in the Agreement, or in any Schedule
thereto.
10. To our knowledge, there is no action or proceeding pending or
threatened before any court or other governmental body by any person or public
authority seeking to restrain or prohibit, or to obtain damages or other relief
in connection with, the execution and delivery of the Agreement or consummation
of the transaction contemplated thereby.
11. To our knowledge, except to the extent disclosed in the Agreement or
any Schedule thereto: (a) neither of the Sellers is a party to or threatened
with, any litigation, suit, action, investigation, proceeding or controversy
before any court, administrative agency or governmental authority which, with
respect to the Transferred Assets, might result in any adverse change in its
licenses, business operations, properties or assets, and (b) neither of the
Sellers is in violation of or in default with respect to any judgment, order,
writ, injunction, decree or rule of any court, administrative agency or
governmental authority or in any material respect under any regulation of any
administrative agency or governmental authority.
12. To our knowledge, except to the extent disclosed in the Agreement or
any Schedule thereto: (a) the Company is not a party to or threatened with,
any litigation, suit, action, investigation, proceeding or controversy before
any court, administrative agency or governmental authority which, with respect
to the Transferred Assets, might result in any adverse change in its licenses,
business operations, properties or assets, and (b) the Company is not in
violation of or in default with respect to any judgment, order, writ,
injunction, decree or rule of any court, administrative agency or governmental
authority or in any material respect under any regulation of any administrative
agency or governmental authority.
13. To our knowledge each of the Sellers and the Company have obtained all
consents, authorizations, orders and approvals of, and filings or registrations
with any governmental commission, board or other regulatory body which are
required for or in connection with the execution and delivery of the Agreement
by the Sellers and the Company and the consummation of the transactions
contemplated thereby by the Sellers and the Company.
The phrase "to our knowledge", when used herein, means to our actual
knowledge, after due inquiry.
The opinions expressed herein are based upon the applicable laws, rules
and regulations in effect as of the date hereof, and any change in such laws,
rules or
<PAGE> 104
Miami/Homestead
July __, 1997
Page 5
regulations may affect our opinions. We assume no obligation to advise you of
any changes concerning matters discussed herein, whether or not deemed
material, of which we may hereafter become aware.
We have not been asked, and we do not render any opinion with respect to
any matters except as expressly set forth above. This opinion is given solely
to the Purchaser and is solely for the benefit of ISC, PMI and any other entity
which may
<PAGE> 105
Miami/Homestead
July __, 1997
Page 6
constitute a "Purchaser" under the terms of the Agreement. This opinion is
rendered as of the date first above written.
Very truly yours,
Akerman, Senterfitt & Eidson, P.A.
By:__________________________________
<PAGE> 106
Exhibit H
PURCHASERS' CERTIFICATE OF
CONTINUED TRUTH OF REPRESENTATIONS
(INTERNATIONAL SPEEDWAY CORPORATION)
THE UNDERSIGNED HEREBY CERTIFIES, in his capacity _______ as of
International Speedway Corporation ("ISC"), in connection with the Closing
under the Purchase Agreement (the "Agreement") dated July __, 1997, by and
among Miami Motorsports Joint Venture and Homestead Motorsports Joint Venture
(the "Sellers"), ISC, Homestead-Miami Speedway, LLC (the "Company") and Penske
Motorsports, Inc., , as follows:
1. The undersigned is the duly elected and qualified officer of ISC.
2. The representations and warranties made by ISC are true in all material
respects on and as of the date of this Certificate as though such
representations and warranties were made on and as of this date, except for any
changes permitted by the terms of the Agreement or consented to in writing by
Sellers.
3. ISC has performed and complied with all terms, conditions, obligations,
agreements and restrictions required by the Agreement to be performed or
complied with by ISC prior to or on the date of this Certificate.
Dated: July ____, 1997
INTERNATIONAL SPEEDWAY CORPORATION
By:____________________________
<PAGE> 107
Exhibit H
PURCHASERS' CERTIFICATE OF
CONTINUED TRUTH OF REPRESENTATIONS
(PENSKE MOTORSPORTS, INC.)
THE UNDERSIGNED HEREBY CERTIFIES, in his capacity as ___________ of Penske
Motorsports, Inc. ("PMI"), in connection with the Closing under the Purchase
Agreement (the "Agreement") dated July __, 1997, by and among Miami Motorsports
Joint Venture and Homestead Motorsports Joint Venture (the "Sellers"), PMI,
Homestead-Miami Speedway, LLC (the "Company") and International Speedway
Corporation, as follows:
1. The undersigned is the duly elected and qualified officer of PMI.
2. The representations and warranties made by PMI are true in all material
respects on and as of the date of this Certificate as though such
representations and warranties were made on and as of this date, except for any
changes permitted by the terms of the Agreement or consented to in writing by
Sellers.
3. PMI has performed and complied with all terms, conditions, obligations,
agreements and restrictions required by the Agreement to be performed or
complied with by PMI prior to or on the date of this Certificate.
Dated: July ____, 1997
PENSKE MOTORSPORTS, INC.
By: __________________________
<PAGE> 1
EXHIBIT 10.2
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement") dated as of August 8, 1997, by
and between Penske Motorsports, Inc., a Delaware corporation (the "Purchaser")
and Grand Prix Association of Long Beach, Inc., a California corporation (the
"Corporation").
RECITALS
A. Subject to the terms and conditions, set forth herein, the Purchaser
desires to purchase from the Corporation, 315,000 shares of Common Stock, no
par value, of the Corporation (the "Shares"), representing 7.2% of the
Corporation's issued and outstanding Common Stock.
B. The Corporation desires to sell the Shares to Purchaser on the terms
and subject to the conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth in this Agreement and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, Purchaser and the Corporation
agree as follows:
ARTICLE ONE
1.1 Sale and Purchase of the Shares. On the basis of the representations,
warranties, covenants and agreements, and subject to the terms set forth
herein, the Corporation hereby issues and sells to the Purchaser, free and
clear of any and all liens and encumbrances of whatever character created by
the Corporation ("Liens") and the Purchaser hereby purchases, acquires and
accepts delivery from the Corporation, the Shares, for an aggregate purchase
price of Three Million Eight Hundred Eighty Seven Thousand One Hundred Dollars
($3,887,100) (the "Purchase Price").
1.2 Deliveries. In order to give effect to the transaction contemplated
by Section 1.1 hereof, (i) the Purchaser hereby delivers to the Corporation a
bank cashier's check or wire transfer of immediately available funds in the
amount of the Purchase Price, and (ii) the Corporation hereby delivers to the
Purchaser certificates representing the Shares.
ARTICLE TWO
2.1 Representations and Warranties of the Corporation. In order to induce
the Purchaser to enter into this Agreement and to purchase the Shares, the
Corporation hereby represents and warrants to the Purchaser as follows:
(a) Organization; Qualification. The Corporation is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of California. The Corporation has full corporate power and authority to own
and operate its properties and assets and to conduct and carry on its business
as it is now being conducted and operated. The Corporation (i) is duly
qualified to do business and is in good standing in each jurisdiction in which
the ownership or lease of real property or the conduct of its business requires
it to be so qualified and (ii) has all governmental licenses, certifications,
permits, approvals and other authorizations necessary to own its properties and
assets and carry on its business as it is presently being conducted, except, in
each case, where the failure to so qualify or be in good standing, or to have
obtained any such governmental licenses, certifications, permits, approvals and
other authorizations, could not reasonably be expected to have a Material
Adverse Effect (as hereinafter defined).
<PAGE> 2
(b) Authorization. The Corporation has full corporate power and authority
to execute and deliver this Agreement, to perform its obligations hereunder and
consummate the transactions contemplated hereby. This Agreement has been duly
authorized by all necessary corporate action on the part of the Corporation,
has been duly and validly executed and delivered by the Corporation, and
(assuming due execution and delivery by the Purchaser) constitutes the legal,
valid and binding obligation of the Corporation, enforceable in accordance with
its terms, except as such enforcement may be limited by general equitable
principles or by applicable bankruptcy, insolvency, moratorium, or similar laws
and judicial decisions from time to time in effect which affect creditors'
rights generally.
(c) Capitalization. The authorized capital stock of the Corporation
consists of (i) 20,000,000 shares of Common Stock, no par value (the "Common
Stock"), of which 3,768,286 shares of Common Stock are issued and outstanding
as of the date hereof; (ii) 10,000,000 shares of Preferred Stock, no par value
(the "Preferred Stock"), of which none of the shares of the Preferred Stock are
issued and outstanding as of the date hereof other than the "Series B Preferred
Stock" (as hereinafter defined); and (iii) 250,000 shares of Series B
Convertible Preferred Stock ("Series B Preferred Stock"), of which 250,000
shares of the Series B Preferred Stock are issued and outstanding as of the
date hereof. The Shares have been duly authorized and upon payment of the
Purchase Price in accordance with the terms hereof will be validly issued,
fully paid and non-assessable, and have not been subject to or issued in
violation of (i) any preemptive or other rights of any Person to acquire
securities of the Corporation, or (ii) subject to the accuracy of the
representations and warranties of Article Three, any applicable securities
laws. Except as set forth in Schedule 2(c) to this Agreement, there are no
outstanding (i) securities or instruments convertible into or exchangeable for
any of the capital stock of the Corporation; (ii) options, warrants,
subscriptions or other rights to acquire capital stock of the Corporation; or
(iii) commitments, agreements or understanding of any kind to which the
Corporation is a party, including employee benefit arrangements, relating to
the issuance or repurchase by the Corporation of any capital stock of the
Corporation, any such securities or instruments convertible into or
exchangeable for capital stock of the Corporation or any such options, warrants
or rights. As of the date hereof, the Corporation had reserved not more than
(x) 474,718 shares of Common Stock for issuance upon exercise of outstanding
stock options, and (y) 400,000 shares of Common Stock for option and other
"Section 423" stock purchase grants that may be made in the future pursuant to
the Corporation's 1996 stock option plan, in each case subject to adjustment
pursuant to the anti-dilution provisions thereof. Schedule 2(c) shall also set
forth the name of the holder and vesting schedule for each outstanding
convertible security, option, warrant or similar right, as well as the number
of shares of Common Stock subject thereto.
(d) No Violation. Except as set forth in Schedule 2(d), the execution,
delivery and performance of this Agreement by the Corporation does not and will
not (i) conflict with or violate any provision of the Corporation's Articles of
Incorporation or By-laws, (ii) violate or breach any provision of, or
constitute or result in a default (or an event which, with notice or lapse of
time or both, would constitute such a default) under, or result in the
imposition of any lien upon or the creation of a security interest in the
assets, business or properties of the Corporation pursuant to, any note, bond,
mortgage, indenture, deed, license, franchise, permit, lease, contract or other
agreement to which the Corporation is a party or by which the Corporation or
any of its assets is bound or subject, (iii) violate any order, writ,
injunction, decree, judgment or ruling of any court or governmental authority
applicable to the Corporation, (iv) violate any statute, law, rule or
regulation applicable to the Corporation, or (v) require the Corporation to
obtain any waiver, consent, approval or authorization of, or make any filing
with, any governmental authority, except such reports as may be required to be
filed by the Corporation with the Securities and Exchange Commission (the
"Commission") pursuant to Regulation D promulgated under the 1933 Act (as
hereinafter defined) or the Securities and Exchange Act of 1934 (the "1934
Act").
(e) SEC Reports. The Corporation has filed all forms, reports and
documents required to be filed with the Commission prior to the date hereof,
and has heretofore delivered or made available to the Purchaser, in the form
filed with the Commission, its (i) Annual Report on Form 10-KSB for the fiscal
year ended November 30, 1996, (ii) its Quarterly Reports on Form 10-QSB for the
quarters ended February 28, 1997 and May 31, 1997, and (iii) its Proxy
Statement with respect to the 1997 annual
-2-
<PAGE> 3
meeting of its shareholders (collectively, the "SEC Reports"). The SEC Reports
(i) were prepared in all material respects in compliance with the requirements
of the 1934 Act, and (ii) did not at the time they were filed contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
financial statements and unaudited interim financial statements of the
Corporation included in such SEC Reports were prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (A) as otherwise indicated in such financial
statements and the notes thereto or, in the case of audited statements, in the
related report of the Corporation's independent accountants or (B) in the case
of unaudited interim statements, to the extent they may not include footnotes
or may be condensed or summary statements), and fairly present the consolidated
financial position, results of operations and cash flows of the Corporation as
of the dates thereof and for the periods indicated therein (subject, in the
case of any unaudited interim financial statements, to normal year-end audit
adjustments).
(f) Absence of Certain Changes. Except as set forth in Schedule 2(f),
since November 30, 1996, there has not been (i) any event or change in
circumstances that has had or could reasonably be expected to have a material
adverse effect on the business, financial condition, results of operations,
properties or prospects of the Corporation and its subsidiaries taken as a
whole or on the ability of the Corporation to timely consummate the
transactions contemplated hereby (a "Material Adverse Effect"), or (ii) any
damage, destruction or loss that has had or could reasonably be expected to
have a Material Adverse Effect.
(g) Status, Title to Assets.
