<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 23, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------
CHAMPIONSHIP AUTO RACING TEAMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 8980 APPLIED FOR
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
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755 WEST BIG BEAVER ROAD, SUITE 800
TROY, MICHIGAN 48084
(248) 362-8800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
ANDREW CRAIG
755 WEST BIG BEAVER ROAD, SUITE 800
TROY, MICHIGAN 48084
(248) 362-8800
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
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<S> <C>
JACK A. BJERKE T. MARK KELLY
AMY M. SHEPHERD JEFFERY B. FLOYD
KEGLER, BROWN, HILL & RITTER CO., L.P.A. VINSON & ELKINS, L.L.P.
65 EAST STATE STREET 1001 FANNIN, SUITE 2300
18TH FLOOR HOUSTON, TX 77002
COLUMBUS, OH 43215 (713) 758-2222
(614) 462-5400
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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==================================================================================================================
TITLE OF EACH CLASS OF SECURITIES PROPOSED MAXIMUM AGGREGATE
TO BE REGISTERED OFFERING PRICE(1) AMOUNT OF REGISTRATION FEE
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<S> <C> <C>
Common Stock, par value $.01 per share:
Shares issued in public offering
including
the associated stock purchase $84,143,200 $24,823
rights..............................
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</TABLE>
(1) Estimated pursuant to Rule 457 solely for the purpose of calculating the
registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED DECEMBER 23, 1997
4,573,000 SHARES
PROSPECTUS
[LOGO]
CHAMPIONSHIP AUTO RACING TEAMS, INC.
COMMON STOCK
------------------------
Of the 4,573,000 shares of Common Stock, par value $.01 per share (the
"Common Stock") offered hereby (the "Offering"), 4,333,000 shares are being sold
by Championship Auto Racing Teams, Inc. (the "Company") and 240,000 shares are
being sold by certain stockholders (the "Selling Stockholders"). The Company
intends to apply for listing of the Common Stock on The New York Stock Exchange
under the symbol " ."
Prior to the Offering, there has been no public market for the Common
Stock. It is currently estimated that the initial offering price will be between
$ and $ per share. See "Underwriting" for a discussion of the factors to
be considered in determining the initial public offering price. It is expected
that following the completion of the Offering, the current stockholders of the
Company will own approximately 69% of the outstanding Common Stock. See "Risk
Factors--Control of the Company." Shares of Common Stock are being reserved for
sale to certain employees, directors and business associates of, and certain
other persons designated by, the Company, at the initial public offering price.
Such employees, directors and other persons are expected to purchase, in the
aggregate, not more than 6.5% of the Common Stock offered in the Offering. See
"Underwriting."
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY POTENTIAL INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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PROCEEDS PROCEEDS TO
PRICE TO UNDERWRITING TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS
-------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Per Share.............................. $ $ $ $
Total(3)............................... $ $ $ $
</TABLE>
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(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $950,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
685,950 additional shares of Common Stock on the same terms and conditions
as set forth above, solely to cover over-allotments, if any. If the option
is exercised in full, the total Price to Public, Underwriting Discount and
Proceeds to Company will be $ , $ and $ , respectively.
See "Underwriting."
------------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale when, as and if issued to and accepted by the Underwriters. The
Underwriters reserve the right to reject orders in whole or part. It is expected
that delivery of the shares of Common Stock will be made against payment
therefor in New York, New York on or about , 1998.
------------------------
JEFFERIES & COMPANY, INC. A.G. EDWARDS & SONS, INC.
, 1998
<PAGE> 3
[PHOTOS]
Prior to the Offering, the Company has not been subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Company intends to furnish its stockholders with annual reports
containing audited consolidated financial statements reported on by independent
public accountants following the end of each fiscal year and such interim
reports as it may determine to be necessary or desirable.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE STABILIZATION, THE PURCHASE OF COMMON STOCK TO COVER
SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITING."
This Prospectus includes references to certain registered trademarks,
servicemarks and logos, including FedEx, PPG, MCI, Indianapolis 500 and others,
all of which are owned by the respective corporations.
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<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. References in this Prospectus to the
"Company" shall mean Championship Auto Racing Teams, Inc., its predecessor and
its subsidiaries, and references to "CART" shall mean the Company's subsidiary,
CART, Inc., its predecessors and its and their subsidiaries, unless the context
otherwise requires. Unless otherwise noted herein, the information contained in
this Prospectus gives effect to (i) the Reorganization (as defined herein)and
the proposed acquisition of American Racing Series, Inc. and BP Automotive,
Inc., as described herein (the "Indy Lights Acquisition") and (ii) assumes the
Underwriters' over-allotment option will not be exercised.
THE COMPANY
Championship Auto Racing Teams, Inc. owns, operates and sanctions the
premier open-wheel motorsports series in North America, the FedEx Championship
Series, formerly known as the PPG CART World Series (the "CART Championship"),
and is responsible for organizing, marketing and staging each of the races in
the CART Championship. With speeds up to 240 miles per hour, and an average
margin of victory during the 1997 race season of fewer than four seconds, CART
open-wheel racing is the fastest form of closed-circuit auto racing available to
motorsports audiences, providing intense excitement and competition.
The drivers and racing teams participating in CART racing events are among
the most recognized names in motorsports, with marquee drivers including Michael
Andretti, Bobby Rahal, Al Unser Jr., Jimmy Vasser and Alex Zanardi. The
excitement and competition of CART racing also attracts well-known racing
legends, business leaders and sports and entertainment personalities as team
owners, including Chip Ganassi, Carl Haas, David Letterman, Bruce McCaw, Joe
Montana, Paul Newman, U.E. "Pat" Patrick, Walter Payton and Roger Penske. For a
complete list of CART drivers and teams, see "Business." Major sponsors of the
1998 CART Championship will include Federal Express and PPG Industries as the
co-title sponsors, MCI, Budweiser, Mercedes-Benz, Honda, Craftsman and other
Fortune 500 companies.
Open-wheel racing in the United States traces its history to 1904, and is
the oldest continually scheduled motorsports competition in the world. The 1997
CART Championship included 17 races staged in four countries -- the United
States, Canada, Australia and Brazil. Two additional races have been added for
1998, one in Motegi, Japan and one in Houston, Texas. CART races are conducted
on four different types of tracks: superspeedways, ovals, temporary street
courses and permanent road courses, requiring teams and drivers to employ a
variety of skills to master different courses to compete for the CART
Championship. Each race weekend in the CART Championship is an "event" offering
spectators the opportunity to enjoy a CART race as well as a full weekend of
entertainment, including additional races, practice and qualifying rounds for
all racing events, and automotive and general entertainment demonstrations and
displays. Race weekends provide corporate sponsors and other businesses the
opportunity to entertain their customers and employees through hospitality areas
and other activities.
Motorsports is among the most popular and fastest growing spectator sports
in the United States and, after soccer, it is the most watched sport worldwide.
CART's races were televised in more than 185 countries in 1996 with aggregate
television audiences of approximately 1 billion viewers. Total attendance at
major auto racing series' events in North America and CART racing events
increased significantly from 12.4 million and 1.8 million, respectively, in 1991
to 15.4 million and 2.4 million, respectively, in 1996. CART believes the
demographic profile of its growing spectator base has considerable appeal to
track owners, sponsors, television networks and advertisers. The mean annual
family income of CART spectators has been estimated to be $52,700, compared to
$38,400 for an average United States household.
The Company derives its revenues from four primary sources: sanction fees
paid by track promoters, corporate sponsorship fees and television and royalty
revenues. The Company's revenues have increased during the last three years from
$25.2 million in 1994 to $41.5 million in 1996. Based upon current promoter and
sponsorship agreements, the Company expects that sanction fee revenues will
increase from $24.4 million to $30.4 million and that sponsorship revenues will
increase from $7.2 million to $12.1 million from 1997 to 1998.
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<PAGE> 5
GROWTH STRATEGY
The Company's growth strategy is to increase revenues and net income by
expanding the worldwide audience for CART racing. The Company intends to
capitalize on its position as the premier open-wheel racing series in North
America and the thrill and excitement of CART racing to increase CART's brand
awareness. The Company believes that these factors will provide it with
opportunities for increased sanction fees, corporate sponsorship fees,
television revenues and royalties. To implement its strategy, the Company
intends to:
- Acquire and Develop Related Businesses and Properties. The Company
will selectively pursue opportunities to acquire and apply the CART brand
name to other race-related businesses and properties. The Company expects
to vertically integrate certain support-racing series to develop future
racing talent in the United States. The Company is also seeking
opportunities to acquire and develop race experience products such as
simulation or virtual reality products, indoor kart racing centers and race
schools, which will provide potential and existing race fans with an
affordable and accessible opportunity to experience the sport. As the first
step in this strategy, the Company is acquiring American Racing Series,
Inc. ("ARS"), which operates the PPG Dayton Indy Lights Championship ("Indy
Lights") and BP Automotive, Inc. ("BP"), which provides certain equipment
to the participants of Indy Lights. This transaction will close
concurrently with the Offering.
- Increase Market Penetration in the United States. The Company will
continue to develop its race schedule in key markets in the United States
and will sanction a new race in Houston, Texas during the 1998 season.
Because CART races are conducted on superspeedways, ovals, temporary street
courses and permanent road courses, the Company believes it has great
flexibility in selecting future race venues.
- Expand International Audience. The Company believes that the world
market for motorsports is predisposed to CART's style of exciting,
competitive, open-wheel racing. The CART Championship will span four
continents in 1998, with events in the United States, Canada, Australia,
Brazil and Japan. The Company typically receives higher sanction fees from
the promoters of international race events. Management continues to explore
additional opportunities to export its high-value, American racing product
throughout the world and to include more international-based sponsors for
the Company and its race teams.
- Expand Media Exposure. The Company plans to expand CART's exposure
and fan awareness by developing additional television and radio coverage.
During the 1998 race season, the Company expects to continue its
magazine-style program, "Inside CART," which premiered in the United States
on the Fox Sports Network in late 1997. Internationally, CART will continue
to build on the solid media distribution base established over recent years
in conjunction with its various distribution partners, with a particular
emphasis on expanding primary network coverage within individual countries.
- Increase CART's Licensing Opportunities. The Company will continue
to seek out opportunities to bring the CART brand to a broader market.
Through CART Licensed Products, LP ("CART Licensed Products"), an
affiliated limited partnership, CART provides "one stop shopping" for
potential licensees for the servicemarks and trademarks of CART, as well as
for participating race teams, drivers and tracks. This integrated approach
allows licensees and retailers to work with a single licensing entity
rather than negotiating in the fragmented licensing environment found in
other sports.
RECENT DEVELOPMENTS
CO-TITLE SPONSORSHIP FROM FEDERAL EXPRESS
Beginning with the 1998 race season, Federal Express will become the
co-title sponsor of the CART Championship, which has been officially designated
the "FedEx Championship Series." Under the sponsorship agreement, Federal
Express has acquired a comprehensive range of marketing benefits as well as
opportunities to supply services to CART, its teams and its race promoters. A
significant feature of this sponsorship arrangement is the combination of the
marketing rights of both CART and its race promoters to provide an exclusive
sponsorship involvement through the entire CART Championship. PPG Industries,
CART's long-time title sponsor, will continue to be involved as a co-title
sponsor of the series and the name
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sponsor of the CART Championship winner's trophy -- the "PPG Cup." PPG will also
continue with its successful pace car program at each CART race event.
THE INDY LIGHTS ACQUISITION
In December 1997, the Company entered into a binding letter of intent to
acquire all of the outstanding shares of common stock of ARS and the assets of
BP for $10.0 million in cash, and options to purchase 100,000 shares of Common
Stock at the initial public offering price (the "Indy Lights Acquisition"). ARS
operates Indy Lights and BP provides certain equipment to the participants of
Indy Lights. Indy Lights, the Official Development Series of the CART
Championship, was founded in 1986 as a series to develop future CART teams,
drivers, engineers and crew members. Indy Lights was designed to emphasize
driver and team talent, while reducing any advantage gained through large
monetary expenditures for equipment and technology. By restricting competition
to a single chassis design, powered by identical, sealed engines and running a
single brand of tires, Indy Lights offers a series in which costs can be
carefully controlled and creates a level playing field for drivers, team
managers and engineers. Indy Lights races are sanctioned by CART and 11 of the
13 races in the 1997 Indy Lights series were held in conjunction with CART
events. The Indy Lights Acquisition will close concurrently with the Offering
and will be funded with a portion of the proceeds from the Offering. See "Use of
Proceeds" and "Business-PPG Dayton Indy Lights Championship."
THE REORGANIZATION
The Company was formed in December 1997 to serve as a holding company for
CART and its subsidiaries. CART previously issued 25.5 shares of its common
stock to racing teams who met certain participation requirements. Each
outstanding share of common stock of CART was acquired by the Company in
exchange for 400,000 shares of Common Stock (the "Reorganization"). The
Reorganization was completed in anticipation of, and to facilitate, the
Offering. In connection with the Reorganization and pursuant to a three-year
agreement among each of the Company's current stockholders, effective January 1,
1998, the payment of certain items to franchise members including reimbursement
of travel expenses on a per race basis, directors fees and other race-related
payments will be discontinued. Such payments aggregated approximately $8,976,000
and $8,527,000 in 1995 and 1996, respectively, and $19,389,000 in the nine
months ended September 30, 1997. See "Business -- Franchise System and Race
Teams."
THE OFFERING
Common Stock offered by the
Company............................. 4,333,000 shares
Common Stock offered by the Selling
Stockholders...................... 240,000 shares
Common Stock outstanding after the
Offering(1)......................... 14,533,000 shares
Use of Proceeds..................... $10.0 million of the net proceeds from
the Offering will be used to fund the
cash portion of the Indy Lights
Acquisition; $9.5 million will be used
to pay certain obligations to franchise
race teams; and the balance will be
used for working capital and other
general corporate purposes, including
funding future acquisitions and
developing racing related businesses
and properties. See "Use of Proceeds."
The Company will not receive any of the
proceeds from the sale of Common Stock
by the Selling Stockholders.
Proposed New York Stock Exchange
Symbol.............................. " "
- ---------------
(1) Excludes 1,088,050 shares issuable upon exercise of stock options to be
granted under the Company's 1997 Stock Option Plan concurrently with the
Offering (the "Stock Option Plan") and 100,000 shares issuable upon exercise
of stock options to be granted in connection with the Indy Lights
Acquisition. See "Management -- Stock Option Plan."
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SUMMARY CONSOLIDATED FINANCIAL DATA
The following pro forma financial information gives effect to (i) the Indy
Lights Acquisition, (ii) the Reorganization, and (iii) the Offering and the
application of the net proceeds therefrom, as if each of these events had
occurred on January 1, 1996. The Summary Consolidated Financial Data below
should be read in conjunction with "Selected Consolidated Financial Data," the
Company's Consolidated Financial Statements and related notes thereto, the
Unaudited Pro Forma Condensed Consolidated Financial Information and related
notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations," contained elsewhere in this Prospectus.
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YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------- -----------------------------------
HISTORICAL HISTORICAL
-------------------------------- PRO FORMA ---------------------- PRO FORMA
1994 1995 1996 1996 1996 1997 1997
-------- -------- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
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(IN THOUSANDS, EXCEPT PER SHARE DATA AND NUMBER OF RACES)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:(1)
Revenues:
Sanction fees........................... $ 16,299 $ 18,708 $ 21,078 $ 21,078 $ 21,178 $ 24,248 $ 24,248
Sponsorship revenue..................... 4,104 4,780 5,501 7,797 4,488 6,186 8,074
Television revenue...................... 2,343 3,177 4,139 4,139 4,139 5,002 5,002
U.S. 500(2)............................. -- -- 7,054 7,054 7,078 -- --
Other revenue........................... 2,441 3,312 3,682 6,189 2,967 4,467 6,928
-------- -------- -------- --------- --------- --------- ---------
Total revenues...................... 25,187 29,977 41,454 46,257 39,850 39,903 44,252
Total expenses(2)(3)(4)(5)................ 25,105 29,196 41,971 37,802 37,419 47,268 31,310
Income (loss) before income taxes......... 82 781 (517) 8,455 2,431 (7,365) 12,942
Net income (loss)......................... 426 985 (338) 5,675 1,540 (4,789) 8,732
Net income (loss) per share............... $ .04 $ .10 $ (.04) $ .41 $ .16 $ (.47) $ .60
Weighted average common shares
outstanding(6).......................... 10,200 10,200 9,400 13,733 9,400 10,200 14,533
OTHER DATA:
Number of CART races...................... 15 16 16 16 16 17 17
Total attendance.......................... 2,015 2,260 2,366 N/A 2,366 --(7) N/A (7)
</TABLE>
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AS OF SEPTEMBER 30,
1997
-----------------------
ACTUAL PRO FORMA
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(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................................................ $ 4,850 $44,005
Working capital (deficit)................................................................ (2,291) 46,399
Total assets............................................................................. 18,461 67,616
Total long-term debt (including current portion)......................................... 466 466
Total stockholders' equity (deficit)..................................................... (2,827) 58,468
</TABLE>
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(1) The Company derives a substantial portion of its total revenues from
sanction fees and sponsorship revenue received primarily during the racing
season. As a result, the Company's operations have been, and are expected to
remain highly seasonal. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Seasonality and Quarterly
Results."
(2) In 1996, the Company staged and acted as promoter of the inaugural U.S. 500.
Revenues attributable to the U.S. 500 included sponsorship fees, television,
admissions, program sales and other revenues associated with promoting the
event. Expenses included, among others, the race purse, track rental,
promotional and advertising costs and other expenses necessary to promote
the event. Such expenses for the year ended December 31, 1996 and the nine
months ended September 30, 1996 (including purse awards) amounted to
$8,246,000 and $8,220,000, respectively. The Company no longer acts as the
promoter of the U.S. 500, but does continue to sanction the event.
(3) Total expenses for the years ended December 31, 1994, 1995 and 1996 and the
nine months ended September 30, 1996 and 1997 include certain payments to
franchise members, including reimbursement of travel expenses, director
fees, purse awards and other race related payments. Effective January 1,
1998, the Company and the existing franchise members entered into an
agreement whereby reimbursements for travel expenses, directors fees and
race-related payments will be discontinued. Such agreement expires in
December 2000. The pro forma statement of income data for the year ended
December 31, 1996 and the nine months ended September 30, 1997 excludes
reimbursements of $8,527,000 and $19,389,000, respectively, which will be
discontinued as a result of such agreement.
(4) Total historical and pro forma expenses for the year ended December 31, 1996
include approximately $1,734,000 of expenses related to litigation and the
settlement of lawsuits.
(5) Total expenses for the historical and pro forma year ended December 31, 1996
and the historical and pro forma nine months ended September 30, 1996 and
1997 include compensation expense of $1,167,000, $1,167,000 and $1,483,000,
respectively, related to the issuance of Common Stock to franchise members
below its fair value, on the date the Common Stock became eligible for
purchase. If these compensation expenses were excluded from the pro forma
results, net income per share would increase by $.06 and $.07 for the year
ended December 31, 1996 and nine months ended September 30, 1997,
respectively. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(6) Includes 1,400,000 shares, consisting of 1,200,000 shares and 200,000 shares
of Common Stock issued to new franchise members and other race competitors,
respectively, on December 19, 1997. See "Business -- Franchise System and
Race Teams."
(7) Total attendance information for the 1997 race season is not yet available.
6
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RISK FACTORS
Prospective Purchasers of the Common Stock should consider carefully the
risk factors set forth below, as well as the other information contained in this
Prospectus. This Prospectus contains certain forward-looking statements. The
safe harbor provisions of the Private Securities Litigation Reform Act of 1995
do not apply to this Offering or other initial public offerings. Actual results
may differ materially from those projected in the forward-looking statements as
a result of any number of factors, including the risk factors set forth below.
COMPETITION
The Company's racing events compete for television viewership, attendance
and sponsorship funding with other racing events sanctioned by various other
racing bodies and with other sports, entertainment and recreational events, such
as football, basketball and baseball. The competition with other racing bodies
such as Formula One, NASCAR, the Indy Racing League ("IRL"), the United States
Auto Club ("USAC"), the National Hot Rod Association ("NHRA"), the Sports Car
Club of America ("SCCA"), Professional SportsCar Racing ("PSCR"), the Automobile
Racing Club of America ("ARCA") and others is intense. Racing events sanctioned
by other organizations often are held on the same dates as CART events, at
separate tracks, and compete for attendance as well as television viewership. In
addition, CART competes with other racing bodies to sanction racing events at
various motorsports facilities. In consideration of the intense competition in
the sports and entertainment industry, there can be no assurance that the
Company will maintain or improve its market position. See "Auto Racing Industry
Overview" and "Business -- Competition."
INDUSTRY SPONSORSHIPS
The motorsports industry generates significant revenue each year from the
promotion, sponsorship and advertising of various companies and their products.
Government regulation can adversely impact the availability to motorsports of
this promotion, sponsorship and advertising revenue. If promotion, sponsorship
and advertising revenues are not available to the Company and its teams in the
future, the Company's results of operations would be adversely affected.
Advertising by the tobacco and liquor industries is generally subject to greater
governmental regulation than advertising by other sponsors. Although the Company
does not derive significant advertising revenue from the tobacco and liquor
industries, many of the teams participating in CART-sanctioned events derive a
substantial portion of their operating revenues from such industry sponsors. In
addition, many of the race events that are sanctioned by CART are sponsored in
part by the tobacco and/or liquor industries, with such sponsorship fees paid to
the track promoters. There is currently pending litigation involving various
aspects of the tobacco industry. In settlement of outstanding litigation with
various state attorneys general in the United States, the tobacco industry has
proposed an agreement which would implement certain proposed governmental
regulations which would prohibit advertisement of tobacco products at sports
events, including motorsports. The proposed settlement must be approved by the
United States Congress and signed by the President prior to implementation into
law, and therefore could change substantially prior to approval by Congress. The
Company cannot predict whether the settlement discussed above will be approved
by Congress or the timing of any future restrictions on advertising impacting
the tobacco industry. The Company believes that a prohibition on tobacco
advertising will have an immediate effect on some of the teams participating in
CART events (specifically including the seven 1998 race teams who the Company
expects will derive substantially all of their funding from tobacco industry
sponsors), as well as those United States race promoters who derive a portion of
their revenues from tobacco advertising and sponsorship.
If the settlement is approved by Congress, the race teams will be required
to seek other sponsorship and their failure to secure replacement sponsorship
could adversely affect the ability of these race teams to continue their
participation in CART events. Regardless of the outcome of the proposed
settlement in the United States, any future limitations on tobacco advertising
may have an adverse effect on race venues and may limit the Company's ability to
expand its race schedule into other countries. See "Auto Racing Industry
Overview" and "Business -- Drivers and Corporate Sponsors."
RELIANCE ON PARTICIPATION BY TEAMS
The future success of the Company is dependent upon the continued
participation of racing teams, including team owners, drivers, engineers,
mechanics and other team members, in CART-sanctioned race events. The teams
currently participating in CART events derive substantially all of their funding
for race operations from such team's sponsors. Generally, the team sponsors
measure advertising exposure, including attendance at the events and television
viewership, to determine future sponsorship commitments. Decreased attendance
and television viewership could adversely affect the level of funding by some
team sponsors. If sponsorship revenues are not available to teams, such teams
may not have the
7
<PAGE> 9
necessary funding to participate in CART events, which could have an adverse
effect on the Company's business and financial condition. In addition, the
termination of continued participation by teams currently competing in all CART
events could have an adverse effect on the Company's business and financial
condition. See "Business -- Franchise System and Race Teams."
In connection with the Reorganization, CART discontinued certain
significant payments to CART's race teams. The discontinuation of payments may
have an adverse effect on CART's ability to retain existing race teams or
attract new race teams that could have previously received these payments. Since
CART will continually need to attract new race teams, this change could have a
negative impact on CART's operations. See "Business -- Franchise System and Race
Teams."
THE INDY RACING LEAGUE
In 1995, the IRL was formed as a rival open-wheel racing league to compete
directly with CART and the CART Championship. The IRL was founded by affiliates
of the Indianapolis Motor Speedway ("IMS").
Following the creation of the IRL and rule changes instituted by USAC,
which governed the Indianapolis 500, almost all of the CART teams and drivers
have not competed at the Indianapolis 500, believing that the rule changes were
adverse to CART and the teams participating in CART events. The 1996 rule
changes included, among others, reservation of 25 of the 33 starting positions
in the Indianapolis 500 for those competing in other IRL events. Additional rule
changes for 1997 included substantial changes to equipment specifications such
that the cars competing in CART-sanctioned events could not compete at the
Indianapolis 500. The reservation of starting positions was eliminated by the
IRL for 1998.
The Indianapolis 500 is a major racing event in the United States and draws
substantial television viewership. For these reasons, many companies that
sponsored race teams historically regarded an involvement at the Indianapolis
500 as being an extremely important part of their sponsorship. Considerable sums
have been spent by corporations to sponsor race teams participating at the
Indianapolis 500 and on advertising and promotion in support of such
sponsorship. Through the date of this Prospectus, the Company does not believe
that it or its teams have lost significant sponsors due to non-participation by
CART teams and drivers at the Indianapolis 500.
The Company is unable to predict what effect, if any, the IRL or the
continued non-participation by CART teams at the Indianapolis 500 will have on
the Company's future results. See "Auto Racing Industry Overview" and
"Business -- Competition."
LIABILITY FOR PERSONAL INJURIES
Racing events can be dangerous to participants and spectators. CART
requires all race participants (excluding the general public) to execute a
general release and waiver of liability prior to participating in racing events
sanctioned by CART and requires each track promoter to indemnify CART against
any liability for personal injuries sustained at such promoter's racing event.
In addition, CART requires each event promoter to carry a minimum of $10.0
million in liability insurance, with CART as a named insured, and CART maintains
a $15.0 million umbrella insurance policy. Nevertheless, there can be no
assurance that the release and waivers will be fully enforced in a court of law,
that the promoter will have liquid assets to satisfy any indemnification
requirement, or that such insurance will be adequate or available at all times
at reasonable premiums and in all circumstances. The Company's financial
condition and results of operations would be adversely affected to the extent
claims and associated expenses exceed insurance and indemnification recoveries
or are otherwise not covered by insurance. See "Business -- Legal Proceedings."
RELIANCE ON PARTICIPATION BY SUPPLIERS
The Company's racing events are dependent upon the continued participation
of suppliers of engines, tires and chassis to teams competing in CART events.
The engines and tires for CART race cars are designed specifically for CART
racing, and the Company believes that the costs to some industry suppliers are
greater than the revenues generated from the sale or lease of such products to
the teams. Without the continued supply of engines, chassis and tires, the
Company believes that its financial condition could be adversely affected. See
"Business."
8
<PAGE> 10
LIMITATIONS ON ABILITY TO EXPAND THE RACE SCHEDULE
The 1998 CART Championship schedule includes 19 races, with one race in
Japan, one race in Australia and one race in Brazil, in addition to the 16 races
that will be staged in North America. The first race of the 1998 season will be
held on March 15, with the season-ending race to be run on November 1. Although
the Company intends to explore opportunities to further extend the racing
season, continued expansion of the number of races staged each year will require
additional personnel and resolution of logistical issues such as transportation
and availability of equipment. The Company's ability to expand the race schedule
will also be limited to the extent the teams are able to secure funding and
equipment for participation in additional events and the teams' willingness to
participate in an expanded schedule. See "Business -- Racing Events."
RELIANCE ON EVENT PROMOTERS
The Company derives a substantial portion of its total revenues from
sanction fees which are paid by each promoter to the Company. In the event that
the particular event or event promoters incur financial losses or restrictions
that prohibit future events from taking place, the Company believes that its
financial condition could be adversely affected.
MANAGING THE COMPANY'S GROWTH
The Company's ability to effectively manage future growth and to
successfully implement its growth strategy in connection with acquiring and
developing race related businesses and properties will require it to
successfully integrate the operations of such businesses and properties with the
Company's operations, to further enhance its operational, financial and
management systems, and to successfully hire, train, retain and motivate
additional employees. The failure of the Company to manage its growth on an
effective basis could have a material adverse effect on the Company's business
and financial condition. See "Business -- Growth Strategy."
CONTROL OF THE COMPANY
Upon completion of the Offering, current stockholders of the Company will
own approximately 69% (approximately 65% if the Underwriters' over-allotment
option is exercised in full) of the Company's Common Stock. As a result, the
current stockholders, as a group, will continue to control the outcome of
substantially all issues submitted to the Company's stockholders, including the
election of directors. See "Principal and Selling Stockholders" and "Business --
Franchise System and Race Teams."
CONFLICTS OF INTEREST
Each of the current stockholders is the owner of a race team that
participates in the CART Championship, and each of the current directors is
affiliated with a race team that participates in the CART Championship, which
will result in an inherent conflict of interest with regard to certain matters
to be considered by the stockholders or directors. In addition, certain
stockholders and directors control, or are affiliated with persons who control,
racing venues which stage CART and other racing events and therefore a conflict
of interest may arise with respect to determining the location and dates of CART
events and the amount of sanction fees paid. See "Certain Related Transactions."
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a large extent upon the availability and
performance of certain key employees, including Messrs. Andrew Craig, President
and Chief Executive Officer, and Randy K. Dzierzawski, Executive Vice President
and Chief Financial Officer, the loss of whose services could have a material
adverse effect on the Company. In an effort to minimize this risk, the Company
has entered into employment agreements with certain key employees, including
Messrs. Craig and Dzierzawski. See "Management."
SEASONALITY AND FLUCTUATION OF QUARTERLY RESULTS
The Company derives a substantial portion of its total revenues from
sanction fees and sponsorship revenues paid primarily during the racing season.
As a result, the Company's operations have been, and are expected to remain,
highly seasonal. Historically, revenues are higher in the second and third
quarters of the year due to the number of races staged in those quarters. The
scheduling of any race in the CART Championship can significantly affect the
Company's quarterly results of operations when compared to a previous quarter if
such race is scheduled during different quarters from year to year. The 1998
racing season will extend through the month of November, compared to 1997, when
the last
9
<PAGE> 11
race was staged in September. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Seasonality and Quarterly
Results."
ABSENCE OF PUBLIC MARKET AND DETERMINATION OF OFFERING PRICE
Prior to the Offering, there has been no public market for the Common Stock
and there can be no assurance that an active trading market will develop
subsequent to the Offering. The offering price will be determined by
negotiations between the Company and representatives of the Underwriters and may
not be indicative of the market price of the Common Stock after the Offering.
See "Underwriting" for the factors to be considered in determining the initial
public offering price. There can be no assurance that the market price of the
Common Stock prevailing at any time after the Offering will equal or exceed the
initial public offering price. In addition, the stock market has, from time to
time, experienced extreme price and volume fluctuations, which could adversely
affect the market price of the Common Stock without regard to the financial
performance of the Company. The market price of the Common Stock may fluctuate
substantially in response to variations in the Company's results of operations,
announcements by the Company or other developments affecting the Company, as
well as by general economic trends and other external factors. See "Description
of Capital Stock" and "Underwriting."
DILUTION
Purchasers of the shares of Common Stock offered hereby will experience an
immediate and substantial dilution of $ per share in net tangible book
value from the initial public offering price. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of significant amounts of the Common Stock in the public market after
this Offering could adversely affect the market price of the Company's Common
Stock. After the Offering, 14,533,000 shares of Common Stock (15,218,950 shares
if the Underwriters' over-allotment option is exercised in full) will be
outstanding. In addition to the 4,573,000 shares of Common Stock offered hereby
(5,258,950 shares if the Underwriters' over-allotment option is exercised in
full), a total of 8,560,000 shares of Common Stock have been held by
non-affiliates for more than one year but less than two years, or by affiliates
for more than one year and, therefore, will be eligible for sale, beginning 90
days after the date of this Prospectus, subject to the volume limitations of
Rule 144 under the Securities Act of 1933, as amended (the "Securities Act"),
the Underwriters' lock-up and an agreement among stockholders. The approximately
1,400,000 remaining shares have been held for less than one year and are not yet
eligible for sale. In addition to the 10,200,000 shares of Common Stock
outstanding, the Company has reserved an additional 2,000,000 and 100,000 shares
of Common Stock for issuance pursuant to the Stock Option Plan and the Director
Option Plan, respectively, which shares will be registered under the Securities
Act, and will be freely transferable.
No prediction can be made as to the effect that resale of shares of Common
Stock, or the availability of shares of Common Stock for resale, will have on
the market price of the Common Stock prevailing from time to time. The resale of
substantial amounts of Common Stock, or the perception that such resales may
occur, could adversely affect prevailing market prices of the Common Stock. The
Company's officers, directors and current stockholders have agreed not to sell
their shares (approximately 9,960,000 shares) for a period of 180 days from the
date of this Prospectus without the prior written consent of the representatives
of the Underwriters. In addition, each of the current stockholders have signed
an agreement which restricts their ability to sell any shares of Common Stock
for a period of one year from the date of this Prospectus. See "Shares Eligible
for Future Sale" and "Underwriting."
ANTI-TAKEOVER PROVISIONS
The General Corporation Law of the State of Delaware contains certain
provisions which may delay or prevent an attempt by a third party to acquire
control of the Company. In addition, certain provisions of the Company's
Certificate of Incorporation and Bylaws authorize the issuance of preferred
stock, and establish advance notice requirements for director nominations and
actions to be taken at stockholder meetings. These provisions could discourage
or impede a tender offer, proxy contest or other similar transaction involving
control of the Company, which transaction might be viewed favorably by minority
stockholders. In addition, the severance provisions of employment agreements
with certain members of management could impede an attempted change of control
of the Company. The Company has adopted a Stockholder Rights Plan which may have
the effect of impeding a hostile attempt to acquire control of the Company. See
"Description of Capital Stock -- Delaware Law" and "Certain Charter and By-Law
Provisions."
10
<PAGE> 12
ABILITY TO ISSUE PREFERRED STOCK
The Company may issue preferred stock in the future without stockholder
approval and upon such terms and conditions, and having such rights, privileges
and preferences, as the Board of Directors may determine. The rights of the
holders of Common Stock will be subject and subordinate to, and may be adversely
affected by, the rights of the holders of any preferred stock that may be issued
in the future. The issuance of preferred stock could have the effect of making
it more difficult for a third party to acquire, or discouraging a third party
from acquiring, a majority of the outstanding voting stock of the Company. The
Company has no outstanding preferred stock and no present plans to issue any
shares of preferred stock. See "Description of Capital Stock -- Preferred
Stock."
DIVIDEND POLICY
The Company does not anticipate declaring and paying cash dividends on its
Common Stock after consummation of the Offering at any time in the foreseeable
future. See "Dividend Policy."
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements and information contained in this Prospectus,
particularly those under the headings "Business," "Risk Factor," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," concerning future, proposed and anticipated activities of the
Company, certain trends with respect to the Company's revenues, operating
results on a pro forma basis, capital resources and liquidity or with respect to
the Company's competitive position or the motorsports industry in general, and
other statements contained in this Prospectus regarding matters that are not
historical facts are forward-looking statements. Such statements, by their very
nature, include risks and uncertainties, many of which are beyond the Company's
control. Accordingly, actual results may differ, perhaps materially, from those
expressed in or implied by such forward-looking statements. Factors that could
cause actual results to differ materially include those discussed herein under
"Risk Factors."
11
<PAGE> 13
USE OF PROCEEDS
The net proceeds to the Company from the Offering are estimated to be
$ ($ if the Underwriters' over-allotment option is exercised in
full), assuming an initial public offering price of $ per share (the
midpoint of the initial public offering filing range) and after deducting the
underwriting discount and estimated offering expense payable by the Company.
The Company intends to use approximately $10.0 million of the net proceeds
of the Offering to purchase the common stock of ARS which operates the Indy
Lights Championship, the Official Development Series for CART, and the assets of
BP, which supplies certain equipment to the participants in the Indy Lights
Championship. See "Business--PPG Dayton Indy Lights Championship." Approximately
$9.5 million will be used to pay certain obligations to franchise race teams,
and the remaining net proceeds from the Offering will be used for working
capital and general corporate purposes, including the expansion of the Company's
business through the acquisition or development of racing-related businesses and
properties. The Company currently has no agreements with respect to any
acquisitions other than the Indy Lights Acquisition, but it regularly engages in
discussions relating to potential acquisitions. No assurance can be given that
the Company will be able to acquire racing-related businesses in the near
future.
Pending application of the net proceeds of this Offering as described
above, the Company will invest such proceeds in short-term, interest-bearing,
investment grade securities. The Company will not receive any proceeds from the
sale of shares of Common Stock to be sold by the Selling Stockholders.
12
<PAGE> 14
CAPITALIZATION
The following table sets forth the cash and cash equivalents and the
consolidated capitalization of the Company as of September 30, 1997 and on a pro
forma basis reflects the sale of the Common Stock offered hereby and application
of the estimated net proceeds as described in "Use of Proceeds." This table
should be read in conjunction with the Consolidated Financial Statements and
related notes thereto, "Management's Discussion and Analysis of Results of
Operations" and the Unaudited Pro Forma Condensed Consolidated Financial
Information and related notes thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
------------------------
ACTUAL PRO FORMA(1)
------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents.............................................. $ 4,850 $ 44,005
======= ========
Long-term debt (including current portion)............................. $ 466 $ 466
Membership deposits.................................................... 1,320 --
Franchise fund liability............................................... 1,320 --
Stockholders' equity (deficit):
Preferred Stock, $.01 par value, 5,000,000 shares authorized; none
issued and outstanding............................................ -- --
Common Stock, $.01 par value, 50,000,000 shares authorized;
10,200,000 issued and outstanding, as of September 30, 1997; and
14,533,000 issued and outstanding, as adjusted(1)(2).............. 88 145
Additional paid-in-capital........................................... 3,472 64,710
Accumulated deficit.................................................. (6,387) (6,387)
------- --------
Total stockholders' equity (deficit)............................ (2,827) 58,468
------- --------
Total capitalization................................................... $ 279 $ 58,934
======= ========
</TABLE>
- ---------------
(1) Includes (i) the proceeds from the issuance of 1,400,000 shares by the
Company, consisting of 1,200,000 shares and 200,000 shares issued to new
franchise members and other race competitors, respectively, on December 19,
1997, (ii) the Indy Lights Acquisition, (iii) the payment of accrued point
awards and repayment of membership deposits and the franchise fund liability
to franchise members, and (iv) the Offering and the application of the net
proceeds therefrom. See "Business--Franchise System and Race Teams."
(2) Excludes 1,088,050 shares issuable upon exercise of stock options to be
granted under the Company's 1997 Stock Option Plan concurrently with the
Offering and 100,000 shares issuable upon exercise of stock options to be
granted in connection with the Indy Lights Acquisition. See
"Management -- Stock Option Plans."
DIVIDEND POLICY
The Company intends to retain future earnings for the operation and
expansion of its business. The Company does not anticipate paying any cash
dividends in the foreseeable future. Any decision by the Board of Directors
concerning the payment of dividends on the Common Stock in the future will be
dependent upon the Company's results of operations, financial condition, cash
requirements, capital expenditure requirements and other factors deemed relevant
by the Board of Directors.
13
<PAGE> 15
DILUTION
The Company's net tangible book value at September 30, 1997 was
$ , or $ per share. Net tangible book value per share
represents the Company's total tangible assets less its total liabilities,
divided by the number of shares of Common Stock outstanding. After giving effect
to the sale of the Common Stock offered hereby (assuming an offering price of
$ per share, the midpoint of the price range set forth on the cover
page of this Prospectus, and after deducting underwriting discounts and
commissions and estimated offering expenses), the Company's pro forma net
tangible book value at September 30, 1997 would have been approximately
$ or $ per share. This represents an immediate increase in net
tangible book value per share of $ to existing stockholders and an
immediate dilution of $ per share to the investors purchasing shares of
Common Stock at the initial public offering price. The following table
illustrates this dilution in net tangible book value to new investors:
<TABLE>
<S> <C> <C>
Assumed price to public................................................. $
Net tangible book value before Offering............................... $
Increase attributable to new investors................................
--------
Pro forma net tangible book value after Offering........................
--------
Dilution to new investors............................................... $
--------
</TABLE>
If the Underwriters exercise their right to purchase an additional
shares of Common Stock in the aggregate to cover over-allotments, the net
tangible book value per share after the Offering would be $ , which
would result in dilution to new investors of $ per share.
The above table excludes 1,088,050 shares of Common Stock issuable upon
exercise of options to be granted under the Company's Stock Option Plan and
100,000 shares of Common Stock issuable upon exercise of options to be granted
in connection with the Indy Lights Acquisition, all of which are subject to
vesting schedules. See "Management -- Stock Option Plans" and "Business -- PPG
Dayton Indy Lights Championship."
The following table sets forth the number of shares of Common Stock
purchased from the Company, the effective cash contributions made and the
average price per share paid by existing stockholders and by purchasers of the
Common Stock offered hereby:
<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED CONSIDERATION PAID
------------------ ------------------ AVERAGE PRICE
NUMBER PERCENT NUMBER PERCENT PER SHARE
------ ------- ------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing Stockholders........................ % % $
New Investors................................
----- ----- ----- -----
Total...................................... 100.0% 100.0%
===== ===== ===== =====
</TABLE>
14
<PAGE> 16
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data as of and for the
periods ended December 31, 1992, 1993, 1994, 1995 and 1996 are derived from the
Company's Consolidated Financial Statements, audited by Deloitte & Touche LLP,
independent auditors. The selected consolidated financial data for the nine
months ended September 30, 1996 and 1997 are derived from the Company's
unaudited Consolidated Financial Statements. In the opinion of management, such
unaudited Consolidated Financial Statements contain all adjustments (consisting
of only normal recurring accruals) necessary for a fair presentation of the
consolidated financial condition and results of operations as of and for the
periods presented. Operating results for the nine months ended September 30,
1997 are not necessarily indicative of the results that may be expected for the
entire year ending December 31, 1997. The pro forma financial information gives
effect to (i) the Indy Lights Acquisition, (ii) the Reorganization, and (iii)
the Offering and the application of the net proceeds therefrom as if each of
these events had occurred on January 1, 1996. The selected consolidated
financial data below should be read in conjunction with the Company's
Consolidated Financial Statements and related notes thereto and the Pro Forma
Financial Information contained elsewhere in this Prospectus and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------------- ------------------------------
HISTORICAL PRO HISTORICAL PRO
------------------------------------------------ FORMA ------------------- FORMA
1992 1993 1994 1995 1996 1996 1996 1997 1997
------- ------- ------- -------- ------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:(1)
Revenues:
Sanction fees.................... $14,168 $15,239 $16,299 $ 18,708 $21,078 $ 21,078 $ 21,178 $ 24,248 $ 24,248
U.S. 500(2)...................... -- -- -- -- 7,054 7,054 7,078 -- --
Sponsorship revenue.............. 4,547 3,664 4,104 4,780 5,501 7,797 4,488 6,186 8,074
Television revenue............... 7,425 9,391 2,343 3,177 4,139 4,139 4,139 5,002 5,002
Engine leases, rebuilds and wheel
sales.......................... -- -- -- -- -- 2,347 -- -- 2,355
Other revenue.................... 1,773 2,132 2,441 3,312 3,682 3,842 2,967 4,467 4,573
------- ------- ------- ------- ------- -------- -------- -------- --------
Total revenues............... 27,913 30,426 25,187 29,977 41,454 46,257 39,850 39,903 44,252
Expenses:
Race and franchise fund
payments(3).................... 16,852 17,425 18,305 18,446 17,198 11,649 17,096 28,686 12,226
U.S. 500(2)...................... -- -- -- -- 8,246 8,246 8,220 -- --
Race expenses(4)................. 6,604 8,530 2,621 4,612 6,055 4,804 4,409 6,118 4,489
Costs of engine rebuilds and
wheel sales.................... -- -- -- -- -- 898 -- -- 742
Administrative and indirect
expenses(3)(4)................. 4,224 3,992 3,977 5,832 8,620 10,012 6,153 10,841 11,974
Compensation expense (5)......... 179 204 -- -- 1,167 1,167 1,167 1,483 1,483
Depreciation and amortization.... -- -- 202 306 685 1,026 374 350 606
Minority interest................ -- -- -- -- -- -- -- (210) (210)
------- ------- ------- ------- ------- -------- -------- -------- --------
Total expenses............... 27,859 30,151 25,105 29,196 41,971 37,802 37,419 47,268 31,310
------- ------- ------- ------- ------- -------- -------- -------- --------
Income (loss) before income
taxes............................ 54 275 82 781 (517) 8,455 2,431 (7,365) 12,942
Income tax expense (benefit)....... -- 3 (344) (204) (179) 2,780 891 (2,576) 4,210
------- ------- ------- ------- ------- -------- -------- -------- --------
Net income (loss).................. $ 54 $ 272 $ 426 $ 985 $ (338) $ 5,675 $ 1,540 $ (4,789) $ 8,732
======= ======= ======= ======= ======= ======== ======== ======== ========
Net income (loss) per share(6)..... $ .01 $ .02 $ .04 $ .10 $ (.04) $ .41 $ .16 $ (.47) $ .60
======= ======= ======= ======= ======= ======== ======== ======== ========
Weighted average common shares
outstanding(6)................... 10,600 11,000 10,200 10,200 9,400 13,733 9,400 10,200 14,533
======= ======= ======= ======= ======= ======== ======== ======== ========
</TABLE>
15
<PAGE> 17
<TABLE>
<CAPTION>
AS OF
AS OF DECEMBER 31, SEPTEMBER 30, 1997
------------------------------------------------ -------------------
1992 1993 1994 1995 1996 ACTUAL PRO FORMA
------- ------- ------- -------- ------- ------- ---------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................ $ 259 $ 327 $ 1,393 $ 2,046 $ 630 $ 4,850 $44,005
Working capital (deficit)............................ (1,023) (378) (209) (1,182) (524) (2,291) 46,399
Total assets......................................... 1,181 1,378 2,974 5,613 6,600 18,461 67,616
Long-term debt (including current portion)........... -- -- -- -- 574 466 466
Total Stockholders' equity (deficit)................. (2,509) (2,101) (1,875) (1,250) (151) (2,827) 58,468
</TABLE>
- ---------------
(1) The Company derives a substantial portion of its total revenues from
sanction fees and sponsorship revenue, received primarily during the racing
season. As a result, the Company's operations have been, and are expected to
remain, highly seasonal. See "Management's Discussion's and Analysis of
Financial Condition and Results of Operations--Seasonality and Quarterly
Results."
(2) In 1996, the Company staged and acted as promoter of the inaugural U.S. 500.
Revenues attributable to the U.S. 500 included sponsorship fees, television,
admissions, program sales and other revenues associated with promoting the
event. Expenses included, among others, the race purse, track rental,
promotional and advertising costs and other expenses necessary to promote
the event.
(3) Total expenses for the years ended December 31, 1994, 1995 and 1996 and the
nine months ended September 30, 1996 and 1997 include certain payments to
franchise members, including reimbursement of travel expenses, director
fees, purse awards and other race related payments. Effective January 1,
1998, the Company and the existing franchise members entered into an
agreement whereby reimbursements for travel expenses, directors fees and
race-related payments will be eliminated. Such agreement expires in December
2000. The pro forma statement of income data for the year ended December 31,
1996 and the nine months ended September 30, 1997 excludes reimbursements of
$8,527,000 and $19,389,000, respectively, which will be discontinued as a
result of such agreement.
(4) Total historical and pro forma expenses for the year ended December 31, 1996
include approximately $1,734,000 of expenses related to litigation and the
settlement of lawsuits.
(5) Total expenses for the historical and pro forma year ended December 31, 1996
and the historical and pro forma nine months ended September 30, 1996 and
1997 include compensation expense of $1,167,000, $1,167,000 and $1,483,000,
respectively, related to the issuance of Common Stock to franchise members
below its fair value, on the date the Common Stock became eligible for
purchase. If these compensation expenses were excluded from the pro forma
results, net income per share would increase by $.06 and $.07 for the year
ended December 31, 1996 and nine months ended September 30, 1997,
respectively. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(6) Includes 1,400,000 shares, consisting of 1,200,000 shares and 200,000 shares
issued to new franchise members and other race competitors, respectively, on
December 19, 1997. See "Business -- Franchise System and Race Teams."
16
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements and related notes thereto and "Selected
Consolidated Financial Data" included elsewhere in this Prospectus.
GENERAL
In December 1997, as part of the Reorganization, each of the current
stockholders exchanged their shares of stock in CART for shares of Common Stock
of the Company. Prior to the Reorganization, the franchise owners received
reimbursement of travel expenses, directors fees and franchise payments in an
aggregate amount equal to $7.4 million, $9.0 million and $8.5 million for the
years ended December 31, 1994, 1995 and 1996, respectively, and $8.4 million and
$19.4 million for the nine months ended September 30, 1996 and 1997,
respectively. These payments will be discontinued after January 1, 1998 pursuant
to contractual commitments, which were entered into on December 19, 1997 and
expire in December 2000.
Set forth below are selected income and expense items and the relationship
of such income and expense items to total revenues for the years ended December
31, 1994, 1995 and 1996 and the nine month periods ended September 30, 1996 and
1997.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------------ --------------------------------------
1994 1995 1996 1996 1997
---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Sanction fees....... $16,299 64.7% $18,708 62.4% $21,078 50.8% $21,178 53.1% $24,248 60.8%
U.S. 500(1)......... -- -- -- -- 7,054 17.0 7,078 17.8 -- --
Sponsorship
revenue........... 4,104 16.3 4,780 15.9 5,501 13.3 4,488 11.3 6,186 15.5
Television
revenue............... 2,343 9.3 3,177 10.6 4,139 10.0 4,139 10.4 5,002 12.5
Other revenue....... 2,441 9.7 3,312 11.1 3,682 8.9 2,967 7.4 4,467 11.2
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Total
Revenues...... $25,187 100.0% $29,977 100.0% $41,454 100.0% $39,850 100.0% $39,903 100.0%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Expenses:
Race and franchise
fund payments(2).. $18,305 72.7% $18,446 61.5% $17,198 41.5% $17,096 42.9% $28,686 71.9%
U.S. 500(1)......... -- -- -- -- 8,246 19.9 8,220 20.6 -- --
Race expenses(2).... 2,621 10.4 4,612 15.4 6,055 14.6 4,409 11.1 6,118 15.3
Compensation
expense........... -- -- -- -- 1,167 2.8 1,167 2.9 1,483 3.7
Administrative and
other indirect
expenses(2)....... 3,977 15.8 5,832 19.5 8,620 20.8 6,153 15.5 10,841 27.2
Depreciation and
amortization...... 202 0.8 306 1.0 685 1.6 374 0.9 350 0.9
Minority interest in
loss of
subsidiaries...... -- -- -- -- -- -- -- -- (210) (0.5)
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Total
Expenses...... $25,105 99.7% $29,196 97.4% $41,971 101.2% $37,419 93.9% $47,268 118.5%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
- ---------------
(1) CART's promotion of the U.S. 500 was a one-time event, and though CART
continues to sanction the event, it does not anticipate acting as the
promoter of the U.S. 500 in the future.
(2) Includes certain payments that will be discontinued after January 1, 1998,
as discussed above.
REVENUES
The Company classifies its revenues to include sanction fees, the U.S. 500,
sponsorship revenue, television revenue and other revenue, as discussed below:
Sanction Fees. The Company derives its sanction fee revenue from the
promoter at each venue on the CART Championship schedule in accordance with
negotiated contracts pursuant to which CART agrees to stage a CART Championship
race at such venue in return for the payment of a sanction fee (a "Promoter
Agreement"). The terms of each contract vary by location and type of facility
and have maturities ranging from 1998 to 2002. Sanction fee revenue is recorded
upon completion of each event. The entire sanction fee is collected in advance
of the relevant event with the contracted fees ranging from $850,000 to $4.1
million, from 1998 to 2000, respectively, excluding option periods.
U.S. 500. In 1996, due to the reservation of starting positions at the
Indianapolis 500 for IRL competitors, CART promoted and sanctioned the inaugural
U.S. 500 at Michigan International Speedway on May 26. Because the event was
promoted by CART, CART did not receive sanction fee revenue from the event but
did receive revenue from admissions,
17
<PAGE> 19
hospitality, television, sponsorship and licensing. CART's promotion of the U.S.
500 was a one-time event, and though CART continues to sanction the event, it
does not anticipate acting as the promoter of the U.S. 500 in the future.
Sponsorship Revenue. The Company receives corporate sponsorship revenue in
accordance with negotiated contracts. CART currently has corporate sponsor
contracts with 15 major manufacturing and consumer products companies. The
remaining terms of these contracts range from one to three years. An official
corporate sponsor receives status and recognition rights, event rights and
product category exclusivity with respect to CART as the sanctioning body.
Television Revenue. The Company's television revenue is derived from
negotiated contracts with ESPN, ESPN International, Fittipaldi USA (Brazil),
Gold Coast Motor Events Co. (Australia) and Molstar (Canada) ("broadcast
partners"). A guaranteed rights fee is paid to CART by each broadcast partner.
In addition, pursuant to the agreement with ESPN/ESPN International (the "ESPN
Contract"), CART receives 50% of the net profits generated from the CART race
broadcasts under the ESPN Contract which exceed the minimum guaranteed rights
fee. A provision of the ESPN Contract requires that at least 50% of the CART
events are broadcast on a major broadcasting network in the United States. In
1996 and 1997, all CART races were broadcast on either ABC or ESPN. In addition,
CART races are re-aired on ESPN and ESPN2. ESPN2 also broadcasts CART qualifying
sessions and pre-race shows.
Other Revenue. Other revenue includes membership and entry fees,
contingency awards money, royalties and other miscellaneous revenue items.
Membership and entry fees are payable on an annual basis by CART and Indy Lights
competitors. In addition, competitors are charged fees for credentials for all
team participants and driver license fees for all drivers competing in the
series. Contingency awards money is payable to competitors in the CART
Championship upon satisfaction of specific criteria. Royalty revenue is received
by the Company for the use of the CART servicemarks and trademarks on licensed
merchandise that is sold both at tracks and at off-track sites.
EXPENSES
The Company classifies its expenses to include race and franchise fund
payments, expenses related to promoting the U.S. 500, race expenses and
administrative and indirect expenses, as discussed below. For a discussion of
expenses discontinued in connection with the Reorganization, see
"Business -- Franchise System and Race Teams."
Race and Franchise Fund Payments. The Company pays the racing teams for
their on-track performance. Race and franchise fund payments include the
following for each event: a fixed franchise expense to each franchise
competitor, the event purse which is paid based on finishing position, and
contingency award payments. The Company also pays awards to the teams based on
their cumulative performance for the season out of the year-end point fund.
After the Reorganization, franchise fund payments will be discontinued.
U.S. 500. In addition to the race purse, expenses for the U.S. 500 in 1996
included sales costs related to the sale of sponsorships, track rental expenses,
compensation expenses related to contract staff, promotional and advertising
costs and administrative expenses incurred solely with respect to the U.S. 500
event.
Race Expenses. The Company is responsible for officiating and
administering each event in the CART Championship. Costs primarily include
officiating fees, travel, per diem and lodging expenses for the following
officiating groups: safety, technical inspection, race officiating and rules
compliance, medical services, timing and scoring audit, registration and race
administration. Prior to the Reorganization, each franchise team was paid a
travel fee to attend and participate in each event, and after January 1, 1998,
such payments will be discontinued. Overseas event organizers are responsible
for costs related to cargo, air passenger travel and lodging for CART staff and
race participants.
Administrative and Indirect Expenses. All operating costs not directly
incurred for a specific event, primarily wages, Board of Directors fees and
other administrative expenses, are recorded as administrative and indirect
expenses.
RESULTS OF OPERATIONS
Nine months ended September 30, 1997 Compared to Nine Months Ended September 30,
1996
Revenues. Total revenues for the nine months ended September 30, 1997 were
$39.9 million, an increase of $53,000 from the corresponding period in the prior
year. This increase was due to higher sanction fees and sponsorship, television
and other revenue as described below, partially offset by a reduction in revenue
of $7.1 million due to the fact that the Company did not promote the U.S. 500 in
1997.
18
<PAGE> 20
Sanction fees for the nine months ended September 30, 1997 were $24.2
million, an increase of $3.1 million, or 15%, from the corresponding period in
the prior year. This increase was the result of the addition of two new events
in Madison, Illinois near St. Louis and Fontana, California near Los Angeles and
annual sanction fee escalation for 15 other events.
Sponsorship revenue for the nine months ended September 30, 1997 was $6.2
million, an increase of $1.7 million, or 38%, from the corresponding period in
the prior year. This increase was primarily attributable to a new sponsorship
agreement entered into with MCI.
Television revenue for the nine months ended September 30, 1997 was $5.0
million, an increase of $863,000, or 21%, from the corresponding period in the
prior year. This increase was due to the escalation in the ESPN rights fee and
an increase in rights fees from Fittipaldi USA, the Company's Brazilian
television partner.
Other revenue for the nine months ended September 30, 1997 was $4.5
million, an increase of $1.5 million, or 51%, from the corresponding period in
the prior year. This increase was primarily attributable to additional revenue
from CART-sanctioned support series, the sale of commercial time for "Inside
CART" and video footage sales.
Expenses. Total expenses for the period ended September 30, 1997 were
$47.3 million, an increase of $9.8 million, or 26%, from the corresponding
period in the prior year. This increase was due to higher race and franchise
fund payments, race expense, compensation expense and administrative and
indirect expenses as described below, partially offset by a reduction in
expenses of $8.2 million because the Company did not act as the promoter of the
U.S. 500 in 1997.
Race and franchise fund payments for the period ended September 30, 1997
were $28.7 million, an increase of $11.6 million, or 68%, from the corresponding
period in the prior year. This increase was attributable to a one-time increase
of $9.5 million in the year-end point fund in 1997, increases in purse
distributions for the additional events in Madison, Illinois and Fontana,
California and payments related to team travel expenses.
Race expenses for the nine months ended September 30, 1997 were $6.1
million, an increase of $1.7 million, or 39%, from the corresponding period in
the prior year. This increase was the result of the addition of the events in
Madison, Illinois and Fontana, California.
Compensation expense for the nine months ended September 30, 1997 was $1.5
million, an increase of $316,000, or 27%, from the corresponding period in the
prior year. This increase was attributable to purchases of the Company's stock
at below fair market value prices. New franchise members became eligible to
acquire three and one-half shares during the nine months ended September 30,
1997, compared to the three shares that were eligible for purchase during the
comparable period in 1996.
Administrative and indirect expenses for the nine months ended September
30, 1997 were $10.8 million, an increase of $4.7 million, or 76%, from the
corresponding period in the prior year. This increase was primarily attributable
to the hiring of additional personnel in the marketing, promotion, public
relations and television areas and the implementation of new programs as part of
the corporate expansion program in the areas previously described, and increased
sales costs from the sponsorship agreement entered into with MCI.
Loss before income taxes for the nine months ended September 30, 1997 was
$7.4 million, a decrease in income of $9.8 million from the corresponding period
in the prior year due to the factors described above.
Income tax benefit for the nine months ended September 30, 1997 was $2.6
million compared to an income tax expense of $891,000 for the corresponding
period in the prior year.
Net loss for the nine months ended September 30, 1997 was $4.8 million, a
decrease in net income of $6.3 million from the corresponding period in the
prior year as a result of the factors described above.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Revenues. Total revenues for 1996 were $41.5 million, an increase of $11.5
million, or 38%, from 1995. This increase was the result of higher sanction
fees, revenue received from the promotion of the U.S. 500 and increases in
sponsorship, television and other revenue as described below.
Sanction fees for 1996 were $21.1 million, an increase of $2.4 million, or
13%, from 1995. This increase was primarily attributable to the addition of a
new race in Rio de Janeiro, Brazil and annual sanction fee escalation for 14
other events, partially offset by the elimination of the Phoenix and New
Hampshire events for 1996.
19
<PAGE> 21
U.S. 500 revenues for 1996 were $7.1 million. These revenues resulted from
the Company's promotion of the inaugural U.S. 500 and were comprised of ticket
sales, sponsorship, hospitality, television and other revenue. The Company did
not act as the promoter of the U.S. 500 prior to 1996, and, therefore, no
revenues were received for the comparable prior period.
Sponsorship revenue for 1996 was $5.5 million, an increase of $721,000, or
15%, from 1995. This increase was primarily the result of new sponsorship
agreements entered into with Toyota Truck and Honda Motorcycle and revenue from
PPG's sponsorship of the CART Championship internet website.
Television revenue for 1996 was $4.1 million, an increase of $962,000, or
30%, from 1995 due to increased revenue received from ESPN over the minimum
guarantee.
Other revenue for 1996 was $3.7 million, an increase of $370,000, or 11%,
from 1995. This additional revenue resulted from increases related to the
CART-sanctioned support series, Indy Lights, and interest from investments,
additional licensing revenues related to radio rights, a franchise redemption
and revenues from equipment leases.
Expenses. Total expenses for 1996 were $42.0 million, an increase of
$12.8 million, or 44%, from 1995. This increase was due to higher race, non-cash
compensation, administrative and indirect expenses and the Company's promotion
of the U.S. 500 as described below, partially offset by slightly lower race and
franchise fund payments.
Race and franchise fund payments for 1996 were $17.2 million, a decrease of
$1.2 million, or 7%, from 1995. The Company had a reduction in franchise fund
payments in 1996 because the Company did not make a franchise fund payment
related to the U.S. 500 and because race payments related to the U.S. 500 are
included in U.S. 500 expenses below.
U.S. 500 expenses for 1996 were $8.2 million. These expenses include track
rental, cost of sales related to sponsorships, labor costs to promote and
officiate the event and advertising and promotions to publicize the event, as
well as associated race payments which are not included in the race and
franchise fund payments described above. The expenses incurred in 1996 were
related to the Company's promotion of the inaugural U.S. 500 in that year, and,
therefore, no expenses related to the U.S. 500 were incurred for the comparable
prior period or any period subsequent to 1996.
Race expenses for 1996 were $6.1 million, an increase of $1.4 million, or
31%, from 1995. This increase was primarily attributable to one-time research
and development costs, a restructuring of officials fees, the addition of spring
training for the race teams and the write-off of equipment.
Compensation expense for 1996 was $1.2 million. The non-cash compensation
expense relates to the issuance of the Company's stock to new franchise members
at below fair market value prices. New franchise members became eligible to
acquire three shares in 1996. Non-cash compensation expenses related to stock
purchases by eligible franchise members which were not incurred in the prior
year.
Administrative and indirect expenses for 1996 were $8.6 million, an
increase of $2.8 million, or 48%, from 1995. This increase was primarily the
result of professional fee expenses incurred in litigation, an increase in
interest expense related to the acquisition of a new medical coach and costs
associated with the continued growth of the Company.
Loss before income taxes for 1996 was $517,000, a decrease in income of
$1.3 million from 1995 due to the factors described above.
Income tax benefit for 1996 was $179,000, a decrease of $25,000 from 1995.
Net loss for 1996 was $338,000, a decrease in net income of $1.3 million
from 1995 as a result of the factors described above.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Revenues. Total revenues for 1995 were $30.0 million, an increase of $4.8
million, or 19%, from 1994. This increase was due to higher sanction fees,
sponsorship, television and other revenue as described below.
Sanction fees for 1995 were $18.7 million, an increase of $2.4 million, or
15%, from 1994. This increase was attributable to the addition of a new race in
Miami, Florida and annual sanction fee escalation for certain other race events.
20
<PAGE> 22
Sponsorship revenue for 1995 was $4.8 million, an increase of $676,000, or
16%, from 1994. This increase was primarily the result of new sponsorship
agreements entered into with Budweiser, Mercedes Benz, Craftsman, IBM and
Domaine Chandon.
Television revenue for 1995 was $3.2 million, an increase of $834,000, or
36%, from 1994 due to an increase in net revenues and minimum guarantees from
ESPN.
Other revenue for 1995 was $3.3 million, an increase of $871,000, or 36%,
from 1994. This additional revenue was the result of increases in royalty
revenues and consulting fees from the development of an on-track physical damage
program.
Expenses. Total expenses for the year-ended 1995 were $29.2 million, an
increase of $4.1 million, or 16%, from 1994. This increase was due to higher
race and franchise fund payments, race expenses and administrative and indirect
expenses.
Race and franchise fund payments for 1995 were $18.4 million, an increase
of $141,000, or 1%, from 1994. This increase was attributable to the additional
race held in Miami, Florida and was partially offset by a reduction in franchise
fund payments that was the result of a decrease in franchises from 23 to 24 in
1995 to 22 in 1994.
Race expenses for 1995 were $4.6 million, an increase of $2.0 million, or
76%, from 1994. This increase was due to the additional race in Miami, Florida
and expenses related to a travel reimbursement plan implemented in 1995.
Administrative and indirect expenses for 1995 were $5.8 million, an
increase of $1.9 million, or 47%, from 1994 due to a relocation of the Company's
headquarters and the continued growth of the Company.
Income before income taxes for 1995 was $781,000, an increase of $699,000
from 1994 due to the factors described above.
Income tax benefit for 1995 was $204,000, a decrease of $140,000 from 1994.
Net income for 1995 was $985,000, an increase of $559,000 from 1994 as a
result of the factors described above.
SEASONALITY AND QUARTERLY RESULTS
The Company derives a substantial portion of its total revenues during the
CART Championship season. As a result, the Company's business has been, and is
expected to remain, seasonal, based upon the CART Championship schedule. The
Company's quarterly results vary relative to the number of races held during the
quarter. In addition, the mix between the type of race (street course,
superspeedway, etc.) and the sanction fees attributed to those races will affect
quarterly results. The following table sets forth certain unaudited quarterly
financial data of the Company for each of the four quarters of 1995 and 1996 and
for the first three quarters of 1997. The information for each of these quarters
is prepared on the same basis as the financial statements of the Company and
related notes thereto included elsewhere in this Prospectus and include, in the
opinion of management, all adjustments (consisting of normal recurring
adjustments) necessary to fairly present the data for such periods. The tables
should be read in conjunction with "Selected Consolidated Financial Data," the
financial statements of the Company and the related notes thereto and the other
financial information included elsewhere in this Prospectus.
21
<PAGE> 23
<TABLE>
<CAPTION>
QUARTERS ENDED
--------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Total Revenues
1995............................................................ $5,995 $ 9,427 $ 12,721 $ 1,834
1996(1)......................................................... 10,623 17,580 11,647 1,604
1997............................................................ 5,569 18,564 15,770 --
Income (Loss) Before Taxes
1995............................................................ $1,159 $ (662) $ 1,166 $ (882)
1996............................................................ 3,542 (948) (163) (2,948)
1997............................................................ 1,272 (1,695) (6,942) --
Number of Races
1995............................................................ 2 6 8 0
1996............................................................ 3 6 7 0
1997............................................................ 1 8 8 --
</TABLE>
(1) Includes revenues of $7.1 million related to the Company's promotion of the
U.S. 500 in the quarter ended June 30. The Company will continue to sanction
this event, but does not anticipate promoting the event in the future.
The revenues from any race in the CART Championship can significantly
affect the Company's results of operations for a particular quarter.
Consequently, changes in race schedules from year to year, with races held in
different quarters, will result in the fluctuation of quarterly results and
affect comparability.
LIQUIDITY AND CAPITAL RESOURCES
The Company has relied on cash flow from operations, supplemented by bank
borrowings, to finance working capital, investments and capital expenditures.
The Company's bank borrowing with a commercial bank consists of a fixed
rate installment note incurred in connection with the acquisition of a mobile
medical unit that is transported to each North American race. The note bears
interest at the rate of 8.25% per annum and matures on May 1, 2001. The note is
secured by the Company's mobile medical unit. Interest is payable monthly. As of
September 30, 1997, the current portion of this note was $130,000 and the
long-term portion was $336,000.
The Company also has a $1.5 million revolving line of credit with a
commercial bank. As of September 30, 1997, there was no outstanding balance
under the line of credit. The line of credit contains no covenants or
restrictions. Advances on the line of credit are payable on demand and bear
interest at the bank's prime rate. The line is secured by the Company's deposits
with the bank.
The Company's cash balance on September 30, 1997 was $4.9 million, a net
increase of $4.2 million from December 31, 1996. This increase was primarily the
result of net cash provided by operations of $3.9 million, net equity
contributions of $855,000 and an increase in net working capital, which was
offset by capital expenditures incurred during the year of $583,000. The
Company's cash balance on September 30, 1996 was $5.4 million, compared to $2.0
million at December 31, 1995, a net increase of $3.4 million. The increase was
primarily the result of net cash from operations of $3.3 million, net proceeds
from long-term debt and a line of credit of $204,000, increase in membership
deposits of $360,000 and net equity contributions of $60,000, which were
partially offset by capital expenditures incurred during 1995 of $641,000.
The Company has budgeted approximately $1.7 million of capital expenditures
for 1998, including capital expenditures expected by Indy Lights. The Company
believes that the proceeds of the Offering, cash flow from operations and
available borrowings under its bank facilities will be sufficient to fund its
capital expenditures and other cash needs during 1998.
YEAR 2000 COMPLIANCE
The Company does not expect the cost of converting its computer systems to
year 2000 compliance will be material to its financial condition. The Company
believes that it will be able to achieve year 2000 compliance by the end of
1999,
22
<PAGE> 24
and does not currently anticipate any disruption in its operations as the result
of any failure by the Company to be in compliance. The Company does not
currently have any information concerning the year 2000 compliance status of its
suppliers and customers.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings per Share" was issued by the Financial Accounting Standards Board
("FASB"). SFAS No. 128 establishes standards for computing and presenting
earnings per share ("EPS") and applies to all entities with publicly-held common
shares or potential common shares. SFAS No. 128 replaces the presentation of
primary EPS and fully-diluted EPS with a presentation of basic EPS and diluted
EPS, respectively. Basic EPS excludes dilution and is computed by dividing
earnings available to common shareholders by the weighted-average number of
common shares outstanding for the period. Similar to fully diluted EPS, diluted
EPS reflects the potential dilution of securities that could share in the
earnings. SFAS No. 128 is not expected to have a material effect on the
Company's reported EPS amounts. SFAS No. 128 is effective for the Company's
financial statements for the year ending December 31, 1997.
In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise
and related Information was issued by the FASB. SFAS No. 131 establishes
standards for the way that public business enterprises report financial and
descriptive information about its reporting operating segments. The Company has
not determined the impact on the Company's financial statement disclosure. SFAS
No. 131 is effective for the Company's financial statements for the year ending
December 31, 1998.
23
<PAGE> 25
AUTO RACING INDUSTRY OVERVIEW
Auto racing consists of several distinct categories, each with its own
organizing body and racing events. The largest category in the United States, in
terms of attendance and media exposure, is stock car racing, which is dominated
by NASCAR. Stock car racing utilizes equipment similar in appearance to standard
passenger automobiles and races are typically staged on oval courses.
Internationally, the most recognized form of auto racing is open-wheel racing,
utilizing an aerodynamically designed chassis to attain high speeds, and
technologically advanced equipment. The most established international
open-wheel racing series' are Formula One, the CART Championship, Formula 3000
and Indy Lights. In addition to these established open-wheel series, the Indy
Racing League (the "IRL"), a new American-based oval-racing series that includes
the Indianapolis 500, was formed in 1996. Drag racing typically involves short
sprint races on a straight-line drag strip, with the objective being to attain
the lowest elapsed time over the short distance of the track. The National Hot
Rod Association ("NHRA") is the most preeminent organizing body in drag racing.
Other, less prominent, racing segments include various types of sports car
racing and club racing.
Motorsports events are generally heavily promoted, with a number of
supporting events surrounding the main race event. Examples of supporting events
include qualifying trials, secondary racing events, driver autograph sessions,
automobile and product expositions, catered parties and other related events
which are all designed to maximize the spectators' entertainment experience. The
primary participants in motorsports are spectators, corporate sponsors, track
owners, drivers, team owners and sanctioning bodies.
Spectators. Motorsports is among the fastest growing spectator sports in
the United States and, after soccer, it is the most watched sport worldwide.
Total attendance at all motorsports events in the United States in 1996 exceeded
15 million people. During 1996, approximately 2.4 million people attended CART
events. CART races were also televised in more than 185 countries in 1996, with
aggregate television audiences of approximately 1 billion viewers.
Corporate Sponsors. Drawn to motorsports by the large number of spectators
and television audiences and their attractive demographics, corporate sponsors
are active in all phases of the industry. The Company believes that the
demographic profile of its growing spectator base has considerable appeal to
sponsors, track owners, television networks and advertisers. The mean annual
family income of CART spectators has been estimated to be $52,700, compared to
$38,400 for an average United States household. The Company believes that the
spectators are loyal to motorsports and to its corporate sponsors. In addition
to sponsoring the various racing series, corporate sponsors support drivers and
teams by funding certain costs of their operations, and race promoters and track
owners by sponsoring and promoting specific events. In return, corporate
sponsors receive advertising exposure on television and radio, through
newspapers, printed materials, advertising and promotional and hospitality
benefits at the track over the race weekend. Companies negotiate sponsorship
arrangements based on factors including a series' or event's audience size or
spectator demographics and a team's racing success.
Race Promoters. Race promoters, which include track owners, government
organizations and other groups and individuals, pay a fee to have an event
sanctioned at their race venue and are responsible for the local marketing and
promotion of the event. Their revenue sources generally include admissions,
sponsorships, corporate hospitality (suites, chalets and tents for race viewing
and other amenities), advertising and concessions and souvenir sales.
Drivers. A majority of drivers contract independently with team owners,
while select drivers own their own teams. Principally, these drivers receive
income from contracts with team owners, sponsorship fees and prize money.
Successful drivers may also receive income from personal endorsement fees and
souvenir sales. The personality and success of a driver can be an important
marketing advantage for team owners, because it can help attract corporate
sponsorships and generate sales for licensed merchandise.
Team Owners. In most instances, team owners underwrite the financial risk
of placing their teams in competition. They contract with drivers, acquire
racing vehicles and support equipment, employ pit crews and mechanics and
syndicate sponsorship of their teams. Team owners generally receive income
primarily from sponsorships and a percentage of the purses.
Sanctioning Bodies. Sanctioning bodies sanction events at various race
venues in exchange for fees from race promoters and track owners, and are
responsible for all aspects of race management necessary to "manufacture" the
race event. Sanctioning bodies are responsible for presenting racing cars,
drivers, and teams and providing race officials to ensure fair competition, as
well as providing the race and series' purses and other prize payments.
24
<PAGE> 26
The Federation Internationale de l'Automobile (the "FIA"), based in Paris,
France, is the worldwide governing body for auto racing, with "national sporting
authority" members in more than 100 countries. The FIA's United States national
sporting authority is the Automobile Competition Committee of the United States,
which in turn is made up of seven member sanctioning organizations: CART,
NASCAR, United States Auto Club ("USAC"), Professional SportsCar Racing
("PSCR"), NHRA, Sports Car Club of America ("SCCA") and the IRL.
- CART. The CART Championship is the premier open-wheel motorsports
series in North America. CART events are staged on four different types of
tracks -- superspeedways, ovals, temporary street courses and permanent
road courses, requiring teams and drivers to employ a variety of skills to
master different courses to compete for the CART Championship. The CART
Championship is sanctioned by CART and will include 19 races in the 1998
season.
- Formula One. The FIA sanctions the Formula One World Championship
events consisting of open-wheel races on road courses in Europe, South
America, Canada, Australia and Japan. The Formula One World Championship
was founded in 1950. The 1997 Formula One calendar included 17 events in 16
different countries. Currently, there are no events in the Formula One
World Championship that are staged in the United States.
- IRL. In 1995, the IRL was formed as a rival United States open-wheel
racing series, competing directly with CART. The IRL's events are staged
solely on oval courses. The IRL's first season of racing commenced in 1996
and consisted of five races, including the Indianapolis 500. The 1998
season will consist of 11 races, including the Indianapolis 500. The IRL
was sanctioned by USAC during 1996, but during 1997, the IRL elected to
sanction its own events.
- NASCAR. Professional stock car racing developed in the Southeastern
United States in the 1930s, and NASCAR has been influential in the growth
and development of the sport. NASCAR is the most recognized sanctioning
body of professional stock car racing in North America, supervising the
Winston Cup and Busch Grand National stock car race series. The 1997
Winston Cup and Busch Grand National race series included 31 and 29 races,
respectively, all of which were held in the United States, with an
exhibition event in Japan.
- Other Sanctioning Bodies. Sports car races are held on road courses
and temporary street circuits throughout the United States and are
sanctioned by SCCA and PSCR. Drag racing is sanctioned in the United States
by NHRA. ARCA sanctions stock cars races that are less prominent than the
those sanctioned by NASCAR.
25
<PAGE> 27
BUSINESS
THE COMPANY
The Company owns, operates and sanctions the premier open-wheel motorsports
series in North America, the CART Championship, and is responsible for
organizing, marketing and staging each of the races in the CART Championship.
With speeds up to 240 miles per hour, and an average margin of victory during
the 1997 race season of fewer than four seconds, CART open-wheel racing is the
fastest form of closed-circuit auto racing available to motorsports audiences,
providing intense excitement and competition.
The drivers and racing teams participating in CART racing events are among
the most recognized names in motorsports, with marquee drivers including Michael
Andretti, Bobby Rahal, Al Unser Jr., Jimmy Vasser and Alex Zanardi. The
excitement and competition of CART racing also attracts well-known racing
legends, business leaders and sports and entertainment personalities as team
owners including Chip Ganassi, Carl Haas, David Letterman, Bruce McCaw, Joe
Montana, Paul Newman, U.E. "Pat" Patrick, Walter Payton and Roger Penske. For a
complete list of CART drivers and teams, see "-- Drivers and Corporate
Sponsors," below. Major sponsors of the 1998 CART Championship will include
Federal Express and PPG Industries as the co-title sponsors, MCI, Budweiser,
Mercedes-Benz, Honda, Craftsman and other Fortune 500 companies.
Open-wheel racing in the United States traces its history to 1904, and is
the oldest continually scheduled motorsports competition in the world. The 1997
CART Championship included 17 races staged in four countries -- the United
States, Canada, Australia and Brazil. Two additional races have been added for
1998, one in Motegi, Japan and one in Houston, Texas. CART races are conducted
on four different types of tracks: superspeedways, ovals, temporary street
courses and permanent road courses, requiring teams and drivers to employ a
variety of skills to master different courses to compete for the CART
Championship. Each race weekend in the CART Championship is an "event" offering
spectators the opportunity to enjoy a CART race as well as a full weekend of
entertainment, including additional races, practice and qualifying rounds for
all racing events, and automotive and general entertainment demonstrations and
displays. Race weekends provide corporate sponsors and other businesses the
opportunity to entertain their customers and employees through hospitality areas
and other activities.
Motorsports is among the most popular and fastest growing spectator sports
in the United States and, after soccer, it is the most watched sport worldwide.
CART's races were televised in more than 185 countries in 1996 with aggregate
television audiences of approximately 1 billion viewers. Total attendance at
major auto racing series' events in North America and CART racing events
increased significantly from 12.4 million and 1.8 million, respectively, in 1991
to 15.4 million and 2.4 million, respectively, in 1996. CART believes the
demographic profile of its growing spectator base has considerable appeal to
track owners, sponsors, television networks and advertisers. The mean annual
family income of CART spectators has been estimated to be $52,700, compared to
$38,400 for an average United States household.
The Company derives its revenues from four primary sources: sanction fees
paid by track promoters, corporate sponsorship fees and television and royalty
revenues. The Company's revenues have increased during the last three years from
$25.2 million in 1994 to $41.5 million in 1996. Based upon current promoter and
sponsorship agreements, The Company expects that sanction fee revenues will
increase from $24.4 million to $30.4 million and that sponsorship revenues will
increase from $7.2 million to $12.1 million from 1997 to 1998.
In December 1997, the Company was incorporated in Delaware in contemplation
of the Reorganization. The Company's principal executive office is located at
755 West Big Beaver Road, Suite 800, Troy, Michigan 48084, and its telephone
number is (248)362-8800.
GROWTH STRATEGY
The Company's growth strategy is to increase revenues and net income by
expanding the worldwide audience for CART racing. The Company intends to
capitalize on its position as the premier open-wheel racing series in North
America and the thrill and excitement of CART racing to increase CART's brand
awareness. The Company believes that these factors will provide it with
opportunities for increased sanction fees, corporate sponsorship fees,
television revenues and royalties. To implement its strategy, the Company
intends to:
26
<PAGE> 28
- Acquire and Develop Related Businesses and Properties. The Company
will selectively pursue opportunities to acquire and apply the CART brand
name to other race-related businesses and properties. The Company expects
to vertically integrate certain support-racing series to develop future
racing talent in the United States. The Company is also seeking
opportunities to acquire and develop race experience products such as
simulation or virtual reality products, indoor kart racing centers and race
schools, which will provide potential and existing race fans with an
affordable and accessible opportunity to experience the sport. As the first
step in this strategy, the Company is acquiring ARS, which operates Indy
Lights, and BP, which provides certain equipment to the participants of
Indy Lights. This transaction will close concurrently with the Offering.
- Increase Market Penetration in the United States. The Company will
continue to develop its race schedule in key markets in the United States
and will stage a race in Houston, Texas during the 1998 season. Because
CART races are conducted on superspeedways, ovals, temporary street courses
and permanent road courses, the Company believes it has great flexibility
in selecting future race venues.
- Expand International Audience. The Company believes that the world
market for motorsports is predisposed to CART's style of exciting,
competitive, open-wheel racing. The CART Championship will span four
continents in 1998, with events in the United States, Canada, Australia,
Brazil and Japan. The Company typically receives higher sanction fees from
the promoters of international race events. Management continues to explore
additional opportunities to export its high-value, American racing product
throughout the world and to include more international-based sponsors for
the Company and its race teams.
- Expand Media Exposure. The Company plans to expand CART's exposure
and fan awareness by developing additional television and radio coverage.
During the 1998 race season, the Company expects to continue its
magazine-style program, "Inside CART," which premiered in the United States
on the Fox Sports Network in late 1997. Internationally, CART will continue
to build on the solid media distribution base established over recent years
in conjunction with its various distribution partners, with a particular
emphasis on expanding primary network coverage within individual countries.
- Increase CART's Licensing Opportunities. The Company will continue
to seek out opportunities to bring the CART brand to a broader market.
Through CART Licensed Products, an affiliated limited partnership, CART
provides "one stop shopping" for potential licensees for the servicemarks
and trademarks of CART, as well as for participating race teams, drivers
and tracks. This integrated approach allows licensees and retailers to work
with a single licensing entity rather than negotiating with the fragmented
licensing environment found in other sports.
THE CART ADVANTAGE
The CART Championship. CART was founded in 1978 by a group of team owners
dedicated to the future of open-wheel motorsports. This group has evolved into
today's CART Championship competitors. In 1997, 17 teams entered 27 cars to
compete for the title of PPG CART World Series Champion. Purse money and CART
Championship points are awarded to teams based on their finishing position in
each race. The CART Champion is determined by the cumulative points received
over the course of the season. The current champion is Alex Zanardi of Italy.
Past CART champions include such well known drivers as Mario Andretti, Michael
Andretti, Emerson Fittipaldi, Nigel Mansell, Rick Mears, Bobby Rahal, Johnny
Rutherford, Danny Sullivan, Al Unser, Jr., Al Unser, Sr., Jimmy Vasser and
Jacques Villeneuve.
The Races. Winning the CART Championship requires race teams and their
drivers to master superspeedways, high-intensity one-mile ovals, permanent road
courses and temporary road courses. High-tech race cars with state-of-the-art
engines from Mercedes-Benz, Honda, Ford and Toyota reach speeds of up to 240
miles per hour. The Company believes that the CART Championship offers the
fastest and most competitive racing of any closed-circuit motorsport series,
with an average margin of victory during 1997 of fewer than four seconds.
The World-Wide Appeal. The sport of motor racing is second only to soccer
in its worldwide popularity. CART's open-wheel style of racing is well
understood throughout the world and is recognized as the ultimate form of the
sport. CART has capitalized on its broad, worldwide appeal and now races in
Australia, Brazil and Canada, in addition to the United States. In 1998, a race
in Japan will be added to the CART schedule. Adding to CART's worldwide appeal
is the diversity of its drivers. In 1997, 19 of the 31 drivers who competed in
at least one CART race event were born outside of the United States. In total,
these drivers represented 10 different countries.
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<PAGE> 29
The Fans. The primary means for a fan to interface with the CART
Championship is through direct attendance at events or by television viewership.
CART spectators are demographically attractive to sponsors and advertisers in
that they are generally young males with education and income levels above the
national average. This demographic group is hard to reach by traditional
methods, making sponsorship of CART's teams or events an attractive advertising
and promotional investment. CART's television audience, while closer to the
national average for household income, encompasses an above average proportion
of males in the 25 to 54 age group, an attractive demographic for advertisers
since this age group tends to watch less television than the average American.
CART's television ratings have declined in recent years and mirror the overall
decline in television ratings for sports events in the United States. On a
worldwide basis, CART's television audience was composed of approximately 1
billion viewers during 1996, which represented a 7% increase over the 1995 race
season.
CART HISTORY
CART-style, open-wheel racing stands as the longest continually scheduled
major motorsports championship in the world, dating back to the early 1900s. The
first American automobile race took place in 1895, and the American Automobile
Association ("AAA") began sanctioning major races in 1904. The AAA sanctioned
races through the 1955 season at which time USAC became the official sanctioning
body.
In the 1970s, race team owners became increasingly concerned about
escalating costs, lack of promotional activities and concentration solely on the
Indianapolis 500. As a result, in November 1978, a group of 18 of the 21 team
owners left USAC to form CART and the CART Championship. The group included U.E.
"Pat" Patrick, Roger Penske and other teams owners who desired greater
participation in the rule-making and administrative processes concerning
open-wheel racing in the United States. In its 1979 inaugural season, CART
staged 13 races. PPG Industries became the title sponsor of the CART
Championship late in that inaugural year, and Rick Mears was crowned the first
champion of the CART Championship.
Since Mears' victory in the inaugural season, CART has had many other
memorable champions including Al Unser, Sr., Johnny Rutherford, Mario Andretti,
Danny Sullivan, Emerson Fittipaldi, Al Unser, Jr., Michael Andretti, Bobby
Rahal, Nigel Mansell, Jacques Villeneuve, Jimmy Vasser and Alex Zanardi.
Competitive, close racing is the hallmark of CART. In 1991, there were six
different winners in the first six races, and the 1993 season yielded six
different race winners and 13 different podium finishers. The 1994 through 1997
race seasons were equally competitive. In 1997, there were eight different
winners, including first-time victories in the CART Championship for Mark
Blundell, Mauricio Gugelmin and Greg Moore.
Due to starting position reservations and changes to equipment
specifications, CART teams have generally not competed in the Indianapolis 500
since 1995. The reservation of starting positions for IRL competitors was
removed by the Indianapolis Motor Speedway ("IMS") after the 1997 Indianapolis
500. The Company will continue to evaluate opportunities for an accommodation
with the IMS, but there can be no assurance that a resolution will be reached or
of the timing of any such resolution. The Company is unable to predict what
effect, if any, the continued non-participation by CART teams at the
Indianapolis 500 will have on the Company's future results.
Since 1995, CART has added domestic races in Homestead, Florida, Madison,
Illinois, and Fontana, California. These races serve the important Miami, St.
Louis and Los Angeles markets, respectively. Internationally, a race in Rio de
Janeiro, Brazil was added to CART's schedule in 1996. The Company has scheduled
new races in Houston, Texas and Motegi, Japan for 1998.
Today, the CART Championship is the premier open-wheel racing series in
North America and has successfully expanded its core domestic audience and
exported its product to international race venues and television markets. CART's
race cars, which can attain speeds of up to 240 miles per hour, are the fastest
closed-circuit race cars in the United States, and its events, staged on four
types of tracks, require different skills and disciplines from the drivers and
teams.
FRANCHISE SYSTEM AND RACE TEAMS
Since 1984, CART has been operated as a "franchise system." A franchise was
available for each competing car, with any one owner limited to a maximum of two
franchise memberships. The number of franchises awarded has varied,
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<PAGE> 30
but has never exceeded 25. To become a franchise member, a race team must have
competed in all events for the prior race year and be one of the 25 highest
placed teams, based on points received from competition. Prior to the
Reorganization, each franchise member received the right to purchase one share
of common stock of CART.
The participation of race teams is critical to the ongoing success of the
Company and the CART Championship. The Company believes that the franchise
system, which is the only race governing system that offers teams direct input
into race scheduling, rules and all other racing activities, is a significant
factor in encouraging entities who are interested in auto racing to participate
in CART-sanctioned events.
CART, which became a wholly-owned subsidiary of the Company following the
Reorganization, is managed by a board of directors composed of race team
participants (the "CART franchise board"). Prior to the Reorganization, each
franchise owner was entitled to designate a member to the CART franchise board
and to receive certain benefits, including reimbursement of travel expenses on a
per race basis, directors fees and other race-related expenses. The franchise
and the one share of stock were not transferable without the approval of the
CART franchise board and were subject to redemption by CART at the price set by
the CART franchise board for the year in which the redemption occurred. In
certain instances, a race team sold its franchise and share of stock to an
incoming franchisee at the price set by the CART franchise board. In other
instances, the franchise and stock were redeemed by CART on the same basis. For
the 1997 season, each new race team that purchased a franchise and a share of
common stock paid $400,000.
At the end of the 1997 race season, there were 22 franchises, each of
which, prior to the Reorganization, owned one share of stock in CART. Upon
completion of the Reorganization, each share of stock was converted into 400,000
shares of Common Stock. The three new race teams who met the franchise purchase
criteria in September 1997 became franchise owners in December 1997, and were
issued one share of stock in CART, which was subsequently converted into 400,000
shares of Common Stock of the Company. In addition, three new race teams who
competed in all of the CART races during the 1997 season, but did not earn
enough points to be a franchise owner, were awarded an aggregate of one-half
share of stock, which was converted into an aggregate of 200,000 shares of
Common Stock upon the Reorganization.
