AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 4, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
SPEEDWAY MOTORSPORTS, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 7948 51-0363307
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
U.S. HIGHWAY 29 NORTH
P.O. BOX 600
CONCORD, NORTH CAROLINA 28026-0600
TELEPHONE (704) 455-3239
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
---------------
MR. O. BRUTON SMITH
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SPEEDWAY MOTORSPORTS, INC.
U.S. HIGHWAY 29 NORTH
P.O. BOX 600
CONCORD, NORTH CAROLINA 28026-0600
TELEPHONE (704) 455-3239
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent For Service)
COPIES TO:
PETER J. SHEA, ESQ.
PARKER, POE, ADAMS & BERNSTEIN L.L.P.
2500 CHARLOTTE PLAZA
CHARLOTTE, NORTH CAROLINA 28244
TELEPHONE (704) 372-9000
---------------
Approximate date of commencement of proposed sale to the public: AS SOON AS
PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, 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, 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(b)
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. [ ]
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==============================================================================================
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER NOTE OFFERING PRICE FEE (1)
<S> <C> <C> <C> <C>
8 1/2% Senior
Subordinated Notes
due 2007 ............... $250,000,000 100% $250,000,000 $69,500
Guarantees of 8 1/2%
Senior Subordinated
Notes due 2007 (2) ..... $250,000,000 100% $250,000,000 (3)
==============================================================================================
</TABLE>
(1) The registration fee has been calculated in accordance with Rule 457(f)
under the Securities Act of 1933, as amended.
(2) See inside facing page for table of additional guarantor registrants.
(3) Pursuant to Rule 457(n) under the Securities Act of 1933, as amended, no
separate filing fee is required for the guarantees.
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, AS AMENDED, OR THIS REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF ADDITIONAL REGISTRANT GUARANTORS
<TABLE>
<CAPTION>
ADDRESS, INCLUDING ZIP CODE
AND TELEPHONE NUMBER
STATE OR OTHER OF REGISTRANT
JURISDICTION OF IRS EMPLOYER GUARANTOR'S
EXACT NAME OF INCORPORATION IDENTIFICATION PRINCIPAL EXECUTIVE
REGISTRANT GUARANTOR OR ORGANIZATION NUMBER OFFICES
- ------------------------------------ ----------------- ---------------- ----------------------------
<S> <C> <C> <C>
Atlanta Motor Speedway, Inc. Georgia 58-0698318 U.S. Highway 29 North
P.O. Box 600
Concord, NC 28026-0600;
(704) 455-3239
Bristol Motor Speedway, Inc. Tennessee 62-1016760 U.S. Highway 29 North
P.O. Box 600
Concord, NC 28026-0600;
(704) 455-3239
Charlotte Motor Speedway, Inc. North Carolina 56-1483030 U.S. Highway 29 North
P.O. Box 600
Concord, NC 28026-0600;
(704) 455-3239
SPR Acquisition Corporation California 68-0395350 U.S. Highway 29 North
P.O. Box 600
Concord, NC 28026-0600;
(704) 455-3239
Texas Motor Speedway, Inc. Texas 56-1931988 U.S. Highway 29 North
P.O. Box 600
Concord, NC 28026-0600;
(704) 455-3239
600 Racing, Inc. North Carolina 56-1780351 U.S. Highway 29 North
P.O. Box 600
Concord, NC 28026-0600;
(704) 455-3239
Sonoma Funding Corporation California 68-0395351 U.S. Highway 29 North
P.O. Box 600
Concord, NC 28026-0600;
(704) 455-3239
Speedway Consulting & Design, Inc. North Carolina 56-1802347 U.S. Highway 29 North
P.O. Box 600
Concord, NC 28026-0600;
(704) 455-3239
The Speedway Club, Inc. North Carolina 56-1499914 U.S. Highway 29 North
P.O. Box 600
Concord, NC 28026-0600;
(704) 455-3239
INEX Corp. North Carolina 56-1861546 U.S. Highway 29 North
P.O. Box 600
Concord, NC 28026-0600;
(704) 455-3239
Speedway Funding Corp. Delaware 51-0371383 900 Market Street
Suite 200
Wilmington, DE 19801
(704) 455-3239
Las Vegas Motor Speedway, LLC Nevada 56-2112634 U.S. Highway 29 North
P.O. Box 600
Concord, NC 28026-0600;
(704) 455-3239
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ADDRESS, INCLUDING ZIP CODE
AND TELEPHONE NUMBER
STATE OR OTHER OF REGISTRANT
JURISDICTION OF IRS EMPLOYER GUARANTOR'S
EXACT NAME OF INCORPORATION IDENTIFICATION PRINCIPAL EXECUTIVE
REGISTRANT GUARANTOR OR ORGANIZATION NUMBER OFFICES
- --------------------------------- ----------------- ---------------- ----------------------------
<S> <C> <C> <C>
IMS Systems Limited Partnership North Carolina 56-2071118 U.S. Highway 29 North
P.O. Box 600
Concord, NC 28026-0600;
(704) 455-3239
SMI Systems, LLC North Carolina 56-2114978 U.S. Highway 29 North
P.O. Box 600
Concord, NC 28026-0600;
(704) 455-3239
Speedway Screen Printing, LLC North Carolina 56-2105051 U.S. Highway 29 North
P.O. Box 600
Concord, NC 28026-0600;
(704) 455-3239
Speedway Systems LLC North Carolina 56-2062093 U.S. Highway 29 North
P.O. Box 600
Concord, NC 28026-0600;
(704) 455-3239
</TABLE>
<PAGE>
[REDHERRING APPEARS HERE WITH THE FOLLOWING STATEMENT]
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
THIS PROSPECTUS IS SUBJECT TO COMPLETION AND AMENDMENT, DATED JUNE 4, 1999
PROSPECTUS
[Speedway logo appears here]
OFFER TO EXCHANGE ALL OF OUR OUTSTANDING
REGISTERED 8 1/2% SENIOR SUBORDINATED NOTES DUE 2007, SERIES B
AND
UNREGISTERED 8 1/2% SENIOR SUBORDINATED NOTES DUE 2007, SERIES C
FOR
REGISTERED 8 1/2% SENIOR SUBORDINATED NOTES DUE 2007, SERIES D
We hereby offer, on the terms and conditions described in this prospectus
and in the accompanying letter of transmittal, to exchange all of our
outstanding registered 8 1/2% Senior Subordinated Notes Due 2007, Series B (the
"Series B Notes") and all of our outstanding unregistered 8 1/2% Senior
Subordinated Notes Due 2007, Series C (the "Series C Notes") for $250 million in
aggregate principal amount of our registered 8 1/2% Senior Subordinated Notes
Due 2007, Series D, which we sometimes refer to as the Exchange Notes. The
Series B Notes were issued in a publicly registered exchange on October 22, 1997
and, as of the date of this prospectus, an aggregate principal amount of $125
million is outstanding. The Series C Notes were issued in a private transaction
on May 11, 1999 and, as of the date of this prospectus, an aggregate principal
amount of $125 million is outstanding. The Series B Notes and the Series C Notes
are sometimes collectively referred to as the Old Notes, and the Old Notes and
the Exchange Notes are sometimes collectively referred to as the Notes. The
terms of the exchange notes are identical to the terms of the old notes except
that, in the case of the Series C Notes, the exchange notes will be registered
under the Securities Act of 1933, as amended, and will not contain any legends
restricting their transfer. If all old notes are exchanged for exchange notes in
this exchange offer, a single series of registered notes will be outstanding.
PLEASE CONSIDER THE FOLLOWING:
YOU SHOULD CAREFULLY REVIEW THE RISK FACTORS BEGINNING ON PAGE 11 OF THIS
PROSPECTUS.
Our offer to exchange our two series of old notes for our exchange notes
will be open until 5:00 p.m., New York City time, on , 1999, unless we extend
the offer.
You should carefully review the procedures for tendering the old notes
described under the caption "The Exchange Offer" beginning on page 46 of this
prospectus. If you do not follow those procedures, we may not exchange your old
notes for exchange notes.
If you currently hold Series B Notes and fail to tender them, then you
will continue to hold registered securities, but the total principal amount of
Series B Notes may be reduced by this exchange offer, which may reduce the
liquidity of Series B Notes outstanding after the exchange offer.
If you currently hold Series C Notes and fail to tender them, then you
will continue to hold unregistered securities and your ability to transfer them
could be adversely affected.
We do not intend to list the exchange notes on any securities exchange
and, therefore, we do not anticipate an active public market for them.
INFORMATION ABOUT THE EXCHANGE NOTES:
o Maturity: The exchange notes will mature on August 15, 2007.
o Interest: We will pay interest on the exchange notes semi-annually on
February 15 and August 15 of each year beginning August 15, 1999.
o Redemption: We have the option to redeem all or a portion of the exchange
notes at any time on or after August 15, 2002 at the redemption prices
indicated on page 55 of this prospectus.
o Ranking: The exchange notes will be general unsecured obligations. The
exchange notes will be subordinated in right of payment to our existing
and future senior indebtedness. As of May 26, 1999, the exchange notes
would have been subordinated to approximately $133.1 million of debt. The
exchange notes will rank equally with all our existing and future senior
subordinated indebtedness and will rank senior to all our future debt that
expressly provides that it is subordinated to the notes.
o Mandatory Offer to Repurchase: If we sell all or substantially all of our
assets, or experience specific kinds of changes in control of our company,
we may be required to offer to repurchase the exchange notes.
o Subsidiary Guarantees: The exchange notes will be unconditionally
guaranteed on a senior subordinated basis by each of our existing and
future material subsidiaries, except for Oil-Chem Research Corporation and
its subsidiaries.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE NOTES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is , 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Prospectus Summary ....................................................................... 1
Risk Factors ............................................................................. 11
Use of Proceeds .......................................................................... 18
Capitalization ........................................................................... 18
Selected Financial Data .................................................................. 19
Management's Discussion and Analysis of Financial Condition and Results of Operations .... 22
National Association for Stock Car Auto Racing, Inc. (NASCAR) ............................ 31
Business ................................................................................. 35
Management ............................................................................... 44
Certain Transactions ..................................................................... 45
The Exchange Offer ....................................................................... 46
Description of Exchange Notes ............................................................ 52
Description of Certain Indebtedness ...................................................... 80
Certain United States Federal Tax Considerations ......................................... 80
Plan of Distribution ..................................................................... 81
Legal Matters ............................................................................ 81
Experts .................................................................................. 81
Unaudited Pro Forma Consolidated Financial Data .......................................... P-1
Index to Financial Statements ............................................................ F-1
</TABLE>
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and its supplements contain statements that constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements can be identified by the use of
forward-looking terminology such as "may," "will," "expect," "anticipate,"
"estimate" or "continue" or other variations of these words. The statements in
"Risk Factors" beginning on page 11 of this prospectus are cautionary
statements identifying important factors, including certain risks and
uncertainties, that could cause actual results to differ materially from those
reflected in such forward-looking statements.
WHERE YOU CAN FIND MORE INFORMATION ABOUT SMI
SMI files annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission (the
"Commission"). Such reports and information relate to SMI's business, financial
condition and other matters. You may read and copy these reports, proxy
statements and other information at the Public Reference Room of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices
of the Commission located at 7 World Trade Center, Suite 1300, New York, New
York 10048 and at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
You may obtain information on the operation of the Commission's Public
Reference Room in Washington, D.C. by calling the Commission at 1-800-SEC-0330.
Copies may be obtained from the Commission upon payment of the prescribed fees.
The Commission maintains an Internet Web site that contains reports, proxy and
information statements and other information regarding SMI and other
registrants that file electronically with the Commission. The address of such
site is http://www.sec.gov. Such information may also be read and copied at the
offices of the New York Stock Exchange at 20 Broad Street, New York, New York
10005.
The Commission allows us to "incorporate by reference" the information we
file with them, which means that we can disclose important business and
financial information to you by referring to those documents. The information
incorporated by reference is considered to be part of this prospectus, and the
information that we file later with the Commission will automatically update
and supercede this information. We incorporate by reference the documents
listed below and any future filings made with the Commission under Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange
Act") until this exchange offer is terminated:
(i) our Annual Report on Form 10-K for the year ended December 31, 1998
(File No. 1-13582) dated March 26, 1999;
(ii) our Quarterly Report on Form 10-Q for the quarter ended March 31,
1999 dated May 12, 1999;
(iii) our Amendment to our Quarterly Report on Form 10-Q/A for the
quarter ended March 31, 1999 dated May 19, 1999;
i
<PAGE>
(iv) our Amendment to our Current Report on Form 8-K/A dated February 12,
1999;
(v) our Current Report on Form 8-K dated April 29, 1999;
(vi) our definitive Proxy Materials dated March 26, 1999; and
(vii) our Current Report on Form 8-K dated June 2, 1999.
SMI WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS PROSPECTUS IS
DELIVERED, UPON THEIR WRITTEN OR ORAL REQUEST, A COPY OF ANY OR ALL OF THE
DOCUMENTS INCORPORATED BY REFERENCE IN THIS PROSPECTUS (EXCLUDING EXHIBITS TO
SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE). WRITTEN OR TELEPHONE REQUESTS SHOULD BE DIRECTED TO MARYLAUREL E.
WILKS, ESQ., SPEEDWAY MOTORSPORTS, INC., U.S. HIGHWAY 29 NORTH, P.O. BOX 600,
CONCORD, NORTH CAROLINA 28026, TELEPHONE NUMBER (704) 455-3239. YOU MUST MAKE
YOUR REQUEST FOR DOCUMENTS NO LATER THAN FIVE BUSINESS BEFORE THE DATE YOU MAKE
YOUR INVESTMENT DECISION CONCERNING OUR SECURITIES TO OBTAIN TIMELY DELIVERY OF
THESE DOCUMENTS. IN ADDITION, YOU MUST REQUEST THIS INFORMATION BY , 1999 OR
AT LEAST FIVE BUSINESS DAYS IN ADVANCE OF THE EXPIRATION OF THIS EXCHANGE
OFFER.
This prospectus is a part of a Registration Statement on Form S-4 (the
"Registration Statement") filed with the Commission by SMI. This prospectus
does not contain all of the information set forth in the Registration Statement
and the exhibits thereto. Statements about the contents of contracts or other
documents contained in this prospectus or in any other filing to which we refer
you are not necessarily complete. You should review the actual copy of such
documents filed as an exhibit to the Registration Statement or such other
filing. Copies of the Registration Statement and these exhibits may be obtained
from the Commission as indicated above upon payment of the fees prescribed by
the Commission.
As long as any notes are outstanding, SMI will provide holders of the
notes with the following information after it would have been required or is
required to be filed with the Commission:
1. all quarterly and annual financial information that would be required to
be included in Forms 10-Q and 10-K; and
2. all current reports that would be required to be filed on Form 8-K.
---------------
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized any other person to
provide you with different information. If anyone provides you with different
or inconsistent information, you should not rely on it. We are not making an
offer to sell these securities (1) in any jurisdiction where the offer or sale
is not permitted, (2) where the person making the offer is not qualified to do
so, or (3) to any person who cannot legally be offered the securities. You
should assume that the information appearing in this prospectus is accurate
only as of the date on the front cover of this prospectus. Our business,
financial condition, results of operations and prospects may have changed since
that date.
---------------
NASCAR-related data used throughout this prospectus was obtained or derived
from industry publications or third-party sources which we believe to be
reliable. We cannot assure you that this NASCAR-related information is
accurate.
Our company has trademark rights in "Atlanta Motor Speedway," "Charlotte
Motor Speedway," "AutoFair," "Lugnut," and "The Speedway Club." Trademark and
service mark registrations are pending for "Speedway Motorsports," "Bristol
Motor Speedway," "Bandolero," "Finish Line Events," "Sears Point Raceway," and
"Texas Motor Speedway." We also have two patent applications pending for our
Legends Car and Bandolero Car technology. We also have trademark rights
concerning our Legends Car and our corporate logos.
ii
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS THE MORE DETAILED INFORMATION AND FINANCIAL
STATEMENTS FROM THIS PROSPECTUS. IT MAY NOT CONTAIN ALL OF THE INFORMATION THAT
IS IMPORTANT TO YOU. WE ENCOURAGE YOU TO READ THIS ENTIRE PROSPECTUS AND THE
DOCUMENTS TO WHICH WE REFER YOU TO UNDERSTAND FULLY THE TERMS OF THE NOTES AND
THIS EXCHANGE OFFER.
SPEEDWAY MOTORSPORTS, INC.
Speedway Motorsports, Inc. ("SMI") is a leading promoter, marketer and
sponsor of motorsports activities in the United States. We have one of the
largest portfolios of major speedway facilities in the motorsports industry
with a total permanent seating capacity, as of December 31, 1998, exceeding
665,000. We also provide event food, beverage, and souvenir merchandising
services through our Finish Line Events ("FLE") subsidiary. In addition, we
manufacture and distribute smaller-scale, modified racing cars and parts
through our 600 Racing subsidiary. We own and operate the following facilities:
<TABLE>
<CAPTION>
AT DECEMBER 31, 1998
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APPROX. LENGTH PERMANENT
SPEEDWAY LOCATION ACREAGE (MILES) SUITES SEATING
- ----------------------------------------------- --------------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Atlanta Motor Speedway ("AMS") ................ Hampton, GA 870 1.5 141 124,000
Bristol Motor Speedway ("BMS") ................ Bristol, TN 550 0.5 97 134,000
Las Vegas Motor Speedway ("LVMS") ............. Las Vegas, NV 1,300 1.5 102 107,000
Lowe's Motor Speedway at Charlotte ("LMSC")
(formerly Charlotte Motor Speedway) .......... Concord, NC 1,000 1.5 125 147,000
Sears Point Raceway ("SPR") ................... Sonoma, CA 1,500 2.5 Temporary Temporary
Texas Motor Speedway ("TMS") .................. Ft. Worth, TX 1,360 1.5 194 153,000
-------- --------
659 665,000
======== ========
</TABLE>
Our speedways are strategically positioned in six of the premier markets
in the United States, including three of the top ten television markets. Our
NASCAR Winston Cup events in 1998 achieved four of the top eight Winston Cup
television ratings and would have accounted for five of the top eight Winston
Cup television ratings if LVMS, which was purchased in December 1998, was
included in our operations in the 1998 season. In February 1999, we obtained
the motorsports industry's first facility naming rights agreement, which
renamed Charlotte Motor Speedway as Lowe's Motor Speedway for gross fees
aggregating approximately $35.0 million over the ten year term of the
agreement. In February 1999, we also announced we would be part of a newly
formed NASCAR television negotiating alliance. In October 1998, we entered into
a joint venture with Turner Sports in which LMSC's October 1998 NASCAR Winston
Cup race was broadcast on pay-per-view DirectTV, as well as on TBS.
We will sponsor 17 major annual racing events in 1999 sanctioned by the
National Association of Stock Car Auto Racing, Inc. ("NASCAR"). These include
ten races associated with the Winston Cup Series of professional stock car
racing (the "Winston Cup") and seven races associated with the Busch Series. We
also will sponsor five Indy Racing League ("IRL") racing events, four NASCAR
Craftsman Truck Series racing events, and two major National Hot Rod
Association ("NHRA") racing events in 1999.
In 1999, we will be hosting a variety of new motorsports events at our
facilities. TMS will be hosting its first IRL Series championship finale race,
which will be preceded by a new Craftsman Truck Series race. BMS is finishing
construction of a new dragway that will host the NHRA's inaugural "The Winston
No-Bull Showdown" all-star event.
We derive revenues principally from the following activities:
o the sale of tickets to automobile races and other events held at our
speedway facilities;
o the licensing of television, cable network and radio rights to broadcast
such events;
o the sale of food, beverages and souvenirs during such events; and
o the sale of sponsorships to companies that desire to advertise or sell
their products or services at such events.
We have experienced substantial growth in revenues and profitability as a
result of the continued improvement and expansion of and investment in our
facilities, our consistent marketing and promotional efforts and the overall
increase in popularity of Winston Cup, Busch Series and other motorsports
events in the United States.
1
<PAGE>
INDUSTRY OVERVIEW
Motorsports is currently the fastest growing spectator sport in the United
States, with NASCAR the fastest growing industry segment. In 1998, NASCAR
sanctioned 93 Winston Cup, Busch and Craftsman Truck Series races which were
attended by approximately 9.3 million spectators. Attendance of these NASCAR
events has increased at a compound annual growth rate of 10.8% since 1994.
Based on information developed independently by Goodyear Tire and Rubber,
spectator attendance at Winston Cup events increased at a compound annual
growth rate of 6.5% from 1994 to 1998 while spectator attendance at Busch
events increased at a compound annual growth rate of 12.7% for the same period.
Races are generally heavily promoted, with a number of supporting events
surrounding the main event, for a total weekend experience.
In recent years, television coverage and corporate sponsorship have
increased for NASCAR-related events. All NASCAR Winston Cup and Busch Series
events sponsored by us are broadcast by ABC, CBS, ESPN, TBS or TNN. Also, all
IRL events we sponsor are broadcast. We have entered into television rights
contracts for all our major sanctioned events. According to NASCAR, major
national corporate sponsorship of NASCAR-sanctioned events (which currently
includes over 80 Fortune 500 companies) also has increased significantly.
Sponsors include such companies as Coca-Cola, General Motors, Cracker Barrel,
NAPA, PRIMESTAR, Save Mart, Kragen, Food City, Goody's and RJR Nabisco.
The dramatic increase in corporate interest in the sport has been driven
by the attractive advertising demographics of stock car and other motorsports
racing fans. In addition, brand loyalty, as measured by fans using sponsors'
products, is the highest of any nationally televised sport according to a study
published by Performance Research in 1997. Speedway operations generate high
operating margins and are protected by high barriers to competitive entry,
including capital requirements for new speedway construction, marketing,
promotional and operational expertise, and license agreements with NASCAR.
Industry competitors are actively pursuing internal growth and industry
consolidation due to the following factors:
o popular and accessible drivers;
o strong fan brand loyalty;
o a widening demographic reach;
o increasing appeal to corporate sponsors; and
o rising broadcast revenues.
GROWTH STRATEGY
Our operating strategy is to increase revenues and profitability through
the promotion and production of racing and related events at modern facilities,
which serve to enhance customer loyalty. We market our scheduled events
throughout the year both regionally and nationally via television, radio and
newspaper advertising, facility tours, satellite links for media outlets,
direct mail campaigns, pre-race promotional activities and other innovative
marketing activities. The key components of this growth strategy are as
follows:
o EXPAND AND IMPROVE EXISTING FACILITIES. We believe that spectator demand
for our largest events exceeds existing permanent seating capacity. We
plan to continue our expansion by adding permanent grandstand seating and
luxury suites at several of our facilities, and making other significant
renovations and improvements at each of our facilities in 1999. In 1998,
excluding our acquisition of LVMS, we added more than 34,000 permanent
seats, including approximately 19,000 at BMS, 12,000 at LMSC and 3,000 at
TMS. In 1999, as a result of our plans to add more than 25,000 permanent
seats, our total permanent seating capacity will exceed 690,000 and there
will be approximately 659 luxury suites.
o MAXIMIZE MEDIA EXPOSURE AND ENHANCE BROADCAST AND SPONSORSHIP REVENUES.
NASCAR-sanctioned stock car racing is experiencing significant growth in
television viewership and spectator attendance. This growth has allowed us
to expand our television coverage to include more races and to negotiate
more favorable broadcast rights fees with television networks as well as
to negotiate more favorable contract terms with sponsors. We believe that
spectator interest in stock car racing will continue to grow, thereby
increasing broadcast media and sponsors' interest in the sport.
o FURTHER DEVELOP 600 RACING AND FINISH LINE EVENTS. In 1992, we developed
the Legends Circuit for which we manufacture and sell cars and parts used
in Legends Circuit racing events. We are the official sanctioning body for
the Legends Circuit. At retail prices starting at less than $12,400, we
believe that Legends Cars are economically affordable to a new group of
racing enthusiasts who previously could not race on an organized circuit.
Legends
2
<PAGE>
Cars are an important part of our business as revenues from this business
have grown from $5.7 million in 1994 to $10.9 million in 1998. As an
extension of the Legends Car concept, we released in late 1997 a new
smaller, lower priced "Bandolero" stock car, which appeals largely to
younger racing enthusiasts. We intend to further broaden the Legends Car
Circuit, increasing the number of sanctioned races and tracks at which
Legend and Bandolero Car races are held in 1999. FLE provides event food,
beverage, and souvenir merchandising services, as well as expanded
ancillary support services, to all of our facilities and other
unaffiliated sports-related venues. We believe this provides better
products and expanded services to our customers, enhancing the overall
entertainment experience for spectators, while allowing us to achieve
substantial operating efficiencies.
o INCREASE THE DAILY USAGE OF EXISTING FACILITIES. We constantly seek
revenue-producing uses for our speedway facilities on days not committed
to racing events. Such other uses include car and truck shows, motorcycle
racing, auto fairs, driving schools, vehicle testing and settings for
television commercials, concerts, holiday season festivities, print
advertisements and motion pictures. In 1998, we began hosting a summer
Legend Cars series at AMS and TMS, and in 1999 are planning to begin a
similar series at LVMS and SPR. Other examples of increased usage include
LMSC's hosting of the 35th Anniversary of the Mustang celebration, and
TMS's spring and fall Autofests in 1999. We are also currently attempting
to schedule music concerts at certain facilities.
o ACQUIRE AND DEVELOP ADDITIONAL MOTORSPORTS FACILITIES. We also consider
growth by acquisition and development of motorsports facilities as
appropriate opportunities arise. We acquired BMS in January 1996, SPR in
November 1996, and LVMS in December 1998. In 1997, we completed
construction of TMS. We continuously seek to locate, acquire, develop and
operate venues which we feel are underdeveloped or underutilized and to
capitalize on markets where the pricing of sponsorship and television
rights are considerably more lucrative.
RECENT DEVELOPMENTS
o MAY 1999 SERIES C NOTES OFFERING. On May 11, 1999, we issued $125.0
million in aggregate principal amount of our unregistered Series C Notes.
The net proceeds from the issuance of these notes were approximately
$125.7 million. We used the net proceeds to repay a portion of amounts
outstanding under our revolving bank credit facility, which was used to
finance the acquisition of LVMS.
o LMSC CANCELS IRL EVENT AFTER ACCIDENT. LMSC cancelled its May 1, 1999 IRL
event after three spectators were killed and eight others injured when
debris from an on-track accident at LMSC entered a grandstand during the
race. We are investigating this incident and have not reached any final
conclusion regarding it. On May 28, 1999, a wrongful death lawsuit was
filed against SMI, IRL and H.A. Wheeler, SMI's President and Chief
Operating Officer, by a representative of one of the spectators who was
fatally injured during the May 1999 IRL accident. This lawsuit seeks
unspecified compensatory and punitive damages. SMI has not yet filed an
answer to, but intends to defend itself against, the lawsuit's
allegations. We cannot assure you that this incident will not result in
additional claims by the injured parties or their representatives or other
liabilities that may have a material adverse effect on us.
o NASCAR TELEVISION ALLIANCE. In February 1999, we announced with NASCAR
that we would be a part of a newly formed NASCAR television negotiating
alliance. In the past, event rights fees were negotiated individually by
officials at each venue. Under the newly formed alliance, NASCAR and the
alliance members plan to negotiate television broadcast rights agreements
by bundling multiple events. This alliance will allow us to maximize our
negotiating opportunities for new television broadcast rights agreements
for events held at our facilities.
o NAMING RIGHTS AGREEMENT. In February 1999, we obtained the motorsports
industry's first facility naming rights agreement whereby Charlotte Motor
Speedway has been renamed Lowe's Motor Speedway for gross fees aggregating
approximately $35.0 million over the ten-year agreement term.
o ACQUISITION OF LVMS. On December 1, 1998, SMI acquired LVMS, including an
industrial park and certain adjacent unimproved land for approximately
$215.0 million. Of this purchase price, approximately $150.0 million was
allocated to the speedway and approximately $65.0 million was allocated to
1.4 million square feet of warehouse space and approximately 300 acres of
nearby real estate. LVMS is located in one of the most recognized, leading
markets in the United States and the world, and its acquisition is a major
strategic transaction that is expected to enhance our overall operations,
as well as broadcast and sponsorship opportunities.
LVMS is a newly constructed 1.5 mile, lighted, asphalt superspeedway,
with several other on-site race tracks, and has permanent seating capacity
of approximately 107,000, including 102 luxury suites, as of December 31,
1998. The superspeedway's configuration readily allows for significant
future expansion. LVMS currently hosts
3
<PAGE>
several annual NASCAR-sanctioned racing events, including a Winston Cup
Series, Busch Series, Craftsman Truck Series, two Winston West Series, and
two Winston Southwest Series racing events. Additional major events held
annually include IRL, World of Outlaws, American Motorcycle Association,
and drag racing events, among others.
On March 6 and 7, 1999, LVMS conducted the Las Vegas 400 NASCAR Winston
Cup Series and Sam's Town 300 NASCAR Busch Series events, which set the
attendance record for the largest sporting event in Nevada. In addition,
the 6.0 television rating, up from 5.8 a year ago, made the Las Vegas 400
on ABC the second most watched NASCAR race in history, excluding the
Daytona 500. Approximately 14 million viewers in 6 million homes tuned in
to watch Jeff Burton claim victory after a side-by-side duel with his
brother, Ward. The Sam's Town 300 garnered a 2.2 television rating, up
from a 1.9 last year.
o 1999 CREDIT FACILITY. On November 23, 1998, our bank revolving credit
facility was amended with the December 1, 1998 acquisition of LVMS. This
amended credit facility (the "Acquisition Loan") increased our overall
borrowing limit from $175.0 million to $270.0 million to fund the LVMS
acquisition and to maintain a revolving credit facility for working
capital and general corporate purposes. The Acquisition Loan was repaid
and retired on May 28, 1999 with proceeds from our sale of Series C Notes
and with borrowings under our 1999 Credit Facility described below. As of
December 31, 1998 and March 31, 1999, SMI had $254.0 million in
outstanding borrowings under the Acquisition Loan.
On May 28, 1999, we replaced our senior unsecured revolving credit
facility with a senior secured revolving credit facility having a
borrowing limit of $250.0 million and a final maturity in 2004 (the "1999
Credit Facility"). The 1999 Credit Facility has terms substantially
similar to those of our existing credit facility. Interest on borrowings
under the 1999 Credit Facility will, at our option, be based on (1) LIBOR
plus a margin ranging from 0.5% to 1.25% as adjusted from time to time
under the terms of the 1999 Credit Facility or (2) the greater of the
Federal Funds rate plus 0.5% or NationsBank's prime rate. Proceeds from
the 1999 Credit Facility were used to repay and retire the remaining
portion of the Acquisition Loan after application of the proceeds from our
sale of the Series C Notes, and will be used for working capital and
general corporate purposes. The outstanding principal balance under our
1999 Credit Facility as of June 1, 1999 was approximately $133.1 million.
For further discussion of our bank credit arrangements, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations
-- Liquidity and Capital Resources" and "Description of Certain
Indebtedness."
---------------
SMI was incorporated in December 1994 as a Delaware corporation and its
common stock is traded on the New York Stock Exchange under the symbol "TRK."
SMI's principal executive office is located on U.S. Highway 29 North in
Concord, North Carolina. Its preferred mailing address is Post Office Box 600,
Concord, North Carolina 28026-0600, and its telephone number is (704) 455-3239.
4
<PAGE>
THE EXCHANGE OFFER
Securities to be Exchanged...... On August 4, 1997 we issued $125.0 million
in aggregate principal amount of
unregistered 8 1/2% Senior Subordinated
Notes due 2007 (the "Series A Notes") to
certain initial purchasers in a transaction
exempt from the registration requirements of
the Securities Act of 1933. Subsequently, we
conducted an exchange offer in which we
offered to exchange the Series A Notes for
the Series B Notes, which were substantially
identical to the Series A Notes in all
respects except that the Series B Notes
offered in the 1997 exchange offer were
registered with the Commission and thus
freely transferrable by the noteholders. The
Series B Notes are currently governed by the
terms of an indenture dated as of August 4,
1997.
On May 11, 1999, we issued $125.0 million in
aggregate principal amount of unregistered
Series C Notes to certain initial purchasers
in a transaction exempt from the
registration requirements of the Securities
Act of 1933. The Series C Notes are
currently governed by the terms of an
indenture dated as of May 11, 1999.
We are now conducting this exchange offer so
that the holders of the registered Series B
Notes and the holders of the unregistered
Series C Notes can exchange their old notes
for exchange notes, which are substantially
identical to the old notes in all respects
except that, with regard to the Series C
Notes, the exchange notes will be registered
with the Commission and thus freely
transferrable. If all holders of Series B
and Series C Notes elect to tender their old
notes, then there will be $250.0 million in
aggregate principal amount of exchange notes
outstanding. The Series C Notes and the
exchange notes are governed by the terms of
the same indenture dated as of May 11, 1999.
The Exchange Offer.............. We are offering to exchange $1,000
principal amount of exchange notes for each
$1,000 principal amount of old notes. As of
the date hereof, $250.0 million aggregate
principal amount of old notes are
outstanding. The terms of the exchange notes
are substantially the same as the terms of
the old notes except that, with regard to the
Series C Notes, the exchange notes will be
registered under the Securities Act of 1933,
as amended, and will not contain any legends
restricting their transfer.
Based on interpretations by the staff of the
Commission, as set forth in no-action
letters issued to certain third parties
unrelated to us in other transactions, we
believe that exchange notes issued pursuant
to this exchange offer in exchange for old
notes may be offered for resale, resold or
otherwise transferred by holders thereof
(other than any holder which is an
"affiliate" of SMI within the meaning of
Rule 405 promulgated under the Securities
Act, or a broker-dealer who purchased old
notes directly from us to resell pursuant to
Rule 144A or any other available exemption
promulgated under the Securities Act),
without compliance with the registration and
prospectus delivery requirements of the
Securities Act, provided that such exchange
notes are acquired in the ordinary course of
such holders' business and such holders have
no arrangement with any person to engage in
a distribution of exchange notes.
However, the Commission has not considered
this exchange offer in the context of a
no-action letter and we cannot be sure that
the staff
5
<PAGE>
of the Commission would make a similar
determination with respect to this exchange
offer as in such other circumstances.
Furthermore, each holder, other than a
broker-dealer, must acknowledge that it is
not engaged in, and does not intend to
engage in, a distribution of such exchange
notes and has no arrangement or
understanding to participate in a
distribution of exchange notes. Each
broker-dealer that receives exchange notes
for its own account pursuant to the exchange
offer must acknowledge that it will comply
with the prospectus delivery requirements of
the Securities Act in connection with any
resale of such exchange notes.
Broker-dealers who acquired old notes
directly from us and not as a result of
market-making activities or other trading
activities may not rely on the staff's
interpretations discussed above or
participate in this exchange offer and must
comply with the prospectus delivery
requirements of the Securities Act in order
to resell the old notes.
Expiration Date................. The exchange offer will expire at 5:00 p.m.
New York City time, , 1999 or such
later date and time to which we extend the
offer.
Withdrawal...................... The tender of the old notes pursuant to
this exchange offer may be withdrawn at any
time prior to 5:00 p.m., New York City time,
on , 1999, or such later date and time
to which we extend the offer. Any old notes
not accepted for exchange for any reason will
be returned without expense to the tendering
holder thereof as soon as practicable after
the expiration or termination of this
exchange offer.
Interest on the Exchange Notes and
the Old Notes.................... Interest on the exchange notes will accrue
from the date of issuance of the old notes
for which the exchange notes are exchanged or
from the date of the last periodic payment of
interest on the old notes, whichever is
later. Interest on the exchange notes will be
at the same rate and upon the same terms as
interest on the old notes. No additional
interest will be paid on old notes tendered
and accepted for exchange.
Conditions to the
Exchange Offer.................. This exchange offer is subject to certain
customary conditions, certain of which may be
waived by us. See "The Exchange Offer --
Conditions to the Exchange Offer."
Procedures for Tendering
Old Notes....................... Each holder of the old notes wishing to
accept this exchange offer must complete,
sign and date the Letter of Transmittal, or a
copy thereof, in accordance with the
instructions contained herein and therein,
and mail or otherwise deliver the Letter of
Transmittal or the copy thereof, together
with the old notes and any other required
documentation, to the exchange agent at the
address set forth herein. Persons holding the
old notes through the Depository Trust
Company ("DTC") and wishing to accept the
exchange offer must do so pursuant to the
DTC's Automated Tender Offer Program, by
which each tendering participant will agree
to be bound by the Letter of Transmittal. By
executing or agreeing to be bound by the
Letter of Transmittal, each holder will
represent to us that, among other things:
o the exchange notes acquired pursuant to
this exchange offer are being obtained in
the ordinary course of business of the
person receiving such exchange notes,
whether or not such person is the
registered holder of the old notes,
6
<PAGE>
o the holder is not engaging in and does not
intend to engage in a distribution of such
exchange notes,
o the holder does not have an arrangement or
understanding with any person to
participate in the distribution of such
exchange notes and
o the holder is not an "affiliate," as
defined under Rule 405 promulgated under
the Securities Act, of SMI.
We will accept for exchange any and all old
notes which are properly tendered (and not
withdrawn) in this exchange offer prior to
5:00 p.m., New York City time, on ,
1999. The exchange notes issued pursuant to
this exchange offer will be delivered
promptly following the expiration date. See
"The Exchange Offer -- Terms of the Exchange
Offer."
Exchange Agent.................. U.S. Bank Trust National Association is
serving as exchange agent (sometimes referred
to herein as the "exchange agent") in
connection with this exchange offer.
Federal Income
Tax Considerations.............. The exchange of old notes for exchange notes
pursuant to this exchange offer should not
constitute a sale or an exchange for federal
income tax purposes. See "Certain United
States Federal Tax Considerations."
Effect of Not Tendering......... Series B Notes that are not tendered or
that are tendered but not accepted, following
the completion of this exchange offer, (1)
will continue to be subject to the terms of
the indenture dated as of August 4, 1997; (2)
will continue to be registered securities;
and (3) may have their liquidity impaired as
a result of fewer Series B Notes outstanding
after the exchange offer is completed. Series
C Notes that are not tendered or that are
tendered but not accepted will, following the
completion of the Exchange Offer, continue to
be subject to the existing restrictions upon
their transfer. Upon consummation of this
exchange offer, we will have no further
obligation to provide for the registration
under the Securities Act of such Series C
Notes or provide for the exchange of Series B
Notes for exchange notes. See "Risk Factors
-- Consequences of Failure to Exchange."
Use of Proceeds................. We will not receive any cash from the
exchange of the old notes pursuant to the
exchange offer.
7
<PAGE>
THE EXCHANGE NOTES
The summary below describes the principal terms of the exchange notes.
Certain of the terms and conditions described below are subject to important
limitations and exceptions. The "Description of Exchange Notes" section of this
prospectus contains a more detailed description of the terms of the exchange
notes.
Issuer.......................... Speedway Motorsports, Inc.
Securities...................... $250.0 million in aggregate principal
amount of 8 1/2% Senior Notes due 2007.
Maturity........................ August 15, 2007.
Interest........................ Semi-annually in cash in arrears on
February 15 and August 15, commencing on
August 15, 1999.
Ranking......................... The exchange notes will be our general
unsecured obligations.
The exchange notes will rank in right of
payment behind all of our existing and
future senior debt.
As of May 26, 1999, the exchange notes will
be subordinated to approximately $133.1
million of debt.
The exchange notes will rank equally with
all of our existing and future senior
subordinated debt and will rank senior to
all our future debt that is expressly
subordinated to the notes.
Guarantees...................... The exchange notes will be unconditionally
guaranteed, jointly and severally, on a
senior subordinated basis by each of our
existing and future material subsidiaries,
except for Oil-Chem Research Corporation and
its subsidiaries.
Optional Redemption............. On or after August 15, 2002, we may redeem
some or all of the exchange notes at any time
at the redemption prices described in the
"Description of Exchange Notes" section under
the heading "Optional Redemption," plus any
interest and liquidated damages that is due
and unpaid on the date that we redeem the
exchange notes.
Mandatory Redemption............ None.
Change of Control............... If we experience certain types of change of
control, we must offer to repurchase the
exchange notes at 101% of the aggregate
principal amount of the exchange notes
repurchased plus accrued and unpaid interest.
Basic Covenants of Indenture.... The indenture will, among other things,
restrict our and our subsidiaries' ability
to:
o borrow money;
o issue preferred stock;
o incur liens to secure PARI PASSU or
subordinated debt;
o pay dividends on stock or repurchase
stock;
o apply net proceeds from certain asset
sales;
o engage in transactions with our
affiliates;
o sell equity interests in certain types of
subsidiaries;
o merge or consolidate with any other
person;
o sell equity interests of subsidiaries; and
o sell, assign, transfer, lease, convey or
dispose of assets.
See "Description of Exchange Notes --
Certain Covenants."
You should refer to the section entitled "Risk Factors" for an explanation
of certain risks of investing in the exchange notes.
8
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
We derived the following historical financial information from the
consolidated financial statements of SMI for 1996, 1997, 1998, and the three
months ended March 31, 1998 and 1999. The pro forma financial statements do not
purport to represent what our results of operations actually would have been if
the events assumed therein had occurred as of the dates indicated or what our
results will be for any future period.
You should read the following summary together with the "Management's
Discussion and Analysis of Results of Operations and Financial Condition" for
SMI and the financial statements and the related notes and the pro forma
financial statements and related notes contained elsewhere in this prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, (1)
-------------------------------------------------------
PRO FORMA
1996 1997 1998 1998 (2)
------------- ------------- ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE, RATIOS, AND SELECTED
DATA)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues ........................... $ 102,113 $ 192,126 $ 229,796 $ 264,583
Total operating expenses ................. 62,771 123,743 150,001 175,219
Operating income (loss) .................. 39,342 68,383 79,795 89,364
Interest expense(3) ...................... 693 7,745 15,258 28,302
Net income (loss)(3) ..................... 26,405 38,178 42,371 40,945
OTHER DATA:
EBITDA(4)(5) ............................. $ 51,348 $ 87,548 $ 107,728 $ 121,892
Depreciation and amortization(5) ......... 7,598 15,742 22,453 25,930
Capital expenditures(6) .................. 147,741 162,011 98,574
Cash flows provided by (used in):
Operating activities .................... $ 37,384 $ 81,049 $ 86,396
Financing activities .................... 171,861 97,491 232,375
Investing activities .................... (197,125) (172,644) (311,520)
Ratio of earnings to fixed
charges(7) .............................. 11.5x 5.0x 4.2x 2.7x
SELECTED DATA:
SMI major NASCAR-sanctioned
events .................................. 12 15 15
Attendance at all Winston Cup
events(8) ............................... 5,588,000 6,091,000 6,301,000
<CAPTION>
THREE MONTHS ENDED MARCH 31, (1)
---------------------------------------
PRO FORMA
1998 1999 1999 (2)
--------------- ------------ ----------
(IN THOUSANDS, EXCEPT PER SHARE, RATIOS,
AND SELECTED
DATA)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues ........................... $ 17,960 $ 53,104 $53,104
Total operating expenses ................. 21,107 41,215 41,215
Operating income (loss) .................. (3,147) 11,889 11,889
Interest expense(3) ...................... 3,408 7,037 7,727
Net income (loss)(3) ..................... (2,923) 2,008 2,952
OTHER DATA:
EBITDA(4)(5) ............................. $ 3,315 $ 19,892 $19,892
Depreciation and amortization(5) ......... 4,758 9,382 7,119
Capital expenditures(6) .................. 36,478 30,484
Cash flows provided by (used in):
Operating activities .................... $ 29,104 $ 36,396
Financing activities .................... 7,098 32
Investing activities .................... (37,366) (30,686)
Ratio of earnings to fixed
charges(7) .............................. -- 1.2x 1.5 x
SELECTED DATA:
SMI major NASCAR-sanctioned
events .................................. 1(11) 4
Attendance at all Winston Cup
events(8) ...............................
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998 MARCH 31, 1999
------------------- --------------------------
ACTUAL ACTUAL PRO FORMA (9)
------------------- ----------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets ......................................... $904,877 $941,194 $947,144
Total long-term debt, including current maturities(10) 453,924 454,806 460,756
Stockholders' equity ................................. 287,120 289,260 289,260
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
9
<PAGE>
- ---------
(1) The year end data for 1994 and 1995 include AMS and LMSC; for 1996 include
BMS acquired in January 1996 and SPR acquired in November 1996; for 1997
include TMS which hosted its first racing event on April 6, 1997; and for
1998 include LVMS acquired in December 1998. The quarterly data for the
three months ended March 31, 1998 include AMS, BMS, LMSC, SPR and TMS, and
for the three months ended March 31, 1999 include LVMS. See Note 1 to the
December 31, 1998 and March 31, 1999 Consolidated Financial Statements.
(2) Adjusted to give effect to the acquisition of LVMS, the sale of the Series
C Notes and the application of the net proceeds therefrom, and the closing
of the 1999 Credit Facility concurrently with the sale of the Series C
Notes, as if they had occurred on January 1, 1998. Assumes that net
proceeds of $122.8 million from the sale of the Series C Notes, after
deducting estimated loan costs for the 1999 Credit Facility, and including
issuance premium of $3.8 million that was paid by the Series C Notes
purchasers, were applied to repay a portion of the amounts outstanding
under the Acquisition Loan.
(3) Interest expense excludes interest income and is net of capitalized
interest of $2.8 million, $5.8 million and $3.8 million for the years
ended December 31, 1996, 1997 and 1998, and $905,000 and $943,000 for the
three months ended March 31, 1998 and 1999. Pro forma interest expense is
net of capitalized interest of $6.1 million for the year ended December
31, 1998 and $1.0 million for the three months ended March 31, 1999. Pro
forma net income also reflects elimination of Acquisition Loan cost
amortization of $752,000 for the year ended December 31, 1998 and $2.3
million for the three months ended March 31, 1999.
(4) EBITDA represents income before interest expense, income taxes and
depreciation and amortization. EBITDA is included herein because
management believes that certain investors may find EBITDA useful for
measuring a company's ability to service its debt; however, EBITDA does
not represent cash flow from operations, as defined by generally accepted
accounting principles, and should not be considered as a substitute for
net income as an indicator of our operating performance or for cash flow
as a measure of liquidity. The Company's determination and presentation of
the non-GAAP measures of financial performance such as EBITDA may not be
comparable to similarly titled measures reported by other companies.
(5) Amortization expense includes Acquisition Loan cost amortization of
$752,000 for the year ended December 31, 1998 and $2.3 million for the
three months ended March 31, 1999. See Note 2 to the December 31, 1998 and
March 31, 1999 Consolidated Financial Statements.
(6) Capital expenditures exclude the acquisition of BMS, SPR and Oil Chem in
1996 and of LVMS in 1998.
(7) The ratio of earnings to fixed charges is computed by dividing fixed
charges into income from continuing operations before income taxes plus
fixed charges. Fixed charges consist of interest, whether expensed or
capitalized, amortization of financing costs and the estimated interest
component of rent expense. Earnings were insufficient to cover fixed
charges by $4.9 million for the three months ended March 31, 1998. The pro
forma effect of the events described in (2) above is an increase in
interest charges of $14.3 million for 1998 and $539,000 for the three
months ended March 31, 1999, respectively. The pro forma ratio of earnings
to fixed charges does not reflect any income earned from the proceeds of
the Series C Notes or 1999 Credit Facility in excess of the refinanced
debt amounts. See Notes 1 and 2 to the Unaudited Pro forma Consolidated
Financial Data on P-2 for additional information on pro forma interest
charges.
(8) Source: Goodyear Tire and Rubber Company.
(9) The summary pro forma balance sheet data give effect to the sale of the
Series C Notes offered by SMI hereby and the application of the net
proceeds therefrom, and the closing of the 1999 Credit Facility
concurrently with the sale of the Series C Notes.
(10) As of December 31, 1998 and March 31, 1999, on a pro forma basis after
giving effect to the issuance of the Series C Notes and application of the
net proceeds therefrom, SMI would have had $132.4 million and $133.3
million, respectively, of outstanding indebtedness which would rank senior
to the Series C Notes.
(11) The Busch Series race at AMS, originally scheduled to be held in March
1998, was rescheduled to November 1998 due to poor weather conditions.
Rescheduling did not materially impact revenues and operating expenses as
reported for the first and fourth quarters of 1998.
10
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE EXCHANGE NOTES REPRESENTS A HIGH DEGREE OF RISK.
THERE ARE A NUMBER OF FACTORS, INCLUDING THOSE SPECIFIED BELOW, WHICH MAY
ADVERSELY AFFECT OUR ABILITY TO MAKE PAYMENTS ON THE EXCHANGE NOTES. YOU COULD
THEREFORE LOSE A SUBSTANTIAL PORTION OR ALL OF YOUR INVESTMENT IN THE EXCHANGE
NOTES. CONSEQUENTLY, AN INVESTMENT IN THE EXCHANGE NOTES SHOULD ONLY BE
CONSIDERED BY PERSONS WHO CAN ASSUME SUCH RISK. THE RISK FACTORS DESCRIBED
BELOW ARE NOT NECESSARILY ALL-INCLUSIVE AND YOU ARE ENCOURAGED TO PERFORM YOUR
OWN INVESTIGATION WITH RESPECT TO THE EXCHANGE NOTES AND OUR COMPANY.
SUBSTANTIAL LEVERAGE -- OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT THE
FINANCIAL HEALTH OF OUR COMPANY AND PREVENT US FROM FULFILLING OUR OBLIGATIONS
UNDER THESE EXCHANGE NOTES
We have now and, after the offering and the application of the proceeds,
will continue to have a significant amount of indebtedness. The following chart
shows certain important credit statistics:
<TABLE>
<CAPTION>
PRO FORMA FOR THE SALE OF THE SERIES C
NOTES AND 1999 CREDIT FACILITY
-----------------------------------------
AT DECEMBER 31, 1998 AT MARCH 31, 1999
---------------------- ------------------
<S> <C> <C>
Total indebtedness ....... $ 459,874,000 $ 460,756,000
Stockholders' equity ..... $ 287,120,000 $ 289,260,000
Debt to equity ratio ..... 1.6x 1.6x
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA FOR THE SALE OF THE SERIES
C NOTES AND 1999 CREDIT FACILITY
------------------------------------
FOR THE THREE
FOR THE YEAR ENDED MONTHS ENDED
DECEMBER 31, 1998 MARCH 31, 1999
-------------------- ---------------
<S> <C> <C>
Ratio of earnings to fixed charges .. 2.7x 1.5x
</TABLE>
Our substantial indebtedness could have important consequences to you. For
example, it could:
o make it more difficult for us to satisfy our obligations with respect to
these notes;
o increase our vulnerability to general adverse economic and industry
conditions;
o limit our ability to fund future working capital, capital expenditures
costs and other general corporate requirements;
o require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund working capital, capital
expenditures and other general corporate purposes;
o limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate;
o place us at a competitive disadvantage compared to our competitors that
have less debt; and
o limit, along with the financial and other restrictive covenants in our
indebtedness, among other things, our ability to borrow additional funds.
And, failing to comply with those covenants could result in an event of
default which, if not cured or waived, could have a material adverse
effect on us.
SUBORDINATION -- YOUR RIGHT TO RECEIVE PAYMENTS ON THE EXCHANGE NOTES IS JUNIOR
TO OUR EXISTING INDEBTEDNESS AND POSSIBLY ALL OF OUR FUTURE BORROWINGS,
INCLUDING BORROWINGS UNDER THE 1999 CREDIT FACILITY. FURTHER, THE GUARANTEES OF
THE EXCHANGE NOTES ARE JUNIOR TO ALL OUR GUARANTORS' EXISTING INDEBTEDNESS AND
POSSIBLY TO ALL THEIR FUTURE BORROWINGS
The exchange notes and the guarantees will be subordinated in right of
payment to all of our and the guarantors' existing and future senior
indebtedness, including borrowings currently under the 1999 Credit Facility.
Our and the guarantors' senior indebtedness includes all debt allowed under the
indenture governing the exchange notes, except for trade payables, tax
obligations and any future debt that is expressly equal with, or subordinated
in right of payment to, the exchange notes and the guarantees. The holders of
our and the guarantors' senior debt will be entitled to be paid in full in cash
before any payment may be made on the exchange notes or the guarantees in any
bankruptcy, liquidation, reorganization or similar proceeding applicable to us,
the guarantor or related properties. In the event of such a proceeding, holders
of the exchange notes will participate with our and the guarantors' trade
creditors and holders of other subordinated indebtedness in the distribution of
assets remaining after all of the senior debt has been paid in full. Moreover,
holders of the exchange notes may receive less, ratably, than holders of trade
payables in any such proceding because the indenture
11
<PAGE>
requires payment on senior debt before payment on the exchange notes. We and
the guarantors may not have sufficient funds to pay all of our creditors, and
holders of exchange notes may receive less, ratably, than the holders of senior
debt.
In addition, all payments on the exchange notes and the guarantees will be
blocked in the event of a payment default on senior debt and may be blocked for
up to 179 of 360 consecutive days.
The exchange notes would have been subordinated, as of May 26, 1999, to
approximately $133.1 million of senior debt on a pro forma basis. We may incur
additional senior debt in the future, subject to restrictions in the indenture.
See "Description of Exchange Notes -- Subordination."
AVAILABLE ADDITIONAL BORROWINGS AND ASSET ENCUMBRANCES -- DESPITE CURRENT
INDEBTEDNESS LEVELS, WE AND OUR SUBSIDIARIES MAY STILL BE ABLE TO INCUR
SUBSTANTIALLY MORE DEBT. IN ADDITION, WE AND OUR SUBSIDIARIES MAY BE ABLE TO
SECURE SUCH ADDITIONAL DEBT WITH OUR ASSETS AND THE ASSETS OF OUR SUBSIDIARIES.
THIS COULD FURTHER EXACERBATE THE RISKS ASSOCIATED WITH OUR SUBSTANTIAL
LEVERAGE
We and our subsidiaries may be able to incur substantial additional
indebtedness in the future. The terms of the indenture do not fully prohibit us
or our subsidiaries from doing so. Our new 1999 Credit Facility permits
additional borrowing of up to $250.0 million and these borrowings would be
senior to the exchange notes and the subsidiary guarantees. In addition, those
borrowings are secured by a pledge of all the capital stock, limited
partnership interests and limited liability company interests of the subsidiary
guarantors. If new debt is added to our and our subsidiaries' current debt
levels, the related risks that we and they now face could intensify. See
"Description of Certain Indebtedness -- 1999 Credit Facility."
ABILITY TO SERVICE DEBT -- TO SERVICE OUR INDEBTEDNESS, WE WILL REQUIRE A
SIGNIFICANT AMOUNT OF CASH. OUR ABILITY TO GENERATE CASH DEPENDS ON MANY
FACTORS BEYOND OUR CONTROL
Our ability to make payments on and to refinance our indebtedness,
including these exchange notes, and to fund planned capital expenditures and
research and development efforts will depend on our ability to generate cash in
the future. This, to a certain extent, is subject to general economic,
financial, competitive, legislative, regulatory and other factors that are
beyond our control.
Based on our current level of operations and anticipated cost savings and
operating improvements, we believe our cash flow from operations, available
cash and the anticipated available borrowings under our new 1999 Credit
Facility, will be adequate to meet our future liquidity needs for at least the
next few years.
We cannot assure you, however, that our business will generate sufficient
cash flow from operations, that currently anticipated cost savings and
operating improvements will be realized on schedule or that future borrowings
will be available to us under our 1999 Credit Facility in an amount sufficient
to enable us to pay our indebtedness, including these exchange notes, or to
fund our other liquidity needs. We may need to refinance all or a portion of
our indebtedness, including these exchange notes, on or before maturity. We
cannot assure you that we will be able to refinance any of our indebtedness,
including our 1999 Credit Facility and these exchange notes, on commercially
reasonable terms or at all.
NONRENEWAL OF A NASCAR EVENT LICENSE OR A DETERIORATION IN OUR RELATIONSHIP
WITH NASCAR COULD ADVERSELY AFFECT OUR PROFITABILITY
Our success has been and will remain dependent to a significant extent
upon maintaining a good working relationship with NASCAR, the sanctioning body
for Winston Cup and Busch races. We currently hold licenses to sponsor ten
Winston Cup races and seven Busch races. In 1998, we derived approximately 77%
of our total revenues from events sanctioned by NASCAR. Each NASCAR event
license is awarded on an annual basis. Although we believe that our
relationship with NASCAR is good, NASCAR is under no obligation to continue to
license SMI to sponsor any event. Nonrenewal of a NASCAR event license would
have a material adverse effect on our financial condition and results of
operations. Our strategy has included growth through the addition of
motorsports facilities. We cannot assure you that we will continue to obtain
NASCAR licenses to sponsor races at such facilities. See "National Association
for Stock Car Auto Racing, Inc. (NASCAR)."
HIGH COMPETITION IN THE MOTORSPORTS INDUSTRY COULD HINDER OUR ABILITY TO
MAINTAIN OR IMPROVE OUR POSITION IN THE INDUSTRY
Motorsports promotion is a competitive industry. We compete in regional
and national markets to sponsor events, especially NASCAR-sanctioned events.
Certain of our competitors have resources that exceed ours. NASCAR is owned by
Bill France, Jr. and the France family, who also control International Speedway
Corporation ("ISC"). ISC presently holds licenses to sponsor nine Winston Cup
races, more than any other track owner except for SMI. Bill France, Jr.
12
<PAGE>
through ISC also has made a substantial investment and is in the process of
acquiring the remaining interests in Penske Motorsports, Inc., another operator
of three tracks hosting NASCAR Winston Cup races. ISC and Penske Motorsports
are also part owners of another track hosting one NASCAR Winston Cup event. We
also compete locally with other sports and entertainment businesses, many of
which have resources that exceed ours. We cannot assure you that we will
maintain or improve our position in light of such competition. See "Business --
Competition."
BAD WEATHER ADVERSELY AFFECTS THE PROFITABILITY OF OUR MOTORSPORTS EVENTS
We sponsor and promote outdoor motorsports events. Weather conditions
affect sales of tickets, concessions and souvenirs, among other things, at
these events. Although we sell tickets well in advance of our events, poor
weather conditions can have an effect on our results of operations.
GOVERNMENT REGULATION OF CERTAIN MOTORSPORTS SPONSORS COULD NEGATIVELY IMPACT
THE AVAILABILITY OF PROMOTION, SPONSORSHIP AND ADVERTISING REVENUE FOR US
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. Advertising by the tobacco
and liquor industries is generally subject to greater governmental regulation
than advertising by other sponsors of our events. In addition, certain of our
sponsorship contracts are terminable upon the implementation of adverse
regulations. In August 1996, the U.S. Food and Drug Administration published
final regulations that substantially restrict tobacco industry sponsorship of
sporting events. We are aware of several pending legal challenges to the
regulations by third parties which, we believe, are likely to extend the
regulatory process. The final outcome of this regulatory process is uncertain,
and the impact on SMI, if any, is unclear.
In June 1997, tobacco industry representatives, health groups, state
attorneys general and certain plaintiffs' lawyers reached a settlement that
would, among other things, impose strict new limits on tobacco marketing and
advertising, including a ban on outdoor billboards and sponsoring sporting
events. The settlement must be approved by Congress and the President before it
becomes effective. There can be no assurance as to when or whether any such
approval will be obtained; the final outcome of this approval process and its
effects on the terms of the settlement are uncertain at the date of this
Prospectus. We cannot assure you that:
o the tobacco industry will continue to sponsor sporting events;
o suitable alternative sponsors could be located; or
o NASCAR will continue to sanction individual racing events sponsored by
the tobacco industry at any of our facilities.
Advertising and sponsorship revenue from the tobacco industry accounted
for approximately 1% of our total revenues in both fiscal 1997 and 1998. In
addition, the tobacco industry provides financial support to the motorsports
industry through, among other things, its purchase of advertising time and its
sponsorship of racing teams and racing series such as NASCAR's Winston Cup
series.
THE LOSS OF KEY PERSONNEL OF SMI COULD ADVERSELY AFFECT OUR OPERATIONS AND
GROWTH
Our success depends to a great extent upon the availability and
performance of our senior management, particularly O. Bruton Smith, the
Company's Chairman and Chief Executive Officer, and H.A. "Humpy" Wheeler, its
President and Chief Operating Officer, who have managed SMI as a team for over
25 years. Their experience within the industry, especially their working
relationship with NASCAR, will continue to be of considerable importance to us.
The loss of any of our key personnel or our inability to attract and retain key
employees in the future could have a material adverse effect on our operations
and business plans. See "NASCAR," "Business -- Growth Strategy" and
"Management."
SEASONALITY OF THE MOTORSPORTS INDUSTRY ADVERSELY AFFECTS OUR THIRD QUARTER
REVENUES
We have derived a substantial portion of our total revenues from
admissions and event-related revenue attributable to NASCAR-sanctioned races
held in March, April, May, June, August, October and November. As a result, our
business has been, and is expected to remain, highly seasonal. In 1997, our
second and fourth quarters accounted for 78% of our total annual revenues and
100% of our total annual operating income. In 1998, our second and fourth
quarters accounted for 74% of our total annual revenues and 97% of our total
annual operating income. We sometimes produce minimal operating income during
our third quarter, when we sponsor only one Winston Cup race weekend.
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<PAGE>
The concentration of our racing events in the second quarter and the
growth in our operations with attendant increases in overhead expenses will
tend to minimize operating income in future third quarters. Also, race dates at
our various facilities may from time to time be changed, lessening the
comparability of the financial results of quarters between years and increasing
or decreasing the seasonal nature of our business. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Overview" and
" -- Seasonality and Quarterly Results."
OUR CHAIRMAN OWNS A MAJORITY OF SMI'S COMMON STOCK WHICH WILL AFFECT ANY
POTENTIAL CHANGE OF CONTROL
As of March 31, 1999, Mr. Smith, who is our Chairman, owned, directly and
indirectly, approximately 67% of the outstanding shares of common stock. As a
result, Mr. Smith will continue to control the outcome of substantially all
issues submitted to our stockholders, including the election of all of our
directors.
ADVERSE OUTCOMES IN LEGAL PROCEEDINGS TO WHICH WE ARE A PARTY COULD ADVERSELY
AFFECT OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SMI is a party to ordinary routine litigation incidental to its business.
We do not believe that the resolution of any or all of such litigation is
likely to have a material adverse effect on our financial condition or results
of operations.
On April 23, 1996, the Northwest Independent School District (the "Texas
School District"), within whose borders TMS is located, filed a complaint
against TMS, among others, in a case styled "Northwest Independent School
District v. City of Fort Worth, FW Sports Authority, Inc., the Governor of
Texas, the Comptroller of Public Accounts of Texas, the Attorney General and
Texas Motor Speedway, Inc." (the "School District Litigation"). The School
District Litigation was filed in State District Court of Travis County, Texas
seeking a judgement that revokes TMS' tax exemption. The School District
Litigation was dismissed by the trial court and such dismissal was upheld on
appeal on June 1997. Subsequently, the Texas School District filed an
administrative protest with the Denton County, Texas Tax Appraisal District,
which substantially realleges the allegations expressed originally in the
School District Litigation challenging the tax exempt status of the TMS
facility. By order entered on June 19, 1997, the Denton County, Texas Tax
Appraisal District confirmed the tax exempt status of the TMS properties. The
Texas School District appealed that order in state district court. The case
remains in its discovery phase. SMI has vigorously defended, and will continue
to defend, the tax exempt status of TMS. At this pretrial stage in the
proceeding, we are unable to quantify with any certainty the tax effect on SMI
of any outcome in this matter.
On December 18, 1996, TMS conveyed its facility properties to the FW
Sports Authority, a non-profit corporate instrumentality of the City of Fort
Worth, Texas, for a specified amount payable over 30 years from incremental tax
funds collected on non-exempt properties located within the boundaries of a
reinvestment zone established by the City. TMS simultaneously entered into a
lease with the FW Sports Authority ("TMS Lease"). Because the properties are
owned by a public instrumentality and are to be used for public recreational
purposes, the TMS facility properties are listed as exempt from ad valorem
taxes on the property tax rolls of the Tarrant and Denton County Tax Appraisal
Districts. Like other publicly owned professional sports facilities,
significant ad valorem tax savings are expected over the next 30 years. Should
the Texas School District successfully challenge the ad valorem tax exemption,
the TMS Lease provides that all taxes levied on the TMS facility properties,
including any claims for back taxes, are payable by TMS and SMI.
A bill was recently introduced in the Texas Legislature seeking to
prohibit non-profit corporate instrumentalities, like the FW Sports Authority,
from owning and leasing sports and recreational facilities unless the voters of
the sponsoring City have affirmatively voted for certain sales taxes. SMI
intends to vigorously oppose the passage of this bill and to make all legal
challenges to the bill should it become law. We cannot assure you that we will
be successful in protecting the tax exempt status of the TMS facility. If the
TMS facility loses its tax exempt status, the TMS Lease provides TMS with a
purchase option that is immediately exercisable provided that TMS continues to
operate the speedway as a motorsports facility for 15 years.
On May 28, 1999, a civil wrongful death complaint was filed in the
Superior Court of Mecklenburg County, North Carolina styled "Laurie Ann Mobley
Helton, as Administratrix of the Estate of Dexter Barry Mobley, Sr. v. Speedway
Motorsports, Inc., a Delaware corporation, d/b/a Lowe's Motor Speedway; Pep
Boys Indy Racing League; and H.A. "Humpy" Wheeler" (the "Mobley Complaint").
The Mobley Complaint seeks unspecified compensatory and punitive damages
arising from the accident at LMSC's May 1999 IRL race that resulted in a fatal
injury to Dexter Mobley, Sr. SMI and the other defendants have not yet filed an
answer in this matter but intend to defend themselves against the allegations
of the Mobley Complaint. See " -- Liability for Personal Injuries and Product
Liability Claims Could Significantly Affect Our Financial Condition and Results
of Operations."
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<PAGE>
LIABILITY FOR PERSONAL INJURIES AND PRODUCT LIABILITY CLAIMS COULD
SIGNIFICANTLY AFFECT OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Motorsports can be dangerous to participants and to spectators. LMSC
cancelled its May 1, 1999 IRL event after three spectators were killed and
eight others injured when debris from an on-track accident at LMSC entered a
grandstand during the race. We are investigating this incident and have not
reached any final conclusion regarding it. The Mobley Complaint was filed
against SMI, among others, by a representative of the estate of one of the
spectators who was fatally injured in this accident. We cannot assure you that
this incident will not result in additional claims by the injured parties or
their representatives or other liabilities that may have a material adverse
effect on us. We maintain insurance policies that provide coverage within
limits that are sufficient, in management's judgment, to protect us from
material financial loss due to liability for personal injuries sustained by
persons on our premises in the ordinary course of our business. Nevertheless,
there can be no assurance that such insurance will be adequate at all times and
in all circumstances. We also may be subject to product liability claims, for
which we are self-insured, with respect to the manufacture and sale of Legends
Cars. Our financial condition and results of operations would be adversely
affected to the extent claims and associated expenses exceed insurance
recoveries. See "--Adverse Outcomes in Legal Proceedings to Which We Are a Party
Could Adversely Affect Our Financial Condition and Results of Operations."
ENVIRONMENTAL REGULATION COMPLIANCE COSTS MAY NEGATIVELY IMPACT OUR
PROFITABILITY
Solid waste landfilling has occurred on and around our property at LMSC
for many years. Landfilling of general categories of municipal solid waste on
the LMSC property ceased in 1992. However, there are two landfills currently
operating at LMSC that are permitted to receive inert debris and waste from
land clearing activities ("LCID" landfills). Two other LCID landfills on the
LMSC property were closed in 1994. LMSC intends to allow similar LCID landfills
to be operated on the LMSC property in the future. LMSC also leases a portion
of its property to a subsidiary of Browning-Ferris Industries, Inc. ("BFI") for
use as a construction and demolition debris landfill (a "C&D" landfill), which
can receive solid waste resulting solely from construction, remodeling, repair
or demolition operations on pavement, buildings or other structures, but which
cannot receive inert debris, land-clearing debris or yard debris. In addition,
the BFI subsidiary owns and operates an active solid waste landfill adjacent to
LMSC. We believe that the active solid waste landfill was constructed in such a
manner as to minimize the risk of contamination to surrounding property.
Portions of the inactive solid waste landfill areas on the LMSC property
are subject to a groundwater monitoring program and data is submitted to the
North Carolina Department of Environment and Natural Resources ("DENR"). DENR
has noted that data from certain groundwater sampling events have indicated
levels of certain regulated compounds that exceed acceptable trigger levels and
organic compounds that exceed regulatory groundwater standards. DENR has not
acted to require any remedial action by us at this time with respect to this
situation. In the future, DENR could possibly require us to take certain
actions with respect to this situation that could result in material costs
being incurred by us.
We believe that our operations, including the landfills on our property,
are in substantial compliance with all applicable federal, state and local
environmental laws and regulations. Nonetheless, if damage to persons or
property or contamination of the environment is determined to have been caused
by the conduct of our business or by pollutants used, generated or disposed of
by us, or which may be found on our property, we may be held liable for such
damage and may be required to pay the cost of investigation or remediation, or
both, of such contamination or damage. The amount of such liability, as to
which we are self-insured, could be material. Changes in federal, state or
local laws, regulations or requirements, or the discovery of previously unknown
conditions, could require additional expenditures by us.
HOLDERS OF OUR OLD NOTES MAY CHOOSE NOT TO PARTICIPATE IN THE EXCHANGE OFFER
We believe that most or all of the old notes will be tendered in the
exchange offer for exchange notes; however, we cannot assure you that a
significant amount of the old notes will be tendered. Failure of a significant
amount of the old notes to be tendered could affect the liquidity of the market
for the exchange notes.
FINANCING CHANGE OF CONTROL OFFER -- WE MAY NOT HAVE THE ABILITY TO RAISE THE
FUNDS NECESSARY TO FINANCE THE CHANGE OF CONTROL OFFER REQUIRED BY THE
INDENTURE
Upon the occurrence of certain specific kinds of change of control events,
we will be required to offer to repurchase all outstanding exchange notes.
However, it is possible that we will not have sufficient funds at the time of
the change of control to make the required repurchase of exchange notes or that
restrictions in our 1999 Credit Facility will not allow such repurchases. In
addition, certain important corporate events, such as leveraged
recapitalizations that would increase
15
<PAGE>
the level of our indebtedness, would not constitute a "Change of Control" under
the indenture. See "Description of Exchange Notes -- Repurchase at the Option
of Holders."
FRAUDULENT CONVEYANCE MATTERS -- FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER
SPECIFIC CIRCUMSTANCES, TO VOID GUARANTEES AND REQUIRE NOTEHOLDERS TO RETURN
PAYMENTS RECEIVED FROM GUARANTORS
Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, a guarantee could be voided, or claims in respect of
a guarantee could be subordinated to all other debts of that guarantor if,
among other things, the guarantor, at the time it incurred the indebtedness
evidenced by its guarantee:
o received less than reasonably equivalent value or fair consideration for
the incurrence of such guarantee; and
o was insolvent or rendered insolvent by reason of such incurrence; or
o was engaged in a business or transaction for which the guarantor's
remaining assets constituted unreasonably small capital; or
o intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they mature.
In addition, any payment by that guarantor pursuant to its guarantee could
be voided and required to be returned to the guarantor, or to a fund for the
benefit of the creditors of the guarantor.
The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, a guarantor would be
considered insolvent if:
o the sum of its debts, including contingent liabilities, were greater
than the fair saleable value of all of its assets, or
o the present fair saleable value of its assets were less than the amount
that would be required to pay its probable liability on its existing
debts, including contingent liabilities, as they become absolute and
mature, or
o it could not pay its debts as they become due.
On the basis of historical financial information, recent operating history
and other factors, we believe that each guarantor, after giving effect to its
guarantee of these exchange notes, will not be insolvent, will not have
unreasonably small capital for the business in which it is engaged and will not
have incurred debts beyond its ability to pay such debts as they mature. We can
give you no assurance, however, as to what standard a court would apply in
making such determinations or that a court would agree with our conclusions in
this regard.
RESTRICTIONS IMPOSED BY TERMS OF OUR INDEBTEDNESS COULD LIMIT OUR ABILITY TO
RESPOND TO CHANGING BUSINESS AND ECONOMIC CONDITIONS AND TO SECURE ADDITIONAL
FINANCING
The indenture restricts, among other things, our and our subsidiaries'
ability to do any of the following:
o incur additional indebtedness;
o pay dividends or make certain other restricted payments;
o incur liens to secure PARI PASSU or subordinated indebtedness;
o sell stock of subsidiaries;
o apply net proceeds from certain asset sales;
o merge or consolidate with any other person;
o sell, assign, transfer, lease, convey or otherwise dispose of
substantially all of our assets;
o enter into certain transactions with affiliates; or
o incur indebtedness that is subordinate in right of payment to any senior
indebtedness and senior in right of payment to the exchange notes.
As a result of these covenants, our ability to respond to changing business and
economic conditions and to secure additional financing, if needed, may be
significantly restricted. We may be prevented from engaging in transactions
that might otherwise be considered beneficial to us. See "Description of
Exchange Notes" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
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<PAGE>
The 1999 Credit Facility contains more extensive and restrictive covenants
and restrictions than the indenture. It requires us to maintain specified
financial ratios and satisfy certain financial condition tests. Our ability to
meet those financial ratios and tests can be affected by events beyond our
control, and there can be no assurance that we will meet those tests. A breach
of any of these covenants could result in a default under the 1999 Credit
Facility. If there is an event of default under the 1999 Credit Facility, the
lenders could elect to declare all amounts outstanding, including accrued
interest or other obligations, to be immediately due and payable. If we were
unable to repay these amounts, such lenders could proceed against the
collateral, if any, granted to them to secure that indebtedness. If any senior
indebtedness were to be accelerated, we cannot assure that our assets would be
sufficient to repay in full the senior indebtedness and our other indebtedness,
including the exchange notes.
ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON TRANSFER -- YOU CANNOT BE SURE THAT
AN ACTIVE TRADING MARKET WILL DEVELOP FOR THE EXCHANGE NOTES
The Series B and Series C Notes were not listed on any securities
exchange. Before the May 1999 offering of the Series C Notes, there had been no
market for the Series C Notes. Since the issuance of the Series C Notes, there
has been a limited trading market for the Series C Notes and there can be no
assurance that such market will provide adequate liquidity for holders who want
to sell their Series C Notes.
The exchange notes will not be listed on any securities exchange. The
exchange notes are new securities for which there is currently no market. The
exchange notes may trade at a discount from their initial offering price,
depending upon prevailing interest rates, the market for similar securities,
our performance and other factors. We have been advised that the initial
purchasers of the old notes intend to make a market in the exchange notes, as
well as the unregistered notes, as permitted by applicable laws and
regulations. However, they are not obligated to do so and their market making
activities may be discontinued at any time without notice. In addition, their
market making activities may be limited during the exchange offer and the
pendency of the shelf registration statement. Therefore, there can be no
assurance that an active market for the exchange notes will develop. If no
active trading market develops, you may not be able to resell your exchange
notes at their fair market value or at all. See "The Exchange Offer" and "Plan
of Distribution."
CONSEQUENCES OF FAILURE TO EXCHANGE
Series C Notes that are not exchanged for exchange notes in the exchange
offer will remain restricted securities. The Series C Notes will continue to be
subject to the following restrictions on transfer and limitation of rights:
o the Series C Notes may be resold only if registered pursuant to the
Securities Act, if an exemption from registration is available
thereunder, or if neither such registration nor such exemption is
required by law;
o The Series C Notes will bear a legend restricting transfer in the
absence of registration or an exemption therefrom;
o a holder of Series C Notes who wishes to sell or otherwise dispose of
all or any part of its Series C Notes under an exemption from
registration under the Securities Act, if requested by SMI, must
deliver to SMI an opinion of counsel reasonably satisafactory in form
and substance to SMI, that such exemption is available; and
o the Series C Notes may no longer have rights under the registration
rights agreement.
Consequently, the Series C Notes will have less liquidity than the exchange
notes but will bear interest at the same rate as that borne by the exchange
notes.
Holders of Series B Notes who fail to tender them will continue to hold
registered securities, but the total principal amount of Series B Notes may be
reduced by this exchange offer which in turn may reduce the liquidity of the
Series B Notes outstanding after the offering.
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the exchange
notes. In consideration for issuing the exchange notes as contemplated in this
prospectus, we will receive in exchange Series B and Series C Notes in like
principal amount, which will be canceled. Accordingly, there will not be any
increase in our outstanding indebtedness.
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CAPITALIZATION
The following table sets forth our capitalization on a historical basis as
of December 31, 1998, and March 31, 1999 and on a pro forma basis to give
effect to the sale of the Series C Notes in May 1999, the application of the
net proceeds from that offering, and the closing of the 1999 Credit Facility.
This table should be read in conjunction with the Consolidated Financial
Statements (including the notes thereto) included elsewhere in this prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1998 MARCH 31, 1999
--------------------------- --------------------------
(IN THOUSANDS)
ACTUAL PRO FORMA (1) ACTUAL PRO FORMA (1)
----------- --------------- ----------- --------------
<S> <C> <C> <C> <C>
Long-term debt, including current maturities:
Bank and other loans payable ............................ $255,216 $132,416 $256,089 $133,289
8 1/2% Senior Subordinated Notes due 2007 ............... 124,708 253,458 124,717 253,467
5 3/4% Convertible Subordinated Debentures due 2003 ..... 74,000 74,000 74,000 74,000
-------- -------- -------- --------
Total long-term debt .................................. 453,924 459,874 454,806 460,756
Total stockholders' equity ............................... 287,120 287,120 289,260 289,260
-------- -------- -------- --------
Total capitalization ................................ $741,044 $746,994 $744,066 $750,016
======== ======== ======== ========
</TABLE>
- ---------
(1) Assumes that net proceeds of $122.8 million from the sale of the Series C
Notes, and after deducting estimated loan costs for the 1999 Credit
Facility, were applied to repay a portion of the amounts outstanding under
the Acquisition Loan.
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<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data for the five years ended December
31, 1998 have been derived from audited financial statements. The financial
statements for the three years ended December 31, 1998 were audited by Deloitte
& Touche LLP, independent auditors, and these financial statements and
auditors' report are contained elsewhere in this prospectus. The financial data
for the three months ended March 31, 1998 and 1999 are derived from unaudited
consolidated financial statements. The unaudited consolidated financial
statements include all adjustments, consisting of normal recurring accruals,
which management considers necessary for fair presentation of the financial
position and the results of operations for these periods. Operating results for
the three months ended March 31, 1999 are not indicative of the results that
may be expected for the entire year ended December 31, 1999. All of the data
set forth below are qualified by reference to, and should be read in
conjunction with, "Description of Certain Indebtedness," SMI's Consolidated
Financial Statements (including the notes thereto), and its "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1994 1995 1996 1997 1998
----------- ----------- ------------ ---------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(1):
Revenues:
Admissions .............................................. $ 31,523 $ 36,569 $ 52,451 $ 94,032 $ 107,601
Event-related revenue ................................... 24,814 27,783 36,414 83,177 105,459
Other operating revenue ................................. 8,200 11,221 13,248 14,917 16,736
-------- -------- --------- -------- ---------
Total revenues ......................................... 64,537 75,573 102,113 192,126 229,796
-------- -------- --------- -------- ---------
Operating Expenses:
Direct expense of events ................................ 18,327 19,999 30,173 65,347 83,046
Other direct operating expense .......................... 6,110 7,611 8,005 9,181 10,975
General and administrative .............................. 11,812 13,381 16,995 31,623 34,279
Non-cash stock compensation(2) .......................... 3,000 -- -- -- --
Depreciation and amortization ........................... 4,500 4,893 7,598 15,742 21,701
Preoperating expense of new facility(3) ................. -- -- -- 1,850 --
-------- -------- --------- -------- ---------
Total operating expenses ............................... 43,749 45,884 62,771 123,743 150,001
======== ======== ========= ======== =========
Operating income (loss) .................................. 20,788 29,689 39,342 68,383 79,795
Interest income (expense), net ........................... (3,855) (24) 1,316 (5,313) (12,228)
Acquisition loan cost amortization(4) .................... -- -- -- -- (752)
Other income ............................................. 1,592 3,625 2,399 991 3,202
-------- -------- --------- -------- ---------
Income (loss) from continuing operations before income
taxes ................................................... 18,525 33,290 43,057 64,061 70,017
Provision for income taxes ............................... 8,055 13,700 16,652 25,883 27,646
-------- -------- --------- -------- ---------
Income (loss) from continuing operations ................. 10,470 19,590 26,405 38,178 42,371
Discontinued operations .................................. (294) -- -- -- --
-------- -------- --------- -------- ---------
Income (loss) before extraordinary item .................. 10,176 19,590 26,405 38,178 42,371
Extraordinary item, net .................................. -- (133) -- -- --
-------- -------- --------- -------- ---------
Net income (loss) ........................................ $ 10,176 $ 19,457 $ 26,405 $ 38,178 $ 42,371
======== ======== ========= ======== =========
Income (loss) from continuing operations applicable to
Common Stock(5) ......................................... $ 7,464 $ 19,590 $ 26,405 $ 38,178 $ 42,371
======== ======== ========= ======== =========
Income (loss) per share from continuing operations
applicable to Common Stock-basic(6) ..................... $ 0.25 $ 0.53 $ 0.65 $ 0.92 $ 1.02
======== ======== ========= ======== =========
Weighted average shares outstanding-basic(6) ............. 30,000 36,663 40,476 41,338 41,482
======== ======== ========= ======== =========
Income (loss) per share from continuing operations
applicable to Common Stock-diluted(6) ................... $ 0.25 $ 0.52 $ 0.64 $ 0.89 $ 1.00
======== ======== ========= ======== =========
Weighted average shares outstanding-diluted(6) ........... 30,400 37,275 41,911 44,491 44,611
======== ======== ========= ======== =========
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1998 1999
----------- ----------
(IN THOUSANDS, EXCEPT
PER SHARE
DATA)
<S> <C> <C>
INCOME STATEMENT DATA(1):
Revenues:
Admissions .............................................. $ 5,688 $ 19,826
Event-related revenue ................................... 8,469 27,956
Other operating revenue ................................. 3,803 5,322
-------- --------
Total revenues ......................................... 17,960 53,104
-------- --------
Operating Expenses:
Direct expense of events ................................ 5,953 19,769
Other direct operating expense .......................... 2,222 3,527
General and administrative .............................. 8,174 10,800
Non-cash stock compensation(2) .......................... -- --
Depreciation and amortization ........................... 4,758 7,119
Preoperating expense of new facility(3) ................. -- --
-------- --------
Total operating expenses ............................... 21,707 41,215
======== ========
Operating income (loss) .................................. (3,147) 11,889
Interest income (expense), net ........................... (2,748) (6,327)
Acquisition loan cost amortization(4) .................... -- (2,263)
Other income ............................................. 1,044 174
-------- --------
Income (loss) from continuing operations before income
taxes ................................................... (4,851) 3,473
Provision for income taxes ............................... (1,928) 1,465
-------- --------
Income (loss) from continuing operations ................. (2,923) 2,008
Discontinued operations .................................. -- --
-------- --------
Income (loss) before extraordinary item .................. (2,923) 2,008
Extraordinary item, net .................................. -- --
-------- --------
Net income (loss) ........................................ $ (2,923) $ 2,008
======== ========
Income (loss) from continuing operations applicable to
Common Stock(5) ......................................... $ (2,923) $ 2,008
======== ========
Income (loss) per share from continuing operations
applicable to Common Stock-basic(6) ..................... $ (0.07) $ 0.05
======== ========
Weighted average shares outstanding-basic(6) ............. 41,461 41,507
======== ========
Income (loss) per share from continuing operations
applicable to Common Stock-diluted(6) ................... $ (0.07) $ 0.05
======== ========
Weighted average shares outstanding-diluted(6) ........... 44,613 44,872
======== ========
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1994 1995 1996 1997 1998
------------- ------------- ------------- ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE, RATIOS AND SELECTED DATA)
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Cash flows provided by (used in):
Operating activities ........................... $ 13,993 $ 31,045 $ 37,384 $ 81,049 $ 86,396
Financing activities ........................... (11,423) 18,371 171,861 97,491 232,375
Investing activities ........................... (3,887) (46,330) (197,125) (172,644) (311,520)
EBITDA(7) ........................................ 27,307 39,100 51,348 87,548 107,728
Depreciation and amortization(8) ................. 4,500 4,893 7,598 15,742 22,453
Capital expenditures ............................. 5,009 40,718 147,741 162,011 98,574
Ratio of earnings to fixed charges(9) ............ 5.2x 36.1x 11.5x 5.0x 4.2x
SELECTED DATA:
SMI major NASCAR-sanctioned events ............... 8 8 12 15 15
Attendance at all Winston Cup events(10) ......... 4,896,000 5,327,000 5,588,000 6,091,000 6,301,000
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1998 1999
--------------- ------------
(IN THOUSANDS, EXCEPT PER
SHARE, RATIOS AND
SELECTED DATA)
<S> <C> <C>
OTHER DATA:
Cash flows provided by (used in):
Operating activities ........................... $ 29,104 $ 36,396
Financing activities ........................... 7,098 32
Investing activities ........................... (37,366) (30,686)
EBITDA(7) ........................................ 3,315 19,892
Depreciation and amortization(8) ................. 4,758 9,382
Capital expenditures ............................. 36,478 30,484
Ratio of earnings to fixed charges(9) ............ -- 1.2x
SELECTED DATA:
SMI major NASCAR-sanctioned events ............... 1(13) 4
Attendance at all Winston Cup events(10) .........