(i) General. Except as disclosed in Schedule 2(g) attached hereto
or in the SEC Reports, the Corporation has good and marketable title to
all the properties and assets reflected in the latest audited balance
sheet included in such SEC Reports (except properties sold or otherwise
disposed of since the date thereof in the ordinary course of business),
free and clear of all claims, liens, charges, security interests, or
encumbrances of any nature whatsoever except (i) statutory liens securing
payments not yet due and (ii) such imperfections or irregularities of
title, claims, liens, charges, security interests, or encumbrances as do
not materially affect the use of the properties or assets subject thereto
or affected thereby or otherwise materially impair business operations at
such properties, or as do not materially impair the marketability
thereof.
(ii) Leased Properties. Except as disclosed in the SEC Reports
filed prior to the date of this Agreement, the Corporation is the valid
lessee of all material leasehold estates reflected in the latest audited
financial statements included in such SEC Reports or acquired after the
date thereof (except for leases that have expired without default by
their terms since the date thereof) and is in valid possession of the
properties purported to be leased thereunder, and each such lease is in
full force and effect and without default thereunder in any material
respect by the lessee or, to the Corporation's knowledge, the lessor.
(h) Litigation and Proceedings. Except as set forth in the SEC Reports or
Schedule 2(h) attached hereto, no litigation, proceeding, whether civil or
criminal, or governmental investigation is pending or, to the Corporation's
knowledge, threatened against or relating to the Corporation or its properties
or businesses which could reasonably be expected to have a Material Adverse
Effect.
(i) Tax Returns and Audits. The Corporation has duly filed all federal,
state, local and foreign tax returns required to be filed by it and has duly
paid or made adequate provision for the payment of all Federal income and other
material taxes that are due and payable pursuant to such returns or pursuant to
any assessment with respect to taxes in such jurisdictions, whether or not in
connection with such returns. Except as set forth in Schedule 2(i), there are
no pending, or to the Corporation's knowledge, threatened, claims asserted for
taxes or assessments of the Corporation or relating to the Corporation's
present practices in computing or reporting taxes which could reasonably be
-3-
<PAGE> 4
expected to have a Material Adverse Effect. Adequate provision has been made
in the Corporation's most recent balance sheet, included in the SEC Reports
for all then accrued and unpaid taxes, whether or not yet due and payable and
whether or not disputed by the Corporation.
(j) Environmental and Safety Laws. Except as disclosed in Schedule 2(j)
attached hereto, the Corporation is not the subject of any environmental
enforcement proceeding, and complies in all material respects with all laws and
regulations relating to pollution control and environmental protection in all
jurisdictions in which the Corporation is presently doing business. In
addition, the Corporation has no material liability for past violations of such
laws and regulations in jurisdictions in which the Corporation presently does
business or in the past has done business.
(k) Brokers, Finders, etc. The Corporation has not employed any broker,
finder or other intermediary in connection with the transactions contemplated
by this Agreement who might be entitled to a fee or commission from the
Corporation or the Purchaser in connection with the transactions contemplated
by this Agreement other than L.H. Friend, Weinress, Frankson & Presson, Inc.
("L.H. Friend"). A true, correct and complete description of the Corporation's
fee and other arrangements in connection with this Agreement and the
transactions contemplated hereby with L.H. Friend is included in Schedule 2(k)
hereto.
ARTICLE THREE
3.1 Representations and Warranties of the Purchaser. To induce the
Corporation to enter into this Agreement and to issue and sell the Shares, the
Purchaser hereby represents and warrants to the Corporation as follows:
(a) Organization; Qualification. The Purchaser is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware. The Purchaser has full corporate power and authority to own and
operate its properties and assets and to conduct and carry on its business as
it is now being conducted and operated. The Purchaser (i) is duly qualified to
do business and is in good standing in each jurisdiction in which the ownership
or lease of real property or the conduct of its business requires it to be so
qualified and (ii) has all governmental licenses, certifications, permits,
approvals and other authorizations necessary to own its properties and assets
and carry on its business as it is presently being conducted, except, in each
case, where the failure to so qualify or be in good standing, or to have
obtained any such governmental licenses, certifications, permits, approvals and
other authorizations, could not reasonably be expected to have a material
adverse effect on the Purchaser.
(b) Authorization. The Purchaser has full corporate power and authority
to execute and deliver this Agreement, to perform its obligations hereunder and
consummate the transactions contemplated hereby. This Agreement has been duly
authorized by all necessary corporate action on the part of the Purchaser, has
been duly and validly executed and delivered by the Purchaser, and (assuming
due execution and delivery by the Corporation) constitutes the legal, valid and
binding obligation of the Purchaser, enforceable in accordance with its terms,
except as such enforcement may be limited by general equitable principles or by
applicable bankruptcy, insolvency, moratorium, or similar laws and judicial
decisions from time to time in effect which affect creditors' rights generally.
(c) No Violation. The execution, delivery and performance of this
Agreement by the Purchaser does not and will not (i) conflict with or violate
any provision of the Purchaser's Articles of Incorporation or By-laws, (ii)
violate or breach any provision of, or constitute or result in a default (or an
event which, with notice or lapse of time or both, would constitute such a
default) under, or result in the imposition of any lien upon or the creation of
a security interest in the assets, business or properties of the Purchaser
pursuant to, any material note, bond, mortgage, indenture, deed, license,
franchise, permit, lease, contract or other agreement to which the Purchaser is
a party or by which the Purchaser or any of its assets is bound or subject,
(iii) violate any order, writ, injunction, decree, judgment or ruling of any
court or governmental authority applicable to the Purchaser, (iv) violate any
statute, law, rule or
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<PAGE> 5
regulation applicable to the Purchaser, or (v) require the Purchaser to obtain
any waiver, consent, approval or authorization of, or make any filing with,
any governmental authority, except such reports as may be required to be filed
by the Purchaser with the Commission pursuant to the 1934 Act.
(d) No Registration, Etc. The Purchaser acknowledges that the
Corporation's offering and sale of the Shares to the Purchaser pursuant to this
Agreement (i) has not been registered under the Securities Act of 1933, as
amended (the "1933 Act"), or under the securities or "blue sky" laws, rules or
regulations of any State (collectively, the "Securities Laws") and (ii) is
intended to be exempt from registration under the 1933 Act by virtue of Section
4(2) of the 1933 Act and the provisions of Rule 506 of Regulation D promulgated
thereunder by the Commission. In furtherance thereof, the Purchaser represents
and warrants to the Corporation that it is an "accredited investor", as defined
in Rule 501 of Regulation D promulgated under the 1933 Act. The Purchaser
acknowledges that it has been afforded, prior to the execution of this
Agreement, the opportunity to ask questions of, and to receive answers from,
the Corporation and its management. The Shares are being purchased by
Purchaser for its own account for investment and not for resale or distribution
to others within the meaning of the federal Securities Laws. The Purchaser
agrees that it will not transfer the Shares unless such Shares are registered
under any applicable Securities Laws, or unless an exemption is available under
such Securities Laws.
(e) Brokers, Finders, etc. The Purchaser has not employed any broker,
finder or other intermediary in connection with the transactions contemplated
by this Agreement who might be entitled to a fee or commission from the
Purchaser or the Corporation upon execution of this Agreement or consummation
of such transactions.
ARTICLE FOUR
COVENANTS OF THE CORPORATION
AND THE PURCHASER
4.1 Further Assurances. Subject to the terms and conditions hereof, each
of the Purchaser and the Corporation agree to use all reasonable efforts to
take, or cause to be taken, all further actions and to do, or cause to be done,
all things necessary, proper or reasonably requested by the other to give
effect to the transactions contemplated by this Agreement.
4.2 Preemptive Rights. If, subsequent to the date hereof and during the
"Covered Period" (as hereinafter defined), the Corporation desires to issue and
sell any shares of capital stock of the Corporation (other than "Excluded
Stock," as hereinafter defined), the Corporation shall afford the Purchaser
"preemptive rights" (exercisable within 10 days following reasonably detailed
written notice from the Corporation of the proposed sale of stock) in order to
permit the Purchaser to maintain its proportionate percentage ownership in the
Corporation (it being agreed that the Purchaser's "proportionate" ownership
shall be computed by comparing the Corporation's aggregate number of
outstanding shares of common stock to the aggregate number of shares of common
stock then held by Purchaser and acquired pursuant to this Agreement on the
date hereof and the "Right of First Refusal Agreement" being executed by
Purchaser on or about the date hereof). As used herein, the term (x) "Covered
Period" shall mean the period commencing on the date hereof and ending on the
earliest to occur of (i) the date four years after the date hereof, and (ii)
the date Purchaser no longer owns at least 80% of the Shares acquired pursuant
to this Agreement on the date hereof; and (y) "Excluded Stock" shall mean (i)
securities issued upon exercise of options or warrants or conversion of
convertible securities outstanding as of the date hereof as disclosed in
Schedule 2(c) to this Agreement, (ii) shares of Common Stock issuable pursuant
to stock options or "Section 423" stock purchase rights (with per share
exercise or purchase prices no less than 85% of the fair market value of the
Common Stock on the date of grant) that may be granted in the future pursuant
to the Company's 1996 and 1993 stock option plans (as such plans are currently
in effect), (iii) securities issued to Purchaser or Penske Motorsports, Inc.
("Penske") or any of their respective affiliates, (iv) shares of Common Stock
issued in "private placement" transactions that constitute bona fide financings
or acquisitions, if and only if , with respect to
-5-
<PAGE> 6
this item (iv), (A) at least 50%-in-interest of the acquirors of such stock
(the "New Shareholders") enter into agreements (in form reasonably acceptable
to Purchaser) substantially the same as the Right of First Refusal Agreement
(with the term of such agreement not to exceed the then remaining term of the
Right of First Refusal Agreement), and (B) the identity of all of such New
Shareholders is approved by the Purchaser, which approval shall not be
unreasonably withheld or delayed it being agreed that approval shall not be
required with respect to (x) institutional investors, or (y) any other New
Shareholder that would not be required to file or amend a Schedule 13D
statement with respect to the Corporation by reason of its acquisition or
ownership of Common Stock (a "Non-13D Filer"); provided, however, that upon
consummation of such a financing or acquisition where the Purchaser does not
approve the Non-13D Filer (whether or not required), the Corporation shall be
obligated to file a "shelf" resale registration statement with the Commission
within 15 business days of the consummation of such financing or acquisition
with respect to the potential public offering and sale of up to all of the
shares of Common Stock owned by Purchaser unless a "shelf" resale registration
statement is then in effect or on file with the Commission with respect to such
shares of Common Stock owned by Purchaser, and (v) securities issued pursuant
to stock dividends, stock splits, and similar "no sale" events that apply
generally to all shares of outstanding Common Stock.
4.3 Right to Nominate Directors. The Corporation shall (i) take all
corporate action necessary to immediately cause the size of the Corporation's
Board to be increased by one and appoint one (1) individual designated by the
Purchaser and reasonably acceptable to the Corporation's Board (it being agreed
that any of Purchaser's officers who also serves as an executive officer or
director of Purchaser shall be deemed reasonably acceptable to the
Corporation's Board), as a member of the Board of Directors of the Corporation
to fill such vacancy, and (ii) thereafter during the Covered Period use
reasonable efforts, consistent with and no less than are taken with respect to
all other nominees to the Board of Directors, to have such designee (or other
reasonably acceptable designee of Purchaser) to be nominated and elected to its
Board of Directors at each election of the Corporation's directors (it being
agreed that Purchaser shall be entitled to two (2) designees for election as
director if at any time during the Covered Period Purchaser acquires the
Corporation's Common Stock hereafter transferred by Penske, and, as a result of
such acquisition, Penske or any of its affiliates loses its rights to nominate
a director designee). Each Purchaser designee elected to the Board of
Directors shall be indemnified by the Corporation to the fullest extent
permitted by law and, without limiting the generality of the foregoing, shall
be given indemnification agreement protection, if any, by the Corporation in
the same form as currently in effect for the Corporation's current directors.
The Corporation agrees to provide each such Purchaser designee with the same
compensation paid by the Corporation to its other outside directors and to
reimburse the Purchaser's designee for out-of-pocket expenses reasonably
incurred in connection with his or her attendance of Board meetings. In the
event the Purchaser's designee(s) is (are) not elected as a member of the Board
of Directors during the Covered Period, the Corporation shall take all
corporate action necessary to entitle such designee(s) to attend and
participate in all of the Corporation's Board of Directors meetings.
4.4 Publicity. Except as required by law or by the rules of the Nasdaq
Stock Market or the Commission, neither of the parties hereto shall issue or
make any public release or announcement concerning this Agreement or the
transactions contemplated hereby. In addition, each party shall use its
reasonable best efforts to first consult in advance with the other party
concerning the content of any required public release or arrangement relating
to this Agreement.
4.5 Indemnity. Each of the Purchaser and the Corporation hereby agrees to
indemnify and hold harmless the other and the other's officers, directors and
agents, and their respective successors and assigns, from, against and in
respect of any and all demands, claims, actions or causes of action,
assessments, liabilities, losses, costs, damages, penalties, charges, fines or
expenses, including without limitation attorney's fees and expenses, arising
out of or relating to any breach by such indemnifying party of any
representation, warranty, covenant or agreement made in this Agreement. Such
right to indemnification shall be in addition to any and all other rights of
the parties under this Agreement or otherwise, at law or in equity.
