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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB
(MARK ONE)
[X]ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1997
[_]TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NO. 1-11837
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GRAND PRIX ASSOCIATION OF LONG BEACH, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
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<S> <C>
CALIFORNIA 95-2945353
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
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3000 PACIFIC AVENUE, LONG BEACH, CA 90806
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(562) 981-2600
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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SECURITIES REGISTERED UNDER SECTION 12(b) OF N/A
THE ACT:
NONE (NAME OF EXCHANGE ON WHICH REGISTERED)
(TITLE OF EACH CLASS)
SECURITIES REGISTERED UNDER SECTION 12(g) OF
THE ACT:
COMMON STOCK, NO PAR VALUE
(TITLE OF EACH CLASS)
</TABLE>
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Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 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 [_]
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [_]
State issuer's revenues for its most recent fiscal year: $30,909,000.
As of February 18, 1998, there were 4,665,236 outstanding shares of Common
Stock, no par value. The aggregate market value of the voting stock of the
registrant held by non-affiliates of the registrant on February 18, 1998,
based on the average bid and asked price on such date was $41,760,000.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of Form 10-KSB is incorporated by
reference to the registrant's definitive Proxy Statement relating to its 1998
Annual Meeting of Shareholders, which will be filed with the Commission within
120 days after the end of the registrant's fiscal year.
Transitional Small Business Disclosure Format: Yes [_] No [X]
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INTRODUCTION
Definitions There are numerous acronyms used in the motorsports industry and
otherwise, several of which are used herein. For the facility of the reader,
acronyms used herein are defined below:
ARCA--Automobile Racing Club of America
CART--Championship Auto Racing Teams, Inc.
Grand Prix--The Grand Prix of Long Beach, an annual temporary circuit
professional motorsports event held in Long Beach, California
IPO--Initial public offering
NASCAR--The National Association for Stock Car Auto Racing, Inc.
NHRA--The National Hot Rod Association
SEC--Securities Exchange Commission
SWIDA--Southwestern Illinois Development Authority
USAC--United States Auto Club
PART I
ITEM 1. DESCRIPTION OF BUSINESS
For the past 25 years, the Grand Prix Association of Long Beach, Inc. (the
"Company") has been organizing and promoting automobile racing events. The
Company developed and, has operated the Grand Prix of Long Beach (the "Grand
Prix"), an annual temporary circuit professional motorsports event in Long
Beach, California since its formation as a California corporation in 1974. The
Grand Prix has the second highest paid attendance of any Indy car race, second
only to the Indianapolis 500. The Grand Prix weekend has attracted in excess
of 200,000 paid spectators in each of the past six years, and is currently
televised to over 125 countries throughout the world.
In addition to operating the Grand Prix, the Company owns two permanent
motorsports facilities, Gateway International Raceway ("Gateway"), in Madison,
Illinois (near St. Louis) and Memphis Motorsports Park ("Memphis") near
Memphis, Tennessee. Since it acquired the Gateway facility the Company has put
in place a new infrastructure, including electrical service; a sanitation
system; a ground water drainage system; ingress and egress roads for new
parking facilities; a new drag strip; 1.25 mile oval track and road course; a
drag strip tower; an oval suite tower; walkways; concession stands and
grandstands capable of presently hosting 55,000 spectators per event and
eventually 85,000 per event at the oval and 30,000 at the drag strip. The
Company is in the process of adding restrooms and concessions and improving
ingress, egress and parking.
The Company acquired Memphis in June 1996 with the intention to make
modifications and improvements to bring the facility up to "today's"
professional motorsports standards. Memphis currently has a regulation NHRA
drag strip, a road course, a 1/4 mile dirt track, ten corporate suites, and is
capable of seating approximately 16,000 people at the drag strip utilizing
permanent grandstands supplemented by the Company's portable grandstands. The
Company is in the process of making needed improvements and expansions to
Memphis, including converting the old clay oval to a 3/4 mile paved oval,
modifying the road course and increasing the seating capacity to enable this
regional facility to host nationally sanctioned motorsports events as well as
to continue to host local and regional events.
Both Gateway and Memphis have the capability of hosting major stock car and
Indy car races. Both facilities have national caliber NHRA 1/4 mile drag
strips. In 1998, Memphis will host the NHRA Pennzoil Nationals, Presented by
AutoZone; a NASCAR Craftsman Series Truck race, and an ARCA and USAC Silver
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Crown event. Gateway will host the NHRA Sears Craftsman Nationals, the
Motorola 300 Fedex Championship Series race sanctioned by CART, the CARQUEST
Auto Parts 250 NASCAR Busch Series Grand National Division race, and a NASCAR
Craftsman Series Truck race.
Prior to June 30, 1996, the Company derived the majority of its revenues
from the Grand Prix. The addition of two permanent facilities has reduced its
reliance on the Grand Prix as its primary revenue source. The Company will,
however, continue to place great emphasis on the Grand Prix and the revenue it
generates.
The Company's business strategy is to maintain the Grand Prix as one of the
motorsports industry's premier events and to maximize its return on assets
while using the experience and expertise of its senior management team to
locate and develop other motorsports venues. In furtherance of this strategy,
the Company seeks to locate, acquire, develop and operate venues which the
Company believes are underdeveloped or underutilized; are located in major
metropolitan areas; can be acquired, improved and developed at a reasonable
cost; and can be operated as multi-purpose motorsports facilities.
A further business strategy of the Company has been to maximize the
productivity of both its employees and the race-related operating equipment it
has acquired, by renting its temporary structures and electrical equipment to
other event operators and providing consulting and marketing services to other
entities. While both Gateway and Memphis need a relatively limited amount of
temporary equipment to meet peak demands, the Company intends to enter the
equipment rental business in those markets as well as to continue in the
Southern California market. In addition to rental of temporary structures and
electrical services for other special events, the Company will continue to
provide marketing and promotional services for other entities, as well as
media production services and merchandise/souvenirs for all three of its
venues--Long Beach, Gateway and Memphis.
The Company now employs 56 full time and 3 part time employees. The Company
hires seasonal employees as required to supplement its permanent staff at all
locations for various events. The Company is party to collective bargaining
agreements with the Construction Laborers Union, Local 507 for seasonal
employees limited to construction activities related to the Grand Prix, and
with the Tradeshow and Sign Crafts Union, Local 831, all in California.
Employees subject to collective bargaining agreements have had good
relationships with the Company. No work stoppages have occurred and none are
expected.
Recent Developments
On January 23, 1998, Gateway International Motorsports Corporation signed a
Reimbursement Agreement with First Tennessee Bank whereby the bank provided an
irrevocable standby letter of credit to secure the debt reserve fund
established pursuant to Gateway's agreement with SWIDA. In furtherance of the
Reimbursement Agreement and concurrent therewith, the Company and each of its
subsidiaries signed Guaranty Agreements, and Memphis International Motorsports
Corporation signed a Trust Deed on its properties to secure repayment of the
letter of credit. (See Cautionary Statement: "Ability to Meet Payment
Obligations on SWIDA Loan" and "Encumbrance of Assets".)
CAUTIONARY STATEMENT
Matters discussed in this annual report on Form 10-KSB contain estimates and
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities and Exchange Act of 1934,
including statements regarding the Company's expectations, hopes, intentions,
beliefs or strategies regarding the future. All forward looking statements
included in this document are based on information available to the Company on
the date hereof, and the Company assumes no obligation to update any such
forward looking statements. It is important to note that the Company's actual
results could differ materially from those in such forward looking statements.
Among the factors that could cause results to differ materially are the
following:
WEATHER AND CONSTRUCTION DELAYS
Adverse weather conditions have caused construction delays and could cause
further delays in construction at the Company's Memphis Motorsports Park
facility. Delays in construction of improvements at Memphis have
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resulted in one event being rescheduled to Gateway. Future construction delays
could result in the cancellation of events. Weather conditions could also
cause the cancellation or postponement of one or more events. The Company's
inability to host scheduled events could have a material adverse effect on its
business, revenues and financial condition.
IMPORTANCE OF SANCTIONING CONTRACTS
The success of the Company depends in large part on its ability to attract
and retain national racing events sanctioned by motorsports' principal
governing bodies, particularly at its permanent facilities. To date, the
Company has been able to secure four such events for Gateway and three for
Memphis. For Gateway, the Company entered into a four year agreement with CART
for annual events starting in 1997, a three year lease with NHRA for an annual
national event starting in 1997 with options for an additional 10 years, and a
one year agreement with NASCAR for a 1998 Craftsman Truck Series and a Busch
Series, Grand National Division event. With respect to Memphis, the Company
has one year remaining on its agreement with the NHRA for an annual national
event (1998) and a one year agreement with NASCAR for a 1998 Craftsman Truck
Series event. Memphis has a one year agreement with ARCA for a national
championship stock car event, and it also has two years remaining on its
agreement with USAC for a Silver Crown Championship series annual event. The
Company has one year remaining on its sanction agreement with CART for the
Grand Prix at Long Beach with options through the year 2000. The inability of
the Company to obtain further sanction agreements and to maintain sanction
agreements at this level would likely result in lower than anticipated
revenues for the Company from admissions, sponsorships, hospitality,
concessions, and merchandise, which could have a material adverse effect on
the Company's business, financial condition, and results of operations.
COMPETITION
The Company's racing events compete with other sports and recreational
events scheduled on the same dates, as well as with motorsports racing events
sanctioned by various other racing bodies. Racing events sanctioned by
different organizations are often held on the same dates at different tracks.
The Company competes with other track owners for the patronage of motor racing
spectators as well as for promotions and sponsorships. The Company's agreement
with CART grants it the exclusive right to conduct a CART-sanctioned FedEx
Championship Series race in Southern California; however, the agreement allows
CART to grant a sanctioned event to California Speedway recently constructed
approximately 60 miles from Long Beach in Fontana, California, as long as such
race is not held within a period of several months before or after the Grand
Prix, which is traditionally held in April. The California Speedway has
scheduled a CART-sanctioned race for November 1, 1998, and is scheduled to
host several NASCAR events in 1998. Furthermore, it was recently announced
that the Route 66 Raceway, a new track under construction 23 miles southwest
of Chicago, Illinois will host a NHRA national event in late May, and an AMA
Superbike Tour event in August, 1998. International Speedway Corporation
recently announced that it is building a track in Kansas City capable of
hosting oval track events which it expects will be completed in two years. The
conduct of such competing events could have a material impact on attendance,
sponsorships and other revenues from the Grand Prix and events held at Gateway
and Memphis.
SEASONALITY
Historically, most of the Company's revenues have been derived from the
Grand Prix held each April, in the Company's second fiscal quarter. The
Company anticipates that the addition of revenues from operations at Gateway
and Memphis will result in significant revenues in its third and fourth
quarters as well; however, because Gateway and Memphis will have very limited,
if any, racing during the winter season, it is anticipated that during the
period from November through February the Company will continue to have
minimal revenues resulting in significant operating losses during its first
fiscal quarter.
GOVERNMENT APPROVALS
Operation of the Grand Prix is dependent upon obtaining a permit from the
City of Long Beach allowing the Company to hold the race on city streets. The
Company has such a permit through the year 2010.
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Traditionally, the city has been cooperative in working with the Company with
respect to the terms of the permit and in extending the term thereof; however,
there is no assurance that the City of Long Beach will extend the permit after
the year 2010.
SPONSORSHIP CONTRACTS
The Company derives a substantial portion of its annual revenues from
sponsorship agreements, including title sponsorship of its various events,
sponsorship of its permanent venues, and "official product" sponsorships. The
Company's title sponsorship agreements include a contract with Toyota Motor
Sales U.S.A. for title sponsorship of the Grand Prix through the year 2000; a
three year agreement with Motorola for title sponsorship of Gateway's CART
FedEx Championship Series race; a three year agreement with CARQUEST to act as
the title sponsor of the Busch Series Grand National NASCAR event at Gateway;
a two year agreement with NHRA for Sears Craftsman to be the sponsor of the
NHRA event at Gateway; and an agreement with the NHRA for Pennzoil to be the
sponsor of the NHRA event at Memphis through the 1998 event. Loss of these
title sponsors or other major sponsorship agreements or failure to secure such
sponsorship agreements in the future could have a material adverse affect on
the Company's revenues.
GOVERNMENT REGULATION OF SPONSORS
The Company derives a significant portion of its revenue each year from
sponsorship and advertising by various companies. Tobacco and liquor companies
have traditionally sponsored motorsports events. In August 1995, the U.S. Food
and Drug Administration announced proposed regulations which, if implemented,
could potentially restrict tobacco industry sponsorship of sporting events.
Furthermore, recent tobacco litigation and settlements between tobacco
companies and several states could have an impact on the tobacco industry's
ability and/or desire to engage in motorsports sponsorship and advertising
activities. Government regulations and restrictions on advertising by tobacco,
liquor and other potential sponsors could adversely impact the Company's
revenues, as well as that of the motorsports industry as a whole, and there is
no assurance that alternate sponsors could be obtained.
RELIANCE ON THE GRAND PRIX OF LONG BEACH
Traditionally the Company has obtained in excess of 80% of its annual
revenues from the Grand Prix. This reliance diminished in 1997 and should
further diminish as additional races are added at Gateway and Memphis.
However, the reliance is still significant with approximately 39% of its
revenues in 1997 and 72% of its revenues in 1996 being derived from the Grand
Prix. Although the Company has operated a racing event on the streets of Long
Beach for 23 years, there can be no assurance that the Grand Prix will
continue to be successful.
INSURANCE
The Company maintains insurance policies that provide coverage within limits
that are sufficient, in the opinion of management, to protect the Company from
material financial loss incurred in the ordinary course of business. The
Company also purchases special event insurance for motorsports events to
protect against race related liability. The Company maintains "key man"
insurance on its key corporate executives. However, there can be no assurance
that such insurance will be adequate at all times and in all circumstances. If
the Company is held liable for damages beyond the scope of its insurance
coverage, its business, financial condition and results of operations could be
materially and adversely affected.
LIABILITY FOR PERSONAL INJURIES
Motorsports can be dangerous to participants and to spectators. The Company
maintains insurance policies that provide coverage within limits that are
sufficient, in the judgment of management, to protect the Company from
material financial loss due to liability for personal injuries sustained by
persons on the Company's premises in the ordinary course of the Company's
business. Throughout the year the Company maintains commercial general and
automobile liability insurance with a combined single limit of $5,000,000 per
occurrence. During
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the weekend of the Grand Prix, the Company increases its insurance coverage to
$20,000,000 per occurrence to encompass the heightened risks associated with
running a race on city streets. Beginning in 1998, the Company will carry
$10,000,000-$20,000,000 per occurrence during each NASCAR event at Gateway and
Memphis. However, there can be no assurance that such insurance will be
adequate at all times and in all circumstances. If the Company is held liable
for personal injuries beyond the scope of its insurance coverage, its
business, financial condition and results of operations could be materially
and adversely affected.
PATENTS, TRADEMARKS, COPYRIGHTS
The Company has registered the following trademarks (among others): "Long
Beach Grand Prix", "U.S. Grand Prix West", "200 MPH Beach Party", "LBGP" and
regularly copyrights its artwork, including poster art and artwork for
clothing and souvenirs sold at the Grand Prix, Gateway and Memphis. Although
the Company takes care to protect its intellectual property, the loss of any
of these trademarks, copyrights or patents would not, in the opinion of
management, have a material adverse effect on the revenues of the Company.
STATUS OF GATEWAY LAW ENFORCEMENT DRIVING SCHOOL
In its IPO Prospectus, the Company disclosed that it expected to apply
approximately $1,500,000 of the net proceeds from its IPO to establish and
equip the Gateway Law Enforcement Driving School. Because the Company was able
to obtain major event sanctions for Gateway earlier than anticipated, it had
to accelerate redevelopment of Gateway in order to permit it to host those
major events in 1997. The cost of redeveloping and improving Gateway at an
accelerated rate has exceeded the initial redevelopment estimates, and the
portion of the proceeds used for the redevelopment of Gateway has exceeded the
estimate set forth in the Prospectus. Therefore, the Company does not have
sufficient proceeds from the IPO remaining after completion of the Gateway
redevelopment to enable it to establish and equip the Gateway Law Enforcement
Driving School from that source of funds. However, the Company does intend to
go forward with the law enforcement driving school, and believes that the cash
flow from earnings generated from major events at the redeveloped Gateway
facility will be sufficient to complete this goal.
POTENTIAL FOR CHANGE IN CONTROL
On August 8, 1997, the Company signed Stock Purchase Agreements with Midwest
Facility Investments, Inc. ("MFI"), a wholly owned subsidiary of International
Speedway Corporation, and Penske Motorsports, Inc. ("PMI") (the "Agreements")
for the purchase by each of 315,000 shares of the Company's unregistered
Common Stock for a purchase price of $12.34 per share. This purchase resulted
in MFI and PMI each owning 7.2% of the Company's outstanding Common Stock. The
Agreements provide that the funds received by the Company from the sale of
stock to MFI and PMI must be used only for capital expenditures of Board
approved improvement projects that are intended to enhance the Company's
ability to obtain additional motor racing events at its Gateway and Memphis
facilities; and give MFI and PMI certain preemptive rights for up to four
years. In connection with the Agreements, the Company agreed to expand its
Board of Directors by two and to use its best efforts to cause one nominee of
MFI and one nominee of PMI to be elected to the Board to fill the new
positions. MFI and PMI also agreed (until the earlier of (i) six years or (ii)
the date Christopher R. Pook ceases to serve as Chief Executive Officer unless
a successor approved by MFI and PMI has been appointed within 120 days, (iii)
there is a tender offer for the Company's shares or (iv) the Company enters
into a merger or other agreement pursuant to which the Company's current
shareholders would own less than 50% of the surviving corporation's capital
stock) not to (a) purchase additional shares of the Company's stock without
Board approval, (b) conduct a proxy contest to obtain control of the Board or
(c) enter into any non-market transaction to sell the Company's stock to
anyone who does not agree to be bound by the same aforementioned stand still
provisions, except they may each purchase up to 5% of the Company's
outstanding Common Stock, and purchase shares from other shareholders who are
subject to a Right of First Refusal Agreement between MFI and PMI and that
shareholder (hereinafter the "stand still" provisions).
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In connection with the Agreements, the bylaws of the Company were amended by
written consent of a majority of the shareholders to increase the board of
directors to a maximum of eleven and on October 13, 1997, Gregory W. Penske
and H. Lee Combs were elected as directors to the Company's board.
Concurrent with the signing of the Agreements, the same parties signed
Registration Rights Agreements, pursuant to which the Company agreed, for a
period of three years, to provide MFI and PMI the right to demand that the
Company register the shares acquired by MFI and PMI concurrent with the
registration of shares for any other security holder (other than on a form S-4
or S-8 or in connection with the registration of the Common Stock issued upon
the conversion of its Series B Convertible Preferred shares if the same was
filed prior to September 30, 1997) as long as MFI and PMI own at least 1% of
the outstanding shares of the Company's Common Stock. The Company also agreed
to the Stock Purchase Agreements by MFI and PMI.
Further to the Agreements and Registration Rights Agreements, MFI and PMI
entered into a Right of First Refusal Agreement with certain shareholders of
the Company, which shareholders collectively controlled 38% of Company's
outstanding shares (assuming such shareholders exercise all conversion rights,
exercise all options and warrants held by them). Exercise of their rights of
first refusal pursuant to these agreements could result in MFI and/or PMI
acquiring over 40% of the Company's Common Stock. In December 1997, MFI and
PMI exercised their right of first refusal to acquire 22,500 shares each
offered by EDMARJON-RONBREWDAVE, LLC. In addition, in September, 1997 MFI and
PMI also acquired 2,500 shares each from a former board member.
In the Stock Purchase Agreements, MFI and PMI are allowed to each purchase
up to 5% of the Company's outstanding Common Stock, and purchase shares from
other shareholders who are subject to the Right of First Refusal Agreement. In
the event that such purchases bring the total ownership of MFI or PMI to
greater than 10%, each has the right to purchase sufficient Common Stock on
the open market to bring the ownership interest of each up to 20.5% of the
outstanding Common Stock of the Company. If they make such purchases, however,
their rights under the Right of First Refusal Agreement are reduced on a share
for share basis. Exercise of their rights of first refusal and other rights
pursuant to these agreements could result in MFI and/or PMI acquiring over 40%
of the Company's Common Stock. Both MFI and PMI are SEC reporting companies.
None of the control persons of the Company serve on the boards of directors of
MFI, PMI or International Speedway Corporation ("ISC"). H. Lee Combs, a
Director and Senior Vice President of ISC, and Gregory W. Penske, a Director
and Executive Vice President of PMI are directors of the Company.
RESTRICTION ON USE OF FUNDS
The Company received a total of $7,615,000, net of issuance costs, as a
result of the sale of common stock to MFI & PMI (see "Potential for Change in
Control"). The Stock Purchase Agreements provide that the funds received by
the Company from the sale of stock to MFI and PMI must be used only for
capital expenditures of board approved improvement projects that are intended
to enhance the Company's ability to promote additional motor racing events at
Gateway and Memphis. The company has expended $3,430,000 of these funds on
approved projects as of November 30, 1997.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends largely on the availability and performance of
its senior management team, particularly Christopher R. Pook, the Company's
Chairman and Chief Executive Officer. Mr. Pook's reputation and experience
within the motorsports industry, including his relationship with the various
motorsports sanctioning bodies, will continue to be of considerable importance
to the Company. The loss of any of the Company's key personnel or its
inability to attract and retain key employees in the future could have a
material adverse effect on the Company. In addition, the Company's agreement
with Toyota is cancelable at the option of Toyota should Mr. Pook cease to be
Chairman or Chief Executive Officer of the Company. The Stock Purchase
Agreements contain certain "stand still" provisions which terminate if
Christopher R. Pook ceases to serve as
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Chief Executive Officer, unless a successor approved by MFI and PMI has been
appointed within 120 days. The loss of any of its senior management team
members could have a material adverse effect on the business of the Company.
MANAGEMENT OF GROWTH
The acquisition of Gateway and Memphis and associated major events scheduled
at each has and will continue to place substantial burdens on the Company's
management resources and financial controls. The Company's ability to manage
its growth effectively will require it to continue to implement and improve
its operational, financial and management information systems and controls,
and to train, motivate and manage its employees. The Company's failure to
manage its growth effectively could have a material adverse effect on the
Company's business, financial condition and results of operations.
ABILITY TO MAKE ADVANTAGEOUS ACQUISITIONS
The Company's ongoing strategy includes locating, acquiring and developing
multi-purpose motorsports facilities. There can be no assurance that the
Company will be able to identify suitable acquisition candidates or consummate
advantageous acquisitions. The Company intends to review and evaluate
acquisition opportunities as they arise, but presently has no commitments with
respect to any potential acquisition. If the Company does make one or more
future acquisitions, these acquisitions may require substantial additional
debt and may not be profitable or otherwise beneficial for the Company. Due to
the restriction on use of the remaining $4,340,000 of proceeds from the recent
sale of stock to MFI and PMI contained in the Stock Purchase Agreements, the
Company would not have those funds available for the acquisition of other
facilities (see "Restriction on Use of Funds"). Investors may not have an
advance opportunity to evaluate the merits and risks of any acquisitions
undertaken by the Company.
BLANK CHECK PREFERRED STOCK
The Company's Board of Directors has total discretion in the issuance of its
Preferred Stock and the determination of the rights and privileges associated
with any shares of Preferred Stock which might be issued in the future, which
rights and privileges may be detrimental to the holders of the Common Stock.
The Company is authorized to issue 10,000,000 shares of Preferred Stock of
which only two series, Series A Convertible Preferred Stock, representing
312,500 shares, and Series B Convertible Preferred Stock, representing 250,000
shares, has been designated to date. All Series A and Series B Convertible
Preferred shares were previously converted into Common Stock. The issuance of
Preferred Stock in the future could discourage or impede a tender offer, proxy
contest or other similar transaction involving a potential change in control
of the Company, which transaction might be viewed favorably by other
shareholders.
ANTI-TAKEOVER PROVISIONS
In addition to provisions in the Company's Articles of Incorporation which
authorize the issuance of "Blank Check" Preferred Stock, the Company's Bylaws
provide for a staggered Board of Directors, and provisions in the employment
agreements for each of Christopher R. Pook and James P. Michaelian provide for
severance payments to these individuals in the event of a change in control of
the Company coupled with a change in their job duties. Furthermore, the
Company is a party to an agreement with MFI & PMI, each of which currently
owns 340,000 shares of the Company's Common Stock, which give these
shareholders certain preemptive rights. These provisions and agreements could
discourage or impede a tender offer, proxy contest or other similar
transaction involving a potential change in control of the Company which
transaction might be viewed favorably by minority shareholders.
ABILITY TO MEET PAYMENT OBLIGATIONS ON SWIDA LOAN
In order to finance the redevelopment of Gateway, the Company entered into a
loan agreement with SWIDA, which agreed to fund a loan to the Company by
issuing municipal bonds in the aggregate principal amount of $21,500,000
designated as the "Taxable Sports Facility Revenue Bonds, Series 1996 (Gateway
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International Motorsports Corporation Project)" (the "Bonds"). The Bonds are
unconditionally guaranteed by the Company. The closing of the sale of the
Bonds occurred on June 21, 1996. The Bonds were offered by SWIDA on a private
placement basis in reliance upon an exemption from registration contained in
Section 4(2) of the 1933 Act.
SWIDA has loaned all of the proceeds from the Municipal Bond Offering to the
Company for the purpose of the development, construction and expansion of
Gateway, and the funds so obtained were irrevocably committed to complete all
planned construction of Gateway.
The Bonds are enhanced by the moral obligation of the State of Illinois and
have a 20-year maturity. The Company issued a 20-year $21,500,000 promissory
note to SWIDA which bears interest at an effective rate of approximately 9.1%
per annum (the "SWIDA Loan"). Payments of interest are made semi-annually, and
began in February 1997, with interest payments through February 1998 derived
from an interest reserve fund described below, and principal payments will
begin in February 2000. All proceeds from the SWIDA Loan are required to be
dedicated by the Company to the redevelopment of Gateway and debt service
obligations with respect to the SWIDA Loan.
As required pursuant to the financing arrangement, the Company established a
$2,550,000 interest reserve fund (from the proceeds of the SWIDA Loan). In
addition, the Company established a $2,300,000 debt service reserve fund from
the net proceeds of its $2,500,000 private placement of its Series A
Convertible Preferred Stock. In January, 1998, the Company substituted an
irrevocable standby letter of credit from First Tennessee Bank National
Association for the cash on deposit in the debt service reserve fund.
Additionally, the Company is required to impose a 5% ticket surcharge on all
nationally sanctioned motorsports events at Gateway to establish an additional
debt service reserve fund for the Bonds. Once $2,000,000 has been accumulated
in this fund, excess funds then accumulating will be used to redeem Bonds
annually commencing February 1, 2002.
Although the Company's obligations for interest payments on the SWIDA Loan
through February 1998, were reserved out of the proceeds of the SWIDA Loan and
were held in an interest reserve fund for the purpose of making those
payments, future payments on the SWIDA Loan are intended to be made primarily
from the revenues from the operations of Gateway. Although the Company is
current on its obligation and expects to meet its future debt payment
obligations out of the revenues from Gateway, and although the Company will
receive certain assistance from the City of Madison, Illinois in the form of a
tax increment finance fund which should assist it in meeting its debt burdens,
there can be no assurance that earnings from the future operations of Gateway
will be sufficient to meet the Company's debt service obligations. If the
Company is unable to meet these obligations, the resulting default could
result in the foreclosure on the assets of Gateway, and the acceleration of
the Company's obligation to make payment of the full principal amount and all
interest due on the SWIDA Loan.
ENCUMBRANCE OF ASSETS
In January, 1998, the Company and each of its subsidiaries, signed Guaranty
Agreements, co-obligating themselves for the $2,501,825 contingent liability
of Gateway International Motorsports Corporation, to First Tennessee Bank
National Association under a Reimbursement Agreement pursuant to which First
Tennessee Bank National Association issued an irrevocable standby Letter of
Credit to secure Gateway International Motorsports Corporation's obligation to
maintain the debt service reserve fund referred to above in connection with
its agreement with SWIDA (see "Ability to Meet Payment Obligations on SWIDA
Loan"). As further security for the standby letter of credit, the Company's
subsidiary, Memphis International Motorsports Corporation signed a deed of
trust covering the Memphis facility. The Guaranty Agreements, Reimbursement
Agreement and Deed of Trust contain various covenants limiting the signatory's
financial, debt and financing ratios, which could have the effect of limiting
the Company's ability to raise capital by asset financing. The Company's
default under its agreement to maintain the debt reserve fund, would result in
a draw on the letter of
9
<PAGE>
credit and could result in foreclosure on Memphis International Motorsports
Park and trigger the Company's and each subsidiary's obligation to pay all
obligations of Gateway International Motorsports Corporation under the Letter
of Credit.
YEAR 2000 ISSUES
The Company is aware of the issues related to the approach of the year 2000
and has assessed and investigated what steps must be taken to ensure that its
critical systems and equipment will function appropriately after the turn of
the century. The assessment included a review of what systems and equipment
need to be changed or replaced in order to function correctly within the
company and with other entities. The company's accounting and ticketing
hardware and software have been found to be year 2000 compliant and no
corrections will be needed to those systems as a result of the year 2000. The
Company does not place substantial reliance on any other systems, and no
systems have been found to need substantial correction.
ITEM 2. PROPERTIES
Long Beach Properties
The Company owns its principal executive offices at 3000 Pacific Avenue,
Long Beach, California, which consists of approximately 82,000 square feet of
land and a building with approximately 50,000 square feet of office and
warehouse space. The executive offices are encumbered with a first trust deed
loan from Harbor Bank and a second trust deed loan from the U.S. Small
Business Administration, which were used to acquire and improve the property
in 1992 (see Note 5 of Notes to Consolidated Financial Statements included
elsewhere herein). The Company leases a 750 square foot ticket office in
downtown Long Beach for the sale of Grand Prix tickets and souvenirs and
storage facilities in Long Beach for its equipment and structures. The Company
also leases a 4,000 square foot industrial building in Long Beach to house its
clothing manufacturing division (see Note 10 of Notes to Consolidated
Financial Statements included elsewhere herein). In the opinion of the
Company's management, these facilities are adequately covered by insurance.
Gateway International Raceway Property
Gateway International Raceway is located on approximately 239 acres of land
in Madison, Illinois, five miles from the St. Louis Arch. The Company owns
approximately 94 of the 239 acres and has three long term leases (expiring in
2025, 2026, and 2070) for the remaining 145 acres, with purchase options. The
Company is also a party to a ten year lease (with four five-year renewals) of
twenty acres for the purpose of providing overflow parking for major events on
a neighboring golf course, and a five year lease commencing March 1, 1997 of
approximately 14 acres for major event parking (see Note 10 of Notes to
Consolidated Financial Statements included elsewhere herein). The Company is
in the process of negotiating relationships with the City of Madison and
neighboring land owners to fulfill its major event parking needs. The Company
has granted a first mortgage lien on all the real property owned and a
security interest in all property leased by the Company at Gateway to SWIDA as
security for the repayment of principal and interest on its $21.5 million loan
from SWIDA (see Note 5 of Notes to Consolidated Financial Statements included
elsewhere herein). Using the SWIDA loan proceeds and certain proceeds from the
IPO, the Company extensively reconfigured Gateway into a major regional
multipurpose motorsports facility capable of hosting the top-tier events, as
well as continuing to host a variety of local and regional events. Management
believes that the insurance coverage it maintains on this property is
adequate.
Memphis Motorsports Park Property
On June 28, 1996, the Company acquired Memphis Motorsports Park, located on
374 acres of land approximately ten miles northeast of downtown Memphis,
Tennessee with part of the proceeds from its IPO (See Note 2 of Notes to
Consolidated Financial Statements included elsewhere herein). The facility is
being renovated
10
<PAGE>
to include a regulation NHRA drag strip, a road course, a 3/4 mile paved oval
track, a 1/4 mile dirt oval track, ten corporate suites, 5,500 permanent
grandstand seats and the use of approximately 20,000 portable grandstand
seats. The facility is encumbered by a first trust deed to First Tennessee
Bank for purpose of securing the standby letter of credit issued by First
Tennessee Bank to Gateway International Motorsports Corporation to secure its
obligation to SWIDA under the Bonds (see "Ability to Meet Payment Obligations
on SWIDA Loan"). In the opinion of the Company's management, the property is
adequately covered by insurance.
Prior to the acquisition of each of its major properties, the Company
obtained Phase I Preliminary Site Assessment environmental reports. The
Company updated its Phase I report on the Memphis property in 1997, at the
request of First Tennessee Bank, as a condition to accepting the property as
collateral for the obligation of Gateway International Motorsports Corporation
under the standby letter of credit. None of these reports indicated any
material environmental contamination. Because Phase I reports do not include
testing of soil, water or air samples, it is possible that there may be
undetected environmental contamination at one or more of the Company's
properties.
ITEM 3. LEGAL PROCEEDINGS
The Company is not currently involved in any legal proceedings that it
believes could have, either individually or in the aggregate, a material
adverse effect on its business or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the last quarter of the fiscal year ending November 30, 1997, the
following matters were voted upon by the shareholders.
By written consent of a majority of the shares then outstanding the
company's bylaws were amended to provide for eleven directors in three classes
rather than nine directors in three classes as the bylaws previously provided.
No proxies were solicited.
11
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Common stock of the Company began trading on June 25, 1996 (subsequent
to the IPO) on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") National Market under the symbol GPLB. Prior to
the offering in June 1996, no established public trading market existed. The
following table sets forth the high and low quotations from NASDAQ for fiscal
quarters subsequent to June 25, 1996:
<TABLE>
<CAPTION>
COMMON STOCK PRICE
------------------
HIGH LOW
--------- ---------
<S> <C> <C>
Quarter ended September 30, 1996...................... $ 9.63 $ 8.13
Quarter ended November 30, 1996(1).................... 10.13 8.00
Quarter ended February 28, 1997....................... 10.75 9.13
Quarter ended May 31, 1997............................ 13.63 10.00
Quarter ended August 31, 1997......................... 15.50 11.50
Quarter ended November 30, 1997....................... 17.75 13.25
</TABLE>
- --------
(1) The Company changed its fiscal year end from June 30 to November 30 in
December 1996.
The number of record holders of the Company's Common stock as of February
27, 1997 was 223. The Company has not paid a dividend with respect to its
Common stock since prior to the IPO, and the Company does not anticipate
paying dividends in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis should be read in conjunction with
Item 1. Business, with the Company's Consolidated Financial Statements and the
notes thereto and other financial information included elsewhere herein.
BASIS OF PRESENTATION
Major Event Revenues--Major event revenues are derived from nationally
sanctioned events at the Grand Prix, Gateway and Memphis. For the year ended
November 30, 1997, major event revenues include revenues earned from the Grand
Prix in Long Beach; the Motorola 300, Gateway 300, NHRA Sears Craftsman
Nationals and the ARCA/USAC Twin 100's at Gateway; and the NHRA Pennzoil
Nationals at Memphis. For the year ended June 30, 1996, major event revenues
included the Grand Prix in Long Beach and the NHRA Pennzoil Nationals in
Memphis. There were no major event revenues in the five month period ended
November 30, 1996.
Admissions--Admissions revenue represents ticket sales in connection with
the major events. Ticket sales revenue, whenever collected, is considered
earned upon completion of the related event. A substantial portion of the
Company's admissions revenue is collected in advance of the event to which it
relates.
Sponsorships--Sponsorship revenue includes corporate sponsorships for major
events received in accordance with negotiated contracts with a diverse group
of companies.
Ancillary--Ancillary revenues for major events include hospitality,
broadcast services, merchandise and concession sales, expo and program ads.
Other Operating Revenues--The company generates other operating revenues
from special, local and regional motorsports events and related concessions
and venue sponsorships at Gateway and Memphis, along with promotion, marketing
and public relations consulting services, and rentals of grandstands,
structures and related equipment services.
12
<PAGE>
Expenses--The Company classifies its expenses to include major event
expenses, other operating expenses, general and administrative expenses and
depreciation. Major event expenses principally include sanction fees, circuit
construction costs, operational direct expenses, marketing, advertising and
public relations, costs of souvenir sales, ticket sales expenses and city
service fees. Sanction agreements require race promoters to pay fees and
provide services to the relevant sanctioning body during the event. Other
operating expenses include expenses directly related to operating the Gateway
and Memphis facilities for the special, local and regional events; marketing
and public relations consulting services; structures and electrical services
costs. General and administrative expenses include wages and other general
expenses, as well as the infrastructure costs of Gateway and Memphis during
periods when events do not occur.
RESULTS OF OPERATIONS
The table below sets forth revenues and expenses as a percentage of total
revenue for the year ended November 30, 1997, the five month transition period
ended November 30, 1996 and the year ended June 30, 1996.
<TABLE>
<CAPTION>
5 MONTHS
YEAR ENDED ENDED YEAR ENDED
JUNE 30, 1996 NOV. 30, 1996 NOV. 30, 1997
------------- ------------- -------------
<S> <C> <C> <C>
Revenues:
Major event revenues
Admissions...................... 36.4% 0.0% 39.4%
Sponsorships.................... 19.9 0.0 13.1
Ancillary....................... 25.5 0.0 26.7
----- ------ -----
Total major event revenues...... 81.8 0.0 79.2
Other operating revenues.......... 18.2 100.0 20.8
----- ------ -----
Total revenues.................. 100.0 100.0 100.0
----- ------ -----
Expenses:
Major event expenses............ 47.3 0.0 48.8
Other operating expenses........ 12.9 51.5 8.0
General and administrative...... 21.1 117.1 26.1
Depreciation.................... 3.0 34.1 4.8
----- ------ -----
Total expenses.................. 84.3 202.7 87.7
----- ------ -----
Operating income (loss)........... 15.7 (102.7) 12.3
Other expense..................... (0.7) (6.5) (2.5)
(Provision) benefit for income
taxes............................ (6.3) 40.7 (4.1)
----- ------ -----
Net income (loss)................. 8.7% (68.5)% 5.7%
===== ====== =====
</TABLE>
Year ended November 30, 1997 compared to the year ended June 30, 1996.
The following discussion compares the year ended November 30, 1997 with the
Company's previous fiscal year ended June 30, 1996. No discussion of the five
months ended November 30, 1996 has been included as it was a transition period
with no major racing events occurring during that period.
Major event revenues increased by $11,993,000 to $24,470,000 from
$12,477,000 in the prior year. The significant increase in revenues was
primarily due to the Company operating six major events compared with two in
1996. The Grand Prix of Long Beach and the NHRA Pennzoil Nationals at Memphis
were featured in both fiscal years. In 1997 the following additional major
events took place: the CART sanctioned Motorola 300, the NHRA sanctioned Sears
Craftsman Nationals, the NASCAR sanctioned Gateway 300 and the ARCA/USAC
sanctioned Twin 100's. The most significant increases occurred in admissions
and ancillary revenue attributed
13
<PAGE>
largely to spectator attendance. Major event expenses increased by $7,881,000
to $15,089,000 also as a result of the addition of six major events in 1997
compared to 1996.
Other operating revenues increased $3,665,000 to $6,439,000 primarily as a
result of experiencing a full year of special, local and regional motorsports
events and related concessions and venue sponsorships at Gateway and Memphis.
In the prior full fiscal year ended June 30, 1996, there were no such revenues
recorded for Memphis because the facility was purchased in June 1996. In
addition, at Gateway, due to the redevelopment that was ongoing, there was
limited event activity during 1996. Both Gateway and Memphis obtained venue
sponsorships in 1997, whereas previously there were event sponsorships only.
These sponsorships resulted in additional revenues of approximately $700,000
over prior periods. Other operating expenses increased $520,000 to $2,491,000.
The increase was primarily due to the increase in staffing needed to execute a
full season of racing activity at Gateway and Memphis in 1997 versus the
limited activity included in 1996.
General and administrative costs increased by $4,842,000 to $8,074,000
primarily as a result of the overhead costs of two additional permanent racing
facilities compared with the overhead costs of operating one temporary circuit
race. The addition of overhead costs was required to enable the company to
stage the four additional major events in 1997 and to be prepared to add
additional major events in the future. Management believes that adding
additional major events should not require a substantial increase in overhead
as the infrastructure of personnel and facilities is in place. The paved oval
at Memphis Motorsports Park is still under construction. Therefore a certain
amount of additional overhead costs associated with operating and maintaining
that facility is expected. The increase is not expected to be significant.
Depreciation expense increased $1,004,000 to $1,455,000 primarily as a
result of the completion of the first phase of the redevelopment at Gateway in
time for the Motorola 300 race in May 1997. Accordingly depreciation expense
on these assets was recognized for the first time in fiscal year 1997.
Interest income increased $507,000 to $626,000 primarily as a result of
increased cash reserves during the period. Interest expense increased
$1,261,000 to $1,435,000 primarily due to the interest on the SWIDA Loan no
longer being capitalized following substantial completion of the redevelopment
project at Gateway.
The Company's effective income tax rate for 1997 and 1996 was 42%.
Net income increased by $439,000 due to the inclusion of six major events in
1997 compared with two in 1996, offset by the increase in interest expense
related to the SWIDA Loan, additional depreciation and infrastructure costs
necessary to be prepared to host major events at Gateway and Memphis.
FIVE MONTH TRANSITION PERIOD ENDED NOVEMBER 30, 1996 COMPARED TO THE FIVE
MONTH PERIOD ENDED NOVEMBER 30, 1995 (UNAUDITED)
The company did not hold any major events July through November 1995 or
1996. All revenues collected during these months related to major events are
deferred until completion of the related event. All direct major event
expenses incurred were deferred until completion of the related event.
Other operating revenues increased by $364,000 primarily as a result of five
months of revenues at Memphis in 1996 not operated by the Company in 1995 and
increases in revenues from grandstand rentals.
Other operating expenses increased by 30.2% from 1995 to 1996, or 2.9% as a
percentage of other operating revenues from 48.6% in 1995 to 51.5% in 1996,
primarily due to the change in other operating revenues as described above.
14
<PAGE>
General and administrative expenses increased by $975,000 from 1995 to 1996.
This increase is due to several factors including five months of expenditures
related to Memphis ($254,000), administrative costs related to operating
Gateway ($136,000), increases in the number of employees over the prior period
and increases in professional fees pertaining mainly to the reporting
requirements of a public company.
Depreciation expense of $668,000 for the five months ended November 30, 1996
increased $503,000, from the five months ended November 30, 1995. This
increase is attributable to five months of depreciation expense on Memphis
capital assets in 1996, depreciation on the completed drag strip at Gateway
for three months, other Gateway construction and corporate capital assets
purchased during the current period.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations for the year ended November 30, 1997 was
$2,508,000.
The Company relied on cash generated from operating revenues and on the
proceeds of its initial public offering for working capital during the year
ended November 30, 1997. In addition, the proceeds of its 21-year, $21,500,000
promissory note to SWIDA (the SWIDA Loan), the initial public offering and
cash generated from operations were used to fund the redevelopment at Gateway
and Memphis.
On August 8, 1997 the Company reached an agreement to sell 630,000 shares of
common stock for $12.34 per share. There was a requirement to meet certain
conditions prior to the effective date of the sale. Those conditions were
subsequently met and the stock was issued with an effective date of September
23, 1997 resulting in net proceeds to the Company of $7,615,000. The remaining
proceeds of $4,340,000 are available for board approved projects (see
"Potential for Change in Control").
The Company's cash and cash equivalents as of November 30, 1997 are
$1,520,000, a net decrease of $8,694,000 from November 30, 1996. The decrease
in cash is primarily the result of funding redevelopment activities at Gateway
and Memphis.
Restricted cash pursuant to the terms of the SWIDA Loan as of November 30,
1997 was $3,305,000. Cash used by the Company from restricted and non-
restricted cash in capital improvements totaled $23,762,000 for the year ended
November 30, 1997, primarily for the redevelopment at Gateway and Memphis.
The Company expects to make capital expenditures of approximately $5,400,000
which will include completion of the paved oval at Memphis and construction of
additional grandstands, concession facilities and other improvements at
Gateway. The Company anticipates funding the costs of additional capital
improvements primarily through cash generated from the sale of common stock in
September 1997 and with cash flow from operations. The Company anticipates
meeting its working capital needs which include its major event expenditures
such as sanctioning fees and other commitments through cash generated from
operations.