Subsequent to the Reorganization, the franchise system will continue
without any additional equity ownership in the Company or CART. Rather, the 25
race teams which have met participation requirements and have the highest total
of points from the prior season will each be permitted to designate a member to
the CART franchise board, which will manage and oversee all racing-related
activities and make all decisions with respect to specifications for engines and
chassis, race and venue participation, rules and related matters.
The stockholders of the Company have received payments in equal amounts
based on their ownership of franchises and race participation for the fiscal
year ended December 31, 1994, 1995, 1996 and the nine months ended September 30,
1997 in the aggregate amounts of $7.4 million, $9.0 million, $8.5 million and
$19.4 million, respectively. These franchise payments will be discontinued after
January 1, 1998 pursuant to contractual commitments which expire in December
2000.
In addition, all of the stockholders of the Company have competed for the
purse money distributions for each race event and year-end points distributions
and contingency awards. These amounts have been paid by CART to various teams
based solely upon their performance in the CART events and have been paid to
race teams regardless of whether or
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<PAGE> 31
not they were franchise or share owners. The amounts paid to each of the current
stockholders and their predecessors during the past four years were as follows:
<TABLE>
<CAPTION>
STOCKHOLDERS 1994 1995 1996 1997
- ----------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
All American Racers, Inc................. $ -- $ -- $ 265,250 $ 240,250
Arciero-Wells Racing, Inc................ 95,950 133,000 173,250 275,000
Bettenhausen Motorsports, Inc............ 272,725 246,125 367,300 275,450
Davis Racing, Inc........................ -- -- -- 146,900
Della Penna Motorsports, Inc............. -- -- 28,650 125,000
Forsythe-Green Racing, Inc............... 362,050 -- -- --
Forsythe Racing, Inc..................... -- 461,100 489,175 541,000
Hogan/Penske Racing, Inc................. -- -- 229,750 --
Hogan Racing, L.L.C...................... -- -- -- 178,500
Newman/Haas Racing....................... 635,000 1,169,600 1,695,850 729,000
PacWest Racing Group..................... 366,600 621,150 700,100 1,283,000
Patrick Racing, Inc...................... -- 522,070 503,400 984,000
Dale Coyne Racing........................ 153,725 267,900 366,050 251,250
Penske Racing, Inc....................... 3,941,600 1,319,751 1,004,500 895,500
Project Indy............................. 88,500 69,500 11,500 82,000
Rahal/Hogan Racing, Inc.................. 412,875 929,150 -- --
Chip Ganassi Racing, Inc................. 797,050 634,500 3,823,175 2,564,750
Tasman Motorsports Group................. -- 275,400 762,975 399,000
Team Green, Inc.......................... -- 1,667,050 -- 216,900
Team Rahal, Inc.......................... -- -- 1,115,875 582,000
Walker & Associates Motorsport, Ltd...... 750,900 850,250 424,400 1,013,250
</TABLE>
PPG DAYTON INDY LIGHTS CHAMPIONSHIP
The Indy Lights Championship was formed in 1986 by racing team owner U.E.
"Pat" Patrick as a series in which team owners could discover and develop the
next generation of CART talent. Indy Lights was designed to emphasize driver and
team talent, while reducing any advantage gained through large monetary
expenditures for equipment and technology. By restricting competition to a
single chassis design, powered by identical, sealed engines and running a single
brand of tires, Indy Lights offers a series in which costs can be carefully
controlled and creates a level playing field for drivers, team managers and
engineers.
The Indy Lights Championship is designated as the "Official Development
Series of the CART Championship," and is sanctioned by CART. During the 1997
season, seven different drivers, representing five different race teams and four
different countries, won races, making 1997 one of the most competitive seasons
in the series' history. During 1997, the series had 21 full-season entrants,
with a total of 36 drivers competing in at least one race in the Indy Lights
Championship. Graduates from the Indy Lights Championship who now compete in the
CART Championship include drivers Paul Tracy, Bryan Herta, Greg Moore, Andre
Ribeiro, Adrian Fernandez and Gualter Salles, as well as Steve Horne's Tasman
Motorsports Group. In 1997, CART team owners Steve Horne (Tasman Motorsports
Group), Gerald Forsythe (Players' Forsythe Racing), Bruce McCaw (PacWest Racing)
and Barry Green (Team KOOL Green) each competed in the Indy Lights Championship
to train a talent pool of mechanics, engineers and other team personnel. At the
conclusion of the 1997 season, CART team owner and driver, Bobby Rahal,
announced that Team Rahal will compete in the Indy Lights Championship for the
1998 race season.
Similar to the CART Championship, the Indy Lights Championship races are
run on four different types of tracks. Each of the race events is sanctioned by
CART and, at certain venues, CART receives a sanction fee from the promoter for
staging the Indy Lights event. CART's management believes that the Indy Lights
Championship can create significant revenue growth for CART through packaged
sponsorships, extending CART's efforts to integrate category sponsorship and
additional sanction fees for "stand alone" Indy Lights events, both in the
United States and overseas. With the growth and popularity of the series, the
Company believes that Indy Lights will play a significant role in its future
revenue growth.
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<PAGE> 32
In December 1997, the Company entered into a binding letter of intent to
acquire all of the outstanding shares of ARS and certain assets of BP for a
total purchase price of $10.0 million, of which $7.0 million is payable in cash
at closing and $3.0 million, which will be escrowed and payable equally over
three years subject to ARS meeting certain performance criteria. In addition,
the shareholders of ARS and BP will be granted options to purchase 100,000
shares of the Company's common stock at the initial public offering price which
vest one year from closing if certain performance criteria are met for 1998. At
the time of the Offering, the shareholders of ARS will be granted the right to
purchase 67,000 shares of the Company's common stock at the initial public
offering price. ARS operates Indy Lights and BP provides certain equipment to
the participants of Indy Lights. The Indy Lights Acquisition will close
concurrently with the Offering and a portion of the proceeds from the Offering
will be used to fund the cash portion of the Indy Lights Acquisition.
RACING EVENTS
When staging a CART event, the Company provides all aspects of race
management necessary to "manufacture" the race event, including the required
expertise and personnel. Such race management services are provided to track
promoters in exchange for a sanction fee. CART stages events at four different
types of tracks, including superspeedways, ovals, temporary street courses and
permanent road courses. Superspeedways are banked ovals of two miles or more in
distance, on which CART cars can attain speeds of up to 240 miles per hour. Oval
tracks are closed circuits, less than two miles in distance, which are often
"banked" at varying angles. Temporary street courses are typically built on
closed-off downtown streets of major cities, but can also be built on airport
runways or similar facilities which have a primary purpose other than as a
motorsports venue. Permanent road courses are raceways built solely for
motorsports racing and are designed with varying turns, straight-aways and
elevation changes to simulate driving on a road.
As competition, support and interest in the CART Championship have
increased, CART has increased the number of events staged per race season. The
1979 CART Championship was comprised of 13 race events. In 1997, CART ran 17
races -- 13 in the United States, two in Canada and one each in Australia and
Brazil. These races included two superspeedway races, five oval races, six
temporary street course races and four permanent road course races. The 1998
CART Championship will be comprised of 19 races in five different countries and
will include two new race venues for CART participants. A race event will be run
through the streets of Houston, marking CART's first race in Texas, and CART
will also add its first race in Asia, a 500-kilometer oval race in Motegi,
Japan.
In 1997, the Indy Lights Championship was comprised of 13 races. Of the 13
races, 11 were held in conjunction with CART events, and two races were "stand
alone" events. In 1998, the Indy Lights Championship is expected to include 13
races, one of which will be a stand alone event.
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<PAGE> 33
The following table sets forth the locations and venues for the 1997 and
1998 CART Championship and the 1997 and 1998 Indy Lights Championship, as well
as the CART event dates of the 1997 and 1998 seasons, whether there was an Indy
Light race as part of the event weekend and a description of the racing circuit:
<TABLE>
<CAPTION>
1998
EVENT DATE INDY
--------------- LIGHTS
LOCATION 1998 1997 RACE TRACK DESCRIPTION
- ----------------------------------------------------- ----- ----- ------- -----------------------------------
<S> <C> <C> <C> <C>
Homestead, Florida................................... 3/1 3/2 Yes 1.5 mile oval
Metro-Dade Homestead Motorsports Complex
Motegi, Japan (1).................................... 3/28 -- No 1.5 mile oval
Twin Ring
Long Beach, California............................... 4/5 4/13 Yes 1.6 mile temporary street course
Long Beach
Nazareth, Pennsylvania............................... 4/26 4/27 Yes 1.0 mile tri-oval
Nazareth Speedway
Rio de Janeiro, Brazil............................... 5/10 5/11 No 1.8 mile oval
Emerson Fittipaldi Speedway at
Nelson Piquet International Raceway
Madison, Illinois.................................... 5/23 5/24 Yes 1.3 mile banked oval
Gateway International Raceway
West Allis, Wisconsin................................ 5/31 6/1 Yes 1.0 mile oval
The Milwaukee Mile
Detroit, Michigan.................................... 6/7 6/8 Yes 2.1 mile temporary street course
The Raceway on Belle Isle
Portland, Oregon..................................... 6/21 6/22 Yes 2.0 mile permanent road course
Portland International Raceway
Cleveland, Ohio...................................... 7/12 7/13 Yes 2.4 mile temporary street course
Burke Lakefront Airport
Toronto, Ontario, Canada............................. 7/19 7/20 Yes 1.8 mile temporary street course
Toronto
Brooklyn, Michigan................................... 7/26 7/27 Yes 2.0 mile tri-oval superspeedway
Michigan International Speedway
Lexington, Ohio...................................... 8/9 8/10 No 2.3 mile permanent road course
Mid-Ohio Sports Car Course
Elkhart, Wisconsin................................... 8/16 8/17 No 4.0 mile permanent road course
Road America
Vancouver, British Columbia, Canada.................. 9/6 8/31 Yes 1.7 mile temporary street course
Vancouver
Monterey, California................................. 9/13 9/7 Yes 2.2 mile permanent road course
Laguna Seca Raceway
Houston, Texas (1)................................... 10/4 -- No 1.7 mile temporary street course
Houston
Gold Coast, Queensland, Australia.................... 10/18 4/6 No 2.8 mile temporary street course
Surfers Paradise, Queensland
Fontana, California.................................. 11/1 9/28 Yes 2.0 mile banked oval superspeedway
California Speedway
Trois-Rivieres, Quebec, Canada (2)................... -- -- Yes 2.1 mile temporary street course
Trois-Rivieres
Savannah, Georgia (3)................................ -- -- No 2.0 mile temporary street course
Grand Prize Circuit at Savannah Harbor
</TABLE>
- ---------------
(1) Added to race schedule for 1998.
(2) Indy Lights race only, to be held on August 2, 1998 and held on August 3,
1997.
(3) Indy Lights ran a stand alone race on May 18, 1997, but will not race at
Savannah in 1998.
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SANCTION FEES
For each race in the CART Championship, the promoter enters into a
multi-year sanction agreement which provides for payment of a sanction fee to
CART. For the 1997 season, CART received sanction fees of approximately $24.4
million, an average of $1.4 million per event. For the year ended December 31,
1996, CART received sanction fees of approximately $21.1 million, representing
approximately 51% of CART's total revenues, and averaging $1.3 million per
event. Based upon current promoter agreements, CART projects it will receive
sanction fee revenue of $30.4 million in 1998, an average of $1.6 million per
event.
As CART has expanded internationally, its average sanction fee has
increased as international events typically have higher sanction fees than
events in North America. During 1997, sanction fees at international events
averaged $2.8 million per event, compared to $1.2 million for events in North
America. As the terms of existing promoter agreements expire, CART believes that
it will be positioned to negotiate increased sanction fees at many of the
current race venues to stage future races. Further, CART believes that the
popularity of the CART Championship will provide additional domestic and
international race venues willing to pay sanction fees higher than CART's
current average sanction fee.
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<PAGE> 35
DRIVERS AND CORPORATE SPONSORS
Drivers. During the 1997 season, 31 drivers competed in at least one of
the CART race events, including such well known drivers as Michael Andretti,
Bobby Rahal, Al Unser, Jr., Jimmy Vasser and Alex Zanardi. Set forth below is
information regarding each of the drivers who participated in the 1997 CART
Championship:
<TABLE>
<CAPTION>
DRIVER BIRTH PLACE 1997 RACE TEAM
- ---------------------------------- ---------------------------------- ----------------------------------
<S> <C> <C>
MICHAEL ANDRETTI*................. Bethlehem, Pennsylvania Newman/Haas Racing
Mark Blundell..................... Barret, Hertforshire, England PacWest Racing Group
Raul Boesel....................... Curitiba, Brazil Brahma Sports Team/Patrick Racing
Patrick Carpentier................ Ville Lasalle, Quebec, Canada Bettenhausen Motorsports
Gil DeFerran...................... Paris, France Walker Racing
Juan Fangio II.................... Balcarce, Buenos Aires, Argentina All American Racers
Adrian Fernandez.................. Mexico City, Mexico Tasman Motorsports Group
Christian Fittipaldi.............. Sao Paulo, Brazil Newman/Haas Racing
Dario Franchitti.................. Edinburgh, Scotland Hogan Racing
Mauricio Gugelmin................. Joinville, Brazil PacWest Racing Group
Richie Hearn...................... Glendale, California Della Penna Motorsports
Bryan Herta....................... Warren, Michigan Team Rahal
Parker Johnstone.................. Fort Benning, Georgia Team KOOL Green
PJ Jones.......................... Torrance, California All American Racers
Michel Jourdain, Jr............... Mexico City, Mexico Payton/Coyne Racing
Hiro Matsushita................... Kobe, Japan Arciero-Wells/Panasonic Racing
Arnd Meier........................ Hanover, Germany Project Indy
Roberto Moreno.................... Rio de Janeiro, Brazil Payton/Coyne Racing
Greg Moore........................ British Columbia, Canada Player's Forsythe Racing Team
Charlie Nearwood.................. Midland, Texas Payton/Coyne Racing
Max Papis......................... Como, Italy Arciero-Wells/Panasonic Racing
Scott Pruett...................... Sacramento, California Brahma Sports Team/Patrick Racing
BOBBY RAHAL*...................... Medina, Ohio Team Rahal
Andre Ribeiro..................... Sao Paulo, Brazil Tasman Motorsports Group
Gualter Salles.................... Rio de Janeiro, Brazil Davis Racing
Paul Tracy........................ Scarborough, Ontario, Canada Marlboro Team Penske
AL UNSER JR.*..................... Albuquerque, New Mexico Marlboro Team Penske
JIMMY VASSER*..................... Canoga Park, California Target/Chip Ganassi Racing
Dennis Vitolo..................... Massapequa, New York Project Indy
ALEX ZANARDI*..................... Bologna, Italy Target/Chip Ganassi Racing
</TABLE>
- ---------------
*Indicates past champion of the CART Championship.
Corporate Sponsors. Sponsorship revenues are paid to CART pursuant to
sponsorship contracts, primarily for the opportunity to receive brand and
product exposure. For the year ended December 31, 1996, CART received
sponsorship revenues of approximately $5.5 million, representing approximately
13% of CART's total revenues. For the 1997 season, CART has sponsorship
contracts requiring aggregate payments to CART in sponsorship revenue of
approximately $7.2 million. Based upon sponsorship agreements, CART expects that
it will receive sponsorship revenues of approximately $12.1 million in 1998.
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<PAGE> 36
Management believes that as CART expands the audience for CART events, it
will see a corresponding increase in sponsorship opportunities and expects that
sponsorship revenues would increase. In addition, CART has taken a different
approach to selling sponsorship by integrating the rights of the sanctioning
body and the race tracks. This approach provides series-wide exclusivity and a
centralized sponsorship program which increases the value and appeal of the
sponsorship opportunity. MCI was the first such integrated sponsor, becoming the
Official Communications Company of CART in 1997.
Beginning with the 1998 race season, Federal Express has become the
co-title sponsor of the CART Championship, which has been officially designated
the "FedEx Championship Series." Under the agreement, Federal Express has
acquired a comprehensive range of marketing benefits as well as opportunities to
supply services to CART, its teams and its race promoters. A significant feature
of this sponsorship arrangement is the combination of the marketing rights of
both CART and its race promoters to provide an exclusive sponsorship involvement
through the entire CART Championship. PPG Industries, CART's long-time title
sponsor, will continue to be involved as a co-title sponsor of the series and
will continue to be the name sponsor of the CART Championship winner's
trophy--the "PPG Cup." PPG will also continue with its successful pace car
program at each CART race event.
The current list of sponsors for the 1998 CART Championship is set forth
below:
<TABLE>
<CAPTION>
SPONSOR OFFICIAL DESIGNATION YEARS AS SPONSOR
-------------------------------------------- ------------------------------------ ----------------
<S> <C> <C>
Federal Express............................. Official Co-Title Sponsor New
PPG Industries.............................. Official Co-Title Sponsor 18
MCI Telecommunications...................... Official Communications Company 1
Budweiser................................... Official Beer 3
Craftsman Tools............................. Official Hand Tools 3
Featherlite Trailers and Vantare Coach...... Official Trailer and Coach 3
Ford SVO Technology......................... Official Safety Technology Provider 1
Holmatro.................................... Official Rescue Tool 6
Honda Motorcycles........................... Official Motorcycle 2
Honda Power Equipment....................... Official Power Equipment 2
K&K Insurance............................... Official Insurance Provider 4
Mercedes-Benz............................... Official Car 3
Motorola/Racing Radios...................... Official Two-Way Radio 8
Omega....................................... Official Watch and Timekeeper 1
Toyota Trucks............................... Official Truck 2
The Valvoline Company....................... Official Fuel and Oil 18
</TABLE>
In addition to the sponsors listed above, CART has entered into various
sponsorship agreements with other companies who supply CART with products and
services.
ATTENDANCE, VIEWERSHIP AND BROADCAST RIGHTS
Attendance. CART spectator attendance has grown dramatically in the 1990s,
with more than a 40% increase from 1990 to 1996, based upon figures compiled by
Goodyear Tire & Rubber Co. Race Reports (the "Goodyear Race Reports"). The table
below shows attendance information for CART events, based upon the Goodyear Race
Reports. The figures do not include attendance at the Indianapolis 500, which
was not a CART-sanctioned event.
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Attendance at CART Events..... 1,683,139 1,803,601 1,890,327 1,964,180 2,015,417 2,259,751 2,366,440
Number of Race Events............... 15 16 15 15 15 16 16
Average Attendance per Event........ 112,209 112,725 126,022 130,945 134,361 141,234 147,902
Percentage Change................... -- 0.1% 11.8% 3.9% 2.6% 5.1% 4.7%
</TABLE>
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<PAGE> 37
Viewership. In addition to the fan support offered by spectators at CART
race events, millions of people around the world watch CART racing on
television. According to the Nielson Season Summary for 1996, an aggregate of
32.6 million gross United States households were delivered for the CART races,
with gross United States viewership of approximately 41.8 million. The CART
races are televised in 188 countries and territories through terrestrial and
satellite broadcasts, in 19 languages. Based upon an independent study conducted
by Sponsorship Research International ("SRI"), the 1996 CART Championship had an
average of 61 million viewers per race, an increase of 7% over the 1995 per race
average, with cumulative worldwide viewership of 973.5 million.
Broadcast Rights. In 1994, CART entered into a long-term agreement with
ESPN, which was amended in 1996 to extend through 2001, to provide broadcast
coverage of each CART race, with at least 50% of the races each year to be
broadcast on one of the three major broadcast networks of ABC, CBS or NBC.
Pursuant to the agreement, CART receives 50% of the net revenues received by
ESPN for distribution of the race programs, subject to an escalating minimum
guarantee.
CART retained the television rights for Brazil, Canada and Australia, and
has entered into exclusive agreements with (i) Fittipaldi U.S.A., Inc. to
provide television broadcasts in Brazil of the CART race events through the 2001
race season, (ii) Molstar for the distribution of television broadcasts in
Canada through the 2002 race season, and (iii) Gold Coast Motor Events for the
distribution of television broadcasts in Australia through the 2000 race season.
In 1997, the Company introduced "Inside CART," a weekly magazine-type show
aired on the Fox Sport Network. In 1998, the Company intends to produce 28
episodes of "Inside CART." The Company intends to expand this show in future
years and will explore additional media opportunities.
CART LICENSED PRODUCTS
As a part of the Company's initiative to increase CART's brand awareness
and increase licensing opportunities, the Company formed CART Licensed Products,
a Georgia limited partnership, in 1996. The Company has a 55% interest in CART
Licensed Products. The primary purpose of CART Licensed Products is to provide
"one stop shopping" for potential licensees for the servicemarks and trademarks
of CART, the race teams, drivers and tracks. This integrated structure allows
licensees and retailers to work with a single licensing entity rather than
negotiating in the fragmented licensing environment found in other sports.
CART Licensed Products pays approximately 60% of the royalties it receives
to the owners of the licensed property (including CART). The Company is paid a
royalty for the sale of products which bear the CART name or logo. Drivers, team
owners and track promoters are similarly paid royalties for products bearing
their names, likeness or other property. The remaining 40% of revenues is used
to fund the operations of CART Licensed Products. CART will be attributed with
55% of the net income (or loss) of CART Licensed Products related to its
ownership interest in the entity.
CART Licensed Products has executed long-term licensing agreements with
such major companies as Microsoft, Sony, Mattel, Antigua, Warner Brothers,
Sierra Online and Racing Champions, in addition to other licensing contracts.
COMPETITION
The Company's racing events compete not only with other sports and
recreational events scheduled on the same dates, but also with racing events
sanctioned by various other racing bodies such as the FIA, NASCAR, the IRL,
USAC, NHRA, SCCA, PSCR, ARCA and others. Racing events sanctioned by other
organizations often are held on the same dates as CART events, at separate
tracks, and compete for attendance as well as television viewership. In
addition, CART competes with other racing bodies to sanction racing events at
various motorsports facilities. The quality of the competition, caliber of the
events, drivers and team owners participating in CART, and speed of the CART
cars distinguish CART events from the racing events staged by other racing
bodies. CART receives numerous requests to sanction racing events at venues
throughout the world. However, there can be no assurance that the Company will
maintain or improve its position in light of such competition.
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<PAGE> 38
EMPLOYEES
As of December 1, 1997, the Company had 48 full-time employees and a roster
of approximately 101 people who serve as race officials and 204 volunteers for
CART events. None of the Company's employees are represented by a labor union.
Management believes that the Company enjoys a good relationship with its
employees.
LEGAL PROCEEDINGS
The Company is a party to routine litigation incidental to its business.
Management does not believe that the resolution of any or all of such litigation
is likely to have a material adverse effect on the Company's financial
condition.
Racing events can be dangerous to participants and spectators. CART
requires all race participants (excluding the general public) to execute a
general release and waiver of liability prior to participating in racing events
sanctioned by CART and requires each track promoter to indemnify CART against
any liability for personal injuries sustained at such promoter's racing event.
In addition, CART requires each track promoter to carry a minimum of $10.0
million in liability insurance, with CART as a named insured, and CART maintains
a $15.0 million umbrella insurance policy. Nevertheless, there can be no
assurance that the release and waivers will be fully enforced in a court of law,
that the promoter will have sufficient assets to satisfy any indemnification
requirement, or that such insurance will be adequate or available at all times
at reasonable premiums and in all circumstances.
PATENTS AND TRADEMARKS
The Company has various registered and common law trademark rights to
"CART" and related logos. The Company has licenses from various drivers, teams,
tracks and industry sponsors to use names and logos for merchandising programs
and product sales. Management's policy is to vigorously protect its intellectual
property rights to maintain its proprietary value in merchandise and promotional
sales.
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<PAGE> 39
MANAGEMENT
Set forth below is the name, age as of the date of this Prospectus, and
position of each of the directors, executive officers and other significant
employees of the Company and CART as they will exist at the closing of the
Offering. Each director is elected by the stockholders to serve a one-year term.
The Company intends to add two additional outside directors as soon as possible
after the Offering.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------- -------------------------------------------------------------
<S> <C> <C>
Andrew Craig...................... 48 President, Chief Executive Officer, Chairman of the Board and
Director of the Company
Randy K. Dzierzawski.............. 34 Executive Vice President and Chief Financial Officer of the
Company
Carl L. Cohen..................... 37 Executive Vice President of Marketing of CART
Robert E. Hollander............... 50 President of CART Licensed Products
J. Kirk Russell................... 53 Vice President of Competition of CART
Dennis Swan....................... 50 Vice President of Logistics of CART
Keith Allo........................ 31 Vice President of Television of CART
Rena Shanaman..................... 45 Vice President of Promoter Relations of CART
Ron Richards...................... 45 Vice President of Communications of CART
Wally Dallenbach.................. 60 Chief Steward of CART
Michael J. Mills.................. 46 Secretary and General Counsel of the Company
Gerald R. Forsythe(1)............. 57 Director of the Company
Chip Ganassi...................... 39 Director of the Company
Carl A. Haas(1)................... 68 Director of the Company
Bruce R. McCaw(2)................. 51 Director of the Company
U.E. Patrick(1)................... 68 Director of the Company
Robert W. Rahal................... 44 Director of the Company
Derrick Walker(1)................. 52 Director of the Company
</TABLE>
- ---------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
Messrs. Craig, Dzierzawski, Cohen and Hollander have entered into
employment agreements with the Company or CART pursuant to which they hold their
current positions. See "-- Employment Agreements." The other officers of the
Company and CART are elected by the Board of Directors to serve one year terms.
Set forth below is a brief description of the background of each of the
directors, executive officers and significant employees of the Company and CART:
Andrew Craig was first elected President, Chief Executive Officer and
Chairman of the Board of the Company in December 1997 and has served as the
President and Chief Executive Officer of CART since January 1994. He has served
as a director of the Company since December 1997. From 1983 to 1994, Mr. Craig
was employed by ISL Marketing, AG, an international sports marketing firm
located in Switzerland. For the four years prior to his employment with CART,
Mr. Craig served as executive vice president and deputy chief executive officer
of ISL Marketing, AG.
Randy K. Dzierzawski was first elected Executive Vice President and Chief
Financial Officer of the Company in December 1997 and has served as Executive
Vice President and Chief Financial Officer of CART since October 1996. From
December 1990 until his appointment as Executive Vice President of CART in 1996,
Mr. Dzierzawski served in various positions with CART, including Director of
Administration, Treasurer, Vice President and Senior Vice President. From 1988
to 1990, Mr. Dzierzawski served as a Senior Analyst in the Financial and
Reporting Division and as the
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<PAGE> 40
president of his own financial consulting company. Prior to 1988, Mr.
Dzierzawski, a certified public accountant, was employed by Arthur Andersen and
Company as a Senior Tax Consultant.
Carl L. Cohen was first named Executive Vice President of Series Marketing
for CART in May 1997. From 1995 to 1997, Mr. Cohen was the director of marketing
for Ryder System. Prior to his position with Ryder System, Mr. Cohen served as
brand director of Philip Morris Companies. He has also held marketing positions
with Airwick Industries and Colgate-Palmolive.
Robert E. Hollander was first named President and Chief Executive Officer
of CART Licensed Products in 1997. From 1992 to 1996, Mr. Hollander was the
leader of the worldwide licensing and merchandising effort for the 1996 Olympic
Games. Prior to that, Mr. Hollander worked with various companies, including IBM
and Shearson, Lehman Brothers, in the area of licensing and marketing consumer
products.
Keith Allo was first named Vice President of Television for CART in June
1997. Prior to his employment with CART, Mr. Allo was an executive for PASS
Sports beginning in 1994. While with PASS Sports, Mr. Allo served as executive
producer of programming for the Detroit Redwings, Pistons, Tigers and Lions, and
the University of Michigan and Michigan State University. From 1988 to 1993, Mr.
Allo worked as producer and director for SportsChannel Florida and the
University of Florida Athletic Association, as well as producing programs for
Jefferson Pilot Teleproductions and Host Creative.
Rena Shanaman was first named Vice President of Promoter Relations for CART
in July 1997 after serving as the General Manager of CART's inaugural U.S. 500
on a contractual basis. Ms. Shanaman has been involved in motorsports for more
than 16 years, including the Detroit Grand Prix, Molson Indy Vancouver and the
Arrivederci, Mario tour for racing legend Mario Andretti.
Ron Richards was first named Vice President of Communications of CART in
November 1996. From 1989 to 1996, Mr. Richards worked for Miller Brewing Company
in several positions including manager and director of employee communications,
including the management of all sports marketing public relations. From 1982 to
1984 and from 1987 to 1989, Mr. Richard worked with the Sports Car Club of
America as both director of marketing and public relations manager. During this
time, he also served as the motorsports public relations manager for
Coors-sponsored racing programs.
Wally Dallenbach was first appointed Chief Steward of CART in 1981. Mr.
Dallenbach joined CART as Competition Director in 1979 after retiring as a
driver. Mr. Dallenbach's distinguished racing career spanned fourteen years and
included five wins. He was a fixture at the Indianapolis 500, starting thirteen
times. In 1995, Mr. Dallenbach received the Championship Drivers Association's
highest honor, the "Carl Horton Safety Award."
Michael J. Mills was appointed general corporate counsel and corporate
secretary to CART in 1990. From 1978 to 1989, Mr. Mills served as CART's
associate counsel. In addition to his positions with CART, Mr. Mills currently
serves as counsel to the law firm of Monaghan, LoPrete, McDonald, Yakima &
Grenke. From 1989 to 1996, Mr. Mills was the managing partner of Tripp and
Mills. Prior to that time, he was a partner with Frasco, Hackett & Mills. Mr.
Mills' law practice focuses on corporate and pension law, business and
commercial transactions, labor/management relations and general litigation.
Gerald R. Forsythe was first elected a director of the Company in December
1997. Mr. Forsythe currently serves as President of Forsythe Racing, Inc. and a
director and President of Player's/Forsythe Racing Team, Ltd. Since 1963, Mr.
Forsythe has been employed in various positions with and currently serves as
Chairman and Chief Executive Officer of INDECK Power Equipment Company, its
subsidiaries and affiliates. INDECK Power Equipment Company is North America's
largest emergency and back-up steam generating source. The company also designs
and fabricates water treatment equipment and rents generator sets, chillers and
compressors.
Chip Ganassi was first elected a director of the Company in December 1997.
Since 1987, Mr. Ganassi has served as President and owner of Chip Ganassi Racing
Teams, Inc. Mr. Ganassi currently holds executive positions with Fox Gulf, a
private air transportation company, Premier Marine, a barge towing company; and
CCT Liquidating, a liquidating corporation.
U.E. Patrick was first elected a director of the Company in December 1997.
Mr. Patrick was a founding member of CART in November of 1978 and served as its
first President and Chief Executive Officer. Mr. Patrick currently serves as
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<PAGE> 41
President of Patrick Racing, Patrick Racing International and Patrick
Properties. He holds the position of Chairman of the Board for Patrick
Exploration, Inc., an oil and gas exploration company; Turbo-Mac Software, a
company specializing in software sales; and ARS. In addition, Mr. Patrick serves
on the Board of Directors of Marcum Natural Gas Services, Inc., a publicly-held
oil and gas company.
Carl A. Haas was first elected a director of the Company in December 1997.
Currently, Mr. Haas serves as Chief Executive Officer of Carl A. Haas Auto
Imports, a company specializing in the distribution of race cars and parts. Mr.
Haas is also the Managing Partner of Newman Haas Racing. He currently serves as
President of Carl A. Haas Racing Teams, Ltd. and the Managing Member of Texaco
Grand Prix of Houston, LLC. Both Carl A. Haas Racing Teams, Ltd. and Texaco
Grand Prix of Houston, LLC are race promotion organizations. In addition, Mr.
Haas also holds positions with various companies, including, but not limited to,
Carl A. Haas Enterprises, Inc., Team Haas USA Ltd., Kranefuss Haas Racing, Inc.,
Road America, SCCA Pro Racing, Inc. and Milwaukee Mile, Inc, all of which are
racing related businesses.
Derrick Walker was first elected a director of the Company in 1997. Mr.
Walker is currently the President and owner of Derrick Walker Racing. In 1988,
he joined Al Holbert's Porsche Indy Car project and assumed control of the
program upon the death of Al Holbert. From 1980 to 1988, he was responsible for
Penske Racing, Inc.'s Indy car program.
Bruce R. McCaw was first elected a director of the Company in December
1997. Mr. McCaw currently serves as the president of RaceSport Management
Company, which he founded in 1993, and PacWest Racing Group, LLC, PacWest Lights
and PacWest Touring Car Group, Inc., affiliated companies, each of which is
involved in various types of auto racing. Mr. McCaw is also involved in various
other ventures in the areas of communications, real estate and aviation and
holds a variety of positions in entities involved in these businesses.
Robert W. Rahal was first elected a director of the Company in December
1997. Mr. Rahal is the co-owner of Team Rahal, Inc. He has an accomplished
career as a CART competitor, winning the PPG CART World Series title three times
in his 15-year CART career. Additionally, Mr. Rahal won the Indianapolis 500 in
1986. Mr. Rahal is the only driver in the CART Championship who is also a team
owner.
COMMITTEES
The Board of Directors of the Company has established an Audit Committee
and a Compensation Committee. The Audit Committee is charged with recommending
to the Board of Directors the appointment of the Company's independent auditors,
reviewing the compensation of such auditors and reviewing with such accountants
the plans for the result and scope of their auditing engagement. The
Compensation Committee reviews the performance and compensation of directors,
executive officers and key employees and makes recommendations to the Board of
Directors with respect thereto. It also administers the Company's Stock Option
Plan. See "-- Stock Option Plan."
LIMITED LIABILITY AND INDEMNIFICATION OF DIRECTORS
The Company's Certificate of Incorporation provides that the liability of
the directors for monetary damages shall be limited to the fullest extent
permissible under Delaware law, except in the case of: (i) a breach of the
director's duty of loyalty to the Company or its stockholders, (ii) an act or
omission not in good faith or which involves intentional misconduct or a knowing
violation of law, (iii) the unlawful payment of dividends or unlawful stock
purchases or redemptions, or (iv) a transaction from which a director derived an
improper personal benefit.
The Company's Bylaws indemnify its directors and officers to the fullest
extent possible under Delaware law, except as otherwise provided in the
Certificate of Incorporation. These indemnification provisions require the
Company to indemnify such persons against certain liabilities and expenses to
which they may become subject by reason of their service as a director or
officer of the Company. The provisions also set forth certain procedures,
including the advancement of expenses, that apply in the event of a claim for
indemnification. The Company intends to enter into indemnification agreements
with each of the directors of the Company, pursuant to which the Company will
indemnify each such director to the fullest extent permitted by law, except as
otherwise provided in the Certificate of Incorporation. The Company also intends
to obtain insurance to protect its officers and directors from liability.
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<PAGE> 42
DIRECTOR COMPENSATION
Independent members of the Board of Directors who are not Company officers
and who are not team owners participating in CART events may be paid a per
meeting fee. The Company will also reimburse all directors for their expenses
incurred in connection with their activities as directors of the Company.
Directors who are also employees of the Company or who otherwise participate as
a team owner in CART events receive no compensation for serving on the Board of
Directors.
EXECUTIVE COMPENSATION
Set forth below is information regarding all forms of compensation paid or
payable by the Company to the Chief Executive Officer and the only other
executive officers whose annual salary and bonus exceeded $100,000 in 1996 (the
"Named Officers"):
ANNUAL COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
NAME AND OTHER ANNUAL ALL OTHER
PRINCIPAL POSITIONS YEAR SALARY BONUS COMPENSATION COMPENSATION
- --------------------------------------------- ---- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Andrew Craig................................. 1996 $373,436 $120,000 $ --(1) $5,912(2)
Chief Executive Officer and President
Randy K. Dzierzawski......................... 1996 173,041 33,000 $ --(1) 2,375(3)
Executive Vice President
J. Kirk Russell.............................. 1996 118,461 11,500 $ --(1) 2,375(3)
Vice President of Competition
</TABLE>
- ---------------
(1) The aggregate amount of perquisite compensation to be reported herein is
less than the lesser of $50,000 or 10% of the total of annual salary and
bonus reported for the named executive officer. No other annual compensation
was paid or payable to the named executive officers in the years indicated.
(2) Includes annual Company contributions of $2,375 to vested and unvested
defined contribution plans, and insurance premiums of $3,537 paid by the
Company with respect to term life insurance for the benefit of the named
executive officer.
(3) Represents annual contributions to vested and unvested defined contribution
plans.
STOCK OPTION PLANS
In December 1997, the Board of Directors of the Company (the "Board")
authorized, and the stockholders of the Company approved, a stock incentive plan
for executive and key management employees of the Company and its subsidiaries,
including a limited number of outside consultants and advisors, effective as of
the completion of the Offering (the "Stock Option Plan"). Under the Stock Option
Plan, key employees, outside consultants and advisors (the "Participants") of
the Company and its Subsidiaries (as defined in the Stock Option Plan) may
receive awards of stock options (both Nonqualified Options and Incentive
Options, as defined in the Stock Option Plan). A maximum of 2,000,000 shares of
Common Stock will be subject to the Stock Option Plan. The purpose of the Stock
Option Plan is to provide key employees (including officers and directors who
are also key employees) and key non-employee consultants and advisors of the
Company and its Subsidiaries ("employees") with an increased incentive to make
significant and extraordinary contributions to the long-term performance and
growth of the Company and its Subsidiaries, to join the interests of key
employees with the interests of the stockholders of the Company, and to
facilitate attracting and retaining key employees of exceptional ability.
Administration. The Stock Option Plan is administered by the Compensation
Committee of the Board of Directors of the Company (the "Committee"), or such
other committee as may be specified by the Board of Directors to perform the
functions and duties of the Committee under the Stock Option Plan. Subject to
the provisions of the Stock Option Plan, the Committee shall determine, from
those eligible to be Participants, the persons to be granted stock options, the
amount of stock options granted to each such person, and the terms and
conditions of any stock options. Subject to the
41
<PAGE> 43
provisions of the Stock Option Plan, the Committee is authorized to interpret
the Stock Option Plan, to make, amend and rescind rules and regulations relating
to the Stock Option Plan and to make all other determinations necessary or
advisable for the Stock Options Plan's administration.
Participants. The Participants in the Stock Option Plan are those key
employees, consultants and advisors of the Company or any Subsidiary who in the
judgment of the Committee are or will become responsible for the direction and
financial success of the Company or any Subsidiary. Key employees include
officers and directors who are also key employees of the Company or any
Subsidiary.
Shares Subject to Plan. The maximum number of shares with respect to which
stock options may be granted under the Stock Option Plan is 2,000,000 shares of
Common Stock. Shares covered by expired or terminated stock options will again
become available for grant under the Stock Option Plan. The number of shares
subject to each outstanding stock option, the option price with respect to
outstanding stock options, and the aggregate number of shares remaining
available under the Stock Option Plan will be subject to such adjustment as the
Committee, in its discretion, deems appropriate to reflect such events as stock
dividends, stock splits, recapitalizations, mergers, consolidations or
reorganizations of or by the Company.
Stock Options. Subject to the terms of the Stock Option Plan, the
Committee may grant to Participants either Incentive Options meeting the
definition of an incentive stock option under Section 422 of the Code or
Nonqualified Options not meeting such definition, or any combination thereof.
The exercise price for an Incentive Option may not be less than 100% of the fair
market value of the stock on the date of grant; however, the exercise price for
an Incentive Option granted to an employee who owns more than 10% of the voting
stock of the Company or any subsidiary may not be less than 110% of the fair
market value of the stock on the date of grant. The exercise price for a
Nonqualified Option may not be less than 100% of the fair market value of the
stock on the date of grant.
The exercise period for stock options will be determined by the Committee,
but no stock option may be exercisable after 10 years from the date of grant,
subject to certain conditions and limitation.
Stock options are not transferable by a Participant other than by will or
by the laws of descent and distribution, and stock options are exercisable,
during the lifetime of the Participant, only by the Participant.
If the employment or consultancy of a Participant by the Company or a
Subsidiary terminates, the committee may, in its discretion, permit the exercise
of stock options granted to such Participant (i) for a period not to exceed
three months following termination of employment with respect to Incentive
Options of employment is not due to death or permanent disability of the
Participant, (ii) for a period not to exceed one year following termination of
employment with respect to Incentive Options if termination of employment is due
to the death or permanent disability of the Participant, and (iii) for a period
not to extend beyond the expiration date with respect to Nonqualified Options.
Termination, Duration and Amendments Of Plan. The Stock Option Plan may be
abandoned or terminated at any time by the Board of Directors. Unless sooner
terminated, the Stock Option Plan will terminate on the date ten years after its
adoption by the Board of Directors. The termination of the Stock Option Plan
will not affect the validity of any stock option outstanding on the date of
termination.
For the purpose of conforming to any changes in applicable law or
governmental regulation, or for any other lawful purpose, the Board of Directors
will have the right, with or without approval of the stockholders of the
Company, to amend or revise the terms of the Stock Option Plan at any time;
however, no such amendment or revision will (i) without approval or ratification
of the stockholders (A) increase the maximum number of shares in the aggregate
which are subject to the Stock Option Plan (other than anti-dilution
adjustments), (B) increase the maximum number of shares for which any
Participant may be granted stock options under the Stock Option Plan (other than
anti-dilution adjustments), (C) change the class of persons eligible to be
Participants under the Stock Option Plan, or (ii) without the consent of the
holder thereof, change the stock option price (other than anti-dilution
adjustments) or alter or impair any stock option which has been previously
granted or awarded under the Stock Option Plan.
Federal Income Tax Consequences. The rules governing the tax treatment of
stock options, stock appreciation rights, and shares acquired upon the exercise
of stock options are technical. Therefore, the description of federal income tax
consequences set forth below is necessarily general in nature and does not
purport to be complete. Moreover, statutory
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<PAGE> 44
provisions are subject to change, as are their interpretations, and their
application may vary in individual circumstances. Finally, the tax consequences
under applicable state and local income tax laws may not be the same as under
the federal income tax laws.
Incentive Options. Incentive Options granted pursuant to the Plan are
intended to qualify as "Incentive Options" within the meaning of Section 422 of
the Code. If the Participant makes no disposition of the shares acquired
pursuant to exercise of an Incentive Option within one year after the transfer
of shares to such Participant and within two years from grant of the option,
such Participant will realize no taxable income as a result of the grant or
exercise of such option, and any gain or loss that is subsequently realized may
be treated as long-term capital gain or loss, as the case may be. Under these
circumstances, the Company will not be entitled to a deduction for federal
income tax purposes with respect to either the issuance of such Incentive
Options or the transfer of shares upon their exercise. However, the exercise of
an Incentive Option is an item of tax preference and a Participant may have
alternative minimum tax liability.
If shares acquired upon exercise of Incentive Options are disposed of prior
to the expiration of the above time periods, the Participant will recognize
ordinary income in the year in which the disqualifying disposition occurs, the
amount of which will generally be the lesser of (i) the excess of the market
value of the shares on the date of exercise over the option price, or (ii) the
gain recognized on such disposition. Such amount will ordinarily be deductible
by the Company for federal income tax purposes in the same year, provided that
the amount constitutes reasonable compensation. In addition, the excess, if any,
of the amount realized on a disqualifying disposition over the market value of
the shares on the date of exercise will be treated as capital gain.
Nonqualified Options. A Participant who acquires shares by exercise of a
Nonqualified Option generally realizes as taxable ordinary income, at the time
of exercise, the difference between the exercise price and the fair market value
of the shares on the date of exercise. Such amount will ordinarily be deductible
by the Company in the same year, provided that the amount constitutes reasonable
compensation. Subsequent appreciation or decline in the value of the shares on
the sale or other disposition of the shares will generally be treated as capital
gain or loss.
Withholding Payments. If, upon exercise of a Nonqualified Option or upon a
disqualifying disposition of shares acquired upon exercise of an Incentive
Option, the Company or any Subsidiary must pay amounts for income tax
withholding, then in the Committee's sole discretion, either the Company will
appropriately reduce the amount of stock or cash to be delivered or paid to the
Participant or the Participant must pay such amount to the Company to reimburse
the Company for such payment. The Committee may permit a Participant to satisfy
such withholding obligations by electing to reduce the number of shares of
Common Stock delivered or deliverable to the Participant upon exercise of a
stock option or by electing to tender an appropriate number of shares of Common
Stock back to the Company subsequent to exercise of a stock option (with such
restrictions as the Committee may adopt).
Limitation on Compensation Deduction. Publicly-held corporations are
precluded from deducting compensation paid to certain of its executive officers
in excess of $1.0 million. The employees covered by the $1.0 million limitation
on deductibility of compensation include the chief executive officer and those
employees whose annual compensation is required to be reported to the Securities
and Exchange Commission because the employee is one of the company's four
highest compensated employees for the taxable year (other than the chief
executive officer). The grant of stock options generally are included in an
employees compensation for purposes of the $1.0 million limitation on
deductibility of compensation.
There is an exception to the $1.0 million deduction limitation for
compensation (including the grant of stock options paid pursuant to a qualified
performance-based compensation plan.) Compensation attributable to stock options
is deemed to satisfy the qualified performance-based compensation exception if
the grant is made by a compensation committee comprised of outside directors;
the plan under which the option is granted states the maximum number of shares
with respect to which options may be granted during a specified period to any
employee; and, under the terms of the option, the amount of compensation the
employee could receive is based solely on an increase in the value of the stock
after the date of the grant.
If the amount of compensation a covered employee will receive under the
grant is not based solely on an increase of the value of the stock after the
date of the grant (e.g., an option that is granted with an exercise price that
is less than the fair market value as of the date of the grant), none of the
compensation attributable to the grant is qualified performance-
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<PAGE> 45
based compensation unless the grant is made on account of the attainment of a
performance goal that has been previously established and approved by the
stockholders of the Company.
The grant of stock options to a Participant under the Stock Option Plan to
purchase the Company's stock at fair market value determined on the date of the
grant will, if granted at fair market value, be deemed to satisfy the
requirements of the performance-based compensation exception and the $1.0
million deduction limitation will not otherwise limit the deductibility of the
compensation paid to covered employees by the Company. However, the grant of a
stock option with an exercise price less than the fair market value of the stock
on the date of grant will be included in a covered employee's compensation in
determining the $1.0 million deductibility limit.
Accounting Treatment. Generally, under current accounting rules neither
the grant nor the exercise of an Incentive Option or a Nonqualified Option
granted at an exercise price equal to the fair market value of the shares on the
date of grant requires any charge against earnings. The Company will implement
the provisions of Statement of Financial Accounting Standards (SFAS) No. 123,
Accounting for Stock-Based Compensation, which provide for the disclosure of the
pro forma impact of the issuance of options on net income and earnings per share
in the footnotes to the Company's financial statements. Accordingly, management
currently believes that there will be no impact on earnings of the Company as a
result of the adoption of SFAS 123.
Director Option Plan. The Director Option Plan permits the granting of
non-qualified stock options ("Director NQSOs") for up to 100,000 shares of
Common Stock to directors of the Company who are neither employees of the
Company nor affiliates of a race team which participates in CART race events (an
"Independent Director"). Each person who is first elected or appointed to serve
as an Independent Director of the Company is automatically granted an option to
purchase shares of Common Stock. In addition, each individual who is
re-elected as an Independent Director is automatically granted an option to
purchase shares of Common Stock each year on the date of the annual meeting
of stockholders. Each of the options automatically granted upon election,
appointment or re-election as an Independent Director (the "Fixed Options") are
exercisable at a price at least equal to the fair market value of the Common
Stock on the date of grant. In addition to the Fixed Options, each Independent
Director may elect to receive stock options in lieu of any director's fees
payable to such individuals.
All Directors NQSOs are immediately exercisable upon grant. The exercise
price for all such options may be paid in cash, shares of Common Stock or other
property. If an independent Director dies or becomes ineligible to participate
in the Director Option Plan due to disability, his Director NQSOs expire on the
first anniversary of such event. If an Independent Director retires with the
consent of the Company, his Director NQSOs expire 90 days after his retirement.
In no event may a Director NQSO be exercised more than 10 years from the date of
grant.
EMPLOYMENT AGREEMENTS
Andrew Craig and Randy K. Dzierzawski currently have employment agreements
with the Company. Pursuant to the terms of the agreements, Messrs. Craig and
Dzierzawski have agreed to serve as full-time employees of the Company until
December 2000.
In the event there is a change in control in the Company, the Company will
pay each employee, upon termination for any reason, a lump sum equal to three
times his base salary in effect at termination. If the change of control
provisions were applied at the present time, Messrs. Craig and Dzierzawski would
receive $1.5 million and $675,000, respectively.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the Reorganization in December 1997, all matters concerning
executive officer compensation were determined by the Compensation Committee of
CART. No executive officer of the Company was a director of CART during 1994,
1995, 1996 or 1997. In connection with the Reorganization, the Board of
Directors has established a Compensation Committee to deliberate upon matters
concerning executive compensation, the issuance of options under the Stock
Option Plan and other benefits payable to the Company's executive officers. The
members of the Compensation Committee are Messrs. Haas (Chairman), Patrick,
Forsythe and Walker.
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<PAGE> 46
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CART has entered into, and the Company will continue to enter into,
transactions with entities that are affiliated with the Company's stockholders
and directors and with affiliates of its race teams (the "Race Teams"). Race
Teams that participate in the CART Championship and are franchise members have
received certain payments and reimbursements from CART. In addition, Race Teams
receive purse distributions on a per race basis and from the year end point fund
which amounts have been paid based solely upon their performance in specific
races. See "Business -- Franchise System and Race Teams."
Penske Motorsports, Inc. ("PMI"), a public company controlled indirectly by
Roger S. Penske, a Race Team owner, has entered into Promoter Agreements with
CART with respect to PMI's race tracks in Brooklyn, Michigan, Nazareth,
Pennsylvania, and Fontana, California. Pursuant to the terms thereof, and
subject to such agreement's extension or renewal, a CART Championship race will
be held at the Brooklyn and Nazareth facilities through 1998, and at the Fontana
facilities in each year through 1999. The sanction fees payable to CART pursuant
to these agreements vary from year to year and track to track and are similar to
sanction fees paid by independent third parties. Pursuant to existing Promoter
Agreements, PMI has paid or will pay sanction fees to CART in the aggregate
amount of $3.4 million, $3.7 million and $1.1 million in 1997, 1998 and 1999,
respectively. In 1997, PMI also acquired a 40% interest in the race track at
Homestead, Florida. Pursuant to the Promoter Agreement for Homestead, CART will
sanction a race through 2000 and will be paid a sanction fee in the amount of
$1.3 million, $1.37 million and $1.43 million in 1998, 1999 and 2000,
respectively. See "Business -- Racing Events and Sanction Fees."
In May 1996, CART leased PMI's Michigan facility, the Michigan
International Speedway, at which CART organized, promoted and staged the U.S.
500. CART paid PMI a total lease payment of $1.2 million.
Carl A. Haas, a director of the Company and a Race Team owner, is a
principal owner of Carl Haas Racing Teams, Ltd. and Texaco Houston Grand Prix
L.L.C., each of which have entered into Promoter Agreements with respect to CART
Championship races at the Wisconsin State Park Speedway in Milwaukee, Wisconsin
and at a temporary road course to be constructed in Houston, Texas. Pursuant to
the terms thereof, a CART Championship race will be held in Milwaukee through
1998, and in Houston, beginning in 1998, through 2003. The sanction fees payable
to CART under these agreements are similar to those paid by independent race
promoters. Pursuant to existing Promoter Agreements, entities affiliated with
Mr. Haas have paid or will pay sanction fees to CART in the aggregate amount of
$792,200, $2.0 million, $1.4 million, $1.9 million, $2.4 million, $2.7 million
and $2.7 million in 1997, 1998, 1999, 2000, 2001, 2002 and 2003, respectively.
See "Business -- Racing Events and Sanction Fees."
Gerald Forsythe, a director of the Company and a Race Team owner, is a
principal of North American Touring Car Championship, L.L.C. ("NATCC"). In 1997,
NATCC entered into an agreement with CART which provided that CART would
sanction the NATCC racing series held in conjunction with certain CART
Championship races for a fee of $200,000. The term of the agreement commenced in
the 1997 season. At the end of the 1997 racing season, NATCC decided to
terminate its racing activities and subsequently the agreement between NATCC and
CART was terminated by mutual agreement.
ARS, the organizer of the Indy Lights Championship, is controlled
indirectly by U.E. Patrick, a director of the Company and a Race Team owner. ARS
has entered into an agreement with CART that provides that ARS will be the
"Official Development Series of the CART Championship", that its racing
activities will be sanctioned by CART and for the sharing of sanction fees,
television revenues and costs. In connection with this agreement, CART has paid
ARS $269,625 and $120,406 for the fiscal year ended December 31, 1995 and 1996,
respectively, and $688,750 for the nine months ended September 30, 1997. In
addition, the Company has entered into a binding letter of intent to purchase
all of the stock of ARS and certain assets of BP for a total purchase price of
$10.0 million and the grant of 100,000 options to purchase the Company's common
stock at the initial public offering price. Mr. Patrick did not participate in
or vote upon the approval of the Indy Lights Acquisition.
Mr. Michael J. Mills, secretary of the Company, is a principal in a law
firm which received fees for legal services from the Company in the amount of
$111,540, $128,660 and $133,200 during 1995, 1996 and 1997, respectively.
Each of the current directors is affiliated with entities engaged in
various levels of business activity with CART. These and other transactions of
the Company with officers, directors, employees, principal stockholders or
affiliates have been or will be (i) made in the ordinary course of business,
(ii) on substantially the same terms as those prevailing at the
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<PAGE> 47
time for comparable transactions with other persons, and (iii) such that did not
or do not involve more than normal levels of risk or present other unfavorable
features.
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<PAGE> 48
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information, as of December 19, 1997, with
respect to the beneficial ownership of the Common Stock by (i) each person or
entity known to the Company to be the beneficial owner of more than five percent
of the outstanding shares of the Common Stock, (ii) each of the Company's
directors, (iii) each of the Named Officers, (iv) each of the Selling
Stockholders, and (v) all directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY NUMBER OF SHARES BENEFICIALLY
OWNED SHARES OWNED
NAME(1) PRIOR TO OFFERING BEING OFFERED AFTER OFFERING
- ---------------------------------------------- -------------------------- ------------- --------------------------
NUMBER PERCENT(2) NUMBER PERCENT
--------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
All American Racers, Inc...................... 466,666 4.6% -- 466,666 3.2%
Arciero-Wells Racing, Inc..................... 400,000 4.6% 40,000 360,000 2.5%
Arciero-Wells Racing II, Ltd., LLC............ 66,666 * -- 66,666 *
Bettenhausen Motorsports, Inc................. 400,000 3.9% -- 400,000 2.8%
Dale Coyne Racing(2).......................... 800,000 7.8% 80,000 720,000 5.0%
Davis Racing, Inc............................. 400,000 3.9% -- 400,000 2.8%
Della Penna Motorsports, Inc.................. 400,000 3.9% -- 400,000 2.8%
Forsythe Racing, Inc.(3)...................... 400,000 3.9% -- 400,000 2.8%
Hogan Racing, L.L.C........................... 400,000 3.9% -- 400,000 2.8%
Newman/Haas Racing(4)......................... 800,000 7.8% -- 800,000 5.5%
PacWest Racing Group(5)....................... 800,000 7.8% -- 800,000 5.5%
Patrick Racing, Inc.(6)....................... 800,000 7.8% -- 800,000 5.5%
Penske Racing, Inc.(7)........................ 800,000 7.8% -- 800,000 5.5%
Project Indy.................................. 66,666 * -- 66,666 *
Chip Ganassi Racing Teams, Inc.(8)............ 800,000 7.8% 80,000 720,000 5.0%
Tasman Motorsports Group(9)................... 800,000 7.8% -- 800,000 5.5%
Team Green, Inc............................... 400,000 3.9% 40,000 360,000 2.5%
Team Rahal, Inc.(10).......................... 800,000 7.8% -- 800,000 5.5%
Walker & Associates Motorsport, Ltd.(11)...... 400,000 3.9% -- 400,000 2.8%
Andrew Craig(12).............................. -- -- -- -- --
Randy K. Dzierzawski(12)...................... -- -- -- -- --
J. Kirk Russell(12)........................... -- -- -- -- --
Gerald Forsythe(3)............................ 400,000 3.9% -- 400,000 2.8%
Chip Ganassi(8)............................... 800,000 7.8% 80,000 720,000 5.0%
Carl A. Haas(4)............................... 800,000 7.8% -- 800,000 5.5%
Bruce R. McCaw(5)............................. 800,000 7.8% -- 800,000 5.5%
U.E. Patrick(6)............................... 800,000 7.8% -- 800,000 5.5%
Robert W. Rahal(10)........................... 800,000 7.8% -- 800,000 5.5%
Derrick Walker(11)............................ 400,000 3.9% -- 400,000 2.8%
All executive officers and directors as a
group (11) persons)......................... 4,800,000 47.1% 4,720,000 32.5%
</TABLE>
- ---------------
* Less than 1%
(1) Unless otherwise noted, each person or entity has sole investing and voting
power with respect to the shares indicated.
(2) Percent before the Offering is based on 10,200,000 shares outstanding on
December 19, 1997.
(3) The shares are held of record by Forsythe Racing, Inc. and beneficially by
Gerald Forsythe.
(4) The shares are held of record by Newman/Haas Racing and beneficially by
Carl A. Haas. The address for Newman/Haas Racing and Carl A. Haas is 500
Tower Parkway, Lincolnshire, Illinois 60069.
(5) The shares are held of record by PacWest Racing Group and beneficially by
Bruce R. McCaw. The address for PacWest Racing Group and Bruce R. McCaw is
4601 Methanol Lane, Indianapolis, Indiana 46268.
(6) The shares are held of record by Patrick Racing, Inc. and beneficially by
U.E. Patrick. The address for Patrick Racing, Inc. and U.E. Patrick is 8431
Georgetown Road, Indianapolis, Indiana 46268.
(7) The address for Penske Racing, Inc. is 366 Penske Plaza, Reading,
Pennsylvania 19603.
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<PAGE> 49
(8) The shares are held of record by Chip Ganassi Racing Teams, Inc. and
beneficially by Chip Ganassi. The address for Chip Ganassi Racing Teams,
Inc. and Chip Ganassi is 3821 Industrial Boulevard, Indianapolis, Indiana
46254.
(9) The address for Tasman Motorsports Group is 4192 Weaver Court, Hilliard,
Ohio 43026.
(10) The shares are held of record by Team Rahal, Inc. and beneficially by
Robert W. Rahal. The address for Team Rahal, Inc. and Robert W. Rahal is
4601 Lyman Drive, Hilliard, Ohio 43026.
(11) The shares are held of record by Walker & Associates Motorsport, Ltd. and
beneficially by Derrick Walker.
(12) The address for Messrs. Craig, Dzierzawski and Russell is 755 West Big
Beaver Road, Suite 800, Troy, Michigan 48084.
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<PAGE> 50
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 50,000,000 shares
of Common Stock, par value $.01 per share, and 5,000,000 shares of Preferred
Stock, par value $.01 per share. On December 19, 1997, a total of 10,200,000
shares of Common Stock were issued and outstanding and such shares were held by
19 stockholders. No shares of Preferred Stock were outstanding. Upon completion
of the Offering, there will be 14,533,000 shares of Common Stock (15,218,950
shares if the Underwriters' over-allotment option is exercised in full) and no
shares of Preferred Stock issued and outstanding.
The following summary description of the Company's capital stock does not
purport to be complete and is qualified in its entirety by this reference to the
Company's Certificate of Incorporation and By-laws, copies of which have been
filed as exhibits to the Registration Statement of which this Prospectus is a
part.
COMMON STOCK
All outstanding shares of Common Stock are, and the shares offered hereby
will be, duly authorized, validly issued, fully paid and nonassessable. Holders
of Common Stock are entitled to receive dividends, when and if declared by the
Board of Directors, out of funds legally available therefor and, subject to the
prior rights of holders of any Preferred Stock then outstanding, to share
ratably in the net assets of the Company upon liquidation. The payment by the
Company of dividends, if any, rests with the Board of Directors and will depend
upon the Company's results of operation, financial condition and capital
expenditure plans, as well as other factors considered relevant by the Board of
Directors. Holders of Common Stock do not have preemptive or other rights to
subscribe for additional shares, nor are there any redemption or sinking fund
provisions associated with the Common Stock.
Holders of Common Stock are entitled to one vote per share on all matters
requiring a vote of stockholders. Since the Common Stock does not have
cumulative voting rights in electing directors, the holders of more than a
majority of the outstanding shares of Common Stock voting for the election of
directors can elect all of the directors whose terms expire that year, if they
choose to do so.
PREFERRED STOCK
Under the Company's Certificate of Incorporation ("Certificate"), the Board
of Directors has the power, without further action by the holders of the Common
Stock, to designate the relative rights and preferences of the Preferred Stock,
when and if issued. The Board of Directors are authorized to issue up to
5,000,000 shares of Preferred Stock in one or more series. The rights and
preferences could include preferences as to liquidation, redemption and
conversion rights, voting rights, dividends or other preferences, any of which
may be dilutive to the interests of the holders of Common Stock. The issuance of
Preferred Stock may have the effect of delaying or preventing a change in
control of the Company and may have an adverse effect on the rights of the
holders of Common Stock.
The issuance of any series of Preferred Stock, and the relative powers,
preferences, rights, qualifications, limitations and restrictions of such
series, if and when established, will depend upon, among other things, the
future capital needs of the Company, then-existing market conditions and other
factors that, in the judgment of the Board of Directors, might warrant the
issuance of Preferred Stock. At the date of this Prospectus, there are no plans,
agreements or understandings relative to the issuance of any shares of Preferred
Stock.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
Certain provisions of the General Corporation Law of the State of Delaware
(the "DGCL")and of the Company's Certificate of Incorporation and By-laws,
summarized in the following paragraphs, may be considered to have an anti-
takeover effect and may delay, deter or prevent a tender offer, proxy contest or
other takeover attempt that a stockholder might consider to be in such
stockholder's best interest, including such an attempt as might result in
payment of a premium over the market price for shares held by stockholders.
Anti-Greenmail. The Certificate of Incorporation prohibits redemption by
the Company of any of its securities held by a person holding more than 5% or
more of its securities at a price in excess of the securities then fair market
value unless certain conditions are met, including stockholder approval or a
comparable offer to all stockholders.
Other Voting Requirements. The Certificate of Incorporation requires the
approval of 67% of the Company's voting securities for an amendment of certain
provisions of the Certificate of Incorporation, unless 2/3 of the Board of
Directors
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<PAGE> 51
first approve the matter. The Certificate of Incorporation also requires either
the approval of 67% of the Company's voting securities or a vote of not less
than a majority of the Board of Directors to amend the By-Laws.
Delaware Anti-Takeover Law. The Company, a Delaware corporation, is
subject to the provisions of the General Corporation Law of the State of
Delaware, including Section 203 thereof. In general, Section 203 prohibits a
public Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which such person became an interested stockholder unless: (i)
prior to such date, the Board of Directors approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; or (ii) upon becoming an interested stockholder, the
stockholder then owned at least 85% of the voting stock, as defined in Section
203; or (iii) subsequent to such date, the business combination is approved by
both the Board of Directors and by holders of at least 66 2/3% of the
corporation's outstanding voting stock, excluding shares owned by the interested
stockholder. For these purposes, the term "business combination" includes
mergers, asset sales and other similar transactions with an "interested
stockholder." An "interested stockholder" is a person who together with
affiliates and associates, owns (or, within the prior three years, did own) 15%
or more of the corporation's voting stock. Although Section 203 permits a
corporation to elect not to be governed by its provisions, to date the Company
has not made this election.
Special Meetings of Stockholders; No Action Without Meeting. The Company's
By-laws provide that special meetings of stockholders may be called only by the
Chairman, the President or the Board of Directors. The Company's Certificate of
Incorporation and By-laws also provide that no action required to be taken or
that may be taken at any annual or special meeting of stockholders may be taken
without a meeting. Additionally, the power of stockholders to consent in
writing, without a meeting, to the taking of any action is specifically denied.
These provisions may make it more difficult for stockholders to take action
opposed by the Board of Directors.
Advance Notice Requirements for Stockholder Proposals and Director
Nominations. The Company's By-laws provide that stockholders seeking to bring
business before an annual or special meeting of stockholders, or to nominate
candidates for election as directors at an annual or a special meeting of
stockholders, must provide timely notice thereof in writing. To be timely, a
stockholder's notice must be delivered to, or mailed and received at, the
principal executive office of the Company (i) with respect to business to be
considered at the annual meeting of the stockholders of the Company not less
than 90 days prior to the anniversary date of the immediately preceding annual
meeting of stockholders of the Company, and (ii) with respect to business to be
considered at a special meeting of stockholders of the Company not later than
the close of business on the 10th day following the day on which notice of the
date of the special meeting was mailed to stockholders of the Company, or public
disclosure of the date of the special meeting was made, whichever first occurs.
These provisions may preclude some stockholders from making nominations for
directors at an annual or special meeting or from bringing other matters before
the stockholders at a meeting.
RIGHTS AGREEMENT
The Company and a rights agent will enter into a Rights Agreement, dated
effective December 22, 1997, which provides for the distribution of a right to
purchase one share of Common Stock at an exercise price of $80 to the holder of
each share of Common Stock. The holders of rights do not have any voting rights
and are not entitled to dividends. Prior to the distribution date (the
"Distribution Date"), the rights will be evidenced by certificates representing
the shares of Common Stock to which they are attached and may be transferred
with, and only with, shares of Common Stock. The Distribution Date will occur,
if at all, upon the earlier of (a) the tenth day following a public announcement
that a person has acquired or obtained the right to acquire, beneficial
ownership of 15% or more of the outstanding shares of Common Stock, or (b) the
tenth business day (or such later date as determined by the board of Directors)
following the commencement of or the first public announcement of intent of a
tender offer or exchange for 15% or more of the outstanding shares of Common
Stock (other than by the Company or certain related entities). The rights are
not exercisable until the Distribution Date and will expire at the close of
business on December 22, 2007, unless earlier redeemed by the Company.
After the Distribution Date, the rights may either "flip-in" or
"flip-over," allowing a stockholder to acquire the common stock or the voting
equity securities of the acquiring person, respectively, at a 50% discount. Once
any person (other than the Company or certain related entities) becomes a 15%
beneficial owner of the outstanding shares of Common Stock, the rights (other
than rights beneficially owned by the acquiring person which would become null
and void) automatically flip-in, unless the Board of Directors has decided to
exchange the rights for shares of Common Stock.
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<PAGE> 52
If, after the Distribution Date, the Company consolidates or merges with, or
transfers a majority of its assets to, any person, the rights will flip-over.
The rights may have certain anti-takeover effects. The rights are designed
to cause substantial dilution to a person or group that attempts to acquire the
Company on terms not approved by the Board of Directors. The rights will not
interfere with any merger or other business combination approved by the Board
because the rights may be redeemed by the Company at $.01 per right at any time
prior to a 15% acquisition. The Rights Agreement may be amended, without
limitation prior to the distribution of the Rights, by the Board of Directors
without the approval of the holders of the rights.
TRANSFER AGENT
The transfer agent and registrar of the Common Stock is
.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding
14,533,000 shares of Common Stock (15,218,950 shares if the Underwriters'
over-allotment option is exercised in full). In addition, the Company has
reserved an additional 2,000,000 and 100,000 shares of Common Stock for issuance
pursuant to the Stock Option Plan and Directors Option Plan, respectively, which
shares will be registered under the Securities Act and will be freely
transferable. Of such outstanding shares, the 4,573,000 Shares (5,258,950 shares
if the over-allotment option is exercised in full) sold in the Offering will be
freely transferable and may be resold without further registration under the
Securities Act. The holders of the remaining 9,960,000 shares will be entitled
to resell them only pursuant to a registration statement under the Securities
Act or an applicable exemption from registration thereunder, such as an
exemption provided by Rule 144.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned "restricted securities"
for at least one year may, under certain circumstances, resell within any three-
month period such number of shares as does not exceed the greater of one percent
of the then-outstanding shares or the average weekly trading volume during the
four calendar weeks prior to such resale. Rule 144 also permits, under certain
circumstances, the resale of shares without any quantity limitation by a person
who has satisfied a two-year holding period and who is not, and has not been for
the preceding three months, an affiliate of the Company. In addition, holding
periods of successive non-affiliate owners are aggregated for purposes of
determining compliance with these one- and two-year holding period requirements.
Upon completion of the Offering, 8,560,000 shares of Common Stock
outstanding on the date of this Prospectus and not sold in the Offering will
have been held for at least one year and may be resold pursuant to Rule 144
three months after the date of this Prospectus.
The availability of shares for sale or actual sales under Rule 144 may have
an adverse effect on the market price of the Common Stock. Sales under Rule 144
also could impair the Company's ability to market additional equity securities.
The Company has agreed, however, not to issue, and the officers and directors of
the Company have each agreed not to resell, or otherwise dispose of, any shares
of Common Stock or other equity securities of the Company for a period of 180
days after the date of this Prospectus without the prior written consent of the
representatives of the Underwriters. In addition, each of the current
stockholders have entered into an agreement which restricts the resale of shares
of Common Stock for a period of one year from the date of this Prospectus.
51
<PAGE> 53
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company and the Selling Stockholders have severally agreed to
sell to the underwriters named below (the "Underwriters"), for whom Jefferies &
Company, Inc. ("Jefferies") and A.G. Edwards & Sons, Inc. are acting as
representatives (the "Representatives"), and the Underwriters have severally
agreed to purchase, the number of shares of Common Stock set forth opposite
their respective names in the table below at the public offering price less the
underwriting discount set forth on the cover page of this Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
---------------------------------------------------------------------------------- ---------
<S> <C>
Jefferies & Company, Inc..........................................................
A.G. Edwards & Sons, Inc..........................................................
Total...................................................................
</TABLE>
The Underwriting Agreement provides that the obligation of the Underwriters
to purchase the shares of Common Stock offered hereby is subject to certain
conditions. The Underwriters are committed to purchase all of the shares of
Common Stock offered hereby (other than those covered by the over-allotment
option described below), if any are purchased.
The Underwriters propose to offer the Common Stock initially at the public
offering price set forth on the cover page of this Prospectus and to certain
dealers at such price less a concession not in excess of $ per share.
The Underwriters may allow, and such dealers may reallow, a discount not in
excess of $ per share to certain other dealers. After the initial
public offering of Common Stock, the public offering price, concession to
selected dealers and reallowance to other dealers may be changed by the
Representatives.
The Company has granted the Underwriters an option, exercisable for 30 days
from the date of this Prospectus, to purchase up to 685,950 additional shares of
Common Stock at the initial public offering price, less the underwriting
discount. The Underwriters may exercise this option solely for the purpose of
covering over-allotments, if any, made in connection with the shares of Common
Stock offered by this Prospectus. To the extent such option is exercised, each
Underwriter will become obligated, subject to certain conditions, to purchase
additional shares of Common Stock proportionate to such Underwriters' initial
commitment as indicated in the preceding table.
The Company, the Selling Stockholders and the directors and executive
officers of the Company have agreed not to offer for sale, sell or otherwise
dispose of any shares of Common Stock or options, right or warrants to acquire
any Common Stock, or any securities convertible into or exchangeable for Common
Stock, for a period of 180 days from the date of this Prospectus, without the
prior written consent of Jefferies.
52
<PAGE> 54
The Representatives have informed the Company that they do not expect the
Underwriters to confirm sales of shares of Common Stock offered by this
Prospectus to any accounts over which they exercise discretionary authority.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities that may be incurred in connection with
the Offering, including liabilities under the Securities Act, or contribute to
payments the Underwriters may be required to make in respect thereof.
In order to facilitate the Offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may overallot in
connection with the Offering, creating a short position in the Common Stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the Common Stock, the Underwriters may bid for, and purchase, the
Common Stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an Underwriter or a dealer in distributing the
Common Stock in the Offering. If the syndicate repurchases previously
distributed shares of Common Stock in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the Common Stock above independent
market levels. The Underwriters are not required to engage in these activities
and may end any of these activities at any time.
The Company intends to make application to list the Common Stock on the
NYSE under the symbol " ".
The Underwriters have reserved for sale, at the initial public offering
price, up to 297,245 shares of Common Stock for certain employees, directors and
business associates of, and certain other persons designated by, the Company who
have expressed an interest in purchasing such shares of Common Stock. The number
of shares available for sale to the general public in the Offering will be
reduced to the extent such persons purchase such reserved shares. Any reserved
shares not so purchased will be offered to the general public on the same basis
as other shares offered hereby.
Prior to the Offering, there has been no public trading market for the
Common Stock and there can be no assurance that an active trading market will
develop or be sustained upon the completion of the Offering. The initial public
offering price of the Common Stock will be determined by negotiations among the
Company, the Selling Stockholders and the Representatives. The material factors
considered in determining such public offering price will be the history of and
the prospects for the industry in which the Company competes, an assessment of
the Company's management, the Company's past and present operations, the
Company's past and present earnings and the trend of its earnings, the general
condition of the securities markets at the time of the Offering and the
price-earnings ratio and market prices of publicly traded securities of
companies that the Company and the Representatives believe to be comparable to
the Company.
In order to facilitate the Offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may over-allot in
connection with the Offering, creating a short position in the Common Stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the Common Stock, the Underwriters may bid for, and purchase, the
Common Stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an Underwriter or a dealer in distributing the
Common Stock in the Offering if the syndicate repurchases previously distributed
shares of Common Stock in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Common Stock above independent market
levels. The Underwriters are not required to engage in these activities and any
of these may be discontinued at any time.
LEGAL MATTERS
Certain legal matters related to this Offering will be passed upon for the
Company and the Selling Stockholders by Kegler, Brown, Hill & Ritter Co.,
L.P.A., Columbus, Ohio. Certain legal matters related to this Offering will be
passed upon for the Underwriters by Vinson & Elkins L.L.P., Houston, Texas.
EXPERTS
The Consolidated Financial Statements of the Company included in this
Prospectus and the Consolidated Financial Statements from which the Selected
Consolidated Financial Data included in this Prospectus have been derived, have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein. Such Consolidated Financial Statements and Selected
Consolidated Financial Data have been included herein in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
53
<PAGE> 55
The Combined Financial Statements of American Racing Series, Inc. and BP
Automotive, Inc. as of December 31, 1996 and 1995 and for the two-year period
ended December 31, 1996, included in this Prospectus, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report appearing
herein and have been so included in reliance upon the report of such firm given
their authority as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission,
Washington, D.C. 20549 (the "SEC"), a registration statement on Form S-1 under
the Securities Act of 1933 with respect to the shares of Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits thereto. For further information with
respect to the Company and the Common Stock, reference is made to the
Registration Statement, including the exhibits filed as a part thereof.
Statements contained in this Prospectus as to the contents of any contract or
any other document are not necessarily complete, and, in each such instance,
reference is hereby made to the contract or document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
this reference thereto. The Registration Statement, together with its exhibits,
may be inspected at the Public Reference Section of the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the regional offices of the SEC located at
7 World Trade Center, Suite 1300, New York, New York 10048 and at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of all or any part
of such materials may be obtained from any such office upon the payment of the
fees prescribed by the SEC, or through the Internet at www.sec.gov. The Company
intends to furnish its stockholders with annual reports containing financial
statements audited by its independent public accountants and to announce
publicly its quarterly results for the first three quarters of each fiscal year.
54
<PAGE> 56
CHAMPIONSHIP AUTO RACING TEAMS, INC.
INDEX TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION, CONSOLIDATED FINANCIAL STATEMENTS, AND
COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CHAMPIONSHIP AUTO RACING TEAMS, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
Unaudited Pro Forma Condensed Consolidated Financial Information................... F-2
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30,
1997............................................................................... F-3
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Nine
Months Ended September 30, 1997.................................................... F-4
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Year
Ended December 31, 1996............................................................ F-5
Notes to Unaudited Pro Forma Condensed Consolidated Financial Information.......... F-6
CHAMPIONSHIP AUTO RACING TEAMS, INC.
Independent Auditors' Report....................................................... F-8
Consolidated Balance Sheets as of December 31, 1995 and 1996 and September 30, 1997
(Unaudited)........................................................................ F-9
Consolidated Statements of Operations for the Years Ended December 31, 1994, 1995
and 1996 and for the Nine Months Ended September 30, 1996 and 1997 (Unaudited)..... F-10
Consolidated Statements of Stockholders' Deficit for the Years Ended December 31,
1994, 1995 and 1996 and for the Nine Months Ended September 30, 1997 (Unaudited)... F-11
Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1995
and 1996 and for the Nine Months Ended September 30, 1996 and 1997 (Unaudited)..... F-12
Notes to Consolidated Financial Statements......................................... F-13
AMERICAN RACING SERIES, INC. AND BP AUTOMOTIVE, INC.
Independent Auditors' Report....................................................... F-20
Combined Balance Sheets as of December 31, 1995 and 1996 and September 30, 1997
(Unaudited)........................................................................ F-21
Combined Statements of Income for the Years Ended December 31, 1995 and 1996 and
for the Nine Months Ended September 30, 1996 and 1997 (Unaudited).................. F-22
Combined Statements of Stockholders' Equity (Deficit) for the Years Ended December
31, 1995 and 1996 and for the Nine Months Ended September 30, 1997 (Unaudited)..... F-23
Combined Statements of Cash Flows for the Years Ended December 31, 1995 and 1996
and for the Nine Months Ended September 30, 1996 and 1997 (Unaudited).............. F-24
Notes to Combined Financial Statements............................................. F-25
</TABLE>
F-1
<PAGE> 57
CHAMPIONSHIP AUTO RACING TEAMS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The unaudited pro forma condensed consolidated balance sheet as of September 30,
1997 gives effect to (i) the Reorganization and the elimination of certain
payments to franchise members. See "Business -- Franchise System and Race Teams"
(ii) the Indy Lights Acquisition (See "Business -- PPG Dayton Indy Lights
Championship") and (iii) the Offering and application of the net proceeds from
the Offering (after deducting underwriting discounts and commissions and
estimated expenses of the Offering, but excluding the underwriters'
over-allotment option), as if each had occurred as of September 30, 1997. The
following unaudited pro forma condensed consolidated statements of operations
for the nine months ended September 30, 1997 and for the year ended December 31,
1996 give effect to each of the above transactions as if each had occurred as of
January 1, 1996. Pro forma adjustments are described in the accompanying notes.
The unaudited pro forma condensed consolidated financial information should
be read in conjunction with "Capitalization" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and with the
Consolidated and Combined Financial Statements and the Notes thereto included
elsewhere in this Prospectus. The unaudited pro forma condensed consolidated
statements of operations are not necessarily indicative of the actual results of
operations that would have been reported if the events described above had
occurred as of January 1, 1996, nor do such statements propose to indicate the
results of future operations of the Company. Furthermore, the pro forma results
do not give effect to cost savings or incremental costs, if any, which may occur
as a result of the integration and consolidation of the Indy Lights Acquisition
or the investment of cash balances available from the Offering. In the opinion
of management, all adjustments necessary to present fairly such unaudited pro
forma condensed consolidated financial statements have been made.
F-2
<PAGE> 58
CHAMPIONSHIP AUTO RACING TEAMS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA FOR ACQUISITION OF INDY
LIGHTS
--------------------------------------
INDY PRO FORMA ADJUSTMENTS
LIGHTS PRO FORMA FOR INDY FOR THE
HISTORICAL HISTORICAL ADJUSTMENTS LIGHTS OFFERING PRO FORMA
----------- ---------- ----------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents..................... $ 4,850 $ 430 $ (10,000)(A) $ (5,150) $ (12,140)(A) $44,005
(430)(A) 59,495(B)
1,800(B)
Accounts receivable........................... 5,225 1,094 (1,094)(A) 5,225 -- 5,225
Inventory..................................... 17 35 -- 52 -- 52
Prepaid expenses.............................. 1,155 205 (205)(A) 1,155 -- 1,155
Deferred tax asset............................ 4,759 -- -- 4,759 -- 4,759
------- ------ --------- ------- ------- -------
Total current assets................... 16,006 1,764 (11,729) 6,041 49,155 55,196
PROPERTY AND EQUIPMENT -- Net................... 2,177 758 (482)(A) 4,382 -- 4,382
1,929(A)
INTANGIBLES..................................... 128 -- 7,760(A) 7,888 -- 7,888
OTHER ASSETS.................................... 150 3 (3)(A) 150 -- 150
------- ------ ------- ------- -------
TOTAL ASSETS.................................... $18,461 $2,525 $ (2,525) $ 18,461 $ 49,155 $67,616
======= ====== ========= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable.............................. $ 2,246 $ 498 $ (498)(A) $ 2,246 $ -- $ 2,246
Accrued liabilities........................... 14,788 456 (456)(A) 14,788 (9,500)(A) 5,288
Unearned revenue.............................. 1,133 775 (775)(A) 1,133 -- 1,133
Current portion of notes payable.............. 130 -- -- 130 -- 130
------- ------ --------- ------- ------- -------
Total current liabilities.............. 18,297 1,729 (1,729) 18,297 (9,500) 8,797
NOTES PAYABLE................................... 336 -- -- 336 -- 336
MEMBERSHIP DEPOSITS............................. 1,320 -- -- 1,320 (1,320)(A) --
FRANCHISE FUND LIABILITY........................ 1,320 -- -- 1,320 (1,320)(A) --
MINORITY INTEREST............................... 15 -- -- 15 -- 15
COMMITMENTS AND CONTINGENCIES................... -- -- -- -- -- --
STOCKHOLDERS' EQUITY (DEFICIT).................. (2,827) 796 (485)(A) (2,827) 1,800(B) 58,468
-- -- (311)(A) -- 59,495(B) --
------- ------ --------- ------- ------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)..................................... $18,461 $2,525 $ (2,525) $ 18,461 $ 49,155 $67,616
======= ====== ========= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
condensed consolidated financial statements.
F-3
<PAGE> 59
CHAMPIONSHIP AUTO RACING TEAMS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA FOR ACQUISITION
OF INDY LIGHTS
---------------------------------------
INDY PRO FORMA ADJUSTMENTS
LIGHTS PRO FORMA FOR FOR THE
HISTORICAL HISTORICAL ADJUSTMENTS INDY LIGHTS OFFERING PRO FORMA
------------- ---------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Sanction fees............................. $24,248 $ -- $ -- $24,248 $ -- $24,248
Sponsorship revenue....................... 6,186 2,287 (399)(D) 8,074 -- 8,074
Television revenue........................ 5,002 -- -- 5,002 -- 5,002
Engine leases, rebuilds and wheel sales... -- 2,355 -- 2,355 -- 2,355
Other revenue............................. 4,467 106 -- 4,573 -- 4,573
-------- ------ ----- ------- --------
Total revenues..................... 39,903 4,748 (399) 44,252 -- 44,252
EXPENSES:
Race and franchise fund payments.......... 28,686 540 -- 29,226 (17,000)(E) 12,226
Race expenses............................. 6,118 989 (399)(D) 6,708 (2,219)(E) 4,489
Cost of engine rebuilds and wheel sales... -- 742 -- 742 -- 742
Administrative and indirect expenses...... 10,841 1,303 -- 12,144 (170)(E) 11,974
Compensation expense (I).................. 1,483 -- -- 1,483 -- 1,483
Depreciation and amortization............. 350 235 21(C) 606 -- 606
Minority interest......................... (210) -- -- (210) -- (210)
-------- ------ ----- ------- ------- --------
Total expenses..................... 47,268 3,809 (378) 50,699 (19,389) 31,310
-------- ------ ----- ------- ------- --------
INCOME (LOSS) BEFORE INCOME TAXES........... (7,365) 939 (21) (6,447) 19,389 12,942
INCOME TAX EXPENSE (BENEFIT)................ (2,576) -- -- (2,576) 6,786(F) 4,210
-------- ------ ----- ------- ------- --------
NET INCOME (LOSS)........................... $(4,789) $ 939 $ (21) $(3,871) $ 12,603 $ 8,732
======== ====== ===== ======= ======= ========
EARNINGS (LOSS) PER
SHARE (G)................................. $ (.47) $ .60
======== ========
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
condensed consolidated financial statements.
F-4
<PAGE> 60
CHAMPIONSHIP AUTO RACING TEAMS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA FOR
INDY LIGHTS ACQUISITION
----------------------------------------
PRO FORMA ADJUSTMENTS
INDY LIGHTS PRO FORMA FOR FOR THE
HISTORICAL HISTORICAL ADJUSTMENTS INDY LIGHTS OFFERING PRO FORMA
------------ ----------- ----------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Sanction fees.................. $ 21,078 $ -- $ -- $ 21,078 $ -- $21,078
U.S. 500....................... 7,054 -- -- 7,054 -- 7,054
Sponsorship revenue............ 5,501 2,416 (120)(D) 7,797 -- 7,797
Television revenue............. 4,139 -- -- 4,139 -- 4,139
Engine leases, rebuilds and
wheel sales.................. -- 2,347 -- 2,347 -- 2,347
Other revenue.................. 3,682 160 -- 3,842 -- 3,842
------- ------ ----- ------- --------
Total revenues.......... 41,454 4,923 (120) 46,257 -- 46,257
EXPENSES:
Race and franchise fund
payments..................... 17,198 731 -- 17,929 (6,280)(E) 11,649
U.S. 500....................... 8,246 -- -- 8,246 -- 8,246
Race expenses.................. 6,055 822 (120)(D) 6,757 (1,953)(E) 4,804
Cost of engine rebuilds and
wheel sales.................. -- 898 -- 898 -- 898
Administrative and indirect
expenses(H).................. 8,620 1,686 -- 10,306 (294)(E) 10,012
Compensation expense(I)........ 1,167 -- -- 1,167 -- 1,167
Depreciation and
amortization................. 685 397 (56)(C) 1,026 -- 1,026
------- ------ ----- ------- -------- --------
Total expenses.......... 41,971 4,534 (176) 46,329 (8,527) 37,802
------- ------ ----- ------- -------- --------
INCOME (LOSS) BEFORE INCOME
TAXES.......................... (517) 389 56 (72) 8,527 8,455
INCOME TAX (BENEFIT) EXPENSE..... (179) -- -- (179) 2,959(F) 2,780
------- ------ ----- ------- -------- --------
NET INCOME (LOSS)................ $ (338) $ 389 $ 56 $ 107 $ 5,568 $ 5,675
======= ====== ===== ======= ======== ========
EARNINGS (LOSS) PER SHARE (G).... $ (.04) $ .41
======= ========
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
condensed consolidated financial statements.
F-5
<PAGE> 61
CHAMPIONSHIP AUTO RACING TEAMS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
BALANCE SHEET -- In December 1997, the Company entered into a binding
letter of intent to acquire all of the outstanding shares of stock of ARS and
the assets of BP (entities related through certain common ownership) for
$10,000,000 in cash and options to purchase 100,000 shares of the Company's
Common Stock at the initial public offering price. ARS operates Indy Lights and
BP provides certain equipment to the participants of Indy Lights. The excess of
the purchase price over the net book value of the net assets acquired of Indy
Lights has been allocated to the tangible and intangible assets based on the
Company's estimate of the fair market value of the net assets acquired. The
allocation of the purchase price paid for Indy Lights is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Fair market value of net assets acquired................................. $ 2,240
Allocation of purchase price in excess of acquired assets--Goodwill...... 7,760
--------------
Total Purchase Price................................................ $ 10,000
===========
</TABLE>
The accompanying unaudited pro forma condensed consolidated balance sheet
as of September 30, 1997 has been prepared as if the Offering, the Indy Lights
Acquisition and the Reorganization had been consummated as of September 30, 1997
and includes:
(A) a pro forma adjustment has been made to:
- record the write-up to fair market value of assets acquired
($1,929,000) and goodwill related to the Indy Lights Acquisition
($7,760,000);
- repay accrued point awards of $9,500,000 and the Membership Deposits
of $1,320,000 and Franchise Fund Liability of $1,320,000 to
Franchise Members for a total of $12,140,000;
- present the Indy Lights Acquisition for $10,000,000 in cash;
- eliminate Indy Lights historical equity balances ($311,000) and the
net assets and liabilities (net amount of $485,000) that will be
distributed to the stockholders of ARS and BP immediately prior to
the Indy Lights Acquisition.
(B) a pro forma adjustment has been recorded to present the
application of the net proceeds ($59,495,000) of the Offering, assuming
additional Offering expenses of $950,000. A pro forma adjustment has been
recorded to present the proceeds of $1,800,000 related to the issuance of
1,400,000 shares of Common Stock on December 19, 1997. See
"Business -- Franchise System and Race Teams."
STATEMENT OF OPERATIONS -- The accompanying unaudited pro forma condensed
consolidated statements of operations for the nine months ended September 30,
1997 and for the year ended December 31, 1996 present the results as though the
Offering, the Indy Lights Acquisition and the Reorganization had been
consummated on January 1, 1996.
The accompanying unaudited pro forma condensed consolidated statements of
operations for the nine months ended September 30, 1997 and for the year ended
December 31, 1996 have been prepared by combining the historical results for the
Company and Indy Lights for such respective periods and include the following
adjustments:
(C) Adjustments for the nine months ended September 30, 1997 and for
the year ended December 31, 1996 have been made to increase (decrease)
depreciation and amortization by $21,000 and $(56,000), respectively,
related to the Indy Lights Acquisition (which has been primarily allocated
to property and equipment and goodwill) as if the Indy Lights Acquisition
had occurred as of January 1, 1996. Property and equipment is depreciated
over their estimated useful lives of 15 years. Goodwill is amortized over
40 years. The Company intends to periodically evaluate the recoverability
of goodwill based upon future profitability and undiscounted operating cash
flows of the Indy Lights Acquisition.
F-6
<PAGE> 62
(D) Represents the elimination of inter-entity revenues and expenses
based upon agreements between the Company and Indy Lights.
(E) Pro forma adjustments for the periods presented have been made to
reduce certain benefits paid to franchise members, including reimbursement
of travel expenses, director fees, purse awards and other race related
payments, to discontinue specific expenses that would not have been
incurred had the Offering, the Indy Lights Acquisition and the
Reorganization occurred as of January 1, 1996. Effective January 1, 1998,
the Company and the existing franchise members entered into an agreement
whereby reimbursements for travel expenses, director fees and race related
payments will be discontinued. Such agreement expires in December 2000.