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<PAGE> 7
4.6 Access. The Corporation shall during the Covered Period: (i) afford
to the Purchaser and its agents and representatives reasonable access to the
properties, books, records and other information of the Corporation, provided
that such access shall be granted upon reasonable notice and at reasonable
times during normal business hours in such a manner as to not unreasonably
interfere with normal business operations; (ii) use its reasonable efforts to
cause the Corporation's personnel, without unreasonable disruption of normal
business operations, to assist the Purchaser in its investigation of the
Corporation pursuant to this Section 4.6; and (iii) furnish promptly to the
Purchaser all information and documents concerning the business, assets,
liabilities, properties and personnel of the Corporation as the Purchaser may
from time to time reasonably request. In addition, from the date of this
Agreement, the Corporation shall cause one or more of its officers to confer on
a regular basis with officers of the Purchaser and to report on the general
status of its ongoing operations.
4.7 Shares. The Corporation shall use its reasonable best efforts to take
any and all action necessary after the date hereof so that the Shares sold by
the Corporation to the Purchaser are listed on the Nasdaq National Market.
4.8 Use of Proceeds. Without the prior written consent of the Purchaser,
the Corporation shall use the Purchase Price proceeds solely to fund capital
expenditures for Board approved improvement projects that are intended to
enhance the Corporation's ability to promote additional sanctioned motorsports
events at the Corporation's Millington, Tennessee and/or Madison, Illinois
facility(ies).
4.9 Future Stock Issuance. Without the prior written consent of
Purchaser, and notwithstanding Section 4.2 hereof, during the Covered Period,
the Corporation shall not issue (or agree to issue) any shares of capital stock
other than Excluded Stock.
4.10 Standstill. Until the "Standstill Termination Date" (as hereinafter
defined), Purchaser and its affiliates (which for purposes hereof shall not
include Penske or any of its subsidiaries) will not, directly or indirectly,
without the express permission of the Corporation's Board of Directors, (A)
purchase or offer to purchase any of the Corporation's equity securities (or
securities convertible into the Corporation's equity securities), (B) conduct a
"proxy contest" to obtain control of the Corporation's Board, or (C) enter into
any non-market transaction to sell Common Stock to any person or entity which
does not agree in writing (in form reasonably acceptable to the Corporation) to
be subject to and bound by the provisions of this Section 4.10; provided,
however, that nothing herein shall limit the right of the Purchaser and its
affiliates to (i) purchase securities pursuant to, and exercise all other rights
contemplated by, this Agreement and the "Right of First Refusal Agreement"
being executed in connection herewith, (ii) purchase additional Common Stock
that does not represent more than 5% of the Corporation's aggregate outstanding
shares of Common Stock, (iii) except to the extent limited by the Right of
First Refusal Agreement, vote shares and exercise rights as directors and/or
(iv) if and only if Purchaser owns at least 10% of the outstanding shares of
the Corporation's Common Stock by reason of (A) purchases pursuant to this
Agreement on or about the date hereof, and (B) purchases pursuant to the Right
of First Refusal Agreement, purchase additional Common Stock that, together
with such purchases and purchases made pursuant to the preceding clause (ii),
represents in the aggregate not more than 20.5% of the Corporation's aggregate
outstanding shares of Common Stock (it being agreed that any purchases pursuant
to this item (iv) shall reduce on a one-for-one basis the number of shares that
Purchaser is entitled to purchase under the Right of First Refusal Agreement);
provided, further, that the provisions of this Section 4.10 shall automatically
terminate in full if (x) the Corporation enters into a merger, asset purchase,
business combination or similar agreement pursuant to which the Corporation's
shareholders would own less than fifty percent (50%) of the surviving
corporation's capital stock, or (y) a tender offer or exchange offer commences
for the Corporation's equity securities. For purposes hereof, "Standstill
Termination Date" means the earlier of (A) the sixth anniversary of the date of
this Agreement, and (B) the date that Christopher R. Pook no longer serves
as Chief Executive Officer of the Corporation (unless within 120 days of the
termination of Mr. Pook's service a successor is appointed who is approved by
Purchaser, which approval shall not be unreasonably withheld or delayed).
-7-
<PAGE> 8
4.11 Breach of Representation Regarding Outstanding Securities. The
parties specifically agree that if the Corporation's representation regarding
outstanding securities set forth in Section 2.3 hereof and the related Schedule
2(c) is incorrect, then (x) the Corporation shall promptly file and use its
reasonable best efforts to have declared effective as soon as practicable
thereafter the shelf resale registration statement contemplated by Section 2 of
the "Registration Rights Agreement" being executed in connection herewith,
notwithstanding the time periods set forth therein, (y) the Purchaser shall
have the option to purchase (at a per share exercise price equal to the per
share Purchase Price paid pursuant to this Agreement) the number of shares
equal to 50% of the excess (the "Total Shortfall Number"), if any, of (A) the
"Actual Fully Diluted Shares" over (B) the "Disclosed Fully Diluted Shares,"
and (iii) if and only if the fair market value of the Total Shortfall Number of
shares of Common Stock (based on the "Then Fair Market Value") exceeds
$250,000, the Purchaser shall have the right, exercisable by written notice
within 60 days of the "Shortfall Discovery Date," to require the Corporation to
purchase all or any specified number of the shares of Common Stock then held by
Purchaser, at a price equal to the greater of (i) the Then Fair Market Value,
and (ii) the per share Purchase Price paid pursuant to this Agreement. For
purposes of this Section 4.11:
(a) "Actual Fully Diluted Shares" means the sum of (i) all shares of
Common Stock to be issued Purchaser pursuant to this Agreement and all shares
to be issued to Penske on or about the date hereof, plus (ii) the aggregate
number of shares of Common Stock that are currently outstanding, to be issued
upon conversion of outstanding convertible securities, to be issued pursuant to
outstanding options, warrants or other rights, and/or to be issued pursuant to
awards that can be made in the future under the Corporation's current employee
benefit plans.
(b) "Disclosed Fully Diluted Shares" means that number of Actual Fully
Diluted Shares described in paragraph (a)(ii) above that are accurately set
forth on Schedule 2(c).
(c) "Then Fair Market Value" means the average closing sales price for the
Common Stock during the ten trading days preceding the Shortfall Discovery
Date.
(d) "Shortfall Discovery Date" means the first date that the Corporation
or the Purchaser notifies the other of any misrepresentation in Section 2(c)
hereof and provides a reasonable description thereof.
Notwithstanding the above, the Total Shortfall Number shall be reduced by
the number of shares of Common Stock which become subject to and bound by the
terms of the Right of First Refusal Agreement within twenty (20) business days
subsequent to the earlier of (x) the Shortfall Discovery Date, and (y) the date
that the Chief Executive Officer or Chief Financial Officer of the Corporation
had actual knowledge of the likelihood of a Total Shortfall Number.
ARTICLE FIVE
MISCELLANEOUS
5.1 Governing Law. This Agreement and its validity, construction and
performance shall be governed in all respects by the internal laws of the State
of Florida (without reference to the conflict of laws provisions or principles
thereof).
5.2 Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns; but neither this Agreement nor any of the rights, benefits or
obligations hereunder shall be assigned, by operation of law or otherwise, by
either party hereto without the prior written consent of the other party.
Nothing in this Agreement, express or implied, is intended to confer upon any
person other than the parties hereto and their respective permitted successors
and assigns, any rights, benefits or obligations hereunder.
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<PAGE> 9
5.3 Amendment; Waiver. This Agreement shall not be changed, modified or
amended in any respect except by the mutual written agreement of the parties
hereto. Any provision of this Agreement may be waived in writing by the party
which is entitled to the benefits thereof. No waiver of any provision of this
Agreement shall be deemed to or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall any such waiver constitute
a continuing waiver.
5.4 Notices. Any notices, requests, demands and other communications
required or permitted to be given hereunder must be in writing and, except as
otherwise specified in writing, will be deemed to have been duly given when
personally delivered, telexed or facsimile transmitted, or three days after
deposit in the United States mail, by certified mail, postage prepaid, return
receipt requested, as follows:
IF TO THE CORPORATION: Grand Prix Association of Long Beach, Inc.
3000 Pacific Avenue
Long Beach, CA 90806
Attention: Christopher R. Pook
Telephone: (562) 490-4520
Facsimile: (562) 981-2632
with a copy to: Barry L. Dastin
Kaye, Scholer, Fierman, Hays & Handler, LLP
1999 Avenue of the Stars, Suite 1600
Los Angeles, California 90067
Telephone: (310) 788-1000
Facsimile: (310) 788-1200
IF TO PURCHASER: Penske Motorsports, Inc.
3270 W. Big Beaver Road, Suite 130
Troy, Michigan 48084
Attention: Robert H. Kurnick, Jr.
Telephone: (248) 614-1116
Facsimile: (248) 614-1125
with a copy to: Greenberg Traurig Hoffman Lipoff
Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attention: Bruce E. Macdonough
Telephone: (305) 579-0500
Facsimile: (305) 579-0717
Any party may change its address for the purposes of this Agreement by
giving notice of such change of address to the other parties in the manner
herein provided for giving notice.
5.5 Survival. The representations and warranties of the parties set forth
in this Agreement shall survive the Closing; provided, that all such
representations and warranties shall expire, terminate and be of no force and
effect (or provide the basis for any claim) and no party hereto shall have any
obligation to indemnify any other party with respect thereto unless written
notice of any claim with respect thereto is received prior to the third
anniversary of this Agreement.
5.6 Severability. Any term or provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction
only, be ineffective only to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof or affecting the validity
or enforceability of such provision in any other jurisdiction.
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<PAGE> 10
5.7 Headings. The captions, headings and titles herein are for
convenience of reference only and shall not effect the construction, meaning or
interpretation of this Agreement or any term or provision hereof.
5.8 Counterparts. This Agreement may be executed through the use of one
or more counterparts, each of which shall be deemed an original and all of
which shall be considered one and the same agreement, notwithstanding that all
parties are not signatories to the same counterpart.
5.9 Expenses. Each party to this Agreement shall bear their own fees,
costs and expenses incurred in connection with the negotiation, execution and
consummation of this Agreement and the transactions contemplated hereby.
5.10 Entire Agreement. Except for written agreements executed on or about
the date hereof in connection with the transactions contemplated hereby, this
Agreement merges and supersedes any and all prior agreements, understandings,
discussions, assurances, promises, representations or warranties among the
parties with respect to the subject matter hereof, and contains the entire
agreement among the parties with respect to the subject matter hereof.
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<PAGE> 11
IN WITNESS WHEREOF, the Corporation and the Purchaser have each duly
executed this Agreement as of the date first above written.
PENSKE MOTORSPORTS, INC.
By: /s/ Gregory W. Penske
-----------------------------
Gregory W. Penske
GRAND PRIX ASSOCIATION OF
LONG BEACH, INC.
By: /s/ Christopher R. Pook
-----------------------------
Title: President
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<PAGE> 12
Schedule 2(c)
<TABLE>
<CAPTION>
CONVERTIBLE
NAME WARRANTS SHARES 1993 OPTIONS(1)
- ---- -------- ----------- ---------------
<S> <C> <C> <C>
Christopher R. Pook 174,435
James P. Michaelian 108,702
Dwight Tanaka 20,830(6)
Michael S. Clark 12,691(6)
Rick Lalor 31,728
Gemma Bannon 9,064(6)
James Sullivan 14,939
Wayne Kees 11,952(7)
Daniel S. Gurney 11,952(7)
George Pellin 14,939
Joeseph Ainge 14,939
Lou Mirabile 11,952(2)(3)
Ruth Queen 11,952(3)
John R. Queen, Jr. 11,952(3)
EDMARJON-RONBREWDAVE, LLC
A Tennessee limited liability company
(successor in interest to Memphis
International Motorsports Corporation) 45,000(4)
L. H. Friend, Weinress,
Frankson & Presson, Inc. 31,250(5)
</TABLE>
(1) Options granted 12/93 under the Corporation's 1993 Stock Option Plan vest
one-fifth on 12/1/94, 12/1/95, 12/1/96, 12/1/97 and 12/1/98 respectively,
except as otherwise noted.
(2) Subject to right of first refusal agreement dated 8/8/97 between he and
Christopher R. Pook.
(3) All fully vested.
(4) Holders of Series B Convertible Preferred shares have the right to convert
to Common stock of the Corporation on a share for share basis, as more
fully described in the Certificate of Rights, Preferences and Privileges
of Series B Convertible Preferred Shares, as amended, filed with the
California Secretary of State.
(5) Warrant to purchase 31,250 shares of common stock of the Corporation for
$10.00 per share must be exercised prior to June 24, 2001.
(6) Remaining 2/5 of original grant. 1/2 will vest on 12/1/97 and the balance
on 12/1/98.
(7) Remaining 4/5 of original grant. 1/2 is vested, 1/4 will vest on 12/1/97
and the balance on 12/1/98.
Note: 1993 Stock options, Series B Convertible Preferred shares and
L. H. Friend, etc. Warrant are all subject to certain anti-dilution
provisions.
<PAGE> 13
Schedule 2(d)
None.
<PAGE> 14
Schedule 2(f)
Change of Races Dates from Memphis Motorsports Park to Gateway Raceway. The
Corporation's recent decision to move the ARCA and USAC Silver Crown series
events scheduled for September 13, and 14, 1997, from Memphis Motorsports Park
to Gateway Raceway due to construction delays.