The Company's bank borrowings consist of short and long term obligations
incurred in connection with specific capital improvements and expenditures.
Long term debt includes first and second trust deed notes, which together had
an outstanding principal balance of approximately $2,461,000 on November 30,
1997 and the SWIDA Loan with a balance of $21,460,000.
15
<PAGE>
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per
Share. This statement, which is effective for fiscal 1998, simplifies the
standards for computing earnings per share (EPS) by replacing the presentation
of primary EPS with a presentation of basic EPS. The Company has not
determined the impact of SFAS 128 on its financial statements.
ITEM 7. FINANCIAL STATEMENTS
For a list of financial statements filed as part of this report, see Index
to Financial Statements at F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
16
<PAGE>
PART III
Certain information required by Part III is omitted from this Report in that
the Registrant will file a definitive proxy statement pursuant to Regulation
14A (the "Proxy Statement") not later than 120 days after the end of the
fiscal year covered by this Report and certain information included therein is
incorporated herein by reference. Only those sections of the Proxy Statement
that specifically address the items set forth herein are incorporated by
reference. Such incorporation does not include the Compensation Committee
Report or the Performance Graph included in the Proxy Statement.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Incorporated by reference to the Company's Proxy Statement for Annual
Meeting of Shareholders to be filed with the Securities and Exchange
Commission within 120 days after the close of the fiscal year ended
November 30, 1997.
ITEM 10. EXECUTIVE COMPENSATION
Incorporated by reference to the Company's Proxy Statement for Annual
Meeting of Shareholders to be filed with the Securities and Exchange
Commission within 120 days after the close of the fiscal year ended
November 30, 1997.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference to the Company's Proxy Statement for Annual
Meeting of Shareholders to be filed with the Securities and Exchange
Commission within 120 days after the close of the fiscal year ended November
30, 1997.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference to the Company's Proxy Statement for Annual
Meeting of Shareholders to be filed with the Securities and Exchange
Commission within 120 days after the close of the fiscal year ended November
30, 1997.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibits required to be filed by Item 601 of Regulation S-B are listed in
the Exhibit Index attached hereto, which is incorporated herein by reference.
(b) Reports on Form 8-K.
Three reports on Form 8-K were filed during the period covered by this
report:
September 11, 1997 (regarding the sale of 630,000 shares of its
unregistered common stock).
November 7, 1997 (regarding election of two new directors to fill
vacancies created upon amendment of bylaws to provide for a board of 11
members)
November 19, 1997 (regarding two new NASCAR sanction agreements)
17
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Date: February 27, 1998 GRAND PRIX ASSOCIATION OF
LONG BEACH, INC.
/s/ Christopher R. Pook
By __________________________________
Christopher R. Pook
Chairman of the Board, President,
and Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Christopher R. Pook Chairman of the Board, February 27, 1998
____________________________________ President and Chief
Christopher R. Pook Executive Officer
(Principal Executive
Officer)
/s/ James P. Michaelian Chief Operating Officer and February 27, 1998
____________________________________ Director
James P. Michaelian
/s/ Ronald C. Shirley Chief Financial Officer February 27, 1998
____________________________________ (Principal Financial and
Ronald C. Shirley Accounting Officer)
/s/ Joseph Ainge Director February 27, 1998
____________________________________
Joseph Ainge
/s/ Daniel Gurney Director February 27, 1998
____________________________________
Daniel Gurney
/s/ Wayne Kees Director February 27, 1998
____________________________________
Wayne Kees
/s/ George Pellin Director February 27, 1998
____________________________________
George Pellin
/s/ James Sullivan Director February 27, 1998
____________________________________
James Sullivan
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ John R. Queen, III Director February 27, 1998
____________________________________
John R. Queen, III
/s/ Neil Matlins Director February 27, 1998
____________________________________
Neil Matlins
/s/ H. Lee Combs Director February 27, 1998
____________________________________
H. Lee Combs
/s/ Gregory W. Penske Director February 27, 1998
____________________________________
Gregory W. Penske
</TABLE>
19
<PAGE>
EXHIBIT INDEX
The following exhibits to this Form 10-KSB are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S>
1.1* Form of Underwriting Agreement
1.2* Form of Warrant to L.H. Friend, Weinress, Frankson & Presson, Inc.
3.1* Restated Articles of Incorporation of the Company
3.2* Certificate of Correction of Restated Articles of Incorporation
3.3* By-laws of the Company
4.1* Form of Stock Certificate
5.1* Opinion letter of Law Offices of Edward S. Gelfand regarding the
legality of the securities registered
5.2** Opinion letter of Gartenberg Jaffe Gelfand & Stein LLP relating to the
legality of the securities registered on Form S-3 dated September 29,
1997
5.3++ Opinion letter of Gartenberg Jaffe Gelfand & Stein LLP relating to the
legality of the securities registered on Form S-3 dated February 20,
1998
10.1* Amended and Restated Agreement dated September 15, 1996 between the
Company and the City of Long Beach
10.2* Official Organizer/Promoter Agreement dated April 5, 1995 between the
Company and Championship Auto Racing Teams, Inc. (Certain
confidential portions of this agreement have been deleted)
10.3* Agreement dated August 2, 1995 between the Company and Toyota Motor
Sales, U.S.A., Inc. (Certain confidential portions of this agreement
have been deleted)
10.4* 1993 Stock Option Plan
10.5* 1996 Employee and Director Stock Incentive Plan
10.6* Employment Agreement dated May 16, 1996 between the Company and
Christopher R. Pook
10.7* Employment Agreement dated May 16, 1996 between the Company and James
P. Michaelian
10.8* Agreement dated May 6, 1996 between the Company and Memphis
International Motorsports Park and amendment thereto
10.9* Moral Obligation of State of Illinois dated May 1, 1996 to the
Southwestern Illinois Development Authority regarding Taxable Sports
Facility Revenue Bonds, Series 1996
10.10* Redevelopment Agreement between the City of Madison, Illinois and the
Company dated February 27, 1996
10.11* U.S. Small Business Administration ("SBA") "504" Note (loan number
CDC-L-GP-489638-30-08-LA) in the principal amount of $750,000 made to
the Company by Long Beach Local Development Corporation
10.12* Short Form Deed of Trust and Assignment of Rents dated July 20, 1992
(92-2037097) between the Company, as trustor, and Long Beach Local
Development Corporation, as beneficiary, and Assignment of said Deed
of Trust (92-2037098) to SBA
10.13* Development Company 504 Debenture dated December 16, 1992 in the
principal amount of $750,000 made by Long Beach Local Development
Corporation to fund the SBA loan to the Company
10.14* Loan Agreement dated June 20, 1992 made between Long Beach Development
Corporation and the Company with respect to SBA loan to the Company
10.15* Promissory Note dated June 30, 1992 made by the Company to Harbor Bank
in the principal amount of $814,000
</TABLE>
20
<PAGE>
EXHIBIT INDEX--(CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<C> <S>
10.16* Deed of Trust dated June 30, 1992 (92-1214039) between the
Company, as trustor, and Harbor Bank, as beneficiary, securing
$814,000 note
10.17* Three Tier Bonus Plan of the Company
10.18* Revolving Line of Credit Agreement with West Pointe Bank and Trust
Company dated February 24, 1995, as amended by
Extension/Modification Agreement dated February 24, 1996
10.19* Memorandum of Understanding dated February 26, 1996 by and between
the United States of America, Gateway International Motorsports
Corporation and BBJJ Land Trust
10.20* Form of Stock Option Agreement for 1993 Stock Option Plan
10.21* Lease Agreement dated June 12, 1996 by and between Helen M.
Bergfield, trustee and Gateway International Motorsports
Corporation
10.22* Lease Agreement dated April 1, 1996 by and between Ruth C. Franke
and Gateway International Motorsports Corporation
10.23* Lease Agreement dated June 1, 1996 by and between Joseph E. Trover
and Gateway Intentional Motorsports Corporation
10.24* Form of Loan Agreement by and between Southwestern Illinois
Development Authority and Gateway International Motorsports
Corporation
10.25* Form of Guaranty Agreement made by the Company and Automotive
Safety & Transportation Systems, Inc. to Magna Trust Company,
Trustee, dated May 1, 1996
10.26* Form of Mortgage and Security Agreement by and between Gateway
International Motorsports Corporation, as mortgagor and
Southwestern Illinois Development Authority, as mortgagee dated
May 1, 1996
10.27* Indenture of Trust dated May 1, 1996 by Southwestern Illinois
Development Authority, as mortgagee dated May 1, 1996
10.28* Form of Tax Escrow Agreement to be entered into between the City
of Madison, Illinois, Magna Trust Company, as escrow agent and
Gateway International Motorsports Corporation
10.29*** Sanction Application and Agreement Form--NASCAR Busch Series,
Grand National Division between the National Association for
Stock Car Racing, Inc. and Applicant, dated December 17, 1996
(Certain confidential portions of this agreement have been
deleted)
10.30*** Official Sanction Application under the Rules and Regulations of
USAC, between United States Auto Club and Applicant, dated
November 18, 1996 (Certain confidential portions of this
agreement have been deleted)
10.31*** Sanction Agreement Application for National Championship Stock
Cars between Automobile Racing Club of America and Applicant,
dated November 25, 1996 (Certain confidential portions of this
agreement have been deleted)
10.32(A)*** Ground Lease between Land Trust No. 898 Magna Bank, Trustee and
Gateway International Motorsports Corporation, an Illinois
corporation dated February 7, 1997
10.33(A)*** Lease agreement between Gateway Golf Links LLC and Gateway
International Motorsports Corporation, an Illinois corporation
dated January 27, 1997
10.32**** Stock Purchase Agreement, dated August 8, 1997, between Midwest
Facility Investments, Inc., and the Company
10.33**** Registration Rights Agreement, dated August 8, 1997, between
Midwest Facility Investments, Inc., and the Company
10.34**** Stock Purchase Agreement, dated August 8, 1997, between Penske
Motorsports, Inc., and the Company
</TABLE>
21
<PAGE>
EXHIBIT INDEX--(CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S>
10.35**** Registration Rights Agreement, dated August 8, 1997, between Penske
Motorsports, Inc., and the Company
10.36**** Right of First Refusal Agreement, dated August 8, 1997 between
Midwest Facility Investments, Inc., Penske Motorsports, Inc. and
various Shareholders
10.37+ Sanction Application and Agreement between Gateway International
Motorsports Corporation and NASCAR Craftsman Truck Series dated
October 22,1997 (Certain confidential portions of this agreement
have been deleted)
10.38+ Sanction Application and Agreement between Memphis International
Motorsports Corporation and NASCAR Craftsman Truck Series dated
October 22, 1997 (Certain confidential portions of this agreement
have been deleted)
10.39 Reimbursement Agreement between First Tennessee Bank National
Association and Gateway International Motorsports Corporation dated
January 23, 1998 (filed herewith)
10.40 Irrevocable Standby Letter of Credit No. S983013 dated January 23,
1998 issued by First Tennessee Bank National Association directed
to Magna Bank, N.A. (filed herewith)
10.41 Tennessee Deed of Trust with Security Agreement and Assignment of
Rents and Leases dated January 23, 1998 between First Tennessee
Bank National Association and Memphis International Motorsports
Corporation (filed herewith)
10.42 Guaranty Agreement dated January 22, 1998 by the Company in favor of
First Tennessee Bank National Association (filed herewith)
10.43 Guaranty Agreement dated January 22, 1998 by Gateway International
Services Corporation in favor of First Tennessee Bank National
Association (filed herewith)
10.44 Guaranty Agreement dated January 22, 1998 by Memphis International
Motorsports Corporation in favor of First Tennessee Bank National
Association (filed herewith)
10.45 Guaranty Agreement dated January 22, 1998 by Motorsports Services
Corporation of Memphis in favor of First Tennessee Bank National
Association (filed herewith)
10.46 Guaranty Agreement dated January 22, 1998 by Del Mar Race
Management, Inc. in favor of First Tennessee Bank National
Association (filed herewith)
10.47 Guaranty Agreement dated January 22, 1998 by Automotive Safety &
Transportation Systems, Inc. in favor of First Tennessee Bank
National Association (filed herewith)
21.* Subsidiaries of Registrant
23.7 Consent of Arthur Andersen LLP (filed herewith)
27 Financial Data Schedule
</TABLE>
- --------
* Incorporated herein by reference to the Company's Registration Statement
on Form SB-2 filed with the Commission on May 17, 1996, as amended on June
24, 1996.
** Incorporated by reference to Company's Form S-3 Filed September 29, 1997.
*** Incorporated by reference to the Company's Form 10-KSB/A filed April 8,
1997.
**** Incorporated by reference to the Company's Form 8-K filed September 11,
1997.
+ Incorporated by reference to the Company's Form 8-K filed November 7,
1997.
++ Incorporated by reference to the Company's Form S-3 filed February 24,
1998.
22
<PAGE>
GRAND PRIX ASSOCIATION OF LONG BEACH, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated Financial Statements:
Report of Independent Public Accountants.................................. F-2
Consolidated Balance Sheets as of November 30, 1997 and 1996.............. F-3
Consolidated Statements of Income for the year ended November 30, 1997,
the five month transition period ended November 30, 1996 and the year
ended June 30, 1996...................................................... F-4
Consolidated Statements of Shareholders' Equity for the year ended
November 30, 1997, the five month transition period ended November 30,
1996 and the year ended June 30, 1996.................................... F-5
Consolidated Statements of Cash Flows for the year ended November 30,
1997, the five month transition period ended November 30, 1996 and the
year ended June 30, 1996................................................. F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Grand Prix Association of Long Beach, Inc.:
We have audited the accompanying consolidated balance sheets of Grand Prix
Association of Long Beach, Inc. (a California corporation) and subsidiaries as
of November 30, 1997 and 1996 and the related consolidated statements of
income, shareholders' equity and cash flows for the year ended November 30,
1997, the five month transition period ended November 30, 1996 and the year
ended June 30, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Grand Prix Association of
Long Beach, Inc. and subsidiaries as of November 30, 1997 and 1996 and the
results of their operations and their cash flows for the year ended November
30, 1997, the five month transition period ended November 30, 1996 and the
year ended June 30, 1996 in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Los Angeles, California
February 20, 1998
F-2
<PAGE>
GRAND PRIX ASSOCIATION OF LONG BEACH, INC.
CONSOLIDATED BALANCE SHEETS
NOVEMBER 30, 1997 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NOVEMBER 30, NOVEMBER 30,
1996 1997
------------ ------------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents......................... $ 10,214 $ 1,520
Accounts receivable............................... 456 712
Prepaid expenses and other current assets......... 388 587
Inventories....................................... 51 326
Income taxes receivable........................... -- 966
Deferred income tax asset......................... 860 207
-------- -------
Total current assets............................ 11,969 4,318
Property and equipment, net......................... 22,279 44,786
Restricted cash..................................... 11,546 7,645
Other assets........................................ 1,092 1,407
-------- -------
Total assets.................................... $ 46,886 $58,156
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable, current............................ $ 73 $ 228
Accounts payable.................................. 680 870
Accrued interest.................................. 817 593
Deferred major event revenues..................... 1,424 1,511
Other accrued liabilities......................... 49 104
-------- -------
Total current liabilities......................... 3,043 3,306
Notes and bonds payable, long term.................. 22,932 23,693
Other long term liabilities......................... -- 200
Deferred income tax liability....................... 928 915
-------- -------
Total liabilities............................... 26,903 28,114
-------- -------
Series B mandatorily redeemable convertible
preferred stock, 250,000 shares issued and
outstanding at November 30, 1996................... 2,500 --
-------- -------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, no par value, 10,000,000 shares
authorized......................................... -- --
Common stock, no par value, 20,000,000 shares
authorized, 4,648,000 and 3,641,000 shares issued
and outstanding as of November 30, 1997 and
November 30, 1996, respectively.................... 15,673 26,536
Retained earnings................................... 2,193 3,864
Shareholders' notes................................. (383) (358)
-------- -------
Total shareholders' equity...................... 17,483 30,042
-------- -------
Total liabilities and shareholders' equity...... $ 46,886 $58,156
======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE>
GRAND PRIX ASSOCIATION OF LONG BEACH, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED NOVEMBER 30, 1997, THE FIVE MONTH TRANSITION PERIOD
ENDED NOVEMBER 30, 1996, AND THE YEAR ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
YEAR ENDED FIVE MONTHS ENDED YEAR ENDED
JUNE 30, 1996 NOVEMBER 30, 1996 NOVEMBER 30, 1997
------------- ----------------- -----------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues:
Major event revenues
Admissions............... $ 5,552 $ -- $ 12,166
Sponsorships............. 3,033 -- 4,049
Ancillary................ 3,892 -- 8,255
--------- --------- ---------
Total major event
revenues.............. 12,477 -- 24,470
Other operating revenues... 2,774 1,960 6,439
--------- --------- ---------
Total revenues......... 15,251 1,960 30,909
--------- --------- ---------
Expenses:
Major event expenses....... 7,208 -- 15,089
Other operating expenses... 1,971 1,010 2,491
General and administrative. 3,232 2,295 8,074
Depreciation............... 451 668 1,455
--------- --------- ---------
Total expenses......... 12,862 3,973 27,109
--------- --------- ---------
Income (loss) from
operations.................. 2,389 (2,013) 3,800
Other income (expense):
Interest income............ 119 647 626
Interest expense, net of
capitalized interest of
$772 for the year ended
November 30, 1997, $186
for the five month period
ended November 30, 1996
and $0 for the year ended
June 30, 1996............. (174) (764) (1,435)
Other, net................. (59) (10) 41
--------- --------- ---------
Total other income
(expense)............. (114) (127) (768)
--------- --------- ---------
Income (loss) before
(provision) benefit for
income taxes................ 2,275 (2,140) 3,032
(Provision) benefit for
income taxes................ (955) 797 (1,273)
--------- --------- ---------
Net income (loss)............ 1,320 (1,343) 1,759
Dividends on Series B
mandatorily redeemable
convertible preferred stock. -- (44) (88)
--------- --------- ---------
Net income (loss) applicable
to common stockholders...... $ 1,320 $ (1,387) $ 1,671
========= ========= =========
Income (loss) per share...... $ 0.62 $ (0.38) $ 0.42
========= ========= =========
Weighted average number of
common and common equivalent
shares outstanding.......... 2,137,351 3,640,574 4,007,500
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
GRAND PRIX ASSOCIATION OF LONG BEACH, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED NOVEMBER 30, 1997, THE FIVE MONTH TRANSITION PERIOD
ENDED NOVEMBER 30, 1996, AND THE YEAR ENDED JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREFERRED
COMMON STOCK STOCK
--------------- ------------- RETAINED SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT EARNINGS NOTES TOTAL
------ ------- ------ ------ -------- ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, June 30, 1995.. 1,956 $ 1,385 -- $ -- $ 2,261 $(399) $ 3,247
Issuance of common
stock................ 23 25 -- -- -- -- 25
Repurchase of common
stock................ (1) (1) -- -- (1) -- (2)
Cash received on
shareholders' notes.. -- -- -- -- -- 16 16
Issuance of Series A
redeemable preferred
stock, net of
issuance cost of
$170................. -- -- 313 2,330 -- -- 2,330
Conversion of Series A
redeemable preferred
stock................ 313 2,330 (313) (2,330) -- -- --
Issuance of common
stock for cash in
connection with the
initial public
offering, net of
issuance costs of
$1,566............... 1,350 11,934 -- -- -- -- 11,934
Net income............ -- -- -- -- 1,320 -- 1,320
----- ------- ---- ------ ------- ----- -------
BALANCE, June 30, 1996.. 3,641 15,673 -- -- 3,580 (383) 18,870
Net loss.............. -- -- -- -- (1,343) -- (1,343)
Dividends paid........ -- -- -- -- (44) -- (44)
----- ------- ---- ------ ------- ----- -------
BALANCE, November 30,
1996................... 3,641 15,673 -- -- 2,193 (383) 17,483
Cash received on
shareholders' notes.. -- -- -- -- -- 25 25
Exercise of common
stock options........ 127 139 -- -- -- -- 139
Tax benefit from
exercise of stock
options.............. -- 609 -- -- -- -- 609
Private placement of
common stock, net of
issuance costs
of $159.............. 630 7,615 -- -- -- -- 7,615
Conversion of Series B
preferred stock to
common stock......... 250 2,500 -- -- -- -- 2,500
Net income............ -- -- -- -- 1,759 -- 1,759
Dividends paid........ -- -- -- -- (88) -- (88)
----- ------- ---- ------ ------- ----- -------
BALANCE, November 30,
1997................... 4,648 $26,536 -- $ -- $ 3,864 $(358) $30,042
===== ======= ==== ====== ======= ===== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
GRAND PRIX ASSOCIATION OF LONG BEACH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED NOVEMBER 30, 1997, THE FIVE MONTH TRANSITION PERIOD
ENDED NOVEMBER 30, 1996, AND THE YEAR ENDED JUNE 30, 1996
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED FIVE MONTHS ENDED YEAR ENDED
JUNE 30, 1996 NOVEMBER 30, 1996 NOVEMBER 30, 1997
------------- ----------------- -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income................... $ 1,320 $ (1,343) $ 1,759
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Depreciation................ 451 668 1,455
Amortization of deferred
financing costs............ -- 30 98
Interest earned on
restricted cash............ -- (400) (312)
Gain on sale of assets...... (1) (2) --
Tax benefit from exercise
of employee stock options.. -- -- 609
Changes in assets and
liabilities:
Accounts receivable....... (249) 421 (256)
Income taxes receivable... -- -- (966)
Notes receivable.......... (3) -- --
Other current assets...... (80) (100) (474)
Other assets.............. -- 50 (153)
Accounts payable.......... 1,323 (1,943) 190
Other accrued
liabilities.............. -- -- 55
Accrued interest.......... -- 817 (224)
Deferred major event
revenues................. -- 1,424 87
Income taxes payable...... (129) -- --
Deferred income taxes..... (2) (786) 640
-------- -------- --------
Net cash provided by (used
in) operating activities... 2,630 (1,164) 2,508
-------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures......... (2,400) (11,774) (23,762)
Memphis acquisition.......... (2,604) -- --
Restricted cash--construction
fund........................ (17,124) 11,036 4,213
Cash received for sale of
assets...................... 4 10 --
Other........................ -- -- (260)
-------- -------- --------
Net cash used in investing
activities................. (22,124) (728) (19,809)
-------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Borrowings under notes
payable..................... 16 -- 1,027
Repayment under notes
payable..................... (217) (158) (111)
Borrowings under loans
payable..................... 21,460 -- --
Repurchase of common stock... (2) -- --
Restricted cash--debt service
reserve fund................ (2,504) -- --
Restricted cash--interest
fund........................ (2,554) -- --
Bond issuance costs.......... (1,048) -- --
Proceeds from Series A
preferred stock, net........ 2,330 -- --
Proceeds from initial public
offering, net............... 11,934 -- --
Dividends.................... -- (44) (88)
Exercise of stock options.... -- -- 139
Proceeds from private
placement of common stock,
net......................... -- -- 7,615
Shareholders' notes.......... 16 -- 25
-------- -------- --------
Net cash (used in) provided
by financing activities.... 29,431 (202) 8,607
-------- -------- --------
Net increase (decrease) in
cash........................ 9,937 (2,094) (8,694)
Cash and cash equivalents at
beginning of period......... 2,371 12,308 10,214
-------- -------- --------
Cash and cash equivalents at
end of period............... $ 12,308 $ 10,214 $ 1,520
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid during the period
for:
Interest.................... $ 174 $ 60 $ 2,412
Income taxes................ $ 960 $ 199 $ 944
Cash received during the
period for:
Interest.................... $ 119 $ 622 $ 624
DISCLOSURE OF NON-CASH
FINANCING ACTIVITIES:
Intangible recorded on
issuance of common stock for
minority interest in
subsidiaries................ $ 25 $ -- $ --
Series B preferred stock
issued for Memphis
acquisition................. $ 2,500 $ -- $ --
Conversion of Series B
preferred stock to common
shares...................... $ -- $ -- $ 2,500
Financing of property and
equipment................... $ -- $ -- $ 200
</TABLE>
F-6
<PAGE>
GRAND PRIX ASSOCIATION OF LONG BEACH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1997
NOTE 1--DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
GENERAL
Grand Prix Association of Long Beach, Inc. and its wholly-owned
subsidiaries (the "Company") engage primarily in the organization, promotion
and management of auto racing events. The Company's wholly-owned subsidiaries
are:
Del Mar Race Management, Inc.
Automotive Safety & Transportation Systems, Inc.
Event Construction Services, Inc.
Gateway International Motorsports Corporation ("Gateway")
Gateway International Services Corporation
Memphis International Motorsports Corporation ("Memphis")
Motorsports Services Corporation of Memphis
In June 1996, the Company purchased Memphis Motorsports Park located in
Millington, Tennessee. See Note 2 for acquisition details.
On December 9, 1996, the shareholders of the Company ratified a Board of
Directors resolution to change the fiscal year end from June 30 to November
30. Unaudited results of operations for the comparable five month period ended
November 30, 1995 are as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
----------------------
<S> <C>
Revenues......................................... $ 1,596
Loss from operations............................. (665)
Loss before benefit for income taxes............. (805)
Net loss......................................... (467)
Loss per share................................... (0.23)
Weighted average number of common shares
outstanding..................................... 2,018,000
</TABLE>
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
STATEMENTS OF CASH FLOWS
The Company prepares its statements of cash flows using the indirect method
as defined under Statement of Financial Accounting Standards (SFAS) No. 95,
"Statement of Cash Flows". The Company considers all short term investments
with a maturity at the date of purchase of three months or less to be cash
equivalents.
F-7
<PAGE>
GRAND PRIX ASSOCIATION OF LONG BEACH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CONCENTRATION OF RISK
Balances on deposits at banks in the United States are insured by the
Federal Deposit Insurance Corporation up to $100,000 per institution per
corporation. As of November 30, 1997, the uninsured portion of these balances
held at banks aggregated $5,527,000. In addition, the Company has established
certain restricted cash funds which are held by a trustee. See Note 3 for
details.
Accounts receivable represent unsecured balances due from its customers and
the Company is at risk to the extent such amounts become uncollectible. The
Company performs credit evaluations of each of its customers and maintains
allowances for potential credit losses. Such losses have generally been within
management's expectations.
A substantial portion of the Company's revenues (39% and 72% for the years
ended November 30, 1997 and June 30, 1996, respectively) was realized in
connection with the annual Grand Prix race (normally in April) in Long Beach,
California. The Company has an agreement with the City of Long Beach to
conduct open wheel racing one weekend a year through June 30, 2010. The
Company has been conducting Championship Auto Racing Teams, Inc. ("CART")
sanctioned Indy car events since 1984 and currently has an agreement which
(including the option periods) expires in April 2000. For the year ended
November 30, 1997 the Motorola 300 held at Gateway International Raceway
accounted for 11% of revenues. The Company has an agreement with CART to
conduct this event through November 30, 2000. Should these contracts be
terminated or if the Company is not successful in extending the contracts,
this would have a significant impact on the Company. Management is developing
other racing venues and other ancillary revenue sources in order to reduce the
Company's reliance on the Grand Prix.
INVENTORIES
Inventories are stated at the lower of cost (first in, first out) or market
and consist principally of merchandise held for resale.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using
the straight-line depreciation method over the estimated useful lives of the
various classes of property and equipment, which range from five to thirty-one
and one-half years. Betterment's, renewals and extraordinary repairs that
extend the life of an asset are capitalized. Other repairs and maintenance
costs are expensed.
DEBT ISSUANCE COSTS
Costs associated with the issuance of the Southwestern Illinois Development
Authority ("SWIDA") loan have been capitalized and included in other assets in
the accompanying consolidated balance sheet. These costs are being amortized
over the life of the loan using the effective interest rate method and are
included in interest expense in the accompanying consolidated statements of
income. Amortization expense totaled $98,000 and $30,000 for the year ended
November 30, 1997 and the five month transition period, ended November 30,
1996 respectively.
INCOME TAXES
The Company accounts for income taxes using the liability method as required
by SFAS No. 109, "Accounting for Income Taxes". Under SFAS 109, a deferred tax
liability or asset is recognized for the estimated future tax effects
attributable to temporary differences and carryforwards. The measurement of
deferred
F-8
<PAGE>
GRAND PRIX ASSOCIATION OF LONG BEACH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
income tax assets is adjusted by a valuation reserve, if necessary, so that
the net tax benefits are recognized only to the extent that they will be
realized.
NON-MONETARY TRADE AGREEMENTS
The Company enters into agreements to exchange advertising, exhibit space,
hospitality or event tickets for goods or services. The recorded value of the
goods or services received is based on their fair market value. The recorded
value of non-monetary trade agreements included within major event revenues
for the years ended November 30, 1997 and June 30, 1996 amounted to $518,000
and $137,000, respectively. There were no such agreements recorded during the
five month transition period ended November 30, 1996.
REVENUE RECOGNITION
The Company records race event and related revenues at the date the event is
held. Revenues related to public relations and marketing services and other
operating revenues are recorded as services are rendered.
DEFERRED COSTS
Direct costs associated with and incurred prior to major race events
primarily consisting of deposits for convention facilities, hospitality
facilities, construction of the racing circuit, sanctioning body fees and
other direct costs are initially capitalized and then charged to expense at
the date of the event. Indirect costs and period costs are charged to expense
when incurred.
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform with the
current year presentation.
NET INCOME PER SHARE
Net income per share is calculated using the weighted average number of
shares of Common stock outstanding during the period. The calculations are
based on the treasury stock method. In accordance with this method,
unexercised dilutive options and warrants are assumed to have been exercised
at the beginning of the period or at the date of issuance, if later. The
assumed proceeds are then treated as if used to purchase Common stock at the
average market price during the period. Pursuant to Securities and Exchange
Commission Staff Accounting Bulletin No. 83, Common stock issued for
consideration below the estimated offering price of $10.00 per share and stock
options and warrants issued with exercise prices below the offering price
during the twelve month period preceding the initial filing of the initial
public offering, have been included in the calculation of Common shares, using
the treasury method, as if they were outstanding for all periods presented
prior to the initial public offering. The effect of the Series A convertible
stock issued at consideration below the initial public offering price was to
increase the weighted average shares outstanding for the year ended June 30,
1996 by 62,500 shares. Stock options and warrants were not included in the
weighted average shares for the five month period ended November 30, 1996 as
they were anti-dilutive.
NEW FINANCIAL ACCOUNTING PRONOUNCEMENTS
In March 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 128, "Earnings Per Share" and SFAS No. 129, "Disclosure of Information
about Capital Structure". SFAS No. 128 is effective for both interim and
annual periods ending after December 15, 1997 and SFAS No. 129 is effective
for periods ending after December 15, 1997.
F-9
<PAGE>
GRAND PRIX ASSOCIATION OF LONG BEACH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In June, 1997 the FASB issued SFAS No. 130, "Reporting Comprehensive Income"
and SFAS No. 131, "Disclosure about Segments of An Enterprise and Related
Information" which are effective for the financial statements for periods
beginning after December 15, 1997.
Management has not determined the effect of the adoption of these
pronouncements on the Company's financial statements.
NOTE 2--ACQUISITIONS:
MEMPHIS MOTORSPORTS PARK
On June 28, 1996, the Company acquired substantially all of the assets of
Memphis Motorsports Park for a total acquisition cost of $5,104,000. In
connection with the acquisition, the Company paid certain indebtedness of the
seller totaling $2,500,000 and issued 250,000 shares of Series B Mandatorily
Redeemable Convertible Preferred stock valued at $2,500,000 which bears a
cumulative 4.185% dividend rate (see Note 7). In accordance with the purchase
agreement, the results of operations have been included in these financial
statements from June 1, 1996 forward.
Unaudited pro forma results of operations of the Company assuming this
transaction, the private placement of Series A Preferred Stock as discussed in
Note 6, and the SWIDA loan discussed in Note 5 had all taken place effective
as of July 1, 1995 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30,
1996
-----------
<S> <C>
Revenues..................................................... $16,416,000
Net loss..................................................... (38,000)
Pro forma loss per share..................................... (0.01)
Pro forma weighted average number of common shares
outstanding................................................. 3,939,000
</TABLE>
NOTE 3--RESTRICTED CASH:
The Company has established certain restricted cash funds as required by the
SWIDA loan (see Note 5) which are held by the Trustee (Magna Trust Company)
and as required by the terms of its $7,615,000 private placement (See Note 6)
and consist of the following as of November 30, 1997 and 1996:
<TABLE>
<CAPTION>
NOVEMBER NOVEMBER 30,
30, 1996 1997
----------- ------------
<S> <C> <C>
Debt service reserve fund......................... $ 2,561,000 $ 2,524,000
Interest fund..................................... 2,609,000 511,000
Construction fund................................. 6,376,000 1,000
Ticket surcharge fund............................. -- 269,000
Private placement restricted funds................ -- 4,340,000
----------- -----------
$11,546,000 $ 7,645,000
=========== ===========
</TABLE>
These funds are primarily invested in cash equivalents.
The proceeds from the issuance of common stock during the year ended
November 30, 1997 must be used to develop the company's facilities at Gateway
and Memphis and to obtain additional sanctioned events.
On January 23, 1998, Gateway International Motorsports Corporation signed a
Reimbursement Agreement with First Tennessee Bank whereby the bank provided an
irrevocable standby letter of credit to secure the debt reserve fund
established pursuant to Gateway's agreement with SWIDA. In furtherance of the
Reimbursement Agreement and concurrent therewith, the Company and each of its
subsidiaries signed Guaranty Agreements, and Memphis International Motorsports
Corporation signed a Trust Deed on its properties to secure repayment of the
letter of credit.
F-10
<PAGE>
GRAND PRIX ASSOCIATION OF LONG BEACH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4--PROPERTY AND EQUIPMENT:
Property and equipment as of November 30, 1997 and 1996 consist of the
following:
<TABLE>
<CAPTION>
NOVEMBER 30, NOVEMBER 30,
1996 1997
------------ ------------
<S> <C> <C>
Buildings...................................... $ 3,841,000 $14,996,000
Safety systems and materials................... 4,041,000 6,834,000
Land........................................... 2,827,000 3,273,000
Vehicles and equipment......................... 1,585,000 2,514,000
Facilities..................................... 5,855,000 16,489,000
Office furniture and fixtures.................. 882,000 1,779,000
Equipment...................................... 704,000 1,100,000
Construction in process........................ 6,142,000 2,475,000
Other.......................................... 781,000 1,160,000
----------- -----------
26,658,000 50,620,000
Less: accumulated depreciation................. (4,379,000) (5,834,000)
----------- -----------
$22,279,000 $44,786,000
=========== ===========
</TABLE>
The cost of fully depreciated property included above is $1,664,000 and
$1,465,000 at November 30, 1997 and 1996, respectively.
Construction in process relates to the redevelopment of Gateway
International Raceway and Memphis Motorsports Park.
F-11
<PAGE>
GRAND PRIX ASSOCIATION OF LONG BEACH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5--NOTES AND LOANS PAYABLE:
Notes and loans payable as of November 30, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
NOVEMBER NOVEMBER
30, 1996 30, 1997
----------- -----------
<S> <C> <C>
SWIDA loan for Gateway redevelopment, net of $40,000
original issue discount (see below)................. $21,460,000 $21,460,000
First trust deed on Long Beach office note payable to
bank; bearing interest at a variable rate of prime
plus 2% per annum (10.50% at November 30, 1997);
payable in monthly installments of principal and
interest of $7,000 through May 2002; final payment
of principal and interest totaling $730,000 due June
2002................................................ 775,000 771,000
Second trust deed on Long Beach office note payable
to bank; bearing interest at 7.519% per annum;
payable in monthly installments of principal and
interest of $6,000 through December 2012............ 673,000 651,000
Other................................................ 97,000 1,039,000
----------- -----------
23,005,000 23,921,000
Less: current portion................................ (73,000) (228,000)
----------- -----------
$22,932,000 $23,693,000
=========== ===========
</TABLE>
The Company entered into an agreement with Southwestern Illinois Development
Authority ("SWIDA") to receive the proceeds from a Municipal Bond Offering (the
"SWIDA loan") which issued "Taxable Sports
F-12
<PAGE>
GRAND PRIX ASSOCIATION OF LONG BEACH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Facility Revenue Bonds, Series 1996 (Gateway International Motorsports
Corporation Project)" municipal bonds in the aggregate principal amount of
$21,500,000. The offering of the bonds closed on June 21, 1996. The repayment
terms and debt service reserve requirements of the bonds issued in the
Municipal Bond Offering correspond to the terms of the SWIDA loan. SWIDA
loaned all of the proceeds from the Municipal Bond Offering to the Company for
the purpose of the redevelopment, construction and expansion of Gateway
International Raceway, and the proceeds of the SWIDA loan are irrevocably
committed to complete all planned construction of Gateway International
Raceway, to fund interest, to create a debt service reserve fund and to pay
for the cost of issuance of the bonds. The SWIDA loan is secured by a first
mortgage lien on all the real property owned and a security interest in all
property leased by the Company at Gateway International Raceway. The SWIDA
loan bears interest at varying rates ranging from 8.35% to 9.25% with an
effective rate of approximately 9.1%. The structure of the bonds permits
amortization from February 1997 through February 2017 with debt service
beginning in 2000 following interest only payments from February 1997 through
August 1999. In addition, a portion of the property taxes to be paid by the
Company (if any) to the City of Madison Tax Incremental Fund have been pledged
to the annual retirement of debt.
Aggregate annual maturities of long term debt are as follows:
<TABLE>
<CAPTION>
YEARS ENDING
NOVEMBER 30,
------------
<S> <C>
1998................................ $ 228,000
1999................................ 130,000
2000................................ 749,000
2001................................ 695,000
2002................................ 1,440,000
Thereafter........................... 20,679,000
-----------
$23,921,000
===========
</TABLE>
The carrying values of long term debt approximate their fair value.
NOTE 6--EQUITY:
In May 1996, the Company effected a recapitalization pursuant to which the
Company (i) increased its authorized shares of Common stock to 20,000,000
shares, (ii) effected a 1:35.57013 stock split and (iii) authorized 10,000,000
shares of Preferred stock. Share and per share information presented in these
financial statements reflect this recapitalization.
In April and May 1996, the Company conducted a private placement of 312,500
shares of its Series A Convertible Preferred stock for $2,500,000. The private
placement closed concurrently with the closing of the SWIDA loan to the
Company. Effective June 25, 1996, the Series A Convertible Preferred stock
automatically converted into Common stock at $8.00 per share. Additionally,
the placement agent for the Series A Convertible Preferred stock offering
received warrants to purchase 31,250 shares of Common stock at $10.00 per
share. The net proceeds from the private placement of approximately $2,330,000
were used by the Company to establish a portion of the debt service reserve
fund required for the SWIDA loan.
The Company received net proceeds of $11,934,000 from the sale of 1,350,000
shares of Common stock offered at the initial public offering price of $10.00
per share (aggregate gross proceeds of $13,500,000), with the deduction of
offering expenses and underwriting discounts ($1,566,000). The Company applied
approximately $2,500,000 of the net proceeds to fund the acquisition of
Memphis Motorsports Park with the remainder being used for the redevelopment
at Gateway, the improvements at Memphis and general corporate purposes.
F-13
<PAGE>
GRAND PRIX ASSOCIATION OF LONG BEACH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company received $7,615,000, net of issuance costs of $159,000, from a
private placement sale of 630,000 shares of Common stock during the year ended
November 30, 1997. The proceeds from the issuance of this stock must be used
to develop the company's facilities at Gateway and Memphis and to obtain
additional sanctioned events
NOTE 7--MANDATORILY REDEEMABLE PREFERRED STOCK:
On June 28, 1996, the Company issued 250,000 shares of Series B Convertible
Preferred stock which was mandatorily redeemable (the number of shares of
Series B Convertible Preferred stock was based upon the initial public
offering price of the common stock) for the acquisition of Memphis Motorsports
Park. The stock was issued with a cumulative 4.185% dividend rate payable
quarterly. The preferred stock was converted to common stock in October 1997
on a one for one basis. Dividends paid while these shares were outstanding
totaled $88,000 and $44,000 for the year ended November 30, 1997 and the five
month period ended November 30, 1996, respectively.
NOTE 8--STOCK REPURCHASE AND STOCK OPTION PLAN:
All options under the Company's 1990 Stock Option Plan were exercised and
resulted in the Company receiving notes from employees, officers and board
members with the stock received upon exercise of the options being pledged as
collateral for these notes. The notes bear interest at 6.5% with interest only
payable annually through December 1997.
The Company granted options to purchase 602,451 shares of Common stock
pursuant to the Company's 1993 Stock Option Plan (the Plan) at an exercise
price of $1.09 per share (estimated fair market value at date of grant) to
certain key employees, officers and members of the Board of Directors. The
options granted under the Plan vest over a five year period and must be
exercised by December 13, 2003. As of November 30, 1997 approximately 257,270
shares have vested and are exercisable. An additional 127,723 options that
were vested were exercised during the year ended November 30, 1997. An
additional 12,691 non-vested options were forfeited in 1997 upon the
resignation of an employee.
In May 1996, the 1996 Employee and Director Stock Incentive Plan (the 1996
Plan) was approved with all directors and year-round salaried employees of the
Company eligible to participate. Pursuant to the 1996 Plan, the Stock Option
Committee (the Committee) may grant, without limitation, any of the following
awards to employees or directors: shares of common stock or any option,
warrant, convertible security, stock appreciation right or similar right with
an exercise or conversion privilege at a price related to an equity security,
or similar securities with a value derived from the value of an equity
security (an "Award"). Awards are not restricted to any specified form or
structure and may include, without limitation, sales or bonuses of stock,
restricted stock, stock options, stock purchase warrants, other rights to
acquire stock, securities convertible into or redeemable for stock, stock
appreciation rights, limited stock appreciation rights, phantom stock,
dividend equivalents, performance units or performance shares. An Award may
consist of one such security or benefit, or two or more of them in tandem or
in the alternative. The Committee, in its sole discretion, determines all of
the terms and conditions of each Award granted under the 1996 Plan. An
aggregate of 400,000 shares of Common stock have been reserved for issuance in
connection with Awards made to employees and directors under the 1996 Plan. No
stock options have been granted under the 1996 Plan which terminates in May
2006. The Board of Directors of the Company may amend or terminate the 1996
Plan at any time and in any manner; provided, however, that no such amendment
or termination may terminate or modify any Award previously granted under the
1996 Plan without the consent of the recipient of the Award.
The Company applies Accounting Principles Board Opinion No. 25 and related
interpretations in accounting for its fixed stock option plans. Accordingly,
no compensation cost has been recognized. In fiscal year 1996 the Company
adopted the disclosure method as permitted under SFAS No. 123, "Accounting for
Stock-Based Compensation. The adoption of SFAS 123 has had no impact on the
Company as there have been no options granted subsequent to June 30, 1995.
F-14
<PAGE>
GRAND PRIX ASSOCIATION OF LONG BEACH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 9--INCOME TAXES:
The provisions (benefit) for income taxes for the years ended November 30,
1997 and June 30, 1996 and the five month transition period ended November 30,
1996 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED FIVE MONTHS ENDED YEAR ENDED
JUNE 30, 1996 NOVEMBER 30, 1996 NOVEMBER 30, 1997
------------- ----------------- -----------------
<S> <C> <C> <C>
Taxes currently payable
(receivable):
Federal............... 744,000 $ (22,000) $ 512,000
State................. 213,000 11,000 121,000
-------- --------- ----------
957,000 (11,000) 633,000
Taxes applicable to
temporary differences.. (2,000) (786,000) 640,000
-------- --------- ----------
Provision (benefit) for
income taxes........... $955,000 $(797,000) $1,273,000
======== ========= ==========
</TABLE>
The provisions (benefit) for income taxes for the year ended November 30,
1997, the five month transition period ended November 30, 1996 and the year
ended June 30, 1996 result in effective tax rates of 42%, 37% and 42%,
respectively.