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD)(1):
Working capital (deficit), including Acquisition Loan ............ $ (1,344) $ (1,816) $ 3,644
Working capital (deficit), excluding Acquisition Loan(11) ........ (1,344) (1,816) 3,644
Total assets ..................................................... 93,453 136,446 409,284
Total long-term debt, including current maturities(12) ........... 47,261 1,806 115,630
Stockholders' equity ............................................. 19,232 95,379 204,735
<CAPTION>
DECEMBER 31, MARCH 31,
--------------------------- --------------
1997 1998 1999
------------ -------------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD)(1):
Working capital (deficit), including Acquisition Loan ............ $ (1,988) $ (268,326) $ (287,538)
Working capital (deficit), excluding Acquisition Loan(11) ........ (1,988) (14,276) (33,488)
Total assets ..................................................... 597,168 904,877 941,194
Total long-term debt, including current maturities(12) ........... 219,510 453,924 454,806
Stockholders' equity ............................................. 244,114 287,120 289,260
</TABLE>
- ---------
(1) The year end data for 1994 and 1995 include AMS and LMSC; for 1996 include
BMS acquired in January 1996 and SPR acquired in November 1996; for 1997
include TMS which hosted it first racing event on April 6, 1997; and for
1998 include LVMS acquired in December 1998. The quarterly data for the
three months ended March 31, 1998 include AMS, BMS, LMSC, SPR and TMS, and
for the three months ended March 31, 1999 include LVMS. See Note 1 to the
December 31, 1998 (included herein) and March 31, 1999 (incorporated by
reference) Consolidated Financial Statements.
(2) On December 21, 1994, we granted options to nine employees to purchase an
aggregate of 800,000 shares of common stock at an exercise price of $3.75
per share. As a result, we recorded a non-cash stock compensation charge
of $3.0 million (before tax) in December 1994, which represents the
difference between managements' estimate of the fair value of the common
stock at the date of grant, after considering the then proposed initial
public offering of our stock, and the exercise price of the options
granted.
(3) Preoperating expense of new facility represents non-recurring and non-event
related costs to develop, organize and open TMS.
(4) Acquisition Loan cost amortization represents financing costs incurred in
obtaining the Acquisition Loan to fund the LVMS acquisition. See Notes 2
and 5 to the December 31, 1998 and March 31, 1999 Consolidated Financial
Statements.
(5) The data for 1994 represents reported income from continuing operations
less accretion in the estimated redemption value of certain warrants to
purchase AMS stock. On December 16, 1994, AMS redeemed such warrants from
NationsBank, N.A. (Carolinas).
(6) The 1994 income per share from continuing operations applicable to common
stock has been prepared on a pro forma basis to reflect the 30,000,000
common shares outstanding after giving effect to a restructuring whereby
AMS and LMSC became wholly-owned subsidiaries of SMI. Income per share
from continuing operations applicable to common stock represents basic and
diluted earnings per share. See Notes 1 and 9 to the Speedway Motorsports,
Inc. and Subsidiaries December 31, 1996 Consolidated Financial Statements.
(7) EBITDA represents income from continuing operations before interest
expense, income taxes and depreciation and amortization. EBITDA is
included herein because we believe that certain investors find it to be a
useful tool for measuring a company's ability to service its debt;
however, EBITDA does not represent cash flow from operations, as defined
by generally accepted accounting principles, and should not be considered
as a substitute for net income as an indicator of our operating
performance or for cash flow as a measure of liquidity. The Company's
determination and presentation of the non-GAAP measures of financial
performance such as EDITDA may not be comparable to similarly titled
measures reported by other companies.
20
<PAGE>
(8) Amortization expense includes Acquisition Loan cost amortization of
$752,000 for the year ended December 31, 1998 and $2.3 million for the
three months ended March 31, 1999. See Note 2 to the December 31, 1998 and
March 31, 1999 Consolidated Financial Statements.
(9) The ratio of earnings to fixed charges is computed by dividing fixed
charges into income from continuing operations before income taxes plus
fixed charges. Fixed charges consist of interest, whether expensed or
capitalized, amortization of financing costs and the estimated interest
component of rent expense. Earnings were insufficient to cover fixed
charges by $4.9 million for the three months ended March 31, 1998.
(10) Source: Goodyear Tire and Rubber Company.
(11) Working capital deficit as of December 31, 1998 and March 31, 1999
excludes borrowings of $254.0 million under SMI's Revolving Credit
Facility and the Acquisition Loan which was repaid and retired May 31,
1999. See Note 5 to the Speedway Motorsports, Inc. and Subsidiaries
December 31, 1998 (included herein) and March 31, 1999 (incorporated by
reference) Consolidated Financial Statements.
(12) As of December 31, 1998 and March 31, 1999, on a pro forma basis after
giving effect to the issuance of the notes and application of the net
proceeds therefrom, we would have had $132.4 million and $133.3 million,
respectively, of outstanding indebtedness which would rank senior to the
Notes.
(13) The Busch Series race at AMS, originally scheduled to be held in March
1998, was rescheduled to November 1998 due to poor weather conditions.
Rescheduling did not materially impact revenues and operating expenses as
reported for the first and fourth quarters of 1998.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Audited Consolidated Financial Statements and related notes appearing
elsewhere in this prospectus.
OVERVIEW
We derive revenues principally from the following:
o the sale of tickets to automobile races and other events held at our
speedway facilities;
o the licensing of television, cable network and radio rights to broadcast
such events;
o the sale of food, beverages and souvenirs during such events; and
o the sale of sponsorships to companies that desire to advertise or sell
their products or services at such events.
We derive additional revenue from The Speedway Club, a dining and
entertainment facility at LMSC, Legends Car operations, Oil-Chem, a
wholly-owned subsidiary that produces an environmentally friendly motor oil
additive that we intend to promote in conjunction with our speedways, and Wild
Man Industries ("WMI"), a wholly owned subsidiary of FLE, that is a screen
printing and embroidery manufacturer and distributor of wholesale and retail
apparel.
We classify our revenues as admissions, event-related revenues and other
operating revenue. "Admissions" includes ticket sales for all of our events.
"Event related revenues" includes food, beverage and souvenir sales, luxury
suite rentals, sponsorship fees and broadcast right fees. "Other operating
revenue" includes the Speedway Club, Legends Car, industrial park rental, WMI
and Oil-Chem revenues. Our revenue items produce different operating margins.
Sponsorships, broadcast rights, ticket sales and luxury suite rentals produce
higher margins than concessions and souvenir sales, as well as Legends Car
sales.
We classify our expenses to include direct expense of events and other
direct operating expense, among other things. "Direct expense of events"
principally consists of race purses, sanctioning fees, cost of souvenir sales,
compensation of certain employees and advertising. "Other direct operating
expense" includes the cost of the Speedway Club and Legends Car sales, and
industrial park rentals, WMI and Oil-Chem revenues.
We sponsor and promote outdoor motorsports events. Weather conditions
affect sales of tickets, concessions and souvenirs, among other things, at
these events. Although we sell tickets well in advance of our events, poor
weather conditions can have an effect on our results of operations.
Significant growth in our revenues will depend on consistent investment in
facilities. We have several capital projects underway at each of our speedways.
We do not believe that our financial performance has been materially
affected by inflation. We have been able to mitigate the effects of inflation
by increasing prices.
RESULTS OF OPERATIONS
In 1998, we began operating certain food and beverage concession
activities through our wholly-owned subsidiary Finish Line Events, which
previously had been procured from a third party. As a result, revenues and
expenses associated with such concession activities for the year ended December
31, 1998 are included in event related revenues, direct expense of events and
general and administrative expense. For the years ended December 31, 1996 and
1997, our operating profits from such activities under our arrangement with the
outside vendor were reported as event related revenue.
22
<PAGE>
The table below shows the relationship of income and expense items
relative to total revenue for the years ended December 31, 1996, 1997 and 1998
and for the three months ended March 31, 1998 and 1999.
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL REVENUE FOR THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------------- ------------------------
1996 1997 1998 1998 1999
---------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Revenues:
Admissions ................................. 51.4% 48.9% 46.8% 31.7% 37.3%
Event-related revenue ...................... 35.6 43.3 45.9 47.1 52.7
Other operating revenue .................... 13.0 7.8 7.3 21.2 10.0
----- ----- ----- ----- -----
Total revenues ............................. 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
Operating Expenses:
Direct expense of events ................... 29.6 34.0 36.1 33.1 37.2
Other direct operating expense ............. 7.8 4.8 4.8 12.4 6.6
General and administrative ................. 16.6 16.4 14.9 45.5 20.4
Depreciation and amortization .............. 7.5 8.2 9.5 26.5 13.4
Preoperating expense of new facility ....... -- 1.0 -- -- --
----- ----- ----- ----- -----
Total operating expenses ................... 61.5 64.4 65.3 117.5 77.6
----- ----- ----- ----- -----
Operating income ........................... 38.5 35.6 34.7 (17.5) 22.4
Interest income (expense), net ............. 1.3 ( 2.7) ( 5.3) (15.3) (11.9)
Other income, net .......................... 2.4 .5 1.0 5.8 ( 3.9)
Income tax provision ....................... (16.3) (13.5) (12.0) 10.7 ( 2.8)
----- ----- ----- ----- -----
Net income ................................. 25.9% 19.9% 18.4% (16.3)% 3.8%
===== ===== ===== ===== =====
</TABLE>
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
TOTAL REVENUES for the three months ended March 31, 1999 increased by
$35.1 million, or 195.7%, to $53.1 million, over such revenues for the same
period in 1998. This improvement was due to increases in all revenue items,
particularly admissions and event related revenues.
ADMISSIONS for the three months ended March 31, 1999 increased by $14.1
million, or 248.6%, over admissions for the same period in 1998. This increase
was due primarily to hosting new NASCAR-sanctioned racing events at LVMS, which
was acquired in December 1998. The increase also was due to growth in
NASCAR-sanctioned racing events held at AMS during the current quarter. The
growth in admissions also reflects the continued increases in attendance and in
ticket prices, and additions to permanent seating capacity.
EVENT RELATED REVENUE for the three months ended March 31, 1999 increased
by $19.5 million, or 230.1%, over such revenue for the same period in 1998.
This increase was due primarily to hosting NASCAR-sanctioned racing events at
our newly acquired LVMS. The increase also was due to increases in broadcast
rights and sponsorship fees, and to growth in attendance, including related
increases in concessions and souvenir sales.
OTHER OPERATING REVENUE for the three months ended March 31, 1999
increased by $1.5 million, or 39.9%, over such revenue for the same period in
1998. This increase was primarily attributable to revenues derived from WMI,
which was acquired in October 1998, and to an increase in Legend Car revenues
of 600 Racing.
DIRECT EXPENSE OF EVENTS for the three months ended March 31, 1999
increased by $13.8 million, or 232.1%, over such expense for the same period in
1998. This increase was due primarily to hosting NASCAR-sanctioned racing
events at our newly acquired LVMS. The increase also was due to higher race
purses and sanctioning fees required for NASCAR-sanctioned racing events held
at AMS, and to increased operating costs associated with the growth in
attendance, including related increases in concessions and souvenir sales.
OTHER DIRECT OPERATING EXPENSES for the three months ended March 31, 1999
increased by $1.3 million, or 58.7%, over such expense for the same period in
1998. The increase includes expenses associated with other operating revenues
derived from WMI and with the increase in revenues derived from Legend Cars of
600 Racing.
GENERAL AND ADMINISTRATIVE EXPENSE for the three months ended March 31,
1999 increased by $2.6 million, or 32.1%, over such expense for the same period
in 1998. The increase was primarily attributable to costs associated with
23
<PAGE>
our newly acquired LVMS. The increase also was due to increases in operating
costs associated with the growth and expansion at our other speedways.
DEPRECIATION AND AMORTIZATION EXPENSE for the three months ended March 31,
1999 increased by $2.4 million, or 49.6%, over such expense for the same period
in 1998. This increase was primarily due to property and equipment and
intangible assets related to the LVMS acquisition. The increase also was due to
additions to property and equipment at our other speedways.
OPERATING INCOME for the three months ended March 31, 1999 increased $15.0
million to $11.9 million compared to an operating loss of $3.1 million for the
same period in 1998. This increase was due to the factors discussed above.
INTEREST EXPENSE, NET for the three months ended March 31, 1999 was $6.3
million compared to $2.7 million for the same period in 1998. This increase was
due primarily to higher average borrowings outstanding during the three months
ended March 31, 1999 as compared to the same period in 1998. The increase
reflects additional borrowings to fund the LVMS acquisition.
ACQUISITION LOAN COST AMORTIZATION of $2.3 million for the three months
ended March 31, 1999 represents financing costs incurred in obtaining the
Acquisition Loan to fund the LVMS acquisition. Associated deferred financing
costs of $4.1 million are being amortized over the loan term which matures May
31, 1999.
OTHER INCOME for the three months ended March 31, 1999 decreased by
$870,000 from such income for the same period in 1998. This decrease results
primarily from gains on sales of eight TMS condominiums in the three months
ended March 31, 1998. No sales of TMS condominiums occurred in the three months
ended March 31, 1999.
INCOME TAX PROVISION. Our effective income tax rate for the three months
ended March 31, 1999 and 1998 was 40%.
NET INCOME for the three months ended March 31, 1999 increased by $4.9
million to $2.0 million, compared to a net loss of $2.9 million for the same
period in 1998. This increase was due to the factors discussed above.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
TOTAL REVENUES for 1998 increased by $37.7 million, or 19.6%, to $229.8
million, over such revenues for 1997. This improvement was attributable to
increases in all revenue items, particularly admissions and event related
revenues.
ADMISSIONS for 1998 increased by $13.6 million, or 14.4%, over admissions
for 1997. This increase was due primarily to growth in NASCAR sanctioned racing
events, and to hosting new IRL racing events at AMS and TMS during the current
period. The growth in admissions reflects the continued increases in
attendance, additions to permanent seating capacity, and increases in ticket
prices.
EVENT RELATED REVENUE for 1998 increased by $22.3 million, or 26.8%, over
such revenue for 1997. This increase was due to the growth in attendance,
including related increases in concessions and souvenir sales, to hosting new
IRL racing events at AMS and TMS, and to increases in broadcast rights and
sponsorship fees. The increase also reflects that we now operate certain food
and beverage concession activities previously procured from a third party.
OTHER OPERATING REVENUE for 1998 increased by $1.8 million, or 12.2%, over
such revenue for 1997. This increase was primarily attributable to an increase
in Legend Car revenues of 600 Racing.
DIRECT EXPENSE OF EVENTS for 1998 increased by $17.7 million, or 27.1%,
over such expense for 1997. This increase was due to hosting new IRL events at
AMS and TMS, to increased operating costs associated with the growth in
attendance and seating capacity, including related increases in concessions and
souvenir sales, and to higher sanctioning fees and race purses required for
NASCAR-sanctioned racing events held during the current year. This increase
also reflects that we now operate certain food and beverage concession
activities previously procured from a third party.
As a percentage of admissions and event related revenues combined, direct
expense of events for 1998 was 39.0% compared to 36.9% for 1997. Such increase,
which was anticipated, results primarily from proportionately higher operating
expenses associated with hosting IRL racing events relative to operating
margins historically achieved with NASCAR sanctioned events. The increase also
results because operating profits from certain food and beverage concession
activities previously procured from a third party were reported as event
related revenue in 1997.
OTHER DIRECT OPERATING EXPENSE for 1998 increased by $1.8 million, or
19.5%, over such expense for 1997. The increase includes expenses associated
with the increase in other operating revenues derived from Legend Cars.
24
<PAGE>
GENERAL AND ADMINISTRATIVE EXPENSE. As a percentage of total revenues,
general and administrative expense decreased from 16.5% for 1997 to 14.9% for
1998. This improvement reflects continuing scale efficiencies associated with
revenue increases outpacing increases in general and administrative expenses.
General and administrative expense for 1998 increased by $2.7 million, or 8.4%,
over such expense for 1997. The increase reflects costs associated with our now
operating certain food and beverage concession activities previously procured
from a third party. Increases in operating costs associated with the growth and
expansion at our speedways, and to a lesser extent, the LVMS acquisition in
December 1998, also contributed to this increase.
DEPRECIATION AND AMORTIZATION EXPENSE for 1998 increased by $6.0 million,
or 37.9%, over such expense for 1997. This increase was due to property and
equipment of TMS placed into service upon hosting of its first racing event in
April 1997, and to additions to property and equipment at AMS, BMS and LMSC.
The increase was also due, to a lesser extent, the LVMS acquisition in December
1998.
PREOPERATING EXPENSE OF NEW FACILITY for 1997 of $1.85 million consist of
non-recurring and non-event related costs to develop, organize and open TMS.
OPERATING INCOME for 1998 increased $11.4 million, or 16.7%, over such
income for 1997. This increase was due to the factors discussed above.
INTEREST EXPENSE, NET for 1998 was $12.2 million compared to $5.3 million
for 1997. This increase was due to higher average borrowings outstanding in
1998, including additional borrowings to fund the LVMS acquisition, as compared
to 1997. The change also reflects lower capitalized interest costs of $3.8
million during 1998 as compared to $5.8 million in 1997. The lower capitalized
interest results from property and equipment of TMS being placed into service
upon its opening in April 1997, and reduced capital expenditures for
construction projects in 1998 as compared to 1997.
ACQUISITION LOAN COST AMORTIZATION for 1998 of $752,000 represents
financing costs incurred in obtaining the Acquisition Loan to fund the LVMS
acquisition. Associated deferred financing costs of $4.0 million are being
amortized over the loan term which matures May 31, 1999.
OTHER INCOME, NET for 1998 increased by $2.2 million over such income for
1997. This increase resulted from gains on sales of fifteen TMS condominiums
during 1998. No sales of TMS condominiums were recognized in 1997. The increase
also reflects a gain on exercise of the SPR purchase option.
INCOME TAX PROVISION. Our effective income tax rate for 1998 and 1997 was
approximately 40%.
NET INCOME for 1998 increased by $4.2 million, or 11.0%, over such income
for 1997. This increase was due to the factors discussed above.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
TOTAL REVENUES for 1997 increased by $90.0 million, or 88.2%, to $192.1
million, over such revenues for 1996. This improvement was attributable to
increases in all revenue items, particularly admissions and event related
revenues.
ADMISSIONS for 1997 increased by $41.6 million, or 79.3%, over admissions
for 1996. This increase was due primarily to hosting major NASCAR Winston Cup
series racing events at each of our then new speedways, TMS and SPR, to hosting
IRL racing events at LMSC and TMS, to hosting a NASCAR Craftsman Truck Series
racing event at TMS, and to growth in NASCAR sanctioned racing events held at
AMS, BMS, and LMSC during the current year. The growth in admissions reflects
the continued increases in attendance, additions to permanent seating capacity
and, to a lesser extent, ticket prices.
EVENT RELATED REVENUE for 1997 increased by $46.8 million, or 128.4%, over
such revenue for 1996. The increase was due primarily to hosting major NASCAR
Winston Cup series racing events at our then new speedways, TMS and SPR, to
hosting IRL racing events at LMSC and TMS, to hosting a NASCAR Craftsman Truck
Series racing event at TMS, to the growth in attendance, including related
increases in concessions and souvenir sales, and to increases in broadcast
rights and sponsorship fees.
OTHER OPERATING REVENUE for 1997 increased by $1.7 million, or 12.6%, over
such revenue for 1996. This increase was primarily attributable to operating
revenues derived from Oil-Chem, and to rental revenues from SPR, which were
acquired in April and November 1996, respectively, and to an increase in
Speedway Club revenues.
DIRECT EXPENSE OF EVENTS for 1997 increased by $35.2 million, or 116.6%,
over such expense for 1996. This increase was due primarily to hosting major
NASCAR Winston Cup series racing events at TMS and SPR, IRL racing events at
25
<PAGE>
LMSC and TMS, and a NASCAR Craftsman Truck Series racing event at TMS, to
higher operating costs associated with the growth in attendance and seating
capacity at AMS, BMS and LMSC, and to increases in the size of race purses and
sanctioning fees required for NASCAR sanctioned racing events held during the
current year. As a percentage of admissions and event related revenues
combined, direct expense of events for 1997 was 36.9% compared to 34.0% for
1996. Such increase results primarily from proportionately higher operating
expenses associated with TMS's inaugural race weekend, the inaugural IRL racing
events at LMSC and TMS, and at SPR, relative to operating margins historically
achieved at SMI's other speedways.
OTHER DIRECT OPERATING EXPENSE for 1997 increased by $1.2 million, or
14.7%, over such expense for 1996. The increase occurred primarily due to the
expenses associated with the increase in other operating revenues derived from
SPR, Oil-Chem, and the Speedway Club.
GENERAL AND ADMINISTRATIVE EXPENSE. As a percentage of total revenues,
general and administrative expense decreased from 16.6% for 1996 to 16.4% for
1997. This improvement reflects continuing scale efficiencies associated with
revenue increases outpacing increases in general and administrative expenses.
General and administrative expense for 1997 increased by $14.6 million, or
86.1%, over such expense for 1996. The increase was due primarily to general
and administrative expenses incurred during 1997 by Oil-Chem and SPR, acquired
in April 1996 and November 1996, respectively, and at TMS, and to increases in
operating costs associated with the growth and expansion at AMS, BMS and LMSC.
DEPRECIATION AND AMORTIZATION EXPENSE for 1997 increased by $8.1 million,
or 107.2%, over such expense for 1996. This increase was due to property and
equipment of TMS placed into service upon hosting of its first racing event in
April 1997, to additions to property and equipment at AMS, BMS and LMSC, and
from the property and equipment and goodwill and other intangible assets
related to the acquisitions of SPR in 1996.
PREOPERATING EXPENSE OF NEW FACILITY for 1997 of $1.85 million consist of
non-recurring and non-event related costs to develop, organize and open TMS.
OPERATING INCOME for the year ended December 31, 1997 increased by $29.0
million, or 73.8%, over such income for 1996.
This increase was due to the factors discussed above.
INTEREST INCOME (EXPENSE), NET for 1997 was $5.3 million, compared to
interest income, net for 1996 of $1.3 million. This change was due to higher
levels of average outstanding borrowings for construction funding during 1997
as compared to 1996. The change also reflects the capitalizing of $5.8 million
in interest costs incurred during 1997 on TMS and other construction projects
compared to $2.8 million for 1996.
OTHER INCOME for 1997 decreased by $1.4 million over such income for 1996.
This decrease was primarily due to fewer gains recognized on sales of
marketable equity securities during 1997 as compared to 1996. In addition, the
decrease reflects recognition of our loss in equity method investee of $97,000
in 1997 as compared to equity income of $371,000 for 1996.
PROVISION FOR INCOME TAXES. Our effective income tax rate was
approximately 40% for 1997 and 39% for 1996.
NET INCOME for 1997 increased by $11.8 million, or 44.6%, compared to
1996. This increase was due to the factors discussed above.
SEASONALITY AND QUARTERLY RESULTS
We have derived a substantial portion of our 1998 total revenues from
admissions and event-related revenue attributable to 15 major NASCAR-sanctioned
races, four IRL races, three NASCAR Craftsman Truck Series and one National Hot
Rod Association Nationals racing events. In 1999, we currently will host 17
major NASCAR-sanctioned races, five IRL races, four NASCAR Craftsman Truck
Series and two major National Hot Rod Association racing events.
In 1997, our second and fourth quarters accounted for 78% of our total
annual revenues and 100% of our total annual operating income. In 1998, our
second and fourth quarters accounted for 74% of our total annual revenues and
97% of our total annual operating income. We sometimes produce minimal
operating income or losses during our third quarter when we host only one major
NASCAR race weekend. In 1999, our operating results for the first and third
quarters will be significantly impacted by the additional scheduled racing
events at LVMS. The concentration of racing events in the second quarter and
the growth in our operations with attendant increases in overhead expenses will
tend to increase operating losses or minimize operating income in future first
and third quarters. Also, race dates at our various facilities
26
<PAGE>
may be changed from time to time, lessening the comparability of the financial
results of quarters between years and increasing or decreasing the seasonal
nature of our business.
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT NASCAR-SANCTIONED EVENTS AND PER SHARE
AMOUNTS)
----------------------------------------------------------------
1997 (UNAUDITED)
----------------------------------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER TOTAL
----------- ------------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Total revenues .... $ 15,453 $ 104,141 $26,384 $ 46,148 $ 192,126
Operating
income (loss)..... (1,065) 51,155 768 17,525 68,383
Net income
(loss) ........... (263) 29,517 (981) 9,905 38,178
NASCAR-sanctioned
events ........... 2 8 2 3 15
Basic earnings
(loss) per
share ............ $ (0.01) $ 0.71 $ (0.02) $ 0.24 $ 0.92
Diluted earnings
(loss) per
share ............ $ (0.01) $ 0.67 $ (0.02) $ 0.23 $ 0.89
<CAPTION>
(IN THOUSANDS, EXCEPT NASCAR-SANCTIONED EVENTS AND PER SHARE AMOUNTS)
-----------------------------------------------------------------------------------
1998 (UNAUDITED) 1999 (UNAUDITED)
----------------------------------------------------------------- -----------------
1ST 2ND 3RD 4TH 1ST
QUARTER QUARTER QUARTER QUARTER TOTAL QUARTER
----------- ------------- ------------ ------------ ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues .... $ 17,960 $ 117,739 $ 41,748 $ 52,349 $ 229,796 $ 53,104
Operating
income (loss)..... (3,147) 60,139 5,852 16,951 79,795 11,889
Net income
(loss) ........... (2,923) 34,614 1,895 8,785 42,371 2,008
NASCAR-sanctioned
events ........... 1 8 2 4 15 4
Basic earnings
(loss) per
share ............ $ (0.07) $ 0.83 $ 0.05 $ 0.21 $ 1.02 $ 0.05
Diluted earnings
(loss) per
share ............ $ (0.07) $ 0.79 $ 0.05 $ 0.21 $ 1.00 $ 0.05
</TABLE>
Where computations are anti-dilutive, reported basic and diluted per share
amounts are the same. As such, individual quarterly per share amounts may not
be additive. The Busch Series race at AMS, originally scheduled to be held in
March 1998, was rescheduled to November 1998 due to poor weather conditions.
Rescheduling did not materially impact revenues and operating expenses as
reported for the first and fourth quarters of 1998.
LIQUIDITY AND CAPITAL RESOURCES
We have historically met our working capital and capital expenditure
requirements through a combination of cash flow from operations, bank
borrowings and other debt and equity offerings. We expended significant amounts
of cash in 1998 for the acquisition of LVMS in December 1998, for improvements
and expansion at BMS, LMSC and TMS, and the exercise of the SPR purchase option
on February 17, 1998 as further described below. Significant changes in our
financial condition and liquidity during 1998 resulted primarily from:
(1) net cash generated by operations amounting to $86.4 million;
(2) capital expenditures amounting to $98.6 million; and
(3) net borrowings of $235.7 million, including amendment of our bank
credit facility to fund the December 1998 acquisition of LVMS costing
approximately $215.0 million as further described below.
We expended significant amounts of cash in the first quarter of 1999 for
improvements and expansion at its speedway facilities. Significant changes in
our financial condition and liquidity during the three months ended March 31,
1999 resulted primarily from:
(1) net cash generated by operations amounting to $36.4 million and
(2) capital expenditures amounting to $30.5 million.
As of December 31, 1998 and March 31, 1999, SMI had $254.1 million in
outstanding borrowings under the $270.0 million Acquisition Loan.
1999 CREDIT FACILITY AND ACQUISITION LOAN. On November 23, 1998, our
unsecured credit facility dated as of August 4, 1997 was amended in connection
with the December 1, 1998 acquisition of LVMS. The Acquisition Loan increased
our overall borrowing limit from $175.0 million to $270.0 million to fund the
LVMS acquisition and maintain a revolving credit facility for working capital
and general corporate purposes. Interest, standby letters of credit terms and
restrictive and required financial covenants are generally similar to those
before amendment. The Acquisition Loan was obtained from NationsBank N.A., and
is an unsecured, senior revolving credit facility and term loan with a $10.0
million borrowing sub-limit for standby letters of credit. Interest is based,
at our option, upon (i) LIBOR plus no charge or (ii) the greater of
NationsBank's prime rate or the Federal Funds Rate plus 0.5%. The Acquisition
Loan was repaid and retired on May 28, 1999 with the proceeds of our sale of
the Series C Notes and the 1999 Credit Facility.
While the Acquisition Loan's maturity did not result in the use of
significant working capital, the amount outstanding has been classified as a
current liability in the Consolidated December 31, 1998 and March 31, 1999
Balance Sheets in accordance with generally accepted accounting principles. See
Note 5 to the December 31, 1998 Consolidated Financial Statements for
discussion of additional terms and restrictive covenants of the Acquisition
Loan.
27
<PAGE>
We anticipate that cash from operations, and funds available through our
1999 Credit Facility, proceeds from our sale of the Series C Notes and equity
offering alternatives will be sufficient to meet our operating needs through
1999, including planned capital expenditures at our speedway facilities. Based
upon anticipated future growth and financing requirements, we expect that we
will, from time to time, engage in additional financing of a character and in
amounts to be determined. While we expect to continue to generate positive cash
flows from our existing speedway operations, and have generally experienced
improvement in our financial condition, liquidity and credit availability, such
resources, as well as possibly others, could be needed to fund our continued
growth, including the continued expansion and improvement of our speedway
facilities.
On May 28, 1999, we entered into the 1999 Credit Facility. The 1999 Credit
Facility is a secured senior revolving credit facility provided by a syndicate
of banks led by NationsBank, N.A. as an agent and lender. The 1999 Credit
Facility has an overall borrowing limit of $250.0 million, with a sub-limit of
$10.0 million for standby letters of credit. Amounts outstanding under the 1999
Credit Facility will constitute senior indebtedness. Indebtedness under the
1999 Credit Facility is guaranteed by each of our material domestic
subsidiaries and is secured by a pledge of all such subsidiaries' capital
stock, limited partnership interests and limited liability company interests,
as the case may be, except for Oil-Chem Corporation and its subsidiaries. The
1999 Credit Facility matures on May 31, 2004. Interest is based, at SMI's
option, upon (i) LIBOR plus 0.5% to 1.25% or (ii) the greater of the Federal
Funds Rate plus 0.5% or NationsBank's prime rate. Draws are permitted under the
1999 Credit Facility for working capital, capital expenditures, acquisitions,
refinancing existing debt, including the Acquisition Loan, and other corporate
purposes. We also agreed not to pledge our assets to any third party. In
addition, we made certain financial covenants, including specified levels of
net worth and ratios of (1) debt to EBITDA, (2) earnings before interest and
taxes ("EBIT") to interest expense and (3) minimum net worth. The 1999 Credit
Facility also limits our ability to make certain cash expenditures in excess of
certain levels to acquire additional motor speedways, without the consent of
the lenders, and would limit our consolidated capital expenditures to certain
levels. The 1999 Credit Facility contains certain other limitations or
prohibitions concerning the incurrence of other indebtedness, guarantees, asset
sales, mergers, investments, dividends, distributions and redemptions. The 1999
Credit Facility permits additional indebtedness, within certain parameters.
EXERCISE OF SPR PURCHASE OPTION. On February 17, 1998, the real estate
purchase option on SPR was consummated for an $18.0 million net cash outlay by
SMI, thereby transferring ownership of the SPR complex to SMI and eliminating
its capital lease obligation. The purchase transaction was funded with
borrowings from our previous credit facility.
ACQUISITION OF LVMS. On December 1, 1998, we acquired certain tangible and
intangible assets, including the real and personal property and operations of
LVMS, an industrial park and certain adjacent unimproved land for approximately
$215.0 million consisting principally of a net cash outlay of $210.4 million
and assumed associated deferred revenue. The acquisition was financed through
borrowings under the Acquisition Loan.
MAY 1999 IRL RACE EVENT CANCELLED AFTER ACCIDENT. LMSC cancelled its May
1, 1999 IRL event after three spectators were killed and eight others injured
when debris from an on-track accident at LMSC entered a grandstand during the
race. We are investigating this incident and have not reached any final
conclusion regarding it. We are offering refunds to paid ticket holders for the
IRL event, and will be pursuing recovery of associated race purse and sanction
fees. On May 28, 1999, a wrongful death lawsuit was filed against SMI, IRL and
H.A. Wheeler by Laurie Ann Mobley Helton, as Administratrix of the Estate of
Dexter Barry Mobley, Sr. This lawsuit seeks unspecified compensatory and
punitive damages arising from the May 1999 IRL accident that resulted in a
fatal injury to Dexter Mobley, Sr. SMI has not yet filed an answer to this
lawsuit but intends to defend itself against the lawsuit's allegations. For
further discussion of this matter, see "Risk Factors -- Liability for Personal
Injuries and Product Liability Claims Could Significantly Affect Our Financial
Condition and Results of Operations" and " -- Adverse Outcomes in Legal
Proceedings to Which We Are a Party Could Adversely Affect Our Financial
Condition and Results of Operations." We are presently unable to determine
whether this incident will result in additional claims by injured parties or
their representatives or other liabilities that may have a material adverse
effect on us.
CAPITAL EXPENDITURES
Significant growth in our revenues depends, in large part, on consistent
investment in facilities. Therefore, we expect to continue to make substantial
capital improvements in our facilities to meet increasing demand and to
increase revenue. Currently, a number of significant capital projects are
underway.
In 1998, AMS installed lighting for its inaugural IRL night race in
August. In 1998, BMS added approximately 19,000 permanent grandstand seats,
including 42 new luxury suites, featuring a new stadium-style terrace section
and
28
<PAGE>
mezzanine level facilities, and made other site improvements. LMSC added
approximately 12,000 permanent seats, including 12 new luxury suites, also
featuring a stadium-style terrace section and mezzanine level facilities. Also
in 1998, LMSC and SPR further expanded their parking areas, and SPR acquired
adjoining land to provide an additional entrance, to accommodate the increases
in attendance and to ease congestion, and made other site improvements. SPR
also was partially reconfigured into a stadium-style road course featuring "The
Chute" which provides spectators improved sight lines and expanded viewing
areas. In 1998, TMS significantly expanded its parking areas and improved
traffic control, which dramatically reduced travel congestion, and added
approximately 3,000 permanent seats, among making other site improvements.
In 1999, AMS plans to continue improving and expanding its on-site roads
and available parking, as well as reconfiguring traffic patterns and entrances,
to ease congestion and improve traffic flow. BMS is reconstructing and
expanding its dragstrip with permanent grandstand seating, luxury suites, and
extensive fan amenities and facilities. Construction of the Bristol Dragway is
expected to be completed in 1999. LMSC plans to add approximately 10,000
permanent seats, further expand concessions, restroom and other fan amenities
facilities, and make other site improvements. In 1999, LVMS plans to add
approximately 15,000 permanent seats, expand concessions, restroom and other
fan amenities facilities, and make other site improvements. SPR plans to
further expand and improve seating and viewing areas to increase spectator
comfort and enjoyment. Also in 1999, pending governmental approvals, we expect
to begin major renovations at SPR, including its on-going reconfiguration into
a "stadium-style" road racing course, the addition of approximately 45,000
permanent seats, and improving and expanding concessions, restroom and other
fan amenities facilities. Construction of the Texas Motor Speedway Club and
corporate offices was substantially completed with their opening in March 1999.
In 1999, after adding approximately 25,000 permanent seats, our total permanent
seating capacity at our motorsports facilities will exceed 690,000 and the
total number of luxury suites will be approximately 659.
The estimated aggregate cost of capital expenditures in 1999 will
approximate $60 million. Numerous factors, many of which are beyond our
control, may influence the ultimate costs and timing of various capital
improvements at our facilities, including:
o undetected soil or land conditions;
o additional land acquisition costs;
o increases in the cost of construction materials and labor;
o unforeseen changes in the design;
o litigation;
o accidents or natural disasters affecting the construction site; and
o national or regional economic changes.
In addition, the actual cost could vary materially from our estimates if
our assumptions about the quality of materials or workmanship required or the
cost of financing such construction were to change. Construction is also
subject to state and local permitting processes, which if changed, could
materially affect the ultimate cost.
In addition to expansion and improvements of our existing speedway
facilities and business operations, we are continually evaluating new
opportunities that will add value for our stockholders, including the
acquisition and construction of new speedway facilities, the expansion and
development of our existing Legends Cars and Oil-Chem products and markets and
the expansion into complementary businesses.
DIVIDENDS
We have not paid any cash dividends on our common stock to date and do not
anticipate paying any cash dividends on our common stock in the foreseeable
future. We intend to retain our earnings to provide funds for our operations
and for capital projects and acquisitions. In addition, the 1999 Credit
Facility will include covenants that prohibit our payment of cash dividends and
the indenture governing the Notes includes covenants that restrict our ability
to pay cash dividends.
IMPACT OF NEW ACCOUNTING STANDARDS
We adopted SFAS No. 130 "Reporting Comprehensive Income" in 1998. SFAS No.
130 specifies that components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial
29
<PAGE>
statements. Because we do not have material items of other comprehensive
income, adoption did not result in presentation or financial statements
significantly different from that under previous accounting standards.
We also adopted SFAS No. 131 "Disclosures about Segments of an Enterprise
and Related Information" in 1998. SFAS No. 131 establishes standards for
reporting selected information about operating segments determined using
quantitative thresholds and a "management approach," which reflects how the
chief operating decision maker evaluates segment performance and allocates
resources. The combined operations of our speedways comprise one operating
segment, and encompasses all admissions and event related revenues and
associated expenses. Other SMI operations presently are not considered
significant relative to those of the speedways. As such, adoption had no effect
on our financial statements or disclosures.
YEAR 2000 COMPLIANCE
The ability of automated systems to recognize the date change from
December 31, 1999 to January 1, 2000 is commonly referred to as the Year 2000
matter. We have assessed the potential impact of the Year 2000 matter on our
operations based on current and foreseeable computer and other automated system
applications, including those of our significant third party vendors, suppliers
and customers. The nature of our business does not require significant reliance
on automated systems applications except for our ticketing systems, which
presently are believed to be compliant. For critical systems, contingency plans
may include utilizing alternative processing methods and manual processes,
among others.
Should Year 2000 problems arise, we believe interruption to our operations
would be limited principally to delays in capital projects during the first two
months of 2000. Also, we are not aware of any significant potential Year 2000
problems or risks involving third parties based on the nature of our
relationships with third parties such as NASCAR and other sanctioning bodies,
network and cable television companies, major sponsors, and financial services
companies. We believe that any potential adverse consequences or risk of
financial loss from Year 2000 issues are substantially mitigated as our first
significant racing event, as presently scheduled, does not occur until March
2000. Although Year 2000 problems could cause temporary minor inconveniences,
we and third parties likely would have over two months to resolve any
significant Year 2000 matters that might arise.
While no assurances can be given, our assessment has determined that the
potential consequences of Year 2000 problems, if any, would not materially
adversely impact our business, or cause us to incur potential liabilities to
third parties if our systems were not Year 2000 compliant. The costs associated
with modifying our computer software and other automated systems for Year 2000
matters has not been, and is not expected to be, significant. The aggregate
incremental costs associated with our Year 2000 compliance are expected to be
less than $100,000. In addition, we are not aware of any Year 2000 issues which
would materially adversely affect our financial condition, liquidity or future
results of operations.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK. SMI's financial instruments with market risk exposure
consist only of bank revolving credit facility and acquisition loan borrowings
which are sensitive to changes in interest rates. The weighted-average interest
rate on borrowings under the credit facility and acquisition loan during the
year ended December 31, 1998 and the three months ended March 31, 1999 was
6.4%, and the total outstanding balance was $254.1 million as of December 31,
1998 and March 31, 1999. A change in interest rates of one percent on this
balance would cause a change in interest expense of approximately $2.5 million.
Our senior subordinated notes payable and convertible subordinated debentures
are fixed interest rate debt obligations. See Note 5 to the December 31, 1998
Consolidated Financial Statements for information on the terms and conditions,
including redemption and conversion features, of SMI's debt obligations. The
carrying values of short and long-term debt approximate their fair value as of
December 31, 1998 and March 31, 1999. The table below presents the principle
balances outstanding, maturity dates, and interest rates as of December 31,
1998 (dollars in thousands):
<TABLE>
<CAPTION>
PRINCIPAL MATURITY
INTEREST BALANCE DATE
---------------- ----------- ---------------
<S> <C> <C> <C>
Revolving credit facility and bridge loan ... Variable $254,050 May 1999
Senior subordinated notes ................... Fixed -- 8.5% 124,674 August 2007
Convertible subordinated debentures ......... Fixed -- 5.75% 74,000 September 2003
</TABLE>
EQUITY PRICE RISK. SMI has marketable equity securities, all classified as
"available for sale", with an aggregate cost of $2.1 million and $2.4 million,
and fair market value of $1.4 million and $1.7 million, as of December 31, 1998
and March 31, 1999, respectively. Such investments are subject to price risk.
We attempt to minimize price risk generally through portfolio diversification.
30
<PAGE>
There has been no significant change in our interest rate risk or equity
price risk as of and during the three months ended March 31, 1999.
ENVIRONMENTAL MATTERS
Our property at LMSC includes areas that were used as solid waste
landfills for many years. Landfilling of general categories of municipal solid
waste on the LMSC property ceased in 1992. There are two landfills currently
operating at LMSC, however, that are permitted to receive inert debris and
waste from land clearing activities ("LCID" landfills). Two other LCID
landfills on the LMSC property were closed in 1994. LMSC intends to allow
similar LCID landfills to be operated on the LMSC property in the future. LMSC
also leases certain LMSC property to a BFI subsidiary for use as C&D landfill,
which can receive solid waste resulting solely from construction, remodeling,
repair or demolition operations on pavement, buildings or other structures, but
cannot receive inert debris, land-clearing debris or yard debris. In addition,
the BFI subsidiary owns and operates an active solid waste landfill adjacent to
LMSC. We believe that the active solid waste landfill was constructed in such a
manner as to minimize the risk of contamination to surrounding property. We
also believe that our operations, including the landfills and facilities on our
property, are in substantial compliance with all applicable federal, state and
local environmental laws and regulations. We are not aware of any situations
related to landfill operations which we expect would materially adversely
affect our financial position or future results of operations.
NATIONAL ASSOCIATION FOR STOCK CAR AUTO RACING, INC. (NASCAR)
The National Association for Stock Car Auto Racing, Inc. has been
influential in the growth and development of professional stock car racing.
NASCAR is owned and operated by Bill France, Jr. and other members of the
France family and is the premier official sanctioning body of professional
stock car racing in the United States. Its officials supervise the conduct of
all races that constitute the Winston Cup and Busch stock car Series. We derive
a substantial majority of our total revenues from NASCAR-sanctioned racing
events. We hosted 15 major NASCAR-sanctioned events in 1997 and 1998. We are
scheduled to host 17 NASCAR-sanctioned racing events in 1999. See "Risk Factors
- -- Nonrenewal of a NASCAR Event License or a Deterioration in Our Relationship
with NASCAR Could Adversely Affect Our Profitability" and "-- High Competition
in the Motorsports Industry Could Hinder Our Ability to Maintain or Improve Our
Position in the Industry."
OVERVIEW OF STOCK CAR RACING
Professional stock car racing developed in the southeastern United States
in the 1930s. It began to mature in 1947, when Bill France, Sr. organized
NASCAR in Daytona Beach, Florida. The first NASCAR-sanctioned race was held on
June 19, 1949 in Charlotte. The "superspeedway era" of stock car racing began
in 1959, when the France family completed construction of the Daytona
International Speedway and sponsored the first "Daytona 500." A superspeedway
is generally considered to be a banked, paved track longer than one mile.
Superspeedways were built in the early 1960s near Atlanta (AMS), near Charlotte
(LMSC) and elsewhere in the Southeast. NASCAR also sanctions Winston Cup races
on shorter tracks, such as BMS, which was built in 1961. The industry began to
gather momentum in the mid-1960s, when major North American automobile and tire
producers first offered engineering and financial support. In the late 1960s,
NASCAR decided to create a more elite circuit focused on the best drivers.
Accordingly, it reduced the number of races in its premier series from
approximately 50 to approximately 30. In 1971, R.J. Reynolds began to sponsor
NASCAR racing by developing the Winston Cup series as a marketing outlet for
its products.
NASCAR events, particularly Winston Cup races, enjoy a large and growing
base of spectator support. Based on information developed independently by
Goodyear Tire and Rubber, spectator attendance at Winston Cup events increased
at a compound annual growth rate of 6.5% from 1994 to 1998. The entire Winston
Cup series is broadcast to national television audiences by six networks: ABC,
CBS, NBC, ESPN, TBS and TNN. Increased media coverage has led to national
recognition of several "star" NASCAR drivers. The result has been not only
record NASCAR race attendance, but also increasing revenues to track owners,
such as SMI, for broadcast rights and sponsorship fees.
We believe that the increasing payments for broadcast rights and
sponsorship fees are a result of the demographic appeal of the spectator base
to advertisers. Surveys published by NASCAR indicate that: 38% of Winston Cup
spectators are women; 53% work in professional, managerial or skilled labor
jobs; 58% are married; and 65% own homes. The median annual family income of
Winston Cup spectators has been estimated in NASCAR publications at $39,280.
Corporate sponsors of NASCAR-sanctioned events now include most major North
American automobile producers and parts manufacturers, the largest and
best-known food, beverage and tobacco companies and leading firms in other
manufacturing and consumer products industries. See "Risk Factors -- "Government
Regulation of Certain Motorsports Sponsors Could Negatively Impact the
Availability of Promotion, Sponsorship and Advertising Revenue For Us."
31
<PAGE>
GOVERNANCE OF STOCK CAR RACING
NASCAR regulates its membership, including drivers and their crews, team
owners and track owners, the composition of race cars and the sanctioning of
races. It sanctions events by means of one-year agreements executed with track
owners, each of which specifies the race date, the sanctioning fee and the
purse payable by the track owner. NASCAR officials control qualifying
procedures, the line-up of the cars, the start of the race, the control of cars
throughout the race, the election to stop or delay a race, "pit" activity,
"flagging," the positioning of cars, the assessment of lap and time penalties
and the completion of the race.
ECONOMICS OF STOCK CAR RACING
SPONSORS. Sponsors are active in all phases of professional stock car
racing. They support drivers and teams by funding certain costs of their
operations. Sponsors also support track owners by funding certain costs of
specific races. In return, sponsors receive advertising exposure on television
and radio, through newspapers, printed brochures and advertisements and at the
track on race day. Companies negotiate sponsorship arrangements with reference
to a team's racing success and spectator and viewer demographic
characteristics. A "major" team's primary sponsor pays annually from $5.0
million to $9.0 million to the team.
TEAM OWNERS. In most instances, team owners underwrite the financial risk
of placing their teams in competition. They contract with drivers, hire pit
crews and mechanics and syndicate sponsorship of their teams. We estimate that
Winston Cup teams spend up to approximately $10.0 million per season.
DRIVERS. A substantial majority of drivers contract independently with
team owners while a few drivers own their own teams. Drivers receive income
from contracts with team owners, sponsorship fees and prize money. Successful
drivers also may receive income from personal endorsement fees and souvenir
sales. The personality and racing success of a driver can be an important
marketing advantage for a team owner because it can attract corporate
sponsorships.
TRACK OWNERS. Track owners market and promote events at their facilities
and negotiate directly with television and radio networks for coverage of such
events. The revenue sources of track owners include admissions, sponsorships,
advertising and broadcast fees, concessions and souvenir sales.
THE WINSTON CUP
NASCAR's premier circuit is the Winston Cup Series, which currently begins
with the "Daytona 500" in February and concludes with the "NAPA 500" in
November. Including two "all-star" races, 36 races are licensed annually to
tracks operating in 17 states. The 1999 Winston Cup schedule is as follows:
32
<PAGE>
<TABLE>
<CAPTION>
DATE RACE LOCATION
- ----------------- ---------------------------------------- -----------------------
<S> <C> <C>
February 7 "Bud Shootout" Daytona Beach, Fla.
February 14 "Daytona 500" Daytona Beach, Fla.
February 21 "Dura-Lube/Big Kmart 400" Rockingham, N.C.
MARCH 7 "LAS VEGAS 400" LAS VEGAS, NEV. (LVMS)
MARCH 14 "CRACKER BARREL OLD COUNTRY STORE 500" HAMPTON, GA. (AMS)
March 21 "TranSouth Financial 400" Darlington, S.C.
MARCH 28 "PRIMESTAR 500" FORT WORTH, TX. (TMS)
APRIL 11 "FOOD CITY 500" BRISTOL, TN. (BMS)
April 18 "Goody's Body Pain 500" Martinsville, Va.
April 25 "DieHard 500" Talledega, Ala.
May 2 "California 500 by NAPA" Fontana, Ca.
May 15 "Pontiac Excitement 400" Richmond, Va.
MAY 22 "THE WINSTON" CONCORD, N.C. (LMSC)
MAY 30 "COCA-COLA 600" CONCORD, N.C. (LMSC)
June 6 "MBNA Platinum 400" Dover, Del.
June 13 "Michigan 400" Brooklyn, Mich.
June 20 "Pocono 500" Long Pond, Penn.
JUNE 27 "SAVE MART/KRAGEN 350" SONOMA, CA. (SPR)
July 3 "Pepsi 400" Daytona Beach, Fla.
July 11 "Jiffy Lube 300" Loudon, N.H.
July 25 "Pocono Raceway" Long Pond, Penn.
August 7 "Brickyard 400" Indianapolis, Ind.
August 15 "Frontier at The Glen" Watkins Glen, N.Y.
August 22 "Pepsi 400" Brooklyn, Mich.
AUGUST 28 "GOODY'S HEADACHE POWDER 500" BRISTOL, TN. (BMS)
September 5 "Pepsi Southern 500" Darlington, S.C.
September 11 "Exide NASCAR Select Batteries 400" Richmond, Va.
September 19 "New Hampshire 300" Loudon, N.H.
September 26 "MBNA Gold 400" Dover, Del.
October 3 "NAPA Auto Care 500" Martinsville, Va.
OCTOBER 10 "UAW-GM QUALITY 500" CONCORD, N.C. (LMSC)
October 17 "Winston 500" Talledega, Ala.
October 24 "Rockingham 400" Rockingham, N.C.
November 7 "Checker Auto Parts/Dura Lube 500 K" Phoenix, Ariz.
November 14 "Jiffy Lube Miami 400" Miami. Fla.
NOVEMBER 21 "NAPA 500" HAMPTON, GA. (AMS)
</TABLE>
As the table indicates, no track currently sponsors more than two Winston
Cup Series events. SMI holds licenses for two such events at each of AMS, BMS
and LMSC, and one such event at each of SPR, LVMS and TMS. LMSC also holds the
license for the all-star race held in May, "The Winston." Every Winston Cup
event in 1999 has been or is scheduled to be televised on ABC, CBS, NBC, ESPN,
TBS or TNN.
THE BUSCH SERIES
The second-tier NASCAR circuit is the Busch Series, which in 1999 is
scheduled to include 32 races held at 26 tracks in 20 states. Many track owners
who hold Winston Cup licenses also hold Busch Series events on the day
preceding a Winston Cup event. Accordingly, Winston Cup drivers will
occasionally compete in Busch Series races, which can boost overall attendance.
We are licensed for seven such events in 1999: the "Sam's Town 300" at LVMS on
March 6, the "Yellow Freight 300" at AMS on March 13, the "Coca-Cola 300" at
TMS on March 27, the "Moore's Snack Food 250" at BMS on April 10, the "CARQUEST
Auto Parts 300" at LMSC on May 29, the "Food City 250" at BMS on August 27, and
the "All Pro Auto Parts Bumper to Bumper 300" at LMSC on October 9, all of
which were or are scheduled to be televised. Each of the Busch Series events at
our tracks will be conducted on the day before a Winston Cup event.
33
<PAGE>
OTHER MOTORSPORTS
Other motorsports include NASCAR-sanctioned Craftsman Truck racing, stock
car racing not sanctioned by NASCAR, "Indy car" racing, "Formula One" racing
and sports car racing.
CRAFTSMAN TRUCK RACING. In 1995, a new NASCAR-sanctioned Craftsman Truck
circuit was introduced to the public. According to statistics compiled by
Goodyear, Craftsman Truck events attracted 938,775 spectators to 27 events in
1998. In 1999, 25 Craftsman Truck Series events will be held at 24 tracks in 20
states. We are scheduled to promote one Craftsman Truck Series race at BMS, one
at LVMS, and two at TMS.
STOCK CAR RACING. NASCAR sanctions nearly all of the major stock car
racing events. Another, less-well-known association is the American Race Car
Association, which sanctions a stock car racing circuit that ranks in prestige
just below the Busch circuit. In 1999, SMI is scheduled to sponsor two ARCA
races at AMS and two at LMSC.
INDY CAR RACING. "Indy cars" take their name from the Indianapolis Motor
Speedway, of Indianapolis, Indiana, which holds the "Indianapolis 500" on the
last Sunday before Memorial Day every year. Indy car racing is sanctioned by
two associations, the Championship Auto Racing Team ("CART") and the IRL. For
the remainder of 1999, SMI is scheduled to host one IRL event each at AMS and
LVMS and two IRL events at TMS.
FORMULA ONE AND SPORTS CAR RACING. Formula One car races are held on road
courses in Europe, Australia and Japan and are sanctioned by the Federation
Internationale de l'Automobile ("FIA"). SMI has never sponsored a Formula One
race and has no plans to do so. Sports car racing is sanctioned in the United
States by the Sports Car Club of America ("SCCA") and by Professional SportsCar
Racing ("PSR"), formerly the International Motor Sports Association, which
sponsor races held on road courses throughout the country. We occasionally
lease our tracks for sports car racing events.
34
<PAGE>
BUSINESS
SMI is a leading promoter, marketer and sponsor of motorsports activities
in the United States. We have one of the largest portfolios of major speedway
facilities in the motorsports industry. We own and operate AMS, BMS, LVMS,
LMSC, SPR and TMS. We also provides event food, beverage, and souvenir
merchandising services through our FLE subsidiary. We also manufacture and
distribute smaller-scale, modified racing cars and parts through our 600 Racing
subsidiary.
We currently will sponsor 17 major annual racing events in 1999 sanctioned
by NASCAR, including ten races associated with the Winston Cup and seven races
associated with the Busch Series. We will also sponsor five IRL racing events,
four NASCAR Craftsman Truck Series racing events, and two major NHRA racing
events in 1999.
On December 1, 1998, we acquired LVMS, an industrial park and certain
adjacent unimproved land for approximately $215.0 million. LVMS is located in
one of the most recognized, leading markets in the United States and the world,
and its acquisition is a major strategic transaction that is expected to
enhance our overall operations as well as broadcast and sponsorship
opportunities. LVMS is a newly constructed 1.5 mile, lighted, asphalt
superspeedway, with several other on-site race tracks, and has permanent
seating capacity of approximately 107,000, including 102 luxury suites, as of
December 31, 1998. The superspeedway's configuration readily allows for
significant future expansion. LVMS currently hosts several annual
NASCAR-sanctioned racing events, including a Winston Cup Series, Busch Series,
Craftsman Truck Series, two Winston West Series, and two Winston Southwest
Series racing events. Additional major events held annually include IRL, World
of Outlaws, AMA, and drag racing events, among others.
As of December 31, 1998, our total permanent seating capacity exceeded
665,000, the largest in the motorsports industry. Management believes that
spectator demand for our largest events exceeds existing permanent seating
capacity at each of our speedways. In 1998, we added more than 140,000
permanent seats, including approximately 19,000 at BMS, 12,000 at LMSC, 3,000
at TMS, and the acquisition of LVMS. At December 31, 1998, AMS had permanent
seating capacity of approximately 124,000; BMS, 134,000; LMSC, 147,000; LVMS,
107,000; and TMS, 153,000, in each case excluding infield admission, temporary
seats and general admission. Also at December 31, 1998, we had a total of 659
suites luxury suites, with 141 at AMS, 97 at BMS, 125 at LMSC, 102 at LVMS, and
194 at TMS. SPR currently does not have permanent seating capacity but provides
temporary seating and suites for approximately 24,000 spectators in addition to
other general admission seating arrangements along its 2.52 mile road course.
In 1998, we derived approximately 77% of our total revenues from events
sanctioned by NASCAR. We have experienced substantial growth in revenues and
profitability as a result of the continued improvement and expansion of and
investment in our facilities, our consistent marketing and promotional efforts
and the overall increase in popularity of Winston Cup, Busch and other
motorsports events in the United States.
Television broadcast and naming rights values are rising. Published 1998
NASCAR Winston Cup television ratings indicated that our events achieved four
of the top eight ratings, which would have been five of such top events if
LVMS' operations for 1998 were included, and were above the average for all
Winston Cup events. In February 1999, we obtained the motorsports industry's
first facility naming rights agreement which renamed Charlotte Motor Speedway
as Lowe's Motor Speedway for gross fees aggregating approximately $35.0 million
over the ten year term of the agreement. Also, we jointly announced with NASCAR
in February 1999 that we would be part of a newly formed NASCAR television
negotiating alliance. We believe these positive developments bode well for our
television contract renegotiations in 2000 and beyond and for future naming
rights possibilities.
INDUSTRY OVERVIEW
Motorsports is currently the fastest growing spectator sport in the United
States, with NASCAR the fastest growing industry segment. In 1998, NASCAR
sanctioned 93 Winston Cup, Busch and Craftsman Truck Series races, which were
attended by approximately 9.3 million spectators. Attendance of these NASCAR
events has increased at a compound annual growth rate of 10.8% since 1994.
Based on information developed independently by Goodyear, spectator attendance
at Winston Cup events increased at a compound annual growth rate of 6.5% from
1994 to 1998 while spectator attendance at Busch Series events increased at a
compound annual growth rate of 12.7% for the same period. In 1998, IRL
sanctioned events were attended by approximately 1.3 million spectators. Races
are generally heavily promoted, with a number of supporting events surrounding
the main event, for a total weekend experience.
In recent years, television coverage and corporate sponsorship have
increased for NASCAR-related events. All NASCAR Winston Cup and Busch Series
events sponsored by SMI are currently broadcast by ABC, CBS, ESPN, TBS or
35
<PAGE>
TNN. Also, all IRL events sponsored by us are currently broadcast. We have
entered into television rights contracts for all its major sanctioned events.
According to NASCAR, major national corporate sponsorship of NASCAR-sanctioned
events (which currently includes over 80 Fortune 500 companies) also has
increased significantly. Sponsors include such companies as Coca-Cola, General
Motors, Cracker Barrel, NAPA, PRIMESTAR, Save Mart, Kragen, Food City, Goody's
and RJR Nabisco.
We intend to do all of the following to promote our speedways:
o increase the exposure of our current Winston Cup, Busch Series, IRL and
NHRA events;
o add television coverage to other speedway events;
o increase broadcast and sponsorship revenues; and
o schedule additional racing and other events at each of our speedway
facilities.
The dramatic increase in corporate interest in the sport has been driven
by the attractive advertising demographics of stock car and other motorsports
racing fans. In addition, brand loyalty, as measured by fans using sponsors'
products, is the highest of any nationally televised sport according to a study
published by Performance Research in 1997. Speedway operations generate high
operating margins and are protected by high barriers to competitive entry,
including capital requirements for new speedway construction, marketing,
promotional and operational expertise, and license agreements with NASCAR.
Industry competitors are actively pursuing internal growth and industry
consolidation due to all of the following factors:
o popular and accessible drivers;
o strong fan brand loyalty;
o a widening demographic reach;
o increasing appeal to corporate sponsors; and
o rising broadcast revenues.
OPERATING STRATEGY
Our operating strategy is to increase revenues and profitability through
the promotion and production of racing and related events at modern facilities,
which serve to enhance customer loyalty. We market our scheduled events
throughout the year both regionally and nationally via television, radio and
newspaper advertising, facility tours, satellite links for media outlets,
direct mail campaigns, pre-race promotional activities and other innovative
marketing activities. The key components of this strategy are as follows:
o COMMITMENT TO QUALITY AND CUSTOMER SATISFACTION. Upon assuming control
of LMSC in 1975, we embarked upon a series of capital improvements, including
the construction of additional permanent grandstand seating, new luxury suites,
trackside dining and entertainment facilities and a condominium complex
overlooking the track. In 1992, LMSC became the first and only superspeedway in
North America to offer nighttime racing, and now all of our speedways, except
SPR, offer it. Following the purchase of AMS in 1990, we began to implement a
similar strategy of constructing additional grandstand seating, luxury suites
and condominiums.
We continue to improve and construct new concessions, restrooms and other
fan amenities at each of our speedways to increase spectator comfort and
enjoyment. For example, BMS has relocated various souvenir, concessions and
restroom facilities to the mezzanine level, and added new permanent seating,
all of which feature new stadium-style terrace sections to increase spectator
convenience and accessibility. In 1997, LMSC opened the Diamond Tower Terrace,
a "state-of-the-art" 25,000 seat grandstand, also featuring a unique mezzanine
level concourse, which was further expanded in 1998 with the addition of 12,000
permanent seats.
We continue to reconfigure traffic patterns, entrances, and expand on-site
roads and available parking at each of our speedways to ease congestion caused
by the increases in attendance. For example, in 1998 SPR acquired adjoining
land to provide an additional entrance and significantly expand spectator
parking areas. Also, TMS has significantly expanded its parking areas and
improved traffic control dramatically reducing travel congestion. Finally, LVMS
and TMS were designed to maximize spectator comfort and enjoyment, and further
design improvements are expected as management acquires operating experience
with these new facilities.
o INNOVATIVE MARKETING AND EVENT PROMOTION. We believe that the marketing
of our scheduled events throughout the year, both regionally and nationally, is
important. We market our events by offering tours of our facilities, providing
satellite links for media outlets, conducting direct mail campaigns and staging
pre-race promotional activities such as live music, skydivers and daredevil
stunts. Our marketing program also includes the solicitation of prospective
event sponsors.
36
<PAGE>
Sponsorship provisions for a typical NASCAR-sanctioned event include luxury
suite rentals, block ticket sales and SMI-catered hospitality, as well as
souvenir race program and track signage advertising. Recent examples of
marketing innovations include our announcement of our facility naming rights
agreement involving Lowe's Home Improvements Warehouse in early 1999 -- a first
in the motorsports industry. Another industry first was our joint venture with
Turner Sports, in which LMSC's October 1998 NASCAR Winston Cup race was
broadcast on pay-per-view DirectTv, as well as on TBS. Subscribers to DirectTv
received the full broadcast of the race plus continuous broadcasts from four
in-car cameras, along with constantly updated graphics of various driver, car
and race statistics.
We also own The Speedway Club, an exclusive dining and entertainment
facility located on the fifth and sixth floors of Smith Tower at LMSC. We have
constructed a similar office tower adjoining the main grandstand and
overlooking turn one at TMS that houses The Texas Motor Speedway Club. We are
conducting a membership drive for The Texas Motor Speedway Club, which contains
a first-class, year-round restaurant-entertainment club and a health-fitness
club. The Texas Motor Speedway Club celebrated its grand opening in March 1999.
Open year-round, these two VIP clubs are a focal point of our efforts to
improve the amenities and enhance the comfort of our facilities for the benefit
of spectators.
o UTILIZATION OF MEDIA. We currently negotiate directly with network and
cable television companies for live coverage of our NASCAR-sanctioned
races.
o In May 1996, AMS signed a four-year television rights agreement with ESPN
for NASCAR seasons for 1997 through 2000.
o Also in May 1996, BMS renegotiated a seven-year television rights
agreement with ESPN covering the April and August NASCAR Winston Cup and
related races through the NASCAR season for 2002.
o In May 1996, LMSC signed a three-year television rights agreement with
Turner Sports, Inc. with a Turner Sports renewal right for the fourth
year. The Turner Sports agreement covers the May and October NASCAR and
ARCA races at LMSC to be broadcast on TBS through the NASCAR season for
2000. In 1997, LMSC entered into a five-year television rights agreement
with TNN for "The Winston" race and associated events to be held through
2002.
o LVMS has a five-year television rights agreement with ESPN covering the
March NASCAR Winston Cup and related races through the NASCAR season for
2002.
o In November 1996, SPR renegotiated a three-year television rights
agreement with ESPN covering its June NASCAR Winston Cup races through
the NASCAR season for 1999.
o In August 1996, TMS signed a four-year television rights agreement with
CBS Sports for the March races at TMS through the NASCAR season for 2000.
We also broadcast all of our NASCAR Winston Cup and Busch Series racing
events over our proprietary radio Performance Racing Network, which is
syndicated to more than 500 stations. Performance Racing Network also sponsors
a weekly racing-oriented program throughout the NASCAR season, which is
syndicated to more than 175 stations. We also seek to increase the visibility
of our racing events and facilities through local and regional media
interaction. For example, each January SMI sponsors a four-day media tour at
LMSC to promote the upcoming Winston Cup season. In 1999, this event featured
Winston Cup drivers and attracted media personnel representing television
networks and stations from throughout the United States. In addition, in early
1999, a similar media tour was staged at TMS which also featured Winston Cup
drivers and was attended by numerous media personnel from throughout the United
States.
GROWTH STRATEGY
We believe that we can achieve our growth objectives by increasing
attendance and revenues at existing facilities and by expanding our promotional
and marketing expertise to take advantage of opportunities in attractive new
markets. We intend to continue implementing our growth strategy through the
following means:
o EXPAND AND IMPROVE EXISTING FACILITIES. We believe that spectator demand
for our largest events exceeds existing permanent seating capacity. We plan to
continue our expansion by adding permanent grandstand seating and luxury suites,
and making other significant renovations and improvements at each of our
speedways in 1999, as further described in " -- Motorsports Facilities" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Capital Expenditures."
37
<PAGE>
o We completed major renovations at AMS in 1997, including reconfiguration
into a "state-of-the-art" 1.54 mile, lighted, quad-oval superspeedway,
adding approximately 22,000 permanent seats, including 58 new suites, and
changing the start-finish line location. AMS installed lighting for its
inaugural IRL night race in August, and now all of our speedways, except
SPR, offer nighttime racing.
o In 1998, BMS continued its expansion by adding approximately 19,000
permanent seats, including 42 new luxury suites, and LMSC added
approximately 12,000 permanent seats, including 12 new luxury suites.
o In 1998, SPR purchased adjoining land to provide an additional entrance
and further expand its parking areas to improve traffic flow and ease
congestion caused by the growth in attendance. Also in 1998, SPR was
partially reconfigured into a stadium-style road course featuring "The
Chute" which provides spectators improved sight lines and expanded
viewing areas for increased spectator comfort and enjoyment.
o TMS opened in April 1997 as the second-largest sports facility in the
United States. Since its inaugural Winston Cup event in 1997, TMS has
significantly expanded its parking areas and improved traffic control
dramatically reducing travel congestion.
In 1999, as a result of our plans to add more than 25,000 permanent seats,
exclusive of SPR, our total permanent seating capacity at our motorsports
facilities will exceed 690,000 and the total number of luxury suites will be
approximately 659. In 1999, BMS is reconstructing and expanding its dragstrip
into a "state-of-the-art" dragway with permanent grandstand seating, luxury
suites, and extensive fan amenities and facilities. Also in 1999, we expect to
continue major renovations at SPR, including its on-going reconfiguration into
a stadium-style road racing course, the addition of approximately 45,000
permanent seats, and further improving and expanding concessions, restroom and
other fan amenities facilities. We continue to improve and expand concessions,
restroom and other fan amenities facilities at each of our speedways, as well
as reconfiguring traffic patterns, entrances, and expanding on-site roads and
available parking to ease congestion caused by the increases in attendance,
consistent with management's commitment to quality and customer satisfaction.
We believe that the expansion and improvements will generate additional
admissions and event-related revenues.
o MAXIMIZE MEDIA EXPOSURE AND ENHANCE BROADCAST AND SPONSORSHIP REVENUES.
NASCAR-sanctioned stock car racing is experiencing significant growth in
television viewership and spectator attendance. This growth has allowed us to
expand our television coverage to include more races and to negotiate more
favorable broadcast rights fees with television networks as well as to
negotiate more favorable contract terms with sponsors. We believe that
spectator interest in stock car racing will continue to grow, thereby
increasing broadcast media and sponsors' interest in the sport. We intend to
increase media exposure of our current NASCAR and IRL events, to add television
coverage to other speedway events and to further increase broadcast and
sponsorship revenues. For instance, with over 30 million people visiting Las
Vegas annually, we believe the newly acquired LVMS has the potential to
significantly increase broadcasting and sponsorship revenues. Also, the
acquisition of SPR marked our entry into the Northern California television
market, which is currently the 5th largest television market in the United
States.
The LVMS acquisition is a major strategic transaction for us. It achieves
a critical mass west of the Mississippi River that will enhance our overall
operations, as well as broadcast and sponsorship opportunities. We intend to
capitalize on its top market entertainment value to further grow LVMS, the
sport of NASCAR and other racing series.
We are strategically positioned with speedways in six of the premier
markets in the United States, including three of the top ten television
markets. Also, our NASCAR Winston Cup events in 1998 achieved four of the top
eight Winston Cup television ratings, and rankings above the average for all
Winston Cup events. In February 1999, we obtained our naming rights agreement
involving Lowe's Home Improvements Warehouse -- a first in the motorsports
industry, and jointly announced we would be part of a newly formed NASCAR
television negotiating alliance. We believe these positive developments bode
well for our television contract renegotiations in 2000 and beyond and for
future naming rights possibilities. Another example of our being a leading
promoter is our joint venture with Turner Sports in which LMSC's October 1998
NASCAR Winston Cup race was broadcast on pay-per-view DirectTV, as well as on
TBS. Subscribers to DirectTV received the full broadcast of the race plus
continuous broadcasts from four in-car cameras, along with constantly updated
graphics of various driver, car and race statistics.
o FURTHER DEVELOP FINISH LINE EVENTS. In January 1998, we formed FLE to
consolidate our food, beverage and souvenir operations. FLE provides event
food, beverage, and souvenir merchandising services, as well as expanded
ancillary support services, to all of our facilities and other unaffiliated
sports-related venues. We believe this provides better products and expanded
services to our customers, enhancing the overall entertainment experience for
spectators, while allowing us to achieve substantial operating efficiencies.
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<PAGE>
o FURTHER DEVELOP 600 RACING. In 1992, we developed the Legends Circuit
for which we manufacture and sell cars and parts used in Legends Circuit racing
events. We are the official sanctioning body for the Legends Circuit. At retail
prices starting at less than $12,400, we believe that Legends Cars are
economically affordable to a new group of racing enthusiasts who previously
could not race on an organized circuit. Legends Cars are an important part of
our business as revenues from this business have grown from $5.7 million in
1994 to $10.9 million in 1998. As an extension of the Legends Car concept, we
released in late 1997 a new smaller, lower priced "Bandolero" stock car, which
appeals largely to younger racing enthusiasts. We intend to further broaden the
Legends Car Circuit, increasing the number of sanctioned races and tracks at
which Legend and Bandolero Car races are held in 1999.
o INCREASE DAILY USAGE OF EXISTING FACILITIES. We constantly seek
revenue-producing uses for our speedway facilities on days not committed to
racing events. Such other uses include car and truck shows, motorcycle racing,
auto fairs, driving schools, vehicle testing and settings for television
commercials, concerts, holiday season festivities, print advertisements and
motion pictures. In 1998, we began hosting a summer Legend Cars series at AMS
and TMS, and in 1999 are planning to begin a similar series at LVMS and SPR.
Other examples of increased usage include LMSC's hosting of the 35th
Anniversary of the Mustang celebration, and TMS's spring and fall Autofests in
1999. We are also currently attempting to schedule music concerts at certain
facilities with one concert already scheduled at AMS in 1999. Non-race-day
track rental revenues were $1.7 million in 1996, $3.0 million in 1997 and $3.9
million in 1998.
Along with such increased daily usage of the facilities, we hosted one new
IRL race event at both AMS and TMS in 1998. The TMS and LMSC races were
attended by the second and third largest crowds, respectively, ever for an IRL
event, exclusive of the Indianapolis 500. In 1999, we are hosting five IRL
events, including those at LVMS. Also, the IRL season championship finale has
been moved to TMS coupled with a NASCAR Craftsman Truck Series race. With more
than twelve different track configurations at LVMS, including a 2.5 mile road
course, 1/4 mile dragstrip, 1/8 mile dragstrip, 1/2 mile clay oval, 3/8
mile paved oval and several other race courses, we plan to capitalize on our
top market entertainment value to further grow the speedways and other racing
series, and to promote new expanded venues.
o ACQUIRE AND DEVELOP ADDITIONAL MOTORSPORTS FACILITIES. We also consider
growth by acquisition and development of motorsports facilities as appropriate
opportunities arise. We acquired BMS in January 1996, SPR in November 1996, and
LVMS in December 1998. In 1997, we completed construction of TMS. We
continuously seek to locate, acquire, develop and operate venues which we feel
are underdeveloped or underutilized and to capitalize on markets where the
pricing of sponsorships and television rights are considerably more lucrative.
OPERATIONS
Our operations consist principally of racing and related events. We also
sell Legends and Bandolero Cars. We are the official sanctioning body for the
Legends and Bandolero Car Racing Circuits. Our other activities are ancillary
to our core business of racing.
RACING AND RELATED EVENTS
NASCAR-sanctioned races are held annually at each of our speedways. The
following are summaries of racing events scheduled in 1999 at each of our
speedways. We are actively pursuing the scheduling of additional motorsports
racing and other events.
o AMS. In March 1999, AMS conducted the Cracker Barrel Old Country Store
500 Winston Cup Series race and the Yellow Freight 300 Busch Series race. AMS
is scheduled to promote the last Winston Cup Series race of the season, as well
as several other races and events. Its NASCAR-sanctioned racing schedule is as
follows:
<TABLE>
<CAPTION>
DATE CIRCUIT
- ------------- EVENT ------------
<S> <C> <C>
March 13 "Yellow Freight 300" Busch
March 14 "Cracker Barrel Old Country Store 500" Winston Cup
November 21 "NAPA 500" Winston Cup
</TABLE>
In 1999, AMS is also scheduled to promote an IRL event and two ARCA races.
o BMS. In April 1999, BMS conducted the Food City 500 Winston Cup Series
race and the Moore's Snack Food 250 Busch Series race. BMS is scheduled to
promote one more Winston Cup Series race and Busch Series race, as well as
several other races and events. Its NASCAR-sanctioned racing schedule is as
follows:
39
<PAGE>
<TABLE>
<CAPTION>
DATE EVENT CIRCUIT
- ----------- ------------------------------- ------------
<S> <C> <C>
April 10 "Moore's Snack Food 250" Busch
April 11 "Food City 500" Winston Cup
August 27 "Food City 250" Busch
August 28 "Goody's Headache Powder 500" Winston Cup
</TABLE>
In 1999, BMS is also scheduled to promote a NASCAR Craftsman Truck Series
event and the NHRA's "The Winston No-Bull Showdown" all-star race.
o LMSC. In May 1999, LMSC conducted the Coca-Cola 600 Winston Cup Series
race, The Winston, and the CARQUEST Auto Parts 300 Busch Series race and is
scheduled to promote one other Winston Cup Series race and one other Busch
Series race, as well as several other races and events. Its NASCAR-sanctioned
racing schedule is as follows:
<TABLE>
<CAPTION>
DATE EVENT CIRCUIT
- ------------ ------------------------------------------- ----------------------------
<S> <C> <C>
May 22 "The Winston" Winston Cup (all-star race)
May 29 "CARQUEST Auto Parts 300" Busch
May 30 "Coca-Cola 600" Winston Cup
October 9 "All Pro Auto Parts Bumper to Bumper 300" Busch
October 10 "UAW-GM Quality 500" Winston Cup
</TABLE>
For the remainder of 1999, LMSC is also scheduled to promote two ARCA
races.
o LVMS. In March 1999, LVMS conducted the Las Vegas 400 Winston Cup Series
race and the Sam's Town 300 Busch Series race, among others. Its
NASCAR-sanctioned racing schedule is as follows:
<TABLE>
<CAPTION>
DATE EVENT CIRCUIT
- --------- ------------------ ------------
<S> <C> <C>
March 6 "Sam's Town 300" Busch
March 7 "Las Vegas 400" Winston Cup
</TABLE>
In 1999, LVMS is also scheduled to promote one NASCAR Craftsman Truck
Series event, one IRL event, two NASCAR Winston West and two Winston Southwest
Series events, and various AMA, NHRA, World of Outlaws and other events.
o SPR. In 1999, SPR is scheduled to promote one Winston Cup Series race,
as well as several other races and events. Its NASCAR-sanctioned racing
schedule is as follows:
<TABLE>
<CAPTION>
DATE EVENT CIRCUIT
- --------- -------------------------- ------------
<S> <C> <C>
June 27 "Save Mart / Kragen 350" Winston Cup
</TABLE>
In 1999, SPR is also scheduled to promote a NHRA Nationals event, a NASCAR
Winston Southwest Series event, and various AMA, Sports Car Club of America and
other racing events.
o TMS. In March 1999, TMS conducted the PRIMESTAR 500 Winston Cup Series
race and the Coca-Cola 300 Busch Series race, and will promote several other
races and events. Its NASCAR-sanctioned racing schedule is as follows:
<TABLE>
<CAPTION>
DATE EVENT CIRCUIT
- ---------- ----------------- ------------
<S> <C> <C>
March 27 "Coca-Cola 300" Busch
March 28 "PRIMESTAR 500" Winston Cup
</TABLE>
In 1999, TMS is also scheduled to promote two NASCAR Craftsman Truck
Series events and two IRL events.
The following table shows selected revenues for the years ended December
31, 1996, 1997 and 1998. All amounts for 1996, 1997 and 1998 exclude
information for LVMS before the December 1, 1998 acquisition.
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------
THREE MONTHS ENDED
1996 1997 1998 MARCH 31, 1999
---------- ---------- ----------- -------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Admissions .................. $ 52,451 $ 94,032 $107,601 $19,826
Sponsorship revenue ......... 6,989 14,646 18,346 5,316
Broadcast revenue ........... 5,299 17,947 20,014 8,742
Other ....................... 37,374 65,501 83,835 19,220
-------- -------- -------- -------
Total ...................... $102,113 $192,126 $229,796 $53,104
======== ======== ======== =======
</TABLE>
40
<PAGE>
ADMISSIONS. Grandstand ticket prices at our NASCAR-sanctioned events in
1999 range from $15.00 to $130.00. In general, we are raising ticket prices as
the cost of living increases.
SPONSORSHIP REVENUE. Our revenue from corporate sponsorships is paid in
accordance with negotiated contracts. The identities of sponsors and the terms
of sponsorship change from time to time. We currently have sponsorship
contracts with such major manufacturing and consumer products companies as
Coca-Cola, General Motors, Miller Brewing Company, Anheuser-Busch, NAPA,
Cracker Barrel, PRIMESTAR, Goody's, Save Mart, Kragen, Chevrolet and Ford. Some
contracts allow the sponsor to name a particular racing event, as in the
"Coca-Cola 600" and the "UAW-GM Quality 500." Other consideration ranges from
"Official Car" designation, as with Ford at AMS, and Chevrolet at BMS, LMSC,
LVMS, SPR and TMS, to exclusive advertising and promotional rights in the
sponsor's product category, as with Anheuser-Busch at AMS, BMS, LVMS and TMS,
Coors also at TMS, and Miller at LMSC. Also, we obtained a naming rights
agreement in early 1999 renaming Charlotte Motor Speedway as Lowe's Motor
Speedway at Charlotte. None of our event sponsors individually accounted for as
much as 5% of total revenues in 1998.
BROADCAST REVENUE. We have negotiated contracts with television networks
and stations for the broadcast coverage of all of its NASCAR-sanctioned events.
We have contracts with ABC, CBS, ESPN, TBS and TNN covering events at AMS, BMS,
LMSC, LVMS, SPR and TMS. We also broadcast all of our NASCAR Winston Cup and
Busch Series races over our proprietary Performance Racing Network, which is
syndicated to more than 500 stations. Performance Racing Network also sponsors
a weekly racing-oriented program throughout the NASCAR season, which is
syndicated to more than 175 stations. We derive revenue from the sale of
commercial time on Performance Racing Network. None of our broadcast contracts
individually accounted for as much as 5% of total revenues in 1998.
OTHER REVENUE. We derive other revenue from the sale of souvenirs and
concessions, from fees paid for catering "hospitality" receptions and private
parties at our speedways and from parking. Also, as of December 31, 1998, our
speedway facilities include a total of approximately 659 luxury suites
available for leasing to corporate sponsors or others at current 1999 annual
rates ranging from $20,000 to $100,000. LMSC has also constructed 40 open-air
boxes, each containing 32 seats, which are currently available for renting by
corporate sponsors or others at annual rates of up to $37,000. Our tracks and
related facilities often are leased to others for use in driving schools,
testing, research and development of race cars and racing products, use as
settings for commercials and motion pictures, and other outdoor events. We also
derive other revenue from the sale of Legend and Bandolero cars and parts, and
industrial park rental revenues.
QUAD-CITIES INTERNATIONAL RACEWAY PARK. In October 1996, we signed a joint
management and development agreement with Quad-Cities International Raceway
Park. We will serve in an advisory capacity for the development of a multi-use
facility, which includes a speedway in northwest Illinois. The agreement also
grants us the option to purchase up to 40% equity ownership in the facility.
The option has not been exercised.
600 RACING AND THE LEGENDS CARS CIRCUIT
Introduced in 1992, Legends Cars are 5/8-scale versions of the modified
cars driven by legendary early NASCAR racers. Designed primarily to race on
"short" tracks of 3/8-mile or less, they are currently available in eight body
styles modeled after classic sedans and coupes. Legends Circuit races are
sanctioned by our subsidiary, 600 Racing, and continue to be the fastest
growing short track racing division in motorsports. More than 1,500 sanctioned
races were held nationwide in 1998, and 600 Racing is now the third largest
short track sanctioning body in terms of membership behind NASCAR and IMCA.
Since 1995, Legends Cars have been manufactured by 600 Racing at a leased
92,000-square-foot facility located approximately two miles from LMSC.
We believe that the Legends Car is one of only a few complete race cars
manufactured in the United States for a retail price of less than $12,400. At
these retail prices, we believe that Legends Cars are economically affordable
to a new group of racing enthusiasts who otherwise could not race on an
organized circuit. Legends Cars are not designed for general road use. Cars and
parts are currently marketed and sold through approximately 45 distributors
doing business throughout the United States, Canada, and Europe.