Additional cost savings that the Company expects to realize through the
integration of the Indy Lights Acquisition have not been included.
(F) Prior to the Indy Lights Acquisition, ARS and BP were
S-Corporations and, accordingly, were not subject to federal or state
income taxes. The pro forma provision for income taxes has been computed as
if the Indy Lights Acquisition was subject to federal and state income
taxes for the periods presented based on the statutory tax rate then in
effect. Additionally, the pro forma adjustments have been tax effected at a
35% federal rate.
(G) Pro forma earnings per share is computed by dividing pro forma net
income by the weighted average common shares outstanding and the shares
offered hereby. Pro forma common shares outstanding for the nine months
ended September 30, 1997 and the year ended December 31, 1996 were
14,533,000 shares and 13,733,000 shares, respectively. The weighted average
common shares outstanding used in the computation of historical and pro
forma earnings (loss) per share reflect the issuance of 1,400,000 shares of
Common Stock on December 19, 1997. See "Business -- Franchise System and
Race Teams."
(H) Included in administrative and indirect expenses for the
historical and pro forma year ended December 31, 1996 is approximately
$1,734,000 related to litigation expenses and the settlement of lawsuits.
(I) Total expenses for the historical and pro forma year ended
December 31, 1996 and the historical and pro forma nine months ended
September 30, 1997 include compensation expense of $1,161,000 and
$1,483,000, respectively, related to the issuance of Common Stock to
franchise members below its fair value, on the date the common stock became
eligible for purchase.
F-7
<PAGE> 63
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Championship Auto Racing Teams, Inc.:
We have audited the accompanying consolidated balance sheets of
Championship Auto Racing Teams, Inc. (the "Company") as of December 31, 1995 and
1996, and the related consolidated statements of operations, stockholders'
deficit, and cash flows for each of the three years in the period ended December
31, 1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of the Company as of
December 31, 1995 and 1996, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Detroit, Michigan
January 20, 1997 (December 19, 1997 as to Note 9)
F-8
<PAGE> 64
CHAMPIONSHIP AUTO RACING TEAMS, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------ -------------
1995 1996 1997
------- ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 2,046 $ 630 $ 4,850
Accounts receivable (no allowance for doubtful accounts
deemed necessary in 1995, 1996 and 1997)............... 821 2,302 5,225
Inventory................................................. 53 16 17
Prepaid expenses.......................................... 121 423 1,155
Deferred income taxes..................................... -- 12 4,759
------- ------ -------
Total current assets.............................. 3,041 3,383 16,006
PROPERTY AND EQUIPMENT -- Net............................... 1,580 1,929 2,177
DEFERRED INCOME TAXES....................................... 828 1,042 --
TRADEMARKS (Net of accumulated amortization of $59 in 1995,
$0 in 1996 and $15 in 1997)............................... 89 101 128
OTHER ASSETS................................................ 75 145 150
------- ------ -------
TOTAL ASSETS................................................ $ 5,613 $6,600 $18,461
======= ====== =======
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable.......................................... $ 797 $ 931 $ 2,246
Accrued liabilities:
Race expenses and point awards......................... -- -- 13,130
Bonus.................................................. 167 195 172
Taxes.................................................. 250 250 1,429
Other.................................................. 34 70 57
Unearned revenue.......................................... 2,583 2,331 1,133
Bank line of credit....................................... 392 -- --
Current portion of long-term debt......................... -- 130 130
------- ------ -------
Total current liabilities.............................. 4,223 3,907 18,297
LONG-TERM DEBT.............................................. -- 444 336
MEMBERSHIP DEPOSITS......................................... 600 960 1,320
FRANCHISE FUND LIABILITY.................................... 2,040 1,440 1,320
COMMITMENTS AND CONTINGENCIES (Note 7)...................... -- -- --
MINORITY INTEREST IN SUBSIDIARIES........................... -- -- 15
STOCKHOLDERS' DEFICIT:
Preferred Stock, $.01 par value; 5,000,000 shares
authorized, none issued and outstanding at December 31,
1995, 1996 and September 30, 1997...................... -- -- --
Common stock, $.01 par value; 45,000,000 shares
authorized,
8,800,000; 8,000,000; and 8,800,000 shares issued and
outstanding at December 31, 1995, 1996 and September
30, 1997, respectively................................. 88 80 88
Additional paid-in capital................................ 522 1,367 3,472
Note receivable -- stockholder............................ (600) -- --
Accumulated deficit....................................... (1,260) (1,598) (6,387)
------- ------ -------
Total stockholders' deficit....................... (1,250) (151) (2,827)
------- ------ -------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT................. $ 5,613 $6,600 $18,461
======= ====== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-9
<PAGE> 65
CHAMPIONSHIP AUTO RACING TEAMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- -------------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Sanction fees.................................... $16,299 $18,708 $21,078 $21,178 $24,248
U.S. 500......................................... -- -- 7,054 7,078 --
Sponsorship revenue.............................. 4,104 4,780 5,501 4,488 6,186
Television revenue............................... 2,343 3,177 4,139 4,139 5,002
Other revenue.................................... 2,441 3,312 3,682 2,967 4,467
------- ------- ------- ------- -------
Total revenues........................... 25,187 29,977 41,454 39,850 39,903
EXPENSES:
Race and franchise fund payments................. 18,305 18,446 17,198 17,096 28,686
U.S. 500......................................... -- -- 8,246 8,220 --
Race expenses.................................... 2,621 4,612 6,055 4,409 6,118
Administrative and indirect expenses............. 3,977 5,832 8,620 6,153 10,841
Compensation expense............................. -- -- 1,167 1,167 1,483
Depreciation and amortization.................... 202 306 685 374 350
Minority interest in loss of subsidiaries........ -- -- -- -- (210)
------- ------- ------- ------- -------
Total expenses........................... 25,105 29,196 41,971 37,419 47,268
------- ------- ------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES.................. 82 781 (517) 2,431 (7,365)
INCOME TAX EXPENSE (BENEFIT)....................... (344) (204) (179) 891 (2,576)
------- ------- ------- ------- -------
NET INCOME (LOSS).................................. $ 426 $ 985 $ (338) $ 1,540 $(4,789)
======= ======= ======= ======= =======
EARNINGS (LOSS) PER SHARE.......................... $ .04 $ .10 $ (.04) $ .16 $ (.47)
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-10
<PAGE> 66
CHAMPIONSHIP AUTO RACING TEAMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(DOLLARS AND SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL NOTE
--------------- PAID-IN RECEIVABLE- ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL STOCKHOLDER DEFICIT DEFICIT
------ ------ ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, JANUARY 1, 1994.......... 9,600 $ 96 $ 474 $ -- $(2,671) $(2,101)
Net income....................... -- -- -- -- 426 426
Stock redemption................. (1,600) (16) (464) -- -- (480)
Stock issuance................... 800 8 272 -- -- 280
----- ----- ---- ------- ----- -------
BALANCES, DECEMBER 31, 1994........ 8,800 88 282 -- (2,245) (1,875)
Net income....................... -- -- -- -- 985 985
Stock redemption................. (1,600) (16) (464) -- -- (480)
Issuance of note receivable to
stockholder................... -- -- -- (600) -- (600)
Stock issuance................... 1,600 16 704 -- -- 720
----- ----- ---- ------- ----- -------
BALANCES, DECEMBER 31, 1995........ 8,800 88 522 (600) (1,260) (1,250)
Net income....................... -- -- -- -- (338) (338)
Compensation expense............. -- -- 1,167 -- -- 1,167
Stock redemption and repayment of
note receivable............... (2,000) (20) (940) 600 -- (360)
Stock issuance................... 1,200 12 618 -- -- 630
----- ----- ---- ------- ----- -------
BALANCES, DECEMBER 31, 1996........ 8,000 80 1,367 -- (1,598) (151)
Net loss (Unaudited)............. -- -- -- -- (4,789) (4,789)
Compensation expense............. -- -- 1,483 -- -- 1,483
Stock redemption (Unaudited)..... (400) (4) (206) -- -- (210)
Stock issuance (Unaudited)....... 1,200 12 828 -- -- 840
----- ----- ---- ------- ----- -------
BALANCES, SEPTEMBER 30, 1997
(Unaudited)...................... 8,800 $ 88 $3,472 $ -- $(6,387) $(2,827)
===== ===== ==== ======= ===== =======
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statements.
F-11
<PAGE> 67
CHAMPIONSHIP AUTO RACING TEAMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------------ -------------------
1994 1995 1996 1996 1997
------ ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................................... $ 426 $ 985 $ (338) $ 1,540 $(4,789)
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
Depreciation...................................................... 188 292 671 364 335
Amortization...................................................... 14 14 14 10 15
Compensation expense.............................................. -- -- 1,167 1,167 1,483
Net gain from sale of property and equipment...................... -- (77) (133) (101) --
Write-off of trademark............................................ -- -- 88 -- --
Deferred income taxes............................................. (358) (471) (226) (204) (3,705)
Minority interest in loss of subsidiaries......................... -- -- -- -- (210)
Changes in assets and liabilities that provided (used) cash:
Accounts receivable............................................. (30) (447) (1,481) (3,824) (2,923)
Prepaid expenses................................................ (56) (34) (302) 67 (732)
Inventory....................................................... (147) (65) 37 29 (1)
Other assets.................................................... (41) (11) (70) (113) (5)
Accounts payable................................................ 390 192 134 3,634 1,315
Accrued liabilities............................................. 56 198 65 2,194 14,273
Unearned revenue................................................ 603 1,233 (253) (1,414) (1,198)
------ ------- ------- ------- -------
Net cash provided by (used in) operating activities........... 1,045 1,809 (627) 3,349 3,858
------ ------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment............................... (100) (1,365) (1,094) (641) (583)
Proceeds from sale of property and equipment........................ -- 177 194 36 --
Acquisition of trademark............................................ -- -- (101) -- (42)
------ ------- ------- ------- -------
Net cash used in investing activities......................... (100) (1,188) (1,001) (605) (625)
CASH FLOWS FROM FINANCING ACTIVITIES:
Note receivable from stockholder.................................... -- (600) -- -- --
Proceeds from long-term debt........................................ -- -- 650 650 --
Payments on long-term debt.......................................... -- -- (76) (54) (108)
Redemption of common stock.......................................... (480) (480) (360) -- (210)
Issuance of common stock............................................ 280 720 630 60 840
Proceeds from membership deposit.................................... 240 480 360 360 360
Payments on membership deposits..................................... (200) (240) -- -- --
Proceeds from franchise fund liability.............................. 480 -- -- -- --
Payments on franchise fund liability................................ (200) (240) (600) -- (120)
Capital contributions to subsidiaries by minority stockholder....... -- -- -- -- 225
Advances (Payments) on line of credit............................... -- 392 (392) (392) --
------ ------- ------- ------- -------
Net cash provided by financing activities..................... 120 32 212 624 987
------ ------- ------- ------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.................. 1,065 653 (1,416) 3,368 4,220
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD...................... 328 1,393 2,046 2,046 630
------ ------- ------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............................ $1,393 $ 2,046 $ 630 $ 5,414 $ 4,850
====== ======= ======= ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes........................................................ $ -- $ -- $ 23 $ 17 $ 15
====== ======= ======= ======= =======
Interest............................................................ $ -- $ -- $ 50 $ 42 $ 37
====== ======= ======= ======= =======
</TABLE>
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES -- During
1995 and 1996, the Company received property and equipment worth approximately
$110 and $75, respectively, in exchange for sponsorship privileges to the
providers. In 1996, the Company redeemed 800,000 shares of common stock for
$600,000 (including $240,000 representing a refund of membership deposits or
franchise fund liability), which was used to offset a note receivable from a
stockholder.
The accompanying notes are an integral part of the Consolidated Financial
Statements.
F-12
<PAGE> 68
CHAMPIONSHIP AUTO RACING TEAMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization. Championship Auto Racing Teams, Inc., ("CART") (a Michigan
Corporation) (the "Company") was organized as a not-for-profit corporation in
1978, with its main function being to promote the sport of automobile racing,
primarily open-wheel type racing cars. As of January 1, 1992, the entity became
a profit corporation and continued to use the CART name.
The Company has a total of twenty stockholders at December 31, 1996. These
stockholders are also Board of Director members and team owners who participate
in the Company's sanctioned events (the "Franchise Member"). Certain Franchise
Members also serve as promoters of the Company's sanctioned events.
As of January 1, 1997, the consolidated financial statements include the
financial statements of the Company and its wholly owned subsidiary corporations
CART Properties, Inc. and CART Licensed Products, Inc. In addition, the
consolidated financial statements include the financial statements of CART
Licensed Products, L.P., a 55% owned subsidiary. All significant intercompany
balances and transactions have been eliminated in consolidation.
On December 19, 1997, the shareholders of the Company exchanged each of
their shares for 400,000 shares of Championship Auto Racing Teams, Inc., (a
Delaware corporation) (the "Reorganization") (See Note 9).
Operations and Major Customer. The Company is the sanctioning body
responsible for organizing, marketing and staging each of the racing events for
the open-wheeled motorsports series in North America -- the CART Championship.
The Company stages events at four different types of tracks, including
superspeedways, ovals, temporary road courses and permanent road courses, each
of which require different skills and disciplines from the drivers and teams.
Substantially all of the Company's revenue is derived from sanction fees,
sponsorship revenues, television revenues, licensing and royalties, each of
which is dependent upon continued fan support and interest in CART race events.
Sanction fee revenues are fees paid to the Company by track promoters to
sanction a CART event at the race venue, and to provide the necessary race
management. The Company receives sponsorship revenues from companies who desire
to receive brand and product exposure in connection with CART races. Pursuant to
broadcast agreements, the Company generates revenues for the right to broadcast
the races, with revenues based upon viewership with a minimum guarantee. The
Company also receives revenues from royalty fees paid for licenses to use
servicemarks of the Company, various drivers, teams, tracks and industry
sponsors for merchandising programs and product sales.
The Company has one sponsor which accounted for approximately 13% of the
Company's total revenues for the year ended December 31, 1995. There was no
other sponsor or major customer that accounted for more than 10% of total
revenues for 1994 and 1996.
Inventory. Inventory consists of merchandise which is stated at the lower
of cost or market on a first-in, first-out (FIFO) basis.
Property and Equipment. Property and equipment are stated at cost and are
depreciated using the straight-line and accelerated methods over their estimated
useful lives which range from 3 to 7 years. Leasehold improvements are amortized
over the life of the related lease.
Revenue Recognition. Recognition of revenue from race sanction agreements
is deferred until the event has occurred. Sponsorship revenue is recognized
during the racing season to which the sponsorship agreement relates. Television
revenue is recognized ratably over the race schedule. Other revenue includes
membership and entry fees, contingency awards money, royalty income and other
revenue and are recognized as earned.
F-13
<PAGE> 69
CHAMPIONSHIP AUTO RACING TEAMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Cash and Cash Equivalents. Cash and cash equivalents include investments
with original maturities of three months or less at the date of original
acquisition.
Trademarks. The Company incurred costs of approximately $101,000 during
December 1996 relating to the development of a new corporate logo and
trademarks. These costs are being amortized on a straight-line basis over 10
years. The unamortized costs associated with the previous corporate logo were
written-off in 1996.
Earnings (Loss) Per Share. Earnings (loss) per share are based on the
weighted average number of common shares outstanding. The weighted average
common shares used in the computation of earnings (loss) per share were
10,200,000; 10,200,000; 9,400,000 and 10,200,000, respectively, for the years
ended December 31, 1994, 1995, 1996 and the nine months ended September 30,
1997, respectively. See Note 9 for a discussion of the Reorganization of the
Company and the issuance of 1,400,000 shares on December 19, 1997.
Fair Value of Financial Instruments. Statement of Financial Accounting
Standards ("SFAS") No. 107, "Disclosures About Fair Value of Financial
Instruments", requires disclosures about the fair value of financial instruments
whether or not such instruments are recognized on the balance sheet. Due to the
short-term nature of the Company's financial instruments, other than debt, fair
values are not materially different from their carrying values. Based on the
borrowing rates available to the Company, the carrying value of debt
approximated fair value as of December 31, 1995 and 1996.
Membership Deposits and Franchise Fund Liability. Any Franchise Member who
acquires stock subsequent to December 31, 1991 is required to make a
conditionally refundable deposit. The deposit amount is determined annually by
the Board of Directors and is $120,000 at December 31, 1996 ("New Member"). Any
Franchise Member who acquired his stock prior to January 1, 1992 is not required
to make such a deposit ("Old Member"). All Franchise Members must sign an
agreement which obligates the member to participate, as defined by the Board of
Directors, in all of the Company's events. If the participation requirement is
met in a given year and the Franchise Member elects to sell his stock to the
Company prior to signing the following year's participation agreement, the
Franchise Member is entitled to a final "Franchise Fund Payment" (the
"Payment"). The amount of the Payment is determined annually by the Board of
Directors. For New Members, the minimum Payment represents a return of the
membership deposit though such amount may exceed the original deposit.
Incremental increases, as determined by the Board of Directors, in the Payment
amount are charged to expense annually. Franchise Members forfeit their rights
to return of the membership deposit and/or payment of the franchise fund
liability if the minimum participation requirement is not met. See Note 9 for a
discussion of the Reorganization of the Company.
Management 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 December 31,
1995 and 1996, and the reported amounts of revenues and expenses during the
periods presented. The actual outcome of the estimates could differ from the
estimates made in the preparation of the financial statements.
Accounting Pronouncements. In February 1997, Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings per Share" was issued by the
Financial Accounting Standards Board ("FASB"). SFAS No. 128 establishes
standards for computing and presenting earnings per share ("EPS") and applies to
all entities with publicly-held common shares or potential common shares. SFAS
No. 128 replaces the presentation of primary EPS and fully-diluted EPS with a
presentation of basic EPS and diluted EPS, respectively. Basic EPS excludes
dilution and is computed by dividing earnings available to common shareholders
by the weighted-average number of common shares outstanding for the period.
Similar to fully diluted EPS, diluted EPS reflects the potential dilution of
securities that could share in the earnings. SFAS No. 128 is not expected to
have a material effect on the Company's reported EPS amounts. SFAS No. 128 is
effective for the Company's financial statements for the year ending December
31, 1997.
F-14
<PAGE> 70
CHAMPIONSHIP AUTO RACING TEAMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information was issued by the FASB. SFAS No. 131 establishes
standards for the way that public business enterprises report financial and
descriptive information about its reporting operating segments. The Company has
not determined the impact on the Company's financial statement disclosure. SFAS
No. 131 is effective for the Company's financial statements for the year ending
December 31, 1998.
Interim Information (Unaudited). The accompanying unaudited interim
consolidated financial statements reflect all adjustments which are, in the
opinion of management, necessary to a fair statement of the results for the
interim periods presented. All such adjustments are of a normal recurring
nature. Operating results for the nine-month period ended September 30, 1997 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1997.
2. INCOME TAXES
Deferred income tax assets and liabilities are computed annually for
differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets and
liabilities.
Realization of the Company's deferred tax assets is dependent on generating
sufficient taxable income. Although realization is not assured, management
believes it is more likely than not that all of the deferred tax assets will be
realized. The amount of the deferred tax asset considered realizable, however,
could be reduced in the near term if estimates of future taxable income are
reduced.
\The tax effects of temporary differences giving rise to deferred tax assets
(liabilities) at December 31 are as follows:
<TABLE>
<CAPTION>
1995 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets (liabilities):
Franchise fund liability.......................................... $ 694 $ 522
Compensation expense.............................................. -- 415
Net operating loss carryforwards.................................. 59 15
Alternative minimum tax credit carryforwards...................... 44 83
Pension liability................................................. 11 2
Membership deposits............................................... 7 7
State taxes....................................................... -- (12)
Other............................................................. 13 22
----- -----
Total.......................................................... 828 1,054
Current portion................................................... -- 12
----- -----
Noncurrent portion.................................................. $ 828 $1,042
===== =====
</TABLE>
The provision (credit) for income taxes consists of the following at
December 31:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Current.................................................... $ 14 $ 267 $ 25
Deferred................................................... (358) (471) (204)
----- ----- -----
Total...................................................... $ (344) $ (204) $ (179)
===== ===== =====
</TABLE>
F-15
<PAGE> 71
CHAMPIONSHIP AUTO RACING TEAMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company had net operating loss carryforwards of approximately $130,000
which were utilized during 1996. The Company also has tax credit carryforwards
of approximately $83,000 as of December 31, 1996, which have an indefinite
carryforward period.
The reconciliation of income tax expense (benefit) computed at the U.S.
federal statutory tax rate to the Company's effective income tax rate is as
follows:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Tax at U.S. federal statutory rate............... 34.0% 34.0% 34.0%
Lobbying expense................................. 24.0 -- --
Meals and entertainment.......................... 12.0 2.3 (6.5)
Change in valuation allowance.................... (503.0) (62.1) --
Other............................................ 9.0 (0.3) 7.1
----- ----- -----
Total............................................ (424.0)% (26.1)% 34.6%
===== ===== =====
</TABLE>
The change in the valuation allowance during 1995 and 1996 is primarily due
to utilization of net operating loss carryforwards. Based upon prior earnings
history, it is expected that future taxable income will be more than sufficient
to utilize the remaining deductible temporary differences.
3. DEBT
At December 31, 1996, the Company had an unused bank line of credit of
$1,500,000. At December 31, 1995, $392,000 had been advanced. There were no
amounts outstanding at December 31, 1996. Advances on the line of credit are
payable on demand, with interest at the bank's prime rate. The line of credit is
secured by the Company's deposits with the bank.
At December 31, 1996, the Company has a five-year note payable to a bank
with an original face value of $650,000, with interest at 8.25%; payable in
monthly installments of $11,000, plus interest through May 2001. The note
payable is secured by the Company's mobile medical unit. Future payments under
the above agreement are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1997........................................................... $130
1998........................................................... 130
1999........................................................... 130
2000........................................................... 130
2001........................................................... 54
----
Total........................................................ 574
Less current portion........................................... 130
----
Long-term portion.............................................. $444
====
</TABLE>
4. EMPLOYEE BENEFIT PLANS
During 1991, the Company indicated its intent to terminate its defined
benefit pension plan. The plan assets were frozen and remain in trust at
December 31, 1996. The outstanding accrued liability (frozen benefit obligation
of $238,000 less fair value of plan assets of $233,000) at December 31, 1996,
was approximately $5,000.
In addition, the Company began a 401(k) savings plan (the "plan") in 1991
to which it contributes 25% of the participating employee's contribution. The
Company's contributions to the plan were approximately $23,000, $18,000 and
$25,000 in 1994, 1995 and 1996, respectively.
F-16
<PAGE> 72
CHAMPIONSHIP AUTO RACING TEAMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. OPERATING LEASES
The Company has entered into various noncancelable operating leases for
office space and equipment which expire through 2002. Total rent expense was
approximately $100,000, $159,000 and $194,000 for 1994, 1995 and 1996,
respectively.
Approximate future minimum lease payments under noncancelable operating
leases are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Year ending December 31:
1997................................................................... $209
1998................................................................... 217
1999................................................................... 217
2000................................................................... 95
2001................................................................... 91
----
Total.................................................................... $829
====
</TABLE>
6. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Equipment......................................................... $ 786 $ 1,045
Vehicles.......................................................... 524 1,421
Furniture and fixtures............................................ 172 174
Leasehold improvements............................................ 56 56
Construction in progress.......................................... 524 --
Pop-off valves.................................................... 159 303
------- -------
Total........................................................... 2,221 2,999
Less accumulated depreciation and amortization.................... (641) (1,070)
------- -------
Property and equipment -- net..................................... $ 1,580 $ 1,929
======= =======
</TABLE>
During 1995 and 1996, the Company received vehicles and computer equipment
worth approximately $110,000 and $75,000, respectively, in exchange for
sponsorship privileges to the providers.
7. COMMITMENTS AND CONTINGENCIES
Television Agreements. The Company has entered into multi-year television
arrangements with ESPN and ESPN International for the production, sales and
worldwide distribution of the Company's events. ESPN has guaranteed the Company
a rights fee payable through 2001. In addition, the Company receives 50% of the
annual net revenues derived from ESPN's distribution of the Company's events.
The Company has also entered into multi-year television arrangements with
Molstar for the distribution of the Company's events in Canada, Fittipaldi USA
in Brazil and Gold Coast Motor Events in Australia. The Company receives a fixed
rights fee for these territories that are contracted for outside of the ESPN
agreement.
Insurance. The Company is self-insured for the deductible amount ($50,000)
on an insurance policy which provides accident medical expense benefits for
participants of CART sanctioned races. Losses above the deductible amount are
covered by the insurance policy.
F-17
<PAGE> 73
CHAMPIONSHIP AUTO RACING TEAMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Promoter Agreements. The Company has entered into promoter contracts that
extend through the year 2000 racing season, whereby it is obligated to sanction
CART Championship racing events and provide related race management functions.
Capital Stock. Prior to the Reorganization, the Company, at its option,
may redeem the stock of existing stockholders at prices determined annually by
the Company's Board of Directors, but in no event, less than the share value
paid for the share being redeemed. See Note 9.
During 1994, the Company redeemed 1,600,000 shares of common stock for
$900,000 (including $420,000 representing a refund of Membership Deposits or
Franchise Fund Liability).
During 1995, the Company redeemed 1,600,000 shares of common stock for
$960,000 (including $480,000 representing a refund of Membership Deposits or
Franchise Fund Liability).
During 1996, the Company redeemed 2,000,000 shares of common stock for
$1,440,000 (including $480,000 representing a refund of Membership Deposits or
Franchise Fund Liability), and sold 1,200,000 shares of common stock for
$990,000 (including $360,000 representing Membership Deposits). A total of
800,000 of the shares of common stock were redeemed for $600,000 (including
$240,000 representing a refund of Membership Deposits or Franchise Fund
Liability), which was used to offset a note receivable from a stockholder as of
December 31, 1995.
In January 1996, a lawsuit was filed against the Company by one of its
shareholders and a related company. The lawsuit alleged antitrust and
anticompetitive violations as well as damage of reputation. In December 1996,
the Company settled the lawsuit and other related litigation. Included in the
settlement amount was the redemption of common stock and related Franchise Fund
Liability. Expenses incurred in 1996 which were in connection with the lawsuit
and other related litigation and a settlement payment of $1,734,000 are included
in administrative and indirect expenses.
SFAS No. 123 "Accounting for Stock Based Compensation" was issued in
October 1995 and was effective for years beginning after December 15, 1995. That
standard requires the recognition of compensation expense for equity investments
that are issued for consideration other than employee services based upon the
fair value of the common stock issued. The fair value of the Company's Common
Stock has been measured on the date New Franchise Members become eligible to
acquire such stock. Compensation expense of $1,167,000 has been recorded for the
year ended 1996, related to certain shares that became eligible for purchase
based upon eligibility requirements met during 1996.
8. RELATED PARTY TRANSACTIONS
The Company receives sanction fees from two entities related through
certain common ownership. Total sanction fee revenue related to these entities
for 1994, 1995 and 1996 was approximately $2,575,000, $2,800,000 and $3,100,000,
respectively.
The Company rented track facilities from an entity related through certain
common ownership. Total track rental expense related to this entity for 1996 was
approximately $1,200,000.
The Company has entered into an agreement with an entity related through
certain common ownership whereby the Company has agreed to sanction the Indy
Lights Championship. The agreement provides for sharing of sanction fees,
television revenues and costs. The Company incurred expenses of $270,000 and
$120,000 for 1995 and 1996, respectively.
At December 31, 1995 and 1996, the Company has accounts receivable of
approximately $36,000 and $194,000, respectively, due from entities related
through certain common ownership.
F-18
<PAGE> 74
CHAMPIONSHIP AUTO RACING TEAMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. SUBSEQUENT EVENTS
In January 1997, CART redeemed 400,000 shares of common stock for $330,000
(including $120,000 representing a refund of Membership Deposits or Franchise
Fund Liability). In February and March 1997, the Company issued 1,200,000 shares
of common stock for $1,200,000 (including $360,000 representing Membership
Deposits). In December 1997, the Company issued 1,400,000 shares for $1,800,000.
In December 1997, Championship Auto Racing Teams, Inc., a Delaware
corporation was formed to serve as a holding company for the Company and its
subsidiaries. Each outstanding share of common stock of the Company was acquired
in exchange for 400,000 shares of common stock. All per share information
included in these financial statements have been restated to reflect the effect
of the Reorganization and the issuance of 1,400,000 shares in December 1997.
10. SUBSEQUENT EVENTS (UNAUDITED)
The Company expects to register 4,333,000 shares of common stock in
December 1997 for sale in an underwritten public offering (the "Offering").
Also, in connection with the Reorganization and the Offering, Membership
Deposits and Franchise Fund Liability amounts due to the Franchise Members will
be paid to the Franchise Members.
In December 1997 the Company entered into a binding letter of intent to
acquire all of the outstanding shares of stock of American Racing Series, Inc.
("ARS") and the assets of BP Automotive, Inc. ("BP") (entities related through
certain common ownership) for $10,000,000 in cash and options to purchase
100,000 shares of the Company's Common Stock at the initial public offering
price, (the "Indy Light Acquisition"). ARS operates Indy Lights and BP provides
certain equipment to participants of Indy Lights. The Indy Lights Acquisition is
anticipated to close concurrently with the Offering and a portion of the
proceeds from the Offering will be used to fund the Indy Lights Acquisition.
In connection with the Reorganization, effective January 1, 1998, the
Company and the existing franchise members entered into an agreement on December
19, 1997 whereby reimbursements for travel expenses, directors fees and
race-related payments will be discontinued. Such agreement expires in December
2000.
In December 1997, the Board of Directors of the Company (the "Board")
authorized, and the stockholders of the Company approved, a stock incentive plan
for executive and key management employees of the Company and its subsidiaries,
including a limited number of outside consultants and advisors, effective as of
the completion of the Offering (the "Stock Option Plan"). Under the Stock Option
Plan, key employees, outside consultants and advisors (the "Participants") of
the Company and its subsidiaries (as defined in the Stock Option Plan) may
receive awards of stock options (both Nonqualified Options and Incentive
Options, as defined in the Stock Option Plan). A maximum of 2,000,000 shares of
Common Stock will be subject to the Stock Option Plan. The purpose of the Stock
Option Plan is to provide key employees (including officers and directors who
are also key employees) and key non-employee consultants and advisors of the
Company and its subsidiaries ("employees") with an increased incentive to make
significant contributions to the long-term performance and growth of the Company
and its subsidiaries.
F-19
<PAGE> 75
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
American Racing Series, Inc.
and BP Automotive, Inc.:
We have audited the accompanying combined balance sheets of American Racing
Series, Inc. and BP Automotive, Inc. (the "Companies") (entities related through
common ownership) as of December 31, 1995 and 1996, and the related combined
statements of income, stockholders' equity (deficit), and cash flows for each of
the two years in the period December 31, 1996. These combined financial
statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these combined 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 combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall combined
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such combined financial statements present fairly, in all
material respects, the financial position of the Companies' as of December 31,
1995 and 1996, and the results of their operations and their cash flows for each
of the two years in the period December 31, 1996, in conformity with generally
accepted accounting principles.
/s/ Deloitte & Touche LLP
Detroit, Michigan
December 19, 1997
F-20
<PAGE> 76
AMERICAN RACING SERIES, INC. AND BP AUTOMOTIVE, INC.
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- SEPTEMBER 30,
1995 1996 1997
------ ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................ $ 68 $ 229 $ 430
Accounts receivable (less allowance of $28, $26 and $81 as of 1995,
1996, and 1997, respectively,).................................... 550 519 1,094
Inventory............................................................ 25 20 35
Note receivable...................................................... -- -- 88
Prepaid expenses and other current assets............................ 22 51 117
------ ------ ------
Total current assets......................................... 665 819 1,764
PROPERTY AND EQUIPMENT -- Net.......................................... 1,000 856 758
OTHER ASSETS........................................................... 1 1 3
------ ------ ------
TOTAL ASSETS........................................................... $1,666 $1,676 $ 2,525
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable..................................................... $ 341 $ 415 $ 498
Accrued liabilities.................................................. 97 86 86
Purse Awards payable................................................. -- -- 95
Deposits............................................................. 132 107 275
Distribution payable................................................. -- 135 --
Unearned revenue..................................................... 90 280 775
Bank lines of credit................................................. 400 -- --
Notes payable to related party....................................... 525 750 --
------ ------ ------
Total current liabilities.................................... 1,585 1,773 1,729
COMMITMENTS AND CONTINGENCIES (NOTE 6)
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock......................................................... 47 46 46
Retained earnings (deficit).......................................... 34 (11) 861
Notes receivable -- stockholders..................................... -- (132) (111)
------ ------ ------
Total stockholders' equity (deficit).............................. 81 (97) 796
------ ------ ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)................... $1,666 $1,676 $ 2,525
====== ====== ======
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-21
<PAGE> 77
AMERICAN RACING SERIES, INC. AND BP AUTOMOTIVE, INC.
COMBINED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
----------------- -----------------
1995 1996 1996 1997
------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES:
Engine leases.................................................. $1,101 $1,129 $ 847 $ 970
Engine rebuilds and wheel sales................................ 975 1,218 942 1,385
Sponsorship and commissions.................................... 2,793 2,416 1,606 2,287
Other revenue.................................................. 75 160 104 106
------ ------ ------ ------
Total revenues......................................... 4,944 4,923 3,499 4,748
EXPENSES:
Race expenses.................................................. 815 818 687 901
Race distributions............................................. 669 731 564 540
Cost of engine rebuilds and wheels sold........................ 758 898 670 742
Television..................................................... 418 4 4 88
Administrative and indirect expenses........................... 1,263 1,686 1,004 1,303
Depreciation and amortization.................................. 260 397 259 235
------ ------ ------ ------
Total expenses.............................................. 4,183 4,534 3,188 3,809
INCOME BEFORE INCOME TAXES....................................... 761 389 311 939
INCOME TAX EXPENSE............................................... 181 -- -- --
------ ------ ------ ------
NET INCOME....................................................... $ 580 $ 389 $ 311 $ 939
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-22
<PAGE> 78
AMERICAN RACING SERIES, INC. AND BP AUTOMOTIVE, INC.
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK RETAINED NOTE STOCKHOLDERS'
----------------- EARNINGS RECEIVABLE- EQUITY
SHARES AMOUNT (DEFICIT) STOCKHOLDER (DEFICIT)
------ ------ -------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCES, JANUARY 1, 1995......................... 475 $ 47 $ (436) $ -- $(389)
Net income...................................... -- -- 580 -- 580
Distributions to stockholders................... -- -- (110) -- (110)
--- --- ---- ---- ----
BALANCES, DECEMBER 31, 1995....................... 475 47 34 -- 81
Net income...................................... -- -- 389 -- 389
Stock redemption................................ (90) (1) (299) -- (300)
Distributions to stockholders................... -- -- (135) -- (135)
Issuance of notes receivable -- stockholders.... -- -- -- (132) (132)
--- --- ---- ---- ----
BALANCES, DECEMBER 31, 1996....................... 385 46 (11) (132) (97)
Net income (Unaudited).......................... -- -- 939 -- 939
Distributions to stockholders (Unaudited)....... -- -- (67) -- (67)
Repayment of notes receivable -- stockholders
(Unaudited).................................. -- -- -- 21 21
--- --- ---- ---- ----
BALANCES, SEPTEMBER 30, 1997 (Unaudited).......... 385 $ 46 $ 861 $(111) $ 796
=== === ==== ==== ====
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-23
<PAGE> 79
AMERICAN RACING SERIES, INC. AND BP AUTOMOTIVE, INC.
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------- -------------------
1995 1996 1996 1997
------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................. $ 580 $ 389 $ 311 $ 939
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization........................... 260 397 259 235
Net loss from disposal of property and equipment........ 6 200 -- --
Deferred income taxes................................... 87 -- -- --
Changes in assets and liabilities that provided (used)
cash:
Accounts receivable................................... (409) 31 (69) (575)
Inventory............................................. 2 5 6 (15)
Note receivable....................................... -- -- -- (88)
Prepaid expenses and other current assets............. (20) (29) (6) (66)
Other assets.......................................... -- -- -- (2)
Accounts payable...................................... 103 74 (110) 83
Accrued liabilities................................... 89 (11) (13) --
Deposits.............................................. (6) (25) 43 168
Distribution payable.................................. -- 135 -- (135)
Purse payable......................................... (5) -- 1 95
Unearned revenue...................................... (124) 190 756 495
------- ------- ------- -------
Net cash provided by operating activities.......... 563 1,356 1,178 1,134
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment...................... (1,023) (453) (73) (137)
Issuance of notes receivable -- stockholders............... -- (132) -- --
Payment of notes receivable -- stockholders................ -- -- -- 21
------- ------- ------- -------
Net cash used in investing activities.............. (1,023) (585) (73) (116)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment for stock redemption............................... -- (300) (300) --
Proceeds from note payable to related party................ 675 1,100 325 720
Payments on notes payable to related party................. (275) (875) (775) (1,470)
Advances on lines of credit................................ 150
Payments on lines of credit................................ -- (400) (400) --
Distributions to stockholders.............................. (110) (135) -- (67)
------- ------- ------- -------
Net cash provided by (used in) financing
activities....................................... 440 (610) (1,150) (817)
------- ------- ------- -------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS......... (20) 161 (45) 201
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............. 88 68 68 229
------- ------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................... $ 68 $ 229 $ 23 $ 430
======= ======= ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Income taxes............................................... $ 12 $ -- $ -- $ --
======= ======= ======= =======
Interest................................................... $ 27 $ 22 $ 17 $ 59
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-24
<PAGE> 80
AMERICAN RACING SERIES, INC. AND BP AUTOMOTIVE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS -- American Racing Series, Inc. ("ARS") was
incorporated in 1985 and is a racing league for Indy Lights cars which race in
the PPG Dayton Indy Lights Championship (the "Championship"). ARS leases engines
and provides engine rebuild services to the teams that race in the Championship.
The leases for the engines are for a period of 1 year and are subject to annual
renewal.
BP Automotive ("BP") was incorporated in 1988 and provides wheels and parts
for teams in the Indy Lights series.
ARS and BP (the "Companies") (entities related through common ownership)
conduct their business in the United States and Canada.
PRINCIPLES OF COMBINATION -- The accompanying combined financial statements
include the assets, liabilities and operations associated with ARS and BP. All
significant inter-entity balances and transactions have been eliminated in
combination.
CASH EQUIVALENTS include investments with original maturities of three
months or less at the date of original acquisition.
INVENTORY consists of wheels and parts and are stated at the lower of cost
or market on a first-in, first-out (FIFO) basis.
PROPERTY AND EQUIPMENT are stated at cost and are depreciated using
accelerated methods over their estimated useful lives which range from five to
seven years. Leasehold improvements are amortized over the life of the related
lease.
REVENUE RECOGNITION -- Recognition of revenue from engine leases and
sponsorship and commissions are recognized during the year to which the leases
and sponsorship agreements relate. Engine rebuilds and wheel sales are
recognized as earned. Other revenue includes rental income (related party),
testing fees, interest income and other revenue and are recognized as earned.
INCOME TAXES -- Since inception in 1988, BP elected by consent of its
stockholders to be taxed under the provisions of Subchapter S of the Internal
Revenue Code. Under those provisions BP will not pay federal corporate income
tax on its taxable income; rather, the individual stockholders are liable for
federal income tax on their respective share of BP's taxable income. Effective
January 1, 1996, ARS has elected to be organized as a Subchapter S corporation
for purpose of federal income taxes and these income taxes are the
responsibility of the individual shareholders. Prior to 1996, ARS was a C
corporation.
FAIR VALUE OF FINANCIAL INSTRUMENTS -- Statement of Financial Accounting
Standards ("SFAS") No. 107, "Disclosures About Fair Value of Financial
Instruments," requires disclosures about the fair value of financial instruments
whether or not such instruments are recognized on the balance sheet. Due to the
short-term nature of the Companies financial instruments, other than debt, fair
values are not materially different from their carrying values. Based on the
borrowings rates available to the Companies, the carrying value of debt
approximated fair value as of December 31, 1995 and 1996.
MANAGEMENT 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 December 31,
1995 and 1996, and the reported amounts of revenues and expenses during the
periods presented. The actual outcome of the estimates could differ from the
estimates made in the preparation of the financial statements.
F-25
<PAGE> 81
AMERICAN RACING SERIES, INC. AND BP AUTOMOTIVE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
INTERIM INFORMATION (UNAUDITED) -- The accompanying unaudited interim
combined financial statements reflect all adjustments which are, in the opinion
of management of the Companies, necessary to a fair statement of the results for
the interim periods presented. All such adjustments are of a normal recurring
nature. Operating results for the nine-month period ended September 30, 1997,
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1997.
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Engines.................................................................... $1,172 $1,123
Airplane and hanger........................................................ 970 1,062
Machinery and office equipment............................................. 81 84
Vehicles................................................................... 185 213
Molds and other............................................................ 69 134
------ ------
Total............................................................ 2,477 2,616
Less accumulated depreciation and amortization............................. 1,477 1,760
------ ------
Property and equipment -- net.............................................. $1,000 $ 856
====== ======
</TABLE>
3. INCOME TAXES
On January 1, 1996, ARS elected S corporation status for federal income tax
purposes. At December 31, 1995, ARS utilized its available deferred income tax
benefits.
The provision for income taxes consists of the following at December 31,
1995:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Current............................................ $ 94
Deferred........................................... 87
---
Total.................................... $181
===
</TABLE>
ARS had net operating loss carryforwards of approximately $257,000 which
were utilized during 1995.
The reconciliation of income tax from income before income taxes computed
at the U.S. federal statutory tax rate to ARS' effective income tax rate for the
year ended December 31, 1995 is as follows:
<TABLE>
<S> <C>
Tax at U.S. federal statutory rate...................................... 34.0%
Meals and entertainment................................................. 1.0
Other................................................................... 5.0
----
Total......................................................... 40.0%
====
</TABLE>
4. BANK LINES OF CREDIT
At December 31, 1996, the Companies have an unused bank line of credit of
$300,000 and an unused revolving credit facility of $600,000. At December 31,
1995, $200,000 had been advanced on the line of credit and $200,000 had been
advanced on the revolving credit facility. The line of credit is unsecured and
is payable on demand, with monthly interest at the bank's prime rate (8.50% at
December 31, 1995). The revolving credit facility is secured by certain assets
of the Companies and is payable on demand, with monthly interest at the bank's
prime rate (8.50% at December 31, 1995). The line of credit and revolving credit
facility are guaranteed by a stockholder of the Companies.
F-26
<PAGE> 82
AMERICAN RACING SERIES, INC. AND BP AUTOMOTIVE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
5. OPERATING LEASES
The Companies have entered into a noncancelable operating lease for office
space, vehicles and office equipment which expire on various dates through 1999.
Total lease expense was approximately $33,000 and $52,000 for 1995 and 1996,
respectively.
Approximate future minimum lease payments under noncancelable operating
leases are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Year ending December 31:
1997................................... $ 34
1998................................... 34
1999................................... 14
---
Total.......................... $ 82
===
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
At December 31, 1996, ARS has employment agreements with its President and
Chief Executive Officer (CEO) and a key management employee. The employment
agreements expire September 1, 1999 for the President and CEO and November 1,
1999 for its key management employee unless earlier terminated as provided in
the agreements. The President and CEO and key management employee were entitled
to receive annual base salaries which at December 31, 1996 were $200,000 and
$100,000, respectively, plus certain fringe benefits. The key management
employee has agreed not to compete with ARS during specified periods.
7. RELATED PARTY TRANSACTIONS
At December 31, 1995 and 1996, the Companies have accounts receivable of
approximately $4,000 and $2,000, respectively, due from entities related through
certain common ownership.
The Companies have notes payable due to related parties of $525,000 and
$750,000 at December 31, 1995 and 1996, respectively. All amounts are due on
demand and are non-interest bearing.
The Companies have notes receivable due from stockholders of $132,000 at
December 31, 1996. The notes are due on demand and interest accrues at a rate of
6% per annum.
ARS receives rental income for the use of its airplane and hanger from an
entity related through certain common ownership. Total rental income for 1995
and 1996 was approximately $10,000 and $64,000, respectively.
ARS pays management and consulting fees to an entity related through
certain common ownership and certain stockholders. Total management and
consulting fees for 1995 and 1996 was approximately $74,000 and $276,000,
respectively.
8. SUBSEQUENT EVENT (UNAUDITED)
In December 1997, the Companies entered into a binding letter of intent to
sell to Championship Auto Racing Teams, Inc. ("CART") all of the outstanding
shares of stock of ARS and the assets of BP for $10,000,000 in cash and options
to purchase 100,000 shares of CART common stock at the initial public offering
(the "Offering") price (the "Indy Lights Acquisition"). The Indy Lights
Acquisition is anticipated to close concurrently with the Offering and a portion
of the proceeds from the Offering will be used to fund the Indy Lights
Acquisition.
F-27
<PAGE> 83
======================================================
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFERING OTHER
THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED ON
AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATED IN ANY STATE
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
STATE. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................... 3
Risk Factors................................ 7
Use of Proceeds............................. 12
Capitalization.............................. 13
Dividend Policy............................. 13
Dilution.................................... 14
Selected Consolidated Financial Data........ 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................ 17
Auto Racing Industry Overview............... 24
Business.................................... 26
Management.................................. 38
Certain Relationships and Related
Transactions.............................. 45
Principal and Selling Stockholders.......... 47
Description of Capital Stock................ 49
Shares Eligible for Future Sale............. 51
Underwriting................................ 52
Legal Matters............................... 53
Experts..................................... 53
Additional Information...................... 54
Index to Unaudited Pro Forma Condensed
Consolidated Financial Information,
Consolidated Financial Statements, and
Combined Financial Statements............. F-1
</TABLE>
------------------------
UNTIL , 1998 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
======================================================
======================================================
4,573,000 SHARES
[LOGO]
CHAMPIONSHIP AUTO
RACING TEAMS, INC.
COMMON STOCK
PROSPECTUS
JEFFERIES & COMPANY, INC.
A.G. EDWARDS & SONS, INC.
, 1998
======================================================
<PAGE> 84
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is an estimated statement of expenses payable in connection with
the issuance and sale of the securities being registered, other than
underwriting discounts and commissions:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee $ 25,257
National Association of Securities Dealers, Inc. Fee 9,504
Accounting Fees and Expenses 200,000
Printing and Engraving Expenses 200,000
Blue Sky Filing Fees 15,000
New York Stock Exchange Fees 170,000
Legal Fees and Expenses 250,000
Miscellaneous 80,239
--------
TOTAL $950,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under provisions of the Certificate of Incorporation and By-laws of the
Company, each person who is or was a director or officer of the Company shall be
indemnified by the Company as a matter of right to the full extent permitted by
law. The effects of the Certificate of Incorporation, By-laws and General
Corporation Law of Delaware may be summarized as follows:
(a) Under Delaware law, to the extent that such a person is successful
on the merits in defense of a suit or proceeding brought against him by
reason of the fact that he is a director or officer of the Company, he
shall be indemnified against expenses (including attorneys' fees)
reasonably incurred in connection with such action.
(b) If unsuccessful in defense of a third-party civil suit or a
criminal suit, or if such suit is settled, such person shall be indemnified
under such law against both (1) expenses (including attorneys' fees) and
(2) judgments, fines and amounts paid in settlement if he acted in good
faith and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the Company, and with respect to any criminal action,
had no reason to believe his conduct was unlawful.
(c) If unsuccessful in a defense of a suit brought by or in the right
of the Company, or if such suit is settled, such a person shall be
indemnified under such law only against expenses (including attorneys'
fees) incurred in the defense or settlement of such suit if he acted in
good faith and in a manner he reasonably believed to be in, or not opposed
to, the best interests of the Company except that if such a person is
adjudged to be liable in a suit in the performance of his duty to the
Company, he cannot be made whole even for expenses unless the court
determines that he is fairly and reasonably entitled to indemnify for such
expenses.
(d) The Company may not indemnify a person in respect of a proceeding
described in (b) or (c) above unless it is determined that indemnification
is permissible because the person has met the prescribed standard of
conduct by any one of the following: (i) the Board of Directors, by a
majority vote of a quorum consisting of directors not at the time parties
to the proceeding, (ii) if a quorum of directors not parties to the
proceeding cannot be obtained, or, if obtainable but the quorum so directs,
by independent legal counsel selected by the Board of Directors or the
committee thereof, or (iii) by the stockholders.
II-1
<PAGE> 85
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, the Registrant has sold shares of its Common
Stock and redeemed shares of its Common Stock. The following table sets forth
the dates of sales, title and amounts of securities sold during the past three
years by the Registrant:
SHARES ISSUANCES (THE SHARES ISSUED REFLECT THE 400,000 FOR ONE SHARE
EXCHANGE ON DECEMBER 19, 1997):
<TABLE>
<CAPTION>
AMOUNT OF PRINCIPAL
NUMBER OF SHARES DATE OF SALE CONSIDERATION UNDERWRITER EXEMPTION
- ------------------- -------------------- -------------- --------------- ---------------------------
<C> <C> <C> <C> <S>
10,200,000 December 19, 1997 N/A None 3(a)(9)--
Share exchange in
connection with corporate
reorganization
1,200,000 December 19, 1997 $1,200,000 None 4(2)--
Sale to 3 accredited
investors
200,000 December 19, 1997 $ 600,000 None 4(2)--
Sale to 3 accredited
investors
1,200,000 January 29, 1997 $ 840,000 None 4(2)--
Sale to 3 accredited
investors
1,200,000 February 16, 1997 $ 630,000 None 4(2)--
Sale to 3 accredited
investors
</TABLE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<S> <C>
(a) Exhibits
1.1 Form of Underwriting Agreement
2.1 Letter of Intent dated December 22, 1997 regarding the acquisition of American
Racing Series, Inc. and the assets of BP Automotive, Inc.
3.1 Certificate of Incorporation of the Company filed December 8, 1997
3.2 Bylaws of the Company
4.1 Form of Common Stock Certificate*
5.1 Form of Legal Opinion of Kegler, Brown, Hill & Ritter Co., L.P.A.
10.1 1997 Stock Option Plan
10.2 Director Stock Option Plan
10.3 Employment Agreement with Andrew Craig dated December 22, 1997
10.4 Employment Agreement with Randy K. Dzierzawski dated December 22, 1997
10.5 Form of Promoter Agreement
10.6 Promoter Agreement with Wisconsin State Park Speedway related to West Allis,
Wisconsin dated June 5, 1996
10.7 Promoter Agreement with Texaco Houston Grand Prix L.L.C. related to Houston, Texas
dated July 28, 1997
10.8 Sanction Agreement with American Racing Series, Inc. dated December 22, 1995
10.9 Loan Agreement with Comerica Bank dated April 30, 1997
10.10 Loan Agreement with Comerica Bank dated May 1,1996
10.11 Form of Sponsorship Agreement
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Kegler, Brown, Hill & Ritter Co., L.P.A.
</TABLE>
II-2
<PAGE> 86
<TABLE>
<S> <C>
24.1 Powers of Attorney
24.2 Power of Attorney of the Company
27.1 Financial Data Schedule
(b) Financial Statement Schedules
None
</TABLE>
- ---------------
* To be filed as an Exhibit with Amendment No. 1.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements certificates in such
denomination and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of a registration statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
<PAGE> 87
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Detroit,
State of Michigan, on the 23 day of December, 1997.
CHAMPIONSHIP AUTO RACING TEAMS, INC.
By: /s/ ANDREW CRAIG
------------------------------------
Andrew Craig, Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed on December 23, 1997 by the
following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<S> <C>
/s/ ANDREW CRAIG Chief Executive Officer and Director
- ---------------------------------------------
Andrew Craig
/s/ RANDY K. DZIERZAWSKI Chief Financial and Accounting Officer
- ---------------------------------------------
Randy K. Dzierzawski
/s/ GERALD FORSYTHE* Director
- ---------------------------------------------
Gerald Forsythe
/s/ CHIP GANASSI* Director
- ---------------------------------------------
Chip Ganassi
/s/ CARL A. HAAS* Director
- ---------------------------------------------
Carl A. Haas
/s/ BRUCE R. MCCAW* Director
- ---------------------------------------------
Bruce R. McCaw
/s/ U.E. PATRICK* Director
- ---------------------------------------------
U.E. Patrick
/s/ ROBERT W. RAHAL* Director
- ---------------------------------------------
Robert W. Rahal
/s/ DERRICK WALKER* Director
- ---------------------------------------------
Derrick Walker
* Signed pursuant to a
power of attorney
/s/ RANDY K. DZIERZAWSKI
- ---------------------------------------------
Randy K. Dzierzawski,
Attorney-in-Fact
</TABLE>
<PAGE> 1
EXHIBIT 1.1
CHAMPIONSHIP AUTO RACING TEAMS, INC.
(A DELAWARE CORPORATION)
5,000,000 SHARES
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
---------------------
UNDERWRITING AGREEMENT
January __, 1997
JEFFERIES & COMPANY, INC.
A.G. EDWARDS & SONS, INC.
As Representatives of
the Several Underwriters
c/o Jefferies & Company, Inc.
11100 Santa Monica Boulevard
Los Angeles, California 90025
Dear Sirs:
Championship Auto Racing Teams, Inc., a Delaware corporation (the
"Company"), and certain selling Stockholders named in Schedule II hereto (the
"Selling Stockholders") hereby confirm their agreement with you, as
representatives (the "Representatives") of the underwriters named in Schedule I
hereto (the "Underwriters"), with respect to the issuance and sale by the
Company of an aggregate of 4,333,000 shares (the "Primary Shares") and the sale
by the Selling Stockholders of [667,000] shares (the "Stockholder Shares") of
the Company's common stock, par value $.01 per share (the "Common Stock"), and
the purchase of the Primary Shares and the Stockholder Shares by the
Underwriters, acting severally and not jointly. The Company also has agreed to
sell up to 750,000 shares (the "Option Shares") of Common Stock to cover
over-allotments, if any. The Primary Shares, the Stockholder Shares and the
Option Shares are hereinafter collectively referred to as the "Shares."
The Company and the Underwriters agree that up to _______ shares of the
Primary Shares to be purchased by the Underwriters (the "Reserved Shares") shall
be reserved for sale by the Underwriters to certain eligible employees and
persons having business relationships with the Company, as part of the
distribution of the Shares by the Underwriters, subject to the terms of this
Agreement, the applicable rules, regulations and interpretations of the National
Association of Securities Dealers, Inc. (the "NASD") and all other applicable
laws, rules and regulations. To the extent that such Reserved Shares are not
orally confirmed for purchase by such eligible employees
<PAGE> 2
and persons having business relationships with the Company by the end of the
first business day after the date of this Agreement, such Reserved Shares may be
offered to the public as part of the public offering contemplated hereby.
You have advised us that you desire to purchase the Shares and that you
propose to make a public offering of the Shares as soon as you deem advisable
after the Registration Statement referred to below becomes effective upon the
terms set forth in the Prospectus referred to below.
The terms that follow, when used in this Agreement, shall have the
meanings indicated. The term "the Effective Date" shall mean each date that the
Registration Statement and any post-effective amendment or amendments thereto
became or become effective. "Preliminary Prospectus" shall mean any preliminary
prospectus referred to in Section 1(a)(i) below and any preliminary prospectus
included in the Registration Statement at the Effective Date that omits Rule
430A Information (as defined below). "Registration Statement" shall mean the
registration statement referred to in Section 1(a)(i) below, as amended at the
Representation Date (as defined below) (or, if not effective at the
Representation Date, in the form in which it shall become effective) and, in the
event any post-effective amendment thereto becomes effective prior to the
Closing Date (as defined in Section 2 hereof), shall also mean such registration
statement as so amended. Such term shall include Rule 430A Information deemed to
be included therein at the Effective Date as provided by Rule 430A (as defined
below). If the Company files an additional registration statement to register
additional shares of Common Stock pursuant to Rule 462(b) (defined below) (the
"Additional Registration Statement"), all references in this Underwriting
Agreement to "Registration Statement" shall mean the Additional Registration
Statement, as amended at the Effective Date, including the contents of the
initial registration statement incorporated by reference therein and including
all information (if any) deemed to be a part of the Additional Registration
Statement as of its effective time pursuant to Rule 430A(b). The prospectus
constituting a part of the Registration Statement (including the Rule 430A
Information), as from time to time amended or supplemented, is hereinafter
referred to as the "Prospectus", except that if any revised prospectus shall be
provided to the Underwriters by the Company that differs from the prospectus on
file at the Securities and Exchange Commission (the "Commission") at the
Effective Date (whether or not such revised prospectus is required to be filed
by the Company pursuant to Rule 424 of the Act Regulations), the term
"Prospectus" shall refer to each such revised prospectus from and after the time
it is first provided to the Underwriters for such use. "Rule 158", "Rule 415",
"Rule 424", "Rule 430A", "Rule 462" and "Regulation S-K" refer to such rules or
regulation under the Securities Act of 1933, as amended (the "Act"; and the
rules and regulations under the Act, the "Act Regulations"). "Rule 430A
Information" means information with respect to the Shares and the offering
thereof permitted to be omitted from the Registration Statement when it becomes
effective pursuant to Rule 430A. "Exchange Act" refers to the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the
Commission promulgated thereunder.
SECTION 1. Representations and Warranties.
(a) The Company represents and warrants to the Underwriters as of the
date hereof (such date being referred to as the "Representation Date") and as of
the Closing Date, as follows:
CHAMPIONSHIP AUTO RACING TEAMS, INC.
UNDERWRITING AGREEMENT
-2-
<PAGE> 3
(i) the Company meets the requirements for use of Form S-1
under the Act and has filed with the Commission a registration
statement on such Form (Registration No. 333-_______), including a
related preliminary prospectus, and one or more amendments thereto,
including the related preliminary prospectus, each of which has
previously been furnished to the Underwriters, for the registration
under the Act of the offering and sale of the Shares. Such registration
statement and any post-effective amendment thereto, each in the form
heretofore delivered to you, have been declared effective by the
Commission in such form. No other document with respect to such
registration statement has heretofore been filed with the Commission
and no stop order suspending the effectiveness of such registration
statement has been issued and no proceeding for that purpose has been
initiated or threatened by the Commission. The Company will file with
the Commission (A) prior to effectiveness of such registration
statement, a further amendment to such registration statement
(including the form of final prospectus), (B) after effectiveness of
such registration statement, if applicable, an Additional Registration
Statement pursuant to Rule 462(b) or (C) after effectiveness of such
registration statement or such Additional Registration Statement, a
final prospectus in accordance with Rules 430A and 424(b)(1) or (4) or
Rule 434 of the Act Regulations. The Company has included in such
registration statement, as amended at the Effective Date, all
information (other than Rule 430A Information in the case of clause
(C)) required by the Act and the Act Regulations to be included in the
Prospectus with respect to the Shares and the offering thereof. As
filed, such amendment and form of final Prospectus, or such final
Prospectus, shall contain all Rule 430A Information, together with all
other such required information, with respect to the Shares and the
offering thereof and, except to the extent the Underwriters shall agree
in writing to a modification, shall be in all substantive respects in
the form furnished to the Underwriters prior to the date hereof;
(ii) no order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission, and each
Preliminary Prospectus, at the time of filing thereof, conformed in all
material respects to the requirements of the Act and the Act
Regulations, and did not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of the
Selling Stockholders or the Underwriters through Jefferies & Company,
Inc. expressly for use therein;
(iii) on the Effective Date, the Representation Date and the
Closing Date, the Registration Statement did and will, and when the
Prospectus is first filed (if required) in accordance with Rule 424(b)
the Prospectus will, comply in all material respects with the
applicable requirements of the Act and the Act Regulations and the
Exchange Act; on the Effective Date, the Representation Date and the
Closing Date, the Registration Statement did not and will not contain
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein not misleading; and, on the Effective Date, the
Representation Date and the Closing Date, and
CHAMPIONSHIP AUTO RACING TEAMS, INC.
UNDERWRITING AGREEMENT
-3-
<PAGE> 4
on the date of any filing pursuant to Rule 424(b), the Prospectus did
not and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of the
Selling Stockholders or the Underwriters through Jefferies & Company,
Inc. expressly for use therein. The Company agrees that the only
information provided in writing by or on behalf of the Underwriters to
the Company, expressly for use in the Registration Statement or the
Prospectus, is that information contained in [the table and the second,
fifth, sixth and eighth paragraphs following the table] in the section
of the Prospectus entitled "Underwriting" and the last paragraph on the
cover page of the Prospectus;
(iv) the Company is a corporation duly organized and validly
existing in good standing under the laws of the State of Delaware, with
full corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Registration
Statement and the Prospectus, and is duly registered and qualified to
conduct its business and is in good standing in each jurisdiction where
the nature or location of its properties (owned or leased) or the
conduct of its business requires such registration or qualification,
except where the failure so to register or qualify would not have a
Material Adverse Effect. As used herein, the term "Material Adverse
Effect" shall mean an adverse effect on the financial condition,
business, prospects, properties, net worth or results of operations of
the Company or its Subsidiaries (as hereinafter defined) that would be,
singly or in the aggregate, material to the Company and the
Subsidiaries, taken as a whole, whether or not occurring in the
ordinary course of business (a "Material Adverse Effect");
(v) the only significant subsidiaries (as defined in the Act
Regulations) of the Company are the subsidiaries listed on Schedule III
hereto (the "Subsidiaries"). Each of the Subsidiaries is a corporation,
or in the case of CART Licensed Products, L.P. ("CLP"), a partnership,
duly organized and validly existing in good standing under the laws of
its jurisdiction of incorporation or organization with full corporate
or partnership power and authority to own, lease and operate its
properties and to conduct its business as described in the Registration
Statement and in the Prospectus, and is duly registered and qualified
to conduct its business and is in good standing in each jurisdiction
where the nature or location of its properties (owned or leased) or the
conduct of its business requires such registration or qualification,
except where the failure so to register or qualify would not have a
Material Adverse Effect;
(vi) each of the Company and the Subsidiaries has all
necessary authorizations, approvals, orders, licenses, rights-of-way,
operating rights, easements, certificates and permits of and from, and
has made all declarations and filings with, all regulatory or
governmental officials and bodies, all self-regulatory organizations
and all courts and other tribunals ("Permits"), to own or lease its
respective properties and to conduct its respective businesses
described in the Prospectus and the Registration Statement, except
where failure to have obtained or made the same would not have a
Material Adverse
CHAMPIONSHIP AUTO RACING TEAMS, INC.
UNDERWRITING AGREEMENT
-4-
<PAGE> 5
Effect, and neither the Company nor any of the Subsidiaries has
received any notice of proceedings relating to the revocation or
modification of any such Permits; each of the Company and the
Subsidiaries has fulfilled and performed all its current material
obligations with respect to such Permits and no event has occurred that
allows, or after notice or lapse of time, or both, would allow,
revocation or termination thereof or result in any other material
impairment of the rights of the holder of any such Permit; and each of
the Company and the Subsidiaries is in compliance with all applicable
laws, rules, regulations, orders and consents, the violation of which
would have a Material Adverse Effect. The property and business of each
of the Company and the Subsidiaries conform in all material respects to
the descriptions thereof contained in the Prospectus and the
Registration Statement;
(vii) the Company has the authorized capitalization set forth
in the Prospectus under the heading "Description of Capital Stock,";
all of the Company's outstanding capital stock has been duly
authorized, validly issued and is fully paid and nonassessable and were
not issued in violation of any preemptive or similar rights; and the
capitalization of the Company conforms to the descriptions thereof and
the statements made with respect thereto in the Registration Statement
and the Prospectus as of the date set forth therein. There are no
outstanding securities convertible into or exchangeable for, and no
outstanding options, warrants or other rights to purchase, any shares
of the capital stock of the Company, nor any agreements or commitments
to issue any of the same, except as described in the Registration
Statement and the Prospectus, and there are no restrictions upon the
voting or transfer of, any capital stock of the Company pursuant to the
Company's Certificate of Incorporation or Bylaws, or any agreement or
other instrument to which the Company is a party, except as described
in the Registration Statement and the Prospectus;
(viii) all the outstanding shares of capital stock of each of
the Subsidiaries have been duly authorized and are validly issued,
fully paid and nonassessable and were not issued in violation of or
subject to any preemptive or similar rights. Except as otherwise set
forth in the Registration Statement and the Prospectus, there are no
outstanding securities convertible into or exchangeable for, and no
outstanding options, warrants or other rights to purchase, any shares
of the capital stock of any of the Subsidiaries, nor any agreements or
commitments to issue any of the same, and except as otherwise set forth
in the Registration Statement and the Prospectus, all outstanding
shares of capital stock and partnership interests of the Subsidiaries
are owned by the Company, directly or indirectly through another
Subsidiaries, free and clear of any security interests, liens,
encumbrances, equities or other claims;
(ix) each of the Company and the Subsidiaries has good and
indefeasible title to all real property and good and marketable title
to all personal property owned by it, including those properties
described in the Registration Statement and Prospectus, in each case
free and clear of all liens, charges, encumbrances and restrictions,
except such as are described in the Registration Statement and
Prospectus. Each of the Company and the Subsidiaries has valid,
subsisting and enforceable leases for the properties described in the
Registration Statement and the Prospectus as leased by it with such
exceptions as are described in the Registration Statement and the
Prospectus;
CHAMPIONSHIP AUTO RACING TEAMS, INC.
UNDERWRITING AGREEMENT
-5-
<PAGE> 6
(x) the Company has all requisite power and authority to enter
into this Agreement and to carry out the provisions and conditions
hereof, and to issue and deliver the Shares to the Underwriters as
provided herein. This Agreement has been duly authorized, executed and
delivered by the Company;
(xi) the Shares to be issued and sold by the Company have been
duly and validly authorized for issuance by the Company, and the
Company has full corporate power and authority to issue, sell and
deliver the Shares; and, when such Shares are issued and delivered
against payment therefor as provided by this Agreement, the Shares will
have been validly issued, fully paid and nonassessable, will conform to
the description of the Shares contained in the Prospectus under the
heading "Description of Capital Stock," and the issuance of such Shares
will not be subject to any preemptive or similar rights;
(xii) Deloitte & Touche LLP, who have certified certain
financial statements of the Company and the Subsidiaries, are
independent accountants with respect to the Company and the
Subsidiaries as required by the Act and the rules and regulations of
the Commission thereunder;
(xiii) the consolidated financial statements and related notes
and schedules included in the Registration Statement, the Preliminary
Prospectus and the Prospectus present fairly the financial position of
the Company and the Subsidiaries, on the basis stated in the
Registration Statement, as of the respective dates thereof and the
consolidated statement of income and consolidated balance sheet of the
Company and the Subsidiaries, for the respective periods covered
thereby; and such financial statements and the related schedules and
notes have been prepared in conformity with U.S. generally accepted
accounting principles ("U.S. GAAP") applied on a consistent basis
throughout the entire period involved, except as otherwise disclosed in
the Registration Statement, the Preliminary Prospectus and the
Prospectus. The selected consolidated financial data included in the
Registration Statement, the Preliminary Prospectus and the Prospectus
presents fairly the information shown therein and has been compiled on
a basis consistent with that of the audited financial statements of the
Company included therein. The pro forma consolidated financial
information in the Registration Statement, the Preliminary Prospectus
and the Prospectus complies in all material respects with the
applicable accounting requirements of Article 11 of Regulation S-X
promulgated by the Commission and presents fairly the information shown
therein; the assumptions used in the preparation thereof are reasonable
and the adjustments used therein are appropriate to give effect to the
transactions or circumstances referred to therein. No other financial
statements or schedules of the Company and the Subsidiaries are
required by the Exchange Act, the Act or the Act Regulations to be
included in the Registration Statement, the Preliminary Prospectus or
the Prospectus;
(xiv) neither the Company, any of the Subsidiaries nor CLP is
in violation of its charter or bylaws or other organizational
documents. Neither the Company, any of the Subsidiaries nor CLP is, nor
with the passage of time or the giving of notice or both would be, in
violation of any law, ordinance, administrative or governmental rule or
regulation
CHAMPIONSHIP AUTO RACING TEAMS, INC.
UNDERWRITING AGREEMENT
-6-
<PAGE> 7
applicable to the Company, any of the Subsidiaries or CLP, or of any
judgment, order or decree of any court or governmental agency or body
or of any arbitrator having jurisdiction over the Company, any of the
Subsidiaries or CLP, or in default in the performance or observance of
any obligation, agreement, covenant or condition contained in any
mortgage, loan agreement, note, bond, debenture, credit agreement or
any other evidence of indebtedness or in any agreement, contract,
indenture, lease or other instrument to which the Company, any of the
Subsidiaries or CLP is a party or by which any of them may be bound, or
to which any of the property or assets of the Company, any of the
Subsidiaries or CLP is subject;
(xv) there is no agreement, contract, indenture, lease or
other document or instrument that is required to be described in the
Registration Statement or Prospectus or to be filed as an exhibit to
the Registration Statement that is not described or filed as required;
(xvi) except for the Selling Stockholders, no person has any
right to the registration of any security of the Company by reason of
the filing of the Registration Statement with the Commission or the
consummation of the transactions contemplated hereby, which right has
not been waived or lapsed;
(xvii) other than as set forth in the Registration Statement
and the Prospectus, there are no legal or governmental proceedings
pending to which the Company or any of the Subsidiaries is a party or
of which any property of the Company or any of the Subsidiaries is the
subject; and, to the best of the Company's knowledge, no such
proceedings are threatened or contemplated by any court or governmental
agency or body or any stock exchange authorities ("Governmental
Agency") or threatened by others;
(xviii) the Company is not and, after giving effect to the
offering and sale of the Shares, will not be an "investment company" or
an entity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act");
(xix) except as disclosed in the Registration Statement and
the Prospectus, the Company and each of the Subsidiaries owns or
possesses, has applied for or can acquire on reasonable terms, the
patents, patent rights, licenses, inventions, copyrights, knowhow
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names (collectively, "Patent and
Proprietary Rights") presently employed by it in connection with the
business now operated by it, except where the failure to apply for or
acquire any such Patent and Proprietary Rights would not, singly or in
the aggregate, result in a Material Adverse Effect, and neither the
Company nor any of the Subsidiaries has received any notice or is
otherwise aware of any infringement of or conflict with asserted rights
of others with respect to any Patent and Proprietary Rights, or of any
facts which would render any Patent and Proprietary Rights invalid or
inadequate to protect the interests of the Company therein, and which
infringement or conflict (if the subject of any unfavorable decision,
ruling or
CHAMPIONSHIP AUTO RACING TEAMS, INC.
UNDERWRITING AGREEMENT
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<PAGE> 8
finding) or invalidity or inadequacy, singly or in the aggregate, could
have a Material Adverse Effect;
(xx) as of the date of the Prospectus, neither the Company nor
any of the Subsidiaries currently is planning any probable acquisitions
for which disclosure of pro forma financial information would be
required by the Act;
(xxi) except as disclosed in the Registration Statement and
the Prospectus (or any amendment or supplement thereto), since the
respective dates as of which information is given therein (or any
amendment or supplement thereto), (A) neither the Company nor any of
the Subsidiaries (1) has issued any securities other than in connection
with the exercise of any outstanding options, (2) incurred any material
liability or obligations, direct or contingent, for borrowed money, (3)
entered into any transaction, not in the ordinary course of business,
that is material to the Company and the Subsidiaries, taken as a whole,
(4) entered into any transaction with an affiliate of the Company (as
the term "affiliate" is defined in Rule 405 of the Act Regulations)
that would otherwise be required to be disclosed in the Prospectus or
the Registration Statement, or (5) declared or paid any dividend on its
capital stock, or made any other distribution to its equity holders and
(B) there has not been any change in the capital stock or any increase
in long-term debt of the Company and the Subsidiaries or any material
adverse change, or any development involving a prospective material
adverse change, in or affecting the general affairs, management,
prospects, current or future consolidated financial position,
stockholders' equity or results of operations of the Company and the
Subsidiaries, taken as a whole. Neither the Company nor any of the
Subsidiaries has sustained since the date of the latest audited
financial statements included in the Prospectus any loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any organized
labor dispute or court or governmental action, order or decree, except
as otherwise set forth or contemplated in the Registration Statement
and the Prospectus;
(xxii) each of the Company and the Subsidiaries, directly or
indirectly, maintains insurance covering its properties, operations,
personnel and businesses, and in the Company's reasonable judgment,
such insurance provides coverage against such losses and risks as is
adequate in accordance with customary industry practice to protect the
Company and its businesses. Neither the Company nor any of the
Subsidiaries has received notice from any insurer or agent of such
insurer that substantial capital improvements or other expenditures
will have to be made in order to continue such insurance, and all such
insurance is outstanding and duly in force;
(xxiii) the Company has not distributed and, prior to the
later to occur of (A) the Closing Date and (B) completion of the
distribution of the Shares, will not distribute without your prior
consent any offering material in connection with the offering and sale
of the Shares other than the Registration Statement, the Prospectus or
other materials, if any, permitted by the Act;
CHAMPIONSHIP AUTO RACING TEAMS, INC.
UNDERWRITING AGREEMENT
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(xxiv) prior to the Closing Date, the Shares will be duly
authorized for listing on the [New York Stock Exchange] upon official
notice of issuance;
(xxv) neither the Company nor any Subsidiaries is involved in
any labor dispute or, to the knowledge of the Company, is any dispute
threatened;
(xxvi) neither the Company nor any Subsidiaries nor, to the
best of its knowledge, any employee or agent of the Company or any
Subsidiaries, has made any payment of funds of the Company or any
Subsidiaries or received or retained any funds of a character required
to be disclosed in the Prospectus;
(xxvii) each of the Company and the Subsidiaries has filed (or
have obtained extensions thereto) all federal, state and local or
foreign tax returns that are required to be filed, which returns are
complete and correct in all material respects, and have paid all taxes
shown on such returns and all assessments with respect thereto to the
extent that the same have become due, except those taxes that are being
contested or protested in good faith by the Company or its
Subsidiaries;
(xxviii) except for the shares of capital stock of the
Subsidiaries, neither the Company nor any of the Subsidiaries owns any
shares of stock or any other securities of any corporation or has any
equity interest in any firm, partnership, association or other entity
other than as reflected in the consolidated financial statements
included in the Registration Statement and the Prospectus;
(xxix) neither the execution or delivery of this Agreement,
the offer, issuance, sale or delivery of the Shares nor the
consummation by the Company of the terms of this Agreement (A) requires
the consent, approval, authorization or order of any court or
governmental agency or body except such as have been obtained under the
Act or as may be required under state securities or "blue sky" laws of
any jurisdiction in connection with the purchase and distribution of
the Shares by the Underwriters or such as may be required by the NASD,
(B) will conflict with, result in a breach of, or constitute a default
under the terms of any indenture, agreement, lease or other instrument
to which the Company or any of the Subsidiaries is a party or by which
any of them or any of their respective properties may be bound, or will
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any of the Subsidiaries
pursuant to the terms of any agreement or instrument to which any of
them is a party or by which any of them may be bound or to which any of
the property or assets of any of them is subject, (C) will conflict
with or violate any law, order, statute, regulation, consent or
memorandum of understanding applicable to the Company or any of the
Subsidiaries of any court, regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over the Company or
any of the Subsidiaries, or (D) will conflict with or violate the
charter or bylaws or other organizational documents of the Company or
any of the Subsidiaries;
(xxx) the Company has not taken, directly or indirectly, any
action designed to cause or result in or that has constituted or that
might reasonably be expected to constitute,
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<PAGE> 10
the stabilization or manipulation of the price of the shares of Common
Stock to facilitate the sale or resale of the Shares;
(xxxi) the statements set forth in the Prospectus under the
caption "Description of Capital Stock," insofar as they purport to
constitute a summary of the terms of the Common Stock, and under the
captions "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources,"
"Management," and "Certain Relationships and Related Transactions,"
insofar as they purport to describe the provisions of the laws,
agreements, contracts, indentures, leases or other documents or
instruments referred to therein, are accurate and fair summaries of the
material and relevant provisions thereof;
(xxxii) each of the persons identified by the Company to the
Underwriters to receive Reserved Shares is a citizen of the United
States and currently is a resident of one of the United States;
(xxxiii) each of the Company and the Subsidiaries (A) are in
compliance with any and all applicable federal, state, local and
foreign laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws"), (B) have received
all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their business and (C) are in
compliance with all terms and conditions of any such permit, license or
approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or approvals or failure
to comply with the terms and conditions of such permits, licenses or
approvals would not have a Material Adverse Effect;
(xxxiv) there are no costs or liabilities, to the Company's
knowledge after due inquiry, associated with the effect of
Environmental Laws on the business, operations and properties of the
Company and its Subsidiaries that would have a Material Adverse Effect;
and
(b) Each of the Selling Stockholders severally represents and warrants
to, and agrees with, the Underwriters as of the Representation Date and as of
the Closing Date, as follows:
(i) the sale of the Shares to be sold by such Selling
Stockholder hereunder and the compliance by such Selling Stockholder
with all of the provisions of this Agreement, the Power of Attorney and
the Custody Agreement and the consummation of the transactions herein
and therein contemplated will not conflict with or result in a breach
or violation of any of the terms or provisions of, or constitute a
default under, any statute, indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which such Selling
Stockholder is a party or by which such Selling Stockholder is bound or
to which any of the property or assets of such Selling Stockholder is
subject, nor will such action result in any violation of the provisions
of the charter or bylaws of such Selling Stockholder if such Selling
Stockholder is a corporation, the Partnership Agreement of such Selling
Stockholder
CHAMPIONSHIP AUTO RACING TEAMS, INC.
UNDERWRITING AGREEMENT
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<PAGE> 11
if such Selling Stockholder is a partnership; or any applicable statute
or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over such Selling Stockholder or the property
of such Selling Stockholder;
(ii) the Selling Stockholders now have, and on the Closing
Date will have, valid title to the Shares to be sold by the Selling
Stockholders pursuant to this Agreement, free and clear of any security
interests, liens, encumbrances, equities or other claims, including,
without limitation, any restrictions or transfer (except for
restrictions imposed by applicable federal or state securities laws)
other than as specified on the certificate(s) representing such Shares,
and, upon delivery of and payment for such Shares hereunder, the
several Underwriters will acquire valid title to such Shares free and
clear of any adverse claims, assuming that the Underwriters have
acquired such Shares for value, in good faith and without notice of any
adverse claim;
(iii) this Agreement has been duly authorized, executed and
delivered by or on behalf of the Selling Stockholders;
(iv) the Selling Stockholders have not taken, directly or
indirectly, any action designed to or that might reasonably be expected
to cause or result in stabilization or manipulation of the price of the
Common Stock to facilitate the sale or resale of the Shares, except for
the lock-up arrangements described herein and in the Prospectus;
(v) each Preliminary Prospectus that has been distributed by
the Underwriters or the Company to prospective investors and the
Prospectus, insofar as they include or reflect information with respect
to such Selling Stockholder, has conformed in all material respects to
the requirements of the Act and the rules and regulations of the
Commission thereunder and has not included any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein not misleading in light of the circumstances under
which they were made; and neither the Registration Statement nor the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), nor any amendment or supplement thereto,
insofar as they include or reflect information with respect to such
Selling Stockholder, will include any untrue statement of a material
fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading;
(vi) such Selling Stockholder is not aware that any of the
representations or warranties the Company set forth in Section 2(a)
above is untrue or inaccurate in any material respect;
(vii) all stock transfer or other taxes (other than income
taxes), if any, that are required to be paid in connection with the
sale and transfer of the Stockholder Shares proposed to be sold by such
Selling Stockholder to the several Underwriters pursuant to this
Agreement will be fully paid or provided for by such Selling
Stockholder;
CHAMPIONSHIP AUTO RACING TEAMS, INC.
UNDERWRITING AGREEMENT
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<PAGE> 12
(viii) no consent, approval, authorization or order of, or any
filing with, any court or governmental agency or body is required for
the consummation by such Selling Stockholder of the transactions on its
part contemplated in this Agreement, the Power of Attorney or the
Custody Agreement, except as may be required under the Act or state
securities or "blue sky" laws or similar laws in applicable foreign
jurisdictions;
(ix) other than as permitted by the Act and the rules and
regulations of the Commission thereunder, such Selling Stockholder has
not distributed and will not distribute any preliminary prospectus, the
Prospectus or any other offering material in connection with the
offering and sale of the Stockholder Shares proposed to be sold by the
Selling Stockholder;
(x) during the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the
Prospectus, not to offer, sell, contract to sell or otherwise dispose
of, except as provided hereunder, any securities of the Company that
are substantially similar to the Shares, including but not limited to
any securities that are convertible into or exchangeable for, or that
represent the right to receive, Common Stock or any such substantially
similar securities (other than pursuant to employee stock option or
benefit plans existing on the date of this Agreement), without the
prior written consent of the Underwriters;
(xi) in order to document the Underwriters' compliance with
the reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein
contemplated, such Selling Stockholder will deliver to you prior to or
at the First Time of Delivery (as hereinafter defined) a properly
completed and executed United States Treasury Department Form W-9 (or
other applicable form or statement specified by Treasury Department
regulations in lieu thereof);
(xii) certificates in negotiable form representing all of the
Shares to be sold by such Selling Stockholder hereunder have been
placed in custody under a Custody Agreement, in the form heretofore
furnished to you (the "Custody Agreement"), duly executed and delivered
by such Selling Stockholder to Randy K. Dzierzawski, as custodian (the
"Custodian"), and such Selling Stockholder has duly executed and
delivered a Power of Attorney, in the form heretofore furnished to you
(the "Power of Attorney"), appointing Randy K. Dzierzawski as such
Selling Stockholder's attorney-in-fact (the "Attorney-in-Fact") with
authority to execute and deliver this Agreement on behalf of such
Selling Stockholder, to determine the purchase price to be paid by the
Underwriters to the Selling Stockholders as provided in Section 2
hereof, to authorize the delivery of the Shares to be sold by such
Selling Stockholder hereunder and otherwise to act on behalf of such
Selling Stockholder in connection with the transactions contemplated by
this Agreement and the Custody Agreement; and
(xiii) the Shares represented by the certificates held in
custody for such Selling Stockholder under the Custody Agreement are
subject to the interests of the Underwriters hereunder; the
arrangements made by such Selling Stockholder for such custody, and the
CHAMPIONSHIP AUTO RACING TEAMS, INC.
UNDERWRITING AGREEMENT
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<PAGE> 13
appointment by such Selling Stockholder of the Attorney-in-Fact by the
Power of Attorney, are to that extent irrevocable; the obligations of
the Selling Stockholders hereunder shall not be terminated by operation
of law, whether by the death or incapacity of any individual Selling
Stockholder or, in the case of an estate or trust, by the death or
incapacity of any executor or trustee or the termination of such estate
or trust, or in the case of a partnership or corporation, by the
dissolution of such partnership or corporation, or by the occurrence of
any other event; if any individual Selling Stockholder or any such
executor or trustee should die or become incapacitated, or if any such
estate or trust should be terminated, or if any such partnership or
corporation should be dissolved, or if any other such event should
occur, before the delivery of the Shares hereunder, certificates
representing the Shares shall be delivered by or on behalf of the
Selling Stockholders in accordance with the terms and conditions of
this Agreement and of the Custody Agreements; and actions taken by the
Attorney-in-Fact pursuant to the Powers of Attorney shall be as valid
as if such death, incapacity, termination, dissolution or other event
had not occurred, regardless of whether or not the Custodian, the
Attorney-in-Fact, or either of them, shall have received notice of such
death, incapacity, termination, dissolution or other event.
Any certificate signed by any officer of the Company or the Selling
Stockholders delivered to the Underwriters or to counsel for the Underwriters
pursuant to the terms of this Agreement shall be deemed a representation and
warranty by the Company or the Selling Stockholders, as the case may be, to each
Underwriter as to the matters covered thereby.
SECTION 2. Sale and Delivery to the Underwriters; Closing.
(a) Subject to the terms and conditions set forth herein, and subject
to adjustments as you may determine to avoid fractional shares:
(i) the Company agrees to sell to each Underwriter, severally
and not jointly, and, on the basis of the representations and
warranties herein contained and subject to the terms and conditions
herein set forth, each Underwriter, severally and not jointly, agrees
to purchase from the Company, at a purchase price of per share (the
"Initial Price"), the aggregate number of Primary Shares that bears
that same proportion to the aggregate number of Primary Shares to be
issued and sold by the Company as the number of Primary Shares set
forth opposite the name of such Underwriter in Schedule I (or such
number of Primary Shares increased as provided in Section 9 hereof)
bears to the aggregate number of Primary Shares to be sold by the
Company and the Selling Stockholders. The Company will have no
obligation to sell to the Underwriters any of such Primary Shares that
are being issued and sold by the Company hereunder unless the
Underwriters purchase all of the Primary Shares hereunder; and
(ii) the Selling Stockholders agree, severally and not
jointly, to sell to each Underwriter, severally and not jointly, and,
on the basis of the representations and warranties herein contained and
subject to the terms and conditions herein set forth, each Underwriter,
severally and not jointly, agrees to purchase from the Selling
Stockholders at the Initial Price, the aggregate
CHAMPIONSHIP AUTO RACING TEAMS, INC.
UNDERWRITING AGREEMENT
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<PAGE> 14
number of Stockholder Shares that bears the same proportion to the
aggregate number of Stockholder Shares to be sold by the Selling
Stockholder as the number of Stockholder Shares set forth opposite the
name of such Underwriter in Schedule I hereto (or such number of
Stockholder Shares increased as provided in Section 9 hereof) bears to
the aggregate number of Stockholder Shares to be sold by the Company
and the Selling Stockholders, and the Selling Stockholders will have no
obligation to sell to the Underwriters any of the Stockholders Shares
to be sold by the Selling Stockholders hereunder unless the
Underwriters purchase all of such Stockholder Shares hereunder.
(b) The Company grants to the Underwriters an option to purchase all or
any part of the Option Shares at the Initial Price. Option Shares shall be
purchased from the Company, severally and not jointly, for the accounts of the
Underwriters in proportion to the number of Primary Shares set forth in Schedule
I hereto opposite the name of such Underwriter. Such option may be exercised
only to cover over-allotments in the sale of the Primary Shares and the
Stockholder Shares by the Underwriters and may be exercised in whole or in part
at any time on or before 12:00 noon, New York City time, on the business day
before the Primary Shares Closing Date (as hereinafter defined), and only once
thereafter within 30 days after the date of the Prospectus, in each case upon
written or telegraphic notice, or oral or telephonic notice confirmed by written
or facsimile notice, by the Underwriters to the Company no later than 12:00
noon, New York City time, on the business day before the Primary Shares Closing
Date or at least two business days before the Option Shares Closing Date (as
hereinafter defined), as the case may be, setting forth the number of Option
Shares to be purchased and the time and date (if other than the Primary Shares
Closing Date) of such purchase.
(c) Payment of the purchase prices for, and delivery of, the Primary
Shares and the Stockholders Shares to be purchased by the Underwriters shall be
made at the offices of Jefferies & Company, Inc., 39 Broadway, New York, New
York 10006, or at such other place as shall be agreed upon by the Underwriters
and the Company, at 10:00 A.M., New York City time, on the third or fourth
business day following the date of the Registration Statement becomes effective
(or, if the Company elected to rely upon Rule 430A, the fourth business day
after the date of execution of this Agreement), or such other time not later
than ten business days after such date as shall be agreed upon by the
Underwriters and the Company ( such time and date of payment and delivery being
herein called the "Primary Shares Closing Date"). Payment shall be made to the
Company and the Selling Stockholders, as the case may be, by wire transfer in
same day funds payable to the order of the Company or the Selling Stockholders,
as applicable, against delivery to the Underwriters of the Primary Shares or
Stockholder Shares.
(d) Payment of the purchase price for, and delivery of, the Option
Shares to be purchased by the Underwriters shall be made at the office as set
forth above or at such other place as shall be agreed upon by the Underwriters
and the Company at the time and on the date (which may be the same as, but in no
event shall be earlier than, the Primary Shares Closing Date) specified in the
notice referred to in Section 2(b) (such time and date of delivery and payment
being herein called the "Option Shares Closing Date"). The Primary Shares
Closing Date and the Option Shares Closing Date are called, individually, the
"Closing Date" and together, the "Closing Dates." Payment shall be made to the
Company by wire transfer in same day funds payable to the order of the Company
against delivery to the Underwriters of the Option Shares.
CHAMPIONSHIP AUTO RACING TEAMS, INC.
UNDERWRITING AGREEMENT
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(e) Certificates representing the Shares shall be issued in such
denominations and registered in such names as the Underwriters may request in
writing at least two business days before the Primary Shares Closing Date or, in
the case of Option Shares, on the day of notice of exercise of the option as
described in Section 2(b). The certificates representing the Shares will be made
available for examination and packaging by the Underwriters not later than 1:00
P.M., New York City time, on the last business day prior to the Primary Shares
Closing Date (or the Option Shares Closing Date in the case of the Option
Shares) at such place as is designated by the Underwriters.
SECTION 3. Covenants of the Company. The Company covenants with each of the
Underwriters as follows:
(a) the Company will use its best efforts to cause the Registration
Statement, if not effective at the Representation Date, and any amendment
thereof, to become effective, as promptly as possible after the filing thereof.
The Company will not file any amendment to the Registration Statement or any
amendment or supplement to the Prospectus to which the Underwriters shall
reasonably object in writing after a reasonable opportunity to review such
amendment or supplement. Subject to the foregoing sentences in this clause (a),
if the Registration Statement has become or becomes effective pursuant to Rule
430A, or filing of the Prospectus or supplement to the Prospectus is otherwise
required under Rule 424(b), the Company will cause the Prospectus, properly
completed, or such supplement thereto to be filed with the Commission pursuant
to the applicable paragraph of Rule 424(b) within the time period prescribed and
will provide evidence satisfactory to the Underwriters of such timely filing.