Weather and Construction Delays. Adverse weather conditions have caused delays
and could cause future delays in construction at Gateway Raceway and/or Memphis
Motorsports Park. Construction delays resulting from various other factors have
or could have an Material Adverse Effect on the Corporation's ability to meet
the deadlines necessary to host the major events scheduled in 1997 at Gateway
Raceway and/or Memphis Motorsports Park. The Corporation's motorsports events
could be adversely affected by weather patterns and seasonal weather changes.
Manpower Overload and Growth Management. The operation of the 1997 major events
at Gateway Raceway and/or Memphis Motorsports Park placed substantial burdens
on the Corporation's management resources and financial controls since the
Corporation has never before promoted and/or operated more than three major
events in one year.
Effect of Seasonality. The Corporation had very limited racing during the
winter season and, accordingly, reported an operating loss during its first
fiscal quarter.
Government Regulation of Sponsors. The Corporation derives a significant
portion of its revenue each year from sponsorship and advertising by various
companies, including tobacco and liquor companies. The impact of the recently
settled litigation between various states' attorneys general and several large
tobacco companies, as well as other tobacco litigation, could have a Material
Adverse Effect. In addition, actions by certain liquor companies with respect
to advertising could lead to additional regulation or otherwise may have a
Material Adverse Effect.
Environmental Matters. There may be undetected environmental contamination at
the Corporation's Long Beach, Gateway Raceway or Memphis Motorsports Park
properties. Present but undetected environmental contamination, as well as the
conduct of the Corporation's business could have resulted in damage to persons
or property or contamination of the environment by pollutants, substances,
contaminants or wastes. The Corporation could have liability under California,
Illinois or Tennessee statutes, or Federal law, including but not limited to
the Federal Water Pollution Control Act, Comprehensive Environmental Response,
Compensation and Liability Act, and the Resource Conservation and Recovery Act
for violations of environmental laws by the Company or by prior owners of its
properties.
Liability for Personal Injuries. Motorsports activities, construction and
weather conditions have resulted in injuries to third parties including
participants and spectators at the Corporation's facilities. If the Corporation
is held liable for personal injuries beyond the scope of its insurance
coverage, such liability could result in a Material Adverse Effect.
<PAGE> 15
Schedule 2(h)
Claim by former Chief Financial Officer for wrongful termination, as of the
date hereof no lawsuit filed but counsel has been retained by such former chief
financial officer and threatens to seek damages including punitive and
attorneys fees.
<PAGE> 16
Schedule 2(i)
None.
<PAGE> 17
Schedule 2(j)
The Corporation obtained Phase I environmental reports on all properties it
owns prior to the purchase thereof and knows of no presence of undetectable
environmental hazards at any of those properties. Because Phase I reports do
not include testing of soil, water or air or other types of samples, it is
possible that there may be undetected environmental contamination at one or
more of the Corporation's properties. In addition, the conduct of the
Corporation's business may result in damage to persons or property or
contamination of the environment by pollutants, substances, contaminants or
wastes used, generated or disposed of by the Corporation (for example, gasoline
used at the motorsports facilities). The Corporation could have liability under
California, Illinois or Tennessee statutes, or Federal law, including but not
limited to the Federal Water Pollution Control Act, Comprehensive Environmental
Response, Compensation and Liability Act, and the Resource Conservation and
Recovery Act for past violations of environmental laws by prior owners of those
properties.
<PAGE> 18
Schedule 2(k)
L. H. Friend, Weinress, Frankson & Presson, Inc. compensation agreement
pursuant to which the Corporation has agreed to compensate L. H. Friend etc.
$50,000.00 for its services in connection with this Agreement and the
transactions contemplated hereby.
<PAGE> 1
EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is made and entered
into this 8th day of August, 1997, between GRAND PRIX ASSOCIATION OF LONG
BEACH, INC., a California corporation (the "Company") and Penske
Motorsports, Inc., a Delaware corporation (the "Holder").
RECITALS
A. The Company is contemporaneously issuing and delivering to Holder
315,000 shares of the Company's common stock, no par value per share (the
"Common Stock").
B. In connection with that certain Stock Purchase Agreement, dated as
of August 8, 1997 (the "Purchase Agreement"), between the Company and the
Holder, the Company has agreed to provide to Holder certain registration rights
with respect to the 315,000 shares of Common Stock issued to Holder pursuant to
the Purchase Agreement (such 315,000 shares of Common Stock being referred to
herein as the "Restricted Shares").
AGREEMENT
NOW, THEREFORE, in consideration of the premises and covenants set
forth in the Purchase Agreement, the parties agree as follows:
1. Incidental (Piggyback) Registration. Subject to the limitations
set forth in this Agreement, if the Company at any time within three (3) years
of the date hereof proposes to file on its behalf and/or on behalf of any of
its security holders ("the demanding security holders") a Registration
Statement under the Securities Act of 1933, as amended (the "Securities Act")
on any form (other than a Registration Statement on Form S-4 or S-8 or any
successor form for securities to be offered in a transaction of the type
referred to in Rule 145 under the Securities Act or to employees of the Company
pursuant to any employee benefit plan, respectively) for the general
registration of any sale or resale of Common Stock or any other class of the
Company's securities, it shall give written notice to the Holder at least 15
days before the initial filing with the Commission of such Registration
Statement, which notice shall set forth the intended method of disposition of
the securities proposed to be registered by the Company. The notice shall
offer to include in such filing the aggregate number of shares of Restricted
Shares as Holder may request.
If Holder desire to have any offer and sale of Restricted Shares
registered under this Section 1, it shall advise the Company in writing within
10 days after the date of receipt of such offer from the Company, setting forth
the amount of such Restricted Shares for which registration is requested. The
Company shall thereupon include in such filing the number of shares of
Restricted Shares for which registration is so requested, subject to the
following. In the event that the proposed registration by the Company is, in
whole or in part, an underwritten public offering of securities of the Company,
the Company shall not be required to include any of the Restricted Shares in
such underwriting unless Holder agrees to accept the offering on the same terms
and conditions as the shares of Common Stock, if any, otherwise being sold
through underwriters under such registration. In each case all shares of
Common Stock owned by the Holder which are not included in the underwritten
public offering shall be withheld from the market by the Holder for a period,
not to exceed ninety (90) calendar days, which the managing underwriter
reasonably determines as necessary in order to effect the underwritten public
offering. In the event the Company chooses a registration form which limits
the size offering either in terms of the number of shares or dollar amount, the
Company shall not be required to include in the offering (in addition to the
number of shares to be sold by the Company) Restricted Shares which would
exceed such limits.
In no event shall the Company be required to provide the "piggyback"
registration rights contemplated by this Section 1 in connection with the
Company's filing, not later than September 30,1997, of a registration statement
for the resale by Memphis International Motorsports, Inc. (or its permitted
transferees) of the Common Stock issued or to be issued to it upon conversion
of the Company's outstanding Series B Convertible Preferred Stock.
<PAGE> 2
2. Shelf Registration
Subject to the limitations set forth in this Agreement, not later than
June 30, 1998 the Company will file a Registration Statement for an offering to
be made on a continuous basis pursuant to Rule 415 under the Securities Act
(the "Shelf Registration Statement") covering the Holder's sale, from time to
time or any time (in public sales, negotiated sales, or otherwise) up to all of
the Restricted Shares and thereafter shall use its reasonable best efforts to
cause the Shelf Registration Statement to be declared effective as soon as
practicable following such filing and to maintain such effectiveness for a
period of at least two (2) years from the effective date thereof; provided,
however, that the Company shall have the right to prohibit the sale of Common
Stock pursuant to the Shelf Registration Statement, upon notice to the Holder
if in the opinion of counsel for the Company, the Company would thereby be
required to disclose information not otherwise then required by law to be
publicly disclosed, provided that the Company shall use its best efforts to
minimize the period of time in which it shall prohibit the sale of any shares
of Common Stock and in no event shall the prohibition on sales extend more than
ten (10) calendar days or twenty (20) days in any twelve (12) month period.
Notwithstanding anything herein to the contrary, the Company shall not be
obligated to maintain the effectiveness of the Shelf Registration Statement
pursuant to this Section 1(b), to deliver any prospectus under the Shelf
Registration Statement or to provide the "piggyback" registration rights
contemplated by Section 1 hereof if the Holder owns less than 1% of the
Company's outstanding shares and has owned the Restricted Shares at least a
year.
3. Expenses. Subject to the limitations contained in this Section 3
and except as otherwise specifically provided in this Agreement, the entire
costs and expenses of the registrations and qualifications pursuant to Sections
1 and 2 hereof shall be borne by the Company. Such costs and expenses shall
include, without limitation, the fees and expenses of counsel for the Company
and of its accountants, all other costs, fees and expenses of the Company
incident to the preparation, printing and filing under the Securities Act of
the registration statement and all amendments and supplements thereto
(including all expenses incident to filing with the NASD), the cost of
furnishing copies of each preliminary prospectus, each final prospectus and
each amendment or supplement thereto to underwriters, dealers and other
purchasers of the Restricted Shares and the costs and expenses (including fees
and disbursements of counsel) incurred in connection with the qualification of
the Restricted Shares under the blue sky laws of various jurisdictions. The
Company shall not, however, pay (x) any underwriting discount or commissions to
the extent related to the sale of the Restricted Shares sold in any
registration and qualification, (y) the fees and expenses of counsel or any
other adviser(s) to the Holder, or (z) any stock transfer taxes payable by the
Holder.
4. Registration Procedures.
(a) In the case of each registration or qualification pursuant to
Sections 1 or 2, the Company will keep Holder advised in writing as to the
initiation of proceedings for such registration and qualification and as to the
completion thereof, and will advise any such holder, upon request, of the
progress of such proceedings.
(b) Except as otherwise specifically provided in this Agreement,
at the Company's expense, the Company will keep each registration and
qualification under this Agreement effective (and in compliance with the
Securities Act) by such action as may be necessary or appropriate until the
distribution contemplated thereby is completed, including, without limitation,
the filing of post-effective amendments and supplements to any registration
statement or prospectus necessary to keep the registration statement current
and the further qualification under any applicable blue sky or other state
securities laws to permit such sale or distribution, all as requested by
Holder; provided, however, that except as expressly provided in Section 2
hereof, the Company shall have no obligation to keep any registration statement
current for more than 90 days after its initial effective date. The Company
will immediately notify Holder pursuant to this Agreement, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus included
in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing.
2
<PAGE> 3
(c) In connection with all underwritten offerings, the Company will
use its reasonable best efforts to furnish to Holder a signed counterpart,
addressed to Holder, of (i) an opinion of counsel for the Company, dated the
effective date of such registration statement, and (ii) a so-called "cold
comfort" letter signed by the independent public accountants who have certified
the Company's financial statements included in such registration statement, and
such opinion of counsel and accountants' letter shall cover substantially the
same matters with respect to such registration statement (and the prospectus
included therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are customarily
covered in opinions of issuer's counsel and in accountants' letters delivered
to underwriters in connection with underwritten public offerings of securities.
(d) Without limiting any other provision hereof, in connection with
any registration of the Restricted Shares under this Agreement, the Company
will use its reasonable best efforts to comply with the Securities Act, the
Securities Exchange Act of 1934, as amended (the "Securities Exchange Act"),
and all applicable rules and regulations of the Commission, and will make
generally available to its securities holders, as soon as reasonably
practicable, an earnings statement covering a period of at least twelve months,
beginning with the first month of the first fiscal quarter after the effective
date of such registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act.
(e) In connection with any registration of the Restricted Shares
under this Agreement, the Company will provide, if appropriate, a transfer
agent and registrar for the Restricted Shares not later than the effective date
of such registration statement.
(f) If the Company at any time proposes to register any of its
securities under the Securities Act, other than pursuant to a request made
under Section 2 hereof, whether or not for sale for its own account, and such
securities are to be distributed by or through one or more underwriters, then
the Company will make reasonable efforts, if requested by Holder pursuant to
Section 1 hereof, to arrange for such underwriters to include such Restricted
Shares among the securities to be distributed by or through such underwriters.
Holder shall be party to any such underwriting agreement, and (x) the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of Holder, and (y) the Holder shall make customary
representations and agreements with respect to itself for the benefit of the
underwriters and the Company.
(g) In connection with the preparation and filing of each
registration statement registering the Restricted Shares under this Agreement,
the Company will give Holder and its underwriters, if any, and its counsel and
accountants the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give
each of them such reasonable access to its books and records and such
opportunities to discuss the business of the Company with its officers, its
counsel and the independent public accountants who have certified its financial
statements, as shall be necessary, in the opinion of Holder or such
underwriters or their respective counsel, in order to conduct a reasonable and
diligent investigation within the meaning of the Securities Act. Without
limiting the foregoing, each registration statement, prospectus, amendment,
supplement or any other document filed with respect to a registration under
this Agreement shall be subject to review and reasonable approval by Holder and
by its counsel, which shall not be unreasonably delayed.
(h) The Company will use reasonable efforts to list, on or prior to
the effective date of each registration statement registering the Restricted
Shares under this Agreement, all shares covered by such registration statement
on any securities exchange on which any of the Common Stock is then listed, if
any.
(i) The Company will cooperate with Holder and each underwriter or
agent participating in the disposition of securities subject to any
registration hereunder and their respective counsel in connection with any
filings required to be made with the National Association of Securities
Dealers.