In late 1997, 600 Racing released a new "Bandolero" line of smaller,
lower-priced, entry level stock cars, which is expected to appeal to younger
racing enthusiasts. We further broadened the Legends Car Circuit in 1998,
increasing the number of sanctioned races and tracks at which Legend and
Bandolero Car races are held. In 1998, 600 Racing also began conducting
sanctioned Legend and Bandolero Car races at AMS and TMS, as well as again at
LMSC, and in 1999, plans to begin at both SPR and LVMS.
41
<PAGE>
OTHER ACTIVITIES
We also own Smith Tower, a seven-story, 135,000 square foot building
adjoining the main grandstand and overlooking the principal track at LMSC.
Smith Tower houses the Speedway Club, the corporate offices of LMSC and office
space leased to others. The Speedway Club is an exclusive dining and
entertainment facility located on the fifth and sixth floors of Smith Tower. We
have constructed a similar office tower adjoining the main grandstand and
overlooking the track at TMS. This TMS tower houses The Texas Motor Speedway
Club and the corporate offices of TMS. We are currently conducting a membership
drive for The Texas Motor Speedway Club, which contains a first class, year
round dining-entertainment club and a health-fitness club. The Texas Motor
Speedway Club opened in March 1999. Open year-round, these two VIP clubs are a
focal point of our efforts to improve the amenities and enhance the comfort of
our facilities for the benefit of spectators.
We have built 46 trackside condominiums at AMS of which 41 were sold as of
December 31, 1998. Also, the Company completed construction of 76 condominiums
at TMS above turn two of the speedway, 66 of which have been sold or contracted
for sale as of December 31, 1998. We built and sold 40 trackside condominiums
at LMSC in the 1980's and another 12 units at LMSC from 1991 to 1994. Some are
used by team owners and drivers, which is believed to enhance their commercial
appeal.
COMPETITION
We are the leading motorsports promoter in the local and regional markets
served by AMS, BMS, LMSC, LVMS, SPR and TMS, and compete regionally and
nationally with other speedway owners to sponsor events, especially NASCAR, IRL
and NHRA sanctioned events. We also must compete for spectator interest with
all forms of professional and amateur spring, summer and fall sports conducted
in and near Atlanta, Bristol, Charlotte, Las Vegas, Fort Worth, and Sonoma. We
also compete for attendance with a wide range of other available entertainment
and recreational activities.
MOTORSPORTS FACILITIES
o ATLANTA MOTOR SPEEDWAY. AMS is located on 870 acres of land in Hampton,
Georgia, approximately 30 miles south of downtown Atlanta. Built in 1960, today
it is a modern, attractive facility. In 1996, SMI completed 17 new suites at
AMS, reconfigured AMS's main entrances and expanded on-site roads to ease
congestion caused by the increases in attendance. In November 1997, SMI
completed major renovations at AMS, including its reconfiguration into a
"state-of-the-art" 1.54 mile, lighted, quad-oval superspeedway, the addition of
approximately 22,000 permanent seats, including 58 new suites, and changing the
start-finish line location. Other significant improvements in 1997 included new
scoreboards, new garage areas, and new infield media and press box centers.
Lighting was installed for its inaugural IRL night race in August 1998. At
December 31, 1998, AMS had permanent seating capacity of approximately 124,000,
including 141 new luxury suites. In 1999, AMS plans to improve and expand its
on-site roads and available parking, as well as reconfiguring traffic patterns
and entrances, to ease congestion and improve traffic flow. AMS has constructed
46 condominiums overlooking the Atlanta speedway and is in the process of
selling the four remaining condominiums.
o BRISTOL MOTOR SPEEDWAY. In January 1996, SMI acquired 100% of the
capital stock of BMS. BMS is located on approximately 550 acres in Bristol,
Tennessee and is a one-half mile, lighted, 36-degree banked concrete oval. BMS
also owns and operates a one-quarter mile lighted dragstrip. BMS is one of the
most popular facilities in the Winston Cup circuit among race fans due to its
36 degree banked turns and lighted nighttime races. We believe that spectator
demand for its Winston Cup events at BMS exceeds existing permanent seating
capacity. In 1996, BMS added approximately 6,000 permanent grandstand seats and
relocated various souvenir, concessions and restroom facilities to the
mezzanine level to increase spectator convenience and accessibility. In 1997,
BMS added approximately 39,000 permanent grandstand seats and constructed 55
new suites for a net increase of 31. In 1998, BMS added approximately 19,000
permanent grandstand seats, including 42 new luxury suites, again featuring a
new stadium-style terrace section and mezzanine level facilities for enhanced
spectator convenience and assessibility, and made other site improvements. At
December 31, 1998, BMS had permanent seating capacity of approximately 134,000,
including 97 luxury suites. In 1999, BMS is reconstructing and expanding its
dragstrip into a "state-of-the-art" dragway with permanent grandstand seating,
luxury suites, and extensive fan amenities and facilities. Construction of the
Bristol Dragway is expected to be completed in 1999, and its inaugural NHRA
sanctioned Winston Showdown will be hosted in July 1999. Bristol Dragway will
also host regional and weekly drag racing events, as well as various auto
shows.
o LOWE'S MOTOR SPEEDWAY (FORMERLY CHARLOTTE MOTOR SPEEDWAY). LMSC is
located in Concord, North Carolina, approximately 12 miles northeast of uptown
Charlotte. On Winston Cup race days it uses more than 1,000 acres of land, some
of which is leased from others. LMSC was among the first superspeedways built
and today is a modern, attractive
42
<PAGE>
facility. The principal track is a 1.5-mile banked asphalt quad-oval facility
in excellent condition, having been repaved in 1994, and was the first
superspeedway in North America lighted for nighttime racing. LMSC also has
three lighted "short" tracks (a 1/5-mile asphalt oval, a 1/4-mile asphalt
oval and a 1/5-mile dirt oval), as well as a 2.25-mile asphalt road course.
SMI has consistently improved and increased spectator seating arrangements at
LMSC. In 1997, LMSC added a "state-of-the-art" 25,000 seat grandstand,
featuring a unique mezzanine level concourse and 26 new suites, among other
site improvements. In 1998, LMSC added approximately 12,000 permanent seats,
including 12 new luxury suites, again featuring a new stadium-style terrace
section and mezzanine level facilities for enhanced spectator convenience and
assessibility. LMSC also further expanded parking areas to accommodate the
increases in attendance and to ease congestion. At December 31, 1998, LMSC had
permanent seating capacity of approximately 147,000, including 125 luxury
suites. In 1999, LMSC added approximately 10,000 permanent seats, further
expanded concessions, restroom and other fan amenities, and made other site
improvements.
o LAS VEGAS MOTOR SPEEDWAY. LVMS, located on approximately 1,300 acres in
Las Vegas, Nevada, is a 1.5 mile, lighted, asphalt superspeedway, and includes
several other on-site race tracks and a 1.4 million square foot on-site
industrial park. The other race tracks include a 1/4 mile dragstrip, 1/8 mile
dragstrip, 2.5 mile road course, 1/2 mile clay oval, 3/8 mile paved oval,
motocross and other off-road race courses. Construction of LVMS was
substantially completed in 1997 and its first major NASCAR Winston Cup Series
race was held in March 1998. As of December 31, 1998, construction of the 1.4
million square foot industrial park was nearing completion and is expected to
commence operations in early 1999. The industrial park is expected to be leased
under triple net operating leases primarily to businesses and individuals
involved in racing and related industries. At December 31, 1998, LVMS had
permanent seating capacity of approximately 107,000, including 102 luxury
suites. In 1999, LVMS plans to add approximately 15,000 permanent seats, expand
concessions, restroom and other fan amenities facilities, and make other site
improvements.
o SEARS POINT RACEWAY. SPR, located on approximately 1,500 acres in
Sonoma, California, consists of a 2.52-mile, twelve-turn road course, a
one-quarter mile dragstrip, and a 157,000 square foot industrial park. SPR
currently does not have permanent seating capacity but provides temporary
seating and suites for approximately 24,000 spectators in addition to other
general admission seating arrangements along its 2.52 mile road course. In
1997, SPR made various parking, road improvements and grading changes to
improve spectator sight lines, and to increase and improve seating and
facilities for spectator and media amenities. In 1998, SPR acquired adjoining
land to provide an additional entrance and expanded spectator parking areas to
accommodate the increases in attendance and to ease congestion. Also in 1998,
SPR was partially reconfigured into a stadium-style road course featuring "The
Chute" which provides spectators with improved sight lines and expanded viewing
areas. Pending governmental approvals, in 1999, SMI expects to begin major
renovations at SPR, including its on-going reconfiguration into a
"stadium-style" road racing course, the addition of approximately 45,000
permanent seats, and improving and expanding concessions, restroom and other
fan amenities facilities.
o TEXAS MOTOR SPEEDWAY. TMS, located on approximately 1,360 acres in Fort
Worth, Texas, is a 1.5-mile, lighted, banked, asphalt quad-oval superspeedway
with a permanent seating capacity of approximately 153,000, including 194
suites, and 76 condominiums. TMS, the second-largest sports facility in the
United States in terms of permanent seating capacity, hosted its first major
NASCAR Winston Cup race on April 6, 1997, preceded by a Busch race. TMS was
designed to maximize spectator comfort and enjoyment, and further design
improvements are expected at TMS as management acquires operating experience
with this new facility. The TMS facilities are subject to a lease transaction
with the Fort Worth Sports Authority as of December 31, 1998. See Note 2 to the
Consolidated Financial Statements for information on the terms and conditions
of the lease transaction. In addition to adding approximately 3,000 permanent
seats, among other site improvements, TMS significantly expanded its parking
areas and improved traffic control dramatically reducing travel congestion.
In addition, TMS has constructed an office tower adjoining the main
grandstand and overlooking the speedway, similar to The Speedway Club at LMSC.
This TMS tower houses The Texas Motor Speedway Club and corporate offices. The
Company is currently conducting a membership drive for The Texas Motor Speedway
Club which opened in March 1999.
43
<PAGE>
MANAGEMENT
Our directors are elected at the annual meetings of stockholders to serve
staggered terms of three years and until their successors are elected and
qualified. The Board of Directors currently consists of seven directors. The
terms of Messrs. Brooks and Gambill expire at the 2002 annual meeting; the
terms of Messrs. Wheeler and Clark expire at the 2000 annual meeting; and the
terms of Messrs. Smith and Benton expire at the 2001 annual meeting. The term
of Mr. Kemp expires at the 2002 annual meeting. Messrs. Brooks and Gambill were
reelected at the 1999 Annual Meeting. Officers are elected by the Board of
Directors to hold office until the first meeting of the Board of Directors
following the next annual meeting of stockholders and until their successors
are elected and qualified. Our directors and executive officers are as follows:
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL POSITION(S) WITH THE COMPANY
- ------------------------------- ----- -----------------------------------------------
<S> <C> <C>
O. Bruton Smith ............... 72 Chief Executive Officer and Chairman
H.A. "Humpy" Wheeler .......... 60 President, Chief Operating Officer and
Director of SMI; President and General Manager
of LMSC
William R. Brooks ............. 49 Vice President, Treasurer, Chief Financial
Officer and Director
Edwin R. Clark ................ 44 Executive Vice President and Director of SMI;
President and General Manager of AMS
William P. Benton ............. 75 Director
Mark M. Gambill ............... 48 Director
Jack F. Kemp .................. 63 Director
</TABLE>
The name, age, present principal occupation or employment and the material
occupations, positions, offices or employments for the past five years of each
SMI director and director-nominee are set forth below.
O. BRUTON SMITH, 72, has been Chief Executive Officer and a director of
LMSC, a wholly-owned subsidiary of SMI, since 1975. He was a founder of LMSC in
1959 and was an executive officer and director of LMSC until 1961, when it
entered reorganization proceedings under the bankruptcy laws. Mr. Smith became
Chairman and Chief Executive Officer, President and a director of AMS upon
acquiring it in 1990. He became Chief Executive Officer of SMI upon its
organization in December 1994 and became the Chairman and CEO of BMS upon its
acquisition in January 1996, SPR upon its acquisition in November 1996, and TMS
in 1995. Mr. Smith became the President of LVMS upon its acquisition on
December 1, 1998. Mr. Smith also is the Chairman, Chief Executive Officer, a
director and controlling stockholder of Sonic Automotive, Inc. ("SAI"), (NYSE:
symbol SAH), and serves as the president and a director of each of SAI's
operating subsidiaries. SAI is believed to be one of the ten largest automobile
retail dealership groups in the United States and is engaged in the acquisition
and operation of automobile dealerships principally in the southeastern United
States. Mr. Smith has entered into an employment agreement with SAI pursuant to
which he has agreed to devote 50% of his business time to the affairs of SAI.
Mr. Smith also owns and operates Sonic Financial Corporation ("Sonic
Financial"), among other private businesses.
H.A. "HUMPY" WHEELER, 60, was hired by LMSC in 1975 and has been a
director and General Manager of LMSC since 1976. Mr. Wheeler was named
President of LMSC in 1980 and became a director of AMS upon its acquisition in
1990. He became President, Chief Operating Officer and a director of SMI upon
its organization in December 1994. Mr. Wheeler has been a Vice President and a
director of BMS and SPR since their acquisition in 1996, and of TMS since its
formation in 1995. Mr. Wheeler also became Vice President of LVMS upon its
acquisition on December 1, 1998.
WILLIAM R. BROOKS, 49, joined Sonic Financial from PricewaterhouseCoopers
in 1983. Mr. Brooks has been Vice President of LMSC for more than five years
and has been Vice President and a director of AMS, BMS and SPR since their
acquisition, and TMS since its formation. Mr. Brooks became Vice President of
LVMS upon its acquisition on December 1, 1998. Mr. Brooks has been Vice
President, Treasurer, Chief Financial Officer and a director of SMI since its
organization in December 1994 and has been the President and a director of
Speedway Funding Corp., the Company's financing subsidiary, since 1995. Mr.
Brooks has also served as a director of SAI since its formation in 1997 and
served as its Chief Financial Officer from February to April 1997.
EDWIN R. CLARK, 44, became Vice President and General Manager of AMS in
1992 and was promoted to President and General Manager of AMS in 1995. Prior to
that appointment, he had been LMSC' Vice President of Events since 1981. Mr.
Clark became Executive Vice President of SMI upon its organization in December
1994 and became a director of SMI in 1995.
44
<PAGE>
WILLIAM P. BENTON, 75, became a director of SMI in 1995. Since January
1997, Mr. Benton has been the Executive Director of Ogilvy & Mather, a
world-wide advertising agency. He is also a consultant to the Chairman and
Chief Executive Officers of TI Group and Allied Holdings, Inc. Prior to his
appointment at Ogilvy & Mather, Mr. Benton served as Vice Chairman of Wells,
Rich, Greene/BDDP Inc., an advertising agency with offices in New York and
Detroit. Mr. Benton retired from Ford Motor Company as its Vice President of
Marketing Worldwide in 1984 after a 37-year career with that company. In
addition, Mr. Benton serves as a director of SAI.
MARK M. GAMBILL, 48, became a director of SMI in 1995. Mr. Gambill has
been employed continuously since 1972 by First Union Capital Markets and its
predecessor entities. First Union Capital Markets is the investment banking
subsidiary of First Union Corporation. In 1996, he was named President of Wheat
First Butcher Singer, which was subsequently purchased by First Union in 1998.
In 1999, Mr. Gambill was named Managing Director and Head of Equity Capital
Markets of First Union Capital Markets. Previously, Mr. Gambill acted as head
of various divisions including Corporate and Public Finance, Taxable Fixed
Income, and Equity Sales, Trading and Research.
JACK F. KEMP, 63, became a director of SMI in 1999. Mr. Kemp is a
co-director of Empower America, a public policy and advocacy organization he
co-founded in 1993. Prior to founding Empower America, Mr. Kemp served four
years as Secretary of Housing and Urban Development. Mr. Kemp received the
Republican Party's nomination for Vice President in August of 1996. In 1995,
Mr. Kemp served as Chairman of the National Commission on Economic Growth and
Tax Reform. Before his appointment to the Cabinet, Mr. Kemp represented the
Buffalo area and western New York for 18 years in the United States House of
Representatives from 1971 to 1989. He served for seven years in the Republican
Leadership as Chairman of the House Republican Conference after a 13-year
career as a professional football quarterback with the San Diego Chargers and
the Buffalo Bills.
CERTAIN TRANSACTIONS
LMSC holds a note from a partnership in which Mr. Smith, our Chairman and
Chief Executive officer, is a partner. The outstanding balance due thereunder
at December 31, 1998 was $798,000 and at March 31, 1999 was $810,000 including
accrued interest. The note due from such partnership is collateralized by
certain land owned by the partnership and is payable on demand. The note bears
interest at 1% over prime.
Sonic Financial, an affiliate of SMI through common ownership, has made
several loans and cash advances to AMS prior to 1996. Such loans and advances
stood at approximately $2.6 million at December 31, 1998 and March 31, 1999. Of
such amount, approximately $1.8 million bears interest at 3.83% per annum. The
remainder of the amount bears interest at 1% over prime.
From time to time during 1998 and 1999 we paid certain expenses and made
cash advances for various corporate purposes on behalf of Sonic Financial. At
December 31, 1998 and March 31, 1999, we had a net receivable from Sonic
Financial of approximately $1.0 million and $909,000, respectively.
Prior to the completion of our initial public offering, LMSC joined with
Sonic Financial in filing consolidated federal income tax returns for several
years. It did so for the period of 1995 ending with the restructuring
consummated prior to the completion of the initial public offering. Under
applicable federal tax law, each corporation included in Sonic Financial's
consolidated return is jointly and severally liable for any resultant tax.
Under a tax allocation agreement dated January 27, 1995, however, LMSC agreed
to pay Sonic Financial, in the event that additional federal income tax is
determined to be due, an amount equal to LMSC' separate federal income tax
liability computed for all periods in which LMSC and Sonic Financial have been
members of Sonic Financial's consolidated group. Also pursuant to such
agreement, Sonic Financial agreed to indemnify LMSC for any additional amount
determined to be due from Sonic Financial's consolidated group in excess of the
federal income tax liability of LMSC for such periods. The tax allocation
agreement establishes procedures with respect to tax adjustments, tax claims,
tax refunds, tax credits and other tax attributes relating to periods ending
prior to the time that LMSC left Sonic Financial's consolidated group. Pursuant
to such agreement, amounts payable by LMSC for tax adjustments, if any, shall
in no event exceed the sum of $1.8 million plus the amount of any tax
adjustments for which LMSC may receive future tax benefits.
At December 31, 1998 and March 31, 1999, SMI had a note receivable from
Mr. Smith for approximately $842,000 and $1.6 million, respectively, including
accrued interest. The principal balance of the note represents premiums paid by
SMI under the split-dollar life insurance trust arrangement on behalf of Mr.
Smith, in excess of cash surrender value. The note bears interest at 1% over
prime.
45
<PAGE>
At December 31, 1998 and March 31, 1999, SMI owed approximately $1.5
million to a former shareholder of LVMS who is now a LVMS officer and employee.
The amount is due in equal monthly payments through December 2003 at 6.4%
imputed interest.
THE EXCHANGE OFFER
PURPOSE AND EFFECT
In 1997, we sold the Series A Notes which we subsequently exchanged on
October 22, 1997 for registered Series B Notes. We privately sold the Series C
Notes on May 11, 1999. In connection with the May 11, 1999 transaction, we
entered into a registration rights agreement, which requires us to file a
registration statement under the Securities Act of 1933 with respect to the
registration of the Series C Notes. Upon the effectiveness of that registration
statement, we are required to offer to the holders of all the old notes the
opportunity to exchange their old notes for a like principal amount of
registered exchange notes, which will be issued without a restrictive legend
and which generally may be reoffered and resold by the holder without
registration under the Securities Act of 1933.
The registration rights agreement further provides that we must use our
reasonable best efforts to:
o cause the registration statement with respect to this exchange offer to
be declared effective by the Commission within 120 days of the date on
which we issued the Series C Notes; and
o consummate this exchange offer within 30 business days from the date on
which the registration statement is declared effective.
Except as provided below, our obligations with respect to the registration
of the Series C Notes and exchange of the Series B Notes will terminate upon
the completion of this exchange offer. A copy of the registration rights
agreement has been filed as an exhibit to the registration statement, of which
this prospectus is a part, and the summary in this prospectus of the material
provisions of the registration rights agreement does not purport to be complete
and is qualified in its entirety by reference to that agreement. Following the
completion of this exchange offer, except as set forth below, (A) holders of
Series C Notes not tendered will not have any further registration rights and
those Series C Notes will continue to be subject to certain restrictions on
transfer and (B) holders of Series B Notes not tendered will not have any
further rights under the registration rights agreement. Accordingly, the
liquidity of the market for the old notes could be adversely affected upon
consummation of this exchange offer.
In order to participate in this exchange offer, a holder must represent to
us, among other things, that:
o the registered exchange notes acquired pursuant to this exchange offer
are being obtained in the ordinary course of business of the holder;
o the holder is not engaging in and does not intend to engage in a
distribution of the exchange notes;
o the holder does not have an arrangement or understanding with any person
to participate in a distribution of the exchange notes; and
o the holder is not an "affiliate," as defined under Rule 405 promulgated
under the Securities Act of 1933, of SMI.
Pursuant to the registration rights agreement if:
o we determine that we are not permitted to effect this exchange offer as
contemplated by this prospectus because of any change in applicable law
or Commission policy, or
o any holder of Transfer Restricted Securities notifies us prior to the
20th day following consummation of this exchange offer:
o that it is prohibited by law or Commission policy from
participating in this exchange offer;
o that it may not resell the exchange notes acquired by it in the
exchange offer to the public without delivering a prospectus and
that this prospectus is not appropriate or available for such
resales; or
o that it is a broker-dealer and owns Series C Notes acquired
directly from us or our affiliate,
46
<PAGE>
we will be required to file a "shelf" registration statement for a continuous
offering pursuant to Rule 415 under the Securities Act of 1933 in respect of
the unregistered notes. For purposes of the foregoing, "Transfer Restricted
Securities" means each Series C Note until:
o the date on which such note has been exchanged by a person other than a
broker-dealer for an exchange note in the exchange offer;
o following the exchange by a broker-dealer in the exchange offer of a
Series C Note for an exchange note, the date on which such exchange note
is sold to a purchaser who receives from such broker-dealer on or prior
to the date of such sale a copy of this prospectus;
o the date on which such Series C Note has been electively registered
under the Securities Act of 1933 and disposed of in accordance with such
"shelf" registration statement; or
o the date on which such Series C Note is distributed to the public
pursuant to Rule 144 under the Act or may be distributed to the public
pursuant to Rule 144(k) under the Act.
Other than as set forth above, no holder will have the right to
participate in the shelf registration statement nor otherwise require that we
register such holder's shares of unregistered Series C Notes under the
Securities Act of 1933. See " -- Procedures for Tendering."
Based on an interpretation by the Commission's staff set forth in
no-action letters issued to third parties unrelated to us, we believe that,
with the exceptions set forth below, exchange notes issued pursuant to the
exchange offer in exchange for Series C Notes may be offered for resale, resold
and otherwise transferred by holders thereof (other than any holder which is
our "affiliate" within the meaning of Rule 405 promulgated under the Securities
Act of 1933, or a broker-dealer who purchased unregistered notes directly from
us to resell pursuant to Rule 144A or any other available exemption promulgated
under the Securities Act of 1933) without compliance with the registration and
prospectus delivery provisions of the Securities Act of 1933; PROVIDED that the
exchange notes are acquired in the ordinary course of business of the holder
and the holder does not have an arrangement or understanding with any person to
participate in the distribution of such exchange notes.
Any holder who tenders in the exchange offer for the purpose of
participating in a distribution of the exchange notes cannot rely on this
interpretation by the Commission's staff and must comply with the registration
and prospectus delivery requirements of the Securities Act of 1933 in
connection with a secondary resale transaction. Each broker-dealer that
receives exchange notes for its own account in exchange for old notes, where
such old notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. See "Plan of
Distribution." Broker-dealers who acquired unregistered notes directly from us
and not as a result of market-making activities or other trading activities may
not rely on the staff's interpretations discussed above or participate in the
exchange offer and must comply with the prospectus delivery requirements of the
Securities Act of 1933 in order to sell the Series C Notes.
Holders of Series B Notes currently hold registered securities. If we fail
to complete this exchange offer, as discussed above, holders of Series B Notes
are only entitled under the registration rights agreement relating to the
Series C Notes to liquidated damages as discussed under "Description of
Exchange Notes -- Liquidated Damages." To the extent a holder is able currently
to transfer their Series B Notes, they will be able to transfer exchange notes
received in this exchange offer.
CONSEQUENCES OF FAILURE TO EXCHANGE
Following the completion of the exchange offer (except as set forth under
" -- Purpose and Effect" above), (A) holders of Series C Notes not tendered
will not have any further registration rights and those Series C Notes will
continue to be subject to certain restrictions on transfer and (B) holders of
Series B Notes not tendered will not have any further rights under the
registration rights agreement. Accordingly, the liquidity of the market for a
holder's old notes could be adversely affected upon completion of the exchange
offer if the holder does not participate in the exchange offer.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, we will accept any and all old notes validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on ,
1999, or such date and time to which we extend the offer. We will issue $1,000
principal amount of exchange notes in
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exchange for each $1,000 principal amount of outstanding old notes accepted in
the exchange offer. Holders may tender some or all of their old notes pursuant
to the exchange offer. However, old notes may be tendered only in integral
multiples of $1,000 in principal amount.
The form and terms of the exchange notes are substantially the same as the
form and terms of the old notes except, with respect to the Series C Notes, the
exchange notes have been registered under the Securities Act of 1933 and will
not bear legends restricting their transfer. The exchange notes will evidence
the same debt as the old notes and will be issued pursuant to, and entitled to
the benefits of, the Indenture dated as of May 11, 1999.
As of May 26, 1999, old notes representing $250 million in aggregate
principal amount were outstanding. This prospectus, together with the letter of
transmittal, is being sent to registered holders and to others believed to have
beneficial interests in the old notes. We intend to conduct the exchange offer
in accordance with the applicable requirements of the Exchange Act and the
rules and regulations of the Commission promulgated thereunder.
We shall be deemed to have accepted validly tendered old notes when, as,
and if we have given oral or written notice thereof to the exchange agent. The
exchange agent will act as agent for the tendering holders for the purpose of
receiving the exchange notes from us. If any tendered old notes are not
accepted for exchange because of an invalid tender, the occurrence of certain
other events set forth herein or otherwise, certificates for any such
unaccepted old notes will be returned, without expense, to the tendering holder
thereof as promptly as practicable after , 1999, unless the exchange offer
is extended.
Holders who tender old notes in the exchange offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the letter
of transmittal, transfer taxes with respect to the exchange of old notes
pursuant to the exchange offer. We will pay all charges and expenses, other
than certain applicable taxes, in connection with the exchange offer. See " --
Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The expiration date shall be 5:00 p.m., New York City time, on ,
1999, unless we, in our sole discretion, extend the exchange offer, in which
case the expiration date shall mean the latest date and time to which the
exchange offer is extended. In order to extend the exchange offer, we will
notify the exchange agent and each registered holder of any extension by oral
or written notice prior to 9:00 a.m., New York City time, on the next business
day after the previously scheduled expiration date.
We reserve the right, in our sole discretion:
o to delay accepting any old notes, to extend the exchange offer or, if
any of the conditions set forth under " -- Conditions to the Exchange
Offer" shall not have been satisfied, to terminate the exchange offer,
by giving oral or written notice of such delay, extension or termination
to the exchange agent; or
o to amend the terms of the exchange offer in any manner.
In the event that we make a material or fundamental change to the terms of
the exchange offer, we will file a post-effective amendment to the registration
statement of which this prospectus is a part.
PROCEDURES FOR TENDERING
Only a holder of old notes may tender the old notes in the exchange offer.
Except as set forth under " -- Book-Entry Transfer," to tender in the exchange
offer a holder must complete, sign and date the letter of transmittal, or a
copy thereof, have the signatures thereon guaranteed if required by the letter
of transmittal, and mail or otherwise deliver the letter of transmittal or copy
to the exchange agent prior to the expiration date. In addition:
o certificates for such old notes must be received by the exchange agent
along with the letter of transmittal prior to the expiration date;
o a timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of such old notes, if that procedure is available, into
the exchange agent's account at DTC (the "Book-Entry Transfer Facility")
pursuant to the procedure for book-entry transfer described below, must
be received by the exchange agent prior to the expiration date; or
o the holder must comply with the guaranteed delivery procedures described
below.
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To be tendered effectively, the letter of transmittal and other required
documents must be received by the exchange agent at the address set forth under
" -- Exchange Agent" prior to the expiration date.
The tender by a holder that is not withdrawn before the expiration date
will constitute an agreement between that holder and us in accordance with the
terms and subject to the conditions set forth herein and in the letter of
transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE.
YOU SHOULD NOT SEND ANY LETTER OF TRANSMITTAL OR OLD NOTES TO US. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR
NOMINEES TO EFFECT THESE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose old notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct the
registered holder to tender on the beneficial owner's behalf. If the beneficial
owner wishes to tender on the owner's own behalf, the owner must, prior to
completing and executing the letter of transmittal and delivering the owner's
old notes, either make appropriate arrangements to register ownership of the
old notes in the beneficial owner's name or obtain a properly completed bond
power from the registered holder. The transfer of registered ownership may take
considerable time.
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an eligible institution unless old notes
tendered pursuant thereto are tendered:
o by a registered holder who has not completed the box entitled "Special
Registration Instruction" or "Special Delivery Instructions" on the
letter of transmittal; or
o for the account of an eligible institution.
If signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, are required to be guaranteed, the guarantee must be by any
eligible guarantor institution that is a member of or participant in the
Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Program or an "eligible guarantor institution" within the
meaning of Rule 17Ad-15 under the Exchange Act (an "eligible institution").
If the letter of transmittal is signed by a person other than the
registered holder of any old notes listed therein, the old notes must be
endorsed or accompanied by a properly completed bond power, signed by the
registered holder as that registered holder's name appears on the old notes.
If the letter of transmittal or any old notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to us of
their authority to so act must be submitted with the letter of transmittal
unless waived by us.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered notes will be determined by us
in our sole discretion, which determination will be final and binding. We
reserve the absolute right to reject any and all old notes not properly
tendered or any old notes that would, in the opinion of counsel, be unlawful to
accept. We also reserve the right to waive any defects, irregularities or
conditions of tender as to particular old notes. Our interpretation of the
terms and conditions of this exchange offer (including the instructions in the
letter of transmittal) will be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of old notes must be
cured within such time as we shall determine. Although we intend to notify
holders of defects or irregularities with respect to tenders of old notes,
neither we, the exchange agent, nor any other person shall incur any liability
for failure to give such notification. Tenders of old notes will not be deemed
to have been made until such defects or irregularities have been cured or
waived. Any unregistered notes received by the exchange agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned by the exchange agent to the tendering
holders, unless otherwise provided in the letter of transmittal, as soon as
practicable following , 1999, unless we extend this exchange offer.
In addition, we reserve the right in our sole discretion to purchase or
make offers for any old notes that remain outstanding after the expiration date
or, as set forth under " -- Conditions to the Exchange Offer," to terminate the
exchange
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offer and, to the extent permitted by applicable law, purchase old notes in the
open market, in privately negotiated transactions, or otherwise. The terms of
any such purchases or offers could differ from the terms of this exchange
offer.
By tendering, each holder will represent to us that, among other things:
o the exchange notes acquired pursuant to this exchange offer are being
obtained in the ordinary course of business of the person receiving such
exchange notes, whether or not such person is the registered holder;
o the holder is not engaging in and does not intend to engage in a
distribution of such exchange notes;
o the holder does not have an arrangement or understanding with any person
to participate in the distribution of such exchange notes; and
o the holder is not our "affiliate," as defined under Rule 405 of the
Securities Act of 1933.
In all cases, issuance of exchange notes for old notes that are accepted
for exchange pursuant to this exchange offer will be made only after timely
receipt by the exchange agent of certificates for such notes or a timely
Book-Entry Confirmation of such old notes into the exchange agent's account at
the Book-Entry Transfer Facility, a properly completed and duly executed letter
of transmittal (or, with respect to the DTC and its participants, electronic
instructions in which the tendering holder acknowledges its receipt of and
agreement to be bound by the letter of transmittal) and all other required
documents. If any tendered old notes are not accepted for any reason set forth
in the terms and conditions of the exchange offer or if old notes are submitted
for a greater principal amount than the holder desires to exchange, such
unaccepted or non-exchanged old notes will be returned without expense to the
tendering holder (or, in the case of old notes tendered by book-entry transfer
into the exchange agent's account at the Book-Entry Transfer Facility pursuant
to the book-entry transfer procedures described below, such nonexchanged old
notes will be credited to an account maintained with such Book-Entry Transfer
Facility) as promptly as practicable after the expiration or termination of
this exchange offer.
Each broker-dealer that receives exchange notes for its own account in
exchange for old notes, where such old notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such exchange notes. See "Plan of Distribution."
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account in respect
of the old notes at the Book-Entry Transfer Facility for purposes of this
exchange offer within two business days after the date of this prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of old notes being tendered by
causing the Book-Entry Transfer Facility to transfer such old notes into the
exchange agent's account at the Book-Entry Transfer Facility in accordance with
such Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of old notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the letter of transmittal or copy thereof, with
any required signature guarantees and any other required documents, must, in
any case other than as set forth in the following paragraph, be transmitted to
and received by the exchange agent at the address set forth under " -- Exchange
Agent" on or prior to the expiration date or the guaranteed delivery procedures
described below must be complied with.
DTC's Automated Tender Offer Program ("ATOP") is the only method of
processing exchange offers through DTC. To accept this exchange offer through
ATOP, participants in DTC must send electronic instructions to DTC through
DTC's communication system in lieu of sending a signed, hard copy letter of
transmittal. DTC is obligated to communicate those electronic instructions to
the exchange agent. To tender old notes through ATOP, the electronic
instructions sent to DTC and transmitted by DTC to the exchange agent must
contain the character by which the participant acknowledges its receipt of and
agrees to be bound by the letter of transmittal.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the old notes desires to tender such old notes
and the old notes are not immediately available, or time will not permit such
holder's old notes or other required documents to reach the exchange agent
before the expiration date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if:
o the tender is made through an eligible institution;
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o prior to the expiration date, the exchange agent receives from such
eligible institution a properly completed and duly executed letter of
transmittal (or a facsimile thereof) and notice of guaranteed delivery,
substantially in the form provided by us (by telegram, telex, facsimile
transmission, mail or hand delivery), setting forth the name and address
of the holder of unregistered notes and the amount of old notes tendered,
stating that the tender is being made thereby and guaranteeing that
within three New York Stock Exchange, Inc, ("NYSE") trading days after
the date of execution of the notice of guaranteed delivery, the
certificates for all physically tendered unregistered notes, in proper
form for transfer, or a Book-Entry Confirmation, as the case may be, will
be deposited by the eligible institution with the exchange agent; and
o the certificates for all physically tendered old notes, in proper form
for transfer, or a Book-Entry Confirmation, as the case may be, are
received by the exchange agent within three NYSE trading days after the
date of execution of the notice of guaranteed delivery.
WITHDRAWAL RIGHTS
Tenders of old notes may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the expiration date.
For a withdrawal of a tender of old notes to be effective, a written or
(for DTC participants) electronic ATOP transmission notice of withdrawal must
be received by the exchange agent at its address set forth under
" -- Exchange Agent" prior to 5:00 p.m., New York City time, on the expiration
date. Any such notice of withdrawal must:
o specify the name of the person having deposited the old notes to be
withdrawn;
o identify the old notes to be withdrawn (including the certificate number
or numbers and principal amount of such old notes);
o in the case of a written notice of withdrawal, be signed by the holder in
the same manner as the original signature on the letter of transmittal by
which such old notes were tendered (including any required signature
guarantees) or be accompanied by documents of transfer sufficient to have
the trustee register the transfer of such old notes into the name of the
person withdrawing the tender; and
o specify the name in which any such old notes are to be registered, if
different from that of the person having deposited the old notes.
All questions as to the validity, form, and eligibility (including time of
receipt) of such notices will be determined by us. Such determination shall be
final and binding on all parties. Any old notes so withdrawn will be deemed not
to have been validly tendered for exchange for purposes of this exchange offer.
Any old notes which have been tendered for exchange but which are not exchanged
for any reason will be returned to the holder thereof without cost to such
holder as soon as practicable after withdrawal, rejection of tender, or
termination of the exchange offer. Properly withdrawn notes may be retendered
by following one of the procedures under " -- Procedures for Tendering" at any
time on or prior to the expiration date.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of this exchange offer, we are not
required to accept for exchange, or to issue exchange notes in exchange for,
any old notes and may terminate or amend this exchange offer if, at any time
before the acceptance of such old notes for exchange or the exchange of the
exchange notes for such old notes, we determine that this exchange offer
violates applicable law, any applicable interpretation of the staff of the
Commission or any order of any governmental agency or court of competent
jurisdiction.
The foregoing conditions are for our sole benefit and may be asserted by
us regardless of the circumstances giving rise to any such condition or may be
waived by us in whole or in part at any time and from time to time in our sole
discretion. Our failure to exercise any of the foregoing rights at any time
shall not be deemed a waiver of any such right and each such right shall be
deemed an ongoing right which may be asserted at any time and from time to
time.
In addition, we will not accept for exchange any old notes tendered, and
no exchange notes will be issued in exchange for any such old notes, if at such
time any stop order shall be threatened or in effect with respect to the
registration statement of which this prospectus constitutes a part or the
qualification of the indentures governing the notes under the Trust Indenture
Act of 1939, as amended. In any such event we are required to use every
reasonable effort to obtain the withdrawal of any stop order at the earliest
possible time.
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EXCHANGE AGENT
All executed letters of transmittal should be directed to the exchange
agent. U.S. Bank Trust National Association has been appointed as exchange
agent for this exchange offer. Questions, requests for assistance and requests
for additional copies of this prospectus or of the letter of transmittal should
be directed to the exchange agent addressed as follows:
U.S. BANK TRUST NATIONAL ASSOCIATION
BY REGISTERED OR CERTIFIED MAIL: BY HAND OR OVERNIGHT DELIVERY:
U.S. Bank Trust National Association U.S. Bank Trust National Association
180 East Fifth Street 180 East Fifth Street
Mail Code: SPFT0210 Mail Code: SPFT0210
St. Paul, Minnesota 55101 St. Paul, Minnesota 55101
Attention: Specialized Finance Attention: Specialized Finance
BY FACSIMILE:
(ELIGIBLE INSTITUTIONS ONLY)
(612) 244-1537 (MN)
FOR INFORMATION OR
CONFIRMATION BY TELEPHONE:
(612) 244-5011 (MN)
Originals of all documents sent by facsimile should be sent promptly by
registered or certified mail, by hand or by overnight delivery service.
FEES AND EXPENSES
We will not make any payments to brokers, dealers or others soliciting
acceptances of this exchange offer. The principal solicitation is being made by
mail; however, additional solicitations may be made in person or by telephone
by our officers and employees. We will pay the estimated cash expenses to be
incurred in connection with this exchange offer. We estimate such expenses to
be $ , which includes fees and expenses of the exchange agent, accounting,
legal, printing and related fees and expenses.
TRANSFER TAXES
Holders who tender their old notes for exchange will not be obligated to
pay any transfer taxes in connection therewith, except that holders who
instruct us to register exchange notes in the name of, or request that old
notes not tendered or not accepted in the exchange offer be returned to, a
person other than the registered tendering holder will be responsible for the
payment of any applicable transfer tax thereon.
DESCRIPTION OF EXCHANGE NOTES
GENERAL
You can find the definitions of certain terms used in this description
under the subheading "Certain Definitions." SMI will issue the exchange notes
under an indenture dated May 11, 1999 (the "Indenture") among itself, its
subsidiary guarantors (the "Guarantors") and U.S. Bank Trust National
Association as trustee (the "Trustee"). The terms of the notes include those
stated in the Indenture and those made part of the Indenture by reference to
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
EXCEPT AS WE OTHERWISE INDICATE, THE FOLLOWING SUMMARY APPLIES TO BOTH THE
OLD NOTES AND THE EXCHANGE NOTES.
The form and terms of the exchange notes are substantially indentical to
the form and terms of the old notes, except that, unlike the unregistered
Series C Notes, the exchange notes will have been registered and will not bear
legends restricting their transfer.
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The following description is a summary of the material provisions of the
Indenture. It does not restate the agreement in its entirety. We urge you to
read the Indenture because it, and not this description, defines your rights as
holders of these exchange notes. We will provide you with a copy of the
Indenture free of charge as explained under " -- Additional Information."
PRINCIPAL, MATURITY AND INTEREST
The Indenture governing the exchange notes provides for the issuance of up
to $325.0 million in aggregate principal amount of notes. If all of SMI's
outstanding old notes participate in this exchange offer, there will be $250.0
million in aggregate principal amount of notes issued under the Indenture. See
"Risk Factors -- Holders of Our Old Notes May Choose Not to Participate In The
Exchange Offer." The Indenture also provides for the issuance of up to $75.0
million aggregate principal amount of additional notes having identical terms
and conditions to the exchange notes (the "Additional Notes"). Any Additional
Notes will be part of the same class of notes offered hereby and will vote on
all matters with the exchange notes offered hereby. For purposes of this
"Description of Exchange Notes" references to the exchange notes do not include
the Additional Notes. No offering of any such Additional Notes is being or shall
in any manner be deemed to be made by this prospectus. In addition there can be
no assurance as to when or whether SMI will issue any such Additional Notes or
as to the aggregate principal amount of such Additional Notes.
The exchange notes will mature on August 15, 2007. Interest on the
exchange notes will accrue at the rate of 8 1/2% per annum and will be payable
semi-annually in arrears on February 15 and August 15, commencing on August 15,
1999. SMI will make each interest payment to the Holders of record of the
exchange notes on the immediately preceding January 31 and July 31.
SMI will issue exchange notes in denominations of $1,000 and integral
multiples of $1,000. Interest on the exchange notes will accrue from the date
of original issuance or, if interest has already been paid, from the date it
was most recently paid. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months.
METHODS OF RECEIVING PAYMENTS ON THE NOTES
If a Holder has given wire transfer instructions to SMI, SMI will pay all
principal, premium, interest and Liquidated Damages on the exchange notes in
accordance with those instructions. All other payments on the exchange notes
will be made at the office or agency SMI maintains for such purpose within the
State of New York. However, SMI may choose to pay interest and Liquidated
Damages by mailing a check to the Holders of the exchange notes at their
addresses set forth in the Register of Holders.
SUBSIDIARY GUARANTEES
Each of the existing and future domestic material subsidiaries of SMI,
other than Oil-Chem Research Corporation and its subsidiaries, will jointly and
severally guarantee SMI's obligations under the exchange notes. Each other SMI
subsidiary that guarantees SMI's obligations under the 1999 Credit Facility
will also guarantee the exchange notes. Each subsidiary guarantee will be
subordinated to the prior payment in full of all Senior Indebtedness of that
Guarantor. The obligations of each Guarantor under its subsidiary guarantee
will be limited as necessary to prevent that subsidiary guarantee from
constituting a fraudulent conveyance under applicable law. See "Risk Factors --
Fraudulent Conveyance Matters."
A Guarantor may not consolidate with or merge into (whether or not such
Guarantor is the surviving person) another Person unless:
(1) immediately after giving effect to that transaction, no Default or
Event of Default exists; and
(2) the Person formed by or surviving any such consolidation or merger (if
other than such Guarantor) assumes all the obligations of that
Guarantor pursuant to a supplemental indenture satisfactory to the
Trustee.
The Subsidiary Guarantee of a Guarantor will be released:
(1) in connection with any sale or other disposition of all of the assets
of that Guarantor (including by way of merger or consolidation), if SMI
applies the Net Proceeds of that sale or other disposition, in
accordance with the applicable provisions of the Indenture; or
(2) in connection with any sale of all of the capital stock of a Guarantor,
if SMI applies the Net Proceeds of that sale in accordance with the
applicable provisions of the Indenture; or
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(3) upon the release by all holders of Senior Indebtedness and Guarantor
Senior Indebtedness of all guarantees issued by a Guarantor and all
liens of the property and assets of such Guarantor that relate to
Senior Indebtedness and Guarantor Senior Indebtedness.
On a PRO FORMA basis, after giving effect to our sale of the Series C
Notes and the application of the proceeds therefrom, the principal amount of
Guarantor Senior Indebtedness outstanding at December 31, 1998 and March 31,
1999 would have been approximately $132.4 million and $133.1 million,
respectively, which amounts are the same Indebtedness that constitutes Senior
Indebtedness of the Company. The Indenture will limit, subject to certain
financial tests, the amount of additional indebtedness, including Guarantor
Senior Indebtedness, that the Guarantors can incur. See
" -- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred
Stock."
The Board of Directors of SMI may at any time designate the Unrestricted
Subsidiary to be a Subsidiary; PROVIDED that such designation shall be deemed
to be an incurrence of Indebtedness by a Subsidiary of SMI of any outstanding
Indebtedness of the Unrestricted Subsidiary and such designation shall only be
permitted if:
(1) such Indebtedness is permitted under the covenant described under the
caption " -- Certain Covenants -- Incurrence of Indebtedness and
Issuance of Preferred Stock," calculated on a PRO FORMA basis as if
such designation had occurred at the beginning of the four-quarter
reference period; and
(2) no Default or Event of Default would be in existence following such
designation.
In addition, the Unrestricted Subsidiary shall continue to be an
unrestricted subsidiary for purposes of the Indenture only if it:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is a Person with respect to which neither SMI nor any of its
Subsidiaries has any direct or indirect obligation,
(a) to subscribe for additional Equity Interests; or
(b) to maintain or preserve such Person's financial condition or to cause
such Person to achieve any specified levels of operating results; and
(3) has not guaranteed or otherwise directly or indirectly provided credit
support for any Indebtedness of SMI or any of its Subsidiaries.
If, at any time, the Unrestricted Subsidiary fails to meet the
requirements described in the preceding paragraph, the Unrestricted Subsidiary
shall thereafter cease to be an unrestricted subsidiary for purposes of the
Indenture and any Indebtedness of the Unrestricted Subsidiary shall be deemed
to be incurred by a Subsidiary of SMI as of such date. If
such Indebtedness is not permitted to be incurred as of such date under the
covenant described under the caption " -- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock," SMI shall be in default of such
covenant. In the event the Unrestricted Subsidiary is designated as a
Subsidiary or ceases to be an unrestricted subsidiary for purposes of the
Indenture, the Indenture will require SMI to cause the Unrestricted Subsidiary
to execute and deliver to the Trustee a supplemental indenture pursuant to
which the Unrestricted Subsidiary will become a Guarantor.
SUBORDINATION
The payment of principal, premium and interest, and Liquidated Damages, if
any, on the exchange notes will be subordinated to the prior payment in full of
all Senior Indebtedness of SMI.
The holders of Senior Indebtedness will be entitled to receive payment in
full of all Obligations due in respect of Senior Indebtedness (including
interest after the commencement of any such proceeding at the rate specified in
the applicable Senior Indebtedness) before the Holders of exchange notes will
be entitled to receive any payment with respect to the exchange notes (except
that Holders of exchange notes may receive common equity securities or debt
securities that are subordinated at least to the same extent as the notes to
Senior Indebtedness and any securities issued in exchange for
Senior Indebtedness (collectively, "Permitted Junior Securities")) and payments
made from the trust described under " -- Legal Defeasance and Covenant
Defeasance," in the event of any distribution to creditors of SMI:
(1) in a liquidation or dissolution of SMI;
(2) in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to SMI or its property;
(3) in an assignment for the benefit of creditors; or
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(4) in any marshalling of SMI's assets and liabilities.
SMI also may not make any payment in regard to the exchange notes (except
in Permitted Junior Securities or from the trust described under " -- Legal
Defeasance and Covenant Defeasance") if:
(1) a payment default on Designated Senior Indebtedness occurs and is
continuing beyond any applicable grace period; or
(2) any other default occurs and is continuing on Designated Senior
Indebtedness that permits holders of the Designated Senior Debt to
accelerate its maturity and the Trustee receives a notice of such
default (a "Payment Blockage Notice") from SMI or the holders of any
Designated Senior Debt.
Payments on the exchange notes may and shall be resumed:
(1) in the case of a payment default, upon the date on which such default
is cured or waived; and
(2) in the case of a nonpayment default, the earlier of the date on which
such nonpayment default is cured or waived or 179 days after the date
on which the applicable Payment Blockage Notice is received, unless the
maturity of any Designate Senior Indebtedness has been accelerated.
No new period of payment blockage may be commenced unless and until:
(1) 360 days have elapsed since the effectiveness of the immediately prior
Payment Blockage Notice; and
(2) all scheduled payments of principal, premium and interest on the Notes
that have come due have been paid in full in cash.
No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be made,
the basis for a subsequent Payment Blockage Notice unless such default shall
have been cured or waived for a period of not less than 90 days.
SMI must promptly notify holders of Senior Indebtedness if payment of the
exchange notes is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event
of a bankruptcy, liquidation or reorganization of SMI, Holders of the exchange
notes may recover less ratably than creditors of SMI who are holders of Senior
Indebtedness.
OPTIONAL REDEMPTION
SMI may not redeem the exchange notes prior to August 15, 2002. After
August 15, 2002, SMI has the option to redeem all or part of the exchange notes
upon not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on August
15 of the years indicated below:
<TABLE>
<S> <C>
Year Percentage
2002 ........................ 104.250%
2003 ........................ 102.830%
2004 ........................ 101.420%
2005 and thereafter ......... 100.000%
</TABLE>
SELECTION AND NOTICE
If less than all of the exchange notes are to be redeemed at any time, the
Trustee will select exchange notes for redemption as follows:
(1) if the exchange notes are listed, in compliance with the requirements
of the principal national securities exchange on which the notes are
listed; or
(2) if the exchange notes are not so listed, on a pro rata basis, by lot or
by such method as the Trustee shall deem fair and appropriate.
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No exchange notes of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than 60
days before the redemption date to each Holder of exchange notes to be redeemed
at its registered address.
If any exchange notes are to be redeemed in part only, the notice of
redemption that relates to that exchange note shall state the portion of the
principal amount thereof to be redeemed. A new exchange note in principal
amount equal to the unredeemed portion of the original exchange note will be
issued in the name of the Holder thereof upon cancellation of the original
exchange note. Exchange notes called for redemption become due on the date
fixed for redemption. On and after the redemption date, interest ceases to
accrue on exchange notes or portions of them called for redemption.
MANDATORY REDEMPTION
Except as set forth below under " -- Repurchase at the Option of Holders,"
SMI is not required to make mandatory redemption or sinking fund payments with
respect to the exchange notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of exchange notes
will have the right to require SMI to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of that Holder's exchange notes
pursuant to the offer described below (the "Change of Control Offer"). In the
Change of Control Offer, SMI will offer a price in cash equal to 101% of the
aggregate principal amount of the exchange notes repurchased plus accrued and
unpaid interest and Liquidated Damages, if any, thereon (the "Change of Control
Payment") to the date of purchase (the "Change of Control Payment Date").
Within 15 days following any Change of Control, SMI will mail a notice to
each Holder describing the transaction or transactions that constitute the
Change of Control and offering to repurchase exchange notes pursuant to the
procedures required by the Indenture and described in such notice. The Change
of Control Payment Date shall be a business day not less than 30 days nor more
than 60 days after such notice is mailed. SMI will comply with the requirements
of Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations are applicable
in connection with the repurchase of the exchange notes as a result of a Change
of Control.
On the Change of Control Payment Date, SMI will, to the extent lawful:
(1) accept for payment all exchange notes or portions thereof properly
tendered pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of Control
Payment in respect of all exchange notes or portions thereof so
tendered; and
(3) deliver or cause to be delivered to the Trustee the exchange notes so
accepted together with an officers' certificate stating the aggregate
principal amount of exchange notes or portions thereof being purchased
by SMI.
The Paying Agent will promptly mail to each Holder of exchange notes so
tendered the Change of Control Payment for such exchange notes, and the Trustee
will promptly authenticate and mail (or cause to be transferred by book entry)
to each Holder a new exchange note equal in principal amount to any unpurchased
portion of the exchange notes surrendered, if any; PROVIDED, that each such new
exchange note will be in a principal amount of $1,000 or an integral multiple
thereof.
Prior to complying with the provisions described under this caption, but
in any event within 90 days following a Change of Control, SMI will either
repay all outstanding Senior Indebtedness or obtain the requisite consents, if
any, under all agreements governing outstanding Senior Indebtedness to permit
the repurchase of exchange notes as described under this caption. SMI will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The Change of Control provisions described above will be applicable
whether or not any other provisions of the Indenture are applicable to the
transaction constituting a Change of Control. Except as described above with
respect to a Change of Control, the Indenture does not contain provisions that
permit Holders of exchange notes to require that SMI repurchase or redeem the
exchange notes in the event of a takeover, recapitalization or similar
transaction.
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Although the existence of a Holder's right to require SMI to repurchase
the exchange notes in respect of a Change of Control may deter a third party
from acquiring SMI in a transaction that constitutes a Change of Control, the
provisions of the Indenture relating to a Change of Control in and of
themselves may not afford Holders of exchange notes protection in the event of
a highly leveraged transaction, reorganization, recapitalization,
restructuring, merger or similar transaction involving SMI that may adversely
affect Holders, if such transaction is not the type of transaction included
within the definition of a Change of Control.
The Credit Agreement as in effect on the date of the Indenture provides
that certain change of control events with respect to SMI would constitute a
default thereunder. Any future credit agreements or other agreements relating
to Senior Indebtedness to which SMI becomes a party may contain similar
restrictions and provisions. In the event a Change of Control occurs at a time
when SMI is prohibited from purchasing exchange notes, SMI could seek the
consent of its lenders to the purchase of exchange notes or could attempt to
refinance the borrowings that contain such prohibition. If SMI does not obtain
such a consent or repay such borrowings, SMI will remain prohibited from
purchasing exchange notes. In such case, SMI's failure to purchase tendered
exchange notes would constitute an Event of Default under the Indenture which
would, in turn, constitute a default under the Credit Agreement. In such
circumstances, the subordination provisions in the Indenture would likely
restrict payments to Holders of notes.
SMI will not be required to make a Change of Control Offer upon a Change
of Control if a third party makes the Change of Control Offer in the manner, at
the times and otherwise in compliance with the requirements set forth in the
Indenture applicable to a Change of Control Offer made by SMI and purchases all
exchange notes validly tendered and not withdrawn under such Change of Control
Offer.
The definition of Change of Control includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of "all or substantially
all" of the assets of SMI and its Subsidiaries taken as a whole. Although there
is a developing body of case law interpreting the phrase "substantially all,"
there is no precise established definition of the phrase under applicable law.
Accordingly, the ability of a Holder of exchange notes to require SMI to
repurchase such exchange notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of SMI and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
Restrictions in the Indenture described herein on the ability of SMI and
its Subsidiaries to incur additional Indebtedness, to grant Liens on its or
their property, to make Restricted Payments and to make Asset Sales also may
make more difficult or discourage a takeover of SMI, whether favored or opposed
by the management of SMI. Consummation of any such transaction in certain
circumstances may require redemption or repurchase of the exchange notes, and
there can be no assurance that SMI or the acquiring party will have sufficient
financial resources to effect such redemption or repurchase. In certain
circumstances, such restrictions and the restrictions on transactions with
Affiliates may make more difficult or discourage any leveraged buyout of SMI or
any of its Subsidiaries. While such restrictions cover a variety of
arrangements which traditionally have been used to effect highly leveraged
transactions, the Indenture may not afford the Holders of exchange notes
protection in all circumstances from the adverse aspects of a highly leveraged
transaction, reorganization, restructuring, merger or similar transaction.
SMI will comply with the requirements of Section 14(e) of, and Rule 14e-1
under, the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the exchange notes as a result of a Change of Control.
ASSET SALES
SMI will not, and will not permit any of its Subsidiaries to, consummate
an Asset Sale unless:
(1) SMI (or the Subsidiary, as the case may be) receives consideration at
the time of such Asset Sale at least equal to the fair market value of
the assets or Equity Interests issued or sold or otherwise disposed of;
(2) such fair market value is determined SMI's Board of Directors and
evidenced by a resolution of the Board of Directors set forth in an
officers' certificate delivered to the Trustee, or by independent
appraisal by an accounting, appraisal or investment banking firm of
national standing; and
(3) at least 75% of the consideration therefor received by SMI or such
Subsidiary is in the form of cash or Cash Equivalents.
However, requirement (3) does not apply to any Asset Sale involving SMI's
Unrestricted Subsidiary. Further, Requirements (1)-(3) do not apply to any Like
Kind Exchange.
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Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
SMI may apply such Net Proceeds, at its option:
(1) to permanently reduce Senior Indebtedness (and correspondingly reduce
commitments with respect thereto in the case of any reduction of
borrowings under the Credit Agreement);
(2) to the acquisition of a controlling interest in another business, the
making of a capital expenditure or the acquisition of other long-term
assets, in each case, in the same or a similar line of business as SMI
was engaged in on the date of the Indenture; or
(3) to reimburse SMI or its Subsidiaries for expenditures made, and costs
incurred, to repair, rebuild, replace or restore property subject to
loss, damage or taking to the extent that the Net Proceeds consist of
insurance proceeds received on account of such loss, damage or taking.
Pending the final application of any such Net Proceeds, SMI may temporarily
reduce Senior Indebtedness or otherwise invest such Net Proceeds in any manner
that is not prohibited by the Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million,
SMI will be required to make an offer to all Holders of exchange notes (an
"Asset Sale Offer") to purchase the maximum principal amount of exchange notes
that may be purchased out of the Excess Proceeds. The notes will be purchased
at an offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase, in accordance with the procedures set forth in
the Indenture. To the extent that the aggregate amount of exchange notes
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, SMI
may use any remaining Excess Proceeds for general corporate purposes. If the
aggregate principal amount of exchange notes surrendered by Holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the exchange
notes to be purchased on a PRO RATA basis. Upon completion of such offer to
purchase, the amount of Excess Proceeds shall be reset at zero.
Notwithstanding the foregoing, SMI and its Subsidiaries will be permitted
to consummate one or more Asset Sales with respect to assets or properties with
an aggregate fair market value not in excess of $7.5 million with respect to
all such Asset Sales made subsequent to the date of the Indenture without
complying with the provisions of the preceding paragraphs. Fair market value
will be evidenced by a resolution of SMI's Board of Directors set forth in an
Officers' Certificate delivered to the Trustee.
In the event of the transfer of substantially all (but not all) of the
property and assets of SMI as an entirety to a Person in a transaction
permitted under the caption " -- Certain Covenants -- Merger, Consolidation or
Sale of Assets" below, the successor corporation shall be deemed to have sold
the properties and assets of SMI not so transferred for purposes of this
covenant and shall comply with the provisions of this covenant with respect to
such deemed sale as if it were an Asset Sale. In addition, the fair market
value of such properties and assets of SMI or its Subsidiaries deemed to be
sold shall be deemed to be Net Proceeds for purposes of this covenant.
If at any time any non-cash consideration received by SMI in connection
with any Asset Sale is converted into or sold or otherwise disposed of for
cash, then such conversion or disposition shall be deemed to constitute an
Asset Sale hereunder and the Net Proceeds thereof shall be applied in
accordance with this covenant.
SMI will comply with the requirements of Section 14(e) of, and Rule 14e-1
under, the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of exchange notes pursuant to an Asset Sale Offer.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
SMI will not, and will not permit any of its Subsidiaries to, directly or
indirectly:
(1) declare or pay any dividend or make any other payment or distribution
on account of the Equity Interests of SMI or any of its Subsidiaries
(including, without limitation, any payment in connection with any
merger or consolidation involving SMI or any of its Subsidiaries) or to
the direct or indirect holders of the Equity Interests of SMI
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or any of its Subsidiaries in their capacity as such (other than dividends
or distributions payable in Equity Interests (other than Disqualified
Stock) of SMI, dividends or distributions payable to SMI or any Subsidiary
of SMI or dividends or distributions made by a Subsidiary of SMI to all
holders of its Common Stock on a PRO RATA basis);
(2) purchase, redeem or otherwise acquire or retire for value any Equity
Interests of SMI, any Subsidiary of SMI, the Unrestricted Subsidiary or
any direct or indirect parent of SMI (other than any such Equity
Interests owned by SMI or any Subsidiary of SMI);
(3) make any principal payment on, or purchase, redeem, defease or
otherwise acquire or retire for value, any Indebtedness that is
subordinated to the exchange notes (other than the exchange notes),
except at Stated Maturity; or
(4) make any Restricted Investment (all such payments and other actions set
forth in clauses (1) through (4) above being collectively referred to
as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(1) no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof; and
(2) SMI would, at the time of such Restricted Payment and after giving PRO
FORMA effect thereto as if such Restricted Payment had been made at the
beginning of the applicable four-quarter period, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the
covenant described below under the caption " -- Incurrence of
Indebtedness and Issuance of Preferred Stock"; and
(3) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by SMI and its Subsidiaries after the date of
the Indenture (excluding Restricted Payments permitted by clauses (2),
(3) and (4) of the next succeeding paragraph), is less than the sum of:
(a) 50% of the Consolidated Net Income of SMI for the period (taken as
one accounting period) commencing April 1, 1997 to the end of SMI's
most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or,
if such Consolidated Net Income for such period is a deficit, less
100% of such deficit); plus
(b) 100% of the aggregate net cash proceeds and the fair market value, as
determined in good faith by the Board of Directors, of marketable
securities received by SMI from the issue or sale since the date of
the Indenture of Equity Interests of SMI or of debt securities of SMI
that have been converted into such Equity Interests (other than Equity
Interests (or convertible debt securities) sold to a Subsidiary of SMI
or the Unrestricted Subsidiary and other than Disqualified Stock or
debt securities that have been converted into Disqualified Stock);
plus
(c) to the extent that any Restricted Investment that was made after the
date of the Indenture is sold for cash or otherwise liquidated or
repaid for cash, the lesser of (i) the cash return of capital with
respect to such Restricted Investment (less the cost of disposition,
if any), and (ii) the initial amount of such Restricted Investment,
plus (iii) the amount resulting from designation of the Unrestricted
Subsidiary as a Subsidiary or the Unrestricted Subsidiary ceasing to
be an unrestricted subsidiary for purposes of the Indenture (such
amount to be valued as provided in the second succeeding paragraph)
not to exceed the amount of Investments previously made by SMI or any
Subsidiary in the Unrestricted Subsidiary and which was, while the
Unrestricted Subsidiary was treated as an unrestricted subsidiary for
purposes of the Indenture, treated as a Restricted Payment under the
Indenture.
The preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would
have complied with the provisions of the Indenture;
(2) the redemption, repurchase, retirement or other acquisition of any
Equity Interests of SMI in exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to a Subsidiary of SMI or the
Unrestricted Subsidiary) of other Equity Interests of SMI (other than
any Disqualified Stock); PROVIDED, that the amount of any
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such net cash proceeds that are utilized for any such redemption,
repurchase, retirement or other acquisition shall be excluded from clause
(3)(b) of the preceding paragraph;
(3) the defeasance, redemption or repurchase of PARI PASSU or subordinated
Indebtedness with the net cash proceeds from an incurrence of Permitted
Refinancing Indebtedness or the substantially concurrent sale (other
than to a Subsidiary of SMI or the Unrestricted Subsidiary) of Equity
Interests of SMI (other than Disqualified Stock); PROVIDED, that the
amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement or other acquisition shall be
excluded from clause (3)(b) of the preceding paragraph;
(4) the making of any Restricted Investments after the date of the
Indenture not exceeding in the aggregate $25.0 million; and
(5) the repurchase, redemption or other acquisition or retirement for value
of any Equity Interests of the SMI or any Subsidiary of SMI held by any
member of SMI's (or any of its Subsidiaries') management pursuant to
any management equity subscription agreement or stock option agreement;
PROVIDED, that:
(a) the aggregate price paid for all such repurchased, redeemed, acquired
or retired Equity Interests shall not exceed $1.0 million in any
twelve-month period plus the aggregate cash proceeds received by SMI
during such twelve-month period from any reissuance of Equity
Interests by SMI to members of management of SMI and its Subsidiaries;
and
(b) no Default or Event of Default shall have occurred and be continuing
immediately after such transaction.
In connection with the designation of the Unrestricted Subsidiary as a
Subsidiary or the Unrestricted Subsidiary ceasing to be an unrestricted
subsidiary for purposes of the Indenture, all outstanding Investments
previously made by SMI or any Subsidiary in the Unrestricted Subsidiary will be
deemed to constitute Investments in an amount equal to the greater of the
following:
o the net book value of such Investments at the time of such designation
or the Unrestricted Subsidiary ceasing to be an unrestricted subsidiary
for purposes of the Indenture; and
o the fair market value of such Investments at the time of such
designation or the Unrestricted Subsidiary ceasing to be an
unrestricted subsidiary for purposes of the Indenture.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) proposed to
be transferred by SMI or such Subsidiary, as the case may be, pursuant to the
Restricted Payment. Fair market value will be evidenced by a resolution of
SMI's Board of Directors set forth in an officers' certificate delivered to the
Trustee not later than the date of making any Restricted Payment. The officers'
certificate will state that such Restricted Payment is permitted and set forth
the basis upon which the calculations required by the covenant described above
were computed. The calculations may be based upon SMI's latest available
financial statements.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
SMI will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create, incur, issue, assume, guarantee or otherwise become
directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Indebtedness). SMI
also will not issue any Disqualified Stock and will not permit any of its
Subsidiaries to issue any shares of preferred stock.
However, SMI and any Guarantor may incur Indebtedness (including Acquired
Indebtedness), and SMI may issue Disqualified Stock, if the Fixed Charge
Coverage Ratio for SMI's most recently ended four full fiscal quarters for
which internal financial statements are available immediately preceding the
date on which such additional Indebtedness is incurred or such Disqualified
Stock is issued would have been at least 2.0 to 1 prior to and including
December 31, 1998 and 2.25 to 1 after January 1, 1999, determined on a PRO
FORMA basis (including a PRO FORMA application of the net proceeds therefrom),
as if the additional Indebtedness had been incurred, or the Disqualified Stock
had been issued, as the case may be, at the beginning of such four-quarter
period.
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The foregoing provisions will not prohibit the incurrence of any of the
following items of indebtedness:
(1) the incurrence by SMI of Indebtedness under the Credit Agreement (and
guarantees thereof by the Guarantors) in an aggregate principal amount at
any time outstanding (with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of SMI and its
Subsidiaries thereunder) not to exceed $175.0 million less the aggregate
amount of all Net Proceeds of Asset Sales applied to permanently reduce
the commitments with respect to such Indebtedness pursuant to the
covenant described above under the caption
" -- Repurchase at the Option of Holders -- Asset Sales";
(2) the incurrence by SMI of Indebtedness represented by the Notes,
excluding any Additional Notes, and the incurrence by the Guarantors of
Indebtedness represented by the Guarantees;
(3) the incurrence by SMI or any of its Subsidiaries of Indebtedness
represented by Capital Lease Obligations (whether or not incurred
pursuant to sale and leaseback transactions), mortgage financings or
purchase money obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of construction
or improvement of property, plant or equipment used in the business of
SMI or such Subsidiary, in an aggregate principal amount not to exceed
$10.0 million at any time outstanding;
(4) the incurrence by SMI or any of its Subsidiaries of Permitted
Refinancing Indebtedness in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund,
Existing Indebtedness or Indebtedness that was permitted by the Indenture
to be incurred (other than any such Indebtedness incurred pursuant to
clause (1), (3), (5), (6), (7), (8), (9) or (10) of this paragraph);
(5) the incurrence by SMI or any of its Wholly Owned Subsidiaries of
intercompany Indebtedness between or among SMI and any of its Wholly
Owned Subsidiaries; PROVIDED, HOWEVER, that: (a) if SMI is the obligor on
such Indebtedness, such Indebtedness must be expressly subordinate to the
payment in full of all Obligations with respect to the Notes; and
(b)(i) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than SMI or
a Wholly Owned Subsidiary, and (ii) any sale or other transfer of any
such Indebtedness to a Person that is not either SMI or a Wholly Owned
Subsidiary shall be deemed, in each case, to constitute an incurrence of
such Indebtedness by SMI or such Subsidiary, as the case may be;
(6) the incurrence by SMI of Hedging Obligations that are incurred for the
purpose of fixing or hedging interest rate risk with respect to
Indebtedness that is permitted by the terms of the Indenture to be
incurred;
(7) the incurrence by SMI of Hedging Obligations under currency exchange
agreements; PROVIDED, that such agreements were entered into in the
ordinary course of business;
(8) the incurrence of Indebtedness of a Guarantor represented by guarantees
of Indebtedness of SMI that has been incurred in accordance with the
terms of the Indenture;
(9) Indebtedness for letters of credit relating to workers' compensation
claims and self-insurance or similar requirements in the ordinary course
of business; and
(10) the incurrence by SMI of Indebtedness (in addition to Indebtedness
permitted by any other clause of this paragraph) in an aggregate
principal amount (or accreted value, as applicable) at any time
outstanding not to exceed $15.0 million.
LIENS
SMI will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create, incur, assume or suffer to exist any Lien securing
Indebtedness on any asset now owned or hereafter acquired, or any income or
profits therefrom, or assign or convey any right to receive income therefrom,
except Permitted Liens, unless all payments due under the Indenture and the
Notes are secured on an equal and ratable basis with the Indebtedness so
secured until such time as such Indebtedness is no longer secured by a Lien;
PROVIDED, that if such Indebtedness is by its terms expressly subordinated to
the Notes or any Guarantee, the Lien securing such Indebtedness shall be
subordinate and junior to the Lien securing the Notes and the Guarantees with
the same relative priority as such subordinate or junior Indebtedness shall
have with respect to the Notes and the Guarantees.
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DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
SMI will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective
any encumbrance or restriction on the ability of any Subsidiary to:
(1) pay dividends or make any other distributions to SMI or any of its
Subsidiaries on its Capital Stock or with respect to any other interest
or participation in, or measured by, its profits, or pay any
indebtedness owed to SMI or any of its Subsidiaries;
(2) make loans or advances to SMI or any of its Subsidiaries; or
(3) transfer any of its properties or assets to SMI or any of its
Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) applicable law;
(2) the Indenture; or
(3) the Credit Agreement as in effect on the date of the Indenture (and
thereafter only to the extent such encumbrances or restrictions are no
more restrictive than those in effect under the Credit Agreement as in
effect on the date of the Indenture);
(4) Existing Indebtedness;
(5) any instrument governing Indebtedness or Capital Stock of a Person
acquired by SMI or any of its Subsidiaries as in effect at the time of
such acquisition (except to the extent such Indebtedness was incurred
in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired;
(6) customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices;
(7) purchase money obligations for property acquired in the ordinary course
of business that impose restrictions of the nature described in clause
(3) above on the property so acquired; or
(8) Permitted Refinancing Indebtedness; PROVIDED that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive than those contained in the
agreements governing the Indebtedness being refinanced.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
Whether or not SMI is the surviving corporation, SMI may not consolidate
or merge with or into, or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its properties or assets in one or more
related transactions, to another corporation, Person or entity unless:
(1) (a) SMI is the surviving corporation or the entity; or (b) the Person
formed by or surviving any such consolidation or merger (if other than
SMI) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation organized or
existing under the laws of the United States, any state thereof or the
District of Columbia;
(2) the entity or Person formed by or surviving any such consolidation or
merger (if other than SMI) or the entity or Person to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have
been made assumes all the obligations of SMI under the Notes and the
Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee;
(3) immediately after such transaction no Default or Event of Default
exists; and
(4) except in the case of a merger of SMI with or into a Wholly Owned
Subsidiary of SMI, SMI or the entity or Person formed by or surviving
any such consolidation or merger (if other than SMI), or to which such
sale, assignment, transfer, lease, conveyance or other disposition
shall have been made:
(a) will have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of SMI immediately
preceding the transaction; and
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(b) will, at the time of such transaction and after giving PRO FORMA
effect thereto as if such transaction had occurred at the beginning of
the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the first paragraph of the covenant described
above under the caption " -- Incurrence of Indebtedness and Issuance
of Preferred Stock."
TRANSACTIONS WITH AFFILIATES
SMI will not, and will not permit any of its Subsidiaries to, make any
payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable to
SMI or the relevant Subsidiary than those that would have been obtained
in a comparable transaction by SMI or such Subsidiary with an unrelated
Person; and
(2) SMI delivers to the Trustee:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$2.5 million, a resolution of the Board of Directors set forth in an
officers' certificate certifying that such Affiliate Transaction
complies with this covenant and that such Affiliate Transaction has
been approved by a majority of the disinterested members of the Board
of Directors or, if there are no such disinterested directors, by a
majority of the members of the Board of Directors; or
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$10.0 million, an opinion as to the fairness to the Holders of Notes
of such Affiliate Transaction from a financial point of view issued by
an accounting, appraisal or investment banking firm of national
standing.
The following items shall not be deemed to be Affiliate Transactions, and,
therefore, will not be subject to the provisions of the prior paragraph:
(1) any issuance of securities, or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of,
employment arrangements, stock options and stock ownership plans
approved by the Board of Directors or the payment of fees and
indemnities to directors of SMI and its Subsidiaries in the ordinary
course of business and consistent with the past practice of SMI or such
Subsidiary;
(2) loans or advances to employees in the ordinary course of business;
(3) transactions between or among SMI and/or its Wholly Owned Subsidiaries;
and
(4) Restricted Payments (other than Restricted Investments) that are
permitted by the provisions of the Indenture described above under the
caption " -- Restricted Payments," in each case, shall not be deemed
Affiliate Transactions.
SALE AND LEASEBACK TRANSACTIONS
SMI will not, and will not permit any of its Subsidiaries to, enter into
any sale and leaseback transaction; PROVIDED, that SMI or one of its
Subsidiaries may enter into a sale and leaseback transaction if:
(1) SMI or such Subsidiary could have (a) incurred Indebtedness in an
amount equal to the Attributable Indebtedness relating to such sale and
leaseback transaction pursuant to the Fixed Charge Coverage Ratio test
set forth in the first paragraph of the covenant described above under
the caption " -- Incurrence of Indebtedness and Issuance of Preferred
Stock" and (b) incurred a Lien to secure such Indebtedness pursuant to
the covenant described above under the caption " -- Liens";
(2) the gross cash proceeds of such sale and leaseback transaction are at
least equal to the fair market value (as determined in good faith by
the Board of Directors and set forth in an officers' certificate
delivered to the Trustee) of the property that is the subject of such
sale and leaseback transaction; and
(3) the transfer of assets in such sale and leaseback transaction is
permitted by, and SMI applies the proceeds of such transaction in
compliance with, the covenant described above under the caption " --
Repurchase at the Option of Holders -- Asset Sales."
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LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY OWNED
SUBSIDIARIES
SMI will not, and will not permit any Wholly Owned Subsidiary of SMI to
transfer, convey, sell, lease or otherwise dispose of any Capital Stock of any
Wholly Owned Subsidiary of SMI to any Person (other than SMI or a Wholly Owned
Subsidiary of SMI), unless:
(1) such transfer, conveyance, sale, lease or other disposition is of all
the Capital Stock of such Wholly Owned Subsidiary; and
(2) the cash Net Proceeds from such transfer, conveyance, sale, lease or
other disposition are applied in accordance with the covenant described
above under the caption " -- Repurchase at the Option of Holders --
Asset Sales."
In addition, SMI will not permit any Wholly Owned Subsidiary of SMI to
issue any of its Equity Interests (other than, if necessary, shares of its
Capital Stock constituting directors' qualifying shares) to any Person other
than to SMI or a Wholly Owned Subsidiary of SMI.
GUARANTEES OF CERTAIN INDEBTEDNESS
SMI will not permit any of its Subsidiaries that is not a Guarantor to
incur, guarantee or secure through the granting of Liens the payment of any
Senior Indebtedness. Further, SMI will not, and will not permit any of its
Subsidiaries to, pledge any intercompany notes representing obligations of any
of its Subsidiaries, to secure the payment of any Senior Indebtedness. If such
Subsidiary, SMI and the Trustee execute and deliver a supplemental indenture
evidencing such Subsidiary's unconditional guarantee, on a senior subordinated
basis, of the exchange notes, then SMI will permit the above-described actions.
LIMITATION ON LAYERING
Notwithstanding the provisions of the Indenture described above under " --
Incurrence of Indebtedness and Issuance of Preferred Stock," SMI will not
incur, create, issue, assume, guarantee or otherwise become liable for any
Indebtedness that is subordinate or junior in right of payment to any
Indebtedness of SMI and senior in any respect in right of payment to the Notes.
In addition, no Guarantor will incur, create, issue, assume, guarantee or
otherwise become liable for any Indebtedness of such Guarantor that is
subordinate or junior in right of payment to any Indebtedness of such Guarantor
and senior in any respect in right of payment to the Guarantee of such
Guarantor.
PAYMENTS FOR CONSENT
SMI nor any of its Subsidiaries will, directly or indirectly, pay or cause
to be paid any consideration, whether by way of interest, fee or otherwise, to
any Holder of any exchange notes for or as an inducement to any consent, waiver
or amendment of any of the terms or provisions of the Indenture or the exchange
notes UNLESS such consideration is offered to be paid or is paid to all Holders
of the exchange notes that consent, waive or agree to amend in the time frame
set forth in the solicitation documents relating to such consent, waiver or
agreement.
REPORTS
Whether or not required by the Commission, so long as any notes are
outstanding, SMI will furnish to Holders of notes:
(1) all quarterly and annual financial information that would be required
to be contained in a filing with the Commission on Forms 10-Q and 10-K
if SMI were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report
thereon by SMI's certified independent accountants; and
(2) all current reports that would be required to be filed with the
Commission on Form 8-K if SMI were required to file such reports.
In addition, whether or not required by the rules and regulations of the
Commission, SMI will file a copy of all such information and reports with the
Commission for public availability (unless the Commission will not accept such
a filing) and make such information available to securities analysts and
prospective investors upon request. In addition, SMI and the Guarantors have
agreed that, for so long as any notes remain outstanding, they will furnish to
the Holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
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EVENTS OF DEFAULT AND REMEDIES
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on, or
Liquidated Damages, if any, with respect to, the Notes (whether or not
prohibited by the subordination provisions of the Indenture);
(2) default in payment when due of the principal of or premium, if any, on
the exchange notes (whether or not prohibited by the subordination
provisions of the Indenture);
(3) failure by SMI to comply with the provisions described under the
captions " -- Repurchase at the Option of Holders -- Change of Control"
or " -- Asset Sales";
(4) failure by SMI to comply with the provisions described under the
captions " -- Certain Covenants -- Restricted Payments" or " --
Incurrence of Indebtedness and Issuance of Preferred Stock" and the
continuance of such failure for a period of 30 days after notice is
given to SMI by the Trustee or to SMI and the Trustee by the Holders of
at least 25% in aggregate principal amount of the exchange notes then
outstanding;
(5) failure by SMI for 60 days after notice is given to SMI by the Trustee
or to SMI and the Trustee by the Holders of at least 25% in aggregate
principal amount of the exchange notes then outstanding to comply with
any of its other agreements in the Indenture or the exchange notes;
(6) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its
Subsidiaries (or the payment of which is guaranteed by the Company or
any of its Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the date of the Indenture, which default
(a) is caused by a failure to pay principal of such Indebtedness at its
Stated Maturity (after the expiration of any applicable grace period);
or (b) results in the acceleration of such Indebtedness prior to its
maturity and, in each case, the principal amount of which Indebtedness,
together with the principal amount of any other such Indebtedness
described in clauses (a) and (b) above, aggregates $5.0 million or
more;
(7) failure by SMI or any of its Subsidiaries to pay final judgments
aggregating in excess of $5.0 million (net of amounts covered by
insurance), which judgments are not paid, discharged or stayed for a
period of 60 days;
(8) certain events of bankruptcy or insolvency with respect to SMI or any
of its Subsidiaries; or
(9) the Guarantee of any Guarantor is held in judicial proceedings to be
unenforceable or invalid or ceases for any reason to be in full force
and effect (other than in accordance with the terms of the Indenture)
or any Guarantor or any Person acting on behalf of any Guarantor denies
or disaffirms such Guarantor's obligations under its Guarantee (other
than by reason of a release of such Guarantor from its Guarantee in
accordance with the terms of the Indenture).
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of the then outstanding
exchange notes may declare all the exchange notes to be due and payable
immediately. However, if any Senior Indebtedness is outstanding under the
Credit Agreement, upon a declaration of acceleration, the exchange notes shall
be payable upon the earlier of:
(1) the day which is five Business Days after the provision to SMI and the
agent under the Credit Agreement of written notice of such declaration;
or
(2) the date of acceleration of any Indebtedness under the Credit
Agreement.
Notwithstanding the foregoing, in the case of an Event of Default arising
from certain events of bankruptcy or insolvency, with respect to SMI, any
Significant Subsidiary or any group of Subsidiaries that, taken together, would
constitute a Significant Subsidiary, all outstanding exchange notes will become
due and payable without further action or notice.
Holders of exchange notes may not enforce the Indenture or the exchange
notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in aggregate principal amount of the then outstanding
exchange notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of exchange notes notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest.
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In the case of any Event of Default occurring by reason of any willful
action or inaction taken or not taken by or on behalf of SMI with the intention
of avoiding payment of the premium that SMI would have had to pay if SMI then
had elected to redeem the exchange notes pursuant to the optional redemption
provisions of the Indenture, an equivalent premium shall also become and be
immediately due and payable to the extent permitted by law upon the
acceleration of the exchange notes. If an Event of Default occurs prior to
August 15, 2002, by reason of any willful action or inaction taken or not taken
by or on behalf of SMI with the intention of avoiding the prohibition on
redemption of the exchange notes prior to August 15, 2002, then the premium
specified in the Indenture shall also become immediately due and payable to the
extent permitted by law upon the acceleration of the exchange notes.
The Holders of a majority in aggregate principal amount of the exchange
notes then outstanding by notice to the Trustee may on behalf of the Holders of
all of the exchange notes waive any existing Default or Event of Default and
its consequences under the Indenture except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the exchange notes.
SMI is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture, and SMI is required upon becoming aware of any
Default or Event of Default, to deliver to the Trustee a statement specifying
such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND SHAREHOLDERS
No director, officer, employee, incorporator or stockholder of SMI or any
Guarantor, as such, shall have any liability for any obligations of SMI or any
Guarantor under the exchange notes, the Guarantees, the Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of exchange notes by accepting a exchange note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the notes. Such waiver may not be effective
to waive liabilities under the federal securities laws and it is the view of
the Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SMI may, at its option and at any time, elect to have all of the
obligations of SMI and the Guarantors discharged with respect to the
outstanding exchange notes ("Legal Defeasance") except for:
(1) the rights of Holders of outstanding exchange notes to receive payments
in respect of the principal of, premium, if any, and interest and
Liquidated Damages, if any, on such exchange notes when such payments
are due from the trust referred to below;
(2) SMI's obligations with respect to the exchange notes concerning issuing
temporary exchange notes, registration of transfer of exchange notes,
mutilated, destroyed, lost or stolen exchange notes and the maintenance
of an office or agency for payment and money for security payments held
in trust;
(3) the rights, powers, trusts, duties and immunities of the Trustee, and
SMI's obligations in connection therewith; and
(4) the Legal Defeasance provisions of the Indenture.