<TABLE>
<CAPTION>
YEAR ENDED FIVE MONTHS ENDED YEAR ENDED
JUNE 30, 1996 NOVEMBER 30, 1996 NOVEMBER 30, 1997
------------- ------------------ -----------------
<S> <C> <C> <C>
Federal income tax rate. 34% (34)% 34%
State income tax, net of
federal
tax effect............. 6% (4)% 6%
Effect of permanent dis-
allowable
deductions............. 2% 1% 2%
--- ---- ---
Effective tax rate...... 42% (37)% 42%
=== ==== ===
</TABLE>
Temporary differences which give rise to a significant portion of deferred
taxes as of November 30, 1997 and 1996 are:
<TABLE>
<CAPTION>
NOVEMBER 30,
-------------------------
1996 1997
----------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating losses.............................. $ 793,000 $ 1,391,000
Reserves and other................................ 118,000 207,000
Depreciation on property.......................... 152,000 --
----------- -----------
1,063,000 1,598,000
----------- -----------
Deferred tax liabilities:
Reserves and other................................ (51,000) (50,000)
Depreciation and deferred gain on property........ (1,080,000) (2,256,000)
----------- -----------
(1,131,000) (2,306,000)
----------- -----------
Net deferred tax liability.......................... $ (68,000) $ (708,000)
=========== ===========
</TABLE>
NOTE 10--COMMITMENTS AND CONTINGENCIES:
The Company leases certain property at Gateway with leases expiring at
various dates through 2070, subject to annual adjustments based on increases
in the consumer price index. Total rental payments charged to operations
amounted to $162,000 for the year ended November 30, 1997, $50,000 for the
five month transition
F-15
<PAGE>
GRAND PRIX ASSOCIATION OF LONG BEACH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
period ended November 30, 1996 and $84,000 for the year ended June 30, 1996.
In addition, one lease contains a commitment of the Company to pay additional
payments aggregating $120,000 payable in $35,000 installments due June 1,
1996, 1997 and 1998 and $15,000 due June 1, 1999 for the option to purchase
the property in 2015. If the Company does not exercise its purchase option,
these payments will be applied toward reducing the Company's rent payments
after 2015 at the rate of $1,000 per month.
The Company leases office space under a non-cancelable operating lease
through December 1999 for its box office operations. The rental payment is
subject to annual adjustments based on changes in the Los Angeles consumer
price index or five percent (5%), whichever is greater. Total rental payments
charged to operations amounted to $10,000 for the year ended November 30,
1997, $4,000 for the five month transition period ended November 30, 1996 and
$9,000 for the year ended June 30, 1996.
The minimum lease payments due under the aforementioned leases are as
follows:
<TABLE>
<S> <C>
1998........................................................... $ 294,000
1999........................................................... 273,000
2000........................................................... 251,000
2001........................................................... 235,000
2002........................................................... 209,000
Thereafter..................................................... 4,738,000
</TABLE>
The Company has entered into several sanctioning agreements to conduct
various race competitions in Long Beach, at Gateway and at Memphis. These
contracts expire between 1997 and 2000 with certain options to extend
thereafter.
In connection with the major events, fixed commitments related to various
contracts in place, including sanctioning fees and municipal facilities and
services among others, require the following minimum payments as of November
30, 1997:
<TABLE>
<S> <C>
1998.......................................................... $6,956,000
1999.......................................................... 2,352,000
2000.......................................................... 2,123,000
2001.......................................................... 60,000
2002.......................................................... 60,000
Thereafter.................................................... 480,000
</TABLE>
In addition to these fixed commitments, certain of the agreements call for
additional payments based upon the profitability (as defined) of the events.
In May 1996, the Company entered into employment agreements for two key
executive officers. The agreements called for an annual minimum base salary of
$400,000 and expire in May 2001. Annual increases in base salary are based on
increases in the consumer price index. Future minimum payments required under
the employment agreements as of November 30, 1997 are as follows:
<TABLE>
<S> <C>
1998............................................................ $411,000
1999............................................................ 412,000
2000............................................................ 412,000
2001............................................................ 188,000
</TABLE>
F-16
<PAGE>
GRAND PRIX ASSOCIATION OF LONG BEACH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11--RELATED PARTIES:
During the years ended November 30, 1997 and June 30, 1996, the Company
purchased merchandise for resale from a company owned by a director valued at
approximately $38,000 and $12,000 respectively. There were no such purchases
during the five month period ended November 30, 1996.
During the years ended November 30, 1997 and June 30, 1996 the Company
purchased merchandise for resale from a company owned by the daughter and son-
in-law of a director valued at approximately $176,000 and $5,000 respectively.
There were no such purchases during the five month transition period ended
November 30, 1996, however, deposits of $23,000 were made toward purchases of
merchandise to be delivered in the fiscal year ending November 30, 1997. In
addition, during the year ended November 30, 1997, the Company purchased
manufacturing equipment from the same company in the amount of $134,000.
Included in accounts receivable as of November 30, 1997 and 1996 is $15,000
and $8,500, respectively, due from directors and officers and primarily
represents interest due on the shareholders' notes.
NOTE 12--BENEFIT PLANS
On November 1, 1995, the Company adopted a 401(k) profit sharing plan (the
"Plan") pursuant to which employees who have completed at least one year of
service with the Company and meet certain other eligibility requirements, may
contribute, on a pre-tax basis, a percentage of the employee's total annual
income from the Company subject to certain Internal Revenue Code limitations.
The Company may make matching contributions to the 401(k) Plan at its
discretion. Contributions made by the Company to the Plan were $25,000 for the
year ended November 30, 1997, $12,000 for the five month transition period
ended November 30, 1996 and $23,000 for the year ended June 30, 1996.
Since 1990, the Company has had in effect a three tier bonus plan for
eligible employees (the "Bonus Plan") which is geared toward sharing the risk
and reward achieved by the Company, as well as compensating personal
initiative. In the first tier of the Bonus Plan, a bonus is paid based on the
Company's marketing department having surpassed its projected earnings for the
Grand Prix event. The second tier of the Bonus Plan offers incentives to
employees for bringing new business into the Company unrelated to the Grand
Prix of Long Beach. The third tier of the Bonus Plan is based on the general
profitability of the Company overall. For the year ended June 30, 1996
$422,000 was distributed pursuant to the Company's Bonus Plan. There were no
distributions under the Bonus Plan for the five month transition period ended
November 30, 1996 or for the year ended November 30, 1997. The Bonus Plan may
be terminated or modified at any time at the sole discretion of the Company.
Certain Grand Prix employees are covered by union sponsored collectively
bargained multi-employer pension plans. The Company contributed approximately
$49,000, $5,000 and $50,000 for such plans in the year ended November 30,
1997, the five month transition period ended November 30, 1996, and the year
ended June 30, 1996, respectively. Information from the plans' administrators
is not sufficient to permit the Company to determine its share of unfunded
vested benefits, if any.
F-17
<PAGE>
EXHIBIT 10.39
================================================================================
REIMBURSEMENT AGREEMENT
BETWEEN
FIRST TENNESSEE BANK NATIONAL ASSOCIATION, CREDIT BANK
AND
GATEWAY INTERNATIONAL MOTORSPORTS CORPORATION,
ACCOUNT PARTY
DATED AS OF JANUARY 1, 1998
_______________________________
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
(This Table of Contents is not a part of the Reimbursement Agreement and is only
for convenience of reference.)
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms.............................. 1
Section 1.2 Construction....................................... 7
ARTICLE II
LETTER OF CREDIT
Section 2.1 Agreement to Issue Letter of Credit................ 7
Section 2.2 Reinstatement of Letter of Credit.................. 7
Section 2.3 Reduction in Amount of Letter of Credit............ 8
Section 2.4 Obligations........................................ 8
Section 2.5 Obligations Absolute............................... 9
Section 2.6 Fees and Commissions............................... 9
Section 2.7 Increased Costs Due to Change in Law............... 10
Section 2.8 Waivers............................................ 10
Section 2.9 Payment of Expenses, Etc........................... 10
Section 2.10 Actions Relating to Letter of Credit; Indemnity.... 11
Section 2.11 Waiver of Right of Setoff.......................... 12
ARTICLE III
COLLATERAL SECURITY
Section 3.1 Security Interest.................................. 13
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.1 Opinion of Counsel to the Corporation.............. 13
Section 4.2 Opinion of Bond Counsel............................ 13
Section 4.3 Required Acts and Conditions....................... 13
Section 4.4 No Default......................................... 13
Section 4.5 Representations and Warranties..................... 14
Section 4.6 Certificate of Compliance.......................... 14
Section 4.7 Delivery of the Related Documents.................. 14
Section 4.8 Filings and Recordings............................. 14
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 4.9 Proceedings........................................ 14
Section 4.10 Title Insurance.................................... 14
Section 4.11 Other Insurance.................................... 14
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.1 Due Organization, Etc.............................. 15
Section 5.2 Due Authorization, Etc............................. 15
Section 5.3 Approvals.......................................... 15
Section 5.4 Enforceability..................................... 15
Section 5.5 Litigation......................................... 15
Section 5.6 Title to Property.................................. 16
Section 5.7 Compliance with Laws and Contracts................. 16
Section 5.8 Related Documents.................................. 16
Section 5.9 [RESERVED]......................................... 16
Section 5.10 No Misleading Statements........................... 16
Section 5.11 No Burdensome Restrictions......................... 16
Section 5.12 Taxes.............................................. 16
Section 5.13 Leases............................................. 17
Section 5.14 Financial Condition................................ 17
Section 5.15 No Default......................................... 17
Section 5.16 ERISA.............................................. 17
Section 5.17 Environmental and Other Conditions................. 17
Section 5.18 Guarantor.......................................... 18
Section 5.19 Place of Business.................................. 18
Section 5.20 Capital Adequacy................................... 18
ARTICLE VI
AFFIRMATIVE COVENANTS
Section 6.1 Business and Existence............................. 18
Section 6.2 Maintain Property.................................. 18
Section 6.3 Insurance on Properties............................ 19
Section 6.4 Obligations, Taxes and Liens....................... 19
Section 6.5 Financial Reports and Other Data................... 20
(a) Quarterly Statements............................... 20
(b) Annual Statements.................................. 20
Section 6.6 Notice of Default.................................. 21
Section 6.7 Additional Information............................. 21
Section 6.8 Right of Inspection................................ 21
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 6.9 Compliance with Laws, Etc.......................... 21
Section 6.10 Certain Notices.................................... 21
Section 6.11 Environmental Laws................................. 22
Section 6.12 Related Documents.................................. 22
Section 6.13 Notice of Adverse Change in Assets................. 22
Section 6.14 Current Ratio...................................... 22
Section 6.15 Net Worth.......................................... 22
Section 6.16 Interest Coverage Ratio............................ 22
Section 6.17 Debt Coverage Ratio................................ 22
ARTICLE VII
NEGATIVE COVENANTS
Section 7.1 Amendments......................................... 22
Section 7.2 Indebtedness....................................... 23
Section 7.3 Liens.............................................. 23
Section 7.4 Guaranties......................................... 24
Section 7.5 Sale of Assets..................................... 25
Section 7.6 [RESERVED]......................................... 25
Section 7.7 Loans and Investments.............................. 25
Section 7.8 New Business....................................... 25
Section 7.9 [RESERVED]......................................... 25
Section 7.10 [RESERVED]......................................... 25
Section 7.11 Loans to Officers and Employees.................... 25
Section 7.12 Trademarks and Trade Names......................... 25
Section 7.13 Debt to Worth Ratio................................ 25
Section 7.14 [RESERVED]......................................... 25
Section 7.15 [RESERVED]......................................... 25
Section 7.16 Contingent Obligations............................. 26
Section 7.17 Accounting Methods................................. 26
Section 7.18 Fiscal Year........................................ 26
Section 7.19 Management......................................... 26
Section 7.20 Name Change........................................ 26
ARTICLE VIII
EVENTS OF DEFAULT
Section 8.1 Events of Default.................................. 26
Section 8.2 Remedies........................................... 29
Section 8.3 Additional Remedies................................ 29
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE IX
MISCELLANEOUS
Section 9.1 Amendment and Waiver............................... 30
Section 9.2 Governing Law...................................... 30
Section 9.3 Notices............................................ 30
Section 9.4 Waiver............................................. 30
Section 9.5 Headings........................................... 30
Section 9.6 Benefit of Agreement............................... 31
Section 9.7 Counterparts....................................... 31
Section 9.8 Authority to File Notices.......................... 31
Section 9.9 Actions............................................ 31
Section 9.10 Participations..................................... 31
Section 9.11 Term of Agreement.................................. 31
Section 9.12 Severability....................................... 31
Section 9.13 Entire Agreement................................... 32
</TABLE>
iv
<PAGE>
REIMBURSEMENT AGREEMENT
-----------------------
THIS REIMBURSEMENT AGREEMENT is made and dated as of January 1, 1998,
between GATEWAY INTERNATIONAL MOTORSPORTS CORPORATION, an Illinois corporation
(the "Corporation"), and FIRST TENNESSEE BANK NATIONAL ASSOCIATION, a national
banking association (the "Bank"). Unless otherwise indicated, all capitalized
terms used herein shall take the meaning given them in Article I.
A. The Corporation has requested that the Bank issue the Letter of Credit
to replace an existing Debt Service Reserve Fund held by the Trustee for the
benefit of the holders of the Bonds.
B. The Bank has agreed to issue the Letter of Credit on the terms and
subject to the conditions set forth herein.
Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
-----------
Section 1.1 Certain Defined Terms. As used in this Agreement, the
---------------------
following terms shall have the following meanings:
"Agreement" shall mean this Reimbursement Agreement, as the same may be
amended, supplemented or otherwise modified.
"Auditors" shall mean independent certified public accountants selected by
Corporation and reasonably acceptable to Bank.
"Bank" shall mean First Tennessee Bank National Association, a national
banking association.
"Bankruptcy Law" shall mean Title 11, U.S. Code, as amended or
supplemented, any successor statute thereto, or any similar federal, state or
foreign law for the relief of debtors.
"Bond Counsel" means any firm of nationally-recognized bond counsel
familiar with the transactions contemplated under the Indenture and acceptable
to the Trustee and the Bank.
"Bonds" shall mean those certain Taxable Sports Facility Revenue Bonds,
Series 1996 (Gateway International Motorsports Corporation Project) in the
original aggregate principal amount of Twenty-One Million Five Hundred Thousand
Dollars ($21,500,000.00) issued pursuant to the terms of the Indenture.
<PAGE>
"Business Day" shall mean a day other than a Saturday or Sunday on which
the New York Stock Exchange is open for the transaction of business and on which
the Bank and the Trustee are open for the purpose of conducting business.
"Capitalized Leases" shall mean capital leases and subleases, as defined in
the Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 13, dated November 1976, as amended.
"Closing Date" shall mean the date the Letter of Credit is issued.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Collateral" shall mean any and all of the Corporation's property, real or
personal, tangible or intangible, which is pledged, mortgaged and hypothecated,
now or at any time hereafter, to secure the Corporation's Obligations hereunder.
"Commitment Letter" means the letter agreement dated September 11, 1997
between the Bank and the Corporation.
"Contingent Obligation" shall mean, as to any Person, any obligation of
such Person guaranteeing or in effect guaranteeing any Debt, leases, dividends
or other obligations ("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of such Person, whether or not contingent (a) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (b) to advance or supply funds (i) for the purchase
or payment of any such primary obligation or (ii) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (c) to purchase property, Securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation or (d) otherwise to assure or hold harmless the owner of any such
primary obligation against loss in respect thereof; provided, however, that the
term Contingent Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by Corporation
in good faith.
"Corporation" shall mean Gateway International Motorsports Corporation, an
Illinois corporation.
"Current Ratio" shall mean (a) the sum of current assets plus restricted
cash (excluding cash held by trustees for the purpose of paying long term
liabilities), divided by (b) current liabilities less deferred revenue.
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"Debt" shall mean, at any time, the following for Corporation and its
Subsidiaries, on a consolidated basis, determined in accordance with GAAP: (i)
Capitalized Leases, (ii) debt created, issued, guaranteed, incurred or assumed,
or subject to which Property is acquired by Corporation or any of its
Subsidiaries for money borrowed or for the deferred purchase price of Property
or services purchased, and (iii) obligations of Corporation or any Subsidiary in
respect of letters of credit, acceptances or similar obligations issued or
created for the account of Corporation or any Subsidiary.
"Debt to Worth Ratio" shall mean a ratio of total liabilities to Net Worth.
"Default" shall mean any event which with notice or lapse of time, or both,
or the happening of any further condition, event or act, would become an Event
of Default.
"Deferred Costs" shall mean deferred costs, as determined in accordance
with GAAP, and shall include other items generally defined under GAAP and
designated as goodwill, intangibles, franchises, deferred development costs
(excluding Depreciation and amortization, but including deferred loan expense),
deferred charges, and other items generally classified as intangibles and other
assets and deferred charges.
"Depreciation" shall mean depreciation and amortization expenses and other
non-cash charges (excluding from this calculation any change in deferred taxes,
but including any amortization of Deferred Costs) as determined in accordance
with GAAP.
"Drawing" means a drawing made by sight draft accompanied by a certificate
in the form of EXHIBIT "A" to the Letter of Credit, to pay the Trustee any
amount up to the Stated Amount which the Trustee is entitled, under the
Indenture, to draw from the Debt Service Reserve Fund.
"Environmental Laws" means all local, state or federal laws, rules or
regulations pertaining to environmental regulation, contamination or cleanup,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and Recovery
Act of 1976 or any state lien or superlien or environmental cleanup statutes.
"Event of Default" shall mean the events described in Section 8.1 hereof.
"Fiscal Year" shall designate the fiscal year of the Corporation ending
each November 30.
"Funded Debt" shall mean any Debt which is due one year or more from the
date of determination or which may be renewed or extended at the option of the
obligor to a date one year or more from the date of determination.
"GAAP" shall mean generally accepted accounting principles in the United
States of America in effect from time to time.
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<PAGE>
"Group" means Corporation and the Guarantors.
"Guarantor" means collectively Grand Prix Association of Long Beach, Inc.,
Gateway International Services Corporation, Memphis International Motorsport
Corporation, Motorsports Services Corporation of Memphis, Del Mar Race
Management Inc. and Automotive Safety & Transportation Systems, Inc., each as
guarantor under its respective Guaranty Agreement.
"Guaranty Agreement" means the individual guaranty agreement of even date
herewith of each Guarantor of the Corporation's obligations hereunder.
"Hazardous Substances" shall mean and include all hazardous and toxic
substances, wastes or materials, any pollutants or contaminants (including,
without limitation, asbestos and raw materials which include hazardous
constituents), or any other similar substances or materials which are included
under or regulated by any Environmental Laws.
"Indebtedness" of any Person shall mean all items of indebtedness which, in
accordance with generally accepted accounting principles, would be included in
determining liabilities as shown on the liability side of the balance sheet of
such Person as of the date as of which indebtedness is to be determined and
shall include all indebtedness and liabilities of others assumed or guaranteed
by such Person or in respect of which such Person is secondarily or contingently
liable (other than by endorsement of instruments in the course of collection)
whether by reason of any agreement to acquire such indebtedness or to supply or
advance sums or otherwise.
"Indenture" shall mean the Indenture of Mortgage and Trust, dated as of May
1, 1996, between the Issuer and Magna Trust Company as the original Trustee
pursuant to which the Bonds were issued.
"Intangible Assets" shall have the meaning assigned to that term under
GAAP.
"Interest Coverage Ratio" shall mean earnings prior to interest expense,
depreciation amortization and taxes, divided by interest expense.
"Issuer" shall mean The Southwestern Illinois Development Authority and its
lawful successors and assigns.
"Laws" shall mean all statutes, laws, ordinances, regulations, orders,
writs, injunctions, or decrees of the United States, any state or commonwealth,
any municipality, any foreign country, any territory or possession, or any
Tribunal.
"Letter of Credit" shall mean the Bank's irrevocable letter of credit in
substantially the form of EXHIBIT "A" hereto, as the same may be extended,
amended, supplemented or otherwise modified, and any substitute therefor or
replacement thereof issued by the Bank.
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<PAGE>
"Lien" shall mean any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, any lease in
the nature thereof, and the filing of or any agreement to give any financing
agreement under the Uniform Commercial Code or comparable law of any
jurisdiction).
"Material Adverse Change or Effect" shall mean any act or circumstance or
event which (i) causes an Event of Default or Default, (ii) otherwise might be
material and adverse to the consolidated financial condition or business
operations of Borrower and its Subsidiaries, or (iii) in any manner whatsoever
could adversely affect the validity or enforceability of this Agreement.
"Mortgage" shall mean that certain deed of trust, security agreement and
assignment of rents and leases, dated as of January 1, 1998, from Memphis
International Motorsports Corporation to the Bank securing the Obligations, as
the same may be supplemented, amended or modified.
"Net Worth" means the excess of the book value of the assets of the
Borrower over its liabilities calculated in accordance with generally accepted
accounting principles, provided, however, that in performing such calculation
there shall be (a) excluded from the assets of the Borrower (i) any amount in
respect of goodwill, (ii) any amounts owed to Borrower by a Related Person, and
(iii) any amounts owed to Borrower by an employee of Borrower or of any Related
Person, and (b) included, as equity, any indebtedness owed by Borrower to any
Person which indebtedness has, by formal, binding agreement (in form and
substance satisfactory to Bank) been deferred and subordinated in priority of
payment to the indebtednesses and obligations of Borrower to Bank.
"Obligations" shall mean all obligations of the Corporation or any
Guarantor to the Bank hereunder and under the Related Documents, whether
monetary or nonmonetary, now or hereafter existing.
"Paying Agent" shall mean the Trustee or any Paying Agent appointed and
serving in such capacity pursuant to the Indenture.
"Permitted Encumbrances" shall mean those Liens described in Section 7.3
hereof.
"Person" shall mean and include any individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization, a government or
any department or agency thereof or any other entity.
"Project" shall mean the 375 acre racetrack facility owned by Memphis
International Motorsports Corporation in Millington, Tennessee pledged to secure
the Obligations and encumbered by the Mortgage.
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<PAGE>
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Reimbursement Agreement" shall mean this agreement between the Corporation
and the Bank dated as of January 1, 1998 setting forth the terms on which the
Bank has agreed to issue the Letter of Credit.
"Related Documents" shall mean the Commitment Letter, this Agreement, the
Letter of Credit, the Mortgage, the Guaranties and any exhibit, certificate,
notice or other written information or document furnished or to be furnished in
connection therewith.
"Related Person" shall mean Grand Prix Association of Long Beach, Inc. and
any other Person (a) which now or hereafter directly or indirectly through one
or more intermediaries controls, or is controlled by, or is under common control
with, Borrower or any of the corporations or Persons named herein, or (b) which
now or hereafter beneficially owns or holds five percent (5%) or more of the
capital stock of any of the corporations named herein, or (c) five percent (5%)
or more of the capital stock, partnership interest or other form of ownership
interest of which is beneficially owned or held by Borrower or any of the
corporations or Persons named herein. For the purposes hereof, "control" shall
mean possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting stock or interests, by contract or otherwise.
"Restricted Payment" shall mean any distribution or other dividend of cash
or property to any owners of any shares of the stock of the Corporation and its
Subsidiaries (except to the Corporation or its Subsidiaries by its or their
Subsidiary), or any redemption, retirement, purchase or other acquisition,
directly or indirectly, of any shares of any class of any capital stock of the
Corporation or its Subsidiaries, now or hereafter outstanding.
"Security" shall have the same meaning as in Section 2(1) of the Securities
Act of 1933, as amended.
"Stated Amount" means Two Million Three Hundred Thousand Dollars
($2,300,000.00).
"Subsidiary" shall mean as to any Person, any corporation of which more
than five percent (5.0%) of the outstanding stock having ordinary voting power
(irrespective of whether or not at the time stock of any other class or classes
of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned by the
Corporation.
"Title Policy" shall mean an ALTA lender's extended coverage policy of
title insurance on the property encumbered by the Indenture in form and
substance satisfactory to the Bank, in the amount of Two Million Three Hundred
Thousand Dollars ($2,300,000) for the benefit of the Bank, issued by a title
company satisfactory to the Bank, subject only to those exceptions
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<PAGE>
approved by the Bank in writing, together with any endorsements required by the
Bank (including, but not limited to, a future advances endorsement) insuring the
lien created by the mortgage.
"Tribunal" shall mean any state, commonwealth, federal, foreign,
territorial, or other court or governmental department, commission, board,
bureau, agency or instrumentality.
"Trustee" shall mean Magna Bank, N.A. as successor trustee to Magna Trust
Company and such successors and assigns as are permitted under the Indenture.
Section 1.2 Construction. (a) The definitions set forth in Section 1.1
------------
shall be equally applicable to both the singular and the plural forms of the
terms therein defined and shall cover all genders. "Herein," "hereby,"
"hereunder," "hereof," "hereinbefore," "hereinafter" and other equivalent words
refer to this Agreement and not solely to the particular Article, Section or
subdivision hereof in which such word is used. Reference herein to an Article
or Section number (e.g., Section 6.2) shall be construed to be a reference to
the designated Article number or Section number hereof unless the context or use
clearly indicates another or different meaning or intent.
(b) Unless otherwise specified herein, all accounting terms used in this
Agreement shall be interpreted and all accounting determinations hereunder shall
be made in accordance with GAAP.
ARTICLE II
LETTER OF CREDIT
----------------
Section 2.1 Agreement to Issue Letter of Credit. The Bank agrees with
-----------------------------------
the Corporation, on the terms and subject to the conditions herein set forth, to
issue to the Trustee on the Closing Date the Letter of Credit in an amount not
to exceed Two Million Five Hundred One Thousand Eight Hundred Twenty-Five
Dollars ($2,501,825.00) (the "Stated Amount"). The Letter of Credit will have
an initial term beginning on the date of issuance and expiring July 31, 1999,
with automatic renewal for successive one year terms (absent ninety (90) days
notice to the contrary) and a final expiration date of July 1, 2001 unless
otherwise extended.
Section 2.2 Reinstatement of Letter of Credit. After any Drawing, the
---------------------------------
obligation of the Bank to honor demands for payment under the Letter of Credit
with respect to further such drawings will be reinstated up to the total amount
specified therein upon receipt by the Bank of payment of all amounts so drawn
plus any accrued interest on such amounts [as provided in Section 2.4(f)] due
hereunder, provided that the Bank shall have the right to notify the Corporation
and the Trustee not later than the tenth (10th) day (or, if such day is not a
Business Day, on the next preceding Business Day) following the day on which a
payment in respect of a Drawing is made that such reinstatement shall not occur
if (i) such drawing or a previous or subsequent drawing has been made under the
Letter of Credit for which the Bank has not been
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reimbursed for amounts then due by the Corporation or (ii) an Event of Default
shall have occurred and then be continuing.
Section 2.3 Reduction in Amount of Letter of Credit. The total amount
---------------------------------------
available under the Letter of Credit will be permanently decreased from time to
time upon notice from the Trustee to the Bank of the reduction of the Debt
Service Reserve Fund Requirement.
Section 2.4 Obligations. The Corporation promises to pay to the Bank at
-----------
its office in Memphis, Tennessee, in immediately available funds, the following
(the "Obligations"):
(a) On each date that any Drawing is made under the Letter of Credit, an
amount equal to the amount paid under the Letter of Credit.
(b) [RESERVED]
(c) on demand, any and all amounts, other than as described in
subparagraph (a) of this Section, paid, advanced or incurred by the Bank under
this Agreement, the Letter of Credit, the Related Documents or any other
instrument or document related hereto or thereto.
(d) on demand, all taxes (other than general income taxes), levies,
imposts, charges, fees, deductions or withholdings of any nature whatsoever and
by whomsoever imposed, paid or incurred by the Bank in connection with this
Agreement, the Letter of Credit, the Related Documents or any transactions
hereunder or thereunder.
(e) on demand, all other amounts, expenses, fees, commissions, advances,
liabilities or any other financial accommodations, howsoever arising, owing by
the Corporation to the Bank, direct or indirect, absolute or contingent, due or
to become due, now existing or hereafter arising pursuant to the terms of this
Agreement, the Letter of Credit, the Related Documents or any other instrument
or document related hereto or thereto.
(f) on the date of reimbursement or payment to the Bank, interest on the
foregoing, from and including the date paid, disbursed, advanced or incurred by
the Bank (notice of which shall be given to the Corporation by the Bank promptly
after such payment, disbursement or advance by the Bank) at a variable rate per
annum (the "Loan Rate") equal to (i) two percent (2.0%) per annum plus (ii) the
rate which the Bank establishes from time to time, at its principal offices in
Memphis, Tennessee, as its "base commercial rate" (the "Base Rate"). The Base
Rate is one of several interest rate indices employed by the Bank. The
Corporation acknowledges that the Bank has made, and may hereafter make, loans
bearing interest at rates higher or lower than the Base Rate. The rate of
interest under this Section 2.4(f) shall be the lesser of the Loan Rate or the
maximum rate of interest which may be lawfully charged. In the event a court of
competent jurisdiction rules that the Base Rate is invalid, the rate charged
under this Section 2.4(f) shall be the lesser of the maximum rate of interest
then permissible under the law or a rate of eighteen percent (18%) per annum.
Such interest shall be computed on the basis of the actual number of
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days elapsed over a year of 365 days. Any change in the interest rate resulting
from a change in the Base Rate shall be effective on and as of the date of such
change without the necessity of notice to the Corporation.
Section 2.5 Obligations Absolute. The Obligations shall be absolute,
--------------------
unconditional and irrevocable, and shall be paid strictly in accordance with the
terms of this Agreement, under all circumstances whatsoever, including, without
limitation, the following circumstances:
(a) any lack of validity or enforceability of this Agreement, the
Letter of Credit, the Bonds or of any of the Related Documents;
(b) subject to Section 9.1 hereof, any amendment or waiver of or any
consent to departure from the terms of this Agreement, the Letter of
Credit, the Bonds or any of the Related Documents;
(c) the existence of any claim, setoff, defense or other right which
the Corporation or any other Person may have at any time against the
Trustee, any beneficiary or any transferee of the Letter of Credit (or any
Person for whom the Trustee, any such beneficiary or any such transferee
may be acting), the Bank, or any other Person, whether in connection with
this Agreement, the Letter of Credit, the Bonds, the Related Documents, the
Project or any unrelated transaction;
(d) any demand, statement or any other document presented under the
Letter of Credit proving to be invalid or insufficient in any respect, or
any statement therein being untrue or inaccurate in any respect whatsoever;
(e) the surrender or impairment of any security for the performance
or observance of any of the terms of this Agreement; or
(f) any other circumstance, happening or omission whatsoever, whether
or not similar to any of the foregoing.
Section 2.6 Fees and Commissions. In consideration of the issuance by
--------------------
the Bank of the Letter of Credit, the Corporation agrees to pay to the Bank:
(a) simultaneously with the execution of this Agreement, an annual
fee in advance in the amount of two percent (2.0%) of the Stated Amount of
the Letter of Credit; and
(b) on each anniversary of the Closing Date, an annual fee in advance
in the amount of two percent (2.0%) of the Stated Amount of the Letter of
Credit; and
(c) all expenses set forth in Section 2.7, in the manner provided
therein.
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Section 2.7 Increased Costs Due to Change in Law. If any law or
------------------------------------
regulation, any change in any law or regulation, or any interpretation thereof
by any court or administrative or governmental authority charged or claiming to
be charged with the administration thereof, or any change in generally accepted
accounting principles applicable to the Bank, shall (a) impose, modify or make
applicable any reserve, special deposit or similar requirement against letters
of credit issued by, assets held by, or deposits with or for the account of the
Bank or with respect to this Agreement, the Letter of Credit or any Related
Document or any transactions hereunder or thereunder, (b) impose on the Bank any
other condition regarding this Agreement, the Letter of Credit or any Related
Document, or (c) subject the Bank to any tax, charge, fee, deduction or
withholding of any kind whatsoever, and the result of any such event, or any
similar measure, shall be to increase the cost to the Bank of issuing or
maintaining the Letter of Credit (which increase in cost shall be the result of
the reasonable allocation by the Bank of the aggregate of such cost increases
resulting from such events) or reduce the amount of principal of, interest on,
or any fee or compensation receivable by the Bank in respect of, the Letter of
Credit or this Agreement, upon demand by the Bank, the Corporation shall
promptly pay to the Bank, from time to time as specified by the Bank, such
additional amounts as shall, in the reasonable judgment of the Bank, be
sufficient to compensate the Bank for such increased costs or reductions
together with interest on each such amount from the date demanded until payment
in full thereof at the rate set forth in Section 2.4(f) hereof. The obligations
of the Corporation under this Section 2.7 shall survive the cancellation or
expiration of the Letter of Credit. For the purpose of this Section any
reference to the Bank shall be deemed to include any Person to whom the Bank has
sold a participation in the Letter of Credit.
Section 2.8 Waivers. The Corporation hereby waives (a) presentment,
-------
demand, notice of demand, protest, notice of protest, notice of dishonor and
notice of nonpayment; (b) except as provided in the Indenture or the Mortgage,
the right, if any, to the benefit of, or to direct application of, any security
hypothecated to the Bank until all Obligations, howsoever arising, shall have
been paid; (c) the right to require the Bank to proceed against the Corporation
hereunder, or against any Person under any guaranty or similar arrangement, or
under any agreement between the Bank and any Person or to pursue any other
remedy in the Bank's power; (d) to the full extent permitted by law, all
statutes of limitation; and (e) any defense arising out of the election by the
Bank to foreclose on any security by one or more nonjudicial or judicial sales.
The Bank may exercise any other right or remedy, even though any such election
operates to impair or extinguish the Corporation's right to reimbursement from,
or any other right or remedy it may have against, any Person, or any security.
The Corporation agrees that the Bank may proceed against the Corporation or any
Person directly and independently of any other, and that any forbearance, change
of rate of interest, or acceptance, release or substitution of any security,
guaranty, or loan or change of any term or condition hereunder or under the
Letter of Credit or any Related Document shall not in any way affect the
liability of the Corporation hereunder.
Section 2.9 Payment of Expenses, Etc. The Corporation agrees to pay on
-------------------------
demand, whether or not the transactions hereby contemplated shall be
consummated, all reasonable out-of-pocket costs and expenses (including in each
case, without limitation, fees and expenses
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<PAGE>
of counsel for the Bank with respect thereto and with respect to advising the
Bank as to its rights and responsibilities hereunder) paid or incurred by the
Bank or any Person to whom the Bank has sold a participation in the Letter of
Credit in connection with (a) the preparation, review, execution, delivery and
administration of this Agreement, the Letter of Credit and any Related Document
or otherwise arising in connection with this Agreement, the Letter of Credit or
any Related Document, (b) any amendments, consents or waivers to this Agreement,
the Letter of Credit or any Related Document, (c) the protection of the rights
of the Bank under this Agreement, the Letter of Credit and the Related
Documents, (d) the enforcement of this Agreement or any Related Document,
whether by judicial proceedings or otherwise, (e) the enforcement of payment of
all Obligations by any action or participation in, or in connection with, a case
or a proceeding under the Bankruptcy Law, (f) all stamp, documentary and other
taxes and fees (including interest and penalties, if any) which may be payable
in connection with the execution, delivery, filing and recording of this
Agreement or any Related Document, and (g) the administration of this Agreement,
including fees and expenses of a consulting architect and/or engineer of the
Bank's choice to review plans and specifications and for inspection services
during the course of construction, if required by the Bank in its sole
discretion. The Corporation agrees to indemnify, defend and hold the Bank, and
each Person to whom the Bank has sold a participation in the Letter of Credit,
harmless from and against all liability (including, without limitation,
interest, penalties and attorneys' fees and expenses) to which it may become
subject insofar as such liability arises out of or is based upon a suit or
proceeding or governmental action brought or taken in connection with the
Project, the issuance of the Bonds or the use (or the proposed or potential use)
of the proceeds of any drawing under the Letter of Credit. The obligations of
the Corporation hereunder shall survive the cancellation or expiration of the
Letter of Credit and payment of the Bonds.
Section 2.10 Actions Relating to Letter of Credit; Indemnity. (a) Any
-----------------------------------------------
action taken or omitted by the Bank under or in connection with this Agreement,
the Letter of Credit or any Related Document, if taken or omitted in good faith,
shall be binding upon the Corporation and shall not put the Bank under any
resulting liability to the Corporation. Without limiting the generality of the
foregoing, the Bank shall be protected in relying upon a duly executed
instrument of transfer in the form attached as an annex to the Letter of Credit.
(b) The Bank may, under the Letter of Credit, receive, accept and pay any
drafts, demands or other documents and instruments (otherwise in order) signed
by, or issued to, the receiver, trustee in bankruptcy, custodian, executor,
administrator, guardian or conservator of anyone named in the Letter of Credit
as the person by whom drafts, demands and other documents and instruments are to
be made or issued.
(c) Except in the case of fraud or gross negligence on the part of the
Bank, neither the Bank nor any of its officers or directors shall have any
liability to the Corporation, and the Corporation assumes all responsibility for
(i) the form, sufficiency, correctness, validity, genuineness, falsification and
legal effect of any drafts, demands and other documents, instruments and other
papers relating thereto, (ii) the general and particular conditions stipulated
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therein, (iii) the good faith and acts of any Person (other than the Bank)
whomsoever, (iv) the existence, form, sufficiency and breach of contracts of any
nature whatsoever, including the Related Documents, (v) the solvency, standing
and responsibility of any Person whomsoever, (vi) any delay in giving or failure
to give any notice, demand, or protest, (vii) failure of any Person (other than
the Bank) to comply with the terms of the Letter of Credit, (viii) errors,
omissions, delays in or nondelivery of any message, however sent, and (ix) any
other error, neglect or omission, if done in good faith.
(d) Except in the case of fraud or gross negligence on the part of the
Bank, the Corporation hereby waives any right to object to any payment made
under the Letter of Credit against a draft and accompanying documents as
provided in the Letter of Credit varying in punctuation, capitalization,
spelling or similar matters of form. The determination whether a demand has
been made prior to the expiration of the Letter of Credit and whether a demand
is in proper and sufficient form for compliance with the Letter of Credit shall
be made by the Bank in its sole discretion, which determination shall be
conclusive and binding upon the Corporation.
(e) The Corporation agrees at all times to protect, indemnify and save
harmless the Bank, from and against any and all claims, actions, suits and other
legal proceedings, and from and against any and all losses, claims, demands,
liabilities, damages, costs, charges, counsel fees and other expenses which the
Bank may, at any time, sustain or incur by reason of or in consequence of or
arising out of the issuance of the Letter of Credit, this Agreement or any
Related Document; it being the intention of the parties that this Agreement
shall be construed and applied to protect and indemnify the Bank against any and
all risks involved in the issuance of the Letter of Credit, all of which risks
are hereby assumed by the Corporation, including, without limitation, any and
all risks of the acts or omissions, whether rightful or wrongful, of any present
or future de jure or de facto government or governmental authority. The Bank
------- --------
shall not, in any way, be liable for any failure by the Bank or anyone else to
pay any draft under the Letter of Credit as a result of any governmental acts or
any other cause beyond the control of the Bank. The obligations of the
Corporation hereunder shall survive cancellation or expiration of the Letter of
Credit and payment of the Bonds.
Section 2.11 Waiver of Right of Setoff. In addition to any other right or
-------------------------
remedy that the Bank may have by operation of law or otherwise, the Bank shall
be entitled to exercise its right of setoff or banker's lien; provided, however,
that the Bank hereby irrevocably waives such right of setoff or banker's lien in
order to appropriate and apply to the payment of unreimbursed payments under the
Letter of Credit and interest thereon any balances, credits, deposits, accounts
or moneys of the Corporation at any time with the Bank when and if there shall
be a drawing under the Letter of Credit during the pendency of any proceedings
by or against the Corporation, seeking relief in respect of the Corporation
under the Bankruptcy Law; provided further, however, that the Bank may exercise
such right of setoff or banker's lien if (a) it is determined by a court of
competent jurisdiction that such exercise would not lead to the Bank's being
released, prevented or restrained from or delayed in fulfilling its obligations
under the Letter of Credit, and (b) the exercise of such right of setoff or
banker's lien or right of setoff would not constitute any
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payment (including pursuant to the Letter of Credit) to holders of the Bonds in
respect of amounts payable thereunder a voidable preference payment under the
Bankruptcy Law.
ARTICLE III
COLLATERAL SECURITY
-------------------
The Obligations shall be secured as follows:
Section 3.1 Security Interest. At the request of the Corporation,
-----------------
Memphis International Motorsports Corporation ("Motorsports") shall grant to the
Bank, for the benefit of the Bank, as security for the payment and performance
of the Obligations (a) a lien upon and security interest in the Project pursuant
to the Mortgage and (b) a security interest in certain real and personal
property pursuant to the Mortgage. The Corporation agrees to cause Motorsports
to execute, file and deliver such financing statements, acknowledgments,
notices, authorizations, consents and other documents, instruments and
agreements as the Bank may from time to time request to obtain and maintain on
behalf of the Bank, the benefits of the security interest and lien granted in
the Mortgage.
ARTICLE IV
CONDITIONS PRECEDENT
--------------------
The obligations of the Bank to issue the Letter of Credit on the Closing
Date is subject to the satisfaction of the following conditions on or before the
Closing Date:
Section 4.1 Opinion of Counsel to the Corporation. There shall have been
-------------------------------------
delivered to the Bank an opinion of Valerie de Martino, Corporation in-house
counsel, dated the Closing Date, addressed to the Bank and covering such matters
as the Bank may reasonably request.
Section 4.2 Opinion of Bond Counsel. There shall have been delivered to
-----------------------
the Bank the opinion of Bryan Cave, LLP, as Bond Counsel, dated the Closing
Date, addressed to the Bank, and covering such matters as the Bank may
reasonably request.
Section 4.3 Required Acts and Conditions. All acts and conditions
----------------------------
(including, without limitation, the obtaining of any necessary regulatory
approvals and the making of any required filings, recordings or registrations)
required to be done and performed, and to have happened precedent to the
execution, delivery and performance of this Agreement, the Letter of Credit and
the Related Documents to which the Corporation is or is to be a party, and to
constitute the same legal, valid and binding obligations of the Corporation
enforceable in accordance with their respective terms, shall have been done and
performed and shall have happened in due and strict compliance with all
applicable laws.
Section 4.4 No Default. There shall exist no Default or Event of Default.
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Section 4.5 Representations and Warranties. All representations and
------------------------------
warranties of the Corporation contained herein or otherwise made in writing in
connection herewith shall be true and correct with the same force and effect as
though such representations and warranties had been made on and as of the
Closing Date.
Section 4.6 Certificate of Compliance. There shall have been delivered
-------------------------
to the Bank a certificate of the Corporation, signed by a duly authorized
officer of the Corporation and dated the Closing Date, to the effect that all of
the conditions specified in Sections 4.4 and 4.5 hereof have been satisfied as
of such date.
Section 4.7 Delivery of the Related Documents. The Related Documents and
---------------------------------
any documents required by the terms thereof, including specifically the
requirements set forth in the Commitment Letter, shall have been executed and
delivered by the parties thereto, each in form and substance satisfactory to the
Bank and its counsel.
Section 4.8 Filings and Recordings. The Mortgage and any required
----------------------
financing statements relating thereto shall have been duly filed and recorded in
each jurisdiction in which such filing or recordation is required to perfect,
preserve and protect the lien and security interest of the Mortgage, and the
Bank shall have received evidence satisfactory to it as to any such filing,
recording and/or registration.
Section 4.9 Proceedings. All corporate minutes, resolutions and other
-----------
proceedings in connection with the transactions contemplated by this Agreement,
the Letter of Credit and the Related Documents shall be satisfactory in form and
substance to the Bank and its counsel, and the Bank and its counsel shall have
received an executed or conformed copy of each Related Document required to be
executed by the Closing Date, a specimen copy of the Bonds and copies of such
documents as the Bank or such counsel may reasonably request.
Section 4.10 Title Insurance. The Title Policy shall have been issued to
---------------
the Bank and the Bank shall have received an executed original thereof.