3
<PAGE> 4
(j) The Company will use reasonable efforts to prevent the issuance
by the SEC or any other governmental agency or court of a stop order,
injunction or other order suspending the effectiveness of each registration
statement registering the Restricted Shares under this Agreement and, if such
an order is issued, use reasonable efforts to cause such order to be listed as
promptly as practicable.
(k) The Company will promptly notify Holder and each underwriter of
the happening of any event, during the period of distribution, as a result of
which any registration statement registering the Restricted Shares under this
Agreement includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing (in which
case, the Company shall promptly provide Holder with revised or supplemental
prospectuses and, if so requested by the Company in writing, Holder shall
promptly take action to cease making any offers of the Common Stock until
receipt and distribution of such revised or supplemental prospectuses).
(l) To the extent required by law, the Company will use its
reasonable best efforts to register or qualify the securities to be sold by
Holder under such other securities or blue sky laws of such jurisdictions
within the United States as Holder shall reasonably request (provided, however,
the Company shall not be obligated to qualify as a foreign corporation to do
business under the laws of any jurisdiction in which it is not then qualified
or to file any general consent to service of process), and do such other
reasonable acts and things as may be required of it to enable such holder to
consummate the disposition in the jurisdiction of the securities covered by
such registration statement.
5. Provision of Documents. The Company will, at the expense of the
Company, furnish to Holder such number of registration statements,
prospectuses, offering circulars and other documents incident to any
registration or qualification referred to in Sections 1 or 2 as Holder from
time to time may reasonably request.
6. Indemnification. In the event of any registration of any
Restricted Shares under the Securities Act pursuant to this Agreement, the
Company shall indemnify and hold harmless Holder, any underwriter (as defined
in the Securities Act) for Holder, each broker or any other person, if any, who
controls any of the foregoing persons, within the meaning of the Securities Act
against any losses, claims, damages or liabilities, joint or several, and
expenses (including reasonable attorneys' fees and expenses and reasonable
costs of investigation) to which any of the foregoing persons, or such
controlling person may be subject, under the Securities Act or otherwise,
insofar as any thereof arise out of or are based upon (i) any untrue statement
or alleged untrue statement of a material fact contained in (A) any
registration statement under which such Restricted Shares were registered under
the Securities Act pursuant to Sections 1 or 2 hereof, any prospectus or
preliminary prospectus contained therein, or any amendment or supplement
thereto or (B) any other document incident to the registration of the
Restricted Shares under the Securities Act or the qualification of the
Restricted Shares under any state securities laws applicable to the Company,
(ii) the omission or alleged omission to state in any item referred to in the
preceding clause (i) a material fact required to be stated therein or necessary
to make the statements therein not misleading, or (iii) any violation or
alleged violation by the Company of the Securities Act, the Securities Exchange
Act or any other federal or state securities law, rule or regulation applicable
to the Company and relating to action or inaction by the Company in connection
with any such registration or qualification, except insofar as such losses,
claims, damages, liabilities or expenses arise out of or are based upon any
untrue statement or alleged untrue statement or omission or alleged omission
based upon information furnished to the Company in writing by Holder or by any
underwriter for Holder expressly for use therein (with respect to which
information Holder or underwriter shall so indemnify and hold harmless the
Company, any underwriter for the Company and each person, if any, who controls
the Company or such underwriter within the meaning of the Securities Act). The
Company will enter into an underwriting agreement with the underwriter or
underwriters for any underwritten offering registered under the Securities Act
pursuant to Sections 1 or 2 hereof and with Holder pursuant to such offering,
and such underwriting agreement shall contain customary provisions with respect
to indemnification and contribution which shall, at a minimum, provide the
indemnification set forth above.
7. Certain Limitations on Registration Rights. Notwithstanding the
other provisions of this Agreement, the Company shall not be obligated to
register the Restricted Shares of Holder if, in the opinion of counsel to the
Company reasonably satisfactory to Holder, the sale or other disposition of
4
<PAGE> 5
Holder's Restricted Shares may be effected without registering such Restricted
Shares under the Securities Act. The Company's obligations under Section 1 or
2 are also expressly conditioned upon Holder furnishing to the Company in
writing such information concerning Holder and their controlling persons and
the terms of such Holder's proposed offering of Restricted Shares as the
Company shall reasonably request for inclusion in the Registration Statement.
8. Miscellaneous.
(a) Notice Generally. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Agreement shall be sufficiently given or
made if in writing and either delivered in person with receipt acknowledged,
delivered by reputable overnight courier, telecopied and confirmed separately
in writing by a copy mailed as follows or sent by registered or certified mail,
return receipt requested, postage prepaid, addressed as set forth in the
Purchase Agreement.
(b) Governing Law. This Agreement shall be governed by the laws
of the State of Florida, without regard to the provisions thereof relating to
conflict of laws.
(c) Binding Effect; Assignment; Third Party Beneficiaries. This
Agreement shall be binding upon the Parties and their respective successors and
assigns and shall inure to the benefit of the Parties and their respective
successors and permitted assigns. No Party shall assign any of its rights or
delegate any of its duties under this Agreement (by operation of law or
otherwise) without the prior written consent of the other Parties. Any
assignment of rights or delegation of duties under this Agreement by a Party
without the prior written consent of the other Parties, if such consent is
required hereby, shall be void. No person (including, without limitation, any
employee of a Party) shall be, or be deemed to be, a third party beneficiary of
this Agreement.
(d) Entire Agreement. This Agreement, together with the Purchase
Agreement and the "Right of First Refusal Agreement" executed in connection
therewith, is intended by the parties as a final expression of their agreement
and intended to be a complete exclusive statement of the Agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein.
This Agreement supersedes all prior agreements and understandings between the
parties with respect to the subject matter hereof.
(e) Amendments. No addition to, and no cancellation, renewal,
extension, modification or amendment of, this Agreement shall be binding upon a
Party unless such addition, cancellation, renewal, extension, modification or
amendment is set forth in a written instrument which states that it adds to,
amends, cancels, renews, extends or modifies this Agreement and has been
approved by all of the Parties.
(f) Waivers. No waiver of any provision of this Agreement shall
be binding upon a Party unless such waiver is expressly set forth in a written
instrument which is executed and delivered by such Party or on behalf of such
Party by an officer of, or attorney-in-fact for, such Party. Such waiver shall
be effective only to the extent specifically set forth in such written
instrument. Neither the exercise (from time to time and at any time) by a Party
of, nor the delay or failure (at any time or for any period of time) to
exercise, any right, power or remedy shall constitute a waiver of the right to
exercise, or impair, limit or restrict the exercise of, such right, power or
remedy or any other right, power or remedy at any time and from time to time
thereafter. No waiver of any right, power or remedy of a Party shall be deemed
to be a waiver of any other right, power or remedy of such Party or shall,
except to the extent so waived, impair, limit or restrict the exercise of such
right, power or remedy.
(g) Remedies.
(i) The rights, powers and remedies of the Parties set
forth herein for a breach of or default under this Agreement are cumulative
and in addition to, and not in lieu of, any rights or remedies that any Party
may otherwise have under this Agreement, at law or in equity.
5
<PAGE> 6
(ii) The Parties acknowledge that the Restricted Shares are
unique, and that any violation of this Agreement cannot be compensated for by
damages alone. Accordingly, in addition to all of the other remedies which
may be available hereunder or under applicable law, any Party shall have the
right to any equitable relief which may be appropriate to remedy a breach or
threatened breach by any other Party hereunder, including, without limitation,
the right to enforce specifically the terms of this Agreement by obtaining
injunctive relief in respect of any violation or non-performance hereof, and
any Party shall have the right to seek recovery of and be awarded attorneys'
fees and expenses in any proceeding with respect to this Agreement as reasonably
determined by the court in which such proceeding is brought.
(h) Headings; Counterparts. The headings set forth in this
Agreement have been inserted for convenience of reference only, shall not be
considered a part of this Agreement and shall not limit, modify or affect in
any way the meaning or interpretation of this Agreement. This Agreement may
be signed in any number of counterparts, each of which (when executed and
delivered) shall constitute an original instrument, but all of which together
shall constitute one and the same instrument. It shall not be necessary when
making proof of this Agreement to account for any counterparts other than a
sufficient number of counterparts which, when taken together, contain
signatures of all of the Parties.
(i) Severability. If any provision of this Agreement shall
hereafter be held to be invalid, unenforceable or illegal, in whole or in part,
in any jurisdiction under any circumstances for any reason, (i) such provision
shall be reformed to the minimum extent necessary to cause such provision to be
valid, enforceable and legal while preserving the intent of the Parties as
expressed in, and the benefits to the Parties provided by, this Agreement or
(ii) if such provision cannot be so reformed, such provision shall be severed
from this Agreement and an equitable adjustment shall be made to this Agreement
(including, without limitation, addition of necessary further provisions to
this Agreement) so as to give effect to the intent as so expressed and the
benefits so provided. Such holding shall not affect or impair the validity,
enforceability or legality of such provision in any other jurisdiction or under
any other circumstances. Neither such holding nor such reformation or
severance shall affect or impair the legality, validity or enforceability of
any other provision of this Agreement.
6
<PAGE> 7
IN WITNESS WHEREOF, the Company and Holder have executed this Agreement as
of the date first above written.
GRAND PRIX ASSOCIATION OF LONG BEACH, INC.
By: /s/ Christopher R. Pook
---------------------------------------
Title: President
------------------------------------
PENSKE MOTORSPORTS, INC.
By: /s/ Gregory W. Penske
---------------------------------------
Gregory W. Penske
7
<PAGE> 1
EXHIBIT 10.4
RIGHT OF FIRST REFUSAL AGREEMENT
THIS RIGHT OF FIRST REFUSAL AGREEMENT ("Agreement") is made and entered
into as of August 8, 1997, by and among Midwest Facility Investments, Inc., a
Florida corporation ("Facility"), Penske Motorsports, Inc., a Delaware
corporation ("PMI") (collectively, Facility and PMI shall be referred to as the
"Purchasers"), and each of the individuals listed on Schedule I hereto
(individually a "Shareholder" and collectively the "Shareholders").
RECITALS
A. This Agreement is entered into in connection with (i) that certain
Stock Purchase Agreement, dated as of August 8, 1997 (the "Stock Purchase
Agreement"), between Facility and Grand Prix Association of Long Beach, Inc., a
California corporation (the "Corporation"), pursuant to which Facility is
contemporaneously acquiring 315,000 shares of common stock, no par value
("Common Stock"), of the Corporation (together with any and all other shares of
the Corporation's Common Stock that may be acquired by Facility in the future,
the "Facility Shares") and (ii) that certain Stock Purchase Agreement, dated as
of August 8, 1997, between PMI and the Corporation (the "PMI Stock Purchase
Agreement") (collectively, the Facility Stock Purchase Agreement and the PMI
Stock Purchase Agreement shall be referred to as the "Stock Purchase
Agreements"), pursuant to which PMI is contemporaneously acquiring 315,000
shares of Common Stock of the Corporation (together with any and all other
shares of the Corporation's Common Stock that may be acquired by PMI in the
future, the "PMI Shares") (collectively, the Facility Shares and the PMI Shares
shall be referred to as the "Purchased Shares").
B. The Shareholders own collectively 1,403,632 shares of common stock
of the Corporation as of the date hereof (together with any and all other
shares of the Corporation's capital stock that may be acquired by any of the
Shareholders in the future, the "Shareholder Shares").
C. Following consummation of the transactions contemplated by Stock
Purchase Agreements, Facility will own 7.2 percent of the issued and
outstanding shares of the Corporation Common Stock, PMI will own 7.2 percent of
the issued and outstanding shares of the Corporation Common Stock and the
Shareholders will own collectively 37.2 percent of the issued and outstanding
shares of the Corporation Common Stock.
D. As a condition to the willingness of Facility, PMI and the
Corporation to enter into the Stock Purchase Agreements, Facility, PMI and the
Corporation have each requested that the Shareholders agree, and in order to
induce Facility, PMI and the Corporation to enter into the Stock Purchase
Agreements, the Shareholders, Facility and PMI have agreed to place certain
restrictions upon the right of transfer of their respective interests in the
Corporation.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Facility, PMI and each
Shareholder agree as follows:
ARTICLE ONE
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each Shareholder hereby severally represents and warrants to the
Purchasers as follows (as to such Shareholder only):
(a) Authority. Such Shareholder has the power and authority to
execute this Agreement and perform such Shareholder's obligations hereunder.
This Agreement has been duly
<PAGE> 2
executed and delivered by such Shareholder and (assuming the due execution and
delivery hereof by the Purchasers) constitutes a valid and binding obligation
of such Shareholder enforceable against such Shareholder in accordance with its
terms, except to the extent that its enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or other laws affecting the
enforcement of creditors' rights generally or by general equitable principles.