In addition, SMI may, at its option and at any time, elect to have the
obligations of SMI released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the exchange notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) SMI must irrevocably deposit with the Trustee, in trust, for the
benefit of the Holders of exchange notes, cash in United States dollars,
non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay the principal of, premium,
if any, and interest and Liquidated Damages, if any, on the outstanding
exchange notes on the Stated Maturity or on the applicable redemption
date, as the case may be, and SMI must specify whether the exchange notes
are being defeased to maturity or to a particular redemption date;
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(2) in the case of Legal Defeasance, SMI shall have delivered to the
Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that:
(a) SMI has received from, or there has been published by, the Internal
Revenue Service a ruling; or
(b) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that,
and based thereon such opinion of counsel shall confirm that, the
Holders of the outstanding exchange notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, SMI shall have delivered to the
Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders of the
outstanding exchange notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit) or
insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the
date of deposit;
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under, any material
agreement or instrument (other than the Indenture) to which SMI or any
of its Subsidiaries is a party or by which SMI or any of its
Subsidiaries is bound;
(6) SMI must have delivered to the Trustee an opinion of counsel to the
effect that after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(7) SMI must deliver to the Trustee an officers' certificate stating that
the deposit was not made by SMI with the intent of preferring the
Holders of exchange notes over the other creditors of SMI or any
Guarantor with the intent of defeating, hindering, delaying or
defrauding creditors, any Guarantor of SMI or others; and
(8) SMI must deliver to the Trustee an officers' certificate and an opinion
of counsel, each stating that all conditions precedent provided for or
relating to the Legal Defeasance or the Covenant Defeasance have been
complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange exchange notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents. SMI may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. SMI is not required to transfer or exchange any exchange note
selected for redemption. Also, SMI is not required to transfer or exchange any
exchange note for a period of 15 days before a selection of exchange notes to
be redeemed.
The registered Holder of an exchange note will be treated as the owner of
it for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next succeeding paragraphs, the Indenture, the
Guarantees or the exchange notes may be amended or supplemented with the
consent of the Holders of at least a majority in aggregate principal amount of
the exchange notes then outstanding (including, without limitation, consents
obtained in connection with a tender offer or exchange offer for exchange
notes). Further, any existing default or compliance with any provision of the
Indenture, the Guarantees or the exchange notes may be waived with the consent
of the Holders of a majority in aggregate principal amount of the then
outstanding exchange notes (including consents obtained in connection with a
tender offer or exchange offer for exchange notes).
Without the consent of each Holder affected, an amendment or waiver may
not (with respect to any exchange notes held by a non-consenting Holder):
(1) reduce the principal amount of exchange notes whose Holders must
consent to an amendment, supplement or waiver;
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(2) reduce the principal of or change the fixed maturity of any exchange
note or alter the provisions with respect to the redemption or
repurchase of the exchange notes (other than provisions relating to the
covenants described above under the caption " -- Repurchase at the
Option of Holders");
(3) reduce the rate of or change the time for payment of interest on any
exchange note;
(4) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the exchange notes (except a rescission
of acceleration of the exchange notes by the Holders of at least a
majority in aggregate principal amount of the exchange notes and a
waiver of the payment default that resulted from such acceleration);
(5) make any exchange note payable in money other than that stated in the
exchange notes;
(6) make any change in the provisions of the Indenture relating to waivers
of past Defaults or the rights of Holders of exchange notes to receive
payments of principal of or premium, if any, or interest on the
exchange notes;
(7) waive a redemption payment with respect to any exchange note (other
than a payment required by one of the covenants described above under
the caption " -- Repurchase at the Option of Holders");
(8) release any Guarantor from any of its obligations under its Guarantee
or the Indenture, except in accordance with the terms of the Indenture;
or
(9) make any change in the foregoing amendment and waiver provisions.
In addition, any amendment to the provisions of Article X of the Indenture
(which relate to subordination) or the related definitions, will require the
consent of the Holders of at least 75% in aggregate principal amount of the
exchange notes then outstanding if such amendment would adversely affect the
rights of Holders of exchange notes.
Notwithstanding the foregoing, without the consent of any Holder of
exchange notes, SMI, the Guarantors and the Trustee may amend or supplement the
Indenture, the Guarantees or the exchange notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated exchange notes in addition to or in place
of certificated exchange notes;
(3) to provide for the assumption of SMI's or a Guarantor's obligations to
Holders of exchange notes in the case of a merger or consolidation;
(4) to make any change that would provide any additional rights or benefits
to the Holders of exchange notes or that does not adversely affect the
legal rights under the Indenture of any such Holder;
(5) to comply with requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture
Act; or
(6) to provide for the issuance of Additional Notes pursuant to the
Indenture to the extent permitted under the restrictions contained in
the Credit Agreement and described under " -- Certain Covenants --
Incurrence of Indebtedness and Issuance of Preferred Stock."
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of SMI, to obtain payment of claims in certain
cases, or to realize on certain property received in respect of any such claim
as security or otherwise. The Trustee will be permitted to engage in other
transactions. However, if the Trustee acquires any conflicting interest, the
Trustee must:
(1) eliminate such conflict within 90 days;
(2) if a registration statement with respect to the Notes is effective,
apply to the Commission for permission to continue; or
(3) resign.
The Holders of a majority in aggregate principal amount of the then
outstanding Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that in case an Event of
Default shall occur (which shall not be cured), the
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Trustee will be required, in the exercise of its power, to use the degree of
care of a prudent man in the conduct of his own affairs. Subject to such
provisions, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of any Holder of Notes,
unless such Holder shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense.
ADDITIONAL INFORMATION
You may obtain a copy of the Indenture and Registration Rights Agreement
without charge by writing to Speedway Motorsports, Inc., U.S. Highway 29 North,
Post Office Box 600, Concord, North Carolina 28206-0600, Attention: Ms.
Marylaurel E. Wilks, telephone: (704) 455-3239.
BOOK-ENTRY, DELIVERY AND FORM
The exchange notes will be in the form of one or more registered global
notes without interest coupons (collectively, the "Global Notes"). Upon
issuance, the Global Notes will be deposited with the trustee, as custodian for
The Depository Trust Company ("DTC"), in New York, New York, and registered in
the name of DTC or its nominee, in each case for credit to the accounts of
DTC's Direct and Indirect participants (as defined below).
Transfer of beneficial interests in any Global Notes will be subject to
the applicable rules and procedures of DTC and its Direct or Indirect
Participants (including, if applicable, those of Euroclear and CEDEL), which
may change from time to time.
Exchange notes that are issued as described below under " -- Certificated
Securities" will be issued in the form of registered definitive certificates
(the "Certificated Securities"). Upon the transfer of Certificated Securities,
such Certificated Securities may, unless the Global Note has previously been
exchanged for Certificated Securities, be exchanged for an interest in the
Global Note representing the principal amount of exchange notes being
transferred.
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the
"Participants" or the "Depositary's Participants") and to facilitate the
clearance and settlement of transactions in such securities between
Participants through electronic book-entry changes in accounts of its
Participants. The Depositary's Participants include securities brokers and
dealers, banks and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants" or the "Depositary's Indirect Participants") that clear
through or maintain a custodial relationship with a Participant, either
directly or indirectly. Persons who are not Participants may beneficially own
securities held by or on behalf of the Depositary only through the Depositary's
Participants or the Depositary's Indirect Participants.
SMI expects that pursuant to procedures established by the Depositary:
(1) upon deposit of the Global Note, the Depositary will credit the
accounts of Participants designated by the Initial Purchasers with
portions of the principal amount of the Global Note; and
(2) ownership of the exchange notes evidenced by the Global Note will be
shown on, and the transfer of ownership thereof will be effected only
through, records maintained by the Depositary (with respect to the
interests of the Depositary's Participants), the Depositary's
Participants and the Depositary's Indirect Participants.
The laws of some states require that certain persons take physical
delivery in definitive form of securities that they own. Consequently, the
ability to transfer exchange notes evidenced by the Global Note will be limited
to such extent. For certain other restrictions on the transferability of the
exchange notes, see "Notice to Investors."
So long as the Global Note Holder is the registered owner of any exchange
notes, the Global Note Holder will be considered the sole Holder under the
Indenture of any exchange notes evidenced by the Global Note. Beneficial owners
of exchange notes evidenced by the Global Note will not be considered the
owners or Holders thereof under the Indenture for any purpose, including with
respect to the giving of any directions, instructions or approvals to the
Trustee thereunder. Neither SMI nor the Trustee will have any responsibility or
liability for any aspect of the records of the Depositary or for maintaining,
supervising or reviewing any records of the Depositary relating to the exchange
notes.
Payments in respect of the principal of, premium, if any, interest and
Liquidated Damages, if any, on any exchange notes registered in the name of the
Global Note Holder on the applicable record date will be payable by the Trustee
to or at the direction of the Global Note Holder in its capacity as the
registered Holder under the Indenture. Under the terms of the Indenture, SMI
and the Trustee may treat the persons in whose names exchange notes, including
the Global Note, are
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registered as the owners thereof for the purpose of receiving such payments.
Consequently, neither SMI nor the Trustee has or will have any responsibility
or liability for the payment of such amounts to beneficial owners of exchange
notes. SMI believes, however, that it is currently the policy of the Depositary
to immediately credit the accounts of the relevant Participants with such
payments, in amounts proportionate to their respective holdings of beneficial
interests in the relevant security as shown on the records of the Depositary.
Standing instructions and customary practices will govern payments by the
Depositary's Participants and the Depositary's Indirect Participants to the
beneficial owners of exchange notes. Payments will be the responsibility of the
Depositary's Participants or the Depositary's Indirect Participants.
CERTIFICATED SECURITIES
Subject to certain conditions, any person having a beneficial interest in
the Global Note may, upon request to the Trustee, exchange such beneficial
interest for exchange notes in the form of Certificated Securities. Upon any
such issuance, the Trustee is required to register such Certificated Securities
in the name of, and cause the same to be delivered to, such person or persons
(or the nominee of any thereof). All such certificated exchange notes would be
subject to the legend requirements described herein under "Notice to
Investors."
In addition, if (1) SMI notifies the Trustee in writing that the
Depositary is no longer willing or able to act as a depositary and SMI is
unable to locate a qualified successor within 90 days or (2) SMI, at its
option, notifies the Trustee in writing that it elects to cause the issuance of
exchange notes in the form of Certificated Securities under the Indenture,
then, upon surrender by the Global Note Holder of its Global Note, exchange
notes in such form will be issued to each person that the Global Note Holder
and the Depositary identify as being the beneficial owner of the related
exchange notes.
Neither SMI nor the Trustee will be liable for any delay by the Global
Note Holder or the Depositary in identifying the beneficial owners of exchange
notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
SAME-DAY SETTLEMENT AND PAYMENT
Payments in respect of the Notes represented by the Global Note (including
principal, premium, if any, interest and Liquidated Damages, if any) must be
made by wire transfer of immediately available funds to the accounts specified
by the Global Note Holder. With respect to Certificated Securities, SMI will
make all payments of principal, premium, if any, interest and Liquidated
Damages, if any, by wire transfer of immediately available funds to the
accounts specified by the Holders thereof or, if no such account is specified,
by mailing a check to each such Holder's registered address.
The exchange notes represented by the Global Note are expected to be
eligible to trade in the Depositary's Same-Day Funds Settlement System. Any
permitted secondary market trading activity in such Notes will be required by
the Depositary to be settled in immediately available funds. SMI expects that
secondary trading in the Certificated Securities will also be settled in
immediately available funds.
LIQUIDATED DAMAGES
SMI will pay Liquidated Damages to each Holder of notes in the following
circumstances:
(1) SMI fails to file any of the Registration Statements required by the
Registration Rights Agreement on or before the date specified for such
filing;
(2) any of such Registration Statements is not declared effective by the
Commission on or prior to the date specified for such effectiveness
(the "Effectiveness Target Date");
(3) SMI fails to consummate the Exchange Offer within 30 business days of
the Effectiveness Target Date with respect to the Exchange Offer
Registration Statement; or
(4) the Shelf Registration Statement or the Exchange Offer Registration
Statement is declared effective but thereafter ceases to be effective
or usable (including as a result of SMI's suspending the use of any
prospectus pursuant to the preceding paragraph) in connection with
resales of Transfer Restricted Securities during the periods specified
in the Registration Rights Agreement (each such event referred to in
clauses (1) through (4) above a "Registration Default").
With respect to the first 90-day period immediately following the
occurrence of such Registration Default, SMI will pay Liquidated Damages in an
amount equal to $.05 per week per $1,000 principal amount of Notes held by such
Holder.
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The amount of the Liquidated Damages will increase by an additional $.05 per
week per $1,000 principal amount of Notes with respect to each subsequent
90-day period until all Registration Defaults have been cured, up to a maximum
amount of Liquidated Damages of $.30 per week per $1,000 principal amount of
Notes.
All accrued Liquidated Damages will be paid by SMI on each interest
payment date with respect to the Global Note Holder by wire transfer of
immediately available funds or by federal funds check and to Holders of
Certificated Securities by wire transfer to the accounts specified by them or
by mailing checks to their registered addresses if no such accounts have been
specified. Following the cure of all Registration Defaults, the accrual of
Liquidated Damages will cease.
In order to have their notes included in the Shelf Registration Statement
and benefit from the provisions regarding Liquidated Damages, holders of
exchange notes will be required to do the following:
(1) make certain representations to SMI (as described in the Registration
Rights Agreement) in order to participate in this exchange offer;
(2) deliver information to be used in connection with the Shelf
Registration Statement; and
(3) provide comments on the Shelf Registration Statement within the time
periods set forth in the Registration Rights Agreement.
CERTAIN DEFINITIONS
The following defined terms are used in the Indenture. Reference is made
to the Indenture for a full disclosure of all such terms, as well as any other
capitalized terms used in this offering memorandum for which no definition is
provided.
"ACQUIRED INDEBTEDNESS" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other Person
is merged with or into or became a Subsidiary of such specified Person
that was not incurred in connection with, or in contemplation of, such
other Person merging with or into or becoming a Subsidiary of such
specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED, that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"ASSET SALE" means:
(1) the sale, lease, conveyance or other disposition of any assets, other
than sales of inventory in the ordinary course of business consistent
with past practices; PROVIDED, that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the
Company, its Subsidiaries and the Unrestricted Subsidiary taken as a
whole will be governed by the provisions of the Indenture described
above under the caption " -- Repurchase at the Option of Holders --
Change of Control" and/or the provisions described above under the
caption " -- Certain Covenants -- Merger, Consolidation or Sale of
Assets" and shall not be deemed to be "Asset Sales;" and
(2) the issue or sale by SMI or any of its Subsidiaries of Equity Interests
of any of SMI's Subsidiaries.
Notwithstanding the preceding, the following items shall not be deemed to
be Asset Sales:
(1) any single transaction or a series of related transactions (a) that
have a fair market value of less than $500,000 or (b) for net proceeds
of less than $500,000;
(2) a transfer of assets by SMI to a Wholly Owned Subsidiary or by a Wholly
Owned Subsidiary to SMI or to another Wholly Owned Subsidiary;
(3) an issuance of Equity Interests by a Wholly Owned Subsidiary to SMI or
to another Wholly Owned Subsidiary; and
(4) a Restricted Payment that is permitted by the covenant described above
under the caption " -- Certain Covenants -- Restricted Payments" will
not be deemed to be Asset Sales.
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"ATTRIBUTABLE INDEBTEDNESS" in respect of a sale and leaseback transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP)
of the obligation of the lessee for net rental payments during the remaining
term of the lease included in such sale and leaseback transaction (including
any period for which such lease has been extended or may, at the option of the
lessor, be extended).
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"CAPITAL STOCK" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership, partnership interests (whether general or
limited); and
(4) any other interest or participation that confers on a Person the right
to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"CASH EQUIVALENTS" means:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality thereof
having maturities of not more than six months from the date of
acquisition;
(3) certificates of deposit and eurodollar time deposits with maturities of
six months or less from the date of acquisition, bankers' acceptances
with maturities not exceeding six months and overnight bank deposits,
in each case with any lender party to the Credit Agreement or with any
domestic commercial bank having capital and surplus in excess of $500
million and a Keefe Bank Watch Rating of "B" or better;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3)
above entered into with any financial institution meeting the
qualifications specified in clause (3) above; and
(5) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Corporation and in each
case maturing within six months after the date of acquisition.
"CHANGE OF CONTROL" means the occurrence of any of the following:
(1) the sale, lease, transfer, conveyance or other disposition (other than
by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of (a) SMI and
its Subsidiaries taken as a whole to any "person" (as such term is used
in Section 13(d)(3) of the Exchange Act) other than O. Bruton Smith or
his Related Parties or Sonic Financial Corporation or any of their
respective Affiliates or (b) Sonic Financial Corporation to any
"person" (as defined above) other than O. Bruton Smith or his Related
Parties or any of their respective Affiliates;
(2) the adoption of a plan relating to the liquidation or dissolution of
SMI or Sonic Financial Corporation;
(3) the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that (a) any "person"
(as defined above), other than O. Bruton Smith or his Related Parties
or Sonic Financial Corporation or any of their respective Affiliates,
becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act), directly or indirectly, of more
than 50% of the Voting Stock of the Company or (b) any "person" (as
defined above), other than O. Bruton Smith or his Related Parties or
any of their respective Affiliates, becomes the "beneficial owner" (as
defined above), directly or indirectly, of more than 50% of the Voting
Stock of Sonic Financial Corporation;
(4) the first day on which a majority of the members of the Board of
Directors of the Company or Sonic Financial Corporation are not
Continuing Directors; or
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(5) a Repurchase Event occurs with respect to SMI's 5 3/4% Convertible
Subordinated Debentures Due 2003 under the Indenture dated as of
September 1, 1996 (the "Convertible Indenture"), between SMI and First
Union National Bank of North Carolina, as trustee.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period; plus
(1) an amount equal to any extraordinary loss plus any net loss realized in
connection with an Asset Sale (to the extent such losses were deducted
in computing such Consolidated Net Income); plus
(2) provision for taxes based on income or profits of such Person and its
Subsidiaries for such period, to the extent that such provision for
taxes was included in computing such Consolidated Net Income; plus
(3) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized
(including, without limitation, amortization of original issue
discount, non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with
respect to Attributable Indebtedness, commissions, discounts and other
fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in
computing such Consolidated Net Income; plus
(4) depreciation, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses
that were paid in a prior period) and other non-cash charges (excluding
any such non-cash charge to the extent that it represents an accrual of
or reserve for cash charges in any future period or amortization of a
prepaid cash expense that was paid in a prior period) of such Person
and its Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash charges were deducted in
computing such Consolidated Net Income; minus
(5) non-cash items of such Person and its Subsidiaries increasing
Consolidated Net Income for such period, in each case, on a
consolidated basis and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes on the income or
profits of, and the depreciation and amortization and other non-cash charges
of, a Subsidiary of the referent Person shall be added to Consolidated Net
Income to compute Consolidated Cash Flow only to the extent (and in the same
proportion) that the Net Income of such Subsidiary was included in calculating
the Consolidated Net Income of such Person and only if a corresponding amount
would be permitted at the date of determination to be dividended to SMI by such
Subsidiary without prior governmental approval (that has not been obtained),
and without direct or indirect restriction pursuant to the terms of its charter
and all agreements, instruments, judgments, decrees, orders, statutes, rules
and governmental regulations applicable to that Subsidiary or its stockholders.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
PROVIDED that
(1) the Net Income (but not loss) of any Person that is not a Subsidiary or
that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions
paid in cash to the referent Person or a Wholly Owned Subsidiary
thereof;
(2) the Net Income of any Subsidiary shall be excluded to the extent that
the declaration or payment of dividends or similar distributions by
that Subsidiary of that Net Income is not at the date of determination
permitted without any prior governmental approval (that has not been
obtained) or, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Subsidiary or its
stockholders;
(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall
be excluded;
(4) the cumulative effect of a change in accounting principles shall be
excluded; and
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(5) the Net Income of, or any dividends or other distributions from, the
Unrestricted Subsidiary, to the extent otherwise included, shall be
excluded, until distributed in cash to the Company or one of its
Subsidiaries.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any date,
the sum of:
(1) the consolidated equity of the common stockholders of such Person and
its consolidated Subsidiaries as of such date; plus
(2) the respective amounts reported on such Person's balance sheet as of
such date with respect to any series of preferred stock (other than
Disqualified Stock) that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out of
net earnings in respect of the year of such declaration and payment,
but only to the extent of any cash received by such Person upon
issuance of such preferred stock; less
(a) all write-ups (other than write-ups resulting from foreign currency
translations and write-ups of tangible assets of a going concern
business made within 12 months after the acquisition of such business)
subsequent to the date of the Indenture in the book value of any asset
owned by such Person or a consolidated Subsidiary of such Person;
(b) all investments as of such date in unconsolidated Subsidiaries and in
Persons that are not Subsidiaries (except, in each case, Permitted
Investments); and
(c) all unamortized debt discount and expense and unamortized deferred
charges as of such date, all of the foregoing determined in accordance
with GAAP.
"CONTINUING DIRECTORS" means, with respect to any Person as of any date of
determination, any member of the Board of Directors of such Person who:
(1) was a member of such Board of Directors on the date of the Indenture;
or
(2) was nominated for election or elected to such Board of Directors with
the approval of a majority of the Continuing Directors who were members
of such Board at the time of such nomination or election.
"CREDIT AGREEMENT" means that certain Credit Agreement dated as of August
4, 1997, by and among the Company, as borrower, and the lenders named therein,
including NationsBank, N.A., as agent for the lenders and a lender, and First
Union National Bank, as co-agent, including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, and in each case as amended, modified, renewed, refunded, extended
or refinanced from time to time.
"DEFAULT" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"DESIGNATED SENIOR INDEBTEDNESS" means any Senior Indebtedness permitted
under the Indenture principal amount of which is $25.0 million or more and that
has been designated by SMI as "Designated Senior Indebtedness."
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the Holder thereof, in whole or in part, on or prior to the
date that is 91 days after the date on which the Notes mature.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock. It does not include any debt security that is
convertible into, or exchangeable for, Capital Stock.
"EXISTING INDEBTEDNESS" means Indebtedness of SMI and its Subsidiaries in
existence on the date of the Indenture.
"FIXED CHARGES" means, with respect to any Person for any period, the sum
of:
(1) the consolidated interest expense of such Person and its Subsidiaries
for such period, whether paid or accrued (including, without
limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, imputed interest with respect to Attributable
Indebtedness, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations);
plus
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(2) the consolidated interest expense of such Person and its Subsidiaries
that was capitalized during such period; plus
(3) any interest expense on Indebtedness of another Person that is
guaranteed by such Person or one of its Subsidiaries or secured by a
Lien on assets of such Person or one of its Subsidiaries (whether or
not such guarantee or Lien is called upon); plus
(4) the product of (a) all cash dividend payments (and non-cash dividend
payments in the case of a Person that is a Subsidiary) on any series of
preferred stock of such Person, times (b) a fraction, the numerator of
which is one and the denominator of which is one minus the then current
combined federal, state and local statutory tax rate of such Person,
expressed as a decimal, in each case, on a consolidated basis and in
accordance with GAAP.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that SMI or
any of its Subsidiaries incurs, assumes, guarantees or redeems any Indebtedness
(other than revolving credit borrowings) or issues preferred stock subsequent
to the commencement of the period for which the Fixed Charge Coverage Ratio is
being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation
Date"), then the Fixed Charge Coverage Ratio shall be calculated giving PRO
FORMA effect to such incurrence, assumption, guarantee or redemption of
Indebtedness, or such issuance or redemption of preferred stock, as if the same
had occurred at the beginning of the applicable four-quarter reference period.
In addition, for purposes of making the computation referred to above:
(1) acquisitions that have been made by SMI or any of its Subsidiaries,
including through mergers or consolidations and including any related
financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation
Date shall be deemed to have occurred on the first day of the
four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause
(3) of the proviso set forth in the definition of Consolidated Net
Income; and
(2) the Consolidated Cash Flow attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded; and
(3) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, but only
to the extent that the obligations giving rise to such Fixed Charges
will not be obligations of the referent Person or any of its
Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession which are in effect on the date of the Indenture.
"GOVERNMENT SECURITIES" means:
(1) securities that are (a) direct obligations of the United States of
America for the payment of which the full faith and credit of the
United States of America is pledged; or (b) obligations of a Person
controlled or supervised by and acting as an agency or instrumentality
of the United States of America the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States
of America, which, in either case, are not callable or redeemable at
the option of the issuer thereof; and
(2) depositary receipts issued by a bank (as defined in Section 3(a)(2) of
the Securities Act) as custodian with respect to any Government
Security which is specified in clause (1) above and held by such bank
for the account of the holder of such depositary receipt, or with
respect to any specific payment of principal or interest on any
Government Security which is so specified and held; PROVIDED, that
(except as required by law) such custodian is not authorized to make
any deduction from the amount payable to the holder of such depositary
receipt from any amount received by the custodian in respect of the
Government Security or the specific payment of principal or interest of
the Government Security evidenced by such depositary receipt.
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"GUARANTEE" or "GUARANTEE" (unless the context requires otherwise) means a
guarantee (other than by endorsement of negotiable instruments for collection
in the ordinary course of business), direct or indirect, in any manner
(including, without limitation, letters of credit and reimbursement agreements
in respect thereof), of all or any part of any Indebtedness.
"GUARANTOR SENIOR INDEBTEDNESS" means, with respect to any Guarantor:
(1) the guarantee of such Guarantor of SMI's Obligations under the Credit
Agreement; and
(2) any other Indebtedness permitted to be incurred by such Guarantor under
the terms of the Indenture, unless the instrument under which such
Indebtedness is incurred expressly provides that it is on a parity with
or subordinated in right of payment to the Guarantee of such Guarantor.
Notwithstanding anything to the contrary in the foregoing, Guarantor
Senior Indebtedness will not include:
(1) any Indebtedness of such Guarantor representing a guarantee of
Indebtedness of SMI or any other Guarantor which is subordinate or
junior to, or PARI PASSU with, the Notes or the Guarantee of such other
Guarantor, as the case may be;
(2) any Indebtedness that is expressly subordinate or junior in right of
payment to any other Indebtedness of such Guarantor;
(3) any liability for federal, state, local or other taxes owed or owing by
such Guarantor;
(4) any Indebtedness of such Guarantor to any of its Subsidiaries or other
Affiliates;
(5) any trade payables; or
(6) that portion of any Indebtedness that is incurred in violation of the
Indenture.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations
of such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and
(2) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates and the value of foreign
currencies purchased by SMI or any of its Subsidiaries in the ordinary
course of business.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of any of the following if and to
the extent it would appear as a liability upon a balance sheet of such person
prepared in accordance with GAAP (other than letters of credit and Hedging
Obligations):
(1) borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or letters
of credit (or reimbursement agreements in respect thereof);
(3) banker's acceptances;
(4) representing Capital Lease Obligations; or
(5) the balance deferred and unpaid of the purchase price of any property
or representing any Hedging Obligations, except any such balance that
constitutes an accrued expense or trade payable.
In addition, the term "Indebtedness" includes all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
guarantee by such Person of any indebtedness of any other Person.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
However, that an acquisition of assets, Equity Interests or other securities by
SMI for consideration consisting of common equity securities of SMI shall not
be deemed to be an Investment.
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"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law. It
includes any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"LIKE KIND EXCHANGE" means the exchange pursuant to Section 1031 of the
Code of the following:
(1) any real property (other than any speedway that is owned on or acquired
after the date of the Indenture by SMI or any Subsidiary) used or to be
used in connection with the business of SMI; or
(2) any other real property to be used in connection with the business of
SMI.
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however:
(1) any gain (but not loss), together with any related provision for taxes
on such gain (but not loss), realized in connection with (a) any Asset
Sale (including, without limitation, dispositions pursuant to sale and
leaseback transactions) or (b) the disposition of any securities by
such Person or any of its Subsidiaries or the extinguishment of any
Indebtedness of such Person or any of its Subsidiaries; and
(2) any extraordinary or nonrecurring gain (but not loss), together with
any related provision for taxes on such extraordinary or nonrecurring
gain (but not loss).
"NET PROCEEDS" means the aggregate cash proceeds (or in the case of any
Asset Sale involving the Unrestricted Subsidiary, the amount of such aggregate
cash proceeds that equals the aggregate amount of all Restricted Investments in
the Unrestricted Subsidiary that have not been repaid prior to the date of such
Asset Sale) received by SMI or any of its Subsidiaries in respect of any Asset
Sale (including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale, including, without limitation,
legal, accounting and investment banking fees, and sales commissions, any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), and any reserve for adjustment in
respect of the sale price of such asset or assets established in accordance
with GAAP.
Notwithstanding the foregoing, in the event SMI or any of its Subsidiaries
engages in a Like Kind Exchange, Net Proceeds shall not include any cash
proceeds with respect to such Like Kind Exchange that are reinvested in or used
to purchase pursuant to Section 1031 of the Code like kind real property used
or to be used in the business of SMI.
"NON-RECOURSE DEBT" means Indebtedness:
(1) as to which neither SMI nor any of its Subsidiaries (a) provides credit
support of any kind (including any undertaking, agreement or instrument
that would constitute Indebtedness), (b) is directly or indirectly
liable (as a guarantor or otherwise), or (c) constitutes the lender;
and
(2) no default with respect to which (including any rights that the holders
thereof may have to take enforcement action against the Unrestricted
Subsidiary) would permit (upon notice or lapse of time or both) any
holder of any other Indebtedness of SMI or any of its Subsidiaries to
declare a default on such other Indebtedness or cause the payment
thereof to be accelerated or payable prior to its Stated Maturity.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"PERMITTED INVESTMENTS" means:
(1) any Investment in SMI or in a Wholly Owned Subsidiary of SMI;
(2) any Investment in Cash Equivalents;
(3) any Investment by SMI or any Subsidiary of SMI in a Person, if as a
result of such Investment
(a) such Person becomes a Wholly Owned Subsidiary of SMI or
(b) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is
liquidated into, SMI or a Wholly Owned Subsidiary of SMI; and
77
<PAGE>
(4) any Restricted Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption " --
Repurchase at the Option of Holders -- Asset Sales."
"PERMITTED LIENS" means:
(1) Liens on assets of SMI securing Senior Indebtedness and Liens on assets
of a Guarantor securing Guarantor Senior Indebtedness of such
Guarantor, that was permitted by the terms of the Indenture to be
incurred;
(2) Liens in favor of SMI;
(3) Liens on property of a Person existing at the time such Person is
merged into or consolidated with SMI or any Subsidiary of SMI, PROVIDED
that such Liens were in existence prior to the contemplation of such
merger or consolidation and do not extend to any assets other than
those of the Person merged into or consolidated with SMI;
(4) Liens on property existing at the time of acquisition thereof by SMI or
any Subsidiary of SMI, PROVIDED that such Liens were in existence prior
to the contemplation of such acquisition;
(5) Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(6) Liens relating to judgments to the extent permitted under the
Indenture; and
(7) Liens existing on the date of the Indenture.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of SMI or any
of its Subsidiaries issued in exchange for, or the net proceeds of which are
used to extend, refinance, renew, replace, defease or refund other Indebtedness
of SMI or any of its Subsidiaries; PROVIDED, that:
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount
(or accreted value, if applicable) of the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses incurred in connection therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date no
earlier than the final maturity date of, and has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refinancing Indebtedness is subordinated in right of
payment to the Notes on terms at least as favorable to the Holders of
Notes as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; and
(4) such Indebtedness is incurred either by SMI or by the Subsidiary which
is the obligor on the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded.
"PERSON" means any individual, corporation, limited or general
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof or any other entity.
"RELATED PARTIES" means, when used with respect to any individual, the
spouse, lineal descendants, parents and siblings of any such individual; the
estates, heirs, legatees and legal representatives of any such individual and
any of the foregoing; and all trusts established by any such individual and any
of the foregoing for estate planning purposes of which any such individual and
any of the foregoing are the sole beneficiaries or grantors.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"SENIOR INDEBTEDNESS" means:
(1) Indebtedness under the Credit Agreement (including interest in respect
thereof accruing after the commencement of any bankruptcy or similar
proceeding to the extent that such interest is allowable as a
bankruptcy claim in such proceeding); and
78
<PAGE>
(2) any other Indebtedness permitted to be incurred by SMI under the terms
of the Indenture, unless the instrument under which such Indebtedness
is incurred expressly provides that it is on a parity with or
subordinated in right of payment to the Notes.
Notwithstanding anything to the contrary in the foregoing, Senior
Indebtedness will not include:
(1) any Indebtedness that is expressly subordinate or junior in right of
payment to any other Indebtedness of SMI;
(2) any liability for federal, state, local or other taxes owed or owing by
SMI;
(3) any Indebtedness of SMI to any of its Subsidiaries, the Unrestricted
Subsidiary or other Affiliates;
(4) any trade payables; or
(5) that portion of Indebtedness that is incurred in violation of the
Indenture.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date of
the Indenture.
"STATED MATURITY" means, with respect to any payment of interest on or
principal of any Indebtedness, the date on which such payment was scheduled to
be made in the documentation governing such Indebtedness without regard to the
occurrence of any subsequent event or contingency.
"SUBSIDIARY" means, with respect to any Person:
(1) any corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by such Person or one or
more of the other Subsidiaries of that Person (or a combination
thereof); and
(2) any partnership (a) the sole general partner or the managing general
partner of which is such Person or a Subsidiary of such Person, or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
Notwithstanding the foregoing, the Unrestricted Subsidiary shall not,
while designated as an unrestricted subsidiary as described above under " --
Subsidiary Guarantees," be a Subsidiary of SMI for any purposes of the
Indenture.
"UNRESTRICTED SUBSIDIARY" means Oil-Chem Research Corporation and its
subsidiaries taken as a whole. Oil-Chem Research Corporation is wholly owned by
SMI, had Consolidated Net Loss of $191,000 and $253,000, and EBITDA of $92,000
and $(283,000), for the year ended December 31, 1998 and the three months ended
March 31, 1999, respectively, and had Consolidated Net Worth of $3.7 million at
December 31, 1998 and $3.4 million at March 31, 1999.
"VOTING STOCK" means, with respect to any Person as of any date, the
Capital Stock of such Person that is at the time entitled to vote in the
election of the Board of Directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of each
then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such
payment; by
(2) the then outstanding principal amount of such Indebtedness.
"WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person.
Notwithstanding the foregoing, the Unrestricted Subsidiary shall not, while
designated as an unrestricted subsidiary as described above under " --
Subsidiary Guarantees," be included in the definition of Wholly Owned
Subsidiary for any purposes of the Indenture.
79
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
1999 CREDIT FACILITY
On May 28, 1999, we entered into the 1999 Credit Facility. The 1999 Credit
Facility is a secured senior revolving credit facility provided by a syndicate
of banks led by NationsBank, N.A. as an agent and lender. The 1999 Credit
Facility provides for borrowings in an aggregate principal amount of up to
$250.0 million, and includes a sub-limit of $10.0 million for the issuance of
standby letters of credit. Indebtedness under the 1999 Credit Facility is
guaranteed by each of our material domestic subsidiaries and is secured by a
pledge of all such subsidiaries capital stock, limited partnership interests
and limited liability company interests, as the case may be, except for
Oil-Chem Corporation and its subsidiaries. Loans made pursuant to the 1999
Credit Facility may be borrowed, repaid and reborrowed from time to time until
the 1999 Credit Facility's final maturity date on May 31, 2004, subject to
satisfaction of certain conditions on the date of any such borrowing.
Amounts outstanding under the 1999 Credit Facility bear interest at a rate
based, at our option, upon (1) LIBOR plus a margin ranging from 0.5% to 1.25%,
as adjusted from time to time in accordance with the terms of the 1999 Credit
Facility, or (2) the greater of (A) NationsBank's prime rate or (B) the Federal
Funds rate plus 0.5%. The 1999 Credit Facility will adjust the margin
applicable to the LIBOR borrowings based upon certain consolidated ratios of
funded debt to EBITDA.
The 1999 Credit Facility contains a number of financial, affirmative and
negative covenants that regulate our operations. Financial covenants require
maintenance of consolidated ratios of funded debt to EBITDA, and EBIT to
interest expense, and require us to maintain a minimum net worth. Negative
covenants restrict, among other things, the incurrence and existence of liens,
the making of investments, sale leasebacks, dividends and distributions,
issuance of stock, mergers, "restricted payments", including share repurchases,
capital expenditures, transactions with affiliates, acquisitions, sales or
purchase of assets, and the incurrence or prepayment of debt. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
The following is a summary of the principal U.S. federal income tax
consequences of this exchange offer to a holder of old notes that purchased the
old notes pursuant to their original issue and that holds the old notes and
will hold the exchange notes as capital assets. It does not address beneficial
owners that may be subject to special tax rules, such as banks, insurance
companies, dealers in securities or currencies, holders that hold the old notes
or exchange notes as a hedge against currency risks or as part of a straddle
with other investments or as part of a "synthetic security" or other integrated
investment (including a "conversion transaction") comprised of a note and one
or more investments, or holders that have a "functional currency" other than
the U.S. dollar. This summary is based upon the U.S. federal tax laws and
regulations as now in effect and as currently interpreted and does not take
into account possible changes in such tax laws or such interpretations, any of
which may be applied retroactively. It does not include any description of the
tax laws of any state, local or foreign government that may be applicable to
the exchange offer, the old notes, the exchange notes or the holders thereof.
The exchange of exchange notes for the old notes pursuant to this exchange
offer should not be treated as an "exchange" for federal income tax purposes
because the exchange notes will not be considered to differ materially in kind
or extent from the old notes. As a result, there should be no federal income
tax consequences to holders of the old notes exchanging the old notes for the
exchange notes pursuant to this exchange offer, and therefore: (i) no gain or
loss should be realized by a holder upon receipt of an exchange note, (ii) the
holding period of the exchange note should include the holding period of the
old note exchanged therefor, and (iii) the adjusted tax basis of the exchange
note should be the same as the adjusted basis of the old note exchanged
therefor immediately before the exchange.
THIS SUMMARY DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF U.S. FEDERAL
INCOME TAXATION THAT MAY BE RELEVANT TO A HOLDER'S DECISION TO EXCHANGE OLD
NOTES FOR EXCHANGE NOTES. EACH HOLDER SHOULD CONSULT WITH ITS OWN TAX ADVISOR
CONCERNING THE APPLICATION OF THE FEDERAL INCOME TAX LAWS OR OTHER TAX LAWS TO
ITS PARTICULAR SITUATION BEFORE DETERMINING WHETHER TO EXCHANGE OLD NOTES FOR
EXCHANGE NOTES.
80
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account in
exchange for old notes pursuant to this exchange offer, where such old notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such exchange notes. This prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of exchange notes received in exchange for old notes
where such old notes were acquired as a result of market-making activities or
other trading activities. SMI has agreed that, for a period of 180 days after
the consummation of the exchange offer, it will make this prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale.
SMI will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
pursuant to this exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the exchange notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such exchange notes. Any broker-dealer
that resells exchange notes that were received by it for its own account
pursuant to this exchange offer and any broker or dealer that participates in a
distribution of such exchange notes may be deemed to be an "underwriter" within
the meaning of the Securities Act of 1933, and any profit on any such resale of
exchange notes and any commissions or concessions received by any such persons
may be deemed to be underwriting compensation under the Securities Act of 1933.
The letter of transmittal states that by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act of 1933.
For a period of 365 days after the registration statement is declared
effective, SMI will promptly send additional copies of this prospectus and any
amendment or supplement to this prospectus to any broker-dealer that requests
such documents in the letter of transmittal or otherwise. SMI has agreed to pay
all expenses incident to this exchange offer other than commissions or
concessions of any broker-dealers and will indemnify holders of the old notes
(including any broker-dealers) against certain liabilities, including certain
liabilities under the Securities Act of 1933.
LEGAL MATTERS
Parker, Poe, Adams & Bernstein L.L.P., Charlotte, North Carolina, counsel
to SMI, will pass upon the validity of the exchange notes.
EXPERTS
The December 31, 1998 Consolidated Financial Statements of Speedway
Motorsports, Inc. and Subsidiaries and the September 30, 1998 Financial
Statements of Las Vegas Motor Speedway, Inc. included and incorporated by
reference in this prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports appearing herein, and are
included in reliance upon the reports of such firm given upon their authority
as experts in accounting and auditing.
81
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated statements of income for
the year ended December 31, 1998 and the three months ended March 31, 1999
reflects the historical accounts of SMI for that period, adjusted giving effect
to the following events, as if those events had occurred on January 1, 1998:
o the acquisition of Las Vegas Motor Speedway in December 1998;
o the sale of the Series C Notes on May 11, 1999 and the application of the
net proceeds to repay a portion of the existing indebtedness under the
Acquisition Loan; and
o the closing of the 1999 Credit Facility concurrently with the sale of the
Series C Notes.
The unaudited pro forma consolidated financial data and accompanying notes
should be read in conjunction with the Consolidated Financial Statements and
related notes of SMI, as well as the financial statements and related notes of
Las Vegas Motor Speedway, Inc. as of and for the nine months ended September 30,
1998, which are included in this prospectus, and SMI's consolidated financial
statements for the three months ended March 31, 1998 and 1999 which are
incorporated by reference in this prospectus. A pro forma balance sheet has not
been presented as the March 31, 1999 consolidated balance sheet of SMI reflects
the LVMS acquisition, and the effects of the Series C Notes offering and the
closing of the 1999 Credit Facility are not significant. SMI believes that the
assumptions used in the following statements provide a reasonable basis on which
to present the unaudited pro forma financial data. The unaudited pro forma
consolidated financial data are provided for informational purposes only and
should not be construed to be indicative of SMI's financial condition, results
of operations or covenant compliance had the transactions and events described
above been consummated on the dates assumed, and are not intended to project
SMI's financial condition on any future date or its results of operation for any
future period.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME AND OTHER DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
--------------------------------------------------------------------
PRO FORMA
ADJUSTMENTS FOR:
-------------------------- PRO FORMA FOR
LVMS ACQUISITION LVMS
ELEVEN MONTHS ENDED, ACQUISITION, NOTES
HISTORICAL NOTES OFFERING AND OFFERING AND
SMI CONSOLIDATED 1999 CREDIT FACILITY (1) 1999 CREDIT FACILITY
------------------ -------------------------- ----------------------
INCOME STATEMENT DATA:
- -------------------------------------
REVENUES:
<S> <C> <C> <C>
Admissions ........................ $ 107,601 $ 12,889 $ 120,490
Event-related revenue ............. 105,459 21,881 127,340
Other operating revenue ........... 16,736 17 16,753
--------- --------- ---------
Total revenues ................... 229,796 34,787 264,583
--------- --------- ---------
Operating Expenses:
Direct expense
of events ........................ 83,046 14,306 97,352
Other direct operating
expenses ......................... 10,975 -- 10,975
General and
administrative ................... 34,279 6,683 40,962
Depreciation and
amortization ..................... 21,701 4,229 25,930
--------- --------- ---------
Total operating expenses ......... 150,001 25,218 175,219
--------- --------- ---------
Operating Income ................... 79,795 9,569 89,364
Interest income
(expense), net .................... (12,228) (12,684) (24,912)
Acquisition Loan cost
amortization ...................... (752) 752 --
Other income, net .................. 3,202 6 3,208
--------- --------- ---------
Income (loss) before income
taxes ............................. 70,017 (2,357) 67,660
Income tax provision (benefit) ..... 27,646 (931) 26,715
--------- --------- ---------
Net income (loss) .................. $ 42,371 $ (1,426) $ 40,945
========= ========= =========
Basic earnings per share $ 1.02 $ 0.99
Weighted average number of
shares 41,482 41,482
Diluted earnings per share $ 1.00 $ 0.97
Weighted average number of
shares 44,611 44,611
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1999
--------------------------------------------------------------
PRO FORMA PRO FORMA FOR
ADJUSTMENTS FOR: NOTES OFFERING
HISTORICAL NOTES OFFERING AND AND 1999
SMI CONSOLIDATED 1999 CREDIT FACILITY (2) CREDIT FACILITY
------------------ -------------------------- ----------------
INCOME STATEMENT DATA:
- -------------------------------------
REVENUES:
<S> <C> <C> <C>
Admissions ........................ $ 19,826 -- $ 19,826
Event-related revenue ............. 27,956 -- 27,956
Other operating revenue ........... 5,322 -- 5,322
-------- -- --------
Total revenues ................... 53,104 -- 53,104
-------- -- --------
Operating Expenses:
Direct expense
of events ........................ 19,769 -- 19,769
Other direct operating
expenses ......................... 3,527 -- 3,527
General and
administrative ................... 10,800 -- 10,800
Depreciation and
amortization ..................... 7,119 -- 7,119
-------- -- --------
Total operating expenses ......... 41,215 -- 41,215
-------- -- --------
Operating Income ................... 11,889 -- 11,889
Interest income
(expense), net .................... (6,327) (690) (7,017)
Acquisition Loan cost
amortization ...................... (2,263) 2,263 0
Other income, net .................. 174 0 174
-------- ----- --------
Income (loss) before income
taxes ............................. 3,473 1,573 5,046
Income tax provision (benefit) ..... 1,465 629 2,094
-------- ----- --------
Net income (loss) .................. $ 2,008 $ 944 $ 2,952
======== ======= ========
Basic earnings per share $ 0.05 $ 0.07
Weighted average number of
shares 41,507 41,507
Diluted earnings per share $ 0.05 $ 0.07
Weighted average number of
shares 44,872 44,872
</TABLE>
(See accompanying notes to Unaudited Pro Forma Financial Data).
P-1
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1998 MARCH 31, 1999
------------------- --------------------
OTHER DATA: PRO FORMA PRO FORMA
- --------------------------------------------------- ------------------- --------------------
<S> <C> <C>
Ratio of earnings to fixed charges (3)(4) ......... 2.7x 1.5x
</TABLE>
- ---------
(1) Pro forma adjustments give effect to the acquisition of LVMS on December 1,
1998, the sale of the Series C Notes, and the closing of the 1999 Credit
Facility concurrently with the sale of the Series C Notes, as if these
events had occurred on January 1, 1998. The amounts assume that the
estimated net proceeds from the sale of the Series C Notes, including an
issuance premium of $3.8 million paid by the Series C Note purchasers, was
$125.7 million and was applied to repay a portion of the amounts
outstanding under the Acquisition Loan. The amounts were derived from: (a)
the unaudited historical statement of income of LVMS for the eleven months
ended November 30, 1998 and (b) unaudited pro forma adjustments to
depreciation and amortization expense, interest expense, and income taxes
as follows:
<TABLE>
<S> <C>
(i) Increase in depreciation for step-up in fair value of property and
equipment using straight-line basis; and increase in amortization
for goodwill (amortized on straight-line basis over 40 years) ....................... $ 515,000
===========
(ii) Change in interest income (expense), net for increased borrowings under
the Series C Notes and the 1999 Credit Facility for pro forma purposes
using an assumed weighted average 7.60% interest rate ............................... $12,505,000
===========
For pro forma presentation purposes, we assume SMI borrowed an
aggregate of $210.7 million under its 1999 revolving bank credit facility
and the Series C Notes to effect the December 1, 1998 acquisition. The
additional pro forma interest, net of amounts retroactively capitalized for
construction in progress, has been reflected in the pro forma statement of
income. Interest costs of $2.2 million for the eleven months ended
November 30, 1998 were assumed capitalizable for pro forma presentation
purposes.
(iii) Increase in interest expense for amortization of estimated deferred loan
costs for Series C Notes offering and 1999 Credit Facility
over the term of the related debt ................................................... $ 924,000
(iv) Decrease in interest expense for accretion of issuance premium over the
term of the Series C Notes based on issuance at 103% of face principal .............. (469,000)
-----------
$ 455,000
===========
(v) Elimination of Acquisition Loan cost amortization assuming financing of
the LVMS acquisition by the Series C Notes offering and
1999 Credit Facility ................................................................ $ 752,000
===========
(vi) Income tax benefit of pro forma adjustments and loss before income taxes of LVMS
using
SMI's effective income tax rate of 40% (LVMS was treated as a S-Corporation prior to
acquisition) ........................................................................ $ 931,000
===========
</TABLE>
(2) Unaudited pro forma adjustments to interest expense, amortization expense
and income taxes for the three months ended March 31, 1999 are as follows:
<TABLE>
<S> <C>
(i) Increase in interest expense reflecting 8.5% interest rate of Series C Notes ...... $ 576,000
(ii) Increase in interest expense for amortization of estimated deferred loan costs for
Series C Notes offering and 1999 Credit Facility over the term of the related debt. 231,000
(iii) Decrease in interest expense for accretion of issuance premium over the term of
the Series C Notes based on issuance at 103% of face principal ................... (117,000)
----------
$ 690,000
==========
(iv) Elimination of Acquisition Loan cost amortization assuming financing of the LVMS
acquisition by the Series C Notes offering and 1999 Credit Facility ............... $2,263,000
==========
(v) Income tax effect of pro forma adjustments using SMI's effective income tax rate of $ 629,000
40% ==========
</TABLE>
(3) The ratio of earnings to fixed charges is computed by dividing fixed
charges into income from continuing operations before income taxes plus
fixed charges. Fixed charges consist of interest, whether expensed or
capitalized, amortization of financing costs and the estimated interest
component of rent expense. The pro forma ratio of earnings to fixed
charges does not reflect any income earned on the proceeds of the Series C
Notes or 1999 Credit Facility in excess of the refinanced debt amounts.
(4) The pro forma effect of the acquisition of LVMS, the sale of the Series C
Notes and the concurrent closing of the 1999 Credit Facility is an
increase in interest charges of $14.3 million and $539,000, and an
increase (decrease) in fixed charges of $14.5 million and ($1.5 million)
for 1998 and the three months ended March 31, 1999, respectively.
P-2
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT ............................................................. F-2
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets at December 31, 1997 and 1998 ............................... F-3
Consolidated Statements of Income for the Years Ended December 31, 1996, 1997 and 1998 .. F-5
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1996, F-6
1997 and 1998
Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1997 and F-7
1998
Notes to Consolidated Financial Statements .............................................. F-8
LAS VEGAS MOTOR SPEEDWAY, INC.
INDEPENDENT AUDITORS' REPORT ............................................................. F-22
FINANCIAL STATEMENTS:
Balance Sheet at September 30, 1998 ..................................................... F-23
Statement of Income and Stockholders' Equity for the Nine Months Ended September 30, F-24
1998
Statement of Cash Flows for the Nine Months Ended September 30, 1998 .................... F-25
Notes to Financial Statements ........................................................... F-26
SUMMARIZED PARENT COMPANY ONLY FINANCIAL INFORMATION FOR SPEEDWAY
MOTORSPORTS, INC. FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND
MARCH 31, 1999 .......................................................................... F-29
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
BOARD OF DIRECTORS
SPEEDWAY MOTORSPORTS, INC.
CHARLOTTE, NORTH CAROLINA
We have audited the accompanying consolidated balance sheets of Speedway
Motorsports, Inc. and subsidiaries (the Company) as of December 31, 1997 and
1998, and the related consolidated statements of income, stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 1997 and 1998, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1998 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
February 23, 1999
F-2
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1998
<TABLE>
<CAPTION>
1997 1998
---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................................. $ 28,148 $ 35,399
Restricted cash (Note 2) .................................. 2,775 258
Accounts and notes receivable (Notes 2 and 8) ............. 24,452 28,924
Prepaid income taxes ...................................... 4,649 10,356
Inventories (Note 3) ...................................... 8,900 10,447
Speedway condominiums held for sale (Note 2) .............. 22,908 4,930
Prepaid expenses .......................................... 768 2,026
-------- --------
Total Current Assets .................................... 92,600 92,340
-------- --------
PROPERTY AND EQUIPMENT, NET (Notes 2 and 4) ................ 436,547 730,686
GOODWILL AND OTHER INTANGIBLE ASSETS, NET (Note 2) ......... 51,300 56,903
OTHER ASSETS:
Marketable equity securities (Note 2) ..................... 1,609 1,439
Notes receivable (Note 8) ................................. 5,498 11,420
Other assets (Note 2) ..................................... 9,614 12,089
-------- --------
Total Other Assets ...................................... 16,721 24,948
-------- --------
TOTAL ................................................... $597,168 $904,877
======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
DECEMBER 31, 1997 AND 1998
<TABLE>
<CAPTION>
1997 1998
----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 5) .......................................... $ 375 $ 539
Accounts payable ....................................................................... 21,927 6,592
Deferred race event income, net (Note 2) ............................................... 58,433 84,713
Accrued expenses and other liabilities ................................................. 13,853 14,772
-------- --------
94,588 106,616
Revolving credit facility and acquisition loan (Notes 2 and 5) ......................... -- 254,050
-------- --------
Total Current Liabilities ............................................................. 94,588 360,666
LONG-TERM DEBT (Note 5) .................................................................. 219,135 199,335
PAYABLE TO AFFILIATES (Note 8) ........................................................... 2,603 4,134
DEFERRED INCOME, NET (Note 2) ............................................................ 13,900 16,252
DEFERRED INCOME TAXES (Note 7) ........................................................... 18,795 35,208
OTHER LIABILITIES ........................................................................ 4,033 2,162
-------- --------
Total Liabilities ..................................................................... 353,054 617,757
-------- --------
COMMITMENTS AND CONTINGENCIES (Notes 4 and 9)
STOCKHOLDERS' EQUITY (Notes 2, 6 and 11):
Preferred stock, $.10 par value, 3,000,000 shares authorized, no shares issued ......... -- --
Common stock, $.01 par value, 200,000,000 shares authorized, 41,433,000 and 41,502,000
shares issued and outstanding in 1997 and 1998 ........................................ 414 415
Additional paid-in capital ............................................................. 156,477 157,216
Retained earnings ...................................................................... 87,526 129,897
Accumulated other comprehensive loss -- unrealized loss on marketable equity securities (303) (408)
-------- --------
Total Stockholders' Equity ............................................................ 244,114 287,120
-------- --------
TOTAL ................................................................................. $597,168 $904,877
======== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
1996 1997 1998
------------ ------------ -----------
(IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
REVENUES (Note 2):
Admissions ........................................ $ 52,451 $ 94,032 $ 107,601
Event related revenue ............................. 36,414 83,177 105,459
Other operating revenue ........................... 13,248 14,917 16,736
--------- --------- ---------
Total Revenues .................................. 102,113 192,126 229,796
--------- --------- ---------
OPERATING EXPENSES:
Direct expense of events .......................... 30,173 65,347 83,046
Other direct operating expense .................... 8,005 9,181 10,975
General and administrative ........................ 16,995 31,623 34,279
Depreciation and amortization ..................... 7,598 15,742 21,701
Preoperating expense of new facility (Note 2) ..... -- 1,850 --
--------- --------- ---------
Total Operating Expenses ........................ 62,771 123,743 150,001
--------- --------- ---------
OPERATING INCOME ................................... 39,342 68,383 79,795
Interest income (expense), net (Notes 5 and 8) ..... 1,316 (5,313) (12,228)
Acquisition loan cost amortization (Note 2) ........ -- -- (752)
Other income, net (Note 10) ........................ 2,399 991 3,202
--------- --------- ---------
INCOME BEFORE INCOME TAXES ......................... 43,057 64,061 70,017
Provision for income taxes (Note 7) ................ (16,652) (25,883) (27,646)
--------- --------- ---------
NET INCOME ......................................... $ 26,405 $ 38,178 $ 42,371
========= ========= =========
PER SHARE DATA (Note 6):
Basic Earnings Per Share .......................... $ 0.65 $ 0.92 $ 1.02
Weighted average shares outstanding ............. 40,476 41,338 41,482
Diluted Earnings Per Share ........................ $ 0.64 $ 0.89 $ 1.00
Weighted average shares outstanding ............. 41,911 44,491 44,611
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED TOTAL
COMMON STOCK ADDITIONAL OTHER STOCK-
----------------- PAID-IN RETAINED COMPREHENSIVE HOLDERS'
SHARES AMOUNT CAPITAL EARNINGS LOSS EQUITY
-------- -------- ------------ ---------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996 ..................... 38,000 $380 $ 72,148 $ 22,943 $ (92) $ 95,379
Net income ................................. -- -- -- 26,405 -- 26,405
Issuance of common stock (Note 9) .......... 3,000 30 78,324 -- -- 78,354
Issuance of common stock in business
acquisition (Note 1) ...................... 146 1 3,944 -- -- 3,945
Exercise of stock options (Note 11) ........ 159 2 740 -- -- 742
Net unrealized loss on marketable equity
securities ................................ -- -- -- -- (90) (90)
------ ---- -------- -------- ------ --------
BALANCE, DECEMBER 31, 1996 ................... 41,305 413 155,156 49,348 (182) 204,735
Net income ................................. -- -- -- 38,178 -- 38,178
Issuance of stock under employee stock
purchase plan (Note 11) ................... 25 -- 375 -- -- 375
Exercise of stock options (Note 11) ........ 103 1 946 -- -- 947
Net unrealized loss on marketable equity
securities ................................ -- -- -- -- (121) (121)
------ ---- -------- -------- ------ --------
BALANCE, DECEMBER 31, 1997 ................... 41,433 414 156,477 87,526 (303) 244,114
Net income ................................. -- -- -- 42,371 -- 42,371
Issuance of stock under employee stock
purchase plan (Note 11) ................... 16 -- 340 -- -- 340
Exercise of stock options (Note 11) ........ 53 1 399 -- -- 400
Net unrealized loss on marketable equity
securities ................................ -- -- -- -- (105) (105)
------ ---- -------- -------- ------ --------
BALANCE, DECEMBER 31, 1998 ................... 41,502 $415 $157,216 $129,897 $ (408) $287,120
====== ==== ======== ======== ====== ========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
1996 1997 1998
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................................................. $ 26,405 $ 38,178 $ 42,371
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ......................................................... 7,598 15,742 21,701
Gain on sale of marketable equity securities and investments .......................... (698) (241) (150)
Amortization of acquisition loan costs ................................................ -- -- 752
Amortization of deferred income ....................................................... (275) (662) (891)
Deferred income tax provision ......................................................... 3,890 5,053 16,256
Changes in operating assets and liabilities, net of effects of business acquisitions:
Restricted cash ..................................................................... (14,538) 11,849 2,517
Accounts receivable ................................................................. (4,569) (4,245) (7,262)
Prepaid and accrued income taxes .................................................... (4,057) 135 (5,707)
Inventories ......................................................................... (819) (2,682) (1,384)
Condominiums held for sale .......................................................... (393) (19,373) 17,978
Accounts payable .................................................................... (4,917) 10,564 (15,335)
Deferred race event income .......................................................... 15,812 22,040 16,258
Accrued expenses and other liabilities .............................................. 3,179 3,720 672
Deferred income ..................................................................... 8,444 4,830 3,243
Other assets and liabilities ........................................................ 2,322 (3,859) (4,623)
---------- ---------- ----------
Net cash provided by operating activities .......................................... 37,384 81,049 86,396
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under long-term debt and acquisition loan ................................... 146,525 203,073 254,253
Principal payments on long-term debt ................................................... (50,866) (100,475) (18,565)
Payments of debt issuance costs ........................................................ (2,894) (6,429) (4,053)
Issuance of stock under employee stock purchase plan ................................... -- 375 340
Exercise of common stock options ....................................................... 742 947 400
Issuance of common stock to public ..................................................... 78,354 -- --
---------- ---------- ----------
Net cash provided by financing activities .......................................... 171,861 97,491 232,375
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................................................... (147,741) (162,011) (98,574)
Purchase of Bristol Motor Speedway ..................................................... (27,176) -- --
Purchase of Oil-Chem Research Corp ..................................................... (514) -- --
Purchase of Sears Point Raceway ........................................................ (8,487) -- --
Purchase of Las Vegas Motor Speedway ................................................... -- -- (210,400)
Purchase of marketable equity securities and other investments ......................... (2,135) (412) (933)
Proceeds from sales of marketable equity securities and investments .................... 2,094 1,417 692
Distribution from equity method investee ............................................... -- -- 1,300
Increase in notes and other receivables ................................................ (13,166) (11,638) (13,394)
Repayment of notes and other receivables ............................................... -- -- 9,789
---------- ---------- ----------
Net cash used in investing activities .............................................. (197,125) (172,644) (311,520)
---------- ---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS ............................................... 12,120 5,896 7,251
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR .......................................... 10,132 22,252 28,148
---------- ---------- ----------
CASH AND CASH EQUIVALENTS AT END OF YEAR ................................................ $ 22,252 $ 28,148 $ 35,399
========== ========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest, net of amounts capitalized ..................................... -- $ 5,232 $ 14,951
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES (Note 5):
Capital lease obligation incurred for Sears Point Raceway facility ..................... $ 31,618
Net liabilities assumed and incurred in Las Vegas Motor Speedway acquisition ........... $ 8,783
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
BASIS OF PRESENTATION -- The consolidated financial statements include the
accounts of Speedway Motorsports, Inc. (SMI) and its wholly-owned subsidiaries,
Atlanta Motor Speedway, Inc. (AMS), Bristol Motor Speedway, Inc. (BMS),
Charlotte Motor Speedway, Inc. and subsidiaries (LMSC), Las Vegas Motor
Speedway LLC (LVMS), SPR Acquisition Corp. d/b/a Sears Point Raceway (SPR),
Texas Motor Speedway, Inc. (TMS), Speedway Systems LLC d/b/a Finish Line Events
(FLE), Oil-Chem Research Corp. and subsidiary (ORC), Speedway Screen Printing
LLC d/b/a Wild Man Industries (WMI), Speedway Funding Corp. and Sonoma Funding
Corp. (collectively, the Company).
CURRENT YEAR BUSINESS ACQUISITIONS (see Description of Business and Note
14) -- On December 1, 1998, the Company acquired certain tangible and
intangible assets, including the real and personal property and operations of
LVMS, an industrial park and certain adjacent unimproved land for approximately
$215.0 million, consisting principally of net cash outlay of $210.4 million and
assumed associated deferred revenue. The acquisition was financed with
borrowings under the Company's revolving credit facility and acquisition loan
(see Note 5).
On October 2, 1998, the Company acquired certain tangible and intangible
assets and the operations of WMI for $510,000 in cash and notes payable.
DESCRIPTION OF BUSINESS -- AMS owns and operates a 1.54-mile lighted,
quad-oval, asphalt superspeedway located on approximately 870 acres in Hampton,
Georgia. Two major National Association of Stock Car Auto Racing (NASCAR)
Winston Cup events are held annually, one in March and one in November.
Additionally, a Busch race and two Automobile Racing Club of America (ARCA)
races are also held annually, each preceding a Winston Cup event. AMS also
hosts an annual Indy Racing League (IRL) racing event. All of these events are
sanctioned by NASCAR, IRL or ARCA. AMS has constructed 46 condominiums
overlooking the Atlanta speedway and is in the process of selling the 4
remaining condominiums.
BMS owns and operates a one-half mile lighted, 36-degree banked concrete
oval speedway, and a one-quarter mile lighted dragstrip, located on
approximately 550 acres in Bristol, Tennessee. BMS currently holds two major
NASCAR-sanctioned Winston Cup events annually. Additionally, two
NASCAR-sanctioned Busch races are held annually, each preceding a Winston Cup
event. In January 1996, the Company acquired 100% of the outstanding capital
stock of Bristol Motor Speedway, formerly known as National Raceways, Inc., for
$27,176,000. As part of the acquisition, the Company obtained a right of first
refusal to acquire certain adjacent land used for camping and parking for race
events.
BMS is reconstructing and expanding its dragstrip into a
"state-of-the-art" dragway with permanent grandstand seating, luxury suites,
and extensive fan amenities and facilities. Construction of the Bristol Dragway
is expected to be completed in 1999, and its inaugural National Hot Rod
Association (NHRA) sanctioned Winston Showdown will be hosted in July 1999.
Bristol Dragway will also host NHRA and other bracket racing events, as well as
various auto shows.
LMSC owns and operates a 1.5-mile lighted quad-oval, asphalt superspeedway
located in Concord, North Carolina. LMSC stages three major NASCAR Winston Cup
events annually, two in May and one in October. Additionally, two Busch and two
ARCA races are held annually, each preceding a Winston Cup event. LMSC also
hosts an IRL racing event annually. All of these events are sanctioned by
NASCAR, IRL or ARCA. The Charlotte facility also includes a 2.25-mile road
course, a one-quarter mile asphalt oval track, a one-fifth mile asphalt oval
track and a one-fifth mile dirt oval track, all of which hold race events
throughout the year. In addition, LMSC has constructed 52 condominiums
overlooking the main speedway, all of which have been sold.
In February 1999, the Company entered into a ten year naming rights
agreement whereby Charlotte Motor Speedway has been renamed Lowe's Motor
Speedway (at Charlotte) for gross fees aggregating approximately $35,000,000
over the agreement term. The agreement specifies, among other things, that
essentially all promotional signage, souvenirs, marketing and other associated
materials, formerly bearing Charlotte Motor Speedway insignia, be renamed
Lowe's Motor Speedway (at Charlotte). Fee revenues, net of associated expenses,
will be recognized ratably over the ten year agreement term.
F-8
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS -- (CONTINUED)
LMSC also owns an office and entertainment complex which overlooks the
main speedway. A wholly-owned subsidiary, The Speedway Club, Inc. (Speedway
Club), derives rental, catering and dining revenues from the complex.
LVMS owns and operates a 1.5 mile, lighted, asphalt superspeedway, several
other on-site race tracks and a 1.4 million square foot on-site industrial
park, located on approximately 1,300 acres in Las Vegas, Nevada. LVMS currently
hosts several annual NASCAR-sanctioned racing events, including a Winston Cup
Series, Busch Series, Craftsman Truck Series, two Winston West Series, and two
Winston Southwest Series racing events. Additional major events held annually
include IRL, World of Outlaws, American Motorcycle Association (AMA), and drag
racing events, among others. The racetrack is also rented throughout the year
for non-racing activities such as driving schools and automobile testing.
Construction of LVMS was substantially completed in 1997 and its first
major NASCAR Winston Cup race was held in March 1998. As of December 31, 1998,
construction of the 1.4 million square foot industrial park was nearing
completion and is expected to commence operations in the first half of 1999
(see Note 4). The industrial park is expected to be leased under triple net
operating leases primarily to businesses and individuals involved in racing and
related industries.
SPR, located on approximately 1,500 acres in Sonoma, California, owns and
operates a 2.52-mile, twelve-turn road course, a one-quarter mile dragstrip,
and an 157,000 square foot industrial park. SPR currently holds one major
NASCAR-sanctioned Winston Cup racing event annually. Additional events held
annually include a NASCAR-sanctioned Winston Southwest Series, NHRA Winston
Drag Racing Series National, as well as AMA and Sports Car Club of America
(SCCA), racing events. The racetrack is also rented throughout the year by
various organizations, including the SCCA, driving schools, major automobile
manufacturers, and other car clubs.
On November 18, 1996, the Company acquired certain tangible and intangible
assets and the operations of Sears Point Raceway for approximately $2,000,000
in cash, and executed a long-term lease, including a purchase option, for the
racetrack facilities and real property. On February 17, 1998, as further
described in Note 5, the purchase option was exercised for $18,100,000, net
cash outlay, thereby transferring ownership of the racetrack facilities and
real property to the Company and eliminating its capital lease obligation.
TMS, located on approximately 1,360 acres in Fort Worth, Texas, is a
1.5-mile lighted, banked, asphalt quad-oval superspeedway. Construction of TMS
was completed at March 31, 1997 with TMS hosting its first major NASCAR Winston
Cup race on April 6, 1997. TMS currently hosts one major NASCAR Winston Cup
event, preceded by a Busch Series racing event. In 1999, TMS is also hosting
two NASCAR-sanctioned Craftsman Truck Series and two IRL racing events. In
1998, TMS completed construction of 76 condominiums above turn two overlooking
the speedway, 66 of which have been sold or contracted for sale as of December
31, 1998 (see Note 2).
TMS also is constructing an office and entertainment complex which
overlooks the main speedway. Construction is expected to be completed in 1999,
and TMS plans to derive rental, catering and dining revenues from the dining-
entertainment and health-fitness club complex.
FLE provides event food, beverage, and souvenir merchandising services at
each of the Company's speedways and to other third party sports-oriented venues
(see Note 2).
ORC produces an environmentally friendly motor oil additive that the
Company intends to promote in conjunction with its speedways (see Note 2). On
April 16, 1996, the Company acquired 100% of the outstanding capital stock of
ORC for $4,459,000 in Company stock and cash.
WMI, a wholly-owned subsidiary of FLE, is a screen printing and embroidery
manufacturer and distributor of wholesale and retail apparel.
600 RACING, INC., a wholly-owned subsidiary of LMSC, developed, operates
and is the official sanctioning body of the Legends Racing Circuit. 600 Racing
also manufactures and sells 5/8-scale cars (Legends Cars) modeled after older-
style coupes and sedans. In 1997, 600 Racing released a new line of
smaller-scale cars (the Bandolero). Revenue is principally derived from the
sale of vehicles and vehicle parts.
F-9
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS -- (CONTINUED)
OTHER -- In October 1996, the Company signed a joint management and
development agreement with Quad-Cities International Raceway Park. The Company
will serve in an advisory capacity for the development of a multi-use facility,
which includes a speedway located in northwest Illinois. The agreement also
grants the Company the option to purchase up to 40% equity ownership in the
facility. The option has not been exercised.
2. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION -- All significant intercompany accounts and
transactions have been eliminated in consolidation.
REVENUE RECOGNITION -- Admissions revenue consists of ticket sales. Event
related revenues consist of amounts received from sponsorships, broadcasting
rights, concessions, luxury suite rentals, commissions and souvenir sales.
Other operating revenue consists of Legends Car sales, Speedway Club restaurant
and catering revenues, Speedway Club membership income, industrial park
rentals, Oil-Chem and WMI revenues.
The Company recognizes admissions and other event related revenues when
the events are held. Advance revenues and certain related direct expenses
pertaining to a specific event are deferred until such time as the event is
held. Deferred expenses primarily include race purses and sanctioning fees
remitted to NASCAR or other sanctioning bodies.
Deferred race event income relates to scheduled events to be held in the
upcoming year. If circumstances prevent a race from being held at any time
during the racing season, all advance revenue must be refunded and all direct
event expenses deferred would be recognized immediately except for race purses
which would be refundable from NASCAR, IRL or other sanctioning bodies.
CASH AND CASH EQUIVALENTS -- The Company classifies as cash equivalents
all highly liquid investments with original maturities of three months or less.
Cash equivalents principally consist of commercial paper and United States
Treasury securities.
RESTRICTED CASH -- Restricted cash consists principally of customer
deposits received on speedway condominiums under construction and held for sale
of $2,671,000 and $223,000 at December 31, 1997 and 1998. Condominium deposits
are held in escrow accounts until sales are closed.
ACCOUNTS AND NOTES RECEIVABLE -- Accounts receivable are reported net of
allowance for doubtful accounts of $553,000 and $291,000 at December 31, 1997
and 1998. Short term notes receivable amounted to $593,000 and $4,222,000 at
December 31, 1997 and 1998. Bad debt expense amounted to $97,000 in 1996,
$392,000 in 1997 and $29,000 in 1998, and allowance for doubtful accounts
reductions for actual write-offs and recoveries of specific accounts receivable
amounted to $82,000 in 1996, $0 in 1997 and $291,000 in 1998.
INVENTORIES -- Inventories consist of souvenirs, finished vehicles, parts
and accessories, and food costs determined on a first-in, first-out basis, and
apparel and oil additive costs determined on a average current cost basis, all
of which are stated at the lower of cost or market.
SPEEDWAY CONDOMINIUMS HELD FOR SALE -- The Company has constructed 46
condominiums at AMS and 76 condominiums at TMS, of which 41 and 66,
respectively, have been sold or contracted for sale as of December 31, 1998.
Speedway condominiums held for sale represent 5 condominiums at AMS and 10
condominiums at TMS which are substantially complete and are in the process of
being sold.
PROPERTY AND EQUIPMENT -- Property and equipment are recorded at cost less
accumulated depreciation. Depreciation is computed using the straight-line
method over the estimated useful lives of the respective assets. Expenditures
for repairs and maintenance are charged to expense when incurred. Construction
in progress includes all direct costs and capitalized interest on fixed assets
under construction. Management periodically evaluates long-lived assets for
possible impairment based on expected future undiscounted operating cash flows
attributable to such assets.
F-10
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
In the fourth quarter ended December 31, 1997, the Company revised the
estimated useful lives of certain property and equipment based on new
information obtained from a third party review of applicable lives for these
assets. Management believes the revised lives are more appropriate and result
in better estimates of depreciation. The revised lives decreased depreciation
expense $735,000, and increased net income $441,000, or approximately $.01 per
share, for the year ended December 31, 1997 compared to using former lives.
In connection with the development and completed construction of TMS in
1997, the Company entered into arrangements with the FW Sports Authority, a
non-profit corporate instrumentality of the City of Fort Worth, Texas, whereby
the Company conveyed the speedway facility, excluding its on-site condominiums
and office and entertainment complex, to the sports authority and is leasing
the facility back over a 30-year period. Because of the Company's
responsibilities under these arrangements, the speedway facility and related
liabilities are included in the accompanying consolidated balance sheets.
GOODWILL AND OTHER INTANGIBLE ASSETS -- Goodwill and other intangible
assets represent the excess of business acquisition costs over the fair value
of the net assets acquired and are being amortized on a straight-line basis
principally over 40 years. Goodwill and other intangible assets are reported
net of accumulated amortization of $2,837,000 and $4,063,000 at December 31,
1997 and 1998. Management periodically evaluates the recoverability of goodwill
and other intangible assets based on expected future profitability and
undiscounted operating cash flows of acquired businesses.
MARKETABLE EQUITY SECURITIES -- The Company's marketable equity securities
are classified as "available for sale" and are not bought and held principally
for the purpose of selling them in the near term. Accordingly, these securities
are reported at fair value, with unrealized gains and losses, net of tax,
excluded from earnings and reported as a separate component of stockholders'
equity. Management intends to hold these securities through at least fiscal
1999, and accordingly, they are reflected as non-current assets. Realized gains
and losses on sales of marketable equity securities are determined using the
specific identification method.
Valuation allowances for unrealized losses of $303,000 and $408,000, net
of $219,000 and $272,000 in tax benefits, are reflected as a charge to
stockholders' equity to reduce the carrying amount of long-term marketable
equity securities to market value as of December 31, 1997 and 1998,
respectively. Net realized gains on sales of marketable equity securities were
$698,000 in 1996, $241,000 in 1997 and $150,000 in 1998.
DEFERRED FINANCING COSTS AND ACQUISITION LOAN COST AMORTIZATION --
Deferred financing costs are included in other noncurrent assets and are
amortized over the term of the related debt. Acquisition Loan cost amortization
results from financing costs incurred in obtaining an amended credit facility
and acquisition loan to fund the Company's December 1, 1998 acquisition of LVMS
(see Note 5). Associated deferred financing costs of $4,050,000 are being
amortized over the loan term which matures May 31, 1999. Deferred financing
costs are reported net of accumulated amortization of $700,000 and $2,458,000
at December 31, 1997 and 1998.
DEFERRED INCOME -- Deferred income as of December 31, 1997 and 1998
consisted of the following (dollars in thousands):
<TABLE>
<CAPTION>
1997 1998
---------- ----------
<S> <C> <C>
TMS Preferred Seat License fee deposits, net ........ $12,862 $12,624
Deferred gain on TMS condominium sales. ............. -- 2,817
Deferred LMSC Speedway Club membership income ....... 1,014 739
Other ............................................... 24 72
------- -------
Total .............................................. $13,900 $16,252
======= =======
</TABLE>
F-11
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
In 1996, TMS began offering Preferred Seat License ("PSL") agreements
whereby licensees are entitled to purchase annual TMS season-ticket packages
for sanctioned racing events under specified terms and conditions. Among other
items, licensees are required to purchase all season-ticket packages when and
as offered each year. License agreements automatically terminate without refund
should licensees not purchase any offered ticket. Also, licensees are not
entitled to refunds for postponements or cancellation of events due to weather
or certain other conditions. After May 31, 1999, license agreements are
transferrable once each year subject to certain terms and conditions. TMS
Preferred Seat License fee deposits are reported net of expenses of $1,036,000
and $1,052,000 at December 31, 1997 and 1998.
Fees received under PSL agreements were deferred prior to TMS hosting its
first Winston Cup race on April 6, 1997. The Company began amortizing net PSL
fee revenues into income over the estimated useful life of TMS's facility upon
its opening. Amortization income recognized in 1997 was $387,000 and in 1998
was $616,000.
The Speedway Club at LMSC has sold lifetime memberships which entitle
individual members to certain private dining and racing event seating
privileges. Net revenues from lifetime membership fees are being amortized into
income over 25 years. In each of the three years ended December 31, 1998,
lifetime membership income of $275,000 was recognized. The Speedway Club also
offers executive memberships, which entitle members to certain dining
privileges and require a monthly assessment. Monthly executive membership fees
are recognized as income when billed.
Certain condominium sales contracts, aggregating approximately $17,300,000
as of December 31, 1998, provide buyers the right to require the Company to
repurchase real estate within three years from the purchase date. Gain
recognition has been deferred until the buyer's right expires. Management
believes the likelihood of buyers exercising such rights, in amounts that at
any one time or in the aggregate would be significant, is remote.
ADVERTISING EXPENSES -- Advertising costs other than for direct-response
advertising are expensed as incurred and are included principally in direct
expense of events. Advertising expenses amounted to $2,154,000 in 1996,
$5,205,000 in 1997, and $7,626,000 in 1998. Prepaid expense at December 31,
1998 includes $1,240,000 of deferred direct-response advertising costs related
to future media promotion of certain ORC products. These deferred costs will be
amortized over the estimated period of future benefits commencing when primary
media promotion begins.
PREOPERATING EXPENSE OF NEW FACILITY -- Preoperating expenses consist of
non-recurring and non-event related costs to develop, organize and open Texas
Motor Speedway, which hosted its first racing event on April 6, 1997.
INCOME TAXES -- The Company recognizes deferred tax assets and liabilities
for the future income tax effect of temporary differences between financial and
income tax bases of assets and liabilities assuming they will be realized and
settled at the amounts reported in the financial statements.
STOCK-BASED COMPENSATION -- The Company continues to apply Accounting
Principles Board (APB) Opinion No. 25, which recognizes compensation cost based
on the intrinsic value of the equity instrument awarded as permitted under
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation." The pro forma effect on net income and earnings per
share under the provisions of SFAS No. 123 is disclosed in Note 11.
FAIR VALUE OF FINANCIAL INSTRUMENTS -- The Company's financial instruments
consist of cash, accounts and notes receivable, accounts payable and short and
long-term debt. The carrying value of these financial instruments approximate
their fair value at December 31, 1997 and 1998.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses. Actual
future results could differ from those estimates.
IMPACT OF NEW ACCOUNTING STANDARDS -- The Company adopted SFAS No. 130
"Reporting Comprehensive Income" in 1998. SFAS No. 130 specifies that
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. Because the
Company does not have material items of other comprehensive income, adoption
did not result in presentation or financial statements significantly different
from that under previous accounting standards.
F-12
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
The Company also adopted SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information" in 1998. SFAS No. 131 establishes standards
for reporting selected information about operating segments determined using
quantitative thresholds and a "management approach", which reflects how the
chief operating decision maker evaluates segment performance and allocates
resources. The combined operations of the Company's speedways comprise one
operating segment, and encompasses all admissions and event related revenues
and associated expenses. Other Company operations presently are not considered
significant relative to those of the speedways. As such, adoption had no effect
on the Company's financial statements or disclosures.
RECLASSIFICATIONS -- Certain prior year accounts were reclassified to
conform with current year presentation.
PRESENTATION -- In 1998, the Company began operating certain food and
beverage concession activities through FLE which previously had been procured
from a third party. As a result, revenues and expenses associated with such
concession activities in 1998 are included in event related revenues, direct
expense of events and general and administrative expense. In 1996 and 1997, the
Company's operating profits from such activities under its arrangement with the
outside vendor were reported as event related revenue.
3. INVENTORIES
Inventories as of December 31, 1997 and 1998 consisted of the following
components (dollars in thousands):
<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
Souvenirs and apparel .............................. $3,839 $ 5,023
Finished vehicles, parts and accessories. .......... 4,907 4,409
Oil additives, food and other ...................... 154 1,015
------ -------
Total ............................................ $8,900 $10,447
====== =======
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 1997 and 1998 is summarized as
follows (dollars in thousands):
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES 1997 1998
-------------- ------------ -----------
<S> <C> <C> <C>
Land and land improvements ............. 5-25 $ 88,019 $ 200,193
Racetracks and grandstands ............. 5-45 214,998 298,701
Buildings and luxury suites ............ 5-40 140,785 182,426
Machinery and equipment ................ 3-20 15,321 32,302
Furniture and fixtures ................. 5-20 10,878 11,390
Autos and trucks ....................... 3-10 2,747 3,651
Construction in progress ............... 25,303 83,081
--------- ---------
Total ................................. 498,051 811,744
Less accumulated depreciation ......... (61,504) (81,058)
--------- ---------
Net .................................. $ 436,547 $ 730,686
========= =========
</TABLE>
CONSTRUCTION IN PROGRESS -- At December 31, 1998, the Company had various
construction projects underway to increase and improve grandstand seating
capacity, luxury suites, facilities for fan amenities, and make various other
site improvements at each of its speedways. For example, BMS is reconstructing
and expanding its dragstrip with permanent grandstand seating, luxury suites,
and extensive fan amenities and facilities. Construction is expected to be
completed in 1999, with its inaugural NHRA-sanctioned Winston Showdown hosted
in July 1999. In addition, construction of a 1.4 million square foot industrial
park and a dragstrip on-site at LVMS was nearing completion as of December 31,
1998, and commencement of operations is expected in early 1999. The estimated
aggregate cost of capital expenditures in 1999 will approximate $60,000,000.
F-13
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. AMENDED BANK CREDIT FACILITY AND ACQUISITION LOAN AND LONG-TERM DEBT
Revolving credit facility and acquisition loan borrowings and long-term
debt as of December 31, 1997 and 1998 consist of the following (dollars in
thousands):
<TABLE>
<CAPTION>
1997 1998
------------ -------------
<S> <C> <C>
Revolving credit facility and acquisition loan ......................................... $ -- $ 254,050
Senior subordinated notes .............................................................. 124,674 124,708
Convertible subordinated debentures .................................................... 74,000 74,000
Capital lease obligation ............................................................... 19,433 --
Other notes payable .................................................................... 1,403 1,166
-------- ----------
Total ................................................................................ 219,510 453,924
Less current maturities ............................................................. (375) (539)
Less revolving credit facility and acquisition loan borrowings maturing May 1999 .... -- (254,050)
-------- ----------
$219,135 $ 199,335
======== ==========
</TABLE>
AMENDED BANK CREDIT FACILITY AND ACQUISITION LOAN -- On November 23, 1998,
the Company's Credit Facility dated as of August 4, 1997 was amended and
restated in connection with the Company's December 1, 1998 acquisition of LVMS.
The amended Credit Facility and Acquisition Loan (the Acquisition Loan)
increased the Company's overall borrowing limit from $175,000,000 to
$270,000,000 to fund the LVMS acquisition and maintain a revolving credit
facility for working capital needs and general corporate purposes. The
Acquisition Loan matures on May 31, 1999. At December 31, 1998, the Company has
$254,050,000 in outstanding borrowings under the Acquisition Loan. Interest,
standby letters of credit terms and restrictive and required financial
covenants are generally similar to those prior to amendment. The Acquisition
Loan was obtained from NationsBank N.A., and is an unsecured, senior revolving
credit facility and term loan with a $10,000,000 borrowing sub-limit for
standby letters of credit. Associated deferred financing costs incurred in
obtaining the acquisition loan amounted to approximately $4,050,000 and are
being amortized over the loan term through May 31, 1999 (see Note 2).
The Acquisition Loan was retired and repaid on May 28, 1999. While the
retirement and repayment of the loan did not result in the use of significant
working capital, the outstanding borrowings of $254,050,000 have been
classified as a current liability in the accompanying December 31, 1998 balance
sheet in accordance with generally accepted accounting principles. We entered
into the 1999 Credit Facility on May 28, 1999 as a source of replacement
financing with sufficient overall borrowing limits for working capital needs
and general corporate purposes.