Section 4.11 Other Insurance. A certificate from an insurance broker
---------------
shall be delivered to the Bank setting forth the information concerning
insurance which is required by Section 6.3 of this Reimbursement Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce the Bank to enter into this Agreement and to issue the
Letter of Credit, the Corporation makes the following representations and
warranties to the Bank, which shall survive the execution and delivery of this
Agreement and the Letter of Credit (where appropriate, and to the best of its
knowledge, Corporation makes such representations and warranties as to
Motorsports in connection with its obligations under the Mortgage):
-14-
<PAGE>
Section 5.1 Due Organization, Etc. The Corporation is a corporation duly
----------------------
organized and validly existing under the laws of the State of Illinois, with a
term equal to or in excess of the expiration date of the Letter of Credit. The
Corporation has all requisite power and authority to conduct its business as
presently conducted, to own its assets and properties, and to execute and
deliver, and to perform all of its obligations under this Agreement and the
Related Documents to which it is or is to be a party, and to carry out the
transactions contemplated hereby and thereby. The Corporation is qualified to do
business in the jurisdictions in which its ownership of property or conduct of
business legally requires such qualifications.
Section 5.2 Due Authorization, Etc. The execution, delivery and
-----------------------
performance by the Corporation of this Agreement and the Related Documents to
which it is or is to be a party have been duly authorized by all necessary
corporate action and do not and will not (a) require any registration with,
consent or approval of, notice to, or action by, any Person, (b) violate any
provision of any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award presently in effect applicable to the
Corporation, (c) result in a breach of or constitute a default under any
indenture or loan or credit agreement or any other agreement, lease or
instrument to which the Corporation is a party or by which the Corporation or
its assets or properties may be bound or affected or (d) except as provided
herein, result in, or require, the creation or imposition of any Lien upon or
with respect to any of the assets or properties now owned or hereafter acquired
by the Corporation. The Corporation is not a party to, or otherwise subject to
any provision contained in, any instrument evidencing its indebtedness, any
agreement relating thereto or any other contract or agreement which limits the
amount of, or otherwise imposes restrictions on the incurring of, obligations of
the Corporation under this Agreement and the Related Documents, or if such
restrictions are present, such restrictions have been met or duly waived with
respect to this Agreement and the Related Documents.
Section 5.3 Approvals. No consent, approval or other action by or any
---------
notice to or filing with any court or administrative or governmental body is or
will be necessary for the valid execution, delivery or performance by the
Corporation of this Agreement or any of the Related Documents to which it is or
is to be a party other than such consents and approvals which have heretofore
been obtained or will be obtained in a timely manner in the future if not
currently required.
Section 5.4 Enforceability. This Agreement and each of the Related
--------------
Documents to which the Corporation is or is to be a party, when executed and
delivered, will constitute legal, valid and binding obligations of the
Corporation, enforceable against it in accordance with their respective terms.
The Mortgage, along with all action required to fully perfect the Bank's
security interest thereunder, which action has been taken or completed, creates
and constitutes a valid and perfected security interest of a priority acceptable
to the Bank in and to the collateral therein described enforceable against all
third parties and secures the payment of the Obligations.
Section 5.5 Litigation. There are no actions, suits or proceedings
----------
pending or, to the knowledge of the Corporation after due inquiry, threatened
against or affecting the Corporation
-15-
<PAGE>
or any of its assets, properties or rights, at law or in equity by or before any
court, arbitrator, administrative or governmental body or other Person which, if
determined adversely, would have a material adverse effect on the business,
condition (financial or otherwise) or operations of the Corporation or adversely
affect the Corporation's ability to meet its payment obligations hereunder,
except as heretofore disclosed to the Bank in writing.
Section 5.6 Title to Property. The Corporation has good and marketable
-----------------
fee title to all of its properties and assets (other than those which are
leased), subject to no Lien of any kind, except as referred to in Permitted
Encumbrances as set forth in Section 7.3 hereof.
Section 5.7 Compliance with Laws and Contracts. The Corporation is not
----------------------------------
in violation or default with respect to any applicable law and/or regulation,
which materially affects the business, properties or condition (financial or
otherwise) of the Corporation nor is it in violation or default with respect to
any order, writ, injunction, demand or decree of any court, indenture, agreement
or other instrument under which it is bound or may be bound, default under or
violation of which might have a material and adverse effect on the business,
condition or operations (financial or otherwise) of the Corporation or might
result in the acceleration of the maturity of any of its Indebtedness.
Section 5.8 Related Documents. The Corporation makes each of the
-----------------
representations and warranties made by it in the Related Documents to which it
is or is to be a party, to and for the benefit of the Bank as if the same were
set forth at length herein.
Section 5.9 [RESERVED]
Section 5.10 No Misleading Statements. Nothing herein or in any exhibit,
------------------------
certificate, notice or other written information furnished or to be furnished by
the Corporation in connection with this Agreement or any Related Document
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Section 5.11 No Burdensome Restrictions. No contract, agreement or other
--------------------------
instrument as to which the Corporation may be bound materially adversely
affects, or insofar as the Corporation may reasonably foresee may so affect, the
business, operations, property or financial or other condition of the
Corporation.
Section 5.12 Taxes. The Corporation has filed or caused to be filed all
-----
tax returns which to the knowledge of the Corporation are required to be filed,
and has paid all taxes shown to be due and payable on said returns or on any
assessments made against it, except for returns which have been appropriately
extended and all other taxes, fees or other charges imposed on it by any
governmental authority, agency or instrumentality which have become due and
payable (other than those the amount or validity of which is currently being
contested in good faith by appropriate proceedings and with respect to which
reserves in conformity with GAAP have been
-16-
<PAGE>
provided on the books of the Corporation); and no tax liens have been filed and,
to the knowledge of the Corporation, no claims are being asserted with respect
to any such taxes, fees or other charges.
Section 5.13 Leases. The Corporation enjoys peaceful and undisturbed
------
possession under all leases under which it operates, subject to subleases in the
ordinary course of business, and all of such leases are valid and subsisting and
are in full force and effect. There is no default on the part of the
Corporation existing under any of such leases, and none of such leases contains
any unusual or burdensome provision which materially adversely affects or in the
future may (so far as the Corporation can now foresee) materially adversely
affect the Corporation's right of occupancy and right to continue its operations
under such lease.
Section 5.14 Financial Condition. (a) (i) The balance sheet of the
-------------------
Corporation for the fiscal year ended as of November 30, 1996, and the related
statement of income and changes in financial conditions for the year then ended,
certified by Arthur Andersen, Certified Public Accountants, and (ii) the
Corporation's latest quarterly unaudited compilation of all income and expense,
dated as of August 31, 1997, and quarterly thereafter, a copy of each of which
has been furnished to the Bank, together with any explanatory notes therein
referred to and attached thereto, are correct and complete and fairly present
the financial condition of the Corporation as at the date of said balance sheets
and the results of its operations for said periods and as of the date of closing
of this Agreement and related transactions, respectively. All such financial
statements have been prepared in accordance with GAAP.
(b) There has been no material adverse change in the business, properties
or condition, financial or otherwise, of the Corporation since August 31, 1997.
Section 5.15 No Default. The Corporation is not in default in the
----------
performance, observance or fulfillment of any of the obligations, covenants, or
conditions contained in any agreement or instrument to which it is a party,
which default if not cured would materially and substantially affect the
financial condition, property or operations of the Corporation.
Section 5.16 ERISA. The Corporation is in compliance with all applicable
-----
provisions of the Employees Retirement Income Security Act of 1974 ("ERISA") and
all other laws, state or federal, applicable to any employees' retirement plan
maintained or established by it.
Section 5.17 Environmental and Other Conditions. (i) The operations of
----------------------------------
Corporation comply in all respects with all applicable federal, state or local
environmental, health and safety statutes and regulations; (ii) none of the
operations of Corporation is subject to any judicial or administrative
proceeding alleging the violation of any federal, state or local environmental,
health or safety statute or regulation; (iii) none of the operations of
Corporation is the subject of federal or state investigation evaluating whether
any remedial action is needed to respond to a release of any hazardous or toxic
waste, substance or constituent, or other substance into the environment; (iv)
Corporation has not filed any notice under any federal or state law indicating
-17-
<PAGE>
past or present treatment, storage or disposal of a hazardous waste or reporting
a spill or release of a hazardous or toxic waste, substance or constituent, or
other substance into the environment; and (v) to its knowledge, Corporation has
no contingent liability in connection with any release of any hazardous or toxic
waste, substance or constituent, or other substance into the environment.
Section 5.18 Guarantor. The Guarantor has the right, power and authority
---------
to execute, deliver and carry out the terms of the Guaranty, which Guaranty
constitutes the valid and legally binding obligation of the Guarantor,
enforceable in accordance with its terms. The Guarantor does not have any
defense or setoff against the Bank.
Section 5.19 Place of Business. Corporation is engaged in business
-----------------
operations which are in whole or in part carried on at the address or addresses
specified in EXHIBIT "B" hereto; if Corporation has more than one place of
business, its chief executive office is at the address specified as such in such
exhibit.
Section 5.20 Capital Adequacy. Corporation now has capital sufficient to
----------------
carry on its business and transactions and all business and transactions in
which it is about to engage and is now solvent and able to pay its debts as they
mature and Corporation now owns property having a value, both at fair valuation
and at present fair saleable value, greater than the amount required to pay its
Debts.
ARTICLE VI
AFFIRMATIVE COVENANTS
---------------------
The Corporation covenants with the Bank, until expiration or cancellation
of the Letter of Credit and payment in full of all Obligations of the
Corporation hereunder or under the Related Documents, unless the Bank shall
otherwise consent in writing, such consent to be in the discretion of the Bank,
as follows:
Section 6.1 Business and Existence. Perform all things necessary to
----------------------
preserve and keep in full force and effect its existence, rights and franchises
and comply with all laws applicable to it and continue to conduct and operate
its business substantially as conducted and operated during the present and
preceding calendar years.
Section 6.2 Maintain Property. Maintain, preserve, and protect all
-----------------
franchises (except for termination of franchises in the normal and usual course
of business), and trade names and preserve all the remainder of its properties
used or useful in the conduct of its business substantially as conducted and
operated during the present and preceding fiscal year; preserve all the
remainder of its properties used or useful in the conduct of its business and
keep the same in good repair, working order and condition, and from time to time
make, or cause to be made, all needed and proper repairs, renewals,
replacements, betterments and improvements thereto so that the business carried
on in connection therewith may be properly conducted at all times.
-18-
<PAGE>
Section 6.3 Insurance on Properties. (a) At all times maintain in some
-----------------------
company or companies (having a Best's rating of A:XI or better) approved by
Bank:
(i) Comprehensive public liability insurance covering claims for
bodily injury, death, and property damage, with minimum limits satisfactory
to the Bank, but in any event not less than those amounts customarily
maintained by companies in the same or substantially similar business;
(ii) Hazard insurance insuring the Corporation's property and assets
against loss by fire (with extended coverage) and against such other
hazards and perils (including but not limited to loss by windstorm, hail,
flood, explosion, riot, aircraft, smoke, vandalism, malicious mischief and
vehicle damage) as Bank, in its sole discretion, shall from time to time
require, all such insurance to be issued in such form, with such deductible
provision, and for such amount as shall be satisfactory to Bank, with loss
payable clause in favor of the Trustee and the Bank. The Bank is hereby
authorized and empowered, at its option, to adjust or compromise any loss
under any such insurance policies and to collect and receive the proceeds
from any such policy or policies at any time the Corporation is not in
compliance with this Agreement; and
(iii) Such other insurance as the Bank may, from time to time,
reasonably require by notice in writing to the Corporation.
(b) All required insurance policies shall provide for not less than thirty
(30) days' prior written notice to the Bank of any cancellation, termination, or
material amendment thereto; and in all such liability insurance policies, Bank
shall be named as an additional insured. Each such policy shall, in addition,
provide that there shall be no recourse against the Bank for payment of premiums
or other amounts with respect thereto. Hazard insurance policies shall contain
the agreement of the insurer that any loss thereunder shall be payable to the
Bank notwithstanding any action, inaction or breach of representation or
warranty by the Corporation. The Corporation will deliver to Bank original or
duplicate policies of such insurance, or satisfactory certificates of insurance,
and, as often as Bank may reasonably request, a report of a reputable insurance
broker with respect to such insurance. Any insurance proceeds received by Bank
shall be applied upon the indebtednesses, liabilities, and obligations of the
Corporation to the Bank (whether matured or unmatured) or, at Bank's option,
released to the Corporation.
Section 6.4 Obligations, Taxes and Liens. Pay all of its indebtednesses
----------------------------
and obligations promptly in accordance with normal terms and practices of its
businesses and pay and discharge or cause to be paid and discharged promptly all
taxes, assessments, and governmental charges or levies imposed upon it or upon
any of its income and profits, or upon any of its properties, real, personal or
mixed, or upon any part thereof, before the same shall become in default, as
well as all lawful claims for labor, materials, and supplies which otherwise, if
unpaid, might become a lien or charge upon such properties or any part thereof;
provided, however, that the Corporation shall not be required to pay and
discharge or to cause to be paid and discharged any such tax,
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<PAGE>
assessment, trade payable, charge, levy or claim so long as the validity thereof
shall be contested in good faith by appropriate proceedings.
Section 6.5 Financial Reports and Other Data. Corporation shall maintain
--------------------------------
a standard system of accounting in accordance with GAAP consistently applied,
and Corporation shall furnish to Bank the following:
(a) Quarterly Statements. As soon as practicable after the end of each
--------------------
fiscal quarter, and in any event within fifty (50) days thereafter, copies of:
(i) a consolidated and consolidating balance sheet of the Group and
their respective Subsidiaries as of the end of such fiscal quarter, and
(ii) consolidated and consolidating statement of income and of
surplus of the Group and their respective Subsidiaries for such quarter and
for the portion of the Fiscal Year ending with such quarter,
provided that Corporation's Form 10Q may be submitted to Bank in satisfaction of
- --------
these requirements.
(b) Annual Statements. As soon as practicable after the end of each
-----------------
Fiscal Year of the Corporation, and in any event within one hundred twenty (120)
days thereafter, duplicate copies of:
(i) a consolidated and consolidating balance sheet of the Group and
their respective Subsidiaries as of the end of such year,
(ii) a consolidated and consolidating statement of income and of
surplus of the Group and their respective Subsidiaries for such year, and
(iii) a consolidated statement of changes in financial position of the
Group and their respective Subsidiaries for such year, setting forth in
each case in comparative form the figures for the previous Fiscal Year, all
in reasonable detail and accompanied by an unqualified opinion of Auditors,
which opinion shall state that said consolidated financial statements have
been prepared in accordance with GAAP consistently applied, and that the
examination of such Auditors in connection with such financial statements
has been made in accordance with generally accepted auditing standards and
that said financial statements present fairly the financial condition of
the Group and their respective Subsidiaries and their results of
operations, except for any inconsistencies required by changes in GAAP.
Each set of such annual financial statements shall be accompanied by a
certificate of the Auditors, stating that they have reviewed this
Agreement, and stating further, whether, in making their review hereof,
they have become aware of any
-20-
<PAGE>
noncompliance with any of the Sections, and, if any such noncompliance then
exists, specifying the nature and period of existence thereof,
provided that a copy of the Corporation's Form 10K and Annual Report may be
- --------
submitted to Bank in satisfaction of these requirements.
Section 6.6 Notice of Default. At the time of Corporation's first
-----------------
knowledge or notice, furnish the Bank with written notice of the occurrence of
any event or the existence of any condition which constitutes or upon written
notice or lapse of time or both would constitute an Event of Default under the
terms of this Agreement, including specifically, (a) any proceedings before any
Tribunal involving Corporation or any Subsidiary, which involves the probability
of any final judgement or liability against the Group, or any one or more
members thereof, in an amount of Five Hundred Thousand Dollars ($500,000.00) or
more, and (b) information with respect to and copies of any notices received
from federal, state or foreign regulatory agencies or any Tribunal relating to
an order, ruling, statute or other Law or information which might materially and
adversely affect the franchises, permits, licenses, or rights, or the condition,
financial or otherwise, of Corporation or any Subsidiary.
Section 6.7 Additional Information. Furnish such other information
----------------------
regarding the operations, business affairs and financial condition of the
Corporation as the Bank may reasonably request, including, but not limited to,
true and exact copies of its books of account, and all information furnished to
its trustees, or any governmental authority.
Section 6.8 Right of Inspection. Permit any person designated by the
-------------------
Bank, at the Bank's expense, to visit and inspect any of the properties,
corporate books and financial reports of the Corporation and to discuss its
affairs, finances and accounts with its principal officers, all at such
reasonable times and as often as the Bank may reasonably request.
Section 6.9 Compliance with Laws, Etc. The Corporation will comply with
--------------------------
the requirements of all applicable laws, rules, regulations and orders of any
governmental authority having jurisdiction over it, the terms of any indenture,
contract or other instrument to which it is a party or under which it or its
properties may be bound, noncompliance with which could materially adversely
affect (a) the Corporation's business, properties, condition (financial or
otherwise) or operations, (b) the Corporation's ability to perform its
obligations under this Agreement or any of the Related Documents to which it is
or is to be a party, or (c) the Corporation's ability to construct, own or
operate the Project, unless the same is being contested in good faith and by
appropriate proceedings if it makes adequate provision for payment thereof,
satisfactory to the Bank, in the event it should lose such contest.
Section 6.10 Certain Notices. The Corporation will furnish to the Bank
---------------
(a) a copy of any notice, certification, demand or other writing or
communication of a material nature given by the Issuer or the Trustee to the
Corporation or by the Corporation to the Issuer or the Trustee under or in
connection with the Bonds or any of the Related Documents, in each case promptly
after the
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<PAGE>
receipt or giving of the same, and (b) a copy of any opinion of counsel or
certificate required to be given by the Corporation to the Trustee or the Issuer
under the Related Documents, addressed to the Bank.
Section 6.11 Environmental Laws. Maintain at all times all of the
------------------
Corporation's property in compliance with all Environmental Laws, and
immediately notify the Bank of any notice, action, lien or other similar action
alleging either the location of any Hazardous Substances or the violation of any
Environmental Laws with respect to any of Corporation's property or operations.
Section 6.12 Related Documents. The Corporation makes each of the
-----------------
covenants made by it in the Related Documents to which it is or is to be a
party, to and for the benefit of the Bank as if the same were set forth at
length herein.
Section 6.13 Notice of Adverse Change in Assets. At the time of the
----------------------------------
Corporation's first knowledge or notice, immediately notify the Bank of any
information that may adversely affect in any material manner the assets of the
Corporation.
Section 6.14 Current Ratio. Maintain at all times a Current Ratio of at
-------------
least 1.0 to 1.0.
Section 6.15 Net Worth. The Group shall maintain at all times a Net Worth
---------
equal to or greater than that evidenced by Corporation at the prior Fiscal Year
end of Corporation, plus 85% of net proceeds of any equity offering which has
occurred during such prior Fiscal Year.
Section 6.16 Interest Coverage Ratio. The Group shall maintain at all
-----------------------
times a minimum Interest Coverage Ratio of 2.50 to 1.0.
Section 6.17 Debt Coverage Ratio. The Group shall maintain as of the end
-------------------
of each Fiscal Year a ratio of Cash Flow (hereinafter defined) to Current
Maturities of Long-Term Debt (hereinafter defined) of not less than 2.25 to 1.0.
As used herein, "Cash Flow" shall mean the sum of net profit, depreciation and
amortization for such fiscal year; and "Current Maturities of Long-Term Debt"
shall mean the sum of all payments of principal scheduled to come due during the
next succeeding fiscal year on debt with maturities which were initially greater
than one year.
ARTICLE VII
NEGATIVE COVENANTS
------------------
The Corporation covenants with the Bank, until expiration or cancellation
of the Letter of Credit and payment in full of all Obligations of the
Corporation hereunder or under the Related Documents, that, without the prior
written consent of the Bank, the Corporation will not:
Section 7.1 Amendments. Amend, modify or terminate, or agree to amend,
----------
modify or terminate any Related Document.
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<PAGE>
Section 7.2 Indebtedness. Incur, create, assume or permit to exist any
------------
indebtedness or liability for borrowed money, or on account of deposit, advance
or progress payments under contracts, or any other indebtedness or liability
evidenced by notes, bonds, debentures or similar obligations except:
(a) Indebtedness incurred hereunder or under the Related Documents or
in connection with the Bonds;
(b) Other indebtednesses to the Bank;
(c) Indebtednesses for borrowed money under notes and lease
obligations reflected in the Corporation's audited financial statement for
the fiscal year ending November 30, 1996 and on the Corporation's quarterly
financial statement dated August 31, 1997, but excluding those
indebtednesses and obligations which have been or concurrently herewith are
being paid and satisfied;
(d) Trade accounts payable, taxes payable, deferred sales, accrued
employees' bonuses and withheld amounts, accrued liabilities with respect
to contributions to pension plans, equipment and machinery purchases
financed by the sellers thereof and other similar short-term obligations
incurred by the Corporation in the normal course of operating its business,
provided that the amount of such obligations shall not be unduly large, in
the judgment of the Bank, considering the size and nature of the
Corporation's business, and provided that the Corporation shall not be in
default with respect to any of such obligations;
(e) Indebtedness to any other lender which is subordinated to the
indebtednesses described in subsection (a) and (b) hereof by written
agreement acceptable in form and content to the Bank; and
(f) Indebtedness incurred at any one time of less than $1,500,000.00,
provided, that one-time indebtedness in excess of such amount may be
--------
incurred with Bank's consent which will not be unreasonably withheld.
Section 7.3 Liens. Create, incur, assume or suffer to exist or permit
-----
Motorsports to create, incur, assume or suffer to exist any Lien (including any
pledge, encumbrance or security interest) of any kind upon the Project, whether
now owned or hereafter acquired, except the following "Permitted Encumbrances":
(a) liens for taxes or assessments or governmental charges or levies
not yet due or delinquent, or which can thereafter be paid without penalty,
or which are being contested in good faith;
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<PAGE>
(b) unfiled inchoate mechanics' and materialmen's liens for
construction work in progress;
(c) workmen's, repairmen's, warehousemen's, and carriers' liens and
other similar liens, if any, arising in the ordinary course of business, or
which can thereafter be paid without penalty, or which are being contested
in good faith;
(d) all of the following, if, in the reasonable judgment of the Bank,
they do not individually and in the aggregate materially impair the use of
the property of the Corporation or materially detract from the value of the
property of the Corporation, viz: any easements, restrictions, and defects
---
in title;
(e) [RESERVED]
(f) liens created by or resulting from any litigation or other
proceedings, including liens arising out of judgments or awards against the
Corporation with respect to which the Corporation is in good faith
prosecuting an appeal or proceeding for review, or which can thereafter be
paid without penalty, or which are being contested in good faith;
(g) other liens of a nature comparable to those described in clauses
(a) through (f) above which do not, in the reasonable judgment of the Bank
materially interfere with or impair the use of the property of the
Corporation or materially detract from the value thereof;
(h) the mortgage and security interest created under the Mortgage and
the Reimbursement Agreement;
(i) any liens, charges or encumbrances of whatever kind permitted in
writing by the Bank;
(j) [RESERVED]
(k) [RESERVED]
(l) any liens securing the obligations of the Corporation permitted
under Section 7.2.
Section 7.4 Guaranties. Guarantee or otherwise in any way become or be
----------
responsible for the indebtedness or obligations of any other Person, by any
means whatsoever, whether by agreement to purchase the indebtedness of any other
Person or agreement for the furnishing of funds to any other Person through the
purchase of goods, supplies or services (or by way of stock purchase, capital
contribution, advance or loan) for the purpose of paying or discharging the
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<PAGE>
indebtedness of any other Person, or otherwise, except for the endorsement of
negotiable instruments by the Corporation in the ordinary course of business for
collection.
Section 7.5 Sale of Assets. Sell, lease, transfer or dispose of (other
--------------
than in the normal course of business) all or a substantial part of its assets.
Section 7.6 [RESERVED].
Section 7.7 Loans and Investments. Make any loans to or investments in,
---------------------
or purchase any stock, other securities or evidence of indebtedness of any
Person, except as follows: (i) direct obligations of the United States of
America or obligations for which the full faith and credit of the United States
of America is pledged to provide for the payment of principal and interest, (ii)
marketable securities issued by an agency of the United States government, (iii)
commercial paper rated A-1 by Standard and Poors Corporation, or P-1 by Moody's
Investors Service, Inc., (iv) certificates of deposit of or bankers' acceptances
accepted by domestic commercial banks in the United States of America having a
combined capital and surplus of at least Ninety Million Dollars
($90,000,000.00), (v) any additional investment grade investment made with
Bank's approval not to be unreasonably withheld, or (vi) repurchase agreements
of any of the foregoing.
Section 7.8 New Business. Acquire or enter into any business other than
------------
its present business, except for expansions of Corporation's present business or
entry into any business directly related thereto.
Section 7.9 [RESERVED]
Section 7.10 [RESERVED]
Section 7.11 Loans to Officers and Employees. Permit or allow loans to
-------------------------------
officers and employees of the Corporation, in the aggregate, to exceed the
aggregate amount of Five Hundred Thousand Dollars ($500,000.00).
Section 7.12 Trademarks and Trade Names. Sell, transfer, convey, grant
--------------------------
any security interest in, or otherwise encumber any existing or hereafter
acquired trademarks or trade names owned by the Corporation.
Section 7.13 Debt to Worth Ratio. Permit the Debt to Worth Ratio of the
-------------------
Group at any time to exceed a ratio of 2 to 1.
Section 7.14 [RESERVED]
Section 7.15 [RESERVED]
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<PAGE>
Section 7.16 Contingent Obligations. Create, incur, assume, become or be
----------------------
liable in any manner in respect of, or suffer to exist, any Contingent
Obligations, except (i) the endorsement of negotiable instruments in the
ordinary course of business; and (ii) guaranties of obligations of other Persons
not to exceed One Million Five Hundred Thousand Dollars ($1,500,000.00) in an
aggregate principal amount at any one time outstanding.
Section 7.17 Accounting Methods. Without prior notice to Bank, change its
------------------
method of accounting if such change would have a Material Adverse Change or
Effect. Should the Corporation or any other members of the Group or any of
their respective Subsidiaries change any of their methods of accounting,
Corporation shall cause, at Bank's request, annual pro forma financial
statements to be prepared by Auditors on a basis consistent with those financial
statements delivered before such change.
Section 7.18 Fiscal Year. Without prior notice to Bank, change its Fiscal
-----------
Year. Should the Corporation or any other member of the Group or any of their
respective Subsidiaries change any of their Fiscal Years, Corporation shall
cause, at Bank's request, annual pro forma financial statements to be prepared
by Auditors on a basis consistent with those financial statements delivered
before such change.
Section 7.19 Management. Without prior notice to Bank, permit any
----------
material change in the management of Corporation or any Subsidiary.
Section 7.20 Name Change. Change its name or use any other corporate
-----------
name, trade name or fictitious name without at least sixty (60) days prior
written notice of such proposed change to Bank.
ARTICLE VII
EVENTS OF DEFAULT
-----------------
Section 8.1 Events of Default. If any of the following events ("Events
-----------------
of Default") shall occur and be continuing:
(a) the Corporation shall fail to make any payment when due of money
required to be made by it (i) under any of the Related Documents or (ii)
hereunder and such failure shall continue for a period of five (5) days
following notice thereof, except with respect to payments due under Section
2.4(a) or (c) for which there will be no such cure period; or
(b) the Issuer shall fail to make any payment required to be made by
it under the Indenture or any Bond when due and such failure shall continue
after the applicable grace period, if any; or
(c) any representation or warranty made by the Corporation or any
Guarantor in this Agreement, any of the Related Documents or any writing
furnished in connection
-26-
<PAGE>
with or pursuant to this Agreement or any of the Related Documents shall be
false in any material respect on the date as of which made; or
(d) the Corporation shall fail to perform or observe any term,
covenant or agreement contained in Articles VI and VII hereof; or
(e) the Corporation or any Guarantor shall fail to perform or observe
any other term, covenant or agreement contained in this Agreement or any of
the Related Documents on its part to be performed or observed and (i) with
respect to any such term, covenant or agreement contained herein, any such
failure remains unremedied for thirty (30) days after such failure shall
first become known to any officer of the Corporation, and (ii) with respect
to any such term, covenant or agreement contained in any of the other
Related Documents, any such failure remains unremedied after the applicable
grace period specified in such Related Document, if any; or
(f) [RESERVED]
(g) the Corporation shall default in any payment of principal of or
interest on any other material obligation for money borrowed (or of any
obligation under a conditional sale or other title retention agreement or
of any obligation secured by a purchase money mortgage or of any obligation
under notes payable or drafts accepted representing extensions of credit)
beyond any period of grace provided with respect thereto; or the
Corporation shall default in the performance or observance of any other
agreement, term or condition contained in any other agreement under which
any such obligation is created (or if any other event or default thereunder
or under such agreement shall occur and be continuing) and the effect of
such event or default is to cause, or to permit the holder or holders of
such obligation (or a trustee on behalf of such holder or holders) to
cause, such obligation to become due prior to any stated maturity;
provided, however, that for purposes of this subsection 8.1(g), obligations
shall be deemed material when the sum, in the aggregate, of all such
obligations defaulted upon referred to in this subsection 8.1(g) exceeds,
at any one time, One Thousand Dollars ($1,000.00); or
(h) the Corporation shall commence (by petition, application, or
otherwise) a voluntary case or other proceeding under the laws of any
jurisdiction seeking liquidation, reorganization, or other relief with
respect to itself or its debts under any bankruptcy, insolvency, or other
similar law now or hereafter in effect, or seeking the appointment of a
trustee, self-trusteeship, receiver, custodian, or other similar official
of it or any substantial part of its property; or shall consent (by answer
or failure to answer, or otherwise) to any such relief or to the
appointment of or taking possession by any such official in an involuntary
case or other proceeding commenced against it; or shall make an assignment
for the benefit of creditors; or shall generally not pay its debts as they
become due or not be able to pay its debts as they become due; or admit in
writing its inability to
-27-
<PAGE>
pay its debts as they become due; or shall take any partnership or
corporate action, as the case may be, to authorize any of the foregoing; or
(i) an involuntary case or other proceeding shall be commenced under
the laws of any jurisdiction against the Corporation seeking liquidation,
reorganization, or other relief with respect to it or its debts under any
bankruptcy, insolvency, or other similar law now or hereafter in effect, or
seeking the appointment of a trustee, receiver, custodian, or other similar
official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed
for a period of thirty (30) days or a trustee, receiver, custodian or other
official shall be appointed in such involuntary case; or
(j) a final judgment or order for the payment of money in the
aggregate in excess of Two Hundred Fifty Thousand Dollars ($250,000.00),
shall be rendered against the Group or any one or more members thereof and
such judgment or order shall continue unsatisfied and unstayed for a period
of thirty (30) days; or
(k) any final judgment, writ, attachment, execution, injunction, or
similar process which in the aggregate exceeds Two Hundred Fifty Thousand
Dollars ($250,000.00) shall be issued or levied against the property of the
Corporation, and such process shall not be released, vacated, or fully
bonded within thirty (30) days after its issue or levy; or
(l) an event of default shall occur in any agreement now in existence
or to be later established between the Corporation and the Bank that would
require immediate acceleration of sums due the Bank under any such
agreement, or should the Bank, pursuant to the terms of any such agreement,
cause the acceleration of any obligations under such agreement, or there
shall be any material breach under any agreement of any kind between Bank
and the Corporation; or
(m) The Mortgage shall cease to be in full force and effect as a Lien
upon the Project; or
(n) the Title Policy does not insure Obligations advanced or incurred
by the Bank after the date of the Title Policy; or
(o) the Bank reasonably believes that the Obligations might not be
entitled to priority over mechanic's or materialmen's liens or any other
Liens on the Project, unless the Bank receives, at the Corporation's
expense, a title policy endorsement satisfactory to the Bank insuring
priority at the time of closing; or
(p) the Corporation shall be dissolved; or
-28-
<PAGE>
(q) Any Guarantor fails to keep or perform, or terminates or
attempts to terminate, any agreement, undertaking, obligation, covenant or
condition under its respective Guaranty.
THEN, or at any time thereafter, the Bank may take such action in its discretion
as is authorized under Sections 8.2 and 8.3 below.
Section 8.2 Remedies. (a) When an Event of Default has occurred under
--------
Section 8.1(h) or 8.1(i) above, any Obligations then owing or which will become
owing upon a drawing of the full amount available under the Letter of Credit
shall automatically become due and payable, and in the case of any other default
under Section 8.1, the Bank may, at its option, in addition to all other rights,
powers and privileges the Bank may have, by written notice to the Corporation
exercise any or all of the following remedies, which remedies shall not be
exclusive: (i) declare the amount for which the Letter of Credit was issued and
any other Obligations then owing immediately due and payable without further
demand or notice and the Corporation shall pay to Bank such amounts, (ii)
immediately, and without expiration of any period of grace, enforce payment of
all obligations under this Agreement, the Mortgage or any other agreement with
the Corporation or Motorsports relating to the Project and exercise any and all
remedies granted to it at law, in equity or otherwise, including, without
limitation, under this Agreement, the Mortgage or any other agreement with the
Corporation relating to the Project, and (iii) take such action as Bank in its
sole discretion deems necessary or desirable to remedy any default, which action
shall not be deemed a waiver of such default or any prior or subsequent default.
(b) Without modifying any provisions contained herein with respect to the
Corporation's obligations hereunder, the Bank hereby agrees to waive its rights,
at law or otherwise, at any time after the commencement of and during the
pendency of a proceeding by or against the Corporation seeking relief in respect
of the Corporation under the Bankruptcy Law to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at the time
held and any other indebtedness at the time owing by the Bank to or for the
credit or the account of the Corporation against any and all obligations of the
Corporation under this Agreement to reimburse the Bank for amounts drawn and
paid under the Letter of Credit; provided, that such agreement shall terminate
and be of no force and effect as and when and to the extent that the exercise of
such rights would not result in the Bank's being released, prevented, restrained
or delayed in fulfilling the Bank's obligation to cause funding under the Letter
of Credit.
Section 8.3 Additional Remedies. The Bank may exercise any right or
-------------------
remedy which it has under the Mortgage, this Agreement or any other agreement
with the Corporation or Motorsports relating to the Project, or under any
agreement guaranteeing the cost of the Project or the completion of construction
of the Project, or otherwise available at law or in equity or by statute, and
all of the Bank's rights and remedies will be cumulative.
-29-
<PAGE>
ARTICLE IX
MISCELLANEOUS
-------------
Section 9.1 Amendment and Waiver. This Agreement and each provision
--------------------
hereof may be amended, changed, waived, discharged or terminated only by an
instrument in writing signed by the parties hereto. A Default or Event of
Default may be waived by the Bank and any such Default or Event of Default which
has been waived in writing by the Bank shall not be deemed to be continuing
during the period (including any retroactive period) for which the waiver is
effective.
Section 9.2 Governing Law. The Uniform Customs and Practice for
-------------
Documentary Credits (1993 Revision) International Chamber of Commerce,
Publication No. 500 (the "UCP") shall in all respects be deemed a part hereof as
fully as if incorporated herein, and the Letter of Credit shall be governed by
and construed in accordance therewith and, to the extent not inconsistent
therewith, the laws of the State of Tennessee. The Corporation acknowledges
that the provisions of Article 41 of the UCP are not applicable to the Letter of
Credit. This Agreement and the rights and duties of the parties shall be
governed by and construed under the laws of the State of Tennessee.
Section 9.3 Notices. Except as provided herein, all notices, requests,
-------
demands or other communications to or upon the respective parties hereto shall
be deemed to have been given or made when deposited in the mail, postage
prepaid, or, in the case of telex or telegraphic notice, when delivered to the
telex or telegraphic company, or in the case of telex notice sent over a telex
owned or operated by a party hereto, when sent, addressed to the Corporation, or
the Bank, as the case may be, at their respective addresses shown opposite their
signatures hereto or at such other address as either of such parties may
hereafter specify in writing to the other, except that any communication with
respect to a change of address shall be deemed to be given or made when received
by the party to whom such communication was sent.
Section 9.4 Waiver. No failure or delay on the part of the Bank in
------
exercising any right, power or privilege under this Agreement, the Letter of
Credit, or any of the Related Documents and no course of dealing between the
Corporation or any other Person and the Bank shall operate as a waiver hereof or
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise of any other right,
power or privilege. No notice to or demand on the Corporation in any case shall
entitle the Corporation to any other or further notice or demand in similar or
other circumstances or constitute a waiver of the right of the Bank to any other
or further action in any circumstances without notice or demand.
Section 9.5 Headings. The descriptive headings of the several Articles
--------
and Sections of this Agreement are inserted for convenience only and shall not
be deemed to affect the meaning or construction or any of the provisions hereof.
-30-
<PAGE>
Section 9.6 Benefit of Agreement. This Agreement shall be binding upon
--------------------
each party hereto, its successors and assigns, except that the Corporation may
not transfer or assign any or all of its rights or obligations hereunder without
the prior written consent of the Bank. This Agreement is made and entered into
solely for the protection and benefit of the Bank and the Corporation and their
successors and assigns and no other Person shall have any right of action under
this Agreement.
Section 9.7 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
Section 9.8 Authority to File Notices. The Corporation irrevocably
-------------------------
appoints the Bank as its attorney-in-fact, with full power of substitution, to
file for record, at the Corporation's cost and expense and in the Corporation's
name, any continuation statements, notices of completion, notices of cessation
of labor, or any other notices that the Bank considers necessary or desirable to
protect its security.
Section 9.9 Actions. The Bank will have the right, but not the
-------
obligation, to commence, appear in, and defend any action or proceeding which
might affect its security or its rights, duties, or liabilities relating to the
Obligations, the Project, this Agreement, the Related Documents or the Letter of
Credit. The Corporation will pay promptly on demand all of the Bank's
reasonable out-of-pocket costs, expenses, and legal fees and disbursements
incurred in those actions or proceedings. In the event that Bank has reason to
believe the Corporation is unaware of any action or proceeding, and that
Corporation's rights could be affected thereby, Bank will notify Corporation of
the institution of such action. At the request of the Corporation, Bank will
notify Corporation of whether or not Bank intends to exercise its rights under
this Section 9.9.
Section 9.10 Participations. The Bank shall have the right at any time to
--------------
sell participations in the Letter of Credit to any other Persons without the
consent of the Corporation, provided that no such action by the Bank shall
relieve the Bank of its obligations hereunder. The Bank may disclose to any
participants or prospective participants any information or other data or
material in the Bank's possession relating to the Corporation and the Project,
without the consent of the Corporation or the Mortgagor, respectively.
Section 9.11 Term of Agreement. This Agreement shall expire upon
-----------------
expiration of the Letter of Credit and payment in full of all the Obligations.
Section 9.12 Severability. Any provision of this Agreement which is
------------
illegal, invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such illegality, invalidity or
unenforceability without invalidating the remaining provisions hereof or
affecting the legality, validity or enforceability of such provision in any
other jurisdiction. The parties hereto agree to negotiate in good faith to
replace any illegal, invalid or unenforceable provision of this agreement with a
legal, valid and enforceable provision that, to the extent
-31-
<PAGE>
possible, will preserve the economic bargain of this Agreement or otherwise to
amend this Agreement, to achieve such result.
Section 9.13 Entire Agreement. This Agreement with Exhibits embodies the
----------------
entire agreement and understanding between the parties hereto and supersedes all
prior agreements and understandings relating to the subject matter hereof. To
the extent any terms of the Agreement conflict with those of the Commitment
Letter, this Agreement shall prevail.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their respective duly authorized officers as of the
date first above written.
ADDRESS: FIRST TENNESSEE BANK NATIONAL
ASSOCIATION, a national banking
association
165 Madison Avenue
Memphis, Tennessee 38103 By: /s/ Bob Nieman
Attention: Metropolitan Division ---------------------------------
Title: Vice President
------------------------------
ADDRESS: GATEWAY INTERNATIONAL
MOTORSPORTS CORPORATION
______________________________ By: /s/ Ronald C. Shirley
______________________________ ---------------------------------
______________________________ Title: CFO
------------------------------
By: /s/ Gemma A. Bannon
---------------------------------
Title: Corporate Secretary
------------------------------
-32-
<PAGE>
EXHIBIT "A"
-----------
FORM OF LETTER OF CREDIT
------------------------
A-1
<PAGE>
EXHIBIT "B"
-----------
ADDRESSES WHERE THE CORPORATION CONDUCTS ITS BUSINESS
-----------------------------------------------------
B-1
<PAGE>
EXHIBIT 10.40
IRREVOCABLE STANDBY
LETTER OF CREDIT NO. S983013
January 23, 1998
Magna Bank, N.A. (successor in interest to MagnaTrust Company),
as Trustee under the Indenture described below
1401 South Brentwood Boulevard, 9th Floor
St. Louis, Missouri 63144
Ladies and Gentlemen:
General
- -------
At the request and on the instructions of our customer, Gateway
International Motorsports Corporation (the "Account Party"), an Illinois
corporation, First Tennessee Bank National Association (sometimes referred to
hereinafter as "we" or "us"), as Letter of Credit Bank, hereby establishes this
Irrevocable Standby Letter of Credit No. S983013 (hereinafter referred to as the
"Letter of Credit") in favor of Magna Bank, N.A. (successor in interest to Magna
Trust Company), as Trustee (sometimes referred to hereinafter as "you") under
the Indenture of Trust dated as of May 1, 1996, between The Southwestern
Illinois Development Authority (the "Issuer") and you (the "Indenture"),
pursuant to which Twenty-One Million Five Hundred Thousand Dollars
($21,500,000.00) original aggregate principal amount of Taxable Sports Facility
Revenue Bonds Series 1996 (Gateway International Motorsports Corporation
Project) (the "Bonds") were issued.
This Letter of Credit is issued in an initial amount of Two Million Five
Hundred One Thousand Eight Hundred Twenty-Five Dollars ($2,501,825.00)
(hereinafter, as reduced from time to time in accordance with the provisions
hereof, the "Stated Amount") pursuant to the
<PAGE>
January 23, 1998
Page 2
Reimbursement Agreement dated as of December 1, 1997, between the Account Party
and us (the "Reimbursement Agreement").
This Letter of Credit is being issued to you at the request of the Account
Party to replace funds previously held by you under the Indenture in the Debt
Service Reserve Fund (as such term is defined in the Indenture). You have
verified to us that the Stated Amount, on the date of issuance hereof, is equal
to the Debt Service Reserve Requirement (as defined in the Indenture). You will
be permitted to make a draw hereunder upon (a) the occurrence of any event
entitling you, under the Indenture, to withdraw moneys from the Debt Service
Reserve Fund, or (b) upon receipt of notice from the undersigned of the
occurrence of an Event of Default under the Reimbursement Agreement or (c) ten
days prior to the date on which this Letter of Credit is to expire if, by such
date, we receive written notice from you that you have not received a Substitute
Funding Instrument (as defined in the Indenture) or cash or a combination of the
two equal in the aggregate to the amount of the Debt Service Reserve Requirement
in effect at such time.
This Letter of Credit is effective immediately and, unless it expires
earlier as hereinafter provided, will expire at 2:00 P.M., prevailing Memphis
time, on July 31, 1999; provided, however, that the term of this Letter of
Credit shall, absent ninety (90) days' notice from the Bank to you and the
Account Party in its absolute discretion to the contrary, be renewed by the Bank
in accordance with the terms of the Reimbursement Agreement and the Indenture
for additional twelve (12) month periods, each of which shall expire on July 1
of such additional period with a final expiration date of July 1, 2001. The
Bank will provide you with notices of such annual extensions upon request. Upon
expiration, this Letter of Credit must be surrendered to us at the counters of
our International Department, First Tennessee Bank National Association, 165
Madison Avenue, Memphis, Tennessee 38103.
Demands for Payment
- -------------------
Subject to the foregoing and the further provisions of this Letter of
Credit, a demand for payment may be made by you by presentation to us, at the
counters of our International Department, First Tennessee Bank National
Association, 165 Madison Avenue, Memphis, Tennessee 38103 of (a) your executed
sight draft, appropriately completed, in the form attached hereto as ANNEX A and
-------
made a part hereof, and (b) a draw certificate executed by your duly authorized
officer in the form of ANNEX B hereto.