(b) No Breach. The execution, delivery and performance by such
Shareholder and the consummation of the transactions contemplated hereby and
thereby: (i) do not and will not violate or conflict with any provision of law
or regulation, or any writ, order, judgment or decree of any court or
governmental or regulatory authority specifically naming such Shareholder; and
(ii) do not and will not, with or without the passage of time or the giving of
notice, result in the breach of, or constitute a default, cause the
acceleration of performance, permit the unilateral modification or termination
of, or require any consent under, or result in the creation of any lien, charge
or encumbrance upon any property or assets of such Shareholder pursuant to, any
material instrument or agreement to which such Shareholder is a party or by
which such Shareholder may be bound or affected, except in each case where the
violation, breach, default, modification, termination, absence of consent or
lien could not reasonably be expected to impair such Shareholder's timely and
complete performance of his obligations hereunder.
(c) Ownership. The Shareholder Shares set forth opposite such
Shareholder's name on Schedule 1, hereto are owned by such Shareholder, free
and clear of any liens, encumbrances, security interests, options or claims,
including, without limitation, claims or rights under "buy-sell" or other
shareholder agreements (other than this Agreement and other liens heretofore
disclosed in writing to Purchasers).
ARTICLE TWO
RESTRICTIONS IMPOSED UPON THE
TRANSFER OF STOCK BY THE SHAREHOLDERS
2.1 General Prohibition on Transfers. Except as is specifically
permitted by the provisions of this ARTICLE TWO, the sale, assignment, pledge,
gift, transfer or other disposition of any of Shareholder's "Stock" (as defined
in Section 6.13 hereof), either directly or indirectly, to any person or
entity, is prohibited.
2.2 Permitted Transfers. The following transfers of Stock shall be
permitted transfers which do not require the giving of a Notice of Right of
First Refusal under Section 2.3 of this ARTICLE TWO.
(a) Transfers with Consent. Notwithstanding the provisions of
Section 2.1, a transfer or disposition of any kind or character otherwise
prohibited by this ARTICLE TWO may be permitted if approved by each of the
Purchasers.
(b) Transfers to Family Members. Notwithstanding the provisions
of Section 2.1, each Shareholder shall be permitted to transfer (whether by
purchase, assignment, gift, bequest, devise, levy, execution or other means of
transfer) all or any portion of his or her Stock to (i) his or her spouse or
any family members, (ii) any custodian, guardian or other representative for a
spouse or family members, and/or (iii) the trustee of any trust created for the
benefit of the Shareholder, his or her spouse and/or family members
(collectively the "Permitted Family Transferees") provided that each and every
such Permitted Family Transferee executes a written acknowledgment that (i) all
Stock held by the Permitted Family Transferee will, notwithstanding the
transfer to such Permitted Family Transferee, be deemed for all purposes of
this Agreement to be owned by the transferring Shareholder, and (ii) the
Permitted Family Trustee is to be bound by all of the terms of this Agreement
as if a signatory "Shareholder" hereto.
(c) Bona Fide Pledge. Notwithstanding the provisions of Section
2.1, a Shareholder shall be entitled to make a bona fide pledge of his or her
stock to a financial institution or broker in
2
<PAGE> 3
connection with borrowing transactions (each a "Lender"); provided, however,
that, as contemplated by Section 2.4 hereof, any transfer of Stock to the
Lender pursuant to such arrangement, upon foreclosure or otherwise, shall be
subject to the "Right of First Refusal" provisions of Sections 2.3 and 2.4
hereof.
(d) Transfer of Warrant. Notwithstanding the provisions of
Section 2.1, L.H. Friend, Weinress, Frankson & Presson, Inc. (the "Firm") shall
be permitted to assign its warrant to purchase 31,250 shares of the
Corporation's common stock to one or more officers and directors of the Firm
("Permitted Transferees") in the percentages the Firm shall deem fit, provided,
however, that (i) notwithstanding such assignment, the warrant shall be deemed
for purposes of this Agreement to be owned by the Firm, and (ii) each such
Permitted Transferee agrees to be bound by the terms of this Agreement as if a
signatory hereto.
2.3 Transfers to Third Parties.
(a) Notice of Right of First Refusal. Notwithstanding the
provisions of Section 2.1, and absent the right to make a transfer of Stock
pursuant to Section 2.2, each Shareholder may transfer all or a portion of his
or her Stock, subject in all respects to the following "right of first refusal"
provisions of this Section 2.3. If any Shareholder (the "Selling Shareholder")
desires to sell Stock on the market in a "broker's transaction" or to a party
unrelated to the Selling Shareholder, the Selling Shareholder shall, not less
than five (5) business days prior to the date of the proposed sale, assignment,
transfer or other disposition, deliver a Notice of Right of First Refusal to
(x) the "Shareholders Representatives" (which shall mean Christopher R. Pook
and/or Jim Michaelian, acting in such capacity, and/or their assigns, as
applicable), and (y) each of the Purchasers, containing the following
information:
(i) the number of shares of Stock proposed to be so
transferred (the "Offered Stock");
(ii) the terms and conditions of the proposed
transfer, including the identity of the proposed transferee(s), if not a
"market transaction" and the cash consideration to be received therefor (the
"Offered Terms"); and
(iii) an affirmative offer made by the Selling
Shareholder to transfer the Offered Stock to the Shareholders Representatives
and the Purchasers at a price (the "Offer Price") equal to the total cash price
in the proposed transfer for the Offered Stock as indicated in the Notice of
Right of First Refusal (i.e., the number of shares multiplied by the per
share-cash price, to be received for the shares of Stock to be transferred),
it being agreed that, (x) without the prior written approval of each of the
Purchasers, all transfers permitted by this Section 2.3 must be solely for
consideration consisting of cash, and (y) the Offer Price for all broker's
transactions shall be the weighted average sales price for the Common Stock on
the date of delivery of the Notice of Right of First Refusal.
The date that the Notice of Right of First Refusal is delivered to the
Shareholders Representatives and the Purchasers shall constitute the First
Refusal Notice Date.
(b) Primary Right of First Refusal by the Shareholders
Representatives. Each of the Shareholders Representatives shall have the sole
and exclusive option to acquire all or any specified portion of the shares of
Stock offered for transfer in accordance with the provisions of the Notice of
Right of First Refusal for a period of two (2) business days from the First
Refusal Notice Date (the "Shareholder Exclusive Option Period"). The
Shareholders Representatives may exercise such option by giving written notice
of exercise to the Selling Shareholder and the Purchasers prior to the
termination of the Shareholder Exclusive Option Period. Such notice of
exercise shall refer to the Notice of Right of First Refusal and shall set
forth the number of shares to be acquired by the Shareholders Representatives.
The Shareholders Representative may assign their purchase rights under this
Section 2.3 to any of the other Shareholders or to any other then current
executive officer or director of
3
<PAGE> 4
the Company who agrees in writing (in form reasonably acceptable to Purchasers)
to be subject to and bound by the terms of this Agreement.
(c) Secondary Right of First Refusal by the Purchasers. In the
event the Shareholders Representatives do not collectively elect to acquire all
of the Offered Stock, the Purchasers shall have an exclusive option for three
(3) business days after the expiration of the Shareholder Exclusive Option
Period to acquire all or any portion of the Offered Stock not acquired by the
Shareholders Representatives. The Purchasers may, by agreement, allocate
between themselves the right to acquire such part of the Offered Stock that
will not be acquired by the Shareholders Representatives.
In the absence of such an agreement, each Purchaser will be entitled to
give written notice to the Selling Shareholder (the "Purchase Notice"), within
such three business day period, of such Purchaser's election to acquire all or
any part of such Offered Stock that is not being acquired by the Other
Shareholders ("Excess Offered Stock"). If the Purchasers' offers to purchase
exceed the amount of Excess Offered Stock, the option to acquire such Stock
shall be allocated between the Purchasers as follows:
(i) Each Purchaser shall be absolutely entitled to acquire
the number of shares of Excess Offered Stock that is equal to
or less than its proportionate part of such Excess Offered Stock,
based upon the number of shares owned by each Purchaser;
(ii) Each Purchaser electing to acquire more than its
proportionate part of the Excess Offered Stock under the
previous allocation step may acquire the remainder of the Excess
Offered Stock which is not previously allocated to the other Purchaser
(i.e., because the other Purchaser did not elect to acquire its entire
ratable portion under the preceding allocation step);
(d) Requirement to Purchase All Offered Stock. Notwithstanding the
provisions of the Section 2.3(b), the option to purchase shares of Stock
described in a Notice of Right of First Refusal that describes a proposed
non-market transaction may be exercised and the Closing (as hereinafter
defined) consummated only if the Shareholders Representatives and the
Purchasers collectively agree to purchase all of the shares of the Offered
Stock.
(e) Closing and Tender Requirements. The consummation of any
transfer required pursuant to an exercise of option rights created by this
ARTICLE TWO shall constitute the "Closing", and the time and date of such
Closing shall constitute the "Closing Date." The Closing shall be held at the
principal office of the Corporation, at 10:00 a.m. on or before the 25th day
subsequent to the delivery of the final Purchase Notice, and if the Closing
Date falls on a Saturday, Sunday or legal holiday, the Closing Date shall be
postponed to the next succeeding regular business day following such Saturday,
Sunday or legal holiday. At the Closing, the Selling Shareholder shall present
to the acquiring Shareholders and/or Purchaser(s), or cause the Transfer Agent
to, or the Corporation, as the case may be, all share certificates for Stock
required to be sold in proper form for transfer. Such Stock shall be
transferred free of all liens and encumbrances or adverse claims of any kind or
character created by the Selling Shareholder. At the Closing, the acquiring
Shareholders and/or Purchaser(s), upon receipt of proper tender of the Stock,
shall tender full payment of the Offer Price in conformity with the Offered
Terms as set forth in the Notice of Right of First Refusal.
(f) Permitted Transfer Following Right of First Refusal. If all of
the Stock identified in the Notice of Right of First Refusal is not elected to
be purchased in the five business day time period specified above or, if so
elected, is not purchased as required on or prior to the 25th day subsequent to
the delivery of the final Purchase Notice (it being agreed that the Purchasers
shall be entitled to purchase all of the remaining Offered Shares to be
acquired by the Shareholders Representatives if and to the extent that
Purchasers are not provided, at least three business days prior to the Closing
Date, with reasonable evidence that the Shareholders Representatives have
deposited in escrow the full cash purchase price the Common Stock to be
acquired by them or otherwise established a reasonably
4
<PAGE> 5
acceptable guarantee of payment therefor), then all of such Stock (including
any Stock for which a proper tender was made) may be transferred by the Selling
Shareholder at any time during the ensuing 30 days (10 days in the case of a
market transaction) at any price (in the case of a market transaction) or, in
the case of a non-market transaction, in strict conformity with the Offered
Terms (or on terms more favorable to the Selling Shareholder) set forth in the
Notice of Right of First Refusal (it being agreed that the identity of any
purchaser in a non-market transaction may not be changed without submission of
a new Notice of Right of First Refusal). Nothing herein shall limit the rights
of any Selling Shareholder, the Shareholders Representatives or either
Purchaser relating to any breach by any other party hereto.
2.4 Transfers Include Foreclosure. For purposes of this ARTICLE TWO,
a transfer of Stock by a Shareholder shall be deemed to include, but shall not
be limited to, any transfer of legal or beneficial ownership by reason of
foreclosure under any pledge, hypothecation or similar credit transactions (in
which case the 25 day closing period contemplated by Section 2.3(e) shall be
reduced to ten (10) business days).
2.5 Compliance. Absent the right to make a transfer of Stock
pursuant to Section 2.2 or 2.3 hereof, any transfer described in this ARTICLE
TWO of a Shareholder's Stock without complying with the giving of a Notice of
Right of First Refusal shall be void, and the Corporation shall have the right
to issue a Notice of Right of First Refusal upon discovery of such transfer, a
copy of which shall be sent to the person making such transfer and his or her
transferee. Upon the giving of the Notice of Right of First Refusal, the time
periods for the exercise of the options specified in Section 2.3 shall commence
running.
ARTICLE THREE
RESTRICTIONS IMPOSED UPON THE
TRANSFER OF STOCK BY FACILITY AND PMI
3.1 General Prohibition on Transfers. Except as is specifically
permitted by the provisions of this ARTICLE THREE, the sale, assignment,
pledge, gift, transfer or other disposition of any of the Purchased Shares,
either directly or indirectly, to any person or entity, is prohibited.
3.2 Permitted Transfers. The following transfers of the Purchased
Shares shall be permitted transfers which do not require the giving of a Notice
of Right of First Refusal under Section 3.3 of this ARTICLE THREE.
(a) Transfers with Consent. Notwithstanding the provisions of
Section 3.1, a transfer or disposition of any kind or character otherwise
prohibited by this ARTICLE THREE may be permitted if approved by the
Shareholders Representatives.
(b) Transfers to Affiliates. Notwithstanding the provisions of
Section 3.1, each of the Purchasers shall be permitted to transfer (whether by
purchase, assignment, gift, bequest, devise, levy, execution or other means of
transfer) all or any portion of the Purchased Shares to its affiliate (as
defined within the meaning of Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") provided that each and every such
affiliate executes a written acknowledgment that (i) all Purchased Shares held
by such affiliate will, notwithstanding the transfer to such, be deemed for all
purposes of this Agreement to be owned by the transferring Purchaser, and (ii)
that such affiliate agrees in writing to be bound by all of the terms of this
Agreement.