Interest on the Acquisition Loan was based, at the Company's option, upon
(i) LIBOR plus 1.125% or (ii) the greater of NationsBank's prime rate or the
Federal fund rate plus .5%. Although the Acquisition Loan was unsecured, the
Company agreed not to pledge its assets to any third party. In addition, among
other items, the Company had to meet certain financial covenants, including
specified levels of net worth and ratios of (i) debt to capitalization, (ii)
debt to earnings before interest, taxes, depreciation and amortization
(EBITDA), and (iii) earnings before interest and taxes (EBIT) to interest
expense. The Acquisition Loan also contained certain limitations on cash
expenditures to acquire additional motor speedways without the consent of the
lenders, and limited the Company's consolidated capital expenditures to amounts
not to exceed $125 million annually, beginning for fiscal 1998, and $325
million in the aggregate over the loan term. The Company also agreed to certain
other limitations or prohibitions concerning the incurrence of other
indebtedness, transactions with affiliates, guarantees, asset sales,
investments, cash dividends to shareholders, distributions and redemptions. The
weighted-average interest rate on borrowings under the Credit Facility and
Acquisition Loan in 1998 was 6.4%.
SENIOR SUBORDINATED NOTES -- In August 1997, the Company completed a
private placement of 8 1/2% senior subordinated notes (the Senior Notes) in the
aggregate principal amount of $125,000,000. The Senior Notes are unsecured,
mature in August 2007, and are redeemable at the Company's option after August
15, 2002. Interest payments are due semi-annually on February 15 and August 15.
The Senior Notes are subordinated to all present and future senior secured
indebtedness of the Company, including the Acquisition Loan. Redemption prices
in fiscal year periods ending August 15 are 104.25% in 2002, 102.83% in 2003,
101.42% in 2004 and 100% in 2005 and thereafter. The Company filed a
registration statement to register these notes on September 8, 1997. Net
proceeds after commissions and discounts, including
F-14
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. AMENDED BANK CREDIT FACILITY AND ACQUISITION LOAN AND LONG-TERM
DEBT -- (CONTINUED)
issuance discount of $340,000, amounted to $121,548,000 and were used to retire
and repay then outstanding borrowings under the former credit facility, fund
construction costs and for working capital needs of the Company.
The Indenture governing the Senior Notes contains certain specified
restrictive and required financial covenants. The Company has agreed not to
pledge its assets to any third party except under certain limited
circumstances. The Company also has agreed to certain other limitations or
prohibitions concerning the incurrence of other indebtedness, capital stock,
guaranties, asset sales, investments, cash dividends to shareholders,
distributions and redemptions. The Indenture and Acquisition Loan agreements
contain cross-default provisions.
CONVERTIBLE SUBORDINATED DEBENTURES -- In October 1996, the Company
completed a private placement of 5 3/4% convertible subordinated debentures in
the aggregate principal amount of $74,000,000. On October 4, 1996, the Company
filed a registration statement to register these debentures and the underlying
equity securities. Net proceeds after commissions and discounts were
$72,150,000. The debentures are unsecured, mature on September 30, 2003, are
convertible into Company common stock at the holder's option after December 1,
1996 at $31.11 per share until maturity, and are redeemable at the Company's
option after September 29, 2000. Interest payments are due semi-annually on
March 31 and September 30. The debentures are subordinated to all present and
future secured indebtedness of the Company, including the Acquisition Loan.
Redemption prices in fiscal year periods ending September 30 are 102.46% in
2000, 101.64% in 2001 and 100.82% in 2002. After September 30, 2002, the
debentures are redeemable at par. In conversion, 2,378,565 shares of common
stock would be issuable (see Note 6). The proceeds of this offering were used
to repay outstanding borrowings under the Company's former bank credit
facility, fund construction costs of TMS and for working capital needs of the
Company.
CAPITAL LEASE OBLIGATION AND EXERCISE OF PURCHASE OPTION (SEARS POINT
RACEWAY) -- In connection with its SPR asset acquisition on November 18, 1996
(see Note 1), the Company executed a fourteen year capital lease, including a
purchase option, with the seller for all real property of the SPR complex. On
February 17, 1998, the purchase transaction was consummated for $18,100,000 net
cash, thereby transferring ownership of the SPR racetrack facilities and real
property to the Company and eliminating its capital lease obligation. The
purchase transaction was funded with borrowings under the Company's former
credit facility, and has been reflected in the accompanying December 31, 1998
consolidated financial statements.
The purchase option, consisting of the Company's right to purchase the
real property for $38,100,000, subject to seller acceleration, was initially
acquired for a $3,500,000 payment. This payment, a security deposit of
$3,000,000 paid at lease inception, and a promissory note receivable of
$13,453,000 due from the seller, were credited against the purchase price.
Because a legal right of offset existed under the lease obligation and note
receivable agreements prior to exercise, the note receivable was netted against
the capital lease obligation in the accompanying December 31, 1997 consolidated
balance sheet.
OTHER NOTES PAYABLE -- Other notes payable includes a note arrangement the
Company entered into in 1995 to pay a portion of the costs to construct an
improved access road to LMSC from Interstate 85. The note payable bears
interest at 8% and is collateralized by a bank letter of credit from
NationsBank.
Annual maturities of debt at December 31, 1998 are as follows (dollars in
thousands):
<TABLE>
<S> <C>
1999 ............................................................. $ 539
2000 ............................................................. 347
2001 ............................................................. 125
2002 ............................................................. 116
2003 ............................................................. 74,039
Thereafter ....................................................... 124,708
--------
Total ........................................................... 199,874
Revolving credit facility and acquisition loan maturing May 1999 254,050
--------
$453,924
========
</TABLE>
F-15
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. AMENDED BANK CREDIT FACILITY AND ACQUISITION LOAN AND LONG-TERM
DEBT -- (CONTINUED)
Interest income (expense), net includes interest expense of $693,000 in
1996, $7,745,000 in 1997, and $15,258,000 in 1998; and includes interest income
of $2,009,000 in 1996, $2,432,000 in 1997, and $3,030,000 in 1998. The Company
capitalized interest costs of $2,834,000 in 1996, $5,768,000 in 1997, and
$3,846,000 in 1998.
6. CAPITAL STRUCTURE, PUBLIC OFFERING OF COMMON STOCK AND PER SHARE DATA
PREFERRED STOCK -- At December 31, 1998, SMI has authorized 3,000,000
shares of preferred stock with a par value of $.10 per share. Shares of
preferred stock may be issued in one or more series with rights and
restrictions as may be determined by the Company's Board of Directors. No
preferred shares were issued and outstanding at December 31, 1997 or 1998.
STOCK SPLIT -- On February 9, 1996, the Company's Board of Directors
approved a two for one stock split for each share of the Company's common
stock. The stock split was effective March 15, 1996 in the form of a 100%
common stock dividend payable to stockholders of record as of February 26,
1996. All share and per share information in the accompanying consolidated
financial statements take into account this stock split.
PUBLIC OFFERING OF COMMON STOCK -- The Company completed its second
offering of common stock on April 1, 1996 by issuing 3,000,000 shares of common
stock at a price of $27.625 per share. Net proceeds after offering expenses
were $78,354,000 with such proceeds used to pay construction costs of TMS and
for other general corporate purposes.
PER SHARE DATA -- Diluted earnings per share assumes conversion of the
convertible debentures into common stock based on the weighted average of
issuable shares from the date of debt issuance, and elimination of interest
expense, net of taxes, on such debt (see Note 5). The following schedule
reconciles basic and diluted earnings per share(dollars and shares in
thousands):
<TABLE>
<CAPTION>
WEIGHTED
NET AVERAGE EARNINGS
YEAR ENDED: INCOME SHARES PER SHARE
- ------------------------------------------------------ ---------- --------- ----------
<S> <C> <C> <C>
December 31, 1996:
Basic earnings per share ............................ $26,405 40,476 $ 0.65
Dilution adjustments:
Common stock equivalents -- stock options ......... -- 825
5 3/4% Convertible debentures ..................... 210 610
------- -------
Diluted earnings per share .......................... $26,615 41,911 $ 0.64
======= =======
December 31, 1997:
Basic earnings per share ............................ $38,178 41,338 $ 0.92
Dilution adjustments:
Common stock equivalents -- stock options ......... -- 774
5 3/4% Convertible debentures ..................... 1,237 2,379
------- -------
Diluted earnings per share .......................... $39,415 44,491 $ 0.89
======= =======
December 31, 1998:
Basic earnings per share ............................ $42,371 41,482 $ 1.02
Dilution adjustments:
Common stock equivalents -- stock options ......... -- 750
5 3/4% Convertible debentures ..................... 2,108 2,379
------- -------
Diluted earnings per share .......................... $44,479 44,611 $ 1.00
======= =======
</TABLE>
F-16
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES
The components of the provision for income taxes are as follows (dollars
in thousands):
<TABLE>
<CAPTION>
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Current ........... $12,762 $20,830 $11,390
Deferred .......... 3,890 5,053 16,256
------- ------- -------
Total ............ $16,652 $25,883 $27,646
======= ======= =======
</TABLE>
The reconciliation of the statutory federal income tax rate and the
effective income tax rate is as follows:
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- ----------
<S> <C> <C> <C>
Statutory federal tax rate .................................... 35% 35% 35%
State and local income taxes, net of federal income tax effect 4 4 4
Other, net .................................................... -- 1 --
-- -- --
Total ....................................................... 39% 40% 39%
==== ==== =====
</TABLE>
The tax effect of temporary differences resulting in deferred income taxes
are as follows (dollars in thousands):
<TABLE>
<CAPTION>
1996 1997 1998
---------- ---------- ------------
<S> <C> <C> <C>
Deferred tax liabilities:
Property and equipment ........................................ $ 14,958 $ 25,627 $ 49,493
Expenses deducted for tax purposes and other .................. 755 582 1,520
-------- -------- ---------
Subtotal .................................................... 15,713 26,209 51,013
-------- -------- ---------
Deferred tax assets:
Income previously recognized for tax purposes ................. (520) (406) (808)
Stock option compensation expense ............................. (1,095) (1,054) (1,020)
PSL and other deferred income recognized for tax purposes ..... -- (5,028) (5,075)
Alternative minimum tax credit ................................ -- -- (6,898)
Other ......................................................... (356) (926) (2,004)
-------- -------- ---------
Subtotal .................................................... (1,971) (7,414) (15,805)
-------- -------- ---------
Total net deferred tax liability ............................... $ 13,742 $ 18,795 $ 35,208
======== ======== =========
</TABLE>
The Company made income tax payments during 1996, 1997 and 1998 totaling
approximately $17,402,000, $27,329,000 and $16,328,000, respectively. No
valuation allowance against deferred tax assets has been recorded for any year
presented.
On October 31, 1997, the Company reached a final settlement with the
Internal Revenue Service (IRS) involving AMS, as the successor in interest to
BND, Inc. (BND), for deficient income taxes and interest related to BND's
income tax returns for certain years. The IRS had alleged that, during the
acquisition of AMS in 1990, BND's merger into AMS resulted in a taxable gain to
BND, and eliminated a net operating loss carryback to the tax return filed for
1988. The settlement included taxes payable of approximately $2,900,000 plus
interest which have been reflected as an increase to goodwill arising from the
AMS acquisition and a charge to previously established accruals, respectively.
F-17
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. RELATED PARTY TRANSACTIONS
Notes receivable at December 31, 1997 and 1998 include $747,000 and
$798,000, respectively, due from a partnership in which the Company's Chairman
and Chief Executive Officer is a partner. The note bears interest at 1% over
prime, is collateralized by certain partnership land and is payable on demand.
Because the Company does not anticipate repayment of the note during 1999, the
balance has been classified as a noncurrent asset in the accompanying 1998
balance sheet.
Notes receivable also include a note receivable from the Company's
Chairman and Chief Executive Officer for $1,876,000 at December 31, 1997 and
$842,000 at December 31, 1998. The principal balance of the note represents
premiums paid by the Company under a split-dollar life insurance trust
arrangement on behalf of the Chairman, in excess of cash surrender value. The
note bears interest at 1% over prime. Because the Company does not anticipate
repayment of the note during 1999, the balance has been classified as a
noncurrent asset in the accompanying 1998 balance sheet.
From time to time, the Company paid certain expenses and made cash
advances for various corporate purposes on behalf of Sonic Financial Corp.
(Sonic Financial), an affiliate of the Company through common ownership. At
December 31, 1997 and 1998, accounts receivable include approximately
$3,875,000 and $1,040,000 net due from Sonic Financial. The amounts are
classified as short-term based on expected repayment dates.
Interest income of $130,000 in 1996, $166,000 in 1997, and $115,000 in
1998 was earned on amounts due from related parties.
Amounts payable to affiliates at December 31, 1997 and 1998 includes
$2,592,000 for acquisition and other expenses paid on behalf of AMS by Sonic
Financial prior to 1996. Of this amount, approximately $1,800,000 bears
interest at 3.83% per annum. The remainder of the amount bears interest at
prime plus 1%. The entire amount is classified as long-term based on expected
repayment dates. Interest expense incurred on this obligation was $141,000 in
1996, $144,000 in 1997 and $143,000 in 1998. Amounts payable to affiliates at
December 31, 1998 also include $1,542,000 owed to a former LVMS shareholder and
executive officer, who is now a LVMS officer and employee, in equal monthly
payments through December 2003 at 6.4% imputed interest.
9. CONTINGENCIES
The Company is involved in various lawsuits and disputes which arose in
the ordinary course of business. In management's opinion, the outcome of these
matters will not have a material impact on the Company's financial condition or
future results of operations. The Company's property at LMSC includes areas
that were used as solid waste landfills for many years. Landfilling of general
categories of municipal solid waste on the LMSC property ceased in 1992, but
LMSC currently allows certain property to be used for land clearing and inert
debris landfilling and for construction and demolition debris landfilling.
Management believes that the Company's operations, including the landfills on
its property, are in compliance with all applicable federal, state and local
environmental laws and regulations. Company management is not aware of any
situation related to landfill operations which would adversely affect the
Company's financial position or future results of operations.
10. OTHER INCOME
Other income, net for the years ended December 31, 1996, 1997 and 1998
consists of the following (dollars in thousands):
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- ---------
<S> <C> <C> <C>
Gain on sale of speedway condominiums ............ $ 163 $ 142 $1,032
Equity in operations of equity investee .......... 371 (97) 26
Other income ..................................... 1,865 946 2,144
------ ----- ------
$2,399 $ 991 $3,202
====== ===== ======
</TABLE>
F-18
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. OTHER INCOME -- (CONTINUED)
Other income in 1996 consists primarily of gains on sales of land and
marketable equity securities, and landfill fees; in 1997 consists primarily of
gains on sales of marketable equity securities and landfill fees; and in 1998
consists primarily of December gain on exercise of SPR purchase option and on
sales of marketable equity securities and landfill fees.
11. STOCK OPTION PLANS
1994 STOCK OPTION PLAN -- The Board of Directors and stockholders of SMI
adopted the Company's 1994 Stock Option Plan in order to attract and retain key
personnel. Under the stock option plan, options to purchase up to an aggregate
of 3,000,000 shares of common stock may be granted to directors, officers and
key employees of SMI and its subsidiaries. All options to purchase shares under
this plan expire ten years from grant date. Such options provide for the
purchase of common stock at a price as determined by the Compensation Committee
of the Board of Directors. The exercise price of all stock options granted in
1996 through 1998 was the fair or trading value of the Company's common stock
at grant date. Other option information regarding the 1994 Stock Option Plan
for 1996 through 1998 is summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
EXERCISE AVERAGE
SHARES IN PRICE EXERCISE
THOUSANDS PER SHARE PRICE
----------- ----------------- -----------
<S> <C> <C> <C>
Outstanding, January 1, 1996 ........... 1,220 $ 3.75-$15.38 $ 6.00
Granted ................................ 280 23.00 23.00
Exercised .............................. (159) 3.75-15.38 4.67
Cancelled .............................. (17) 15.38 15.38
----- --------------- --------
Outstanding, December 31, 1996 ......... 1,324 3.75-23.00 9.64
Granted ................................ 90 23.50 23.50
Exercised .............................. (83) 3.75-9.00 7.73
----- --------------- --------
Outstanding, December 31, 1997 ......... 1,331 3.75-23.50 10.40
Granted ................................ 200 25.63 25.63
Exercised .............................. (53) 3.75-9.00 7.71
----- --------------- --------
Outstanding, December 31, 1998 ......... 1,478 $ 3.75-$25.63 $ 12.56
===== =============== ========
</TABLE>
Of the options outstanding as of December 31, 1998, 1,438,000 are
currently exercisable at a weighted average exercise price of $12.27 per share.
The weighted average remaining contractual life of the options outstanding at
December 31, 1998 is 7.06 years.
FORMULA STOCK OPTION PLAN -- The Company's Board of Directors and
stockholders adopted the Formula Stock Option Plan for the benefit of the
Company's outside directors. The plan authorizes options to purchase up to an
aggregate of 800,000 shares of common stock. Under the plan, before February 1
of each year, each outside director is awarded an option to purchase 20,000
shares of common stock at an exercise price equal to the fair market value per
share at award date.
In each year of 1996 through 1998, the Company granted options to purchase
20,000 common shares to each of the Company's two outside directors at exercise
prices per share at award dates of $14.94, $20.63 and $24.81, respectively.
Options on 20,000 shares granted in 1996 were exercised in 1997. No stock
options under this plan were exercised in 1996 or 1998. The outstanding options
for 100,000 shares at December 31, 1998 have a weighted average exercise price
of $21.16 per share, with a weighted average remaining contractual life of 8.20
years. Effective January 4, 1999, the Company granted options to purchase an
additional 20,000 shares to each of the two outside directors at an exercise
price per share of $27.88 at award date.
STOCK-BASED COMPENSATION INFORMATION -- As discussed in Note 2, the
Company has adopted the disclosure-only provisions of SFAS No. 123, "Accounting
for Stock-Based Compensation". The Company granted 320,000, 130,000 and
F-19
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. STOCK OPTION PLANS -- (CONTINUED)
240,000 options in 1996, 1997 and 1998 with weighted average grant-date fair
values of $7.16, $7.18 and $7.91, respectively, under both stock option plans.
No compensation cost has been recognized for the stock option plans. Had
compensation cost for the stock options been determined based on the fair value
method as prescribed by SFAS No. 123, the Company's pro forma net income and
basic and diluted earnings per share would have been $25,036,000 or $0.62 and
$0.60 per share for 1996, $37,704,000 or $0.91 and $0.88 per share for 1997,
and $41,223,000 or $0.99 and $0.97 per share for 1998.
The fair value of each option grant is estimated on the grant date using
the Black-Scholes option-pricing model with the following assumptions: expected
volatility of 37.3% in 1996, 37.1% in 1997, and 37.8% in 1998; risk-free
interest rates of 5.7% in 1996, 5.9% in 1997, and 4.6% in 1998; and expected
lives of 3.1 years in 1996, 3.0 years in 1997, and 3.0 years in 1998. The model
reflects that no dividends were declared in 1996 through 1998.
EMPLOYEE STOCK PURCHASE PLAN -- The Company's Board of Directors and
stockholders adopted the SMI Employee Stock Purchase Plan to provide employees
the opportunity to acquire stock ownership. An aggregate total of 400,000
shares of common stock have been reserved for purchase under the plan. Each
January 1, eligible employees electing to participate will be granted an option
to purchase shares of common stock. Prior to each January 1, the Compensation
Committee of the Board of Directors determines the number of shares available
for purchase under each option, with the same number of shares to be available
under each option granted on the same grant date. No participant can be granted
options to purchase more than 500 shares in each calendar year, nor which would
allow an employee to purchase stock under this or all other employee stock
purchase plans in excess of $25,000 of fair market value at the grant date in
each calendar year. Participating employees designate a limited percentage of
their annual compensation or may directly contribute an amount for deferral as
contributions to the Plan. The stock purchase price is 90% of the lesser of
fair market value at grant date or exercise date. Options granted may be
exercised once at the end of each calendar quarter, and will be automatically
exercised to the extent of each participant's contributions. Options granted
that are unexercised expire at the end of each calendar year.
In 1997 and 1998, employees purchased approximately 25,000 and 16,000
shares granted under the Plan on January 1, 1997 and 1998 at an average
purchase price of $18.56 and $21.79 per share, respectively.
12. EMPLOYEE BENEFIT PLAN
The Speedway Motorsports, Inc. 401(k) Plan and Trust is available to all
employees of the Company meeting certain eligibility requirements. The Plan
allows participants to elect contributions of up to 15% of their annual
compensation within certain prescribed limits, of which the Company will match
25% of the first 4% of employee contributions. Participants are fully vested in
Company matching contributions after five years. The Company's contributions to
the Plan were $35,000 in 1996, $81,000 in 1997, and $151,000 in 1998.
13. SUMMARIZED PARENT COMPANY ONLY FINANCIAL INFORMATION
The following table presents summarized financial information of the
Company's parent for fiscal years 1996 through 1998 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31:
---------------------
1997 1998
---------- ----------
<S> <C> <C>
Current assets ........................................... $ 11,342 $ 37,908
Noncurrent assets, including investment in and advances to
subsidiaries, net ....................................... 443,106 732,404
-------- --------
Total Assets ............................................. 454,448 770,312
-------- --------
Current liabilities ...................................... 6,809 9,147
Revolving credit facility and acquisition loan ........... -- 254,050
Noncurrent liabilities ................................... 203,495 219,995
-------- --------
Total Liabilities ........................................ 210,304 483,192
-------- --------
Total Stockholder's Equity ............................... $244,144 $287,120
======== ========
</TABLE>
F-20
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. SUMMARIZED PARENT COMPANY ONLY FINANCIAL INFORMATION -- (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31:
-----------------------------------
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Total revenues ...................................... $ 3,842 $ 2,823 $ 5,344
Total expenses ...................................... (3,080) (5,112) (6,446)
Income (loss) from continuing operations ............ 762 (2,289) (1,102)
Income (loss) before equity in subsidiaries ......... 465 (1,373) (661)
Net income .......................................... 26,405 38,178 42,371
</TABLE>
14. LAS VEGAS MOTOR SPEEDWAY ACQUISITION
As further described in Note 1, the Company acquired Las Vegas Motor
Speedway on December 1, 1998. The LVMS acquisition was accounted for using the
purchase method in accordance with APB No. 16. The results of operations after
the acquisition date are included in the Company's consolidated statements of
income. The purchase price has been allocated to assets and liabilities
acquired at their estimated fair market values at acquisition date. The Company
obtained an independent appraisal of the LVMS property and equipment acquired,
the fair values of which have been used in the accompanying financial
statements. In the near future, the Company plans to obtain an independent
appraisal of the fair value of other LVMS net assets acquired, including
identifiable intangibles, if any. Accordingly, the purchase price allocation is
preliminary. However, based on current information, Company management does not
expect the final allocation of the purchase price to materially differ from
that used in the accompanying December 31, 1998 balance sheet.
The following unaudited pro forma financial information presents a summary
of consolidated results of operations as if the LVMS acquisition had occurred
as of January 1, 1997, after giving effect to certain adjustments, including
amortization of goodwill, interest expense on acquisition debt and related
income tax effects. The pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of what would have occurred
had the acquisition been made on that date, nor are they necessarily indicative
of results which may occur in the future.
<TABLE>
<CAPTION>
PRO FORMA
(IN THOUSANDS,EXCEPT
PER SHARE AMOUNTS)
YEAR ENDED
DECEMBER 31,
---------------------------
1997 1998
------------- -------------
<S> <C> <C>
Total revenues ..................... $ 206,304 $ 264,583
Net income ......................... 26,551 40,672
Basic earnings per share ........... 0.64 0.98
Diluted earnings per share ......... 0.62 0.96
</TABLE>
F-21
<PAGE>
INDEPENDENT AUDITORS' REPORT
We have audited the balance sheet of Las Vegas Motor Speedway, Inc. (the
Company) as of September 30, 1998, and the related statements of income and
stockholders' equity and of cash flows for the nine months then ended. These
financial statements are the responsibility of management of Speedway
Motorsports, Inc. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at September 30, 1998, and the
results of its operations and its cash flows for the nine months then ended in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
February 12, 1999
F-22
<PAGE>
LAS VEGAS MOTOR SPEEDWAY, INC.
BALANCE SHEET
SEPTEMBER 30, 1998
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Notes 2 and 6) ............ $ 14,523,000
Accounts receivable (Note 2) ......................... 673,000
Due from affiliate (Note 6) .......................... 96,000
Inventories (Note 3) ................................. 223,000
Prepaid expenses ..................................... 21,000
------------
Total current assets ................................ 15,536,000
PROPERTY AND EQUIPMENT, NET (Notes 4, 5 and 6) ......... 163,499,000
------------
TOTAL ASSETS ........................................ $179,035,000
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable (Note 5) ............................... $ 401,000
Accounts payable ..................................... 212,000
Deferred event income, net (Note 2) .................. 7,929,000
Accrued expenses and other liabilities ............... 460,000
Payable to affiliates (Note 6) ....................... 1,886,000
------------
Total current liabilities ........................... 10,888,000
------------
CONTINGENCIES AND COMMITMENTS (Notes 4 and 7)
STOCKHOLDERS' EQUITY ................................... 168,147,000
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......... $179,035,000
============
</TABLE>
See notes to financial statements.
F-23
<PAGE>
LAS VEGAS MOTOR SPEEDWAY, INC.
STATEMENT OF INCOME AND STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<S> <C>
REVENUES (Note 2):
Admissions ..................................... $ 10,483,000
Event related revenue .......................... 17,766,000
Other operating revenue ........................ 14,000
------------
Total revenues ................................ 28,263,000
------------
OPERATING EXPENSES:
Direct expense of events ....................... 10,949,000
General and administrative (Note 6) ............ 5,493,000
Depreciation ................................... 3,039,000
------------
Total operating expenses ...................... 19,481,000
------------
OPERATING INCOME ................................. 8,782,000
Interest income .................................. 360,000
Interest expense (Note 5) ........................ (21,000)
Other income, net ................................ 6,000
------------
NET INCOME (Note 2) .............................. 9,127,000
STOCKHOLDERS' EQUITY, JANUARY 1, 1998 ............ 135,020,000
Capital Contributions ............................ 24,000,000
------------
STOCKHOLDERS' EQUITY, SEPTEMBER 30, 1998 ......... $168,147,000
============
</TABLE>
See notes to financial statements.
F-24
<PAGE>
LAS VEGAS MOTOR SPEEDWAY, INC.
STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ...................................................................... $ 9,127,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation ................................................................... 3,039,000
Changes in operating assets and liabilities:
Accounts receivable ........................................................... 5,017,000
Inventories ................................................................... (49,000)
Prepaid expenses .............................................................. (19,000)
Accounts payable .............................................................. (181,000)
Deferred event income ......................................................... (5,144,000)
Accrued expenses and other liabilities ........................................ 295,000
-------------
Net cash provided by operating activities ...................................... 12,085,000
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable ............................................. (335,000)
Capital contributions ........................................................... 24,000,000
-------------
Net cash provided by financing activities ...................................... 23,665,000
-------------
CASH FLOWS FROM INVESTING ACTIVITIES -- Capital expenditures (Note 6) ............. (25,834,000)
-------------
NET INCREASE IN CASH AND CASH EQUIVALENTS ......................................... 9,916,000
CASH AND CASH EQUIVALENTS AT JANUARY 1, 1998 ...................................... 4,607,000
-------------
CASH AND CASH EQUIVALENTS AT SEPTEMBER 30, 1998 ................................... $ 14,523,000
=============
</TABLE>
See notes to financial statements.
F-25
<PAGE>
LAS VEGAS MOTOR SPEEDWAY, INC.
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1998
1. DESCRIPTION OF BUSINESS AND CHANGE IN OWNERSHIP
Las Vegas Motor Speedway, Inc. ("the Company") owns and operates a
business known as Las Vegas Motor Speedway ("LVMS") which consists of a 1.5
mile, lighted, superspeedway, several other on-site race tracks and a 1.4
million square foot on-site industrial park, located on approximately 1,300
acres in Las Vegas, Nevada. The other race tracks include a 1/4 mile
dragstrip, 1/8 mile dragstrip, 2.5 mile road course, 1/2 mile clay oval, 3/8
mile paved oval and several other race courses, including motocross and other
off-road race courses. At September 30, 1998, LVMS had permanent seating
capacity of approximately 107,000, including 102 luxury suites. LVMS currently
hosts several annual NASCAR-sanctioned racing events, including a Winston Cup
Series, Busch Series, Craftsman Truck Series, two Winston West Series, and two
Winston Southwest Series racing events. Additional major events held annually
include Indy Racing League ("IRL"), American Motorcycle Association, and drag
racing events, among others. The racetrack is also rented throughout the year
for non-racing activities such as driving schools and automobile testing.
Construction of LVMS was substantially completed in 1997 and its first
major NASCAR Winston Cup race was held in March 1998 (see Note 4). As of
September 30, 1998, construction of the 1.4 million square foot industrial park
was nearing completion and is expected to commence operations in early 1999.
On December 1, 1998, Speedway Motorsports, Inc. ("SMI"), a publicly-held
company, acquired certain tangible and intangible operating assets, including
the real and personal property and operations of LVMS, the industrial park, and
certain adjacent unimproved land, and assumed deferred revenue, for
approximately $215.0 million. SMI will operate the facilities as Las Vegas
Motor Speedway.
2. SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION -- Admissions revenue consists of ticket sales. Event
related revenues consist of amounts received from sponsorships, broadcasting
rights, concessions, luxury suite rentals, commissions and souvenir sales.
Other operating revenue consists of miscellaneous real property rental income.
The Company recognizes admissions and other event related revenues when
the events are held. Advance revenues and certain related direct expenses
pertaining to a specific event are deferred until such time as the event is
held. Deferred expenses typically include race purses, sanctioning fees and
concessionaire advances for upcoming scheduled events. Deferred race event
income as of September 30, 1998 relates primarily to sponsorship fees, advance
ticket sales and luxury suite rentals for upcoming scheduled events. If
circumstances prevent a race from being held at any time during the racing
season, all advance revenue must be refunded and all direct event expenses
deferred would be recognized immediately except for race purses which would be
refundable from NASCAR, IRL or other sanctioning bodies.
CASH AND CASH EQUIVALENTS -- The Company classifies as cash equivalents
all highly liquid investments with original maturities at date of purchase of
three months or less. Cash equivalents principally consist of money market
funds.
ACCOUNTS RECEIVABLE -- Accounts receivable are shown net of allowance for
doubtful accounts of $78,000 as of September 30, 1998.
INVENTORIES -- Inventories consist of souvenirs, accessories and racing
fuel which are stated at the lower of cost, determined on a first-in, first-out
basis, or market.
PROPERTY AND EQUIPMENT -- Property and equipment is recorded at cost less
accumulated depreciation. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets which range from 5 to 40
years. Expenditures for repairs and maintenance are charged to expense when
incurred. Construction in progress includes all direct costs on fixed assets
under construction. Management periodically evaluates long-lived assets for
possible impairment based on expected future undiscounted operating cash flows
attributable to such assets.
ADVERTISING EXPENSES -- Advertising costs are expensed as incurred.
Advertising expenses amounted to $552,000 for the nine months ended September
30, 1998.
F-26
<PAGE>
LAS VEGAS MOTOR SPEEDWAY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
INCOME TAXES -- The Company had elected to be treated as an S Corporation
for federal income tax purposes. Also, the Company has not been subject to
state income tax. Accordingly, no provision for federal or state income taxes
has been reflected in the accompanying September 30, 1998 financial statements.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual future results could differ from those estimates.
3. INVENTORIES
Inventories as of September 30, 1998 consist of the following components:
<TABLE>
<S> <C>
Souvenirs and accessories ......... $199,000
Racing fuel ....................... 24,000
--------
Total ............................. $223,000
========
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment as of September 30, 1998 is summarized as follows:
<TABLE>
<S> <C>
Land and land improvements .................................... $ 32,569,000
Racetracks, grandstands, buildings and luxury suites .......... 86,933,000
Machinery and equipment ....................................... 14,522,000
Furniture and fixtures ........................................ 1,125,000
Autos, trucks and trailers .................................... 347,000
Construction in progress -- Industrial Park and other ......... 37,095,000
------------
Total (Note 6) ................................................ 172,591,000
Less accumulated depreciation ................................. (9,092,000)
------------
Net ......................................................... $163,499,000
============
</TABLE>
CONSTRUCTION IN PROGRESS -- In late 1997, the Company began constructing a
1.4 million square foot industrial park on site at LVMS (see Note 6). As of
September 30, 1998, construction was nearing completion and commencement of
operations was expected in early 1999. As of September 30, 1998, remaining
construction costs of the Industrial Park and other projects, which consist
principally of an on-site dragstrip and facility amenities, approximate
$5,000,000. The industrial park is expected to be leased under triple net
operating leases primarily to businesses and individuals involved in racing and
related industries.
5. NOTES PAYABLE
Notes payable as of September 30, 1998 consist of the following:
<TABLE>
<S> <C>
Note payable to individual, interest at 7.5%, final scheduled payment due January 1999.
Land costing approximately $10,000,000 pledged as collateral......................... $377,000
Note payable to individual, non-interest bearing, remaining balance scheduled
due December 1998 ................................................................... 24,000
--------
$401,000
========
</TABLE>
F-27
<PAGE>
LAS VEGAS MOTOR SPEEDWAY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. RELATED PARTY TRANSACTIONS
DUE FROM STOCKHOLDER AND AFFILIATES -- At September 30, 1998, due from
affiliate represents amounts due from a Company stockholder and an affiliate
which is commonly owned and controlled by the stockholder. The amount was non-
interest bearing and payable upon demand.
PAYABLE TO AFFILIATES -- At September 30, 1998, payable to affiliates
represents amounts payable to two affiliates which are commonly owned and
controlled by a Company stockholder. The amounts payable principally pertain to
construction costs paid on behalf of the Company. The amounts were non-interest
bearing and payable upon demand.
These amounts due from, and payable to, affiliates were settled by payment
prior to the December 1, 1998 acquisition (see Note 1).
CONSTRUCTION OF LVMS AND INDUSTRIAL PARK (NOTE 4) -- The LVMS and
Industrial Park ("LVMS complex") was constructed principally by a construction
company commonly owned and controlled by a Company stockholder. Substantially
all real and personal property development, acquisition, construction, and
improvement costs of the LVMS complex were billed by and paid to the affiliated
construction company. These construction and other related costs were
principally funded with capital contributions by the Company's stockholders
from 1995 through 1998.
DIVIDENDS AND OTHER PAYMENTS SUBSEQUENT TO SEPTEMBER 30, 1998 -- In
October 1998, cash dividends aggregating $10,000,000 were declared and paid to
the Company's stockholders. The dividends are not reflected in the accompanying
September 30, 1998 financial statements.
In November 30, 1998, the Company paid approximately $1,031,000 to an
affiliate and a Company stockholder. These payments are not reflected in the
accompanying September 30, 1998 financial statements.
7. CONTINGENCIES
The Company is party to certain disputes and legal actions in the normal
course of business. In management's opinion, the resolution of these matters
should not have a material adverse impact on the Company's financial condition
or results of operations.
F-28
<PAGE>
SUMMARIZED PARENT COMPANY ONLY FINANCIAL INFORMATION
Summarized financial information of Speedway Motorsports, Inc., as parent
company only, for fiscal years 1996 through 1998 is set forth in Note 13 to the
December 31, 1998 Consolidated Financial Statements. The following table
presents summarized parent company only financial information as of and for the
three months ended March 31, 1998 and 1999 (in thousands).
<TABLE>
<CAPTION>
MARCH 31
----------------------
1998 1999
---------- ----------
<S> <C> <C>
Current assets .............................................. $ 18,375 $ 27,718
Noncurrent assets, including investment in and advances to
subsidiaries, net .......................................... 458,457 740,835
Total Assets ................................................ 476,832 768,553
Current liabilities ......................................... 6,687 5,240
Revolving credit facility and acquisition loan .............. 0 254,050
Noncurrent liabilities ...................................... 228,504 220,003
Total Liabilities ........................................... 235,191 479,293
Total Stockholders' Equity .................................. 241,641 289,260
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
31:
-----------------------
1998 1999
----------- -----------
<S> <C> <C>
Total revenues ............................. $ 693 $ 836
Total expenses ............................. (1,259) (2,735)
Loss from continuing operations ............ (566) (1,899)
Loss before equity in subsidiaries ......... (340) (1,139)
Net income (loss) .......................... (2,923) 2,008
</TABLE>
F-29
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
OFFER TO EXCHANGE ALL OUTSTANDING
REGISTERED 8 1/2% SENIOR SUBORDINATED NOTES DUE 2007, SERIES B
AND
UNREGISTERED 8 1/2% SENIOR SUBORDINATED NOTES DUE 2007, SERIES C
FOR
REGISTERED 8 1/2% SENIOR SUBORDINATED NOTES DUE 2007, SERIES D
---------------
PROSPECTUS
---------------
ALL TENDERED OLD NOTES, EXECUTED
LETTERS OF TRANSMITTAL AND OTHER
RELATED DOCUMENTS SHOULD BE
DIRECTED TO THE EXCHANGE AGENT.
QUESTIONS AND REQUESTS FOR ASSISTANCE
AND REQUESTS FOR ADDITIONAL COPIES OF
THE PROSPECTUS, THE LETTER OF
TRANSMITTAL AND OTHER RELATED
DOCUMENTS SHOULD BE ADDRESSED TO
THE EXCHANGE AGENT AS FOLLOWS:
BY REGISTERED OR CERTIFIED MAIL:
U.S. BANK TRUST NATIONAL ASSOCIATION
180 EAST FIFTH STREET
MAIL CODE: SPFT0210
ST. PAUL, MINNESOTA 55101
ATTN: SPECIALIZED FINANCE
BY HAND OR OVERNIGHT COURIER:
U.S. BANK TRUST NATIONAL ASSOCIATION
180 EAST FIFTH STREET
MAIL CODE: SPFT0210
ST. PAUL, MINNESOTA 55101
ATTN: SPECIALIZED FINANCE
BY FACSIMILE:
(612) 244-1537 (MN)
CONFIRM BY TELEPHONE (612) 244-5011 (MN)
(ORIGINALS OF ALL DOCUMENTS SUBMITTED BY FACSIMILE SHOULD
BE SENT PROMPTLY BY HAND, OVERNIGHT COURIER, OR REGISTERED
OR CERTIFIED MAIL)
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Bylaws effectively provide that the Registrant shall, to
the full extent permitted by Section 145 of the General Corporation Law of the
State of Delaware, as amended from time to time ("Section 145"), indemnify all
persons whom it may indemnify pursuant thereto. In addition, the Registrant's
Certificate of Incorporation eliminates personal liability of its directors to
the full extent permitted by Section 102(b) (7) of the General Corporation Law
of the State of Delaware, as amended from time to time ("Section 102(b) (7)").
Section 145 permits a corporation to indemnify its directors and officers
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlements actually and reasonably incurred by them in connection with any
action, suit or proceeding brought by a third party if such directors or
officers acted in good faith and in a manner they reasonably believed to be in
or not opposed to the best interests of the corporation and, with respect to
any criminal action or proceeding, had no reason to believe their conduct was
unlawful. In a derivative action, indemnification may be made only for expenses
actually and reasonably incurred by directors and officers in connection with
the defense or settlement of an action or suit and only with respect to a
matter as to which they shall have acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interest of the
corporation, except that no indemnification shall be made if such person shall
have been adjudged liable to the corporation, unless and only to the extent
that the court in which the action or suit was brought shall determine upon
application that the defendant officers or directors are reasonably entitled to
indemnity for such expenses despite such adjudication of liability.
Section 102(b) (7) provides that a corporation may eliminate or limit the
personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided that such
provision shall 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) for willful or
negligent conduct in paying dividends or repurchasing stock out of other than
lawfully available funds or (iv) for any transaction from which the director
derived an improper personal benefit. No such provision shall eliminate or
limit the liability of a director for any act or omission occurring prior to
the date when such provision becomes effective.
The Company maintains insurance against liabilities under the Securities
Act of 1933 for the benefit of its officers and directors.
Section 8 of the Registration Rights Agreement (filed as Exhibit 4.3 to
this Registration Statement) provides that the holders of Transfer Restricted
Securities covered by this Registration Statement severally and not jointly
will indemnify and hold harmless the Registrant, its existing domestic
subsidiaries (other than the Unrestricted Subsidiary), and their respective
officers, directors, partners, employees, representatives and agents from and
against any liability caused by any untrue statement or omission in the
Registration Statement, in the Prospectus or in any amendment or supplement
thereto, in each case to the extent that the statement or omission was made in
reliance upon and in conformity with written information furnished to the
Registrant by the holders of Transfer Restricted Securities covered by this
Registration Statement expressly for use therein.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------- ------------------------------------------------------------------------------------------------------
<S> <C>
*3.1 Certificate of Incorporation of Speedway Motorsports, Inc. (the "Company") (incorporated by reference
to Exhibit 3.1 of the Registration Statement on Form S-1 (File No. 33-87740) of the Company (the
"Form S-1")).
*3.2 Bylaws of the Company (incorporated by reference to Exhibit 3.2 of the Form S-1).
*3.3 Amendment to Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.3 to
the Registration Statement on Form S-3 (File No. 333-13431) of the Company (the "November 1996
Form S-3")).
*3.4 Amendment to Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.4 to
the Registration Statement on Form S-4 (File No. 333-35091) of the Company (the "September 1997
Form S-4")).
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------------- --------------------------------------------------------------------------------------------------------
<S> <C>
*4.1 Form of Stock Certificate (incorporated by reference to Exhibit 4.1 to the Form S-1).
*4.2 Indenture dated as of September 1, 1996 between the Company and First Union National Bank of North
Carolina, as Trustee (the "First Union Indenture") (incorporated by reference to Exhibit 4.1 to the
November 1996 Form S-3).
*4.3 Form of 5 3/4% Convertible Subordinated Debenture due 2003 (included in the First Union Indenture).
*4.4 Indenture dated as of August 4, 1997 between the Company and First Trust National Association, as
Trustee (the "First Trust Indenture") (incorporated by reference to Exhibit 4.1 to the September 1997
Form S-4).
*4.5 Form of 8 1/2% Senior Subordinated Notes Due 2007 (included in the First Trust Indenture).
4.6 First Supplemental Indenture to the First Trust Indenture, dated as of April 1, 1999.
4.7 Second Supplemental Indenture to the First Trust Indenture, dated as of June 1, 1999.
4.8 Indenture dated as of May 11, 1999 between the Company, the Guarantors named therein and U.S. Bank
Trust National Association, as Trustee (the "U.S. Bank Trust Indenture").
4.9 Form of 8 1/2% Senior Subordinated Notes Due 2007 (included in the U.S. Bank Trust Indenture).
4.10 First Supplemental Indenture to the U.S. Bank Trust Indenture, dated as of June 1, 1999.
**5.1 Opinion of Parker, Poe, Adams & Bernstein L.L.P. regarding the legality of the securities being
registered.
*10.1 Letter of Credit issued by NationsBank of North Carolina, N.A. in favor of Charlotte Motor Speedway,
Inc. for the benefit of the North Carolina Department of Transportation for $1,902,600, dated March 14,
1994 (incorporated by reference to Exhibit 10.9 to the Form S-1).
*10.2 Reimbursement Agreement by and between Charlotte Motor Speedway, Inc. and NationsBank of North
Carolina, N.A., dated as of March 11, 1994 (incorporated by reference to Exhibit 10.11 to the Form
S-1).
*10.3 Project Agreement by and among The Department of Transportation, an agency of the State of North
Carolina, Interstate Combined Ventures and Charlotte Motor Speedway, Inc., dated as of December 6,
1993 (incorporated by reference to Exhibit 10.12 to the Form S-1).
*10.4 Deed of Trust by and among Terry L. Faulkenburg and Danny Ray Safrit, as Trustees of West Cabarrus
Church, Charlotte Motor Speedway, Inc. and Alan G. Dexter, Trustee, dated as of September 29, 1994
(incorporated by reference to Exhibit 10.38 to the Form S-1).
*10.5 Balance of Purchase Money Promissory Note in the amount of $720,000, made by Charlotte Motor
Speedway, Inc, in favor of West Cabarrus Church, dated as of September 29, 1994 (incorporated by
reference to Exhibit 10.39 to the Form S-1).
*10.6 Agreement for Purchase and Sale of an Option in Real Property by and between West Cabarrus Church
and Charlotte Motor Speedway, Inc., dated as of July 26, 1994 (incorporated by reference to Exhibit
10.40 to the Form S-1).
*10.7 Deferred Compensation Plan and Agreement by and between Atlanta Motor Speedway, Inc. and Edwin
R. Clark, dated as of January 22, 1993 (incorporated by reference to Exhibit 10.43 to the Form S-1).
*10.8 Deferred Compensation Plan and Agreement by and between Charlotte Motor Speedway, Inc. and H.A.
"Humpy" Wheeler (incorproted by reference to Exhibit 10.44 to the Form S-1).
**10.9 Speedway Motorsports, Inc. 1994 Stock Option Plan Amended and Restated May 5, 1998.
**10.10 Speedway Motorsports, Inc. Formula Stock Option Plan Amended and Restated May 5, 1998.
**10.11 Speedway Motorsports, Inc. Employee Stock Purchase Plan Amended and Restated May 5, 1998.
*10.12 Amended and Restated Agreement by and among Charlotte Motor Speedway, Inc., Sonic Financial
Corporation, Town and Country Ford, Inc., O. Bruton Smith, SMDA Properties and Chartown, dated
February 10, 1995 (incorporated by reference to Exhibit 10.50 to the Form S-1).
*10.13 Promissory Note made by Atlanta Motor Speedway, Inc, in favor of Sonic Financial Corporation in the
amount of $1,708,767, dated as of December 31, 1993 (incorporated by reference to Exhibit 10.51 to
Form S-1).
*10.14 Non-Negotiable Promissory Note dated April 24, 1995 by O. Bruton Smith in favor of the Company
(incorporated by reference to Exhibit 10.20 to the Annual Report on Form 10-K of the Company for the
year ended December 31, 1995).
*10.15 Asset Purchase Agreement dated October 24, 1996 between the Company, as buyer, and Sears Point
Raceway (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K of the Company
filed as of December 4, 1996 (the "SPR Form 8-K")).
*10.16 Master Ground Lease dated November 18, 1996 by and between Brenda Raceway Corporation and the
Company (incorporated by reference to Exhibit 99.2 to the SPR Form 8-K).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------------- -----------------------------------------------------------------------------------------------------------
<S> <C>
*10.17 Deed of Trust, Security Agreement and Fixture Filing with Assignment of Rents and Agreements dated
as of November 18, 1996 by Brenda Raceway Corporation to First American Title Insurance Company
for the benefit of Sonoma Funding Corporation (incorporated by reference to Exhibit 99.3 to the SPR
Form 8-K).
*10.18 Promissory Note secured by Deed of Trust dated November 18, 1996 by Brenda Raceway Corporation
in favor of Sonoma Funding Corporation (incorporated by reference to Exhibit 99.4 to the SPR Form
8-K).
*10.19 Purchase Contract dated December 18, 1996 between Texas Motor Speedway, Inc., as seller, and FW
Sports Authority, Inc., as purchaser (incorporated by reference to Exhibit 10.23 to the Annual Report on
Form 10-K of the Company for the year ended December 31, 1996 (the "1996 Form 10-K")).
*10.20 Lease Agreement dated as of December 18, 1996 between FW Sports Authority, Inc., as lessor, and
Texas Motor Speedway, Inc., as lessee (incorporated by reference to Exhibit 10.24 to the 1996 Form
10-K).
*10.21 Guaranty Agreement dated as of December 18, 1996 among the Company, the City of Fort Worth, Texas
and FW Sports Authority, Inc. (incorporated by reference to Exhibit 10.25 to the 1996 Form 10-K).
*10.22 Credit Agreement dated as of March 7, 1996 among the Company and Speedway Funding Corp., as
borrowers, and the lenders named therein, including NationsBank, N.A. as agent for the lenders and a
lender (incorporated by reference to Exhibit 99.2 to the Registration Statement on Form S-3 (File No.
333-1856) of the Company (the "March 1996 Form S-3")).
*10.23 First Amendment to the Credit Agreement dated as of September 24, 1996 among the Company and
Speedway Funding Corp., as borrowers, and the lenders named therein, including NationsBank, N.A. as
agent for the lenders and a lender (incorporated by reference to Exhibit 99.3 to the November 1996
Form S-3).
*10.24 Second Amendment to Credit Agreement dated June 30, 1997 among the Company and Speedway
Funding Corp., as borrowers, and the lenders named therein, including NationsBank, N.A. as agent for
the lenders and a lender (incorporated by reference to Exhibit 10.32 to the September 1997 Form S-4).
*10.25 Promissory Note dated June 30, 1997 by the Company and Speedway Funding Corp. as borrowers, in
favor of NationsBank, N.A. as lender (incorporated by reference to Exhibit 10.33 to the September 1997
Form S-4).
*10.26 Guaranty Agreement dated as of June 30, 1997 among Atlanta Motor Speedway, Inc., Charlotte Motor
Speedway, Inc., Texas Motor Speedway, Inc., 600 Racing, Inc., Bristol Motor Speedway, Inc. and SPR
Acquisition Corporation, as guarantors, and NationsBank, N.A. (incorporated by reference to Exhibit
10.34 to the September 1997 Form S-4).
*10.27 Amended and Restated Credit Agreement dated as of August 4, 1997 among the Company and
Speedway Funding Corp., as borrowers, and the lenders named therein, including NationsBank, N.A. as
agent for the lenders and a lender (incorporated by reference to Exhibit 10.36 to the September 1997
Form S-4).
*10.28 Registration Rights Agreement dated as of August 4, 1997 among the Company, NationsBanc Capital
Markets, Inc., Wheat, First Securities, Inc. and J.C. Bradford & Co. (incorporated by reference to
Exhibit 4.3 to the September 1997 Form S-4).
*10.29 Purchase Agreement dated as of August 4, 1997 among the Company, NationsBanc Capital Markets,
Inc., Wheat, First Securities, Inc, and J.C. Bradford & Co. (incorporated by reference to Exhibit 10.35 to
the September 1997 Form S-4).
*10.30 Asset Purchase Agreement and Escrow Instructions dated November 17, 1998 between Speedway
Motorsports, Inc, as buyer, and Las Vegas Motor Speedway, Inc., as seller (incorporated by reference to
Exhibit 99.1 to the Company's current Report on Form 8-K filed as of December 15, 1998 (the "LVMS
Form 8-K")).
*10.31 First Amendment to Amended and Restated Credit Agreement dated as of November 18, 1998 among
the Company and Speedway Funding Corp., as borrowers, certain subsidiaries of the Company, as
guarantors, and NationsBank, N.A., as the lender (incorporated by reference to Exhibit 99.2 to the
LVMS Form 8-K).
*10.32 Second Amended and Restated Credit Agreement dated as of November 23, 1998 among the Company
and Speedway Funding Corp., as borrowers, certain subsidiaries of the Company, as guarantors, and
NationsBank, N.A. as agent for the lenders and a lender (incorporated by reference to Exhibit 99.3 to
the LVMS Form 8-K).
*10.33 Naming Rights Agreement dated as of February 9, 1999 by and between the Company, Charlotte Motor
Speedway, Inc., Lowe's Home Centers, Inc., Lowe's HIW, Inc. and Sterling Advertising Ltd.
(incorporated by reference to Exhibit 10.1 to the Amendment to the Company's Quarterly Report on
Form 10-Q/A filed as of May 19, 1999).
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------------ ---------------------------------------------------------------------------------------------------------
<S> <C>
10.34 Registration Rights Agreement dated as of May 11, 1999 among the Company, NationsBanc
Montgomery Securities LLC, First Union Capital Markets Corp. and J.C. Bradford & Co., L.L.C.
10.35 Purchase Agreement dated as of May 4, 1999 among the Company, NationsBanc Montgomery Securities
LLC, First Union Capital Markets Corp. and J.C. Bradford & Co., L.L.C.
10.36 Credit Agreement dated as of May 28, 1999 (the "Credit Agreement") among the Company and
Speedway Funding Corp., as borrowers, certain subsidiaries of the Company, as guarantors, and the
lenders named therein, including NationsBank, N.A., as agent for the lenders and a lender.
10.37 Pledge Agreement dated as of May 28, 1999 among the Company and the subsidiaries of the Company
that are guarantors under the Credit Agreement, as pledgors, and, NationsBank, N.A., as agent for the
lenders under the Credit Agreement.
*11.1 Statement regarding computation of per share earnings (incorporated by reference to Exhibit 11.1 to the
1996 Form 10-K).
12.1 Statement regarding computation of ratios.
21.1 Subsidiaries of the Company
23.1 Consent of Deloitte & Touche LLP
**23.2 Consent of Parker, Poe, Adams & Bernstein L.L.P. (included in Exhibit 5.1 of this Registration
Statement)
24.1 Power of Attorney (included on the signature page of this Registration Statement).
25.1 Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of First Trust
National Association.
*27.1 Financial Data Schedule (incorporated by reference to Exhibit 27.0 to the Annual Report on Form 10-K
of the Company for the year ended December 31, 1998).
**99.1 Form of Letter of Transmittal regarding exchange offer.
**99.2 Notice of Guaranteed Delivery.
</TABLE>
- ---------
* Filed previously.
** To be filed by amendment
(b) Financial Statement Schedules:
None.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Exchange Act) 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 deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report, to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X is not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
Insofar as indemnification for liabilities arising under the Securities
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 Commission such indemnification is
against public policy as expressed in the Securities 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 of whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of
North Carolina, on June 4, 1999.
SPEEDWAY MOTORSPORTS, INC.
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
CHIEF FINANCIAL OFFICER, VICE PRESIDENT
AND TREASURER
POWER OF ATTORNEY
We, the undersigned directors and officers of Speedway Motorsports, Inc.,
do hereby constitute and appoint Messrs. O. Bruton Smith, H.A. "Humpy" Wheeler,
and William R. Brooks, each with full power of substitution, our true and
lawful attorney-in-fact and agent to do any and all acts and things in our
names and in our behalf in our capacities stated below, which acts and things
either of them may deem necessary or advisable to enable Speedway Motorsports,
Inc. to comply with the Securities Act of 1933, as amended, and any rules,
regulations and requirements of the Securities and Exchange Commission, in
connection with this Registration Statement, including specifically, but not
limited to, power and authority to sign for any and all of us in our names, in
the capacities stated below, any and all amendments (including post-effective
amendments) hereto and any subsequent registration statement filed pursuant to
Rule 462(b) under the Securities Act of 1933, as amended and to file the same,
with all exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission; and we do hereby ratify and confirm all
that they shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ---------------------------------------- -------------
<S> <C> <C>
/s/ O. BRUTON SMITH Chairman, Chief Executive Officer and June 4, 1999
------------------------------------- Director (principal executive officer)
O. BRUTON SMITH
/s/ H.A. "HUMPY" WHEELER President, Chief Operating Officer and June 4, 1999
------------------------------------- Director; President and General
H.A. "HUMPY" WHEELER Manager of LMSC
/s/ WILLIAM R. BROOKS Vice President, Treasurer, Chief June 4, 1999
------------------------------------- Financial Officer and Director
WILLIAM R. BROOKS (principal financial officer and
principal accounting officer)
/s/ EDWIN R. CLARK Executive Vice President and Director; June 4, 1999
------------------------------------- President and General Manager of
EDWIN R. CLARK AMS
/s/ WILLIAM P. BENTON Director June 4, 1999
-------------------------------------
WILLIAM P. BENTON
/s/ MARK M. GAMBILL Director June 4, 1999
-------------------------------------
MARK M. GAMBILL
/s/ JACK F. KEMP Director June 4, 1999
-------------------------------------
JACK F. KEMP
</TABLE>
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of
North Carolina, on June 4, 1999.
ATLANTA MOTOR SPEEDWAY, INC.
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
VICE PRESIDENT AND TREASURER
POWER OF ATTORNEY
We, the undersigned directors and officers of Atlanta Motor Speedway,
Inc., do hereby constitute and appoint Mr. William R. Brooks with full power of
substitution, our true and lawful attorney-in-fact and agent to do any and all
acts and things in our names and in our behalf in our capacities stated below,
which acts and things either of them may deem necessary or advisable to enable
Atlanta Motor Speedway, Inc. to comply with the Securities Act of 1933, as
amended, and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with this Registration Statement, including
specifically, but not limited to, power and authority to sign for any and all
of us in our names, in the capacities stated below, any and all amendments
(including post-effective amendments) hereto and any subsequent registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as
amended and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission; and we do
hereby ratify and confirm all that they shall do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------- ---------------------------------------- -------------
<S> <C> <C>
/s/ O. BRUTON SMITH Chairman, Chief Executive Officer and June 4, 1999
------------------------------------- Director (principal executive officer)
O. BRUTON SMITH
/s/ EDWIN R. CLARK President June 4, 1999
-------------------------------------
EDWIN R. CLARK
/s/ WILLIAM R. BROOKS Vice President, Treasurer and Director June 4, 1999
------------------------------------- (principal financial officer and
WILLIAM R. BROOKS principal accounting officer)
/s/ H.A. "HUMPY" WHEELER Director June 4, 1999
-------------------------------------
H.A. "HUMPY" WHEELER
</TABLE>
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of
North Carolina, on June 4, 1999.
BRISTOL MOTOR SPEEDWAY, INC.
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
VICE PRESIDENT AND TREASURER
POWER OF ATTORNEY
We, the undersigned directors and officers of Bristol Motor Speedway,
Inc., do hereby constitute and appoint Mr. William R. Brooks with full power of
substitution, our true and lawful attorney-in-fact and agent to do any and all
acts and things in our names and in our behalf in our capacities stated below,
which acts and things either of them may deem necessary or advisable to enable
Bristol Motor Speedway, Inc. to comply with the Securities Act of 1933, as
amended, and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with this Registration Statement, including
specifically, but not limited to, power and authority to sign for any and all
of us in our names, in the capacities stated below, any and all amendments
(including post-effective amendments) hereto and any subsequent registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as
amended and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission; and we do
hereby ratify and confirm all that they shall do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------- ----------------------------------------- -------------
<S> <C> <C>
/s/ O. BRUTON SMITH Chairman, Chief Executive Officer and June 4, 1999
------------------------------------- Director (principal executive officer)
O. BRUTON SMITH
/s/ H.A. "HUMPY" WHEELER Vice President and Director June 4, 1999
-------------------------------------
H.A. "HUMPY" WHEELER
/s/ WILLIAM R. BROOKS Vice President and Treasurer (principal June 4, 1999
------------------------------------- financial officer and principal
WILLIAM R. BROOKS accounting officer)
</TABLE>
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of
North Carolina, on June 4, 1999.
CHARLOTTE MOTOR SPEEDWAY, INC.
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
VICE PRESIDENT AND TREASURER
POWER OF ATTORNEY
We, the undersigned directors and officers of Charlotte Motor Speedway,
Inc., do hereby constitute and appoint Mr. William R. Brooks, with full power
of substitution, our true and lawful attorney-in-fact and agent to do any and
all acts and things in our names and in our behalf in our capacities stated
below, which acts and things he may deem necessary or advisable to enable
Charlotte Motor Speedway, Inc. to comply with the Securities Act of 1933, as
amended, and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with this Registration Statement, including
specifically, but not limited to, power and authority to sign for any and all
of us in our names, in the capacities stated below, any and all amendments
(including post-effective amendments) hereto and any subsequent registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as
amended and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission; and we do
hereby ratify and confirm all that he shall do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------- -------------------------------------- --------------
<S> <C> <C>
/s/ O. BRUTON SMITH Chief Executive Officer and Director June 4, 1999
------------------------------------- (principal executive officer)
O. BRUTON SMITH
/s/ H.A. "HUMPY" WHEELER President and Director June 4, 1999
-------------------------------------
H.A. "HUMPY" WHEELER
/s/ WILLIAM R. BROOKS Vice President and Treasurer June 4, 1999
------------------------------------- (principal financial officer and
WILLIAM R. BROOKS principal accounting officer)
</TABLE>
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of
North Carolina, on June 4, 1999.
SPR ACQUISITION CORPORATION
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
VICE PRESIDENT AND TREASURER
POWER OF ATTORNEY
We, the undersigned directors and officers of SPR Acquisition Corporation,
do hereby constitute and appoint Mr. William R. Brooks, with full power of
substitution, our true and lawful attorney-in-fact and agent to do any and all
acts and things in our names and in our behalf in our capacities stated below,
which acts and things he may deem necessary or advisable to enable SPR
Acquisition Corporation to comply with the Securities Act of 1933, as amended,
and any rules, regulations and requirements of the Securities and Exchange
Commission, in connection with this Registration Statement, including
specifically, but not limited to, power and authority to sign for any and all
of us in our names, in the capacities stated below, any and all amendments
(including post-effective amendments) hereto and any subsequent registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as
amended and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission; and we do
hereby ratify and confirm all that he shall do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ---------------------------------------- -------------
<S> <C> <C>
/s/ O. BRUTON SMITH Chief Executive Officer and Director June 4, 1999
------------------------------------- (principal executive officer)
O. BRUTON SMITH
/s/ H.A. "HUMPY" WHEELER President and Director June 4, 1999
-------------------------------------
H.A. "HUMPY" WHEELER
/s/ WILLIAM R. BROOKS Vice President, Treasurer and Director June 4, 1999
------------------------------------- (principal financial officer and
WILLIAM R. BROOKS principal accounting officer)
</TABLE>
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of
North Carolina, on June 4, 1999.
TEXAS MOTOR SPEEDWAY, INC.
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
VICE PRESIDENT AND TREASURER
POWER OF ATTORNEY
We, the undersigned directors and officers of Texas Motor Speedway, Inc.,
do hereby constitute and appoint Mr. William R. Brooks, with full power of
substitution, our true and lawful attorney-in-fact and agent to do any and all
acts and things in our names and in our behalf in our capacities stated below,
which acts and things he may deem necessary or advisable to enable Texas Motor
Speedway, Inc. to comply with the Securities Act of 1933, as amended, and any
rules, regulations and requirements of the Securities and Exchange Commission,
in connection with this Registration Statement, including specifically, but not
limited to, power and authority to sign for any and all of us in our names, in
the capacities stated below, any and all amendments (including post-effective
amendments) hereto and any subsequent registration statement filed pursuant to
Rule 462(b) under the Securities Act of 1933, as amended and to file the same,
with all exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission; and we do hereby ratify and confirm all
that he shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ---------------------------------------- -------------
<S> <C> <C>
/s/ O. BRUTON SMITH President and Director (principal June 4, 1999
------------------------------------- executive officer)
O. BRUTON SMITH
/s/ H.A. "HUMPY" WHEELER Vice President and Director June 4, 1999
-------------------------------------
H.A. "HUMPY" WHEELER
/s/ WILLIAM R. BROOKS Vice President, Treasurer and Director June 4, 1999
------------------------------------- (principal financial officer and
WILLIAM R. BROOKS principal accounting officer)
</TABLE>
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of
North Carolina, on June 4, 1999.
600 RACING, INC.
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
VICE PRESIDENT AND TREASURER
POWER OF ATTORNEY
We, the undersigned directors and officers of 600 Racing, Inc., do hereby
constitute and appoint Mr. William R. Brooks, with full power of substitution,
our true and lawful attorney-in-fact and agent to do any and all acts and
things in our names and in our behalf in our capacities stated below, which
acts and things he may deem necessary or advisable to enable 600 Racing, Inc.
to comply with the Securities Act of 1933, as amended, and any rules,
regulations and requirements of the Securities and Exchange Commission, in
connection with this Registration Statement, including specifically, but not
limited to, power and authority to sign for any and all of us in our names, in
the capacities stated below, any and all amendments (including post-effective
amendments) hereto and any subsequent registration statement filed pursuant to
Rule 462(b) under the Securities Act of 1933, as amended and to file the same,
with all exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission; and we do hereby ratify and confirm all
that he shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------- ----------------------------------------- -------------
<S> <C> <C>
/s/ O. BRUTON SMITH Chief Executive Officer and President June 4, 1999
------------------------------------- (principal executive officer)
O. BRUTON SMITH
/s/ WILLIAM R. BROOKS Vice President and Treasurer (principal June 4, 1999
------------------------------------- financial officer and principal
WILLIAM R. BROOKS accounting officer)
/s/ DAVID STETZER Director June 4, 1999
-------------------------------------
DAVID STETZER
</TABLE>
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of
North Carolina, on June 4, 1999.
SONOMA FUNDING CORPORATION
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
VICE PRESIDENT AND TREASURER
POWER OF ATTORNEY
We, the undersigned directors and officers of Sonoma Funding Corporation,
do hereby constitute and appoint Mr. William R. Brooks, with full power of
substitution, our true and lawful attorney-in-fact and agent to do any and all
acts and things in our names and in our behalf in our capacities stated below,
which acts and things he may deem necessary or advisable to enable Sonoma
Funding Corporation to comply with the Securities Act of 1933, as amended, and
any rules, regulations and requirements of the Securities and Exchange
Commission, in connection with this Registration Statement, including
specifically, but not limited to, power and authority to sign for any and all
of us in our names, in the capacities stated below, any and all amendments
(including post-effective amendments) hereto and any subsequent registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as
amended and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission; and we do
hereby ratify and confirm all that he shall do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ---------------------------------------- -------------
<S> <C> <C>
/s/ O. BRUTON SMITH Chief Executive Officer and Director June 4, 1999
------------------------------------- (principal executive officer)
O. BRUTON SMITH
/s/ H.A. "HUMPY" WHEELER President and Director June 4, 1999
-------------------------------------
H.A. "HUMPY" WHEELER
/s/ WILLIAM R. BROOKS Vice President, Treasurer and Director June 4, 1999
------------------------------------- (principal financial officer and
WILLIAM R. BROOKS principal accounting officer)
</TABLE>
II-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of
North Carolina, on June 4, 1999.
SPEEDWAY CONSULTING & DESIGN, INC.
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
VICE PRESIDENT AND TREASURER
POWER OF ATTORNEY
We, the undersigned directors and officers of Speedway Consulting &
Design, Inc., do hereby constitute and appoint Mr. William R. Brooks, with full
power of substitution, our true and lawful attorney-in-fact and agent to do any
and all acts and things in our names and in our behalf in our capacities stated
below, which acts and things he may deem necessary or advisable to enable
Speedway Consulting & Design, Inc. to comply with the Securities Act of 1933,
as amended, and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with this Registration Statement, including
specifically, but not limited to, power and authority to sign for any and all
of us in our names, in the capacities stated below, any and all amendments
(including post-effective amendments) hereto and any subsequent registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as
amended and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission; and we do
hereby ratify and confirm all that he shall do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------- ----------------------------------------- -------------
<S> <C> <C>
/s/ O. BRUTON SMITH President and Director (principal June 4, 1999
------------------------------------- executive officer)
O. BRUTON SMITH
/s/ H.A. "HUMPY" WHEELER Vice President and Director June 4, 1999
-------------------------------------
H.A. "HUMPY" WHEELER
/s/ WILLIAM R. BROOKS Vice President and Treasurer (principal June 4, 1999
------------------------------------- financial officer and principal
WILLIAM R. BROOKS accounting officer)
</TABLE>
II-13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of
North Carolina, on June 4, 1999.
THE SPEEDWAY CLUB, INC.
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
VICE PRESIDENT AND TREASURER
POWER OF ATTORNEY
We, the undersigned directors and officers of The Speedway Club, Inc., do
hereby constitute and appoint Mr. William R. Brooks, with full power of
substitution, our true and lawful attorney-in-fact and agent to do any and all
acts and things in our names and in our behalf in our capacities stated below,
which acts and things he may deem necessary or advisable to enable The Speedway
Club, Inc. to comply with the Securities Act of 1933, as amended, and any
rules, regulations and requirements of the Securities and Exchange Commission,
in connection with this Registration Statement, including specifically, but not
limited to, power and authority to sign for any and all of us in our names, in
the capacities stated below, any and all amendments (including post-effective
amendments) hereto and any subsequent registration statement filed pursuant to
Rule 462(b) under the Securities Act of 1933, as amended and to file the same,
with all exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission; and we do hereby ratify and confirm all
that he shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------- ----------------------------------------- -------------
<S> <C> <C>
/s/ O. BRUTON SMITH Chief Executive Officer and Director June 4, 1999
------------------------------------- (principal executive officer)
O. BRUTON SMITH
/s/ H.A. "HUMPY" WHEELER President and Director June 4, 1999
-------------------------------------
H.A. "HUMPY" WHEELER
/s/ WILLIAM R. BROOKS Vice President and Treasurer (principal June 4, 1999
------------------------------------- financial officer and principal
WILLIAM R. BROOKS accounting officer)
/s/ J. WESLEY HARRIS Vice President June 4, 1999
-------------------------------------
J. WESLEY HARRIS
</TABLE>
II-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of
North Carolina, on June 4, 1999.
INEX CORP.
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
VICE PRESIDENT AND TREASURER
POWER OF ATTORNEY
We, the undersigned directors and officers of INEX Corp., do hereby
constitute and appoint Mr. William R. Brooks, with full power of substitution,
our true and lawful attorney-in-fact and agent to do any and all acts and
things in our names and in our behalf in our capacities stated below, which
acts and things he may deem necessary or advisable to enable INEX Corp. to
comply with the Securities Act of 1933, as amended, and any rules, regulations
and requirements of the Securities and Exchange Commission, in connection with
this Registration Statement, including specifically, but not limited to, power
and authority to sign for any and all of us in our names, in the capacities
stated below, any and all amendments (including post-effective amendments)
hereto and any subsequent registration statement filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission; and we do hereby ratify and confirm all
that he shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------- --------------------------------- -------------
<S> <C> <C>
/s/ JOHN D. MOOSE, JR. President and Director June 4, 1999
------------------------------------- (principal executive officer)
JOHN D. MOOSE, JR.
/s/ WILLIAM R. BROOKS Vice President and Treasurer June 4, 1999
------------------------------------- (principal financial officer and
WILLIAM R. BROOKS principal accounting officer)
</TABLE>
II-15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of
North Carolina, on June 4, 1999.
SPEEDWAY FUNDING CORP.
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
PRESIDENT
POWER OF ATTORNEY
We, the undersigned directors and officers of Speedway Funding Corp., do
hereby constitute and appoint Mr. William R. Brooks, with full power of
substitution, our true and lawful attorney-in-fact and agent to do any and all
acts and things in our names and in our behalf in our capacities stated below,
which acts and things he may deem necessary or advisable to enable Speedway
Funding Corp. to comply with the Securities Act of 1933, as amended, and any
rules, regulations and requirements of the Securities and Exchange Commission,
in connection with this Registration Statement, including specifically, but not
limited to, power and authority to sign for any and all of us in our names, in
the capacities stated below, any and all amendments (including post-effective
amendments) hereto and any subsequent registration statement filed pursuant to
Rule 462(b) under the Securities Act of 1933, as amended and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission; and we do hereby ratify and confirm all that
he shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------- -------------------------------------- -------------
<S> <C> <C>
/s/ WILLIAM R. BROOKS President and Director (principal June 4, 1999
------------------------------------- executive officer)
WILLIAM R. BROOKS
/s/ RANDALL A. STOREY Vice President, Treasurer, Assistant June 4, 1999
------------------------------------- Secretary and Director (principal
RANDALL A. STOREY financial officer and principal
accounting officer)
/s/ VICTORIA L. GARRETT Vice President and Director June 4, 1999
-------------------------------------
VICTORIA L. GARRETT
/s/ DANIEL F. LINDLEY Secretary and Director June 4, 1999
-------------------------------------
DANIEL F. LINDLEY
/s/ JOAN L. DOBRZYNSKI Vice President June 4, 1999
-------------------------------------
JOAN L. DOBRZYNSKI
</TABLE>
II-16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of
North Carolina, on June 4, 1999.
LAS VEGAS MOTOR SPEEDWAY, LLC
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
VICE PRESIDENT, TREASURER AND MANAGER
POWER OF ATTORNEY
We, the undersigned managers and officers of Las Vegas Motor Speedway,
LLC, do hereby constitute and appoint Mr. William R. Brooks, with full power of
substitution, our true and lawful attorney-in-fact and agent to do any and all
acts and things in our names and in our behalf in our capacities stated below,
which acts and things he may deem necessary or advisable to enable Las Vegas
Motor Speedway, LLC to comply with the Securities Act of 1933, as amended, and
any rules, regulations and requirements of the Securities and Exchange
Commission, in connection with this Registration Statement, including
specifically, but not limited to, power and authority to sign for any and all
of us in our names, in the capacities stated below, any and all amendments
(including post-effective amendments) hereto and any subsequent registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as
amended and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission; and we do
hereby ratify and confirm all that he shall do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ --------------------------------------- -------------
<S> <C> <C>
/s/ O. BRUTON SMITH President and Manager (principal June 4, 1999
------------------------------------- executive officer)
O. BRUTON SMITH
/s/ WILLIAM R. BROOKS Vice President, Treasurer and Manager June 4, 1999
------------------------------------- (principal financial officer and
WILLIAM R. BROOKS principal accounting officer)
/s/ WILLIAM F. RAINES, III Vice President and Manager June 4, 1999
-------------------------------------
WILLIAM F. RAINES, III
</TABLE>
II-17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of
North Carolina, on June 4, 1999.
IMS SYSTEMS LIMITED PARTNERSHIP
By: /s/ WILLIAM R. BROOKS
-------------------------------------
SPEEDWAY MOTORSPORTS, INC.
GENERAL PARTNER
WILLIAM R. BROOKS, CHIEF FINANCIAL OFFICER,
VICE PRESIDENT AND TREASURER
POWER OF ATTORNEY
We, the undersigned directors and officers of Speedway Motorsports, Inc.,
as the sole General Partner of IMS Systems Limited Partnership, do hereby
constitute and appoint Mr. William R. Brooks, with full power of substitution,
our true and lawful attorney-in-fact and agent to do any and all acts and things
in our names and in our behalf in our capacities stated below, which acts and
things he may deem necessary or advisable to enable IMS Systems Limited
Partnership to comply with the Securities Act of 1933, as amended, and any
rules, regulations and requirements of the Securities and Exchange Commission,
in connection with this Registration Statement, including specifically, but not
limited to, power and authority to sign for any and all of us in our names, in
the capacities stated below, any and all amendments (including post-effective
amendments) hereto and any subsequent registration statement filed pursuant to
Rule 462(b) under the Securities Act of 1933, as amended and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission; and we do hereby ratify and confirm all that
he shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------- ---------------------------------------- -------------
<S> <C> <C>
/s/ O. BRUTON SMITH Chief Executive Officer and Director June 4, 1999
------------------------------------- (principal executive officer of
O. BRUTON SMITH Speedway Motorsports, Inc. and IMS
Systems Limited Partnership)
/s/ H.A. "HUMPY" WHEELER President and Director June 4, 1999
-------------------------------------
H.A. "HUMPY" WHEELER
/s/ WILLIAM R. BROOKS Vice President, Treasurer and Director June 4, 1999
------------------------------------- (principal financial officer and
WILLIAM R. BROOKS principal accounting officer of
Speedway Motorsports, Inc. and IMS
Systems Limited Partnership)
</TABLE>
II-18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of
North Carolina, on June 4, 1999.
SMI SYSTEMS, LLC
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
VICE PRESIDENT, TREASURER AND MANAGER
POWER OF ATTORNEY
We, the undersigned managers and officers of SMI Systems, LLC, do hereby
constitute and appoint Mr. William R. Brooks, with full power of substitution,
our true and lawful attorney-in-fact and agent to do any and all acts and
things in our names and in our behalf in our capacities stated below, which
acts and things he may deem necessary or advisable to enable SMI Systems, LLC
to comply with the Securities Act of 1933, as amended, and any rules,
regulations and requirements of the Securities and Exchange Commission, in
connection with this Registration Statement, including specifically, but not
limited to, power and authority to sign for any and all of us in our names, in
the capacities stated below, any and all amendments (including post-effective
amendments) hereto and any subsequent registration statement filed pursuant to
Rule 462(b) under the Securities Act of 1933, as amended and to file the same,
with all exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission; and we do hereby ratify and confirm all
that he shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------- --------------------------------------- -------------
<S> <C> <C>
/s/ O. BRUTON SMITH President and Manager (principal June 4, 1999
------------------------------------- executive officer)
O. BRUTON SMITH
/s/ WILLIAM R. BROOKS Vice President, Treasurer and Manager June 4, 1999
------------------------------------- (principal financial officer and
WILLIAM R. BROOKS principal accounting officer)
/s/ RANDALL A. STOREY Vice President, Secretary and Manager June 4, 1999
-------------------------------------
RANDALL A. STOREY
</TABLE>
II-19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of
North Carolina, on June 4, 1999.
SPEEDWAY SCREEN PRINTING, LLC
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
VICE PRESIDENT, TREASURER AND MANAGER
POWER OF ATTORNEY
We, the undersigned managers and officers of Speedway Screen Printing,
LLC, do hereby constitute and appoint Mr. William R. Brooks, with full power of
substitution, our true and lawful attorney-in-fact and agent to do any and all
acts and things in our names and in our behalf in our capacities stated below,
which acts and things he may deem necessary or advisable to enable Speedway
Screen Printing, LLC to comply with the Securities Act of 1933, as amended, and
any rules, regulations and requirements of the Securities and Exchange
Commission, in connection with this Registration Statement, including
specifically, but not limited to, power and authority to sign for any and all
of us in our names, in the capacities stated below, any and all amendments
(including post-effective amendments) hereto and any subsequent registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as
amended and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission; and we do
hereby ratify and confirm all that he shall do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------------- --------------------------------------- -------------
<S> <C> <C>
/s/ JOSEPH PHELPS President and Manager (principal June 4, 1999
------------------------------------- executive officer)
JOSEPH PHELPS
/s/ WILLIAM R. BROOKS Vice President, Treasurer and Manager June 4, 1999
------------------------------------- (principal financial officer and
WILLIAM R. BROOKS principal accounting officer)
/s/ WILLIAM F. RAINES, III Vice President and Manager June 4, 1999
-------------------------------------
WILLIAM F. RAINES, III
</TABLE>
II-20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Charlotte, state of
North Carolina, on June 4, 1999.
SPEEDWAY SYSTEMS LLC
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
VICE PRESIDENT
POWER OF ATTORNEY
We, the undersigned manager and officers of Speedway Systems LLC, do
hereby constitute and appoint Mr. William R. Brooks, with full power of
substitution, our true and lawful attorney-in-fact and agent to do any and all
acts and things in our names and in our behalf in our capacities stated below,
which acts and things he may deem necessary or advisable to enable Speedway
Systems LLC to comply with the Securities Act of 1933, as amended, and any
rules, regulations and requirements of the Securities and Exchange Commission,
in connection with this Registration Statement, including specifically, but not
limited to, power and authority to sign for any and all of us in our names, in
the capacities stated below, any and all amendments (including post-effective
amendments) hereto and any subsequent registration statement filed pursuant to
Rule 462(b) under the Securities Act of 1933, as amended and to file the same,
with all exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission; and we do hereby ratify and confirm all
that he shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------- ----------------------------------------- -------------
<S> <C> <C>
/s/ JOSEPH D. PHELPS President (principal executive officer) June 4, 1999
-------------------------------------
JOSEPH D. PHELPS
/s/ WILLIAM R. BROOKS Vice President of Speedway June 4, 1999
------------------------------------- Motorsports, Inc., general partner of
WILLIAM R. BROOKS SMI Systems Limited Partnership
(manager of Speedway Systems LLC)
and of Speedway Systems LLC
/s/ JENNIFER TURLEY Treasurer and Assistant Secretary June 4, 1999
------------------------------------- (principal financial officer and
JENNIFER TURLEY principal accounting officer)
</TABLE>
II-21
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------------- --------------------------------------------------------------------------------------------------------
<S> <C>
*3.1 Certificate of Incorporation of Speedway Motorsports, Inc. (the "Company") (incorporated by reference
to Exhibit 3.1 of the Registration Statement on Form S-1 (File No. 33-87740) of the Company (the
"Form S-1")).
*3.2 Bylaws of the Company (incorporated by reference to Exhibit 3.2 of the Form S-1).
*3.3 Amendment to Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.3 to
the Registration Statement on Form S-3 (File No. 333-13431) of the Company (the "November 1996
Form S-3")).
*3.4 Amendment to Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.4 to
the Registration Statement on Form S-4 (File No. 333-35091) of the Company (the "September 1997
Form S-4")).
*4.1 Form of Stock Certificate (incorporated by reference to Exhibit 4.1 to the Form S-1).
*4.2 Indenture dated as of September 1, 1996 between the Company and First Union National Bank of North
Carolina, as Trustee (the "First Union Indenture") (incorporated by reference to Exhibit 4.1 to the
November 1996 Form S-3).
*4.3 Form of 5 3/4% Convertible Subordinated Debenture due 2003 (included in the First Union Indenture).
*4.4 Indenture dated as of August 4, 1997 between the Company and First Trust National Association, as
Trustee (the "First Trust Indenture") (incorporated by reference to Exhibit 4.1 to the September 1997
Form S-4).
*4.5 Form of 8 1/2% Senior Subordinated Notes Due 2007 (included in the First Trust Indenture).
4.6 First Supplemental Indenture to the First Trust Indenture, dated as of April 1, 1999.
4.7 Second Supplemental Indenture to the First Trust Indenture, dated as of June 1, 1999.
4.8 Indenture dated as of May 11, 1999 between the Company, the Guarantors named therein and U.S. Bank
Trust National Association, as Trustee (the "U.S. Bank Trust Indenture").
4.9 Form of 8 1/2% Senior Subordinated Notes Due 2007 (included in the U.S. Bank Trust Indenture).
4.10 First Supplemental Indenture to the U.S. Bank Trust Indenture, dated as of June 1, 1999.
**5.1 Opinion of Parker, Poe, Adams & Bernstein L.L.P. regarding the legality of the securities being
registered.
*10.1 Letter of Credit issued by NationsBank of North Carolina, N.A. in favor of Charlotte Motor Speedway,
Inc. for the benefit of the North Carolina Department of Transportation for $1,902,600, dated March 14,
1994 (incorporated by reference to Exhibit 10.9 to the Form S-1).
*10.2 Reimbursement Agreement by and between Charlotte Motor Speedway, Inc. and NationsBank of North
Carolina, N.A., dated as of March 11, 1994 (incorporated by reference to Exhibit 10.11 to the Form
S-1).
*10.3 Project Agreement by and among The Department of Transportation, an agency of the State of North
Carolina, Interstate Combined Ventures and Charlotte Motor Speedway, Inc., dated as of December 6,
1993 (incorporated by reference to Exhibit 10.12 to the Form S-1).
*10.4 Deed of Trust by and among Terry L. Faulkenburg and Danny Ray Safrit, as Trustees of West Cabarrus
Church, Charlotte Motor Speedway, Inc. and Alan G. Dexter, Trustee, dated as of September 29, 1994
(incorporated by reference to Exhibit 10.38 to the Form S-1).
*10.5 Balance of Purchase Money Promissory Note in the amount of $720,000, made by Charlotte Motor
Speedway, Inc, in favor of West Cabarrus Church, dated as of September 29, 1994 (incorporated by
reference to Exhibit 10.39 to the Form S-1).
*10.6 Agreement for Purchase and Sale of an Option in Real Property by and between West Cabarrus Church
and Charlotte Motor Speedway, Inc., dated as of July 26, 1994 (incorporated by reference to Exhibit
10.40 to the Form S-1).
*10.7 Deferred Compensation Plan and Agreement by and between Atlanta Motor Speedway, Inc. and Edwin
R. Clark, dated as of January 22, 1993 (incorporated by reference to Exhibit 10.43 to the Form S-1).
*10.8 Deferred Compensation Plan and Agreement by and between Charlotte Motor Speedway, Inc. and H.A.
"Humpy" Wheeler (incorporated by reference to Exhibit 10.44 to the Form S-1).
**10.9 Speedway Motorsports, Inc. 1994 Stock Option Plan Amended and Restated May 5, 1998.
**10.10 Speedway Motorsports, Inc. Formula Stock Option Plan Amended and Restated May 5, 1998.
**10.11 Speedway Motorsports, Inc. Employee Stock Purchase Plan Amended and Restated as of May 5,
1998.