-------
The sight draft drawn under this Letter of Credit must bear on its face the
clause "Drawn under First Tennessee Bank National Association Irrevocable
Standby Letter of Credit No. S983013." No drawing made hereunder shall exceed
the Stated Amount (as reduced from time to time in accordance with the
provisions hereof) available to be drawn hereunder at any time.
<PAGE>
January 23, 1998
Page 3
Reduction in Stated Amount
- --------------------------
The Stated Amount will be permanently decreased from time to time upon
written notice from the Trustee to the Bank of the reduction of the Debt Service
Reserve Requirement and direction to reduce the Stated Amount by such amount.
Reinstatement
- -------------
After any Drawing, the obligation of the Bank to honor demands for payment
hereunder with respect to further such drawings will be reinstated up to the
total amount specified therein upon receipt by the Bank of payment of all
amounts so drawn plus any accrued interest on such amounts due under the
Reimbursement Agreement, provided that the Bank shall have the right to notify
the Account Party and the Trustee not later than the tenth (10th) day (or, if
such day is not a Business Day, on the next preceding Business Day) following
the day on which a payment in respect of a Drawing is made that such
reinstatement shall not occur if (i) such drawing or a previous or subsequent
drawing has been made hereunder for which the Bank has not been reimbursed for
amounts then due by Account Party or (ii) an Event of Default under the
Reimbursement Agreement shall have occurred and then be continuing.
Payment
- -------
Prior to the expiration of this Letter of Credit, demand for payment may be
made by you under this Letter of Credit at our aforesaid counters at any time
prior to 2:00 P.M., prevailing Memphis, Tennessee time, on a Business Day. As
used herein, the term "Business Day" means a day on which we (at our aforesaid
counters) are not required or authorized by law or executive order to close for
the purpose of conducting a commercial banking business or on which the New York
Stock Exchange is not closed. If demand for payment is made by you hereunder at
or prior to 10:30 a.m., prevailing Memphis, Tennessee time, on a Business Day,
and provided that such demand for payment and the documents presented in
connection therewith conform to the terms and conditions hereof, payment shall
be made to you of the amount demanded, in immediately available funds, on the
same Business Day on which the demand is made or not later than 1:30 P.M.,
prevailing Memphis, Tennessee time, or such later Business Day as you shall
specify. If demand for payment is made by you hereunder after 10:30 a.m.,
prevailing Memphis, Tennessee time, on a Business Day, and provided that such
demand for payment and the documents presented in connection therewith conform
to the terms and conditions hereof, payment shall be made to you of the amount
demanded, in immediately available funds, not later than 1:30 P.M., prevailing
Memphis, Tennessee time, on the next Business Day following the date of demand
or such later Business Day as you shall specify.
<PAGE>
January 23, 1998
Page 4
If a demand for payment made by you hereunder does not conform to the terms
and conditions of this Letter of Credit, we shall give you notice without delay
but no later than the time payment would otherwise be due hereunder that the
demand for payment is not in accordance with the terms and conditions of this
Letter of Credit, stating the reasons therefor and that we are holding any
documents at your disposal or are returning the same to you, as we may elect.
Upon being notified that the demand for payment is not in conformity with the
terms and conditions of this Letter of Credit, you may attempt to correct any
such non-conforming demand for payment if, and to the extent that, you are
entitled (without regard to the provisions of this sentence) and able to do so.
All drafts paid under this Letter of Credit shall be paid solely from the
funds of First Tennessee Bank National Association and not from funds of the
Issuer, the Account Party or any general partner or guarantor of the Account
Party.
Expiration
- ----------
This Letter of Credit shall automatically expire at 2:00 P.M., prevailing
Memphis, Tennessee time, at our aforesaid counters on the earliest to occur of
the following dates:
(a) July 31, 1999 (assuming the Bank has notified you of its intention
not to renew this Letter of Credit as provided in the Reimbursement
Agreement) or such subsequent July 1 to which the term of this Letter of
Credit shall have been automatically renewed or otherwise extended by the
Bank in accordance with the terms of the Indenture and as described above;
or
(b) the date on which the Stated Amount is reduced to zero (0); or
(c) the date 10 days after the Bank notifies you of the occurrence of
an Event of Default under the Reimbursement Agreement; or
(d) the date on which we receive an executed Certificate As To
Alternative Funding of Debt Service Reserve Fund, appropriately completed,
in the form attached hereto as ANNEX C, and made a part hereof, with
-------
respect to the acceptance of a Substitute Funding Instrument (as defined
in the Indenture), cash, or a combination thereof in substitution for this
Letter of Credit.
Upon expiration, this Letter of Credit must be surrendered to us at the
counters of our International Department, First Tennessee Bank National
Association, 165 Madison Avenue, Memphis, Tennessee 38103.
<PAGE>
January 23, 1998
Page 5
Entire Agreement
- ----------------
This Letter of Credit sets forth in full the terms of our undertaking, and
this undertaking shall not in any way be modified, amended, amplified or limited
by reference to any document, instrument or agreement referred to herein or in
which this Letter of Credit is referred to or to which this Letter of Credit
relates, except for the exhibits attached hereto and made a part hereof,
references to the Indenture and Reimbursement Agreement for the definitions of
certain terms, and any amendment to which you consent, as beneficiary of this
Letter of Credit. Any such reference shall not be deemed to incorporate herein
by reference any document, instrument or agreement except for such exhibits,
such references to the Indenture and the Reimbursement Agreement and any
amendment to which you consent.
Transfer
- --------
This Letter of Credit is transferable in its entirety (but not in part) to
any transferee who has succeeded you as Trustee under the Indenture and may be
successively transferred. Transfer of this Letter of Credit to such transferee
shall be effected by the presentation to us of this Letter of Credit for
endorsement of the transfer accompanied by an executed Transfer Of Rights To
Draw Under Letter of Credit, completed in the form of ANNEX D attached hereto
-------
and made a part hereof.
Only you (or a transferee as permitted by the terms of this Letter of
Credit) may make a drawing under this Letter of Credit. Upon the payment to you
or your account or to the transferee or its account of the amount specified in
any sight draft drawn hereunder, we shall be fully discharged on our obligation
under this Letter of Credit to the extent of such drawing (pending reinstatement
thereof as provided elsewhere herein).
Governing Law
- -------------
This Letter of Credit shall be subject to the Uniform Customs and Practice
for Documentary Credits, 1993 Revision, International Chamber of Commerce
Publication No. 500 (the "UCP"), except if this Letter of Credit would have
otherwise expired by its terms during any period when our business has been
interrupted by acts of God or other events not within our control, our
obligations hereunder shall continue for a maximum of thirty (30) days after
resumption of our business, notwithstanding Article 17 of the UCP. This Letter
of Credit shall be deemed to be issued under the laws of the State of Tennessee
and shall, as to matters not governed by the UCP, be governed by and construed
in accordance with the laws of the State of Tennessee.
<PAGE>
Communications
- --------------
Communications with respect to this Letter of Credit shall be in writing
and shall be addressed to us at the address of our counters set forth above
(Attention: International Department), specifically referring to the number of
this Letter of Credit.
We hereby agree with the drawer of a sight draft drawn in compliance with
the terms of this Letter of Credit that the same shall be duly honored on
presentation to the drawee. At your request, we have agreed that any notices to
you will be given by confirmed fax and by overnight delivery such as Federal
---
Express to:
Magna Bank, N.A.
Attn: Kent T. Schroeder
1401 S. Brentwood Boulevard, Ninth Floor
St. Louis, Missouri 63144-1401
Fax #: 314/963-2475
with copy to: Carolyn B. Ryseff, General Counsel
Magna Bank, N.A.
1401 S. Brentwood Boulevard, Ninth Floor
St. Louis, Missouri 63144-1401
Fax #: 314/963-2496
Very truly yours,
FIRST TENNESSEE BANK
NATIONAL ASSOCIATION
By: /s/ Patty L. Wiley
------------------------
Title: Vice President
---------------------
<PAGE>
ANNEX A
-------
FORM OF SIGHT DRAFT
-------------------
DATE: __________________
AT SIGHT
PAY TO THE ORDER OF ___________________________________ THE SUM OF
U.S.$_______________________________________________ DOLLARS. DRAWN UNDER FIRST
TENNESSEE BANK NATIONAL ASSOCIATION IRREVOCABLE STANDBY TRANSFERABLE LETTER OF
CREDIT NO. _____________.
MAGNA BANK, N.A., as Trustee
By:_________________________
Name:_______________________
Title:______________________
TO: First Tennessee Bank National Association
International Department
165 Madison Avenue
Memphis, Tennessee 38103
<PAGE>
Annex B to First Tennessee Bank National Association
Irrevocable Standby Letter of Credit
No. S983013
DRAWING CERTIFICATE
-------------------
The undersigned, a duly authorized officer of the Trustee named below (the
"Trustee"), hereby certifies to First Tennessee Bank National Association (the
"Bank"), with reference to Irrevocable Standby Letter of Credit No. S983013 (the
"Letter of Credit"), issued by the Bank in favor of the Trustee, that:
(1) The Trustee is the Trustee under the Indenture.
(2) The Letter of Credit has been provided to the Trustee in
satisfaction of the requirement of a Debt Service Reserve Fund under the
Indenture.
(3) Choose One:
____ (a) The Trustee is required, under Section 5.10 of the
Indenture, to withdraw moneys from the Debt Service Reserve Fund
in the event there are insufficient funds on deposit in the Bond
Fund established under the Indenture to pay scheduled payments of
principal and interest to the holders of the Bonds. The Trustee
hereby certifies that there are insufficient funds on deposit in
the Bond Fund to pay principal and interest on the Bonds, and
that any other conditions precedent to a withdrawal from the Debt
Service Reserve Fund under the Indenture have occurred. The
amount of the sight draft(s) accompanying this Certificate is
less then or equal to the lesser of (i) the amount of the
shortfall in the Bond Fund or (ii) the Stated Amount.
____ (b) You have notified the Trustee that an Event of Default has
occurred under the Reimbursement Agreement, thus entitling
the Trustee to draw up to the entire amount available under
the Letter of Credit.
____ (c) The Trustee has not received a Substitute Funding
Instrument, or cash, or a combination thereof equal in the
aggregate to the Debt Service Reserve Requirement in effect
on the date hereof, which date is within ten (10) days of
the expiration of the Letter of Credit. The amount of the
sight draft(s) accompanying this Certificate is equal to the
lesser of (i) the amount of the shortfall in the Debt
Service Reserve Fund or (ii) the Stated Amount.
<PAGE>
(4) The amount of the sight draft(s) accompanying this Certificate
does not exceed the amount available to be drawn under the Letter of
Credit.
(5) Upon receipt by the Trustee of the amount demanded hereby, (a) the
Trustee will apply the same directly for the purpose specified in paragraph
(3), and (b) no portion of said amount shall be applied by the Trustee for
any purpose other than as set forth in paragraph (3) above.
Any capitalized term used herein and not defined shall have its respective
meaning as set forth in the Letter of Credit.
IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate
as of the _________ day of ________, _____.
MAGNA BANK, N.A., as trustee
By:________________________
Title:_____________________
<PAGE>
Annex C to First Tennessee Bank National Association
Irrevocable Standby Letter of Credit
No. S983013
CERTIFICATE AS TO ALTERNATIVE FUNDING OF DEBT SERVICE RESERVE FUND
-------------------------------------------------------------------
Magna Bank, N.A., as Trustee (the "Trustee"), and Gateway International
Motorsports Corporation (the "Account Party") hereby certify to First Tennessee
Bank National Association (the "Bank"), in connection with the Bank's
Irrevocable Standby Letter of Credit No. S983013 (the "Letter of Credit") (any
capitalized term used herein and not defined herein shall have its respective
meaning as set forth in the Letter of Credit) issued by the Bank in favor of the
Trustee, that:
(a) The Trustee is the Trustee under the Indenture, and the Account Party
is the Account Party under the Reimbursement Agreement.
(b) The Trustee has accepted the deposit of a Substitute Funding
Instrument, cash, or a combination thereof in the amount of the Debt Service
Reserve Requirement for deposit to the Debt Service Reserve Fund.
(c) By its terms, the Letter of Credit expires as of the date of this
Certificate.
(d) The Trustee is delivering the Letter of Credit to the Bank herewith
for cancellation.
IN WITNESS WHEREOF, the Trustee and the Account Party have executed and
delivered this Certificate as of the _____ day of ____________, ____.
GATEWAY INTERNATIONAL MOTORSPORTS
CORPORATION, as Account Party
By:_________________________
Title:______________________
MAGNA BANK, N.A., as Trustee
By:_________________________
Title:______________________
<PAGE>
Annex D to First Tennessee Bank National Association
Irrevocable Standby Letter of Credit
No. S983013
ANNEX D
-------
TRANSFER OF RIGHTS TO DRAW UNDER LETTER OF CREDIT
-------------------------------------------------
To: First Tennessee Bank National Association
International Department
165 Madison Avenue
Memphis, Tennessee 381301
Re: First Tennessee Bank National Association Irrevocable Standby Letter of
Credit No. S983013
For value received, the undersigned beneficiary hereby irrevocably
transfers to:
_________________________________
(Name of Transferee)
________________________________
________________________________
(Address)
all rights (in their entirety) of the undersigned beneficiary to draw under the
above Letter of Credit.
The transferee has succeeded the undersigned as Trustee under the Indenture
of Trust entered into between The Southwestern Illinois Development Authority
and Magna Trust Company, the original trustee and predecessor in interest to the
undersigned, as Trustee, dated as of May 1, 1996.
By this transfer, all rights of the undersigned beneficiary in the Letter
of Credit are transferred to the transferee, and the transferee shall have the
sole rights as beneficiary thereof, including sole rights relating to any
amendments, whether increases or extensions or other amendments and whether now
existing or hereafter made. All amendments are to be advised directly to the
transferee without necessity of any consent of or notice to the undersigned
beneficiary.
<PAGE>
The Letter of Credit is returned herewith, and we ask you to endorse the
transfer on the reverse hereof, and forward it directly to the transferee with
your customary notice of transfer.
IN WITNESS WHEREOF, the undersigned beneficiary has executed and delivered
this Transfer as of the ____ day of ____________, ____.
MAGNA BANK, N.A., as Trustee
By:_________________________
Name:_______________________
Title:______________________
<PAGE>
EXHIBIT 10.41
THIS INSTRUMENT PREPARED BY
AND RETURN TO:
Anne B. Mathes, Attorney
Baker, Donelson, Bearman & Caldwell
165 Madison Avenue
Memphis, Tennessee
TENNESSEE DEED OF TRUST
-----------------------
WITH SECURITY AGREEMENT AND ASSIGNMENT OF RENTS AND LEASES
----------------------------------------------------------
(WITH FIXTURE FILING)
THIS INDENTURE is made and entered into on this 23rd day of January, 1998,
by and among MEMPHIS INTERNATIONAL MOTORSPORTS CORPORATION, a corporation
organized and existing under the laws of the State of Tennessee whose address is
5500 Taylor Forge Drive, Millington, Tennessee 38053, party of the first part
(hereinafter called "Grantor"), DAVID G. WILLIAMS and THOMAS F. BAKER, IV, as
TRUSTEES, both of whom are residents of Shelby County, Tennessee, parties of
the second part (hereinafter called "Trustees"), and FIRST TENNESSEE BANK
NATIONAL ASSOCIATION, a national banking association whose address is 165
Madison Avenue, Memphis, Tennessee 38103, Attention: Metropolitan Division,
party of the third part (hereinafter called "Bank"). This instrument covers
property which is or may become so affixed to real property as to become
fixtures and also constitutes a fixture filing under (S) 47-9-402 of Tennessee
Code Annotated. NOTICE PURSUANT TO (S) 47-28-104 OF TENNESSEE CODE ANNOTATED:
This Deed of Trust secures future advances which are "obligatory advances" as
defined in the aforesaid statute. This Deed of Trust is for "commercial
purposes" as defined in said statute.
FOR AND IN CONSIDERATION OF FIVE DOLLARS ($5.00) cash in hand paid by the
Trustees to the Grantor, and the debt and trusts hereinafter mentioned, the said
Grantor has bargained and sold, and does hereby bargain, sell, convey and
confirm unto the said Trustees the real estate [said real property together with
the Improvements (hereinafter defined) being herein called the "Mortgaged
Property"] situated and being in Shelby County, Tennessee, more particularly
described in EXHIBIT "A," attached hereto and made a part hereof as fully and
particularly as if set out herein verbatim, together with:
(A) All the improvements now on or which may be hereafter placed on said
land during the existence of this lien; and
(B) All the income, rents, issues and profits arising therefrom and for
the use thereof; and
(C) All materials, equipment, furnishings or other property whatsoever
installed or to be installed and used in and about the building or buildings on
said land, including, but not being limited to, all heating, plumbing, lighting,
water-heating, cooking, refrigerating, incinerating, ventilating and air
conditioning equipment, storm doors and windows, shades, rugs, carpeting,
awnings, blinds, drapes, and linoleums, and property of like nature, all of
which property and things are hereby declared to be permanent accessions to the
freehold and part of the realty conveyed herein as security for the Obligations
(hereinafter defined) [the property described in the foregoing clause (A) and
this clause (C) being sometimes herein called the "Improvements"]; and
(D) All leasehold estate, right, title and interest of Grantor in and to
all leases and subleases covering the Mortgaged Property or any portion thereof
now or hereafter existing or entered into, subject to the provisions of Section
2.15 hereof, including, without limitation, all cash or security deposits,
advance rentals, guarantees and deposits of similar nature;
<PAGE>
TO HAVE AND TO HOLD, the aforedescribed Mortgaged Property, together with
all the hereditaments and appurtenances thereunto belonging or in anywise
appertaining unto the said Trustees, their successors in trust and assigns, in
fee simple forever; and the said Grantor does hereby covenant with the said
Trustees, their successors in trust and assigns, that Grantor is lawfully seized
in fee of the estate described in EXHIBIT "A," hereto attached, that Grantor has
a good right to sell and convey the same; that the same is unencumbered; and
that the title and quiet possession thereto Grantor will and Grantor's
successors shall warrant and forever defend against the lawful claims of all
persons.
BUT THIS IS A TRUST DEED, and is made for the following uses and purposes,
and none other; that is to say: Borrower (as hereinafter defined) is justly
indebted to Bank or the holder of the indebtedness hereinafter mentioned (said
Bank or such holder being hereinafter sometimes called the "Beneficiary"), in
the principal sum of TWO MILLION FIVE HUNDRED ONE THOUSAND EIGHT HUNDRED TWENTY-
FIVE DOLLARS ($ 2,501,825.00), arising under that certain Reimbursement
Agreement dated as of January 1, 1998 between Gateway International Motorsports
Corporation as Account Party ("Borrower") and the Bank as issuer of its
Irrevocable Letter of Credit No. S983013 (the "Letter of Credit") in the amount
of $2,501,825.00 (the "Stated Amount").
AS FURTHER SECURITY, Grantor hereby pledges, assigns and grants to
Beneficiary a continuing security interest in the property (the "Personal
Property") described in EXHIBIT "B," attached hereto and incorporated herein by
reference [the property described in subparagraph (a) of EXHIBIT "B" being
sometimes herein called the "Tangible Personal Property."]
Grantor desires to secure and make certain the payment of the
indebtednesses incurred by Borrower under the Reimbursement Agreement, and any
and all renewals, modifications and extensions thereof, in whole or in part and
also the payment and performance of the other Obligations, as hereinafter
defined.
NOW, THEREFORE, so long as any part of the Obligations shall remain unpaid
or unperformed, Grantor covenants, agrees, represents and warrants as follows:
ARTICLE I
OBLIGATIONS DEFINED
The following obligations of the Grantor and Borrower are hereinafter
collectively called the "Obligations":
1.1 Reimbursement Agreement. (a) Payment of the indebtedness (and
-----------------------
interest thereon) incurred by Borrower arising under the Reimbursement Agreement
in connection with the Letter of Credit, and any and all amendments and
modifications thereof, in whole or in part, including all FUTURE ADVANCES
pursuant to the Reimbursement Agreement and the Letter of Credit which
constitute a binding obligation on the part of the Bank to make loans and
advances on behalf of the Borrower in amounts not to exceed the aggregate
principal amount of Two Million Five Hundred One Thousand Eight Hundred Twenty-
Five Dollars ($2,501,825.00); and (b) performance of all other obligations of
Borrower under the Reimbursement Agreement;
1.2 Deed of Trust. Payment of all sums advanced by Beneficiary to or for
-------------
the benefit of Grantor contemplated hereby and performance of all obligations
and covenants herein contained, including, without limitation, any amounts
advanced to protect the trust estate and security interests herein granted and
all attorneys' fees, court costs, and expenses of whatever kind incident thereto
or to the collection of the indebtednesses and obligations hereby secured and/or
enforcement of the liens and security interests herein granted;
1.3 [Reserved]
--------
- 2 -
<PAGE>
1.4 Other Indebtednesses. Payment of all other indebtednesses arising
--------------------
under or in connection with this Deed of Trust, the Reimbursement Agreement, the
Letter of Credit or any other instrument or document now or at any time
evidencing, securing or guaranteeing the same including specifically Grantor's
Guaranty Agreement of even date to Bank, given to Bank as a guaranty of
Borrower's obligations under the Reimbursement Agreement (collectively the
"Letter of Credit Documents"), of whatever kind or character, now owing or which
may hereafter become owing by Grantor to Beneficiary, whether such
indebtednesses are evidenced by note, open account, overdraft, endorsement,
surety agreement, guaranty or otherwise; and
1.5 Other Indebtednesses of Grantor and Borrower to Beneficiary. Payment
-----------------------------------------------------------
and performance of any and all other present and future indebtednesses and
obligations of Grantor to Beneficiary, of every kind, character and description,
howsoever and whensoever arising, whether absolute or contingent, joint or
several, matured or unmatured, direct or indirect, primary or secondary, and
including without limitation, all future advances to the Grantor, all
liabilities of the Grantor under any guaranty executed in favor of the
Beneficiary at any time and all obligations of the Grantor with respect to any
letters of credit issued at any time by Beneficiary for the benefit of Grantor.
ARTICLE II
COVENANTS AND AGREEMENTS AS TO MORTGAGED PROPERTY
Grantor does hereby covenant, warrant and represent to and agree with
Beneficiary as follows:
2.1 Payment and Performance. Grantor shall make or shall use its best
-----------------------
efforts to cause Borrower to make all payments required under the Reimbursement
Agreement when due and shall punctually and properly perform all of Grantor's
other Obligations, or cause Borrower to do so as applicable.
2.2 Insurance. Grantor shall, at Grantor's sole cost and expense, obtain
---------
and maintain in some company or companies (having a Best's rating of A:XI or
better) approved by Beneficiary:
(a) Comprehensive public liability insurance covering claims for bodily
injury, death, and property damage, with such minimum limits as Beneficiary
shall, from time to time, specify, but in any event not less than those amounts
customarily maintained by owners of substantially similar property; and
(b) If any of the Mortgaged Property is within an area known as a "special
flood hazard area" as defined in the Flood Disaster Protection Act of 1973, a
Standard Flood Insurance Policy on the Mortgaged Property as required by the Act
or in the Stated Amount, whichever is greater; and
(c) Hazard insurance upon the Improvements and Tangible Personal Property,
insuring against loss by fire and all other hazards covered by extended coverage
and special extended coverage endorsements (including but not limited to loss by
windstorm, hail, flood, earthquake, tornado, explosion, riot, aircraft, smoke,
vandalism, malicious mischief and vehicle damage) as Beneficiary, in its sole
discretion, shall from time to time require, all such insurance to be issued in
such form, with such deductible provision, and for such amount (which shall, in
any event be at least equal to the full replacement value of the improvements)
as shall be satisfactory to Beneficiary; and
(d) Such other insurance as the Beneficiary may, from time to time,
reasonably require by notice in writing to the Grantor.
All required insurance policies shall provide for not less than thirty (30)
days' prior written notice to the Beneficiary of any cancellation, termination,
or material amendment thereto. Grantor will cause all policies of hazard
insurance, business interruption insurance and loss of rents insurance to be
payable to Beneficiary pursuant to a standard mortgagee clause acceptable to
Beneficiary; and Grantor will cause all liability insurance policies to name
Beneficiary as additional insured, if Beneficiary so requires. Grantor will
deposit said policy or policies of insurance with the
- 3 -
<PAGE>
Beneficiary as further security for the Obligations, no responsibility for the
approval or maintenance of any insurance (required to be maintained pursuant
hereto) being imposed upon the Beneficiary or the Trustees. In the event of
damage to or destruction of the Improvements and/or Tangible Personal Property
by fire or other casualty, the net proceeds of the insurance shall be applied
upon the Obligations in such manner as the Beneficiary may elect; or, at the
option of the Beneficiary, such proceeds may be released to Grantor to be used
to restore such property to its former condition. Any insurance policies
furnished the Beneficiary shall become its property in the event the Beneficiary
becomes the owner of the Mortgaged Property by foreclosure or otherwise. The
Beneficiary is hereby authorized and empowered, at its option, to adjust or
compromise any loss under any insurance policies, and to collect and receive the
proceeds from any such policy or policies.
2.3 Taxes and Assessments. Grantor will promptly pay when due all taxes,
---------------------
assessments, levies, dues and charges of every type or nature assessed against
the Mortgaged Property or the Personal Property, and any claim, lien or
encumbrance against the Mortgaged Property or the Personal Property which may be
or become prior to the lien of this Deed of Trust.
2.4 Deposit of Taxes and Insurance Premiums. If required by Beneficiary,
---------------------------------------
Grantor will deposit with the Beneficiary, monthly, on the first day of each
month, one-twelfth (1/12) of the annual charges for ground or other rent, if
any, insurance premiums and real estate taxes, assessments, water, sewer, and
other charges which might become a lien upon the Mortgaged Property. In
addition, if required by the Beneficiary, the Grantor shall simultaneously
therewith deposit with the Beneficiary a sum of money which, together with the
monthly installments aforementioned, will be sufficient to make each of the
payments aforementioned at least thirty (30) days prior to the date such
payments are due. Should said charges not be ascertainable at the time any
deposit is required to be made with the Beneficiary, the deposit shall be made
on the basis of an estimate made by the Beneficiary in its sole discretion; and
when the charges are fixed for the then current year, the Grantor shall deposit
any deficiency with the Beneficiary. All funds so deposited with the
Beneficiary shall be held by it, but not in escrow and, except to the extent
required by applicable law, without interest, and, provided that no Event of
Default (hereinafter defined) shall have occurred, shall be applied in payment
of the charges aforementioned when and as payable, to the extent the Beneficiary
shall have funds on hand. Upon the occurrence of any Event of Default, the
funds deposited with the Beneficiary, as aforementioned, may be applied in
payment of the charges for which such funds shall have been deposited, or to the
payment of the Obligations, or upon any other charges affecting the security of
the Beneficiary, as the Beneficiary sees fit, but no such application shall be
deemed to have been made by operation of law or otherwise until actually made by
the Beneficiary as herein provided, nor shall any application be deemed to
affect any right or remedy of the Beneficiary hereunder or under any statute or
rule of law. If deposits are being made with the Beneficiary, the Grantor shall
furnish the Beneficiary with bills for the charges for which such deposits are
required to be made hereunder and/or any other documents necessary for the
payment of same, not later than fifteen (15) days prior to the date upon which
the charges first become payable. The enforceability of the covenants relating
to taxes, assessments, and insurance premiums herein otherwise provided for
shall not be affected except insofar as those obligations have been met by
compliance with this paragraph. Beneficiary may, from time to time, at its
option, waive, and after any such waiver reinstate, any or all of the provisions
hereof requiring such deposits, by notice to Grantor in writing. While any such
waiver is in effect, Grantor shall pay the taxes, assessments, insurance
premiums, and other charges as herein provided.
2.5 Taxes on Reimbursement Agreement or Deed of Trust. If at any time any
-------------------------------------------------
law shall be enacted imposing or authorizing the imposition of any tax upon the
Reimbursement Agreement, any of the Obligations, or this Deed of Trust, or upon
any rights, titles, liens, or security interests created hereby, or any part
thereof, Grantor shall immediately pay all such taxes; provided that, if it is
unlawful for Grantor to pay such taxes, Beneficiary may pay such taxes and
Grantor shall reimburse Beneficiary for such payment in full within ten (10)
days after notice; provided, further, that if it shall be unlawful for Grantor
either to pay such taxes or to reimburse Beneficiary therefor, or if such
payment or reimbursement would be usurious, Grantor shall not be required to
make such payment or reimbursement, but at Beneficiary's option, the Obligations
shall thereupon be immediately due and payable.
- 4 -
<PAGE>
2.6 Eminent Domain. Grantor hereby transfers, sets over, and assigns to
--------------
Beneficiary all judgments, awards of damages and settlements hereafter made as a
result or in lieu of any taking of the Mortgaged Property or any part thereof
under the power of eminent domain, or for any damage (whether caused by such
taking or otherwise) to the Mortgaged Property or any part thereof, or to any
rights appurtenant thereto, including any award for change of grade of streets.
Beneficiary is hereby authorized, but not required, in behalf and in the name of
Grantor, to execute and deliver valid acquittances for, and to appeal from, any
such judgments or awards. Beneficiary may apply all such sums or any part
thereof so received, after the payment of all of its expenses, including costs
and reasonable attorney's fees, on the Obligations secured hereby, whether due
or not, in such manner as it elects or, at its option, the entire amount or any
part thereof so received may be released to the Grantor or other party lawfully
entitled thereto.
2.7 Repair, Waste, Alterations, etc. Grantor shall keep every part of the
--------------------------------
Mortgaged Property and the Personal Property in good operating order, repair and
condition and shall not commit or permit any removal or waste thereof, normal
wear and tear excepted. Grantor shall not remove or demolish or alter the
design or structural character of any Improvements now or hereafter erected upon
the Mortgaged Property without the prior written consent of Beneficiary unless
such removal, demolition or alteration is contemplated and permitted by the
Letter of Credit Documents. Grantor shall make promptly all necessary repairs,
renewals and replacements to the Mortgaged Property and the Personal Property.
2.8 Advances by Beneficiary to Protect Collateral. If the Grantor shall
---------------------------------------------
default in paying taxes, maintaining insurance or making repairs, the
Beneficiary may, at its discretion, advance and pay such sums as may be proper
to satisfy taxes, maintain insurance and make repairs, and protect and preserve
the Mortgaged Property and Personal Property, and such amounts so paid shall be
treated as part of the expense of administering this trust, shall be repaid by
Grantor on demand with interest at the Default Rate (hereinafter defined), and
shall be secured by the lien hereof. However, the making of any such payment by
Beneficiary shall not be construed as a waiver of any default of Grantor.
2.9 No Mechanics' Liens. Grantor shall discharge all claims for labor
-------------------
performed and material furnished to the Mortgaged Property, and shall not suffer
any lien of mechanics or materialmen to be filed against any part of the
Mortgaged Property. Beneficiary has not consented and will not consent to any
contract or to any work or to the furnishing of any materials which might be
deemed to create a lien or liens superior to the lien of this instrument, either
under (S) 66-11-108 of Tennessee Code Annotated, or otherwise.
2.10 Protection and Priority of Lien. Grantor shall not do anything or
-------------------------------
suffer or permit anything to be done whereby the lien and security interest of
this Deed of Trust could be impaired. Grantor shall pay such reasonable
expenses and fees as may be necessary in the protection of the Mortgaged
Property and Personal Property and the maintenance and execution of liens and
security interests herein granted. Any agreement hereafter made by Grantor and
Beneficiary pursuant to or regarding this Deed of Trust shall be superior to the
rights of the holder of any intervening lien or encumbrance.
2.11 Compliance with Laws. Grantor, the Mortgaged Property, the Personal
--------------------
Property, and the use thereof by Grantor shall comply with all laws, rules,
ordinances, regulations, covenants, conditions, restrictions, orders and decrees
of any governmental authority or court applicable to Grantor or the Mortgaged
Property and its use; Grantor will not suffer or permit any violation thereof;
and Grantor shall pay all fees or charges of any kind in connection therewith.
2.12 Further Assurances. Grantor, upon the request of Beneficiary, shall
------------------
execute, acknowledge, deliver, and record such further instruments and do such
further acts as may be necessary, desirable or proper to carry out the purposes
of this instrument and the other Letter of Credit Documents and to subject to
the liens and security interests created thereby any property intended by the
terms thereof to be covered thereby, including specifically but without
limitation any renewals, additions, substitutions, replacements, improvements,
or appurtenances to the Mortgaged Property or the Personal Property.
- 5 -
<PAGE>
2.13 Inspection of Premises. Until the Obligations shall have been fully
----------------------
paid and satisfied, Beneficiary and its agents shall have the right at all
reasonable times to inspect the Mortgaged Property, the Personal Property and
the other security for the Obligations, and all applicable books and financial
records relating thereto.
2.14 Applicable to Prior Liens. If this Deed of Trust is or becomes
-------------------------
subordinate to any other lien, security interest, assignment of leases or rents
or any other encumbrance affecting any of the Mortgaged Property (collectively,
the "Prior Liens") the provisions of this Section shall apply. Grantor shall
not enter into any renewal, extension, modification, increase or refinancing of
any instrument or document (collectively the "Prior Lien Documents") which
creates, evidences or governs any such Prior Lien or the indebtedness secured
thereby without the prior written consent of Beneficiary. Grantor shall pay
when due all indebtednesses evidenced and secured by the Prior Lien Documents
and shall timely perform all other obligations of the Grantor under the Prior
Lien Documents. Beneficiary may, but shall not be obligated to, pay any such
indebtedness or perform any such obligations for the account of Grantor and any
sum so expended plus interest shall be secured hereby. Grantor shall pay to
Beneficiary on demand all amounts so expended by Beneficiary with interest on
such amounts at the Default Rate (hereinafter defined). Grantor shall send to
Beneficiary a copy of each notice of default or notice of acceleration or other
notice received by Grantor from the holder of any of the Prior Lien Documents
within three (3) business days after receipt thereof by Grantor.
Notwithstanding the foregoing, Beneficiary does not consent to any Prior Lien
unless otherwise expressly permitted in this Deed of Trust.
2.15 Due on Sale or Encumbrance. Grantor hereby acknowledges to
--------------------------
Beneficiary that (a) the identity and expertise of Grantor were and continue to
be material circumstances upon which the Beneficiary has relied in connection
with, and which constitute valuable consideration to Beneficiary for, issuing
the Letter of Credit and entering into the Reimbursement Agreement, (b) any
change in such identity or expertise could materially impair or jeopardize the
security granted to Beneficiary by this Deed of Trust, for the payment of the
Obligations. Grantor therefore covenants and agrees with Beneficiary that the
entire Obligations secured by this Deed of Trust shall, at the absolute option
of Beneficiary, be and become immediately due and payable should the Grantor,
without the prior written consent of Beneficiary (which consent may be given or
withheld in the sole and absolute discretion of Beneficiary), sell, assign,
transfer, convey, lease with option to purchase, enter into a contract for sale,
grant an option to purchase, or further encumber any or all of Grantor's
interest in the Mortgaged Property or the Personal Property, or any portion
thereof, or permit the same to be sold, assigned, transferred, conveyed,
contracted for or further encumbered. Any change of ownership in the stock
ownership of Grantor, without the prior written consent of Beneficiary, shall
also be deemed to constitute a breach of this covenant.
2.16 Hazardous Wastes. (a) As used below, and in any of the other Letter
----------------
of Credit Documents, "Hazardous Substances" shall mean and include all hazardous
and toxic substances, wastes or materials, any pollutants or contaminants
(including, without limitation, asbestos and raw materials which include
hazardous constituents), or any other similar substances, or materials which are
included under any local, state or federal law, rules or regulations pertaining
to environmental regulation, contamination or clean-up, including, without
limitation, "CERCLA," "RCRA," or state lien or state superlien or environmental
clean-up statutes (all such laws, rules and regulations being referred to
collectively as "Environmental Laws"). Grantor warrants, represents and
covenants as follows:
(i) Neither the Mortgaged Property nor any other personal or real
property owned by Grantor is subject to any private or governmental lien or
judicial or administrative notice or action, relating to Hazardous
Substances or environmental problems, impairments or liabilities with
respect to the Mortgaged Property or such other property, or the direct or
indirect violation of any Environmental Laws.
(ii) Except strictly in accordance with all applicable Environmental
Laws (A) no Hazardous Substances are located on or have been stored,
processed or disposed of on or to the best of Grantor's knowledge released
or discharged from (including ground water contamination) the Mortgaged
Property, and no aboveground or underground storage tanks exist on the
Mortgaged Property other than as disclosed in environmental reports
supplied to the Beneficiary; and (B) Grantor shall not allow any Hazardous
Substances
- 6 -
<PAGE>
to be stored, located, discharged, possessed, managed, processed or
otherwise handled on the Mortgaged Property. Grantor shall comply with all
Environmental Laws affecting the Mortgaged Property.
(iii) To the best of the Grantor's knowledge and belief, no property
adjoining the Mortgaged Property is being used, or has ever been used at
any previous time for the disposal, storage, treatment processing or other
handling of Hazardous Substances.
(iv) Grantor shall immediately notify Beneficiary should Grantor
become aware of (1) any Hazardous Substance or other environmental problem
or liability with respect to the Grantor or the Mortgaged Property, or (2)
any lien, action, or notice of the nature described in subparagraph (i)
above. Grantor shall, at Grantor's own cost and expense, take all actions
as shall be necessary or advisable for the clean-up of the Mortgaged
Property, including all removal, containment and remedial actions in
accordance with all applicable Environmental Laws (and in all events in a
manner satisfactory to Beneficiary), and shall further pay or cause to be
paid at no expense to Beneficiary all clean-up, administrative and
enforcement costs of any court or applicable government agencies which may
be asserted against the Mortgaged Property or the owner thereof. Grantor
shall indemnify Beneficiary against and hold it harmless from all clean-up,
administrative and enforcement costs, damages, liabilities, losses, claims,
expenses (including attorneys' fees and disbursements) which are incurred
by Beneficiary, whether before or after foreclosure of the lien hereof,
with respect to any violation or claim of violation of any Environmental
Law pertaining to the Mortgaged Property. Grantor shall (1) pay such
amounts within ten (10) days after notice from Beneficiary itemizing the
amounts incurred to the date of such notice without requirement of waiting
for the ultimate outcome of any litigation, claim or other proceeding; or
(2) provide Beneficiary, within ten (10) days after demand by Beneficiary,
with a bond, letter of credit or similar financial assurance evidencing to
Beneficiary's satisfaction that the necessary funds are available to pay
the cost of removing, treating and disposing of such Hazardous Substances
and discharging any assessments which may be established on the Mortgaged
Property as a result thereof.
(b) Beneficiary (by its officers, employees and agents) at any time and
from time to time, after the occurrence of an Event of Default, may contract for
the services of persons (the "Site Reviewers") to perform environmental site
assessments ("Site Assessments") on the Mortgaged Property for the purpose of
determining whether there exists on the Mortgaged Property any environmental
condition which could reasonably be expected to result in any liability, cost or
expense to the owner, occupier or operator of such Mortgaged Property arising
under any state, federal or local law, rule or regulation relating to Hazardous
Substances. The Site Assessments may be performed at any time or times, upon
reasonable notice, and under reasonable conditions established by Grantor which
do not impede the performance of the Site Assessments. The Site Reviewers are
hereby authorized to enter upon the Mortgaged Property for such purposes. The
Site Reviewers are further authorized to perform both above and below the ground
testing for environmental damage or the presence of Hazardous Substances on the
Mortgaged Property and such other tests on the Mortgaged Property as may be
necessary to conduct the Site Assessments in the reasonable opinion of the Site
Reviewers. Grantor will supply to the Site Reviewers such historical and
operational information regarding the Mortgaged Property as may be reasonably
requested by the Site Reviewers to facilitate the Site Assessments and will make
available for meetings with the Site Reviewers appropriate personnel having
knowledge of such matters. On request, Beneficiary shall make the results of
such Site Assessments fully available to Grantor, which (prior to an Event of
Default) may at its election participate under reasonable procedures in the
direction of such Site Assessments and the description of tasks of the Site
Reviewers. The reasonable cost of performing such Site Assessments shall be
paid by Grantor upon demand of Beneficiary and any such obligations shall be
Obligations secured by this Deed of Trust.
(c) Beneficiary shall have the right but not the obligation, prior or
subsequent to an Event of Default, without in any way limiting Beneficiary's
other rights and remedies under this Deed of Trust, to enter onto the Mortgaged
Property or to take such other actions as it deems necessary or advisable to
clean up, remove, resolve or minimize the impact of, or otherwise deal with, any
Hazardous Substances on the Mortgaged Property following receipt of any notice
from any person or entity asserting the existence of any Hazardous Substance
pertaining to the Mortgaged Property or any part thereof which, if true, could
result in an order, suit, imposition of a lien on the Mortgaged Property, or
other
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<PAGE>
action and/or which, in Beneficiary's sole opinion, could jeopardize
Beneficiary's security under this Deed of Trust. All reasonable costs and
expenses paid or incurred by Beneficiary in the exercise of any such rights
shall be Obligations secured by this Deed of Trust and shall be payable by
Grantor upon demand.
(d) All warranties and representations above shall be deemed to be
continuing and shall remain true and correct in all material respects until all
of the Obligations have been paid in full and any limitations period expires.
Grantor's covenants above shall survive any exercise of any remedy by
Beneficiary under the Letter of Credit Documents, including foreclosure of this
Deed of Trust (or deed in lieu thereof), even if, as a part of such foreclosure
or deed in lieu of foreclosure, the Obligations are satisfied in full and/or
this Deed of Trust shall have been released.
2.17 Relationship of Parties; Adequate Consideration. Grantor and Borrower
-----------------------------------------------
are each first tier, wholly-owned subsidiaries of Grand Prix Association of Long
Beach, Inc. and are part of an integrated business. Grantor has received
adequate consideration from Bank for the grant made in this Deed of Trust by
virtue of the benefit it will receive as a result of the issuance of the Letter
of Credit for the benefit of Borrower.
ARTICLE III
ASSIGNMENT OF RENTS AND LEASES
3.1 Assignment of Rents and Leases. All of the rents, royalties, bonuses,
------------------------------
issues, profits, revenue, income, deposits, escrow accounts and other benefits
derived from the Mortgaged Property or arising from the use or enjoyment of any
portion thereof or from any existing or future lease or agreement pertaining
thereto and liquidated damages following default under such leases, and all
proceeds payable under any policy of insurance covering loss of rents resulting
from untenantability caused by damage to any part of the Mortgaged Property,
together with any and all rights that Grantor may have against any tenant under
such leases or any subtenants or occupants of any part of the Mortgaged Property
and any award made hereafter to Grantor in any court proceeding involving any of
the tenants or in any bankruptcy, insolvency, or reorganization proceedings in
any state or federal court, and all payments by tenants in lieu of rent (all
hereinafter collectively called the "Rents"), are hereby absolutely and
unconditionally assigned to Beneficiary, to be applied by Beneficiary in payment
of the Obligations. Grantor hereby further assigns to Beneficiary all existing
and future leases, including subleases, any and all extensions, renewals,
modifications, and replacements thereof, and all guaranties of tenants'
performance thereunder, upon any part of the Mortgaged Property (the "Leases").
It is understood and agreed by the parties that this assignment is intended to
be and is an absolute assignment from Grantor to Beneficiary, and not merely the
passing of a security interest; provided, however, that prior to an Event of
Default, Grantor shall have a license, without joinder of Beneficiary, to
enforce the Leases and to collect the Rents as they come due and to retain, use
and enjoy the same. Grantor shall, upon request of Beneficiary, execute
confirmatory assignments of any specific leases affecting any part of the
Mortgaged Property.
3.2 Warranties Concerning Leases and Rents. Grantor represents and
--------------------------------------
warrants:
(a) Grantor has good title to the Leases and Rents hereby assigned
and full authority to assign them without the consent of any other party;
(b) none of the Rents have been or will be assigned, mortgaged or
pledged;
(c) all existing Leases are valid and in full force and effect, and
neither Grantor nor any tenant is in default under any of the Leases;
(d) none of the Rents have been or will be anticipated, waived,
released, discounted, set off or compromised;
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<PAGE>
(e) except as indicated in the Leases, Grantor has not received any
funds or deposits from any tenant except for and on account of Rents which
have heretofore come due;
(f) the terms of the Leases have not been changed from the terms in
the copies of any of the Leases submitted to Beneficiary for approval.