The Company will promptly advise the Underwriters (i) when the Registration
Statement, if not effective at the Representation Date, and any amendment
thereto, shall have become effective, (ii) when the Prospectus, and any
supplement thereto, shall have been filed (if required) with the Commission
pursuant to Rule 424(b), (iii) when any amendment to the Registration Statement
shall have been filed or become effective, (iv) of any request by the Commission
for any amendment of the Registration Statement or supplement to any Prospectus
or for any additional information, (v) of the receipt by the Company of any
notification of, or if the Company otherwise has knowledge of, the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement or the institution or threatening of any proceeding for
that purpose and (vi) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose. The Company will use its best efforts to prevent the issuance of any
such stop order and, if issued, to obtain as soon as possible the lifting
thereof;
(b) if, at any time when a prospectus relating to the Shares is
required to be delivered under the Act or the Act Regulations, any event occurs
as a result of which the Prospectus as then amended or supplemented would
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading, or
if it shall be necessary to amend the Registration Statement or amend or
supplement the Prospectus to comply with the Act or the Act Regulations, the
Company promptly will prepare and file with the Commission, subject to the
second sentence of paragraph (a) of this Section 3, an amendment or supplement
that will correct such statement or omission or effect such compliance;
CHAMPIONSHIP AUTO RACING TEAMS, INC.
UNDERWRITING AGREEMENT
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<PAGE> 16
(c) the Company consents to the use of the Prospectus in accordance
with the provisions of the Act and with the securities or blue sky laws of the
jurisdictions in which the Shares are offered by the Underwriters and by all
dealers to whom Shares may be sold, both in connection with the offering and
sale of the Shares and for such period of time thereafter as the Prospectus is
required by the Act to be delivered in connection with the sales by any
Underwriter or dealer. The Company will comply with all requirements imposed
upon it by the Act, as now and hereafter amended, so far as necessary to permit
the continuance of sales of or dealing in the Shares in accordance with the
provisions hereof and the Prospectus;
(d) as soon as practicable, but in any event not later than eighteen
months after the Effective Date, the Company will make generally available to
its security holders and to the Underwriters a consolidated earnings statement
or statements of the Company and the Subsidiaries covering a twelve-month period
beginning after the Effective Date that will satisfy the provisions of Section
11(a) of the Act and Rule 158 under the Act Regulations;
(e) the Company will furnish to the Representatives, without charge,
four signed copies of the Registration Statement (including exhibits thereto and
all documents incorporated by referenced therein) and, so long as delivery of a
prospectus by an Underwriter or dealer may be required by the Act, or the Act
Regulations, as many copies of the Prospectus and all amendments and supplements
thereto as the Underwriters may reasonably request;
(f) during the period of five years hereafter, the Company will furnish
to you, as soon as practicable after the end of each fiscal year, a copy of its
annual report to Stockholders for such year; and the Company will furnish to you
(i) as soon as available, a copy of each report or definitive proxy statement of
the Company filed with the Commission under the Exchange Act or mailed to the
Stockholders, and (ii) from time to time, such other information concerning the
Company as you may reasonably request, provided that prior to the Company's
furnishing any such other information that is non-public, you shall enter into
an agreement, in such form as the Company shall reasonably request, with respect
to the confidentiality of such information;
(g) the Company will not, and will cause each of its executive officers
and directors to enter into agreements with the Underwriters in the form set
forth in Annex A hereto to the effect that they will not, during the period
beginning from the date hereof and continuing to and including the date 180 days
after the date of the Prospectus, offer, sell, contract to sell or otherwise
dispose of, except as provided hereunder, any securities of the Company that are
substantially similar to the Shares, including but not limited to any securities
that are convertible into or exchangeable for, or that represent the right to
receive, Common Stock or any such substantially similar securities (other than
pursuant to employee stock incentive plans existing on, or upon the conversion
or exchange of convertible or exchangeable securities outstanding as of, the
date of this Agreement, or in connection with the acquisition of any business or
property so long as the recipient of any Common Stock shall agree not to resell
such Common Stock during the 180 day period), without the prior written consent
of Jefferies & Company, Inc.;
CHAMPIONSHIP AUTO RACING TEAMS, INC.
UNDERWRITING AGREEMENT
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<PAGE> 17
(h) the Company will comply with all the provisions of any undertakings
contained in the Registration Statement;
(i) the Company will apply the net proceeds from the offering and sale
of the Shares to be sold by the Company in accordance with the description set
forth in the "Use of Proceeds" section of the Prospectus;
(j) the Company will cooperate with the Underwriters and their counsel
in connection with endeavoring to obtain and maintain the qualification or
registration, or exemption from qualification, of the Shares for offer and sale
under the applicable securities laws of such states and other jurisdictions of
the United States as the Underwriters may designate; provided, that in no event
shall the Company be obligated to qualify to do business in any jurisdiction
where it is not now so qualified or to take any action that would subject it to
taxation or general service of process in any jurisdiction where it is not now
so subject;
(k) the Company will not take, and will cause each of the Subsidiaries
to not take, directly or indirectly, any action which is designed to or which
constitutes or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the Company or
facilitate the sale or resale or the Shares;
(l) the Company will cause the Shares to be duly listed on the [New
York Stock Exchange];
(m) the Company hereby agrees that it will ensure that the Reserved
Shares will be restricted as required by the NASD or the NASD rules from sale,
transfer, assignment, pledge or hypothecation for a period of three months
following the date of this Agreement. The Underwriters will notify the Company
as to which persons will need to be so restricted. At the request of the
Underwriters, the Company will direct the transfer agent to place a stop
transfer restriction upon such securities for such period of time. Should the
Company release, or seek to release, from such restrictions any of the Reserved
Shares, the Company agrees to reimburse the Underwriters for any reasonable
expenses (including, without limitation, legal expenses) they incur in
connection with such release; and
(n) the Company will comply with the reporting requirements of Rule 463
of the Act Regulations.
SECTION 4. Covenants of the Selling Stockholders. The Selling Stockholders
covenant with each of the Underwriters as follows:
(a) the Selling Stockholders shall cooperate to the extent reasonably
necessary to cause the Registration Statement, if not effective at the
Representation Date, and any amendment thereof, to become effective, as promptly
as possible after the filing thereof;
CHAMPIONSHIP AUTO RACING TEAMS, INC.
UNDERWRITING AGREEMENT
-17-
<PAGE> 18
(b) without prejudice to any rights the Selling Stockholders may have
against the Company, the Selling Stockholders shall pay all federal and other
taxes, if any, on the transfer or sale of the Shares being sold by the Selling
Stockholders to the Underwriters;
(c) the Selling Stockholders shall do or perform all things required to
be done or performed by the Selling Stockholders prior to the Primary Shares
Closing Date to satisfy all conditions precedent to delivery of and the payment
for the Shares to be sold by the Selling Stockholders pursuant to this
Agreement;
(d) the Selling Stockholders will not at any time, directly or
indirectly, take any action which is designed to or which constitutes or which
might reasonably be expected to cause or result in stabilization or manipulation
of the price of any security of the Company or facilitate the sale or resale or
the Shares; and
(e) the Selling Stockholders will advise the Representatives promptly,
and if requested by the Representatives will confirm such advice in writing, of
any change in the information relating to the Selling Stockholders contained in
the Registration Statement under the caption "Selling Stockholders."
SECTION 5. Payment of Expenses. The Company will pay, or reimburse if paid by
the Underwriters, all actual and reasonable costs and expenses incident to the
performance of the obligations of the Company and the Selling Stockholders under
this Agreement, including (i) the fees, disbursements and expenses of counsel
and accountants for the Company and the Selling Stockholders and all other
expense in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus, the Prospectus, and any
amendments or supplements thereto, and the mailing and delivery of copies
thereof to the Underwriters and dealers, (ii) the cost of reproducing the
Agreement Among Underwriters, this Agreement, the Selling Agreement, any Dealer
Agreements, the Underwriters' Questionnaire and the Blue Sky Memorandum (in both
preliminary and final form); (iii) all expenses in connection with qualification
of the Shares for offering and sale under state securities laws as provided in
Section 3(i) hereof, including filing and registration fees and the fees,
disbursements and expenses of counsel for the Underwriters in connection with
such qualification and in connection with Blue Sky surveys; (iv) the filing fees
incident to securing any required review by the NASD; (v) the cost of preparing
stock certificates; (vi) all fees of the Company's transfer agent and registrar;
(vii) any fees for including the Shares on the [New York Stock Exchange]; [(vii)
all costs and expenses of the Underwriters, including the fees and disbursements
of counsel for the Underwriters, in connection with matters related to the
Reserved Shares which are designated by the Company for sales to employees and
others;] and (viii) all other costs and expenses incident to the performances of
its obligations hereunder that are not otherwise specifically provided for in
this Section.
[If this Agreement is terminated by the Underwriters because of any
failure or refusal on the part of the Company or the Selling Stockholders to
comply with the terms or fulfill any of the conditions of this Agreement, the
Company shall reimburse the Underwriters for all of their reasonable
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Underwriters. The Company shall not in any event be liable to
any of the Underwriters for
CHAMPIONSHIP AUTO RACING TEAMS, INC.
UNDERWRITING AGREEMENT
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<PAGE> 19
consequential damages including loss of anticipated profits from the
transactions covered by this Agreement.]
SECTION 6. Conditions of the Underwriters' Obligation. The obligation of the
Underwriters to purchase the Shares hereunder is subject to the continued
accuracy of the representations and warranties of the Company and the Selling
Stockholders herein contained, to the accuracy of the statements of the Company
and the Selling Stockholders made in any certificates pursuant to the provision
hereof, to the performance by the Company and the Selling Stockholders of its
obligations hereunder and to the following further conditions:
(a) the Registration Statement shall have come effective, and you shall
have received notice thereof, not later than 3:00 p.m., Washington D.C. time, on
the date hereof, or such later time and date as shall be approved by the
Representatives and the Company and shall remain effective at the Closing Date.
No stop order suspending the effectiveness of the Registration Statement shall
have been issued under the Act or proceedings therefor initiated or threatened
by the Commission. No order suspending the effectiveness of the Registration
Statement or the qualification or registration of the Shares under the
securities or blue sky laws of any jurisdiction shall be in effect or
proceedings therefor initiated or threatened by the Commission or the
authorities of any such jurisdiction. If the Company has elected to rely upon
Rule 430A, the price of the Shares and any price-related or other information
previously omitted from the effective Registration Statement pursuant to Rule
430A shall have been transmitted to the Commission for filing pursuant to Rule
424(b) within the prescribed time period, and, prior to the Closing Date, the
Company shall have provided evidence satisfactory to the Underwriters of such
timely filing, or a post-effective amendment providing such information shall
have been promptly filed and declared effective in accordance with the
requirement of Rule 430A;
(b) subsequent to the execution and delivery of this Agreement, there
shall not have occurred: (i) any change, or any development involving a
prospective change, in or affecting particularly the business, prospects,
properties, condition (financial or other) or results of operations of the
Company and the Subsidiaries, taken as a whole, which, in the reasonable
judgment of the Underwriters, materially impairs the investment quality of the
Shares and constitutes a Material Adverse Effect; (ii) any material loss or
interference with the business or properties of the Company or the Subsidiaries
from fire, explosion, flood or other casualty, whether or not covered by
insurance, or from any labor dispute or any court or legislative or other
governmental action, order or decree, that is not set forth in the Registration
Statement and the Prospectus, if in the reasonable judgment of the Underwriters
any such development makes it impracticable or inadvisable to proceed with
completion of the sale of and payment for the Shares;
(c) on or after the date hereof there shall not have occurred any of
the following: (i) any suspension or limitation of trading in securities
generally on the New York Stock Exchange or The Nasdaq National Market, or any
setting or minimum prices for trading on such exchange or system, or any
suspension of trading of any securities of the Company on any exchange or system
or in the over-the-counter market; (ii) any banking moratorium declared by
federal or New York authorities; or (iii) any outbreak or escalation of major
hostilities in which the United States is involved, any declaration of war by
Congress or any other substantial national or international calamity or
CHAMPIONSHIP AUTO RACING TEAMS, INC.
UNDERWRITING AGREEMENT
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<PAGE> 20
emergency if, in the reasonable judgment of the Underwriters, the effect of any
such outbreak, escalation, declaration, calamity or emergency makes it
impractical or inadvisable to proceed with completion of the sale of and payment
for the Shares;
(d) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there shall have been no litigation
or other proceeding instituted against the Company or any of the Subsidiaries or
any of their respective officers or directors in their capacities as such,
before or by any federal, state or local court, commission, regulatory body,
administrative agency or other governmental body, domestic or foreign, or
arbitrator, in which litigation or proceeding an unfavorable ruling, decision or
finding would have a Material Adverse Effect;
(e) the Shares to be sold by the Company and the Selling Stockholder at
such Time of Delivery shall have been duly approved for inclusion on the [New
York Stock Exchange], subject to official notice of issuance;
(f) each of the representations and warranties of the Selling
Stockholders contained herein shall be true and correct at the Closing Date, as
if made at the Closing Date, and all covenants and agreements contained herein
to be performed on the part of the Selling Stockholders, and all conditions
contained herein to be fulfilled or complied with by the Selling Stockholders at
or prior to the Closing Date, shall have been duly performed, fulfilled or
complied with, and the Representatives shall have received a certificate to such
effect and as to such other matters as the Underwriters may reasonably request,
dated the Closing Date and signed by or on behalf of the Selling Stockholders;
(g) the Underwriters shall have received an opinion from Kegler, Brown,
Hill & Ritter Co., L.P.A., counsel for the Company and the Selling Stockholders,
satisfactory in form and substance to counsel for the Underwriters, dated as of
each Closing Date, to the effect set forth in Annex B;
(h) the Underwriters shall have received a favorable opinion, dated as
of each Closing Date, of Vinson & Elkins L.L.P., counsel for the Underwriters,
with respect to such matters as may be reasonably requested by the Underwriters,
and you shall have provided such counsel with such papers and information as
they may reasonably request to enable them to provide such opinion;
(i) the conditions contained in subsections (a), (b), (d) and (e) of
this Section 6 shall have been satisfied on and as of each Closing Date and the
Company shall have furnished to the Underwriters a certificate of the Company,
signed by the President and the principal financial or accounting officer of the
Company, dated such Closing Date (A) to the effect that (i) the signers or such
certificate have carefully examined the Registration Statement, the Prospectus,
any supplement or amendment to the Prospectus, and this Agreement, (ii) that the
representations and warranties of the Company in this Agreement are true and
correct on and as of the Closing Date with the same effect as if made on the
Closing Date and (iii) the Company has complied with all the agreements and
satisfied all the conditions under this Agreement on its part to be performed or
satisfied at or
CHAMPIONSHIP AUTO RACING TEAMS, INC.
UNDERWRITING AGREEMENT
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<PAGE> 21
prior to the Closing Date and (B) as to the matters set forth in subsections
(a), (b), (d) and (e) of this Section and such other matters as the Underwriter
may reasonably request;
(j) at the Representation Date and at each Closing Date, Deloitte &
Touche LLP shall have furnished to the Underwriters and the Company and the
Selling Stockholders a letter or letters, dated respectively as of the date of
this Agreement and each Closing Date, in form and substance satisfactory to the
Underwriters, to the effect set forth in Annex C hereto;
(k) at the Representation Date, the Company shall have furnished to the
Underwriters a letter substantially in the form of Annex A hereto from each
executive officer and director of the Company and the Selling Stockholders,
addressed to the Underwriters, in which each such person agrees not to offer,
sell or contract to sell, or otherwise dispose of, directly or indirectly, or
announce an offering of, any shares of Common Stock beneficially owned by such
person or any securities convertible into, or exchangeable for, shares of Common
Stock for a period of 180 days following the date of the Prospectus without the
prior written consent of Jefferies & Company, Inc.; and
(l) at the Closing Date, counsel for the Underwriters shall have been
furnished with such information, certificates and documents as they may
reasonably require for the purpose of enabling them to pass upon the issuance
and sale of the Shares as contemplated herein and related proceedings, or to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained, or otherwise in
connection with the offering contemplated hereby; and all opinions and
certificates mentioned above or elsewhere in this Agreement shall be reasonably
satisfactory in form and substance to the Underwriters and counsel for the
Underwriters.
If any condition specified in this Section 6 shall have not been fulfilled in
all material respects when and as required to be fulfilled, this Agreement may
be terminated by the Underwriters by notice to the Company and such termination
shall be without liability of any party to any other party except as provided in
Section 5.
SECTION 7. Indemnification and Contribution.
(a) The Company agrees to indemnify, defend and hold harmless each
Underwriter and its respective officers, Stockholders, employees, directors and
agents and any person who controls any Underwriter within the meaning of Section
15 of the Act or Section 20 of the Exchange Act from and against any loss
expense, damage, liability or claim (including the reasonable cost of
investigating such claim) that, jointly or severally, any such Underwriter or
any such officer, Stockholder, employee, director, agent or controlling person
may incur under the Act, the Exchange Act or otherwise, as such expenses are
incurred, insofar as such loss, expense, damage, liability or claim arises out
of or is based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (or in the Registration
Statement as amended by any post-effective amendment thereof) or any omission or
alleged omission to state a material fact required to be stated in such
Registration Statement or necessary to make the statements made therein not
misleading or any untrue statement or alleged untrue statement of a material
fact contained in a Prospectus (the term Prospectus for the purpose of this
Section 7 being deemed to
CHAMPIONSHIP AUTO RACING TEAMS, INC.
UNDERWRITING AGREEMENT
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<PAGE> 22
include any Preliminary Prospectus, the Prospectus, the Prospectus as amended or
supplemented and any document filed under the Exchange Act and incorporated by
reference into the Prospectus) or any omission or alleged omission therefrom of
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, the Company will not be liable in any such
case to the extent any such loss, expense, damage, liability or claim arises out
of or is based upon any untrue statement or omission or alleged untrue statement
or omission that has been made therein or omitted therefrom in reliance upon and
in conformity with the information provided in writing to the Company by or on
behalf of the Selling Stockholders or any Underwriter, expressly for use in the
Registration Statement or the Prospectus. The Company agrees that the only such
information provided in writing by or on behalf of any Underwriter to the
Company, expressly for use in the Registration Statement or the Prospectus, is
that information contained in the table and the second, fifth, sixth and eighth
paragraphs following the table in the section of the Prospectus entitled
"Underwriting" and the last paragraph on the cover page of the Prospectus. The
foregoing indemnity agreement shall be in addition to any liability that the
Company may otherwise have.
(b) The Selling Stockholders agree to indemnify, defend and hold
harmless each Underwriter and its respective officers, stockholders, employees
and directors and any person who controls any Underwriter within the meaning of
Section 15 of the Act from and against any loss, expense, liability or claim
(including the reasonable cost of investigating such claim) that, jointly or
severally, any such Underwriter or any such officer, stockholder, employee,
director or controlling person may incur under the Act, the Exchange Act or
otherwise, as such expenses are incurred, insofar as such loss, expense,
liability or claim arises out of or is based upon any untrue statement or
alleged untrue statement of a material fact supplied by the Selling Stockholders
for use in the Registration Statement (or in the Registration Statement as
amended by any post-effective amendment thereof) or any omission or alleged
omission to state a material fact required to be stated in such Registration
Statement or necessary to make the statements made therein not misleading or any
untrue statement or alleged untrue statement of a material fact contained in a
Prospectus (the term Prospectus for the purpose of this Section 7 being deemed
to include any Preliminary Prospectus, the Prospectus, the Prospectus as amended
or supplemented and any document filed under the Exchange Act and incorporated
by reference into the Prospectus) or any omission or alleged omission therefrom
of a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(c) Each Underwriter agrees to indemnify, defend and hold harmless the
Selling Stockholders, the Company and their respective officers, stockholders,
employees and directors and any person who controls either of them within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act from and
against any loss, expense, damage, liability or claim (including the reasonable
cost of investigating such claim) that the Selling Stockholders, the Company or
any such officer, stockholder, employee, director or controlling person may
incur under the Act, the Exchange Act or otherwise to the same extent as the
provisions of Section 7(a) above, but only insofar as such loss, expense,
damage, liability or claim arises out of or is based upon any untrue statement
or omission or alleged untrue statement or omission made in reliance or in
conformity with information relating to such Underwriter furnished in writing to
the Company by or on behalf of such Underwriter, expressly for use in the
Registration Statement or the Prospectus. The Selling
CHAMPIONSHIP AUTO RACING TEAMS, INC.
UNDERWRITING AGREEMENT
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<PAGE> 23
Stockholders and the Company agree that the only information provided in writing
by or on behalf of the Underwriters to the Company, expressly for use in the
Registration Statement or the Prospectus, is that information contained in the
table and the second, fifth, sixth and eighth paragraphs following the table in
the section of the Prospectus entitled "Underwriting" and the last paragraph on
the cover page of the Prospectus.
(d) If any action is brought against an indemnified party under this
Section 7, the indemnified party or parties shall promptly notify the
indemnifying party in writing of the institution of such action (provided that
the failure to give such notice shall not relieve the indemnifying party of any
liability that it may have pursuant to this Agreement, unless and to the extent
the indemnifying party did not otherwise learn of such action and such failure
has resulted in the forfeiture of substantive rights or defenses by the
indemnifying party) and the indemnifying party shall assume the defense of such
action, including the employment of counsel and payment of reasonable expenses.
The indemnified party or parties shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of the indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying party in
connection with the defense of such action, (ii) the indemnifying party shall
not have employed counsel reasonably satisfactory to the indemnified party to
take charge of the defense of such action within a reasonable time after notice
of the institution of such action or (iii) the named parties to any such
proceeding (including any impleaded parties) include both an indemnified party
and an indemnifying party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests between
the named parties (in which case the indemnifying party shall not have the right
to direct the defense of such action on behalf of the indemnified party or
parties), in any of which events such fees and expenses shall be borne by the
indemnifying party and paid as incurred; provided that the indemnifying party
shall only be responsible for the fees and expenses of one counsel for the
indemnified party or parties hereunder, in additional to any local counsel.
Anything in this paragraph to the contrary notwithstanding, the indemnifying
party shall not be liable for any settlement of any such claim or action
effected without its written consent, which consent shall not be unreasonably
withheld.
(e) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party under subsection (a), (b) or (c) of this
Section 7 in respect of any losses, damages, expenses, liabilities or claims
referred to therein, then each applicable indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of such losses,
damages, expenses, liabilities or claims (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Selling Stockholders on the one hand and the Underwriters on the other hand from
the offering of the Shares or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company and the Selling Stockholders on the one
hand and the Underwriters on the other hand in connection with the statements or
omissions that resulted in such losses, damages, expenses, liabilities or
claims, as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Selling Stockholders on the one hand
and the Underwriters on the other hand shall be deemed to be in the same
proportion as the total proceeds from the offering (net of underwriting
discounts
CHAMPIONSHIP AUTO RACING TEAMS, INC.
UNDERWRITING AGREEMENT
-23-
<PAGE> 24
and commissions but before deducting expenses) received by the Company and the
Selling Stockholders bear to the total underwriting discounts and commissions
received by the Underwriters. The relative fault of the Company and the Selling
Stockholders on the one hand and of the Underwriters on the other hand shall be
determined by reference to, among other things, whether the untrue statement or
alleged untrue statement of a material fact or omission or alleged omission
relates to information supplied by the Company, the Selling Stockholders or by
the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, damages,
expenses, liabilities and claims referred to above shall be deemed to include
any legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any claim or action.
(f) The Company, the Selling Stockholders and the Underwriters agree
that it would not be just and equitable if contribution pursuant to this Section
7 were determined by pro rata allocation or by any other method of allocation
that does not take account of the equitable considerations referred to in
Section 7(e) above. Notwithstanding the provisions of this Section 7, (i) no
Underwriter shall be required to contribute any amount in excess of the
underwriting discount received by it by reason of such untrue statement or
alleged untrue statement or omission or alleged omission, (ii) no Selling
Stockholder shall be required to contribute any amount in excess of the gross
proceeds received by such Selling Stockholder from the sale of the shares
pursuant to this Agreement, and (iii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
(g) In connection with the offer and sale of the Reserved Shares, the
Company agrees, promptly upon a request in writing to indemnify and hold
harmless the Underwriters from and against any and all losses, liabilities,
claims, damages and expenses incurred by them as a result of the failure of any
person or entity to whom Reserved Shares are offered to pay for and accept
delivery of Reserved Shares which, by the end of the first business day
following the date of this Agreement, were subject to a properly confirmed
agreement to purchase.
SECTION 8. Representations, Warranties and Agreements to Survive Delivery. The
respective indemnity and contribution agreements contained in Section 7, and the
covenants, representations and warranties of the Company and the Selling
Stockholders contained in this Agreement or contained in certificates of
officers of the Company and the Selling Stockholders submitted pursuant hereto,
shall remain in full force and effect, regardless of any investigation, or
statement as to the results thereof, made by or on behalf of any Underwriter or
any of its respective officers, employees, directors, Stockholders, agents or
any person who controls any Underwriters, or by or on behalf of the Company or
the Selling Stockholders or any of the officers or directors or any controlling
person of the Company or the Selling Stockholders, as the case may be, and will
survive delivery of and payment for the Shares.
SECTION 9. Default of Underwriters. If any Underwriter or Underwriters default
in their obligations to purchase Shares hereunder on either the Primary Shares
Closing Date or the Option Shares Closing Date and the aggregate number of
Shares that such defaulting Underwriter or
CHAMPIONSHIP AUTO RACING TEAMS, INC.
UNDERWRITING AGREEMENT
-24-
<PAGE> 25
Underwriters agreed but failed to purchase does not exceed 10% of the total
number of Shares that the Underwriters are obligated to purchase on such Closing
Date, the Representatives may make arrangements satisfactory to the Company and
the Selling Stockholders for the purchase of such Shares by other persons,
including any of the Underwriters, but if no such arrangements are made by such
Closing Date the non-defaulting Underwriters shall be obligated severally, in
proportion to their respective commitments hereunder, to purchase the Shares
that such defaulting Underwriters agreed but failed to purchase on such Closing
Date. If any Underwriter or Underwriters so default and the aggregate number of
Shares with respect to which such default or defaults occur exceeds 10% of the
total number of Shares that the Underwriters are obligated to purchase on such
Closing Date and arrangements satisfactory to the Representatives and the
Company and the Selling Stockholders for the purchase of such Shares by other
persons are not made within 36 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter, the
Company or the Selling Stockholders, except as provided in this Section 9
(provided that if such default occurs with respect to the Option Shares after
the Primary Shares Closing Date, this Agreement will not terminate as to the
Primary Shares). As used in this Agreement, the term "Underwriter" includes any
person substituted for an Underwriter under this Section. Nothing herein will
relieve a defaulting Underwriter from liability for its default.
SECTION 10. Notices. All notices and other communications hereunder will be in
writing and shall be deemed to have been duly given if mailed or transmitted by
standard form of telecommunication. Notices to the Underwriters shall be
directed to the Underwriters in care of:
Jefferies & Company, Inc.
11100 Santa Monica Boulevard
Los Angeles, California 90025
Attention: Jerry Gluck, Esq.
with a copy to: T. Mark Kelly
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, Texas 77002-6760
or, if sent to the Company, directed to:
Championship Auto Racing Teams, Inc.
755 West Big Beaver Road, Suite 800
Troy, Michigan 48084
Attention: Andrew H. Craig
with a copy to: Jack A. Bjerke
Kegler, Brown, Hill & Ritter Co., L.P.A.
65 East State Street, 18th Floor
Columbus, Ohio 43215
CHAMPIONSHIP AUTO RACING TEAMS, INC.
UNDERWRITING AGREEMENT
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<PAGE> 26
or, if sent to the Selling Stockholders, directed to:
Jack A. Bjerke
Kegler, Brown, Hill & Ritter Co., L.P.A.
65 East State Street, 18th Floor
Columbus, Ohio 43215
SECTION 11. Parties. This Agreement shall inure to the benefit of and be binding
upon the Underwriters, the Company and the Selling Stockholders and their
respective successors and legal representatives. Nothing expressed or mentioned
in this Agreement is intended or shall be construed to provide any person, firm
or corporation, other than the Underwriters and the Company and the Selling
Stockholders and their respective successors and legal representatives and the
controlling persons, officers, employees, directors and Stockholders referred to
in Sections 7 and 8 and their respective heirs and legal representatives, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision herein or therein contained. This Agreement and all conditions
and provisions hereof are intended to be for the sole and exclusive benefit of
the Underwriters, the Company and the Selling Stockholders and their respective
successors and legal representatives, and such controlling persons,
Stockholders, officers and directors and their respective heirs and legal
representatives, and for the benefit of no other person, firm or corporation. No
purchaser of Shares from any Underwriter shall be deemed to be a successor by
reason merely of such purchase.
SECTION 12. Governing Law and Time. This Agreement shall be governed and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed in such State. Specified times of day refer
to New York time, unless otherwise specified.
SECTION 13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
CHAMPIONSHIP AUTO RACING TEAMS, INC.
UNDERWRITING AGREEMENT
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<PAGE> 27
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement among
the Company and the Underwriters in accordance with its terms.
Very truly yours,
CHAMPIONSHIP AUTO RACING TEAMS, INC.
By:
Name:
Title:
SELLING STOCKHOLDERS
By:
Name:
Title:
As Attorney-in-Fact acting on behalf of
each of the Selling Stockholders named in
Schedule II to this Agreement
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
JEFFERIES & COMPANY, INC.
A. G. EDWARDS & SONS, INC.
As Representatives of the Several Underwriters
JEFFERIES & COMPANY, INC.
By:
Name:
Title:
<PAGE> 28
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF OPTION
TOTAL NUMBER OF FIRM SHARES TO BE PURCHASED
Underwriter SHARES TO BE PURCHASED IF MAXIMUM OPTION EXERCISED
----------- ---------------------- ---------------------------
<S> <C> <C>
JEFFERIES & COMPANY, INC.......................
A.G. EDWARDS & SONS, INC.......................
</TABLE>
<PAGE> 29
SCHEDULE II
TOTAL NUMBER OF
NAME STOCKHOLDER SHARES TO BE SOLD
---- -----------------------------
<PAGE> 30
SCHEDULE III
<TABLE>
<CAPTION>
JURISDICTION OF
NAME INCORPORATION/ORGANIZATION
---- --------------------------
<S> <C>
CART, Inc.................................................................. Michigan
CART Properties, Inc....................................................... Michigan
CART Licensed Products, Inc................................................ Michigan
CART Licensed Products, L.P................................................ Georgia
(limited partnership)
</TABLE>
<PAGE> 31
ANNEX A
Form of Lock-Up Agreement
<PAGE> 32
ANNEX B
Form of Opinion of Counsel to
the Company and the Selling Stockholders
<PAGE> 33
ANNEX C
Form of Comfort Letter
Pursuant to Section 7(e) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to
the Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary
financial information and schedules (and, if applicable, financial forecasts
and/or pro forma financial information) examined by them and included in the
Prospectus or the Registration Statement comply as to form in all material
respects with the applicable accounting requirements of the Act and the related
published rules and regulations thereunder; and, if applicable, they have made a
review in accordance with standards established by the American Institute of
Certified Public Accountants of the unaudited consolidated interim financial
statements, selected financial data, pro forma financial information, financial
forecasts and/or condensed financial statements derived from audited financial
statements of the Company for the periods specified in such letter, as indicated
in their reports thereon, copies of which have been separately furnished to the
representatives of the Underwriters (the "Representatives");
(iii) They have made a review in accordance with standards established
by the American Institute of Certified Public Accountants of the unaudited
condensed consolidated statements of income, consolidated balance sheets and
consolidated statements of cash flows included in the Prospectus as indicated in
their reports thereon copies of which have been separately furnished to the
Representatives and on the basis of specified procedures including inquiries of
officials of the Company who have responsibility for financial and accounting
matters regarding whether the unaudited condensed consolidated financial
statements referred to in paragraph (vi)(A)(i) below comply as to form in all
material respects with the applicable accounting requirements of the Act and the
related published rules and regulations, nothing came to their attention that
caused them to believe that the unaudited condensed consolidated financial
statements do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations;
(iv) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company for the
five most recent fiscal years included in the Prospectus agrees with the
corresponding amounts (after restatements where applicable) in the audited
consolidated financial statements for such five fiscal years;
(v) They have compared the information in the Prospectus under selected
captions with the disclosure requirements of Regulation S-K and on the basis of
limited procedures specified in such letter nothing came to their attention as a
result of the foregoing procedures that caused them to believe that this
information does not conform in all material respects with the disclosure
requirements of Items 301, 302, 402 and 503(d), respectively, of Regulation S-K;
<PAGE> 34
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards, consisting
of a reading of the unaudited financial statements and other information
referred to below, a reading of the latest available interim financial
statements of the Company and its subsidiaries, inspection of the minute books
of the Company and its subsidiaries since the date of the latest audited
financial statements included in the Prospectus, inquiries of officials of the
Company and its subsidiaries responsible for financial and accounting matters
and such other inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe that:
(A) (i) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the Act and the
related published rules and regulations, or (ii) any material
modifications should be made to the unaudited condensed consolidated
statements of income, consolidated balance sheets and consolidated
statements of cash flows included in the Prospectus for them to be in
conformity with generally accepted accounting principles;
(B) any other unaudited income statement data and balance
sheet items included in the Prospectus do not agree with the
corresponding items in the unaudited consolidated financial statements
from which such data and items were derived, and any such unaudited
data and items were not determined on a basis substantially consistent
with the basis for the corresponding amounts in the audited
consolidated financial statements included in the Prospectus;
(C) the unaudited financial statements which were not included
in the Prospectus but from which were derived any unaudited condensed
financial statements referred to in Clause (A) and any unaudited income
statement data and balance sheet items included in the Prospectus and
referred to in Clause (B) were not determined on a basis substantially
consistent with the basis for the audited consolidated financial
statements included in the Prospectus;
(D) any unaudited pro forma combined financial statements
included in the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the Act and the
published rules and regulations thereunder or the pro forma adjustments
have not been properly applied to the historical amounts in the
compilation of those statements;
(E) as of a specified date not more than five days prior to
the date of such letter, there have been any changes in the
consolidated capital stock (other than issuances of capital stock upon
exercise of options and stock appreciation rights, upon earn-outs of
performance shares and upon conversions of convertible securities, in
each case which were outstanding on the date of the latest financial
statements included in the Prospectus) or any increase in the
consolidated long-term debt of the Company and its subsidiaries, or any
decreases in consolidated net current assets or stockholders' equity or
other items specified by the Representatives, or any increases in any
items specified by the Representatives, in each case as compared with
amounts shown in the latest balance sheet included in the Prospectus,
<PAGE> 35
except in each case for changes, increases or decreases which the
Prospectus discloses have occurred or may occur or which are described
in such letter; and
(F) for the period from the date of the latest financial
statements included in the Prospectus to the specified date referred to
in Clause (E) there were any decreases in consolidated net revenues or
operating profit or the total or per share amounts of consolidated net
income or other items specified by the Representatives, or any
increases in any items specified by the Representatives, in each case
as compared with the comparable period of the preceding year and with
any other period of corresponding length specified by the
Representatives, except in each case for decreases or increases which
the Prospectus discloses have occurred or may occur or which are
described in such letter; and
(vii) In addition to the examination referred to in their report(s)
included in the Prospectus and the limited procedures, inspection of minute
books, inquiries and other procedures referred to in paragraphs (iii) and (vi)
above, they have carried out certain specified procedures, not constituting an
examination in accordance with generally accepted auditing standards, with
respect to certain amounts, percentages and financial information specified by
the Representatives, which are derived from the general accounting records of
the Company and its subsidiaries, which appear in the Prospectus, or in Part II
of, or in exhibits and schedules to, the Registration Statement specified by the
Representatives, and have compared certain of such amounts, percentages and
financial information with the accounting records of the Company and its
subsidiaries and have found them to be in agreement.
<PAGE> 1
EXHIBIT 2.1
December 22, 1997
U.E. Patrick
Chairman of the Board of Directors
American Racing Series, Inc.
1395 Wheaton Avenue
Troy, MI 48093
Dear Mr. Patrick:
This letter will serve to confirm the intentions of Championship Auto
Racing Teams, Inc., a Delaware corporation ("CART") to enter into a Definitive
Purchase Agreement ("Purchase Agreement") to acquire all of the issued and
outstanding shares of common stock of American Racing Series, Inc. ("ARS") and
certain assets of BP Automotive, Ltd. ("B.P."). Consummation of the transactions
discussed in this letter will be subject to the basic conditions precedent
hereinafter set forth:
1. PURCHASE OF STOCK OF ARS - CART and the shareholders of ARS will
enter into a mutually acceptable Definitive Purchase Agreement providing for the
acquisition by CART of 100% of the issued and outstanding shares of stock in
ARS.
2. ACQUISITION OF ASSETS OF B.P. - CART will enter into a mutually
acceptable Purchase Agreement with respect to the acquisition of certain assets
of B.P., as set forth on Exhibit A attached hereto and incorporated herein.
3. PURCHASE PRICE - The purchase price for the stock of ARS and the
assets of B.P. payable by CART shall be $10,000,000. The purchase price is to be
allocated to the parties based upon their mutual agreement and paid as follows:
a. CART shall pay $7,000,000 at closing.
b. The remaining $3,000,000 of the purchase price shall
be paid to ARS shareholders and B.P. at $1,000,000
per year for three years, subject to the attainment
of certain performance criteria as follows:
(i) Five Hundred Twenty Two Thousand Five
Hundred Dollars ($522,500.00) per year for
three years for sponsorship agreements that
are not currently contracted. ARS will be
entitled to continue to solicit sponsors in
all categories until September 1, 1998 to
meet the guarantee. After September 1, 1998,
ARS agrees to discontinue any sales efforts;
(ii) Two Hundred Thousand Dollars ($200,000.00)
related to promoter fees for the Penske
tracks for the 1998 and 1999 seasons;
<PAGE> 2
(iii) Engines leases and rebuilds based on 30 paid
leases per year for two (2) years;
(iv) Wheel sales of Fifty One Thousand Three
Hundred Dollars ($51,300.00) per year for
three years;
(v) Parts and chassis commissions of Three
Hundred Fifty Thousand Dollars ($350,000.00)
per year for two (2) years;
(vi) The annual average performance criteria
guarantee for the items outlined above are
as follows:
<TABLE>
<CAPTION>
1998 1999 2000
---- ---- ----
<S> <C> <C> <C>
Engine Lease $1,380,000 $1,380,000
Rebuilds 1,440,000 1,440,000
Sponsorship 522,500 522,500 522,500
Promoter Fees
Penske Tracks 200,000 200,000
Wheel Sales (net) 51,300 51,300 51,300
Commissions 350,000 350,000
----------- ---------- --------
$3,943,800 $3,943,800 $573,800
</TABLE>
(vii) In the event that there is an annual
shortfall to the above number, the annual
payments by CART will be reduced dollar for
dollar by the shortfall. If the annual
average is met on a multi-year basis, any
previous shortfall to the One Million Dollar
($1,000,000.00) annual payment will be
reimbursed to ARS stockholders and B.P. ARS
will increase the Engine Lease payments and
engine rebuilds by a reasonable amount for
1999.
c. The shareholders of ARS and B.P. shall be granted
options to purchase 100,000 shares of the common
stock of CART at the initial public offering price.
These options will vest one year from the date of the
initial public offering, subject to ARS meeting the
1998 performance criteria of $3,943,800. If the
performance criteria is not met, the shareholders and
B.P. may pay CART the deficiency and thus meet the
performance criteria. These options may be
exercised at any time within 5 years after they vest.
d. DIRECTED SHARES - The shareholders of ARS and B.P.
shall be granted the right to purchase up to
$1,000,000 of CART's common stock at the initial
public offering price.
4. REPRESENTATIONS AND WARRANTIES - The shareholders of ARS and BP
shall make standard representations and warranties customary to a transaction of
this type, including, but not limited to:
a. Conduct of the business pending closing;
b. Organization and standing of ARS and BP;
2
<PAGE> 3
c. ARS's capitalization share ownership and financial
statements;
d. B.P.'s share ownership and financial statements,
including the accuracy of financial statements.
e. Title to properties owned, absence of litigation,
unasserted claims.
f. Other typical disclosure, including no material
adverse changes in the business, assets, liabilities,
etc., and no other transactions other than in the
normal course of business.
5. CONDITIONS PRECEDENT TO CLOSING. The Purchase Agreement shall
provide that the obligations of the parties to consummate the Purchase Agreement
will be subject to the satisfaction of certain conditions, including the
following:
a. Completion of the CART initial public offering.
b. Representations and warranties contained in the
Purchase Agreement will continue to be true and
correct in all material respects as of the closing.
c. No material adverse changes in the business condition
of ARS or BP.
6. DISTRIBUTIONS PRIOR TO CLOSING. The parties agree that, prior to the
closing of the Purchase Agreement, ARS shall distribute to its shareholders all
cash, accounts receivable, accounts payable, the ARS airplane, the hanger and
the partnership interests with respect to the Melbourne property. The cash
distributed shall be adjusted to reflect any obligations that ARS may have with
respect to engine deposits unearned income related to 1998 and beyond or other
matters recorded on ARS's financial statements which reflect future obligations
of ARS.
7. COVENANT NOT TO COMPETE. U.E. Patrick and Roger Bailey will enter
into a covenant not to compete for a period of five (5) years from the Closing,
which will provide that neither U.E. Patrick or Roger Bailey will form a race
series that directly competes with ARS.
8. CLOSING AND EFFECTIVE DATE. Closing and the effective date will
occur not later than 10 business days after the closing of the CART initial
public offering.
9. TAX ELECTION. ARS agrees to a Section 338(h)(10) under the Internal
Revenue Code on terms mutually acceptable to all parties.
10. ACCESS TO BOOKS AND RECORDS AND DUE DILIGENCE. Prior to the
execution of the Definitive Purchase Agreement, ARS shareholders and B.P. shall
afford CART's officers, attorneys, accountants and other authorized
representatives free and full access, on reasonable notice, and during normal
business hours to all management, personnel, offices, properties, books and
records so that CART may have a reasonable opportunity to make such
investigations as it desires into the management, business, properties and
affairs of ARS and B.P. ARS and B.P. shall furnish to CART financial and
operating data and other information, including legal documents regarding their
business as CART reasonably requests. In the event that CART discovers issues
related to the business of ARS or B.P. which adversely effect the business of
ARS or the value thereof, CART shall have the right to terminate this letter of
intent.
10. NON-SOLICITATION. Until the Definitive Purchase Agreement has been
executed or 60 days from the date hereof, ARS and B.P. will not: (i) solicit
from any outside sources, acquisition proposals relating to ARS or B.P. or their
assets or stock; or (ii) entertain or discuss any acquisition proposals from any
unsolicited outside sources relating to ARS or B.P.
3
<PAGE> 4
This letter is intended to be a binding letter of intent, therefore
constitute a legally binding enforceable contract among the parties pertaining
to the subject matter hereof, which all parties agree to reduce to a definitive
purchase agreement as expeditiously as possible, but no later than January 15,
1998.
If you are in agreement with the foregoing, and this letter of intent
is acceptable to you and the parties that you represent, please confirm by
signing a copy of this letter and returning it to me no later than December 22,
1997.
Sincerely yours,
CHAMPIONSHIP AUTO RACING TEAMS, INC.
By: /s/ RANDY DZIERZAWSKI
--------------------------------------
Randy Dzierzawski, Vice President
Accepted and agreed to this 22nd day of December, 1997.
AMERICAN RACING SERIES, INC.
By: /s/ U.E. Patrick
---------------------------------------
U.E. Patrick
Chairman of the Board of Directors
/s/ U.E. Patrick
---------------------------------------
U.E. Patrick, on behalf of himself, Steve
Patrick, Mark Patrick, Rick Patrick, Sherry
` Patrick-Burke
/s/ Roger Bailey
---------------------------------------
Roger Bailey
B.P. AUTOMOTIVE
By: /s/ Roger Bailey
---------------------------------------
Roger Bailey, President
4
<PAGE> 1
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
CHAMPIONSHIP AUTO RACING TEAMS, INC.
FIRST.
The name of the corporation is Championship Auto Racing Teams, Inc.
(the "Corporation").
SECOND.
The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, County of
New Castle, Delaware 19801. The name of the Corporation's registered agent at
such address is The Corporation Trust Company.
THIRD.
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH.
(a) The total number of shares of stock which the Corporation shall have
authority to issue is fifty-five million (55,000,000) shares of Capital
Stock.
(b) Of such authorized shares, fifty million (50,000,000) shares shall be
designated "Common Stock" and have a par value of $.01 per share.
(c) Of such designated shares, five million (5,000,000) shares shall be
designated "Preferred Stock" and have a par value of $.01 per share.
The Board of Directors of the Corporation is hereby expressly
authorized, to the fullest extent now or hereafter permitted by the General
Corporation Law of the State of Delaware, at any time and from time to time, to
divide the shares of Preferred Stock into one or more series, to establish the
number of shares to be included in each such series, to issue in whole or in
part the shares of Preferred Stock or the shares of any series thereof, and to
fix by resolution or resolutions the designation, powers (voting and otherwise),
preferences and relative, participating, optional or other special rights, and
the qualifications, limitations or restrictions, if any, of the Preferred Stock
or of any series thereof that may be desired.
<PAGE> 2
FIFTH.
The name and mailing address of the incorporator is:
The Corporation Trust Company
Corporation Trust Center
1209 Orange Street
Wilmington, DE 19801
SIXTH.
The Corporation shall have perpetual existence.
SEVENTH.
The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors. Elections of directors need
not be by written ballot except and to the extent required by the bylaws of the
Corporation.
EIGHTH.
Subject to the rights, if any, of the holders of Preferred
Stock to take action by written consent, any action required or permitted to be
taken by the stockholders of the Corporation must be effected at an annual or
special meeting of stockholders of the Corporation and may not be effected by
any consent in writing by such stockholders.
NINTH.
The bylaws of the Corporation may be altered, amended, or
repealed, or new bylaws may be adopted, only by (i) the affirmative vote of the
holders of at least sixty-seven percent (67%) of the outstanding voting stock of
the Corporation (in addition to any separate class vote that may be required
pursuant to the terms of any then outstanding Preferred Stock of the
Corporation), or (ii) by resolution of the Board of Directors duly adopted by a
vote of not less than a majority of the directors then constituting the full
Board of Directors.
TENTH.
(a) Directors of the Corporation shall be elected to hold office until the
expiration of the term for which they are elected, and until their
successors have been duly elected and qualified.
(b) The number of directors which constitutes the whole Board of Directors
of the Corporation shall be designated, or determined in the manner
provided in, the Bylaws of the Corporation.
2
<PAGE> 3
(c) Vacancies occurring on the Board of Directors for any reason may be
filled by vote of a majority of the remaining members of the Board of
Directors, although less than a quorum, at any meeting of the Board of
Directors, or by a sole remaining director.
ELEVENTH.
No director of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except that this Article Eleventh does not eliminate or
limit the liability of a director (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit. If the General Corporation Law of the State of
Delaware is amended after the filing of this Certificate of Incorporation to
authorize corporate action further limiting or eliminating the personal
liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the General
Corporation Law of the State of Delaware. Any amendment or repeal of this
Article Eleventh, or any adoption of any provision of this Certificate of
Incorporation inconsistent with this Article Eleventh, shall be prospective only
and shall not adversely affect any right or protection of a director of the
Corporation existing at the time of such amendment or repeal or adoption of an
inconsistent provision.
TWELFTH.
The Corporation shall not purchase any shares of the
Corporation's Common Stock from any stockholder or stockholders acting as a
group, who individually or collectively hold(s) five percent (5%) or more of the
Corporation's outstanding Common Stock, not including any treasury stock
(individually or collectively referred to in this Article Twelfth as the "Five
Percent Holder(s)") at a price higher than the then current fair market value of
the Corporation's Common Stock, based on the average of the closing prices of
the preceding five (5) trading days, or on terms more favorable, when considered
as a whole, than those otherwise available, unless (i) the Corporation makes an
offer to all of its other stockholders to purchase from each stockholder the
same percentage of that stockholder's Common Stock in the Corporation as the
Corporation intends to purchase from the Five Percent Holder(s), at the same
price and on the same terms as the Five Percent Holder(s) will receive; or (ii)
the holders of a majority of the Corporation's outstanding Common Stock entitled
to vote approve of the Corporation's purchase of its Common Stock from the Five
Percent Holder(s), at the intended price and upon the intended terms, with the
Five Percent Holder(s) not voting on such approval and the Common Stock in the
Corporation which is held by the Five Percent Holder(s) not counted as
outstanding in calculating the number of votes required for approval.
THIRTEENTH.
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of
3
<PAGE> 4
them, any court of equitable jurisdiction within the State of Delaware may, on
the application in a summary way of this Corporation or of any creditor or
stockholder thereof or on the application of any receiver or receivers appointed
for this Corporation under the provisions of Section 291 of the General
Corporation Law of the State of Delaware or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
the provisions of Section 279 of the General Corporation Law of the State of
Delaware order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
this Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this Corporation, as the case may be, and also on this
Corporation.
FOURTEENTH.
Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of the
capital stock required by law or this Certificate of Incorporation, the
affirmative vote of the holders of at least sixty-seven percent (67%) of the
combined voting power of all of the then outstanding shares of the Corporation
entitled to vote shall be required to alter, amend or repeal Articles Eighth,
Ninth, Eleventh, Twelfth or Fourteenth or any provision thereof, unless such
alteration, amendment or repeal shall be approved by a vote of not less than
two-thirds of the directors then constituting the full Board of Directors.
FIFTEENTH.
The Corporation reserves the right, at any time and from time to time,
to amend, alter, change or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed herein, and all rights
conferred upon the stockholders and directors herein are granted subject to this
reservation.
THE UNDERSIGNED, being the incorporator named above, for the purpose of
forming a corporation pursuant to the General Corporation Law of the State of
Delaware, does hereby make this Certificate of Incorporation and certify that
this is my act and deed and that the facts set forth herein are true and,
accordingly, has signed this Certificate of Incorporation this ____ day of
December, 1997.
By:
, Incorporator
4
<PAGE> 1
EXHIBIT 3.2
BY-LAWS
OF
CHAMPIONSHIP AUTO RACING TEAMS, INC.
<PAGE> 2
TABLE OF CONTENTS
PAGE
1. OFFICES...................................................................1
1.1 Registered Office...............................................1
1.2 Other Offices...................................................1
2. MEETINGS OF STOCKHOLDERS..................................................1
2.1 Place of Meetings...............................................1
2.2 Annual Meetings.................................................1
2.3 Special Meetings................................................1
2.4 Notice of Meetings..............................................2
2.5 Procedures for Proposing Consideration of Business..............2
2.6 Quorum..........................................................2
2.7 Adjournment.....................................................3
2.8 Vote Required...................................................3
2.9 Voting Rights...................................................3
2.10 Proxies........................................................4
2.11 List of Stockholders...........................................4
2.12 Organization of Meetings.......................................4
2.13 Inspectors.....................................................5
3. DIRECTORS.................................................................5
3.1 Number, Election, Term and Qualifications.......................5
3.2 Power and Authority.............................................5
3.3 Vacancies and Newly Created Directorships.......................6
3.4 Nominations for Election as a Director..........................6
3.5 Resignation.....................................................7
3.6 Removal.........................................................7
3.7 Place of Meetings...............................................7
3.8 Regular Meetings................................................7
3.9 Special Meetings................................................8
3.10 Quorum; Vote Required..........................................8
3.11 Telephonic Meetings............................................8
3.12 Organization...................................................8
3.13 Action Without Meeting.........................................9
3.14 Committees.....................................................9
3.15 Compensation..................................................10
4. NOTICES..................................................................10
i
<PAGE> 3
4.1 Form of Notice.................................................10
4.2 Waiver of Notice...............................................10
4.3 Undeliverable Notices..........................................10
5. OFFICERS.................................................................11
5.1 Officers.......................................................11
5.2 Term...........................................................11
5.3 Officers Appointed by the President............................11
5.4 Compensation...................................................11
5.5 Removal and Vacancies..........................................11
5.6 Resignations...................................................12
5.7 Chairman of the Board..........................................12
5.8 President......................................................12
5.9 Vice President.................................................12
5.10 Secretary.....................................................12
5.11 Assistant Secretary...........................................13
5.12 Treasurer.....................................................13
5.13 Assistant Treasurer...........................................13
5.14 Additional Officers and Agents................................14
5.15 Delegation of Authority.......................................14
5.16 Voting of Securities Owned by This Corporation................14
6. STOCK AND STOCKHOLDERS...................................................14
6.1 Certificates...................................................14
6.2 Lost, Stolen or Destroyed Certificates.........................15
6.3 Transfers of Shares............................................15
6.4 Fixing Record Date.............................................16
6.5 Registered Stockholders........................................16
6.6 Transfer Agent and Registrar...................................17
7. DIVIDENDS................................................................17
7.1 Declaration....................................................17
7.2 Reserve........................................................17
8. INDEMNIFICATION..........................................................17
8.1 Right to Indemnification.......................................17
8.2 Right to Advance of Expenses...................................17
8.3 Right of Indemnitee to Bring Suit..............................18
8.4 Non-Exclusivity of Rights......................................18
8.5 Insurance......................................................18
8.6 Indemnification of Employees and Agents of the Corporation.....19
8.7 Survival of Indemnification Rights.............................19
ii
<PAGE> 4
8.8 Certain Definitions............................................19
8.9 Amendment or Repeal............................................19
9. MISCELLANEOUS............................................................20
9.1 Loans to Officers..............................................20
9.2 Checks.........................................................20
9.3 Fiscal Year....................................................20
9.4 Seal...........................................................20
9.5 Certificate of Incorporation...................................20
10. AMENDMENTS..............................................................20
iii
<PAGE> 5
BY-LAWS
OF
CHAMPIONSHIP AUTO RACING TEAMS, INC.
1. OFFICES
1.1 REGISTERED OFFICE.
The registered office of the Corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware.
1.2 OTHER OFFICES.
The Corporation may also have offices at such other places, both within
and without the State of Delaware, as the Board of Directors may from time to
time determine or as the business of the Corporation may require.
2. MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS.
Each meeting of the stockholders of the Corporation shall be held at
the principal offices of the Corporation, or at such other place, either within
or without the State of Delaware, and on such date and at such time as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting or in the waiver of notice thereof.
2.2 ANNUAL MEETINGS.
An annual meeting of the stockholders of the Corporation, for the
purpose of the election of directors and for such other business as shall be
properly brought before the meeting, shall be held each calendar year,
commencing in 1998, on such date and at such time as shall be designated from
time to time by the Board of Directors and stated in the notice of the meeting
or in the waiver of notice thereof.
2.3 SPECIAL MEETINGS.
Except as otherwise provided by the General Corporation Law of the
State of Delaware as it may from time to time be amended ("Delaware Law"), the
Certificate of Incorporation of the Corporation as it may be from time to time
be amended or restated ("Certificate of Incorporation") or these By-Laws,
special meetings of the stockholders of the Corporation may be called, for any
purpose or purposes, by (i) the Chairman of the Board (if any), (ii) the
President, or (iii) the Board of Directors. A special meeting of the
stockholders so called shall be
<PAGE> 6
held at such place, on such date, and at such time as is designated by the Board
of Directors and stated in the notice of the meeting or in the waiver of notice.
Business transacted at any special meeting of the stockholders shall be limited
to the purposes stated in the notice.
2.4 NOTICE OF MEETINGS.
Except as otherwise provided by Delaware Law, the Certificate of
Incorporation, or these By-Laws, written notice of each meeting of the
stockholders stating the place, date and time of the meeting and, in the case of
a special meeting, the purpose or purposes for which the meeting is called,
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, which
notice may be delivered either personally or by mail. If mailed, notice shall be
deemed to be given when deposited in the United States mail, postage prepaid,
directed to such stockholder at his address as it appears on the records of the
Corporation, unless he shall have filed with the Secretary of the Corporation a
written request that notices to him be mailed to some other address, in which
case it shall be directed to him at such other address. Notice of any meeting of
the stockholders may be waived in a writing signed by the stockholders waiving
notice, either before or after such meeting and, to the extent permitted by
Delaware Law, will be deemed to be waived by any stockholder who is present, in
person or by proxy, at such meeting, except when the stockholder attends such
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting was not lawfully called
or convened.
2.5 PROCEDURES FOR PROPOSING CONSIDERATION OF BUSINESS.
Unless proposed by a majority of the Board of Directors, no business
shall be eligible for consideration at annual or special meetings of
stockholders unless a written statement setting forth the business and the
purpose therefor is delivered to the Board of Directors on a timely basis. To be
timely, a stockholder's written statement shall be delivered to or mailed and
received at the principal executive offices of the Corporation (i) with respect
to business to be considered at the annual meeting of the stockholders of the
Corporation not less than ninety (90) days prior to the anniversary date of the
immediately preceding annual meeting of stockholders of the Corporation, and
(ii) with respect to business to be considered at a special meeting of
stockholders of the Corporation not later than the close of business on the
tenth (10th) day following the day on which notice of the date of the special
meeting was mailed to stockholders of the Corporation as provided in Section 2.4
or public disclosure of the date of the special meeting was made, whichever
first occurs.
2.6 QUORUM.
The presence, in person or by proxy, at any meeting of the stockholders
of the holders of not less than a majority of the outstanding shares entitled to
vote thereat shall constitute a quorum at such meeting for the transaction of
business, except as otherwise provided by Delaware Law, the Certificate of
Incorporation or these By-Laws. In the absence of a quorum at any meeting of the
stockholders, either the chairman of the meeting or the holders of a majority of
the outstanding shares present, in person or by proxy, and entitled to vote
thereat, may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a
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quorum shall be present, but no other business shall be transacted at such
meeting. The stockholders present at a duly called or convened meeting, at which
a quorum is present, may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum.
2.7 ADJOURNMENT.
Any meeting of stockholders, whether or not a quorum is present, may be
adjourned from time to time, either by the chairman of the meeting or by the
vote of holders of sixty-seven percent (67%) of the outstanding shares present,
in person or by proxy, and entitled to vote thereat, to reconvene at the same or
some other place, and notice need not be given of the time and place of any such
adjourned meeting if the time and place thereof are announced at the meeting at
which the adjournment is taken. At the adjourned meeting at which a quorum shall
be present, any business may be transacted which might have been transacted at
the original meeting. If the adjournment is for more than thirty (30) days, or
if after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the adjourned meeting.
2.8 VOTE REQUIRED.
Except as otherwise required by Delaware Law, the Certificate of
Incorporation or these By-Laws, at any meeting for the election of directors at
which a quorum is present, the candidates receiving the greatest number of votes
shall be elected as directors. All other matters submitted to the stockholders
at any meeting at which a quorum is present shall be decided by the vote of the
holders of a majority of the outstanding shares entitled to vote and present, in
person or by proxy, at the meeting unless the matter is one upon which a
different vote is required by express provision of Delaware Law, the Certificate
of Incorporation or these By-Laws, in which case such express provision shall
govern and control the vote required on such matter. Where a separate vote by
class or series is required, except as otherwise provided by Delaware Law, the
Certificate of Incorporation or these By-Laws, a majority of the outstanding
shares of such class or series, present, in person or by proxy, at the meeting
shall constitute a quorum entitled to take action with respect to that vote on
that matter and, except as otherwise provided by Delaware Law, the Certificate
of Incorporation or these By-Laws, the affirmative vote of the majority (or
plurality, in the case of the election of directors) of the votes cast by the
holders of shares of such class or classes or series shall be the act of such
class or series.
2.9 VOTING RIGHTS.
Except as otherwise provided by Delaware Law, the Certificate of
Incorporation or these By-Laws, each stockholder in whose name shares stand on
the stock records of the Corporation as of the record date, as provided in
Section 6.4 of these By-Laws, shall at each meeting of the stockholders be
entitled to one vote for each share held by such stockholder as of the record
date.
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2.10 PROXIES.
Each stockholder entitled to vote at a meeting of the stockholders may
authorize another person or persons to act for him by proxy, but no such proxy
shall be voted or acted upon after three (3) years from its date, unless the
proxy provides for a longer period. A proxy may be granted by a writing executed
by the stockholder or its authorized officer, director, employee or agent or by
transmission or authorization of transmission of a telegram, cablegram, or other
means of electronic transmission to the person who will be the holder of the
proxy or to a proxy solicitation firm, proxy support service organization or
like agent duly authorized by the person who will be the holder of the proxy to
receive such transmission, subject to the conditions set forth in Section 212 of
the Delaware Law, as it may be amended from time to time. Each proxy shall be
filed with the Secretary of the Corporation prior to or at the time of the
meeting.
2.11 LIST OF STOCKHOLDERS.
The Secretary or other officer who has charge of the stock ledger of
the Corporation shall prepare and make, at least ten (10) days before each
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
2.12 ORGANIZATION OF MEETINGS.
(a) At each meeting of stockholders, the Chairman of the Board, or, if a
Chairman of the Board has not been appointed or is absent, the
President, or, if the President is absent, a chairman of the meeting
chosen by the holders of a majority of the outstanding shares present,
in person or by proxy, at the meeting and entitled to vote thereat
shall act as chairman of the meeting. The Secretary, or, in his
absence, an Assistant Secretary or, if an Assistant Secretary has not
been appointed or is absent, a person appointed by the chairman of the
meeting, shall act as secretary of the meeting.
(b) The Board of Directors of the Corporation shall be entitled to make
such rules or regulations for the conduct of meetings of the
stockholders as it shall deem necessary, convenient or desirable.
Subject to such rules and regulations of the Board of Directors, if
any, the chairman of the meeting shall have the right and authority to
prescribe such rules, regulations and procedures and to do all such
acts as, in the judgment of such chairman, are necessary, convenient or
desirable for the proper conduct of the meeting, including, without
limitation, establishing an agenda or order of business for the
meeting, rules and procedures for maintaining order at the meeting and
the safety of those present, limitations on participation in such
meeting to stockholders of record of the Corporation and their duly
authorized and constituted proxies and such other persons as the
chairman shall
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permit, restrictions on entry to the meeting after the time fixed for
the commencement thereof, limitations on the time allotted to questions
or comments by participants and regulation of the opening and closing
of the polls for balloting on matters which are to be voted on by
ballot. Unless and to the extent determined by the Board of Directors
or the chairman of the meeting, meetings of stockholders shall not be
required to be held in accordance with rules of parliamentary
procedure.
2.13 INSPECTORS.
The Board of Directors by resolutions or the President or Chairman of
the Board, in advance of any stockholder meeting, shall appoint one or more
inspectors, which inspector or inspectors may include individuals who serve the
Corporation in other capacities, including, without limitation, as officers,
employees, agents or representatives, to act at the meeting of stockholders and
make a written report thereof. One or more persons may be designated as
alternate inspectors to replace any inspector who fails to act. If no inspector
or alternate has been appointed to act or is able to act at a meeting of
stockholders, the chairman of the meeting shall appoint one or more inspectors
to act at the meeting. Each inspector, before discharging his or her duties,
shall take and sign an oath faithfully to execute the duties of inspector with
strict impartiality and according to the best of his or her ability. The
inspectors shall have the duties prescribed by law.
3. DIRECTORS
3.1 NUMBER, ELECTION, TERM AND QUALIFICATIONS.
Except as otherwise provided in the Certificate of Incorporation, the
authorized number of directors of the Corporation shall be fixed or changed from
time to time and at any time exclusively by resolution adopted by the Board of
Directors. Unless otherwise fixed by the Board of Directors, the authorized
number of directors of the Corporation shall be [___]. No decrease in the
authorized number of directors shall have the effect of shortening the term of
any incumbent director. The directors, other than the initial directors either
named in the Certificate of Incorporation or elected by the incorporators, shall
be elected at the annual meeting of the stockholders, except as provided in
Section 3.3 hereof. If, for any reason, the directors shall not have been
elected at an annual meeting of the stockholders, they may be elected as soon
thereafter as convenient at a special meeting of the stockholders called for
that purpose. Directors need not be stockholders or residents of the State of
Delaware.
3.2 POWER AND AUTHORITY.
The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors, which shall have and may exercise
all the powers of the Corporation and do all such lawful acts and things as are
not by Delaware Law, the Certificate of Incorporation or these By-Laws directed
or required to be exercised or done by the stockholders.
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3.3 VACANCIES AND NEWLY CREATED DIRECTORSHIPS.
Vacancies on the Board of Directors resulting from death, resignation,
removal, disqualification or otherwise, and newly created directorships
resulting from any increase in the authorized number of directors, may be filled
by a vote of a majority of the directors then in office, even though less than a
quorum, or by a sole remaining director, and any director so chosen shall hold
office for the remainder of the full term of the director replaced and until
such director's successor is duly elected and qualified, or until his earlier
death, resignation or removal, or for directors elected in response to a
increase in the authorized number, until such director's successor is duly
elected and qualified, or until his earlier death, resignation or removal. If at
any time there are no directors in office, then an election of directors may be
held in the manner provided by Delaware Law.
3.4 NOMINATIONS FOR ELECTION AS A DIRECTOR.
Only persons who are nominated in accordance with the procedures set
forth in these bylaws shall be eligible for election by stockholders as, and to
serve as, directors. Nominations of persons for election to the Board of
Directors of the Corporation may be made at a meeting of stockholders (a) by or
at the direction of the Board of Directors or (b) by any stockholder of the
Corporation who is a stockholder of record at the time of giving of notice
provided for in this Section 3.4, who shall be entitled to vote for the election
of directors at the meeting and who complies with the notice procedures set
forth in this Section 3.4. Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made pursuant to timely notice in
writing to the Secretary of the Corporation. To be timely, a stockholder's
written statement shall be delivered to or mailed and received at the principal
executive offices of the Corporation (i) with respect to an election to be held
at the annual meeting of the stockholders of the Corporation not less than
ninety (90) days prior to the anniversary date of the immediately preceding
annual meeting of stockholders of the Corporation, and (ii) with respect to an
election to be held at a special meeting of stockholders of the Corporation for
the election of directors not later than the close of business on the tenth
(10th) day following the day on which notice of the date of the special meeting
was mailed to stockholders of the Corporation as provided in Section 2.4 or
public disclosure of the date of the special meeting was made, whichever first
occurs. Such stockholder's notice to the Secretary shall set forth (x) as to
each person whom the stockholder proposes to nominate for election or
re-election as a director, all information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors,
or is otherwise required, pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (including such person's written consent to
being named in the proxy statement as a nominee and to serve as a director if
elected), and (y) as to the stockholder giving the notice (i) the name and
address, as they appear on the Corporation's books, of such stockholder and (ii)
the class and number of shares of voting stock of the Corporation which are
beneficially owned by such stockholder. At the request of the Board of
Directors, any person nominated by the Board of Directors for election as a
director shall furnish to the Secretary of the Corporation that information
required to be set forth in a stockholder's notice of nomination which pertains
to the nominee. In the event that a person is validly designated as a nominee to
the Board of Directors in accordance with the procedures set forth in this
Section 3.4 and shall thereafter become unable or unwilling to stand for
election to the Board of Directors, the Board of Directors or the
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stockholder who proposed such nominee, as the case may be, may designate a
substitute nominee. Other than directors chosen pursuant to the provisions of
Sections 3.1 or 3.3, no person shall be eligible to serve as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 3.4. The presiding officer of the meeting of stockholders shall, if the
facts warrant, determine and declare to the meeting that a nomination was not
made in accordance with the procedures prescribed by these By-laws, and if he
should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded. Notwithstanding the foregoing provisions of
this Section 3.4, a stockholder shall also comply with all applicable
requirements under the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder with respect to the matters set forth in this
Section 3.4.
3.5 RESIGNATION.
Any director may resign at any time by delivering his written
resignation to the Corporation, such resignation to be effective at the time
specified therein or, if no such specification is made, immediately upon its
receipt by the Corporation. Unless otherwise specified in the notice, acceptance
of a resignation shall not be necessary to make it effective. When one or more
directors shall resign from the Board of Directors, effective at a future date,
a majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon
to take effect when such resignation or resignations shall become effective, and
each director so chosen shall hold office for the unexpired portion of the term
of the director whose place shall be vacated and until his successor shall have
been duly elected and qualified.
3.6 REMOVAL.
Unless otherwise provided by Delaware Law or the Certificate of
Incorporation, any director or the entire Board of Directors may be removed from
office only for cause and only by the holders of a majority of the outstanding
shares of stock of the Corporation entitled to vote at an election of directors.
3.7 PLACE OF MEETINGS.
The Board of Directors may hold meetings, both regular and special,
either within or without the State of Delaware.
3.8 REGULAR MEETINGS.
A regular meeting of the Board of Directors shall be held immediately
following the adjournment of each annual meeting of stockholders at which
directors are elected, and at the same place, unless a majority of the directors
then elected and serving change such time or place, and notice of such meeting
need not be given (unless the time or place is so changed). Additional regular
meetings of the Board of Directors may be held at such other times and places as
may from time to time be determined by resolution by the Board of Directors, and
notice of any such additional regular meetings need not be given.
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3.9 SPECIAL MEETINGS.
Special meetings of the Board of Directors may be called by the
Chairman of the Board, if any, the President or any two (2) directors, and shall
be held at such time and place as shall be stated in the notice of the meeting.
Notice of any special meeting shall be given in person or by facsimile,
telephone, electronic mail, hand delivery, telecopy or other similar method
involving immediate receipt, at least twenty-four (24) hours before the meeting
or by mail at least three (3) days prior to the meeting. Such notice shall be
deemed to be delivered when deposited in the United States mail so addressed,
with postage prepaid, when delivered by expedited delivery service or when
transmitted if sent by facsimile, telecopy or similar means. Neither the
business to be transacted at, nor the purpose of, any special meeting of the
Board of Directors need be specified in the notice or waiver of notice of such
meeting. Notice of any meeting may be waived in a writing signed by any director
at any time before or after the meeting and will be deemed automatically waived
by any director who attends such meeting, except when the director attends the
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened.
3.10 QUORUM; VOTE REQUIRED.
Except as otherwise provided in the Certificate of Incorporation, at
all meetings of the Board of Directors, the presence of a majority of the
directors in office shall constitute a quorum for the transaction of business.
The vote of a majority of the directors present at any meeting at which a quorum
is present shall be the act of the Board of Directors, except as may be
otherwise specifically provided by Delaware Law, the Certificate of
Incorporation or these By-Laws. If a quorum shall not be present at any meeting
of the Board of Directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
3.11 TELEPHONIC MEETINGS.
Unless otherwise provided in the Certificate of Incorporation, any
member of the Board of Directors, or of any committee designated by the Board of
Directors, may participate in a meeting of the Board of Directors, or of any
committee, by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute presence in person at the
meeting.
3.12 ORGANIZATION.
At each meeting of the Board of Directors, the Chairman of the Board,
or, if a Chairman has not been appointed or is absent, the President, or, if the
President is absent, the most senior Vice President, or, in the absence of any
such officer, a chairman of the meeting chosen by a majority of the directors
present, shall preside over the meeting. The Secretary, or in his absence, an
Assistant Secretary or another person appointed by the chairman of the meeting,
shall act as secretary of the meeting. At each meeting of the Board of
Directors, the chairman of the meeting shall establish the order of business of
and the procedures at the meeting, subject to the Board of Directors
determination.
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3.13 ACTION WITHOUT MEETING.
Unless otherwise provided in the Certificate of Incorporation, any
action required or permitted to be taken at any meeting of the Board of
Directors, or of any committee thereof, may be taken without a meeting, if all
members of the Board of Directors or of the committee, as the case may be,
consent thereto in a writing or writings, and such writing or writings are filed
with the minutes of proceedings of the Board of Directors or of the committee.
3.14 COMMITTEES.
The Board of Directors may, by resolution adopted by a majority of the
whole Board of Directors, designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. The Board of
Directors may designate one or more directors as alternative members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of a member of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the Board of Directors unless otherwise restricted
by Delaware Law, the Certificate of Incorporation or these By-Laws, shall have
and may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it. Each
committee shall have such name or names as may be determined from time to time
by resolution adopted by the Board of Directors. Each committee shall keep
regular minutes of its meetings and proceedings and report the same to the Board
of Directors when required.
Committees of the Board of Directors shall not, in any event, have any
power or authority to amend the Certificate of Incorporation (except that a
committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares adopted by the Board of Directors as
provided in Section 151(a) of the Delaware Law, fix the designations and any of
the preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the Corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
corporation or fix the number of shares of any series of stock or authorize the
increase or decrease of the shares of any series), adopt an agreement of merger
or consolidation, recommend to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommend to
the stockholders a dissolution of the Corporation or a revocation of a
dissolution or to amend the By-Laws of the Corporation. Further, no committee of
the Board of Directors shall have the power or authority to declare a dividend,
to authorize the issuance of stock or to adopt a certificate of ownership and
merger pursuant to Section 253 of the Delaware Law, unless the resolution or
resolutions designating such committee expressly so provides.
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3.15 COMPENSATION.
Unless otherwise provided in the Certificate of Incorporation, the
Board of Directors shall have the authority to fix the compensation of
directors. The directors may be paid their reasonable expenses, if any, of
attendance at each meeting of the Board of Directors and may in addition be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of committees of the Board of Directors may be paid compensation and reasonable
expenses for attending committee meetings.
4. NOTICES
4.1 FORM OF NOTICE.
Whenever, under any provision of Delaware Law, the Certificate of
Incorporation or these By-Laws, notice is required to be given to any director
or stockholder and no provision is made as to how such notice shall be given, it
shall not be construed to mean solely personal notice, but such notice may be
given in writing, (i) by mail, postage prepaid, addressed to such director or
stockholder, at his address as it appears on the books or, in the case of a
stockholder, the stock transfer records of the Corporation, and such notice
shall be deemed to be given at the time when the same shall be deposited in the
United States mail, (ii) by overnight courier service, and such notice shall be
deemed to be given the day following the day it is delivered to such service
with all charges prepaid, (iii) by facsimile, telecopy, telegram or similar
means, and such notice shall be deemed to be given the day it is transmitted
with all charges prepaid, or (iv) by any other method permitted by law, such
notice to be deemed to be given when received by the director or stockholder.
4.2 WAIVER OF NOTICE.
Whenever any notice is required to be given to any stockholder,
director or committee member under the provisions of Delaware Law, the
Certificate of Incorporation or these By-Laws, a waiver thereof in writing,
signed by the person or persons entitled to receive such notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
notice to such person or persons. Attendance of a stockholder, director or
committee member at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends for the express purpose of objecting at
the beginning of the meeting to the transaction of any business on the ground
that the meeting is not lawfully called or convened.
4.3 UNDELIVERABLE NOTICES.
The giving of any notice required under any provision of Delaware Law,
the Certificate of Incorporation or these By-Laws shall not be required to be
given to any stockholder to whom (i) notice of two (2) consecutive annual
meetings, and all notices of meetings or of the taking of action by written
consent without a meeting to such stockholder during the period between such two
(2) consecutive annual meetings, or (ii) all, and at least two (2), payments (if
sent by first
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class mail) of dividends or interest on securities during a twelve (12) month
period, have been mailed addressed to such person at his address as shown on the
records of the Corporation and have been returned undeliverable. If any such
stockholder shall deliver to the Corporation a written notice setting forth his
then current address, the requirement that notice be given to such stockholder
shall be reinstated.
5. OFFICERS
5.1 OFFICERS.
The officers of the Corporation, except such officers as may be
appointed in accordance with the provisions of Sections 5.3 or 5.5, shall be
elected or appointed by the Board of Directors and shall include a President, a
Secretary and a Treasurer. The Board of Directors may also elect or appoint a
Chairman of the Board (who must be a director), a Chief Executive Officer, a
Chief Financial Officer, one or more Vice Presidents, one or more Assistant
Secretaries and Assistant Treasurers, and such other officers and agents as it
shall deem necessary, convenient or desirable. Any number of offices may be held
by the same person, unless prohibited by Delaware Law, the Certificate of
Incorporation or these By-Laws. None of the officers of the Corporation, other
than a Chairman of the Board, need be a director.
5.2 TERM.
Each officer of the Corporation shall hold office at the pleasure of
the Board of Directors, or until his successor is elected or appointed and
qualified, or until his earlier death, resignation or removal.
5.3 OFFICERS APPOINTED BY THE PRESIDENT.
The Board of Directors may empower the President to appoint such
officers as the business of the Corporation may require.
5.4 COMPENSATION.
The compensation of all officers of the Corporation shall be fixed by
or in the manner designated by the Board of Directors.
5.5 REMOVAL AND VACANCIES.
Any officer elected or appointed by the Board of Directors may be
removed at any time, with or without cause, by the affirmative vote of a
majority of the Board of Directors and any officer appointed by the President
may be removed at any time with or without cause by the President, but any such
removal shall be without prejudice to the contractual rights, if any, of the
person so removed. Any vacancy occurring in any office of the Corporation may be
filled by the Board of Directors, or to the extent allowed by the Board of
Directors pursuant to Section 5.3, by the President.
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5.6 RESIGNATIONS.
Any officer may resign at any time by giving written notice to the
Board of Directors or to the President or the Secretary. Any such resignation
shall be effective when received by the person or persons to whom such notice is
given, unless a later time is specified therein, in which event the resignation
shall become effective at such later time. Unless otherwise specified in such
notice, the acceptance of any such resignation shall not be necessary to make it
effective. Any resignation shall be without prejudice to the contractual rights,
if any, of the Corporation with the resigning officer.
5.7 CHAIRMAN OF THE BOARD.
The Chairman of the Board, if any, shall preside at all meetings of the
Board of Directors at which he is present, and shall have and perform such other
duties as may from time to time be assigned by the Board of Directors.
5.8 PRESIDENT.
The President shall be the chief executive officer of the Corporation,
shall preside at all meetings of the stockholders unless a Chairman of the Board
has been appointed and is present, and the President shall have general and
active management of the business, affairs, officers, employees and agents of
the Corporation, and shall see that all orders and resolutions of the Board of
Directors are carried into effect. The President shall have general authority to
execute bonds, deeds, mortgages, contracts and other documents and instruments
in the name and on behalf of the Corporation, except where required or permitted
by law to be otherwise executed and except where the execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the Corporation. The President shall perform such other duties and have such
other powers as are commonly incident to his office or may from time to time be
assigned by the Board of Directors.
5.9 VICE PRESIDENT.
In the absence of the President or in the event of his inability or
refusal to act, the Vice President, if any, or in the event there is more than
one (1) Vice President, the Vice Presidents in the order designated by the Board
of Directors, or in the absence of any designation, then in the order of their
election or appointment, shall perform the duties of the President, and when so
acting shall have all the powers of and be subject to all the restrictions upon
the President. Each Vice President shall perform such other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as may from time to time be assigned by the Board of Directors or
the President.
5.10 SECRETARY.
The Secretary shall attend all meetings of the Board of Directors and
all meetings of the stockholders and shall record all the actions and
proceedings of such meetings in a book to be
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kept for that purpose and shall perform like duties for the standing committees
when required. Except as otherwise provided in these By-Laws, the Secretary
shall give, or cause to be given, notice of all meetings of the stockholders and
of all special meetings of the Board of Directors and of all committees that
require notice. The Secretary shall perform such other duties and have such
other powers as are commonly incident to his office and as may from time to time
be assigned by the Board of Directors or the President, under whose supervision
he shall be. The Secretary shall have custody of the corporate seal of the
Corporation, if any, and he, or an Assistant Secretary, shall have authority to
affix the same to any instrument requiring it and when so affixed, it may be
attested by his signature or by the signature of such Assistant Secretary. The
Board of Directors may give general authority to any other officer to affix the
seal of the Corporation and to attest to affixing by his signature.
5.11 ASSISTANT SECRETARY.
The Assistant Secretary, if any, or if there be more than one, the
Assistant Secretaries in the order determined by the Board of Directors, or if
there be no such determination, then in the order of their election, shall, in
the absence of the Secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as may from time to time be
assigned by the Board of Directors or the President.
5.12 TREASURER.
The Treasurer shall have the custody of the corporate funds and
securities and shall keep or cause to be kept full and accurate accounts of
receipts and disbursements of the Corporation and shall deposit all moneys and
other valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. The Treasurer shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the President and the Board of Directors, at its regular meetings, or when the
Board of Directors otherwise so requires, an account of all his transactions as
Treasurer and of the financial condition and results of operations of the
Corporation. If required by the Board of Directors, the Treasurer shall give the
Corporation a bond in such form, in such sum and with such surety or sureties as
shall be satisfactory to the Board of Directors for the faithful performance of
the duties of his office and for the restoration to the Corporation, in case of
his death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation. The Treasurer shall perform other
duties and have such other powers as are commonly incident to his office and as
may from time to time be assigned by the Board of Directors or the President.
Any of the powers or duties of the Treasurer may be assigned to a Chief
Financial Officer or Principal Accounting Officer appointed by the Board of
Directors.
5.13 ASSISTANT TREASURER.
The Assistant Treasurer, if any, or if there shall be more than one
(1), the Assistant Treasurers in the order determined by the Board of Directors,
or if there be no such
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determination, then in the order of their election, shall, in the absence of the
Treasurer or in the event of his inability or refusal to act, perform the duties
and exercise the powers of the Treasurer and shall perform such other duties and
have such other powers as may be assigned from time to time by the Board of
Directors or the President.
5.14 ADDITIONAL OFFICERS AND AGENTS.
The Board of Directors may appoint such other officers and agents as it
shall deem necessary, convenient or desirable, who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
designated from time to time by the Board of Directors.
5.15 DELEGATION OF AUTHORITY.
The Board of Directors may from time to time delegate the powers or
duties of any officer to any other officer or agent, notwithstanding any
provisions hereof.
5.16 VOTING OF SECURITIES OWNED BY THIS CORPORATION.
Subject always to the specific directions of the Board of Directors,
(i) any shares or other securities issued by any other corporation and owned or
controlled by this Corporation may be voted in person at any meeting of security
holders of such other corporation by the Chairman of the Board or President of
this Corporation if either is present at such meeting, or in their absence by
the Treasurer of this Corporation if he is present at such meeting, and (ii)
whenever, in the judgment of the Chairman of the Board or President, it is
desirable for this Corporation to execute a proxy or written consent in respect
to any shares or other securities issued by any other corporation and owned by
this Corporation, such proxy or consent shall be executed in the name of this
Corporation by the Chairman of the Board or President, without the necessity of
any authorization by the Board of Directors, affixation of corporate seal or
countersignature or attestation by another officer, provided that if the
President and Chairman of the Board are unable to execute such proxy or consent
by reason of sickness, absence from the United States or other similar cause,
the Treasurer may execute such proxy or consent. Any person or persons
designated in the manner above stated as the proxy or proxies of this
Corporation shall have full right, power and authority to vote the shares or
other securities issued by such other corporation and owned by this Corporation
the same as such shares or other securities might be voted by this Corporation.
6. STOCK AND STOCKHOLDERS
6.1 CERTIFICATES.
Every stockholder shall be entitled to receive a certificate signed by,
or in the name of the Corporation by, the Chairman of the Board, the President
or a Vice President, and by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary, certifying the number of shares of stock of
the Corporation owned by him. Any or all of the signatures on a
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certificate may be facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
However, as provided in Section 158 of the Delaware Law, the Board of Directors
of the corporation may provide by resolution or resolutions that some or all of
any or all classes or series of stock shall be uncertified shares.
If the Corporation shall be authorized to issue more than one (1) class
of stock or more than one (1) series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in Section 202 of the Delaware Law, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock, a
statement that the Corporation will furnish without charge to each stockholder
who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
Within a reasonable time after the issuance or transfer of
uncertificated stock, the Corporation shall send to the registered owner thereof
a written notice containing the information required to be set forth or stated
on certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the Delaware
Law or a statement that the Corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences and relative
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
6.2 LOST, STOLEN OR DESTROYED CERTIFICATES.
The Corporation may issue a new certificate or certificates or
uncertificated shares of stock of the Corporation in place of any certificate or
certificates theretofore issued by the Corporation alleged by the owner thereof
to have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate to be lost, stolen or destroyed.
When issuing such new certificate or certificates or uncertificated shares, the
Corporation may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the Corporation a bond in such form, and in
such sum as, it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate or certificates alleged
to have been lost, stolen or destroyed.
6.3 TRANSFERS OF SHARES.
Shares of stock of the Corporation shall only be transferable upon the
books of the Corporation by the holder thereof in person or by his duly
authorized attorney or legal
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representative. Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate for shares of stock of the Corporation duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the Corporation or the transfer
agent of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books;
provided, however, that if the certificate contains any legend or other
statement restricting or otherwise providing any condition on transfers of the
shares represented thereby, the Corporation or the transfer agent of the
Corporation shall effect such transfer only upon the terms of such legend or
other statement and only if the Corporation or the transfer agent of the
Corporation is satisfied, in its sole discretion, that all conditions to
transfer have been satisfied. Upon receipt of proper transfer instructions from
the registered owner of uncertificated shares such uncertificated shares shall
be canceled and issuance of new equivalent uncertificated shares or certificated
shares shall be made to the person entitled thereto and the transaction shall be
recorded upon the books of the Corporation.
6.4 FIXING RECORD DATE.
In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of the stockholders or any adjournment
thereof, or entitled to consent to corporate action in writing, without a
meeting, or entitled to receive payment of any dividend or other distribution or
allotment of rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may by resolution fix, in advance, a record date
that does not precede the date upon which the resolution fixing such record date
was adopted, and with respect to stockholder meetings, is not more than sixty
(60) nor less than ten (10) days prior to the date of such meeting, and with
respect to other actions is not more than sixty (60) days prior to any such
other action. If no record date is fixed by the Board of Directors, the record
date for all purposes shall be the close of business on the day on which the
Board of Directors adopts the resolution relating thereto, except as otherwise
required by Delaware Law, the Certificate of Incorporation or these By-Laws. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
6.5 REGISTERED STOCKHOLDERS.
The Corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends, and
to vote as such owner, and to hold liable for calls and assessments a person
registered on its books as the owner of shares, and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by Delaware Law.
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6.6 TRANSFER AGENT AND REGISTRAR.
The Board of Directors may appoint one or more transfer agents or
transfer clerks and one or more registrars and may require all certificates of
stock to bear the signature or signatures of any of them.
7. DIVIDENDS
7.1 DECLARATION.
Dividends upon the capital stock of the Corporation, if any, may be
declared by the Board of Directors at any regular or special meeting, subject to
Delaware Law and the Certificate of Incorporation. Dividends may be paid in
cash, in property, or in shares of the capital stock of the Corporation, subject
to the provisions of Delaware Law and the Certificate of Incorporation.
7.2 RESERVE.
Before payment of any dividend, there may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in its absolute discretion, deems proper as a
reserve or reserves for working capital, to meet contingencies, for equalizing
dividends, for repairing or maintaining any property of the Corporation, or for
such other purposes as the Board of Directors shall deem in the best interests
of the Corporation, and the Board of Directors may modify or abolish any such
reserve in the manner in which it was created.
8. INDEMNIFICATION
8.1 RIGHT TO INDEMNIFICATION.
Except as and to the extent otherwise provided in the Certificate of
Incorporation, the Corporation shall indemnify its directors and officers in
accordance with, and to the fullest extent not prohibited by, the Delaware Law,
subject to individual contractual arrangements between the Corporation and any
such persons.
8.2 RIGHT TO ADVANCE OF EXPENSES.
The indemnification rights in Sections 8.1 and 8.6 of these By-Laws
shall include the right to be paid by the Corporation the expenses (including
attorneys' fees) incurred by an indemnitee in defending any such proceeding in
advance of its final disposition (hereinafter, an "advancement of expenses");
provided, however, that, if the Delaware Law requires, an advancement of
expenses shall be made only upon receipt by the Corporation of an undertaking
(hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is not further right to appeal (hereinafter, a "final
adjudication") that such indemnitee is not entitled to be indemnified for such
expenses under this Section 8.2 or otherwise.
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8.3 RIGHT OF INDEMNITEE TO BRING SUIT.
If a claim under Section 8.1, 8.2 or 8.6 of these By-Laws is not paid
in full by the Corporation within sixty (60) days after a written claim has been
received by the Corporation, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be twenty (20) days, the
indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful, in whole or in part, in
any such suit, or in a suit brought by the Corporation to recover an advancement
of expenses pursuant to the terms of an undertaking, the indemnitee shall be
entitled to be paid also for the expense of prosecuting or defending such suit.
In (i) any suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and (ii) in any suit
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the Corporation shall be entitled to recover such
expenses upon applicable standard for indemnification set forth in the Delaware
Law. Neither the failure of the Corporation (including its Board of Directors,
independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such suit that indemnification of the indemnitee is
proper in the circumstances because the indemnitee has met the applicable
standard of conduct set forth in the Delaware Law, nor an actual determination
by the Corporation (including its Board of Directors, independent legal counsel
or its stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or brought by the Corporation to recover an advancement of expenses pursuant to
the terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
Article 8 or otherwise shall be on the Corporation.
8.4 NON-EXCLUSIVITY OF RIGHTS.
The rights to indemnification and to the advancement of expenses
conferred in this Article 8 shall not be deemed exclusive of any other rights to
which any person may be entitled under Delaware Law, any other law, the
Certificate of Incorporation, these By-Laws, agreement, vote of stockholders or
disinterested directors or otherwise.
8.5 INSURANCE.
The Corporation may purchase and maintain insurance on behalf of any
person who is or was an indemnitee against any liability asserted against such
person and incurred by such person in any capacity, as an indemnitee, or arising
out of his status as such, whether or not the Corporation would have the power
to indemnify such person against such liability under the Delaware Law.
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8.6 INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION.
The Corporation may, to the extent authorized from time to time by the
Board of Directors, grant rights to indemnification to any employee or agent of
the Corporation to the fullest extent of the provisions of this Article 8 with
respect to the indemnification of directors and officers of the Corporation.
8.7 SURVIVAL OF INDEMNIFICATION RIGHTS.
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article 8 shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent of the Corporation and shall inure to the benefit of the
heirs, executors and administrators of such person.
8.8 CERTAIN DEFINITIONS.
For purposes of this Article 8, references to the
"Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Article 8 with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued.
8.9 AMENDMENT OR REPEAL.
Any amendment, repeal or other modification of any of the foregoing
provisions of this Article 8 shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to the
time of such repeal or modification.