*10.12 Amended and Restated Agreement by and among Charlotte Motor Speedway, Inc., Sonic Financial
Corporation, Town and Country Ford, Inc., O. Bruton Smith, SMDA Properties and Chartown, dated
February 10, 1995 (incorporated by reference to Exhibit 10.50 to the Form S-1).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------------- -----------------------------------------------------------------------------------------------------------
<S> <C>
*10.13 Promissory Note made by Atlanta Motor Speedway, Inc, in favor of Sonic Financial Corporation in the
amount of $1,708,767, dated as of December 31, 1993 (incorporated by reference to Exhibit 10.51 to
Form S-1).
*10.14 Non-Negotiable Promissory Note dated April 24, 1995 by O. Bruton Smith in favor of the Company
(incorporated by reference to Exhibit 10.20 to the Annual Report on Form 10-K of the Company for the
year ended December 31, 1995).
*10.15 Asset Purchase Agreement dated October 24, 1996 between the Company, as buyer, and Sears Point
Raceway (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K of the Company
filed as of December 4, 1996 (the "SPR Form 8-K")).
*10.16 Master Ground Lease dated November 18, 1996 by and between Brenda Raceway Corporation and the
Company (incorporated by reference to Exhibit 99.2 to the SPR Form 8-K).
*10.17 Deed of Trust, Security Agreement and Fixture Filing with Assignment of Rents and Agreements dated
as of November 18, 1996 by Brenda Raceway Corporation to First American Title Insurance Company
for the benefit of Sonoma Funding Corporation (incorporated by reference to Exhibit 99.3 to the SPR
Form 8-K).
*10.18 Promissory Note secured by Deed of Trust dated November 18, 1996 by Brenda Raceway Corporation
in favor of Sonoma Funding Corporation (incorporated by reference to Exhibit 99.4 to the SPR Form
8-K).
*10.19 Purchase Contract dated December 18, 1996 between Texas Motor Speedway, Inc., as seller, and FW
Sports Authority, Inc., as purchaser (incorporated by reference to Exhibit 10.23 to the Annual Report on
Form 10-K of the Company for the year ended December 31, 1996 (the "1996 Form 10-K")).
*10.20 Lease Agreement dated as of December 18, 1996 between FW Sports Authority, Inc., as lessor, and
Texas Motor Speedway, Inc., as lessee (incorporated by reference to Exhibit 10.24 to the 1996 Form
10-K).
*10.21 Guaranty Agreement dated as of December 18, 1996 among the Company, the City of Fort Worth, Texas
and FW Sports Authority, Inc. (incorporated by reference to Exhibit 10.25 to the 1996 Form 10-K).
*10.22 Credit Agreement dated as of March 7, 1996 among the Company and Speedway Funding Corp., as
borrowers, and the lenders named therein, including NationsBank, N.A. as agent for the lenders and a
lender (incorporated by reference to Exhibit 99.2 to the Registration Statement on Form S-3 (File No.
333-1856) of the Company (the "March 1996 Form S-3")).
*10.23 First Amendment to the Credit Agreement dated as of September 24, 1996 among the Company and
Speedway Funding Corp., as borrowers, and the lenders named therein, including NationsBank, N.A. as
agent for the lenders and a lender (incorporated by reference to Exhibit 99.3 to the November 1996
Form S-3).
*10.24 Second Amendment to Credit Agreement dated June 30, 1997 among the Company and Speedway
Funding Corp., as borrowers, and the lenders named therein, including NationsBank, N.A. as agent for
the lenders and a lender (incorporated by reference to Exhibit 10.32 to the September 1997 Form S-4).
*10.25 Promissory Note dated June 30, 1997 by the Company and Speedway Funding Corp. as borrowers, in
favor of NationsBank, N.A. as lender (incorporated by reference to Exhibit 10.33 to the September 1997
Form S-4).
*10.26 Guaranty Agreement dated as of June 30, 1997 among Atlanta Motor Speedway, Inc., Charlotte Motor
Speedway, Inc., Texas Motor Speedway, Inc., 600 Racing, Inc., Bristol Motor Speedway, Inc. and SPR
Acquisition Corporation, as guarantors, and NationsBank, N.A. (incorporated by reference to Exhibit
10.34 to the September 1997 Form S-4).
*10.27 Amended and Restated Credit Agreement dated as of August 4, 1997 among the Company and
Speedway Funding Corp., as borrowers, and the lenders named therein, including NationsBank, N.A. as
agent for the lenders and a lender (incorporated by reference to Exhibit 10.36 to the September 1997
Form S-4).
*10.28 Registration Rights Agreement dated as of August 4, 1997 among the Company, NationsBanc Capital
Markets, Inc., Wheat, First Securities, Inc. and J.C. Bradford & Co. (incorporated by reference to
Exhibit 4.3 to the September 1997 Form S-4).
*10.29 Purchase Agreement dated as of August 4, 1997 among the Company, NationsBanc Capital Markets,
Inc., Wheat, First Securities, Inc, and J.C. Bradford & Co. (incorporated by reference to Exhibit 10.35 to
the September 1997 Form S-4).
*10.30 Asset Purchase Agreement and Escrow Instructions dated November 17, 1998 between Speedway
Motorsports, Inc, as buyer, and Las Vegas Motor Speedway, Inc., as seller (incorporated by reference to
Exhibit 99.1 to the Company's current Report on Form 8-K filed as of December 15, 1998 (the "LVMS
Form 8-K")).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------------- ---------------------------------------------------------------------------------------------------------
<S> <C>
*10.31 First Amendment to Amended and Restated Credit Agreement dated as of November 18, 1998 among
the Company and Speedway Funding Corp., as borrowers, certain subsidiaries of the Company, as
guarantors, and NationsBank, N.A., as the lender (incorporated by reference to Exhibit 99.2 to the
LVMS Form 8-K).
*10.32 Second Amended and Restated Credit Agreement dated as of November 23, 1998 among the Company
and Speedway Funding Corp., as borrowers, certain subsidiaries of the Company, as guarantors, and
NationsBank, N.A. as agent for the lenders and a lender (incorporated by reference to Exhibit 99.3 to
the LVMS Form 8-K).
*10.33 Naming Rights Agreement dated as of February 9, 1999 by and between the Company, Charlotte Motor
Speedway, Inc., Lowe's Home Centers, Inc., Lowe's HIW, Inc. and Sterling Advertising Ltd.
(incorporated by reference to Exhibit 10.1 to the Amendment to the Company's Quarterly Report on
Form 10-Q/A filed as of May 19, 1999).
10.34 Registration Rights Agreement dated as of May 11, 1999 among the Company, NationsBanc
Montgomery Securities LLC, First Union Capital Markets Corp. and J.C. Bradford & Co., L.L.C.
10.35 Purchase Agreement dated as of May 4, 1999 among the Company, NationsBanc Montgomery Securities
LLC, First Union Capital Markets Corp. and J.C. Bradford & Co., L.L.C.
10.36 Credit Agreement dated as of May 28, 1999 (the "Credit Agreement") among the Company and
Speedway Funding Corp., as borrowers, certain subsidiaries of the Company, as guarantors, and the
lenders named therein, including NationsBank, N.A., as agent for the lenders and a lender.
10.37 Pledge Agreement dated as of May 28, 1999 among the Company and the subsidiaries of the Company
that are guarantors under the Credit Agreement, as pledgors, and, NationsBank, N.A., as agent for the
lenders under the Credit Agreement.
*11.1 Statement regarding computation of per share earnings (incorporated by reference to Exhibit 11.1 to the
1996 Form 10-K).
12.1 Statement regarding computation of ratios.
21.1 Subsidiaries of the Company
23.1 Consent of Deloitte & Touche LLP
**23.2 Consent of Parker, Poe, Adams & Bernstein L.L.P. (included in Exhibit 5.1 of this Registration
Statement)
24.1 Power of Attorney (included on the signature page of this Registration Statement).
25.1 Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of First Trust
National Association.
*27.1 Financial Data Schedule (incorporated by reference to Exhibit 27.0 to the Annual Report on Form 10-K
of the Company for the year ended December 31, 1998).
**99.1 Form of Letter of Transmittal regarding exchange offer.
**99.2 Notice of Guaranteed Delivery.
</TABLE>
- ---------
* Filed previously.
** To be filed by amendment
EXHIBIT 4.6
------------------------------------------------------------------------------
SPEEDWAY MOTORSPORTS, INC.,
Issuer
and
THE GUARANTORS NAMED IN THE INDENTURE DATED AUGUST
4, 1997, as supplemented by this First Supplemental
Indenture,
Guarantors
TO
U.S. BANK TRUST NATIONAL ASSOCIATION,
Trustee
-------------------------
First Supplemental Indenture
Dated as of April 1, 1999
to
Indenture Dated as of August 4, 1997
-----------------------
$125,000,000
8 1/2% Senior Subordinated Notes Due 2007
------------------------------------------------------------------------------
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of April 1, 1999, between
SPEEDWAY MOTORSPORTS, INC., a corporation duly organized and existing under the
laws of the State of Delaware (herein called the "Company"), having its
principal office on U.S. Highway 29 North in Concord, North Carolina, the
GUARANTORS as set forth in the Indenture dated August 4, 1997, as supplemented
by this First Supplemental Indenture (herein called the "Guarantors"), and U.S.
BANK TRUST NATIONAL ASSOCIATION, a national banking association duly organized
and existing under the laws of the United States of America, as Trustee (herein
called the "Trustee").
RECITALS OF THE COMPANY
The Company, the Guarantors and the Trustee are parties to an
Indenture, dated as of August 4, 1997 (the "Indenture"), pursuant to which the
Company issued $125,000,000 in aggregate principal amount of its 8 1/2% Senior
Subordinated Notes due 2007.
Section 9.01 of the Indenture provides, among other things, that the
Company and the Guarantors, when authorized by a Board Resolution, and the
Trustee may amend the Indenture in certain respects without the consent of any
Holders.
The Company desires to amend the Indenture.
The Company has duly authorized the execution and delivery of this
First Supplemental Indenture.
The execution and delivery of this instrument has been duly authorized
and all conditions and requirements necessary to make this instrument a valid
and binding agreement have been duly performed and complied with.
RECITALS OF THE GUARANTORS
The Guarantors have duly authorized the execution and delivery of this
First Supplemental Indenture.
The execution and delivery of this instrument has been duly authorized
and all conditions and requirements necessary to make this instrument a valid
and binding agreement have been duly performed and complied with.
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises and other good and valuable
consideration, receipt and sufficiency of which are hereby acknowledged, it is
mutually covenanted and agreed, for the equal proportionate benefit of all
Holders of the Securities, as follows:
1
<PAGE>
ARTICLE 1. AMENDMENTS TO INDENTURE
The list of Guarantors set forth in full in the Indenture is hereby
amended to add the following Guarantors:
1. Las Vegas Motor Speedway, LLC;
2. SMI Systems, LLC; and
3. Speedway Systems LLC.
By their execution of this First Supplemental Indenture, the
above-listed Guarantors shall guarantee the obligations of the Company under the
Notes pursuant to the terms of the Indenture and shall be deemed to have issued
their guarantees, as of the date hereof, in the form and with the terms set
forth in the Indenture and the Notes.
ARTICLE 2. MISCELLANEOUS
Section 2.1. The Trustee accepts the trusts created by the Indenture,
as supplemented by this First Supplemental Indenture, and agrees to perform the
same upon the terms and conditions of the Indenture, as supplemented by this
First Supplemental Indenture.
Section 2.2. The recitals contained herein shall be taken as statements
of the Company and the Guarantors, and the Trustee assumes no responsibility for
their correctness. The Trustee makes no representations as to the validity or
sufficiency of this First Supplemental Indenture.
Section 2.3. All capitalized terms used and not defined herein shall
have the respective meanings assigned to them in the Indenture.
Section 2.4. Each of the Company, the Guarantors and the Trustee hereby
confirms and reaffirms the Indenture in every particular except as amended by
this First Supplemental Indenture.
Section 2.5. All covenants and agreements in this First Supplemental
Indenture by the Company, the Guarantors or the Trustee shall bind each of their
respective successors and assigns, whether so expressed or not.
Section 2.6. In case any provisions in this First Supplemental
Indenture shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
Section 2.7. Nothing in this First Supplemental Indenture express or
implied, shall give to any Person, other than the parties hereto and their
successors under the Indenture and the
2
<PAGE>
Holders of the Securities, any benefit or any legal or equitable right, remedy
or claim under the Indenture.
Section 2.8. If any provision hereof limits, qualifies or conflicts
with a provision of the Trust Indenture Act of 1939, as it may be amended from
time to time, that is required under such Act to be a part of and govern this
First Supplemental Indenture, the latter provision shall control. If any
provision hereof modifies or excludes any provision of such Act that may be so
modified or excluded, the latter provision shall be deemed to apply to this
First Supplemental Indenture as so modified or excluded, as the case may be.
SECTION 2.9. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND
BE USED TO CONSTRUE THIS FIRST SUPPLEMENTAL INDENTURE, THE NOTES AND THE
SUBSIDIARY GUARANTEES.
Section 2.10. All provisions of this First Supplemental Indenture shall
be deemed to be incorporated in, and made a part of, the Indenture; and the
Indenture, as supplemented by this First Supplemental Indenture, shall be read,
taken and construed as one and the same instrument.
----------------------
3
<PAGE>
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed, and their respective corporate seals
to be hereunto affixed and attested, all as of the day and year first above
written.
COMPANY:
SPEEDWAY MOTORSPORTS, INC.
By: /s/ William R. Brooks
---------------------------------
William R. Brooks
Chief Financial Officer and
Vice President
Attest:
By: /s/ Randall A. Storey
------------------------------
Name: Randall A. Storey
Title: Assistant Secretary
GUARANTORS:
ATLANTA MOTOR SPEEDWAY, INC.
By: /s/ William R. Brooks
---------------------------------
William R. Brooks
Vice President
Attest:
By: /s/ Randall A. Storey
-------------------------------
Name: Randall A. Storey
Title: Assistant Secretary
4
<PAGE>
BRISTOL MOTOR SPEEDWAY, INC.
By: /s/ William R. Brooks
---------------------------------
William R. Brooks
Vice President
Attest:
By: /s/ Randall A. Storey
------------------------------
Name: Randall A. Storey
Title: Assistant Secretary
CHARLOTTE MOTOR SPEEDWAY, INC.
By: /s/ William R. Brooks
---------------------------------
William R. Brooks
Vice President
Attest:
By: /s/ Randall A. Storey
-------------------------------
Name: Randall A. Storey
Title: Assistant Secretary
SPR ACQUISITION CORPORATION
By: /s/ William R. Brooks
---------------------------------
William R. Brooks
Vice President
Attest:
By: /s/ Randall A. Storey
---------------------------------
Name: Randall A. Storey
Title: Assistant Secretary
TEXAS MOTOR SPEEDWAY
By: /s/ William R. Brooks
---------------------------------
William R. Brooks
Vice President
5
<PAGE>
Attest:
By: /s/ Randall A. Storey
---------------------------------
Name: Randall A. Storey
Title: Assistant Secretary
600 RACING, INC.
By: /s/ William R. Brooks
---------------------------------
William R. Brooks
Vice President
Attest:
By: /s/ Randall A. Storey
---------------------------------
Name: Randall A. Storey
Title: Assistant Secretary
SONOMA FUNDING CORPORATION
By: /s/ William R. Brooks
---------------------------------
William R. Brooks
Vice President
Attest:
By: /s/ Randall A. Storey
---------------------------------
Name: Randall A. Storey
Title: Assistant Secretary
SPEEDWAY CONSULTING & DESIGN, INC.
By: /s/ William R. Brooks
---------------------------------
William R. Brooks
Vice President
Attest:
By: /s/ Randall A. Storey
---------------------------------
Name: Randall A. Storey
Title: Assistant Secretary
6
<PAGE>
THE SPEEDWAY CLUB, INC.
By: /s/ William R. Brooks
---------------------------------
William R. Brooks
Vice President
Attest:
By: /s/ Randall A. Storey
---------------------------------
Name: Randall A. Storey
Title: Assistant Secretary
INEX CORP.
By: /s/ William R. Brooks
---------------------------------
William R. Brooks
Vice President
Attest:
By: /s/ Randall A. Storey
---------------------------------
Name: Randall A. Storey
Title: Assistant Secretary
SPEEDWAY FUNDING CORP.
By: /s/ Victoria L. Garrett
---------------------------------
Name: Victoria L. Garrett
Title: Vice President
Attest:
By: /s/ Daniel F. Lindley
---------------------------------
Name: Daniel F. Lindley
Title: Secretary
7
<PAGE>
LAS VEGAS MOTOR SPEEDWAY, LLC
Sole Member:
Speedway Motorsports, Inc.
By: /s/ William R. Brooks
---------------------------------
William R. Brooks,
Chief Financial Officer
and Vice President
Attest:
By: /s/ Randall A. Storey
---------------------------------
Name: Randall A. Storey
Title: Assistant Secretary
SMI SYSTEMS, LLC
Sole Member:
Speedway Motorsports, Inc.
By: /s/ William R. Brooks
---------------------------------
William R. Brooks,
Chief Financial Officer
and Vice President
Attest:
By: /s/ Randall A. Storey
---------------------------------
Name: Randall A. Storey
Title: Assistant Secretary
SPEEDWAY SYSTEMS LLC
Sole Member:
Speedway Motorsports, Inc.
By: /s/ William R. Brooks
---------------------------------
William R. Brooks,
Chief Financial Officer
and Vice President
8
<PAGE>
Attest:
By: /s/ Randall A. Storey
---------------------------------
Name: Randall A. Storey
Title: Assistant Secretary
TRUSTEE:
U.S. BANK TRUST NATIONAL
ASSOCIATION
By: /s/ Nancie J. Arvin
---------------------------------
Name: Nancie J. Arvin
Title: Vice President
Attest: /s/ Frank Sgaraglino
---------------------------------
Name: Frank Sgaraglino
Title: Vice President
9
<PAGE>
STATE OF NORTH CAROLINA )
ss:
COUNTY OF UNION )
On the day of , 1999, before me personally came
William R. Brooks, to me known, who, being by me duly sworn, did depose and say
that he is the Vice President and Chief Financial Officer of Speedway
Motorsports, Inc., one of the corporations described in and which executed the
foregoing instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
authority of the Board of Directors of said corporation, and that he signed his
name thereto by like authority.
/s/ Donna Bowen
My commission expires: 8-12-2003
STATE OF NORTH CAROLINA )
ss:
COUNTY OF UNION )
On the day of , 1999, before me personally came
William R. Brooks, to me known, who, being by me duly sworn, did depose and say
that he is the Vice President of each of Atlanta Motor Speedway, Inc., Bristol
Motor Speedway, Inc., Lowe's Motor Speedway, Inc., SPR Acquisition Corporation,
Texas Motor Speedway, Inc., 600 Racing, Inc., Sonoma Funding Corporation,
Speedway Consulting & Design, Inc., The Speedway Club, Inc., INEX Corp., and is
the Chief Financial Officer and Vice President of Speedway Motorsports, Inc., as
sole member of Las Vegas Motor Speedway, LLC, SMI Systems, LLC and Speedway
10
<PAGE>
Systems LLC, each of which corporations and limited liability companies is
described in and which executed the foregoing instruments as one of the
Guarantors (other than Speedway Funding Corp.); that he knows the seal of said
corporation and limited liability company; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by authority of the
Board of Directors of said corporation and limited liability company, and that
he signed his name thereto by like authority.
/s/ Donna Bowen
My commission expires:8-12-2003
STATE OF DELAWARE )
ss:
COUNTY OF NEW CASTLE )
On the 6th day of May , 1999, before me personally came Victoria L.
Garrett, to me known, who, being by me duly sworn, did depose and say that she
is Vice President of Speedway Funding Corp., one of the corporations described
in and which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation, and that she signed her name thereto by like authority.
/s/ Joanne E. Lee
My commission expires: May 14, 1999
11
<PAGE>
STATE OF NORTH CAROLINA )
ss:
COUNTY OF MECKLENBURG )
On the 6th day of May 1999, before me personally came Nancie J. Arvin,
to me known, who, being by me duly sworn, did depose and say that she is Vice
President of U.S. Bank Trust National Association, one of the corporations
described in and which executed the foregoing instrument; that she knows the
seal of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by authority of the Board of Directors of
said corporation, and that she signed her name thereto by like authority.
/s/ Remonia Jamison
My commission expires:12/02/2000
12
EXHIBIT 4.7
SECOND SUPPLEMENTAL INDENTURE
SECOND SUPPLEMENTAL INDENTURE (this "SECOND SUPPLEMENTAL INDENTURE"),
dated as of June 1, 1999, among IMS SYSTEMS LIMITED PARTNERSHIP, a North
Carolina limited partnership ("IMS"), SPEEDWAY SCREEN PRINTING, LLC, a North
Carolina limited liability company ("SPEEDWAY SCREEN PRINTING"), LAS VEGAS MOTOR
SPEEDWAY, LLC, A NEVADA LIMITED LIABILITY COMPANY ("LVMS"), SMI SYSTEMS, LLC, A
NEVADA LIMITED LIABILITY COMPANY ("SMI SYSTEMS"), SPEEDWAY SYSTEMS, LLC, A NORTH
CAROLINA LIMITED LIABILITY COMPANY ("SPEEDWAY SYSTEMS," and collectively with
IMS, SPEEDWAY SCREEN PRINTING, LVMS AND SMI SYSTEMS, the "GUARANTEEING
SUBSIDIARIES"), SPEEDWAY MOTORSPORTS, INC., a Delaware corporation (the
"COMPANY"), the other Guarantors (as listed on the signature pages to the
Indenture referred to below) and U.S. BANK TRUST NATIONAL ASSOCIATION, as
trustee under the Indenture referred to below (the "TRUSTEE").
WITNESSETH
WHEREAS, the Company and the other Guarantors have heretofore executed
and delivered to the Trustee an indenture (the "INDENTURE"), dated as of AUGUST
4, 1997 providing for the issuance OF an aggregate principal amount of up to
[$125,000,000] [$200,000,000] of the Company's 8 1/2% Senior Subordinated Notes
due 2007 (thE "NOTES");
WHEREAS, LVMS, SMI SYSTEMS, SPEEDWAY SYSTEMS, THE COMPANY AND THE OTHER
GUARANTORS HAVE HERETOFORE EXECUTED AND DELIVERED TO THE TRUSTEE A FIRST
SUPPLEMENTAL INDENTURE DATED AS OF APRIL 1, 1999 (THE "FIRST SUPPLEMENTAL
INDENTURE"), WHICH AMENDED THE INDENTURE TO ADD LVMS, SMI SYSTEMS AND SPEEDWAY
SYSTEMS AS ADDITIONAL GUARANTORS OF THE NOTES IN ACCORDANCE WITH THE INDENTURE;
WHEREAS, THE PARTIES HERETO DESIRE TO EXECUTE AND DELIVER THIS SECOND
SUPPLEMENTAL INDENTURE IN ORDER TO (I) AMEND AND RESTATE THE FIRST SUPPLEMENTAL
INDENTURE TO PROVIDE CLARIFYING INFORMATION REGARDING THE GUARANTEES OF LVMS,
SMI SYSTEMS AND SPEEDWAY SYSTEMS, AND (II) AMEND THE INDENTURE TO ADD IMS AND
SPEEDWAY SCREEN PRINTING AS ADDITIONAL GUARANTORS OF THE NOTES IN ACCORDANCE
WITH THE INDENTURE;
WHEREAS, the Indenture provides that under certain circumstances each
of the Guaranteeing Subsidiaries shall execute and deliver to the Trustee a
supplemental indenture pursuant to which each of the Guaranteeing Subsidiaries
shall unconditionally guarantee all of the Company's Obligations under the Notes
and the Indenture on the terms and conditions set forth herein (the "NOTE
GUARANTEE");
1
<PAGE>
WHEREAS, the partnership interests of IMS are owned as follows: a 1%
general partnership interest by the Company and a 99% limited partnership
interest by SPR Acquisition Corporation, a California corporation and
wholly-owned subsidiary of the Company;
WHEREAS, Speedway Screen Printing is a wholly-owned subsidiary of
Speedway Systems, WHICH is wholly-owned, in turn, by IMS;
WHEREAS, LVMS IS A WHOLLY-OWNED SUBSIDIARY OF THE COMPANY;
WHEREAS, SMI SYSTEMS IS A WHOLLY-OWNED SUBSIDIARY OF THE COMPANY;
WHEREAS, SPEEDWAY SYSTEMS IS A WHOLLY-OWNED SUBSIDIARY OF IMS; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this SECOND Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, each of the
Guaranteeing Subsidiaries and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. Each of the Guaranteeing Subsidiaries hereby
agrees as follows (notwithstanding anything to the contrary in this SECOND
Supplemental Indenture, such agreements of the Guaranteeing Subsidiaries shall
be construed as identical to those agreements made by the Guarantors under the
Indenture, and the obligations and rights of the Guaranteeing Subsidiaries
hereunder shall be no more and no less than those of the Guarantors under the
Indenture):
(a) Along with all Guarantors named in the Indenture, to jointly and
severally unconditionally Guarantee to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of the Indenture, the Notes or
the obligations of the Company under this SECOND Supplemental Indenture, the
Indenture or the Notes, that:
(i) the principal of and interest on the Notes will be
promptly paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on the overdue principal of and
interest on the Notes, if any, if lawful, and all other obligations of
the Company to the Holders or the Trustee under this SECOND
Supplemental Indenture, the Indenture or the Notes will be promptly
paid in full or performed, all in accordance with the terms of this
SECOND Supplemental Indenture, the Indenture and the Notes; and
2
<PAGE>
(ii) in case of any extension of time of payment or renewal of
any Notes or any of such other obligations, that same will be promptly
paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or
otherwise. Failing payment when due of any amount so guaranteed or any
performance so guaranteed for whatever reason, each of the Guaranteeing
Subsidiaries and the Guarantors will be jointly and severally obligated
to pay the same immediately.
(b) The obligations of the Guaranteeing Subsidiaries hereunder and
under the Indenture shall be unconditional, irrespective of the validity,
regularity or enforceability of this SECOND Supplemental Indenture, the Notes or
the Indenture, the absence of any action to enforce the same, any waiver or
consent by any Holder of the Notes with respect to any provisions hereof, of the
Indenture or of the Notes, the recovery of any judgment against the Company, any
action to enforce the same or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a guarantor.
(c) The following is hereby waived by each of the Guaranteeing
Subsidiaries: diligence, presentment, demand of payment, filing of claims with a
court in the event of insolvency or bankruptcy of the Company, any right to
require a proceeding first against the Company, protest, notice and all demands
whatsoever.
(d) This Note Guarantee shall not be discharged except by complete
performance of the obligations contained herein, and in the Notes and the
Indenture, and each of the Guaranteeing Subsidiaries accepts all obligations of
a Guarantor under the Indenture.
(e) If any Holder or the Trustee is required by any court or otherwise
to return to the Company, the Guaranteeing Subsidiaries or the Guarantors, or
any Custodian, Trustee, liquidator or other similar official acting in relation
to either the Company, the Guaranteeing Subsidiaries or the Guarantors, any
amount paid by any of them to the Trustee or such Holder, this Note Guarantee,
to the extent theretofore discharged, shall be reinstated in full force and
effect.
(f) Each of the Guaranteeing Subsidiaries agrees that they shall not be
entitled to any right of subrogation in relation to the Holders in respect of
any obligations guaranteed hereby and by the Indenture until payment in full of
all obligations guaranteed hereby and by the Indenture.
(g) As between the Guarantors and the Guaranteeing Subsidiaries, on the
one hand, and the Holders and the Trustee, on the other hand, (x) the maturity
of the obligations guaranteed hereby and by the Indenture may be accelerated as
provided in Article VI of the Indenture for the purposes of this Note Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby and by the
Indenture, and (y) in the event of any declaration of acceleration of such
obligations as provided in Article VI of the Indenture, such obligations
(whether or not due and payable) shall forthwith become due and payable by the
Guaranteeing Subsidiaries for the purpose of this Note Guarantee.
3
<PAGE>
(h) The Guaranteeing Subsidiaries and the Guarantors shall have the
right to seek contribution from any non-paying Guaranteeing Subsidiary or
Guarantor so long as the exercise of such right does not impair the rights of
the Holders under the Guarantee.
(i) Notwithstanding anything to the contrary in this SECOND
Supplemental Indenture or in Article XI of the Indenture, the aggregate amount
of the Obligations guaranteed hereunder and under the Indenture by any
Guaranteeing Subsidiary shall be reduced to the extent necessary to prevent the
Note Guarantee of such Guaranteeing Subsidiary from violating or becoming
voidable under any law relating to fraudulent conveyance or fraudulent transfer
or similar laws affecting the rights of creditors.
3. Execution and Delivery. Notwithstanding Section 11.02 of the
Indenture, each of the Guaranteeing Subsidiaries agrees that the Note Guarantees
shall remain in full force and effect notwithstanding any failure to endorse on
each Note a notation of such Note Guarantee.
4. Guaranteeing Subsidiaries May Consolidate Etc. on Certain Terms.
(a) Except as set forth in Articles IV and V of the Indenture, nothing
contained in this SECOND Supplemental Indenture, in the Indenture or in any of
the Notes shall prevent any consolidation or merger of a Guaranteeing Subsidiary
with or into the Company or shall prevent any sale or conveyance of the property
of a Guaranteeing Subsidiary as an entirety or substantially as an entirety, to
the Company.
(b) Except as set forth in Article IV of the Indenture, nothing
contained in this SECOND Supplemental Indenture, in the Indenture or in any of
the Notes shall prevent any consolidation or merger of a Guaranteeing Subsidiary
with or into a corporation or corporations other than the Company (whether or
not affiliated with the Guaranteeing Subsidiary), or successive consolidations
or mergers in which a Guaranteeing Subsidiary or its successor or successors
shall be a party or parties, or shall prevent any sale or conveyance of the
property of a Guaranteeing Subsidiary as an entirety or substantially as an
entirety, to a corporation other than the Company (whether or not affiliated
with the Guaranteeing Subsidiary) authorized to acquire and operate the same;
PROVIDED, HOWEVER, that (i) each Guaranteeing Subsidiary hereby covenants and
agrees that, upon any such consolidation, merger, sale or conveyance, the Note
Guarantee, and the due and punctual performance and observance of all of the
covenants and conditions of this SECOND Supplemental Indenture and the Indenture
to be performed by such Guaranteeing Subsidiary, shall be expressly assumed (in
the event that the Guaranteeing Subsidiary is not the surviving corporation in
the merger) by supplemental indenture reasonably satisfactory in form to the
Trustee, executed and delivered to the Trustee, by the corporation formed by
such consolidation, or into which the Guaranteeing Subsidiary shall have been
merged, or by the corporation which shall have acquired such property and (ii)
immediately after giving effect to such transaction, no Default or Event of
Default would exist. In case of any such consolidation, merger, sale or
conveyance and upon the assumption by the successor corporation, by supplemental
indenture, executed and delivered to the
4
<PAGE>
Trustee and satisfactory in form to the Trustee, of the Note Guarantee and the
due and punctual performance of all of the covenants and conditions of this
SECOND Supplemental Indenture and the Indenture to be performed by the
Guaranteeing Subsidiary, such successor corporation shall succeed to and be
substituted for the Guaranteeing Subsidiary with the same effect as if it had
been named herein as a Guaranteeing Subsidiary. Such successor corporation
thereupon may cause to be signed any or all of the Subsidiary Guarantees to be
endorsed upon all of the Notes issuable under the Indenture which theretofore
shall not have been signed by the Company and delivered to the Trustee. All the
Subsidiary Guarantees so issued shall in all respects have the same legal rank
and benefit under the Indenture as the Subsidiary Guarantees theretofore and
thereafter issued in accordance with the terms of the Indenture as though all of
such Subsidiary Guarantees had been issued at the date of the execution of this
SECOND Supplemental Indenture.
5. Releases.
(a) Concurrently with any sale of assets (including, if applicable, all
of the capital stock of any Guaranteeing Subsidiary), any Liens in favor of the
Trustee in the assets sold thereby shall be released; PROVIDED, that in the
event of an Asset Sale, the Net Proceeds from such sale or other disposition are
treated in accordance with the provisions of Section 4.10 of the Indenture if
the assets sold in such sale or other disposition include all or substantially
all of the assets of any Guaranteeing Subsidiary or all of the capital stock of
any Guaranteeing Subsidiary, then such Guaranteeing Subsidiary (in the event of
a sale or other disposition or all of the capital stock of such Guaranteeing
Subsidiary) or the corporation acquiring the property (in the event of a sale or
other disposition of all or substantially all of the assets of a Guaranteeing
Subsidiary) shall be released and relieved of its obligations under its Note
Guarantee or Section 11.03 of the Indenture, as the case may be; PROVIDED, that
in the event of an Asset Sale, the Net Proceeds from such sale or other
disposition are treated in accordance with the provisions of Section 4.10 of the
Indenture. Upon delivery by the Company to the Trustee of an Officers'
Certificate and an Opinion of Counsel to the effect that such sale or other
disposition was made by the Company in accordance with the provisions of the
Indenture, including without limitation Section 4.10 of the Indenture, the
Trustee shall execute any documents reasonably required in order to evidence the
release of any Guaranteeing Subsidiary from its obligations under its Note
Guarantee.
(b) Upon the release by all holders of Senior Indebtedness and
Guarantor Senior Indebtedness of all guarantees issued by a Guaranteeing
Subsidiary relating to such Senior Indebtedness and Guarantor Senior
Indebtedness and all Liens on the property and assets of such Guaranteeing
Subsidiary relating to Senior Indebtedness and Guarantor Senior Indebtedness,
then such Guaranteeing Subsidiary shall be released and relieved of any
obligations under its Note Guarantee. Upon delivery by the Company to the
Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that
all holders of Senior Indebtedness and Guarantor Senior Indebtedness have
released all guarantees issued by a Guaranteeing Subsidiary and all Liens on the
property and assets of such Guaranteeing Subsidiary relating to such Senior
Indebtedness and Guarantor Senior Indebtedness, the Trustee shall execute any
documents reasonably required in order to evidence the release of such
Guaranteeing Subsidiary from its obligations under its Note Guarantee.
5
<PAGE>
(c) Any Guaranteeing Subsidiary not released from its obligations under
its Note Guarantee pursuant to either of paragraphs (a) or (b) of this Section 5
shall remain liable for the full amount of principal of and interest on the
Notes and for the other obligations of any Guarantor or any Guaranteeing
Subsidiary under this SECOND Supplemental Indenture or the Indenture,
respectively, as provided in Article XI of the Indenture or this SECOND
Supplemental Indenture, respectively.
6. Subordination of Note Guarantees. The obligations of each
Guaranteeing Subsidiary under its Note Guarantee pursuant to this SECOND
Supplemental Indenture and Article XI of the Indenture shall be junior and
subordinated to the Guarantor Senior Indebtedness of such Guaranteeing
Subsidiary on the same basis as the Notes are junior and subordinated to Senior
Indebtedness. For the purposes of the foregoing sentence, the Trustee and the
Holders shall have the right to receive and/or retain payments by any of the
Guaranteeing Subsidiaries only at such times as they may receive and/or retain
payments in respect of the Notes pursuant to the Indenture, including Article X
of the Indenture.
7. No Recourse Against Others. No past, present or future director,
officer, employee, incorporator, stockholder or agent of either of the
Guaranteeing Subsidiaries, as such, shall have any liability for any obligations
of the Company, any Guarantor or any of the Guaranteeing Subsidiaries under the
Notes, the Subsidiary Guarantees, the Note Guarantees, the Indenture or this
SECOND Supplemental Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of the Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the SEC that such a waiver is against public policy.
8. FIRST SUPPLEMENTAL INDENTURE. THE FIRST SUPPLEMENTAL INDENTURE IS
HEREBY AMENDED AND RESTATED IN ITS ENTIRETY BY THIS SECOND SUPPLEMENTAL
INDENTURE.
9. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SECOND SUPPLEMENTAL INDENTURE BUT
WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT
THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.
10. Counterparts. The parties may sign any number of copies of this
SECOND Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
11. Effect of Headings. The Section headings herein are for convenience
only and shall not affect the construction hereof.
6
<PAGE>
12. The Trustee. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this SECOND
Supplemental Indenture or for or in respect of the recitals contained herein,
all of which recitals are made solely by the Guaranteeing Subsidiaries and the
Company.
IN WITNESS WHEREOF, the parties hereto have caused this SECOND
Supplemental Indenture to be duly executed and attested, all as of the date
first above written.
GUARANTEEING SUBSIDIARIES:
IMS SYSTEMS LIMITED PARTNERSHIP
By: Speedway Motorsports, Inc., its
general partner
By: /s/ William R. Brooks
------------------------------------
Name: William R. Brooks
Title: Vice President
SPEEDWAY SCREEN PRINTING, LLC
By: /s/ William R. Brooks
----------------------------------------
Name: William R. Brooks
Title: Manager
LAS VEGAS MOTOR SPEEDWAY, LLC
By: /s/ William R. Brooks
----------------------------------------
Name: William R. Brooks
Title: Manager
SMI SYSTEMS, LLC
By: /s/ William R. Brooks
----------------------------------------
Name: William R. Brooks
Title: Manager
7
<PAGE>
SPEEDWAY SYSTEMS, LLC
By: IMS Systems Limited Partnership, its sole
manager
By: Speedway Motorsports, Inc., its
general partner
By: /s/ William R. Brooks
--------------------------------
Name: William R. Brooks
Title: Vice President
COMPANY:
SPEEDWAY MOTORSPORTS, INC.
By: /s/ William R. Brooks
-----------------------------------------
Name: William R. Brooks
Title: Vice President
GUARANTORS:
ATLANTA MOTOR SPEEDWAY, INC.
By: /s/ William R. Brooks
-----------------------------------------
Name: William R. Brooks
Title: Vice President
BRISTOL MOTOR SPEEDWAY, INC.
By: /s/ William R. Brooks
-----------------------------------------
Name: William R. Brooks
Title: Vice President
CHARLOTTE MOTOR SPEEDWAY, INC.
By: /s/ William R. Brooks
-----------------------------------------
Name: William R. Brooks
Title: Vice President
8
<PAGE>
SPR ACQUISITION CORPORATION
By: /s/ William R. Brooks
-----------------------------------------
Name: William R. Brooks
Title: Vice President
TEXAS MOTOR SPEEDWAY, INC.
By: /s/ William R. Brooks
-----------------------------------------
Name: William R. Brooks
Title: Vice President
600 RACING, INC.
By: /s/ William R. Brooks
-----------------------------------------
Name: William R. Brooks
Title: Vice President
SONOMA FUNDING CORPORATION
By: /s/ William R. Brooks
-----------------------------------------
Name: William R. Brooks
Title: Vice President
SPEEDWAY CONSULTING & DESIGN, INC.
By: /s/ William R. Brooks
-----------------------------------------
Name: William R. Brooks
Title: Vice President
THE SPEEDWAY CLUB, INC.
By: /s/ William R. Brooks
-----------------------------------------
Name: William R. Brooks
Title: Vice President
INEX CORP.
By: /s/ William R. Brooks
-----------------------------------------
Name: William R. Brooks
Title: Vice President
9
<PAGE>
SPEEDWAY FUNDING CORP.
By: /s/ Joan L. Dobrzynski
-----------------------------------------
Name: Joan L. Dobrzynski
Title: Vice President
TRUSTEE:
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Trustee.
By: /s/ Nancie J. Arvin
-----------------------------------------
Authorized Signatory
10
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPEEDWAY MOTORSPORTS, INC.
$325,000,000
8 1/2% SENIOR SUBORDINATED NOTES DUE 2007
INDENTURE
DATED AS OF MAY 11, 1999
U.S. BANK TRUST NATIONAL ASSOCIATION,
AS TRUSTEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE.............................................................1
Section 1.01. Definitions......................................................................................1
Section 1.02. Incorporation by Reference of Trust Indenture Act...............................................17
Section 1.03. Rules of Construction...........................................................................17
ARTICLE II. THE NOTES............................................................................................18
Section 2.01. Form and Dating.................................................................................18
Section 2.02. Execution and Authentication....................................................................19
Section 2.03. Registrar and Paying Agent......................................................................19
Section 2.04. Paying Agent to Hold Money in Trust.............................................................20
Section 2.05. Holder Lists....................................................................................20
Section 2.06. Transfer and Exchange...........................................................................20
Section 2.07. Replacement Notes...............................................................................33
Section 2.08. Outstanding Notes...............................................................................34
Section 2.09. Treasury Notes..................................................................................34
Section 2.10. Temporary Notes.................................................................................34
Section 2.11. Cancellation....................................................................................35
Section 2.12. Defaulted Interest..............................................................................35
ARTICLE III. REDEMPTION AND PREPAYMENT...........................................................................35
Section 3.01. Notices to Trustee..............................................................................35
Section 3.02. Selection of Notes to Be Redeemed...............................................................36
Section 3.03. Notice of Redemption............................................................................36
Section 3.04. Effect of Notice of Redemption..................................................................37
Section 3.05. Deposit of Redemption Price.....................................................................37
Section 3.06. Notes Redeemed in Part..........................................................................37
Section 3.07. Optional Redemption.............................................................................37
Section 3.08. Mandatory Redemption............................................................................38
ARTICLE IV. COVENANTS............................................................................................38
Section 4.01. Payment of Notes................................................................................38
Section 4.02. Maintenance of Office or Agency.................................................................38
Section 4.03. Reports.........................................................................................39
Section 4.04. Compliance Certificate..........................................................................40
Section 4.05. Taxes...........................................................................................40
Section 4.06. Stay, Extension and Usury Laws..................................................................40
Section 4.07. Restricted Payments.............................................................................41
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries..................................43
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock......................................44
Section 4.10. Asset Sales.....................................................................................45
Section 4.11. Transactions with Affiliates....................................................................49
Section 4.12. Liens...........................................................................................49
Section 4.13. Guarantees of Certain Indebtedness..............................................................50
i
<PAGE>
Section 4.14. Corporate Existence.............................................................................50
Section 4.15. Offer to Repurchase Upon Change of Control......................................................50
Section 4.16. Limitation on Layering..........................................................................51
Section 4.17. Sale and Leaseback Transactions.................................................................51
Section 4.18. Limitation on Issuances and Sales of Capital Stock of Wholly Owned
Subsidiaries.............................................................................52
Section 4.19. Payments for Consent............................................................................52
Section 4.20. Future Guarantors...............................................................................52
Section 4.21. Investment Company Act..........................................................................53
ARTICLE V. SUCCESSORS............................................................................................53
Section 5.01. Merger, Consolidation or Sale of Assets.........................................................53
Section 5.02. Successor Corporation Substituted...............................................................53
ARTICLE VI. DEFAULTS AND REMEDIES................................................................................54
Section 6.01. Events of Default...............................................................................54
Section 6.02. Acceleration....................................................................................56
Section 6.03. Other Remedies..................................................................................56
Section 6.04. Waiver of Past Defaults.........................................................................57
Section 6.05. Control by Majority.............................................................................57
Section 6.06. Limitation on Suits.............................................................................57
Section 6.07. Rights of Holders of Notes to Receive Payment...................................................58
Section 6.08. Collection Suit by Trustee......................................................................58
Section 6.09. Trustee May File Proofs of Claim................................................................58
Section 6.10. Priorities......................................................................................59
Section 6.11. Undertaking for Costs...........................................................................59
Section 6.12. Restoration of Rights and Remedies..............................................................59
Section 6.13. Rights and Remedies Cumulative..................................................................60
Section 6.14. Delay or Omission Not Waiver....................................................................60
ARTICLE VII. TRUSTEE.............................................................................................60
Section 7.01. Duties of Trustee...............................................................................60
Section 7.02. Rights of Trustee...............................................................................61
Section 7.03. Individual Rights of Trustee....................................................................62
Section 7.04. Trustee's Disclaimer............................................................................62
Section 7.05. Notice of Defaults..............................................................................62
Section 7.06. Reports by Trustee to Holders of the Notes......................................................63
Section 7.07. Compensation and Indemnity......................................................................63
Section 7.08. Replacement of Trustee..........................................................................64
Section 7.09. Successor Trustee by Merger, etc................................................................65
Section 7.10. Eligibility; Disqualification...................................................................65
Section 7.11. Preferential Collection of Claims Against Company...............................................66
ARTICLE VIII. LEGAL DEFEASANCE AND COVENANT DEFEASANCE...........................................................66
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance........................................66
Section 8.02. Legal Defeasance and Discharge..................................................................66
Section 8.03. Covenant Defeasance.............................................................................66
Section 8.04. Conditions to Legal or Covenant Defeasance......................................................67
ii
<PAGE>
Section 8.05. Deposited Money and Government Securities to be Held in Trust: Other
Miscellaneous Provisions.................................................................68
Section 8.06. Repayment to Company............................................................................69
Section 8.07. Reinstatement...................................................................................69
ARTICLE IX. AMENDMENT, SUPPLEMENT AND WAIVER.....................................................................70
Section 9.01. Without Consent of Holders of Notes.............................................................70
Section 9.02. With Consent of Holders of Notes................................................................70
Section 9.03. Compliance with Trust Indenture Act.............................................................72
Section 9.04. Revocation and Effect of Consents...............................................................72
Section 9.05. Notation on or Exchange of Notes................................................................72
Section 9.06. Trustee to Sign Amendments, etc.................................................................73
ARTICLE X. SUBORDINATION.........................................................................................73
Section 10.01. Agreement to Subordinate.......................................................................73
Section 10.02. Liquidation; Dissolution; Bankruptcy...........................................................73
Section 10.03. Default on Designated Senior Indebtedness......................................................74
Section 10.04. Acceleration of Notes..........................................................................75
Section 10.05. When Distribution Must Be Paid Over............................................................75
Section 10.06. Notice by Company..............................................................................75
Section 10.07. Subrogation....................................................................................75
Section 10.08. Relative Rights................................................................................76
Section 10.09. Subordination May Not Be Impaired by Company...................................................76
Section 10.10. Distribution or Notice to Representative.......................................................76
Section 10.11. Rights of Trustee and Paying Agent.............................................................76
Section 10.12. Authorization to Effect Subordination..........................................................77
Section 10.13. Amendments.....................................................................................77
ARTICLE XI. SUBSIDIARY GUARANTEES................................................................................77
Section 11.01. Subsidiary Guarantees..........................................................................77
Section 11.02. Execution and Delivery of Subsidiary Guarantee.................................................78
Section 11.03. Guarantors May Consolidate or Merger on Certain Terms..........................................79
Section 11.04. Releases of Subsidiary Guarantees..............................................................79
Section 11.05. Trustee to Include Paying Agent................................................................80
Section 11.06. Subordination of Subsidiary Guarantees.........................................................80
Section 11.07. Unrestricted Subsidiary........................................................................81
Section 11.08. Limits on Subsidiary Guarantees................................................................81
ARTICLE XII. MISCELLANEOUS.......................................................................................81
Section 12.01. Trust Indenture Act Controls...................................................................81
Section 12.02. Notices........................................................................................82
Section 12.03. Communication by Holders of Notes with Other Holders of Notes..................................83
Section 12.04. Certificate and Opinion as to Conditions Precedent.............................................83
Section 12.05. Statements Required in Certificate or Opinion..................................................83
Section 12.06. Rules by Trustee and Agents....................................................................83
Section 12.07. No Personal Liability of Directors, Officers, Employees and Stockholders.......................84
Section 12.08. Governing Law..................................................................................84
iii
<PAGE>
Section 12.09. No Adverse Interpretation of Other Agreements..................................................84
Section 12.10. Successors.....................................................................................84
Section 12.11. Severability...................................................................................84
Section 12.12. Counterpart Originals..........................................................................84
Section 12.13. Table of Contents, Headings, etc...............................................................84
Section 12.14. Further Instruments and Acts...................................................................85
</TABLE>
LIST OF EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM Of CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED
INVESTOR
Exhibit E FORM OF NOTE GUARANTEE
Exhibit F FORM OF SUPPLEMENTAL INDENTURE
iv
<PAGE>
<TABLE>
<CAPTION>
CROSS-REFERENCE TABLE
Reconciliation and tie between the Trust Indenture Act of 1939, as amended, and
the Indenture, dated as of May 11, 1999.
TRUST INDENTURE INDENTURE
ACT SECTION SECTION
- ----------- -------
<S> <C>
ss.310(a)(l) ............................................................................. 7.10
(a)(2) ............................................................................. 7.10
(a)(3) ............................................................................. N.A.
(a)(4) ............................................................................. N.A.
(a)(5) ............................................................................. 7.10
(b) ............................................................................. 7.08; 7.10
(c) ............................................................................. N.A.
ss.311(a) ............................................................................. 7.11
(b) ............................................................................. 7.11
(c) ............................................................................. N.A.
ss.312(a) ............................................................................. 2.05
(b) ............................................................................. 12.03
(c) ............................................................................. 12.03
ss.313(a) ............................................................................. 7.06
(b) ............................................................................. 7.06
(c) ............................................................................. 7.06
(d) ............................................................................. 7.06
ss.314(a) ............................................................................. 4.03
(b) ............................................................................. N.A.
(c)(1) ............................................................................. 12.04
(c)(2) ............................................................................. 12.04
(c)(3) ............................................................................. N.A.
(d) ............................................................................. N.A.
(e) ............................................................................. 12.05
(f) ............................................................................. 12.14
ss.315(a) ............................................................................. 7.01(b)
(b) ............................................................................. 7.05
(c) ............................................................................. 7.01(a)
(d) ............................................................................. 7.01(c)
(e) ............................................................................. 6.11
ss.316(a) ............................................................................. 2.08
(a)(1)(A) ............................................................................. 6.05
(a)(1)(B) ............................................................................. 6.04
(a)(2) ............................................................................. N.A.
(b) ............................................................................. 6.07
(c) ............................................................................. N.A.
ss.317(a)(1) ............................................................................. 6.03; 6.08
(a)(2) ............................................................................. 6.09
(b) ............................................................................. 2.04
ss.318(a) ............................................................................. 12.01
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture.
</TABLE>
<PAGE>
INDENTURE
THIS INDENTURE is dated as of May 11, 1999 (this "Indenture"), by and
among SPEEDWAY MOTORSPORTS, INC., a Delaware corporation (the "Company"), the
corporations listed on the signature pages hereto (each, a "Guarantor" and
collectively, the "Guarantors") and U.S. BANK TRUST NATIONAL ASSOCIATION, as
trustee (the "Trustee").
RECITALS
The Company has duly authorized the creation and issue of its 8 1/2%
Senior Subordinated Notes Due 2007 (the "Initial Notes") of substantially the
tenor and amount hereinafter set forth, and to provide therefor and for, if and
when issued in exchange for the Initial Notes pursuant to this Indenture and the
Registration Rights Agreement (as defined herein), the Company's 8 1/2% Senior
Subordinated Notes Due 2007 (the "Exchange Notes," and together with the Initial
Notes, the "Notes"), the Company has duly authorized the execution and delivery
of this Indenture.
All things necessary to make the Notes, when executed by the Company
and authenticated and delivered by the Trustee hereunder and duly issued by the
Company, the valid obligations of the Company and this Indenture a valid
instrument of the Company, in accordance with their respective terms, have been
done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that, for and in
consideration of the premises and the purchase of the Initial Notes by the
Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Notes, as follows:
ARTICLE I.
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A Global Note" means a global note substantially in the form of
Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend
and deposited with or on behalf of, and registered in the name of, the
Depositary or its nominee that will be issued in a denomination equal to the
outstanding principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Indebtedness" means, with respect to any specified Person,
(i) Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person that was not
incurred in connection with, or in contemplation of, such other Person merging
with or into or becoming a Subsidiary of such specified Person, and (ii)
Indebtedness secured by a Lien encumbering any asset acquired by such specified
Person, and in either case for purposes of this Indenture, shall be deemed to be
Incurred by such specified Person at the time such other Person is merged with
or into or becomes a Subsidiary of
<PAGE>
such specified Person, or at the time such asset is acquired by such specified
Person, as the case may be.
"Additional Notes" means up to $200.0 million in aggregate principal
amount of additional Notes having identical terms and conditions to the Notes
initially issued hereunder that may be issued, subject to the restrictions
contained in the Credit Agreement and under Section 4.09 hereof. For purposes of
this Indenture, any Additional Notes shall be part of the same issue of Notes
initially issued hereunder, and the Holders of any such Additional Notes shall
vote on all matters with the Holders of the Notes initially issued hereunder.
"Affiliate" of any specified Person means (i) any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person or (ii) any other Person who is a director or
executive officer of (a) such specified Person or (b) any Person described in
the preceding clause (i). For purposes of this definition, "control" (including,
with correlative meanings, the terms "controlling," "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED, that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Affiliate Transaction" has the meaning set forth in Section 4.11
hereof.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or exchange
of or for beneficial interests in any Global Note, the rules and procedures of
the Depositary, Euroclear and Cedel that apply to such transfer or exchange.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition
of any assets (including, without limitation, by way of (x) a sale and
leaseback, (y) the sale or other transfer of Equity Interests in or assets of
the Company's Unrestricted Subsidiary or (z) a Like Kind Exchange) other than
sales of inventory in the ordinary course of business consistent with past
practices; PROVIDED, that the sale, lease, conveyance or other disposition of
all or substantially all of the assets of the Company, its Subsidiaries and the
Unrestricted Subsidiary taken as a whole will be governed by Section 4.15 and/or
Sections 5.01 and 5.02 hereof and shall not be deemed to be an "Asset Sale," and
(ii) the issue or sale by the Company or any of its Subsidiaries of Equity
Interests of any of the Company's Subsidiaries, in the case of either clause (i)
or (ii), whether in a single transaction or a series of related transactions (a)
that have a fair market value in excess of $500,000 or (b) for net proceeds in
excess of $500,000. Notwithstanding the foregoing: (i) a transfer of assets by
the Company to a Wholly Owned Subsidiary or by a Wholly Owned Subsidiary to the
Company or to another Wholly Owned Subsidiary, (ii) an issuance of Equity
Interests by a Wholly Owned Subsidiary to the Company or to another Wholly Owned
Subsidiary, and (iii) a Restricted Payment that is permitted by Section 4.07
hereof will not be deemed to be an "Asset Sale."
2
<PAGE>
"Asset Sale Offer" has the meaning set forth in Section 4.10 hereof.
"Attributable Indebtedness" in respect of a sale and leaseback
transaction means, at the time of determination, the present value (discounted
at the rate of interest implicit in such transaction, determined in accordance
with GAAP) of the obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback transaction
(including any period for which such lease has been extended or may, at the
option of the lessor, be extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors as now or hereinafter constituted.
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person, or any authorized committee of such Board of
Directors.
"Broker Dealer" has the meaning set forth in the Registration Rights
Agreement.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interest, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership, partnership
interests (whether general or limited) and (iv) any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than six months from the date of acquisition, (iii) certificates of deposit
and Eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any lender party to the 1997
Credit Facility or with any domestic commercial bank having capital and surplus
in excess of $500 million and a Keefe Bank Watch Rating of "B" or better, (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (ii) and (iii) above entered into
with any financial institution meeting the qualifications specified in clause
(iii) above and (v) commercial paper having the highest rating obtainable from
Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each
case maturing within six months after the date of acquisition.
"Cedel" means Cedel Bank, S.A.
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"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of (A) the Company and its Subsidiaries taken as
a whole to any "person" (as such term is used in Section 13(d)(3) of the
Exchange Act) other than O. Bruton Smith or his Related Parties or Sonic
Financial Corporation or any of their respective Affiliates or (B) Sonic
Financial Corporation to any "person" (as defined above) other than O. Bruton
Smith or his Related Parties or any of their respective Affiliates, (ii) the
adoption of a plan relating to the liquidation or dissolution of the Company or
Sonic Financial Corporation, (iii) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of which
is that (A) any "person" (as defined above), other than O. Bruton Smith or his
Related Parties or Sonic Financial Corporation or any of their respective
Affiliates, becomes the "beneficial owner" (as such term is defined in Rule
13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of more
than 50% of the Voting Stock of the Company or (B) any "person" (as defined
above), other than O. Bruton Smith or his Related Parties or any of their
respective Affiliates, becomes the beneficial owner, directly or indirectly, of
more than 50% of the Voting Stock of Sonic Financial Corporation, (iv) the first
day on which a majority of the members of the Board of Directors of the Company
or Sonic Financial Corporation are not Continuing Directors or (v) a Repurchase
Event occurs under the Convertible Note Indenture.
"Change of Control Offer" has the meaning set forth in Section 4.15
hereof.
"Change of Control Payment" has the meaning set forth in Section 4.15
hereof.
"Change of Control Payment Date" has the meaning set forth in Section
4.15 hereof.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the regulations promulgated and rulings issued thereunder.
"Common Stock" means the common stock, par value $0.01 per share, of
the Company.
"Company" means Speedway Motorsports, Inc., a Delaware corporation.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus (i) an
amount equal to any extraordinary loss plus any net loss realized in connection
with an Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income,
plus (iii) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Indebtedness, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was
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deducted in computing such Consolidated Net Income, plus (iv) depreciation,
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period) and other non-cash charges (excluding any such non-cash charge to the
extent that it represents an accrual of or reserve for cash charges in any
future period or amortization of a prepaid cash expense that was paid in a prior
period) of such Person and its Subsidiaries for such period to the extent that
such depreciation, amortization and other non-cash charges were deducted in
computing such Consolidated Net Income minus (v) non-cash items of such Person
and its Subsidiaries increasing Consolidated Net Income for such period, in each
case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes on the income or profits
of, and the depreciation and amortization and other non-cash charges of, a
Subsidiary of the referent Person shall be added to Consolidated Net Income to
compute Consolidated Cash Flow only to the extent (and in the same proportion)
that the Net Income of such Subsidiary was included in calculating the
Consolidated Net Income of such Person and only if a corresponding amount would
be permitted at the date of determination to be dividended to the Company by
such Subsidiary without prior governmental approval (that has not been
obtained), and without direct or indirect restriction pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that Subsidiary or
its stockholders.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
PROVIDED, that (i) the Net Income (but not loss) of any Person that is not a
Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash to the referent Person or a Wholly Owned Subsidiary thereof, (ii) the Net
Income of any Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary of that Net
Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, (iv) the cumulative effect of a change in
accounting principles shall be excluded and (v) the Net Income of, or any
dividends or other distributions from, the Unrestricted Subsidiary, to the
extent otherwise included, shall be excluded, until distributed in cash to the
Company or one of its Subsidiaries.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-
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ups of tangible assets of a going concern business made within 12 months after
the acquisition of such business) subsequent to the date of this Indenture in
the book value of any asset owned by such Person or a consolidated Subsidiary of
such Person, (y) all investments as of such date in unconsolidated Subsidiaries
and in Persons that are not Subsidiaries (except, in each case, Permitted
Investments), and (z) all unamortized debt discount and expense and unamortized
deferred charges as of such date, all of the foregoing determined in accordance
with GAAP.
"Continuing Directors" means, with respect to any Person as of any date
of determination, any member of the Board of Directors of such Person who (i)
was a member of such Board of Directors on the date of this Indenture or (ii)
was nominated for election or elected to such Board of Directors with the
approval of a majority of the Continuing Directors who were members of such
Board of Directors at the time of such nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 12.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Convertible Note Indenture" means that certain Indenture dated as of
September 1, 1996, between the Company and First Union National Bank of North
Carolina, as trustee, governing the Company's 5 3/4% Convertible Subordinated
Debentures Due 2003.
"Covenant Defeasance" has the meaning set forth in Section 8.03 hereof.
"Credit Agreement" means that certain Credit Agreement dated as of
August 4, 1997, by and among the Company, as borrower, and the lenders named
therein, including NationsBank, N.A., as agent for the lenders and a lender, and
First Union National Bank, as co-agent, including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, and in each case as amended, modified, renewed, refunded, extended,
replaced or refinanced from time to time.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequester or similar official under any Bankruptcy Law.
"Default" means any event that is, or with the passage of time or the
giving of notice, or both, would be an Event of Default.
"Definitive Note" means a Note registered in the name of the Holder
thereof and issued in accordance with Section 2.06 hereof, substantially in the
form of the Notes attached hereto as Exhibit A and that does not include the
information called for by footnotes 1 and 3 thereof.
"Depositary" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depositary with respect to the Notes, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depositary" shall mean or include such successor.
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"Designated Senior Indebtedness" means (i) so long as Senior
Indebtedness is outstanding under the Credit Agreement, all Senior Indebtedness
outstanding under the Credit Agreement and (ii) thereafter, any other Senior
Indebtedness permitted under this Indenture the principal amount of which is
$25.0 million or more and that has been designated by the Company as "Designated
Senior Indebtedness."
"Disqualified Stock" means any Capital Stock which, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature.
"DTC" has the meaning set forth in Section 2.03 hereof.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Event of Default" has the meaning set forth in Section 6.01 hereof.
"Excess Proceeds" has the meaning set forth in Section 4.10(b) hereof.
"Exchange Notes" has the meaning set forth in the Recitals.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries in existence on the date of this Indenture.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the offer that may be made by the Company
pursuant to the Registration Rights Agreement to exchange Exchange Notes for
Initial Notes.
"Exchange Offer Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
"Fixed Charges" means, with respect to any Person for any period, the
sum of (i) the consolidated interest expense of such Person and its Subsidiaries
for such period, whether paid or accrued (including, without limitation,
amortization of original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, imputed interest with
respect to Attributable Indebtedness, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations) and (ii)
the consolidated interest expense of such Person and its
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Subsidiaries that was capitalized during such period, and (iii) any interest
expense on Indebtedness of another Person that is guaranteed by such Person or
one of its Subsidiaries or secured by a Lien on assets of such Person or one of
its Subsidiaries (whether or not such guarantee or Lien is called upon) and (iv)
the product of (a) all cash dividend payments (and non-cash dividend payments in
the case of a Person that is a Subsidiary) on any series of preferred stock of
such Person, times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state and
local statutory tax rate of such Person, expressed as a decimal, in each case,
on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Subsidiaries incurs, assumes, guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving PRO FORMA effect
to such incurrence, assumption, guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that have
been made by the Company or any of its Subsidiaries, including through mergers
or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (iii) of
the proviso set forth in the definition of Consolidated Net Income, and (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Subsidiaries following
the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of this Indenture.
"Global Note" means a Note that contains the paragraph referred to in
footnote 1 and the additional schedule referred to in footnote 3 to the form of
the Note attached hereto as Exhibit A.
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<PAGE>
"Global Note Legend" means the legend set forth in Section 2.06(g)(ii),
which is required to be placed on all Global Notes issued under this Indenture.
"Government Securities" means: (i) securities that are (a) direct
obligations of the United States of America for the payment of which the full
faith and credit of the United States of America is pledged or (b) obligations
of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America, which, in either case, are not callable or redeemable at the
option of the issuer thereof; and (ii) depositary receipts issued by a bank (as
defined in Section 3(a)(2) of the Securities Act) as custodian with respect to
any Government Security which is specified in clause (i) above and held by such
bank for the account of the holder of such depositary receipt, or with respect
to any specific payment of principal or interest on any Government Security
which is so specified and held; PROVIDED, that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depositary receipt from any amount received by the custodian in
respect of the Government Security or the specific payment of principal or
interest of the Government Security evidenced by such depositary receipt.
"Guarantee" or "guarantee" (unless the context requires otherwise)
means a guarantee (other than by endorsement of negotiable instruments for
collection in the ordinary course of business), direct or indirect, in any
manner (including, without limitation, letters of credit and reimbursement
agreements in respect thereof), of all or any part of any Indebtedness. The term
"guarantee" used as a verb shall have a correlative meaning.
"Guarantor" means (i) each of the Company's Subsidiaries which becomes
a guarantor of the Notes pursuant to Article XI and (ii) each of the Company's
Subsidiaries executing a supplemental indenture in which such Subsidiary agrees
to be bound by the terms of this Indenture; PROVIDED, that any Person
constituting a Guarantor as described above shall cease to constitute a
Guarantor when its respective Subsidiary Guarantee is released in accordance
with the terms hereof.
"Guarantor Senior Indebtedness" means, with respect to any Guarantor,
(i) the guarantee of such Guarantor of the Company's Obligations under the
Credit Agreement and (ii) any other Indebtedness permitted to be incurred by
such Guarantor under the terms of this Indenture, unless the instrument under
which such Indebtedness is incurred expressly provides that it is on a parity
with or subordinated in right of payment to the Guarantee of such Guarantor.
Notwithstanding anything to the contrary in the foregoing, Guarantor Senior
Indebtedness will not include (u) any Indebtedness of such Guarantor
representing a guarantee of Indebtedness of the Company or any other Guarantor
which is subordinate or junior to, or PARI PASSU with, the Notes or the
Subsidiary Guarantee of such other Guarantor, as the case may be, (v) any
Indebtedness that is expressly subordinate or junior in right of payment to any
other Indebtedness of such Guarantor, (w) any liability for federal, state,
local or other taxes owed or owing by such Guarantor, (x) any Indebtedness of
such Guarantor to any of its Subsidiaries or other Affiliates, (y) any trade
payables or (z) that portion of any Indebtedness that is incurred in violation
of this Indenture.
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"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates and the value of foreign currencies purchased by the Company
or any of its Subsidiaries in the ordinary course of business.
"Holder" means a Person in whose name one of the Notes is registered.
"IA1 Global Note" mean the global Note substantially in the form of
Exhibit A1 hereto bearing the Global Note Legend and the Private Placement
Legend and deposited with or on behalf of and registered in the name of the
Depositary or its nominee that will be issued in a denomination equal to the
outstanding principal amount of the Notes sold to Institutional Accredited
Investors."
"incur" has the meaning set forth in Section 4.09 hereof.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, as well as all indebtedness of
others secured by a Lien on any asset of such Person (whether or not such
indebtedness is assumed by such Person) and, to the extent not otherwise
included, the guarantee by such Person of any indebtedness of any other Person.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Independent" means, with respect to the Company and its Subsidiaries,
any person who (i) is in fact independent, (ii) does not directly or indirectly
have any material financial interest in the Company or any of its Subsidiaries,
or in any Affiliate of the Company or any of its Subsidiaries (other than as a
result of holding securities of the Company) and (iii) is not an officer,
employee, promoter, underwriter, trustee, partner or person performing similar
functions for the Company or any of its Subsidiaries.
"Indirect Participant" means a Person who holds a beneficial interest
in a Global Note through a Participant.
"Initial Notes" has the meaning set forth in the Recitals.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.
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"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP;
PROVIDED, that an acquisition of assets, Equity Interests or other securities by
the Company for consideration consisting of common equity securities of the
Company shall not be deemed to be an Investment.
"Legal Defeasance" has the meaning set forth in Section 8.02 hereof.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be prepared
by the Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Like Kind Exchange" means the exchange pursuant to Section 1031 of the
Code of (i) any real property (other than any speedway that is owned on or
acquired after the date of this Indenture by the Company or any Subsidiary) used
or to be used in connection with the business of the Company or (ii) any other
real property to be used in connection with the business of the Company.
"Liquidated Damages" means all liquidated damages then owing pursuant
to Section 5 of the Registration Rights Agreement.
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries and
(ii) any extraordinary or nonrecurring gain (but not loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (but not
loss).
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"Net Proceeds" means the aggregate cash proceeds (or in the case of any
Asset Sale involving the Unrestricted Subsidiary, the amount of such aggregate
cash proceeds that equals the aggregate amount of all Restricted Investments in
the Unrestricted Subsidiary that have not been repaid prior to the date of such
Asset Sale) received by the Company or any of its Subsidiaries in respect of any
Asset Sale (including, without limitation, any cash received upon the sale or
other disposition of any non-cash consideration received in any Asset Sale), net
of the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees and sales commissions), any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), and any reserve for adjustment in
respect of the sale price of such asset or assets established in accordance with
GAAP. Notwithstanding the foregoing, in the event the Company or any of its
Subsidiaries engages in a Like Kind Exchange, Net Proceeds shall not include any
cash proceeds with respect to such Like Kind Exchange that are reinvested in or
used to purchase pursuant to Section 1031 of the Code like kind real property
used or to be used in the business of the Company.
"Non-Recourse Debt" means Indebtedness: (i) as to which neither the
Company nor any of its Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against the Unrestricted Subsidiary) would permit (upon
notice or lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its Stated Maturity.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Note" or "Notes" have the meaning set forth in the Recitals.
"Note Custodian" means the Trustee, as custodian with respect to the
Global Notes, or any successor entity thereto.
"Obligations" means any principal, interest, premium, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offer Amount" has the meaning set forth in Section 4.10(c) hereof.
"Offer Period" has the meaning set forth in Section 4.10(c) hereof.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice-President of such Person.
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"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 12.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
12.05 hereof. The counsel may be an employee of or counsel to the Company or the
Trustee.
"Participant" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to DTC, shall include Euroclear and Cedel).
"Paying Agent" has the meaning set forth in Section 2.03 hereof.
"Payment Blockage Notice" has the meaning set forth in Section 10.03
hereof.
"Permitted Investments" means: (i) any Investment in the Company or in
a Wholly Owned Subsidiary of the Company; (ii) any Investment in Cash
Equivalents; (iii) any Investment by the Company or any Subsidiary of the
Company in a Person, if as a result of such Investment (y) such Person becomes a
Wholly Owned Subsidiary of the Company or (z) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a Wholly Owned
Subsidiary of the Company; and (iv) any Restricted Investment made as a result
of the receipt of non-cash consideration from an Asset Sale that was made
pursuant to and in compliance with Section 4.10 hereof.
"Permitted Liens" means: (i) Liens on assets of the Company securing
Senior Indebtedness and Liens on assets of a Guarantor securing Guarantor Senior
Indebtedness of such Guarantor; PROVIDED, that such Senior Indebtedness or
Guarantor Senior Indebtedness, as the case may be, was permitted by the terms of
this Indenture to be incurred; (ii) Liens in favor of the Company; (iii) Liens
on property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Subsidiary of the Company, PROVIDED that
such Liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the Person
merged into or consolidated with the Company; (iv) Liens on property existing at
the time of acquisition thereof by the Company or any Subsidiary of the Company,
PROVIDED that such Liens were in existence prior to the contemplation of such
acquisition; (v) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business; (vi) Liens relating to judgments to
the extent permitted under this Indenture; and (vii) Liens existing on the date
of this Indenture.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Subsidiaries; PROVIDED, that: (i) the
principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount (or accreted
value, if
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applicable) of the Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded (plus the amount of reasonable expenses incurred in
connection therewith); (ii) such Permitted Refinancing Indebtedness has a final
maturity date no earlier than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; (iii) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of payment to
the Notes, such Permitted Refinancing Indebtedness is subordinated in right of
payment to the Notes on terms at least as favorable to the Holders of Notes as
those contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness
is incurred either by the Company or by the Subsidiary which is the obligor on
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Person" means any individual, corporation, limited or general
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or agency or any political subdivision
thereof (including any subdivision or ongoing business of any such entity or
substantially all of the assets of any such entity, subdivision or business).
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
"Purchase Date" has the meaning set forth in Section 4.10(c) hereof.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Registrar" has the meaning set forth in Section 2.03 hereof.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of May 11, 1999, by and among the Company and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time.
"Regulations S" means Regulation S promulgated under the Securities
Act.
"Regulation S Global Note" means a Global Note bearing the Private
Placement Legend and deposited with or on behalf of the Depositary and
registered in the name of the Depositary or its nominee, issued in a
denomination equal to the outstanding principal amount of the Notes initially
sold in reliance on Rule 903 of Regulation 903 of Regulation S.
"Related Parties" means, when used with respect to any individual: the
spouse, lineal descendants, parents and siblings of any such individual; the
estates, heirs, legatees and legal representatives of any such individual and
any of the foregoing; and all trusts established by any such individual and any
of the foregoing for estate planning purposes of which any such individual and
any of the foregoing are the sole beneficiaries or grantors.
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"Representative" means the indenture trustee or other trustee, agent or
representative for any Senior Indebtedness.
"Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer or employee to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend.
"Restricted Payments" has the meaning set forth in Section 4.07 hereof.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means (i) Indebtedness under the Credit Agreement
(including interest in respect thereof accruing after the commencement of any
bankruptcy or similar proceeding to the extent that such interest is allowable
as a bankruptcy claim in such proceeding) and (ii) any other Indebtedness
permitted to be incurred by the Company under the terms of this Indenture,
unless the instrument under which such Indebtedness is incurred expressly
provides that it is on a parity with or subordinated in right of payment to the
Notes. Notwithstanding anything to the contrary in the foregoing, Senior
Indebtedness will not include (v) any Indebtedness that is expressly subordinate
or junior in right of payment to any other Indebtedness of the Company, (w) any
liability for federal, state, local or other taxes owed or owing by the Company,
(x) any Indebtedness of the Company to any of its Subsidiaries, the Unrestricted
Subsidiary or other Affiliates, (y) any trade payables or (z) that portion of
Indebtedness that is incurred in violation of this Indenture.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
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"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"Stated Maturity" means, with respect to any payment of interest on or
principal of any Indebtedness, the date on which such payment was scheduled to
be made in the documentation governing such Indebtedness without regard to the
occurrence of any subsequent event or contingency.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership of which (a) the sole general partner or the
managing general partner is such Person or a Subsidiary of such Person or (b)
the only general partners are such Person or of one or more Subsidiaries of such
Person (or any combination thereof). Notwithstanding the foregoing, the
Unrestricted Subsidiary shall not, while designated as an unrestricted
subsidiary under Section 11.07 hereof, be a Subsidiary of the Company for any
purposes of this Indenture.
"Subsidiary Guarantee" means, individually and collectively, the
guarantees given by the Guarantors pursuant to Article XI hereof, including a
notation in the Notes substantially in the form included in Exhibit A.
"TIA" means the Trust Indenture Act of 1939 (15
U.S.C.ss.ss.77aaa-77bbbb) as in effect on the date on which this Indenture is
qualified under the TIA.
"Transfer Restricted Securities" means securities that bear or are
required to bear the legend set forth in Section 2.06(g) hereof.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Definitive Note" means one or more Definitive Notes that
do not bear and are not required to bear the Private Placement Legend.
"Unrestricted Global Note" means a permanent Global Note substantially
in the form of Exhibit A attached hereto that bears the Global Note Legend and
that has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on behalf of and registered in the name
of the Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Subsidiary" means Oil-Chem Research Corp. and its
Subsidiaries taken as a whole.
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"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"Voting Stock" means, with respect to any Person as of any date, the
Capital Stock of such Person that is at the time entitled to vote in the
election of the Board of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person or by
such Person and one or more Wholly Owned Subsidiaries of such Person.
Notwithstanding the foregoing, the Unrestricted Subsidiary shall not, while
designated as an unrestricted subsidiary under Section 11.07 hereof, be included
in the definition of Wholly Owned Subsidiary for any purposes of this Indenture.
SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes and the Subsidiary Guarantees;
"indenture security Holder" means a Holder of a Note;
"indenture to be Qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Company and any successor obligor upon
the Notes or any Guarantor.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.03. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
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(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the
plural include the singular;
(e) provisions apply to successive events and transactions;
and
(f) references to sections of or rules under the Securities
Act shall be deemed to include substitute, replacement of successor
sections or rules adopted by the SEC from time to time.
ARTICLE II.
THE NOTES
SECTION 2.01. FORM AND DATING.
-----------------
(a) General. The Notes and the certificate of authentication of
the Trustee thereon shall be substantially in the form included in Exhibit A
hereto, which is incorporated in and expressly made a part of this Indenture.
The Subsidiary Guarantees shall be substantially in the form of Exhibit E
hereto, the terms of which are incorporated in and made part of this Indenture.
However, to the extent any provision of any Note conflicts with the express
provisions of this Indenture, the provisions of this Indenture shall govern and
be controlling. The Notes may have notations, legends or endorsements required
by law, stock exchange rule or usage. Each Note shall be dated the date of its
authentication. The Notes shall be in denominations of $1,000 and integral
multiples thereof.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture and the Company, the
Guarantors and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby.
(b) Global Notes. Notes issued in global form shall be
substantially in the form of Exhibit A attached hereto (including the text
referred to in footnotes 1 and 3 thereto). Notes issued in certificated form
shall be substantially in the form of Exhibit A attached hereto (but without
including the text referred to in footnotes 1 and 3 thereto). Each Global Note
shall represent such of the outstanding Notes as shall be specified therein and
each shall provide that it shall represent the aggregate amount of outstanding
Notes from time to time endorsed thereon and that the aggregate amount of
outstanding Notes represented thereby may from time to time be reduced or
increased, as appropriate, to reflect exchanges and redemptions. Any endorsement
of a Global Note to reflect the amount of any increase or decrease in the amount
of outstanding Notes represented thereby shall be made by the Trustee or the
Note Custodian, at the direction of
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the Trustee, in accordance with instructions given by the Holder thereof as
required by Section 2.06 hereof.
(c) Euroclear and Cedel Procedures Applicable. The provisions of
the "Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in Global Notes that are held by Participants through
Euroclear or Cedel Bank.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
------------------------------
Two Officers shall sign the Notes for the Company by manual or
facsimile signature. If an Officer whose signature is on a Note no longer holds
that office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Note has
been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers ("Authentication Order"), authenticate Notes for original issue up to
the aggregate principal amount stated in paragraph 4 of the Notes. The aggregate
principal amount of Notes outstanding at any time may not exceed such amount
except as provided in Sections 2.07 and 9.01(f) hereof. The Trustee may appoint
an authenticating agent acceptable to the Company to authenticate Notes. An
authenticating agent may authenticate Notes whenever the Trustee may do so. Each
reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as an
Agent to deal with the Company or an Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
----------------------------
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall notify
the Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Note Custodian with respect to the Global Notes.
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SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
-------------------------------------
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Notes, and
will notify the Trustee of any default by the Company or any Guarantor in making
any such payment. While any such default continues, the Trustee may require a
Paying Agent to pay all money held by it to the Trustee. The Company at any time
may require a Paying Agent to pay all money held by it to the Trustee. Upon
payment over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money received from the
Company or a Subsidiary. If the Company or a Subsidiary acts as Paying Agent, it
shall segregate and hold in a separate trust fund for the benefit of the Holders
all money held by it as Paying Agent. Upon any bankruptcy or reorganization
proceedings relating to the Company or a Guarantor, the Trustee shall serve as
Paying Agent for the Notes.
SECTION 2.05. HOLDER LISTS.
--------------
(a) The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the
names and addresses of all Holders and shall otherwise comply with TIA
ss. 312(a). If the Trustee is not the Registrar, the Company shall, or
shall cause the Registrar to, furnish to the Trustee at least seven
Business Days before each interest payment date, and at such other
times as the Trustee may request in writing, a list in such form and as
of such date as the Trustee may reasonably require of the names and
addresses of the Holders of Notes and the Company and the Guarantors
shall otherwise comply with TIA ss. 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
-----------------------
(a) Transfer and Exchange of Global Notes. A Global Note may
not be transferred as a whole except by the Depositary to a nominee of
the Depositary, by a nominee of the Depositary to the Depositary or to
another nominee of the Depositary, or by the Depositary or any such
nominee to a successor Depositary or a nominee of such successor
Depositary. All Global Notes will be exchanged by the Company for
Definitive Notes if (i) the Company delivers to the Trustee notice from
the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under
the Exchange Act and, in either case, a successor Depositary is not
appointed by the Company within 120 days after the date of such notice
from the Depositary or (ii) the Company in its sole discretion
determines that the Global Notes (in whole but not in part) should be
exchanged for Definitive Notes and delivers a written notice to such
effect to the Trustee. Upon the occurrence of either of the preceding
events in (i) or (ii) above, Definitive Notes shall be issued in such
names as the Depositary shall instruct the Trustee. Global Notes also
may be exchanged or replaced, in whole or in part, as provided in
Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered
in exchange for, or in lieu of, a Global Note or any portion
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thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof,
shall be authenticated and delivered in the form of, and shall be, a
Global Note. A Global Note may not be exchanged for another Note other
than as provided in this Section 2.06(a), however, beneficial interests
in a Global Note may be transferred and exchanged as provided in
Section 2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the
Global Notes. The transfer and exchange of beneficial interests in the
Global Notes shall be effected through the Depositary, in accordance
with the provisions of this Indenture and the Applicable Procedures.
Beneficial interests in the Restricted Global Notes shall be subject to
restrictions on transfer comparable to those set forth herein to the
extent required by the Securities Act. Transfers of beneficial
interests in the Global Notes also shall require compliance with either
subparagraph (i) or (ii) below, as applicable, as well as one or more
of the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same
Global Note. Beneficial interests in any Restricted Global
Note may be transferred to Persons who take delivery thereof
in the form of a beneficial interest in the same Restricted
Global Note in accordance with the transfer restrictions set
forth in the Private Placement Legend. Beneficial interests in
any Unrestricted Global Note may be transferred to Persons who
take delivery thereof in the form of a beneficial interest in
an Unrestricted Global Note. No written orders or instructions
shall be required to be delivered to the Registrar to effect
the transfers described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial
Interests in Global Notes. In connection with all transfers
and exchanges of beneficial interests that are not subject to
Section 2.06(b)(i) above, the transferor of such beneficial
interest must deliver to the Registrar either (A) (1) a
written order from a Participant or an Indirect Participant
given to the Depositary in accordance with the Applicable
Procedures directing the Depositary to credit or cause to be
credited a beneficial interest in another Global Note in an
amount equal to the beneficial interest to be transferred or
exchanged and (2) instructions given in accordance with the
Applicable Procedures containing information regarding the
Participant account to be credited with such increase or (B)
(1) a written order from a Participant or an Indirect
Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to cause to be
issued a Definitive Note in an amount equal to the beneficial
interest to be transferred or exchanged and (2) instructions
given by the Depositary to the Registrar containing
information regarding the Person in whose name such Definitive
Note shall be registered to effect the transfer or exchange
referred to in (1) above. Upon consummation of an Exchange
Offer by the Company in accordance with Section 2.06(f)
hereof, the requirements of this Section 2.06(b)(ii) shall be
deemed to have been satisfied upon receipt by the Registrar of
the instructions contained in the Letter of Transmittal
delivered by the Holder of such beneficial interests in the
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Restricted Global Notes. Upon satisfaction of all of the
requirements for transfer or exchange of beneficial interests
in Global Notes contained in this Indenture and the Notes or
otherwise applicable under the Securities Act, the Trustee
shall adjust the principal amount of the relevant Global
Note(s) pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another
Restricted Global Note. A beneficial interest in any
Restricted Global Note may be transferred to a Person who
takes delivery thereof in the form of a beneficial interest in
another Restricted Global Note if the transfer complies with
the requirements of Section 2.06(b)(ii) above and the
Registrar receives the following:
(A) if the transferee will take delivery in
the form of a beneficial interest in the 144A Global
Note, then the transferor must deliver a certificate
in the form of Exhibit B hereto, including the
certifications in item (1) thereof;
(B) if the transferee will take delivery in
the form of a beneficial interest in the Regulation S
Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto,
including the certifications in item (2) thereof; and
(C) if the transferee will take delivery in
the form of a beneficial interest in the IAI Global
Note, then the transferor must deliver a certificate
in the form of Exhibit B hereto, including the
certifications and certificates and Opinion of
Counsel required by item (3) thereof, if applicable.