3.3 Transfers to Third Parties.
(a) Notice of Right of First Refusal. Notwithstanding the
provisions of Section 3.1, and absent the right to make a transfer of the
Purchased Shares pursuant to Section 3.2, either of the Purchasers may also
transfer all or a portion of the Purchased Shares, subject in all respects to
the following "right of first refusal" provisions of this Section 3.3. If
either of the Purchasers (the "Selling
5
<PAGE> 6
Purchaser") desires to sell Purchased Shares on the market or to a party
unrelated to such Purchaser in a "non-market" sale, the Selling Purchaser shall
not less than five (5) business days prior to the date of the proposed sale,
assignment, transfer or other disposition, deliver to the Other Purchaser and
the Corporation a "Purchaser Notice of Right of First Refusal" containing the
following information:
(i) the number of shares of Purchased Shares proposed to be so
transferred (the "Purchaser Offered Stock");
(ii) the terms and conditions of the proposed transfer,
including the identity of the proposed transferee(s) and the per share price to
be charged (if any) for the Purchased Shares to be transferred and the cash
consideration to be received therefor (the "Purchaser Offered Terms"); and
(iii) an affirmative offer made by the Selling Purchaser to
transfer the Offered Stock to the Other Purchaser and, after the Exclusive
Option Period (as hereinafter defined), to the Corporation at a price (the
"Purchaser Offer Price") equal to the total cash price in the proposed
transfer for the Purchaser Offered Stock as indicated in the Purchaser Notice
of Right of First Refusal (i.e., the number of shares multiplied by the
per share price, if any, to be charged for the shares of Stock to be
transferred), it being agreed that, (x) without the prior written approval of
the Other Purchaser all transfers permitted by this Section 3.3 must be solely
for consideration consisting of cash or cash equivalents, and (y) the Purchase
Offer Price for all broker's transactions shall be the weighted average sales
price for the Common Stock on the date of delivery of the Purchaser Notice of
Right of First Refusal.
The date that the Purchaser Notice of Right of First Refusal is
delivered to the Purchasers Representatives and the Corporation shall
constitute the Purchaser First Refusal Notice Date.
(b) Primary Right of First Refusal by the Purchasers Representatives.
The Other Purchaser shall have the sole and exclusive option to acquire all or
any portion of the Purchased Shares offered by the Selling Shareholder for
transfer in accordance with the provisions of the Purchaser Notice of Right of
First Refusal for a period of five (5) business days from the Purchaser First
Refusal Notice Date (the "Purchaser Exclusive Option Period"). The Other
Purchaser may exercise such option by giving written notice of exercise to the
Selling Purchaser prior to the termination of its Exclusive Option Period.
Such notice of exercise shall refer to the Purchaser Notice of Right of First
Refusal and shall set forth the number of Purchased Shares to be acquired by
the Other Purchaser.
(c) Secondary Right of First Refusal by the Corporation. The
Corporation shall have an exclusive option for two (2) business days after the
expiration of the Purchaser Exclusive Option Period to acquire all of the
Offered Stock that will not be acquired by the Other Purchaser. The
Corporation may assign its purchase rights under this Section 3.3 to any or all
of the Shareholders or to any other current executive officer or director of
the Company who agrees in writing (in form reasonably acceptable to Purchasers)
to be subject to and bound by the terms of this Agreement).
(d) Requirement to Purchase All Offered Stock. Notwithstanding the
provisions of the Section 3.3(b), the option to purchase the Purchased Shares
described in a Purchaser Notice of Right of First Refusal that describes a
proposed non-market transaction may be exercised and the Purchaser Closing (as
hereinafter defined) consummated only if the Corporation and/or the Other
Purchaser collectively agree to purchase all of the shares of the Purchaser
Offered Stock.
(e) Closing and Tender Requirements. The consummation of any transfer
required pursuant to an exercise of option rights created by this ARTICLE THREE
shall constitute the "Purchaser Closing", and the time and date of such Closing
shall constitute the "Purchaser Closing Date." The Purchase Closing shall be
held at the principal office of the Corporation, at 10:00 a.m. on or before the
25th day subsequent to the expiration of the Purchaser Exclusive Option Period
and if the Closing Date falls on a Saturday, Sunday or legal holiday, the
Purchase Closing Date shall be postponed to the next succeeding regular
business day following such Saturday, Sunday or legal holiday. At the
Purchaser
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<PAGE> 7
Closing, the Selling Purchaser shall present to the Corporation and/or
the Other Purchaser, as the case may be, all share certificates for the
Purchased Shares required to be sold in proper form for transfer. Such
Purchased Shares shall be transferred free of all liens and encumbrances or
adverse claims of any kind or character. At the Purchaser Closing, the
Corporation and/or the Other Purchaser, as the case may be, upon receipt of
proper tender of the Purchased Shares, shall tender full payment of the
Purchaser Offer Price in conformity with the Purchaser Offered Terms as set
forth in the Purchaser Notice of Right of First Refusal.
(f) Permitted Transfer Following Right of First Refusal. If all of
the Purchased Shares identified in the Purchaser Notice of Right of First
Refusal are not purchased by the Corporation and/or the Other Purchaser prior
to the 25th day subsequent to the expiration of the Purchaser Exclusive Option
Period, then all of such Purchased Shares (including any shares for which a
proper tender was made) may be transferred by the Selling Purchaser at any time
during the ensuing 30 days (10 days in the case of a market transaction) at any
price (in the case of a market transaction) or, in the case of a non-market
transaction, in strict conformity with the Purchaser Offered Terms (or on terms
more favorable to the Selling Purchaser) set forth in the Purchaser Notice of
Right of First Refusal.
ARTICLE FOUR
THE GIVING OF NOTICES REQUIRED BY THIS AGREEMENT
4.1 Addresses. Any notices, requests, demands and other
communications required or permitted to be given hereunder must be in writing
and, except as otherwise specified in writing, will be deemed to have been duly
given when personally delivered, telexed or facsimile transmitted, or three
days after deposit in the United States mail, by certified mail, postage
prepaid, return receipt requested, as follows. The addresses of the
Corporation, Facility, PMI and the Shareholders, which shall be considered to
be their last known addresses unless subsequently changed in accordance with
the provisions of this Agreement, are as follows:
IF TO THE CORPORATION: Grand Prix Association of Long Beach, Inc.
3000 Pacific Avenue
Long Beach, CA 90806
Attention: Christopher R. Pook
Telephone: (562) 490-4520
Facsimile: (562) 981-2632
IF TO FACILITY: Midwest Facility Investments, Inc.
1801 West International Speedway Boulevard
Daytona Beach, Florida 32120
Attention: H. Lee Combs
Telephone: (904) 947-6731
Facsimile: (904) 257-0266
IF TO PMI: Penske Motorsports, Inc.
3270 W. Big Beaver Road, Suite 130
Troy, Michigan 48084
Attention: Robert H. Kurnick, Jr.
Telephone: (248) 614-1116
Facsimile: (248) 614-1125
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<PAGE> 8
IF TO ANY SHAREHOLDER: at the address reflected opposite the
Shareholder's name on Schedule 1 hereto
IF TO EITHER SHAREHOLDER
REPRESENTATIVE::
Christopher R. Pook or Jim Michaelian
Grand Prix Association of Long Beach, Inc.
3000 Pacific Avenue
Long Beach, CA 90806
Attention: Christopher R. Pook
Telephone: (562) 490-4520
Facsimile: (562) 981-2632
Any party may change its address for the purposes of this Agreement by giving
notice of such change of address to the other parties in the manner herein
provided for giving notice.
4.2 Form of Notice. Any notice or communication hereunder must be in
writing, and may be personally delivered or given by registered or certified
mail, return receipt requested, and if given by registered or certified mail,
shall be deemed to have been given and received forty-eight hours after deposit
in the United States mail of a registered or certified letter, return receipt
requested, containing such notice, properly addressed, with postage prepaid;
and if given otherwise than by registered or certified mail, it shall be deemed
to have been given when received by the party to whom it is addressed at the
time received.
4.3 Failure to Notify of Changed Address. It shall be the
responsibility of each of the parties to this Agreement to notify all other
parties of their respective addresses and any changes thereof, and any
objections to the performance of any act required hereunder based upon a
failure to receive a notice mailed in conformity with the provisions of this
Agreement shall be meritless.
ARTICLE FIVE
ELECTION OF DIRECTORS
During the term of this Agreement, each of the Shareholders and
Purchasers agrees to vote all shares of Corporation Common Stock owned by such
party to elect as directors of the Corporation (x) those designees of Facility
and/or PMI that such Purchaser(s) then has (have) the right to designate as
director nominees pursuant to the Stock Purchase Agreements, and (y) such other
nominees for election as are proposed from time to time by the Corporation's
Board of Directors or appropriate nominating committee thereof.
ARTICLE SIX
MISCELLANEOUS
6.1 Custody. In connection with and to facilitate the terms of this
Agreement, the Shareholders, Facility, PMI and the Corporation hereby appoint
L.H. Friend, Weinress, Frankson & Presson, Inc. as custodian (the "Custodian")
and herewith deposit with the Custodian certificates representing the
Shareholder Shares currently held by the Shareholders listed on Schedule I
hereto, together with certificates representing the Facility Shares and the PMI
Shares. Each such certificate so deposited is in negotiable and proper
deliverable form endorsed in blank with the signature of the Shareholder
thereon guaranteed by a commercial bank or trust company in the United States
or by a member firm of the New York Stock Exchange, or is accompanied by a duly
executed stock power or powers in blank, bearing the signature of the Selling
Shareholder so guaranteed. The Custodian is hereby authorized and directed to
hold in custody the certificate or certificates delivered herewith. The
Shareholders, Facility and PMI understand that the certificates evidencing such
party's Common Stock will bear a restrictive legend prohibiting transfer
thereof except in compliance with (i) applicable state and federal securities
laws and may not be transferred of record except in compliance therewith, and
(ii) the
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<PAGE> 9
terms of this Agreement. The Shareholders and Purchasers agree to
promptly make such deliveries and to execute any additional agreement required
to accomplish the deposit with the Custodian of all certificates evidencing
Common Stock now owned or that may be acquired in the future.
6.2 Termination. This Agreement shall terminate upon the earlier of
(i) six years from the date hereof, (ii) with respect to Facility's rights
hereunder, the date Facility ceases to own at least 80% of the shares of Common
Stock acquired by Facility pursuant to the Facility Stock Purchase Agreement,
and (iii) with respect to PMI's rights hereunder, the date PMI ceases to own at
least 80% of the shares of Common Stock acquired by PMI pursuant to the PMI
Stock Purchase Agreement. This Agreement shall terminate as to any specific
Shareholder upon the date such Shareholder ceases to own any Stock.
6.3 Modification. This Agreement may only be amended, terminated or
modified by the written consent of the Corporation and the Shareholder or
Shareholders to be bound by such modification.
6.4 Successors. This Agreement shall be binding upon the parties
hereto, their heirs, administrators, successors, executors and assigns, and the
parties hereto do covenant and agree that they themselves and their respective
heirs, executors, successors, administrators and assigns will execute any and
all instruments, releases, assignments and consents that may be reasonably
required of them to more fully execute the provisions of this Agreement.
6.5 Counterparts. This Agreement may be executed in several
counterparts, each of which shall serve as an original for all purposes, but
all copies of which shall constitute but one and the same Agreement.
6.6 Headings. All headings set forth in this Agreement are intended
for convenience only and shall not control or affect the meaning, construction
or effect of this Agreement or of any of the provisions thereof.
6.7 Governing Law. This Agreement shall be governed by and shall be
construed and enforced in accordance with the laws of the State of Florida.
6.8 Waiver. The waiver by any party hereto of a breach of any
provision of this Agreement must be in writing and shall not operate or be
construed as a waiver of any subsequent breach by any party.
6.9 Entire Agreement. This Agreement, together with the Stock
Purchase Agreements and "Registration Rights Agreements" executed in connection
therewith, constitute the entire agreement of the parties hereto with respect
to the transactions contemplated hereby, and it is hereby agreed that any prior
oral or written agreements concerning the sale or disposition of Stock shall be
null and void.
6.10 Severability. If any provision of this Agreement shall be held
to be illegal or unenforceable, such illegality or unenforceability shall
extend to that provision solely, and the remainder of this Agreement shall be
enforced as if such illegal or unenforceable provision were not incorporated
herein.
6.11 Specific Performance. The right to own and vote capital stock
of the Corporation is hereby declared by the parties hereto to be a unique
right, the loss of which is not susceptible to monetary quantification.
Consequently, the parties hereto agree that an action for specific performance
of the purchase and sale obligations created by this Agreement is a proper
remedy for the breach of its provisions. If any party(ies) to this Agreement
institute legal proceedings in connection with this Agreement, the prevailing
party(ies) shall be entitled to recover their reasonable attorneys' fees and
court costs.
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<PAGE> 10
6.12 Business Days. References to "Business Days" or "Business Day"
shall mean any day in which The Nasdaq Stock Market is open for business.
Whenever the terms of this Agreement call for the performance of a specific act
on a specified date, which date falls on a Saturday, Sunday or legal holiday,
the date for the performance of such act shall be postponed to the next
succeeding regular business day following such Saturday, Sunday or legal
holiday.
6.13 Stock References. References to "Stock" herein shall mean
(i) each Shareholder's Shares and any capital stock of the Corporation
purchased or otherwise acquired, as of the date hereof or subsequent thereto,
by any Shareholder, and the 31,250 Shares issuable upon exercise of the L.H.