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9. MISCELLANEOUS
9.1 LOANS TO OFFICERS.
The Corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the Corporation or of its
subsidiaries, including any officer or employee who is a director of the
Corporation or its subsidiaries whenever, in the judgment of the Board of
Directors, such loan, guarantee or assistance may reasonably be expected to
benefit the Corporation. The loan, guarantee or other assistance may be with or
without interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the Corporation. Nothing in these By-Laws shall be deemed to deny,
limit or restrict the powers of guaranty or warranty of the Corporation at law.
9.2 CHECKS.
All checks or demands for money and notes of the Corporation shall be
signed by such officer or officers or such other person or persons as the Board
of Directors may from time to time designate.
9.3 FISCAL YEAR.
The fiscal year of the Corporation shall be fixed by resolution of the
Board of Directors.
9.4 SEAL.
The corporate seal, if any, shall have inscribed thereon the name of
the Corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
9.5 CERTIFICATE OF INCORPORATION.
To the extent of any inconsistency between these By-Laws and the
Certificate of Incorporation, the terms and provisions of the Certificate of
Incorporation shall control for all purposes.
10. AMENDMENTS
The Board of Directors and the stockholders of the Corporation shall
have the power to make, alter, amend and repeal any or all of the provisions of
these bylaws to the extent and upon the terms set forth in Article Ninth of the
Certificate of Incorporation.
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EXHIBIT 5.1
KEGLER, BROWN, HILL & RITTER
[LETTER HEAD]
, 1998
Championship Auto Racing Teams, Inc.
755 West Big Beaver Road
Suite 800
Troy, Michigan 48084
Gentlemen:
We have acted as counsel for Championship Auto Racing Teams, Inc. (the
"Company") in connection with the registration under the Securities Act of 1933,
as amended, of up to 5,018,950 shares of Common Stock, par value $.01 per share
(the "Shares") by the Company and up to 240,000 Shares by certain selling
stockholders. In this connection , we have examined the Certificate of
Incorporation, the Bylaws, the directors' and stockholders' minutes and the
Registration Statement filed with the Securities and Exchange Commission,
exhibits thereto, and such other documents as we have deemed necessary to the
opinion hereinafter expressed.
We are of the opinion that the Shares are duly authorized and, upon their
sale as contemplated by the Registration Statement, will be validly issued,
fully paid, and nonassessable.
We hereby consent to the reference to Kegler, Brown, Hill & Ritter Co.,
L.P.A. appearing under the heading "Legal Matters" in the Registration Statement
and any amendments thereto and the Prospectus of the Company relating to its
public offering of the Shares. In giving such consent, we do not hereby admit
that we are within the category of persons whose consent is required under
Section 7 of the Securities Act or the rules and regulations of the Securities
and Exchange Commission thereunder.
Very truly yours,
KEGLER, BROWN, HILL & RITTER
By: /s/ JACK A. BJERKE
-------------------------------------
Jack A. Bjerke
<PAGE> 1
EXHIBIT 10.1
CHAMPIONSHIP AUTO RACING TEAMS, INC.
1997 STOCK OPTION PLAN
I. PURPOSE
The purpose of this 1997 Stock Option Plan (the "Plan") is to enable
Championship Auto Racing Teams, Inc. (the "Company"), and such of its
subsidiaries (as defined in Section 424(f) of the Internal Revenue Code of 1986
(the "Code")) as the Board of Directors of the Company (the "Board") shall from
time to time designate ("Participating Subsidiaries"), to attract and retain
qualified employees, and to provide such persons with additional motivation to
advance the interests of the Company and its Participating Subsidiaries. The
Plan provides for the grant of Stock Options, Limited Rights and Supplemental
Bonuses to employees of the Company.
II. CERTAIN DEFINITIONS
2.1 "CHANGE OF CONTROL". The term "Change of Control" shall mean any of
the following events:
(A) any Person, as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than Company, any trustee or other fiduciary
holding securities under an employee benefit plan of Company, or any company
owned, directly or indirectly, by the stockholders of Company in substantially
the same proportions as their ownership of stock of Company) is or becomes the
"Beneficial Owner" as defined in Rule 13d-3 under the Exchange Act, directly or
indirectly, of 25% or more of the combined voting power of Company's outstanding
securities;
(B) individuals who constitute the Board on the effective date
of the Plan (the "Incumbent Board") cease for any reason to constitute at least
a majority thereof, provided that any Person becoming a director subsequent to
such effective date whose election, or nomination for election by Company's
stockholders, was approved by a vote of at least a majority of the directors
comprising the Incumbent Board (either by a specific vote or by approval of the
proxy statement of Company in which such person is named as a nominee for
director, without objection to such nomination) shall be, for purposes of this
clause (B), considered as though such Person were a member of the Incumbent
Board.
(C) the stockholders of the Company shall approve a merger,
consolidation, recapitalization, or reorganization of the Company, a reverse
stock split of outstanding voting securities, or consummation of any such
transaction if stockholder approval is not obtained, other than (1) any such
transaction which would result in at least 50% of the total voting power
represented by the voting securities of the surviving entity outstanding
immediately after such transaction being "Beneficially Owned" (as defined above)
by 75% or more of the holders of outstanding voting securities of the Company
immediately prior to the transaction, with the voting power of each such
continuing holder relative to other such continuing holders not substantially
altered in the transaction, or (2) a merger or consolidation effected to
implement a recapitalization of Company (or similar transaction) in which no
"Person" (as defined above) acquires more than 50% of the combined voting power
of the Company's then outstanding securities; or
<PAGE> 2
(D) the stockholders of Company approve a plan of complete
liquidation of Company or an agreement for the sale or disposition by Company of
all or substantially all of Company's assets.
Notwithstanding anything in the foregoing to the contrary, no Change of Control
shall be deemed to have occurred with respect to any particular Employee by
virtue of any transaction which results in such Employee, or a group of Persons
which includes such Employee, acquiring, directly or indirectly, 25% or more of
the combined voting power of the Company's outstanding securities.
2.2 "COMMON STOCK". Common Stock means Common Stock, par value $0.01
share of the Company.
2.3 "DISINTERESTED PERSON". A Disinterested Person is a person who, at
the time he exercises discretion in administering the Plan, qualifies as a
"disinterested person" under Rule 16b-3(c)(2) under the Exchange Act.
2.4 "EMPLOYEE". An Employee is an employee of the Company or any
Participating Subsidiary.
2.5 "EXCHANGE ACT". "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time.
2.6 "FAIR MARKET VALUE". The Fair Market Value of a share of Common
Stock on any date shall be the closing price of Common Stock as reported in the
Wall Street Journal for securities listed on the NASDAQ or the New York Stock
Exchange for the date in question, or if no such closing price is available, the
closing price on the next preceding date for which a closing price was so
reported, unless otherwise specified by the Subcommittee.
2.7 "LIMITED RIGHT". A Limited Right is the right to receive payment,
in cash, following a Change of Control, of an amount equal to the product
computed by multiplying (i) the excess of (A) the higher of (x) the Minimum
Price Per Share, if the Change of Control occurs as a result of a Transaction,
tender offer or exchange offer, or (y) the highest Fair Market Value per share
during the period commencing thirty days prior to the Change of Control and
ending immediately prior to the date the Limited Right is exercised, over (B)
the Option Price per share under the Stock Option to which such Limited Right
relates, by (ii) the number of shares of Common Stock as to which such Limited
Right is being exercised provided that, in the case of any ISO, the amount
computed under part (A) of the foregoing formula shall be equal to the Fair
Market Value of Common Stock on the date the Limited Right is in fact exercised,
and provided further that, in the case of any other Limited Right that has not
been outstanding at least seven months at the time the Change of Control occurs,
the amount computed under part (A) of the foregoing formula shall be equal to
the highest amount that could be computed under part (y) of such formula using a
Fair Market Value that first became determinable six months or more after
<PAGE> 3
the date of grant of the Limited Right (with such Fair Market Value otherwise
determined in accordance with the foregoing formula).
2.8 "MINIMUM PRICE PER SHARE". Minimum Price Per Share means the
highest gross price (before brokerage commissions and soliciting dealer's fees)
paid or to be paid for a share of Common Stock (whether by way of exchange,
conversion, distribution or upon liquidation or otherwise) in any Transaction,
tender offer or exchange offer occurring prior to the date on which such Limited
Right is exercised. If the consideration paid or to be paid in any such
Transaction, tender offer or exchange offer shall consist, in whole or in part,
of consideration other than cash, the Subcommittee shall take such action, as in
its judgment it deems appropriate, to establish the cash value of such
consideration, but such valuation shall not be less than the value, if any,
attributed to such consideration in writing by any party to such Transaction,
tender offer or exchange offer other than the Company.
2.9 "PARTICIPANT". A Participant is an Employee to whom a Stock Option,
Limited Right or Supplemental Bonus is granted.
2.10 "STOCK OPTION". A Stock Option is the right granted under the Plan
to an Employee to purchase, at such time or times and at such price or prices
("Option Price") as are determined by the Subcommittee, the number of shares of
Common Stock determined by the Subcommittee.
2.11 "SUBCOMMITTEE". Subcommittee means the Committee described in
Section IV.
2.12 "SUPPLEMENTAL BONUS". A Supplemental Bonus is the right to receive
payment, in shares of Common Stock, cash or a combination of shares of Common
Stock and cash, of an amount specified by the Subcommittee pursuant to Section
7.6.
2.13 "TRANSACTION". A Transaction is (A) any consolidation or merger of
the Company in which the Company is not the surviving corporation other than a
merger solely to effect a reincorporation or a merger of the Company as to which
stockholder approval is not required pursuant to Sections 251(f) or 253 of the
Delaware General Corporation Law, (B) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of 50% or more
of the assets or earnings power of the Company, or (C) the adoption of any plan
or proposal for the liquidation or dissolution of the Company.
For purposes of this Plan, the Subcommittee may, by resolution, clarify the date
as of which a Change of Control shall be deemed to have occurred.
III. INCENTIVE STOCK OPTIONS AND NONSTATUTORY STOCK OPTIONS
The Stock Options granted under the Plan may be either:
(a) Incentive Stock Options ("ISOs") which are intended to be "incentive stock
options" as that term is defined in Section 422 of the Code: or
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(b) Nonstatutory Stock Options ("NSOs") which are intended to be options that do
not qualify as "incentive stock options" under Section 422 of the Code.
The individual Option Agreement(s) shall clearly designate whether the Stock
Options granted are ISOs or NSOs. Subject to other provisions of the Plan, a
Participant may receive ISOs and NSOs at the same time, provided that the ISOs
and NSOs are clearly designated as such.
Except as otherwise expressly provided herein, all of the provisions and
requirements of the Plan relating to Stock Options shall apply to ISOs and NSOs.
IV. ADMINISTRATION
4.1 SUBCOMMITTEE. The Plan shall be administered by a Subcommittee of
the Compensation Committee of the Board. The Subcommittee shall consist of at
least two members of the Board of Directors who are not employed by the Company
and who shall be Disinterested Persons. Subject to the provisions of the Plan,
the Subcommittee shall have full authority to administer the Plan, including
authority to grant awards under the Plan and determine the terms thereof, to
interpret and construe any provision of the Plan and any Stock Option, Limited
Right or Supplemental Bonus granted thereunder, to adopt such rules and
regulations for administering the Plan, including those it may deem necessary in
order to comply with the requirements of the Code or in order that Stock Options
that are intended to be ISOs will be classified as incentive stock options under
the Code, or in order to conform to any regulation or to any change in any law
or regulation applicable thereto and to make all other decisions and
determinations under the plan.
4.2 ACTIONS OF SUBCOMMITTEE. All actions taken and all interpretations
and determinations made by the Subcommittee in good faith (including
determinations of Fair Market Value) shall be final and binding upon all
Participants, the Company and all other interested persons. No member of the
Subcommittee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan, and all members of
the Subcommittee shall, in addition to their rights as directors, be fully
protected by the Company with respect to any such action, determination or
interpretation.
V. ELIGIBILITY AND PARTICIPATION
5.1 ELIGIBLE EMPLOYEES. Grants of Stock Options, Limited Rights and
Supplemental Bonuses may be made to Employees. Any director of the Company or of
a Participating Subsidiary who is also an Employee shall also be eligible, but
directors who are not Employees shall not be eligible, to receive Stock Options,
Limited Rights and Supplemental Bonuses under the Plan. The Subcommittee shall
from time to time determine the Employees to whom Stock Options shall be
granted, the number of shares of Common Stock subject to each Stock Option to be
granted to each such Employee, the Option Price of such Stock Options and the
terms and conditions of such Stock Options, subject to the provisions of this
Plan.
5.2 OPTION PRICE. Except as otherwise provided in Section 7.8, the
Option Price of any ISO or NSO shall not be less than the Fair Market Value of a
share of Common Stock on the date
<PAGE> 5
on which the Stock Option is granted and shall not be less than par value of
Common Stock. If an ISO is granted to an Employee who then owns stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company or any parent or subsidiary corporation of the Company, the Option Price
of such ISO shall be at least 110% of the Fair Market Value of the Common Stock
subject to the ISO on the date such ISO is granted, and such ISO shall not be
exercisable after five years after the date on which it was granted.
5.3 OPTION AGREEMENT. Each Stock Option shall be evidenced by a written
agreement ("Option Agreement") containing such terms and provisions as the
Subcommittee may determine, subject to the provisions of this Plan.
VI. SHARES OF COMMON STOCK SUBJECT TO THE PLAN
6.1 MAXIMUM NUMBER. The maximum aggregate number of shares of Common
Stock that may be issued under the Plan shall be 2,000,000 shares, subject to
adjustment as provided in Section 6.2. Such shares may be authorized and
unissued shares or may be treasury shares. The aggregate Fair Market Value
(determined as of the time the ISO is granted) of the Common Stock as to which
all ISOs granted to an individual may first become exercisable in a particular
calendar year may not exceed $100,000, provided that to the extent that Stock
Options intended to be ISOs (together with all incentive stock options granted
under other Company plans to such individual) become exercisable in a given year
in excess of this limit, such Stock Options shall be deemed to be NSOs and shall
be exercisable as such. If any shares of Common Stock subject to Stock Options
are not purchased or otherwise paid for before such Stock Options expire or
otherwise terminate, unless such Stock Options are surrendered upon exercise of
Limited Rights, such shares may again be made subject to Stock Options or
otherwise issued under the Plan. Shares shall be treated as issued under the
Plan and counted against the limitation set forth in this Section 6.1, including
with respect to the payment of Supplemental Bonuses, in a manner that complies
with applicable requirements under Rule 16b-3 under the Exchange Act.
6.2 CAPITAL CHANGES. In the event any changes are made to the shares of
Common Stock (whether by reason of merger, consolidation, reorganization,
recapitalization, stock dividend in excess of one percent (1%) at any single
time, stock split, combination of shares, exchange of shares, extraordinary cash
dividend, change in corporate structure or otherwise), the Subcommittee shall,
in order to prevent dilution or enlargement of Participants' rights, make
appropriate adjustments in: (i) the number and kind of shares theretofore made
subject to Stock Options, and in the Option Price of said shares; and (ii) the
aggregate number of shares which may be issued under the Plan. If any of the
foregoing adjustments shall result in a fractional share, the fraction shall be
disregarded, and the Company shall have no obligation to make any cash or other
payment with respect to such a fractional share.
VII. EXERCISE OF STOCK OPTIONS
7.1 TIME OF EXERCISE. Subject to the provisions of the Plan, including
without limitation Section 7.7, the Subcommittee, in its discretion, shall
determine the time when a Stock Option, or a portion of a Stock Option, shall
become exercisable, and the time when a Stock Option, or a portion of a Stock
Option, shall expire. Such time or times shall be set forth in the
<PAGE> 6
Option Agreement evidencing such Stock Option. An ISO shall expire, to the
extent not exercised, no later than the tenth anniversary of the date on which
it was granted, and an NSO shall expire, to the extent not exercised, no later
than 10 years and one day after the date on which it was granted. The
Subcommittee may accelerate the vesting of any Participant's Stock option by
giving written notice to the Participant. Unless otherwise determined by the
Subcommittee, the acceleration of the exercise period of a Stock Option shall
not affect the expiration date of that Stock Option.
7.2 SURRENDER OF SHARES IN PAYMENT OF EXERCISE PRICE. The Subcommittee,
in its sole discretion, may permit a Participant to surrender to the Company
shares of the Common Stock as part or full payment for the exercise of a Stock
Option. Such surrendered shares shall be valued at their Fair Market Value on
the date of exercise. Unless otherwise determined by the Subcommittee, any such
shares surrendered by the Participant shall have been held by him for at least
six months prior to surrender.
7.3 USE OF PROMISSORY NOTE: EXERCISE LOANS. The Subcommittee may, in
its sole discretion, impose terms and conditions, including conditions relating
to the manner and timing of payments of the Option Price, on the exercise of
Stock Options. Such terms and conditions may include, but are not limited to,
permitting a Participant to deliver to the Company his promissory note as
payment for the exercise of a Stock Option; provided that, with respect to any
promissory note given as payment or partial payment for the exercise of an ISO,
all terms of such note shall be determined at the time a Stock Option is granted
and set forth in the Option Agreement. The Subcommittee, in its sole discretion,
may authorize the Company to make a loan to a Participant in connection with the
exercise of Stock Options, or authorize the Company to arrange or guaranty loans
to a Participant by a third party, including in connection with broker assisted
cashless exercises. The foregoing notwithstanding, a Participant shall pay at
least the par value of the Common Stock to be acquired upon exercise of a Stock
Option in the form of lawful consideration under the Delaware General
Corporation Law prior to issuance of such shares.
7.4 STOCK RESTRICTION AGREEMENT. The Subcommittee may provide that
shares of Common Stock issuable upon the exercise of a Stock Option shall, under
certain conditions, be subject to restrictions whereby the Company has a right
of first refusal with respect to such shares or a right or obligation to
repurchase all or a portion of such shares, which restrictions may survive a
Participant's term of employment with the Company. The acceleration of time or
times at which the Stock Option becomes exercisable may be conditioned upon the
Participant's agreement to such restrictions.
7.5 TERMINATION OF EMPLOYMENT BEFORE EXERCISE. If a Participant's
employment with the Company or a Participating Subsidiary shall terminate for
any reason other than the Participant's disability, any ISO then held by the
Participant, to the extent then exercisable under the applicable Option
Agreement(s), shall remain exercisable after the termination of his employment
for a period of three months. If the Participant's employment is terminated
because the Participant is disabled within the meaning of Section 22(e)(3) of
the Code, any ISO then held by the Participant, to the extent then exercisable
under the applicable Option Agreement(s), shall remain exercisable after the
termination of his employment for a period of one year (but in no
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<PAGE> 7
event beyond ten years from the date of grant of the ISO). If the Stock Option
is not exercised during the applicable period, it shall be deemed to have been
forfeited and of no further force or effect. The period and extent to which an
NSO may be exercised following termination of employment shall be determined by
the Subcommittee.
7.6 GRANT OF SUPPLEMENTAL BONUSES. The Subcommittee, either at the time
of grant or at any time prior to exercise of any NSO or Limited Right, may
provide for a Supplemental Bonus from the Company or Participating Subsidiary in
connection with a specified number of shares of Common Stock then purchasable,
or which may become purchasable, under an NSO, or a specified number of Limited
Rights which may be or become exercisable. A Supplemental Bonus shall be
automatically payable upon the exercise of the NSO or Limited Right with regard
to which such Supplemental Bonus was granted. A Supplemental Bonus shall not
exceed the amount necessary to reimburse the Participant for the income tax
liability incurred by him upon the exercise of the NSO or upon the exercise of
such Limited Right, calculated using the maximum combined federal and applicable
state income tax rates then in effect and taking into account the tax liability
arising from the Participant's receipt of the Supplemental Bonus, all as
determined by the Subcommittee. The Subcommittee may, in its discretion, elect
to pay any part or all of the Supplemental Bonus in: (i) cash; (ii) shares of
Common Stock; or (iii) any combination of cash and shares of Common Stock;
provided that bonuses payable in respect of Limited Rights shall be payable only
in cash. The Subcommittee's election shall be made by giving written notice to
the Participant not later than 90 days after the related exercise, which notice
shall specify the portion which the Subcommittee elects to pay in cash, shares
of Common Stock or a combination thereof. In the event any portion is to be paid
in shares of Common Stock, the number of shares to be delivered shall be
determined by dividing the amount which the subcommittee elects to pay in shares
of Common Stock by the Fair Market Value of one share of Common Stock on the
date of exercise. Any fractional share resulting from any such calculation shall
be disregarded. Said shares, together with any cash payable to the Participant,
shall be delivered within said 90-day period.
7.7 OPTION VESTING UPON CHANGE OF CONTROL OF THE COMPANY. In the event
of a Change of Control of the Company, the vesting of Stock Options granted
pursuant to the Plan shall automatically be accelerated, so that all Stock
Options outstanding at the time of such Change of Control will be exercisable
immediately except as otherwise provided in Section 2.1.
7.8 STAND-ALONE, ADDITIONAL, TANDEM, AND SUBSTITUTE AWARDS. Awards
granted under the Plan may, in the discretion of the Subcommittee, be granted
either alone or in addition to, in tandem with, or in substitution for, any
other award granted under the Plan or any other plan of the Company or any
Participating Subsidiary or any other right of a Participant to receive payment
from the Company or any Participating Subsidiary. If an award is granted in
substitution for another such award, the Committee shall require the surrender
of such other award in consideration for the grant of the new award. Awards
granted in addition to or in tandem with other awards may be granted either as
of the same time as or a different time from the grant of such other awards. The
per share Option Price of any Stock Option:
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<PAGE> 8
(A) Granted in substitution for an outstanding award shall be
not less than the lesser of the Fair Market Value of a share of Common Stock at
the date such substitute award is granted or such Fair Market Value at that date
reduced to reflect the fair market value (as determined by the Subcommittee) at
that date of the award required to be surrendered by the Participant as a
condition to receipt of the substitute award; or
(B) Retroactively granted in tandem with an outstanding award
shall be not less than the lesser of the Fair Market Value of a share of Common
Stock at the date of grant of the later award or at the date of grant of the
earlier award.
Except for the Option Price required to be paid upon the exercise of Stock
Options and except as provided in this Section 7.8, only services may be
required as consideration for the grant of any award under the Plan.
VIII. LIMITED RIGHTS
8.1 GRANT OF LIMITED RIGHTS. The Subcommittee may in its discretion
grant Limited Rights to a Participant concurrently with the grant of each ISO or
at any time with respect to any NSO. Such Limited Rights shall be exercisable
with respect to the number of shares of Common Stock which are, or may become,
purchasable under any such Stock Option. The Subcommittee may, in its
discretion, specify the terms and conditions of such rights, including without
limitation the date or dates upon which such rights shall expire and become void
and unexercisable, except that Limited Rights granted with respect to an ISO
shall only be exercisable, and shall expire, at the time or times the ISO is
exercisable and expires, respectively. In any event, a Limited Right shall not
be exercisable within six months from the date of grant of the Limited Right.
Each Participant to whom Limited Rights are granted shall be given written
notice advising him of the grant of such rights and specifying the terms and
conditions of the rights, which shall be subject to all the provisions of this
Plan.
8.2 EXERCISE OF LIMITED RIGHTS. Subject to the limitations set forth in
Section 8.1, a Limited Right may be exercised only during the period beginning
on the first day following the occurrence of a Change of Control and ending on
the sixtieth day following such date; provided, however, that if the Change of
Control occurs prior to the expiration of six months after the date of grant of
a Limited Right, then such Limited Right shall be exercisable for a period of 60
days following expiration of such six-month period. Upon the occurrence of a
tender or exchange offer constituting a Change of Control, a Limited Right may
be exercised in such manner regardless of whether the Board supports or opposes
such tender or exchange offer. A Participant shall exercise his Limited Rights
by delivering a written notice to the Subcommittee specifying the number of
shares with respect to which he exercises Limited Rights and agreeing to
surrender the right to purchase an equivalent number of shares of Common Stock
subject to his Stock Option. If a Participant exercises Limited Rights, payment
of his Limited Rights shall be made in accordance with Section 8.3 on or before
the thirtieth day after the date of exercise of the Limited Rights. A Limited
Right shall remain exercisable during the exercise periods specified in
accordance with Section 8.1 and this Section in the event of a termination of
employment of the Participant holding the Limited Right after a Change of
Control. Notwithstanding the above, upon
8
<PAGE> 9
a termination of the employment of the holder of the Limited Right before the
occurrence of any Change of Control, the Limited Right shall expire immediately.
8.3 FORM OF PAYMENT. If a Participant elects to exercise Limited Rights
as provided in Section 8.2, the Company shall pay to the Participant in cash the
amount set forth in Section 2.7 hereof, calculated with respect to the shares as
to which the Participant has exercised Limited Rights, within thirty days of the
date of exercise of the Limited Rights. If such amount is not paid in full
within the prescribed period, the Company shall be liable to such Participant
for the costs of collection of such amount, including attorney's fees.
8.4 TERMINATION. When a Limited Right is exercised, the Stock Option to
which it relates, if any, shall cease to be exercisable to the extent of the
number of shares of Common Stock with respect to which such Limited Right was
exercised. Upon the exercise or termination of a Stock Option, any Limited Right
granted with respect thereto shall terminate to the extent of the number of
shares as to which such Stock Option was exercised or terminated.
IX. NO CONTRACT OF EMPLOYMENT
Nothing in this Plan shall confer upon the Participant the right to
continue in the employ of the Company, or any Participating Subsidiary, nor
shall it interfere in any way with the right of the Company, or any such
Participating Subsidiary, to discharge the Participant at any time for any
reason whatsoever, with or without cause. Nothing in this Article IX shall
affect any rights or obligations of the Company or any Participant under any
written contract of employment.
X. NO RIGHTS AS A STOCKHOLDER
A Participant shall have no rights as a stockholder with respect to any
shares of Common Stock subject to a Stock Option, until such Stock Option is
exercised. Except as provided in Section 6.2, no adjustment shall be made in the
number of shares of Common Stock issued to a Participant, or in any other rights
of the Participant upon exercise of a Stock Option by reason of any dividend,
distribution or other right granted to stockholders for which the record date is
prior to the date of exercise of the Participant's Stock Option.
XI. NON-TRANSFERABILITY
No Stock Option, Limited Right or Supplemental Bonus right granted
under this Plan, nor any other rights acquired by a Participant under this Plan,
shall be assignable or transferable by a Participant, other than by will or the
laws of descent and distribution, or pursuant to a qualified domestic relations
order as defined under the Internal Revenue Code or Title I of the Employee
Retirement Income Security Act of 1974, and any ISO shall be exercisable, during
his lifetime, only by him. In the event of a Participant's death, the Stock
Option or any Limited Right or Supplemental Bonus right may be exercised by the
Personal Representative of the Participant's estate or, if no Personal
Representative has been appointed, by the successor or successors in interest
determined under the Participant's will or under the applicable laws of descent
and distribution.
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<PAGE> 10
XII. COMPLIANCE WITH RULE 16B-3
It is the intent of the Company that the Plan comply in all respects with Rule
l*b-3 under the Exchange Act in connection with any award granted to a person
who is subject to Section 16 of the Exchange Act. Accordingly, if any provision
of the Plan or any agreement hereunder does not comply with the requirements of
Rule 16b-3 as then applicable to any such person, such provision shall be
construed or deemed amended to the extent necessary to conform to such
requirements with respect to such person.
XIII. AMENDMENT
The Company by action of the Board may amend, modify or terminate this
Plan at any time or, by action of the Subcommittee may amend, modify or
terminate any outstanding Option Agreement, except that any such amendment,
modification or termination of the Plan shall be subject to the approval of the
Company's stockholders within one year after such Board action if such
stockholder approval is required by any federal or state law or regulation or
the rules of any stock exchange or automated quotation system on which the
Common Stock may be listed or quoted, or if the Board in its discretion
determines that obtaining such stockholder approval is for any reason advisable.
Moreover, no action may be taken by the Company without the consent of the
affected Participant which will materially impair the rights of any Participant
under any award then outstanding or which will prevent an ISO from continuing to
qualify under Section 422 of the Code.
XIV. REGISTRATION OF OPTIONED SHARES
No Stock Option shall be exercisable unless the Company's sale of such
optioned shares is pursuant to an applicable effective registration statement
under the Securities Act of 1933, as amended, or unless, in the opinion of
counsel to the Company, the Company's sale of such optioned shares would be
exempt from the registration requirements of the Securities Act of 1933, as
amended, and unless, in the opinion of such counsel, such sale would be exempt
from the registration or qualification requirements of applicable state
securities law.
XV. WITHHOLDING TAXES
The Company or a Participating Subsidiary may take such steps as the
Subcommittee may deem necessary or appropriate for the withholding of any taxes
which the Company or the Participating Subsidiary is required by any law or
regulation or any governmental authority, whether federal, state or local,
domestic or foreign, to withhold in connection with any Stock Option, Limited
Right or Supplemental Bonus, and to take such other action as the Subcommittee
may deem necessary or advisable to enable the Company and Participants to
satisfy obligations for the payment of tax liabilities in excess of such
withholding obligations relating to any such award. This authority shall include
authority to withhold or receive shares or other property and to make cash
payments in respect thereof in satisfaction of Participant's tax obligations.
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<PAGE> 11
XVI. FINANCING ARRANGEMENTS
The Subcommittee, in its discretion, may enter into arrangements with
one or more banks, brokers or other financial institutions to facilitate the
exercise, and the disposition of shares acquired upon exercise of Stock Options
or Supplemental Bonuses, including, without limitation, arrangements for the
simultaneous exercise of Stock Options (including a related Supplemental Bonus),
and sale of the shares acquired upon such exercise.
XVII. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board nor the submission of the
Plan to stockholders of the Company for approval shall be construed as creating
any limitations on the power or authority of the Board to adopt such other or
additional incentive or other compensation arrangements of whatever nature as
the Board may deem necessary or desirable or preclude or limit the continuation
of any other plan, practice or arrangement for the payment of compensation or
fringe benefits to employees generally, or to any class or group of employees,
which the Company or any subsidiary now has lawfully put into effect, including,
without limitation, any retirement, pension, savings and stock purchase plan,
insurance, death and disability benefits and executive short-term incentive
plans.
XVIII. EFFECTIVE DATE
This Plan was adopted by the Board of Directors and became effective on
December 19, 1997 and was approved by the Company's stockholders at the
stockholders' meeting in 1997 by the affirmative votes of the holders of a
majority of shares present in person or represented by proxy, and entitled to
vote at such meeting, or any adjournment thereof, or by the written consent of
the holders of a majority of shares entitled to vote, in each case in accordance
with applicable provisions of the Delaware General Corporation Law. Any Stock
Options, Limited Rights, or Supplemental Bonus granted under the Plan prior to
such approval of stockholders shall be effective when granted (unless, with
respect to any such award, the Subcommittee specifies otherwise at the time of
grant), but no such award may be exercised prior to such stockholder approval,
and if stockholders fail to approve the Plan as specified hereunder, any such
award shall be canceled. No ISO shall be granted subsequent to ten years after
the effective date of the Plan. Unless earlier terminated by the Board, the Plan
shall terminate when no shares of Common Stock remain reserved and available for
issuance and the Company has no further obligation with respect to any award
granted under the Plan.
<PAGE> 12
DECEMBER __, 1997
CHAMPIONSHIP AUTO RACING TEAMS, INC.
1997 STOCK OPTION PLAN
EMPLOYEE STOCK OPTION AND LIMITED RIGHT AGREEMENT
Agreement made as of ___________________ by and between CHAMPIONSHIP
AUTO RACING TEAMS, INC. (the "Company") and __________________ (the "Employee").
It is hereby agreed as follows:
1. GRANT OF OPTION AND LIMITED RIGHT; CONSIDERATION. The Company hereby
confirms the grant, pursuant to Section VII of the Company's 1997 Stock Option
Plan (the "Plan"), to the Employee on ________________ of a nonqualified stock
option to purchase up to _______ shares of the Company's Common Stock, par value
$0.01 per share (the "Shares"), at an exercise price of $_____ per share (the
"Option"), together with the grant of a Limited Right pursuant to Section VIII
of the Plan (the "Limited Right"). The Option granted hereunder is not intended
to constitute an incentive stock option within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended. The terms of the Option and Limited
Right are subject to adjustment in certain circumstances, as provided in the
Plan.
The Employee shall be required to pay no consideration for the grant of
the Option and Limited Right, except for his agreement to serve as an employee
of the Company or any subsidiary and other agreements set forth herein. No right
to a Supplemental Bonus is granted hereunder.
2. INCORPORATION OF PLAN BY REFERENCE. The Option and Limited Right
have been granted to the Employee under the Plan, a copy of which is attached
hereto. All of the terms, conditions, and other provisions of the Plan are
hereby incorporated by reference into this Employee Stock Option and Limited
Right Agreement (the "Agreement"). Capitalized terms used in this Agreement but
not defined herein shall have the same meanings as in the Plan. If there is any
conflict between the provisions of this Agreement and the provisions of the
Plan, the provisions of the Plan shall govern.
3. OTHER OPTION TERMS. Subject to all of the terms and conditions of
the Plan and this Agreement, including acceleration of exercisability in the
event of a Change of Control (as provided under Section 7.7 of the Plan), the
Employee may purchase up to ______ Shares upon exercise of this Option on or
after ______________, 1998, an additional ________ Shares upon exercise of this
Option on or after _____________, 1999, and the remaining _______ Shares upon
exercise of this Option on or after __________ , 2000.
<PAGE> 13
This Option, to the extent it or the related Limited Right has not been
previously exercised, shall expire at 5:00 p.m. (Pacific Time) on ___________,
2007 or, if earlier, at 5:00 p.m. (Eastern Time):
(i) on the date 12 months after the Employee ceases to be employed
by the Company or any Subsidiary due to death, disability,
retirement at normal retirement age, early retirement with the
consent of the Subcommittee, or due to involuntary termination
by the Company;
(ii) on the date of termination in the event the Employee ceases to
be employed by the Company or any Subsidiary due to
termination for "cause," as hereinafter defined; or
(iii) on the date 12 months after termination in the event the
Employee ceases to be employed by the Company or any
Subsidiary due to termination by mutual agreement of the
Company and the Employee, provided that Employee enters into a
termination agreement in form and substance satisfactory to
the Subcommittee; or
(iv) on the date three months after the Employee ceases to be
employed by the Company or any Subsidiary in the event of
termination for any reason other than those set forth in (i)
or (ii) above;
PROVIDED, HOWEVER, that, except in the case of a termination subject to (iii)
above, the Option shall be exercisable after the date of such termination of
Employee's employment only to the extent the Option was exercisable at the date
of such termination.
The term "cause" when referring to termination by Company means only the
following and any other termination shall be without cause:
Employee's gross dereliction of his duties; (ii) theft or
misappropriation of any property of Company by Employee or (iii) violation by
Employee of the provisions of this Agreement; provided that, termination for
violation by Employee of the provisions of this Agreement shall occur only after
30 days' advance written notice by Company to Employee containing reasonably
specific details of the alleged breach and failure to cure the same within such
30 day period.
The Option may be exercised in whole or in part (to the extent then
exercisable) by delivery to and receipt by the Secretary of the Company at 755
W. Big Beaver, Suite 800, Troy, MI 48084, of a written notice, signed by the
Employee, specifying that this Option is being exercised for the number of
Shares which the Employee wishes to purchase, accompanied by payment in full of
the exercise price in cash (including by check) or by surrender of shares of
Common Stock acquired by the Employee at least six months prior to the exercise
date (if the repurchase of shares by the Company is then permissible under
applicable law), or a combination of a cash payment and such a surrender of
shares, by means of a broker-assisted cashless exercise to the extent then
permitted under Rules and Regulations adopted by the Subcommittee, or in
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<PAGE> 14
such other manner as may then be permitted under Rules and Regulations adopted
by the Subcommittee. As soon as practicable after the valid exercise of the
Option, the Company shall deliver to the Employee one or more stock certificates
representing the Shares so purchased, with any requisite legend affixed.
4. OTHER TERMS OF THE LIMITED RIGHT. The Limited Right may only be
exercised during the limited period of time following a Change of Control
specified in the Section VIII of the Plan, and subject to the restrictions set
forth therein. The Limited Right may be exercised in whole or in part (to the
extent then exercisable) by delivery to and receipt by the Secretary of the
Company at the address set forth above of a written notice, signed by the
Employee, specifying that the Limited Right is being exercised with respect to a
specified number of Shares subject to the Option. The exercise of the Limited
Right with respect to an Option shall be deemed a surrender and cancellation of
the Option or portion of the Option with respect to which the Limited Right is
exercised, and the Limited Right shall not be exercisable with respect to any
portion of an Option that has previously been exercised or surrendered or has
previously expired. Payment of cash to the Employee upon exercise of the Limited
Right shall be made in accordance with Section 8.3 of the Plan.
Other provisions of the Agreement notwithstanding, the Employee, if he
is then subject to Section 16(b) of the Exchange Act, may not exercise a Limited
Right at any time that such exercise would cause such Employee to actually incur
short-swing profits liability under Section 16(b).
5. NON-TRANSFERABILITY. No right or interest of the Employee in the
Option or related Limited Right shall be pledged, encumbered, or hypothecated to
or in favor of any third party or shall be subject to any lien, obligation, or
liability of the Employee to any third party. The Option and related Limited
Right shall not be transferable to any third party by the Employee otherwise
than by will or the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined under the Internal Revenue Code or Title I
of the Employee Retirement Income Security Act of 1974 ("ERISA").
6. COMPLIANCE WITH LAWS AND REGULATIONS. The obligation of the Company
to deliver Shares upon the exercise of this Option is conditioned upon
compliance by the Employee and by the Company with all applicable laws and
regulations, including regulations of federal and state agencies. If requested
by the Company, the Employee shall provide to the Company, as a condition to the
valid exercise of this Option and the delivery of any certificates representing
Shares, appropriate evidence, satisfactory in form and substance to the Company,
that he is acquiring the Shares for investment and not with a view to the
distribution of the Shares or any interest in the Shares, and a representation
to the effect that the Employee shall make no sale or other disposition of the
Shares unless (i) the Company shall have received an opinion of counsel
satisfactory to it in form and substance that such sale or other disposition may
be made without compliance with registration or other applicable requirements of
federal and state laws and regulations, or (ii) all steps required to comply
with such laws and regulations in connection with the sale or other disposition
of the Shares have been taken and all necessary approvals have been received.
The certificates representing the Shares may bear an appropriate legend giving
notice of
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the foregoing restrictions on transfer of the Shares, and any other
restrictive legend deemed necessary or appropriate by the Subcommittee.
7. TAX WITHHOLDING. Whenever Shares are to be delivered upon exercise
of the Option or cash is to be paid upon exercise of a Limited Right, the
Company shall be entitled to require as a condition of delivery or payment that
the Employee remit or, in appropriate cases, agree to remit when due an amount
sufficient to satisfy all federal, state, and local withholding tax requirements
relating thereto. The Employee will be entitled to elect to have the Company
withhold from the Shares to be delivered upon the exercise of the Option, or to
elect to deliver to the Company from shares of the Company's common stock owned
separately by the Employee, a sufficient number of such shares to satisfy the
Employee's federal, state, and local withholding tax obligations relating to the
Option exercise to the extent then permitted under Rules and Regulations adopted
by the Subcommittee and in effect at the time of the exercise of the Option. In
such case, the Shares withheld or the shares surrendered will be valued at the
Fair Market Value at the time of the exercise of the Option.
8. EMPLOYEE BOUND BY PLAN. The Employee hereby acknowledges receipt of
the attached copy of the Plan and agrees to be bound by all the terms and
provisions thereof (as presently in effect or hereafter amended), and by all
decisions and determinations of the Subcommittee.
9. BINDING EFFECT: INTEGRATION: NO OTHER RIGHTS CREATED. This Agreement
shall be binding upon the heirs, executors, administrators and successors of the
parties. This Agreement constitutes the entire agreement between the parties
with respect to the Option, and supersedes any prior agreements or documents
with respect to the Option. No amendment, alteration, suspension,
discontinuation or termination of this Agreement which may impose any additional
obligation upon the Company or impair the rights of the Employee with respect to
the Option shall be valid unless in each instance such amendment, alteration,
suspension, discontinuation or termination is expressed in a written instrument
duly executed in the name and on behalf of the Company and by the Employee.
Neither this Agreement nor the grant of the Option and Limited Right shall
constitute an employment agreement, nor shall either confer upon the Employee
any right with respect to his continued status as a director of the Company. The
Employee shall remain subject to termination of his status as a director to the
same extent as though this Agreement did not exist and no grant of an Option or
Limited Right were made.
CHAMPIONSHIP AUTO RACING TEAMS, INC.
BY:
--------------------------------------
TITLE: President
EMPLOYEE:
------------------------------------------
Attachment (copy of the Plan)
<PAGE> 1
Exhibit 10.2
CHAMPIONSHIP AUTO RACING TEAMS, INC.
DIRECTOR STOCK OPTION PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE DESCRIPTION PAGE
- ------- ----------- ----
<S> <C>
1. PURPOSE............................................................................2
2. ADMINISTRATION.....................................................................2
3. ELIGIBILITY........................................................................3
4. COMMON STOCK.......................................................................3
5. REQUIRED TERMS AND CONDITIONS OF NONQUALIFIED OPTIONS..............................4
6. EXPIRATION OF OPTION...............................................................5
7. METHOD OF EXERCISE.................................................................6
8. ADJUSTMENTS........................................................................7
9. OPTION AGREEMENTS..................................................................7
10. LEGAL AND OTHER REQUIREMENTS.....................................................8
11. NONTRANSFERABILITY...............................................................8
12. INDEMNIFICATION OF COMMITTEE.....................................................8
13. TERMINATION AND AMENDMENT OF PLAN................................................9
14. EFFECTIVE DATE OF PLAN...........................................................9
</TABLE>
<PAGE> 3
CHAMPIONSHIP AUTO RACING TEAMS, INC.
DIRECTOR STOCK OPTION PLAN
1. PURPOSE
The purpose of the Championship Auto Racing Teams, Inc., Director Stock
Option Plan (the "Plan"), as hereinafter set forth, is to Championship
Auto Racing Teams, Inc., a Delaware corporation (the "Company"), or any
successor corporation, to attract, retain and reward non-employee
Directors; to foster a wide-spread sense of ownership and commitment by
offering them an opportunity to have long-term compensation, a greater
proprietary interest in and closer identity with the Company and with
its financial success; provided, however, that the exercise of Options
shall be subject to the restrictions of Section 6. Proceeds of cash or
property received by the Company from the sale of Common Stock pursuant
to Options granted under the Plan will be used for general corporate
purposes. The use of the terms "Options" herein shall refer to both
Fixed Options and Elected Options.
2. ADMINISTRATION
The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Company (the "Board").
Subject to the express provisions of the Plan, the Committee may
interpret the Plan, prescribe, amend and rescind rules and regulations
relating to it, provide for the terms of the Option Agreements for
Fixed and Elected Options, and make such other determinations as it
deems necessary or advisable for the administration of the Plan. The
decisions of the Committee on matters within their jurisdiction under
the Plan shall be conclusive and binding. No member of the Board or the
Committee shall be liable for any action taken or determination made in
good faith.
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<PAGE> 4
3. ELIGIBILITY
Options are granted under this Plan only to nonemployee Directors, of
the Company, or its subsidiaries and not Franchise Holders (referred to
as "Participants"), who are current and active members of the Board of
Directors of the Company or a subsidiary. Beginning in 1998,
Participants are eligible for Options if they are non-employee
Directors and not Franchise Holders. Directors of the Company following
the adjournment of the Company's Annual Meeting of Shareholders for
that year (the "Annual Meeting"), and will continue to participate each
year thereafter so long as they are a Director immediately preceding
such Annual Meeting and have been reelected or otherwise remain as a
Director immediately thereafter.
4. COMMON STOCK
Options may be granted under the Plan for a number of shares not to
exceed, in the aggregate, ___________ shares of Common Stock of the
Company, except as such number of shares shall be adjusted in
accordance with the provisions of Section 8 hereof. Such shares may be
either authorized but unissued shares or treasury shares. In the event
that any Option granted under the Plan expires unexercised, or is
surrendered by a participant for cancellation, or is terminated, or
ceases to be exercisable for any other reason without having been fully
exercised prior to the end of the period during which Options may be
granted under the Plan, the shares theretofore subject to such Option,
or to the unexercised portion thereof, shall again become available for
new Options to be granted under the Plan to any eligible participant
(including the holder of such former Option) at an Option price
determined in accordance with Sections 5(a) and (b) hereof, which price
may then be greater or less than the Option price of such former
Option.
3
<PAGE> 5
5. REQUIRED TERMS AND CONDITIONS OF NONQUALIFIED OPTIONS
The Options granted under the Plan shall be in the following form:
(a) SHARES UNDER FIXED OPTIONS
Each Participant on the effective date of this Plan shall
automatically be granted Options for ______ Shares. Each
individual first elected to serve as a director of the Company
after the effective date of this Plan shall, upon such
election, automatically be granted Options for ______ Shares
("Fixed Options"). In addition, commencing immediately after
the adjournment of the Company's Annual Meeting continuing on
an annual basis immediately following the adjournment of each
Annual Meeting, each Participant whose term did not expire at
that Annual Meeting and who has then served as a director of
the Company continuously since the previous Annual Meeting
shall automatically be granted an additional Option for ______
Shares ("Fixed Options").
The exercise price per share of each Fixed Option to purchase
Common Stock shall be equal to the Fair Market Value of the
stock on the day of grant.
(b) SHARES UNDER ELECTED OPTIONS
Each Participant shall be eligible to receive additional
Options, if, prior to March 1 of that year, the Participant
files with the Secretary of the Company an irrevocable
election to receive a stock option in lieu of the annual
retainer to be earned in the following year beginning March 1
and ending February 28 (or February 29, as the case may be)
(called "Elected Options").
The number of Elected Option shares granted to a Participant
will be determined by a formula which provides that each
Participant will receive an option equal to the nearest number
of whole shares equivalent to the participant's Annual
Retainer divided by the fair market value of the stock per
share less $1.00. "Annual Retainer" is defined as the amount
to which the participant will be entitled to receive for
serving as a director during the Plan year (from one annual
meeting until the next), but does not include fees directly
associated with service on any committee of the Board of
Directors.
The exercise price of each Elected Option to purchase Common
Stock shall be equal to one dollar ($1.00) per share less than
the Fair Market Value of the stock on the day of grant.
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<PAGE> 6
(c) MAXIMUM TERM
No Option shall be exercisable after the expiration of ten
(10) years from the date it is granted.
(d) TIME OF EXERCISE
All Options granted under the Plan shall be immediately
exercisable.
(e) FAIR MARKET VALUE
If the Company's Common Stock is listed on a national
securities exchange at the date of grant, Fair Market Value
per share shall mean the average of the highest and lowest
selling price of a share on such exchange on such date or, if
there were no sales on said date, then on the next prior
business day on which there were sales.
If the Company's Common Stock is traded other than on a
national securities exchange at the date of the grant of the Option, Fair Market
Value per share shall mean an amount not less than the average between the bid
and asked price of a share on the Option date, as reported by NASDAQ or, if
there is no bid and asked price on said date, then on the next prior business
day on which there was a bid and asked price. If no such bid and asked price is
available, then the Committee shall make a good faith determination of the Fair
Market Value of a share, using any reasonable method of valuation.
6. EXPIRATION OF OPTION
(a) GENERAL RULE
Each Option shall expire on the earlier of the date set forth
in the Option agreement (which shall not exceed the maximum
term permitted by this Plan) or, if earlier on the applicable
date specified in the following subsection of this Section 6.
3
(b) EXPIRATION UPON TERMINATION OF DIRECTORSHIP
Each Option shall expire on the date that the directorship of
the optionee with the Company terminates for any reason other
than disability, death, retirement or death following
retirement; provided, however, that the Committee, in its sole
discretion, may permit such Participant to exercise the Option
during a period of up to ninety (90) days following his/her
directorship termination.
5
<PAGE> 7
(c) EXPIRATION UPON DISABILITY OR DEATH
If the participant ceases to be a Director of the Company by
reason of disability (as determined by the Committee) or by
reason of death, his/her Options, if any, shall expire on the
first anniversary of such termination of directorship.
(d) EXPIRATION UPON RETIREMENT
If the participant ceases to be a Director of the Company due
to retirement with the consent of the Company, his/her
Options, if any, shall expire ninety (90) days after the date
of such termination of directorship. If an optionee who has so
retired dies prior to exercising in full an Option which has
not expired pursuant to the preceding sentence, then
notwithstanding the preceding sentence, his/her Options shall
expire on the first anniversary of the date of the optionee's
death.
(e) EXPIRATION FOR CAUSE
If the participant ceases to be a Director of the Company for
cause, his/her Options, if any, shall expire on the date of
termination. For purposes of the Plan, termination "for cause"
shall mean termination because the optionee engaged in
dishonest or fraudulent conduct in the performance of his/her
duties for the Company or its subsidiaries.
7. METHOD OF EXERCISE
Subject to any restrictions contained herein, Options may be exercised
by the Participant giving written notice to the Secretary of the
Company stating the number of shares of Common Stock with respect to
which the Option is being exercised and tendering payment therefor.
Payment for Common Stock, whether in cash, other shares of Common Stock
or other property, shall be made in full at the time that an Option, or
any part thereof, is exercised.
6
<PAGE> 8
8. ADJUSTMENTS
(a) The aggregate number of shares of Common Stock with respect to
which Options may be granted hereunder, the number of shares
of Common Stock subject to each outstanding Option and the
Option price per share for each such Option may all be
appropriately adjusted, as the Committee may determine, for
any increase or decrease in the number of shares of issued
Common Stock of the Company resulting from a subdivision or
consolidation of shares whether through merger, consolidation,
recapitalization, reorganization, payment of a share dividend
or other increase or decrease in the number of such shares
outstanding effected without receipt of consideration by the
Company.
(b) On the basis of information known to the Company, the Board or
the Committee shall make all determinations under this Section
8, including whether a transaction involves a sale of
substantially all the Company's assets, and all such
determinations shall be conclusive and binding.
9. OPTION AGREEMENTS
Each participant shall agree to such terms and conditions in connection
with the exercise of an Option, including restrictions on the
disposition of the Common Stock acquired upon the exercise thereof, as
the Committee may deem appropriate. The certificates evidencing the
shares of Common Stock acquired upon exercise of an Option may bear a
legend referring to the terms and conditions contained in the
respective Option agreement and the Plan, and the Company may place a
stop transfer order with its transfer agent against the transfer of
such shares. If requested to do so by the Committee at the time of
exercise of an Option, each participant shall execute a certificate
indicating that the participant is purchasing the Common Stock under
such Option for investment and not with any present intention to sell
the same. Upon the exercise of an Option, the Company shall have the
right to deduct from any cash payments otherwise due to the participant
any amounts required to be withheld under any Federal, state or local
income tax laws.
<PAGE> 9
10. LEGAL AND OTHER REQUIREMENTS
The obligation of the Company to grant any option or to sell and
deliver Common Stock under any Option granted under the Plan shall be
subject to all applicable laws, regulations, rules and approvals,
including, but not by way of limitation, securities laws, rules and
regulations and the effectiveness of a registration statement under the
Securities Act of 1933, if deemed necessary or appropriate by the
Board, of the Common Stock reserved for issuance upon exercise of
Options. A participant shall have no rights as a stockholder with
respect to any shares covered by an Option granted to or exercised by
the participant until the date of delivery of a stock certificate for
such shares. No adjustment other than pursuant to Section 8 hereof
shall be made for dividends or other rights for which the record date
is prior to the date such stock certificate is delivered.
11. NONTRANSFERABILITY
During the lifetime of a participant, any Option granted shall be
exercisable only by the participant or the participant's guardian or
legal representative. No Option shall be assignable or transferable by
the Participant, except by will or by the laws of descent or
distribution. The granting of an Option shall impose no obligation upon
the participant to exercise such Option or right.
12. INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification as they may have as
Directors or as members of the Committee, the members of the Committee
shall be indemnified by the Company against the reasonable expenses,
including attorneys' fees actually and necessarily incurred with the
defense of any action, suit or proceeding (or in connection with any
appeal therein), to which they or any of them may be a party by reason
of any action taken or failure to act under or in connection with the
Plan or any Option granted hereunder, and against all amounts paid by
them in settlement thereof or paid by them in satisfaction of a
judgment in any such action, suit or proceeding, so long as such
Committee member acted in good faith, received no improper benefit,
believed his/her conduct was in the best interests of the Company and,
in the case of a criminal proceeding, had no reasonable cause to
believe his/her conduct was unlawful. Indemnification may take the form
of paying attorneys' fees and expenses as they accrue and advancing
attorneys' fees and expenses to the affected Committee member.
<PAGE> 10
13. TERMINATION AND AMENDMENT OF PLAN
No Options shall be granted under the Plan more than ten (10) years
after the date the Plan was adopted by the Board. The Board, acting by
a majority of its members without further action on the part of the
stockholders, may from time to time alter, amend or suspend the Plan or
any Option granted hereunder or may at any time terminate the Plan;
provided, however, the Board may not:
(1) (Except as provided in Section 8 hereof) change the
total number of shares of Common Stock available for
Options under the Plan;
(2) Extend the duration of the Plan;
(3) Increase the maximum term of Option;
(4) Decrease the minimum Option price or otherwise
materially increase the benefits accruing to
participants under the Plan; or
(5) Materially modify the eligibility requirements of
the Plan;
and provided further that no such action shall materially and adversely
affect any outstanding Options without the consent of the respective
optionees.
14. EFFECTIVE DATE OF PLAN
The Plan shall become effective upon adoption by the Board; provided,
however, that it shall be submitted for approval by the holders of a
majority of the outstanding shares of Common Stock of the Company
within twelve (12) months thereafter, and Options granted prior to such
stockholder approval shall become null and void if such stockholder
approval is not obtained.
9
<PAGE> 1
Exhibit 10.3
CHAMPIONSHIP AUTO RACING TEAMS, INC.
EMPLOYMENT AGREEMENT
ANDREW H. CRAIG
---------------
This Employment Agreement (the "Agreement") is entered into as of
December __, 1997 by Championship Auto Racing Teams, Inc., a Delaware
corporation ("Company") and Andrew H. Craig ("Employee").
In consideration of the promises below, the parties agree as follows.
1. TITLE. Employee shall hold the title of President and Chief
Executive Officer.
2. DUTIES.
2.1. GENERAL DUTIES. Employee shall undertake and render
services as may from time to time be assigned to him by the Board of Directors
or their designees. The duties shall be reasonably consistent with Employee's
experiences.
2.2. OUTSIDE ACTIVITIES. Employee shall devote his full time
to the performance of his duties, and agrees that his first duty of loyalty is
to Company. Except with the express written consent of the Board of Directors,
Employee shall not, directly or indirectly, alone or as a member of any
partnership, or as an officer, director or employee of any other corporation,
partnership or other organization, be actively engaged in any other duties or
pursuits which interfere or compete with the performance of his duties under
this Agreement.
3. TERM. This Agreement shall commence on January 1, 1998 and continue
in force for three years until December 31, 2000, (the "Employment Period")
unless sooner terminated by either party pursuant to Section 5 or Section 6 of
this Agreement and except as provided in Section 6.3 of this Agreement.
4. COMPENSATION. As payment in full for services rendered to Company,
Employee shall be entitled to receive from Company, and Company shall pay to
Employee, salary and benefits as follows.
4.1. SALARY. Company shall initially pay to Employee base
salary at a rate of $500,000 per annum ("Base Salary") payable bi-weekly or at
such other time or times as Company may allow or provide to other similarly
situated employees in accordance with policies adopted from time to time by the
Board of Directors. Base Salary for any partial period of employment shall be
prorated. All compensation shall be subject to deductions or withholding for
taxes. The Base Salary shall be increased to $550,000 for the calendar year 1999
and to $600,000 for the calendar year 2000.
<PAGE> 2
4.2. BONUS. After each anniversary of January 1, 1998, the
Company shall pay Employee a Bonus, which shall be based on established
objective goals to be agreed upon by the Company's Compensation Committee and
the Employee. The goals shall be quantitative, definite, qualifiable and
reasonably attainable. Notwithstanding information contained herein to the
contrary, in the event Employee shall become totally and permanently disabled
during the term of this agreement, a bonus of forty percent (40%) of Employee's
Base Salary shall be due and payable, without regard to the bonus formula. Any
bonus earned and payable to the Employee, pursuant to this section shall be paid
to the Employee not later than January 31 of each year of this agreement.
Payment shall be accompanied by a statement reflecting the bonus formula
computation. Employee shall have the right to review the bonus computation so as
to determine if the amount of the bonus is correct.
4.3. FRINGE BENEFITS. Employee shall be entitled to annual
vacation and to receive employee and fringe benefits including but not limited
to any compensation plan such as an incentive stock option, restricted stock or
stock purchase plan or any employee benefit plan such as a thrift, pension,
profit sharing, medical disability, accident, plan program or policy (the
Company's "Plans") as Company may allow or provide to other similarly situated
employees in accordance with policies adopted from time to time by the Board of
Directors, and not less than Employee received at the effective date of this
Agreement.
4.4. EXPENSES REIMBURSEMENT. Company shall reimburse Employee
for expenses necessarily and reasonably incurred by him in travel which have
been authorized in advance by the Chief Executive Officer or his designee.
Employee shall submit such proofs of expense for which reimbursement is claimed
in writing as Company may reasonably require.
4.5. SICKNESS AND DISABILITY. Except as set forth in Section 5
and Section 6, Employee shall receive full compensation for any period of
illness or incapacity during the term of this Agreement.
4.6. HOLIDAYS. Employee shall be entitled to holidays
recognized as State and/or National holidays and as Company may allow or provide
in accordance with policies adopted from time to time by the Board of Directors.
5. TERMINATION OF EMPLOYMENT. The following provisions shall apply in
the event of termination of Employee's employment for any reason other than a
termination that occurs concurrent with or subsequent to a Change in Control as
defined in Section 6.1.
5.1 RIGHT TO TERMINATE BY COMPANY. Company may terminate
Employee's employment, through its Board of Directors, without cause upon 30
days' written Notice of Termination (as defined in Section 7 of this Agreement)
or immediately upon Notice of Termination for Cause. The term "Cause" when
referring to termination by Company means only the following and any other
termination shall be without Cause: (i) Employee's gross dereliction of his
duties; (ii) theft or misappropriation of property of Company by Employee; (iii)
conviction of Employee of a felony or of any crime involving dishonesty or moral
turpitude; or (iv) violation by Employee of the provisions of this Agreement;
provided that, termination for violation by Employee of the provisions of this
Agreement shall occur only after 30 days'
2
<PAGE> 3
advance written notice by Company to Employee containing reasonably specific
details of the alleged breach failure to cure the same within such 30 day
period.
5.2 TERMINATION FOR DEATH OR DISABILITY. Employee's employment
shall terminate upon the earliest of the events specified below:
(i) the death of Employee:
(ii) the Date of Termination (as defined in Section 7)
specified in a written Notice of Termination by reason of physical or mental
condition of Employee which shall substantially incapacitate him from performing
his principal duties ("Disability") delivered by the Board of Directors to
Employee at least 30 days prior to the specified Date of Termination, which
shall be any date after the expiration of any 120 consecutive days during all of
which Employee shall be unable, by reason o his Disability, to perform his
principal duties, provided however, that such Notice of Termination shall be
null and void if Employee fully resumes the performance of his duties under this
Agreement prior to the Date of Termination set forth in the Notice of
Termination.
5.3. RIGHT TO TERMINATE BY EMPLOYEE. Employee may terminate
his employment for good reason or without good reason upon 30 days' written
Notice of Termination. The term "Good Reason" when referring to termination by
Employee means a material breach by Company of its obligations under this
Agreement, or as provided in Section 6.4, including the payment of money, and
only after 30 days' advance written notice of Termination containing reasonably
specific details of the alleged breach and failure to cure the same within such
30 day period. Termination for any other reason shall be without Good Reason.
5.4. RESULTS OF TERMINATION BY COMPANY.
(i) TERMINATION FOR CAUSE. On the Date of Termination for
Cause of Employee's employment by Company, Company shall pay the Base Salary
then in effect through the Date of Termination.
(ii) TERMINATION WITHOUT CAUSE. On the Date of Termination
Without Cause of Employee's employment by Company, Company shall pay the Base
Salary then in effect throughout the Employment Period and Company shall
maintain in full force and effect, for the continued benefit of Employee and
Employee's dependents for a period terminating on the earliest of (a) the
expiration of the Employment Period or (b) the commencement date of equivalent
benefits from a new employer, all life, accidental death, medical and dental
insurance plans or programs in which Employee was entitled to participate
immediately prior to the Date of Termination, provided that Employee's continued
participation is possible under the general terms and provisions of such plans
and Employee continues to pay an amount equal to his regular contribution for
such participation, if any. If, at the end of the Employment Period Employee has
not previously received or is not then receiving equivalent benefits from new
employer, Company shall arrange, at its sole cost and expense, to enable
Employee to convert Employee and Employee's dependents' coverage under such
plans to individual policies or programs upon
3
<PAGE> 4
the same terms as employees of Company may apply for such conversions. In the
event that Employee's participation in any such plan is barred, Company, at its
sole cost and expense, shall arrange to have issued for the benefit of Employee
and Employee's dependents individual policies of insurance providing benefits
substantially similar (on an after-tax basis) to those which Employee and
Employee's dependents equivalent benefits (on an after-tax basis); PROVIDED THAT
Company shall be responsible for the payment of such benefits (on an after tax
basis) for a period not to exceed two years following the end of the one year
after the Termination Date. Employee shall not be required to pay any premiums
or other charges in an amount greater than that which Employee would have paid
in order to participate in such plans.
5.5 RESULTS OF TERMINATION FOR DEATH OR DISABILITY.
(i) DEATH OF EMPLOYEE. If Employee's employment is terminated
due to the death of Employee, Company shall pay the Base salary due Employee
through the date on which death occurs;
(ii) DISABILITY OF EMPLOYEE. If Employee's employment is
terminated due to the disability of Employee as described in Section 5.2 (ii) of
this of this Agreement, Company shall continue to pay Employee his Base Salary
for the 180-day period following the specified Date of Termination. After this
180-day period, Company shall have the right to terminate the Employee's
employment without prejudice to the right of the Employee to receive long term
disability insurance benefits.
The Employer shall, at its expense, provide Employee with a
long term disability policy. Such insurance shall, upon the occurrence of a
qualifying disability and completion and satisfaction of any and all other
policy terms and conditions, provide for payment to the Employee of an amount
not less than is provided in the Company's policy(s) on Employee as of the date
of this Agreement, commencing six (6) months after the Employee becomes disabled
and continuing for the duration of such disability or until age 65, whichever is
shorter. In addition, the Employer shall secure an excess policy or the Company
will pay the Employee such that his Base Salary and a 40% bonus shall be paid to
Employee through December 31, 2000.
5.6. RESULTS OF TERMINATION BY EMPLOYEE.
(i) TERMINATION WITHOUT GOOD REASON. Upon employee's
termination without Good Reason of his employment, Company shall pay the Base
Salary due Employee through the Date of Termination.
(ii) TERMINATION FOR GOOD REASON. Upon Employee's termination
of his employment for Good Reason, Company shall make the same payments to
Employee as Company would be obligated to make under 5.4 (ii) of this Agreement
if Employee's employment was terminated without Cause by Company.
5.7. OTHER COMPANY POLICIES. Upon termination of Employee's
employment for any reason, Employee will be entitled to any additional rights
pursuant to policies of
4
<PAGE> 5
Company regarding employment termination established by the Board of Directors
from time to time.
6. TERMINATION OF COMPANY'S OBLIGATION. If at any time within the 24
month period following termination of Employee's employment without Cause by
Company pursuant to Section 5.1 of this Agreement or termination by Employee for
Good Reason pursuant to Section 5.3 of this Agreement, Employee breaches any of
his obligations under Sections 8, 9, 10, 11 and 12 of this Agreement, then
Company's obligation to make payments under Sections 5.4 (ii) or 5.6 (i) of this
Agreement shall cease as of the date such breach occurs.
7. CHANGE IN CONTROL
7.1. CHANGE IN CONTROL AND PROPOSED CHANGE IN CONTROL DEFINED.
(i) No benefits shall be payable to Employee pursuant to the
this Section 6 unless there shall have been a Change in Control of the Company
as set for the below. For purposes of Company of a nature that This Agreement a
"Change in Control" shall mean a Change in Control of Company of a nature that
would be required to be reported in response to Item 1 (a) of the Current Report
on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"); provided
that, without limitation, such a Change in Control shall be deemed to have
occurred at such time as
(a) any Person, as such term is used in Section 13
(d) and 14 (d) of the Exchange Act (other than Company, any trustee or
other fiduciary holding securities under an employee benefit plan of
Company, or any company owned, directly or indirectly, by the
stockholders of Company in substantially the same proportions as their
ownership of stock of Company) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of 25% or more of the combined voting power of Company's outstanding
securities;
(b) individuals who constitute the Board on the date
hereof (the "Incumbent Board") cease for any reason to constitute at
least a majority thereof, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for
election by Company's shareholders, was approved by a vote of at least
a majority of the directors comprising the Incumbent Board (either by a
specific vote or by approval of the proxy statement of Company in which
such person is named as a nominee for director, without objection to
such nomination) shall be, for purposes of this clause (b), considered
as though such person were a member of the Incumbent Board.
(c) the stockholders of Company approve a merger or
consolidation of Company with any other company, other than (1) a
merger or consolidation which would result in the voting securities of
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding by or being converted into voting
securities of the surviving entity) more than 50% of the combined
voting power of
5
<PAGE> 6
the voting securities of Company or such surviving entity outstanding
immediately after such merger or consolidation or (2) a merger or
consolidation effected to implement a recapitalization of Company (or
similar transition) in which no "Person" (as defined above) acquires
more than 50% of the combined voting power of the Company's then
outstanding securities; or
(d) the stockholders of Company approve a plan of
complete liquidation of Company or an agreement for the sale or
disposition by Company of all or substantially all of Company's assets.
Notwithstanding anything in the foregoing to the contrary, no Change in
Control shall be deemed to have occurred for purposes of this Agreement by
virtue of any transaction which results in Employee, or a group of Persons which
includes Employee, acquiring, directly or indirectly, 50% or more of the
combined voting power of the Company's outstanding securities.
(ii) For purposes of this Agreement, a "Proposed Change in
Control" of Company shall be deemed to have occurred if:
(a) Company enters in an agreement, the consummation
of which would result in the occurrence of a Change in Control of
Company;
(b) any person (including Company) publicly announces
an intention to take or to consider taking actions which if consummated
would constitute a change in Control of Company;
(c) any person (other than a trustee or other
fiduciary holding securities under an employee benefit plan of Company,
or a company owned, directly or indirectly, by the stockholders of
Company in substantially the same proportions as their ownership of
stock of Company), who is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 25% or more of
the combined voting power of Company's then outstanding securities,
increases his beneficial ownership of such securities through either
successive or simultaneous acquisition by a total of 3 percentage
points or more over the percentage so owned by such person prior to
such acquisition; or
(d) the Board adopts a resolution to the effect that,
for purposes of this Agreement, a Proposed Change in Control of Company
has occurred.
7.2. CONTINUED EMPLOYMENT. If a Proposed Change in Control
occurs prior to the expiration of this Agreement, Employee agrees that he will
remain in the employ of Company until the earliest of (a) a date which in 180
days from the occurrence of such Proposed Change in control of Company, (b) the
termination of Employee's employment by reason of death or Disability as defined
in Section 5.2 of this Agreement, or (c) the date on which Employee first
becomes entitled under this Agreement to receive the benefits provided in
Section 6.5 of this Agreement.
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If a Proposed Change in Control occurs prior to the expiration
of this Agreement, Company agrees that it will not terminate Employee's
employment without Cause until the earliest of (a) a date on which the Board
adopts a resolution to the effect that the actions leading to such Proposed
Change in control have been abandoned or terminated, (b) the termination of
Employee's employment by reason of Death or Disability as defined in Section 5.2
of this Agreement, or (c) the date on which Employee first becomes entitled
under this Agreement to receive the benefits provided in Section 6.5 of this
Agreement.
7.3 TERM OF AGREEMENT. If a Change in Control occurs prior to
the expiration of this Agreement, this Agreement shall continue in effect for a
period of not less than twenty-four (24) months beyond the month in which the
Change in Control shall have occurred provided that (i) such Change in Control
shall have occurred prior to the end of the Employment Period and (ii) if
Employee's employment has not been terminated pursuant to Section 5 of this
Agreement prior to the occurrence of such Change in Control. Notwithstanding
anything in this Section 6.3 to the contrary, the provisions of this Section 6
shall terminate at the end of the month in which Employee attains "normal
retirement age" under the provisions of any tax-qualified retirement plan of
Company or any of its subsidiaries in which Employee is participating.
7.4. TERMINATION FOLLOWING CHANGE IN CONTROL. If a Change in
Control shall have occurred, Employee shall be entitled to the benefits provided
in Section 6.5 of this Agreement upon the termination of his employment within
twenty-four (24) months after such Change in Control has occurred, unless such
termination is (a) because of Employee's death, (B) by the Company for Cause,
(c) because of Employee's Disability or (d) by Employee other than for Good
Reason (as all such capitalized terms are hereinafter defined.).
(i) DISABILITY. Termination by Company of Employee's
employment based on Disability shall have the meaning as defined in Section 5.2
of this Agreement.
(ii) TERMINATION BY COMPANY FOR CAUSE. Company may terminate
Employee's employment for Cause, through its Board of Directors, immediately
upon Notice of Termination. Termination by Company of Employee's employment for
Cause shall have the meaning as defined in Section 5.1 of this Agreement.
(iii) TERMINATION BY EMPLOYEE FOR GOOD REASON. Employee may
terminate his employment for Good Reason upon 90 day's written Notice of
Termination. Termination by Employee of his employment for Good Reason shall
have the meaning defined in Section 5.3 of this Agreement and, for the purposes
of this Section 6, shall have the following additional meanings:
(a) a change in Employee's status, position(s) or
responsibilities as an officer of Company which, in his reasonable
judgment, does not represent a promotion from his status, title,
position(s) and responsibilities as in effect immediately prior to the
Change in Control, or the assignment to him of any duties or
responsibilities which, in his reasonable judgment, are inconsistent
with such status, title or position(s), or any removal of him from or
any failure to reappoint or reelect him to such position(s), except in
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<PAGE> 8
connection with the termination of his employment by Company for Cause,
for Disability or as result of Employee's death or by Employee for Good
Reason as defined in Section 5.3 of this Agreement:
(b) a reduction by Company in Employee's Base Salary
as in effect immediately prior to the Change in Control;
(c) the failure by Company to continue in effect any
Plan (as defined in Section 4.3 of this Agreement) in which he is
participating at the time of the Change in Control (or Plans providing
him with at least substantially similar benefits) other than as a
result of the normal expiration of any such Plan in accordance with its
terms in effect at the time of the Change in Control, or the taking of
any action, or the failure to act, by Company which would adversely
affect hi ) continued participation in any of such Plans on at least as
favorable a basis to him as is the case on the date of the Change in
Control or which would materially reduce his benefits in the future
under any of such Plans or deprive him of any material benefit enjoyed
by him at the time of the Change in Control;
(d) Company's requiring Employee to be based anywhere
other than where Employee's office is located immediately prior to the
Change in Control except for required travel on Company's business to
an extent substantially consistent with the business travel obligations
which Employee undertook on behalf of the Company prior to the Change
in Control;
(e) the failure by Company to obtain from any
Successor (as hereinafter defined) the assent to this Agreement
contemplated by Section 6.6 of this Agreement; and
(f) any purported termination by Company of
Employee's employment is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 7.1 of this
Agreement which purported termination shall not be effective for
purposes of this Agreement.
(iv) TERMINATION BY COMPANY WITHOUT CAUSE. Company may
terminate Employee's employment, through its Board of Directors, without Cause
upon 90 days' written Notice of Termination. Termination by Company of
Employee's employment without Cause shall have the meaning as defined in Section
5.1 of this Agreement.
(v) TERMINATION BY EMPLOYEE WITHOUT GOOD REASON. Employee may
terminate his employment without Good Reason upon 90 days' written Notice of
Termination. Terminating by Employee of Employee's employment without Good
Reason shall have the meaning defined in Section 5.3 of this Agreement.
7.5. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
(i) COMPENSATION UPON DISABILITY. During any period following
a Change in Control that Employee fails to perform his duties as a result of
Disability, Company shall make the payments set forth in Section 5.5 (ii) of
this Agreement.
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<PAGE> 9
(ii) COMPENSATION UPON TERMINATION BY COMPANY FOR CAUSE. If
Employee's employment shall be terminated by Company for Cause following a
Change in Control, Company shall make the payments set forth in Section 5.4(i)
of this Agreement.
(iii) COMPENSATION UPON TERMINATION BY COMPANY WITHOUT CAUSE
OR BY EMPLOYEE FOR GOOD REASON. If, within twenty-four (24) months after a
Change in Control shall have occurred Employee's employment by Company shall be
terminated (a) by Company without cause or (b) by Employee for Good Reason based
on an event occurring concurrent with or subsequent to a Change in Control,
then, at the time specified in Subsection (vii), Employee shall be entitled,
without regard to any contrary provisions of any Plan, to the benefits as
provided below:
(a) the company shall pay Employee his full Base
Salary through the Date of Termination at the rate in effect just prior
to the time a Notice of Termination is given plus any benefits or
awards (including both cash and stock components) which pursuant to the
terms of any Plans have been earned or become payable, but which have
not yet been paid to Employee (including amounts which previously had
been deferred at Employee's request);
(b) as severance pay and in lieu of any further
salary for periods subsequent to the Date of Termination, Company shall
pay to Employee at the time specified in subsection (vii), a single
lump sum severance payment (the "Severance Payment") in an amount in
cash equal to three times Employee's annual Base Salary at the rate in
effect just prior to the time a Notice of Termination is given;
(c) Company shall maintain in full force and effect,
for the continued benefit of Employee and Employee's dependents for a
period terminating on the earliest of (x) two years after the Date of
Termination or (y) the commencement date of equivalent benefits from a
new employer all life, accidental death, medical and dental insurance
plans or programs in which Employee was entitled to participate
immediately prior to the Date of Termination, provided that Employee's
continued participation is possible under the general terms and
provisions of such plans and Employee continues to pay an amount equal
to his regular contribution for such participation, if any. If, at the
end of two years after the Termination Date Employee has not previously
received or is not then receiving equivalent benefits from a new
employer, Company shall arrange, at its sole cost and expense, to
enable Employee to convert Employee and Employee's dependents' coverage
under such plans to individual policies or programs upon the same terms
as employees of company may apply for such conversions. In the event
that Employee's participation in any such plan is barred, Company at
its sole cost and expense, shall arrange to have issued for the benefit
of Employee and Employee's dependents individual policies of insurance
providing benefits substantially similar (on an after-tax basis)
PROVIDED THAT, Company shall be responsible for the payment of such
benefits (on an after tax basis) to those which Employee otherwise
would have been entitled to receive under such plans pursuant to this
paragraph (c) or, if such insurance is not available at a reasonable
cost to Company, Company shall otherwise provide Employee and
Employee's dependents equivalent benefits (on an after tax basis) for a
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<PAGE> 10
period not to exceed five years following the end of the two years
after the Termination Date. Employee shall not be required to pay any
premiums or other charges in an amount greater than that which Employee
would have paid in order to participate in such plans.
Company shall pay Employee for any vacation time
earned but not taken at the Date of Termination, at an hourly rate
equal to Employee's annual Base Salary as in effect immediately prior
to the time a Notice of Termination is given divided by 2080.
Company shall pay to Employee all legal fees and
expenses incurred by Employee as a result of such termination,
including all such fees and expenses, if any, incurred in contesting or
disputing any such termination in seeking to obtain or enforce any
right or benefit provided by this Section 6 of this Agreement (other
than any such fees or expenses incurred in connection with any such
claim which is determined to be frivolous) or in connection with any
tax audit or proceeding to the extent attributable to the application
of section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code").
(iv) COMPENSATION UPON TERMINATION BY EMPLOYEE WITHOUT GOOD
REASON. If Employee's employment shall be terminated by Employee without Good
Reason following a Change in Control, Company shall make the payments set forth
in Section 5.6(ii) of this Agreement.
(v) NO OFFSETS OR REDUCTIONS. Except as specifically provided
above, the amount of any payment provided for in this Section 6.5 shall not be
reduced offset or subject to recovery by Company by reason of any compensation
earned by Employee as the result of employment by another employer after the
Date of Termination, or otherwise. Employer's entitlements under Section 6.5 of
this Agreement are in addition to, and not in lieu of, any rights, benefits or
entitlements Employee may have under the terms or provisions of any Plan.
(vi) COMPANY'S DEDUCTION OF PAYMENT. Notwithstanding anything
in the foregoing to the contrary, Company shall not be obligated to pay any
portion of any amount otherwise payable to Employee pursuant to this Agreement
if the payment would cause any amount to be paid by Company to Employee to not
be reasonably deductible by the Company solely by operation of Section 280G of
the Internal Revenue Code of 1986, as amended, or any equivalent successor
provision of law.
(vii) TIME OF PAYMENT. The payments provided for in Subsection
(iii) shall be made not later than the fifth day following the Date of
Termination; provided, however, that if the amounts of such payments cannot be
finally determined on or before such day, Company shall pay to Employee on such
day an estimate, as determined in good faith by Company, of the minimum amount
of such payments and shall pay the remainder of such payments (together with
interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as
the amount thereof can be determined but in no event later than the thirtieth
day after the Date of Termination. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by Company to Employee payable on the fifth
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<PAGE> 11
day after demand therefor by Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code).
7.6 SUCCESSORS; BINDING AGREEMENT.
(i) SUCCESSORS. Company will require any Successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Company to expressly assume
and agree to perform Company's obligations under this Agreement in the same
manner and to the same extent that Company would be required to perform it if
not such succession had taken place. Failure of Company to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle Employee to compensation from
Company in the same amount and on the same terms to which Employee would be
entitled hereunder if Employee terminated his employment for Good Reason
following a Change in Control of Company, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any Successor to
its business and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
(ii) BINDING AGREEMENT. This Agreement shall inure to the
benefit of and be enforceable by Employee and Employee's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If Employee should die while any amount would still be
payable to him hereunder if Employee had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to Employee's devisee, legatee or other designee or, if there be
no such designee, to Employee's estate.
7.7 ARBITRATION. Any dispute or controversy arising under or
in connection with Section 6 of this Agreement shall be settled exclusively by
arbitration in California by three arbitrators in accordance with the rules of
the American Arbitration Association then in effect. Judgment may be entered on
the arbitrators' award in any court having jurisdiction; provided, however, that
Employee shall be entitled to seek specific performance of Employee's right to
be paid until the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with the Agreement. Company shall
bear all costs and expenses arising in connection with any arbitration
proceeding pursuant to this Section 6.7.
7.8 SURVIVAL. The respective obligations of, and benefits
afforded to, Company and Employee as provided in Section 6.5, 6.6 and 6.7 of
this Agreement shall survive termination of this Agreement.
7.9 TERMINATION OF COMPANY'S OBLIGATION. If at any time within
the 24 month period following termination of Employee's employment without Cause
by Company pursuant to Section 6.4(iv) or termination by Employee for Good
Reason pursuant to Section 6.4(iii) of this Agreement, Employee breaches any of
his obligations under Sections 8, 9, 10, 11, and 12 of this Agreement, then
Company's obligation to make payments under Section 6.5(iii) shall cease as of
the date such breach occurs.
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8. DEFINITIONS. For purposes of Section 5 and Section 6 of this
Agreement, Notice of Termination and Date of Termination shall have the
following meanings:
8.1 NOTICE OF TERMINATION. Any purported termination by
Company or by Employee pursuant to Section 5 or Section 6 of this Agreement
shall be communicated by written Notice of Termination to the other party hereto
in accordance with Section 18.3 of this Agreement. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and, except in
the event of termination by Employee without Good Reason or termination by
Company without Cause, such Notice of Termination shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
Employee's employment under the provisions so indicated.
8.2 DATE OF TERMINATION. "Date of Termination" following a
termination of Employee's employment by Company or Employee pursuant to Section
5 or Section 6 of this Agreement shall mean (i) if Employee's employment is to
be terminated for Disability, thirty (30) days after Notice of Termination is
delivered by the Board to Employee provided that such notice shall be given only
after the expiration of any 120 consecutive days during all of which Employee
shall be unable by reason of his disability to perform his principal duties
(provided that such Notice of Termination shall be null and void if Employee
fully resumes the performance of Employee's duties under this Agreement prior to
the Date of Termination as set forth in the Notice); (ii) if Employee's
employment is to be terminated by company for cause, the date on which a Notice
of Termination is given; and (iii) if Employee's employment is terminated by
Employee with Good Reason or without Good Reason or by Company without Cause,
the date specified in the Notice of Termination, which shall be a date no
earlier than thirty (30) days after the date on which Notice of Termination
pursuant to Section 5 is given and no earlier than ninety (90) days after the
date on which a Notice of Termination pursuant to Section 6 is given, unless an
earlier date has been agreed to by the party receiving the Notice of Termination
either in advance of, or after, receiving such Notice of Termination.
Notwithstanding anything in the foregoing to the contrary, if the party
receiving the Notice of Termination pursuant to Section 6 has not previously
agreed to the termination, then within thirty (30) days after any Notice of
Termination is given, the party receiving such Notice of Termination may notify
the other party that a dispute exists concerning the termination, in which event
the Date of Termination shall be the date set either by mutual written agreement
of the parties or by the arbitrators in a proceeding as provided in Section 6.7
of this Agreement.
9. CONFIDENTIALITY.
9.1 DEFINITION OF CONFIDENTIAL INFORMATION. As used in this
Agreement, the term "Confidential Information" means: (a) proprietary
information of Company; (b) information marked or designated by Company as
confidential; (c) information, whether or not in written form and whether or not
designated as confidential, which is known to Employee as being treated by
Company as confidential; and (d) information provided to Company by third
parties which Company is obligated to keep confidential. Confidential
Information includes but is not limited to, discoveries, ideas, designs,
drawings, specifications, techniques, models, devises, data,
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formula, programs, documentation, processes, know-how, customer lists, marketing
plans, and financial and technical information.
9.2 ACKNOWLEDGMENT OF RECEIPT OF CONFIDENTIAL INFORMATION.
Employee acknowledges that in the course of performing his duties for Company he
will have access to Confidential Information, the ownership and confidential
status of which are highly important to company, and Employee agrees in addition
to the specific covenants contained herein to comply with all Company policies
and procedures for the protection of such Confidential Information.
9.3 OWNERSHIP. Employee acknowledges that all Confidential
Information is and shall continue to be the exclusive property of Company,
whether or not prepared in whole or in part by him and whether or not disclosed
to or entrusted to him in connection with employment by Company.
9.4 ACKNOWLEDGMENT OF IRREPARABLE HARM. Employee acknowledges
that any disclosure of Confidential Information will cause irreparable harm to
Company.
9.5 COVENANT OF NONDISCLOSURE. Employee agrees not to disclose
Confidential Information, directly or indirectly, under any circumstances or by
any means, to any third person without the express written consent of Company.
9.6 COVENANT OF NONUSE. Employee agrees that he will not copy,
transmit, reproduce, summarize, quote, or make any commercial or other use
whatsoever of Confidential Information, except as may be necessary to perform
work done by him for Company.
9.7 SAFEGUARD OF CONFIDENTIAL INFORMATION. Employee agrees to
exercise the highest degree of care in safeguarding Confidential Information
against loss, theft, or other inadvertent disclosure and agree generally to take
all steps necessary or requested by Company to insure maintenance of
confidentiality.
9.8 EXCLUSIONS. This Agreement shall not apply to the
following information: (a) information now and hereafter voluntarily
disseminated by Company to the public or which otherwise becomes part of the
public domain through lawful means; (b) information already known to Employee as
documented by written records which predate this Agreement; (c) information
subsequently and rightfully received from third parties and not subject to any
obligation of confidentiality; (d) information independently developed by
Employee.
9.9 WORK MADE FOR HIRE. Employee agrees that all creative
work, including computer programs or models, prepared or originated by him for
Company or during or within the scope of his employment by Company which may be
subject to protection under Federal copyright Law, constitutes "work made for
hire," all rights to which are owned by Company; and, in any event, Employee
assigns to Company all intellectual property rights in such work whether by
right of copyright, trade secret or otherwise and whether or not subject to
protection by copyright laws.
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10. COMPANY OWNERSHIP OF INVENTIONS.
10.1. COMPANY OWNERSHIP. Employee agrees that all inventions,
discoveries, improvements, trade secrets, formula, techniques, processes,
know-how and computer programs, whether or not patentable, and whether or not
reduced to practice, conceived or developed during his employment by Company,
either alone or jointly with others, which relate to or result from the actual
or anticipated business, work, research, or investigation of Company or any
affiliated company, or which result to a extent from use of Company or any
affiliated company's premises or property, shall be owned exclusively by the
Company, the Employee hereby assigns to Company all his right, title and
interest in all such inventions, and Employee agrees that company shall be the
sole owner of all domestic and foreign patents or other rights pertaining
thereto, and further agree to execute all documents which Company reasonably
determines to be necessary or convenient for use in applying for, perfecting, or
enforcing patents or other intellectual any assignments, patent applications, or
other documents which may be requested by Company. Notwithstanding the above,
this provision does not apply to an invention for which no equipment, supplies,
facilities, or trade secret of Company was used and which was developed entirely
on the Employee's own time, unless (a) the invention relates (i) directly to the
business of Company, or (ii) to Company's actual or demonstrably anticipated
research or development, or (b) the invention results from any work performed by
the Employee for Company.
10.2 EMPLOYEE INVENTIONS. All inventions, if any, of Employee
made prior to Employee's employment by Company are excluded from the scope of
this Agreement and a complete list of such inventions, if any, is attached to
this Agreement as Exhibit A. Employee agrees to disclose to Company at the time
of employment or thereafter, all inventions being developed by Employee for the
purposes of determining Employee or Company rights to the invention.
11. VENTURES. If Employee, during the term of this Agreement, is
engaged in or associated with the planning or implementing of any project,
program or venture involving Company and any third party or parties, all rights
in the project, program or venture shall belong to Company, and Employee shall
not be entitled to any interest therein or to any commission, finder's fee or
other compensation in connection therewith other than the salary to be paid to
Employee as provided in this Agreement.
12. COVENANT OF GOOD FAITH. Employee agrees that the subject of this
Agreement involves sensitive matters which go to the very heart of the corporate
existence and well-being of Company and that it may be difficult for Company to
protect adequately its interest through agreement or otherwise. Employee agrees
to exercise the highest degree of good faith in his dealings with Company and to
refrain from any actions which might reasonably be deemed to be contrary to its
interests.
13. DELIVERY OF MATERIALS. Upon termination of his employment status,
Employee will deliver to Company all materials, including without limitation
documents, records, drawings, prototypes, models and schematic diagrams, which
describe, depict, contain, constitute, reflect, record or in any way relate to
inventions or Confidential Information, which are in Employee's possession or
under his control, whether or not the materials were prepared by Employee.
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14. SUBPOENAS. If Employee is served with any subpoena or other
compulsory judicial or administrative process calling for production of
Confidential Information or if Employee is otherwise required by law or
regulation to disclose Confidential Information, Employee will immediately, and
prior to production or disclosure, notify Company and provide it with such
information as may be necessary in order that Company may take such action as it
deems necessary to protect its interest.
15. REMEDIES. Employee acknowledges that breach of Sections 8, 9, 10,
11, 12, 13, 15 and 16 of this Agreement will cause irreparable harm to the
Company and if Employee fails to abide by these obligations, Company will be
entitled to specific performance, including immediate issuance of a temporary
restraining order of preliminary injunction enforcing this Agreement, and to
judgment for damages caused by Employee's breach, and to the rights and duties
of Company and Employee, respectively, under this Agreement are in addition to,
and not in lieu of, those rights and duties afforded to and imposed upon them by
law or at equity.
16. TERMINATION CERTIFICATE. Upon termination of this Agreement,
Employee will give a written statement in the form attached hereto as Exhibit A
to Company certifying that he has complied with his obligations under Sections
9, 11 and 12 and acknowledging his continuing obligations under Section 8 to
preserve and confidentiality of Company's confidential or secret knowledge or
information, and under Section 13 to notify Company if he is served with a
subpoena.
17. OTHER OBLIGATIONS. Employee acknowledges that Company from time to
time may have agreements with other persons or with various governmental
agencies that impose obligations or restrictions on Company regarding inventions
or creative works made during the course of work thereunder or regarding the
confidential nature or such work. Employee agrees to be bound by all such
obligations and restrictions of which he is informed by Company and to take all
action necessary to discharge the obligations of Company thereunder.
18. DURATIONS. The obligations set forth in Sections 8, 9, 10, 11, 12
and 13 of this Agreement will continue beyond the term of Employee's employment
by Company for two years following such termination.
19. GENERAL PROVISIONS.
19.1 SEVERABILITY. The provisions of this Agreement are
severable and if any provision hereof is held to be invalid, illegal, or
unenforceable in any respect, it shall be enforced to the maximum extent
permissible, and the remaining provision of the agreement shall not be affected
thereby and in full force and effect.
19.2 ATTORNEY'S FEES/APPLICABLE LAW/VENUE. Except as provided
in Section 6.5(iii)(E), in any action or suit arising out of this Agreement, the
prevailing party shall be entitled to recover all reasonable attorneys' fees and
expenses of litigation, including fees on appeal or in connection with any
petition for review. The rights and obligations of the parties under this
Agreement shall in all respects be governed by the laws of the State of Michigan
exclusive of choice of law rules.
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19.3 NOTICE. Any notice provided for hereunder may be
delivered to the designated recipient either by personal delivery or by
certified mail, return receipt requested. If mailed, the notice when enclosed in
an envelope properly addressed to the proposed recipient at his address last of
record with the notifying party and deposited postage paid in a mail depository
of the United States post office, shall be deemed given when so mailed. Notice
to Company shall be so delivered or addressed to an officer of Company other
than Employee.