(iv) Transfer and Exchange of Beneficial Interests in
a Restricted Global Note for Beneficial Interests in the
Unrestricted Global Note. A beneficial interest in any
Restricted Global Note may be exchanged by any holder thereof
for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form
of a beneficial interest in an Unrestricted Global Note if the
exchange or transfer complies with the requirements of Section
2.06(b)(ii) above and:
(A) such exchange or transfer is effected
pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the holder of the
beneficial interest to be transferred, in the case of
an exchange, or the transferee, in the case of a
transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a
Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate
(as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to
the Shelf Registration Statement in accordance with
the Registration Rights Agreement;
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(C) such transfer is effected by a
Broker-Dealer pursuant to the Exchange Offer
Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global Note
proposes to exchange such beneficial
interest for a beneficial interest in an
Unrestricted Global Note, a certificate from
such holder in the form of Exhibit C hereto,
including the certifications in item (1)(a)
thereof; or
(2) if the holder of such beneficial
interest in a Restricted Global Note
proposes to transfer such beneficial
interest to a Person who shall take delivery
thereof in the form of a beneficial interest
in an Unrestricted Global Note, a
certificate from such holder in the form of
Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued, the
Company shall issue and, upon receipt of an Authentication Order in accordance
with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be exchanged
for, or transferred to Persons who take delivery thereof in the form of, a
beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for
Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes
to Restricted Definitive Notes. If any holder of a beneficial
interest in a Restricted Global Note proposes to exchange such
beneficial interest for a Restricted Definitive Note or to
transfer such beneficial interest to a Person who takes
delivery thereof in the form of a Restricted Definitive Note,
then, upon receipt by the Registrar of the following
documentation:
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(A) if the holder of such beneficial
interest in a Restricted Global Note proposes to
exchange such beneficial interest for a Restricted
Definitive Note, a certificate from such holder in
the form of Exhibit C hereto, including the
certifications in item (2)(a) thereof;
(B) if such beneficial interest is being
transferred to a QIB in accordance with Rule 144A
under the Securities Act, a certificate to the effect
set forth in Exhibit B hereto, including the
certifications in item (1) thereof;
(C) if such beneficial interest is being
transferred to a Non-U.S. Person in an offshore
transaction in accordance with Rule 903 or Rule 904
under the Securities Act, a certificate to the effect
set forth in Exhibit B hereto, including the
certifications in item (2) thereof;
(D) if such beneficial interest is being
transferred pursuant to an exemption from the
registration requirements of the Securities Act in
accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (3)(a)
thereof;
(E) if such beneficial interest is being
transferred to an Institutional Accredited Investor
in reliance on an exemption from the registration
requirements of the Securities Act other than those
listed in subparagraphs (B) through (D) above, a
certificate to the effect set forth in Exhibit B
hereto, including the certifications, certificates
and Opinion of Counsel required by item (3) thereof,
if applicable;
(F) such beneficial interest is being
transferred to the Company or any of its
Subsidiaries, a certificate to the effect set forth
in Exhibit B hereto, including the certifications in
item (3)(b) thereof; or
(G) if such beneficial interest is being
transferred pursuant to an effective registration
statement under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including
the certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable Global
Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the
Company shall execute and the Trustee shall authenticate and deliver to the
Person designated in the instructions a Definitive Note in the appropriate
principal amount. Any Definitive Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be
registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct the
Registrar through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Definitive Notes to the
Persons in whose names such Notes are so registered. Any Definitive Note issued
in exchange
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for a beneficial interest in a Restricted Global Note pursuant to this Section
2.06(c)(i) shall bear the Private Placement Legend and shall be subject to all
restrictions on transfer contained therein.
(ii) Beneficial Interests in Restricted Global Notes
to Unrestricted Definitive Notes. A holder of a beneficial
interest in a Restricted Global Note may exchange such
beneficial interest for an Unrestricted Definitive Note or may
transfer such beneficial interest to a Person who takes
delivery thereof in the form of an Unrestricted Definitive
Note only if:
(A) such exchange or transfer is effected
pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the holder of such
beneficial interest, in the case of an exchange, or
the transferee, in the case of a transfer, certifies
in the applicable Letter of Transmittal that it is
not (1) a broker-dealer, (2) a Person participating
in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144)
of the Company;
(B) such transfer is effected pursuant to
the Shelf Registration Statement in accordance with
the Registration Rights Agreement;
(C) such transfer is effected by a
Broker-Dealer pursuant to the Exchange Offer
Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global Note
proposes to exchange such beneficial
interest for a Definitive Note that does not
bear the Private Placement Legend, a
certificate from such holder in the form of
Exhibit C hereto, including the
certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial
interest in a Restricted Global Note
proposes to transfer such beneficial
interest to a Person who shall take delivery
thereof in the form of a Definitive Note
that does not bear the Private Placement
Legend, a certificate from such holder in
the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if
the Registrar so requests or if the Applicable Procedures so
require, an Opinion of Counsel in form reasonably acceptable
to the Registrar to the effect that such exchange or transfer
is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
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<PAGE>
(iii) Beneficial Interests in Unrestricted Global
Notes to Unrestricted Definitive Notes. If any holder of a
beneficial interest in an Unrestricted Global Note proposes to
exchange such beneficial interest for a Definitive Note or to
transfer such beneficial interest to a Person who takes
delivery thereof in the form of a Definitive Note, then, upon
satisfaction of the conditions set forth in Section
2.06(b)(ii) hereof, the Trustee shall cause the aggregate
principal amount of the applicable Global Note to be reduced
accordingly pursuant to Section 2.06(h) hereof, and the
Company shall execute and the Trustee shall authenticate and
deliver to the Person designated in the instructions a
Definitive Note in the appropriate principal amount. Any
Definitive Note issued in exchange for a beneficial interest
pursuant to this Section 2.06(c)(iii) shall be registered in
such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall
instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The
Trustee shall deliver such Definitive Notes to the Persons in
whose names such Notes are so registered. Any Definitive Note
issued in exchange for a beneficial interest pursuant to this
Section 2.06(c)(iii) shall not bear the Private Placement
Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial
Interests.
(i) Restricted Definitive Notes to Beneficial
Interests in Restricted Global Notes. If any Holder of a
Restricted Definitive Note proposes to exchange such Note for
a beneficial interest in a Restricted Global Note or to
transfer such Restricted Definitive Notes to a Person who
takes delivery thereof in the form of a beneficial interest in
a Restricted Global Note, then, upon receipt by the Registrar
of the following documentation:
(A) the Holder of such Restricted Definitive
Note proposes to exchange such Note for a beneficial
interest in a Restricted Global Note, a certificate
from such Holder in the form of Exhibit C hereto,
including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is
being transferred to a QIB in accordance with Rule
144A under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;
(C) if such Restricted Definitive Note is
being transferred to a Non-U.S. Person in an offshore
transaction in accordance with Rule 903 or Rule 904
under the Securities Act, a certificate to the effect
set forth in Exhibit B hereto, including the
certifications in item (2) thereof;
(D) if such Restricted Definitive Note is
being transferred pursuant to an exemption from the
registration requirements of the Securities Act in
accordance with Rule 144 under the Securities Act, a
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<PAGE>
certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (3)(a)
thereof;
(E) if such Restricted Definitive Note is
being transferred to an Institutional Accredited
Investor in reliance on an exemption from the
registration requirements of the Securities Act other
than those listed in subparagraphs (B) through (D)
above, a certificate to the effect set forth in
Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item
(3) thereof, if applicable;
(F) if such Restricted Definitive Note is
being transferred to the Company or any of its
Subsidiaries, a certificate to the effect set forth
in Exhibit B hereto, including the certifications in
item (3)(b) thereof; or
(G) if such Restricted Definitive Note is
being transferred pursuant to an effective
registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (3)(c)
thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or cause to be
increased the aggregate principal amount of, in the case of clause (A) above,
the appropriate Restricted Global Note, in the case of clause (B) above, the
144A Global Note, in the case of clause (C) above, the Regulation S Global Note,
and in all other cases, the IAI Global Note.
(ii) Restricted Definitive Notes to Beneficial
Interests in Unrestricted Global Notes. A Holder of a
Restricted Definitive Note may exchange such Note for a
beneficial interest in an Unrestricted Global Note or transfer
such Restricted Definitive Note to a Person who takes delivery
thereof in the form of a beneficial interest in an
Unrestricted Global Note only if:
(A) such exchange or transfer is effected
pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the Holder, in the
case of an exchange, or the transferee, in the case
of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a
Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate
(as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to
the Shelf Registration Statement in accordance with
the Registration Rights Agreement;
(C) such transfer is effected by a
Broker-Dealer pursuant to the Exchange Offer
Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
27
<PAGE>
(1) if the Holder of such Definitive
Notes proposes to exchange such Notes for a
beneficial interest in the Unrestricted
Global Note, a certificate from such Holder
in the form of Exhibit C hereto, including
the certifications in item (1)(c) thereof;
or
(2) if the Holder of such Definitive
Notes proposes to transfer such Notes to a
Person who shall take delivery thereof in
the form of a beneficial interest in the
Unrestricted Global Note, a certificate from
such Holder in the form of Exhibit B hereto,
including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the
subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel the
Definitive Notes and increase or cause to be increased the aggregate
principal amount of the Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial
Interests in Unrestricted Global Notes. A Holder of an
Unrestricted Definitive Note may exchange such Note for a
beneficial interest in an Unrestricted Global Note or transfer
such Definitive Notes to a Person who takes delivery thereof
in the form of a beneficial interest in an Unrestricted Global
Note at any time. Upon receipt of a request for such an
exchange or transfer, the Trustee shall cancel the applicable
Unrestricted Definitive Note and increase or cause to be
increased the aggregate principal amount of one of the
Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a beneficial
interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above
at a time when an Unrestricted Global Note has not yet been issued, the Company
shall issue and, upon receipt of an Authentication Order in accordance with
Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted
Global Notes in an aggregate principal amount equal to the principal amount of
Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive
Notes. Upon request by a Holder of Definitive Notes and such Holder's
compliance with the provisions of this Section 2.06(e), the Registrar
shall register the transfer or exchange of Definitive Notes. Prior to
such registration of transfer or exchange, the requesting Holder shall
present or surrender to the Registrar the Definitive Notes duly
endorsed or accompanied by a written instruction of transfer in form
satisfactory to the Registrar duly executed by such Holder or by its
attorney, duly authorized in writing. In addition, the
28
<PAGE>
requesting Holder shall provide any additional certifications,
documents and information, as applicable, required pursuant to the
following provisions of this Section 2.06(e).
(i) Restricted Definitive Notes to Restricted
Definitive Notes. Any Restricted Definitive Note may be
transferred to and registered in the name of Persons who take
delivery thereof in the form of a Restricted Definitive Note
if the Registrar receives the following:
(A) if the transfer will be made pursuant to
Rule 144A under the Securities Act, then the
transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in
item (1) thereof;
(B) if the transfer will be made pursuant to
Rule 903 or Rule 904, then the transferor must
deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (2)
thereof; and
(C) if the transfer will be made pursuant to
any other exemption from the registration
requirements of the Securities Act, then the
transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item
(3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted
Definitive Notes. Any Restricted Definitive Note may be
exchanged by the Holder thereof for an Unrestricted Definitive
Note or transferred to a Person or Persons who take delivery
thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected
pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the Holder, in the
case of an exchange, or the transferee, in the case
of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a
Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate
(as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant
to the Shelf Registration Statement in accordance
with the Registration Rights Agreement;
(C) any such transfer is effected by a
Broker-Dealer pursuant to the Exchange Offer
Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
29
<PAGE>
(1) if the Holder of such Restricted
Definitive Notes proposes to exchange such
Notes for an Unrestricted Definitive Note, a
certificate from such Holder in the form of
Exhibit C hereto, including the
certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted
Definitive Notes proposes to transfer such
Notes to a Person who shall take delivery
thereof in the form of an Unrestricted
Definitive Note, a certificate from such
Holder in the form of Exhibit B hereto,
including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph
(D), if the Registrar so requests, an Opinion of
Counsel in form reasonably acceptable to the Company
to the effect that such exchange or transfer is in
compliance with the Securities Act and that the
restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in
order to maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted
Definitive Notes. A Holder of Unrestricted Definitive Notes
may transfer such Notes to a Person who takes delivery thereof
in the form of an Unrestricted Definitive Note. Upon receipt
of a request to register such a transfer, the Registrar shall
register the Unrestricted Definitive Notes pursuant to the
instructions from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer
in accordance with the Registration Rights Agreement, the Company shall
issue and, upon receipt of an Authentication Order in accordance with
Section 2.02, the Trustee shall authenticate (i) one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of the beneficial interests in the Restricted Global
Notes tendered for acceptance by Persons that certify in the applicable
Letters of Transmittal that (x) they are not broker-dealers, (y) they
are not participating in a distribution of the Exchange Notes and (z)
they are not affiliates (as defined in Rule 144) of the Company, and
accepted for exchange in the Exchange Offer and (ii) Definitive Notes
in an aggregate principal amount equal to the principal amount of the
Restricted Definitive Notes accepted for exchange in the Exchange
Offer. Concurrently with the issuance of such Notes, the Trustee shall
cause the aggregate principal amount of the applicable Restricted
Global Notes to be reduced accordingly, and the Company shall execute
and the Trustee shall authenticate and deliver to the Persons
designated by the Holders of Definitive Notes so accepted Definitive
Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of
all Global Notes and Definitive Notes issued under this Indenture
unless specifically stated otherwise in the applicable provisions of
this Indenture.
(i) Private Placement Legend.
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<PAGE>
(A) Except as permitted by subparagraph (B)
below, each Global Note and each Definitive Note (and
all Notes issued in exchange therefor or substitution
thereof) shall bear the legend in substantially the
following form :
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933
(THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY
NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM
THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH
SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
BY THE INITIAL PURCHASERS TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, PURCHASING
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 144A UNDER THE SECURITIES ACT, OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
APPLICABLE) OR IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED
UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), TO THE
COMPANY OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
AND, IN ADDITION, TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A
TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND BY SUBSEQUENT INVESTORS, AS SET FORTH IN
THROUGH ABOVE AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY OTHER APPLICABLE JURISDICTION AND THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF
THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET
FORTH ABOVE. NO REPRESENTATION CAN BE MADE AS TO THE
AVAILABILITY OF THE
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EXEMPTION PROVIDED BY RULE 144 FOR RESALE OF THE SECURITY
EVIDENCED HEREBY."
(B) Notwithstanding the foregoing, any
Global Note or Definitive Note issued pursuant to
subparagraphs (b)(iv), (c)(ii), (c)(iii), (d)(ii),
(d)(iii), (e)(ii), (e)(iii) or (f) to this Section
2.06 (and all Notes issued in exchange therefor or
substitution thereof) shall not bear the Private
Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear
a legend in substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY
BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY
BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE
INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE
MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF
THE COMPANY."
(h) Cancellation and/or Adjustment of Global Notes. At such
time as all beneficial interests in a particular Global Note have been
exchanged for Definitive Notes or a particular Global Note has been
redeemed, repurchased or canceled in whole and not in part, each such
Global Note shall be returned to or retained and canceled by the
Trustee in accordance with Section 2.11 hereof. At any time prior to
such cancellation, if any beneficial interest in a Global Note is
exchanged for or transferred to a Person who will take delivery thereof
in the form of a beneficial interest in another Global Note or for
Definitive Notes, the principal amount of Notes represented by such
Global Note shall be reduced accordingly and an endorsement shall be
made on such Global Note by the Trustee or by the Depositary at the
direction of the Trustee to reflect such reduction; and if the
beneficial interest is being exchanged for or transferred to a Person
who will take delivery thereof in the form of a beneficial interest in
another Global Note, such other Global Note shall be increased
accordingly and an endorsement shall be made on such Global Note by the
Trustee or by the Depositary at the direction of the Trustee to reflect
such increase.
(i) General Provisions Relating to Transfers and Exchanges.
-----------------------------------------------------------
(i) To permit registrations of transfers and
exchanges, the Company shall execute and the Trustee shall
authenticate Global Notes and Definitive Notes upon the
Company's order or at the Registrar's request.
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<PAGE>
(ii) No service charge shall be made to a holder of a
beneficial interest in a Global Note or to a Holder of a
Definitive Note for any registration of transfer or exchange,
but the Company may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable
in connection therewith (other than any such transfer taxes or
similar governmental charge payable upon exchange or transfer
pursuant to Sections 2.11, 3.07, 3.08, 4.10, 4.15, 9.03 and
9.05 hereof).
(iii) The Registrar shall not be required to register
the transfer of or exchange any Note selected for redemption
in whole or in part, except the unredeemed portion of any Note
being redeemed in part.
(iv) All Global Notes and Definitive Notes issued
upon any registration of transfer or exchange of Global Notes
or Definitive Notes shall be the valid obligations of the
Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Global Notes or
Definitive Notes surrendered upon such registration of
transfer or exchange.
(v) The Company shall not be required (A) to issue,
to register the transfer of or to exchange any Notes during a
period beginning at the opening of business 15 days before the
day of any selection of Notes for redemption under Section
3.02 hereof and ending at the close of business on the day of
selection, (B) to register the transfer of or to exchange any
Note so selected for redemption in whole or in part, except
the unredeemed portion of any Note being redeemed in part or
(C) to register the transfer of or to exchange a Note between
a record date and the next succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of
a transfer of any Note, the Trustee, any Agent and the Company
may deem and treat the Person in whose name any Note is
registered as the absolute owner of such Note for the purpose
of receiving payment of principal of and interest on such
Notes and for all other purposes, and none of the Trustee, any
Agent or the Company shall be affected by notice to the
contrary.
(vii) The Trustee shall authenticate Global Notes and
Definitive Notes in accordance with the provisions of Section
2.02 hereof.
(viii) All certifications, certificates and Opinions
of Counsel required to be submitted to the Registrar pursuant
to this Section 2.06 to effect a registration of transfer or
exchange may be submitted by facsimile.
SECTION 2.07. REPLACEMENT NOTES.
-------------------
If any mutilated Note is surrendered to the Trustee, or the Company and
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, the Company shall issue and the Trustee, upon the written
order of the Company signed by two Officers of the
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Company, shall authenticate a replacement Note if the Trustee's requirements are
met. If required by the Trustee or the Company, an indemnity bond must be
supplied by the Holder that is sufficient in the judgment of the Trustee and the
Company to protect the Company, the Trustee, any Agent and any authenticating
agent from any loss that any of them may suffer if a Note is replaced. The
Company may charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
-------------------
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note
does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note.
If a Note is replaced pursuant to Section 2.07 hereof, such Note ceases
to be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.01 hereof, the Note ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
SECTION 2.09. TREASURY NOTES.
----------------
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, any Guarantor or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company, shall
be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes that a Trustee knows are so owned shall
be so disregarded.
SECTION 2.10. TEMPORARY NOTES.
----------------
Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes upon a written order of the
Company signed by two Officers of the Company. Temporary Notes shall be
substantially in the form of definitive Notes but may
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<PAGE>
have variations that the Company considers appropriate for temporary Notes and
as shall be reasonably acceptable to the Trustee. Without unreasonable delay,
the Company shall prepare and the Trustee shall authenticate definitive Notes in
exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
SECTION 2.11. CANCELLATION.
--------------
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee (and no one else) shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all cancelled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it has
paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
--------------------
If the Company defaults in a payment of interest on the Notes, the
Company shall pay the defaulted interest in any lawful manner plus, to the
extent lawful, interest payable on the defaulted interest, to the Persons who
are Holders on a subsequent special record date, in each case at the rate
provided in the Notes and in Section 4.01 hereof, and such defaulted interest
shall cease to be payable to the Persons who were Holders on the relevant
regular record date. The Company shall notify the Trustee in writing of the
amount of defaulted interest proposed to be paid on each Note and the date of
the proposed payment. The Company shall fix or cause to be fixed each such
special record date and payment date; PROVIDED, that no such special record date
shall be less than 10 days prior to the related payment date for such defaulted
interest. At least 15 days before the special record date, the Company (or, upon
the written request of the Company, the Trustee in the name and at the expense
of the Company) shall mail or cause to be mailed to Holders a notice that states
the special record date, the related payment date and the amount of such
interest to be paid.
ARTICLE III.
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
--------------------
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, the Company shall furnish to the
Trustee, at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Notes to be redeemed and (iv) the redemption price.
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SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
-----------------------------------
If less than all of the Notes are to be redeemed at any time, the
Trustee shall select the Notes to be redeemed among the Holders of the Notes in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not so listed, on a
PRO RATA basis, by lot or in accordance with any other method the Trustee
considers fair and appropriate. In the event of partial redemption by lot, the
particular Notes to be redeemed shall be selected, unless otherwise provided
herein, not less than 30 nor more than 60 days prior to the redemption date by
the Trustee from the outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or integral multiples thereof;
PROVIDED, that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
----------------------
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail or cause to be mailed, by first class mail, a notice of
redemption to each Holder whose Notes are to be redeemed at its registered
address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
redemption date upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion shall be issued upon
cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such
redemption payment, interest on Notes called for redemption ceases to
accrue on and after the redemption date;
(g) the paragraph of the Notes and/or Section of this
Indenture pursuant to which the Notes called for redemption are being
redeemed; and
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(h) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed
on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; PROVIDED, HOWEVER, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
--------------------------------
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.05.DEPOSIT OF REDEMPTION PRICE.
----------------------------
One Business Day prior to the redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess of
the amounts necessary to pay the redemption price of, and accrued interest on,
all Notes to be redeemed.
If the Company complies with the provisions of the preceding paragraph,
on and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note is redeemed on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest shall be paid to the Person in whose name
such Note was registered at the close of business on such record date. If any
Note called for redemption shall not be so paid upon surrender for redemption
because of the failure of the Company to comply with the preceding paragraph,
interest shall be paid on the unpaid principal, from the redemption date until
such principal is paid, and to the extent lawful on any interest not paid on
such unpaid principal, in each case at the rate provided in the Notes and in
Section 4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
------------------------
Upon surrender of a Note that is redeemed in part, the Company shall
issue and, upon the Company's written request, the Trustee shall authenticate
for the Holder at the expense of the Company a new Note equal in principal
amount to the unredeemed portion of the Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
---------------------
(a) The Company shall not have the option to redeem the Notes
pursuant to this Section 3.07 prior to August 15, 2002. Thereafter, the
Company shall have the
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option to redeem the Notes, in whole or in part, at the redemption
prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the applicable redemption date, if redeemed during the 12-month
period beginning on August 15 of the years indicated below:
YEAR PERCENTAGE
----- --------
2002....................................................... 104.250%
2003....................................................... 102.830%
2004....................................................... 101.420%
2005 and thereafter ....................................... 100.000%
(b) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
---------------------
Except as set forth under Sections 4.10 and 4.15 hereof, the Company
shall not be required to make mandatory redemption or sinking fund payments with
respect to the Notes.
ARTICLE IV.
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
------------------
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due. The Company shall pay all
Liquidated Damages, if any, in the same manner on the dates and in the amounts
set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Notes to the
extent lawful. The Company shall pay interest (including post-petition interest
in any proceeding under any Bankruptcy Law) on overdue installments of interest
and Liquidated Damages (without regard to any applicable grace period) at the
same rate to the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
---------------------------------
The Company shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and
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where notices and demands to or upon the Company in respect of the Notes and
this Indenture may be served. The Company shall give prompt written notice to
the Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee.
The Company also from time to time may designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and from time to time may rescind such designations; PROVIDED,
HOWEVER, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company shall give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee
as one such office or agency of the Company in accordance with Section 2.03.
SECTION 4.03. REPORTS.
--------
(a) Whether or not required by the rules and regulations of
the SEC, so long as any Notes are outstanding, the Company shall
furnish to the Trustee and to all Holders within 15 days after it is or
would have been required to file such with the SEC (i) all quarterly
and annual financial information that would be required to be contained
in a filing with the SEC on Forms 10-Q and 10-K if the Company were
required to file such forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with
respect to the annual information only, a report thereon by the
Company's certified independent accountants and (ii) all current
reports that would be required to be filed with the SEC on Form 8-K if
the Company were required to file such reports. In addition, whether or
not required by the rules and regulations of the SEC, at any time after
the Company files a registration statement with respect to the Exchange
Offer or a Shelf Registration Statement (as defined in the Registration
Rights Agreement), the Company shall file a copy of all such
information and reports with the SEC for public availability (unless
the SEC will not accept such filing) and shall promptly make such
information available to all securities analysts and prospective
investors who request it in writing. The Company and the Guarantors
shall at all times comply with TIA ss. 314(a). Notwithstanding anything
to the contrary set forth in this Section 4.03, the Trustee shall have
no duty to review the reports required to be provided by this Section
4.03 for purposes of determining compliance with any provisions of this
Indenture.
(b) For so long as any Notes remain outstanding, the Company
and the Guarantors shall furnish to all Holders and prospective
purchasers of the Notes designated by the Holders of Notes, promptly
upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act.
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SECTION 4.04. COMPLIANCE CERTIFICATE.
-----------------------
(a) The Company shall deliver to the Trustee, within 90 days
after the end of each fiscal year, an Officers' Certificate stating
that a review of the activities of the Company and its Subsidiaries
during the preceding fiscal year has been made under the supervision of
the signing Officers with a view to determining whether the Company has
kept, observed, performed and fulfilled its obligations under this
Indenture and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge the Company has
kept, observed, performed and fulfilled each and every covenant
contained in this Indenture and is not in default in the performance or
observance of any of the terms, provisions and conditions of this
Indenture (or, if a Default or Event of Default shall have occurred,
describing all such Defaults or Events of Default of which he or she
may have knowledge and what action the Company is taking or proposes to
take with respect thereto) and that to the best of his or her knowledge
no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the
Notes is prohibited or if such event has occurred, a description of the
event and what action the Company is taking or proposes to take with
respect thereto.
(b) So long as not contrary to the then current
recommendations of the American Institute of Certified Public
Accountants, the year-end financial statements delivered pursuant to
Section 4.03(a) above shall be accompanied by a written statement of
the Company's independent public accountants (who shall be a firm of
established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has
come to their attention that would lead them to believe that the
Company has violated any provisions of Article IV or Article V hereof
or, if any such violation has occurred, specifying the nature and
period of existence thereof, it being understood that such accountants
shall not be liable directly or indirectly to any Person for any
failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are
outstanding, deliver to the Trustee, forthwith upon the Company or any
Officer becoming aware of any Default or Event of Default, an Officers'
Certificate specifying such Default or Event of Default and what action
the Company is taking or proposes to take with respect thereto.
SECTION 4.05. TAXES.
-------
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies,
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Notes.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
------------------------------
The Company and each Guarantor covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the
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benefit or advantage of, any stay, extension or usury law wherever enacted, now
or at any time hereafter in force, that may affect the covenants or the
performance of this Indenture; and the Company and each Guarantor (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law, and covenants that it shall not, by resort to any such law,
hinder, delay or impede the execution of any power herein granted to the
Trustee, but shall suffer and permit the execution of every such power as though
no such law has been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
-------------------
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly: (i) declare or pay any dividend or make any other
payment or distribution on account of the Equity Interests of the Company or any
of its Subsidiaries (including, without limitation, any payment in connection
with any merger or consolidation involving the Company or any of its
Subsidiaries) or to the direct or indirect holders of the Equity Interests of
the Company or any of its Subsidiaries in their capacity as such (other than
dividends or distributions payable in Equity Interests (other than Disqualified
Stock) of the Company, dividends or distributions payable to the Company or any
Subsidiary of the Company or dividends or distributions made by a Subsidiary of
the Company to all holders of its Common Stock on a PRO RATA basis); (ii)
purchase, redeem or otherwise acquire or retire for value any Equity Interests
of the Company, any Subsidiary of the Company, the Unrestricted Subsidiary or
any direct or indirect parent of the Company (other than any such Equity
Interests owned by the Company or any Subsidiary of the Company); (iii) make any
principal payment on, or purchase, redeem, defease or otherwise acquire or
retire for value any Indebtedness that is subordinated to the Notes (other than
the Notes), except at Stated Maturity; or (iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment
and after giving PRO FORMA effect thereto as if such Restricted Payment
had been made at the beginning of the applicable four-quarter period,
have been permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of Section 4.09 of this Indenture; and
(c) such Restricted Payment, together with the aggregate of
all other Restricted Payments made by the Company and its Subsidiaries
after the date of this Indenture (excluding Restricted Payments
permitted by clauses (v), (w) and (x) of the next succeeding
paragraph), is less than the sum of (i) 50% of the Consolidated Net
Income of the Company for the period (taken as one accounting period)
commencing April 1, 1997 to the end of the Company's most recently
ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit), plus (ii) 100% of the aggregate net cash proceeds and the
fair market value, as determined
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<PAGE>
in good faith by the Board of Directors of the Company, of marketable
securities received by the Company from the issue or sale since the
date of this Indenture of Equity Interests of the Company or of debt
securities of the Company that have been converted into such Equity
Interests (other than Equity Interests (or convertible debt securities)
sold to a Subsidiary of the Company or the Unrestricted Subsidiary and
other than Disqualified Stock or debt securities that have been
converted into Disqualified Stock), plus (iii) to the extent that any
Restricted Investment that was made after the date of this Indenture is
sold for cash or otherwise liquidated or repaid for cash, the lesser of
(A) the cash return of capital with respect to such Restricted
Investment (less the cost of disposition, if any) and (B) the initial
amount of such Restricted Investment, plus (iv) the amount resulting
from designation of the Unrestricted Subsidiary as a Subsidiary or the
Unrestricted Subsidiary ceasing to be an unrestricted subsidiary for
purposes of this Indenture (such amount to be valued as provided in the
second succeeding paragraph) not to exceed the amount of Investments
previously made by the Company or any Subsidiary in the Unrestricted
Subsidiary and which was, while the Unrestricted Subsidiary was treated
as an unrestricted subsidiary for purposes of this Indenture, treated
as a Restricted Payment under this Indenture.
The foregoing provisions will not prohibit: (u) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of this
Indenture; (v) the redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Company in exchange for, or out of the proceeds of,
the substantially concurrent sale (other than to a Subsidiary of the Company or
the Unrestricted Subsidiary) of other Equity Interests of the Company (other
than any Disqualified Stock); PROVIDED, that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase, retirement or
other acquisition shall be excluded from clause (c) (ii) of the preceding
paragraph; (w) the defeasance, redemption or repurchase of PARI PASSU or
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness or the substantially concurrent sale (other
than to a Subsidiary of the Company or the Unrestricted Subsidiary) of Equity
Interests of the Company (other than Disqualified Stock); PROVIDED, that the
amount of any such net cash proceeds that are utilized for any such redemption,
repurchase, retirement or other acquisition shall be excluded from clause (c)
(ii) of the preceding paragraph; (x) the making of any Restricted Investments
after the date of this Indenture not exceeding in the aggregate $25.0 million;
and (y) the repurchase, redemption or other acquisition or retirement for value
of any Equity Interests of the Company or any Subsidiary of the Company held by
any member of the Company's (or any of its Subsidiaries') management pursuant to
any management equity subscription agreement or stock option agreement;
PROVIDED, that (A) the aggregate price paid for all such repurchased, redeemed,
acquired or retired Equity Interests shall not exceed $1.0 million in any
12-month period plus the aggregate cash proceeds received by the Company during
such 12-month period from any reissuance of Equity Interests by the Company to
members of management of the Company and its Subsidiaries, and (B) no Default or
Event of Default shall have occurred and be continuing immediately after such
transaction.
42
<PAGE>
In connection with the designation of the Unrestricted Subsidiary as a
Subsidiary or the Unrestricted Subsidiary ceasing to be an unrestricted
subsidiary for purposes of this Indenture, all outstanding Investments
previously made by the Company or any Subsidiary in the Unrestricted Subsidiary
will be deemed to constitute Investments in an amount equal to the greater of
(x) the net book value of such Investments at the time of such designation or
the Unrestricted Subsidiary ceasing to be an unrestricted subsidiary for
purposes of this Indenture and (y) the fair market value of such Investments at
the time of such designation or the Unrestricted Subsidiary ceasing to be an
unrestricted subsidiary for purposes of this Indenture.
The amount of all Restricted Payments (other than cash) shall be the
fair market value (evidenced by a resolution of the Board of Directors of the
Company set forth in an Officers' Certificate delivered to the Trustee) on the
date of the Restricted Payment of the asset(s) proposed to be transferred by the
Company or such Subsidiary, as the case may be, pursuant to the Restricted
Payment. Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.07 were computed, which calculations may
be based upon the Company's latest available financial statements.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
--------------------------------------------------------------
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any Subsidiary to
(i)(a) pay dividends or make any other distributions to the Company or any of
its Subsidiaries (1) on its Capital Stock or (2) with respect to any other
interest or participation in, or measured by, its profits, or (b) pay any
indebtedness owed to the Company or any of its Subsidiaries, (ii) make loans or
advances to the Company or any of its Subsidiaries or (iii) transfer any of its
properties or assets to the Company or any of its Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) applicable law,
(b) this Indenture, (c) the Credit Agreement as in effect on the date of this
Indenture (and thereafter only to the extent such encumbrances or restrictions
are no more restrictive than those in effect under the Credit Agreement as in
effect on the date of this Indenture), (d) Existing Indebtedness, (e) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness was incurred in connection with or in
contemplation of such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired, (f) customary
non-assignment provisions in leases entered into in the ordinary course of
business and consistent with past practices, (g) purchase money obligations for
property acquired in the ordinary course of business that impose restrictions of
the nature described in clause (iii) above on the property so acquired, or (h)
Permitted Refinancing Indebtedness; PROVIDED, that the restrictions contained in
the agreements governing such Permitted Refinancing Indebtedness are no more
restrictive than those contained in the agreements governing the Indebtedness
being refinanced.
43
<PAGE>
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
-----------------------------------------------------------
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Indebtedness) and
that the Company will not issue any Disqualified Stock and will not permit any
of its Subsidiaries to issue any shares of preferred stock; PROVIDED, HOWEVER,
that (x) the Company may incur Indebtedness (including Acquired Indebtedness) or
issue shares of Disqualified Stock and (y) a Guarantor may incur Acquired
Indebtedness, in each case if the Fixed Charge Coverage Ratio for the Company's
most recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would have been at
least 2.0 to 1.0 prior to and including December 31, 1998 and 2.25 to 1.0 after
January 1, 1999, determined on a PRO FORMA basis (including a PRO FORMA
application of the net proceeds therefrom), as if the additional Indebtedness
had been incurred, or the Disqualified Stock had been issued, as the case may
be, at the beginning of such four-quarter period.
The foregoing provisions will not apply to:
(i) the incurrence by the Company of Indebtedness
under the Credit Agreement (and guarantees thereof by the
Guarantors) in an aggregate principal amount at any time
outstanding (with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of
the Company and its Subsidiaries thereunder) not to exceed
$175.0 million less the aggregate amount of all Net Proceeds
of Asset Sales applied to permanently reduce the commitments
with respect to such Indebtedness pursuant to Section 4.10
hereof;
(ii) the incurrence by the Company of Indebtedness
represented by the Notes, excluding any Additional Notes, and
the incurrence by the Guarantors of Indebtedness represented
by the Subsidiary Guarantees;
(iii) the incurrence by the Company or any of its
Subsidiaries of Indebtedness represented by Capital Lease
Obligations (whether or not incurred pursuant to sale and
leaseback transactions), mortgage financings or purchase money
obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment
used in the business of the Company or such Subsidiary, in an
aggregate principal amount not to exceed $10.0 million at any
time outstanding;
(iv) the incurrence by the Company or any of its
Subsidiaries of Permitted Refinancing Indebtedness in exchange
for, or the net proceeds of which are used to extend,
refinance, renew, replace, defease or refund, Existing
Indebtedness or Indebtedness that was permitted by this
Indenture to be incurred (other than any such Indebtedness
incurred pursuant to clause (i), (iii), (v), (vi), (vii),
(viii), (ix) or (x) of this paragraph);
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(v) the incurrence by the Company or any of its
Wholly Owned Subsidiaries of intercompany Indebtedness between
or among the Company and any of its Wholly Owned Subsidiaries;
PROVIDED, HOWEVER, that (i) if the Company is the obligor on
such Indebtedness, such Indebtedness is expressly subordinate
to the payment in full of all Obligations with respect to the
Notes and (ii)(A) any subsequent issuance or transfer of
Equity Interests that results in any such Indebtedness being
held by a Person other than the Company or a Wholly Owned
Subsidiary and (B) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a
Wholly Owned Subsidiary shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company
or such Subsidiary, as the case may be;
(vi) the incurrence by the Company of Hedging
Obligations that are incurred for the purpose of fixing or
hedging interest rate risk with respect to Indebtedness that
is permitted by the terms of this Indenture to be incurred;
(vii) the incurrence by the Company of Hedging
Obligations under currency exchange agreements; PROVIDED, that
such agreements were entered into in the ordinary course of
business;
(viii) the incurrence of Indebtedness of a Guarantor
represented by guarantees of Indebtedness of the Company that
has been incurred in accordance with the terms of this
Indenture;
(ix) Indebtedness for letters of credit relating to
workers' compensation claims and self-insurance or similar
requirements in the ordinary course of business; and
(x) the incurrence by the Company of Indebtedness (in
addition to Indebtedness permitted by any other clause of this
paragraph) in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding not to exceed
$15.0 million.
SECTION 4.10. ASSET SALES.
------------
(a) The Company will not, and will not permit any of its
Subsidiaries to, consummate an Asset Sale unless (i) the Company (or
the Subsidiary, as the case may be) receives consideration at the time
of such Asset Sale at least equal to the fair market value (evidenced
by a resolution of the Board of Directors of the Company, set forth in
an Officers' Certificate delivered to the Trustee, or by an independent
appraisal by an accounting, appraisal or investment banking firm of
national standing) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) at least 75% of the consideration
therefor received by the Company or such Subsidiary is in the form of
cash or Cash Equivalents; PROVIDED, HOWEVER, that (x) clause (ii) of
this paragraph shall not apply to any Asset Sale involving the
Company's Unrestricted Subsidiary and (y) this paragraph shall not
apply to any Like Kind Exchange.
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(b) Within 365 days after the receipt of any Net Proceeds from
an Asset Sale, the Company may apply such Net Proceeds, at its option,
(i) to permanently reduce Senior Indebtedness (and correspondingly
reduce commitments with respect thereto in the case of any reduction of
borrowings under the Credit Agreement), (ii) to the acquisition of a
controlling interest in another business, the making of a capital
expenditure or the acquisition of other long-term assets, in each case,
in the same or a similar line of business as the Company was engaged in
on the date of this Indenture or (iii) to reimburse the Company or its
Subsidiaries for expenditures made, and costs incurred, to repair,
rebuild, replace or restore property subject to loss, damage or taking
to the extent that the Net Proceeds consist of insurance proceeds
received on account of such loss, damage or taking. Pending the final
application of any such Net Proceeds, the Company may temporarily
reduce Senior Indebtedness or otherwise invest such Net Proceeds in any
manner that is not prohibited by this Indenture. Any Net Proceeds from
Asset Sales that are not applied or invested as provided in the first
sentence of this clause (b) will be deemed to constitute "Excess
Proceeds." Within in five days of when the aggregate amount of Excess
Proceeds exceeds $5.0 million, the Company shall make an Asset Sale
Offer to purchase the maximum principal amount of Notes that may be
purchased out of the Excess Proceeds, at an offer price in cash in an
amount equal to 100% of the principal amount thereof plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the date of
purchase, in accordance with the procedures set forth in this
Indenture. To the extent that the aggregate amount of Notes tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company may use any remaining Excess Proceeds for general corporate
purposes. If the aggregate principal amount of Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee
shall select the Notes to be purchased on a PRO RATA basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds
shall be reset at zero.
Notwithstanding the foregoing, the Company and its
Subsidiaries will be permitted to consummate one or more Asset Sales
with respect to assets or properties with an aggregate fair market
value (evidenced by a resolution of the Board of Directors set forth in
an Officers' Certificate delivered to the Trustee) not in excess of
$7.5 million with respect to all such Asset Sales made subsequent to
the date of this Indenture without complying with the provisions of
clause (a) of this Section 4.10 or of the immediately preceding
paragraph.
In the event of the transfer of substantially all (but not
all) of the property and assets of the Company as an entirety to a
Person in a transaction permitted under Section 5.01 hereof, the
successor corporation shall be deemed to have sold the properties and
assets of the Company not so transferred for purposes of this covenant
and shall comply with the provisions of this covenant with respect to
such deemed sale as if it were an Asset Sale. In addition, the fair
market value of such properties and assets of the Company or its
Subsidiaries deemed to be sold shall be deemed to be Net Proceeds for
purposes of this covenant.
46
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If at any time any non-cash consideration received by the
Company in connection with any Asset Sale is converted into or sold or
otherwise disposed of for cash, then such conversion or disposition
shall be deemed to constitute an Asset Sale hereunder and the Net
Proceeds thereof shall be applied in accordance with this covenant.
(c) In the event that, pursuant to Section 4.10(b) hereof, the
Company shall be required to commence an offer to all Holders to
purchase Notes (an "Asset Sale Offer"), the Company shall follow the
procedures specified below.
The Asset Sale Offer shall remain open for a period of 20
Business Days following its commencement and no longer, except to the
extent that a longer period is required by applicable law (the "Offer
Period"). No later than five Business Days after the termination of the
Offer Period (the "Purchase Date"), the Company shall purchase the
principal amount of Notes required to be purchased pursuant to Section
4.10(b) hereof (the "Offer Amount") or, if less than the Offer Amount
has been tendered, all Notes tendered in response to the Asset Sale
Offer. Payment for any Notes so purchased shall be made in the same
manner as interest payments are made. If the Purchase Date is on or
after an interest record date and on or before the related interest
payment date, any accrued and unpaid interest shall be paid to the
Person in whose name a Note is registered at the close of business on
such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company
shall send, by first class mail, a notice to the Trustee and each of
the Holders, with a copy to the Trustee. The notice shall contain all
instructions and materials necessary to enable such Holders to tender
Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be
made to all Holders. The notice, which shall govern the terms of the
Asset Sale Offer, shall state:
(i) that the Asset Sale Offer is being made pursuant
to this Section 4.10 and the length of time the Asset Sale
Offer shall remain open;
(ii) the Offer Amount, the purchase price and the
Purchase Date;
(iii) that any Note not tendered or accepted for
payment shall continue to accrue interest;
(iv) that, unless the Company defaults in making such
payment, any Note accepted for payment pursuant to the Asset
Sale Offer shall cease to accrue interest after the Purchase
Date;
(v) that Holders electing to have a Note purchased
pursuant to an Asset Sale Offer may only elect to have all of
such Note purchased and may not elect to have only a portion
of such Note purchased;
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(vi) that Holders electing to have a Note purchased
pursuant to any Asset Sale Offer shall be required to
surrender the Note, with the form entitled "Option of Holder
to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Company, a depository,
if appointed by the Company, or a Paying Agent at the address
specified in the notice at least three days before the
Purchase Date;
(vii) that Holders shall be entitled to withdraw
their election if the Company, the depository or the Paying
Agent, as the case may be, receives, not later than the
expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder,
the principal amount of the Note the Holder delivered for
purchase and a statement that such Holder is withdrawing his
election to have such Note purchased;
(viii) that, if the aggregate principal amount of
Notes surrendered by Holders exceeds the Offer Amount, the
Company shall select the Notes to be purchased on a PRO RATA
basis (with such adjustments as may be deemed appropriate by
the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(ix) that Holders whose Notes were purchased only in
part shall be issued new Notes equal in principal amount to
the unpurchased portion of the Notes surrendered (or
transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the
extent lawful, accept for payment, on a PRO RATA basis to the extent
necessary, the Offer Amount of Notes or portions thereof tendered
pursuant to the Asset Sale Offer, or if less than the Offer Amount has
been tendered, all Notes tendered, and shall deliver to the Trustee an
Officers' Certificate stating that such Notes or portions thereof were
accepted for payment by the Company in accordance with the terms of
this Section 4.10. The Company, the Depository or the Paying Agent, as
the case may be, shall promptly (but in any case not later than five
days after the Purchase Date) mail or deliver to each tendering Holder
an amount equal to the purchase price of the Notes tendered by such
Holder and accepted by the Company for purchase, and the Company shall
promptly issue a new Note, and the Trustee, upon written request from
the Company shall authenticate and mail or deliver such new Note to
such Holder, in a principal amount equal to any unpurchased portion of
the Note surrendered. Any Note not so accepted shall be promptly mailed
or delivered by the Company to the Holder thereof. The Company shall
publicly announce the results of the Asset Sale Offer on the Purchase
Date.
Other than as specifically provided in this Section 4.10, any
purchase pursuant to this Section 4.10 shall be made pursuant to the
provisions of Sections 3.01 through 3.06 hereof.
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(d) The Company will comply with the requirements of Section
14(e) of, and Rule 14e-1, under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of Notes
pursuant to an Asset Sale Offer.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
----------------------------
The Company will not, and will not permit any of its Subsidiaries to,
make any payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that
are no less favorable to the Company or the relevant Subsidiary than those that
would have been obtained in a comparable transaction by the Company or such
Subsidiary with an unrelated Person, (ii) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $2.5 million, the Company delivers to the Trustee a
resolution of the Board of Directors of the Company set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors of the Company or, if there are
no such disinterested directors, by a majority of the members of the Board of
Directors of the Company and (iii) with respect to any Affiliate Transaction or
series of related Affiliate Transactions involving aggregate consideration in
excess of $10.0 million, the Company delivers to the Trustee an opinion as to
the fairness to the Holders of Notes of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or investment banking
firm of national standing; PROVIDED, that (w) any issuance of securities, or
other payments, awards or grants in cash, securities or otherwise pursuant to,
or the funding of, employment arrangements, stock options and stock ownership
plans approved by the Board of Directors of the Company or the payment of fees
and indemnities of directors of the Company and its Subsidiaries in the ordinary
course of business and consistent with the past practices of the Company or such
Subsidiary, (x) loans or advances to employees in the ordinary course of
business, (y) transactions between or among the Company and/or its Wholly Owned
Subsidiaries and (z) Restricted Payments (other than Restricted Investments)
that are permitted by the provisions of Section 4.07 hereof, in each case, shall
not be deemed Affiliate Transactions.
SECTION 4.12. LIENS.
-------
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or suffer to exist any Lien
securing Indebtedness on any asset now owned or hereafter acquired, or any
income or profits therefrom or assign or convey any right to receive income
therefrom, except Permitted Liens, unless all payments due under this Indenture
and the Notes are secured on an equal and ratable basis with the Indebtedness so
secured until such time as such Indebtedness is no longer secured by a Lien;
PROVIDED, that if such Indebtedness is by its terms expressly subordinated to
the Notes or any Subsidiary Guarantee, the Lien securing such Indebtedness shall
be subordinate and junior to the Lien
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securing the Notes and the Subsidiary Guarantees with the same relative priority
as such subordinate or junior Indebtedness shall have with respect to the Notes
and the Subsidiary Guarantees.
SECTION 4.13. GUARANTEES OF CERTAIN INDEBTEDNESS.
----------------------------------
The Company will not permit any of its Subsidiaries that is not a
Guarantor to incur, guarantee or secure through the granting of Liens the
payment of any Senior Indebtedness, and the Company will not, and will not
permit any of its Subsidiaries to, pledge any intercompany notes representing
obligations of any of its Subsidiaries, to secure the payment of any Senior
Indebtedness, in each case unless such Subsidiary, the Company and the Trustee
execute and deliver a supplemental indenture to this Indenture evidencing such
Subsidiary's Subsidiary Guarantee (providing for the unconditional guarantee by
such Subsidiary, on a senior subordinated basis, of the Notes).
SECTION 4.14. CORPORATE EXISTENCE.
-------------------
Subject to Article V hereof, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect (a) its
corporate existence, and the corporate, partnership or other existence of each
of its Subsidiaries, in accordance with the respective organizational documents
(as the same may be amended from time to time) of the Company or any such
Subsidiary and (b) the rights (charter and statutory), licenses and franchises
of the Company and its Subsidiaries; PROVIDED, HOWEVER, that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries, if the
Board of Directors of the Company shall determine that the preservation thereof
is no longer desirable in the conduct of the business of the Company and its
Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any
material respect to the Holders of the Notes.
SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
------------------------------------------
(a) Upon the occurrence of a Change of Control, each Holder of
Notes will have the right to require the Company to repurchase all or
any part (equal to $1,000 or an integral multiple thereof) of such
Holder's Notes pursuant to the offer described below (the "Change of
Control Offer") at an offer price in cash equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest and
Liquidated Damages, if any, thereon (the "Change of Control Payment")
to the date of purchase (the "Change of Control Payment Date"). Within
15 days following any Change of Control, the Company will mail a notice
to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Notes
pursuant to the procedures required by this Indenture and described in
such notice. The Change of Control Payment Date shall be a Business Day
not less than 30 days nor more than 60 days after such notice is
mailed. The Company will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations
thereunder to the extent
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<PAGE>
such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control.
(b) On the Change of Control Payment Date, the Company will,
to the extent lawful, (i) accept for payment all Notes or portions
thereof properly tendered pursuant to the Change of Control Offer, (ii)
deposit with the Paying Agent an amount equal to the Change of Control
Payment in respect of all Notes or portions thereof so tendered and
(iii) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate stating the aggregate
principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee
will promptly authenticate and mail (or cause to be transferred by book
entry) to each Holder a new Note equal in principal amount to any
unpurchased portion of the Notes surrendered, if any; PROVIDED, that
each such new Note will be in a principal amount of $1,000 or an
integral multiple thereof. Prior to complying with the provisions of
this Section 4.15, but in any event within 90 days following a Change
of Control, the Company will either repay all outstanding Senior
Indebtedness or obtain the requisite consents, if any, under all
agreements governing outstanding Senior Indebtedness to permit the
repurchase of Notes required by this Section 4.15. The Company will
publicly announce the results of the Change of Control Offer on or as
soon as practicable after the Change of Control Payment Date.
(c) The Company will not be required to make a Change of
Control Offer upon a Change of Control if a third party makes the
Change of Control Offer in the manner, at the times and otherwise in
compliance with the requirements of this Section 4.15 applicable to a
Change of Control Offer made by the Company and purchases all Notes
validly tendered and not withdrawn under such Change of Control Offer.
SECTION 4.16. LIMITATION ON LAYERING.
----------------------
Notwithstanding the provisions of Section 4.09 hereof, (a) the Company
shall not incur any Indebtedness that is subordinate or junior in right of
payment to any Indebtedness of the Company and senior in any respect in right of
payment to the Notes, and (b) no Guarantor shall incur any Indebtedness that is
subordinate or junior in right of payment to any Indebtedness of such Guarantor
and senior in any respect in right of payment to the Subsidiary Guarantee of
such Guarantor.
SECTION 4.17. SALE AND LEASEBACK TRANSACTIONS.
-------------------------------
The Company will not, and will not permit any of its Subsidiaries to,
enter into any sale and leaseback transaction; PROVIDED, that the Company or one
of its Subsidiaries may enter into a sale and leaseback transaction if (a) the
Company or such Subsidiary could have (i) incurred Indebtedness in an amount
equal to the Attributable Indebtedness relating to such sale and leaseback
transaction pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of Section 4.09 hereof and (ii) incurred a Lien to secure such
Indebtedness pursuant to
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Section 4.12, (b) the gross cash proceeds of such sale and leaseback transaction
are at least equal to the fair market value (as determined in good faith by the
Board of Directors of the Company and set forth in an Officers' Certificate
delivered to the Trustee) of the property that is the subject of such sale and
leaseback transaction and (c) the transfer of assets in such sale and leaseback
transaction is permitted by, and the Company applies the proceeds of such
transaction in compliance with, Section 4.10 hereof.
SECTION 4.18. LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY OWNED
------------------------------------------------------------------
SUBSIDIARIES.
------------
The Company (a) will not, and will not permit any Wholly Owned
Subsidiary of the Company to, transfer, convey, sell, lease or otherwise dispose
of any Capital Stock of any Wholly Owned Subsidiary of the Company to any Person
(other than the Company or a Wholly Owned Subsidiary of the Company), unless (i)
such transfer, conveyance, sale, lease or other disposition is of all the
Capital Stock of such Wholly Owned Subsidiary and (ii) the cash Net Proceeds
from such transfer, conveyance, sale, lease or other disposition are applied in
accordance with Section 4.10 and (b) will not permit any Wholly Owned Subsidiary
of the Company to issue any of its Equity Interests (other than, if necessary,
shares of its Capital Stock constituting directors' qualifying shares) to any
Person other than to the Company or a Wholly Owned Subsidiary of the Company.
SECTION 4.19. PAYMENTS FOR CONSENT.
--------------------
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of this Indenture or the Notes unless such consideration is offered to be paid
or is paid to all Holders of the Notes that consent, waive or agree to amend in
the time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
SECTION 4.20. FUTURE GUARANTORS.
-----------------
The Company and each Guarantor shall cause each domestic Subsidiary of
the Company or such Guarantor, as the case may be, that, after the date of this
Indenture, becomes a Subsidiary to execute and deliver (a) an indenture
supplemental to this Indenture and thereby become a Guarantor that shall be
bound by the Subsidiary Guarantee of the Notes in the form set forth in this
Indenture (without such Guarantor being required to execute and deliver the
Subsidiary Guarantee endorsed on the Notes) and (b) an Opinion of Counsel to the
effect that such supplemental indenture has been duly authorized and executed by
such Person and constitutes the legal, valid, binding and enforceable obligation
of such Person (subject to such customary exceptions concerning fraudulent
conveyance laws, creditors' rights and equitable principles as may be acceptable
to the Trustee in its discretion).
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<PAGE>
SECTION 4.21. INVESTMENT COMPANY ACT.
----------------------
The Company shall not, and shall not permit any of its Subsidiaries to,
become an investment company subject to registration under the Investment
Company Act of 1940, as amended.
ARTICLE V.
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION OR SALE OF ASSETS.
----------------------------------------
The Company may not consolidate or merge with or into (whether or not
the Company is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another corporation, Person or
entity unless: (i) the Company is the surviving corporation or the entity or the
Person formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia; (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the entity or Person to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all the obligations of the Company under the Notes
and this Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee; (iii) immediately after such transaction no Default
or Event of Default exists; and (iv) except in the case of a merger of the
Company with or into a Wholly Owned Subsidiary of the Company, the Company or
the entity or Person formed by or surviving any such consolidation or merger (if
other than the Company), or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (A) will have Consolidated
Net Worth immediately after the transaction equal to or greater than the
Consolidated Net Worth of the Company immediately preceding the transaction and
(B) will, at the time of such transaction and after giving PRO FORMA effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of Section 4.09 hereof.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
---------------------------------
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company, other than for purposes of
calculating Consolidated Net Income in connection with Section 4.07), and may
exercise every right and power of the Company under this Indenture with
53
<PAGE>
the same effect as if such successor Person had been named as the Company
herein; PROVIDED, HOWEVER, that the predecessor Company shall not be relieved
from the obligation to pay the principal of and interest on the Notes except in
the case of a sale of all of the Company's assets that meets the requirements of
Section 5.01 hereof.
ARTICLE VI.
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
-----------------
Each of the following constitutes an "Event of Default":
(a) default for 30 days in the payment when due of interest
on, or Liquidated Damages, if any, with respect to, the Notes (whether
or not prohibited by the subordination provisions of this Indenture);
(b) default in payment when due of the principal of or
premium, if any, on the Notes (whether or not prohibited by Article X
of this Indenture);
(c) failure by the Company to comply with the provisions
described under Section 4.10 or 4.15;
(d) failure by the Company to comply with Section 4.07 or 4.09
hereof and the continuance of such failure for a period of 30 days
after notice is given to the Company by the Trustee or to the Company
and the Trustee by the Holders of at least 25% in aggregate principal
amount of the Notes then outstanding;
(e) failure by the Company for 60 days after notice is given
to the Company by the Trustee or to the Company and the Trustee by the
Holders of at least 25% in aggregate principal amount of the Notes then
outstanding to comply with any of the Company's other covenants or
other agreements in this Indenture or the Notes;
(f) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its
Subsidiaries (or the payment of which is guaranteed by the Company or
any of its Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the date of this Indenture, which default
(i) is caused by a failure to pay principal of such Indebtedness at its
Stated Maturity (after the expiration of any applicable grace period)
or (ii) results in the acceleration of such Indebtedness prior to its
maturity and, in each case, the principal amount of which Indebtedness,
together with the principal amount of any other such Indebtedness
described in clauses (i) and (ii) above, aggregates $5.0 million or
more;
(g) a final judgment or final judgments for the payment of
money are entered by a court or courts of competent jurisdiction
against the Company or any of its Subsidiaries and such judgment or
judgments remain undischarged for a period (during
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which execution shall not be effectively stayed) of 60 days; PROVIDED,
that the aggregate of all such undischarged judgments exceeds $5.0
million (net of amounts covered by insurance);
(h) the Company or any of its Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute a "Significant
Subsidiary" pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief
against it in an involuntary case,
(iii) consents to the appointment of a Custodian of
it or for all or substantially all of its property,
(iv) makes a general assignment for the benefit of
its creditors, or
(v) generally is not paying its debts as they become
due;
(i) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(i) is for relief against the Company or any of its
Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary in an
involuntary case;
(ii) appoints a Custodian of the Company or any of
its Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary or for all or
substantially all of the property of the Company or any of its
Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a "Significant Subsidiary"; or
(iii) orders the liquidation of the Company or any of
its Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60
consecutive days; or
(j) the Subsidiary Guarantee of any Guarantor is held in
judicial proceedings to be unenforceable or invalid or ceases for any
reason to be in full force and effect (other than in accordance with
the terms of this Indenture) or any Guarantor or any Person acting on
behalf of any Guarantor denies or disaffirms such Guarantor's
obligations under its Subsidiary Guarantee (other than by reason of a
release of such Guarantor from its Subsidiary Guarantee in accordance
with the terms of this Indenture).
55
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SECTION 6.02. ACCELERATION.
-------------
If any Event of Default (other than an Event of Default specified in
clause (h) or (i) of Section 6.01 hereof with respect to the Company, any
Significant Subsidiary or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary) occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of the then
outstanding Notes may declare all the Notes to be due and payable immediately.
Upon any such declaration, the Notes shall become due and payable immediately;
PROVIDED, HOWEVER, that if any Senior Indebtedness is outstanding under the
Credit Agreement, upon a declaration of acceleration, the Notes shall be payable
upon earlier of (a) the day which is five Business Days after the provision to
the Company and the agent under the Credit Agreement of written notice of such
declaration and (b) the date of acceleration of any Indebtedness under the
Credit Agreement. Notwithstanding the foregoing, if an Event of Default
specified in clause (h) or (i) of Section 6.01 hereof occurs with respect to the
Company, any Significant Subsidiary or any group of Subsidiaries that, taken as
a whole, would constitute a Significant Subsidiary, all outstanding Notes shall
be due and payable immediately without further action, notice or declaration on
the part of the Trustee or any Holder. The Holders of a majority in aggregate
principal amount of the then outstanding Notes by written notice to the Trustee
may on behalf of all of the Holders rescind an acceleration and its consequences
if the rescission would not conflict with any judgment or decree and if all
existing Events of Default (except nonpayment of principal, interest or premium
that has become due solely because of the acceleration) have been cured or
waived.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to Section
3.07 hereof, an equivalent premium shall also become and be immediately due and
payable to the extent permitted by law upon the acceleration of the Notes. If an
Event of Default occurs prior to August 15, 2002, by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding the prohibition on redemption of the Notes prior to
August 15, 2002, upon the acceleration of the Notes an additional premium shall
also become and be immediately due and payable to the extent permitted by law in
an amount, for each of the years beginning on August 15 of years, set forth
below:
YEAR PERCENTAGE
---- ----------
1999 108.500%
2000 107.080%
2001 105.670%
SECTION 6.03. OTHER REMEDIES.
-------------
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal, premium, if any, and
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
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The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
----------------------
The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under this Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes (including in connection
with an offer to purchase); PROVIDED, HOWEVER, that the Holders of a majority in
aggregate principal amount of the then outstanding Notes may rescind an
acceleration and its consequences, including any related payment default that
resulted from such acceleration. Upon any such waiver, such Default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have
been cured for every purpose of this Indenture; but no such waiver shall extend
to any subsequent or other Default or Event of Default or impair any right
consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
-------------------
Holders of a majority in aggregate principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it; PROVIDED, HOWEVER, the Trustee may refuse to
follow any direction that conflicts with law or this Indenture which the Trustee
determines may be unduly prejudicial to the rights of other Holders of Notes or
that may involve the Trustee in personal liability.
SECTION 6.06. LIMITATION ON SUITS.
-------------------
A Holder of a Note may pursue a remedy with respect to this Indenture
or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice
of a continuing Event of Default;
(b) the Holders of at least 25% in aggregate principal amount
of the then outstanding Notes make a written request to the Trustee to
pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60
days after receipt of the request and the offer and, if requested, the
provision of indemnity; and
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(e) during such 60-day period the Holders of a majority in
aggregate principal amount of the then outstanding Notes do not give
the Trustee a direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of another
Holder of a Note or to obtain a preference or priority over another Holder of a
Note.
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
---------------------------------------------
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall be absolute and unconditional and shall not be impaired or affected
without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
---------------------------
If an Event of Default specified in Section 6.01(a) or (b) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Company or any Guarantor for the
whole amount of principal of, premium and Liquidated Damages, if any, and
interest remaining unpaid on the Notes and interest on overdue principal and, to
the extent lawful, interest and such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
--------------------------------
The Trustee is authorized to file such proofs of claim and other papers
or documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee
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to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder, or to authorize the Trustee to vote in respect of the
claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
----------
If the Trustee collects any money pursuant to this Article VI, it shall
pay out the money in the following order:
FIRST: to the Trustee, its agents and attorneys for amounts
due under Section 7.07 hereof, including payment of all compensation,
expense and liabilities incurred, and all advances made, by the Trustee
and the costs and expenses of collection;
SECOND: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium and Liquidated Damages, if any, and
interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for principal,
premium and Liquidated Damages, if any and interest, respectively; and
THIRD: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
aggregate principal amount of the then outstanding Notes.
SECTION 6.12. RESTORATION OF RIGHTS AND REMEDIES.
----------------------------------
If the Trustee or any Holder of Notes has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case the Company, the
Trustee and the Holders shall, subject to any determination in such proceeding,
be restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
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SECTION 6.13. RIGHTS AND REMEDIES CUMULATIVE.
------------------------------
Except as otherwise provided in Section 7.07 hereof, no right or remedy
herein conferred upon or reserved to the Trustee or to the Holders is intended
to be exclusive of any other right or remedy, and every right and remedy shall,
to the extent permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 6.14. DELAY OR OMISSION NOT WAIVER.
-----------------------------
No delay or omission of the Trustee or of any Holder of any Note to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article VI or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
ARTICLE VII.
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
-------------------
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by
this Indenture, and use the same degree of care and skill in its
exercise as a prudent man would exercise or use under the circumstances
in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined
solely by the express provisions of this Indenture and the
Trustee need perform only those duties that are specifically
set forth in this Indenture and no others, and no implied
covenants or obligations shall be read into this Indenture
against the Trustee; and
(ii) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its
own negligent action, its own negligent failure to act, or its own
willful misconduct, except that:
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(i) this paragraph does not limit the effect of
paragraph (b) of this Section;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless
it is proved that the Trustee was negligent in ascertaining
the pertinent facts; and
(iii) the Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to Section
6.05 hereof.
(d) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is
subject to paragraphs (a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or incur any liability. The Trustee
shall be under no obligation to exercise any of its rights and powers
under this Indenture at the request of any Holders, unless such Holder
shall have offered to the Trustee security and indemnity satisfactory
to it against any loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the
Company. Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) The Trustee shall not be deemed to have knowledge of any
Default or Event of Default unless (i) the Trustee or a Responsible
Officer shall have actual knowledge of a Default or an Event of
Default, (ii) the Trustee or a Responsible Officer shall have received
notice of a Default or an Event of Default in accordance with the
provisions of this Indenture or (iii) a Default or an Event of Default
occurred or is occurring pursuant to Section 4.01 hereof.
SECTION 7.02. RIGHTS OF TRUSTEE.
-----------------
(a) The Trustee may conclusively rely upon any document
believed by it to be genuine and to have been signed or presented by
the proper Person. Except as provided in Section 7.01(b), the Trustee
need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, the
Trustee may require an Officers' Certificate or an Opinion of Counsel
or both. The Trustee shall not be liable for any action it takes or
omits to take in good faith in reliance on such Officers' Certificate
or Opinion of Counsel. The Trustee may consult with counsel and the
written advice of such counsel or any Opinion of Counsel shall be full
and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and
in reliance thereon.
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(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent
appointed with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within
the rights or powers conferred upon it by this Indenture; PROVIDED,
that the Trustee's conduct does not constitute willful misconduct or
negligence.
(e) Unless otherwise specifically provided in this Indenture,
any demand, request, direction or notice from the Company or Guarantor
shall be sufficient if signed by an Officer of the Company or such
Guarantor.
(f) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request,
order, demand or direction of any of the Holders unless such Holders
shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities that might be incurred by
it in compliance with such request, order, demand or direction.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
-----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee; PROVIDED, HOWEVER, in the event that the Trustee acquires any
conflicting interest, the Trustee must (a) eliminate such conflict within 90
days, (b) if a registration statement with respect to the Notes is effective,
apply to the SEC for permission to continue as Trustee or (c) resign as Trustee.
Any Agent may do the same with like rights and duties. The Trustee is also
subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
---------------------
The Trustee shall not be responsible for and makes no representation as
to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
------------------
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal of, premium, if any, or
interest on any Note, the Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good faith determines that withholding
the notice is in the interests of the Holders of the Notes.
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SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
--------------------------------------------
Within 60 days after May 15 of each year commencing with the year 2000,
and for so long as Notes remain outstanding, the Trustee shall mail to the
Holders of the Notes a brief report dated as of such reporting date that
complies with TIA ss. 313(a) (but if no event described in TIA ss. 313(a) has
occurred within the 12 months preceding the reporting date, no report need be
transmitted). The Trustee also shall comply with TIA ss. 313(b)(2). The Trustee
shall also transmit by mail all reports as required by TIA ss. 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA ss. 313(d). The
Company shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY.
--------------------------
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.07) and defending itself against any claim (whether asserted by
the Company or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder (except to
the extent such failure prejudices the Company). The Company shall defend the
claim and the Trustee shall cooperate in the defense. The Trustee may have
separate counsel, and the Company shall pay the reasonable fees and expenses of
one such counsel. The Company need not pay for any settlement made without its
consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
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When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(h) or (i) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA ss. 313(b)(2) to
the extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
----------------------
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.08.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of Notes of a
majority in aggregate principal amount of the then outstanding Notes may remove
the Trustee by so notifying the Trustee and the Company in writing. The Company
may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee
or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in aggregate principal amount of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in aggregate principal amount of the then
outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note who has
been a Holder of a Note for at least six months, fails to comply with Section
7.10, such Holder of a Note may petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the
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Trustee under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee; PROVIDED, all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant
to this Section 7.08, the Company's obligations under Section 7.07 hereof shall
continue for the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
---------------------------------
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee; PROVIDED, that such corporation shall be otherwise qualified and
eligible under this Article VII and under the TIA, without the execution or
filing of any paper or any further act on the part of any of the parties hereto.
In case any Notes shall have been authenticated, but not delivered, by the
Trustee then in office, any successor by merger, conversion or consolidation to
such authenticating Trustee may adopt such authentication and deliver the Notes
so authenticated with the same effect as if such successor Trustee had itself
authenticated such Notes. In the event that any Notes shall not have been
authenticated by such predecessor Trustee, any such successor Trustee may
authenticate and deliver such Notes, in either its own name or that of its
predecessor Trustee, with the full force and effect which this Indenture
provides for the certificate of authentication of the Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
-----------------------------
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus (with its affiliates) of
at least $50 million as set forth in its most recent published annual report of
condition.
If such Person publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section 7.10, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. None
of the Company or any of its Affiliates shall serve as Trustee hereunder. If at
any time the Trustee shall cease to be eligible to serve as Trustee hereunder
pursuant to the provisions of this Section 7.10, it shall resign immediately in
the manner and with the effect specified in this Article VII.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA
ss. 310(b).
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SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
-------------------------------------------------
The Trustee is subject to TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
ARTICLE VIII.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
--------------------------------------------------------
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article VIII.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
------------------------------
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Notes to receive solely from the trust fund described in Section
8.04 hereof, and as more fully set forth in such Section, payments in respect of
the principal of, premium, if any, and interest and Liquidated Damages, if any,
on such Notes when such payments are due; (b) the Company's obligations with
respect to such Notes under Article II and Section 4.02 hereof; (c) the rights,
powers, trusts, duties and immunities of the Trustee hereunder and the Company's
obligations in connection therewith; and (d) this Article VIII. Subject to
compliance with this Article VIII, the Company may exercise its option under
this Section 8.02 notwithstanding the prior exercise of its option under Section
8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
---------------------
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18 and 4.20 hereof with respect to the
outstanding Notes on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter
be deemed not "outstanding" for the
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purposes of any direction, waiver, consent or declaration or act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to the
outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section 6.01
hereof, but, except as specified above, the remainder of this Indenture and such
Notes shall be unaffected thereby. In addition, upon the Company's exercise
under Section 8.01 hereof of the option applicable to this Section 8.03 hereof,
subject to the satisfaction of the conditions set forth in Section 8.04 hereof,
Sections 6.01(c) through 6.01(g) hereof shall not constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
--------------------------------------------
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Notes:
(a) the Company must irrevocably deposit or cause to be
deposited with the Trustee, in trust, for the benefit of the Holders,
cash in United States dollars, non-callable Government Securities, or a
combination thereof, in such amounts as will be sufficient, in the
opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium and Liquidated Damages,
if any, and interest on the outstanding Notes on the Stated Maturity or
on the applicable redemption date, as the case may be, and the Company
must specify whether the Notes are being defeased to maturity or to a
particular redemption date;
(b) in the case of an election under Section 8.02 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in
the United States reasonably acceptable to the Trustee confirming that
(i) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (ii) since the date of this
Indenture, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such Opinion
of Counsel shall confirm that, the Holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes
as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not
occurred;
(c) in the case of an election under Section 8.03 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in
the United States reasonably acceptable to the Trustee confirming that
the Holders of the outstanding Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same
amounts, in
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the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event
of Default resulting from the incurrence of Indebtedness all or a
portion of the proceeds of which will be used to defease the Notes
pursuant to this Article VIII concurrently with such incurrence) or
insofar as Sections 6.01(h) or 6.01(i) hereof is concerned, at any time
in the period ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under, any
material agreement or instrument (other than this Indenture) to which
the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that after the 91st day following the deposit
or on the day after the last day of the applicable preference period
under Bankruptcy Law following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders over any other
creditors of the Company or any Subsidiary Guarantor with the intent of
defeating, hindering, delaying or defrauding any creditors of the
Company, any Guarantor of the Company or others; and
(h) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance
or the Covenant Defeasance have been complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST:
---------------------------------------------------------------
OTHER MISCELLANEOUS PROVISIONS.
------------------------------
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited
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pursuant to Section 8.04 hereof or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the outstanding Notes.
Anything in this Article VIII to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or noncallable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.04(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
SECTION 8.06. REPAYMENT TO COMPANY.
---------------------
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as a
secured creditor, look only to the Company for payments thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease;
PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being required
to make any such repayment to the Company, may at the expense of the Company
cause to be published once, in the New York Times and The Wall Street Journal
(national edition), notice that such money remains unclaimed and that, after a
date specified therein, which shall not be less than 30 days from the date of
such notification or publication, any unclaimed balance of such money then
remaining will be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
-------------
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; PROVIDED, HOWEVER, that, if the Company makes any
payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
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ARTICLE IX.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
-----------------------------------
Notwithstanding Section 9.02 of this Indenture, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture, the
Subsidiary Guarantees or the Notes without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in
place of certificated Notes;
(c) to provide for the assumption of the Company's or
Guarantor's obligations to the Holders of the Notes in the case of a
merger or consolidation in accordance with this Indenture;
(d) to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights hereunder of any Holder of the Notes;
(e) to comply with requirements of the SEC in order to effect
or maintain the qualification of this Indenture under the TIA; or
(f) to provide for the issuance of Additional Notes pursuant
to this Indenture to the extent permitted under the restrictions
contained in the Credit Agreement and described under Section 4.09
hereof.
Upon the request of the Company and the Guarantors accompanied by a
resolution of their respective Boards of Directors authorizing the execution of
any such amended or supplemental Indenture, and upon receipt by the Trustee of
the documents described in Section 7.02 hereof, the Trustee shall join with the
Company and the Guarantors in the execution of any amended or supplemental
Indenture authorized or permitted by the terms of this Indenture and to make any
further appropriate agreements and stipulations that may be therein contained,
but the Trustee shall not be obligated to enter into such amended or
supplemental Indenture that affects its own rights, duties or immunities under
this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
--------------------------------
Except as provided below in this Section 9.02, this Indenture
(including Sections 4.10 and 4.15 hereof), the Notes and the Subsidiary
Guarantees may be amended or supplemented with the consent of the Holders of at
least a majority in aggregate principal amount of the Notes then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing
Default or Event of Default (other than a Default or Event of Default in the
payment of the principal of, premium, if
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any, or interest on the Notes, except a payment default resulting from an
acceleration that has been rescinded) or compliance with any provision of this
Indenture or the Notes may be waived with the consent of the Holders of a
majority in aggregate principal amount of the then outstanding Notes (including
consents obtained in connection with a tender offer or exchange offer for the
Notes).
Upon the request of the Company and the Guarantors accompanied by a
resolution of their respective Boards of Directors authorizing the execution of
any such amended or supplemental Indenture, and upon the filing with the Trustee
of evidence satisfactory to the Trustee of the consent of the Holders of Notes
as aforesaid, and upon receipt by the Trustee of the documents described in
Section 7.02 hereof, the Trustee shall join with the Company and the Guarantors
in the execution of such amended or supplemental Indenture unless such amended
or supplemental Indenture affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise, in which case the Trustee may in its
discretion, but shall not be obligated to, enter into such amended or
supplemental Indenture. It shall not be necessary for the consent of the Holders
of Notes under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Trustee and the Holders of Notes
affected thereby a notice briefly describing the amendment, supplement or
waiver. Any failure of the Company to mail such notice or any defect therein,
shall not, however, in any way impair or affect the validity of any such amended
or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof,
the Holders of a majority in aggregate principal amount of the Notes then
outstanding may waive compliance in a particular instance by the Company with
any provision of this Indenture, the Notes or the Subsidiary Guarantees.
However, without the consent of each Holder affected, an amendment or waiver may
not (with respect to any Notes held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of
any Note or alter or waive any of the provisions with respect to the
redemption or repurchase of the Notes (other than with respect to
Sections 4.10 and 4.15 hereof);
(c) reduce the rate of or change the time for payment of
interest, including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a
majority in aggregate principal amount of the then outstanding Notes
and a waiver of the payment default that resulted from such
acceleration);
(e) make any Note payable in money other than that stated in
the Notes;
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(f) make any change in the provisions of this Indenture
relating to waivers of past Defaults or the rights of Holders of Notes
to receive payments of principal of, premium, if any, or interest on
the Notes;
(g) waive a redemption payment with respect to any Note (other
than a payment required by Section 4.10 or 4.15 hereof);
(h) release any Guarantor from any of its obligations under
its Subsidiary Guarantee or this Indenture, except in accordance with
the terms of this Indenture; or
(i) make any change in Section 6.04 or 6.07 hereof or in the
foregoing amendment and waiver provisions.
In addition, any amendment to the provisions of Article X of this
Indenture or the related definitions will require the consent of the Holders of
at least 75% in aggregate principal amount of the Notes then outstanding if such
amendment would adversely affect the rights of Holders of Notes.
Upon the execution of any supplemental indenture under this Article IX,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Notes theretofore or thereafter authenticated and delivered hereunder shall
be bound thereby.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
-----------------------------------
Every amendment or supplement to this Indenture, the Subsidiary
Guarantees or the Notes shall be set forth in an amended or supplemental
Indenture that complies with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
----------------------------------
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
---------------------------------
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
that reflect the amendment, supplement or waiver.
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Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
-------------------------------
The Trustee shall sign any amended or supplemental indenture authorized
pursuant to this Article IX if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Company
and each Subsidiary Guarantor may not sign an amendment or supplemental
Indenture until each of their respective Boards of Directors approves it. In
executing any amended or supplemental indenture, the Trustee shall be entitled
to receive and (subject to Section 7.01) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that the
execution of such amended or supplemental indenture is authorized or permitted
by this Indenture.
ARTICLE X.
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE.
-------------------------
The Company agrees, and each Holder by accepting a Note agrees, that
the Indebtedness evidenced by the Note is subordinated in right of payment, to
the extent and in the manner provided in this Article X, to the prior payment in
full of all Senior Indebtedness (whether outstanding on the date hereof or
hereafter created, incurred, assumed or guaranteed), and that the subordination
is for the benefit of the holders of Senior Indebtedness.
SECTION 10.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
-------------------------------------
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, in
an assignment for the benefit of creditors or any marshaling of the Company's
assets and liabilities:
(a) holders of Senior Indebtedness shall be entitled to
receive payment in full of all Obligations due in respect of such
Senior Indebtedness (including, in the case of Senior Indebtedness
under the Credit Agreement, interest after the commencement of any such
proceeding at the rate specified in the Credit Agreement) before
Holders of Notes shall be entitled to receive any payment with respect
to the Notes (except that Holders may receive (i) Equity Interests or
debt securities that are subordinated to at least the same extent as
the Notes to (A) Senior Indebtedness and (B) any securities issued in
exchange for Senior Indebtedness and (ii) payments and other
distributions made from any defeasance trust created pursuant to
Section 8.01 hereof); and
(b) until all Obligations with respect to Senior Indebtedness
(as provided in subsection (a) above) are paid in full, any
distribution to which Holders would be entitled but for this Article X
shall be made to holders of Senior Indebtedness (except that Holders
may receive (i) Equity Interests or debt securities that are
subordinated to at least
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the same extent as the Notes to (A) Senior Indebtedness and (B) any
securities issued in exchange for Senior Indebtedness and (ii) payments
and other distributions made from any defeasance trust created pursuant
to Section 8.01 hereof), as their interests may appear.
SECTION 10.03. DEFAULT ON DESIGNATED SENIOR INDEBTEDNESS.
------------------------------------------
The Company may not make any payment or distribution to the Trustee or
any Holder in respect of Obligations with respect to the Notes and may not
acquire from the Trustee or any Holder any Notes for cash or property (other
than (i) Equity Interests or debt securities that are subordinated to at least
the same extent as the Notes to (A) Senior Indebtedness and (B) any securities
issued in exchange for Senior Indebtedness and (ii) payments and other
distributions made from any defeasance trust created pursuant to Section 8.01
hereof) until all principal and other Obligations with respect to the Senior
Indebtedness have been paid in full if:
(a) a default in the payment of any principal of or other
Obligations with respect to Designated Senior Indebtedness occurs and
is continuing beyond any applicable grace period in the agreement,
indenture or other document governing such Designated Senior
Indebtedness; or
(b) a default, other than a payment default under clause (a)
above, on Designated Senior Indebtedness occurs and is continuing that
then permits holders of the Designated Senior Indebtedness as to which
such default relates to accelerate its maturity and the Trustee
receives a notice of the default (a "Payment Blockage Notice") from a
Representative with respect to such Designated Senior Debt. If the
Trustee receives any such Payment Blockage Notice, no subsequent
Payment Blockage Notice shall be effective for purposes of this Section
unless and until (i) at least 360 days shall have elapsed since the
effectiveness of the immediately prior Payment Blockage Notice and (ii)
all scheduled payments of principal, premium, if any, and interest on
the Notes that have come due have been paid in full in cash. No
nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be
made, the basis for a subsequent Payment Blockage Notice unless such
default shall have been waived for a period of not less than 90 days.
The Company may and shall resume payments on and distributions in
respect of the Notes and may acquire them upon the earlier of:
(1) the date upon which the default is cured or waived, or
(2) in the case of a default referred to in clause (b) of the
preceding paragraph, 179 days pass after notice is received if the
maturity of such Designated Senior Indebtedness has not been
accelerated,
if this Article X otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
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SECTION 10.04. ACCELERATION OF NOTES.
----------------------
If payment of the Notes is accelerated because of an Event of Default,
the Company shall promptly notify holders of Senior Indebtedness of the
acceleration.
SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER.
------------------------------------
In the event that the Trustee or any Holder receives any payment of any
Obligations with respect to the Notes at a time when the Trustee or such Holder,
as applicable, has actual knowledge that such payment is prohibited by Section
10.03 hereof, such payment shall be held by the Trustee or such Holder, in trust
for the benefit of, and shall be paid forthwith over and delivered, upon written
request, to, the holders of Senior Indebtedness as their interests may appear or
their Representative under the indenture or other agreement (if any) pursuant to
which Senior Indebtedness may have been issued, as their respective interests
may appear, for application to the payment of all Obligations with respect to
Senior Indebtedness remaining unpaid to the extent necessary to pay such
Obligations in full in accordance with their terms, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article X, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness, and shall not be
liable to any such holders if the Trustee shall pay over or distribute to or on
behalf of Holders or the Company or any other Person money or assets to which
any holders of Senior Indebtedness shall be entitled by virtue of this Article
X, except if such payment is made as a result of the willful misconduct or gross
negligence of the Trustee.
SECTION 10.06. NOTICE BY COMPANY.
-------------------
The Company shall promptly notify the Trustee and the Paying Agent of
any facts known to the Company that would cause a payment of any Obligations
with respect to the Notes to violate this Article X, but failure to give such
notice shall not affect the subordination of the Notes to the Senior
Indebtedness as provided in this Article X.
SECTION 10.07. SUBROGATION.
-------------
After all Senior Indebtedness is paid in full and until the Notes are
paid in full, Holders shall be subrogated (equally and ratably with all other
Indebtedness PARI PASSU with the Notes) to the rights of holders of Senior
Indebtedness to receive distributions applicable to Senior Indebtedness to the
extent that distributions otherwise payable to the Holders have been applied to
the payment of Senior Indebtedness. A distribution made under this Article X to
holders of Senior Indebtedness that otherwise would have been made to Holders is
not, as between the Company and Holders, a payment by the Company on the Notes.
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SECTION 10.08. RELATIVE RIGHTS.
-----------------
This Article X defines the relative rights of Holders and holders of
Senior Indebtedness. Nothing in this Indenture shall:
(a) impair, as between the Company and Holders, the obligation
of the Company, which is absolute and unconditional, to pay principal
of and interest on the Notes in accordance with their terms;
(b) affect the relative rights of Holders and creditors of the
Company other than their rights in relation to holders of Senior
Indebtedness; or
(c) prevent the Trustee or any Holder from exercising its
available remedies upon a Default or Event of Default, subject to the
rights of holders and owners of Senior Indebtedness to receive
distributions and payments otherwise payable to Holders.
If the Company fails because of this Article X to pay principal of or
interest on a Note on the due date, the failure is still a Default or Event of
Default.
SECTION 10.09. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
----------------------------------------------
No right of any holder of Senior Indebtedness to enforce the
subordination of the Indebtedness evidenced by the Notes shall be impaired by
any act or failure to act by the Company or any Holder or by the failure of the
Company or any Holder to comply with this Indenture.
SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
------------------------------------------
Whenever a distribution is to be made or a notice given to holders of
Senior Indebtedness, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company referred to
in this Article X, the Trustee and the Holders shall be entitled to rely upon
any order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Trustee or to the Holders for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other Indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
X.
SECTION 10.11. RIGHTS OF TRUSTEE AND PAYING AGENT.
------------------------------------
Notwithstanding the provisions of this Article X or any other provision
of this Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
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Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article X. Only the Company, the
Representative of Designated Senior Indebtedness or a Representative may give
the notice. Nothing in this Article X shall impair the claims of, or payments
to, the Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights.
SECTION 10.12. AUTHORIZATION TO EFFECT SUBORDINATION.
---------------------------------------
Each Holder of a Note by the Holder's acceptance thereof authorizes and
directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article X, and appoints the Trustee to act as the Holder's attorney-in-fact for
any and all such purposes. If the Trustee does not file a proper proof of claim
or proof of debt in the form required in any proceeding referred to in Section
6.09 hereof at least 30 days before the expiration of the time to file such
claim, each of the Representative of Designated Senior Indebtedness and a
Representative, if any, are hereby authorized to file an appropriate claim for
and on behalf of the Holders of the Notes.