Friend, Weinress, Frankson & Presson, Inc. Warrant, dated as of June 24, 1996
(ii) any equity securities issued or issuable, as of the date hereof or
subsequent thereto, directly or indirectly with respect to the Stock referred
to in clause (i) above by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization, and (iii) any other shares of any class or series of capital
stock of the Corporation held by a Shareholder.
6.14 Failure to Deliver Stock. If a Purchaser or a Shareholder (or
any personal representative or other representative of a Shareholder) who has
become obligated to sell stock of the Corporation hereunder shall fail to
deliver such stock on the terms and in accordance with this Agreement, the
party(ies) having the right to purchase such stock, in addition to all other
remedies they may have, may send to the such obligated party by registered
mail, return receipt requested, the purchase price for such Stock on the terms
provided for in this Agreement. Thereupon, the Corporation, upon written
notice to such obligated Purchaser or Shareholder, shall cause the cancellation
on its books or cause the Transfer Agent to cancel the certificates
representing the stock to be sold; and thereupon, all of the obligated
Purchaser's or Shareholder's rights in and to such Stock shall terminate.
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<PAGE> 11
IN WITNESS WHEREOF, the parties to this Agreement have hereunto set their
names as of the date first above written.
MIDWEST FACILITY INVESTMENTS, INC.
By: /s/ H. Lee Combs
-----------------------------------
H. Lee Combs
PENSKE MOTORSPORTS, INC.
By: /s/ Gregory W. Penske
-----------------------------------
Gregory W. Penske
SHAREHOLDERS:
--------------------------------------
Christopher R. Pook
--------------------------------------
James P. Michaelian
--------------------------------------
Dwight R. Tanaka
--------------------------------------
Michael S. Clark
--------------------------------------
Joseph Ainge
--------------------------------------
Daniel S. Gurney
--------------------------------------
Wayne Kees
11
<PAGE> 12
IN WITNESS WHEREOF, the parties to this Agreement have hereunto set their
names as of the date first above written.
MIDWEST FACILITY INVESTMENTS, INC.
By:
-----------------------------------
H. Lee Combs
PENSKE MOTORSPORTS, INC.
By:
-----------------------------------
Robert H. Kurnick, Jr.
GRAND PRIX ASSOCIATION OF LONG BEACH, INC.
SHAREHOLDERS:
/s/ Christopher R. Pook
--------------------------------------
Christopher R. Pook
/s/ James P. Michaelian
--------------------------------------
James P. Michaelian
/s/ Dwight R. Tanaka
--------------------------------------
Dwight R. Tanaka
/s/ Michael S. Clark
--------------------------------------
Michael S. Clark
/s/ Richard Lalor
--------------------------------------
Richard Lalor
/s/ Gemma A. Bannon
--------------------------------------
Gemma A. Bannon
/s/ Todd Bridges
--------------------------------------
Todd Bridges
/s/ Rod Wolter
--------------------------------------
Rod Wolter
/s/ James Sullivan
--------------------------------------
James Sullivan, Trustee of The
S.R.E. Industries Pension Plan &
Trust and individually
/s/ Wayne G. Kees
--------------------------------------
Wayne Kees, Trustee of the Wayne G.
Kees Living Trust dated 10/24/89
and individually
/s/ Daniel S. Gurney
--------------------------------------
Daniel S. Gurney, Trustee under the
Lambert-Fries Trust dated 12-5-91
/s/ John R. Queen, III
--------------------------------------
John R. Queen, III
/s/ George Pellin
--------------------------------------
George Pellin
<PAGE> 13
IN WITNESS WHEREOF, the parties to this Agreement have hereunto set their
names as of the date first above written.
GRAND PRIX ASSOCIATION OF LONG BEACH, INC.
SHAREHOLDERS:
/s/ Ellen L. Pook
--------------------------------------
Ellen L. Pook
/s/ Evi Gurney
--------------------------------------
Evi Gurney
/s/ Evi Gurney, Trustee
--------------------------------------
Evi Gurney, Trustee
under the Gurney Family Trust
/s/ Gilbert L. Fries, Jr.
--------------------------------------
Gilbert L. Fries, Trustee of
the Lambert-Fries Trust dated 12-5-91
/s/ Mary Lou Lambert Fries, Jr.
--------------------------------------
Mary Lou Lambert Fries, Trustee of
the Lambert-Fries Trust dated 12-5-91
/s/ Sharon Tanaka
--------------------------------------
Sharon Tanaka
--------------------------------------
Gayle Sette, Trustee of the
Sette Family Trust
/s/ Victoria L. Bridges
--------------------------------------
Victoria Bridges
MATLINS FINANCIAL CONSULTING, INC.
PROFIT SHARING PLAN
/s/ Neil Matlins
--------------------------------------
Neil Matlins, Trustee
THE LINCOLN FUND, LP
/s/ Neil Matlins
--------------------------------------
By: Neil Matlins
<PAGE> 14
IN WITNESS WHEREOF, the parties to this Agreement have hereunto set their
names as of the date first above written.
THE LINCOLN FUND TAX
ADVANTAGED, LP
/s/ Neil Matlins
--------------------------------------
By: Neil Matlins
THE GORDON FUND, LP
/s/ Neil Matlins
--------------------------------------
By: Neil Matlins
--------------------------------------
Gayle Sette
/s/ J. Rodney Bryan
--------------------------------------
J. Rodney Bryan Trustee
of the Rodney Bryan Trust dated 12/15/93
/s/ Mary Ann Bryan
--------------------------------------
Mary Ann Bryan Trustee
of the Rodney Bryan Trust dated 12/15/93
/s/ Betty Sullivan
--------------------------------------
Betty Sullivan
/s/ Betty Sullivan
--------------------------------------
Betty Sullivan Trustee of
The S.R.E. Industries Pension Plan & Trust
/s/ Constance Ainge
--------------------------------------
Constance Ainge, Trustee of the Ainge
Family Trust dated 11/21/96
/s/ Martin Bannon
--------------------------------------
Martin Bannon
EDMARJON-RONBREWDAVE,LLC
A Tennessee limited liability company
--------------------------------------
By:
<PAGE> 15
/s/ Joseph Ainge
--------------------------------------
Joseph Ainge, Trustee of the Ainge
Family Trust dated 11/21/96 and
individually
--------------------------------------
Neil Matlins
/s/ Penny Niccole
--------------------------------------
Penny Niccole, Trustee of the
Niccole Family Trust dated 11/13/95
/s/ Michael Niccole
--------------------------------------
Michael Niccole, Trustee of the
Niccole Family Trust dated 11/13/95
--------------------------------------
Louis C. Mirabile
/s/ Ruth A. Queen
--------------------------------------
Ruth Queen
/s/ John R. Queen, Jr.
--------------------------------------
John R. Queen, Jr.
/s/ Robert Sette
--------------------------------------
Robert Sette
--------------------------------------
Gilbert Fries
--------------------------------------
John Read
--------------------------------------
Rodney Bryan
/s/ Herman Maier
--------------------------------------
Herman Maier
EDMARJON-RONBREWDAVE, LLC
SHAREHOLDERS
/s/ Ed H. Gatlin
--------------------------------------
Ed H. Gatlin, CEO
MEMPHIS INTERNATIONAL MOTORSPORTS PARK, INC.
SHAREHOLDERS
--------------------------------------
--------------------------------------
--------------------------------------
L.H. Friend, Weinress, Frankson & Presson,
Inc.
--------------------------------------
/s/ Gregory E. Presson
--------------------------------------
By: Gregory E. Presson
--------------------------------------
It: President
--------------------------------------
Subject to Rider A, which is attached
<PAGE> 16
Agent to cancel the certificates representing the stock to be sold; and
thereupon, all of the obligated Purchaser's or Shareholder's rights in and to
such Stock shall terminate.
Only 45,000 shares of EDMARJON-RONBREWDAVE, LLC is subject to the Right of
First Refusal Agreement.
10
<PAGE> 17
IN WITNESS WHEREOF, the parties to this Agreement have hereunto set
their names as of the date first above written.
/s/ Patricia Queen
-------------------------------
Patricia Queen
<PAGE> 18
SCHEDULE 1 TO RIGHT OF FIRST REFUSAL AGREEMENT
<TABLE>
<CAPTION>
Name Shares 1993 Options
- ---- ------ ------------
<S> <C> <C>
Christopher R. Pook 310,207(8) 174,435
Christopher R. Pook 72,341(9)
Ellen L. Pook 65,804
James P. Michaelian 176,499(12) 108,702
Dwight Tanaka and Sharon Tanaka 55,204(6) 20,830
Michael S. Clark 32,190(5) 12,691
Rick Lalor 31,728
Gemma Bannon 9,064
Gemma Bannon and Martin Bannon 23,049(7)
Todd Bridges and Victoria Bridges 1,400
Rod Wolter 500
James Sullivan 7,114 14,939
Betty Sullivan 7,114
James Sullivan and Betty Sullivan Trustees 41,799
under the S.R.E. Industries Pension Plan & Trust
Wayne Kees 11,952
Wayne Kees Trustee of the
Wayne G. Kees Living Trust dated 10/24/89 49,014
Daniel S. Gurney 11,952
Daniel S. Gurney and Evi Gurney 70,841(1)
Trustees of the Gurney Family Trust
Evi Gurney 2,987
John Queen, III 36,570(3)
George Pellin 59,195(2) 14,939
Joseph Ainge 14,939
Joseph Ainge and Constance Ainge, 46,027
Trustees of the Ainge Family Trust
dated 11/21/96
</TABLE>
<PAGE> 19
Gilbert L. Fries and Mary Lou Lambert
Fries, Trustees of The Lambert-Fries
Trust dated 12-5-91 35,000(4)
The Lincoln Fund, LP 66,600
The Lincoln Fund Tax Advantaged, LP 18,750
The Gordon Fund, LP 15,625
Matlins Financial Consulting, Inc.
Profit Sharing Plan 6,250
Rod Sette and Gayle Sette 37,508(11)
J. Rodney Bryan and Mary Ann Bryan
Trustees of the Rodney Bryan
Trust dated 12/15/93 23,120
Penny Niccoli and Michael Niccoli Trustees
of the Niccoli Family Trust dated 11/13/95 35,570
Ruth Queen 38,557 11,952
John R. Queen, Jr. and Patricia Queen 81,910(1) 11,952
Herman Maier 14,228
EDMARJON-RONBREWDAVE, LLC
A Tennessee limited liability company
(successor in interest to Memphis International
Motorsports Corporation) 45,000(13)
L. H. Friend, Weinress,
Frankson & Presson, Inc. Warrant to
purchase
31,250
(1) 16,148 pledged to secure $12,485 note to GPALB.
(2) 18,148 subject to $44,500.42 margin balance with Evern Securities.
(3) Shares in a Mortgage Pledge Account at Merrill Lynch will be released
within 10 days.
(4) Subject to $105,677 margin balance account with Christopher Weil & Co.
(5) Pledged to secure $24,887.50 note to GPALB.
(6) Pledged to secure $42,679 note to GPALB.
(7) Pledged to secure $17,820 note to GPALB.
(8) Subject to $342,731 margin balance with Bear Stearns.
(9) Shares and options owned by Lou Mirabile subject to right of first
refusal agreement with dated 8-8-97 in favor of Christopher R. Pook
(10,457 of Mr. Mirabile's shares are pledged to secure $8,085 note to
GPALB).
(10) intentionally omitted.
(11) 10,457 pledged to secure $8,085 note to GPALB.
(12) 114,997 pledged to secure $88,907.50 note to GPALB.
(13) Part of total 250,000 series B convertible preferred shares which are
held by First Commercial Bank of Memphis to secure a $1,500,000 note.
<PAGE> 1
EXHIBIT 15.1
Penske Motorsports, Inc. Form 10-Q (continued)
Penske Motorsports, Inc.
Detroit, Michigan
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of Penske Motorsports, Inc. for the periods ended June 30, 1997 and
1996, as indicated in our report dated August 1, 1997; because we did not
perform an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, is
incorporated by reference in Registration Statement No. 333-692 on Form S-8.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
/s/ Deloitte & Touche LLP
Detroit, Michigan
August 1, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> APR-01-1997 JAN-01-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<CASH> 6,973 6,973
<SECURITIES> 0 0
<RECEIVABLES> 12,135 12,135
<ALLOWANCES> 0 0
<INVENTORY> 4,432 4,432
<CURRENT-ASSETS> 24,794 24,794
<PP&E> 231,001 231,001
<DEPRECIATION> 21,230 21,230
<TOTAL-ASSETS> 266,810 266,810
<CURRENT-LIABILITIES> 65,276 65,276
<BONDS> 7,507 7,507
0 0
0 0
<COMMON> 141 141
<OTHER-SE> 181,875 181,875
<TOTAL-LIABILITY-AND-EQUITY> 266,810 266,810
<SALES> 10,901 16,225
<TOTAL-REVENUES> 46,296 51,671
<CGS> 6,226 9,402
<TOTAL-COSTS> 28,331 36,312
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 48 (77)
<INCOME-PRETAX> 17,917 15,436
<INCOME-TAX> 6,988 6,018
<INCOME-CONTINUING> 10,929 9,418
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 10,929 9,418
<EPS-PRIMARY> .80 .70
<EPS-DILUTED> .80 .70
</TABLE>