19.4 ASSIGNMENT. Employee acknowledges that the services to be
rendered are unique and personal. This Agreement may not be assigned by
Employee.
19.5 SUCCESSORS OF COMPANY. This Agreement shall inure to the
benefit of and shall be binding upon Company, its successors, or assigns.
19.6 WAIVER. Company may waive any obligation Employee has
under this Agreement, but such waiver will not affect Company's right to require
strict compliance with the Agreement in the future.
19.7 ENTIRE AGREEMENT. THIS AGREEMENT SUPERSEDES ALL PREVIOUS
AGREEMENTS, ORAL OR WRITTEN, BETWEEN COMPANY AND EMPLOYEE AND CONSTITUTES THE
ENTIRE AGREEMENT BETWEEN THE PARTIES, AND UNLESS OTHERWISE PROVIDED IN THIS
AGREEMENT, NO MODIFICATION OR WAIVER OF ANY OF THE PROVISIONS OR ANY FUTURE
REPRESENTATION, PROMISE, OR ADDITION SHALL BE BINDING UPON THE PARTIES UNLESS
MADE IN WRITING AND SIGNED BY BOTH PARTIES.
IN WITNESS WHEREOF, the parties have executed this contract on the date
first set forth above.
NOTICE TO EMPLOYEE
THIS AGREEMENT MAY REQUIRE TRANSFER TO YOUR EMPLOYER OF CERTAIN
INVENTIONS OR WORKS OF AUTHORSHIP. YOU MAY WISH TO CONSULT YOUR LEGAL COUNSEL
FOR ADVICE.
CHAMPIONSHIP AUTO RACING TEAMS, INC.
By: /s/ Randy K. Dzierzawski
----------------------------------------
Randy K. Dzierzawski, Vice President
EMPLOYEE
By: /s/ Andrew H. Craig
----------------------------------------
Andrew H. Craig
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Exhibit 10.4
CHAMPIONSHIP AUTO RACING TEAMS, INC.
EMPLOYMENT AGREEMENT
RANDY K. DZIERZAWSKI
--------------------
This Employment Agreement (the "Agreement") is entered into as of
December __, 1997 by Championship Auto Racing Teams, Inc., a Delaware
corporation ("Company") and Randy D. Dzierzawski ("Employee").
In consideration of the promises below, the parties agree as follows.
1. TITLE. Employee shall hold the title of Executive Vice President,
Treasurer and Chief Financial Officer.
2. DUTIES.
2.1. GENERAL DUTIES. Employee shall undertake and render
services as may from time to time be assigned to him by the Board of Directors
or their designees. The duties shall be reasonably consistent with Employee's
experiences.
2.2. OUTSIDE ACTIVITIES. Employee shall devote his full time
to the performance of his duties, and agrees that his first duty of loyalty is
to Company. Except with the express written consent of the Board of Directors,
Employee shall not, directly or indirectly, alone or as a member of any
partnership, or as an officer, director or employee of any other corporation,
partnership or other organization, be actively engaged in any other duties or
pursuits which interfere or compete with the performance of his duties under
this Agreement.
3. TERM. This Agreement shall commence on January 1, 1998 and continue
in force for three years until December 31, 2000, (the "Employment Period")
unless sooner terminated by either party pursuant to Section 5 or Section 6 of
this Agreement and except as provided in Section 6.3 of this Agreement.
4. COMPENSATION. As payment in full for services rendered to Company,
Employee shall be entitled to receive from Company, and Company shall pay to
Employee, salary and benefits as follows.
4.1. SALARY. Company shall initially pay to Employee base
salary at a rate of $225,000 per annum ("Base Salary") payable bi-weekly or at
such other time or times as Company may allow or provide to other similarly
situated employees in accordance with policies adopted from time to time by the
Board of Directors. Base Salary for any partial period of employment shall be
prorated. All compensation shall be subject to deductions or withholding for
<PAGE> 2
taxes. The Base Salary shall be increased to $250,000 for the calendar year 1999
and to $275,000 for the calendar year 2000.
4.2. BONUS. After each anniversary of January 1, 1998, the
Company shall pay Employee a Bonus, which shall be based on established
objective goals to be agreed upon by the Company's Compensation Committee and
the Employee. The goals shall be quantitative, definite, qualifiable and
reasonably attainable. Notwithstanding information contained herein to the
contrary, in the event Employee shall become totally and permanently disabled
during the term of this agreement, a bonus o twenty percent (20%) of Employee's
Base Salary shall be due and payable, without regard to the bonus formula. Any
bonus earned and payable to the Employee, pursuant to this section shall be paid
to the Employee not later than January 31 of each year of this agreement.
Payment shall be accompanied by a statement reflecting the bonus formula
computation. Employee shall have the right to review the bonus computation so as
to determine if the amount of the bonus is correct.
4.3. FRINGE BENEFITS. Employee shall be entitled to annual
vacation and to receive employee and fringe benefits including but not limited
to any compensation plan such as an incentive stock option, restricted stock or
stock purchase plan or any employee benefit plan such as a thrift, pension,
profit sharing, medical disability, accident, plan program or policy (the
Company's "Plans") as Company may allow or provide to other similarly situated
employees in accordance with policies adopted from time to time by the Board of
Directors, and not less than Employee received at the effective date of this
Agreement.
4.4. EXPENSES REIMBURSEMENT. Company shall reimburse Employee
for expenses necessarily and reasonably incurred by him in travel which have
been authorized in advance by the Chief Executive Officer or his designee.
Employee shall submit such proofs of expense for which reimbursement is claimed
in writing as Company may reasonably require.
4.5. SICKNESS AND DISABILITY. Except as set forth in Section 5
and Section 6, Employee shall receive full compensation for any period of
illness or incapacity during the term of this Agreement.
4.6. HOLIDAYS. Employee shall be entitled to holidays
recognized as State and/or National holidays and as Company may allow or provide
in accordance with policies adopted from time to time by the Board of Directors.
5. TERMINATION OF EMPLOYMENT. The following provisions shall apply in
the event of termination of Employee's employment for any reason other than a
termination that occurs concurrent with or subsequent to a Change in Control as
defined in Section 6.1.
5.1. RIGHT TO TERMINATE BY COMPANY. Company may terminate
Employee's employment, through its Board of Directors, without cause upon 30
days' written Notice of Termination (as defined in Section 7 of this Agreement)
or immediately upon Notice of Termination for Cause. The term "Cause" when
referring to termination by Company means only the following and any other
termination shall be without Cause: (i) Employee's gross dereliction of his
duties; (ii) theft or misappropriation of an property of Company by Employee;
(iii)
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<PAGE> 3
conviction of Employee of a felony or of any crime involving dishonesty or moral
turpitude; or (iv) violation by Employee of the provisions of this Agreement;
provided that, termination for violation by Employee of the provisions of this
Agreement shall occur only after 30 days' advance written notice by Company to
Employee containing reasonably specific details of the alleged breach failure to
cure the same within such 30 day period.
5.2 TERMINATION FOR DEATH OR DISABILITY. Employee's employment
shall terminate upon the earliest of the events specified below:
(i) the death of Employee:
(ii) the Date of Termination (as defined in Section 7)
specified in a written Notice of Termination by reason of physical or mental
condition of Employee which shall substantially incapacitate him from performing
his principal duties ("Disability") delivered by the Board of Directors to
Employee at least 30 days prior to the specified Date of Termination, which
shall be any date after the expiration of any 120 consecutive days during all of
which Employee shall be unable, by reason of his Disability, to perform his
principal duties, provided however, that such Notice of Termination shall be
null and void if Employee fully resumes the performance of his duties under this
Agreement prior to the Date of Termination set forth in the Notice of
Termination.
5.3. RIGHT TO TERMINATE BY EMPLOYEE. Employee may terminate
his employment for good reason or without good reason upon 30 days' written
Notice of Termination. The term "Good Reason" when referring to termination by
Employee means a material breach by Company of its obligations under this
Agreement, or as provided in Section 6.4, including the payment of money, and
only after 30 days' advance written notice of Termination containing reasonably
specific details of the alleged breach and failure to cure the same within such
30 day period. Termination for any other reason shall be without Good Reason.
5.4. RESULTS OF TERMINATION BY COMPANY.
(i) TERMINATION FOR CAUSE. On the Date of Termination for
Cause of Employee's employment by Company, Company shall pay the Base Salary
then in effect through the Date of Termination.
(ii) TERMINATION WITHOUT CAUSE. On the Date of Termination
Without Cause of Employee's employment by Company, Company shall pay the Base
Salary then in effect throughout the Employment Period and Company shall
maintain in full force and effect, for the continued benefit of Employee and
Employee's dependents for a period terminating on the earliest of (a) the
expiration of the Employment Period or (b) the commencement date of equivalent
benefits from a new employer, all life, accidental death, medical and dental
insurance plans or programs in which Employee was entitled to participate
immediately prior to the Date of Termination, provided that Employee's continued
participation is possible under the general terms and provisions of such plans
and Employee continues to pay an amount equal to his regular contribution for
such participation, if any. If, at the end of the Employment Period Employee has
not previously received or is not then receiving equivalent benefits from new
employer,
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<PAGE> 4
Company shall arrange, at its sole cost and expense, to enable Employee to
convert Employee and Employee's dependents' coverage under such plans to
individual policies or programs upon the same terms as employees of Company may
apply for such conversions. In the event that Employee's participation in any
such plan is barred Company, at its sole cost and expense, shall arrange to have
issued for the benefit of Employee and Employee's dependents individual policies
of insurance providing benefits substantially similar (on an after-tax basis) to
those which Employee and Employee's dependents equivalent benefits (on an
after-tax basis); PROVIDED THAT Company shall be responsible for the payment of
such benefits (on an after tax basis) for a period not to exceed two years
following the end of the one year after the Termination Date. Employee shall not
be required to pay any premiums or other charges in an amount greater than that
which Employee would have paid in order to participate in such plans.
5.5 RESULTS OF TERMINATION FOR DEATH OR DISABILITY.
(i) DEATH OF EMPLOYEE. If Employee's employment is terminated
due to the death of Employee, Company shall pay the Base salary due Employee
through the date on which death occurs;
(ii) DISABILITY OF EMPLOYEE. If Employee's employment is
terminated due to the disability of Employee as described in Section 5.2 (ii) of
this of this Agreement, Company shall continue to pay Employee his Base Salary
for the 90-day period following the specified Date of Termination. After this 90
period, Company agrees to pay to Employee during each month for the next six
months an amount equal to the difference between Employee's monthly Base Salary
and the amount which Employee receives or is entitled to receive from any long
term disability insurance coverage provided for Employee by Company.
5.6. RESULTS OF TERMINATION BY EMPLOYEE.
(i) TERMINATION WITHOUT GOOD REASON. Upon employee's
termination without Good Reason of his employment, Company shall pay the Base
Salary due Employee through the Date of Termination.
(ii) TERMINATION FOR GOOD REASON. Upon Employee's termination
of his employment for Good Reason, Company shall make the same payments to
Employee as Company would be obligated to make under 5.4 (ii) of this Agreement
if Employee's employment was terminated without Cause by Company.
5.7. OTHER COMPANY POLICIES. Upon termination of Employee's
employment for any reason, Employee will be entitled to any additional rights
pursuant to policies of Company regarding employment termination established by
the Board of Directors from time to time.
5.8. TERMINATION OF COMPANY'S OBLIGATION. If at any time
within the 24 month period following termination of Employee's employment
without Cause by Company pursuant to Section 5.1 of this Agreement or
termination by Employee for Good Reason pursuant to Section 5.3 of this
Agreement, Employee breaches any of his obligations under Sections 8, 9, 10, 11
and 12 of this Agreement, then Company's obligation to make payments under
Sections 5.4 (ii) or 5.6
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<PAGE> 5
(i) of this Agreement shall cease as of the date such breach occurs.
5
<PAGE> 6
6. CHANGE IN CONTROL
6.1 CHANGE IN CONTROL AND PROPOSED CHANGE IN CONTROL DEFINED.
(i) No benefits shall be payable to Employee pursuant to the
this Section 6 unless there shall have been a Change in Control of the Company
as set for the below. For purposes of Company of a nature that This Agreement a
"Change in Control" shall mean a Change in Control of Company of a nature that
would be required to be reported in response to Item 1 (a) of the Current Report
on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"); provided
that, without limitation, such a Change in Control shall be deemed to have
occurred at such time as
(a) any Person, as such term is used in Section 13
(d) and 14 (d) of the Exchange Act (other than Company, any trustee or
other fiduciary holding securities under an employee benefit plan of
Company, or any company owned, directly or indirectly, by the
stockholders of Company in substantially the same proportions as their
ownership of stock of Company) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of 25% or more of the combined voting power of Company's outstanding
securities;
(b) individuals who constitute the Board on the date
hereof (the "Incumbent Board") cease for any reason to constitute at
least a majority thereof, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for
election by Company's shareholders, was approved by a vote of at least
a majority of the directors comprising the Incumbent Board (either by a
specific vote or by approval of the proxy statement of Company in which
such person is named as a nominee for director, without objection to
such nomination) shall be, for purposes of this clause (b), considered
as though such person were a member of the Incumbent Board.
(c) the stockholders of Company approve a merger or
consolidation of Company with any other company, other than (1) a
merger or consolidation which would result in the voting securities of
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding by or being converted into voting
securities of the surviving entity) more than 50% of the combined
voting power of the voting securities of Company or such surviving
entity outstanding immediately after such merger or consolidation or
(2) a merger or consolidation effected to implement a recapitalization
of Company (or similar transition) in which no "Person" (as defined
above) acquires more than 50% of the combined voting power of the
Company's then outstanding securities; or
(d) the stockholders of Company approve a plan of
complete liquidation of Company or an agreement for the sale or
disposition by Company of all or substantially all of Company's assets.
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<PAGE> 7
Notwithstanding anything in the foregoing to the contrary, no Change in
Control shall be deemed to have occurred for purposes of this Agreement by
virtue of any transaction which results in Employee, or a group of Persons which
includes Employee, acquiring, directly or indirectly, 50% or more of the
combined voting power of the Company's outstanding securities.
(ii) For purposes of this Agreement, a "Proposed Change in
Control" of Company shall be deemed to have occurred if:
(a) Company enters in an agreement, the consummation
of which would result in the occurrence of a Change in Control of
Company;
(b) any person (including Company) publicly announces
an intention to take or to consider taking actions which if consummated
would constitute a change in Control of Company;
(c) any person (other than a trustee or other
fiduciary holding securities under an employee benefit plan of Company,
or a company owned, directly or indirectly, by the stockholders of
Company in substantially the same proportions as their ownership of
stock of Company), who is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 25% or more of
the combined voting power of Company's then outstanding securities,
increases his beneficial ownership of such securities through either
successive or simultaneous acquisition by a total of 3 percentage
points or more over the percentage so owned by such person prior to
such acquisition; or
(d) the Board adopts a resolution to the effect that,
for purposes of this Agreement, a Proposed Change in Control of Company
has occurred.
6.2. CONTINUED EMPLOYMENT. If a Proposed Change in Control
occurs prior to the expiration of this Agreement, Employee agrees that he will
remain in the employ of Company until the earliest of (a) a date which in 180
days from the occurrence of such Proposed Change in control of Company, (b) the
termination of Employee's employment by reason of death or Disability as defined
in Section 5.2 of this Agreement, or (c) the date on which Employee first
becomes entitled under this Agreement to receive the benefits provided in
Section 6.5 of this Agreement.
If a Proposed Change in Control occurs prior to the expiration
of this Agreement, Company agrees that it will not terminate Employee's
employment without Cause until the earliest of (a) a date on which the Board
adopts a resolution to the effect that the actions leading to such Proposed
Change in control have been abandoned or terminated, (b) the termination of
Employee's employment by reason of Death or Disability as defined in Section 5.2
of this Agreement, or (c) the date on which Employee first becomes entitled
under this Agreement to receive the benefits provided in Section 6.5 of this
Agreement.
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<PAGE> 8
6.3. TERM OF AGREEMENT. If a Change in Control occurs prior to
the expiration of this Agreement, this Agreement shall continue in effect for a
period of not less than twenty-four (24) months beyond the month in which the
Change in Control shall have occurred provided that (i) such Change in Control
shall have occurred prior to the end of the Employment Period and (ii) if
Employee's employment has not been terminated pursuant to Section 5 of this
Agreement prior to the occurrence of such Change in Control. Notwithstanding
anything in this Section 6.3 to the contrary, the provisions of this Section 6
shall terminate at the end of the month in which Employee attains "normal
retirement age" under the provisions of any tax-qualified retirement plan of
Company or any of its subsidiaries in which Employee is participating.
6.4. TERMINATION FOLLOWING CHANGE IN CONTROL. If a Change in
Control shall have occurred, Employee shall be entitled to the benefits provided
in Section 6.5 of this Agreement upon the termination of his employment within
twenty-four (24) months after such Change in Control has occurred, unless such
termination is (a) because of Employee's death, (B) by the Company for Cause,
(c) because of Employee's Disability or (d) by Employee other than for Good
Reason (as all such capitalized terms are hereinafter defined.).
(i) DISABILITY. Termination by Company of Employee's
employment based on Disability shall have the meaning as defined in Section 5.2
of this Agreement.
(ii) TERMINATION BY COMPANY FOR CAUSE. Company may terminate
Employee's employment for Cause, through its Board of Directors, immediately
upon Notice of Termination. Termination by Company of Employee's employment for
Cause shall have the meaning as defined in Section 5.1 of this Agreement.
(iii) TERMINATION BY EMPLOYEE FOR GOOD REASON. Employee may
terminate his employment for Good Reason upon 90 day's written Notice of
Termination. Termination by Employee of his employment for Good Reason shall
have the meaning defined in Section 5.3 of this Agreement and, for the purposes
of this Section 6, shall have the following additional meanings:
(a) a change in Employee's status, position(s) or
responsibilities as an officer of Company which, in his reasonable
judgment, does not represent a promotion from his status, title,
position(s) and responsibilities as in effect immediately prior to the
Change in Control, or the assignment to him of any duties or
responsibilities which, in his reasonable judgment, are inconsistent
with such status, title or position(s), or any removal of him from or
any failure to reappoint or reelect him to such position(s), except in
connection with the termination of his employment by Company for Cause,
for Disability or as result of Employee's death or by Employee for Good
Reason as defined in Section 5.3 of this Agreement:
(b) a reduction by Company in Employee's Base Salary
as in effect immediately prior to the Change in Control;
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<PAGE> 9
(c) the failure by Company to continue in effect any
Plan (as defined in Section 4.3 of this Agreement) in which he is
participating at the time of the Change in Control (or Plans providing
him with at least substantially similar benefits) other than as a
result of the normal expiration of any such Plan in accordance with its
terms in effect at the time of the Change in Control, or the taking of
any action, or the failure to act, by Company which would adversely
affect his continued participation in any of such Plans on at least as
favorable a basis to him as is the case on the date of the Change in
Control or which would materially reduce his benefits in the future
under any of such Plans or deprive him of any material benefit enjoyed
by him at the time of the Change in Control;
(d) Company's requiring Employee to be based anywhere
other than where Employee's office is located immediately prior to the
Change in Control except for required travel on Company's business to
an extent substantially consistent with the business travel obligations
which Employee undertook on behalf of the Company prior to the Change
in Control;
(e) the failure by Company to obtain from any
Successor (as hereinafter defined) the assent to this Agreement
contemplated by Section 6.6 of this Agreement; and
(f) any purported termination by Company of
Employee's employment is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 7.1 of this
Agreement which purported termination shall not be effective for
purposes of this Agreement.
(iv) TERMINATION BY COMPANY WITHOUT CAUSE. Company may
terminate Employee's employment, through its Board of Directors, without Cause
upon 90 days' written Notice of Termination. Termination by Company of
Employee's employment without Cause shall have the meaning as defined in Section
5.1 of this Agreement.
(v) TERMINATION BY EMPLOYEE WITHOUT GOOD REASON. Employee may
terminate his employment without Good Reason upon 90 days' written Notice of
Termination. Terminating by Employee of Employee's employment without Good
Reason shall have the meaning defined in Section 5.3 of this Agreement.
6.5. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
(i) COMPENSATION UPON DISABILITY. During any period following
a Change in Control that Employee fails to perform his duties as a result of
Disability, Company shall make the payments set forth in Section 5.5 (ii) of
this Agreement.
(ii) COMPENSATION UPON TERMINATION BY COMPANY FOR CAUSE. If
Employee's employment shall be terminated by Company for Cause following a
Change in Control, Company shall make the payments set forth in Section 5.4(i)
of this Agreement.
(iii) COMPENSATION UPON TERMINATION BY COMPANY WITHOUT CAUSE
OR BY EMPLOYEE FOR GOOD REASON. If, within twenty-four (24) months after a
Change in Control shall
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<PAGE> 10
have occurred Employee's employment by Company shall be terminated (a) by
Company without cause or (b) by Employee for Good Reason based on an event
occurring concurrent with or subsequent to a Change in Control, then, at the
time specified in Subsection (vii), Employee shall be entitled, without regard
to any contrary provisions of any Plan, to the benefits as provided below:
(a) the company shall pay Employee his full Base
Salary through the Date of Termination at the rate in effect just prior
to the time a Notice of Termination is given plus any benefits or
awards (including both cash and stock components) which pursuant to the
terms of any Plans have been earned or become payable, but which have
not yet been paid to Employee (including amounts which previously had
been deferred at Employee's request);
(b) as severance pay and in lieu of any further
salary for periods subsequent to the Date of Termination, Company shall
pay to Employee at the time specified in subsection (vii), a single
lump sum severance payment (the "Severance Payment") in an amount in
cash equal to two times Employee's annual Base Salary at the rate in
effect just prior to the time a Notice of Termination is given;
(c) Company shall maintain in full force and effect,
for the continued benefit of Employee and Employee's dependents for a
period terminating on the earliest of (x) two years after the Date of
Termination or (y) the commencement date of equivalent benefits from a
new employer all life, accidental death, medical and dental insurance
plans or programs in which Employee was entitled to participate
immediately prior to the Date of Termination, provided that Employee's
continued participation is possible under the general terms and
provisions of such plans and Employee continues to pay an amount equal
to his regular contribution for such participation, if any. If, at the
end of two years after the Termination Date Employee has not previously
received or is not then receiving equivalent benefits from a new
employer, Company shall arrange, at its sole cost and expense, to
enable Employee to convert Employee and Employee's dependents' coverage
under such plans to individual policies or programs upon the same terms
as employees of company may apply for such conversions. In the event
that Employee's participation in any such plan is barred, Company at
its sole cost and expense, shall arrange to have issued for the benefit
of Employee and Employee's dependents individual policies of insurance
providing benefits substantially similar (on an after-tax basis)
PROVIDED THAT, Company shall be responsible for the payment of such
benefits (on an after tax basis) to those which Employee otherwise
would have been entitled to receive under such plans pursuant to this
paragraph (c) or, if such insurance is not available at a reasonable
cost to Company, Company shall otherwise provide Employee and
Employee's dependents equivalent benefits (on an after tax basis) for a
period not to exceed five years following the end of the two years
after the Termination Date. Employee shall not be required to pay any
premiums or other charges in an amount greater than that which Employee
would have paid in order to participate in such plans.
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<PAGE> 11
Company shall pay Employee for any vacation time earned but
not taken at the Date of Termination, at an hourly rate equal to
Employee's annual Base Salary as in effect immediately prior to the
time a Notice of Termination is given divided by 2080.
Company shall pay to Employee all legal fees and expenses
incurred by Employee as a result of such termination, including all
such fees and expenses, if any, incurred in contesting or disputing any
such termination in seeking to obtain or enforce any right or benefit
provided by this Section 6 of this Agreement (other than any such fees
or expenses incurred in connection with any such claim which is
determined to be frivolous) or in connection with any tax audit or
proceeding to the extent attributable to the application of section
4999 of the Internal Revenue Code of 1986, as amended (the "Code").
(iv) COMPENSATION UPON TERMINATION BY EMPLOYEE WITHOUT GOOD
REASON. If Employee's employment shall be terminated by Employee without Good
Reason following a Change in Control, Company shall make the payments set forth
in Section 5.6(ii) of this Agreement.
(v) NO OFFSETS OR REDUCTIONS. Except as specifically provided
above, the amount of any payment provided for in this Section 6.5 shall not be
reduced offset or subject to recovery by Company by reason of any compensation
earned by Employee as the result of employment by another employer after the
Date of Termination, or otherwise. Employer's entitlements under Section 6.5 of
this Agreement are in addition to, and not in lieu of, any rights, benefits or
entitlements Employee may have under the terms or provisions of any Plan.
(vi) COMPANY'S DEDUCTION OF PAYMENT. Notwithstanding anything
in the foregoing to the contrary, Company shall not be obligated to pay any
portion of any amount otherwise payable to Employee pursuant to this Agreement
if the payment would cause any amount to be paid by Company to Employee to not
be reasonably deductible by the Company solely by operation of Section 280G of
the Internal Revenue Code of 1986, as amended, or any equivalent successor
provision of law.
(vii) TIME OF PAYMENT. The payments provided for in Subsection
(iii) shall be made not later than the fifth day following the Date of
Termination; provided, however, that if the amounts of such payments cannot be
finally determined on or before such day, Company shall pay to Employee on such
day an estimate, as determined in good faith by Company, of the minimum amount
of such payments and shall pay the remainder of such payments (together with
interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as
the amount thereof can be determined but in no event later than the thirtieth
day after the Date of Termination. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by Company to Employee payable on the fifth day
after demand therefor by Company (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code).
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6.6 SUCCESSORS; BINDING AGREEMENT.
(i) SUCCESSORS. Company will require any Successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Company to expressly assume
and agree to perform Company's obligations under this Agreement in the same
manner and to the same extent that Company would be required to perform it if
not such succession had taken place. Failure of Company to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle Employee to compensation from
Company in the same amount and on the same terms to which Employee would be
entitled hereunder if Employee terminated his employment for Good Reason
following a Change in Control of Company, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any Successor to
its business and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
(ii) BINDING AGREEMENT. This Agreement shall inure to the
benefit of and be enforceable by Employee and Employee's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If Employee should die while any amount would still be
payable to him hereunder if Employee had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to Employee's devisee, legatee or other designee or, if there be
no such designee, to Employee's estate.
6.7 ARBITRATION. Any dispute or controversy arising under or
in connection with Section 6 of this Agreement shall be settled exclusively by
arbitration in California by three arbitrators in accordance with the rules of
the American Arbitration Association then in effect. Judgment may be entered on
the arbitrators' award in any court having jurisdiction; provided, however, that
Employee shall be entitled to seek specific performance of Employee's right to
be paid until the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with the Agreement. Company shall
bear all costs and expenses arising in connection with any arbitration
proceeding pursuant to this Section 6.7.
6.8 SURVIVAL. The respective obligations of, and benefits
afforded to, Company and Employee as provided in Section 6.5, 6.6 and 6.7 of
this Agreement shall survive termination of this Agreement.
6.9 TERMINATION OF COMPANY'S OBLIGATION. If at any time within
the 24 month period following termination of Employee's employment without Cause
by Company pursuant to Section 6.4(iv) or termination by Employee for Good
Reason pursuant to Section 6.4(iii) of this Agreement, Employee breaches any of
his obligations under Sections 8, 9, 10, 11, and 12 of this Agreement, then
Company's obligation to make payments under Section 6.5(iii) shall cease as of
the date such breach occurs.
7. DEFINITIONS. For purposes of Section 5 and Section 6 of this
Agreement, Notice of Termination and Date of Termination shall have the
following meanings:
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7.1. NOTICE OF TERMINATION. Any purported termination by
Company or by Employee pursuant to Section 5 or Section 6 of this Agreement
shall be communicated by written Notice of Termination to the other party hereto
in accordance with Section 18.3 of this Agreement. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and, except in
the event of termination by Employee without Good Reason or termination by
Company without Cause, such Notice of Termination shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
Employee's employment under the provisions so indicated.
7.2. DATE OF TERMINATION. "Date of Termination" following a
termination of Employee's employment by Company or Employee pursuant to Section
5 or Section 6 of this Agreement shall mean (i) if Employee's employment is to
be terminated for Disability, thirty (30) days after Notice of Termination is
delivered by the Board to Employee provided that such notice shall be given only
after the expiration of any 120 consecutive days during all of which Employee
shall be unable by reason of his disability to perform his principal duties
(provided that such Notice of Termination shall be null and void if Employee
fully resumes the performance of Employee's duties under this Agreement prior to
the Date of Termination as set forth in the Notice); (ii) if Employee's
employment is to be terminated by company for cause, the date on which a Notice
of Termination is given; and (iii) if Employee's employment is terminated by
Employee with Good Reason or without Good Reason or by Company without Cause,
the date specified in the Notice of Termination, which shall be a date no
earlier than thirty (30) days after the date on which Notice of Termination
pursuant to Section 5 is given and no earlier than ninety (90) days after the
date on which a Notice of Termination pursuant to Section 6 is given, unless an
earlier date has been agreed to by the party receiving the Notice of Termination
either in advance of, or after, receiving such Notice of Termination.
Notwithstanding anything in the foregoing to the contrary, if the party
receiving the Notice of Termination pursuant to Section 6 has not previously
agreed to the termination, then within thirty (30) days after any Notice of
Termination is given, the party receiving such Notice of Termination may notify
the other party that a dispute exists concerning the termination, in which event
the Date of Termination shall be the date set either by mutual written agreement
of the parties or by the arbitrators in a proceeding as provided in Section 6.7
of this Agreement.
8. CONFIDENTIALITY.
8.1. DEFINITION OF CONFIDENTIAL INFORMATION. As used in this
Agreement, the term "Confidential Information" means: (a) proprietary
information of Company; (b) information marked or designated by Company as
confidential; (c) information, whether or not in written form and whether or not
designated as confidential, which is known to Employee as being treated by
Company as confidential; and (d) information provided to Company by third
parties which Company is obligated to keep confidential. Confidential
Information includes but is not limited to, discoveries, ideas, designs,
drawings, specifications, techniques, models, devises, data, formula, programs,
documentation, processes, know-how, customer lists, marketing plans, and
financial and technical information.
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8.2 ACKNOWLEDGMENT OF RECEIPT OF CONFIDENTIAL INFORMATION.
Employee acknowledges that in the course of performing his duties for Company he
will have access to Confidential Information, the ownership and confidential
status of which are highly important to company, and Employee agrees in addition
to the specific covenants contained herein to comply with all Company policies
and procedures for the protection of such Confidential Information.
8.3 OWNERSHIP. Employee acknowledges that all Confidential
Information is and shall continue to be the exclusive property of Company,
whether or not prepared in whole or in part by him and whether or not disclosed
to or entrusted to him in connection with employment by Company.
8.4 ACKNOWLEDGMENT OF IRREPARABLE HARM. Employee acknowledges
that any disclosure of Confidential Information will cause irreparable harm to
Company.
8.5 COVENANT OF NONDISCLOSURE. Employee agrees not to disclose
Confidential Information, directly or indirectly, under any circumstances or by
any means, to any third person without the express written consent of Company.
8.6 COVENANT OF NONUSE. Employee agrees that he will not copy,
transmit, reproduce, summarize, quote, or make any commercial or other use
whatsoever of Confidential Information, except as may be necessary to perform
work done by him for Company.
8.7 SAFEGUARD OF CONFIDENTIAL INFORMATION. Employee agrees to
exercise the highest degree of care in safeguarding Confidential Information
against loss, theft, or other inadvertent disclosure and agree generally to take
all steps necessary or requested by Company to insure maintenance of
confidentiality.
8.8 EXCLUSIONS. This Agreement shall not apply to the
following information: (a) information now and hereafter voluntarily
disseminated by Company to the public or which otherwise becomes part of the
public domain through lawful means; (b) information already known to Employee as
documented by written records which predate this Agreement; (c) information
subsequently and rightfully received from third parties and not subject to any
obligation of confidentiality; (d) information independently developed by
Employee.
8.9 WORK MADE FOR HIRE. Employee agrees that all creative
work, including computer programs or models, prepared or originated by him for
Company or during or within the scope of his employment by Company which may be
subject to protection under Federal copyright Law, constitutes "work made for
hire," all rights to which are owned by Company; and, in any event, Employee
assigns to Company all intellectual property rights in such work whether by
right of copyright, trade secret or otherwise and whether or not subject to
protection by copyright laws.
9. COMPANY OWNERSHIP OF INVENTIONS.
9.1 COMPANY OWNERSHIP. Employee agrees that all inventions,
discoveries, improvements, trade secrets, formula, techniques, processes,
know-how and computer programs, whether or not patentable, and whether or not
reduced to practice, conceived or developed during
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<PAGE> 15
his employment by Company, either alone or jointly with others, which relate to
or result from the actual or anticipated business, work, research, or
investigation of Company or any affiliated company, or which result to an extent
from use of Company or any affiliated company's premises or property, shall be
owned exclusively by the Company, the Employee hereby assigns to Company all his
right, title and interest in all such inventions, and Employee agrees that
company shall be the sole owner of all domestic and foreign patents or other
rights pertaining thereto, and further agree to execute all documents which
Company reasonably determines to be necessary or convenient for use in applying
for, perfecting, or enforcing patents or other intellectual any assignments,
patent applications, or other documents which may be requested by Company.
Notwithstanding the above, this provision does not apply to an invention for
which no equipment, supplies, facilities, or trade secret of Company was used
and which was developed entirely on the Employee's own time, unless (a) the
invention relates (i) directly to the business of Company, or (ii) to Company's
actual or demonstrably anticipated research or development, or (b) the invention
results from any work performed by the Employee for Company.
9.2. EMPLOYEE INVENTIONS. All inventions, if any, of Employee
made prior to Employee's employment by Company are excluded from the scope of
this Agreement and a complete list of such inventions, if any, is attached to
this Agreement as Exhibit A. Employee agrees to disclose to Company at the time
of employment or thereafter, all inventions being developed by Employee for the
purposes of determining Employee or Company rights to the invention.
10. VENTURES. If Employee, during the term of this Agreement, is
engaged in or associated with the planning or implementing of any project,
program or venture involving Company and any third party or parties, all rights
in the project, program or venture shall belong to Company, and Employee shall
not be entitled to any interest therein or to any commission, finder's fee or
other compensation in connection therewith other than the salary to be paid to
Employee as provided in this Agreement.
11. COVENANT OF GOOD FAITH. Employee agrees that the subject of this
Agreement involves sensitive matters which go to the very heart of the corporate
existence and well-being of Company and that it may be difficult for Company to
protect adequately its interest through agreement or otherwise. Employee agrees
to exercise the highest degree of good faith in his dealings with Company and to
refrain from any actions which might reasonably be deemed to be contrary to its
interests.
12. DELIVERY OF MATERIALS. Upon termination of his employment status,
Employee will deliver to Company all materials, including without limitation
documents, records, drawings, prototypes, models and schematic diagrams, which
describe, depict, contain, constitute, reflect, record or in any way relate to
inventions or Confidential Information, which are in Employee's possession or
under his control, whether or not the materials were prepared by Employee.
13. SUBPOENAS. If Employee is served with any subpoena or other
compulsory judicial or administrative process calling for production of
Confidential Information or if Employee is otherwise required by law or
regulation to disclose Confidential Information, Employee will immediately, and
prior to production or disclosure, notify Company and provide it with such
information as may be necessary in order that Company may take such action as it
deems necessary to protect its interest.
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14. REMEDIES. Employee acknowledges that breach of Sections 8, 9, 10,
11, 12, 13, 15 and 16 of this Agreement will cause irreparable harm to the
Company and if Employee fails to abide by these obligations, Company will be
entitled to specific performance, including immediate issuance of a temporary
restraining order of preliminary injunction enforcing this Agreement, and to
judgment for damages caused by Employee's breach, and to the rights and duties
of Company and Employee, respectively, under this Agreement are in addition to,
and not in lieu of, those rights and duties afforded to and imposed upon them by
law or at equity.
15. TERMINATION CERTIFICATE. Upon termination of this Agreement,
Employee will give a written statement in the form attached hereto as Exhibit A
to Company certifying that he has complied with his obligations under Sections
9, 11 and 12 and acknowledging his continuing obligations under Section 8 to
preserve and confidentiality of Company's confidential or secret knowledge or
information, and under Section 13 to notify Company if he is served with a
subpoena.
16. OTHER OBLIGATIONS. Employee acknowledges that Company from time to
time may have agreements with other persons or with various governmental
agencies that impose obligations or restrictions on Company regarding inventions
or creative works made during the course of work thereunder or regarding the
confidential nature or such work. Employee agrees to be bound by all such
obligations and restrictions of which he is informed by Company and to take all
action necessary to discharge the obligations of Company thereunder.
17. DURATIONS. The obligations set forth in Sections 8, 9, 10, 11, 12
and 13 of this Agreement will continue beyond the term of Employee's employment
by Company for two years following such termination.
18. GENERAL PROVISIONS.
18.1 SEVERABILITY. The provisions of this Agreement are
severable and if any provision hereof is held to be invalid, illegal, or
unenforceable in any respect, it shall be enforced to the maximum extent
permissible, and the remaining provision of the agreement shall not be affected
thereby and in full force and effect.
18.2 ATTORNEY'S FEES/APPLICABLE LAW/VENUE. Except as provided
in Section 6.5(iii)(E), in any action or suit arising out of this Agreement, the
prevailing party shall be entitled to recover all reasonable attorneys' fees and
expenses of litigation, including fees on appeal or in connection with any
petition for review. The rights and obligations of the parties under this
Agreement shall in all respects be governed by the laws of the State of Michigan
exclusive of choice of law rules.
18.3 NOTICE. Any notice provided for hereunder may be
delivered to the designated recipient either by personal delivery or by
certified mail, return receipt requested. If mailed, the notice when enclosed in
an envelope properly addressed to the proposed recipient at his address last of
record with the notifying party and deposited postage paid in a mail depository
of the United States post office, shall be deemed given when so mailed. Notice
to Company shall be so delivered or addressed to an officer of Company other
than Employee.
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18.4 ASSIGNMENT. Employee acknowledges that the services to be
rendered are unique and personal. This Agreement may not be assigned by
Employee.
18.5 SUCCESSORS OF COMPANY. This Agreement shall inure to the
benefit of and shall be binding upon Company, its successors, or assigns.
18.6 WAIVER. Company may waive any obligation Employee has
under this Agreement, but such waiver will not affect Company's right to require
strict compliance with the Agreement in the future.
18.7 ENTIRE AGREEMENT. THIS AGREEMENT SUPERSEDES ALL PREVIOUS
AGREEMENTS, ORAL OR WRITTEN, BETWEEN COMPANY AND EMPLOYEE AND CONSTITUTES THE
ENTIRE AGREEMENT BETWEEN THE PARTIES, AND UNLESS OTHERWISE PROVIDED IN THIS
AGREEMENT, NO MODIFICATION OR WAIVER OF ANY OF THE PROVISIONS OR ANY FUTURE
REPRESENTATION, PROMISE, OR ADDITION SHALL BE BINDING UPON THE PARTIES UNLESS
MADE IN WRITING AND SIGNED BY BOTH PARTIES.
IN WITNESS WHEREOF, the parties have executed this contract on the date
first set forth above.
NOTICE TO EMPLOYEE
THIS AGREEMENT MAY REQUIRE TRANSFER TO YOUR EMPLOYER OF CERTAIN
INVENTIONS OR WORKS OF AUTHORSHIP. YOU MAY WISH TO CONSULT YOUR LEGAL COUNSEL
FOR ADVICE.
CHAMPIONSHIP AUTO RACING TEAMS, INC.
By: /s/ Andrew H. Craig, President
----------------------------------
Andrew H. Craig, President
EMPLOYEE
By: /s/ Randy K. Dzierzawski
----------------------------------
Randy K. Dzierzawski
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<PAGE> 1
EXHIBIT 10.5
CHAMPIONSHIP AUTO RACING TEAMS, INC.
FORM OF OFFICIAL ORGANIZER/PROMOTER AGREEMENT
<PAGE> 2
CHAMPIONSHIP AUTO RACING TEAMS INC.
FORM OF OFFICIAL ORGANIZER/PROMOTER AGREEMENT
The undersigned hereby applies for the right to conduct an Indy Car World Series
race Competition sanctioned or co-sanctioned by Championship Auto Racing Teams,
Inc. ("CART") upon the following terms and conditions. It is understood that
this is an application only until accepted and approved by CART in writing and
that this Competition shall not be advertised or communicated to the public,
press or any other media or business arrangement as having been approved by CART
until this application has been so approved and until an official sanction has
been granted by CART.
1. Track:
Location:
Organizer/Promoter:
Address: To be furnished by Organizer/Promoter
Telephone:
Facsimile:
Race Distance:
Track Length and Type:
Postponed Date:
2. The term "Competition" as used herein shall include the annual Indy Car
race(s) designated hereinabove, as well as all time trials, practice
runs and rain or postponed dates related thereto. The term "Event" as
used herein shall include the Competition(s) as well as any other
race(s), race-related activities or any other activities associated
with the Competition(s), as approved by CART hereunder. The terms
"Dollars" and "$" refer to the lawful currency of the United States of
America.
3. Subject to compliance with all the terms and conditions set forth in
this Agreement, Organizer/Promoter shall organize, promote and conduct
a CART Indy Car race Competition at the track designated hereinabove in
the following year(s): _____, _____ and ______. The dates for the races
will be agreed upon by the parties. In the event Organizer/Promoter
reasonably determines that the track will not be in race ready
condition for the ______ Competition, Organizer/Promoter shall have the
option to cancel the ______ Competition without further liability for
that Competition, upon notice to CART of such intent by a date to be
determined by mutual agreement. If Organizer/Promoter exercises this
option in a timely manner, the Competitions covered by this Agreement
shall be held in _____, _____ and _____ respectively, and this
Agreement shall continue in full force and effect, except that the
Organization and Rights Fee for the _____ Competition shall be that
stated for _____, the Organization and Rights Fee for the _____
Competition shall be that stated for _____, and the Organization and
Rights Fee for the _____ Competition shall be that stated for _____. In
the event Organizer/Promoter exercises the foregoing option to cancel
the _____ Competition and subsequently reasonably determines that the
track will not be in race ready condition for _____ and notifies CART
of such circumstance by a date to be determined by mutual agreement,
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Organizer/Promoter shall have no further obligation as to that
Competition and the parties shall thereupon commence the re-negotiation
of this Agreement. Organizer/Promoter agrees not to organize, promote,
conduct, authorize or permit the staging of any other major motor
racing event(s) at the track(s) designated hereinabove without the
approval of CART, within the following period of time either preceding
or following any Competition hereunder: two (2) weeks. In addition,
Organizer/Promoter shall not organize, promote, conduct, authorize,
permit the staging of, or enter into negotiations for any other major
racing event(s) involving open-wheeled racing cars, to be conducted at
the track(s) designated hereinabove during any year covered by this
Agreement, provided, however, that nothing contained herein shall
preclude racing events involving the race cars commonly known as
"NASCAR Modifieds" or NHRA race events.
4. Subsequent to paragraph 3, the total Organization and Rights Fee
payable for the _____ Competition shall be ____________ Dollars
($___________), and shall be paid to CART as follows:
A. Fifteen percent (15%), or ________________ Dollars
($___________) by January 1, _____.
B. Thirty-five percent (35%), or _______________ Dollars
($_________) by July 1, _____.
C. The balance due of _______________________ Dollars
($_________) thirty (30) days prior to the day of the race.
5. Subsequent to paragraph 3, the total Organization and Rights Fee
payable for the 1997 Competition shall be ____________________________
Dollars ($___________), and shall be paid to CART as follows:
A. Fifteen percent (15%), or __________________________ Dollars
($____________) by January 1, ____.
B. Thirty-five percent (35%), or __________________________
Dollars ($_____________) by July 1, ____.
C. The balance due of _________________________ Dollars
($____________) thirty (30) days prior to the day of the race.
6. Subsequent to paragraph 3, the total Organization and Rights Fee
payable for the _____ Competition shall be ___________________________
Dollars ($_____________), and shall be paid to CART as follows:
A. Fifteen percent (15%), or _______________________
Dollars ($__________) by January 1, ____.
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B. Thirty-five percent (35%), or
__________________________ Dollars ($___________) by
July 1, _____.
C. The balance due of _____________________ Dollars
($_________) thirty (30) days prior to the day of the
race.
7. Organizer/Promoter expressly understands and agrees that said
Organization and Rights Fees are intended to be net and are
non-refundable except as expressly provided in this Agreement. Subject
to the cancellation and termination provisions in paragraph 3, if said
Organization and Rights Fees are not paid to CART in the manner and by
the time provided above, CART shall have the option to declare this
Agreement terminated, in which circumstance CART will be relieved from
any further liability or responsibility hereunder, and in addition,
Organizer/Promoter shall forthwith pay to CART and CART shall be
entitled to enforce collection of the total amount required under this
Agreement as liquidated damages and not as a penalty, together with all
costs incurred by CART in connection therewith, including reasonable
attorney fees, and interest at the rate of twelve (12%) percent per
annum. If the _____ Competition is cancelled pursuant to paragraph 3,
CART shall refund to Organizer/Promoter any partial rights fees
payments made by Organizer/Promoter, notwithstanding paragraph 9B.
8. Organizer/Promoter shall not be responsible for any purse distribution
whatsoever in respect to a Competition. CART must approve any and all
awards given in conjunction with a Competition and/or for the PPG Indy
Car World Series. Organizer/Promoter agrees to provide driver and
entrant trophies in recognition and representative of the achievements
of at least the first three (3) finishing positions in each
Competition.
9. A. CART shall be responsible for providing not less than
twenty (20) entrants for each Competition. If CART is unable
to provide twenty (20) entrants for any Competition,
Organizer/Promoter shall have the right to cancel such
Competition, providing that Organizer/Promoter first informs
CART in writing of such intent, and provided further that
twenty (20) entries have not been received within seven (7)
days after receipt by CART of such notice. If
Organizer/Promoter under these circumstances exercises this
cancellation right, it will be entitled to the return of the
portion of the Organization and Rights Fee theretofore paid
for such Competition, as shall be determined by mutual
agreement of the parties.
B. Either party hereto shall have the right to cancel a
Competition due to a "force majeure". "Force majeure" shall
mean any event or circumstances (whether arising from natural
causes, human or governmental agency or otherwise) beyond the
control of the parties including by way of illustration, but
not by way of limitation, strikes, lock-outs or other labor
disputes, civil strife, war, flood, fire, or acts of God. If
there is an unexpected cancellation due to a "force majeure",
Organizer/Promoter will be entitled to the return of the
portion of the Organization and Rights Fee theretofore paid
for such Competition, as shall be determined by mutual
agreement of the parties, except that Organizer/Promoter
agrees that
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CART may retain a sum equivalent to the necessary expenses
reasonably incurred by CART and its teams in preparing for
such Competition, which expenses shall be mutually agreed by
the parties provided, however, that if the parties are unable
to agree informally as to the amount of such expenses, such
dispute shall be submitted to binding arbitration and the
result of such arbitration shall be enforceable by any court
having jurisdiction.
C. If Organizer/Promoter cancels or fails to stage a
Competition for any reason other than those mentioned within
this paragraph 9, or in paragraph 3, Organizer/Promoter shall
forthwith pay to CART and CART shall be entitled to enforce
collection of the total amount required under this Agreement
as liquidated damages and not as a penalty, together with all
costs incurred by CART in connection therewith, including
reasonable attorney fees, and interest at the rate of twelve
(12%) percent per annum.
10. Except as expressly provided herein, Organizer/Promoter owns and shall
have exclusive control over all commercial rights to each Event
including by way of illustration, but not by way of limitation, the
right to sell and receive all the proceeds from Event sponsorships,
signage, admission tickets, programs, novelties, concessions (including
food and beverage), catering (including food and beverage), hospitality
facilities, hotel rooms, expositions, displays, parking spaces,
banquets and licenses to parades.
11. Organizer/Promoter shall assume and perform all organizational and
promotional activities for each Event except as otherwise provided
herein, including but not limited to business organization, promotional
activity, management, marketing, general affairs, selling tickets,
track maintenance and accommodations of the press, and further
understands and agrees that CART disclaims any warranty expressed or
implied, as to the potential success of any Event organized hereunder.
12. Organizer/Promoter shall organize and promote the races hereunder as
major motor racing events. Organizer/Promoter shall have the right to
on-site track entitlement, and revenues therefrom. On-site entitlement
is to designate the title/name of the race at the venue, subject to
CART approval which shall not be unreasonably withheld. All media
releases, public announcements and public disclosures by either party
or its employees or agents relating to this Agreement, including but
not limited to promotional or marketing material, but not including any
announcement intended solely for internal distribution at either party
or any disclosure required by legal, accounting or regulatory
requirements beyond the reasonable control of the disclosing party,
shall be coordinated with and approved by the other in writing prior to
the release thereof.
13. A. CART hereby grants Organizer/Promoter the non-exclusive
right to use the IndyCar name and logo in its promotion of
each Event during the term hereof, in accordance with all
provisions contained in this Agreement. Any logo, design, mark
or representation made, formulated, or developed in
conjunction with such Event shall be subject to the prior
written approval of CART.
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B. Organizer/Promoter shall display in all advertising and
publicity material including but not limited to news releases,
posters, banners, program covers, brochures, tickets, passes
and credentials relating to each Event the phrase: "PPG Indy
Car World Series" and the logos of PPG and IndyCar (as
approved and supplied by CART). CART reserves the right to
change such phrase and logo.
C. Organizer/Promoter shall include in its display of the
IndyCar logo the symbol (R) to indicate that it is a
registered mark. A sheet of camera ready art depicting these
logos shall be provided by CART. Further, in promoting and
advertising each Event, Organizer/Promoter shall promote the
Competition as a part of the PPG Indy Car World Series or as
otherwise designated by CART. Organizer/Promoter shall provide
such verification of compliance with the provisions contained
in this paragraph 13 as CART may reasonably request.
D. Organizer/Promoter shall not use the names, logos or
trademarks of CART or PPG for any purpose other than as herein
defined.
E. Upon the expiration or termination of this Agreement for
any reason, Organizer/Promoter shall cease and desist any and
all use of the names, logos or trademarks of CART or PPG or
any colorable imitation, variation or adaptation thereof.
F. CART and Organizer/Promoter shall promptly take such action
as may be necessary to protect the names, logos and trademarks
of CART and PPG against any infringement or threatened
infringement or any common law "passing off".
14. Organizer/Promoter agrees that each Competition shall be organized,
approved by CART and conducted in accordance with all applicable
statutes, ordinances, regulations or other requirements of any
government authority, and the IndyCar Rule Book as amended from time to
time and as the same may be modified or supplemented by any other
rules, regulations, bulletins or releases that may be applicable to
such Competition. CART reserves the right to terminate this Agreement
at any time without further liability for failure of Organizer/Promoter
to abide by said requirements, regulations, rules, or the terms and
conditions of this Agreement, by so notifying Organizer/Promoter in
writing. Organizer/Promoter acknowledges receipt of a copy of the
IndyCar Rule Book.
15. Organizer/Promoter represents and warrants that it has or will have
sole control of the track and of the premises upon which the track is
located, including all facilities thereon, and that Organizer/Promoter
has full authority to conduct each Event thereon as provided for herein
for the defined scheduled term of each Event.
16. Organizer/Promoter shall provide at its expense during each Event the
track, race course, and facilities in good repair and ready for use,
and Organizer/Promoter shall permit CART or its insurance broker or
other designated representative to inspect the track, race course
and/or
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facilities before, during and after each Event. All repairs deemed
necessary in order for the track to meet CART's safety requirements
must be made at Organizer/Promoter's expense and the failure to make
the necessary repairs may result in the postponement or cancellation of
such Event, in CART's sole discretion. In implementing this provision
CART will not act unreasonably. The track site, design and condition
shall be subject to review and approval by the CART Vice President of
Operations and Chief Steward. Organizer/Promoter shall consult with
CART on the layout and design of the track, including but not limited
to the pit area, safety barriers, and other facilities for the
Competition.
17. Organizer/Promoter shall provide at its expense such facilities as CART
deems adequate for the use of CART personnel and those directly
associated with the Event, including but not limited to race control
facilities, facilities for participant registration, television,
scoring, race car inspection, compiling and distributing media
information, a media work area, and facilities and services as may be
reasonably required by those who supply products and/or services for
the Event. Further details of these and other operational and facility
requirements of Organizer/Promoter are agreed to as outlined in
SCHEDULE A attached hereto and made a part hereof.
18. Organizer/Promoter shall at its expense furnish all facilities,
personnel, equipment, and services for accommodating and controlling
the public during each Event, for whose safety and comfort
Organizer/Promoter is solely responsible and liable.
19. Organizer/Promoter shall provide at its expense all necessary personnel
as required by CART for the conduct of each Competition hereunder(other
than the CART staff and officials), and Organizer/Promoter shall assume
all the responsibilities pertaining to workers, volunteers and
subcontractors for each Event weekend.
20. Organizer/Promoter at its expense shall obtain and maintain insurance
for each Event with an insurance company approved by CART. Such
insurance must conform to the minimum coverages, specifications,
limits, etc., as set forth in SCHEDULE B attached hereto and made a
part hereof. If Organizer/Promoter fails to maintain such policies with
the required minimum coverage throughout the Event, CART may cancel
such Event immediately without prior notice to Organizer/Promoter, or
CART may, in its discretion, obtain the required insurance from an
approved insurance company, with acceptable terms, at
Organizer/Promoter's expense.
21. Only those individuals approved by CART or Organizer/Promoter,
including but not limited to drivers and pit crew and necessary fire,
wrecker, ambulance and security crews, shall have access to or be
allowed in the paddock, garage and pit areas, the racing surface, and
other areas to which admission by the general public is normally
prohibited during the Event, and Organizer/Promoter shall be solely
responsible and provide sufficient security personnel in such areas to
enforce this provision at all times during each Event. Such access must
be in compliance with the IndyCar Rule Book and may not interfere with
or adversely affect the Competition.
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22. Organizer/Promoter shall honor CART's Unified Credential System and
shall comply with the facility access provisions implemented by CART,
as set forth in SCHEDULE C attached hereto and made a part hereof.
23. CART shall have the exclusive right to contract out or to take or cause
to be taken by others, make, broadcast, rebroadcast, use, reproduce,
transmit, copyright, sell, license or otherwise dispose of for any
purpose whatsoever, television pictures, sound film and tape, motion
pictures, still photographs, electronic images and sound of each Event.
CART shall retain all national, international and local broadcast
rights including broadcast television, cable and radio.
Organizer/Promoter will assure that the presence of personnel and
equipment for these or similar purposes shall not be inconsistent with
the rights of CART herein provided and shall not interfere or conflict
with the exercise of any such rights by CART as herein provided.
24. Organizer/Promoter recognizes and acknowledges that CART has entered or
intends to enter into a television contract with a national broadcast
or cable network for the coverage of each Competition hereunder.
A. Detailed operational and facility requirements of
Organizer/Promoter in respect to television and other on-site
media are identified in SCHEDULE A.
B. CART has arranged with the television production companies
(subject to network approval) to provide the video portion of
the program feed from the mobile unit to Organizer/Promoter,
so that Organizer/Promoter may feed the video signal as a
courtesy to the media center and hospitality suites. This feed
is limited to on-site press and hospitality use only. Any
other feeds to hotels, bars, or other establishment(s) whether
on-site or off, are strictly prohibited. Organizer/ Promoter
shall be responsible for the installation and maintenance of
appropriate cable originating at the television compound which
will then feed the system. Maintenance and operation of the
system is the sole responsibility of Organizer/Promoter.
C. CART and Organizer/Promoter agree that it is in the best
interest of the sport, its promoters and sponsors to have the
same on-site and television title sponsor. CART and
Organizer/Promoter recognize and agree that all television
entitlements are derived from a privilege granted by the
television network and are subject to network approval. In the
event Organizer/Promoter provides CART with a television
entitlement sponsor, such sponsor must agree to: (i) purchase
one (1) of several commercial unit package options for either
network or cable coverage to be published by CART or its
designee each year, (ii) enter into a negotiated agreement
with CART or its designee, or (iii) guarantee a payment for
entitlement in return for which Organizer/Promoter will
receive eight (8) thirty (30) second commercial units in the
telecast to package with its on-site title. The published rate
option packages and payment option will be made available to
Organizer/Promoter at least one (1) year in advance.
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<PAGE> 9
D. Organizer/Promoter may, at its option, and subject to
approval by CART or its designee and the appropriate network,
elect to guarantee over-the-air broadcast network coverage of
its Event. In this event Organizer/Promoter will be required
to provide a television title sponsor subject to: (i) purchase
of one (1) of several published minimum commercial unit
packages for either network or cable coverage, to be published
by CART or its designee each year, (ii) enter into a
negotiated agreement with CART or its designee, or (iii)
guarantee a payment for entitlement to be determined each
year. In the payment option (iii) Organizer/Promoter will
receive eight (8) thirty (30) second commercial units in the
telecast to package with its on-site title. Published rate
option packages and payment options will be made available to
Organizer/Promoter at least one (1) year in advance.
E. Organizer/Promoter shall exercise its best efforts in
assisting CART's undertaking to secure a television
entitlement sponsor. In the event such joint undertaking is
not successful, then CART or its designee shall have the
option to secure a television entitlement sponsor which need
not be the same as the on-site entitlement sponsor, provided
that upon the exercise of this option, CART agrees to first
consult with Organizer/Promoter in regard to such undertaking.
F. CART and Organizer/Promoter agree that the policy and terms
set forth as a condition of television coverage of this Event
may change from time to time, and, therefore, the television
agreement may supersede portions of this Agreement. In the
event that the television agreement supersedes a portion of
this Agreement, CART will immediately notify
Organizer/Promoter and work toward a mutually agreed upon
solution, provided, however, that if the parties are unable to
agree informally, such dispute shall be submitted to binding
arbitration and the result of such arbitration shall be
enforceable by any court having jurisdiction.
25. Organizer/Promoter recognizes and acknowledges that CART has the right
to contract for an official car and/or truck for the PPG Indy Car World
Series.
26. PPG shall have the exclusive right to provide any and all pace cars
throughout the entire Event. In addition, only PPG pace cars shall be
allowed to participate in the parade laps immediately preceding the
start of the Indy Car race. Further details of these and other
responsibilities of Organizer/Promoter to PPG are agreed to as outlined
in SCHEDULE D attached hereto and made a part hereof.
27. Organizer/Promoter agrees that the scheduled CART activities during
each Event, including those associated with the Competition, PPG Pace
Car on track activities, and CART's official support series, Indy
Lights, shall have priority over any other race or other activity
scheduled during such Event. Organizer/Promoter will not schedule any
supporting races or ancillary activities on the same day as
registration or inspection, or on any other day during an Event,
without prior written approval of CART. Further details
8
<PAGE> 10
of these and other scheduling considerations/requirements are agreed to
as outlined in SCHEDULE E attached hereto and made a part hereof.
28. CART shall maintain control of the grid/pre-race activities which shall
include but are not limited to the pole awards, driver introductions,
etc.
29. CART shall maintain control of the Victory Circle proceedings. Details
of these proceedings and the requirements of Organizer/Promoter in
regard thereto are agreed to as outlined in SCHEDULE F attached hereto
and made a part hereof.
30. Organizer/Promoter shall provide access to the PA system in order for
CART to fulfill its contractual obligations to its sponsors and inform
participants and spectators of activities during the Event.
31. A. CART merchandise, as supplied by CART or its licensed
representative, will be afforded the opportunity to be sold
from its own official concession stand to be located in a
prominent, high-traffic location, generally near the paddock
area. Selected items of merchandise may also be prominently
offered for sale in the track concession sales booths.
Merchandise sold from the CART booth will generate a royalty
of twenty-five percent (25%) of the gross sales, after taxes,
paid to Organizer/Promoter. Merchandise placed in the
concessionaire booths will be done so on a consignment basis
with the concessionaire given a forty (40%) percent discount
on the retail price of all merchandise sold. Retail prices
will be agreed upon in writing prior to the merchandise being
placed in concessionaire booths. All accounting will be
completed by noon of the day following the conclusion of each
Event. All payments will be made and unsold merchandise
returned at the same time.
B. It is Organizer/Promoter's responsibility to insure that
any and all concessions and/or merchandise reflecting the CART
or IndyCar marks is properly licensed. In the event that CART
discovers any unlicensed products, it will have the right to
take appropriate action in its sole discretion.
C. All IndyCar teams will be afforded the opportunity to sell
their team merchandise within the area designated by
Organizer/Promoter for such purpose. Participating teams will
pay a rights fee for such opportunity, which fee shall be (i)
consistent with the then current market price and (ii) no less
favorable for any IndyCar team than the terms and conditions
provided to other vendors located within the same area, under
comparable circumstances.
32. In conjunction with the PPG Indy Car Winner's Circle Club endorsed by
CART, Organizer/Promoter shall provide at its expense:
A. Limited access to restricted areas for club members during
group tours and club functions.
9
<PAGE> 11
B. Inclusion of a PPG Indy Car Winner's Circle Club
advertisement in the official race program. Camera ready art
shall be provided by CART or its designee.
C. Covered facility for meetings with a PA system, if not
provided by PPG.
33. Organizer/Promoter shall cooperate with CART in its spectator research
efforts, including but not by way of limitation allowing CART
representatives access to spectators for personal interviews and
questionnaire distribution and inclusion of a CART questionnaire in the
official race program, for which camera ready art will be provided.
34. A. Subject to availability, Organizer/Promoter shall provide
CART at no cost with space for up to sixteen (16)
non-permanent signs. Signage does not have to be in prime
television positions. CART will assume responsibility and cost
for such signs.
B. Organizer/Promoter shall provide CART, subject to mutually
agreed upon pricing, up to eight (8) advertising pages in the
Event program. One additional page in the program shall be
provided without charge for CART's own use.
C. Organizer/Promoter recognizes that each participating team
has a race sponsor. Organizer/Promoter agrees that each teem
may place its team name and sponsor(s) on both sides of the
wall in the team's assigned pit box, subject to applicable
governmental laws and regulations.
35. Organizer/Promoter acknowledges CART's hospitality requirements and
shall exercise its best efforts in assisting CART's development of a
suitable hospitality program, including the provision by
Organizer/Promoter of a preferred location for a tent or other suitable
accommodations. CART will assume responsibility and cost for food and
beverage.
36. Each Competition shall appear on the FIA calendar as a full
international FIA event. Organizer/Promoter agrees to file this listing
through CART and reimburse CART for all applicable listing fees. In
addition, Organizer/Promoter agrees to pay through CART the applicable
National Motorsports Council assessments, as determined by the
Council's Executive Committee.
37. Organizer/Promoter agrees to indemnify and hold harmless CART, its
directors, officials and officers, agents and employees ("Indemnities")
from any and all liabilities including liability resulting from
negligence of the same and all costs and expenses, including attorneys
fees incurred in the defense thereof, asserted or imposed upon CART,
its directors, officials, official representatives, employees and
officers arising out of or as a result of an Event hereunder, excluding
liabilities, costs, or expenses arising out of the gross negligence or
misconduct of Indemnities.
10
<PAGE> 12
38. Organizer/Promoter agrees not to take any action adverse to the
interest of CART and, in consideration of the acceptance and approval
of this application, releases and discharges CART and its officials and
representatives from all liability for personal injury that may be
received, and from all claims and demands for damages to real or
personal property or to any person growing out of or resulting from an
Event hereunder, whether caused by any construction or condition or any
track or track equipment, cars or debris, or resulting from any act or
failure of any official or any person assisting the officials serving
in connection therewith, excluding liabilities, costs, or expenses
arising out of the gross negligence or misconduct of Indemnities.
39. Nothing contained herein shall be construed to place CART in the
relationship of a partner or joint venturer with Organizer/Promoter,
and Organizer/Promoter shall have no power to obligate or bind CART in
any manner whatsoever other than as specifically provided for herein.
Neither party undertakes by this Agreement to perform any obligations
of the other, whether regulatory or contractual, or to assume any
responsibility for the other's business or operations.
40. The validity, interpretation and construction of this Agreement shall
be governed and construed by the laws of the State of Michigan. Any
litigation commenced by a party to this Agreement as the result of any
alleged breach of this Agreement shall be commenced in the circuit
court for the County of Oakland, State of Michigan, or in the
appropriate lower district court in said county, or in the U.S.
District Court for the Eastern District of Michigan, and the parties
hereby consent to such personal jurisdiction. Arbitration, if required,
shall be conducted in Detroit, Michigan in accordance with the rules of
the American Arbitration Association.
41. This Agreement is not transferable or assignable. Any transfer or
assignment in violation of this provision shall be void.
42. Any notice or written communication required or permissible hereunder
shall be sent by registered mail (or certified mail with return
receipt), postage prepaid, addressed as follows:
To CART: To Organizer/Promoter:
Championship Auto Racing Teams, Inc. Promoter
755 W. Big Beaver Rd., Suite 800 Address
Troy, MI 48084 City, State, Zip Code
43. This Agreement (including the Schedules annexed hereto) contains the
entire agreement of the parties hereto and no representations,
inducements, promises, or agreements, oral or otherwise, not embodied
herein shall be of any force or effect. This Agreement may be modified
only upon the written consent of the parties hereto. No waiver by
either party, whether expressed or implied, of any provision of this
Agreement or any breach or default shall constitute a continuing waiver
thereof. Each and every of the rights, remedies and benefits provided
by this Agreement shall be cumulative, and shall not be exclusive of
any other said rights, remedies and benefits, or of any other rights,
remedies and benefits allowed by law.
11
<PAGE> 13
44. The following Schedules are attached hereto, incorporated herein by
reference as though set forth in their entirety in this Agreement, and
labelled as follows:
SCHEDULE A - OPERATIONAL AND FACILITY REQUIREMENTS
SCHEDULE B - INSURANCE REQUIREMENTS
SCHEDULE C - UNIFIED CREDENTIAL SYSTEM AND FACILITY ACCESS
PROVISIONS
SCHEDULE D - PPG PROGRAM AND OFFICIAL CARS
SCHEDULE E - EVENT ACTIVITIES
SCHEDULE F - POST RACE PROCEDURES/ACTIVITIES
Any person or organization having responsibility in the organization,. promotion
or staging of any Competition, whether by contract or otherwise, shall co-sign
this Agreement and shall be jointly responsible hereunder. Organizer/Promoter
and the undersigned warrant and represent that Applicant has the full right and
authority to enter into and perform this Agreement, and that the execution and
delivery of this Agreement has been duly authorized by all necessary
governmental and/or corporate action.
Date:_____________ Applicant:
Promoter
By: _____________________________
Name
Title
12
<PAGE> 14
CART APPROVAL
The foregoing application is hereby approved and accepted in accordance
with the terms stated therein.
Date: ____________________ Championship Auto Racing Teams, Inc.
By: ________________________________
Its: _______________________________
CART sanction number granted: ____________________________________
Date: ____________________ ____________________________________
Authorized Signature
13
<PAGE> 1
EXHIBIT 10.6
CHAMPIONSHIP AUTO RACING TEAMS, INC.
OFFICIAL ORGANIZER/PROMOTER AGREEMENT
FOR MILWAUKEE, WISCONSIN
Draft as of: June 5, 1996
<PAGE> 2
CHAMPIONSHIP AUTO RACING TEAMS, INC.
OFFICIAL ORGANIZER/PROMOTER AGREEMENT
The undersigned hereby applies for the right to conduct an Indy Car World Series
race Competition sanctioned or co-sanctioned by Championship Auto Racing Teams,
Inc. ("CART"), upon the following terms and conditions. It is understood that
this is an application only until accepted and approved by CART in writing and
that this Competition shall not be advertised or communicated to the public,
press or any other media or business arrangement as having been approved by CART
until this application has been so approved and until an official sanction has
been granted by CART.
<TABLE>
<S> <C> <C>
Track: Wisconsin State Park Speedway
Location: West Allis, Wisconsin
Organizer/Promoter: Carl Haas Racing Teams, Ltd.
Address: 500 Tower Parkway 7722 W. Greenfield Avenue
Lincolnshire, IL 60069 West Allis, WI 53214
Telephone: (708) 634-8210 (414) 453-5761
Facsimile: (708) 634-8208 (414) 453-9920
Race Distance: 200 miles, 200 laps
Track Length and Type: 1-mile oval
Postponed Date: Next clear day
</TABLE>
1. A. The term "Competition" as used herein shall include the annual
Indy Car race(s) designated hereinabove, as well as all time
trials, practice runs and rain or postponed dates related
thereto.
B. The term "Event" as used herein shall include the
Competition(s) as well as any other race(s), race-related
activities or any other activities associated with the
Competition(s), as approved by CART hereunder.
C. The terms "Dollars" and "$" refer to the lawful currency of
the United States of America.
D. References in this Agreement to "PPG" shall be to PPG
Industries, Inc., or any successor Series sponsor.
2. A. Subject to compliance with all the terms and conditions set
forth in this Agreement, Organizer/Promoter shall organize,
promote and conduct a CART Indy Car race Competition in the
following year(s): 1995, 1996, 1997 and 1998.
B. The date for the 1995 race will be June 4, 1995. The races to
be conducted in 1996, 1997 and 1998 will be scheduled for the
first Sunday in June (i.e., one week after the traditional
Indianapolis 500 mile race date),
<PAGE> 3
provided, however, that in the event the Indianapolis 500 mile
race is postponed due to rain, it may be necessary to
reschedule this Event in such year to a mutually agreeable
date. In addition, the parties recognize that the preferred
local start time for the race is 2:00 p.m. and agree that the
start time will not be scheduled for earlier than 1:00 p.m. if
television time is available on this date.
C. Organizer/Promoter agrees not to organize, promote, conduct,
authorize or permit the staging of any other major motor
racing event(s) at the track(s) designated hereinabove,
without the approval of CART, within two (2) weeks either
preceding or following any Competition hereunder.
D. The parties shall have a reciprocal right of first negotiation
for the extension of this Agreement beyond the Events covered
hereunder, through a reasonable period of good faith
negotiation. In addition, such right of first negotiation
shall specifically include a right of first refusal in the
event the terms and conditions offered to a prospective
replacement Organizer/Promoter or venue are less favorable to
CART than those offered to Organizer/Promoter.
3. The total Organization and Rights Fee payable for the 1995 Competition
shall be Seven Hundred Fifty Thousand ($750,000.00) Dollars and shall
be paid to CART as follows:
A. Fifteen (15%) percent, or One Hundred Twelve Thousand Five
Hundred ($112,500.00) Dollars by January 1, 1995.
B. Thirty-five (35%) percent, or Two Hundred Sixty Two Thousand
Five Hundred ($262,500.00) Dollars by April 1, 1995.
C. The balance due of Three Hundred Seventy Five Thousand
($375,000.00) Dollars not later than thirty (30) days prior to
the date of the race.
4. The total Organization and Rights Fee payable for the 1996 Competition
shall be Seven Hundred Fifty Thousand ($750,000.00) Dollars and shall
be paid to CART as follows:
A. Fifteen (15%) percent, or One Hundred Twelve Thousand Five
Hundred ($112,500.00) Dollars by January 1, 1996.
B. Thirty-five (35%) percent, or Two Hundred Sixty Two Thousand
Five Hundred ($262,500.00) Dollars by April 1, 1996.
C. The balance due of Three Hundred Seventy Five Thousand
($375,000.00) Dollars not later than thirty (30) days prior to
the date of the race.
<PAGE> 4
5. The total Organization and Rights Fee payable for the 1997 competition
shall be Eight Hundred Thousand ($800,000.00) Dollars and shall be paid
to CART as follows:
A. Fifteen (15%) percent, or One Hundred Twenty Thousand
($120,000.00) Dollars by January 1, 1997.
B. Thirty-five (35%) percent, or Two Hundred Eighty Thousand
($280,000.00) Dollars by April 1, 1997.
C. The balance due of Four Hundred Thousand ($400,000.00) Dollars
not later than thirty (30) days prior to the date of the race.
6. The total Organization and Rights Fee payable for the 1998 Competition
shall be Eight Hundred Fifty Thousand ($850,000.00) Dollars and shall
be paid to CART as follows:
A. Fifteen (15%) percent, or One Hundred Twenty Seven Thousand
Five Hundred ($127,500.00) Dollars by January 1, 1998.
B. Thirty-five (35%) percent, or Two Hundred Ninety Seven
Thousand Five Hundred ($297,500.00) Dollars by April 1, 1998.
C. The balance due of Four Hundred Twenty Five Thousand
($425,000.00) Dollars not later than thirty (30) days prior to
the date of the race.
7. Organizer/Promoter expressly understands and agrees that said
Organization and Rights Fees are intended to be net and are
non-refundable except as expressly provided in this Agreement. If said
Organization and Rights Fees are not paid to CART in the manner and by
the time provided above, CART shall have the option to declare this
Agreement terminated, upon a fifteen (15) day notice of
default/opportunity to cure, in which circumstance CART will be
relieved from any further liability or responsibility hereunder, and in
addition, Organizer/Promoter shall forthwith pay to CART and CART shall
be entitled to enforce collection of the total amount required under
this Agreement as liquidated damages and not as a penalty, together
with all costs incurred by CART in connection therewith, including
reasonable attorney fees, and interest at the rate of twelve (12%)
percent per annum.
8. Organizer/Promoter shall not be responsible for any purse distribution
whatsoever in respect to a Competition. CART must approve any and all
awards given in conjunction with a Competition and/or for the PPG Indy
Car World Series. Organizer/Promoter agrees to provide driver and
entrant/owner trophies in recognition and representative of the
achievements of at least the first three (3) finishing positions in
each Competition.
9. A. CART shall be responsible for providing not less than eighteen
(18) entrants for each Competition. If CART is unable to
provide eighteen (18) entrants for any Competition,
Organizer/Promoter shall have the right to
<PAGE> 5
cancel such Competition, providing that Organizer/ Promoter
first informs CART in writing of such intent, and provided
further that eighteen (18) entries have not been received
within seven (7) days after receipt by CART of such notice. If
Organizer/Promoter under these circumstances exercises this
cancellation right, it will be entitled to the return of the
portion of the Organization and Rights Fee theretofore paid
for such Competition.
B. Either party hereto shall have the right to cancel a
Competition due to a "force majeure". "Force majeure" shall
mean any event or circumstances (whether arising from natural
causes, human or governmental agency or otherwise) beyond the
control of the parties including by way of illustration, but
not by way of limitation, strikes, lock-outs or other labor
disputes, civil strife, war, flood, fire, or acts of God. If
there is an unexpected cancellation due to a "force majeure",
Organizer/Promoter will be entitled to the return of the
portion of the Organization and Rights Fee theretofore paid,
except that Organizer/Promoter agrees that CART may retain a
sum equivalent to the necessary expenses reasonably incurred
by CART and its teams in preparing for such Competition, which
expenses shall be mutually agreed by the parties provided,
however, that if the parties are unable to agree informally as
to the amount of such expenses, such dispute shall be
submitted to binding arbitration and the result of such
arbitration shall be enforceable by any court having
jurisdiction.
C. If Organizer/Promoter cancels or fails to stage a Competition
for any reason other than those mentioned within this
paragraph 9, Organizer/Promoter shall forthwith pay to CART
and CART shall be entitled to enforce collection of the total
amount required under this Agreement as liquidated damages and
not as a penalty, together with all costs incurred by CART in
connection therewith, including reasonable attorney fees, and
interest at the rate of twelve (12%) percent per annum.
10. Except as expressly provided herein, Organizer/Promoter owns and shall
have exclusive control over all commercial rights to each Event
including by way of illustration, but not by way of limitation, the
right to sell and receive all the proceeds from Event sponsorships,
signage, admission tickets, programs, novelties, concessions (including
food and beverage), catering (including food and beverage), hospitality
facilities, hotel rooms, expositions, displays, parking spaces,
banquets, and licenses to parades.
11. Organizer/Promoter shall assume and perform all organizational and
promotional activities for each Event except as otherwise provided
herein, including but not limited to business organization, promotional
activity, management, marketing, general affairs, selling tickets,
track maintenance and accommodations of the press, and further
understands and agrees that CART disclaims any warranty expressed or
implied, as to the potential success of any Event organized hereunder.
<PAGE> 6
12. Organizer/Promoter shall organize and promote the races hereunder as
major motor racing events. Organizer/Promoter shall have the right to
on-site track entitlement, and revenues therefrom. On-site entitlement
is to designate the title/name of the race at the venue, subject to
CART approval which shall not be unreasonably withheld. All media
releases, public announcements and public disclosures by either party
or its employees or agents relating to this Agreement, including but
not limited to promotional or marketing material, but not including any
announcement intended solely for internal distribution at either party
or any disclosure required by legal, accounting or regulatory
requirements beyond the reasonable control of the disclosing party,
shall be coordinated with and approved by the other in writing prior to
the release thereof.
13. A. CART hereby grants Organizer/Promoter the non-exclusive right
to use the IndyCar name and logo in its promotion of each
Event during the term hereof, in accordance with all
provisions contained in this Agreement. Any logo, design, mark
or representation made, formulated, or developed in
conjunction with such Event shall be subject to the prior
written approval of CART.
B. Organizer/Promoter shall display in all advertising and
publicity material including but not limited to news releases,
posters, banners, program covers, brochures, tickets, passes
and credentials relating to each Event the phrase: "PPG Indy
Car World Series" and the logos of PPG and IndyCar (as
approved and supplied by CART). CART reserves the right to
change such phrase and logo.
C. Organizer/Promoter shall include in its display of the IndyCar
logo the symbol (R) to indicate that it is a registered mark.
A sheet of camera ready art depicting these logos shall be
provided by CART. Further, in promoting and advertising each
Event, Organizer/Promoter shall promote the Competition as a
part of the PPG Indy Car World Series or as otherwise
designated by CART. Organizer/Promoter shall provide such
verification of compliance with the provisions contained in
this paragraph 13 as CART may reasonably request.
D. Organizer/Promoter shall not use the names, logos or
trademarks of CART or PPG for any purpose other than as herein
defined.
E. Upon the expiration or termination of this Agreement for any
reason, Organizer/Promoter shall cease and desist any and all
use of the names, logos or trademarks of CART or PPG or any
colorable imitation, variation or adaptation thereof.
F. CART and Organizer/Promoter shall promptly take such action as
may be necessary to protect the names, logos and trademarks of
CART and PPG
<PAGE> 7
against any infringement or threatened infringement or any
common law "passing off".
14. Organizer/Promoter agrees that each Competition shall be organized,
approved by CART and conducted in accordance with all applicable
statutes, ordinances, regulations or other requirements of any
government authority, and the IndyCar Rule Book as amended from time to
time and as the same may be modified or supplemented by any other
rules, regulations, bulletins or releases that may be applicable to
such Competition. CART reserves the right to terminate this Agreement
at any time without further liability for material failure of
Organizer/Promoter to abide by said requirements, regulations, rules,
or the terms and conditions of this Agreement, by so notifying
Organizer/Promoter in writing, upon a five (5) day notice of
default/opportunity to cure. CART shall notify Organizer/Promoter in
writing of any alleged default and Organizer/Promoter shall have five
(5) days after receipt of such notice to cure the default; provided,
however, if the nature of the default is such that it cannot reasonably
be cured within five (5) days, Organizer/Promoter shall not be deemed
to be in default if it commences the cure within such five (5) day
period and thereafter completes the curative action within a reasonable
time. Organizer/Promoter acknowledges receipt of a copy of the IndyCar
Rule Book.
15. Organizer/Promoter represents and warrants that it has or will have
sole control of the track and of the premises upon which the track is
located, including all facilities thereon, and that Organizer/Promoter
has full authority to conduct each Event thereon as provided for herein
for the defined scheduled term of each Event.
16. Organizer/Promoter shall provide at its expense during each Event the
track, race course, and facilities in good repair and ready for use,
and Organizer/Promoter shall permit CART or its insurance broker or
other designated representative to inspect the track, race course
and/or facilities before, during and after each Event. All repairs
deemed reasonably necessary in order for the track to meet CART's
safety requirements must be made at Organizer/Promoter's expense and
the failure to make the necessary repairs may result in the
postponement or cancellation of such Event, in CART's sole discretion.
The track site, design and condition shall be subject to review and
approval by the CART Vice President, Competition and Chief Steward.
Organizer/Promoter shall consult with CART on the layout and design of
the track, including but not limited to the pit area, safety barriers,
and other facilities for the Competition.
17. Organizer/Promoter shall provide at its expense such facilities as CART
deems reasonably adequate for the use of CART personnel and those
directly associated with the Event, including but not limited to race
control facilities, facilities for participant registration,
television, scoring, race car inspection, compiling and distributing
media information, a media work area, and facilities and services as
may be reasonably required by those who supply products and/or services
for the Event. Further details of these and other operational and
facility requirements of Organizer/Promoter are agreed to as outlined
in SCHEDULE A attached hereto and made a part hereof.
<PAGE> 8
18. Organizer/Promoter shall at its expense furnish all facilities,
personnel, equipment, and services for accommodating and controlling
the public during each Event, for whose safety and comfort
Organizer/Promoter is solely responsible and liable.
19. Organizer/Promoter shall provide at its expense all necessary personnel
as required by CART for the conduct of each Competition hereunder
(other than the CART staff and officials), and Organizer/Promoter shall
assume all the responsibilities pertaining to workers, volunteers and
subcontractors for each Event weekend.
20. Organizer/Promoter at its expense shall obtain and maintain insurance
for each Event with an insurance company approved by CART. Such
insurance must conform to the minimum coverages, specifications,
limits, etc., as set forth in SCHEDULE B attached hereto and made a
part hereof. If Organizer/Promoter fails to maintain such policies with
the required minimum coverage throughout the Event, CART may cancel
such Event immediately without prior notice to Organizer/Promoter, or
CART may, in its discretion, obtain the required insurance from an
approved insurance company, with acceptable terms, at
Organizer/Promoter's expense.
21. Only those individuals approved by CART or Organizer/Promoter,
including but not limited to drivers and pit crew and necessary fire,
wrecker, ambulance and security crews, shall have access to or be
allowed in the paddock, garage and pit areas, the racing surface, and
other areas to which admission by the general public is normally
prohibited during the Event, and Organizer/Promoter shall be solely
responsible and provide sufficient security personnel in such areas to
enforce this provision at all times during each Event. Such access must
be in compliance with the IndyCar Rule Book and may not interfere with
or adversely affect the Competition.
22. Organizer/Promoter shall honor CART's Unified Credential System and
shall comply with the facility access provisions implemented by CART,
as set forth in SCHEDULE C attached hereto and made a part hereof, and
as the same may be amended by future discussions and concurrence
between CART and its race promoters through the promoter group.
23. CART shall have the exclusive right to contract out or to take or cause
to be taken by others, make, broadcast, rebroadcast, use, reproduce,
transmit, copyright, sell, license or otherwise dispose of for any
purpose whatsoever, television pictures, sound film and tape, motion
pictures, still photographs, electronic images and sound of each Event.
CART shall retain all national, international and local broadcast
rights including broadcast television, cable and radio.
Organizer/Promoter will assure that the presence of personnel and
equipment for these or similar purposes shall not be inconsistent with
the rights of CART herein provided and shall not interfere or conflict
with the exercise of any such rights by CART as herein provided.
24. Organizer/Promoter recognizes and acknowledges that CART has entered or
intends to enter into a television contract with a national broadcast
or cable network for the coverage of each Competition hereunder.
<PAGE> 9
A. Detailed operational and facility requirements of
Organizer/Promoter in respect to television and other on-site
media are identified in SCHEDULE A.
B. CART has arranged with the television production companies
(subject to network approval) to provide the video portion of
the program feed from the mobile unit to Organizer/Promoter,
so that Organizer/Promoter may feed the video signal as a
courtesy to the media center and hospitality suites. This feed
is limited to on-site press and hospitality use only. Any
other feeds to hotels, bars, or other establishment(s) whether
on-site or off, are strictly prohibited. Organizer/Promoter
shall be responsible for the installation and maintenance of
appropriate cable originating at the television compound which
will then feed the system. Maintenance and operation of the
system is the sole responsibility of Organizer/Promoter.
C. CART and Organizer/Promoter agree that it is in the best
interest of the sport, its promoters and sponsors to have the
same on-site and television title sponsor. CART and
Organizer/Promoter recognize and agree that all television
entitlements are derived from a privilege granted by the
television network and are subject to network approval. In the
event Organizer/Promoter provides CART with a television
entitlement sponsor, such sponsor must agree to: (i) purchase
one (1) of several commercial unit package options for either
network or cable coverage to be published by CART or its
designee each year, (ii) enter into a negotiated agreement
with CART or its designee, or (iii) guarantee a payment for
entitlement in return for which Organizer/Promoter will
receive eight (8) thirty (30) second commercial units to
package with its on-site title. The published rate option
packages and payment option will be made available to
Organizer/Promoter at least one (1) year in advance.
D. Organizer/Promoter may, at its option, and subject to approval
by CART or its designee and the appropriate network, elect to
guarantee over-the-air broadcast network coverage of its
Event. In this event Organizer/Promoter will be required to
provide a television title sponsor subject to: (i) purchase of
one (1) of several published minimum commercial unit packages,
(ii) enter into a negotiated agreement with CART or its
designee, or (iii) guarantee a payment for entitlement to be
determined each year. In the payment option (iii)
Organizer/Promoter will receive eight (8) thirty (30) second
units in the telecast to package with its on-site title.
E. In the event Organizer/Promoter elects not to provide CART
with a television entitlement sponsor or to guarantee
over-the-air broadcast network coverage, then CART or its
designee shall have the option to secure a television
entitlement sponsor which need not be the same as the on-site
entitlement sponsor.
<PAGE> 10
F. CART and Organizer/Promoter agree that the policy and terms
set forth as a condition of television coverage of this Event
may change from time to time, and, therefore, the television
agreement may supersede portions of this Agreement. In the
event that the television agreement supersedes a portion of
this Agreement, CART will immediately notify
Organizer/Promoter and work toward a mutually agreed upon
solution.
25. Organizer/Promoter recognizes and acknowledges that CART has the right
to contract for an official car and/or truck for the PPG IndyCar World
Series.
26. PPG shall have the exclusive right to provide any and all pace cars
throughout the entire Event. In addition, only PPG pace cars shall be
allowed to participate in the parade laps immediately preceding the
start of the Indy Car race. Further details of these and other
responsibilities of Organizer/Promoter to PPG are agreed to as outlined
in SCHEDULE D attached hereto and made a part hereof.
27. Organizer/Promoter agrees that the scheduled CART activities during
each Event, including those associated with the Competition, PPG Pace
Car on track activities, and CART's official support series, Indy
Lights, shall have priority over any other race or other activity
scheduled during such Event. Organizer/Promoter will not schedule any
supporting races or ancillary activities on the same day as
registration or inspection, or on any other day during an Event,
without prior written approval of CART. Further details of these and
other scheduling considerations/requirements are agreed to as outlined
in SCHEDULE E attached hereto and made a part hereof.
28. CART shall conduct mutually agreed upon grid/pre-race activities which
shall include but are not limited to the pole awards, driver
introductions, etc.
29. CART shall conduct mutually agreed upon Victory Circle proceedings.
Details of these proceedings and the requirements of Organizer/Promoter
in regard thereto are agreed to as outlined in SCHEDULE F attached
hereto and made a part hereof.
30. CART shall have reasonable access to the PA system in order for CART to
fulfill its contractual obligations to its sponsors and inform
participants and spectators of activities during the Event.
31. A. CART merchandise, as supplied by CART or its licensed
representative, will be afforded the opportunity to be sold
from its own official concession stand to be located in a
prominent, high-traffic location, generally near the paddock
area. Selected items of merchandise may also be prominently
offered for sale in the track concession sales booths.
Merchandise sold from the CART booth will generate a royalty
of twenty-five percent (25%) of the gross sales, after taxes,
paid to Organizer/Promoter. Merchandise placed in the
concessionaire booths will be done so on a consignment basis
<PAGE> 11
with the concessionaire given a forty (40%) percent discount
on the retail price of all merchandise sold. Retail prices
will be agreed upon in writing prior to the merchandise being
placed in concessionaire booths. All accounting will be
completed by noon of the day following the conclusion of each
Event. All payments will be made and unsold merchandise
returned at the same time.
B. It is Organizer/Promoter's responsibility to insure that any
and all concessions and/or merchandise is properly licensed.
In the event that CART discovers any unlicensed products, it
will have the right to take appropriate action in its sole
discretion.
C. All IndyCar teams will be afforded the opportunity to sell
merchandise within the confines of the race facility. All
teams will be in a prominent, high-traffic location.
Participating IndyCar teams will pay a rights fee for the
location, which fee shall be (i) consistent with the then
current market price and (ii) no less favorable for any
IndyCar team than the terms and conditions provided to other
vendors located within the same area.
32. In conjunction with the PPG IndyCar Winner's Circle Club endorsed by
CART, Organizer/Promoter shall provide at its expense:
A. Limited access to restricted areas for club members during
group tours and club functions.
B. Inclusion of a PPG IndyCar Winner's Circle Club advertisement
in the official race program. Camera ready art shall be
provided by CART or its designee.
C. Covered facility for meetings with a PA system, if not
provided by PPG.
33. Organizer/Promoter shall cooperate with CART in its spectator research
efforts, including but not by way of limitation allowing CART
representatives access to spectators for personal interviews and
questionnaire distribution and inclusion of a CART questionnaire in the
official race program, for which camera ready art will be provided. The
results of such research shall be made available to Organizer/Promoter.
34. A. The parties agree that, commencing in 1996, CART shall have
the right to designate up to eight (8) sponsorships utilizing
the following entitlements to be provided by
Organizer/Promoter for each sponsorship at no cost to CART
except as otherwise stated:
- designation as an Event sponsor on a totally
exclusive basis;
- inclusion in the Event press kit;
- priority hospitality access;
<PAGE> 12
- one (1) page of advertising in the Event
Program (to be produced and supplied by the
sponsor - 4 color camera ready art to be
provided);
- one (1) 10' x 10' Expo space;
- six (6) public address system announcements
(two per day);
- twenty (20) grandstand admission tickets;
and
- four (4) 3' x 10' wall signs (to be provided
by the sponsor).