3.3 Grantor's Covenants of Performance. Grantor covenants to:
----------------------------------
(a) perform all of its obligations under the Leases, take all action
and fulfill all covenants and conditions required to enforce the Leases
against the tenants, and give prompt notice to Beneficiary of any material
failure to do so;
(b) enforce the tenants' obligations under the Leases;
(c) defend, at Grantor's expense, any proceeding pertaining to the
Leases, including, if Beneficiary so requests, any such proceeding to which
Beneficiary is a party; and
(d) neither create nor permit any encumbrance upon or assignment of
Grantor's interest as lessor under the Leases, except this Deed of Trust.
3.4 Prior Approval for Actions Affecting Leases. Grantor shall not,
-------------------------------------------
without the prior written consent of Beneficiary:
(a) receive or collect Rents not yet due under the terms of any of
the Leases;
(b) waive or release any obligation of any tenant under the Leases or
any party liable under the Leases;
(c) cancel, terminate or modify any of the Leases, cause or permit
any cancellation, termination or surrender of any of the Leases, or
commence any proceedings for dispossession of any tenant under any of the
Leases, except upon default by the tenant thereunder; or
(d) change, alter or modify any of the Leases.
3.5 Settlement for Termination. Grantor agrees that no settlement for
--------------------------
damages for termination of any of the Leases under the Federal Bankruptcy Code,
or under any other federal, state, or local statute, shall be made without the
prior written consent of Beneficiary, and any check in payment of such damages
shall be made payable solely to Beneficiary or jointly to Grantor and
Beneficiary. Grantor agrees to endorse any dual payee check for such payment to
the order of Beneficiary. Unless Beneficiary shall hereafter agree otherwise,
any such settlement for damages shall be applied to the Obligations as
Beneficiary may elect.
3.6 No Obligation upon Beneficiary. Beneficiary's acceptance of the
------------------------------
assignment of Leases and Rents provided for herein shall not obligate
Beneficiary to appear in or defend any proceeding relating to any of the Leases
or to the Mortgaged Property, take any action hereunder, expend any money, incur
any expenses, or perform any obligation or liability under the Leases, or assume
any obligation for any deposits delivered to Grantor by any tenant. Beneficiary
shall not be liable for any injury or damage to person or property in or about
the Mortgaged Property.
3.7 Records. Upon request by Beneficiary, Grantor shall deliver to
-------
Beneficiary executed originals of all Leases and copies of all records relating
thereto.
3.8 Merger. There shall be no merger of the leasehold estates created by
------
the Leases with the fee estate of the Mortgaged Property without the prior
written consent of Beneficiary.
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<PAGE>
3.9 Right to Rely. Grantor hereby authorizes Beneficiary to give notice
-------------
in writing of this assignment at any time to any tenant under any of the Leases,
and from and after the occurrence of an Event of Default hereunder, to direct
any such tenant to make payment of rentals and other amounts due directly to
Beneficiary. Grantor hereby authorizes and directs the tenants under the Leases
to pay Rents to Beneficiary upon written demand by Beneficiary, without further
consent of Grantor, and without verifying whether an Event of Default has
occurred; and the tenants may rely upon any written statement delivered by
Beneficiary to the tenants. Any such payment to Beneficiary shall constitute
full acquittance to the party making such payment for the amount of such
payment.
3.10 Priority of Leases. Except to the extent, if any, otherwise provided
------------------
in a written instrument signed by Beneficiary, the lien of this Deed of Trust is
prior and paramount to all Leases of the Mortgaged Property or any part thereof.
However, Beneficiary may at its option without the consent of any person or
entity, at any time subordinate the lien of this Deed of Trust to any existing
or future Lease of all or any part of the Mortgaged Property by giving written
notice to the tenant under such Lease; and upon sale of the Mortgaged Property
under this Deed of Trust such tenant shall attorn to the owner and each
successive owner of the Mortgaged Property.
ARTICLE IV
SECURITY AGREEMENT
4.1 Security Interest. This Deed of Trust shall be a security agreement
-----------------
between Grantor, as debtor, and Beneficiary, as secured party, respecting the
Personal Property, and Grantor grants to Beneficiary a security interest in such
Personal Property (described in EXHIBIT "B" hereto). In addition to
Beneficiary's other rights hereunder, Beneficiary shall have all rights of
secured parties under the Uniform Commercial Code as adopted in Tennessee
(hereinafter called the "Code"). Grantor shall execute and deliver to
Beneficiary all financing statements that may be required by Beneficiary to
establish and maintain the validity and priority of Beneficiary's security
interest, and Grantor shall bear all costs thereof, including all Code searches
reasonably required by Beneficiary. Upon the occurrence of an Event of Default,
Beneficiary or the Trustees may sell the Personal Property as provided in
Article VI hereof. This security agreement is supplemental to, and not in
derogation of, any separate security agreement which now or hereafter is entered
into between the Grantor and the Beneficiary.
4.2 Representations and Warranties. The Grantor represents and warrants
------------------------------
as follows:
(a) Grantor's principal place of business and chief executive office is
set forth in the first paragraph of this Deed of Trust.
(b) The Grantor owns and, with respect to any Personal Property hereafter
acquired, will own the Personal Property free and clear of any lien, security
interest or other charge or encumbrance except for the security interest created
by this Deed of Trust, and no effective financing statement or other instrument
similar in effect covering all or any part of the Personal Property is on file
in any recording office except such as may have been filed in favor of
Beneficiary relating to this Deed of Trust; Grantor has not and, with respect to
Personal Property hereafter acquired, will not acquire any of the Personal
Property under any conditional sales contract or other agreement or arrangement
where the seller thereof purports to take or reserve a security interest
therein; Grantor has the right to encumber the Personal Property and to grant a
security interest therein to Beneficiary; and Grantor will forever warrant and
defend the security interest of Beneficiary against the lawful claims of all
persons.
4.3 Covenants as to the Personal Property. So long as any of the
-------------------------------------
Obligations shall remain outstanding, unless Beneficiary shall otherwise consent
in writing:
(a) Notice of Changes. Subject to the provisions of Section 2.15 hereof,
-----------------
Grantor shall give advance notice in writing to Beneficiary of any change or
proposed change in Grantor's name, identity, or structure and shall execute and
deliver to Beneficiary, prior to or concurrently with the occurrence of any such
change, all additional financing
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<PAGE>
statements that Beneficiary may require to establish and maintain the validity
and priority of Beneficiary's security interest with respect to any of the
Personal Property described or referred to herein.
(b) Further Assurances. Grantor will at Grantor's expense, at any time
------------------
and from time to time, promptly execute and deliver all further instruments and
documents and take all further action that Beneficiary deems necessary or
desirable or that Beneficiary may request in order (i) to perfect and protect
the security interest created or purported to be created hereby; (ii) to enable
Beneficiary to exercise and enforce its rights and remedies hereunder in respect
of the Personal Property; or (iii) to otherwise effect the purposes of this Deed
of Trust, including, without limitation: (A) executing and filing such financing
or continuation statements, or amendments thereto, as Beneficiary deems
necessary or desirable or that Beneficiary may request in order to perfect and
preserve the security interest created or purported to be created hereby; (B)
furnishing to Beneficiary from time to time statements and schedules further
identifying and describing the Personal Property and such other reports in
connection with the Personal Property as Beneficiary may reasonably request, all
in reasonable detail.
(c) Location of Property. The Grantor will at all times keep all of the
--------------------
Tangible Personal Property on the Mortgaged Property.
(d) Financing Statements. The Grantor hereby authorizes Beneficiary to
--------------------
file, without execution by the Grantor where permitted by law, one or more
financing or continuation statements, and amendments thereto, relating to the
Personal Property.
(e) Care and Custody. The powers conferred on Beneficiary hereunder are
----------------
solely to protect its interest in the Personal Property and shall not impose any
duty upon it to exercise any such powers. Except for the accounting for moneys
actually received by it hereunder, Beneficiary shall have no duty as to any
Personal Property, the preservation or protection of the same or the taking of
any necessary steps to preserve rights against prior parties or any other rights
pertaining to any Personal Property.
ARTICLE V
EVENTS OF DEFAULT
The occurrence of any one or more of the following events shall constitute
an Event of Default hereunder:
5.1 Failure to Pay Obligations. If Grantor or Borrower shall fail to pay
--------------------------
any part of their respective Obligations, whether principal or interest,
promptly when the same becomes due, or if the Grantor shall fail to pay any sum
necessary to satisfy and discharge taxes and assessments promptly when due, or
to maintain insurance or repairs, or the necessary expense of protecting the
Mortgaged Property or the Personal Property and executing this trust; or
5.2 Default Under Other Liens. If any of the Mortgaged Property or the
-------------------------
Personal Property be levied upon or attached by any legal process, or if there
shall occur any default under or with respect to any Prior Lien, or if the
holder of any lien or security interest on the Mortgaged Property or the
Personal Property institutes foreclosure or other proceedings for the
enforcement of its remedies thereunder; or
5.3 Default on Other Indebtedness. If the Grantor shall default in the
-----------------------------
payment of any other indebtedness, liability or obligation now or hereafter owed
by the Grantor to the Beneficiary; or
5.4 Bankruptcy or Insolvency. If Grantor, or any other owner of the
------------------------
Mortgaged Property, or any guarantor of any of the Obligations, shall
voluntarily become a party to any insolvency, bankruptcy, composition or
reorganization procedure, or make any assignment for the benefit of creditors;
or if any involuntary bankruptcy, insolvency, composition, or other
reorganization proceedings be filed against Grantor, any other owner of the
Mortgaged Property,
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<PAGE>
or any guarantor of the Obligations, and the same shall not be dismissed within
thirty (30) days after the commencement of any such involuntary proceedings; or
5.5 Abandonment. If Grantor abandons any material portion of the
-----------
Mortgaged Property; or
5.6 Grant of Easement, etc. If Grantor grants any easement or dedication,
-----------------------
files any plat, condominium declaration or restriction, or enters into any
lease, with respect to the Mortgaged Property, unless such action is authorized
by the Letter of Credit Documents or is otherwise consented to by Beneficiary;
or
5.7 False Representation. If any statement, representation or warranty in
--------------------
the Letter of Credit Documents, any financial statement or any other writing
delivered to Beneficiary in connection with the Obligations is false, misleading
or erroneous in any material respect; or
5.8 Grantor's Default Under Leases. If Grantor shall default in any of
------------------------------
Grantor's covenants, obligations and undertakings under any of the Leases and
shall fail to cure said default within the time, if any, permitted by any of
such Leases for cure thereof; or
5.9 Nonperformance of Covenants. If there shall occur any other default
---------------------------
in Grantor's covenants, warranties, agreements, liabilities, obligations and
undertakings as contained in this Deed of Trust or the Letter of Credit
Documents (including, without limitation, any "Event of Default" as defined in
the Reimbursement Agreement), or contained in any other instrument which now or
hereafter secures the Obligations, if such default is not cured within a period
of ten (10) days following the date of written notice thereof by the Bank to
Grantor, or if there is another cure period specifically applicable to such
default, within such applicable cure period.
ARTICLE VI
REMEDIES
If an Event of Default shall occur, Beneficiary may exercise any one or
more of the following remedies:
6.1 Acceleration. Beneficiary may declare the entire Obligations,
------------
principal and interest, immediately due and payable without notice or demand,
the same being hereby expressly waived.
6.2 Enforcement of Assignment of Rents and Leases. Beneficiary may:
---------------------------------------------
(a) terminate the license granted to Grantor to collect the Rents
(regardless of whether Beneficiary or Trustee shall have entered into
possession of the Mortgaged Property), collect and sue for the Rents in
Beneficiary's own name, give receipts and releases therefor, and after
deducting all expenses of collection, including reasonable attorneys' fees,
apply the net proceeds thereof to any Obligations as Beneficiary may elect;
(b) make, modify, enforce, cancel or accept surrender of any Leases,
evict tenants, adjust Rents, maintain, decorate, refurbish, repair, clean,
and make space ready for renting, and otherwise do anything Beneficiary
reasonably deems advisable in connection with the Mortgaged Property;
(c) apply the Rents so collected to the operation and management of
the Mortgaged Property, including the payment of reasonable management,
brokerage and attorneys' fees, or to the Obligations; and
(d) require Grantor to transfer and deliver possession of all
security deposits and records thereof to Beneficiary.
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<PAGE>
6.3 Power of Sale. Beneficiary may require the Trustees, and the Trustees
-------------
are hereby authorized and empowered, to enter and take possession of the
Mortgaged Property and to sell all or part of the Mortgaged Property, at public
auction, to the highest bidder for cash, free from equity of redemption, and any
statutory or common law right of redemption, homestead, dower, marital share,
and all other exemptions, after giving notice of the time, place and terms of
such sale and of the Mortgaged Property to be sold, by advertising the sale of
the property for twenty-one (21) days by three (3) weekly notices in some
newspaper published in the county and state where the Mortgaged Property is
situated, which notice may be given before or after entry by the Trustees. The
Trustee shall execute a conveyance to the purchaser in fee simple and deliver
possession to the purchaser, which the Grantor warrants shall be given without
obstruction, hindrance or delay. Trustee may sell all or any portion of the
Mortgaged Property, together or in lots or parcels, and may execute and deliver
to the purchaser or purchasers of such property a conveyance in fee simple.
Trustee making such sale shall receive the proceeds thereof and shall apply the
same as follows: (a) first, the payment of the expenses of making, maintaining
and executing this trust, protection of the Mortgaged Property, including the
expense of any litigation and reasonable attorneys' fees, and reasonable
compensation to the Trustee; (b) second, to any advancements made by the Trustee
or the Beneficiary pursuant hereto, with interest thereon; (c) third, to the
payment of the Obligations herein secured or intended so to be, in such order as
Beneficiary shall elect, and any balance of said Obligations may be the subject
of immediate suit; (d) and, fourth, should there be any surplus, Trustee will
pay it to the Grantor, or to such person as may be legally entitled thereto.
The sale or sales by Trustee of less than the whole of the Mortgaged Property
shall not exhaust the power of sale herein granted, and Trustee is specifically
empowered to make successive sale or sales under such power until the whole of
the Mortgaged Property shall be sold; and if the proceeds of such sale or sales
of less than the whole of the Mortgaged Property shall be less than the
aggregate of the Obligations and the expenses thereof, this Deed of Trust and
the lien, security interest and assignment hereof shall remain in full force and
effect as to the unsold portion of the Mortgaged Property; provided, however,
that Grantor shall never have any right to require the sale or sales of less
than the whole of the Mortgaged Property, but Beneficiary shall have the right
at its sole election, to request Trustee to sell less than the whole of the
Mortgaged Property. Beneficiary may bid and become the purchaser of all or any
part of the Mortgaged Property at any such sale, and the amount of Beneficiary's
successful bid may be credited on the Obligations.
6.4 Sale of Personal Property. At the request of the Beneficiary the
-------------------------
Trustee shall sell the Personal Property concurrently with and in conjunction
with a sale of the Mortgaged Property, in which case the provisions of the
preceding Section shall apply to the Personal Property as well as the Mortgaged
Property. Grantor stipulates and agrees that a sale of the Personal Property in
conjunction with the Mortgaged Property is a commercially reasonable manner of
disposing of the Personal Property. Alternatively, Beneficiary may sell or
otherwise dispose of the Personal Property separately and apart from the
Mortgaged Property in the time and manner provided by the Code. To the extent
that the Code shall require prior notice of sale or other disposition of the
Personal Property, five (5) days written notice shall be deemed to be reasonable
notice. Beneficiary also may (a) require the Grantor to, and the Grantor hereby
agrees that Grantor will at Grantor's expense and upon request of Beneficiary
forthwith, assemble all or part of the Personal Property as directed by
Beneficiary and make it available to Beneficiary at a place to be designated by
Beneficiary which is reasonably convenient to the parties; and (b) sell the
Personal Property or any part thereof in one or more parcels at public or
private sale for cash or credit or for future delivery, and at such price or
prices and upon such other terms as Beneficiary may deem commercially
reasonable. Beneficiary shall not be obligated to make any sale of the Personal
Property regardless of notice of sale having been given. Beneficiary may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned.
6.5 Judicial and Other Relief. Beneficiary or Trustees may proceed by a
-------------------------
suit or suits in equity or at law, whether for the specific performance of any
covenant or agreement herein contained or in aid of the execution of any power
herein granted, or for any foreclosure hereunder or for the sale of the
Mortgaged Property or the Personal Property under the judgment or decree of any
court or courts of competent jurisdiction.
6.6 Entry on Mortgaged Property; Tenancy at Will. (a) Beneficiary may
--------------------------------------------
enter into and upon and take possession of all or any part of the Mortgaged
Property, and may exclude Grantor, and all persons claiming under
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<PAGE>
Grantor, and its agents or servants, wholly or partly therefrom; and, holding
the same, Beneficiary may use, administer, manage, operate, and control the
Mortgaged Property and may exercise all rights and powers of Grantor in the
name, place and stead of Grantor, or otherwise, as the Beneficiary shall deem
best; and in the exercise of any of the foregoing rights and powers Beneficiary
shall not be liable to Grantor for any loss or damage thereby sustained unless
due solely to the willful misconduct or gross negligence of Beneficiary.
(b) In the event of a trustee's or other foreclosure sale hereunder and if
at the time of such sale Grantor or any other party (other than a tenant under a
Lease as to which the Beneficiary shall have expressly subordinated the lien of
this Deed of Trust as hereinabove set out) occupies the portion of the Mortgaged
Property so sold or any part thereof, such occupant shall immediately become the
tenant of the purchaser at such sale, which tenancy shall be a tenancy from day
to day, terminable at the will of such purchaser, at a reasonable rental per day
based upon the value of the portion of the Mortgaged Property so occupied (but
not less than any rental theretofore paid by such tenant, computed on a daily
basis). An action of forcible detainer shall lie if any such tenant holds over
after a demand in writing for possession of such portion of the Mortgaged
Property.
6.7 Receiver. Beneficiary may make application to a court of competent
--------
jurisdiction, as a matter of strict right and without notice to Grantor or
regard to the adequacy of the Mortgaged Property for the repayment of the
Obligations, for appointment of a receiver of the Mortgaged Property, and
Grantor does hereby irrevocably consent to such appointment. Any such receiver
shall have all necessary and proper powers and duties of receivers in similar
cases, including the full power to rent, maintain and otherwise operate the
Mortgaged Property upon such terms as may be approved by the court.
6.8 Beneficiary's Right to Perform. Upon Grantor's failure to make a
------------------------------
payment or perform an act required by the Letter of Credit Documents, then at
any time thereafter, and without notice to or demand upon Grantor and without
waiving or releasing any other right, remedy or recourse, Beneficiary may (but
shall not be obligated to) make such payment or perform such act for the account
of and at the expense of Grantor, and shall have the right to enter upon the
Mortgaged Property for such purpose and to take all such action as Beneficiary
may deem necessary or appropriate.
6.9 Remedies Cumulative, Concurrent and Nonexclusive. If the Obligations
------------------------------------------------
are now or hereafter further secured by chattel mortgages, deeds of trust,
security agreements, pledges, contracts of guaranty, assignments of leases, or
other security, Beneficiary may, at its option, exhaust its remedies under any
one or more of said instruments and this Deed of Trust, either concurrently or
independently, and in such order as Beneficiary may determine. Beneficiary
shall have all rights, remedies and recourses granted in the Letter of Credit
Documents and available to it at law or equity (including, without limitation,
those granted by the Code), and same (a) shall be cumulative, concurrent, and
nonexclusive, (b) may be pursued separately, successively or concurrently
against Grantor or others obligated for the Obligations, or any part thereof or
against any one or more of them, or against the Mortgaged Property or the
Personal Property, at the sole discretion of Beneficiary, and (c) may be
exercised as often as occasion therefor shall arise, it being agreed by Grantor
that the exercise of or failure to exercise any of same shall in no event be
construed as a waiver or release thereof or of any other right, remedy or
recourse.
ARTICLE VII
TRUSTEES
7.1 Action by Either Trustee. Either of the Trustees named herein shall
------------------------
be clothed with full power to act when action hereunder shall be required, and
to execute any conveyance of the Mortgaged Property. In the event that the
substitution of a Trustee shall become necessary for any reason, the
substitution of one trustee in the place of those or any of those named herein
shall be sufficient. The term "Trustees" shall be construed to mean "Trustee"
whenever the sense requires. The necessity of the Trustees herein named, or any
successor in trust, making oath or giving bond, is expressly waived.
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<PAGE>
7.2 Employment of Agents. The Trustees, or any one acting in their stead,
--------------------
shall have, in their discretion, authority to employ all proper agents and
attorneys in the execution of this trust and/or in the conducting of any sale
made pursuant to the terms hereof, and to pay for such services rendered out of
the proceeds of the sale of the Mortgaged Property, should any be realized; and
if no sale be made or if the proceeds of sale be insufficient to pay the same,
then Grantor hereby undertakes and agrees to pay the cost of such services
rendered to said Trustees. Trustees may rely on any document believed by them
in good faith to be genuine. All money received by Trustees shall, until used
or applied as herein provided, be held in trust, but need not be segregated
(except to the extent required by law), and Trustees shall not be liable for
interest thereon.
7.3 Indemnification of Trustees. If the Trustees shall be made a party to
---------------------------
or shall intervene in any action or proceeding affecting the Mortgaged Property
or the title thereto, or the interest of the Trustees or Beneficiary under this
Deed of Trust, the Trustees and Beneficiary shall be reimbursed by Grantor,
immediately and without demand, for all reasonable costs, charges and attorney's
fees incurred by them or either of them in any such case, and the same shall be
secured hereby as a further charge and lien upon the Property.
7.4 Successor Trustee. In the event of the death, refusal, or of
-----------------
inability for any cause, on the part of the Trustees named herein, or of any
successor trustee, to act at any time when action under the foregoing powers and
trust may be required, or for any other reason satisfactory to the Beneficiary,
the Beneficiary is authorized, either in its own name or through an attorney or
attorneys in fact appointed for that purpose, by written instrument duly
registered, to name and appoint a successor or successors to execute this trust,
such appointment to be evidenced by writing, duly acknowledged; and when such
writing shall have been registered, the substituted trustee named therein shall
thereupon be vested with all the right and title, and clothed with all the power
of the Trustees named herein and such like power of substitution shall continue
so long as any part of the debt secured hereby remains unpaid.
ARTICLE VII
MISCELLANEOUS
8.1 Waiver of Marshaling and Certain Rights. To the extent that Grantor
---------------------------------------
may lawfully do so, Grantor hereby expressly waives any right pertaining to the
marshalling of assets or marshalling of liens, the equity of redemption, any
statutory or common law right of redemption, homestead, dower, marital share,
and all other exemptions, or other matter which might defeat, reduce or affect
the right of Beneficiary to sell the Mortgaged Property or the Personal Property
for the collection of the Obligations, or the right of Beneficiary to the
payment of the Obligations out of the proceeds of sale of the Mortgaged Property
or the Personal Property, or the proceeds of the Rents and Leases, in preference
to every other person and claimant.
8.2 Waiver of Impairment of Recourse Defenses. Without affecting the
-----------------------------------------
liability of Grantor or any other person (except any person expressly released
in writing) for the payment or performance of any of the Obligations, and
without affecting the rights of Beneficiary with respect to any security not
expressly released in writing, Beneficiary may, at any time, and from time to
time, either before or after the maturity of the Note, and without notice or
consent:
(a) Release any person liable for payment or performance of all or
any part of the Obligations;
(b) Make any agreement extending the time or otherwise altering the
terms of payment or of all or any part of the Obligations (without limit as
to the number of such extensions or the period or periods thereof), or
modifying or waiving any obligation, or subordinating, modifying or
otherwise dealing with the lien or charge hereof;
(c) Exercise or refrain from exercising any right Beneficiary may
have;
(d) Accept additional security of any kind;
- 15 -
<PAGE>
(e) Release or otherwise deal with any property, real or personal,
securing the Obligations, including all or any part of the Mortgaged
Property herein described.
Furthermore, the failure of the Beneficiary to perfect any lien granted herein
or in any other Loan Document, to take any action to obtain payment or
performance of the Obligations or to exercise any rights or remedies available
hereunder shall not relieve Grantor or any other person from liability for the
payment or performance of the Obligations nor effect a discharge of the lien,
security interest or assignment herein granted; it being intended that all
"impairment of recourse" and "impairment of collateral" defenses are hereby
waived.
8.3 No Waiver. No waiver by the Trustee or the Beneficiary shall be
---------
construed as a waiver of a subsequent similar default or any other default by
the Grantor. No delay by Beneficiary or by the Trustee in exercising any right
or remedy hereunder, or otherwise afforded by law, shall operate as a waiver
thereof or preclude the exercise thereof during the continuance of any default
hereunder. No failure of Beneficiary to exercise any option herein given to
declare the maturity of the debt hereby secured, no forbearance by Beneficiary
after the exercise of such option, and no withdrawal or abandonment of
foreclosure proceedings by the Beneficiary after the exercise of such option,
shall be taken or construed as a waiver of its right to exercise such option or
to declare such maturity by reason of any past, present, or future default on
the part of the Grantor. Acceptance by Beneficiary of partial payments shall
not constitute a waiver of the default by failure to make full payments.
8.4 Beneficiary's Consent. Except as otherwise expressly provided herein,
---------------------
in any instance hereunder where Beneficiary's approval or consent is required or
the exercise of Beneficiary's judgment is required, the granting or denial of
such approval or consent and the exercise of such judgment shall be within the
sole discretion of Beneficiary, and Beneficiary shall not, for any reason or to
any extent, be required to grant such approval or consent or exercise such
judgment. Beneficiary may consult with counsel, and the written advice or
opinion of such counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
8.5 Appointment of Attorney. Grantor hereby irrevocably appoints
-----------------------
Beneficiary as Grantor's attorney-in-fact, coupled with an interest, with full
authority in the place and stead of the Grantor and in the name of the Grantor
or otherwise, from time to time in the Beneficiary's discretion, to take any
action and to execute any instrument which Beneficiary may deem necessary or
advisable to accomplish the purposes of this Deed of Trust, including, without
limitation (a) to obtain and adjust insurance required to be maintained pursuant
to the provisions of this Deed of Trust; (b) to ask, demand, collect, sue for,
recover, compound, receive and give acquittance and receipts for moneys due and
to become due in respect of any of the Mortgaged Property, the Leases or the
Personal Property; (c) to receive, endorse, and collect any drafts or other
instruments, documents, and chattel paper in connection with clause (a) or (b)
above; (d) to appear in any action concerning any of the Leases; and (e) to file
any claims or take any action or institute any proceedings which Beneficiary may
deem necessary or desirable for the collection of any of the Rents or the
Personal Property or any amounts otherwise due in connection with the Mortgaged
Property or the Personal Property, or otherwise to enforce the rights of
Beneficiary with respect to the Mortgage Property, the Leases and Rents and the
Personal Property. Grantor hereby ratifies and approves all acts of said
attorney; and so long as the attorney acts in good faith it shall have no
liability to Grantor for any act or omission as such attorney.
8.6 Estoppel Certificate. At the request of the Beneficiary, the Grantor
--------------------
shall furnish promptly a written statement or affidavit, in such form as may be
required by Beneficiary, confirming the unpaid balance of the Obligations, the
date to which interest has been paid and that there are no offsets to or
defenses against any payment or performance of the Obligations or, if there are
any such offsets or defenses, specifying them.
8.7 Expenses of Beneficiary. The Grantor will upon demand pay to the
-----------------------
Beneficiary the amount of any and all costs and expenses, including without
limitation all fees and disbursements of the Beneficiary's counsel and of any
experts and agents, which Beneficiary may incur in connection with (a) the
preparation and recording of this Deed of Trust and the financing statements to
be filed to perfect the security interests granted herein, (b) the
administration of
- 16 -
<PAGE>
this Deed of Trust, (c) the sale of, collection from, or other realization upon
the Mortgaged Property, the Rents and Leases and the Personal Property; (d) the
exercise or enforcement of any of the rights of Beneficiary hereunder; or (e)
the failure of Grantor to perform or observe any of the provisions hereof.
8.8 Indemnification. The Grantor agrees to indemnify and hold the
---------------
Beneficiary harmless from and against any and all claims, losses, and
liabilities arising out of or resulting from this Deed of Trust and the
assignment of rents and leases and the grant of security interests contained
herein (including, without limitation, enforcement of this Deed of Trust),
and/or arising out of or in connection with any other Letter of Credit
Documents, except claims, losses, or liabilities resulting solely and directly
from the Beneficiary's gross negligence or willful misconduct. In the event
that Beneficiary shall assign or transfer its rights hereunder or under the
Reimbursement Agreement or any other Letter of Credit Documents, the rights of
the Beneficiary under this section, under the immediately preceding section and
under any other provisions of the Letter of Credit Documents which require the
Grantor to indemnify or pay expenses of the Beneficiary shall continue in favor
of the Beneficiary originally named herein as well as any successor or assign of
the Beneficiary; and any such provision may be enforced severally by the
original Beneficiary named herein or any such successor or assign of the
Beneficiary or, at their option, by all of such parties acting jointly.
8.9 Default Rate. If Beneficiary shall expend any money chargeable to
------------
Grantor or subject to reimbursement by Grantor under the terms of this Deed of
Trust or any of the other Letter of Credit Documents, Grantor shall repay the
same to Beneficiary immediately at the place where payments, if any, under the
Reimbursement Agreement are payable, together with interest thereon from the
date due (or, if there is no specified due date, from the date of demand
therefor by Beneficiary) until paid at a rate (herein the "Default Rate") equal
to the lesser of (a) twenty percent (20%) per annum, or (b) the maximum
effective contract rate of interest allowed by applicable law.
8.10 Subrogation. To the extent that proceeds of the Obligations are used
-----------
to pay any outstanding lien, charge or encumbrance affecting the Mortgaged
Property (including, without limiting the generality of the foregoing, any Prior
Lien) Beneficiary shall be subrogated to all rights, interests and liens owned
or held by any owner or holder of such outstanding liens, charges and
encumbrances, irrespective of whether such liens, charges or encumbrances are
released of record; provided, however, that the terms and provisions hereof
-----------------
shall govern the rights and remedies of Beneficiary and, to the extent permitted
by law without impairing any of Beneficiary's rights of subrogation, shall
supersede the terms, provisions, rights, and remedies under the lien or liens to
which Beneficiary is subrogated hereunder.
8.11 Payment in Full. If the said Grantor shall pay and perform all of the
---------------
Obligations promptly when due, and shall pay such sums as shall be necessary to
discharge taxes and maintain insurance and perform repairs and the costs, fees
and expenses of making, enforcing and executing this trust, when they shall
severally be due and payable, and shall comply with all of the covenants, terms
and conditions of the Reimbursement Agreement, and this Deed of Trust, and any
other instrument which also now or hereafter secures the Obligations secured
hereby, then this conveyance shall become void, the Trustees shall reconvey by
quitclaim the Mortgaged Property herein described at the expense of the Grantor,
and the Beneficiary shall execute and deliver to Grantor, at Grantor's request,
such documents as may be necessary to evidence the termination of the security
interests and assignments herein granted.
8.12 No Partnership. Nothing contained in this Deed of Trust is intended
--------------
to create any partnership, joint venture or association between Grantor and
Beneficiary, or in any way make Beneficiary a co-principal with Grantor with
reference to the Mortgaged Property, and any inferences to the contrary are
hereby expressly negated.
8.13 Headings, Use of Terms. The article, paragraph and subparagraph
----------------------
headings hereof are inserted for convenience of reference only and shall not
alter, define, or be used in construing the text of such articles, paragraphs or
subparagraphs. Whenever used, the singular number shall include the plural and
the plural the singular, and the use of any gender shall be applicable to all
genders. The term "Grantor" shall include in their individual capacities and
jointly all parties hereinabove named a Grantor. The term "Beneficiary" shall
include any lawful owner, holder, pledgee, or assignee of any of the
Obligations. The duties, covenants, conditions, obligations, and warranties of
Grantor in this
- 17 -
<PAGE>
Deed of Trust shall be joint and several obligations of Grantor and each
Grantor, if more than one, and each Grantor's heirs, personal representatives,
successors and assigns.
8.14 Severability. If any provision of this Deed of Trust is held to be
------------
illegal, invalid, or unenforceable under present or future laws effective while
this Deed of Trust is in effect, the legality, validity and enforceability of
the remaining provisions of this Deed of Trust shall not be affected thereby,
and in lieu of each such illegal, invalid or unenforceable provision, there
shall be added automatically as a part of this Deed of Trust a provision that is
legal, valid and enforceable and as similar in terms to such illegal, invalid or
unenforceable provision as may be possible. If any of the Obligations shall be
unsecured, the unsecured portion of the Obligations shall be completely paid
prior to the payment of the secured portion of such Obligations, and all
payments made on account of the Obligations shall be considered to have been
paid on and applied first to the complete payment of the unsecured portion of
the Obligations.
8.15 Burden and Benefit. This instrument shall be binding on Grantor, and
------------------
Grantor's successors and assigns, and shall inure to the benefit of the
Beneficiary and Trustees and their respective successors and assigns.
8.16 Applicable Law. This Deed of Trust shall be governed by and construed
--------------
in accordance with the laws of the State of Tennessee.
8.17 Financial Statements. At the request of the Beneficiary, Grantor
--------------------
shall furnish to the Beneficiary, (a) within one hundred twenty (120) days
after the end of each fiscal year, financial statements of the Grantor as of the
close of such year, and (b) within ninety (90) days after the close of each
fiscal year, a detailed operating statement with respect to the Mortgaged
Property for the preceding year, reflecting, inter alia, total rents or income
----- ----
received or gross receipts from operations, together with a profit and loss
statement for such year and an occupancy report for the Mortgaged Property. If
required by Beneficiary, such statements shall be prepared by a certified public
accountant acceptable to Beneficiary; and in any event shall be prepared in
accordance with generally accepted accounting principles.
8.18 Venue of Actions. It is expressly understood and agreed that no suit
----------------
or action shall be commenced by the Grantor, or by any successor, personal
representative or assignee of Grantor, with respect to the indebtedness secured
hereby with respect to this Deed of Trust, or any of the other Letter of Credit
Documents, other than in a state court of competent jurisdiction in and for the
County of the State in which the principal place of business of the Bank is
situated, or in the United States District Court for the District in which the
principal place of business of the Bank is situated, and not elsewhere. Nothing
in this paragraph contained shall prohibit Bank from instituting suit in any
court of competent jurisdiction for the enforcement of its rights hereunder, in
the Reimbursement Agreement, or in any other Letter of Credit Document.
8.19 Waiver of Right to Trial By Jury. GRANTOR HEREBY EXPRESSLY WAIVES ANY
--------------------------------
RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a)
ARISING UNDER THIS INSTRUMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (b) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO THIS INSTRUMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO
OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING; AND FURTHER
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL
BE DECIDED BY COURT TRIAL WITHOUT A JURY,
- 18 -
<PAGE>
AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT TO THE WAIVER OF TRIAL
BY JURY.
IN WITNESS WHEREOF, Grantor has caused this Indenture to be executed by its
duly authorized officers, on this the day and year first above written.
ATTEST: MEMPHIS INTERNATIONAL MOTORSPORTS
CORPORATION
/s/ Gemma A. Bannon By: /s/ Christopher R. Pook
- --------------------------------- ------------------------------
Title: Corporate Secretary Title: President
--------------------------- ---------------------------
STATE OF California
---------------
COUNTY OF Los Angeles
--------------
Before me, Christopher Allen, a Notary Public in and for the State and
County aforesaid, personally appeared Chris Pook and Gemma Bannon, with whom I
am personally acquainted (or proved to me on the basis of satisfactory
evidence), and who, upon oath, acknowledged themselves to be the President and
Secretary, respectively, of MEMPHIS INTERNATIONAL MOTORSPORTS CORPORATION, the
within named bargainor, a corporation, and that they as such President and
Secretary, being duly authorized so to do, executed the foregoing instrument for
the purposes therein contained, by the said Chris Pook signing the name of the
corporation by himself as such President and by the said Gemma Bannon attesting
the same as such Secretary.
WITNESS my hand and seal at office, on this the 22 day of January, 1998.
/s/ Christopher Allen
--------------------------------
Notary Public
My Commission Expires:
[NOTARY SEAL]
12-25-99
- ---------------------
- 19 -
<PAGE>
EXHIBIT "A"
-----------
(Property Description)
[SEE ATTACHED]
A-1
<PAGE>
EXHIBIT "B"
-----------
(a) All stoves, ranges, refrigerators, dishwashers, clothes washers,
clothes dryers, disposals, all heating, plumbing, lighting, water heating,
incinerating, ventilating and air conditioning equipment, swimming pool
equipment, shades, awnings, blinds, drapes and draperies, linoleum, rugs
and carpeting, all furniture, furnishings, machinery, equipment, and
fixtures (whether or not so attached to the realty as to become a part
thereof) and all other tangible personal property of every kind and
character now or at any time hereafter located in or on the buildings and
improvements on the property described in EXHIBIT "A" attached hereto,
together with all substitutions, additions, and accessions to any and all
of the foregoing, and exchanges and replacements of any and all of the
foregoing;
(b) All rents, incomes, profits, revenues, royalties, bonuses,
rights, accounts, contract rights, general intangibles, and benefits under
any and all leases or tenancies now existing or hereafter created of the
real property described in EXHIBIT "A," any improvements thereon, or any
part thereof;
(c) All leases and subleases covering the property described in
EXHIBIT "A" or any portion thereof now or hereafter existing or entered
into, and all rights and interests thereunder, including, without
limitation, all cash or security deposits, advance rentals, guarantees and
deposits of similar nature;
(d) All judgments, awards of damages, and settlements hereafter made
as a result of or in lieu of any taking of said real property and
improvements, or any part thereof or interest therein under the power of
eminent domain, or for any damage (whether caused by such taking or
otherwise) to said real property or the improvements thereon or any part
thereof or interest therein, including any award for change of grade of
streets;
(e) All proceeds of hazard or other insurance policies maintained
with respect to any collateral described in subparagraph (a) above or with
respect to the improvements now or hereafter located on said real property
(whether or not First Tennessee Bank National Association is loss payee
thereof);
(f) All proceeds of any and all of the foregoing collateral. Although
proceeds are covered, First Tennessee Bank National Association does not
authorize the sale or other transfer of any of the collateral or the
transfer of any interest in the collateral;
in each case, whether now owned or hereafter acquired by Grantor (Debtor) and
howsoever the interest of Grantor (Debtor) therein may arise or appear (whether
by ownership, lease, security interest, claim, or otherwise).
NAME OF RECORD OWNER OF REAL PROPERTY DESCRIBED IN EXHIBIT "A":
MEMPHIS INTERNATIONAL MOTORSPORTS CORPORATION
B-1
<PAGE>
EXHIBIT 10.42
GUARANTY AGREEMENT
------------------
FOR VALUE RECEIVED, and in consideration of credit given or to be given,
advances made or to be made, or other financial accommodation from time to time
afforded or to be afforded to GATEWAY INTERNATIONAL MOTORSPORTS CORPORATION, an
Illinois corporation (hereinafter called the "Debtor"), by FIRST TENNESSEE BANK
NATIONAL ASSOCIATION, a national banking association organized and existing
under the laws of the United States, and having a place of business in Memphis,
Tennessee (hereinafter called the "Bank"), the undersigned, GRAND PRIX
ASSOCIATION OF LONG BEACH, INC. (hereinafter the "Guarantor"), hereby jointly
and severally (if more than one), for themselves, their heirs, executors,
administrators and successors absolutely and unconditionally guarantee(s) the
full and prompt payment to the Bank, at maturity (whether by acceleration or
otherwise) and at all times thereafter, of each and all of the following:
1. The indebtedness (and interest thereon) incurred under that
certain Reimbursement Agreement dated as of January 1, 1998, between Debtor
and Bank (the "Reimbursement Agreement") pursuant to which Bank has issued
its Irrevocable Standby Letter of Credit No. S983013 in the Stated Amount
of $2,501,825.00 (the "Letter of Credit"), said indebtedness and interest
being payable to the order of the Bank, at the offices of the Bank at 165
Madison Avenue, Memphis, Tennessee 38103, Attention: Metropolitan Division,
or at such other place as the Bank may designate in writing, being executed
by the Debtor, and being given for value received, said Reimbursement
Agreement and Letter of Credit being incorporated herein by reference as
fully and particularly as if set out verbatim herein; and
2. All obligations of Debtor pursuant to any and all renewals,
modifications, or extensions, in whole or in part, of the Reimbursement
Agreement and Letter of Credit; and
3. All obligations of the Debtor or Memphis International Motorsports
Corporation ("Motorsports") under and pursuant to any deed of trust,
mortgage, security agreement, assignment of rents and leases, or other
security document (collectively herein called "Security Documents") which
now or hereafter secures the payment of the indebtedness evidenced by the
Reimbursement Agreement and the Letter of Credit; and
4. All obligations of Debtor or Motorsports pursuant to any and all
renewals, modifications, or extensions, in whole or in part, of any of the
Security Documents;
together with all expenses, legal and/or otherwise (including court costs and
reasonable attorney's fees) incurred by the Bank in collecting or endeavoring to
collect the Indebtedness, or any part thereof, in protecting any collateral, and
in enforcing this Guaranty (all of which is hereinafter collectively referred to
as the "Indebtedness").
THIS GUARANTY SHALL BE A CONTINUING, ABSOLUTE AND UNCONDITIONAL GUARANTY,
and shall remain in full force and effect until the Indebtedness (and interest
thereon
<PAGE>
and expenses in connection therewith), and all renewals, modifications, or
extensions thereof, in whole or in part, shall have been fully paid and
satisfied and shall remain in full force and effect thereafter until written
notice of its discontinuance, addressed to 165 Madison Avenue, Memphis,
Tennessee 38103 Attn: Metropolitan Division, shall be actually received by the
Bank by faxed copy with originals to follow (the burden of proof of receipt by
the Bank of such notice being in all cases upon the Guarantor), and also until
any and all said indebtedness, or any extensions or renewals thereof, existing
before receipt of such notice, and expenses in connection therewith, shall be
fully paid. Regardless of when a renewal or extension of pre-termination debt
occurs (with or without adjustment of interest rate or other terms), the debt is
deemed to have been incurred prior to termination to the extent of the renewal
or extension, and to be fully covered by this Guaranty. The death, dissolution
or withdrawal of the Guarantor (or any of them, if more than one) shall not
terminate this Guaranty until notice of any such death, dissolution or
withdrawal, given as above provided, shall have actually been received by the
Bank, and until all of said indebtedness, or any extensions or renewals thereof,
existing before receipt of such notice shall be fully paid. And in the event of
any such death, dissolution or withdrawal and notice thereof to the Bank, this
Guaranty shall, notwithstanding, continue and remain in force against any
surviving Guarantor until discontinued as hereinabove provided.