All costs associated with the design and production of the
advertising page and wall signs shall be borne by CART. The
parties acknowledge the following categories represent
acceptable potential sponsorships:
- payment systems;
- mineral water;
- confectionery;
- savory snacks;
- film;
- camera;
- electronics (i.e., television, hi-fi, audio,
etc.); and
- one additional mutually agreeable category.
Except as provided in the following sentence, all revenues
received from such sponsorships will be retained by CART. The
collective revenues received from sponsorships in the
electronics, film and camera categories shall be applied as
follows: the first Seventy Five Thousand ($75,000.00) Dollars
shall be retained by CART; the balance of the proceeds
received after Seventy Five Thousand ($75,000.00) Dollars
shall be divided equally between CART and Organizer/Promoter.
B. One additional page in the program shall be provided without
charge for CART's own use for an offered Sponsor Corporate
Advertisement.
CART questionnaire in the official race program, for which
camera ready art will be provided. The results of such
research shall be made available to Organizer/Promoter.
C. Organizer/Promoter recognizes that each participating team has
a race sponsor. Organizer/Promoter agrees that each team may
place its team name and sponsor(s) on both sides of the wall
in the team's assigned pit box, subject to applicable
governmental laws and regulations.
35. Organizer/Promoter shall provide CART at no cost mutually agreed upon
hospitality provisions for not less than forty (40) guests per day.
Hospitality provisions will include food and beverage (at CART's
expense).
<PAGE> 13
36. Each Competition shall appear on the FIA calendar as a full
international FIA event. Organizer/Promoter agrees to file this listing
through CART and reimburse CART for all applicable listing fees. In
addition, Organizer/Promoter agrees to pay through CART the applicable
National Motorsports Council assessments, as determined by the
Council's Executive Committee.
37. Organizer/Promoter agrees to indemnify and hold harmless CART, its
directors, officials and officers, agents and employees, members and
sponsors from any and all liabilities including liability resulting
from the ordinary (but not gross) negligence of the same and all costs
and expenses, including attorneys fees incurred in the defense thereof,
asserted or imposed upon CART, its directors, officials, official
representatives, employees, officers, members and sponsors arising out
of or as a result of an Event hereunder.
38. Organizer/Promoter agrees not to take any action adverse to the
interest of CART and, in consideration of the acceptance and approval
of this application, releases and discharges CART and its officials and
representatives from all liability for personal injury that may be
received, and from all claims and demands for damages to real or
personal property or to any person growing out of or resulting from an
Event hereunder, whether caused by any construction or condition or any
track or track equipment, cars or debris, or resulting from any act or
failure of any official or any person assisting the officials serving
in connection therewith.
39. Nothing contained herein shall be construed to place CART in the
relationship of a partner or joint venturer with Organizer/Promoter,
and Organizer/Promoter shall have no power to obligate or bind CART in
any manner whatsoever other than as specifically provided for herein.
Neither party undertakes by this Agreement to perform any obligations
of the other, whether regulatory or contractual, or to assume any
responsibility for the other's business or operations.
40. The validity, interpretation and construction of this Agreement shall
be governed and construed by the laws of the State of Michigan. Any
litigation commenced by a party to this Agreement as the result of any
alleged breach of this Agreement shall be commenced in the circuit
court for the County of Oakland, State of Michigan, or in the
appropriate lower district court in said county, or in the U.S.
District Court for the Eastern District of Michigan, and the parties
hereby consent to such personal jurisdiction.
41. This Agreement is not transferable or assignable. Any transfer or
assignment in violation of this provision shall be void.
42. Any notice or written communication required or permissible hereunder
shall be sent by registered mail (or certified mail with return
receipt), postage prepaid, addressed as follows:
<PAGE> 14
To CART: To Organizer/Promoter:
Championship Auto Racing Teams, Inc. Carl Haas Racing Teams, Inc.
755 W. Big Beaver Rd., Suite 800 500 Tower Parkway
Troy, MI 48084 Lincolnshire, IL 60069
43. A. This Agreement (including the Schedules annexed hereto)
contains the entire agreement of the parties hereto and no
representations, inducements, promises, or agreements, oral or
otherwise, not embodied herein shall be of any force or
effect. This Agreement may be modified only upon the written
consent of the parties hereto.
B. No waiver by either party, whether expressed or implied, of
any provision of this Agreement or any breach or default shall
constitute a continuing waiver thereof.
C. Each and every of the rights, remedies and benefits provided
by this Agreement shall be cumulative, and shall not be
exclusive of any other said rights, remedies and benefits, or
of any other rights, remedies and benefits allowed by law.
D. If any provision in this Agreement is held to be invalid or
unenforceable, it shall be ineffective only to the extent of
the invalidity, without affecting or impairing the validity
and enforceability of the remainder of the provision or the
remaining provisions of this Agreement.
44. The parties acknowledge the importance of each party's reputation, good
will and public image and, accordingly, agree to maintain and enhance
such image by restraining from taking any action contrary to the best
interest of either party, or detracting from the reputation of either
party. Each party shall refrain from making any statements about the
other party that adversely affects, casts in an unfavorable light, or
otherwise maligns the business or reputation of such other party or any
of its principals.
45. At all times, the terms and conditions of this Agreement are
confidential to CART, Organizer/Promoter, their parent companies and
their respective subsidiaries, and shall not be disclosed to any other
entity or individual without the other party's prior written consent.
Notwithstanding the foregoing, disclosure may be made if necessary to
enforce a party's rights under this Agreement, or if required by a
governmental agency, in which case any and all documents, information,
or materials disclosed shall be marked "confidential" and such party
shall seek confidential treatment of such information.
46. The following Schedules are attached hereto, incorporated herein by
reference as though set forth in their entirety in this Agreement, and
labeled as follows:
<PAGE> 15
Schedule A - Operational and Facility Requirements
Schedule B - Insurance Requirements
Schedule C - Unified Credential System and Facility Access Provisions
Schedule D - PPG Program and Official Cars
Schedule E - Event Activities
Schedule F - Post Race Procedures/Activities
Any person or organization having responsibility in the organization, promotion
or staging of any Competition, whether by contract or otherwise, shall co-sign
this Agreement and shall be jointly responsible hereunder. Organizer/Promoter
and the undersigned warrant and represent that Applicant has the full right and
authority to enter into and perform this Agreement, and that the execution and
delivery of this Agreement has been duly authorized by all necessary
governmental and/or corporate action.
Date: June 1, 1994 /s/ Carl A. Haas
------------------------- ----------------------------------------
Applicant
By: Carl A. Haas
----------------------------------------
Its: President
----------------------------------------
Date: June 1, 1994
------------------------- ----------------------------------------
Co-Signer's Signature
<PAGE> 16
CART APPROVAL
The foregoing application is hereby approved and accepted in accordance
with the terms stated therein.
Date: Championship Auto Racing Teams, Inc.
-------------------------
By:
-------------------------------------
Its:
------------------------------------
CART sanction number granted:
----------------------------------------
Date:
------------------------- ----------------------------------------
Authorized Signature
<PAGE> 17
SCHEDULE "A"
OPERATIONAL AND FACILITY REQUIREMENTS
I. MEDIA CENTER
FACILITIES:
Solid, climate controlled, weatherproof structures capable of
supporting separate work area for IndyCar Media Relations, Event Media
Relations, Support Event Media Relations, deadline media, non-deadline
media, and a dedicated, separate media interview room.
ELECTRIC/POWER REQUIREMENTS:
Organizer/Promoter should provide CART Communications staff at least
two (2) 10 volt, 20 amp, single phase circuits or equivalent with a
minimum of eight (8) electrical outlets. Adequate power and at least
one electrical outlet for each assignable seat for press in media
center.
TELEPHONE REQUIREMENTS:
Twenty (20) direct and five (5) dedicated lines and instruments.
EQUIPMENT:
five (5) photocopy machines;
ten (10) large screen television sets/monitors (including audio) with
direct video feed from television production mobile units (one pair
should be available for CART Communications staff);
three (3) golf carts for exclusive use by CART.
II. OPERATIONS
FACILITIES:
Solid, quite, climate controlled, weatherproof structure capable of
accommodating a minimum of sixty (60) people.
<PAGE> 18
ELECTRIC/POWER REQUIREMENTS:
<TABLE>
<S> <C> <C> <C> <C>
Radio Trailer 110v/115v 2 30 amp single phase
or /220v 30 amp single phase
Timing and Scoring 110v/115v 6 30 amp single phase
Operations Trailer #1 110v/115v 30 amp single phase
Operations Trailer #2 110v/115v 2 30 amp single phase
Medical Coach 110v/115v 50 amp single phase
IndyCar Coach 110v/115v 50 amp single phase
Inspection Area 110v/115v 2 20 amp single phase
EDS/Timing &
Scoring Truck 110v/115v 50 amp single phase
Delco Battery 110v/115v 2 30 amp single phase
or 220v single phase
DieHard Battery 110v/115v 2 30 amp single phase
or 220v
IndyCar Fuel Compound 110v/115v 4 25 amp single phase
IndyCar Tire Compound 220v/240v 2 50 amp single phase
Fuel Compound 110v/115v 30 amp single phase
Scales 110v/115v 20 amp single phase
</TABLE>
TELEPHONE REQUIREMENTS:
As a minimum, the following areas must be supplied telephones which
provide access to commercial telephone lines:
Operations Trailer #2 - telephone and facsimile line
Medical Coach
IndyCar Coach
Race Control
Timing & Scoring
Start/Finish Line
EQUIPMENT:
One (1) print quality hi-speed photo copier.
Organizer/Promoter at its expense shall provide, install and maintain
the equipment necessary to operate the Timing and Scoring system
managed for CART by EDS in accordance with the specifications supplied
by CART and EDS. Organizer/Promoter will provide EDS free of charge at
the start/finish line, on the Timing and Scoring structure and at least
one other prominent location, space to affix and display the "EDS" logo
and/or "EDS Official Timing Technology Provider".
<PAGE> 19
COMMUNICATION CIRCUITS:
Land line communication system connecting all trackside stations, pit
in, pit out, race control and start/finish line.
Private land line communication circuit connecting timing and scoring,
race control, pit center and starters stand.
FUEL:
Organizer/Promoter will provide gasoline for all safety, track
maintenance vehicles and the jet dryer:
Track Dryer Jet A or #1 diesel approximately 50 gallons
(The parties recognize that Organizer/Promoter provides its own track
dryer and, therefore, will be required to provide fuel under this
provision only in the event that use of CART's track dryer is
required.)
Safety Vehicles gasoline approximately 200 gallons
GENERAL:
Minimum of three hundred fifty (350) pounds of ice each day from
Thursday until Sunday of race weekend.
Worker lunches and drinking water will be provided for each day of the
Event weekend. The quantity will be supplied by CART.
All areas and utilities shall be accessible for use by CART on or
before 8:00 AM the Wednesday prior to the published race date.
III. TELEVISION AND RADIO
FACILITIES:
Television Compound Area - Organizer/Promoter shall provide a level,
hard-surfaced area approximately 150 feet x 150 feet for use by IndyCar
Productions and network television production mobile units, broadcast
equipment, and personnel. Compound should be located as follows:
Street Course: As close as possible to the announcement booth
or as close to the majority of camera positions as possible,
but definitely outside the course.
<PAGE> 20
Road Course: As close as possible to the announcement booth,
as close to the majority of camera positions as possible,
preferably outside the course.
Oval Course: As close as possible to the announcement booth
and allowing the most direct cable access to the majority of
camera positions as possible, but definitely outside the
course.
Announcement Booths - Climate controlled. Booths should have a wide
expanse of glare-proof (non-tinted) glass overlooking the pits and
track. Sound deadening materials should be used in construction,
including proper insulation, carpeting, panelling, and double-paned
glass.
The front window overlooking the track and pits should begin around 3.5
feet - 4 feet above the floor. Booth should also have windows on the
sides of the booth facing the track, around 3-4 feet deep from the
front of the booth, to provide sight lines up and down the track and
pits. Where possible, back half of each booth should be elevated 4
inches - 6 inches (minimum) to allow raised sight lines for those
working in rear of booth.
A ledge/table should run the entire width of the front window wall, set
under the window and should be well braced to support necessary video
monitors, timing & scoring monitors, and audio equipment, etc.
Ledge/table should extend two (2') feet into the room from the
front-windowed wall, and where possible, should provide a removable
cut-out against the wall, with a support brace under the cut-out, to
allow monitors to be partially recessed on an angle within the
ledge/table.
Access panels, conduits, and cable troughs (minimum 6 in diameter),
should be provided by promoter as necessary to allow cables to enter
booth for video, audio, timing & scoring, and antennae feeds.
Entry door should have a locking system installed, so that the room and
equipment may be secured. A keyless or combination access system is
preferred. Door should also have a mail slot for press releases, etc.
As other international networks (more than three) may wish to originate
commentary from the site of a CART Event, CART may request, and
Organizer/Promoter agrees to provide, additional announcement booths.
CART agrees to provide at least thirty (30) days notice to
Organizer/Promoter in such cases. All reasonable costs, subject to
competitive bidding, associated with the construction and provision of
any additional booths and required facilities (i.e. telephone, power,
etc.) for international networks shall be the responsibility of CART.
U.S. Television Network:
BOOTH SIZE: 15 feet x 15 feet booth.
<PAGE> 21
LOCATION: Should be placed on the outside of the track
and nearest to the start/finish line,
providing the widest view of the track and
pits. Where possible, booth should be
located alone or at one end of any row of
booths or suites.
IndyCar Radio Network:
BOOTH SIZE: 8 feet x 8 feet (minimum) booth.
LOCATION: Preferred placement on the outside of the
track and nearest to pit center, providing
the widest view of the track and, then, the
start/finish line and pits.
International Networks:
BOOTH SIZE: A minimum of three (3) 8 feet x 8 feet
(minimum) booths.
LOCATION: Preferred placement providing the widest
view of the pits and, then, the track and
start/finish. Where possible, location
should be on the outside of the track.
ELECTRIC/POWER REQUIREMENTS:
Organizer/Promoter shall ensure necessary lighting (minimum of 125 foot
candles) is available for television coverage during the Event.
All power should be "shore" power, as opposed to generator power, where
possible. If "shore" power is not available, generator power must meet
the requirements of the network television production company,
including but not limited to: back-up power, redundant systems,
frequency controlled, and automatic switch-over features. Requirements
to be provided before execution of this Agreement, as follows:
TV COMPOUND - U.S. NETWORK
<TABLE>
<S> <C> <C> <C>
Mobile Unit #1 208v 200 amp 3 phase
Mobile Unit #2 208v 200 amp 3 phase
Uplink Truck #1 208v 150 amp 3 phase
Office Trailer #1 208v 150 amp 3 phase
Office Trailer #2 208v 100 amp single phase
Mobile Support Unit 208v 100 amp single phase
In-Car Camera Truck 208v 60 amp single phase
RF Camera Truck 208v 60 amp single phase
Catering 110v 60 amp single phase
</TABLE>
TV COMPOUND - INTERNATIONAL NETWORKS
<TABLE>
<S> <C> <C> <C>
International M.U. 208v 200 amp 3 phase
</TABLE>
<PAGE> 22
<TABLE>
<S> <C> <C> <C>
Uplink Truck #2 208v 150 amp 3 phase
Uplink Truck #3 208v 150 amp 3 phase
</TABLE>
REMOTE LOCATIONS
<TABLE>
<S> <C> <C> <C>
RF Receive Site 110v 20 amp single phase
RF Receive Site 110v 20 amp single phase
TV Interview Room 110v 20 amp single phase
</TABLE>
ANNOUNCEMENT BOOTHS
<TABLE>
<S> <C> <C> <C>
U.S. Network Production 110v 20 amp single phase
U.S. Network Monitors 110v 20 amp single phase
U.S. Network Audio 110v 20 amp single phase
Radio Production 110v 20 amp single phase
Radio Monitors 110v 20 amp single phase
International #1 Production 110v 20 amp single phase
International #1 Monitors 110v 20 amp single phase
International #2 Production 110v 20 amp single phase
International #2 Monitors 110v 20 amp single phase
International #3 Production 110v 20 amp single phase
International #3 Monitors 110v 20 amp single phase
</TABLE>
EACH ADDITIONAL INTERNATIONAL BOOTH
<TABLE>
<S> <C> <C> <C>
Additional Production 110v 20 amp single phase
Additional Monitors 110v 20 amp single phase
</TABLE>
Minimum four (4) outlets per electrical circuit.
Air-Conditioning/heating systems must be on separate circuits from
those shown above.
TELEPHONE REQUIREMENTS:
Television Compound Area - Organizer/Promoter shall ensure twenty-five
(25) dry pair telephone lines are permanently installed in television
compound.
Announcement Booths -
IndyCar Radio Network:
A maximum of eight (8) dry pair telephone lines permanently
installed in booth.
International Networks:
Eight (8) dry pair telephone lines permanently installed in
each announce booth.
<PAGE> 23
ACCESS:
Organizer/Promoter shall accord all broadcast networks and/or their
designees the right to install and maintain at, and remove from, the
site of the Event and associated areas such wires, cables, and
apparatus as the network or its designee deems necessary for recording
and/or telecasting the Event (provided that there shall not be any
interference with the use of or means of ingress or egress at the site
or associated areas).
INTERVIEW ROOM:
Organizer/Promoter shall provide a small room (8 feet x 8 feet minimum)
which may be used exclusively by the network production companies for
driver interviews. Room should be climate controlled and quiet from
other on track sounds and activities and should be located near the
paddock, media center, or team hospitality area. In the event the
Organizer/Promoter provides an office trailer for meetings or other use
by IndyCar Operations, the side room of this trailer would be
acceptable.
SECURITY:
Organizer/Promoter must provide sufficient security, with radio
communications, for all broadcast equipment in the television compound
and around the track, including camera, remote, and booth locations.
Security should be available from the first evening of arrival through
the morning of the last day of departure of all broadcast equipment.
ADDITIONAL FACILITIES:
CART may also require, and Organizer/Promoter agrees to provide,
additional space to locate one (1) or more mobile announce booths to
accommodate international networks, plus any required electrical power.
All reasonable costs associated with the provision of power and other
required facilities (i.e. telephone, etc.) for these additional
international networks shall be the responsibility of CART.
EQUIPMENT VENDORS:
Broadcast crews will use best efforts to achieve highest quality,
lowest cost for renting equipment from Organizer/Promoter's exclusive
source. If this cannot be achieved, then the exclusive track source
will not apply to production company's needs.
IV. GENERAL
As the execution of the Competition and broadcast coverage of CART events is
vital to the success and growth of the Series and each Event, and as newer and
additional technical facilities may be required to meet media, operational and
broadcast production standards in order to enhance and upgrade the facility and
broadcast quality, Organizer/Promoter agrees to provide
<PAGE> 24
additional space, power, facilities, or other services as may be requested by
CART. CART agrees to provide Organizer/Promoter as much advance notice as
possible of these additional requirements.
<PAGE> 25
SCHEDULE "B"
INSURANCE REQUIREMENTS
In an effort to protect the interest of track owners, Organizers/Promoters,
sponsors, CART, its Members, Associate Members and participants, CART has
established certain minimum criteria for insurance coverage which must be in
effect for all CART Events.
The insurance requirements for CART events consist of the following areas of
insurance coverage:
1. Spectator and Participant Legal Liability Insurance; and
2. Participant Accident Insurance.
The minimum specifications and requirements for acceptable coverage are:
$10,000,000 LIABILITY INSURANCE (coverage must be primary)
V. POLICY FORM
The policy must be a Comprehensive General Liability form and may be
either a manuscript Automobile Racing policy or a Commercial General Liability
policy with endorsements that provide the amendments required to cover
automobile racing events.
Coverage provided must include, but shall not be limited to:
1. Spectator/Public Bodily Injury Liability
2. Participant Legal Liability - Participant Bodily Injury
Liability - Participant to Participant Liability
3. Property Damage Liability
a. Including participants' property except when in
restricted areas.
b. No more than a Fifty Dollar ($50.00) deductible.
4. Refreshments/Products Liability including Concession Hard
Goods and Host Liquor Liability.
5. Personal Injury Liability, including false arrest, detentions,
imprisonment or malicious prosecution, libel and slander;
wrongful entry or eviction.
6. Mobile Equipment Liability
<PAGE> 26
7. Incidental Medical Malpractice Liability including primary
coverage for medical professionals.
8. Temporary and Air Ambulance Liability.
9. Off Premises Sign Liability.
10. Official Vehicle Physical Damage
a. Two Hundred Fifty Dollar ($250.00) maximum
deductible.
11. Contractual Liability
VI. MINIMUM LIMITS OF COVERAGE
CART reserves the right to change insurance limits as long as ninety (90) days
notice is given to Organizer/Promoter.
1. 1996 Event - $10 million combined single limits per occurrence
for Bodily Injury and Property damage with no aggregate limit.
2. 1996 Event - $5 million minimum for Participant Legal
Liability. Subsequent Events subject to 50% of limits in place
in paragraph 2A.
3. 1996 Event - $1 million Medical Malpractice Liability with $1
million aggregate per incident. Coverage to include Medical
Professionals. (See paragraph 1[G]).
VII. NAMED INSUREDS
Must include:
1. CART, its officers, directors and employees; PPG Industries,
Inc.
2. CART reserves the right to add additional named insureds
provided however, that notice be given no later than sixty
(60) days prior to the Event.
VIII. PERSONS INSURED
Must include:
<PAGE> 27
All participants, race car owners, sponsors for this Competition, Event or the
Series of which the Competition is a part, and CART Members and Associate
Members. The definition of participants must include drivers, mechanics, pitmen,
officials of the race, and those assisting the officials, event staff,
announcers, emergency and safety crews and security personnel and all other
persons allowed access to restricted areas. Such definition also applies to Indy
Car and support series events.
IX. WAIVER AND RELEASE FROM LIABILITY
The insurance policy must require the utilization of a system at all CART Events
which secures properly executed and signed "Waiver and Release from Liability"
forms from all participants. The procedure for obtaining such executed waivers
from CART participants shall be determined by CART.
X. GENERAL SPECIFICATIONS
1. The insurer must be admitted or approved to write insurance in
the state, province and country where the insured track is
located. The broker or agent must be licensed to transact
business in the state, province and country where the track is
located. It is Organizer/Promoter's responsibility to inform
all participants of all coverages and conditions available
throughout the Event.
2. The insurer must have a minimum of a Best A rating, and the
name of the insurer must be supplied to CART for the purposes
of confirmation.
3. The insurer must formally agree to send duplicate notice of
cancellation to CART in the event of cancellation a minimum of
thirty (30) days in advance of the cancellation. The reason
for the cancellation must be included with this notification.
The insurer must also formally agree to immediately notify
CART of each instance of the insured's failure to remit proper
premium or other required payments.
4. The agent or broker must submit a narrative explanation of
systems, procedures and authority for adjusting and paying
liability and participant accident claims.
PROCEDURES FOR OBTAINING APPROVAL OF AND UTILIZING INSURANCE COVERAGE
1. Any request or submission for approval of insurance coverage not
meeting the minimum specifications and requirements or procedures will
not be accepted.
<PAGE> 28
2. To obtain approval for sources of insurance, Organizer/Promoter or its
insurance broker must submit a certified true specimen copy of the
proposed policy forms to CART at least ninety (90) days prior to the
first date proposed to be insured by the insurance.
3. CART will notify the party submitting the request in writing of the
acceptance or rejection of insurance submissions within fifteen (15)
days of receipt of the submission. Only formal written approval of the
acceptance of insurance coverage by CART shall be considered valid.
4. Upon acceptance, Organizer/Promoter must provide CART a certified true
copy of the actual policy of insurance issued to track operators or
Organizer/Promoter at the time of issuance and no later than thirty
(30) days prior to the first day of the Event.
5. Should Organizer/Promoter fail to comply with the above requirements,
CART shall have the right to purchase the insurance and obtain
reimbursement from Organizer/Promoter.
6. PARTICIPANT ACCIDENT INSURANCE FOR CART PARTICIPANTS
Organizer/Promoter shall reimburse CART for the cost of participant
accident disability, medical and life insurance which minimum coverages
for 1995 are as follows:
<TABLE>
<S> <C>
Accidental Death and Dismemberment $ 50,000.00
Primary Accident Medical $ 150,000.00
Excess Major Medical $ 350,000.00
Weekly Disability (to 104 weeks) $ 250.00
Monthly Disability (to 48 months) $ 300.00
</TABLE>
<PAGE> 29
SCHEDULE "C"
UNIFIED CREDENTIAL SYSTEM AND FACILITY ACCESS PROVISIONS
CART SEASON CREDENTIALS (PLASTIC PICTURE IDENTIFICATION)
A. TEAMS
Each CART Owner Membership is entitled to a maximum of forty (40) CART picture
I.D. license/credentials upon acceptance of application and payment of fees due
CART. Additional license/credentials (41-100) may be purchased at a cost of
$185.00 each per season. Revenues derived from such purchases less $25.00 per
credential will be divided equally among all CART Organizer/Promoters.
These license/credentials are to be issued to team members, i.e., owner, team
manager, chief mechanic, crew members, designated team and/or sponsor public
relations representative and any other associates the owner desires within the
allotted maximum number. This credential will permit access to the facility and
restricted areas including the pit area at all times during any CART Event. At
specified Events, a limited number of special credentials will be issued to
allow only necessary and appropriate personnel access to the pit area thirty
(30) minutes prior to and during the IndyCar race.
B. DRIVERS
Each driver will be issued a permanent CART picture license/credential. An
additional picture license/credential will be issued to the driver's spouse or
companion. Both credentials will permit access to the facility and restricted
areas including the pit area at all times during any CART Event. At specified
Events, a limited number of special credentials will be issued to allow only
necessary and appropriate personnel access to the pit area thirty (30) minutes
prior to and during the IndyCar race.
C. INDY LIGHTS OR CART OFFICIAL SUPPORT SERIES
CART will provide credentials to Indy Light competitors, sponsors and suppliers
pursuant to provisions in the contract between CART and American Racing Series.
D. OFFICIALS
Each CART official will be issued a permanent CART picture I.D.
license/credential. This credential will permit access to the facility and
restricted areas including the pit area at all times during any CART Event. At
specified Events, a limited number of special credentials will be issued to
allow only necessary and appropriate personnel access to the pit area thirty
(30) minutes prior to and during the IndyCar race.
<PAGE> 30
E. SUPPLIERS AND AWARD POSTERS
A reasonable number of suppliers and award posters will be issued credentials as
determined by CART. These credentials will permit access to the facility and
restricted areas including the pit area at all times during any CART Event. At
specified Events, a limited number of special credentials will be issued to
allow only necessary and appropriate personnel access to the pit area thirty
(30) minutes prior to and during the IndyCar race.
Commencing in 1996, each CART authorized supplier and award poster shall be
entitled to a maximum of five (5) credentials at no charge. Additional
credentials may be purchased at a cost of $100.00 each per season. Revenues
derived from such purchases less $10.00 per credential will be divided equally
among all CART Organizer/Promoters.
F. MEDIA
CART will issue a limited number of credentials to nationally and
internationally recognized print journalists and photographers covering the
majority of Series Events on assignment for recognized media. They will clearly
be marked "MEDIA" and "PHOTO" respectively. Television talent and key production
staff are also credentialed and marked "TV". All media, photo and TV credentials
will permit access to the facility and restricted areas including the pit area
at all times during any CART Event. At specified Events, a limited number of
special credentials will be issued to allow only necessary and appropriate
personnel access to the pit area thirty (30) minutes prior to and during the
IndyCar race.
G. SPONSORS
A reasonable number of CART sponsors will be issued credentials as determined by
CART. These credentials will permit access to the facility and restricted areas
including the pit area at all times during any CART Event. At specified Events,
a limited number of special credentials will be issued to allow only necessary
and appropriate personnel access to the pit area thirty (30) minutes prior to
and during the IndyCar race.
Commencing in 1996, each CART sponsor shall be entitled to a maximum of five (5)
credentials at no charge. Additional credentials may be purchased at a cost of
$500.00 each per season. Revenues derived from such purchase less $50.00 per
credential will be divided equally among all CART Organizer/Promoters.
<PAGE> 31
EVENT CREDENTIALS (PROVIDED BY THE ORGANIZER/PROMOTER)
A. ISSUED BY CART:
1. ASSISTANTS
Organizer/Promoter shall make Event credentials available to
CART for those persons assisting CART Officials. These
credentials shall be the same type of credentials as those
issued by Organizer/Promoter to others assisting in the
production of the Event and will permit access to the facility
and restricted areas including the it areas at all times
during any CART Event. At specified events, a limited number
of special credentials will be issued to allow only necessary
and appropriate personnel access to the pit area thirty (30)
minutes prior to and during the IndyCar race.
2. SPONSORS
For each Owner Membership accepted by CART the entrant may be
entitled to a maximum of twenty (20) credentials per accepted
membership for team sponsors. These credentials will permit
access to the facility and restricted areas during CART
activities. Access to the pit area will be terminated thirty
(30) minutes prior to the start of and during the CART race.
Each credential purchased hereunder shall apply to all CART
sanctioned events during the season and shall be purchased at
a cost equivalent to the sum of $45.00 for each permanent race
circuit on the schedule and $55.00 for each temporary race
circuit on the schedule. Revenues derived from such purchases
will be divided equally among all CART Organizer/Promoters.
3. ADDITIONAL CREDENTIALS, PASSES, TICKETS AND PARKING
Organizer/Promoter will provide CART with additional
credentials, passes, tickets and parking to be utilized as
stated below for distribution at the discretion of CART.
a. CREDENTIALS AND PASSES
General - Forty (40) corporate village suite passes or other
mutually agreed upon passes and credentials; Three Hundred
(300) credentials for distribution by CART;
Drivers - Four (4) credentials to each participating IndyCar
driver;
U.S. Television Network - Promoter will provide all IndyCar
Productions and network & international network television
crews with specifically designated all access "NETWORK" TV
credentials, which accord production personnel free and
unrestricted access to the site of the Event and all
associated areas, including all
<PAGE> 32
media areas and activities, broadcast facilities, practice &
qualifying and race pit activities, and all other areas, and
also including hospitality and restricted trackside areas for
the sole purpose of producing coverage of the Event. This
"NETWORK" TV credential should be restricted for distribution
to and use by IndyCar Productions and network television crews
only. Individuals accredited by an CART Season Credential
marked "TV" should receive access to the same areas as any
credential issued by the promoter to the television production
crews;
International Television Networks - Same as U.S. Television
Networks; designated "NETWORK" TV;
IndyCar Radio Network - Promoter will provide the IndyCar
Radio Network crews with general media credentials, but which
specifically allow access to all media areas and activities,
broadcast facilities, practice & qualifying and race pit
activities, and, when requested by CART, access to restricted
trackside areas. "NETWORK" TV credentials are acceptable, CART
to coordinate;
Indy Lights - Organizer/Promoter will provide Event
credentials for Indy Lights sponsors, suppliers, and guests.
CART to coordinate.
b. TICKETS
General - Fifty (50) tickets (prime location seating) for
intended use by CART's TV network; Fifty (50) tickets (deluxe
grandstand seating) for use by CART - received thirty (30)
days prior to race day;
c. PARKING
General - Twenty-five (25) parking passes for corporate
village suite guests;
U.S. Television Network - Parking passes shall be provided by
Organizer/Promoter up to a total of (10) ten. Ten (10) service
vehicle passes to allow delivery and servicing of equipment to
all areas of Event, excluding track access. For road & street
courses, an additional three (3) on-track access passes for
delivery and servicing of equipment under radio-controlled
supervision of race control and track security. CART to
coordinate;
International Television Networks - Parking passes shall be
provided by Organizer/Promoter up to a total of three (3) per
attending network, preferably in general media or general
network TV parking areas. One (1) parking pass to allow
equipment delivery as close as possible to these booths. CART
to coordinate;
IndyCar Radio Network - Parking passes shall be provided by
Organizer/Promoter up to a total of (3) three, preferably in
general media or general network TV
<PAGE> 33
parking areas. One (1) parking pass to allow parking or
equipment delivery as close as possible to radio booth. CART
to coordinate;
Deadline Media - At least twenty-five (25) parking spaces for
deadline media in the vicinity of the press area, which
convenient overflow parking;
Competitor Transporter Space - each entrant (i.e. each
separately entered car/driver combination) will be allocates
sufficient parking space in the paddock for one (1)
transporter and work area (minimum 85 feet x 31 feet);
Competitor Motor Coach/Hospitality Space - Each entrant (i.e.
each separately entered car/driver combination) will be
allocated sufficient parking space for (1) motor coach
(minimum 50 feet x 15 feet); Additional space over and beyond
the 50 feet x 15 feet will be charges to the teams;
Owners/Drivers/Team Affiliates/CART Officials & Staff -
Organizer/Promoter will designate a parking area which will
accommodate owners, drivers, team affiliates and CART
officials and staff. Such area will be located in close
proximity to the paddock and/or garage area. Decaled vehicles
supplied by CART's Official car and truck suppliers and
IndyCar owners and drivers will have access to park in the
paddock or motor coach areas. The number of passes required
will be mutually agreed upon by Organizer/Promoter and CART's
Manager of Customer Services/Registrar;
CART Business Coach - Organizer/Promoter shall provide space
in an area easily accessible from the pit and paddock for the
parking of CART's business coach;
Supplier and Manufacturers - Organizer/Promoter will provide
parking and work areas in the paddock for suppliers and
manufacturers that provide entrants with products and
services;
Indy Lights or CART Officials Support Series -
Organizer/Promoter will provide an area in the paddock for
Indy lights transporter parking, competitor work areas,
administrative functions and technical inspection. An area
close to the paddock for team parking will be available.
B. ISSUED BY PROMOTER:
1. RACE PIT CREDENTIALS
This Event credential, provided by Organizer/Promoter for
issue by the organizer/Promoter and CART allows the bearer
access to the facility, paddock/garage and the pit area at any
time during a weekend racing Event. At specified Events, a
limited number of special credentials will be issued to allow
only necessary and appropriate personnel access to the pit
area thirty (30) minutes
<PAGE> 34
prior to and during the IndyCar race. Persons with this
credential must remain behind the pit wall during on track
activity. The dress code will be in effect during races with
scheduled pit stops.
2. PRACTICE & QUALIFYING CREDENTIALS
This Event credential, provided by Organizer/Promoter for
issue by Organizer/Promoter and CART allows the bearer access
to the pit area during all on track activity except races when
scheduled pit stops are a part of the race. Persons with this
credential must remain behind the pit wall during on track
activity. The bearer must leave the pit lane thirty (30)
minutes prior to the start of a race with scheduled pit stops.
3. REDEEMABLE CREDENTIAL
This credential provides the bearer general admission and
paddock/garage area access, but does not allow admission into
other restricted areas. To gain access to the pit area, the
bearer must present the credential for validation or reissue
and sign the proper waiver at a redemption center. The
redemption center will be operated by CART or
Organizer/Promoter and will be located in the infield, paddock
or other area mutually agreed upon by CART and
Organizer/Promoter. The purpose of this credential is to allow
distribution of credentials to V.I.P.'s that would be issued a
pit access credential prior to the Event. This system will
ensure easy access to the facility and not allow pit access
until the proper waiver is signed.
4. MEDIA
Organizer/Promoter shall issue credentials to media personnel
in accordance with the criteria established by CART and
Organizer/Promoter to meet local market obligations.
C. All credentials shall be plainly market "RACE PIT" or "PRACTICE &
QUALIFYING PIT", "MEDIA", "PHOTO", etc. Terms such as "HOT PITS" or
"COLD PITS" are not acceptable.
RULES
1. Credentials are not transferable.
2. Persons in restricted areas may not enter team areas unless
invited, must obey the instructions given by CART officials
and security personnel in regards to their safety and well
being and may not interfere in any way with the activities of
CART participants or the Event. All credentialed persons are
bound by the rules set forth in the IndyCar Rule Book which
pertain to conduct and safety.
<PAGE> 35
3. Persons not properly attired must leave the pit area thirty
(30) minutes prior to the scheduled start of the race. Proper
attire is defined as including the following tenets:
A. Shorts are not permitted.
B. Shirts fully covering the shoulders must be worn at
all times.
C. Open-toe shoes are not permitted.
IMPLEMENTATION
1. All security, gate guards, pit workers, registrars and staff
members with activities that may be affected by this policy,
will be notified of this policy.
2. All CART Owners, Drivers, team Managers, Chief Mechanics and
corporate Sponsors will be notified of this policy.
<PAGE> 36
SCHEDULE "D"
PPG PROGRAM AND OFFICIAL CARS
PACE CARS
The PPG pace cars will serve as the Official Pace Cars at all IndyCar Events
sanctioned by CART and shall be the only pace cars referred to as "Official Pace
Cars" in any advertising, publicity, or promotion of a CART Event by the
Organizer/Promoter.
Track announcers shall identify the PPG pace cars during the parade laps and
continue to identify the starting PPG pace car when it starts the race and when
it is on the track during caution flag periods.
SIGNS AND FLAGS
A. Organizer/Promoter shall furnish PPG at no charge with one (1) location
for a painted sign, highly visible to the principal grandstands and to
television cameras covering the race. PPG will assume responsibility
and cost for painting the sign.
B. PPG shall receive preferential treatment in placement of temporary
banners, signs, and flags at each track for CART Events only. Where
there is a tower, or two towers, PPG's banner shall be placed in a
center location, separate and apart from all other signs and banners.
PPG shall receive at no charge at least two (2) choice locations at
each track. Additional placement of PPG signs and banners will be in
such locations as may be determined by discussions between
Organizer/Promoter and representatives of PPG.
TICKETS AND CREDENTIALS
Organizer/Promoter shall provide choice seating locations for PPG when it makes
ticket purchase for its customers at the same rates, including discounts,
provided any other corporation or group. Also, Organizer/Promoter shall provide
PPG with a reasonable number of pit passes and parking stickers at no cost.
PROGRAM
Organizer/Promoter shall provide PPG with one (1) full-page, full color ad, for
which PPG will furnish color separations, and one (1) full-page of editorial in
their program at no cost to PPG.
VICTORY LANE
A banner bearing the words "PPG Indy Car World Series" shall appear above the
banner of the race sponsor on all podiums or stands in Victory Lanes or Winners'
Circles. Or, where a painted
<PAGE> 37
podium is used, "PPG Indy Car World Series" logo shall appear just above the
logo of the race sponsor in at least equal size. The backdrop built, maintained
and transported by PPG shall serve as the official and only backdrop unless
PPG's Racing Coordinator agrees for substitution of a special backdrop built by
Organizer/Promoter to specifications and approval of the PPG racing Coordinator.
NEWS RELEASES
The CART-sanctioned PPG Indy Car World Series and/or PPG Cup shall be identified
in all news releases and publicity issued by Organizer/Promoter, and such race
shall be identified as part of the Series, i.e., "... second race in the PPG
Indy Car World Series."
DISPLAY IN WORK AREA
Organizer/Promoter shall provide an area for the display and maintenance of the
PPG Pace Car fleet as required by PPG and CART.
PPG ON TRACK ACTIVITIES
The Event schedule will include time for PPG on track activities. The scheduling
(placement and allotted time) of these activities will be consistent with
Paragraph 26 of the Organizer/Promoter Agreement and Schedule E.
OFFICIAL CARS
In the event that Organizer/Promoter is able to obtain an official car from a
national automobile manufacturer and/or its local auto dealer, the parties agree
to designate that car as the Official Car of the Event and Organizer/Promoter
shall obtain any revenue derived as a result of the participation of the
national automobile manufacturer and/or its local dealer as a sponsor. In the
event that the national automobile manufacturer from which Organizer/Promoter
obtains a car is a manufacturer of a participating PPG car (whether such car is
obtained by the Organizer/Promoter directly from the manufacturer or from a
local dealer), CART agrees that such official car, if represented in the PPG
fleet, or if not so represented, such other model produced by said manufacturer
which is represented in the PPG fleet as may be selected by such manufacturer
shall be designated by CART as the Official Pace Car of such Event.
<PAGE> 38
SCHEDULE "E"
EVENT ACTIVITIES
INDYCAR ACTIVITIES
The appropriate (road course, oval or 500 mile) standard IndyCar schedule will
be in effect at all Events.
OFFICIAL SUPPORT SERIES AND PPG PACE CAR ACTIVITIES
Indy Lights or CART's official support series shall be entitled to compete at
this Event at no cost to CART or the support series. CART shall have the right
to schedule, at any time during the Event, including race day, its official
support series event as part of the overall CART activities. Standardized
schedules similar to the IndyCar standard format schedules will be developed for
PPG Pace Car on track activities and CART's official support series.
OTHER SUPPORT RACE ACTIVITIES
Any additional motor racing events must be approved by CART's Vice-President of
Operations. These activities will be scheduled in a manner which will minimize
any interference with any scheduled IndyCar, Indy Lights or CART's official
support series and PPG Pace Car on track activities. Support activities should
be selected to provide an appropriate complement to IndyCar activities and must
be a balanced program and offer good entertainment value to the fans. A one
half-hour break between scheduled competition activities is recommended. All on
track support activities must be sanctioned by a recognized FIA affiliate. A
formal sanction agreement executed between the sanctioning body and the event
organizer must be on file with CART. This agreement must verify the performance
and obligations of the sanctioning body and the event organizer and must not
infer any organizational or operational responsibility to CART. These activities
must be held in compliance with the sanctioning body's rules. The participant
accident and liability insurance limits and carrier must be acceptable to CART.
In addition, celebrity events must comply with the following:
1. All drivers must have successfully completed both classroom and on
track instruction.
2. Race cars must meet the safety requirements prescribed by the
sanctioning body of record and as a minimum must be equipped as
follows:
a. A seat that provides proper driver support in case of impact.
b. A five (5) point competition seat belt and harness.
c. Rollover protection
i) roll cage for closed-wheel production-type or -based
vehicles
ii) roll hoop for sports race and open-wheel race cars
<PAGE> 39
d. The electrical system must include an accessible master switch
and an impact/rollover switch. Both of these devices must
interrupt the current to all onboard circuits.
3. Historic and vintage car practice, qualifying, race or exhibition
activities will not be scheduled as part of this Event.
ENTERTAINMENT ACTIVITIES
Parades, exhibitions, stunts and other entertainment activities must be
scheduled in a manner which will not interfere with any racing activity. CART
does not accept any organizational or operational responsibility for these
activities. These activities must be held in compliance with any applicable
local, state or federal guidelines or regulations. Event liability insurance
must be in place to cover these activities.
<PAGE> 40
SCHEDULE "F"
POST RACE PROCEDURES/ACTIVITIES
The following post-race Victory Circle procedures are to be followed by all
drivers, teams, sponsors, promoters, track and security personnel, P.R.
representatives and the media. Procedures may vary at individual tracks by prior
arrangement between Organizer/Promoter and CART. In the event of such change,
notification will be made in the Drivers Meeting and in the Press Room.
The objectives of these procedures are to develop a uniform handling of the
victory Circle procedure in order to provide for a safe conclusion to the Event,
protect the integrity of the live television coverage of the Event, and to
present the winning drivers to the fans and the media in a organized fashion
that showcases the sport, and the sponsors who support it, in the most positive
way possible.
These procedures are meant to provide a guideline for the ideal handling of the
conclusion of the Event. Some of these procedures or the order of them may be
modified to take advantage of the physical properties of the Competition. It is
not meant in any way to deter the spontaneity or enthusiasm associated with
winning the race.
VICTORY CIRCLE PROCEDURES
1. The backdrop supplied by PPG will be the exclusive backdrop used on the
victory stand for all CART Competitions. The backdrop may not be
covered over. Its appearance or function may not be changed without
permission of the PPG Director of Racing.
2. Security sets temporary fencing across from the track at designated
location near the finish line and along the side or sides of the track
to form a "U" shape into which the cars will drive. Security will
coordinate with the Assistant Technical Director. All personnel are
reminded of the IndyCar Rule Book which prohibits the crossing of the
track and pit areas while hot.
3. Accredited photographers move behind security on up track side to await
the top three (3) cars.
4. The top three (3) cars stop perpendicular to security line side by
side. Or, alternately, winning car pulls into permanent track Victory
Circle where available.
5. Security sets temporary fencing across track behind top three (3) cars,
totally surrounding the cars, however, establishing two (2) entry
points on opposite ends of the Victory Circle for access. The following
personnel will be admitted: CART officials, TV and radio crews,
owners/teams, drivers's immediate family, key sponsor executives,
senior track and security, limited other personnel as determined by
CART.
<PAGE> 41
6. CART TV Coordinator gives Goodyear Hat or appropriate tire manufacturer
to winner for television interviews. Television interviews will be
conducted in the following order with priority given to live shows over
tape:
a. Host TV broadcaster
b. Foreign TV broadcaster
c. Network radio - if live
d. Local radio - if live
e. IndyCar Productions
Note that with three (3) drivers available, some interviews may occur
simultaneously. Live television will have preference of interviewing
drivers one, two and three without wait.
Teams, P.R. representatives, sponsors and other should respect the
integrity of the television broadcast and act appropriately. All three
(3) drivers should be respected. No unauthorized hats, products, signs,
etc. may be thrust in front of Television cameras. No hats may be
exchanged during televisions interviews or in front of the camera.
7. PPG/Title Sponsor Victory Podium Truck, if applicable, moves into
position during interviews.
8. After all television/radio interviews, top three (3) drivers proceed to
Victory Podium Truck or permanent podium where available. Security will
provide escort for drivers. In the event Television is still live,
security will expedite same.
9. Drivers will be presented and interviewed by the track announcer on
stage in the following order: 3-2-1
10. Trophies are presented by executive presenters according to agreement
between Organizer/Promoter and CART. Event title sponsor hats are worn.
Beauty queens should not be on stage unless stated in pre-existing
agreements with title sponsor.
11. Winning owner(s) are present on podium for presentation of Trophy.
12. First round of photography. Executive presenters and/or owner(s) leave
platform.
13. CART TV Coordinator effectuates changes of driver's hats for still
photography session(s). This sequence will not appear on television.
Hats will be accommodated in the following order:
a. PPG Industries
b. Team Sponsor(s)
c. Limited number of additional sponsor(s) only by prior
agreement-time permitting
14. Champagne will be discouraged unless there is a prior sponsorship
agreement, and will not be sprayed until all photo sessions are
concluded.
<PAGE> 42
VICTORY LAP
Drivers should be showcased to the fans. CART Pit Reporters may accompany
drivers if sufficient space is available.
Upon completion of Victory Lap drivers proceed to Press Room for interviews.
Security will provide proper escort.
<PAGE> 1
EXHIBIT 10.7
CHAMPIONSHIP AUTO RACING TEAMS, INC.
OFFICIAL ORGANIZER/PROMOTER AGREEMENT
HOUSTON, TEXAS
EXECUTION COPY as of: July 28, 1997
<PAGE> 2
CHAMPIONSHIP AUTO RACING TEAMS, INC.
OFFICIAL ORGANIZER/PROMOTER AGREEMENT
The undersigned hereby applies for the right to conduct a PPG CART World Series
race Competition sanctioned or co-sanctioned by Championship Auto Racing Teams,
Inc. ("CART"), upon the following terms and conditions. It is understood that
this is an application only until accepted and approved by CART in writing and
that this Competition shall not be advertised or communicated to the public,
press or any other media or business arrangement as having been approved by CART
until this application has been so approved and until an official sanction has
been granted by CART.
Track: City of Houston Temporary Circuit
Location: George R. Brown Convention Center
Organizer/Promoter: Texaco Houston Grand Prix LLC
Address: 500 Tower Parkway
Lincolnshire, IL 60069
Telephone: (708) 634-8210
Facsimile: (708) 634-8208
Race Distance: 200 Miles
Track Length and Type: 1.68 Miles, Temporary Street Circuit
Postponed Date: Rain tires will be used
DEFINITIONS:
A. The term "Competition" as used herein shall include the annual Indy
car race(s) designated hereinabove, as well as all time trials,
practice runs and rain or postponed dates related thereto.
B. The term "Event" as used herein shall include the Competition(s) as
well as any other race(s), race-related activities or any other
activities associated with the Competition(s), as approved by CART
hereunder.
C. The terms "Dollars" and "$" refer to the lawful currency of the
United States of America.
D. References in this Agreement to "PPG" shall be to PPG Industries,
Inc., or (where applicable) any successor Series title or co-title
sponsor.
1. A. Subject to compliance with all the terms and conditions set forth
in this Agreement, Organizer/Promoter shall organize, promote and
conduct a PPG CART World Series race Competition in the following
year(s): 1998, 1999, 2000, 2001, 2002 and 2003.
<PAGE> 3
B. The date for the 1998 race will be October 4, 1998. CART and
Organizer/Promoter will mutually agree as to the date for the
subsequent race(s). However, subject to television availability
(network and/or major cable), the dates for such subsequent races
shall be in accordance with the following agreed dates:
1999 - September 26 or October 10
2000 - October 1
2001 - October 7
2002 - October 6
2003 - September 28 or October 5
C. Organizer/Promoter agrees not to organize, promote, conduct,
authorize or permit the staging of any other major motor racing
event(s) at the track(s) designated hereinabove, without the
approval of CART, within the following period of time either
preceding or following any Competition hereunder: thirty (30) days.
D. Provided Organizer/Promoter is not in default hereunder,
Organizer/Promoter shall have the exclusive right to organize and
promote each and every CART sanctioned temporary street course Indy
car race held in the State of Texas during each year covered by this
Agreement.
E. The parties shall have a reciprocal right of first negotiation for
the extension of this Agreement beyond the Events covered hereunder,
through a reasonable period of good faith negotiation.
F. The parties acknowledge that this Agreement is subject to and
contingent upon the approval of the Houston City Council, which
Organizer/Promoter anticipates will be given forthwith. Unless
Organizer/Promoter notifies CART in writing on or before August 22,
1997, that such approval has not been given, this contingency shall
lapse, and this Agreement will continue in full force and effect.
2. The total Organization and Rights Fee payable for the 1998 Competition
shall be One Million Two Hundred Fifty Thousand ($1,250,000.00) Dollars
and shall be paid to CART as follows:
A. Fifteen (15%) percent, or One Hundred Eighty Seven Thousand Five
Hundred ($187,500.00) Dollars by January 1, 1998.
B. Thirty-five (35%) percent, or Four Hundred Thirty Seven Thousand
Five Hundred ($437,500.00) Dollars by July 1, 1998.
C. The balance due of Six Hundred Twenty Five Thousand ($625,000.00)
Dollars not later than thirty (30) days prior to the date of the
race.
<PAGE> 4
3. The total Organization and Rights Fee payable for the 1999 Competition
shall be One Million Four Hundred Fifty Thousand ($1,450,000.00)
Dollars and shall be paid to CART as follows:
A. Fifteen (15%) percent, or Two Hundred Seventeen Thousand Five
Hundred ($217,500.00) Dollars by January 1, 1999.
B. Thirty-five (35%) percent, or Five Hundred Seven Thousand Five
Hundred ($507,500.00) Dollars by July 1, 1999.
C. The balance due of Seven Hundred Twenty Five Thousand ($725,000.00)
Dollars not later than thirty (30) days prior to the date of the
race.
4. The total Organization and Rights Pee payable for the 2000 Competition
shall be One Million Nine Hundred Fifty Thousand ($1,950,000.00)
Dollars and shall be paid to CART as follows:
A. Fifteen (15%) percent, or Two Hundred Ninety Two Thousand Five
Hundred ($292,500.00) Dollars by January 1, 2000.
B. Thirty-five (35%) percent, or Six Hundred Eighty Two Thousand
Five Hundred ($682,500.00) Dollars by July 1, 2000.
C. The balance due of Nine Hundred Seventy Five Thousand ($975,000.00)
Dollars not later than thirty (30) days prior to the date of the
race.
5. The total Organization and Rights Fee payable for the 2001 Competition
shall be Two Million Four Hundred Fifty Thousand ($2,450,000.00)
Dollars and shall be paid to CART as follows:
A. Fifteen (15%) percent, or Three Hundred Sixty Seven Thousand Five
Hundred ($367,500.00) Dollars by January 1, 2001.
B. Thirty-five (35%) percent, or Eight Hundred Fifty Seven Thousand
Five Hundred ($857,500.00) Dollars by July 1, 2001.
C. The balance due of One Million Two Hundred Twenty Five Thousand
($1,225,000.00) Dollars not later than thirty (30) days prior to the
date of the race.
6. The total Organization and Rights Fee payable for the 2002 Competition
shall be Two Million Seven Hundred Thousand ($2,700,000.00) Dollars and
shall be paid to CART as follows:
A. Fifteen (15%) percent, or Four Hundred Five Thousand ($405,000.00)
Dollars by January 1, 2002.
<PAGE> 5
B. Thirty-five (35%) percent, or Nine Hundred Forty Five Thousand
($945,000.00) Dollars by July 1, 2002.
C. The balance due of One Million Three Hundred Fifty Thousand
($1,350,000.00) Dollars not later than thirty (30) days prior to the
date of the race.
7. The total Organization and Rights Fee payable for the 2003 Competition
shall be Two Million Seven Hundred Thousand ($2,700,000.00) Dollars and
shall be paid to CART as follows:
A. Fifteen (15%) percent, or Four Hundred Five Thousand
($405,000.00) Dollars by January 1, 2003.
B. Thirty-five (35%) percent, or Nine Hundred Forty Five Thousand
($945,000.00) Dollars by July 1, 2003.
C. The balance due of One Million Three Hundred Fifty Thousand
($1,350,000.00) Dollars not later than thirty (30) days prior to the
date of the race.
8. A. Organizer/Promoter expressly understands and agrees that said
Organization and Rights Fees are intended to be net and are
non-refundable except as expressly provided in this Agreement. If
said Organization and Rights Fees are not paid to CART in the
manner and by the time provided above, CART shall have the option
to declare this Agreement terminated, in which circumstance CART
will be relieved from any further liability or responsibility
hereunder, and in addition, Organizer/Promoter shall forthwith
pay to CART and CART shall be entitled to enforce collection of
the total amount required under this Agreement as liquidated
damages and not as a penalty, together with all costs incurred by
CART in connection therewith, including reasonable attorney fees,
and interest at the rate of twelve (12%) percent per annum.
B. Organizer/Promoter shall not be responsible for any purse
distribution whatsoever in respect to a Competition. CART must
approve any and all awards given in conjunction with a Competition
and/or for the PPG CART World Series. Organizer/Promoter agrees to
provide driver and owner trophies in recognition and representative
of the achievements of at least the first three (3) finishing
positions in each Competition.
9. A. CART shall be responsible for providing not less than eighteen (18)
entrants for each Competition. If CART is unable to provide eighteen
(18) entrants for any Competition, Organizer/Promoter shall have the
right to cancel such Competition, providing that Organizer/Promoter
first informs CART in writing of such intent, and provided further
that eighteen (18) entries have not been received within seven (7)
days after receipt by CART of such notice. If Organizer/Promoter
under
<PAGE> 6
these circumstances exercises this cancellation right, it will be
entitled to the return of the portion of the Organization and Rights
Fee theretofore paid for such Competition.
B. Either party hereto shall have the right to cancel a Competition due
to a "force majeure". "Force majeure" shall mean any event or
circumstances (whether arising from natural causes, human or
governmental agency or otherwise) beyond the control of the parties
including by way of illustration, but not by way of limitation,
strikes, lock-outs or other labor disputes, civil strife, war,
flood, fire, or acts of God. If there is an unexpected cancellation
due to a 'force majeure", Organizer/Promoter will be entitled to the
return of the portion of the Organization and Rights Fee theretofore
paid, except that Organizer/Promoter agrees that CART may retain a
sum equivalent to the necessary expenses reasonably incurred by CART
and its teams in preparing for such Competition, which expenses
shall be mutually agreed by the parties provided, however, that if
the parties are unable to agree informally as to the amount of such
expenses, such dispute shall be submitted to binding arbitration and
the result of such arbitration shall be enforceable by any court
having jurisdiction.
C. If Organizer/Promoter cancels or fails to stage a Competition for
any reason other than those mentioned within this paragraph 9,
Organizer/Promoter shall forthwith pay to CART and CART shall be
entitled to enforce collection of the total amount required under
this Agreement as liquidated damages and not as a penalty,
together with all costs incurred by CART in connection therewith,
including reasonable attorney fees, and interest at the rate of
twelve (12%) percent per annum.
10. Except as expressly provided herein, Organizer/Promoter owns and shall
have exclusive control over all commercial rights to each Event
including by way of illustration, but not by way of limitation, the
right to sell and receive all the proceeds from Event sponsorships,
signage, admission tickets, programs, novelties, concessions (including
food and beverage), catering (including food and beverage), hospitality
facilities, hotel rooms, expositions, displays, parking spaces,
banquets and licenses to parades.
11. Organizer/Promoter shall assume and perform all organizational and
promotional activities for each Event except as otherwise provided herein,
including but not limited to business organization, promotional activity,
management, marketing, general affairs, selling tickets, track maintenance
and accommodations of the press, and further understands and agrees that
CART disclaims any warranty expressed or implied, as to the potential
success of any Event organized hereunder.
12. Organizer/Promoter shall organize and promote the races hereunder as major
motor racing events. Organizer/Promoter shall have the right to on-site
track entitlement, and revenues therefrom. On-site entitlement is to
designate the title/name of the race at the venue, subject to CART
approval which shall not be unreasonably withheld. CART shall approve the
name "Texaco Houston Grand Prix", or any similar name. All media
<PAGE> 7
releases, public announcements and public disclosures by either party or
its employees or agents relating to this Agreement, including but not
limited to promotional or marketing material, but not including any
announcement intended solely for internal distribution at either party or
any disclosure required by legal, accounting or regulatory requirements
beyond the reasonable control of the disclosing party, shall be
coordinated with and approved by the other in writing prior to the release
thereof.
13. A. CART hereby grants Organizer/Promoter the non-exclusive right to
use the CART name and logo in its promotion of each Event during the
term hereof, in accordance with all provisions contained in this
Agreement. Any logo, design, mark or representation made,
formulated, or developed in conjunction with such Event shall be
subject to the prior written approval of CART.
B. Organizer/Promoter shall display in all advertising and publicity
material including but not limited to news releases, posters,
banners, program covers, brochures, tickets, passes, credentials
and print and television advertising relating to each Event the
phrase: "PPG CART World Series" and the logos of PPG and CART (as
approved and supplied by CART). CART reserves the right to change
such phrase and logo, including the identity of the title sponsor
of the Series. Provided Organizer/Promoter notifies CART of its
production schedule no later than January 1 of each year, in the
event of a notification by CART to Organizer/Promoter of a change
in phrase and/or logo after January 1 of any year, the
reproduction of publicity materials already produced by the
Organizer/Promoter prior to notification of such change shall be
a the discretion of Organizer/Promoter, unless CART agrees to pay
Organizer/Promoter the cost of the stock in inventory which would
be unusable, should it elect to enforce reproduction of publicity
materials already produced at the time of notification of such
change.
C. Organizer/Promoter shall include in its display of the CART logo
the symbol to indicate that it is a registered mark. A sheet of
camera ready art depicting these logos shall be provided by CART.
Further, in promoting and advertising each Event,
Organizer/Promoter shall promote the Competition as a part of the
PPG CART World Series or as otherwise designated by CART.
Organizer/Promoter shall provide such verification of compliance
with the provisions contained in this paragraph 13 as CART may
reasonably request.
D. Organizer/Promoter shall not use the names, logos or trademarks
of CART or PPG for any purpose other than as herein defined.
E. Upon the expiration or termination of this Agreement for any reason,
Organizer/Promoter shall cease and desist any and all use of the
names, logos or trademarks of CART or PPG or any colorable
imitation, variation or adaptation thereof.
<PAGE> 8
F. CART and Organizer/Promoter shall promptly take such action as may
be necessary to protect the names, logos and trademarks of CART and
PPG against any infringement or threatened infringement or any
common law "passing off".
14. Organizer/Promoter agrees that each Competition shall be organized,
approved by CART and conducted in accordance with all applicable statutes,
ordinances, regulations or other requirements of any government authority,
the FIA (CART shall determine in its sole discretion the applicability of
FIA requirements), and the CART Rule Book as amended from time to time and
as the same may be modified or supplemented by any other rules,
regulations, bulletins or releases that may be applicable to such
Competition. CART reserves the right to terminate this Agreement at any
time without further liability in the event of a material breach by
Organizer/Promoter of said requirements, regulations, rules, or the terms
and conditions of this Agreement, by so notifying Organizer/Promoter in
writing, upon a five (5) business day notice of default/opportunity to
cure, except where such breach requires immediate remedial action as
reasonably determined by CART. CART shall notify Organizer/Promoter in
writing of any alleged default and Organizer/Promoter shall have five (5)
business days after receipt of such notice to cure the default; provided,
however, if the nature of the default is such that it cannot reasonably be
cured within five (5) business days, Organizer/Promoter shall not be
deemed to be in default if it commences the cure within such five (5)
business day period and thereafter completes the curative action within a
reasonable time. Organizer/Promoter acknowledges receipt of a copy of the
CART Rule Book.
15. Organizer/Promoter represents and warrants that it has or will have sole
control of the track and of the premises upon which the track is located,
including all facilities thereon, and that Organizer/Promoter has full
authority to conduct each Event thereon as provided for herein for the
defined scheduled term of each Event.
16. A. Organizer/Promoter shall provide at its expense during each Event
the track, race course, and facilities in good repair and ready
for use, and Organizer/Promoter shall permit CART or its
insurance broker or other designated representative, and the FIA
(CART shall determine in its sole discretion the applicability of
FIA requirements) to inspect the track, race course and/or
facilities before, during and after each Event. Except as
provided in paragraph 16C, all repairs deemed necessary in order
for the track to meet CART's safety requirements must be made at
Organizer/Promoter's expense and the failure to make the
necessary repairs may result in the postponement or cancellation
of such Event, in CART's sole discretion. The track site, design
and condition shall be subject to review and approval by CART.
Organizer/Promoter shall consult with CART on the layout and
design of the track, including but not limited to the pit area,
safety barriers, and other facilities for the Competition.
B. Annually, seven (7) months prior to the next Event,
Organizer/Promoter shall submit an engineering drawing(s) of
proposed changes to the race circuit and other facilities for CART's
approval. CART will have thirty (30) days to
<PAGE> 9
acknowledge approval or request changes. CART shall have the right
to inspect the circuit for the purpose of verifying that the circuit
is being constructed in accordance with the drawings as submitted
and approved. Within sixty (60) days after the execution of this
Agreement, CART and Organizer/Promoter shall mutually agree on the
specific track and facility improvements to be implemented for the
1998 Event, and a written summary thereof shall be prepared and
appended hereto. Thereafter, a similar process shall occur within
sixty (60) days following each Event, in respect to improvements to
be implemented for the following year's Event.
C. Any changes to the safety system requested by CART will be
identified and communicated by CART to Organizer/Promoter within
one hundred twenty (120) days after the conclusion of the 1998
Event and each subsequent Event hereunder. Absent unforeseeable
supervening circumstances, the parties agree that the cost of
such changes to be implemented for any Event hereunder shall not
exceed ten percent (10%) of the Organization and Rights Fee for
such Event. The foregoing cost limitation shall be construed to
exclude Organizer/Promoter's capital improvements/investments
(i.e., fencing, barriers, gravel traps, etc.), as well as changes
to the safety system requested by any third party (i.e., not
mandated by CART).
17. A. Organizer/Promoter shall provide at its expense such facilities as
CART deems adequate for the use of CART personnel and those directly
associated with the Event, including but not limited to race control
facilities, facilities for participant registration, television,
scoring, race car inspection, compiling and distributing media
information, a media work area, and facilities and services as may
be reasonably required by those who supply products and/or services
for the Event. Further details of these and other operational and
facility requirements of Organizer/Promoter are agreed to as
outlined in SCHEDULE A attached hereto and made a part hereof.
B. Organizer/Promoter at its expense shall provide, install and
maintain the equipment necessary to operate CART's Timing and
Scoring system, in accordance with the specifications supplied by
CART, provided however, that Organizer/Promoter shall not be
responsible for the costs of the initial installation of
additional timing lines beyond those utilized in 1996 at other
temporary street circuits. On street courses, this shall also
include the annual set up and tear down of all antennas and
cabling. Organizer/Promoter will provide CART's timing and
scoring provider free of charge at the start/finish line, on the
Timing and Scoring structure and at least one other prominent
location, space to affix and display the logo and/or officially
designated status of CART's timing and scoring provider.
Organizer/Promoter shall not sell or secure any timekeeping
sponsorship which would be in effect during any CART Event.
18. Organizer/Promoter shall at its expense furnish all facilities, personnel,
equipment, and
<PAGE> 10
services for accommodating and controlling the public during each Event,
for whose safety and comfort Organizer/Promoter is solely responsible and
liable.
19. Organizer/Promoter shall provide at its expense all necessary personnel as
required by CART for the conduct of each Competition hereunder(other than
the CART staff and officials), and Organizer/Promoter shall assume all the
responsibilities pertaining to workers, volunteers and subcontractors
necessary to properly staff the facility for the purposes of the
Competition and the public for each Event weekend.
20. Organizer/Promoter at its expense shall obtain and maintain insurance
for each Event and all scheduled activities with an insurance company
approved by CART. Such insurance must conform to the minimum
coverages, specifications, limits, etc., as set forth in SCHEDULE B
attached hereto and made a part hereof. If Organizer/Promoter fails to
maintain such policies with the required minimum coverage throughout
the Event, CART may cancel such Event immediately without prior notice
to Organizer/Promoter, or CART may, in its discretion, obtain the
required insurance from an approved insurance company, with acceptable
terms, at Organizer/ Promoter's expense.
21 Only those individuals approved by CART or Organizer/Promoter, including
but not limited to drivers and pit crew and necessary fire, wrecker,
ambulance and security crews, shall have access to or be allowed in the
paddock, garage and pit areas, the racing surface, and other areas to
which admission by the general public is normally prohibited during the
Event, and Organizer/Promoter shall be solely responsible and provide
sufficient security personnel in such areas to enforce this provision at
all times during each Event. Such access must be in compliance with the
CART Rule Book and may not interfere with or adversely affect the
Competition.
22. Organizer/Promoter shall honor CART's Unified Credential System and shall
comply with the facility access provisions implemented by CART, as set
forth in SCHEDULE C attached hereto and made a part hereof, and as the
same may be amended by future discussions and concurrence between CART and
its race promoters through the promoter group.
23. CART shall have the exclusive right to contract out or to take or cause
to be taken by others, make, broadcast, rebroadcast, use, reproduce,
transmit, copyright, sell, license or otherwise dispose of for any
purpose whatsoever, television pictures, sound film and tape, motion
pictures, still photographs, electronic images and sound of each Event,
including the non-exclusive right to market for commercial purposes the
name, identity, likeness and logo(s) of the track, on a composite basis
with other tracks where CART races are conducted. CART shall retain all
national, international and local broadcast rights including broadcast
television, cable and radio. Organizer/Promoter will assure that the
presence of personnel and equipment for these or similar purposes shall
not be inconsistent with the rights of CART herein provided and shall
not interfere or conflict with the exercise of any such rights by CART
as herein provided.
<PAGE> 11
24. Organizer/Promoter recognizes and acknowledges that CART has entered or
intends to enter into a television contract with a national broadcast or
cable network for the coverage of each Competition hereunder.
A. Detailed operational and facility requirements of Organizer/Promoter
in respect to television and other on-site media are identified in
SCHEDULE A.
B. CART has arranged with the television production companies
(subject to network approval) to provide the video portion of the
program feed from the mobile unit to Organizer/Promoter, so that
Organizer/Promoter may feed the video signal as a courtesy to the
media center and hospitality suites. This feed is limited to
on-site press and hospitality use only. Any other feeds to
hotels, bars, or other establishment(s) whether on-site or off,
are strictly prohibited. Organizer/Promoter shall be responsible
for the installation and maintenance of appropriate cable
originating at the television compound which will then feed the
system. Maintenance and operation of the system is the sole
responsibility of Organizer/Promoter.
C. CART and Organizer/Promoter agree that it is in the best interest
of the sport, its promoters and sponsors to have the same on-site
and television title sponsor. CART and Organizer/Promoter
recognize and agree that all television entitlements are derived
from a privilege granted by the television network and are
subject to network approval. In the event Organizer/Promoter
provides CART with a television entitlement sponsor, such sponsor
must agree to: (i) purchase one (1) of several commercial unit
package options for either network or cable coverage to be
published by CART or its designee each year, (ii) enter into a
negotiated agreement with CART or its designee, or (iii)
guarantee a payment for entitlement in return for which
Organizer/Promoter will receive eight (8) thirty (30) second
commercial units to package with its on-site title. The published
rate option packages and payment option will be made available to
Organizer/Promoter at least one (1) year in advance.
D. Organizer/Promoter may, at its option, and subject to approval by
CART or its designee and the appropriate network, elect to
guarantee over-the-air broadcast network coverage of its Event.
In this event Organizer/Promoter will be required to provide a
television title sponsor subject to: (i) purchase of one (1) of
several published minimum commercial unit packages, (ii) enter
into a negotiated agreement with CART or its designee, or (iii)
guarantee a payment for entitlement to be determined each year.
In the payment option (iii) Organizer/Promoter will receive eight
(8) thirty (30) second units in the telecast to package with its
on-site title.
E. In the event Organizer/Promoter elects not to provide CART with a
television entitlement sponsor or to guarantee over-the-air
broadcast network coverage, then CART or its designee shall have the
option to secure a television entitlement
<PAGE> 12
sponsor which need not be the same as the on-site entitlement
sponsor.
F. CART and Organizer/Promoter agree that the policy and terms set
forth as a condition of television coverage of this Event may change
from time to time, and, therefore, the television agreement may
supersede portions of this Agreement. In the event that the
television agreement supersedes a portion of this Agreement, CART
will immediately notify Organizer/Promoter and work toward a
mutually agreed upon solution.
G. Notwithstanding any other provisions contained in this Agreement,
Organizer/Promoter acknowledges and agrees to the following with
respect to the scheduling and televising of the 1998 Event (and
future events that require a race date that takes place in the
fall): (i) October 4, 1998 is the only available date as mandated
by Organizer/Promoter on which the 1998 race can be held; (ii)
such date is not a readily available spot for either network or
cable television coverage; (iii) CART has secured network
coverage of the 1998 Event on a time buy basis, contingent upon
CART's undertaking that, if the broadcast loses money, any such
loss will be offset against CART's distributive share otherwise
payable under its ESPN television agreement; (iv) the amount of
any such offset, if any, shall be reimbursed by
Organizer/Promoter to CART promptly upon receipt of an
appropriately detailed accounting and invoice; and (v) there is
no guarantee as to affiliate clearances with respect to such
network broadcast.
25. Organizer/Promoter recognizes and acknowledges that CART has the right to
contract for official sponsors for the PPG CART World Series, which need
not coincide with specific Event sponsors, as well as to grant other
official product designations on a Series wide basis, in CART's sole
discretion.
26. PPG shall have the exclusive right to provide any and all pace cars
throughout the entire Event. In addition, only PPG pace cars shall be
allowed to participate in the parade laps immediately preceding the start
of the Indy car race. Further details of these and other responsibilities
of Organizer/Promoter to PPG are agreed to as outlined in SCHEDULE D
attached hereto and made a part hereof.
27. Organizer/Promoter agrees that the scheduled CART activities during
each Event, including those associated with the Competition, PPG Pace
Car on track activities, and CART's official support series, Indy
Lights, shall have priority over any other race or other activity
scheduled during such Event. Organizer/Promoter will not schedule any
supporting races or ancillary activities on the same day as
registration or inspection, or on any other day during an Event,
without prior written approval of CART. Further details of these and
other scheduling considerations/requirements are agreed to as outlined
in SCHEDULE E attached hereto and made a part hereof.
28. CART shall conduct grid/pre-race activities which shall include but are
not limited to the pole awards, other contingency award activities, driver
introductions, etc.
<PAGE> 13
29. CART shall conduct mutually agreed upon Victory Circle proceedings.
Details of these proceedings and the requirements of Organizer/Promoter in
regard thereto are agreed to as outlined in SCHEDULE F attached hereto and
made a part hereof.
30. CART shall have reasonable access to the PA system in order for CART to
fulfill its contractual obligations to its sponsors and inform
participants and spectators of activities during the Event.
31. A. CART merchandise, as supplied by CART or its licensed
representative, will be afforded the opportunity to be sold from
its own official concession stand to be located in a prominent,
high-traffic location, generally near the paddock area. CART or
its licensed representative shall pay to Organizer/Promoter
$1,500.00 for each CART concession stand provided by
Organizer/Promoter. Selected items of merchandise may also be
prominently offered for sale in the track concession sales
booths. Merchandise placed in the track concessionaire booths
will be done so on a consignment basis with the concessionaire
given a forty (40%) percent discount on the retail price of all
merchandise sold. Retail prices will be agreed upon in writing
prior to the merchandise being placed in concessionaire booths.
All accounting will be completed by noon of the day following the
conclusion of each Event. All payments will be made and unsold
merchandise returned at the same time.
B. It is Organizer/Promoter's responsibility to insure that any and all
concessions and/or merchandise is properly licensed. In the event
that CART discovers any unlicensed products, it will have the right
to take appropriate action in its sole discretion.
C. All CART Indy car teams will be afforded the opportunity to sell
merchandise within the confines of the race facility. All teams will
be in a prominent, high-traffic location. Participating teams will
pay a rights fee for the location, which fee shall be (i) consistent
with the then current market price and (ii) no less favorable than
the terms and conditions provided to other vendors located within
the same area.
32. In conjunction with the CART Winner's Circle Club, Organizer/Promoter
shall provide at its expense:
A. Limited access to restricted areas for club members during group
tours and club functions.
B. Inclusion of a CART Winner's Circle Club advertisement in the
official race program. Camera ready art shall be provided by CART
or its designee.
<PAGE> 14
C. Covered facility for meetings with a PA system.
33. Organizer/Promoter shall cooperate with CART in its spectator research
efforts, including but not by way of limitation allowing CART
representatives access to spectators for personal interviews and
questionnaire distribution and inclusion of a CART questionnaire in the
official race program, for which camera ready art will be provided. The
results of such research shall be made available to Organizer/Promoter.
34. A. CART shall have the right to designate up to seven (7) exclusive
sponsorships utilizing the following entitlements to be provided
by Organizer/Promoter for each sponsorship at no cost to CART
except as otherwise stated:
- Series-wide product category exclusivity;
- Twenty Thousand ($20,000.00) Dollar hospitality credit
which can be applied to facility, food and beverage;
- Acknowledgment by Organizer/Promoter as an Event
sponsor, with such recognition to include all
entitlements normally afforded an associate Event
sponsor;
- Inclusion in the Event press kit;
- One full page, four-color advertisement in the Event
souvenir program;
- One page of editorial in the Event souvenir program;
- One 40' x 40' expo/sampling space;
- Twenty (20) big screen messages (street courses only);
- Twenty (20) public address announcements over Event
weekend;
- One Hundred (100) grandstand admission tickets;
- One Hundred (100) restricted area credentials;
- Track side signage, which receives significant exposure
to the global audience; CART and Organizer/Promoter to
agree on size and placement;
All costs associated with the design and production of the
advertising page and wall signs shall be borne by Sponsor. For each
such sponsorship sold by CART, Organizer/Promoter shall receive One
Hundred Thousand ($100,000.00) Dollars in return for the above
listed entitlements. The parties acknowledge the following
categories represent acceptable potential sponsorships:
- payment systems
- confectionery
- snacks
- film
- camera
- electronics (i.e., television, hi-fi, audio, etc.)
- long distance
<PAGE> 15
B. Organizer/Promoter shall provide CART with two (2) pages in the
Event Program without charge for CART's own use. CART's placement of
advertising within the Program shall be sensitive to
Organizer/Promoter's existing commercial and promotional
relationships.
C. Organizer/Promoter recognizes that each participating team has a
race sponsor. Organizer/Promoter agrees that each team may place its
team name and sponsor(s) on both sides of the wall in the team's
assigned pit box, subject to applicable governmental laws and
regulations.
35. Organizer/Promoter shall provide CART at no cost a chalet or other
mutually agreed upon hospitality provisions for not less than forty (40)
guests per day. Hospitality provisions will include food and beverage
(alcoholic and non-alcoholic) as associated with such hospitality
provisions. Organizer/Promoter shall also provide CART at no cost ten (10)
passes for guests of CART's choice to a pit row suite.
36. If appropriate as determined by CART in its sole discretion, each
Competition shall appear in the FIA calendar as a full international FIA
event. Organizer/Promoter agrees to file this listing through CART and
reimburse CART for all applicable listing fees. In addition,
Organizer/Promoter agrees to pay through CART the applicable National
Motorsports Council assessments, as determined by the Council's Executive
Committee.
37. Organizer/Promoter agrees to indemnify and hold harmless CART, its
directors, officials and officers, participants, agents and employees,
members and sponsors from any and all liabilities and all costs and
expenses, including attorneys fees incurred in the defense thereof,
asserted or imposed upon CART, its directors, officials, official
representatives, employees, officers, members and sponsors arising out of
or as a result of an Event hereunder, or in any way related to third party
claims of any nature in any way related to previous discussions and
negotiations with any third party regarding the staging of a CART race
event in Houston, Texas.
38. Organizer/Promoter agrees not to take any action adverse to the interest
of CART and, in consideration of the acceptance and approval of this
application, releases and discharges CART and its officials and
representatives from all liability for personal injury that may be
received, and from all claims and demands for damages to real or personal
property or to any person growing out of or resulting from an Event
hereunder, whether caused by any construction or condition or any track or
track equipment, cars or debris, or resulting from any act or failure of
any official or any person assisting the officials serving in connection
therewith.
39. Nothing contained herein shall be construed to place CART in the
relationship of a partner or joint venturer with Organizer/Promoter, and
Organizer/Promoter shall have no power to obligate or bind CART in any
manner whatsoever other than as specifically provided
<PAGE> 16
for herein. Neither party undertakes by this Agreement to perform any
obligations of the other, whether regulatory or contractual, or to assume
any responsibility for the other's business or operations.
40. The validity, interpretation and construction of this Agreement shall be
governed and construed by the laws of the State of Michigan. Any
litigation commenced by a party to this Agreement as the result of any
alleged breach of this Agreement shall be commenced in the circuit court
for the County of Oakland, State of Michigan, or in the appropriate lower
district court in said county, or in the U.S. District Court for the
Eastern District of Michigan, and the parties hereby consent to such
personal jurisdiction.
41. This Agreement is not transferable or assignable. Any transfer or
assignment in violation of this provision shall be void.
42. Any notice or written communication required or permissible hereunder
shall be sent by registered mail (or certified mail with return receipt),
postage prepaid, addressed as follows:
To CART: To Organizer/Promoter:
Championship Auto Racing Teams, Inc. Texaco Houston Grand Prix LLC
755 W. Big Beaver Rd, Suite 800 500 Tower Parkway
Troy, MI 48084 Lincolnshire, IL 60069
43. A. This Agreement (including the Schedules annexed hereto) contains the
entire agreement of the parties hereto and no representations,
inducements, promises, or agreements, oral or otherwise, not
embodied herein shall be of any force or effect. This Agreement may
be modified only upon the written consent of the parties hereto.
B. No waiver by either party, whether expressed or implied, of any
provision of this Agreement or any breach or default shall
constitute a continuing waiver thereof.
C. Each and every of the rights, remedies and benefits provided by this
Agreement shall be cumulative, and shall not be exclusive of any
other said rights, remedies and benefits, or of any other rights,
remedies and benefits allowed by law.
D. If any provision in this Agreement is held to be invalid or
unenforceable, it shall be ineffective only to the extent of the
invalidity, without affecting or impairing the validity and
enforceability of the remainder of the provision or the remaining
provisions of this Agreement.
44. The parties acknowledge the importance of each party's reputation, good
will and public image and, accordingly, agree to maintain and enhance
such image by restraining from
<PAGE> 17
taking any action contrary to the best interest of either party, or
detracting from the reputation of either party. Each party shall refrain
from making any statements about the other party that adversely affects,
casts in an unfavorable light, or otherwise maligns the business or
reputation of such other party or any of its principals.
45. At all times, the terms and conditions of this Agreement are
confidential to CART, Organizer/Promoter, their parent companies and
their respective subsidiaries, and shall not be disclosed to any other
entity or individual without the other party's prior written consent.
Notwithstanding the foregoing, disclosure may be made if necessary to
enforce a party's rights under this Agreement, or if required by a
governmental agency, in which case any and all documents, information,
or materials disclosed shall be marked "confidential" and such party
shall seek confidential treatment of such information.
46. The following Schedules are attached hereto, incorporated herein by
reference as though set forth in their entirety in this Agreement, and
labeled as follows:
SCHEDULE A - OPERATIONAL, MEDIA, AND OTHER FACILITY/SUPPLY REQUIREMENTS
SCHEDULE B - INSURANCE REQUIREMENTS
SCHEDULE C - UNIFIED CREDENTIAL SYSTEM AND FACILITY ACCESS PROVISIONS
SCHEDULE D - PPG PROGRAM AND OFFICIAL CARS
SCHEDULE E - EVENT ACTIVITIES
SCHEDULE F - POST RACE PROCEDURES/ACTIVITIES
Any person or organization having responsibility in the organization, promotion
or staging of any Competition, whether by contract or otherwise, shall co-sign
this Agreement and shall be jointly responsible hereunder. Organizer/Promoter
and the undersigned warrant and represent that Applicant has the full right and
authority to enter into and perform this Agreement, and that the execution and
delivery of this Agreement has been duly authorized by all necessary
governmental and/or corporate action.
Date 7/29/97 Texaco Houston Grand Prix LLC
By: /s/ Carl A. Haas
Its: Managing Member
Date:______________________________ ______________________________
Co-Signer's Signature
CART APPROVAL
The foregoing application is hereby approved and accepted in accordance
with the terms stated therein.
Date: 7/29/97 Championship Auto Racing Teams, Inc.
By: /s/ Andrew H. Craig
Its: President and CEO
<PAGE> 18
SCHEDULE "A"
OPERATIONAL, MEDIA, AND OTHER
FACILITY/SUPPLY REQUIREMENTS
Pursuant to paragraph 17A of the Agreement, Organizer/Promoter shall
provide at its expense except as otherwise specifically provided the
following additional items. The specific items listed in this Schedule A
reflect minimum requirements for certain areas, and should not be
construed as inclusive of all necessary items Organizer/Promoter must
provide.
A. MEDIA CENTER
FACILITIES
Total capacity to be capable of accommodating a minimum of 120 people.
Solid, climate controlled, weatherproof structures capable of supporting
separate work area for CART Media Relations, Event Media Relations,
Support Event Media Relations, deadline media, non-deadline media, and a
dedicated separate media interview room.
EQUIPMENT:
Four (4) photocopy machines, three (3) of which shall be print quality
high speed photocopiers with collating and stapling capability;
Minimum of ten (10) large screen television sets/monitors (including
audio) with direct video feed to on-track racing activities.
B. ACCREDITATION FACILITIES
LOCATION:
- easily accessible by public transport
- adequate car parking
- within 15 minutes walking distance to the track
<PAGE> 19
SIZE:
- minimum of 12' x 30' working area
- separate area for office and/or storage of computer cases
- 20 ft. Minimum of table/desk space
- seating for a minimum of 10 people
- ample space inside/under cover to allow for queuing of guests
- entrance and exit doors
TEMPERATURE:
- heating/air conditioning control to maintain adequate temperature
for computers
SIGNAGE:
- directing people to registration area
- "entrance" and "exit" signs to provide smooth flow
- external signage upon leaving showing way to parking areas and
entrances
- identifying separate series within one credential area
SECURITY:
- all doors, windows to be lockable
- in the case of a temporary structure an internal fully secure facility
should be provided and/or overnight security.
CLEANING:
- the facility should be cleaned at the end of each day.
C. OPERATIONS
FACILITIES:
Solid, quiet, climate controlled, weatherproof structure capable of
accommodating a minimum of sixty (60) people.
EQUIPMENT:
One (1) print quality hi-speed photo copier with collating and stapling
capability. (Option - CART may invoice Organizer/Promoter in an agreed
amount in lieu of
<PAGE> 20
Organizer/Promoter supplying this machine.)
Three (3) golf carts for exclusive use by CART. One (1) for the
Communications staff, one (1) for the CART C.E.O., and one (1) for CART
broadcast services.
COMMUNICATION CIRCUITS:
Land line communication system connecting all trackside observer stations,
pit in, pit out, pit center, race control and starter stand.
Private land line communication circuit connecting timing and scoring,
race control, pit center and starter stand.
FUEL:
Organizer/Promoter will provide fuel for all safety vehicles and the jet
dryer:
Track Dryer - Jet A - approximately 500 gallons
Safety Vehicles - gasoline - approximately 200 gallons
GENERAL:
Minimum three hundred fifty (350) pounds of ice each day from Thursday
until Sunday of race weekend (including any rain dates).
Worker lunches and drinking water will be provided for each day of the
Event weekend. CART will identify the quantity to be supplied.
All areas and utilities shall be accessible for use by CART on or before
8:00 AM the Wednesday prior to the published race date.
D. TELEVISION AND RADIO
FACILITIES:
Television Compound Area - Organizer/Promoter shall provide a level,
hard-surfaced area approximately 150 feet x 150 feet for use by CART
Productions and network television production mobile units, broadcast
equipment, and personnel. Compound should be located as follows:
Street Course: As close as possible to the announcement booth or as
close to the majority of camera positions as possible, but
definitely outside the course.
Road Course: As close as possible to the announcement booth or as
close to the
<PAGE> 21
majority of camera positions as possible, but definitely outside the
course.
Oval Course: As close as possible to the announcement booth and
allowing the most direct cable access to the majority of camera
positions as possible, but definitely outside the course.
Announcement Booths - Climate controlled. An Announcement Booth should be
climate controlled, with air conditioning and insulation in the Booth.
Booths should have a wide expanse of glare-proof (non-tinted) glass
overlooking the pits and track. Sound deadening materials should be used
in construction, including proper insulation, carpeting, panelling, and
double-paned glass.
The front window overlooking the track and pits should begin around 3.5
feet - 4 feet above the floor. Booth should also have windows on the sides
of the booth facing the track, around 3-4 feet deep from the front of the
booth, to provide sight lines up and down the track and pits. Where
possible, back half of each booth should be elevated 4 inches - 6 inches
(minimum) to allow raised sight lines for those working in rear of booth.
A ledge/table should run the entire width of the front window wall, set
under the window and should be well braced to support necessary video
monitors, timing & scoring monitors, and audio equipment, etc. Ledge/table
should extend two (2') feet into the room from the front-windowed wall,
and where possible, should provide a removable cut-out against the wall,
with a support brace under the cut-out, to allow monitors to be partially
recessed on an angle within the ledge/table.
Access panels, conduits (minimum 6 inch diameter), and cable troughs
should be provided by promoter as necessary to allow cables to enter booth
for video, audio, timing & scoring, and antennae feeds.
Entry door should have a locking system installed, so that the room and
equipment may be secured. A keyless or combination access system is
preferred. Door should also have a mail slot for press releases, etc.
Organizer/Promoter agrees to provide at its expense, a U.S. Television
Network Booth, three (3) International Television Network Booths and a
CART Radio Network Booth. As other international networks (more than
three) may wish to originate commentary from the site of a CART event,
CART may request, and Organizer/Promoter agrees to provide, additional
announcement booths. CART agrees to provide at least thirty (30) days
notice to Organizer/Promoter in such cases. All reasonable costs, subject
to competitive bidding, associated with the construction and provision of
any additional booths and required facilities (i.e. telephone, power,
etc.) for international networks shall be the responsibility of the
international networks.
U.S. Television Network:
<PAGE> 22
BOOTH SIZE: 15 feet x 15 feet booth.
LOCATION: Should be placed on the outside of the track
and nearest to the start/finish line, providing
the widest view of the track and pits. Where
possible, booth should be located alone or at
one end of any row of booths or suites.
CART Radio Network:
BOOTH SIZE: 8 feet x 8 feet booth.
LOCATION: Preferred placement on the outside of the
outside of the track and nearest to pit center,
providing the widest view of the track and,
then, the start/finish line and pits.
International Television Networks:
BOOTH SIZE: A minimum of three (3) 8 feet x 8 feet (minimum)
booths.
LOCATION: Preferred placement providing the widest view
of the pits and, then, the track and
start/finish. Where possible, location should
be on the outside of the track.
ACCESS:
Organizer/Promoter shall accord all broadcast networks and/or their
designees the right to install and maintain at, and remove from, the site
of the Event and associated areas such wires, cable, and apparatus as the
network or its designee deems necessary for recording and/or telecasting
the Event (provided that there shall not be any interference with the use
of or means of ingress or egress at the site or associated areas).
SECURITY:
Organizer/Promoter must provide security, with radio communications,
mutually agreed by the parties as sufficient, for all broadcast equipment
in the television compound and around the track, including camera, remote,
and booth locations. Security should be available from the first evening
of arrival through the morning of the last day of departure of all
broadcast equipment. Upon compliance with the security provisions
contained in this paragraph. Organizer/Promoter shall not be liable for
any claims based on the lack of sufficient security.
ADDITIONAL FACILITIES:
CART may also require, and Organizer/Promoter agrees to provide,
additional space to
<PAGE> 23
locate one (1) or more mobile announce booths to accommodate international
networks, plus any required electrical power. All reasonable costs
associated with the provision of power and other required facilities (i.e.
telephone, etc.) for these additional international networks shall be the
responsibility of the international networks. Location of the mobile
booths will be mutually agreed upon.
Other networks may mount cameras, in a manner not to interfere with the
world feed, that would allow US and international networks to focus on
different drivers. Most likely these positions would be near or across
from pit lane. The location of these camera positions will be mutually
agreed upon by Organizer/Promoter, the networks and CART. The networks
would agree to provide at least 30 days notice of intent to supplement
world feed cameras.
EQUIPMENT VENDORS:
Broadcast crews will use best efforts to achieve highest quality, lowest
cost for renting equipment from Organizer/Promoter's exclusive source. If
this cannot be achieved, then the exclusive track source will not apply to
production company's needs.