The Bank is hereby expressly authorized to make from time to time, without
notice to anyone: any renewals, modifications or extensions, whether such
renewals, modifications or extensions be in whole or in part and without limit
as to the number of such extensions or of the renewal periods thereof, and
without notice to or further assent from the undersigned, sales, pledges,
surrenders, compromises, settlements, releases, indulgences, alterations,
substitutions, exchanges, changes in, modifications, or other dispositions
including, without limitation, cancellations, of all or any part of the
collateral pledged to secure the Indebtedness or any part of said Indebtedness,
either express or implied, or of any contracts or instruments evidencing any
thereof, or of any security or collateral therefor, and/or to take any security
for or other guaranties upon any of said Indebtedness; and the liability of the
Guarantor (or any of them, if more than one) shall not be in any manner
affected, diminished or impaired thereby, or by any lack of diligence, failure,
neglect or omission on the part of the Bank to make any demand or protest, or
give any notice of dishonor or default, or to realize upon or protect any of
said Indebtedness, or any collateral or security therefor, or to exercise any
lien upon or right of appropriation or setoff of any moneys, accounts, credits,
or property of said Debtor, possessed by the Bank, towards the liquidation of
said Indebtedness, or by any application of payments or credits thereon. The
Bank shall have the exclusive right to determine how, when and what application
of payments and credits, if any, shall be made on said Indebtedness, or any part
thereof, and shall be under no obligation, at any time, to first resort to, make
demand on, file a claim against, or exhaust its remedies against the Debtor, or
any one or more of the Guarantors, or other persons or corporations, their
properties or estates, or to resort to or exhaust its remedies against, any
collateral, security, property, liens or other rights whatsoever. It is
expressly agreed that the Bank may at any time make demand for payment on, or
bring suit against the Guarantor (or any of them, if more than one), or any
other guarantors, may compound with the Guarantor or any other guarantor for
such sums or on such terms as Bank may see fit and release the Guarantor (or any
of them, if more than one) or any other guarantor from all further liability to
the Bank, without thereby impairing the rights of the Bank in any respect to
demand, sue for and collect the balance of the Indebtedness from any guarantor
not so released; and that any claims against Debtor, against any
-2-
<PAGE>
other guarantor, or against any collateral, accruing to the Guarantor (or any of
them, if more than one) by reason of payments made hereunder shall be in all
respects junior and subordinate to any obligation then or subsequently owed by
the Debtor or by such other guarantor to the Bank. In addition, the liability of
the Guarantors (or each of them, if more than one) shall not be affected by any
lack of validity or enforceability of the guaranteed debt. As security for the
undertakings and obligations of the Guarantor hereunder, the Guarantor (or each
of them, if more than one) expressly grants and gives to the Bank a right of
immediate setoff, without demand or notice, of the balance of every deposit
account, now or at any time hereafter existing, of the Guarantor (or each of
them, if more than one) with the Bank, and a general lien upon, and security
interest in all money, negotiable instruments, commercial paper, notes, bonds,
stocks, credits and/or choses in action, or any interest therein, and any other
property, rights, and interests of the Guarantor (or each of them, if more than
one) or any evidence thereof, which have or any time shall come into the
possession, custody, or control of the Bank, and, in the event of default
hereunder, the Bank may sell or cause to be sold at public or private sale in
any manner which may be lawful, for cash or credit and upon such terms as the
Bank may see fit, and (except as may be otherwise expressly provided by the
Uniform Commercial Code, or other applicable law) without demand or notice to
the Guarantor (or each of them, if more than one), all or any of such security,
and the Bank (unless prohibited by the Uniform Commercial Code from so doing) or
any other person may purchase such property, rights or interests so sold and
thereafter hold the same free of any claim or right of whatsoever kind,
including any right or equity or redemption, of the Guarantor (or each of them,
if more than one), such demand, notice, right or equity of redemption being
hereby expressly waived and released.
In the event of the death, incompetency, dissolution, liquidation,
insolvency (however evidenced) of the Debtor, or institution of bankruptcy or
receivership proceedings by the Debtor, or in the event that any involuntary
bankruptcy or receivership proceedings filed against the Debtor shall not be
dismissed within thirty (30) days following the institution of such proceedings,
then and in any such event all of the Indebtedness shall, for the purposes of
this Guaranty, and at the option of the Bank, immediately become due and payable
from the Guarantor; and, in such event, any and all sums or payments of any
nature which may be or become due and payable by the Debtor to the undersigned
are hereby assigned to the Bank, and shall be collectible by the Bank, without
necessity for other authority than this instrument, until the Indebtedness shall
be fully paid and discharged, but such collection by the Bank shall not in any
respect affect, impair or diminish any other rights of the Bank hereunder.
The granting of credit from time to time by the Bank to the Debtor, in
excess of the amount to which right of recovery under this Guaranty is limited
and without notice to the Guarantor (or any of them, if more than one), is
hereby expressly authorized and shall in no way affect or impair this Guaranty;
and, in the event that the Indebtedness of the Debtor to the Bank shall so
exceed the amount to which this Guaranty is limited, any payment by the Debtor
or any collections or recovery by the Bank from any sources other than this
Guaranty may first be applied by the Bank to any portion of the Indebtedness
which exceeds the limits of this Guaranty.
The Guarantor (or each of them, if more than one) will not exercise any
rights that Guarantor (or any of them, if more than one) may acquire by way of
subrogation under this Guaranty, by any payment made hereunder or otherwise,
until all of the Indebtedness shall have been paid in full. If
-3-
<PAGE>
any amount shall be paid to the Guarantor (or any of them, if more than one) on
account of such subrogation rights at any time when all the Indebtedness shall
not have been paid in full, such amount shall be held in trust for the benefit
of the Bank and shall forthwith be paid to the Bank to be credited and applied
upon the Indebtedness.
NOTWITHSTANDING ANY PROVISION OF THE PRECEDING PARAGRAPH TO THE CONTRARY,
IF AT ANY TIME THE GUARANTOR (OR ANY OF THEM, IF MORE THAN ONE) IS OR BECOMES AN
"INSIDER" (AS DEFINED FROM TIME TO TIME IN SECTION 101 OF THE FEDERAL BANKRUPTCY
CODE) WITH RESPECT TO THE DEBTOR, THE GUARANTOR (OR EACH OF THEM, IF MORE THAN
ONE) WAIVES ANY AND ALL RIGHTS OF SUBROGATION AGAINST THE DEBTOR WITH RESPECT TO
THIS GUARANTY, WHETHER SUCH RIGHTS ARISE UNDER AN EXPRESS OR IMPLIED CONTRACT OR
BY OPERATION OF LAW, IT BEING THE INTENTION OF THE PARTIES THAT, IF ANY
GUARANTOR IS AN "INSIDER" WITH RESPECT TO THE DEBTOR, THE GUARANTOR SHALL NOT BE
DEEMED TO BE A "CREDITOR" (AS DEFINED IN SECTION 101 OF THE FEDERAL BANKRUPTCY
CODE) OF THE DEBTOR, BY REASON OF THE EXISTENCE OF THIS GUARANTY IN THE EVENT
THAT THE DEBTOR BECOMES A DEBTOR IN ANY PROCEEDING UNDER THE FEDERAL BANKRUPTCY
CODE.
Notwithstanding any other provision of this Guaranty to the contrary, if
the obligations of the Guarantor hereunder would otherwise be held or determined
by a court of competent jurisdiction in any action or proceeding involving any
state corporate law or any state or Federal bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other law affecting the
rights of creditors generally, to be void, invalid or unenforceable to any
extent on account of the amount of the Guarantor's (or each of them, if more
than one) liability under this Guaranty, then notwithstanding any other
provision of this Guaranty to the contrary, the amount of such liability shall,
without any further action by the Guarantor (or each of them, if more than one)
or any other person, be automatically limited and reduced to the highest amount
which is valid and enforceable as determined in such action or proceeding.
The Bank may without any notice whatsoever to anyone, sell, assign or
transfer all or any part of said Indebtedness; and in that event each and every
immediate and successive assignee, transferee or holder of all or any part of
said Indebtedness shall have the right to enforce this Guaranty, by suit or
otherwise, for the benefit of such assignee, transferee or holder, as fully as
though such assignee, transferee or holder were herein by name given such
rights, powers and benefits; but the Bank shall have an unimpaired right, prior
and superior to that of any said assignee, transferee or holder, to enforce this
Guaranty for the benefit of the Bank, as to so much of said Indebtedness that
has not been sold, assigned or transferred.
No act of commission or omission of any kind, or at any time, on the part
of the Bank in respect of any matter whatsoever shall in any way affect or
impair this Guaranty. This Guaranty is in addition to and not in substitution
for or discharge of any other Guaranty held by the Bank. The Guarantor (or each
of them, if more than one) waives any rights of action Guarantor (or any of
them, if more than one) might have against the Bank because of the exercise by
the Bank in any manner howsoever of any rights granted to the Bank herein.
This Guaranty contains the entire agreement between the parties and every
part thereof shall be binding upon the Guarantor (or each of them, if more than
one), Guarantor's successors and
-4-
<PAGE>
assigns, as fully as though everywhere specifically mentioned, and shall inure
to the benefit of the Bank, and its successors and assigns, and shall be
construed according to the laws of the State of Tennessee, in which state it is
accepted by the Bank.
If any provision hereof is invalid or unenforceable, the remaining
provisions hereof shall not be affected by such invalidity or unenforceability.
Each term and provision contained herein shall, however, be valid and
enforceable to the fullest extent permitted by applicable law.
The Guarantor (or each of them, if more than one) acknowledges that this
Guaranty Agreement is and shall be effective against such Guarantor upon
execution by such Guarantor (regardless of whether any other person named herein
as Guarantor shall sign), and delivery hereof to the Bank, or its agent; and
that it shall not be necessary for the Bank to execute any acceptance hereof or
otherwise to signify or express its acceptance hereof.
ALL OF THE PARTIES HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BROUGHT BY ANY OF THE PARTIES AGAINST THE OTHER ON ANY MATTER
WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT OR UNDER
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED (OR WHICH MAY BE
DELIVERED IN THE FUTURE) IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING
RELATIONSHIP BETWEEN THE PARTIES TO THIS AGREEMENT.
IN WITNESS WHEREOF, the Guarantor (or each of them, if more than one) has
caused this Guaranty Agreement to be executed by its duly authorized officers on
this the ____ day of January, 1998.
ATTEST: GRAND PRIX ASSOCIATION OF LONG
BEACH, INC.
_______________________________ By:____________________________
Title:_________________________ Title:_________________________
-5-
<PAGE>
STATE OF ______________
COUNTY OF _____________
Before me, ______________________________, a Notary Public in and for the
State and County aforesaid, personally appeared ___________________ and
______________________, with whom I am personally acquainted (or proved to me on
the basis of satisfactory evidence), and who, upon oath, acknowledged himself
(or herself) to be the ______________________ and _______________, respectively,
of GRAND PRIX ASSOCIATION OF LONG BEACH, INC., the within-named bargainor, a
corporation, and that they as such ________________________ and _______________,
being duly authorized so to do, executed the foregoing instrument for the
purposes therein contained, by signing the name of the corporation by themselves
as such ____________________ and _______________.
WITNESS my hand and seal at office, on this the ____ day of January, 1998.
______________________________________
Notary Public
My Commission Expires:
______________________
-6-
<PAGE>
EXHIBIT 10.43
GUARANTY AGREEMENT
------------------
FOR VALUE RECEIVED, and in consideration of credit given or to be given,
advances made or to be made, or other financial accommodation from time to time
afforded or to be afforded to GATEWAY INTERNATIONAL MOTORSPORTS CORPORATION, an
Illinois corporation (hereinafter called the "Debtor"), by FIRST TENNESSEE BANK
NATIONAL ASSOCIATION, a national banking association organized and existing
under the laws of the United States, and having a place of business in Memphis,
Tennessee (hereinafter called the "Bank"), the undersigned, GATEWAY
INTERNATIONAL SERVICES CORPORATION (hereinafter the "Guarantor"), hereby jointly
and severally (if more than one), for themselves, their heirs, executors,
administrators and successors absolutely and unconditionally guarantee(s) the
full and prompt payment to the Bank, at maturity (whether by acceleration or
otherwise) and at all times thereafter, of each and all of the following:
1. The indebtedness (and interest thereon) incurred under that
certain Reimbursement Agreement dated as of January 1, 1998, between Debtor
and Bank (the "Reimbursement Agreement") pursuant to which Bank has issued
its Irrevocable Standby Letter of Credit No. S983013 in the Stated Amount
of $2,501,825.00 (the "Letter of Credit"), said indebtedness and interest
being payable to the order of the Bank, at the offices of the Bank at 165
Madison Avenue, Memphis, Tennessee 38103, Attention: Metropolitan Division,
or at such other place as the Bank may designate in writing, being executed
by the Debtor, and being given for value received, said Reimbursement
Agreement and Letter of Credit being incorporated herein by reference as
fully and particularly as if set out verbatim herein; and
2. All obligations of Debtor pursuant to any and all renewals,
modifications, or extensions, in whole or in part, of the Reimbursement
Agreement and Letter of Credit; and
3. All obligations of the Debtor or Memphis International Motorsports
Corporation ("Motorsports") under and pursuant to any deed of trust,
mortgage, security agreement, assignment of rents and leases, or other
security document (collectively herein called "Security Documents") which
now or hereafter secures the payment of the indebtedness evidenced by the
Reimbursement Agreement and the Letter of Credit; and
4. All obligations of Debtor or Motorsports pursuant to any and all
renewals, modifications, or extensions, in whole or in part, of any of the
Security Documents;
together with all expenses, legal and/or otherwise (including court costs and
reasonable attorney's fees) incurred by the Bank in collecting or endeavoring to
collect the Indebtedness, or any part thereof, in protecting any collateral, and
in enforcing this Guaranty (all of which is hereinafter collectively referred to
as the "Indebtedness").
THIS GUARANTY SHALL BE A CONTINUING, ABSOLUTE AND UNCONDITIONAL GUARANTY,
and shall remain in full force and effect until the Indebtedness (and interest
thereon
<PAGE>
and expenses in connection therewith), and all renewals, modifications,
or extensions thereof, in whole or in part, shall have been fully paid and
satisfied and shall remain in full force and effect thereafter until written
notice of its discontinuance, addressed to 165 Madison Avenue, Memphis,
Tennessee 38103 Attn: Metropolitan Division, shall be actually received by the
Bank by faxed copy with originals to follow (the burden of proof of receipt by
the Bank of such notice being in all cases upon the Guarantor), and also until
any and all said indebtedness, or any extensions or renewals thereof, existing
before receipt of such notice, and expenses in connection therewith, shall be
fully paid. Regardless of when a renewal or extension of pre-termination debt
occurs (with or without adjustment of interest rate or other terms), the debt is
deemed to have been incurred prior to termination to the extent of the renewal
or extension, and to be fully covered by this Guaranty. The death, dissolution
or withdrawal of the Guarantor (or any of them, if more than one) shall not
terminate this Guaranty until notice of any such death, dissolution or
withdrawal, given as above provided, shall have actually been received by the
Bank, and until all of said indebtedness, or any extensions or renewals thereof,
existing before receipt of such notice shall be fully paid. And in the event of
any such death, dissolution or withdrawal and notice thereof to the Bank, this
Guaranty shall, notwithstanding, continue and remain in force against any
surviving Guarantor until discontinued as hereinabove provided.
The Bank is hereby expressly authorized to make from time to time, without
notice to anyone: any renewals, modifications or extensions, whether such
renewals, modifications or extensions be in whole or in part and without limit
as to the number of such extensions or of the renewal periods thereof, and
without notice to or further assent from the undersigned, sales, pledges,
surrenders, compromises, settlements, releases, indulgences, alterations,
substitutions, exchanges, changes in, modifications, or other dispositions
including, without limitation, cancellations, of all or any part of the
collateral pledged to secure the Indebtedness or any part of said Indebtedness,
either express or implied, or of any contracts or instruments evidencing any
thereof, or of any security or collateral therefor, and/or to take any security
for or other guaranties upon any of said Indebtedness; and the liability of the
Guarantor (or any of them, if more than one) shall not be in any manner
affected, diminished or impaired thereby, or by any lack of diligence, failure,
neglect or omission on the part of the Bank to make any demand or protest, or
give any notice of dishonor or default, or to realize upon or protect any of
said Indebtedness, or any collateral or security therefor, or to exercise any
lien upon or right of appropriation or setoff of any moneys, accounts, credits,
or property of said Debtor, possessed by the Bank, towards the liquidation of
said Indebtedness, or by any application of payments or credits thereon. The
Bank shall have the exclusive right to determine how, when and what application
of payments and credits, if any, shall be made on said Indebtedness, or any part
thereof, and shall be under no obligation, at any time, to first resort to, make
demand on, file a claim against, or exhaust its remedies against the Debtor, or
any one or more of the Guarantors, or other persons or corporations, their
properties or estates, or to resort to or exhaust its remedies against, any
collateral, security, property, liens or other rights whatsoever. It is
expressly agreed that the Bank may at any time make demand for payment on, or
bring suit against the Guarantor (or any of them, if more than one), or any
other guarantors, may compound with the Guarantor or any other guarantor for
such sums or on such terms as Bank may see fit and release the Guarantor (or any
of them, if more than one) or any other guarantor from all further liability to
the Bank, without thereby impairing the rights of the Bank in any respect to
demand, sue for and collect the balance of the Indebtedness from any guarantor
not so released; and that any claims against Debtor, against any
-2-
<PAGE>
other guarantor, or against any collateral, accruing to the Guarantor (or any of
them, if more than one) by reason of payments made hereunder shall be in all
respects junior and subordinate to any obligation then or subsequently owed by
the Debtor or by such other guarantor to the Bank. In addition, the liability of
the Guarantors (or each of them, if more than one) shall not be affected by any
lack of validity or enforceability of the guaranteed debt. As security for the
undertakings and obligations of the Guarantor hereunder, the Guarantor (or each
of them, if more than one) expressly grants and gives to the Bank a right of
immediate setoff, without demand or notice, of the balance of every deposit
account, now or at any time hereafter existing, of the Guarantor (or each of
them, if more than one) with the Bank, and a general lien upon, and security
interest in all money, negotiable instruments, commercial paper, notes, bonds,
stocks, credits and/or choses in action, or any interest therein, and any other
property, rights, and interests of the Guarantor (or each of them, if more than
one) or any evidence thereof, which have or any time shall come into the
possession, custody, or control of the Bank, and, in the event of default
hereunder, the Bank may sell or cause to be sold at public or private sale in
any manner which may be lawful, for cash or credit and upon such terms as the
Bank may see fit, and (except as may be otherwise expressly provided by the
Uniform Commercial Code, or other applicable law) without demand or notice to
the Guarantor (or each of them, if more than one), all or any of such security,
and the Bank (unless prohibited by the Uniform Commercial Code from so doing) or
any other person may purchase such property, rights or interests so sold and
thereafter hold the same free of any claim or right of whatsoever kind,
including any right or equity or redemption, of the Guarantor (or each of them,
if more than one), such demand, notice, right or equity of redemption being
hereby expressly waived and released.
In the event of the death, incompetency, dissolution, liquidation,
insolvency (however evidenced) of the Debtor, or institution of bankruptcy or
receivership proceedings by the Debtor, or in the event that any involuntary
bankruptcy or receivership proceedings filed against the Debtor shall not be
dismissed within thirty (30) days following the institution of such proceedings,
then and in any such event all of the Indebtedness shall, for the purposes of
this Guaranty, and at the option of the Bank, immediately become due and payable
from the Guarantor; and, in such event, any and all sums or payments of any
nature which may be or become due and payable by the Debtor to the undersigned
are hereby assigned to the Bank, and shall be collectible by the Bank, without
necessity for other authority than this instrument, until the Indebtedness shall
be fully paid and discharged, but such collection by the Bank shall not in any
respect affect, impair or diminish any other rights of the Bank hereunder.
The granting of credit from time to time by the Bank to the Debtor, in
excess of the amount to which right of recovery under this Guaranty is limited
and without notice to the Guarantor (or any of them, if more than one), is
hereby expressly authorized and shall in no way affect or impair this Guaranty;
and, in the event that the Indebtedness of the Debtor to the Bank shall so
exceed the amount to which this Guaranty is limited, any payment by the Debtor
or any collections or recovery by the Bank from any sources other than this
Guaranty may first be applied by the Bank to any portion of the Indebtedness
which exceeds the limits of this Guaranty.
The Guarantor (or each of them, if more than one) will not exercise any
rights that Guarantor (or any of them, if more than one) may acquire by way of
subrogation under this Guaranty, by any payment made hereunder or otherwise,
until all of the Indebtedness shall have been paid in full. If any amount shall
be paid to the Guarantor (or any of them, if more than one) on account of such
-3-
<PAGE>
subrogation rights at any time when all the Indebtedness shall not have been
paid in full, such amount shall be held in trust for the benefit of the Bank and
shall forthwith be paid to the Bank to be credited and applied upon the
Indebtedness.
NOTWITHSTANDING ANY PROVISION OF THE PRECEDING PARAGRAPH TO THE CONTRARY,
IF AT ANY TIME THE GUARANTOR (OR ANY OF THEM, IF MORE THAN ONE) IS OR BECOMES AN
"INSIDER" (AS DEFINED FROM TIME TO TIME IN SECTION 101 OF THE FEDERAL BANKRUPTCY
CODE) WITH RESPECT TO THE DEBTOR, THE GUARANTOR (OR EACH OF THEM, IF MORE THAN
ONE) WAIVES ANY AND ALL RIGHTS OF SUBROGATION AGAINST THE DEBTOR WITH RESPECT TO
THIS GUARANTY, WHETHER SUCH RIGHTS ARISE UNDER AN EXPRESS OR IMPLIED CONTRACT OR
BY OPERATION OF LAW, IT BEING THE INTENTION OF THE PARTIES THAT, IF ANY
GUARANTOR IS AN "INSIDER" WITH RESPECT TO THE DEBTOR, THE GUARANTOR SHALL NOT BE
DEEMED TO BE A "CREDITOR" (AS DEFINED IN SECTION 101 OF THE FEDERAL BANKRUPTCY
CODE) OF THE DEBTOR, BY REASON OF THE EXISTENCE OF THIS GUARANTY IN THE EVENT
THAT THE DEBTOR BECOMES A DEBTOR IN ANY PROCEEDING UNDER THE FEDERAL BANKRUPTCY
CODE.
Notwithstanding any other provision of this Guaranty to the contrary, if
the obligations of the Guarantor hereunder would otherwise be held or determined
by a court of competent jurisdiction in any action or proceeding involving any
state corporate law or any state or Federal bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other law affecting the
rights of creditors generally, to be void, invalid or unenforceable to any
extent on account of the amount of the Guarantor's (or each of them, if more
than one) liability under this Guaranty, then notwithstanding any other
provision of this Guaranty to the contrary, the amount of such liability shall,
without any further action by the Guarantor (or each of them, if more than one)
or any other person, be automatically limited and reduced to the highest amount
which is valid and enforceable as determined in such action or proceeding.
The Bank may without any notice whatsoever to anyone, sell, assign or
transfer all or any part of said Indebtedness; and in that event each and every
immediate and successive assignee, transferee or holder of all or any part of
said Indebtedness shall have the right to enforce this Guaranty, by suit or
otherwise, for the benefit of such assignee, transferee or holder, as fully as
though such assignee, transferee or holder were herein by name given such
rights, powers and benefits; but the Bank shall have an unimpaired right, prior
and superior to that of any said assignee, transferee or holder, to enforce this
Guaranty for the benefit of the Bank, as to so much of said Indebtedness that
has not been sold, assigned or transferred.
No act of commission or omission of any kind, or at any time, on the part
of the Bank in respect of any matter whatsoever shall in any way affect or
impair this Guaranty. This Guaranty is in addition to and not in substitution
for or discharge of any other Guaranty held by the Bank. The Guarantor (or each
of them, if more than one) waives any rights of action Guarantor (or any of
them, if more than one) might have against the Bank because of the exercise by
the Bank in any manner howsoever of any rights granted to the Bank herein.
This Guaranty contains the entire agreement between the parties and every
part thereof shall be binding upon the Guarantor (or each of them, if more than
one), Guarantor's successors and assigns, as fully as though everywhere
specifically mentioned, and shall inure to the benefit of the
-4-
<PAGE>
Bank, and its successors and assigns, and shall be construed according to the
laws of the State of Tennessee, in which state it is accepted by the Bank.
If any provision hereof is invalid or unenforceable, the remaining
provisions hereof shall not be affected by such invalidity or unenforceability.
Each term and provision contained herein shall, however, be valid and
enforceable to the fullest extent permitted by applicable law.
The Guarantor (or each of them, if more than one) acknowledges that this
Guaranty Agreement is and shall be effective against such Guarantor upon
execution by such Guarantor (regardless of whether any other person named herein
as Guarantor shall sign), and delivery hereof to the Bank, or its agent; and
that it shall not be necessary for the Bank to execute any acceptance hereof or
otherwise to signify or express its acceptance hereof.
ALL OF THE PARTIES HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BROUGHT BY ANY OF THE PARTIES AGAINST THE OTHER ON ANY MATTER
WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT OR UNDER
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED (OR WHICH MAY BE
DELIVERED IN THE FUTURE) IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING
RELATIONSHIP BETWEEN THE PARTIES TO THIS AGREEMENT.
IN WITNESS WHEREOF, the Guarantor (or each of them, if more than one) has
caused this Guaranty Agreement to be executed by its duly authorized officers on
this the 22 day of January, 1998.
ATTEST: GATEWAY INTERNATIONAL SERVICES CORPORATION
/s/ Gemma A. Bannon By: /s/ James P. Michaelian
- ------------------------------ --------------------------------------
Title: Corporate Secretary Title: Chief Operating Officer
------------------------ -----------------------------------
-5-
<PAGE>
STATE OF California
----------------
COUNTY OF Los Angeles
---------------
Before me, Christopher Allen, a Notary Public in and for the State and
County aforesaid, personally appeared Jim Michaelian and Gemma Bannon, with whom
I am personally acquainted (or proved to me on the basis of satisfactory
evidence), and who, upon oath, acknowledged himself (or herself) to be the
President and Secretary, respectively, of GATEWAY INTERNATIONAL SERVICES
CORPORATION, the within-named bargainor, a corporation, and that they as such
President and Secretary, being duly authorized so to do, executed the foregoing
instrument for the purposes therein contained, by signing the name of the
corporation by themselves as such President and Secretary.
WITNESS my hand and seal at office, on this the 22 day of January, 1998.
/s/ Christopher Allen
-------------------------------------------
Notary Public
My Commission Expires:
[NOTARY STAMP]
12-25-99
- ----------------------
-6-
<PAGE>
EXHIBIT 10.44
GUARANTY AGREEMENT
------------------
FOR VALUE RECEIVED, and in consideration of credit given or to be given,
advances made or to be made, or other financial accommodation from time to time
afforded or to be afforded to GATEWAY INTERNATIONAL MOTORSPORTS CORPORATION, an
Illinois corporation (hereinafter called the "Debtor"), by FIRST TENNESSEE BANK
NATIONAL ASSOCIATION, a national banking association organized and existing
under the laws of the United States, and having a place of business in Memphis,
Tennessee (hereinafter called the "Bank"), the undersigned, MEMPHIS
INTERNATIONAL MOTORSPORTS CORPORATION (hereinafter the "Guarantor"), hereby
jointly and severally (if more than one), for themselves, their heirs,
executors, administrators and successors absolutely and unconditionally
guarantee(s) the full and prompt payment to the Bank, at maturity (whether by
acceleration or otherwise) and at all times thereafter, of each and all of the
following:
1. The indebtedness (and interest thereon) incurred under that
certain Reimbursement Agreement dated as of January 1, 1998, between Debtor
and Bank (the "Reimbursement Agreement") pursuant to which Bank has issued
its Irrevocable Standby Letter of Credit No. S983013 in the Stated Amount
of $2,501,825.00 (the "Letter of Credit"), said indebtedness and interest
being payable to the order of the Bank, at the offices of the Bank at 165
Madison Avenue, Memphis, Tennessee 38103, Attention: Metropolitan Division,
or at such other place as the Bank may designate in writing, being executed
by the Debtor, and being given for value received, said Reimbursement
Agreement and Letter of Credit being incorporated herein by reference as
fully and particularly as if set out verbatim herein; and
2. All obligations of Debtor pursuant to any and all renewals,
modifications, or extensions, in whole or in part, of the Reimbursement
Agreement and Letter of Credit; and
3. All obligations of the Debtor or Memphis International Motorsports
Corporation ("Motorsports") under and pursuant to any deed of trust,
mortgage, security agreement, assignment of rents and leases, or other
security document (collectively herein called "Security Documents") which
now or hereafter secures the payment of the indebtedness evidenced by the
Reimbursement Agreement and the Letter of Credit; and
4. All obligations of Debtor or Motorsports pursuant to any and all
renewals, modifications, or extensions, in whole or in part, of any of the
Security Documents;
together with all expenses, legal and/or otherwise (including court costs and
reasonable attorney's fees) incurred by the Bank in collecting or endeavoring to
collect the Indebtedness, or any part thereof, in protecting any collateral, and
in enforcing this Guaranty (all of which is hereinafter collectively referred to
as the "Indebtedness").
THIS GUARANTY SHALL BE A CONTINUING, ABSOLUTE AND UNCONDITIONAL GUARANTY,
and shall remain in full force and effect until the Indebtedness (and interest
thereon
-1-
<PAGE>
and expenses in connection therewith), and all renewals, modifications, or
extensions thereof, in whole or in part, shall have been fully paid and
satisfied and shall remain in full force and effect thereafter until written
notice of its discontinuance, addressed to 165 Madison Avenue, Memphis,
Tennessee 38103 Attn: Metropolitan Division, shall be actually received by the
Bank by faxed copy with originals to follow (the burden of proof of receipt by
the Bank of such notice being in all cases upon the Guarantor), and also until
any and all said indebtedness, or any extensions or renewals thereof, existing
before receipt of such notice, and expenses in connection therewith, shall be
fully paid. Regardless of when a renewal or extension of pre-termination debt
occurs (with or without adjustment of interest rate or other terms), the debt is
deemed to have been incurred prior to termination to the extent of the renewal
or extension, and to be fully covered by this Guaranty. The death, dissolution
or withdrawal of the Guarantor (or any of them, if more than one) shall not
terminate this Guaranty until notice of any such death, dissolution or
withdrawal, given as above provided, shall have actually been received by the
Bank, and until all of said indebtedness, or any extensions or renewals thereof,
existing before receipt of such notice shall be fully paid. And in the event of
any such death, dissolution or withdrawal and notice thereof to the Bank, this
Guaranty shall, notwithstanding, continue and remain in force against any
surviving Guarantor until discontinued as hereinabove provided.
The Bank is hereby expressly authorized to make from time to time, without
notice to anyone: any renewals, modifications or extensions, whether such
renewals, modifications or extensions be in whole or in part and without limit
as to the number of such extensions or of the renewal periods thereof, and
without notice to or further assent from the undersigned, sales, pledges,
surrenders, compromises, settlements, releases, indulgences, alterations,
substitutions, exchanges, changes in, modifications, or other dispositions
including, without limitation, cancellations, of all or any part of the
collateral pledged to secure the Indebtedness or any part of said Indebtedness,
either express or implied, or of any contracts or instruments evidencing any
thereof, or of any security or collateral therefor, and/or to take any security
for or other guaranties upon any of said Indebtedness; and the liability of the
Guarantor (or any of them, if more than one) shall not be in any manner
affected, diminished or impaired thereby, or by any lack of diligence, failure,
neglect or omission on the part of the Bank to make any demand or protest, or
give any notice of dishonor or default, or to realize upon or protect any of
said Indebtedness, or any collateral or security therefor, or to exercise any
lien upon or right of appropriation or setoff of any moneys, accounts, credits,
or property of said Debtor, possessed by the Bank, towards the liquidation of
said Indebtedness, or by any application of payments or credits thereon. The
Bank shall have the exclusive right to determine how, when and what application
of payments and credits, if any, shall be made on said Indebtedness, or any part
thereof, and shall be under no obligation, at any time, to first resort to, make
demand on, file a claim against, or exhaust its remedies against the Debtor, or
any one or more of the Guarantors, or other persons or corporations, their
properties or estates, or to resort to or exhaust its remedies against, any
collateral, security, property, liens or other rights whatsoever. It is
expressly agreed that the Bank may at any time make demand for payment on, or
bring suit against the Guarantor (or any of them, if more than one), or any
other guarantors, may compound with the Guarantor or any other guarantor for
such sums or on such terms as Bank may see fit and release the Guarantor (or any
of them, if more than one) or any other guarantor from all further liability to
the Bank, without thereby impairing the rights of the Bank in any respect to
demand, sue for and collect the balance of the Indebtedness from any guarantor
not so released; and that any claims against Debtor, against any
-2-
<PAGE>
other guarantor, or against any collateral, accruing to the Guarantor (or any of
them, if more than one) by reason of payments made hereunder shall be in all
respects junior and subordinate to any obligation then or subsequently owed by
the Debtor or by such other guarantor to the Bank. In addition, the liability of
the Guarantors (or each of them, if more than one) shall not be affected by any
lack of validity or enforceability of the guaranteed debt. As security for the
undertakings and obligations of the Guarantor hereunder, the Guarantor (or each
of them, if more than one) expressly grants and gives to the Bank a right of
immediate setoff, without demand or notice, of the balance of every deposit
account, now or at any time hereafter existing, of the Guarantor (or each of
them, if more than one) with the Bank, and a general lien upon, and security
interest in all money, negotiable instruments, commercial paper, notes, bonds,
stocks, credits and/or choses in action, or any interest therein, and any other
property, rights, and interests of the Guarantor (or each of them, if more than
one) or any evidence thereof, which have or any time shall come into the
possession, custody, or control of the Bank, and, in the event of default
hereunder, the Bank may sell or cause to be sold at public or private sale in
any manner which may be lawful, for cash or credit and upon such terms as the
Bank may see fit, and (except as may be otherwise expressly provided by the
Uniform Commercial Code, or other applicable law) without demand or notice to
the Guarantor (or each of them, if more than one), all or any of such security,
and the Bank (unless prohibited by the Uniform Commercial Code from so doing) or
any other person may purchase such property, rights or interests so sold and
thereafter hold the same free of any claim or right of whatsoever kind,
including any right or equity or redemption, of the Guarantor (or each of them,
if more than one), such demand, notice, right or equity of redemption being
hereby expressly waived and released.
In the event of the death, incompetency, dissolution, liquidation,
insolvency (however evidenced) of the Debtor, or institution of bankruptcy or
receivership proceedings by the Debtor, or in the event that any involuntary
bankruptcy or receivership proceedings filed against the Debtor shall not be
dismissed within thirty (30) days following the institution of such proceedings,
then and in any such event all of the Indebtedness shall, for the purposes of
this Guaranty, and at the option of the Bank, immediately become due and payable
from the Guarantor; and, in such event, any and all sums or payments of any
nature which may be or become due and payable by the Debtor to the undersigned
are hereby assigned to the Bank, and shall be collectible by the Bank, without
necessity for other authority than this instrument, until the Indebtedness shall
be fully paid and discharged, but such collection by the Bank shall not in any
respect affect, impair or diminish any other rights of the Bank hereunder.
The granting of credit from time to time by the Bank to the Debtor, in
excess of the amount to which right of recovery under this Guaranty is limited
and without notice to the Guarantor (or any of them, if more than one), is
hereby expressly authorized and shall in no way affect or impair this Guaranty;
and, in the event that the Indebtedness of the Debtor to the Bank shall so
exceed the amount to which this Guaranty is limited, any payment by the Debtor
or any collections or recovery by the Bank from any sources other than this
Guaranty may first be applied by the Bank to any portion of the Indebtedness
which exceeds the limits of this Guaranty.
The Guarantor (or each of them, if more than one) will not exercise any
rights that Guarantor (or any of them, if more than one) may acquire by way of
subrogation under this Guaranty, by any payment made hereunder or otherwise,
until all of the Indebtedness shall have been paid in full. If
-3-
<PAGE>
any amount shall be paid to the Guarantor (or any of them, if more than one) on
account of such subrogation rights at any time when all the Indebtedness shall
not have been paid in full, such amount shall be held in trust for the benefit
of the Bank and shall forthwith be paid to the Bank to be credited and applied
upon the Indebtedness.
NOTWITHSTANDING ANY PROVISION OF THE PRECEDING PARAGRAPH TO THE CONTRARY,
IF AT ANY TIME THE GUARANTOR (OR ANY OF THEM, IF MORE THAN ONE) IS OR BECOMES AN
"INSIDER" (AS DEFINED FROM TIME TO TIME IN SECTION 101 OF THE FEDERAL BANKRUPTCY
CODE) WITH RESPECT TO THE DEBTOR, THE GUARANTOR (OR EACH OF THEM, IF MORE THAN
ONE) WAIVES ANY AND ALL RIGHTS OF SUBROGATION AGAINST THE DEBTOR WITH RESPECT TO
THIS GUARANTY, WHETHER SUCH RIGHTS ARISE UNDER AN EXPRESS OR IMPLIED CONTRACT OR
BY OPERATION OF LAW, IT BEING THE INTENTION OF THE PARTIES THAT, IF ANY
GUARANTOR IS AN "INSIDER" WITH RESPECT TO THE DEBTOR, THE GUARANTOR SHALL NOT BE
DEEMED TO BE A "CREDITOR" (AS DEFINED IN SECTION 101 OF THE FEDERAL BANKRUPTCY
CODE) OF THE DEBTOR, BY REASON OF THE EXISTENCE OF THIS GUARANTY IN THE EVENT
THAT THE DEBTOR BECOMES A DEBTOR IN ANY PROCEEDING UNDER THE FEDERAL BANKRUPTCY
CODE.
Notwithstanding any other provision of this Guaranty to the contrary, if
the obligations of the Guarantor hereunder would otherwise be held or determined
by a court of competent jurisdiction in any action or proceeding involving any
state corporate law or any state or Federal bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other law affecting the
rights of creditors generally, to be void, invalid or unenforceable to any
extent on account of the amount of the Guarantor's (or each of them, if more
than one) liability under this Guaranty, then notwithstanding any other
provision of this Guaranty to the contrary, the amount of such liability shall,
without any further action by the Guarantor (or each of them, if more than one)
or any other person, be automatically limited and reduced to the highest amount
which is valid and enforceable as determined in such action or proceeding.
The Bank may without any notice whatsoever to anyone, sell, assign or
transfer all or any part of said Indebtedness; and in that event each and every
immediate and successive assignee, transferee or holder of all or any part of
said Indebtedness shall have the right to enforce this Guaranty, by suit or
otherwise, for the benefit of such assignee, transferee or holder, as fully as
though such assignee, transferee or holder were herein by name given such
rights, powers and benefits; but the Bank shall have an unimpaired right, prior
and superior to that of any said assignee, transferee or holder, to enforce this
Guaranty for the benefit of the Bank, as to so much of said Indebtedness that
has not been sold, assigned or transferred.
No act of commission or omission of any kind, or at any time, on the part
of the Bank in respect of any matter whatsoever shall in any way affect or
impair this Guaranty. This Guaranty is in addition to and not in substitution
for or discharge of any other Guaranty held by the Bank. The Guarantor (or each
of them, if more than one) waives any rights of action Guarantor (or any of
them, if more than one) might have against the Bank because of the exercise by
the Bank in any manner howsoever of any rights granted to the Bank herein.
This Guaranty contains the entire agreement between the parties and every
part thereof shall be binding upon the Guarantor (or each of them, if more than
one), Guarantor's successors and
-4-
<PAGE>
assigns, as fully as though everywhere specifically mentioned, and shall inure
to the benefit of the Bank, and its successors and assigns, and shall be
construed according to the laws of the State of Tennessee, in which state it is
accepted by the Bank.
If any provision hereof is invalid or unenforceable, the remaining
provisions hereof shall not be affected by such invalidity or unenforceability.
Each term and provision contained herein shall, however, be valid and
enforceable to the fullest extent permitted by applicable law.
The Guarantor (or each of them, if more than one) acknowledges that this
Guaranty Agreement is and shall be effective against such Guarantor upon
execution by such Guarantor (regardless of whether any other person named herein
as Guarantor shall sign), and delivery hereof to the Bank, or its agent; and
that it shall not be necessary for the Bank to execute any acceptance hereof or
otherwise to signify or express its acceptance hereof.
ALL OF THE PARTIES HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BROUGHT BY ANY OF THE PARTIES AGAINST THE OTHER ON ANY MATTER
WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT OR UNDER
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED (OR WHICH MAY BE
DELIVERED IN THE FUTURE) IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING
RELATIONSHIP BETWEEN THE PARTIES TO THIS AGREEMENT.
IN WITNESS WHEREOF, the Guarantor (or each of them, if more than one) has
caused this Guaranty Agreement to be executed by its duly authorized officers on
this the ____ day of January, 1998.
ATTEST: MEMPHIS INTERNATIONAL
MOTORSPORTS CORPORATION
/s/ Gemma A. Bannon By: /s/ Christopher R. Pook
- --------------------------- ------------------------
Title: Corporate Secretary Title: President
--------------------- ---------------------
-5-
<PAGE>
STATE OF California
------------
COUNTY OF Los Angeles
-----------
Before me, Christopher Allen, a Notary Public in and for the State and
County aforesaid, personally appeared Chris Pook and Gemma Bannon, with whom I
am personally acquainted (or proved to me on the basis of satisfactory
evidence), and who, upon oath, acknowledged himself (or herself) to be the
President and Secretary respectively, of MEMPHIS INTERNATIONAL MOTORSPORTS
CORPORATION, the within-named bargainor, a corporation, and that they as such
President and Secretary, being duly authorized so to do, executed the foregoing
instrument for the purposes therein contained, by signing the name of the
corporation by themselves as such President and Secretary.
WITNESS my hand and seal at office, on this the 22 day of January, 1998.
/s/ Christopher Allen
--------------------------
Notary Public
My Commission Expires:
[NOTARY SEAL]
12-25-99
- ----------------------
-6-
<PAGE>
EXHIBIT 10.45
GUARANTY AGREEMENT
------------------
FOR VALUE RECEIVED, and in consideration of credit given or to be given,
advances made or to be made, or other financial accommodation from time to time
afforded or to be afforded to GATEWAY INTERNATIONAL MOTORSPORTS CORPORATION, an
Illinois corporation (hereinafter called the "Debtor"), by FIRST TENNESSEE BANK
NATIONAL ASSOCIATION, a national banking association organized and existing
under the laws of the United States, and having a place of business in Memphis,
Tennessee (hereinafter called the "Bank"), the undersigned, MOTORSPORTS SERVICES
CORPORATION OF MEMPHIS (hereinafter the "Guarantor"), hereby jointly and
severally (if more than one), for themselves, their heirs, executors,
administrators and successors absolutely and unconditionally guarantee(s) the
full and prompt payment to the Bank, at maturity (whether by acceleration or
otherwise) and at all times thereafter, of each and all of the following:
1. The indebtedness (and interest thereon) incurred under that
certain Reimbursement Agreement dated as of January 1, 1998, between Debtor
and Bank (the "Reimbursement Agreement") pursuant to which Bank has issued
its Irrevocable Standby Letter of Credit No. S983013 in the Stated Amount
of $2,501,825.00 (the "Letter of Credit"), said indebtedness and interest
being payable to the order of the Bank, at the offices of the Bank at 165
Madison Avenue, Memphis, Tennessee 38103, Attention: Metropolitan Division,
or at such other place as the Bank may designate in writing, being executed
by the Debtor, and being given for value received, said Reimbursement
Agreement and Letter of Credit being incorporated herein by reference as
fully and particularly as if set out verbatim herein; and
2. All obligations of Debtor pursuant to any and all renewals,
modifications, or extensions, in whole or in part, of the Reimbursement
Agreement and Letter of Credit; and
3. All obligations of the Debtor or Memphis International Motorsports
Corporation ("Motorsports") under and pursuant to any deed of trust,
mortgage, security agreement, assignment of rents and leases, or other
security document (collectively herein called "Security Documents") which
now or hereafter secures the payment of the indebtedness evidenced by the
Reimbursement Agreement and the Letter of Credit; and
4. All obligations of Debtor or Motorsports pursuant to any and all
renewals, modifications, or extensions, in whole or in part, of any of the
Security Documents;
together with all expenses, legal and/or otherwise (including court costs and
reasonable attorney's fees) incurred by the Bank in collecting or endeavoring to
collect the Indebtedness, or any part thereof, in protecting any collateral, and
in enforcing this Guaranty (all of which is hereinafter collectively referred to
as the "Indebtedness").