E. WINNERS CIRCLE
FACILITIES:
- A fenced, separate area, preferably away from pit lane
- Photographers riser, placed proportionately to the podium
- Raised podium
- Two separate entrances: One for drivers, team owners and presenters
only (if necessary, TV); the other for VIP's, sponsors and
photographers
F. CHAPEL
Organizer/Promoter shall provide appropriate space and facilities for use
as a chapel during all CART Events at a maximum cost to CART of
$1,000.00.
G. ELECTRIC/POWER REQUIREMENTS
GENERAL:
All power supplied shall be 60-cycle and should be clean and stable
dependable power, as opposed to generator power, where possible. If
"shore" power is not available, dedicated generator power must meet the
requirements of the network television production company, including but
not limited to: back-up power, redundant systems, frequency
<PAGE> 24
controlled, and automatic switch-over features. Organizer/Promoter shall
provide an adequate supply of electrical power to service all areas,
consistent with the applicable function or activity therein.
MEDIA CENTER:
Organizer/Promoter shall provide CART Communications staff at least two
(2) 110 volt, 20 amp, single phase circuits or equivalent with a minimum
of eight (8) electrical outlets. Adequate power and at least one
electrical outlet for each assignable seat for press in media center.
ACCREDITATION FACILITIES:
Organizer/Promoter shall provide at least one (1) 110 volt 30 amp, single
phase circuit, exclusive of climate control and lighting, with a minimum
of four (4) main power outlets.
OPERATIONS:
Radio Trailer 220v/240v 2 60 amp single phase
30 amp single phase
Timing and Scoring 110v/115v 6 30 amp single phase
Operations Trailer #1 220v/240v 60 amp single phase
Operations Trailer #2 220v/240v 60 amp single phase
Medical Center 220v/240v 100 amp single phase
CART Business Coach 220v/240v 60 amp single phase
Timing & Scoring Truck 110v/115v 50 amp single phase
Battery Compound 220V/240V 60 amp single phase
CART Fuel Compound 110v/115v 4 25 amp single phase
(one common ground
pursuant to local code)
CART Tire Compound 220v/240v 2 60 amp single phase
Scales 110v/115v 20 amp single phase
* Each Entrant Pit 110v/115v 30 amp single phase
* Each Entrant Pit 110v/115v 20 amp single phase
Chief Stewards Trailer 220v/240v 50 amp single phase
(* Entrant is defined as a race car with an assigned driver)
TELEVISION AND RADIO:
Organizer/Promoter shall ensure necessary lighting (minimum of 125 foot
candles) is available for television coverage during the Event.
<PAGE> 25
TV COMPOUND - U.S. NETWORK
Mobile Unit #1 208v 200 amp 3 phase
Mobile Unit #2 208v 200 amp 3 phase
Uplink Truck #1 208v 150 amp 3 phase
Office Trailer #1 208v 150 amp Single phase
Office Trailer #2 208v 100 amp Single phase
Mobile Support 208v 100 amp Single phase
In-Car Camera 208v 60 amp Single phase
RF Camera Truck 208v 60 amp Single phase
TV COMPOUND - INTERNATIONAL NETWORKS
Inet Mobil Unit 208v 200 amp 3 phase
Uplink #2 208v 150 amp 3 phase
Uplink #3 208v 150 amp 3 phase
Uplink #4 208v 150 amp 3 phase
REMOTE LOCATIONS
RF Receive Site US #1 110v 20 amp Single phase
RF Receive Site US #2 110v 20 amp Single phase
RF Receive Site INET #1 110v 20 amp Single phase
RF Receive Site INET #2 110v 20 amp Single phase
ANNOUNCEMENT BOOTHS
U.S. Network Production 110v 20 amp single phase
U.S. Network Monitors 110v 20 amp single phase
U.S. Network Audio 110v 20 amp single phase
Radio Production 110v 20 amp single phase
Radio Monitors 110v 20 amp single phase
International #1 Production 110v 20 amp single phase
International #1 Monitors 110v 20 amp single phase
International #2 Production 110v 20 amp single phase
International #2 Monitors 110v 20 amp single phase
International #3 Production 110v 20 amp single phase
International #3 Monitors 110v 20 amp single phase
EACH ADDITIONAL INTERNATIONAL BOOTH
<PAGE> 26
Additional Production 110v 20 amp Single phase
Additional Monitors 110v 20 amp single phase
Minimum of four (4) outlets per electrical circuit.
Air-Conditioning/heating systems must be on separate circuits from those
shown above. Without separate air-conditioning circuit, broadcast may be
jeopardized.
H. TELEPHONE REQUIREMENTS
MEDIA CENTER:
Twenty-five (25) direct and five (5) dedicated lines and instruments. The
25 direct lines may be restricted to local and "800" number access. The
five dedicated lines are to be unrestricted and will be used exclusively
by the CART Communications Staff. All charges related to telephone
requirements are the responsibility of Organizer/Promoter.
ACCREDITATION FACILITIES:
- Two lines, one for telephone and one for facsimile
OPERATIONS:
As a minimum, the following areas must be supplied telephones which
provide access to commercial telephone lines:
Registration
Operations Trailer - telephone and facsimile line
Medical Center
CART Business Coach
Race Control
Timing & Scoring (2 lines)
Start/Finish line
Chief Steward Trailer
TELEVISION AND RADIO:
Television Compound Area - Organizer/Promoter shall ensure twenty-five
(25) pair telephone lines are permanently installed in television
compound.
<PAGE> 27
Announcement Booths -
CART Radio Network:
A maximum of eight (8) pair telephone lines permanently installed in
booth, as in the past.
International Networks:
Eight (8) pair telephone lines permanently installed in each announce
booth.
I. GENERAL
As the execution of the Competition and broadcast coverage of CART events is
vital to the success and growth of the Series and each Competition, and as newer
and additional technical facilities may be required to meet media, operational
and broadcast production standards in order to enhance and upgrade the facility
and broadcast quality, Organizer/Promoter agrees to provide reasonable
additional space, power, facilities, or other services as may be requested by
CART, on such terms as Organizer/Promoter and CART may agree. CART agrees to
provide Organizer/Promoter as much advance notice as possible of these
additional requirements.
<PAGE> 28
SCHEDULE "B"
INSURANCE REQUIREMENTS
In an effort to protect the interest of track owners, Organizers/Promoters,
sponsors, CART, its Members, Associate Members and participants, CART has
established certain minimum criteria for insurance coverage which must be in
effect for all CART Events.
The insurance requirements for CART events consist of the following areas of
insurance coverage:
Spectator and Participant Legal Liability Insurance; and
Participant Accident Insurance.
The minimum specifications and requirements for acceptable coverage are:
$10,000,000 LIABILITY INSURANCE (coverage must be primary)
1. POLICY FORM
The policy must be a Comprehensive General Liability form and may be
either a manuscript Automobile Racing policy or a Commercial General Liability
policy with endorsements that provide the amendments required to cover
automobile racing events.
Coverage provided must include, but shall not be limited to:
A. Spectator/Public Bodily Injury Liability
B. Participant Legal Liability - Participant Bodily Injury
Liability - Participant to Participant Liability
C. Property Damage Liability
1. Including participants' property except when in
restricted areas.
2. No more than a Fifty Dollar ($50.00) deductible.
D. Refreshments/Products Liability including Concession Hard
Goods and Host Liquor Liability.
E. Personal Injury Liability, including false arrest, detention,
imprisonment or malicious prosecution, libel and slander;
wrongful entry or eviction.
<PAGE> 29
F. Mobil Equipment Liability
G. Incidental Medical Malpractice Liability including primary
coverage for medical professionals.
H. Temporary and Air Ambulance Liability.
I. Off Premises Sign Liability
J. Official Vehicle Physical Damage - Two Hundred Fifty Dollar
($250.00) maximum deductible.
K. Contractual Liability
2. MINIMUM LIMITS OF COVERAGE
CART reserves the right to change insurance limits as long as ninety (90) days
notice is given to Organizer/Promoter.
A. 1997 Event - $10 million combined single limits per occurrence for
Bodily Injury and Property Damage with no aggregate limit.
B. 1997 Event - $5 million minimum for Participant Legal Liability.
Subsequent Events subject to 50% of limits in place in paragraph 2A.
C. 1997 Event - $1 million Medical Malpractice Liability with $1
million aggregate per incident. Coverage to include Medical
Professionals. (See paragraph 1 [G}).
3. NAMED INSUREDS
Must include:
A. CART, its officers, directors and employees; PPG Industries, Inc.
B. CART reserves the right to add additional named insureds provided
however, that notice be given no later than sixty (60) days prior to
the Event.
4. PERSONS INSURED
Must include:
All participants, entrants, sponsors for this Competition, Event or the
Series of which the Competition is a part, and CART Members and Associate
Members. The definition of participants must include drivers, mechanics,
pitmen, officials of the race, and those
<PAGE> 30
assisting the officials, event staff, announcers, emergency and safety
crews and security personnel and all other persons allowed access to
restricted areas. Such definition also applies to CART and support series
events.
5. WAIVER AND RELEASE FROM LIABILITY
The insurance policy must require the utilization of a system at all CART
Events which secures properly executed and signed "Waiver and Release from
Liability" forms from all participants. The procedure for obtaining such
executed waivers from CART participants shall be determined by CART.
6. GENERAL SPECIFICATIONS
A. The insurer must be admitted or approved to write insurance in the
state, province and country where the insured track is located. The
broker or agent must be licensed to transact business in the state,
province and country where the track is located. It is
Organizer/Promoter's responsibility to inform all participants of
all coverages and conditions available throughout the Event.
B. The insurer must have a minimum of a "Best A rating", and the name
of the insurer must be supplied to CART for the purposes of
confirmation.
C. The insurer must formally agree to send duplicate notice of
cancellation to CART in the event of cancellation a minimum of
thirty (30) days in advance of the collection. The reason for the
cancellation must be included with this notification. The insurer
must also formally agree to immediately notify CART of each instance
of the insured's failure to remit proper premium or other required
payments.
D. The agent or broker must submit a narrative explanation of systems,
procedures and authority for adjusting and paying liability and
participant accident claims.
PROCEDURES FOR OBTAINING APPROVAL OF AND UTILIZING INSURANCE COVERAGE
1. Any request or submission for approval of insurance coverage not
meeting the minimum specifications and requirement so procedures
will not be accepted.
2. To obtain approval for sources of insurance, Organizer/Promoter or
its insurance broker must submit a certified true specimen copy of
the proposed policy forms to CART at least ninety (90) days prior to
the first date proposed to be insured by the insurance.
3. CART will notify the party submitting the request in writing of the
acceptance or
<PAGE> 31
rejection of insurance submissions within fifteen (15) days receipt
of the submission. Only formal written approval of the acceptance of
insurance coverage by CART shall be considered valid.
4. Upon acceptance, Organizer/Promoter must provide CART a certified
true copy of the actual policy of insurance issued to track
operators or Organizer/Promoter at the time of issuance and no later
than thirty (3) days prior to the first day of the Event.
5. Should Organizer/Promoter fail to comply with the above
requirements, CART shall have the right to purchase the insurance
and obtain reimbursement from Organizer/Promoter.
6. PARTICIPANT ACCIDENT INSURANCE FOR CART PARTICIPANTS
Organizer/Promoter shall reimburse CART for the cost of participant
accident disability, medical and life insurance which minimum overages for
1997 are as follows:
<TABLE>
<S> <C>
Accidental Death and Dismemberment $ 50,000.00
Primary Accident Medical $ 150,000.00
Excess Major Medical $ 350,000.00
Weekly Disability (to 104 weeks) $ 250.00
Monthly Disability (to 48 months) $ 300.00
</TABLE>
<PAGE> 32
SCHEDULE "C"
UNIFIED CREDENTIAL SYSTEM
AND FACILITY ACCESS PROVISIONS
CART SEASON CREDENTIALS (PLASTIC PICTURE IDENTIFICATION)
Picture identification cards will be issued to CART participants as provided in
this Agreement. Persons issued this credential may only use this credential as
expressly allowed for by the CART Rule Book, and only applies as to their need
or function. Any change in costs agreed to by the Promoters' Association and
CART will supersede the costs included in this Schedule "C".
A. Teams
Each CART Owner Membership is entitled to a maximum of forty (40) CART picture
I.D. license/credentials upon acceptance of application and payment of fees due
CART. Additional license/credentials (41-100) may be purchased at a cost of
$185.00 each per season. Revenues derived from such purchases less $25.00 per
credential will be divided equally among all CART Organizer/Promoters;
These license/credentials are to be issued to team members, i.e., owner, team
manager, chief mechanic, crew members, designated team and/or sponsor public
relations representative and any other associates the owner desires within the
allotted maximum number. This credential will permit access to the facility and
restricted areas including the pit area at all times during any CART Event. At
specified Events, a limited number of special credentials will be issued to
allow only necessary and appropriate personnel access to the pit area thirty (3)
minutes prior to and during the CART race.
B. Drivers
Each driver will be issued a permanent CART picture license/credential. An
additional picture license/credential will be issued to the driver's spouse or
companion. Both credentials will permit access to the facility and restricted
areas including the pit area at all times during any CART Event. At specified
Events, a limited number of special credentials will be issued to allow only
necessary and appropriate personnel access to the pit area thirty (3) minutes
prior to and during the CART race.
C. Indy Lights or CART Official Support Series
CART will provide credentials to Indy Light competitors, sponsors and suppliers
pursuant to provisions in the contract between CART and American Racing Series,
which currently includes the following entrant credentials:
<PAGE> 33
1 - 12 Team Credentials (12) Complimentary
13 - 17 (5) at $145 per credential
18 - 25 (8) at $250 per credential
Revenues derived from such purchases shall be divided equally among all CART
Organizer/Promoters.
D. Officials
Each CART official will be issued a permanent CART picture I.D.
license/credential. This credential will permit access to the facility and
restricted areas including the pit area at all times during any CART Event. At
specified Events, a limited number of special credentials will be issued to
allow only necessary and appropriate personnel access to the pit area thirty
(30) minutes prior to and during the CART race.
E. Suppliers and Award Providers
A reasonable number of suppliers and award providers will be issued credentials
as determined by CART. These credentials will permit access to the facility and
restricted areas including the pit area at all times during any CART Event. At
specified Events, a limited number of special credentials will be issued t allow
only necessary and appropriate personnel access to the pit area thirty (30)
minutes prior to and during the CART race;
Each CART authorized supplier and award provider shall be entitled to a maximum
of five (5) credentials at no charge. Additional credentials may be purchased at
a cost of $100.00 each per season. Revenues derived from such purchases less
$10.00 per credential will be divided equally among all CART
Organizer/Promoters.
F. Media
CART will issue a limited number of credentials to nationally and
internationally recognized journalists and photographers covering the majority
of Series Events on assignment for recognized media. They will clearly be marked
"MEDIA" and "PHOTO" respectively. All media and photo credentials will permit
access to the facility and restricted areas including the pit area and media
center at all times during any CART Event. At specified Events, a limited number
of special credentials will be issued to allow only necessary and appropriate
personnel access to the pit area thirty (30) minutes prior to and during the
CART race.
G. Television Production
Television talent, key production staff and season-long television production
crew members are
<PAGE> 34
credentialed and marked "Network TV". All "Network TV" credentials will permit
free and unrestricted access to the facility and all associated areas including
the pit area and media center at all times during any CART event. Individuals
accredited by this CART Season Credential marked "Network TV" should receive
access to the same areas as any Event credential issued by CART or the promoter
to the television production crews. At specified Events, a limited number of
special credentials will be issued to allow only necessary and appropriate
personnel access to the pit area thirty (30) minutes prior to and during the
CART race.
H. Sponsors
A reasonable number of CART sponsors will be issued credentials as determined by
CART. These credentials will permit access to the facility and restricted areas
including the pit area at all times during any CART Event. At specified Events,
a limited number of special credentials will issued to allow only necessary and
appropriate personnel access to the pit area thirty (30) minutes prior to and
during the CART race;
Each CART sponsor shall be entitled to a maximum of five (5) credentials at no
charge. Additional credentials may be purchased at a cost of $500.00 each per
season. Revenues derived from such purchase less $50.00 per credential will be
divided equally among all CART Organizer/Promoters.
EVENT CREDENTIALS (PROVIDED BY THE ORGANIZER/PROMOTER)
A. Issued by CART:
1. Assistants
Organizer/Promoter shall make Event credentials available to CART for those
persons assisting CART Officials. These credentials shall be the same type of
credentials as those issued by Organizer/Promoter to others assisting in the
production of the Event and will permit access to the facility and restricted
areas including the pit areas at all times during any CART Event. At specified
events, a limited number of special credentials will be issued to allow only
necessary and appropriate personnel access to the pit area thirty (30) minutes
prior to and during the CART race.
2. Sponsors
For each Owner Membership accepted by CART the entrant may be entitled to a
maximum of twenty (20) credentials per accepted membership for team sponsors.
These credentials will permit access to the facility and restricted areas during
CART activities. Access to the pit area will be terminated thirty (30) minutes
prior to the start of and during the CART race. Each credential purchased
hereunder shall apply to all CART sanctioned events during the season and shall
be purchased at a cost equivalent to the sum of $45.00 for each permanent race
circuit on
<PAGE> 35
the schedule and $55.00 for each temporary race circuit on the schedule.
Revenues derived from such purchases will be divided equally among all CART
Organizer/Promoters.
3. Additional Credentials, Passes, Tickets and Parking
Organizer/Promoter will provide CART with additional credentials, passes,
tickets and parking to be utilized as stated below for distribution at the
discretion of CART.
(a) Credentials and Passes
General - Three Hundred (300) credentials for distribution by CART; Access to
the pit area will be terminated thirty (30) minutes prior to the start of and
during the CART race;
Drivers - Four (4) credentials to each participating CART driver;
Broadcast Partners (U.S. and International Television and CART Radio) -
Organizer/Promoter will provide all broadcast partners with specifically
designated all access "Network TV" credentials, which accord production
personnel free and unrestricted access to the site of the event and associated
areas otherwise restricted to the general public. These areas are to include the
media center, pit lane, paddock, television compound, camera locations, announce
booths, hospitality areas, and trackside access for the sole purpose of
producing television coverage of the Event. This "Network TV" credential should
be restricted for distribution to and use by authorized workers only under the
direction of CART. At specified Events, a limited number of special credentials
will be issued to allow only necessary and appropriate personnel access to the
pit area thirty (30) minutes prior to and during the CART race;
Indy Lights - Organizer/Promoter will provide Events credentials for Indy Lights
sponsors, suppliers, and guests. CART to coordinate.
(b) Tickets
General - One Hundred Fifty (150) tickets (deluxe grandstand seating) for use by
CART - to be received thirty (30) days prior to race day;
Television Network - Fifty (50) tickets (prime seating location) for intended
use by CART's TV Network, to be received thirty (30) days prior to race day.
(c) Parking
U.S. Television Network - Parking passes shall be provided by Organizer/Promoter
up to a total of (64) sixty-four; Forty (40) should allow parking adjacent or as
close as possible to television compound, with another twenty (20) providing
convenient access to overflow parking; Four (4) service vehicle passes shall
also be provided to allow delivery and servicing of equipment to all areas of
Event. CART to coordinate. Notwithstanding the foregoing requirements of general
application, the parties acknowledge Organizer/Promoter's space limitations, and
such
<PAGE> 36
requirements shall be subject to mutual agreement between Organizer/Promoter and
CART for these Events;
International Television Networks - Parking passes shall be provided by
Organizer/Promoter up to a total of (17) for ESPN International. Ten (10) should
allow parking adjacent or as close as possible to the television compound with
another five (5) providing convenient access to overflow parking. Two (2)
"service" vehicle passes shall also be provided to allow delivery and servicing
of equipment to all areas of event. Additionally, four (4) parking passes shall
be provided for each other attending international network (excluding ESPN
International), preferably located as conveniently as possible to the television
compound. CART to coordinate. Notwithstanding the foregoing requirements of
general application, the parties acknowledge Organizer/Promoter's pace
limitations, and such requirements shall be subject to mutual agreement between
Organizer/Promoter and CART for these Events;
CART Radio Network - Parking passes shall be provided by Organizer/Promoter up
to a total of (4) four, including three (3) preferably in a location as close as
possible to the radio announce booth, and one (1) "service" vehicle pass to
allow for delivery or servicing of equipment to all areas of event.
CART to coordinate.
Media - At least forty (40) parking spaces shall be provided by
Organizer/Promoter for media personnel credentialed by CART in the vicinity of
the media center, with convenient overflow parking;
Competitor Transporter Space - Each entrant (i.e., each separately entered
car/driver combination) will be allocated sufficient parking space in the
paddock area for one (1) transporter and work area (minimum 85 feet x 31 feet);
Competitor Motor Coach/Hospitality Space - Each entrant (i.e., each separately
entered car/driver combination) will be allocated sufficient parking space for
one (1) motor coach (minimum 55 feet x 15 feet); Additional space over and
beyond the 55 feet x 15 feet will be charged to the teams, consistent with the
CART/Promoter Motorhome Policy;
Owners/Drivers/Team Affiliates/CART Officials & Staff - Organizer/Promoter will
designate a parking area which will accommodate owners, drivers, team affiliates
and CART officials and staff. Such area will be located in close proximity to
the paddock and/or garage area. CART owners and drivers will have access to park
in the paddock or motor coach areas. The number of passes required will be
mutually agreed upon by Organizer/Promoter and CART's Registration Manager;
CART Business Coach - Organizer/Promoter shall provide space in an area easily
accessible from the pit and paddock for the parking of CART's business coach;
Suppliers and Manufacturers - Organizer/Promoter will provide parking and work
areas in the paddock for suppliers and manufacturers that provide entrants with
products and services;
<PAGE> 37
Indy Lights or CART Official Support Series - Organizer/Promoter will provide an
area in the paddock for Indy Lights transporter parking, competitor work areas,
administrative functions and technical inspection. An area close to the paddock
for team parking will be available.
B. Issued by Promoter:
1. Race Pit Credentials
This Event credential, provided by Organizer/Promoter for issue by the
Organizer/Promoter and CART allows the bearer access to the facility,
paddock/garage and the pit area at any time during a weekend racing Event.
At specified Events, a limited number of special credentials will be
issued to allow only necessary and appropriate personnel access to the pit
area thirty (30) minutes prior to and during the CART race. Persons with
this credential must remain behind the pit wall during on track activity.
The dress code will be in effect during races with scheduled pit stops.
2. Practice & Qualifying Credentials
This Event credential, provided by Organizer/Promoter for issue by
Organizer/Promoter and CART allows the bearer access to the pit area
during all on track activity except races when scheduled pit stops are a
part of the race. Persons with this credential must remain behind the pit
wall during on track activity. The bearer must leave the pit lane thirty
(30) minutes prior to the start of a race with scheduled pit stops.
3. Redeemable Credential
This credential provides the bearer general admission and paddock/garage
area access, but does not allow admission into other restricted areas. To
gain access to the pit area, the bearer must present the credential for
validation or reissue and sign the proper waiver at a redemption center.
The redemption center will be operated by CART or Organizer/Promoter and
will be located in the infield, paddock or other area mutually agreed upon
by CART and Organizer/Promoter. The purpose of this credential is to allow
distribution of credentials to V.I.P.'s that would be issued a pit access
credential prior to the Event. This system will ensure easy access to the
facility and not allow pit access until the proper waiver is signed.
4. Other Access Identifiers
There are some other access identifiers that are used in conjunction with
the above three credentials to allow access into specific restricted areas
(trackside access, media center access, etc.) that are provided by
Organizer/Promoter for issue by Organizer/Promoter and CART.
Organizer/Promoter agrees to provide a list to CART, two (2) weeks in a
advance of the Event, of all local and regional TV broadcasters accredited
by Organizer/Promoter, for the Media Center area.
<PAGE> 38
C. All credentials shall be plainly marked "RACE PIT" or "PRACTICE &
QUALIFYING PIT", "MEDIA", "PHOTO", etc. Terms such as "HOT PITS" OR "COLD
PITS" are not acceptable.
RULES
1. Credentials are not transferable.
2. Persons in restricted areas may not enter team areas unless invited,
must obey the instructions given by CART officials and security
personnel in regards to their safety and well being and may not
interfere in any way with the activities of CART participants or the
Event. All credentialed persons are bound by the rules set forth in
the CART Rule Book which pertain to conduct and safety.
3. Persons not properly attired must leave the pit area thirty (30)
minutes prior to the scheduled start of the race. Proper attire is
defined as including the following tenets:
A. Shorts are not permitted.
B. Shirts fully covering the shoulders must be worn at
all times.
C. Open-toe shoes are not permitted.
IMPLEMENTATION
1. All security guards, gate guards, pit workers, registrars and staff
members with activities that may affected by this policy, will be
notified of this policy.
2. All CART Owners, Drivers, Team Managers, Chief Mechanics and
corporate Sponsors will be notified of this policy.
<PAGE> 39
SCHEDULE "D"
PPG PROGRAM AND OFFICIAL CARS
PACE CARS
The PPG pace cars will serve as the Official Pace Cars at all CART Events
sanctioned by CART and shall be the only pace cars referred to as "Official Pace
Cars" in any advertising, publicity, or promotion of a CART Event by the
Organizer/Promoter.
Track announcers shall identify the PPG pace cars during the parade laps and
continue to identify the starting PPG pace car when it starts the race and when
it is on the track during caution flag periods.
SIGNS AND FLAGS
A. Organizer/Promoter shall furnish PPG at no charge with one (1) location
for a painted sing, highly visible to the principal grandstands and to
television cameras covering the race. PPG will assume responsibility and
cost for painting the sign.
B. PPG shall receive preferential treatment in placement of temporary
banners, signs, and flags at each track for CART Events only. Where
there is a tower, or two towers, PPG's banner shall be placed in a
center location, separate and apart from all other signs and banners.
PPG shall receive at no charge at least two (2) choice location at each
track. Additional placement of PPG signs and banner will be in such
locations at may be determined by discussions between
Organizer/Promoter and representatives of PPG.
TICKETS AND CREDENTIALS
Organizer/Promoter shall provide choice seating locations for PPG when it makes
ticket purchases for its customers at the same rates, including discounts,
provided any other corporation or group. Also, Organizer/Promoter shall provide
PPG with a reasonable number of pit passes and parking stickers at no cost.
PROGRAM
Organizer/Promoter shall provide PPG with one (1) full-page, full color ad, for
which PPG will furnish color separations, and one (1) full-page of editorial in
their program at no cost to PPG.
<PAGE> 40
SCHEDULE "E"
EVENT ACTIVITIES
CART ACTIVITIES
The appropriate (road course, oval or 500 mile) standard CART schedule
will be in effect at all Events.
OFFICIAL SUPPORT SERIES AND PPG PACE CAR ACTIVITIES
Indy Lights or CART's official support series shall be entitled to compete
at this Event at no cost to CART or the support series. CART shall have
the right to schedule, at any time during the Event, including race day,
its official support series event as part of the overall CART activities.
Standardized schedules similar to the CART standard format schedules will
be developed for PPG Pace Car on track activities and CART's official
support series.
OTHER SUPPORT RACE ACTIVITIES
Any additional motor racing events must be approved by CART's Vice
President, Competition. These activities will be scheduled in a manner
which will minimize any interference with any scheduled CART, Indy Lights
or CART's official support series and PPG Pace Car on track activities.
Support activities should be selected to provide an appropriate complement
to CART activities and must be a balanced program and offer good
entertainment value to the fans. A one half-hour break between scheduled
competition activities is recommended. All on track support activities
must be sanctioned by a recognized FIA affiliate. A formal sanction
agreement executed between the sanctioning body and the event organizer
must be on file with CART. This agreement must verify the performance and
obligations of the sanctioning body and the event organizer and must not
infer any organization or operational responsibility to CART. These
activities must be held in compliance with the sanctioning body's rules.
The participant accident and liability insurance limits and carrier must
be acceptable to CART. In addition, celebrity events must comply with the
following:
1. All drivers must have successfully completed both classroom
and on track instruction.
2. Race cars must meet the safety requirements prescribed by the
sanctioning
a) A seat that provides proper driver support in case of
impact.
b) A five (5) point competition seat belt and harness.
c) Rollover protection:
- roll cage for closed-wheel production-type or - based
vehicles;
- roll hoop for sports race and open-wheel race cars.
<PAGE> 41
d) The electrical system must include an accessible master
switch and an impact/rollover switch. Both of these
devices must interrupt the current to all onboard
circuits.
3. Historic and vintage car practice, qualifying, race or
exhibition activities will not be scheduled as part of this
Event.
4. Only one race competition per CART sanctioned event weekend
will be scheduled for any support race category.
5. Commitments to live television coverage or time certain
scheduling of support activities should not be planned, as
such commitments will be interrupted by any delay in the
schedule.
ENTERTAINMENT ACTIVITIES
Parades, exhibitions, stunts and other entertainment activities must be
scheduled in a manner which will not interfere with any racing activity.
CART does not accept any organizational or operational responsibility for
these activities. These activities must be held in compliance with any
applicable local, state or federal guidelines or regulations. Event
liability insurance must be in place to cover these activities.
<PAGE> 42
owners/teams and CART officials.
6. CART Promotions Coordinator gives appropriate tire manufacturer hat to
winner for television interviews. Television interviews will be conducted
in the following order with priority given to live shows over tape:
A. Host TV broadcaster
B. Foreign TV broadcaster
C. Network radio-if live
D. Local radio-if live
E. CART Productions
Note that with three (3) drivers available, some interviews may occur
simultaneously. Live television will have preference of interviewing
drivers one, two and three without wait. All other driver interviews may
be conducted following trophy presentation.
Teams, P.R. representatives, sponsors and others should respect the
integrity of the television broadcast and act appropriately. All three
(3) drivers should be respected. No unauthorized hats, products,
signs, etc. may thrust in front of Television cameras. No hats may be
exchanged during televisions interviews or in front of the camera.
7. PPG/Title Sponsor Victory Podium Truck, if applicable, moves into position
during interviews.
8. After all television/radio interviews, top three (3) drivers proceed to
Victory Podium Truck or permanent podium where available. Security will
provide escort for drivers. In the event Television is still live,
security will expedite same.
9. Drivers will be presented and interviewed by the track announcer on stage
in the following order: 3-2-1
10. Organizer/Promoter may designate and present additional awards as agreed
by CART. Such agreement will not be unreasonable withheld. Any additional
award presentation must follow the Event trophy presentation to the three
(3) drivers and winning team owners.
11. Trophies are presented by executive presenters designated by
Organizer/Promoter. Event title sponsor hats are worn. Beauty queens
should not be on stage unless stated in preexisting agreements with title
sponsor, or otherwise in accordance with the promotional model program as
agreed upon by CART and the Organizers/Promoters.
12. Winning owners(s) are present on podium for presentation of Trophy.
13. First round of photography. Executive presenters and/or owners(s) leave
platform.
14. CART Promotions Coordinator effectuates changes of driver's hates for
still photography
<PAGE> 43
session(s). This sequence will not appear on television. Hats will be
accommodated in the following order:
A. PPG Industries
B. Team Sponsor(s)
C. Limited number of additional sponsor(s) only by prior agreement-time
permitting
15. Organizer/Promoter retains the right to provide champagne which will not
be sprayed until all photo sessions are concluded.
VICTORY LAP
Drivers should be showcased to the fans. CART News Managers may accompany
drivers if sufficient space is available.
Upon completion of Victory Lap drivers proceed to Press Room for interviews.
Security will provide proper escort.
The Victory Lap is optional at the discretion of Organizer/Promoter.
<PAGE> 1
EXHIBIT 10.8
ARS Agreement
Draft #6 E.C.
December 21, 1995
AGREEMENT
THIS AGREEMENT made this 22nd day of December, 1995, by and between
Championship Auto Racing Teams, Inc., a Michigan corporation, of 755 W. Big
Beaver Road, Suite 800, Troy, Michigan 48084, herein referred to as "CART", and
American Racing Series, Inc., a Michigan corporation, of 1396 Wheaton Avenue,
Suite 700, Troy, Michigan 48083, herein referred to as "ARS".
W I T N E S S E T H:
1. OFFICIAL SUPPORT SERIES. CART hereby designates ARS as the exclusive
organizer of a series of open wheel automobile races to comprise and be
conducted as the Official Support Series of CART, herein referred to as the Indy
Lights Series. The Indy Lights Series shall be sanctioned exclusively by CART in
accordance with the IndyCar Rule Book and the current Indy Lights Rules
Supplement and shall be recognized as its Official Support Series, and as the
primary source from which to license drivers for participating in the IndyCar
Series, giving due credence to all other qualifications and requirements
considered by CART in passing on driver license applications.
2. TERM. The term of this Agreement shall commence with the 1996 racing
season and continue through the 1998 racing season, except as otherwise provided
in this Agreement. Provided ARS is in compliance with all the terms and
conditions of this Agreement, ARS shall have the option to extend this Agreement
on the same terms for an additional term of three (3) years, i.e., for the years
1999, 2000 and 2001, by notification to CART of such intent no later than
January 1, 1998.
3. SCHEDULE OF EVENTS. The Indy Lights Series races shall be scheduled
by CART and shall include not less than twelve (12) IndyCar events, unless a
lower number is requested by ARS. If ARS wishes to run more than twelve (12)
events or any event not held in conjunction with a CART
<PAGE> 2
ARS Agreement
Draft #6 E.C.
December 21, 1995
event, then the parties will discuss and agree in good faith respecting the
additional arrangements or where applicable adjustments to this Agreement
necessary for such event(s), including but not limited to race promoter
agreements, officiating staff, television production arrangements, and safety
and medical team coverage. CART shall place the Indy Lights Series events on the
IndyCar event schedule at no promoter cost to ARS. No financial renumeration,
concession or adjustment to this Agreement will be made should ARS elect for any
reason to run at less than twelve (12) IndyCar events. ARS intends to present a
starting field of at least twenty (20) cars, and shall use its best efforts to
assure no less than fifteen (15) cars at each event.
4. SCHEDULE OF ACTIVITIES. Each Indy Lights Series race shall be
scheduled for seventy-five (75) miles in duration (subject to Rule 6.25 in the
Indy Lights Rules Supplement to the 1995 IndyCar Rule Book), and shall be
scheduled to start not more than two and one-half (2 1/2) hours prior to the
start of the IndyCar race when held in conjunction with CART events, unless
mutually agreed to the contrary. Furthermore, Indy Lights Series competitors
will receive a minimum of one (1) hour of track time on each of the Friday and
Saturday of the IndyCar event for practice and qualifying and an additional
fifteen (15) minutes for final practice on Saturday or warm-up on Sunday. If
possible, the Indy Lights Series on track activities shall be scheduled adjacent
to the IndyCar on track activities. Specifics of the schedule of activities are
as follows (subject to prevailing "two-thirds rule" as recognized by event
promoters for support event activities):
A. Road Course Events:
- Minimum of two (2) one-half hour on track sessions on
Friday (Friday practice/qualifying format to be
consistent with IndyCar procedures);
- Minimum of two (2) one-half hour on track sessions on
Saturday (Saturday practice/qualifying format to be
consistent with IndyCar procedures).
2
<PAGE> 3
ARS Agreement
Draft #6 E.C.
December 21, 1995
B. Oval Course Events:
- Minimum of two (2) one-half hour practice sessions on
Friday;
- Minimum of one-half hour practice and one (1) hour
qualifying sessions on Saturday.
5. RACE NAME ENTITLEMENT. Partly in recognition of the obligation being
imposed upon the event promoter to include the Indy Lights Series at no cost,
the parties recognize that the event promoter shall have the right to sell the
Indy Lights Series race title, provided, however, that the name shall include
reference to "Indy Lights", as well as the identity of a series sponsor or
sponsors as ARS may designate. In addition, CART shall exercise its approval
rights as to such on-site entitlement in a similar manner as with the on-site
entitlement of the Indy Car race, including a reasonable effort to avoid any
entitlement that may conflict with an existing ARS sponsor.
6. DISTRIBUTION OF REVENUES.
A. Entry fees paid by Indy Lights Series competitors and all associated
licensing and registration fees shall be paid to CART. The following costs
directly related to the Indy Lights Series shall be paid from such gross
receipts:
1. Direct insurance costs for liability, driver life,
participant accident, catastrophic medical;
2. Officials' fees and expenses for those officials
whose function is allocated primarily to the Indy
Lights Series;
3. Television production charges of $15,000.00 per race.
The parties agree that the resulting "net receipts" will be divided equally
between CART and ARS. In addition, each party shall contribute fifty percent
(50%) of their respective allocation toward the Indy
3
<PAGE> 4
ARS Agreement
Draft #6 E.C.
December 21, 1995
Lights Series prize fund for the following season, as illustrated in Exhibit "A"
attached hereto.
B. The distribution of revenues provisions set forth in paragraph 6A
shall also apply to the money CART received in conjunction with the 1995 Indy
Lights Series, except that the only costs to be deducted by CART from the gross
receipts will be for insurance and for the Series Chief Steward.
7. TELEVISION.
A. ARS hereby appoints CART as its exclusive agent for negotiating the
sale of the television rights to the Indy Lights Series. CART shall use its best
efforts in obtaining as much television exposure as possible, and the parties
acknowledge that the amount of revenues obtained shall be regarded as secondary
to maximizing the coverage of the races. Net revenues from the sale of
television rights will be divided equally between the parties.
B. The parties hereto acknowledge that when Indy Lights Series races
are not held in conjunction with a CART event, television production cannot be
provided within the scope of the normal production arrangements. CART and ARS
will cooperate to ensure that the race promoter takes responsibility for the
supply of a live feed at the promoter's expense.
8. RACE ADMINISTRATION. Except as otherwise mutually agreed, CART shall
be responsible for each of the following race-related items:
A. CART shall administer the credentialling, licensing and registration
of Indy Lights Series participants, at no cost to ARS.
B. The parties shall provide by mutual agreement for on site race
personnel and support, including the provision by CART of the following specific
officials and/or functions to be assigned by CART for Indy Lights Series
activities, at no cost to ARS, except as provided in paragraph 8I below:
4
<PAGE> 5
ARS Agreement
Draft #6 E.C.
December 21, 1995
- Series Chief Steward, Indy Lights;
- Technical Coordinator;
- Six (6) permanent Technical Workers;
- Starter;
- Timing and Scoring Coordinator;
- Pace Car Coordinator;
- Complete timing and scoring service with applicable
equipment and EDS Service;
- Three (3) Stewards (including Chief Steward).
No increase in the number of officials will occur without the prior
written approval of ARS.
C. Subject to paragraph 3 above, Indy Lights Series participants shall
receive full coverage by the CART safety and medical team at all Indy Lights
Series races and CART sanctioned Indy Lights tests.
D. CART shall provide a minimum of two (2) scoring monitors in pit lane
during all phases of Indy
Lights Series competitions.
E. CART shall include the Indy Lights Rules Supplement in its official
IndyCar Rule Book.
F CART shall conduct and oversee all phases of Indy Lights Series race
competitions, consistent with past practices.
G. CART shall use its best efforts to locate the Indy Lights Series
paddock as close to the IndyCar area as possible, subject to existing
established practices where applicable.
H. Paddock Parking Passes:
1. Each entered Indy Lights Series team owner will
receive no less than one (1) Team Owner Parking Pass
(area to be designated by the event promoter) to
allow the team to access the Indy Lights Series
paddock area for event activities;
2. Each entered driver will receive one (1) Driver
Parking Pass to allow
5
<PAGE> 6
ARS Agreement
Draft #6 E.C.
December 21, 1995
access to the Indy Lights Series paddock area;
3. ARS will receive a maximum of ten (10) credentials
and a reasonable number of parking passes for the use
of its full time staff.
I. ARS shall be responsible for the supply and associated cost of all
equipment specifically required for the sole purpose of carrying out technical
inspections on Indy Lights race cars.
9. INSURANCE. CART agrees to name ARS, its directors, officials,
officers, agents, sponsors, and employees as an additional insured in any and
all event insurance policies including, but not limited to, participant
accident, participant to participant liability, spectator liability and the
like.
10. ANNOUNCEMENT OF RACE RESULTS. CART shall use its best efforts to
have the results of the Indy Lights Series races announced during the television
broadcast of the Indy Car races.
11. TEST DAYS. CART shall arrange for sanctioned "open test" days for
the Indy Lights Series teams, to be held in conjunction with IndyCar sanctioned
tests, with the incremental increase in costs to be divided consistent with past
practices.
12. SPONSOR CONFLICTS. ARS agrees not to contract with any sponsor for
the Indy Lights Series that may conflict with any CART contract or agreement,
without the prior written approval of CART.
13. SALE OF ARS.
A. CART may submit an offer to purchase ARS at any time during the term
of this Agreement. ARS may accept, reject, or propose a counter offer to any
such offer, in its sole discretion.
B. If ARS receives a bona fide offer from any third party to acquire
the business of ARS, through the purchase of its stock or assets, merger,
consolidation, or any other fundamental corporate
6
<PAGE> 7
ARS Agreement
Draft #6 E.C.
December 21, 1995
reorganization, or any other method, CART shall have an exclusive right of first
refusal to acquire same, provided that the business and operational structure of
CART has not substantially changed from that existing when this Agreement is
signed. ARS shall submit to CART in writing the specific terms of such offer and
CART shall have ten (10) business days after receiving the bona fide offer
within which to accept the same, provided, however, that such time shall be
extended for a reasonable period if necessary (not to exceed thirty (30) days)
for the CART CEO to submit the offer to the CART Board if necessary to obtain
approval, and to communicate any pertinent feedback to ARS. If CART does not
accept such proposal within such time, ARS shall be free to contract with such
third party but not on terms different than those offered to CART without again
giving CART an additional ten (10) business day right of first refusal
concerning some.
14. ASSIGNABILITY. Neither party may assign its rights and/or
obligations under this Agreement.
15. INDEMNITY. ARS agrees to indemnify and hold harmless CART, its
directors, officials and officers, agents and employees from any and all
liabilities and all costs and expenses, including attorney fees incurred in the
defense thereof, asserted or imposed on CART, its directors, official
representatives, employees and officers, arising out of or as a result of the
Indy Lights Series.
16. CONFIDENTIALITY..
A. All media releases, public announcements, including competition
related announcements and public disclosures by either party or its employees or
agents relating to this Agreement, including but not limited to promotional or
marketing material, but not including any announcement intended solely for
internal distribution by either party or any disclosure required by legal,
accounting, or regulatory requirements beyond the reasonable control of the
disclosing party, or
7
<PAGE> 8
ARS Agreement
Draft #6 E.C.
December 21, 1995
any announcements which solely make incidental references to the Indy Lights
Series as the Official Support Series of CART shall be coordinated with and
approved by the other party prior to the release thereof.
B. CART and ARS agree to safeguard the confidentiality of any
information obtained in the performance of this Agreement regarding the
products, accessories, designs and developments of the other party. It is agreed
that each party remains the owner of its information and documents and that such
information and documents can be used by the other party only for the purpose of
performing under the terms of this Agreement. The disclosure of any such
information or documents to any third party requires prior written approval of
the owner of such information and requires the prior agreement of such third
party to safeguard the confidentiality. Notwithstanding the foregoing,
disclosure may be made if necessary to enforce a party's rights under this
Agreement, or if required by a governmental agency, in which case any and all
documents, information, or materials disclosed shall be marked "confidential"
and such party shall seek confidential treatment of such information.
17. AUTHORITY TO CONTRACT. Each party warrants and represents that it
has the full right and authority to enter into and perform this Agreement and to
grant all rights granted herein, (subject in all cases to any applicable legal
limitations or restrictions), and that the execution and delivery of this
Agreement has been duly authorized by all necessary corporate action.
18. ENTIRE AGREEMENT: WAIVERS AND AMENDMENTS. This Agreement sets forth
the entire agreement between the parties and supersedes all prior agreements and
understandings between the parties, their officers, directors, or employees
relating to the subject matter hereof. None of the terms of this Agreement may
be waived or modified except as expressly agreed to, in writing, by both
parties.
8
<PAGE> 9
ARS Agreement
Draft #6 E.C.
December 21, 1995
19. NOTICES. Except as otherwise provided, any notice or other
communication required or permitted to be given under this Agreement will be
sufficient if it is in writing and delivered personally, telegraphed, telecopied
or telexed, or mailed (by certified, registered or first class mail or by
recognized overnight courier), postage prepaid, and will be deemed given when so
delivered personally, telegraphed, telecopied or telexed, or if mailed by
certified, registered, first class mail or by recognized overnight courier, one
day after the date of mailing, as follows (or to any other address provided by a
party in accordance with this Section):
If to CART: Championship Auto Racing Teams, Inc.
755 W. Big Beaver Road, Suite 800
Troy, MI 48084
Facsimile: (810) 362-8810
Attention: Mr. Andrew Craig and
Mr. Randy Dzierzawski
If to ARS: American Racing Series, Inc.
1395 Wheaton Avenue
Troy, MI 48083
Facsimile: (810) 528-8119
Attention: Mr. U.E. (Pat) Patrick
Mr. Roger Bailey
20. GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of Michigan.
21. HEADINGS. The headings in this Agreement are for reference purposes
only and will not in any way affect the meaning or interpretation of this
Agreement.
22. SEVERABILITY. If any provision of this Agreement is determined to
be illegal or invalid, such illegality or invalidity will have no effect on the
other provisions of this Agreement, which will remain valid, operative and
enforceable.
9
<PAGE> 10
ARS Agreement
Draft #6 E.C.
December 21, 1995
23. RELATIONSHIP OF THE PARTIES. Nothing in this Agreement will be
deemed to create a partnership or joint venture among any one or more of the
parties.
24. CANCELLATION. Either party may unilaterally cancel this Agreement
upon the occurrence of any of the following on behalf of the non-canceling
party, provided, however, the canceling party must give notice in writing by
certified mail to the non-canceling party, specifying the ground or grounds for
termination and permitting said party thirty (30) days in which to cure the
purported ground or grounds of termination:
A. Either party becomes insolvent or enters federal bankruptcy or
reorganization proceedings; or
B. A receiver, trustee, guardian or marshall is appointed to manage the
affairs of either party; or
C. Either party should, for reasons totally beyond its cause or
control, be completely and permanently prevented from reasonably complying with
its duties hereunder; or
D. Either party fails to perform any of the material terms and
conditions herein; or
E. Any of the material representations made by either party to the
other which led to this Agreement proves to be false.
IN WITNESS WHEREOF, this Agreement is executed by the parties hereto as
of the date first above written.
AMERICAN RACING SERIES, INC. CHAMPIONSHIP AUTO RACING TEAMS, INC.
By: /s/ Roger Bailey By: /s/ Andrew H. Craig
----------------------------------- ---------------------------------
Its: President Its: President and CEO
10
<PAGE> 11
ARS Agreement
Draft #6 E.C.
December 21, 1995
EXHIBIT A
Income = A
Insurance costs = B
Officials costs = C
TV Production costs = D
Net Distribution Formula: A-(B+C+D) = Net Distribution
Net Distribution
(25%) 50%-------50% 50%------- 50% (25%)
to IndyCar to ARS
(25%) 50% 50%(25%)
to Prize Fund
11
<PAGE> 1
EXHIBIT 10.9
MASTER REVOLVING NOTE
VARIABLE RATE-MATURITY DATE-OPTIONAL ADVANCES (BUSINESS AND COMMERCIAL LOANS
ONLY)
- -------------------- ----------------- --------------------- ----------------
AMOUNT NOTE DATE MATURITY DATE TAX ID #
$1,500,000.00 April 30, 1997
- -------------------- ----------------- --------------------- ----------------
On the Maturity Date, as stated above, for value received, the undersigned
promise(s) to pay to the order of Comerica Bank ("Bank"), at any office of the
Bank in the State of Michigan, ***** One Million Five Hundred Thousand and
00/100 ***** Dollars (U.S.) (or that portion of it advanced by the Bank and not
repaid as later provided) with interest until maturity, whether by acceleration
or otherwise, or until Default, as later defined, at a per annum rate equal to
the Bank's prime rate from time to time in effect plus -0-% per annum and after
that at a rate equal to the rate of interest otherwise prevailing under this
Note plus 3% per annum (but in no event in excess of the maximum rate permitted
by law). The Bank's "prime rate" is that annual rate of interest so designated
by the Bank and which is changed by the Bank from time to time. Interest rate
changes will be effective for interest computation purposes as and when the
Bank's prime rate changes. Interest shall be calculated on the basis of a
360-day year for the actual number of days the principal is outstanding. Accrued
interest on this Note shall be payable on the first day of each month commencing
June 1, 1996, until the Maturity Date (set forth above) when all amounts
outstanding under this Note shall be due and payable in full. If the frequency
of interest payments is not otherwise specified, accrued interest on this Note
shall be payable monthly on the first day of each month. If any payment of
principal or interest under this Note shall be payable on a day other than a day
on which the Bank is open for business, this payment shall be extended to the
next succeeding business day and interest shall be payable at the rate specified
in this Note during this extension. A late payment charge equal to 5% of each
late payment may be charged on any payment not received by the Bank within 10
calendar days after the payment due date, but acceptance of payment of this
charge shall not waive any Default under this Note.
The principal amount payable under this Note shall be the sum of all advances
made by the Bank to or at the request of the undersigned, less principal
payments actually received in cash by the Bank. The books and records of the
Bank shall be the best evidence of the principal amount and the unpaid interest
amount owing at any time under this Note and shall be conclusive absent manifest
error. No interest shall accrue under this Note until the date of the first
advance made by the Bank; after that interest on all advances shall accrue and
be computed on the principal balance outstanding from time to time under this
Note until the same is paid in full. At no time shall the Bank be under any
obligation to make any advances to the undersigned pursuant to this Note
(notwithstanding anything expressed or implied in this Note or elsewhere to the
contrary, including without limit if the Bank supplies the undersigned with a
borrowing formula) and the Bank, at any time and from time to time, without
notice, and its sole discretion, may refuse to make advances to the undersigned
without incurring any liability due to this refusal and without affecting the
undersigned's liability under this Note for any and all amounts advanced.
This Note and any other indebtedness and liabilities of any kind of the
undersigned (or any of them) to the Bank, and any and all modifications,
renewals or extensions of it, whether joint or several, contingent or absolute,
now existing or later arising, and however evidenced (collectively
"Indebtedness") are secured by and the Bank is granted a security interest in
all items deposited in any account of any of the undersigned with the Bank and
by all proceeds of these items (cash or otherwise), all account balances of any
of the undersigned from time to time with the Bank, by all property of any of
the undersigned from time to time in the possession of the Bank and by any other
collateral, rights and properties described in each and every deed of trust,
mortgage, security agreement, pledge, assignment and other security or
collateral agreement which has been, or will at any time(s) later be, executed
by any (or all) of the undersigned to or for the benefit of the Bank
(collectively "Collateral"). Notwithstanding the above, (i) to the extent that
any portion of the Indebtedness is a consumer loan, that portion shall not be
secured by any deed of trust or mortgage on or other security interest in any of
the undersigned's principal dwelling or in any of the undersigned's real
property which is not a purchase money security interest as to that portion,
unless
<PAGE> 2
expressly provided to the contrary in another place, or (ii) if the undersigned
(or any of them) has (have) given or give(s) Bank a deed of trust or mortgage
covering California real property, that deed of trust or mortgage shall not
secure this Note or any other indebtedness of the undersigned (or any of them),
unless expressly provided to the contrary in another place.
If the undersigned (or any of them) or any guarantor under a guaranty of all or
part of the Indebtedness ("guarantor") (i) fails(s) to pay any of the
Indebtedness when due, by maturity, acceleration or otherwise, or fail(s) to pay
any Indebtedness owing on a demand basis upon demand; or (ii) fail(s) to comply
with any of the terms or provisions of any agreement between the undersigned (or
any of them) or any such guarantor and the Bank; or (iii) become(s) insolvent or
the subject of a voluntary or involuntary proceeding in bankruptcy, or a
reorganization, arrangement or creditor composition proceeding, (if a business
entity) cease(s) doing business as a going concern, (if a natural person) die(s)
or become(s) incompetent, (if a partnership) dissolve(s) or any general partner
of it dies, becomes incompetent or becomes the subject of a bankruptcy
proceeding or (if a corporation or a limited liability company) is the subject
of a dissolution, merger or consolidation; or (a) if any warranty or
representation made by any of the undersigned or any guarantor in connection
with this Note or any of the Indebtedness shall be discovered to be untrue or
incomplete; or (b) if there is any termination, notice of termination, or breach
of any guaranty, pledge, collateral assignment or subordination agreement
relating to all or any part of the Indebtedness; or (c) if there is any failure
by any of the undersigned or any guarantor to pay when due any of its
indebtedness (other than to the Bank) or in the observance or performance of any
term, covenant or condition in any document evidencing, securing or relating to
such indebtedness; or (d) if the Bank deems itself insecure believing that the
prospect of payment of this Note or any of the Indebtedness is impaired or shall
fear deterioration, removal or waste of any of the Collateral; or (e) if there
is filed or issued a levy or writ of attachment or garnishment or other like
judicial process upon the undersigned (or any of them) or any guarantor or any
of the Collateral, including without limit, any accounts of the undersigned (or
any of them) or any guarantor with the Bank, then the Bank, upon the occurrence
of any of these events (each a "Default"), may at its option and without prior
notice to the undersigned (or any of them), declare any or all of the
Indebtedness to be immediately due and payable (notwithstanding any provisions
contained in the evidence of it to the contrary), sell or liquidate all or any
portion of the Collateral, set off against the Indebtedness any amounts owing by
the Bank to the undersigned (or any of them), charge interest at the default
rate provided in the document evidencing the relevant Indebtedness and exercise
any one or more of the rights and remedies granted to the Bank by any agreement
with the undersigned (or any of them) or given to it under applicable law. All
payments under this Note shall be in immediately available United States funds,
without setoff or counterclaim.
If this Note is signed by two or more parties (whether by all as makers or by
one or more as an accommodation party or otherwise), the obligations and
undertakings under this Note shall be that of all and any two or more jointly
and also of each severally. This Note shall bind the undersigned, and the
undersigned's respective heirs, personal representatives, successors and
assigns.
The undersigned waive(s) presentment, demand, protest, notice of dishonor,
notice of demand or intent to demand notice of acceleration or intent to
accelerate, and all other notices and agree(s) that no expansion or indulgence
to the undersigned, any guarantor or any other party, whether with or without
notice, shall affect the obligations of any of the undersigned. The undersigned
waive(s) all defenses or right to discharge available under Section 3-605 of
the Michigan Uniform Commercial Code and waive(s) all other suretyship defenses
or right to discharge. The undersigned agree(s) that the Bank has the right to
sell, assign, or grant participations or any interest in, any or all of the
Indebtedness, and that, in connection with this right, but without limiting its
ability to make other disclosures to the full extent allowable, the Bank may
disclose all documents and information which the Bank now or later has relating
to the undersigned or the Indebtedness. The undersigned agree(s) that the Bank
may provide information relating to this Note or relating to the undersigned
to the Bank's parent, affiliates, subsidiaries and service providers.
The undersigned agree(s) to reimburse the holder or owner of this Note upon
demand for any and all costs and expenses (including without limit, court
costs, legal expenses and reasonable attorney fees, whether inside or outside
counsel is used, whether or not suit is instituted and, if suit is instituted,
whether at the trial court level, appellate level, in a bankruptcy, probate or
administrative proceeding or otherwise) incurred in collecting or attempting to
collect this Note or incurred in any other matter or proceeding relating to the
Note.
The undersigned acknowledge(s) and agree(s) that there are no contrary
agreements, oral or written, establishing a term of this Note and agree(s) that
the terms and conditions of this Note may not be amended, waived or modified
except in a writing signed by an officer of the Bank expressly stating that the
writing constitutes an amendment, waiver or modification of the terms of this
Note. As used in this Note, the word "undersigned" means, individually and
collectively, each maker, accommodation party, indorser and other party signing
this Note in a similar capacity. If any provision of this Note is unenforceable
in whole or part for any reason, the remaining provisions shall continue to be
effective. THIS NOTE IS MADE IN THE STATE OF MICHIGAN AND SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF MICHIGAN,
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
2
<PAGE> 3
THE MAXIMUM INTEREST RATE SHALL NOT EXCEED 25% PER ANNUM, OR THE HIGHEST
APPLICABLE USURY CEILING, WHICHEVER IS LESS.
THE UNDERSIGNED AND THE BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED, EACH PARTY, AFTER CONSULTING (OR
HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY
AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO TRIAL BY JURY
IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN
ANY WAY RELATED TO, THIS NOTE OR THE INDEBTEDNESS.
<TABLE>
<S> <C> <C>
Championship Auto Racing Teams, Inc. By: /s/ Randy K. Dzierzawski Its: Senior Vice President
- ------------------------------------ ------------------------------- -------------------------
Obligor Name Typed/Printed Signature Of Title (if applicable)
By: /s/ Andrew H. Craig Its: President and CEO
------------------------------- -------------------------
Signature Of Title (if applicable)
By: Its:
------------------------------- -------------------------
Signature Of Title (if applicable)
By: Its:
------------------------------- -------------------------
Signature Of Title (if applicable)
</TABLE>
3
<PAGE> 1
EXHIBIT 10.10
COMERICA
FIXED RATE-INSTALLMENT NOTE
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- --------------------------- -------------------------- -------------------------- --------------------------
OBLIGOR NOTE # NOTE DATE TAX ID #
15-0381659-3 May 1, 1996
- --------------------------- -------------------------- -------------------------- --------------------------
AMOUNT MATURITY DATE
$650,000.00 Troy, Michigan May 1, 2001
- --------------------------- ------------------------------------------------------ --------------------------
</TABLE>
For Value Received, the undersigned promise(s) to pay to the order of Comerica
Bank ("Bank"), at any office of the Bank in the State of Michigan, ***** Six
Hundred Fifty Thousand and 00/100 ***** Dollars (U.S.) in installments of
$10,833.33 each PLUS [STRIKE ONE] interest on the unpaid principal balance from
the date of this Note at the rate of 8.25% per annum until maturity, whether by
acceleration or otherwise, or until Default, as later defined, and after that at
a default rate equal to the rate of interest otherwise prevailing under this
Note plus 3% per annum (but in no event in excess of the maximum rate permitted
by law). Interest shall be calculated for the actual number of days the
principal is outstanding on the basis of a 360-day year if this Note evidences a
business or commercial loan or a 365/366-day if a consumer loan. Installments of
principal and accrued interest due under this Note shall be payable on the first
day of each month, commencing June 1, 1996, and the entire remaining unpaid
balance of principal and accrued interest shall be payable on May 1, 2001. If
the frequency of principal and interest installments is not otherwise specified,
installments of principal and interest due under this Note shall be payable
monthly on the first day of each month. If this Note or any installment of
principal or interest under this Note shall become payable on a day other than a
day on which the Bank is open for business, this payment shall be extended to
the next succeeding business day and interest shall be payable at the rate
specified in this Note during this extension. A late installment charge equal to
5% of each late installment may be charged on any installment payment not
received by the Bank within 10 calendar days after the installment due date, but
acceptance of payment of this charge shall not waive any Default under this
Note.
The Bank does not have to accept any prepayment of principal under this Note
except as described below or as required under applicable law. The undersigned
may prepay principal of this Note in increments of $25,000.00 at any time as
long as the Bank is provided written notice of the prepayment at least five
business days prior to the date of prepayment. The notice of prepayment shall
contain the following information: (a) the date of prepayment (the "Prepayment
Date") and (b) the amount of principal to be prepaid. On the Prepayment Date,
the undersigned will pay to the Bank, in addition to the other amounts then due
on this Note, the Prepayment Amount described below. The Bank, in its sole
discretion, may accept any prepayment of principal even if not required to do so
under this Note and may deduct from the amount to be applied against principal
the other amounts required as part of the Prepayment Amount.
The Prepaid Principal Amount (as defined below) will be applied to this Note in
the reverse order of which the principal payments would have been due under this
Note's principal amortization schedule. In other words, if this Note requires
multiple principal payments, then as opposed to prepaying the next principal
payment due, the Prepaid Principal Amount will be applied beginning with the
final principal payment due on this Note.
If the Bank exercises its right to accelerate the payment of the Note prior to
maturity, the undersigned will pay to the Bank, in addition to the other amounts
then due on this Note, on the date specified by the Bank as the Prepayment Date,
the Prepayment Amount.
The Bank's determination of the Prepayment Amount will be conclusive in the
absence of obvious error or fraud. If requested in writing by the undersigned,
the Bank will provide the undersigned a written statement specifying the
Prepayment Amount.
The following (the "Prepayment Amount") shall be due and payable in full on the
Prepayment Date:
<PAGE> 2
(a) If the face amount of this Note exceeds Seven Hundred Fifty Thousand
Dollars ($750,000) (regardless of what the outstanding principal balance
may be on the Prepayment Date) then the Prepayment Amount is the sum of:
(i) the amount of principal which the undersigned has elected to prepay or
the amount of principal which the Bank has required the undersigned to
prepay because of acceleration, as the case may be (the "Prepaid Principal
Amount"), (ii) interest accruing on the Prepaid Principal Amount up to, but
not including, the Prepayment Date, (iii) Five Hundred Dollars ($500) plus
(iv) the present value, discounted at the Reinvestment Rates (as defined
below), of the positive amount by which (A) the interest the Bank would
have earned had the Prepaid Principal Amount been paid according to the
Note's amortization schedule at the Note's interest rate exceeds (B) the
interest the Bank would earn by reinvesting the Prepaid Principal Amount at
the Reinvestment Rates.
(b) If the face amount of this Note is Seven Hundred Fifty Thousand Dollars
($750,000) or less (regardless of what the outstanding principal balance
may be on the Prepayment Date), then the Prepayment Amount is the sum of:
(i) the amount of principal which the undersigned has elected to prepay or
the amount of principal which the Bank has required the undersigned to
prepay because of acceleration, as the case may be (the "Prepaid Principal
Amount"), (ii) interest accruing on the Prepaid Principal Amount up to, but
not including, the Prepayment Date, plus (iii) an amount equal to one
percent (1%) of the Prepaid Principal Amount multiplied by the number of
calendar years remaining until the maturity date of this Note, but in no
event less than two percent (2%) of the Prepaid Principal Amount. For
purposes of this computation, any portion of a calendar year remaining
until the maturity date of this Note shall be deemed to be a full calendar
year.
"Reinvestment Rates" mean the per annum rates of interest equal to one half
percent (1/2%) above the rates of interest reasonably determined by the Bank to
be in effect not more than seven days prior to the Prepayment Date in the
secondary market for United States Treasury Obligations in amount(s) and with
maturity(ies) which correspond (as closely as possible) to the principal
installment amount(s) and the payment date(s) against which the Prepaid
Principal Amount will be applied.
This Note and any other indebtedness and liabilities of any kind of the
undersigned (or any of them) to the Bank, and any and all modifications,
renewals or extensions of it, whether joint or several, contingent or absolute,
now existing or later arising, and however evidenced (collectively
"Indebtedness") are secured by and the Bank is granted a security interest in
all items deposited in any account of any of the undersigned with the Bank and
by all proceeds of these items (cash or otherwise), all account balances of any
of the undersigned from time to time with the Bank, by all property of any of
the undersigned from time to time in the possession of the Bank and by any other
collateral, rights and properties described in each and every mortgage, security
agreement, pledge, assignment and other security or collateral agreement which
has been, or will at any time(s) later be, executed by any (or all) of the
undersigned to or for the benefit of the Bank (collectively "Collateral").
Notwithstanding the above, to the extent that any portion of the consumer
Indebtedness is a consumer loan, that portion shall not be secured by any
mortgage on or other security interest in the undersigned's principal dwelling
which is not a purchase money security interest as to that portion, unless
expressly provided to the contrary in another place.
If the undersigned (or any of them) or any guarantor under a guaranty of all or
part of the Indebtedness ("guarantor") (a) fail(s) to pay this Note or any of
the Indebtedness when due, by maturity, acceleration or otherwise, or fail(s) to
pay any Indebtedness owing on a demand basis upon demand; or (b) fail(s) to
comply with any of the terms or provisions of any agreement between the
undersigned (or any of them) or any guarantor and the Bank; or (c) become(s)
insolvent or the subject of a voluntary or involuntary proceeding in bankruptcy,
or a reorganization, arrangement or creditor composition proceeding, (if a
business entity) cease(s) doing business as a going concern, (if a natural
person) die(s) or become(s) incompetent, (if a partnership) dissolve(s) or any
general partner of it dies, becomes incompetent or becomes the subject of a
bankruptcy proceeding or (if a corporation) is the subject of a dissolution,
merger or consolidation; or (d) if any warranty or representation made by any of
the undersigned or any guarantor in connection with this Note or any of the
Indebtedness shall be discovered to be untrue or incomplete; (e)
2
<PAGE> 3
or if there is any termination, notice of termination, or breach of any
guaranty, pledge, collateral assignment or subordination agreement relating to
all or any part of the Indebtedness; or (f) if there is any failure by any of
the undersigned or any guarantor to pay when due any of its indebtedness (other
than to the Bank) or in the observance or performance of any term, covenant or
condition in any document evidencing, securing or relating to such indebtedness;
or (g) if the Bank deems itself insecure believing that the prospect of payment
of this Note or any of the Indebtedness is impaired or shall fear deterioration,
removal or waste of any of the Collateral; or (h) if there is filed or issued a
levy or writ of attachment or garnishment or other like judicial process upon
the undersigned (or any of them) or any guarantor or any of the Collateral,
including without limit, any accounts of the undersigned (or any of them) or any
guarantor with the Bank, then the Bank, upon the occurrence of any of these
events (each a "Default"), may at its option and without prior notice to the
undersigned (or any of them), declare any or all of the Indebtedness to be
immediately due and payable (notwithstanding any provisions contained in the
evidence of it to the contrary), sell or liquidate all or any portion of the
Collateral, set off against the Indebtedness any amounts owing by the Bank to
the undersigned (or any of them), charge interest at the default rate provided
in the document evidencing the relevant Indebtedness and exercise any one or
more of the rights and remedies granted to the Bank by any agreement with the
undersigned (or any of them) or given to it under applicable law. All payments
under this Note shall be in immediately available United States funds, without
setoff or counterclaim.
If this Note is signed by two or more parties (whether by all as makers or by
one or more as an accommodation party or otherwise), the obligations and
undertakings under this Note shall be that of all and any two or more jointly
and also of each severally. This Note shall bind the undersigned, and the
undersigned's respective heirs, personal representatives, successors and
assigns.
The undersigned waive(s) presentment, demand, protest, notice of dishonor,
notice of demand or intent to demand, notice of acceleration or intent to
accelerate, and all other notices, and agree(s) that no extension or indulgence
to the undersigned (or any of them) or release, substitution or nonenforcement
of any security, or release or substitution of any of the undersigned, any
guarantor or any other party, whether with or without notice, shall affect the
obligations of any of the undersigned. The undersigned waive(s) all defenses or
right to discharge available under Section 3-606 of the Uniform Commercial Code
and waive(s) all other suretyship defenses or right to discharge. The
undersigned agree(s) that the Bank has the right to sell, assign, or grant
participations, or any interest, in any or all of the Indebtedness, and that, in
connection with this right, but without limiting its ability to make other
disclosures to the full extent allowable, the Bank may disclose all documents
and information which the Bank now or later has relating to the undersigned or
the Indebtedness.
The undersigned agree(s) to reimburse the holder or owner of this Note for any
all costs and expenses (including without limit, court costs, legal expenses and
reasonable attorney fees, whether inside or outside counsel is used, whether or
not suit is instituted and, if suit is instituted, whether at the trial court
level, appellate level, in a bankruptcy, probate or administrative proceeding or
otherwise) incurred in collecting or attempting to collect this Note or incurred
in any other matter or proceeding relating to this Note.
The undersigned acknowledge(s) and agree(s) that there are no contrary
agreements, oral or written, establishing a term of this Note and agree(s) that
the terms and conditions of this Note may not be amended, waived or modified
except in a writing signed by an officer of the Bank expressly stating that the
writing constitutes an amendment, waiver or modification of the terms of this
Note. As used in this Note, the word "undersigned" means, individually and
collectively, each maker, accommodation party, indorser and other party signing
this Note in a similar capacity. If any provision of this Note is unenforceable
in whole or part for any reason, the remaining provisions shall continue to be
effective. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF MICHIGAN.
3
<PAGE> 4
THE UNDERSIGNED AND THE BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING (OR
HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY
AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO TRIAL BY JURY
IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN
ANY WAY RELATED TO, THIS NOTE OR THE INDEBTEDNESS.
For Corporations or Partnerships
<TABLE>
<S> <C> <C>
Championship Auto Racing Teams, Inc. By: /s/ Randy K. Dzierzawski Its: Senior Vice President
- ------------------------------------ ------------------------ ---------------------
Obligor Name Typed/Printed Signature Of Title
755 West Big Beaver Ste 800 By: Its:
- ------------------------------------ ------------------------ ---------------------
Street Address Signature Of Title
Troy MI 48084 By: Its:
- ----------------------------------- ------------------------ ---------------------
City State Zip Code Signature Of Title
</TABLE>
For Individuals, Sole Proprietorships, Trusts, or Estates
<TABLE>
<S> <C> <C>
Name(s) of Obligor(s) (Type or Print): Signature(s) of Obligor(s):
------------------------ ---------------------
- ----------------------------------- ------------------------ ---------------------
Street Address
- ----------------------------------- ------------------------ ---------------------
City State Zip Code
</TABLE>
For Bank Use Only
Loan Officer Initials Loan Group Name
PTF METRO B
Loan Officer I.D. No. Loan Group No.
1075 91237
4
<PAGE> 1
Exhibit 10.11
FORM OF AGREEMENT
THIS AGREEMENT made this ______ day of___________________, 1997 by and
between Sponsor, Inc. of __________________________________________, herein
referred to as "Sponsor" and Championship Auto Racing Teams, Inc., 755 W. Big
Beaver Road, Suite 800, Troy, Michigan 48084 herein referred to as "CART".
1. Official Supplier Designation. During the term of this Agreement,
Sponsor shall be, and shall have the right to hold itself out as an Official
Supplier of CART including the following specific exclusive designation:
"_______________________." Sponsor shall have the right to use the above
designation for the purposes of advertising, publicity and promotion, provided,
however, that approval of CART is obtained prior to any publication utilizing
the CART name, logo, or any of its marks. Approved use of the CART name and logo
may be on a stand-alone basis or in a composite logo format.
2. Use of Proprietary Rights.
A. Both Sponsor and CART recognize the need of maintaining uniformly
high standards of ethical advertising of a quality and dignity consonant with
the reputation and standing of the two parties to this Agreement. Accordingly,
neither Sponsor nor CART will publish, nor cause or permit to be published, any
advertising relating to the sponsorship which is likely to impair the goodwill
of Sponsor or CART.
B. CART recognizes that it is not authorized to use any of Sponsor's
trademarks and trade names for the purpose of promoting CART or the sponsorship
in conjunction with CART trademarks, trade names or corporate name without the
prior written approval of Sponsor, which approval shall not be unreasonably
withheld, and that use of Sponsor's trademarks and trade names must be in
accordance with Sponsor's Corporate Guidelines for use of said trademarks and
trade names. CART shall not file, register, or record with any federal, state,
local government, or agency thereof, any name, design or form which may conform
to or be confused with a Sponsor trademark. CART acknowledges Sponsor's
exclusive ownership of, and the validity of, the Sponsor trademarks and all
registrations thereof, and shall not contest during the term of this Agreement
or at any time thereafter Sponsor's exclusive ownership of, and the validity of,
the Sponsor trademarks and all registrations thereof. The parties agree to
cooperate with each other and with Sponsor in preventing any acts of trademark
infringement or unfair competition with respect to any Sponsor trademark, but
Sponsor shall have sole control over all actions and legal proceedings to
suppress infringement of, and unfair competition with respect to any Sponsor
trademark.
C. Except as expressly provided herein, neither party is
granted any ownership interest in or license to use the marks or intellectual
property rights of the other party.
<PAGE> 2
3. Term of Agreement. The term of this Agreement shall commence on
________________, 19____ and shall terminate on _______________, _____. The
parties agree to negotiate in good faith to extend this Agreement beyond
______________, _____. If such negotiations do not result in the extension of
this Agreement by ____________, _____, then CART shall be free to negotiate with
third parties in regard to the subject matter of this Agreement for __________
and beyond, provided, however, that Sponsor shall have a right of first refusal
to match the terms and conditions that may be presented by a third party to CART
in regard to an official car program for _________, such right of first refusal
to be exercised by Sponsor, if at all, within a reasonable period of time after
notice of such third party offer.
4. Announcement of Agreement. This arrangement shall be announced in a
manner mutually agreeable by the parties. Additionally, a special press release
issued jointly by CART and Sponsor shall announce this program. This release
shall be sent to CART's national and regional news release recipient list which
covers press, radio and television, business, society and entertainment editors,
teams, drivers, officials, owners and sponsors. In addition to being available
and distributed to all media centers on the Fed Ex Championship Series schedule,
the release shall be distributed via the CART publicity department's media fax
and mailing system.
5. General Publicity and Recognition.
A. The official supplier designation as the Official _______ of CART
shall be acknowledged and publicized by CART in its general press releases,
publicity materials and other appropriate published materials during the term
hereof, in similar manner as other official suppliers.
B. The following CART publications shall include composite sponsor
and supplier recognition: Media Guide, Resource Guide, Fan Guide, Race Event
Souvenir Programs, Rule Book, Official "Season in Review" Book, and Awards
Banquet Program. In addition, the CART Media Guide and Web Site shall include an
editorial feature publicizing Sponsor's role as an Official Supplier of CART.
The text of such editorial content shall be supplied by Sponsor in a timely
manner.
C. Sponsor identification and/or official supplier recognition shall
also be accorded (i) within the CART executive offices; and (ii) through a
supplier message on CART's voice mail system.
D. Sponsor shall also exercise its best efforts to publicize this
designation and its association with CART and agrees to consult with CART in
conjunction with such efforts. Sponsor agrees to utilize its Official
Designation in all race related advertising.
E. The CART Sponsor Showcase is a moveable trailer which has been
designed to display promotional materials of all official CART sponsors,
including a portion dedicated to Sponsor and shall be featured by CART at a
variety of public events (in some cases not at the site of the CART Event).
Sponsor shall also have the right to three (3) days annual use of the CART
Sponsor Showcase subject to availability and presentation of a promotional
support plan. Bookings for use of the display should be agreed upon by January
31 of each year of this Agreement. When booking dates are agreed upon, CART
shall deliver the display to the location designated by Sponsor. Transport of
<PAGE> 3
the display shall be borne entirely by CART. Sponsor agrees to provide its
display in a timely manner, for inclusion in the CART Sponsor Showcase.
6. On-Site Presence and Hospitality.
A. Appropriate official product supplier recognition shall be
embodied in six (6) 30-second composite public address system announcements
within the course of each race event weekend, or other mutually agreeable public
communication over the event weekend.
B. During the term of this Agreement, Sponsor shall have the right
to participate as a corporate member of CART and receive the benefits of such
membership, which shall include twelve (12) annual hard cards and up to fifteen
(15) paper credentials (including pit passes) on an as needed basis, which shall
be made available to designated Sponsor guests. So as to assure proper handling
of these guest passes, Sponsor agrees to provide to CART at least seven (7) days
notice of its intent to use these guest passes and the identity of the guests
for which these passes shall be made available. It is understood that these
credentials may not provide specific seat availability but instead allow limited
access to the race track and surrounding facility.
C. Sponsor identification and/or official supplier recognition shall
be provided (i) on the CART transporters; (ii) on selected CART officials'
uniforms; and (iii) through a track bannering program in areas controlled by
CART, i.e., CART hospitality tent, CART "official" hotel, CART registration and
CART motorcoach hospitality.
D. At each event, CART shall arrange and coordinate (i) twenty (20)
free admission/grandstand tickets (where available); (ii) PPG pace car ride for
two (2) persons; (iii) on-site V.I.P. expedited servicing of credentials; (iv)
hospitality photo support services at the request of Sponsor; and (v) assistance
in the development of hospitality packages at race venues.
E. Sponsor Public Relations and photographic personnel will be
provided full credentials and access to all CART sanctioned event locations
normally available to fully accredited working press and photographers.
7. Advertising Opportunities. Sponsor shall have priority
advertising purchasing rights (subject to availability and at an incremental
cost) for:
A. Television airtime in the race broadcast;
B. Radio airtime in the race broadcast;
C. Advertising package in souvenir event programs;
D. Official CART Book;
E. Advertising in the Official "Season in Review" Book;
F. Advertising in all advertorials commissioned by CART.
It is further understood that Sponsor's parent company and affiliates shall be
permitted to obtain the priority advertising purchasing rights as set forth in
paragraph 7 from CART.
<PAGE> 4
8. Additional Support Services and Marketing Opportunities. CART
shall provide Sponsor the following support items and additional benefits:
A. Services of the CART Client Services Group;
B. Access to ongoing CART attitude and awareness research study
with the option to co-fund specific research questions;
C. Access to CART specialist research services;
D. Opportunity to participate in CART Supplier workshops;
E. Access to CART video and photo archives at cost;
F. Right to use the CART mark on nonsalable premiums with no
royalty due to CART;
G. Sponsor will be recognized as an Official Sponsor of the CART
Awards Banquet, which provides for a table of ten (10),
signage, and appropriate recognition during the activities;
H. Sponsor shall have the right to maintain a hot-link to the
Sponsor's home page on the World Wide Web from the CART
Internet Web Site.
9. Consideration.
A. Sponsor shall pay an annual rights fee of
________________________ ($_____________) Dollars during the term hereof,
according to the following payment schedule:
- ($ ) Dollars by January 1
------------ ---------
of each year of this Agreement;
- ($ ) Dollars by April 1 of
------------ ---------
each year of this Agreement;
- ($ ) Dollars by July 1 of
------------ ---------
each year of this Agreement;
- ($ ) Dollars by October 1
------------ ---------
of each year of this Agreement.
CART shall submit an appropriate invoice for payment thirty (30) days prior to
the date the respective payments are due.
B. Sponsor shall sell reasonable quantities of additional
product to CART and its teams at its best available delivered price in the
market, consistent with past practices.
10. Confidentiality.
A. All media releases, public announcements, and public disclosures
by either party or its employees or agents relating to this Agreement,
including, but not limited to promotional or marketing material, but not
including any announcement intended solely for internal distribution by either
party or any disclosure required by legal, accounting, or regulatory
requirements beyond the reasonable control of the disclosing party, or any
announcements which solely make incidental references to Sponsor as the
"Official __________ of CART" shall be coordinated with and approved
<PAGE> 5
by the other party prior to the release thereof.
B. CART and Sponsor agree to safeguard the confidentiality of any
information obtained in the performance of this Agreement regarding the
products, accessories, designs and developments of the other party. It is agreed
that each party remains the owner of its information and documents and that such
information and documents can be used by the other party only for the purpose of
performing under the terms of this Agreement. The disclosure of any such
information or documents to any third party requires prior written approval of
the owner of such information and requires the prior agreement of such third
party to safeguard the confidentiality. Notwithstanding the foregoing,
disclosure may be made if necessary to enforce a party's rights under this
Agreement, or if required by a governmental agency, in which case any and all
documents, information, or materials disclosed shall be marked "confidential"
and such party shall seek confidential treatment of such information.
11. Authority to Contract. Each party warrants and represents that it has
the full right and authority to enter into and perform this Agreement and to
grant all rights granted herein, and that the execution and delivery of this
Agreement has been duly authorized by all necessary corporate action. CART
acknowledges that only the President or Vice President of Sponsor are
authorized, on behalf of Sponsor, to execute this Agreement or any modifications
or amendments thereto, or any notice of prior termination thereof. Contracts,
agreements, promises, representations, understandings, or arrangements of any
nature, with respect to this Agreement, which shall have the effect of waiving
performance of any of the provisions of the Agreement or making any amendment or
modification or any other change in, or addition to, this Agreement or imposing
definite obligations on either Sponsor or CART not otherwise specifically
imposed by this Agreement, may be made only in writing by the President or Vice
President of Sponsor. Sponsor will not be bound by any contracts, agreements,
promises, representations, understandings, or arrangements of any nature,
whether or not in writing, made by any other person.
12. Assignment. Neither party may assign this Agreement, or
sublicense any or all of its rights and obligations hereunder, without first
obtaining the written consent of the other party.
13. Entire Agreement; Waivers and Amendments. This Agreement sets forth
the entire agreement between the parties and supersedes all prior agreements and
understandings between the parties, their officers, directors, or employees
relating to the subject matter hereof. None of the terms of this Agreement may
be waived or modified except as expressly agreed to, in writing, by both
parties.
14. Notices. Except as otherwise provided, any notice or other
communication required or permitted to be given under this Agreement will be
sufficient if it is in writing and delivered personally, telegraphed, telecopied
or telexed, or mailed (by certified, registered or first class mail or by
recognized overnight courier), postage prepaid, and will be deemed given when so
delivered personally, telegraphed, telecopied or telexed, or if mailed by
certified, registered, first class mail or by recognized overnight courier, one
day after the date of mailing, as follows (or to any other address provided by a
party in accordance with this Section):
<PAGE> 6
If to CART: Championship Auto Racing Teams, Inc.
750 W. Big Beaver Road, Suite 800
Troy, MI 48084
Facsimile: (248) 362-8810
Attention: Andrew Craig and Randy Dzierzawski
With a copy to: Michael J. Mills, Esq.
1700 North Woodward Avenue, Suite A
Bloomfield Hills, MI 48034
Facsimile: (248) 647-7461
If to Sponsor: Name
Address
City, State, Zip Code
With a copy to: General Counsel
Name
Address
City, State, Zip Code
15. Governing Law. This Agreement will be governed by and construed
in accordance with the laws of the State of Michigan.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which
together will constitute one and the same instrument.
17. Headings. The headings in this Agreement are for reference
purposes only and will not in any way affect the meaning or interpretation of
this Agreement.
18. Severability. If any provision of this Agreement is determined
to be illegal or invalid, such illegality or invalidity will have no effect
on the other provisions of this Agreement, which will remain valid, operative
and enforceable.
19. Relationship of the Parties. Nothing in this Agreement will be
deemed to create a partnership or joint venture among any one or more of the
parties.
20. Cancellation. Either party may unilaterally cancel this Agreement upon
the occurrence of any of the following on behalf of the non-canceling party,
provided, however, the canceling party must give notice in writing by certified
mail to the non-canceling party, specifying the ground or grounds for
termination and permitting said party thirty (30) days in which to cure the
purported ground or grounds of termination:
A. Either party becomes insolvent or enters federal bankruptcy
or reorganization proceedings; or
<PAGE> 7
B. A receiver, trustee, guardian or marshal! is appointed to
manage the affairs of either party; or
C. Either party should, for reasons totally beyond its cause
or control, be completely and permanently prevented from reasonably complying
with its duties hereunder; or
D. Either party fails to perform any of the material terms and
conditions herein; or
E. Any of the material representations made by either party to
the other which led to this Agreement proves to be false.
Should Sponsor invoke the above cancellation provisions, all money paid by
Sponsor in connection with this Agreement shall be forthwith returned to Sponsor
in full, less monies sufficient to pay any reasonable charges any debts already
incurred by CART before termination, subject to verification by Sponsor. Return
of such monies shall thereupon constitute mutual release from any further
obligation or responsibility of any kind whatsoever hereunder, other than those
provisions listed in this Agreement.
21. Indemnity Provisions.
A. Sponsor agrees to indemnify and hold harmless CART and its
authorized agent(s), or either of them, from and against any and all expenses,
damages, claims, suits, actions, judgments and costs, including reasonable
attorneys' fees, arising out of Sponsor's negligence, willful misconduct in
connection with this Agreement, and/or alleged defect in design, manufacture or
assembly of _____________ products supplied by Sponsor under this Agreement,
provided that Sponsor is given prompt written notice of any such action or
claim.
B. CART agrees to indemnify and hold harmless Sponsor and its
authorized agent(s), or either of them, from and against any and all expenses,
damages, claims, suits, actions, judgments and costs, including reasonable
attorneys' fees, arising out of or in connection with any event under this
Agreement hereunder, other than negligence, willful misconduct or breach of
contract by Sponsor, provided that CART is given prompt written notice of any
such action or claim.
C. Following the receipt of such notice required under subsections A
or B above, the indemnifying party shall have the option, upon written notice of
same to the other, to contest any such claim or action and to have exclusive
control of the defense thereof.
IN WITNESS WHEREOF, this Agreement is executed by the parties hereto as of
the date first above written.
SPONSOR CHAMPIONSHIP AUTO RACING
TEAMS, INC.
By: By:
----------------------------- --------------------------
Its: Its:
----------------------------- --------------------------
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Championship Auto Racing
Teams, Inc. on Form S-1 of (a) our report on the financial statements of
Championship Auto Racing Teams, Inc. dated January 20, 1997 (December 19, 1997
as to Note 9) and (b) our report on the combined financial statements of
American Racing Series, Inc. and BP Automotive, Inc. dated December 19, 1997
appearing in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the headings "Selected
Consolidated Financial Data" and "Experts" in such Prospectus.
Deloitte & Touche LLP
Detroit, Michigan
December 23, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF KEGLER, BROWN, HILL & RITTER CO., L.P.A.
We hereby consent to reference to us under the heading "Legal Matters" in the
registration statement on Form S-1 of Championship Auto Racing Teams, Inc. In
giving such consent, we do not hereby admit that we are within the category of
persons whose consent is required under Section 7 of the Securities Act or the
rules and regulations of the Securities and Exchange Commission thereunder.
KEGLER, BROWN, HILL & RITTER CO., L.P.A.
By: /s/ AMY M. SHEPHERD
-------------------------------
Amy M. Shepherd, Vice President
December 23, 1997
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
CHAMPIONSHIP AUTO RACING TEAMS, INC.
KNOW ALL MEN BY THESE PRESENTS: That the undersigned hereby appoints
Andrew H. Craig, Randy K. Dzierzawski, Jack A. Bjerke and Amy M. Shepherd, and
any of them, any of whom may act without the joinder of the others, as his true
and lawful attorney-in-fact, with full power of substitution and resubstitution,
for him, and in his stead, in his capacity as an officer or director, or both,
of Championship Auto Racing Teams, Inc., a Delaware corporation, to sign a
Registration Statement on Form S-1 or other form registering under the
Securities Act of 1933, as amended, its shares of common stock and any and all
amendments thereto, including post-effective amendments to the Registration
Statement, and to file the same, with all exhibits thereto and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent or their
substitute or substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have signed this Power of Attorney on the ____
day of December, 1997.
December 22, 1997 /s/ Andrew H. Craig
----------------------------------
Andrew H. Craig
/s/ Randy K. Dzierzawski
----------------------------------
Randy K. Dzierzawski
/s/ Gerald Forsythe
----------------------------------
Gerald Forsythe
/s/ Chip Ganassi
----------------------------------
Chip Ganassi
/s/ Carl Haas
----------------------------------
Carl Haas
/s/ Bruce Mccaw
----------------------------------
Bruce Mccaw
/s/ U.E. Patrick
----------------------------------
U.E Patrick
/s/Robert Rahal
----------------------------------
Robert Rahal
/s/ Derrick Walker
----------------------------------
Derrick Walker
<PAGE> 1
EXHIBIT 24.2
SECRETARY'S CERTIFICATE
The undersigned hereby certifies that:
He is now and at all times herein mentioned has been the duly elected,
qualified and acting Secretary of Championship Auto Racing Teams, Inc. a duly
organized and existing Delaware corporation, and in charge of the minute books
and corporate records of said corporation. Attached hereto and marked Exhibit A
is a true copy of resolutions duly adopted by the Board of Directors of said
corporation on December 17, 1997; and said resolutions have not been modified or
rescinded and are at the date of this Certificate in full force and effect.
IN WITNESS WHEREOF, the undersigned has executed this certificate and
affixed the corporate seal of said corporation on this 19th day of December,
1997.
/s/ Michael J. Mills
-----------------------------
Michael J. Mills, Secretary
<PAGE> 2
EXHIBIT A
RESOLVED FURTHER, that Andrew H. Craig is authorized to sign the registration
statement and execute a power of attorney on behalf of the Company and as the
Company's President and Chief Executive Officer (Principal Executive Officer),
and that Randy K. Dzierzawski is authorized to sign the registration statement
and execute a power of attorney as the Company's Chief (and Principal) Financial
Officer and Chief Accounting Officer, which powers of attorney appoint Andrew H.
Craig, Randy K. Dzierzawski, Jack A. Bjerke, and Amy M. Shepherd and each of
them, as Attorney-in-Fact and agents to execute all necessary documents required
to be filed with the Securities and Exchange Commission or any state in
connection with the registration of the Stock.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 4,850
<SECURITIES> 0
<RECEIVABLES> 5,225
<ALLOWANCES> 0
<INVENTORY> 17
<CURRENT-ASSETS> 16,006
<PP&E> 3,671
<DEPRECIATION> 1,494
<TOTAL-ASSETS> 18,461
<CURRENT-LIABILITIES> 18,297
<BONDS> 0
0
0
<COMMON> 88
<OTHER-SE> 3,472
<TOTAL-LIABILITY-AND-EQUITY> 18,461
<SALES> 0
<TOTAL-REVENUES> 39,903
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 47,268
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (7,365)
<INCOME-TAX> (2,576)
<INCOME-CONTINUING> (4,789)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,789)
<EPS-PRIMARY> (.47)
<EPS-DILUTED> (.47)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 630
<SECURITIES> 0
<RECEIVABLES> 2,302
<ALLOWANCES> 0
<INVENTORY> 16
<CURRENT-ASSETS> 3,383
<PP&E> 2,999
<DEPRECIATION> 1,070
<TOTAL-ASSETS> 6,600
<CURRENT-LIABILITIES> 3,907
<BONDS> 0
0
0
<COMMON> 80
<OTHER-SE> 1,367
<TOTAL-LIABILITY-AND-EQUITY> 6,600
<SALES> 0
<TOTAL-REVENUES> 41,454
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 41,971
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (517)
<INCOME-TAX> (179)
<INCOME-CONTINUING> (338)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (338)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