THIS GUARANTY SHALL BE A CONTINUING, ABSOLUTE AND UNCONDITIONAL GUARANTY,
and shall remain in full force and effect until the Indebtedness (and interest
thereon
<PAGE>
and expenses in connection therewith), and all renewals, modifications, or
extensions thereof, in whole or in part, shall have been fully paid and
satisfied and shall remain in full force and effect thereafter until written
notice of its discontinuance, addressed to 165 Madison Avenue, Memphis,
Tennessee 38103 Attn: Metropolitan Division, shall be actually received by the
Bank by faxed copy with originals to follow (the burden of proof of receipt by
the Bank of such notice being in all cases upon the Guarantor), and also until
any and all said indebtedness, or any extensions or renewals thereof, existing
before receipt of such notice, and expenses in connection therewith, shall be
fully paid. Regardless of when a renewal or extension of pre-termination debt
occurs (with or without adjustment of interest rate or other terms), the debt is
deemed to have been incurred prior to termination to the extent of the renewal
or extension, and to be fully covered by this Guaranty. The death, dissolution
or withdrawal of the Guarantor (or any of them, if more than one) shall not
terminate this Guaranty until notice of any such death, dissolution or
withdrawal, given as above provided, shall have actually been received by the
Bank, and until all of said indebtedness, or any extensions or renewals thereof,
existing before receipt of such notice shall be fully paid. And in the event of
any such death, dissolution or withdrawal and notice thereof to the Bank, this
Guaranty shall, notwithstanding, continue and remain in force against any
surviving Guarantor until discontinued as hereinabove provided.
The Bank is hereby expressly authorized to make from time to time, without
notice to anyone: any renewals, modifications or extensions, whether such
renewals, modifications or extensions be in whole or in part and without limit
as to the number of such extensions or of the renewal periods thereof, and
without notice to or further assent from the undersigned, sales, pledges,
surrenders, compromises, settlements, releases, indulgences, alterations,
substitutions, exchanges, changes in, modifications, or other dispositions
including, without limitation, cancellations, of all or any part of the
collateral pledged to secure the Indebtedness or any part of said Indebtedness,
either express or implied, or of any contracts or instruments evidencing any
thereof, or of any security or collateral therefor, and/or to take any security
for or other guaranties upon any of said Indebtedness; and the liability of the
Guarantor (or any of them, if more than one) shall not be in any manner
affected, diminished or impaired thereby, or by any lack of diligence, failure,
neglect or omission on the part of the Bank to make any demand or protest, or
give any notice of dishonor or default, or to realize upon or protect any of
said Indebtedness, or any collateral or security therefor, or to exercise any
lien upon or right of appropriation or setoff of any moneys, accounts, credits,
or property of said Debtor, possessed by the Bank, towards the liquidation of
said Indebtedness, or by any application of payments or credits thereon. The
Bank shall have the exclusive right to determine how, when and what application
of payments and credits, if any, shall be made on said Indebtedness, or any part
thereof, and shall be under no obligation, at any time, to first resort to, make
demand on, file a claim against, or exhaust its remedies against the Debtor, or
any one or more of the Guarantors, or other persons or corporations, their
properties or estates, or to resort to or exhaust its remedies against, any
collateral, security, property, liens or other rights whatsoever. It is
expressly agreed that the Bank may at any time make demand for payment on, or
bring suit against the Guarantor (or any of them, if more than one), or any
other guarantors, may compound with the Guarantor or any other guarantor for
such sums or on such terms as Bank may see fit and release the Guarantor (or any
of them, if more than one) or any other guarantor from all further liability to
the Bank, without thereby impairing the rights of the Bank in any respect to
demand, sue for and collect the balance of the Indebtedness from any guarantor
not so released; and that any claims against Debtor, against any
-2-
<PAGE>
other guarantor, or against any collateral, accruing to the Guarantor (or any of
them, if more than one) by reason of payments made hereunder shall be in all
respects junior and subordinate to any obligation then or subsequently owed by
the Debtor or by such other guarantor to the Bank. In addition, the liability of
the Guarantors (or each of them, if more than one) shall not be affected by any
lack of validity or enforceability of the guaranteed debt. As security for the
undertakings and obligations of the Guarantor hereunder, the Guarantor (or each
of them, if more than one) expressly grants and gives to the Bank a right of
immediate setoff, without demand or notice, of the balance of every deposit
account, now or at any time hereafter existing, of the Guarantor (or each of
them, if more than one) with the Bank, and a general lien upon, and security
interest in all money, negotiable instruments, commercial paper, notes, bonds,
stocks, credits and/or choses in action, or any interest therein, and any other
property, rights, and interests of the Guarantor (or each of them, if more than
one) or any evidence thereof, which have or any time shall come into the
possession, custody, or control of the Bank, and, in the event of default
hereunder, the Bank may sell or cause to be sold at public or private sale in
any manner which may be lawful, for cash or credit and upon such terms as the
Bank may see fit, and (except as may be otherwise expressly provided by the
Uniform Commercial Code, or other applicable law) without demand or notice to
the Guarantor (or each of them, if more than one), all or any of such security,
and the Bank (unless prohibited by the Uniform Commercial Code from so doing) or
any other person may purchase such property, rights or interests so sold and
thereafter hold the same free of any claim or right of whatsoever kind,
including any right or equity or redemption, of the Guarantor (or each of them,
if more than one), such demand, notice, right or equity of redemption being
hereby expressly waived and released.
In the event of the death, incompetency, dissolution, liquidation,
insolvency (however evidenced) of the Debtor, or institution of bankruptcy or
receivership proceedings by the Debtor, or in the event that any involuntary
bankruptcy or receivership proceedings filed against the Debtor shall not be
dismissed within thirty (30) days following the institution of such proceedings,
then and in any such event all of the Indebtedness shall, for the purposes of
this Guaranty, and at the option of the Bank, immediately become due and payable
from the Guarantor; and, in such event, any and all sums or payments of any
nature which may be or become due and payable by the Debtor to the undersigned
are hereby assigned to the Bank, and shall be collectible by the Bank, without
necessity for other authority than this instrument, until the Indebtedness shall
be fully paid and discharged, but such collection by the Bank shall not in any
respect affect, impair or diminish any other rights of the Bank hereunder.
The granting of credit from time to time by the Bank to the Debtor, in
excess of the amount to which right of recovery under this Guaranty is limited
and without notice to the Guarantor (or any of them, if more than one), is
hereby expressly authorized and shall in no way affect or impair this Guaranty;
and, in the event that the Indebtedness of the Debtor to the Bank shall so
exceed the amount to which this Guaranty is limited, any payment by the Debtor
or any collections or recovery by the Bank from any sources other than this
Guaranty may first be applied by the Bank to any portion of the Indebtedness
which exceeds the limits of this Guaranty.
The Guarantor (or each of them, if more than one) will not exercise any
rights that Guarantor (or any of them, if more than one) may acquire by way of
subrogation under this Guaranty, by any payment made hereunder or otherwise,
until all of the Indebtedness shall have been paid in full. If
-3-
<PAGE>
any amount shall be paid to the Guarantor (or any of them, if more than one) on
account of such subrogation rights at any time when all the Indebtedness shall
not have been paid in full, such amount shall be held in trust for the benefit
of the Bank and shall forthwith be paid to the Bank to be credited and applied
upon the Indebtedness.
NOTWITHSTANDING ANY PROVISION OF THE PRECEDING PARAGRAPH TO THE CONTRARY,
IF AT ANY TIME THE GUARANTOR (OR ANY OF THEM, IF MORE THAN ONE) IS OR BECOMES AN
"INSIDER" (AS DEFINED FROM TIME TO TIME IN SECTION 101 OF THE FEDERAL BANKRUPTCY
CODE) WITH RESPECT TO THE DEBTOR, THE GUARANTOR (OR EACH OF THEM, IF MORE THAN
ONE) WAIVES ANY AND ALL RIGHTS OF SUBROGATION AGAINST THE DEBTOR WITH RESPECT TO
THIS GUARANTY, WHETHER SUCH RIGHTS ARISE UNDER AN EXPRESS OR IMPLIED CONTRACT OR
BY OPERATION OF LAW, IT BEING THE INTENTION OF THE PARTIES THAT, IF ANY
GUARANTOR IS AN "INSIDER" WITH RESPECT TO THE DEBTOR, THE GUARANTOR SHALL NOT BE
DEEMED TO BE A "CREDITOR" (AS DEFINED IN SECTION 101 OF THE FEDERAL BANKRUPTCY
CODE) OF THE DEBTOR, BY REASON OF THE EXISTENCE OF THIS GUARANTY IN THE EVENT
THAT THE DEBTOR BECOMES A DEBTOR IN ANY PROCEEDING UNDER THE FEDERAL BANKRUPTCY
CODE.
Notwithstanding any other provision of this Guaranty to the contrary, if
the obligations of the Guarantor hereunder would otherwise be held or determined
by a court of competent jurisdiction in any action or proceeding involving any
state corporate law or any state or Federal bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other law affecting the
rights of creditors generally, to be void, invalid or unenforceable to any
extent on account of the amount of the Guarantor's (or each of them, if more
than one) liability under this Guaranty, then notwithstanding any other
provision of this Guaranty to the contrary, the amount of such liability shall,
without any further action by the Guarantor (or each of them, if more than one)
or any other person, be automatically limited and reduced to the highest amount
which is valid and enforceable as determined in such action or proceeding.
The Bank may without any notice whatsoever to anyone, sell, assign or
transfer all or any part of said Indebtedness; and in that event each and every
immediate and successive assignee, transferee or holder of all or any part of
said Indebtedness shall have the right to enforce this Guaranty, by suit or
otherwise, for the benefit of such assignee, transferee or holder, as fully as
though such assignee, transferee or holder were herein by name given such
rights, powers and benefits; but the Bank shall have an unimpaired right, prior
and superior to that of any said assignee, transferee or holder, to enforce this
Guaranty for the benefit of the Bank, as to so much of said Indebtedness that
has not been sold, assigned or transferred.
No act of commission or omission of any kind, or at any time, on the part
of the Bank in respect of any matter whatsoever shall in any way affect or
impair this Guaranty. This Guaranty is in addition to and not in substitution
for or discharge of any other Guaranty held by the Bank. The Guarantor (or each
of them, if more than one) waives any rights of action Guarantor (or any of
them, if more than one) might have against the Bank because of the exercise by
the Bank in any manner howsoever of any rights granted to the Bank herein.
This Guaranty contains the entire agreement between the parties and every
part thereof shall be binding upon the Guarantor (or each of them, if more than
one), Guarantor's successors and
-4-
<PAGE>
assigns, as fully as though everywhere specifically mentioned, and shall inure
to the benefit of the Bank, and its successors and assigns, and shall be
construed according to the laws of the State of Tennessee, in which state it is
accepted by the Bank.
If any provision hereof is invalid or unenforceable, the remaining
provisions hereof shall not be affected by such invalidity or unenforceability.
Each term and provision contained herein shall, however, be valid and
enforceable to the fullest extent permitted by applicable law.
The Guarantor (or each of them, if more than one) acknowledges that this
Guaranty Agreement is and shall be effective against such Guarantor upon
execution by such Guarantor (regardless of whether any other person named herein
as Guarantor shall sign), and delivery hereof to the Bank, or its agent; and
that it shall not be necessary for the Bank to execute any acceptance hereof or
otherwise to signify or express its acceptance hereof.
ALL OF THE PARTIES HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BROUGHT BY ANY OF THE PARTIES AGAINST THE OTHER ON ANY MATTER
WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT OR UNDER
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED (OR WHICH MAY BE
DELIVERED IN THE FUTURE) IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING
RELATIONSHIP BETWEEN THE PARTIES TO THIS AGREEMENT.
IN WITNESS WHEREOF, the Guarantor (or each of them, if more than one) has
caused this Guaranty Agreement to be executed by its duly authorized officers on
this the 22 day of January, 1998.
ATTEST: MOTORSPORTS SERVICES
CORPORATION OF MEMPHIS
/s/ Gemma A. Bannon By: /s/ Christopher R. Pook
- ------------------- -----------------------
Title: Corporate Secretary Title: President
------------------- --------------------
-5-
<PAGE>
STATE OF California
------------
COUNTY OF Los Angeles
------------
Before me, Christopher Allen, a Notary Public in and for the State and
County aforesaid, personally appeared Chris Pook and Gemma Bannon, with whom I
am personally acquainted (or proved to me on the basis of satisfactory
evidence), and who, upon oath, acknowledged himself (or herself) to be the
President and Corporate Secretary, respectively, of MOTORSPORTS SERVICES
CORPORATION OF MEMPHIS, the within-named bargainor, a corporation, and that they
as such President and Secretary, being duly authorized so to do, executed the
foregoing instrument for the purposes therein contained, by signing the name of
the corporation by themselves as such President and Secretary.
WITNESS my hand and seal at office, on this the 22 day of January, 1998.
/s/ Christopher Allen
------------------------------
Notary Public
My Commission Expires:
[NOTARY STAMP]
12-25-99
- ----------------------
-6-
<PAGE>
EXHIBIT 10.46
GUARANTY AGREEMENT
------------------
FOR VALUE RECEIVED, and in consideration of credit given or to be given,
advances made or to be made, or other financial accommodation from time to time
afforded or to be afforded to GATEWAY INTERNATIONAL MOTORSPORTS CORPORATION, an
Illinois corporation (hereinafter called the "Debtor"), by FIRST TENNESSEE BANK
NATIONAL ASSOCIATION, a national banking association organized and existing
under the laws of the United States, and having a place of business in Memphis,
Tennessee (hereinafter called the "Bank"), the undersigned, DEL MAR RACE
MANAGEMENT, INC. (hereinafter the "Guarantor"), hereby jointly and severally (if
more than one), for themselves, their heirs, executors, administrators and
successors absolutely and unconditionally guarantee(s) the full and prompt
payment to the Bank, at maturity (whether by acceleration or otherwise) and at
all times thereafter, of each and all of the following:
1. The indebtedness (and interest thereon) incurred under that
certain Reimbursement Agreement dated as of January 1, 1998, between Debtor
and Bank (the "Reimbursement Agreement") pursuant to which Bank has issued
its Irrevocable Standby Letter of Credit No. S983013 in the Stated Amount
of $2,501,825.00 (the "Letter of Credit"), said indebtedness and interest
being payable to the order of the Bank, at the offices of the Bank at 165
Madison Avenue, Memphis, Tennessee 38103, Attention: Metropolitan Division,
or at such other place as the Bank may designate in writing, being executed
by the Debtor, and being given for value received, said Reimbursement
Agreement and Letter of Credit being incorporated herein by reference as
fully and particularly as if set out verbatim herein; and
2. All obligations of Debtor pursuant to any and all renewals,
modifications, or extensions, in whole or in part, of the Reimbursement
Agreement and Letter of Credit; and
3. All obligations of the Debtor or Memphis International Motorsports
Corporation ("Motorsports") under and pursuant to any deed of trust,
mortgage, security agreement, assignment of rents and leases, or other
security document (collectively herein called "Security Documents") which
now or hereafter secures the payment of the indebtedness evidenced by the
Reimbursement Agreement and the Letter of Credit; and
4. All obligations of Debtor or Motorsports pursuant to any and all
renewals, modifications, or extensions, in whole or in part, of any of the
Security Documents;
together with all expenses, legal and/or otherwise (including court costs and
reasonable attorney's fees) incurred by the Bank in collecting or endeavoring to
collect the Indebtedness, or any part thereof, in protecting any collateral, and
in enforcing this Guaranty (all of which is hereinafter collectively referred to
as the "Indebtedness").
THIS GUARANTY SHALL BE A CONTINUING, ABSOLUTE AND UNCONDITIONAL GUARANTY,
and shall remain in full force and effect until the Indebtedness (and interest
thereon and expenses in connection therewith), and all renewals, modifications,
or extensions thereof, in
<PAGE>
whole or in part, shall have been fully paid and satisfied and shall remain in
full force and effect thereafter until written notice of its discontinuance,
addressed to 165 Madison Avenue, Memphis, Tennessee 38103 Attn: Metropolitan
Division, shall be actually received by the Bank by faxed copy with originals to
follow (the burden of proof of receipt by the Bank of such notice being in all
cases upon the Guarantor), and also until any and all said indebtedness, or any
extensions or renewals thereof, existing before receipt of such notice, and
expenses in connection therewith, shall be fully paid. Regardless of when a
renewal or extension of pre-termination debt occurs (with or without adjustment
of interest rate or other terms), the debt is deemed to have been incurred prior
to termination to the extent of the renewal or extension, and to be fully
covered by this Guaranty. The death, dissolution or withdrawal of the Guarantor
(or any of them, if more than one) shall not terminate this Guaranty until
notice of any such death, dissolution or withdrawal, given as above provided,
shall have actually been received by the Bank, and until all of said
indebtedness, or any extensions or renewals thereof, existing before receipt of
such notice shall be fully paid. And in the event of any such death, dissolution
or withdrawal and notice thereof to the Bank, this Guaranty shall,
notwithstanding, continue and remain in force against any surviving Guarantor
until discontinued as hereinabove provided.
The Bank is hereby expressly authorized to make from time to time, without
notice to anyone: any renewals, modifications or extensions, whether such
renewals, modifications or extensions be in whole or in part and without limit
as to the number of such extensions or of the renewal periods thereof, and
without notice to or further assent from the undersigned, sales, pledges,
surrenders, compromises, settlements, releases, indulgences, alterations,
substitutions, exchanges, changes in, modifications, or other dispositions
including, without limitation, cancellations, of all or any part of the
collateral pledged to secure the Indebtedness or any part of said Indebtedness,
either express or implied, or of any contracts or instruments evidencing any
thereof, or of any security or collateral therefor, and/or to take any security
for or other guaranties upon any of said Indebtedness; and the liability of the
Guarantor (or any of them, if more than one) shall not be in any manner
affected, diminished or impaired thereby, or by any lack of diligence, failure,
neglect or omission on the part of the Bank to make any demand or protest, or
give any notice of dishonor or default, or to realize upon or protect any of
said Indebtedness, or any collateral or security therefor, or to exercise any
lien upon or right of appropriation or setoff of any moneys, accounts, credits,
or property of said Debtor, possessed by the Bank, towards the liquidation of
said Indebtedness, or by any application of payments or credits thereon. The
Bank shall have the exclusive right to determine how, when and what application
of payments and credits, if any, shall be made on said Indebtedness, or any part
thereof, and shall be under no obligation, at any time, to first resort to, make
demand on, file a claim against, or exhaust its remedies against the Debtor, or
any one or more of the Guarantors, or other persons or corporations, their
properties or estates, or to resort to or exhaust its remedies against, any
collateral, security, property, liens or other rights whatsoever. It is
expressly agreed that the Bank may at any time make demand for payment on, or
bring suit against the Guarantor (or any of them, if more than one), or any
other guarantors, may compound with the Guarantor or any other guarantor for
such sums or on such terms as Bank may see fit and release the Guarantor (or any
of them, if more than one) or any other guarantor from all further liability to
the Bank, without thereby impairing the rights of the Bank in any respect to
demand, sue for and collect the balance of the Indebtedness from any guarantor
not so released; and that any claims against Debtor, against any other
guarantor, or against any collateral, accruing to the Guarantor (or any of them,
if more than
-2-
<PAGE>
one) by reason of payments made hereunder shall be in all respects junior and
subordinate to any obligation then or subsequently owed by the Debtor or by such
other guarantor to the Bank. In addition, the liability of the Guarantors (or
each of them, if more than one) shall not be affected by any lack of validity or
enforceability of the guaranteed debt. As security for the undertakings and
obligations of the Guarantor hereunder, the Guarantor (or each of them, if more
than one) expressly grants and gives to the Bank a right of immediate setoff,
without demand or notice, of the balance of every deposit account, now or at any
time hereafter existing, of the Guarantor (or each of them, if more than one)
with the Bank, and a general lien upon, and security interest in all money,
negotiable instruments, commercial paper, notes, bonds, stocks, credits and/or
choses in action, or any interest therein, and any other property, rights, and
interests of the Guarantor (or each of them, if more than one) or any evidence
thereof, which have or any time shall come into the possession, custody, or
control of the Bank, and, in the event of default hereunder, the Bank may sell
or cause to be sold at public or private sale in any manner which may be lawful,
for cash or credit and upon such terms as the Bank may see fit, and (except as
may be otherwise expressly provided by the Uniform Commercial Code, or other
applicable law) without demand or notice to the Guarantor (or each of them, if
more than one), all or any of such security, and the Bank (unless prohibited by
the Uniform Commercial Code from so doing) or any other person may purchase such
property, rights or interests so sold and thereafter hold the same free of any
claim or right of whatsoever kind, including any right or equity or redemption,
of the Guarantor (or each of them, if more than one), such demand, notice, right
or equity of redemption being hereby expressly waived and released.
In the event of the death, incompetency, dissolution, liquidation,
insolvency (however evidenced) of the Debtor, or institution of bankruptcy or
receivership proceedings by the Debtor, or in the event that any involuntary
bankruptcy or receivership proceedings filed against the Debtor shall not be
dismissed within thirty (30) days following the institution of such proceedings,
then and in any such event all of the Indebtedness shall, for the purposes of
this Guaranty, and at the option of the Bank, immediately become due and payable
from the Guarantor; and, in such event, any and all sums or payments of any
nature which may be or become due and payable by the Debtor to the undersigned
are hereby assigned to the Bank, and shall be collectible by the Bank, without
necessity for other authority than this instrument, until the Indebtedness shall
be fully paid and discharged, but such collection by the Bank shall not in any
respect affect, impair or diminish any other rights of the Bank hereunder.
The granting of credit from time to time by the Bank to the Debtor, in
excess of the amount to which right of recovery under this Guaranty is limited
and without notice to the Guarantor (or any of them, if more than one), is
hereby expressly authorized and shall in no way affect or impair this Guaranty;
and, in the event that the Indebtedness of the Debtor to the Bank shall so
exceed the amount to which this Guaranty is limited, any payment by the Debtor
or any collections or recovery by the Bank from any sources other than this
Guaranty may first be applied by the Bank to any portion of the Indebtedness
which exceeds the limits of this Guaranty.
The Guarantor (or each of them, if more than one) will not exercise any
rights that Guarantor (or any of them, if more than one) may acquire by way of
subrogation under this Guaranty, by any payment made hereunder or otherwise,
until all of the Indebtedness shall have been paid in full. If any amount shall
be paid to the Guarantor (or any of them, if more than one) on account of such
-3-
<PAGE>
subrogation rights at any time when all the Indebtedness shall not have been
paid in full, such amount shall be held in trust for the benefit of the Bank and
shall forthwith be paid to the Bank to be credited and applied upon the
Indebtedness.
NOTWITHSTANDING ANY PROVISION OF THE PRECEDING PARAGRAPH TO THE CONTRARY,
IF AT ANY TIME THE GUARANTOR (OR ANY OF THEM, IF MORE THAN ONE) IS OR BECOMES AN
"INSIDER" (AS DEFINED FROM TIME TO TIME IN SECTION 101 OF THE FEDERAL BANKRUPTCY
CODE) WITH RESPECT TO THE DEBTOR, THE GUARANTOR (OR EACH OF THEM, IF MORE THAN
ONE) WAIVES ANY AND ALL RIGHTS OF SUBROGATION AGAINST THE DEBTOR WITH RESPECT TO
THIS GUARANTY, WHETHER SUCH RIGHTS ARISE UNDER AN EXPRESS OR IMPLIED CONTRACT OR
BY OPERATION OF LAW, IT BEING THE INTENTION OF THE PARTIES THAT, IF ANY
GUARANTOR IS AN "INSIDER" WITH RESPECT TO THE DEBTOR, THE GUARANTOR SHALL NOT BE
DEEMED TO BE A "CREDITOR" (AS DEFINED IN SECTION 101 OF THE FEDERAL BANKRUPTCY
CODE) OF THE DEBTOR, BY REASON OF THE EXISTENCE OF THIS GUARANTY IN THE EVENT
THAT THE DEBTOR BECOMES A DEBTOR IN ANY PROCEEDING UNDER THE FEDERAL BANKRUPTCY
CODE.
Notwithstanding any other provision of this Guaranty to the contrary, if
the obligations of the Guarantor hereunder would otherwise be held or determined
by a court of competent jurisdiction in any action or proceeding involving any
state corporate law or any state or Federal bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other law affecting the
rights of creditors generally, to be void, invalid or unenforceable to any
extent on account of the amount of the Guarantor's (or each of them, if more
than one) liability under this Guaranty, then notwithstanding any other
provision of this Guaranty to the contrary, the amount of such liability shall,
without any further action by the Guarantor (or each of them, if more than one)
or any other person, be automatically limited and reduced to the highest amount
which is valid and enforceable as determined in such action or proceeding.
The Bank may without any notice whatsoever to anyone, sell, assign or
transfer all or any part of said Indebtedness; and in that event each and every
immediate and successive assignee, transferee or holder of all or any part of
said Indebtedness shall have the right to enforce this Guaranty, by suit or
otherwise, for the benefit of such assignee, transferee or holder, as fully as
though such assignee, transferee or holder were herein by name given such
rights, powers and benefits; but the Bank shall have an unimpaired right, prior
and superior to that of any said assignee, transferee or holder, to enforce this
Guaranty for the benefit of the Bank, as to so much of said Indebtedness that
has not been sold, assigned or transferred.
No act of commission or omission of any kind, or at any time, on the part
of the Bank in respect of any matter whatsoever shall in any way affect or
impair this Guaranty. This Guaranty is in addition to and not in substitution
for or discharge of any other Guaranty held by the Bank. The Guarantor (or each
of them, if more than one) waives any rights of action Guarantor (or any of
them, if more than one) might have against the Bank because of the exercise by
the Bank in any manner howsoever of any rights granted to the Bank herein.
This Guaranty contains the entire agreement between the parties and every
part thereof shall be binding upon the Guarantor (or each of them, if more than
one), Guarantor's successors and assigns, as fully as though everywhere
specifically mentioned, and shall inure to the benefit of the
-4-
<PAGE>
Bank, and its successors and assigns, and shall be construed according to the
laws of the State of Tennessee, in which state it is accepted by the Bank.
If any provision hereof is invalid or unenforceable, the remaining
provisions hereof shall not be affected by such invalidity or unenforceability.
Each term and provision contained herein shall, however, be valid and
enforceable to the fullest extent permitted by applicable law.
The Guarantor (or each of them, if more than one) acknowledges that this
Guaranty Agreement is and shall be effective against such Guarantor upon
execution by such Guarantor (regardless of whether any other person named herein
as Guarantor shall sign), and delivery hereof to the Bank, or its agent; and
that it shall not be necessary for the Bank to execute any acceptance hereof or
otherwise to signify or express its acceptance hereof.
ALL OF THE PARTIES HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BROUGHT BY ANY OF THE PARTIES AGAINST THE OTHER ON ANY MATTER
WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT OR UNDER
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED (OR WHICH MAY BE
DELIVERED IN THE FUTURE) IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING
RELATIONSHIP BETWEEN THE PARTIES TO THIS AGREEMENT.
IN WITNESS WHEREOF, the Guarantor (or each of them, if more than one) has
caused this Guaranty Agreement to be executed by its duly authorized officers on
this the 22 day of January, 1998.
ATTEST: DEL MAR RACE MANAGEMENT, INC.
/s/ Gemma A. Bannon By: /s/ James P. Michaelian
- -------------------------- --------------------------
Title: Corporate Secretary Title: Chief Operating Officer
------------------- -----------------------
-5-
<PAGE>
STATE OF California
------------
COUNTY OF Los Angeles
-----------
Before me, Christopher Allen, a Notary Public in and for the State and
County aforesaid, personally appeared Jim Michaelian and Gemma Bannon, with whom
I am personally acquainted (or proved to me on the basis of satisfactory
evidence), and who, upon oath, acknowledged himself (or herself) to be the
President and Secretary respectively, of DEL MAR RACE MANAGEMENT, INC., the
within-named bargainor, a corporation, and that they as such President and
Secretary being duly authorized so to do, executed the foregoing instrument for
the purposes therein contained, by signing the name of the corporation by
themselves as such President and Secretary.
WITNESS my hand and seal at office, on this the 22 day of January, 1998.
/s/ Christopher Allen
-------------------------------
Notary Public
My Commission Expires: --------------------------------
12-25-99 NOTARY STAMP
- ---------------------- --------------------------------
-6-
<PAGE>
EXHIBIT 10.47
GUARANTY AGREEMENT
------------------
FOR VALUE RECEIVED, and in consideration of credit given or to be given,
advances made or to be made, or other financial accommodation from time to time
afforded or to be afforded to GATEWAY INTERNATIONAL MOTORSPORTS CORPORATION, an
Illinois corporation (hereinafter called the "Debtor"), by FIRST TENNESSEE BANK
NATIONAL ASSOCIATION, a national banking association organized and existing
under the laws of the United States, and having a place of business in Memphis,
Tennessee (hereinafter called the "Bank"), the undersigned, AUTOMOTIVE SAFETY &
TRANSPORTATION SYSTEMS, INC. (hereinafter the "Guarantor"), hereby jointly and
severally (if more than one), for themselves, their heirs, executors,
administrators and successors absolutely and unconditionally guarantee(s) the
full and prompt payment to the Bank, at maturity (whether by acceleration or
otherwise) and at all times thereafter, of each and all of the following:
1. The indebtedness (and interest thereon) incurred under that
certain Reimbursement Agreement dated as of January 1, 1998, between Debtor
and Bank (the "Reimbursement Agreement") pursuant to which Bank has issued
its Irrevocable Standby Letter of Credit No. S983013 in the Stated Amount
of $2,501,825.00 (the "Letter of Credit"), said indebtedness and interest
being payable to the order of the Bank, at the offices of the Bank at 165
Madison Avenue, Memphis, Tennessee 38103, Attention: Metropolitan Division,
or at such other place as the Bank may designate in writing, being executed
by the Debtor, and being given for value received, said Reimbursement
Agreement and Letter of Credit being incorporated herein by reference as
fully and particularly as if set out verbatim herein; and
2. All obligations of Debtor pursuant to any and all renewals,
modifications, or extensions, in whole or in part, of the Reimbursement
Agreement and Letter of Credit; and
3. All obligations of the Debtor or Memphis International Motorsports
Corporation ("Motorsports") under and pursuant to any deed of trust,
mortgage, security agreement, assignment of rents and leases, or other
security document (collectively herein called "Security Documents") which
now or hereafter secures the payment of the indebtedness evidenced by the
Reimbursement Agreement and the Letter of Credit; and
4. All obligations of Debtor or Motorsports pursuant to any and all
renewals, modifications, or extensions, in whole or in part, of any of the
Security Documents;
together with all expenses, legal and/or otherwise (including court costs and
reasonable attorney's fees) incurred by the Bank in collecting or endeavoring to
collect the Indebtedness, or any part thereof, in protecting any collateral, and
in enforcing this Guaranty (all of which is hereinafter collectively referred to
as the "Indebtedness").
THIS GUARANTY SHALL BE A CONTINUING, ABSOLUTE AND UNCONDITIONAL GUARANTY,
and shall remain in full force and effect until the Indebtedness (and interest
thereon
<PAGE>
and expenses in connection therewith), and all renewals, modifications, or
extensions thereof, in whole or in part, shall have been fully paid and
satisfied and shall remain in full force and effect thereafter until written
notice of its discontinuance, addressed to 165 Madison Avenue, Memphis,
Tennessee 38103 Attn: Metropolitan Division, shall be actually received by the
Bank by faxed copy with originals to follow (the burden of proof of receipt by
the Bank of such notice being in all cases upon the Guarantor), and also until
any and all said indebtedness, or any extensions or renewals thereof, existing
before receipt of such notice, and expenses in connection therewith, shall be
fully paid. Regardless of when a renewal or extension of pre-termination debt
occurs (with or without adjustment of interest rate or other terms), the debt is
deemed to have been incurred prior to termination to the extent of the renewal
or extension, and to be fully covered by this Guaranty. The death, dissolution
or withdrawal of the Guarantor (or any of them, if more than one) shall not
terminate this Guaranty until notice of any such death, dissolution or
withdrawal, given as above provided, shall have actually been received by the
Bank, and until all of said indebtedness, or any extensions or renewals thereof,
existing before receipt of such notice shall be fully paid. And in the event of
any such death, dissolution or withdrawal and notice thereof to the Bank, this
Guaranty shall, notwithstanding, continue and remain in force against any
surviving Guarantor until discontinued as hereinabove provided.
The Bank is hereby expressly authorized to make from time to time, without
notice to anyone: any renewals, modifications or extensions, whether such
renewals, modifications or extensions be in whole or in part and without limit
as to the number of such extensions or of the renewal periods thereof, and
without notice to or further assent from the undersigned, sales, pledges,
surrenders, compromises, settlements, releases, indulgences, alterations,
substitutions, exchanges, changes in, modifications, or other dispositions
including, without limitation, cancellations, of all or any part of the
collateral pledged to secure the Indebtedness or any part of said Indebtedness,
either express or implied, or of any contracts or instruments evidencing any
thereof, or of any security or collateral therefor, and/or to take any security
for or other guaranties upon any of said Indebtedness; and the liability of the
Guarantor (or any of them, if more than one) shall not be in any manner
affected, diminished or impaired thereby, or by any lack of diligence, failure,
neglect or omission on the part of the Bank to make any demand or protest, or
give any notice of dishonor or default, or to realize upon or protect any of
said Indebtedness, or any collateral or security therefor, or to exercise any
lien upon or right of appropriation or setoff of any moneys, accounts, credits,
or property of said Debtor, possessed by the Bank, towards the liquidation of
said Indebtedness, or by any application of payments or credits thereon. The
Bank shall have the exclusive right to determine how, when and what application
of payments and credits, if any, shall be made on said Indebtedness, or any part
thereof, and shall be under no obligation, at any time, to first resort to, make
demand on, file a claim against, or exhaust its remedies against the Debtor, or
any one or more of the Guarantors, or other persons or corporations, their
properties or estates, or to resort to or exhaust its remedies against, any
collateral, security, property, liens or other rights whatsoever. It is
expressly agreed that the Bank may at any time make demand for payment on, or
bring suit against the Guarantor (or any of them, if more than one), or any
other guarantors, may compound with the Guarantor or any other guarantor for
such sums or on such terms as Bank may see fit and release the Guarantor (or any
of them, if more than one) or any other guarantor from all further liability to
the Bank, without thereby impairing the rights of the Bank in any respect to
demand, sue for and collect the balance of the Indebtedness from any guarantor
not so released; and that any claims against Debtor, against any
-2-
<PAGE>
other guarantor, or against any collateral, accruing to the Guarantor (or any of
them, if more than one) by reason of payments made hereunder shall be in all
respects junior and subordinate to any obligation then or subsequently owed by
the Debtor or by such other guarantor to the Bank. In addition, the liability of
the Guarantors (or each of them, if more than one) shall not be affected by any
lack of validity or enforceability of the guaranteed debt. As security for the
undertakings and obligations of the Guarantor hereunder, the Guarantor (or each
of them, if more than one) expressly grants and gives to the Bank a right of
immediate setoff, without demand or notice, of the balance of every deposit
account, now or at any time hereafter existing, of the Guarantor (or each of
them, if more than one) with the Bank, and a general lien upon, and security
interest in all money, negotiable instruments, commercial paper, notes, bonds,
stocks, credits and/or choses in action, or any interest therein, and any other
property, rights, and interests of the Guarantor (or each of them, if more than
one) or any evidence thereof, which have or any time shall come into the
possession, custody, or control of the Bank, and, in the event of default
hereunder, the Bank may sell or cause to be sold at public or private sale in
any manner which may be lawful, for cash or credit and upon such terms as the
Bank may see fit, and (except as may be otherwise expressly provided by the
Uniform Commercial Code, or other applicable law) without demand or notice to
the Guarantor (or each of them, if more than one), all or any of such security,
and the Bank (unless prohibited by the Uniform Commercial Code from so doing) or
any other person may purchase such property, rights or interests so sold and
thereafter hold the same free of any claim or right of whatsoever kind,
including any right or equity or redemption, of the Guarantor (or each of them,
if more than one), such demand, notice, right or equity of redemption being
hereby expressly waived and released.
In the event of the death, incompetency, dissolution, liquidation,
insolvency (however evidenced) of the Debtor, or institution of bankruptcy or
receivership proceedings by the Debtor, or in the event that any involuntary
bankruptcy or receivership proceedings filed against the Debtor shall not be
dismissed within thirty (30) days following the institution of such proceedings,
then and in any such event all of the Indebtedness shall, for the purposes of
this Guaranty, and at the option of the Bank, immediately become due and payable
from the Guarantor; and, in such event, any and all sums or payments of any
nature which may be or become due and payable by the Debtor to the undersigned
are hereby assigned to the Bank, and shall be collectible by the Bank, without
necessity for other authority than this instrument, until the Indebtedness shall
be fully paid and discharged, but such collection by the Bank shall not in any
respect affect, impair or diminish any other rights of the Bank hereunder.
The granting of credit from time to time by the Bank to the Debtor, in
excess of the amount to which right of recovery under this Guaranty is limited
and without notice to the Guarantor (or any of them, if more than one), is
hereby expressly authorized and shall in no way affect or impair this Guaranty;
and, in the event that the Indebtedness of the Debtor to the Bank shall so
exceed the amount to which this Guaranty is limited, any payment by the Debtor
or any collections or recovery by the Bank from any sources other than this
Guaranty may first be applied by the Bank to any portion of the Indebtedness
which exceeds the limits of this Guaranty.
The Guarantor (or each of them, if more than one) will not exercise any
rights that Guarantor (or any of them, if more than one) may acquire by way of
subrogation under this Guaranty, by any payment made hereunder or otherwise,
until all of the Indebtedness shall have been paid in full. If
-3-
<PAGE>
any amount shall be paid to the Guarantor (or any of them, if more than one) on
account of such subrogation rights at any time when all the Indebtedness shall
not have been paid in full, such amount shall be held in trust for the benefit
of the Bank and shall forthwith be paid to the Bank to be credited and applied
upon the Indebtedness.
NOTWITHSTANDING ANY PROVISION OF THE PRECEDING PARAGRAPH TO THE CONTRARY,
IF AT ANY TIME THE GUARANTOR (OR ANY OF THEM, IF MORE THAN ONE) IS OR BECOMES AN
"INSIDER" (AS DEFINED FROM TIME TO TIME IN SECTION 101 OF THE FEDERAL BANKRUPTCY
CODE) WITH RESPECT TO THE DEBTOR, THE GUARANTOR (OR EACH OF THEM, IF MORE THAN
ONE) WAIVES ANY AND ALL RIGHTS OF SUBROGATION AGAINST THE DEBTOR WITH RESPECT TO
THIS GUARANTY, WHETHER SUCH RIGHTS ARISE UNDER AN EXPRESS OR IMPLIED CONTRACT OR
BY OPERATION OF LAW, IT BEING THE INTENTION OF THE PARTIES THAT, IF ANY
GUARANTOR IS AN "INSIDER" WITH RESPECT TO THE DEBTOR, THE GUARANTOR SHALL NOT BE
DEEMED TO BE A "CREDITOR" (AS DEFINED IN SECTION 101 OF THE FEDERAL BANKRUPTCY
CODE) OF THE DEBTOR, BY REASON OF THE EXISTENCE OF THIS GUARANTY IN THE EVENT
THAT THE DEBTOR BECOMES A DEBTOR IN ANY PROCEEDING UNDER THE FEDERAL BANKRUPTCY
CODE.
Notwithstanding any other provision of this Guaranty to the contrary, if
the obligations of the Guarantor hereunder would otherwise be held or determined
by a court of competent jurisdiction in any action or proceeding involving any
state corporate law or any state or Federal bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other law affecting the
rights of creditors generally, to be void, invalid or unenforceable to any
extent on account of the amount of the Guarantor's (or each of them, if more
than one) liability under this Guaranty, then notwithstanding any other
provision of this Guaranty to the contrary, the amount of such liability shall,
without any further action by the Guarantor (or each of them, if more than one)
or any other person, be automatically limited and reduced to the highest amount
which is valid and enforceable as determined in such action or proceeding.
The Bank may without any notice whatsoever to anyone, sell, assign or
transfer all or any part of said Indebtedness; and in that event each and every
immediate and successive assignee, transferee or holder of all or any part of
said Indebtedness shall have the right to enforce this Guaranty, by suit or
otherwise, for the benefit of such assignee, transferee or holder, as fully as
though such assignee, transferee or holder were herein by name given such
rights, powers and benefits; but the Bank shall have an unimpaired right, prior
and superior to that of any said assignee, transferee or holder, to enforce this
Guaranty for the benefit of the Bank, as to so much of said Indebtedness that
has not been sold, assigned or transferred.
No act of commission or omission of any kind, or at any time, on the part
of the Bank in respect of any matter whatsoever shall in any way affect or
impair this Guaranty. This Guaranty is in addition to and not in substitution
for or discharge of any other Guaranty held by the Bank. The Guarantor (or each
of them, if more than one) waives any rights of action Guarantor (or any of
them, if more than one) might have against the Bank because of the exercise by
the Bank in any manner howsoever of any rights granted to the Bank herein.
This Guaranty contains the entire agreement between the parties and every
part thereof shall be binding upon the Guarantor (or each of them, if more than
one), Guarantor's successors and
-4-
<PAGE>
assigns, as fully as though everywhere specifically mentioned, and shall inure
to the benefit of the Bank, and its successors and assigns, and shall be
construed according to the laws of the State of Tennessee, in which state it is
accepted by the Bank.
If any provision hereof is invalid or unenforceable, the remaining
provisions hereof shall not be affected by such invalidity or unenforceability.
Each term and provision contained herein shall, however, be valid and
enforceable to the fullest extent permitted by applicable law.
The Guarantor (or each of them, if more than one) acknowledges that this
Guaranty Agreement is and shall be effective against such Guarantor upon
execution by such Guarantor (regardless of whether any other person named herein
as Guarantor shall sign), and delivery hereof to the Bank, or its agent; and
that it shall not be necessary for the Bank to execute any acceptance hereof or
otherwise to signify or express its acceptance hereof.
ALL OF THE PARTIES HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BROUGHT BY ANY OF THE PARTIES AGAINST THE OTHER ON ANY MATTER
WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT OR UNDER
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED (OR WHICH MAY BE
DELIVERED IN THE FUTURE) IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING
RELATIONSHIP BETWEEN THE PARTIES TO THIS AGREEMENT.
IN WITNESS WHEREOF, the Guarantor (or each of them, if more than one) has
caused this Guaranty Agreement to be executed by its duly authorized officers on
this the 22 day of January, 1998.
ATTEST: AUTOMOTIVE SAFETY &
TRANSPORTATION SYSTEMS, INC.
/s/ Gemma A. Bannon By: /s/ Dwight R. Tanaka
- -------------------------- -----------------------
Title: Corporate Secretary Title: President
------------------- --------------------
-5-
<PAGE>
STATE OF California
-------------
COUNTY OF Los Angeles
------------
Before me, Christopher Allen, a Notary Public in and for the
State and County aforesaid, personally appeared Gemma Bannon and
Dwight Tanaka, with whom I am personally acquainted (or proved to me on
the basis of satisfactory evidence), and who, upon oath, acknowledged himself
(or herself) to be the Corporate Secretary and President respectively,
of AUTOMOTIVE SAFETY & TRANSPORTATION SYSTEMS, INC., the within-named bargainor,
a corporation, and that they as such Corporate Secretary and
President, being duly authorized so to do, executed the foregoing
instrument for the purposes therein contained, by signing the name of the
corporation by themselves as such Corporate Secretary and President.
WITNESS my hand and seal at office, on this the 22 day of January, 1998.
/s/ Christopher Allen
-------------------------------
Notary Public
My Commission Expires:
[NOTARY SEAL]
12-25-99
- ----------------------
-6-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10KSB FOR
THE YEAR ENDED NOVEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STAETMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<CASH> 1,520,000
<SECURITIES> 0
<RECEIVABLES> 712,000
<ALLOWANCES> 0
<INVENTORY> 326,000
<CURRENT-ASSETS> 4,318,000
<PP&E> 50,620,000
<DEPRECIATION> (5,834,000)
<TOTAL-ASSETS> 58,156,000
<CURRENT-LIABILITIES> 3,306,000
<BONDS> 23,693,000
0
0
<COMMON> 26,536,000
<OTHER-SE> 3,864,000
<TOTAL-LIABILITY-AND-EQUITY> 58,156,000
<SALES> 30,909,000
<TOTAL-REVENUES> 30,909,000
<CGS> 0
<TOTAL-COSTS> 27,109,000
<OTHER-EXPENSES> (768,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,435,000
<INCOME-PRETAX> 3,032,000
<INCOME-TAX> 1,273,000
<INCOME-CONTINUING> 1,759,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,671,000
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.42
</TABLE>