SECTION 10.13. AMENDMENTS.
-----------
The provisions of this Article X shall not be amended or modified
without the written consent of the holders of all Senior Indebtedness.
ARTICLE XI.
SUBSIDIARY GUARANTEES
SECTION 11.01. SUBSIDIARY GUARANTEES.
----------------------
Each of the Guarantors hereby, jointly and severally, unconditionally
guarantees to each Holder of a Note authenticated and delivered by the Trustee
and to the Trustee and its successors and assigns, irrespective of the validity
and enforceability of this Indenture, the Notes or the obligations of the
Company hereunder or thereunder, that: (a) the principal of and interest on the
Notes will be promptly paid in full when due, whether at maturity, by
acceleration, redemption or otherwise, and interest on the overdue principal of
and interest on the Notes, if any, if lawful, and all other obligations of the
Company to the Holders or the Trustee hereunder or thereunder will be promptly
paid in full or performed, all in accordance with the terms hereof and thereof;
and (b) in case of any extension of time of payment or renewal of any Notes or
any of such other obligations, that same will be promptly paid in full when due
or performed in accordance with the terms of the extension or renewal, whether
at stated maturity, by acceleration or otherwise. Failing payment when due of
any amount so guaranteed or any performance so guaranteed for whatever reason,
the Guarantors will be jointly and severally obligated to pay the same
immediately. The Guarantors hereby agree that their obligations hereunder shall
be unconditional, irrespective of the validity, regularity or enforceability of
the Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of
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the Notes with respect to any provisions hereof or thereof, the recovery of any
judgment against the Company, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of a guarantor. Each Guarantor hereby waives diligence, presentment,
demand of payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first against the
Company, protest, notice and all demands whatsoever and covenant that this
Subsidiary Guarantee will not be discharged except by complete performance of
the obligations contained in the Notes and this Indenture. If any Holder or the
Trustee is required by any court or otherwise to return to the Company or
Guarantors, or any Custodian, Trustee, liquidator or other similar official
acting in relation to either the Company or Guarantors, any amount paid by
either to the Trustee or such Holder, this Subsidiary Guarantee, to the extent
theretofore discharged, shall be reinstated in full force and effect. Each
Guarantor agrees that they shall not be entitled to any right of subrogation in
relation to the Holders in respect of any obligations guaranteed hereby until
payment in full of all obligations guaranteed hereby. Each Guarantor further
agrees that, as between the Guarantors, on the one hand, and the Holders and the
Trustee, on the other hand, (x) the maturity of the obligations guaranteed
hereby may be accelerated as provided in Article VI for the purposes of this
Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the obligations guaranteed hereby,
and (y) in the event of any declaration of acceleration of such obligations as
provided in Article VI, such obligations (whether or not due and payable) shall
forthwith become due and payable by the Guarantors for the purpose of this
Subsidiary Guarantee. The Guarantors shall have the right to seek contribution
from any non-paying Guarantor so long as the exercise of such right does not
impair the rights of the Holders under the Guarantee.
SECTION 11.02. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE.
------------------------------------------------
To evidence its Subsidiary Guarantee set forth in Section 11.01, each
Guarantor hereby agrees that a notation of such Subsidiary Guarantee
substantially in the form included in Exhibit A shall be endorsed by an officer
of such Subsidiary Guarantor on each Note authenticated and delivered by the
Trustee and that this Indenture shall be executed on behalf of such Guarantor by
its President or one of its Vice Presidents and attested to by an Officer.
Each Guarantor hereby agrees that its Subsidiary Guarantee set forth in
Section 11.01, shall remain in full force and effect notwithstanding any failure
to endorse on each Note a notation of such Subsidiary Guarantee.
If an officer or Officer whose signature is on this Indenture or on the
Subsidiary Guarantee no longer holds that office at the time the Trustee
authenticates the Note on which a Subsidiary Guarantee is endorsed, the
Subsidiary Guarantee shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Subsidiary Guarantee set
forth in this Indenture on behalf of the Guarantors.
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SECTION 11.03. GUARANTORS MAY CONSOLIDATE OR MERGER ON CERTAIN TERMS.
------------------------------------------------------
(a) Except as set forth in Articles IV and V, nothing
contained in this Indenture or in any of the Notes shall prevent any
consolidation or merger of a Guarantor with or into the Company or
shall prevent any sale or conveyance of the property of a Guarantor as
an entirety or substantially as an entirety, to the Company.
(b) Except as set forth in Article IV, nothing contained in
this Indenture or in any of the Notes shall prevent any consolidation
or merger of a Guarantor with or into a corporation or corporations
other than the Company (whether or not affiliated with the Guarantor),
or successive consolidations or mergers in which a Guarantor or its
successor or successors shall be a party or parties, or shall prevent
any sale or conveyance of the property of a Guarantor as an entirety or
substantially as an entirety, to a corporation other than the Company
(whether or not affiliated with the Guarantor) authorized to acquire
and operate the same; PROVIDED, HOWEVER, that (i) each Guarantor hereby
covenants and agrees that, upon any such consolidation, merger, sale or
conveyance, the Subsidiary Guarantee endorsed on the Notes, and the due
and punctual performance and observance of all of the covenants and
conditions of this Indenture to be performed by such Guarantor, shall
be expressly assumed (in the event that the Guarantor is not the
surviving corporation in the merger) by supplemental indenture
reasonably satisfactory in form to the Trustee, executed and delivered
to the Trustee, by the corporation formed by such consolidation, or
into which the Guarantor shall have been merged, or by the corporation
which shall have acquired such property and (ii) immediately after
giving effect to such transaction, no Default or Event of Default would
exist. In case of any such consolidation, merger, sale or conveyance
and upon the assumption by the successor corporation, by supplemental
indenture, executed and delivered to the Trustee and satisfactory in
form to the Trustee, of the Subsidiary Guarantee endorsed upon the
Notes and the due and punctual performance of all of the covenants and
conditions of this Indenture to be performed by the Guarantor, such
successor corporation shall succeed to and be substituted for the
Guarantor with the same effect as if it had been named herein as a
Guarantor. Such successor corporation thereupon may cause to be signed
any or all of the Subsidiary Guarantees to be endorsed upon all of the
Notes issuable hereunder which theretofore shall not have been signed
by the Company and delivered to the Trustee. All the Subsidiary
Guarantees so issued shall in all respects have the same legal rank and
benefit under this Indenture as the Subsidiary Guarantees theretofore
and thereafter issued in accordance with the terms of this Indenture as
though all of such Subsidiary Guarantees had been issued at the date of
the execution hereof.
SECTION 11.04. RELEASES OF SUBSIDIARY GUARANTEES.
-----------------------------------
Concurrently with any sale of assets (including, if applicable, all of
the capital stock of any Guarantor), any Liens in favor of the Trustee in the
assets sold thereby shall be released; PROVIDED, that in the event of an Asset
Sale, the Net Proceeds from such sale or other disposition are treated in
accordance with the provisions of Section 4.10 hereof If the assets sold in such
sale or other disposition include all or substantially all of the assets of any
Guarantor or all of the
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capital stock of any Guarantor, then such Guarantor (in the event of a sale or
other disposition of all of the capital stock of such Guarantor) or the
corporation acquiring the property (in the event of a sale or other disposition
of all or substantially all of the assets of a Guarantor) shall be released and
relieved of its obligations under its Subsidiary Guarantee or Section 11.03,
hereof, as the case may be; PROVIDED, that in the event of an Asset Sale, the
Net Proceeds from such sale or other disposition are treated in accordance with
the provisions of Section 4.10 hereof. Upon delivery by the Company to the
Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that
such sale or other disposition was made by the Company in accordance with the
provisions of this Indenture, including without limitation Section 4.10 hereof,
the Trustee shall execute any documents reasonably required in order to evidence
the release of any Guarantor from its obligations under its Subsidiary
Guarantee.
Upon the release by all holders of Senior Indebtedness and Guarantor
Senior Indebtedness of all guarantees issued by a Guarantor relating to such
Senior Indebtedness and Guarantor Senior Indebtedness and all Liens on the
property and assets of such Guarantor relating to Senior Indebtedness and
Guarantor Senior Indebtedness, then such Guarantor shall be released and
relieved of any obligations under its Subsidiary Guarantee. Upon delivery by the
Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to
the effect that all holders of Senior Indebtedness and Guarantor Senior
Indebtedness have released all guarantees issued by a Guarantor and all Liens on
the property and assets of such Guarantor relating to such Senior Indebtedness
and Guarantor Senior Indebtedness, the Trustee shall execute any documents
reasonably required in order to evidence the release of such Guarantor from its
obligations under its Subsidiary Guarantee.
Any Guarantor not released from its obligations under its Subsidiary
Guarantee pursuant to either of the preceding paragraphs of this Section 11.04
shall remain liable for the full amount of principal of and interest on the
Notes and for the other obligations of any Guarantor under this Indenture as
provided in this Article XI.
SECTION 11.05. TRUSTEE TO INCLUDE PAYING AGENT.
--------------------------------
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article XI, shall in such case (unless the context shall
otherwise require) be construed as extending to and including such Paying Agent
within its meaning as fully and for all intents and purposes as if such Paying
Agent were named, in this Article XI, in place of the Trustee.
SECTION 11.06. SUBORDINATION OF SUBSIDIARY GUARANTEES.
----------------------------------------
The obligations of each Guarantor under its Subsidiary Guarantee
pursuant to this Article XI shall be junior and subordinated to the Guarantor
Senior Indebtedness of such Guarantor on the same basis as the Notes are junior
and subordinated to Senior Indebtedness. For the purposes of the foregoing
sentence, the Trustee and the Holders shall have the right to receive and/or
retain payments by any of the Guarantors only at such times as they may receive
and/or retain payments in respect of the Notes pursuant to this Indenture,
including Article X hereof.
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<PAGE>
SECTION 11.07. UNRESTRICTED SUBSIDIARY.
------------------------
The Board of Directors of the Company may at any time designate the
Unrestricted Subsidiary to be a Subsidiary; PROVIDED, that such designation
shall be deemed to be an incurrence of Indebtedness by a Subsidiary of the
Company of any outstanding Indebtedness of the Unrestricted Subsidiary and such
designation shall only be permitted if (a) such Indebtedness is permitted under
Section 4.09 hereof, calculated on a PRO FORMA basis as if such designation had
occurred at the beginning of the four-quarter reference period, and (b) no
Default or Event of Default would be in existence following such designation. In
addition, the Unrestricted Subsidiary shall continue to be an unrestricted
subsidiary for purposes of this Indenture only if it: (i) has no Indebtedness
other than Non-Recourse Debt; (ii) is a Person with respect to which neither the
Company nor any of its Subsidiaries has any direct or indirect obligation (A) to
subscribe for additional Equity Interests or (B) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results; and (iii) has not guaranteed or otherwise directly
or indirectly provided credit support for any Indebtedness of the Company or any
of its Subsidiaries. If, at any time, the Unrestricted Subsidiary fails to meet
the requirements described in the preceding sentence, the Unrestricted
Subsidiary shall thereafter cease to be an unrestricted subsidiary for purposes
of this Indenture and any Indebtedness of the Unrestricted Subsidiary shall be
deemed to be incurred by a Subsidiary of the Company as of such date (and, if
such Indebtedness is not permitted to be incurred as of such date under Section
4.09 hereof, the Company shall be in default of such covenant). In the event the
Unrestricted Subsidiary is designated as a Subsidiary or ceases to be an
unrestricted subsidiary for purposes of this Indenture, the Company shall cause
the Unrestricted Subsidiary to execute and deliver to the Trustee a supplemental
indenture pursuant to which the Unrestricted Subsidiary will become a Guarantor.
SECTION 11.08. LIMITS ON SUBSIDIARY GUARANTEES.
-------------------------------
Notwithstanding anything to the contrary in this Article XI, the
aggregate amount of the Obligations guaranteed under this Indenture by any
Guarantor shall be reduced to the extent necessary to prevent the Subsidiary
Guarantee of such Guarantor from violating or becoming voidable under any law
relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors.
ARTICLE XII.
MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT CONTROLS.
-----------------------------
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA ss.318(c), the imposed duties shall control. If any
provision of this Indenture modifies or excludes any provision of the TIA that
may be so modified or excluded, the latter provision shall be deemed to apply to
this Indenture as so modified or to be excluded, as the case may be.
81
<PAGE>
SECTION 12.02. NOTICES.
---------
Any notice or communication by the Company, a Guarantor or the Trustee
to the others is duly given if in writing and delivered in person or mailed by
first class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address:
If to the Company or a Guarantor:
Speedway Motorsports, Inc.
Highway 29 North
Post Office Box 600
Concord, NC 28026-0600
Telecopier No.: (704) 532-3312
Attention: Mr. William R. Brooks
If to the Trustee:
U.S. Bank National Association
180 East Fifth Street
Suite 200
St. Paul, MN 55101
Telecopier No.: (651) 244-0711
Attention: CORPORATE TRUST ADMINISTRATION
The Company, a Guarantor or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) shall
be deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA ss. 313(c), to the extent required by the TIA. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
82
<PAGE>
SECTION 12.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
-------------------------------------------------------------
Holders may communicate pursuant to TIA ss. 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company, the
Guarantors, the Trustee, the Registrar and anyone else shall have the protection
of TIA ss. 312(c).
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
---------------------------------------------------
Upon any request or application by the Company and/or any Guarantor to
the Trustee to take any action or refrain from taking any action under this
Indenture, the Company and/or such Guarantor, as the case may be, shall furnish
to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 12.05 hereof) stating that, in the opinion of the
signers, all conditions precedent and covenants, if any, provided for
in this Indenture relating to the proposed action have been satisfied;
and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 12.05 hereof) stating that, in the opinion of such
counsel, all such conditions precedent and covenants have been
satisfied.
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
----------------------------------------------
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA ss.
314(e) and shall include:
(a) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been satisfied; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been satisfied.
SECTION 12.06. RULES BY TRUSTEE AND AGENTS.
-----------------------------
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions; PROVIDED, that no such rule shall
conflict with the terms of this Indenture or the TIA.
83
<PAGE>
SECTION 12.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
------------------------------------------------------------
STOCKHOLDERS.
-------------
No director, officer, employee, incorporator or stockholder of the
Company or any Guarantor, as such, shall have any liability for any obligations
of the Company or any Guarantor under the Notes, the Subsidiary Guarantees, this
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
SEC that such a waiver is against public policy.
SECTION 12.08. GOVERNING LAW.
--------------
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES.
SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
----------------------------------------------
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture, the Notes or the Subsidiary Guarantees.
SECTION 12.10. SUCCESSORS.
------------
All agreements of the Company and the Guarantors in this Indenture, the
Subsidiary Guarantees and the Notes shall bind its successors. All agreements of
the Trustee in this Indenture shall bind its successors.
SECTION 12.11. SEVERABILITY.
--------------
In case any provision in this Indenture, the Subsidiary Guarantees or
in the Notes shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 12.12. COUNTERPART ORIGINALS.
-----------------------
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC.
---------------------------------
The Table of Contents and Headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part of this Indenture and shall in no way modify or restrict any
of the terms or provisions hereof.
84
<PAGE>
SECTION 12.14. FURTHER INSTRUMENTS AND ACTS.
-----------------------------
Upon request of the Trustee, the Company and the Guarantors will
execute and deliver such further instruments and do such further acts as may be
reasonably necessary or proper to carry out more effectively the purposes of
this Indenture.
(Signatures on following page]
85
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
COMPANY:
--------
SPEEDWAY MOTORSPORTS, INC.,
a Delaware corporation
By:/s/ Williams R. Brooks
-------------------------
William R. Brooks
Chief of Financial Officer and
Vice President
GUARANTORS:
-----------
ATLANTA MOTOR SPEEDWAY, INC.,
a Georgia corporation
By:/s/ Williams R. Brooks
-------------------------
William R. Brooks
Vice President
BRISTOL MOTOR SPEEDWAY, INC.,
a Tennessee corporation
By:/s/ Williams R. Brooks
-------------------------
William R. Brooks
Vice President
CHARLOTTE MOTOR SPEEDWAY, INC.,
a North Carolina corporation
By:/s/ Williams R. Brooks
-------------------------
William R. Brooks
Vice President
SPR ACQUISITION CORPORATION,
a California corporation
By:/s/ Williams R. Brooks
-------------------------
William R. Brooks
Vice President
86
<PAGE>
TEXAS MOTOR SPEEDWAY, INC.,
a Texas corporation
By:/s/ Williams R. Brooks
-------------------------
William R. Brooks
Vice President
600 RACING, INC.,
a North Carolina corporation
By:/s/ Williams R. Brooks
-------------------------
William R. Brooks
Vice President
SONOMA FUNDING CORPORATION,
a California corporation
By:/s/ Williams R. Brooks
-------------------------
William R. Brooks
Vice President
SPEEDWAY CONSULTING & DESIGN, INC.,
a North Carolina corporation
By:/s/ Williams R. Brooks
-------------------------
William R. Brooks
Vice President
THE SPEEDWAY CLUB, INC.,
a North Carolina corporation
By:/s/ Williams R. Brooks
-------------------------
William R. Brooks
Vice President
INEX CORP.,
a North Carolina corporation
By:/s/ Williams R. Brooks
-------------------------
William R. Brooks
Vice President
87
<PAGE>
SPEEDWAY FUNDING CORP.,
a Delaware corporation
By:/s/ Joan Dobrzynski
-------------------------
Name: Joan Dobrzynski
Title Vice President
LAS VEGAS MOTOR SPEEDWAY, LLC,
a Nevada limited liability company
By:/s/ Williams R. Brooks
-------------------------
Name: William R. Brooks
Title Manager
SMI SYSTEMS, LLC,
A Nevada limited liability company
By:/s/ Williams R. Brooks
-------------------------
Name: William R. Brooks
Title Manager
SPEEDWAY SYSTEMS LLC,
a North Carolina limited liability company
By: IMS Systems Limited Partnership,
its sole manager
By: Speedway Motorsports, Inc., its
general partner
By:/s/ Williams R. Brooks
-------------------------
Name: William R. Brooks
Title Vice President
88
<PAGE>
TRUSTEE:
--------
U.S. BANK TRUST NATIONAL
ASSOCIATION
By: /s/ Nancie J. Arnin
-----------------------
Name: Nancie J. Arnin
Title: Vice President
89
<PAGE>
EXHIBIT A
CUSIP NUMBER 8477888G1
(Face of Note)
SPEEDWAY MOTORSPORTS, INC.
8 1/2% [INITIAL] [EXCHANGE] SENIOR SUBORDINATED NOTES DUE 2007
No.______________ $_______________
SPEEDWAY MOTORSPORTS, INC., a Delaware corporation, for value
received, hereby promises to pay to _________________________________________
_________________________________________ or registered assigns, the
principal sum of __________________ Dollars on August 15, 2007.
Interest Payment Dates: February 15, and August 15
Record Dates: January 31, and July 31
SPEEDWAY MOTORSPORTS, INC.
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
This is one of the [Global] Notes referred
to in the within mentioned Indenture:
Dated: _______, ____
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Trustee
By:______________________________
Authorized Signatory
A-1
<PAGE>
(Back of Note)
SPEEDWAY MOTORSPORTS, INC.
8 1/2 % [INITIAL] [EXCHANGE] SENIOR SUBORDINATED NOTES DUE 2007
[Unless and until it is exchanged in whole or in part for Notes in
certificated form, this Note may not be transferred except as a whole by the
Depository to a nominee of the Depository, by a nominee of the Depository to the
Depository or another nominee of the Depository or by the Depository or any such
nominee to a successor Depository or a nominee of such successor Depository.
Unless this certificate is presented by an authorized representative of The
Depository Trust Company (55 Water Street, New York, New York) ("DTC"), to the
issuer or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or such other name as
may be requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or such other entity as may be requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.](1)'
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER
SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES
ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY
EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH SECURITY MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY BY THE INITIAL
PURCHASERS TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A UNDER THE SECURITIES ACT, OUTSIDE THE UNITED STATES TO A FOREIGN
PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE
904 OF REGULATION S UNDER THE SECURITIES ACT, PURSUANT TO AN EXEMPTION
FROM
- ------------------------
(1) This paragraph should be included only if the Note is issued in Global
Form.
A-2
<PAGE>
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER
(IF APPLICABLE) OR IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), TO THE COMPANY OR
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN ADDITION, TO AN
INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND BY SUBSEQUENT
INVESTORS, AS SET FORTH IN THROUGH ABOVE AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND THE HOLDER WILL,
AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH ABOVE.
NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION
PROVIDED BY RULE 144 FOR RESALE OF THE SECURITY EVIDENCED HEREBY."(2)
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY
PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE
SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF
THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT
IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL
NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO
SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE
TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF
THE COMPANY."
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. Interest. Speedway Motorsports, Inc., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture, being herein
called the ("Company"), promises to pay interest on the principal amount of this
Note at 8 1/2% per annum from May 11, 1999 until maturity and shall pay the
Liquidated Damages, if any, payable pursuant to Section 5 of the Registration
Rights Agreement referred to below. The Company will pay interest and Liquidated
Damages semi-annually on February 15 and August 15 of each year, or if any such
day is not a Business Day, on the next succeeding Business Day (each, an
"Interest Payment
- --------------------------
(2) This paragraph should be included only if the Note is a Transfer
Restricted Security.
A-3
<PAGE>
Date"). Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
issuance; PROVIDED, that if there is no existing Default in the payment of
interest, and if this Note is authenticated between a record date referred to on
the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; PROVIDED, FURTHER, that
the first Interest Payment Date shall be August 15, 1999. The Company shall pay,
to the extent lawful, interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand at a rate that is 1% per annum in excess of the rate
then in effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
2. Method of Payment. The Company shall pay interest on the Notes
(except defaulted interest) and Liquidated Damages, if any, to the Persons who
are registered Holders of Notes at the close of business on the January 31 or
July 31 next preceding the Interest Payment Date, even if such Notes are
canceled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Notes will be payable as to principal, premium, interest and
Liquidated Damages at the office or agency of the Company maintained for such
purpose within or without the City and State of New York, or, at the option of
the Company, payment of interest and Liquidated Damages may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and provided that payment by wire transfer of immediately available will be
required with respect to principal of and interest, premium and Liquidated
Damages, if any, on all Global Notes and all other Notes the Holders of which
shall have provided wire transfer instructions to the Company or the Paying
Agent. Such payment shall be in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts.
3. Paying Agent and Registrar. Initially, U.S. Trust National
Association, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity; PROVIDED that if the Company or such Subsidiary is acting as Paying
Agent, the Company or such Affiliate shall segregate all funds held by it as
Paying Agent and hold them in trust for the benefit of the Holders or the
Trustee.
4. Indenture. The Company issued the Notes under an Indenture dated as
of May 11, 1999 (the "INDENTURE"), among the Company, the Guarantors and the
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Notes are subject to all such
terms, and Holders are referred to the Indenture and such Act for a statement of
such terms. The Notes are unsecured obligations of the Company limited to $325.0
million in aggregate principal amount.
A-4
<PAGE>
The summary of the terms of this Note contained herein does not purport
to be complete and is qualified by reference to the Indenture. To the extent
permitted by applicable law, in the event of any inconsistency between the terms
of this Note and the terms of the Indenture, the terms of the Indenture shall
control.
The Indenture restricts, among other things, the Company's ability to
incur additional indebtedness and issue preferred stock, pay dividends or make
certain other restricted payments, incur liens to secure PARI PASSU or
subordinated indebtedness, engage in any sale and leaseback transaction, sell
stock of Subsidiaries, incur indebtedness that is subordinate in right of
payment to any Senior Indebtedness and senior in right of payment to the Notes,
apply net proceeds from certain asset sales, merge or consolidate with any other
person, sell, assign, transfer, lease, convey or otherwise dispose of
substantially all of the assets of the Company or enter into certain
transactions with affiliates.
5. Optional Redemption.
--------------------
The Company shall not have the option to redeem the Notes prior to
August 15, 2002. Thereafter, the Company shall have the option to redeem the
Notes, in whole or in part, upon not less than 30 nor more than 60 days' notice,
at the redemption prices (expressed as percentages of principal amount) set
forth below plus accrued and unpaid interest thereon to the applicable
redemption date, if redeemed during the 12-month period beginning on August 15
of the years indicated below:
YEAR PERCENTAGE
----- ----------
2002.......................................... 104.250%
2003.......................................... 102.830%
2004.......................................... 101.420%
2005 and thereafter .......................... 100.000%
6. Mandatory Redemption.
----------------------
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption payments with respect to the Notes.
7. Repurchase at Option of Holder.
--------------------------------
(a) Upon a Change of Control, each Holder of Notes will have
the right to require the Company to make an offer (a "Change of Control
Offer") to repurchase all or any part (equal to $1,000 or an integral
multiple thereof) of each Holder's Notes at a purchase price equal to
101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of purchase (in
either case, the "Change of Control Payment"). Within 15 days following
any Change of Control, the Company shall mail a notice to each Holder
describing the transaction or transactions that constitute the Change
of Control and offering to repurchase Notes pursuant to the
A-5
<PAGE>
procedures governing the Change of Control Offer as required by the
Indenture and described in such notice.
(b) If the Company or a Subsidiary consummates any Asset Sale,
within five days of each date on which the aggregate amount of Excess
Proceeds exceeds $5.0 million, the Company shall commence an offer to
all Holders of Notes (an "Asset Sale Offer") pursuant to Section 4.10
of the Indenture to purchase the maximum principal amount of Notes that
may be purchased out of the Excess Proceeds at an offer price in cash
in an amount equal to 100% of the principal amount thereof plus accrued
and unpaid interest, if any, thereon to the date fixed for the closing
of such offer, in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate amount of Notes tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company may use such deficiency for general corporate purposes. If the
aggregate principal amount of Notes surrendered by Holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes to be purchased on a PRO RATA basis. Holders of Notes that are
the subject of an offer to purchase will receive an Asset Sale Offer
from the Company prior to any related purchase date and may elect to
have such Notes purchased by completing the form entitled "Option of
Holder to Elect Purchase" attached to this Note.
8. Notice of Redemption. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date, interest ceases to accrue on Notes or portions
thereof called for redemption.
9. Denominations, Transfer, Exchange. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, it need not
exchange or register the transfer of any Notes for a period of 15 days before a
selection of Notes to be redeemed or during the period between a record date and
the corresponding Interest Payment Date.
10. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes.
11. Amendment, Supplement and Waiver. Subject to certain exceptions,
the Indenture or the Notes may be amended or supplemented with the consent of
the Holders of at least a majority in aggregate principal amount of the then
outstanding Notes, and any existing default or compliance with any provision of
the Indenture or the Notes may be waived with the
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consent of the Holders of a majority in aggregate principal amount of the then
outstanding Notes. Without the consent of any Holder of a Note, the Indenture or
the Notes may be amended or supplemented to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place of
certificated Notes, to provide for the assumption of the Company's, or any
Guarantor's obligations to Holders of the Notes in case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, to comply with the requirements
of the SEC in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act or to provide for the issuance of Additional Notes
pursuant to the Indenture to the extent permitted under the restrictions
contained in the Credit Agreement and in the Indenture.
12. Defaults and Remedies. The Events of Default provided by the
Indenture include, without limitation:
(a) default for 30 days in the payment when due of interest
on, or Liquidated Damages, if any, with respect to, the Notes (whether
or not prohibited by the subordination provisions of the Indenture);
(b) default in payment when due of the principal of or premium, if any,
on the Notes (whether or not prohibited by the subordination provisions
of the Indenture); (c) failure by the Company to comply with Section
4.10 or 4.15 of the Indenture; (d) failure by the Company to comply
with Section 4.07 or 4.09 of the Indenture and the continuance of such
failure for a period of 30 days after notice is given to the Company by
the Trustee or to the Company and the Trustee by the Holders of at
least 25 % in aggregate principal amounts of the Notes then
outstanding; (e) failure by the Company for 60 days after notice is
given to the Company by the Trustee or to the Company and the Trustee
by the Holders of at least 25 % in aggregate principal amount of the
Notes then outstanding to comply with any of the Company's other
covenants or agreements in the Indenture or the Notes; (f) default
under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness
for money borrowed by the Company or any of its Subsidiaries (or the
payment of which is guaranteed by the Company or any of its
Subsidiaries) whether such Indebtedness or guarantee now exists, or is
created after the date of the Indenture, which default (i) is caused by
a failure to pay principal of such Indebtedness at its Stated Maturity
(after the expiration of any applicable grace period) or (ii) results
in the acceleration of such Indebtedness prior to its maturity and, in
each case, the principal amount of which Indebtedness, together with
the principal amount of any other such Indebtedness described in
clauses (i) and (ii) above, aggregates $5.0 million or more; (g)
failure by the Company or any of its Subsidiaries to pay final
judgments aggregating in excess of $5.0 million (net of amounts covered
by insurance), which judgments are not paid, discharged or stayed for a
period of 60 days; (h) certain events of bankruptcy or insolvency with
respect to the Company or any of its Subsidiaries; (i) the Subsidiary
Guarantee of any Guarantor is held in judicial proceedings to be
unenforceable or invalid or ceases for any reason to be in full force
and effect (other than in accordance with the terms of the Indenture)
or any Guarantor or any Person acting on behalf of any Guarantor denies
or disaffirms such Guarantor's obligations under its
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Subsidiary Guarantee (other than by reason of a release of such
Guarantor from its Subsidiary Guarantee in accordance with the terms of
the Indenture). If any Event of Default (other than an Event of Default
specified in clause (h) above occurs and is continuing, the Trustee or
the Holders of at least 25% in aggregate principal amount of the then
outstanding Notes may declare all the Notes to be due and payable
immediately; PROVIDED, however, that if any Senior Indebtedness is
outstanding under the Credit Agreement, upon a declaration of
acceleration, the Notes shall be payable upon earlier of (x) the day
which is five Business Days after the provision to the Company and the
agent under the Credit Agreement of written notice of such declaration
and (y) the date of acceleration of any Indebtedness under the Credit
Agreement. Notwithstanding the foregoing, in the case of an Event of
Default specified in clause (h) of this paragraph 12 occurs with
respect to the Company, any Significant Subsidiary or any group of
Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary, all outstanding Notes will become due and payable without
further action or notice. Holders may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in aggregate principal amount of the
then outstanding Notes may direct the Trustee in its exercise of any
trust or power. The Trustee may withhold from Holders of the Notes
notice of any continuing Default or Event of Default (except a Default
or Event of Default relating to the payment of principal or interest)
if it determines that withholding notice is in their interest. The
Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of
all of the Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event
of Default in the payment of interest on, or the principal of, the
Notes. The Company is required to deliver to the Trustee annually a
statement regarding compliance with the Indenture, and the Company is
required upon becoming aware of any Default or Event of Default, to
deliver to the Trustee a statement specifying such Default or Event of
Default.
13. Trustee Dealings with Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
14. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder, by accepting a Note, waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
15. Authentication. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
16. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT ( tenants
by the entireties),
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JE TEN (= joint tenants with right of survivorship and not as tenants in
common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
17. Additional Rights of Holders of Transfer Restricted Securities. In
addition to the rights provided to Holders of Notes under the Indenture, Holders
of Transferred Restricted Securities shall have all the rights set forth in the
Registration Rights Agreement dated as of May 11, 1999, among the Company and
the parties named on the signature pages thereof (the "Registration Rights
Agreement").
18. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Speedway Motorsports, Inc.
Highway 29 North
Post Office Box 600
Concord, NC 28026-0600
Attention: Secretary
19. Unclaimed Money. If money for the payment of principal, premium, if
any, or interest, or Liquidated Damages, if any, remains unclaimed for two
years, the Trustee or Paying Agent shall pay the money back to the Company at
its request unless any abandoned property law designates another Person. After
any such payment, Holders entitled to the money must look only to the Company
and not to the Trustee for payment unless such abandoned property law designates
another Person.
20. Discharge and Defeasance. Subject to certain conditions, the
Company at any time may terminate some or all of the obligations of the Company
under the Notes and the Indenture if the Company irrevocably deposits in trust
with the Trustee cash or U.S. Government Obligations for the payment of
principal, premium, if any, interest and Liquidated Damages, if any, on the
Notes to redemption or maturity, as the case may be.
21. Reports. Whether or not required by the rules and regulations of
the SEC, so long as any Notes are outstanding, the Company shall furnish to the
Trustee and to the Holders of Notes within 15 days after it is or would have
been required to file such with the SEC (i) all quarterly and annual financial
information that is or would be required to be contained in a filing with the
SEC on Forms l0-Q and 10-K if the Company were required to file such forms,
including a "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed
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with the SEC on Form 8-K if the Company were required to file such reports. In
addition, whether or not required by the rules and regulations of the SEC, at
any time after the Company files a registration statement with respect to the
Exchange Offer or a Shelf Registration Statement, the Company shall (i) file a
copy of all such information and reports with the SEC for public availability
(unless the SEC will not accept such a filing) and (ii) if the SEC will not
accept such filing, promptly upon written request and payment of the reasonable
cost of duplication and delivery, supply copies of such documents to securities
analysts and prospective inventors. In addition, for so long as any Notes remain
outstanding, the Company shall furnish to the Trustee, the Holders and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act. The Company also shall comply with the other provisions of TIA
ss. 314(a).
22. Governing Law. THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.
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EXHIBIT E
FORM OF GUARANTEE
For value received, each Guarantor (which term includes any successor
Person under the Indenture) has, jointly and severally, unconditionally
guaranteed, to the extent set forth in the Indenture and subject to the
provisions in the Indenture, (a) the due and punctual payment of the principal
of, premium, if any, and interest on the Notes, whether at maturity, by
acceleration or otherwise, the due and punctual payment of interest on overdue
principal and premium, and, to the extent permitted by law, interest, and the
due and punctual performance of all other obligations of the Company to the
Holders or the Trustee all in accordance with the terms of the Indenture and (b)
in case of any extension of time of payment or renewal of any Notes or any of
such other obligations, that the same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise. The obligations of the Guarantors
to the Holders of Notes and to the Trustee pursuant to the Subsidiary Guarantee
and the Indenture are expressly set forth in Article XI of the Indenture and
reference is hereby made to the Indenture for the precise terms of the
Subsidiary Guarantee. The Indebtedness evidenced by this Subsidiary Guarantee
is, to the extent and in the manner provided in the Indenture, subordinate and
subject in right of payment to the prior payment in full of all Guarantor Senior
Indebtedness (as defined in the Indenture), and this Subsidiary Guarantee is
issued subject to such provisions. Each Holder of a Note, by accepting the same,
(a) agrees to and shall be bound by such provisions, (b) authorizes and directs
the Trustee, on behalf of such Holder, to take such action as may be necessary
or appropriate to effectuate the subordination as provided in the Indenture and
(c) appoints the Trustee attorney-in-fact of such Holder for such purpose;
PROVIDED, HOWEVER, that the Indebtedness evidenced by this Subsidiary Guarantee
shall cease to be so subordinated and subject in right of payment upon any
defeasance of this Note in accordance with the provisions of the Indenture.
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GUARANTORS:
-----------
ATLANTA MOTOR SPEEDWAY, INC.,
a Georgia corporation
By:__________________________________
Name:
Title:
BRISTOL MOTOR SPEEDWAY, INC.,
a Tennessee corporation
By:__________________________________
Name:
Title:
CHARLOTTE MOTOR SPEEDWAY, INC.,
a North Carolina corporation
By:__________________________________
Name:
Title:
SPR ACQUISITION CORPORATION,
a California corporation
By:__________________________________
Name:
Title:
TEXAS MOTOR SPEEDWAY, INC.,
a Texas corporation
By:__________________________________
Name:
Title:
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600 RACING, INC.,
a North Carolina corporation
By:__________________________________
Name:
Title:
SONOMA FUNDING CORPORATION,
a California corporation
By:__________________________________
Name:
Title:
SPEEDWAY CONSULTING & DESIGN, INC.,
a North Carolina corporation
By:__________________________________
Name:
Title:
THE SPEEDWAY CLUB, INC.,
a North Carolina corporation
By:__________________________________
Name:
Title:
INEX CORP.,
a North Carolina corporation
By:__________________________________
Name:
Title:
SPEEDWAY FUNDING CORP.,
a Delaware corporation
By:__________________________________
Name:
Title:
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LAS VEGAS MOTOR SPEEDWAY, LLC,
a Nevada limited liability company
By:__________________________________
Name:
Title:
SMI SYSTEMS, LLC,
A Nevada limited liability company
By:__________________________________
Name:
Title:
SPEEDWAY SYSTEMS LLC,
a North Carolina limited liability company
By:__________________________________
Name:
Title:
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EXHIBIT 4.10
FIRST SUPPLEMENTAL INDENTURE
FIRST SUPPLEMENTAL INDENTURE (this "SUPPLEMENTAL INDENTURE"), dated as
of June 1, 1999, among IMS SYSTEMS LIMITED PARTNERSHIP, a North Carolina limited
partnership ("IMS"), SPEEDWAY SCREEN PRINTING, LLC, a North Carolina limited
liability company ("SPEEDWAY SCREEN PRINTING," and collectively with IMS, the
"GUARANTEEING SUBSIDIARIES"), SPEEDWAY MOTORSPORTS, INC., a Delaware corporation
(the "COMPANY"), the other Guarantors (as listed on the signature pages to the
Indenture referred to below) and U.S. BANK TRUST NATIONAL ASSOCIATION, as
trustee under the Indenture referred to below (the "TRUSTEE").
WITNESSETH
WHEREAS, the Company and the other Guarantors have heretofore executed
and delivered to the Trustee an indenture (the "INDENTURE"), dated as of May 11,
1999 providing for the issuance in an aggregate principal amount of up to
$325,000,000 of the Company's 8 1/2% Senior Subordinated Notes due 2007 (the
"NOTES");
WHEREAS, the Indenture provides that under certain circumstances each
of the Guaranteeing Subsidiaries shall execute and deliver to the Trustee a
supplemental indenture pursuant to which each of the Guaranteeing Subsidiaries
shall unconditionally guarantee all of the Company's Obligations under the Notes
and the Indenture on the terms and conditions set forth herein (the "NOTE
GUARANTEE");
WHEREAS, the partnership interests of IMS are owned as follows: a 1%
general partnership interest by the Company and a 99% limited partnership
interest by SPR Acquisition Corporation, a California corporation and
wholly-owned subsidiary of the Company;
WHEREAS, Speedway Screen Printing is a wholly-owned subsidiary of
Speedway Systems, LLC, a North Carolina limited liability company that is
wholly-owned, in turn, by IMS; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, each of the
Guaranteeing Subsidiaries and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
<PAGE>
1. Capitalized Terms. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. Each of the Guaranteeing Subsidiaries hereby
agrees as follows (notwithstanding anything to the contrary in this Supplemental
Indenture, such agreements of the Guaranteeing Subsidiaries shall be construed
as identical to those agreements made by the Guarantors under the Indenture, and
the obligations and rights of the Guaranteeing Subsidiaries hereunder shall be
no more and no less than those of the Guarantors under the Indenture):
(1) Along with all Guarantors named in the Indenture, to jointly and
severally unconditionally Guarantee to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of the Indenture, the Notes or
the obligations of the Company under this Supplemental Indenture, the Indenture
or the Notes, that:
(1) the principal of and interest on the Notes will be promptly
paid in full when due, whether at maturity, by acceleration, redemption
or otherwise, and interest on the overdue principal of and interest on
the Notes, if any, if lawful, and all other obligations of the Company
to the Holders or the Trustee under this Supplemental Indenture, the
Indenture or the Notes will be promptly paid in full or performed, all
in accordance with the terms of this Supplemental Indenture, the
Indenture and the Notes; and
(2) in case of any extension of time of payment or renewal of any
Notes or any of such other obligations, that same will be promptly paid
in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or
otherwise. Failing payment when due of any amount so guaranteed or any
performance so guaranteed for whatever reason, each of the Guaranteeing
Subsidiaries and the Guarantors will be jointly and severally obligated
to pay the same immediately.
(2) The obligations of the Guaranteeing Subsidiaries hereunder and
under the Indenture shall be unconditional, irrespective of the validity,
regularity or enforceability of this Supplemental Indenture, the Notes or the
Indenture, the absence of any action to enforce the same, any waiver or consent
by any Holder of the Notes with respect to any provisions hereof, of the
Indenture or of the Notes, the recovery of any judgment against the Company, any
action to enforce the same or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a guarantor.
(3) The following is hereby waived by each of the Guaranteeing
Subsidiaries: diligence, presentment, demand of payment, filing of claims with a
court in the event of insolvency or bankruptcy of the Company, any right to
require a proceeding first against the Company, protest, notice and all demands
whatsoever.
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<PAGE>
(4) This Note Guarantee shall not be discharged except by complete
performance of the obligations contained herein, and in the Notes and the
Indenture, and each of the Guaranteeing Subsidiaries accepts all obligations of
a Guarantor under the Indenture.
(5) If any Holder or the Trustee is required by any court or otherwise
to return to the Company, the Guaranteeing Subsidiaries or the Guarantors, or
any Custodian, Trustee, liquidator or other similar official acting in relation
to either the Company, the Guaranteeing Subsidiaries or the Guarantors, any
amount paid by any of them to the Trustee or such Holder, this Note Guarantee,
to the extent theretofore discharged, shall be reinstated in full force and
effect.
(6) Each of the Guaranteeing Subsidiaries agrees that they shall not be
entitled to any right of subrogation in relation to the Holders in respect of
any obligations guaranteed hereby and by the Indenture until payment in full of
all obligations guaranteed hereby and by the Indenture.
(7) As between the Guarantors and the Guaranteeing Subsidiaries, on the
one hand, and the Holders and the Trustee, on the other hand, (x) the maturity
of the obligations guaranteed hereby and by the Indenture may be accelerated as
provided in Article VI of the Indenture for the purposes of this Note Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby and by the
Indenture, and (y) in the event of any declaration of acceleration of such
obligations as provided in Article VI of the Indenture, such obligations
(whether or not due and payable) shall forthwith become due and payable by the
Guaranteeing Subsidiaries for the purpose of this Note Guarantee.
(8) The Guaranteeing Subsidiaries and the Guarantors shall have the
right to seek contribution from any non-paying Guaranteeing Subsidiary or
Guarantor so long as the exercise of such right does not impair the rights of
the Holders under the Guarantee.
(9) Notwithstanding anything to the contrary in this Supplemental
Indenture or in Article XI of the Indenture, the aggregate amount of the
Obligations guaranteed hereunder and under the Indenture by any Guaranteeing
Subsidiary shall be reduced to the extent necessary to prevent the Note
Guarantee of such Guaranteeing Subsidiary from violating or becoming voidable
under any law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors.
3. Execution and Delivery. Notwithstanding Section 11.02 of the
Indenture, each of the Guaranteeing Subsidiaries agrees that the Note Guarantees
shall remain in full force and effect notwithstanding any failure to endorse on
each Note a notation of such Note Guarantee.
4. Guaranteeing Subsidiaries May Consolidate Etc. on Certain Terms.
(1) Except as set forth in Articles IV and V of the Indenture, nothing
contained in this Supplemental Indenture, in the Indenture or in any of the
Notes shall prevent any consolidation or merger of a Guaranteeing Subsidiary
with or into the Company or shall prevent any sale or
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<PAGE>
conveyance of the property of a Guaranteeing Subsidiary as an entirety or
substantially as an entirety, to the Company.
(2) Except as set forth in Article IV of the Indenture, nothing
contained in this Supplemental Indenture, in the Indenture or in any of the
Notes shall prevent any consolidation or merger of a Guaranteeing Subsidiary
with or into a corporation or corporations other than the Company (whether or
not affiliated with the Guaranteeing Subsidiary), or successive consolidations
or mergers in which a Guaranteeing Subsidiary or its successor or successors
shall be a party or parties, or shall prevent any sale or conveyance of the
property of a Guaranteeing Subsidiary as an entirety or substantially as an
entirety, to a corporation other than the Company (whether or not affiliated
with the Guaranteeing Subsidiary) authorized to acquire and operate the same;
PROVIDED, HOWEVER, that (i) each Guaranteeing Subsidiary hereby covenants and
agrees that, upon any such consolidation, merger, sale or conveyance, the Note
Guarantee, and the due and punctual performance and observance of all of the
covenants and conditions of this Supplemental Indenture and the Indenture to be
performed by such Guaranteeing Subsidiary, shall be expressly assumed (in the
event that the Guaranteeing Subsidiary is not the surviving corporation in the
merger) by supplemental indenture reasonably satisfactory in form to the
Trustee, executed and delivered to the Trustee, by the corporation formed by
such consolidation, or into which the Guaranteeing Subsidiary shall have been
merged, or by the corporation which shall have acquired such property and (ii)
immediately after giving effect to such transaction, no Default or Event of
Default would exist. In case of any such consolidation, merger, sale or
conveyance and upon the assumption by the successor corporation, by supplemental
indenture, executed and delivered to the Trustee and satisfactory in form to the
Trustee, of the Note Guarantee and the due and punctual performance of all of
the covenants and conditions of this Supplemental Indenture and the Indenture to
be performed by the Guaranteeing Subsidiary, such successor corporation shall
succeed to and be substituted for the Guaranteeing Subsidiary with the same
effect as if it had been named herein as a Guaranteeing Subsidiary. Such
successor corporation thereupon may cause to be signed any or all of the
Subsidiary Guarantees to be endorsed upon all of the Notes issuable under the
Indenture which theretofore shall not have been signed by the Company and
delivered to the Trustee. All the Subsidiary Guarantees so issued shall in all
respects have the same legal rank and benefit under the Indenture as the
Subsidiary Guarantees theretofore and thereafter issued in accordance with the
terms of the Indenture as though all of such Subsidiary Guarantees had been
issued at the date of the execution of this Supplemental Indenture.
5. Releases.
(1) Concurrently with any sale of assets (including, if applicable, all
of the capital stock of any Guaranteeing Subsidiary), any Liens in favor of the
Trustee in the assets sold thereby shall be released; provided, that in the
event of an Asset Sale, the Net Proceeds from such sale or other disposition are
treated in accordance with the provisions of Section 4.10 of the Indenture if
the assets sold in such sale or other disposition include all or substantially
all of the assets of any Guaranteeing Subsidiary or all of the capital stock of
any Guaranteeing Subsidiary, then such Guaranteeing Subsidiary (in the event of
a sale or other disposition or all of the capital stock of such Guaranteeing
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<PAGE>
Subsidiary) or the corporation acquiring the property (in the event of a sale or
other disposition of all or substantially all of the assets of a Guaranteeing
Subsidiary) shall be released and relieved of its obligations under its Note
Guarantee or Section 11.03 of the Indenture, as the case may be; PROVIDED, that
in the event of an Asset Sale, the Net Proceeds from such sale or other
disposition are treated in accordance with the provisions of Section 4.10 of the
Indenture. Upon delivery by the Company to the Trustee of an Officers'
Certificate and an Opinion of Counsel to the effect that such sale or other
disposition was made by the Company in accordance with the provisions of the
Indenture, including without limitation Section 4.10 of the Indenture, the
Trustee shall execute any documents reasonably required in order to evidence the
release of any Guaranteeing Subsidiary from its obligations under its Note
Guarantee.
(2) Upon the release by all holders of Senior Indebtedness and
Guarantor Senior Indebtedness of all guarantees issued by a Guaranteeing
Subsidiary relating to such Senior Indebtedness and Guarantor Senior
Indebtedness and all Liens on the property and assets of such Guaranteeing
Subsidiary relating to Senior Indebtedness and Guarantor Senior Indebtedness,
then such Guaranteeing Subsidiary shall be released and relieved of any
obligations under its Note Guarantee. Upon delivery by the Company to the
Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that
all holders of Senior Indebtedness and Guarantor Senior Indebtedness have
released all guarantees issued by a Guaranteeing Subsidiary and all Liens on the
property and assets of such Guaranteeing Subsidiary relating to such Senior
Indebtedness and Guarantor Senior Indebtedness, the Trustee shall execute any
documents reasonably required in order to evidence the release of such
Guaranteeing Subsidiary from its obligations under its Note Guarantee.
(3) Any Guaranteeing Subsidiary not released from its obligations under
its Note Guarantee pursuant to either of paragraphs (a) or (b) of this Section 5
shall remain liable for the full amount of principal of and interest on the
Notes and for the other obligations of any Guarantor or any Guaranteeing
Subsidiary under this Supplemental Indenture or the Indenture, respectively, as
provided in Article XI of the Indenture or this Supplemental Indenture,
respectively.
6. Subordination of Note Guarantees. The obligations of each
Guaranteeing Subsidiary under its Note Guarantee pursuant to this Supplemental
Indenture and Article XI of the Indenture shall be junior and subordinated to
the Guarantor Senior Indebtedness of such Guaranteeing Subsidiary on the same
basis as the Notes are junior and subordinated to Senior Indebtedness. For the
purposes of the foregoing sentence, the Trustee and the Holders shall have the
right to receive and/or retain payments by any of the Guaranteeing Subsidiaries
only at such times as they may receive and/or retain payments in respect of the
Notes pursuant to the Indenture, including Article X of the Indenture.
7. No Recourse Against Others. No past, present or future director,
officer, employee, incorporator, stockholder or agent of either of the
Guaranteeing Subsidiaries, as such, shall have any liability for any obligations
of the Company, any Guarantor or any of the Guaranteeing Subsidiaries under the
Notes, the Subsidiary Guarantees, the Note Guarantees, the Indenture or this
Supplemental Indenture or for any claim based on, in respect of, or by reason
of, such obligations or their creation.
5
<PAGE>
Each Holder of the Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the SEC that such a waiver is
against public policy.
8. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
9. Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
10. Effect of Headings. The Section headings herein are for convenience
only and shall not affect the construction hereof.
11. The Trustee. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Subsidiaries and the Company.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
GUARANTEEING SUBSIDIARIES:
IMS SYSTEMS LIMITED PARTNERSHIP
By: Speedway Motorsports, Inc.,
its general partner
By: /s/ William R. Brooks
-------------------------------
Name: William R. Brooks
Title: Vice President
SPEEDWAY SCREEN PRINTING, LLC
By: /s/ William R. Brooks
-------------------------------
Name: William R. Brooks
Title: Manager
6
<PAGE>
COMPANY:
SPEEDWAY MOTORSPORTS, INC.
By: /s/ William R. Brooks
-------------------------------
Name: William R. Brooks
Title: Vice President
GUARANTORS:
ATLANTA MOTOR SPEEDWAY, INC.
By: /s/ William R. Brooks
-------------------------------
Name: William R. Brooks
Title: Vice President
BRISTOL MOTOR SPEEDWAY, INC.
By: /s/ William R. Brooks
--------------------------------
Name: William R. Brooks
Title: Vice President
CHARLOTTE MOTOR SPEEDWAY, INC.
By: /s/ William R. Brooks
--------------------------------
Name: William R. Brooks
Title: Vice President
SPR ACQUISITION CORPORATION
By: /s/ William R. Brooks
--------------------------------
Name: William R. Brooks
Title: Vice President
TEXAS MOTOR SPEEDWAY, INC.
By: /s/ William R. Brooks
--------------------------------
Name: William R. Brooks
Title: Vice President
7
<PAGE>
600 RACING, INC.
By: /s/ William R. Brooks
--------------------------------
Name: William R. Brooks
Title: Vice President
SONOMA FUNDING CORPORATION
By: /s/ William R. Brooks
--------------------------------
Name: William R. Brooks
Title: Vice President
SPEEDWAY CONSULTING & DESIGN, INC.
By: /s/ William R. Brooks
--------------------------------
Name: William R. Brooks
Title: Vice President
THE SPEEDWAY CLUB, INC.
By: /s/ William R. Brooks
--------------------------------
Name: William R. Brooks
Title: Vice President
INEX CORP.
By: /s/ William R. Brooks
--------------------------------
Name: William R. Brooks
Title: Vice President
SPEEDWAY FUNDING CORP.
By: /s/ Victoria L. Garrett
--------------------------------
Name: Victoria L. Garrett
Title: Vice President
LAS VEGAS MOTOR SPEEDWAY, LLC
By: /s/ William R. Brooks
--------------------------------
Name: William R. Brooks
Title: Manager
8
<PAGE>
SMI SYSTEMS, LLC
By: /s/ William R. Brooks
--------------------------------
Name: William R. Brooks
Title: Manager
SPEEDWAY SYSTEMS, LLC
By: IMS Systems Limited Partnership, its
sole manager
By: Speedway Motorsports, Inc., its
general partner
By: /s/ William R. Brooks
-------------------------------
Name: William R. Brooks
Title: Vice President
TRUSTEE:
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Trustee.
By: /s/ Nancie J. Arvin
--------------------------------
Authorized Signatory
9
EXHIBIT 10.34
EXECUTION COPY
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
dated as of May 11, 1999
by and among
SPEEDWAY MOTORSPORTS, INC.,
as Company,
ATLANTA MOTOR SPEEDWAY, INC.,
BRISTOL MOTOR SPEEDWAY, INC.,
CHARLOTTE MOTOR SPEEDWAY, INC.,
SPR ACQUISITION CORPORATION, TEXAS MOTOR SPEEDWAY, INC.,
600 RACING, INC, SPEEDWAY FUNDING CORP.,
SONOMA FUNDING CORPORATION,
SPEEDWAY CONSULTING & DESIGN, INC.,
THE SPEEDWAY CLUB, INC., AND
INEX CORP.
LAS VEGAS MOTOR SPEEDWAY, LLC
SMI SYSTEMS, LLC
SPEEDWAY SYSTEMS LLC
as Guarantors
and
NATIONSBANC MONTGOMERY SECURITIES LLC
FIRST UNION CAPITAL MARKETS CORP.
J.C. BRADFORD & CO., L.L.C.
as Initial Purchasers
================================================================================
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of May 11, 1999, by and among Speedway Motorsports, Inc., a
Delaware corporation (the "Company"), and each of the domestic subsidiaries of
the Company set forth on the signature pages hereto (each, a "Guarantor" and,
collectively, the "Guarantors"), and NationsBanc Montgomery Securities LLC,
First Union Capital Markets Corp. and J.C. Bradford & Co., L.L.C. (each, an
"Initial Purchaser" and, collectively, the "Initial Purchasers"), each of whom
has agreed severally to purchase the Company's 8 1/2% Senior Subordinated Notes
due 2007 (the "Notes") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement dated May 4,
1999 (the "Purchase Agreement"), by and among the Company, the Guarantors and
the Initial Purchasers. In order to induce the Initial Purchasers to purchase
the Notes and the guarantees of the Guarantors (the "Guarantees" and
collectively with the Notes, the "Securities"), the Company and the Guarantors
(collectively, the "Issuers") have agreed to provide the registration rights set
forth in this Agreement. The execution and delivery of this Agreement is a
condition to the obligations of the Initial Purchasers set forth in Section 7 of
the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS.
Capitalized terms used herein without definition shall have the
respective meanings set forth in the Purchase Agreement. As used in this
Agreement, the following capitalized terms shall have the following meanings:
Act: The Securities Act of 1933, as amended.
Advice: As defined in Section 6(c).
Agreement: As defined in the preamble hereof.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Closing Date: The date of this Agreement.
Commission: The Securities and Exchange Commission.
Company: As defined in the preamble hereof.
Consummate or Consummation: An Exchange Offer shall be deemed
"Consummated" for purposes of this Agreement upon the occurrence of (i) the
filing and effectiveness under the Act of the Exchange Offer Registration
Statement relating to the New Securities to be issued in the Exchange Offer,
(ii) the maintenance of such Registration Statement continuously effective and
the
<PAGE>
keeping of the Exchange Offer open for a period not less than the minimum period
required pursuant to Section 3(b) hereof and (iii) the delivery by the Issuers
to the registrar under the Indenture of New Securities in the same aggregate
principal amount as the aggregate principal amount of Securities that were
tendered by Holders and holders of Old Notes thereof pursuant to the Exchange
Offer.
Damages Payment Date: With respect to the Securities or the New
Securities, each Interest Payment Date.
Effectiveness Target Date: As defined in Section 5.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The registration by the Issuers under the Act of the
New Securities pursuant to a Registration Statement pursuant to which the
Issuers offer the Holders of all outstanding Transfer Restricted Securities and
holders of the Old Notes the opportunity to exchange all such outstanding
Transfer Restricted Securities and the Old Notes held by such Holders and
holders of the Old Notes for New Securities in an aggregate principal amount
equal to the aggregate principal amount of the Transfer Restricted Securities
and the Old Notes tendered in such exchange offer by such Holders and holders of
the Old Notes.
Exchange Offer Registration Statement: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
Guarantees: As defined in the preamble hereof.
Guarantor or Guarantors: As defined in the preamble hereof.
Holders: As defined in Section 2(b) hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indenture: The Indenture dated as of May 11, 1999, among the Issuers
and U.S. Trust Bank National Association, as trustee (the "Trustee"), pursuant
to which the Securities and New Securities are to be issued, as such Indenture
is amended or supplemented from time to time in accordance with the terms
thereof.
Initial Purchaser or Initial Purchasers: As defined in the preamble
hereof.
Interest Payment Date: As defined in the Indenture, the Securities and
the New Securities.
Issuers: As defined in the preamble hereof.
Liquidated Damages: As defined in Section 5 hereof.
NASD: National Association of Securities Dealers, Inc.
2
<PAGE>
New Securities: Debt securities of the Company and related guarantees
of the Guarantors identical in all material respects to (i) the Securities and
the Guarantees, respectively (except that the transfer restrictions pertaining
to such Securities and Guarantees will be eliminated) to be issued under the
Indenture, and (ii) the Old Notes and the Old Guarantees.
Notes: As defined in the preamble hereof.
Old Guarantees: the subsidiary guarantees on the Old Notes.
Old Notes: the Company's outstanding 8 1/2% Senior Subordinated Notes
due 2007 issued on August 4, 1997.
Person: An individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
Prospectus: The prospectus included in a Registration Statement, as
amended or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such Prospectus.
Purchase Agreement: As defined in the preamble hereof.
Record Holder: With respect to any Damages Payment Date relating to
the Securities or the New Securities, each Person who is a Holder of Securities
or New Securities, as the case may be, on the record date with respect to the
Interest Payment Date on which such Damages Payment Date shall occur.
Registrar: As defined in the Indenture.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Issuers
relating to (a) an offering of New Securities pursuant to an Exchange Offer or
(b) the registration for resale of Transfer Restricted Securities and the Old
Notes pursuant to the Shelf Registration Statement, which is filed pursuant to
the provisions of this Agreement, in each case, including the Prospectus
included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.
Securities: As defined in the preamble hereof.
Shelf Filing Deadline: As defined in Section 4(a)(x) hereof.
Shelf Registration Statement: As defined in Section 4(a)(x) hereof.
TIA: The Trust Indenture Act of 1939, as amended, as in effect on the
date of the Indenture.
Transfer Restricted Securities: Each Security, until the earliest to
occur of (a) the date on
3
<PAGE>
which such Security is exchanged by a person other than a Broker-Dealer for a
New Security in the Exchange Offer, (b) following the exchange by a
Broker-Dealer in the Exchange Offer of a Security for a New Security, the date
on which such New Security is sold to a purchaser who receives from such
Broker-Dealer on or prior to the date of such sale a copy of the Prospectus
contained in the Exchange Offer Registration Statement, (c) the date on which
such Security has been effectively registered under the Act and disposed of in
accordance with a Shelf Registration Statement or (d) the date on which such
Security is distributed to the public pursuant to Rule 144 under the Act.
Underwritten Registration or Underwritten Offering: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT.
(a) Transfer Restricted Securities and Old Notes. The securities
entitled to the benefits of this Agreement are the Transfer Restricted
Securities and the Old Notes (only with respect to the Exchange Offer).
(b) Holders of Transfer Restricted Securities. A Person is deemed to
be a holder of Transfer Restricted Securities (each, a "Holder") whenever such
Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER.
(a) Unless the Exchange Offer shall not be permissible under
applicable law or Commission policy (after the procedures set forth in Section
6(a) below have been complied with), the Issuers shall (i) cause to be filed
with the Commission as soon as practicable after the Closing Date, but in no
event later than 60 days after the Closing Date, a Registration Statement under
the Act relating to the New Securities and the Exchange Offer, (ii) use their
best efforts to cause such Registration Statement to become effective at the
earliest practicable time, but in no event later than 120 days after the Closing
Date, (iii) in connection with the foregoing, file (A) all pre-effective
amendments to such Registration Statement as may be necessary in order to cause
such Registration Statement to become effective, (B) if applicable, a
post-effective amendment to such Registration Statement pursuant to Rule 430A
under the Act and (C) cause all necessary filings in connection with the
registration and qualification of the New Securities to be made under the Blue
Sky laws of such jurisdictions as are necessary to permit Consummation of the
Exchange Offer and (iv) upon the effectiveness of such RegistrationStatement,
commence the Exchange Offer. The Exchange Offer shall be on the appropriate form
permitting registration of the New Securities to be offered in exchange for the
Transfer Restricted Securities and the Old Notes and to permit resales of New
Securities held by Broker-Dealers as contemplated by Section 3(c) below.
(b) The Company shall cause the Exchange Offer Registration Statement
to be effective continuously and shall keep the Exchange Offer open for a period
of not less than the minimum period required under applicable federal and state
securities laws to Consummate the Exchange Offer; PROVIDED, HOWEVER, that in no
event shall such period be less than 20 business days. The
4
<PAGE>
Company shall cause the Exchange Offer to comply with all applicable federal and
state securities laws. No securities other than New Securities shall be included
in the Exchange Offer Registration Statement. The Company shall use its best
efforts to cause the Exchange Offer to be Consummated on the earliest
practicable date after the Exchange Offer Registration Statement has become
effective, but in no event later than 30 business days thereafter.
(c) The Company shall indicate in a "Plan of Distribution" section
contained in the Prospectus contained in the Exchange Offer Registration
Statement that any Broker-Dealer who holds Securities that are Transfer
Restricted Securities and that were acquired for its own account as a result of
market-making activities or other trading activities (other than Transfer
Restricted Securities acquired directly from the Company), may exchange such
Securities pursuant to the Exchange Offer; PROVIDED, HOWEVER, such Broker-Dealer
may be deemed to be an underwriter within the meaning of the Act and must,
therefore, deliver a prospectus meeting the requirements of the Act in
connection with any resales of the New Securities received by such Broker-Dealer
in the Exchange Offer, which prospectus delivery requirement may be satisfied by
the delivery by such Broker-Dealer of the Prospectus contained in the Exchange
Offer Registration Statement. Such "Plan of Distribution" section shall also
contain all other information with respect to such resales by Broker-Dealers
that the Commission may require in order to permit such resales pursuant
thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer
or disclose the amount of Securities and New Securities held by any such
Broker-Dealer except to the extent required by the Commission.
The Issuers shall use their best efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented and amended, as
required by the provisions of Section 6(c) below, to the extent necessary to
ensure that it is available for resales of the New Securities acquired by
Broker-Dealers for their own accounts as a result of market-making activities or
other trading activities, and to ensure that it conforms with the requirements
of this Agreement, the Act and the policies, rules and regulations of the
Commission as announced from time to time, for a period of one year from the
date on which the Exchange Offer Registration Statement is declared effective.
The Issuers will be permitted to suspend use of the Prospectus included in the
Exchange Offer Registration Statement during periods of time and in
circumstances relating to pending corporate developments and public filings with
the Commission and similar events in which the use of the Prospectus for the
offer or sale of the Securities, in the reasonable opinion of the Issuers, may
give rise to claims of liability against the Issuers under applicable federal or
state securities law.
The Issuers shall provide sufficient copies of the latest version of
such Prospectus to Broker-Dealers promptly upon request at any time during such
one-year period in order to facilitate such resales.
5
<PAGE>
SECTION 4. SHELF REGISTRATION.
(a) Shelf Registration. If (i) the Issuers are not required to file an
Exchange Offer Registration Statement or permitted to Consummate the Exchange
Offer because the Exchange Offer is not permitted by applicable law or
Commission policy (after the procedures set forth in Section 6(a) below have
been complied with) or (ii) if any Holder of Transfer Restricted Securities
shall notify the Company within 20 business days of the Consummation of the
Exchange Offer (A) that such Holder is prohibited by applicable law or
Commission policy from participating in the Exchange Offer, or (B) that a Holder
or a holder of the Old Notes may not resell the New Securities acquired by it in
the Exchange Offer to the public without delivering a prospectus and that the
Prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by a Holder or holder of the Old
Notes, as the case may be, or (C) that such Holder is a Broker-Dealer and holds
Securities acquired directly from the Company or one of its affiliates, then the
Issuers shall:
(x) use their best efforts to file a shelf registration
statement pursuant to Rule 415 under the Act, which may be an amendment
to the Exchange Offer Registration Statement (in either event, the
"Shelf Registration Statement") on or prior to the earliest to occur of
(1) the 45th day after the date on which the Company determines that it
is not required or permitted to file the Exchange Offer Registration
Statement, (2) the 45th day after the date on which the Company
receives notice from a Holder of Transfer Restricted Securities or
holder of the Old Notes as contemplated by clause (ii) above, or (3)
the 120th day after the Closing Date (such earliest date being the
"Shelf Filing Deadline"), which Shelf Registration Statement shall
provide for resales of all Transfer Restricted Securities the Holders
of which shall have provided the information required pursuant to
Section 4(b) hereof; and
(y) use their best efforts to cause such Shelf Registration
Statement to be declared effective by the Commission on or before the
90th day after the obligation to file such Shelf Registration Statement
arises.
The Issuers shall use their best efforts to keep such Shelf
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Sections 6(b) and 6(c) hereof to the extent
necessary to ensure that it is available for resales of Securities or New
Securities by the Holders of Transfer Restricted Securities or holders of the
Old Notes entitled to the benefit of this Section 4(a), and to ensure that it
conforms with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of at least three years following the Closing Date or such shorter period
that will terminate when there are no Transfer Restricted Securities
outstanding. The Issuers will be permitted to suspend use of the Prospectus
included in the Shelf Registration Statement during periods of time and in
circumstances relating to pending corporate developments and public filings with
the Commission and similar events in which the use of the Prospectus for the
offer or sale of Securities, in the reasonable opinion of the Issuers, may give
rise to claims of liability against the
6
<PAGE>
Issuers under applicable federal and state securities laws.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 business days after receipt of a request
therefor, such information as the Company may reasonably request for use in
connection with any Shelf Registration Statement or Prospectus or preliminary
Prospectus included therein. No Holder of Transfer Restricted Securities shall
be entitled to Liquidated Damages pursuant to Section 5 hereof unless and until
such Holder shall have used its best efforts to provide all such reasonably
requested information. Each Holder as to which any Shelf Registration Statement
is being effected agrees to furnish promptly to the Company all information
required to be disclosed in order to make the information previously furnished
to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES.
If (i) any of the Registration Statements required by this Agreement
is not filed with the Commission on or prior to the date specified for such
filing in this Agreement, (ii) any of such Registration Statements has not been
declared effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "Effectiveness Target Date"), (iii) the
Exchange Offer has not been Consummated within 30 business days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (iv) any Registration Statement required by this Agreement is filed
and declared effective but shall thereafter cease to be effective or fail to be
usable (including as contemplated by the last sentence of the penultimate
paragraph of Section 3(c) hereof or the last sentence of Section 4(a) hereof)
for its intended purpose without being succeeded immediately by a post-effective
amendment to such Registration Statement that cures such failure and that is
itself immediately declared effective (each such event referred to in clauses
(i) through (iv), a "Registration Default"), the Issuers hereby jointly and
severally agree to pay liquidated damages ("Liquidated Damages") to each Holder
of Securities, with respect to the first 90-day period immediately following the
occurrence of such Registration Default, in an amount equal to $.05 per $1,000
principal amount of Securities held by such Holder for each week or portion
thereof that the Registration Default continues. The amount of the Liquidated
Damages shall increase by an additional $.05 per week per $1,000 in principal
amount of Securities with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of Liquidated
Damages of $.30 per week per $1,000 principalamount of Securities. All accrued
Liquidated Damages shall be paid to Record Holders by the Company by wire
transfer of immediately available funds or by federal funds check on each
Damages Payment Date, as provided in the Indenture. Following the cure of all
Registration Defaults relating to any particular Securities, the accrual of
Liquidated Damages with respect to such Securities will cease.
All obligations of the Issuers set forth in the preceding paragraph
that are outstanding with respect to any Security shall survive until such time
as all such obligations with respect to such Security shall have been satisfied
in full.
7
<PAGE>
SECTION 6. REGISTRATION PROCEDURES.
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer. the Issuers shall comply with all of the provisions of Section
6(c) below, shall use their best efforts to effect such exchange to permit the
sale of the Securities and the New Securities in accordance with the intended
method or methods of distribution thereof and shall comply with all of the
following provisions:
(i) If, in the reasonable opinion of counsel to the Company,
there is a question as to whether the Exchange Offer is permitted by
applicable law, the Issuers hereby agree to seek a no-action letter or
other favorable decision from the Commission allowing the Issuers to
Consummate an Exchange Offer for the Securities or the Old Notes. The
Issuers hereby agree to pursue the issuance of such a decision to the
Commission staff level but shall not be required to take commercially
unreasonable action to effect a change of Commission policy. The
Issuers hereby agree, however, to (A) participate in telephonic
conferences with the Commission, (B) deliver to the Commission staff an
analysis prepared by counsel to the Company setting forth the legal
bases, if any, upon which such counsel has concluded that such an
Exchange Offer should be permitted and (C) diligently pursue a
resolution (which need not be favorable) by the Commission staff of
such submission.
(ii) As a condition to its participation in the Exchange
Offer pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities or holder of the Old Notes shall furnish, upon
the request of the Company, prior to the Consummation thereof, a
written representation to the Company (which may be contained in the
letter of transmittal contemplated by the Exchange Offer Registration
Statement) to the effect that (A) it is not an affiliate of the
Issuers, (B) it is not engaged in, and does not intend to engage in,
and has no arrangement or understanding with any person to participate
in, a distribution of the New Securities to be issued in the Exchange
Offer and (C) it is acquiring the New Securities in its ordinary
course of business. In addition, all such Holders of Transfer
Restricted Securities or holders of the Old Notes shall otherwise
cooperate in the Issuers' preparations for the Exchange Offer (to meet
Commission requirements with respect to the Exchange Offer or
otherwise). Each Holder, by its receipt of the Securities,
acknowledges and agrees that any Broker-Dealer and any such Holder
using the Exchange Offer to participate in a distribution of the New
Securities to be acquired in the Exchange Offer (1) could not under
Commission policy as in effect on the date of this Agreement rely on
the position of the Commission enunciated in Morgan Stanley and Co.,
Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation
(available May 13, 1988), as interpreted in the Commission's letter to
Shearman & Sterling dated July 2, 1993, and similar no-action letters
(including any no-action letter obtained pursuant to clause (i)
above), and (2) must comply with the registration and prospectus
delivery requirements of the Act in connection with a secondary resale
transaction and that such a secondary resale transaction should be
covered by an effective registration statement containing the selling
security holder information required by Item 507 or 508, as
applicable, of Regulation S-K if the resales are of New Securities
obtained by such
8
<PAGE>
Holder in exchange for Securities acquired by such Holder directly
from the Company.
(iii) Prior to effectiveness of the Exchange Offer
Registration Statement, the Issuers shall provide a supplemental letter
to the Commission (A) stating that the Issuers are registering the
Exchange Offer in reliance on the position of the Commission enunciated
in Exxon Capital Holdings Corporation (available May 13, 1988). Morgan
Stanley and Co., Inc. (available June 5, 1991) and, if applicable, any
no-action letter obtained pursuant to clause (i) above and (B)
including a representation that neither the Company nor any Guarantor
has entered into any arrangement or understanding with any Person to
distribute the New Securities to be received in the Exchange Offer and
that to the best of the Company's information and belief (subject to
information provided to the Issuers by the Holders or the holders of
the Old Notes), each Holder or holder of the Old Notes participating in
the Exchange Offer is acquiring the New Securities in its ordinary
course of business and has no arrangement or understanding with any
Person to participate in the distribution of the New Securities
received in the Exchange Offer.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Issuers shall comply with all the provisions of
Section 6(c) below and shall use their best efforts to effect such registration
to permit the sale of the Securities being sold in accordance with the intended
method or methods of distribution thereof, and pursuant thereto the Issuers will
as expeditiously as possible prepare and file with the Commission a Registration
Statement relating to the shelf registration on any appropriate form under the
Act, which form shall be available for the sale of the Securities in accordance
with the intended method or methods of distribution thereof.
(c) General Provisions. In connection with any Registration Statement
and any Prospectus required by this Agreement to permit the sale or resale of
Transfer Restricted Securities (including, without limitation, any Registration
Statement and the related Prospectus required to permit resales of the
Securities or New Securities by Broker-Dealers), the Issuers shall:
(i) use their best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements
(including, if required by the Act or any regulation thereunder,
financial statements of the Guarantors) for the period specified in
Section 3 or 4 of this Agreement, as applicable; upon the occurrence of
any event that would cause any such Registration Statement or the
Prospectus contained therein (A) to contain a material misstatement or
omission or (B) not to be effective and usable for resale of Transfer
Restricted Securities during the period required by this Agreement, the
Issuers shall file promptly an appropriate amendment to such
Registration Statement, in the case of clause (A), correcting any such
misstatement or omission, and, in the case of either clause (A) or (B),
use its best efforts to cause such amendment to be declared effective
and such Registration Statement and the related Prospectus to become
usable for their intended purpose(s) as soon as practicable thereafter;
(ii) prepare and file with the Commission such amendments and
post-effective
9
<PAGE>
amendments to the Registration Statement as may be necessary to keep
the Registration Statement effective for the applicable period set
forth in Section 3 or 4 hereof, as applicable, or such shorter period
as will terminate when all Transfer Restricted Securities covered by
such Registration Statement have been sold; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the Act, and to
comply fully with the applicable provisions of Rules 424 and 430A
under the Act in a timely manner; and comply with the provisions of
the Act with respect to the disposition of all securities covered by
such Registration Statement during the applicable period in accordance
with the intended method or methods of distribution by the sellers
thereof set forth in such Registration Statement or supplement to the
Prospectus;
(iii) advise the underwriter(s), if any, and selling holders
of securities covered by such Registration Statement promptly and, if
requested by such Persons, to confirm such advice in writing, (A) when
the Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to any Registration
Statement or any post-effective amendment thereto, when the same has
become effective, (B) of any request by the Commission for amendments
to the Registration Statement or amendments or supplements to the
Prospectus or for additional information relating thereto, (C) of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the Act or of the
suspension by any state securities commission of the qualification of
the Transfer Restricted Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of the
preceding purposes, (D) of the existence of any fact or the happening
of any event that makes any statement of a material fact made in the
Registration Statement, the Prospectus, any amendment or supplement
thereto, or any document incorporated by reference therein untrue, or
that requires the making of any additions to or changes in the
Registration Statement or the Prospectus in order to make the
statements therein not misleading. If at any time the Commission shall
issue any stop order suspending the effectiveness of the Registration
Statement, or any state securities commission or other regulatory
authority shall issue an order suspending the qualification or
exemption from qualification of the Transfer Restricted Securities
under state securities or Blue Sky laws, the Issuers shall use their
best efforts to obtain the withdrawal or lifting of such order at the
earliest possible time;
(iv) furnish to each of the selling holders of securities
covered by such Registration Statement and each of the underwriter(s),
if any, before filing with the Commission, copies of any Registration
Statement or any Prospectus included therein or any amendments or
supplements to any such Registration Statement or Prospectus (including
all documents incorporated by reference after the initial filing of
such Registration Statement), which documents will be subject to the
review of such holders of securities covered by such Registration
Statement and underwriter(s), if any, for a period of at least three
business days, and the Issuers will not file any such Registration
Statement or Prospectus or any amendment or supplement to any such
Registration Statement or Prospectus (including all such
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documents incorporated by reference) to which a selling holder of
securities covered by such Registration Statement or the
underwriter(s), if any, shall reasonably object within three business
days after the receipt thereof;
(v) to the extent practicable, promptly prior to the filing of
any document that is to be incorporated by reference into a
Registration Statement or Prospectus, make available and, if requested,
provide copies of such document to the selling holders of securities
covered by such Registration Statement and to the underwriter(s), if
any, make the Issuers' representatives available for discussion of such
document and other customary due diligence matters, and include such
information in such document prior to the filing thereof as such
selling holders of securities covered by such Registration Statement or
underwriter(s), if any, reasonably may request;
(vi) make available at reasonable times for inspection by the
selling holders of securities covered by such Registration Statement,
any underwriter participating in any disposition pursuant to such
Registration Statement and any attorney or accountant retained by such
selling holders of securities covered by such Registration Statement or
any of the underwriter(s), all financial and other records, pertinent
corporate documents and properties of the Issuers and cause the
Issuers' officers, directors and employees to supply all information
reasonably requested by any such holder of securities covered by such
Registration Statement, underwriter, attorney or accountant in
connection with such Registration Statement subsequent to the filing
thereof and prior to its effectiveness;
(vii) if requested by any selling holders of securities
covered by such Registration Statement or the underwriter(s), if any,
promptly incorporate in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such selling holders of securities covered by such
Registration Statement and underwriter(s), if any, may reasonably
request to have included therein, including, without limitation,
information relating to the "Plan of Distribution" of the Transfer
Restricted Securities, information with respect to the principal amount
of Transfer Restricted Securities being sold to such underwriter(s),
the purchase price being paid therefor and any other terms of the
offering of the Transfer Restricted Securities to be sold in such
offering; and make all required filings of such Prospectus supplement
or post-effective amendment as soon as practicable after the Issuers
are notified of the matters to be incorporated in such Prospectus
supplement or post-effective amendment;
(viii) use their best efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be rated with the
appropriate rating agencies, if not rated, and so requested by the
holders of a majority in aggregate principal amount of the Securities
and New Securities covered thereby or the underwriter(s), if any;
(ix) furnish to each selling holder of securities covered by
such Registration Statement and each of the underwriter(s), if any,
without charge, at least one copy of the
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Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by reference
therein and all exhibits (including exhibits incorporated therein by
reference);
(x) deliver to each selling holder of securities covered by
such Registration Statement and each of the underwriter(s), if any,
without charge, as many copies of the Prospectus (including each
preliminary Prospectus) and any amendment or supplement thereto as such
Persons reasonably may request; the Issuers hereby consent to the use
of the Prospectus and any amendment or supplement thereto by each of
the selling holders of securities covered by such Registration
Statement and each of the underwriter(s), if any, in connection with
the offering and the sale of the Transfer Restricted Securities covered
by the Prospectus or any amendment or supplement thereto;
(xi) enter into such agreements (including an underwriting
agreement), and make such representations and warranties, and take all
such other actions in connection therewith in order to expedite or
facilitate the disposition of the Transfer Restricted Securities
pursuant to any Registration Statement contemplated by this Agreement,
all to such extent as may be reasonably requested by any Initial
Purchaser or by any Holder of Transfer Restricted Securities or
underwriter in connection with any sale or resale pursuant to any
Registration Statement contemplated by this Agreement; and whether or
not an underwriting agreement is entered into and whether or not the
registration is an Underwritten Registration, the Issuers shall:
(A) furnish to each Initial Purchaser, each selling
holder of securities covered by such Registration Statement
and each underwriter, if any, in such substance and scope as
they may reasonably request and as are customarily made by
issuers to underwriters in primary underwritten offerings,
upon the date of the Consummation of the Exchange Offer and,
if applicable, the effectiveness of the Shelf Registration
Statement:
(1) a certificate, dated the date of
Consummation of the Exchange Offer or the date of
effectiveness of the Shelf Registration Statement, as
the case may be, signed by (y) the President or any
Vice President and (z) a principal financial or
accounting officer of the Company confirming, as of
the date thereof, the matters set forth in paragraphs
(b), (c) and (d) of Section 7 of the Purchase
Agreement and such other matters as such parties may
reasonably request;
(2) an opinion, dated the date of
Consummation of the Exchange Offer or the date of
effectiveness of the Shelf Registration Statement, as
the case may be, of counsel for the Issuers, covering
the matters set forth in paragraph (g) of Section 7
of the Purchase Agreement and such other matter as
such parties may reasonably request, and in any event
including a
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statement to the effect that such counsel has
participated in conferences with officers and other
representatives of the Issuers, representatives of
the independent public accountants for the Issuers,
the Initial Purchasers' representatives and the
Initial Purchasers' counsel in connection with the
preparation of such Registration Statement and the
related Prospectus and have considered the matters
required to be stated therein and the statements
contained therein, and although such counsel has not
independently verified the accuracy, completeness or
fairness of such statements, on the basis of the
foregoing, no facts came to such counsel's attention
that caused such counsel to believe that the
applicable Registration Statement, at the time such
Registration Statement or any post-effective
amendment thereto became effective, and, in the case
of the Prospectus included in the Exchange Offer
Registration Statement, as of the date of
Consummation, contained an untrue statement of a
material fact or omitted to state a material fact
required to be stated therein or necessary to make
the statements therein not misleading, or that the
Prospectus contained in such Registration Statement
as of its date and, in the case of the opinion dated
the date of Consummation of the Exchange Offer, as of
the date of Consummation, contained an untrue
statement of a material fact or omitted to state a
material fact necessary in order to make the
statements therein, in light of the circumstances
under which they were made, not misleading. In
connection with the foregoing, such counsel may state
further that such counsel assumes no responsibility
for, and has not independently verified, the
accuracy, completeness or fairness of exhibits, the
financial statements, notes and schedules and other
financial and statistical data included in any
Registration Statement contemplated by this Agreement
or the related Prospectus; and
(3) a customary comfort letter, dated as of
the date of Consummation of the Exchange Offer or the
date of effectiveness of the Shelf Registration
Statement, as the case may be, from the Issuers'
independent accountants, in the customary form and
covering matters of the type customarily covered in
comfort letters by underwriters in connection with
primary underwritten offerings, and affirming the
matters set forth in the comfort letters delivered
pursuant to Section 7(k) of the Purchase Agreement,
without exception;
(B) set forth in full or incorporate by reference in
the underwriting agreement, if any, the indemnification
provisions and procedures of Section 8 hereof with respect to
all parties to be indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as
may be reasonably requested by such parties to evidence
compliance with clause (A) above and with any customary
conditions contained in the underwriting agreement or other
agreement
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entered into by the Issuers pursuant to this clause (xi), if
any.
If at any time the Issuers become aware that the representations and
warranties of the Issuers contemplated in clause (A)(1) above cease to be true
and correct, the Issuers shall so advise the Initial Purchasers and the
underwriter(s), if any, and each selling holder of securities covered by such
Registration Statement promptly and, if requested by such Persons, shall confirm
such advice in writing;
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling holders of securities covered by
such Registration Statement, the underwriter(s), if any, and their
respective counsel in connection with the registration and
qualification of the Transfer Restricted Securities under the
securities or Blue Sky laws of such jurisdictions as the selling
holders of securities covered by such Registration Statement or
underwriter(s) may reasonably request and do any and all other acts or
things reasonably necessary or advisable to enable the disposition in
such jurisdictions of the Transfer Restricted Securities covered by the
Shelf Registration Statement; PROVIDED, HOWEVER, that neither the
Company nor any of the Guarantors shall be required to register or
qualify as a foreign corporation where it is not now so qualified or to
take any action that would subject it to the service of process in
suits or to taxation, other than as to matters and transactions
relating to the Registration Statement, in any jurisdiction where it is
not now so subject;
(xiii) issue, upon the request of any Holder of Securities
covered by the Shelf Registration Statement, New Securities having an
aggregate principal amount equal to the aggregate principal amount of
Securities surrendered to the Company by such Holder in exchange
therefor or being sold by such Holder; such New Securities to be
registered in the name of such Holder or in the name of the
purchaser(s) of such Securities or New Securities, as the case may be;
in return, the Securities held by such Holder shall be surrendered to
the Company for cancellation;
(xiv) cooperate with the selling Holders and the
underwriter(s), if any, to facilitate the timely preparation and
delivery of certificates representing Transfer Restricted Securities to
be sold and not bearing any restrictive legends; and enable such
Transfer Restricted Securities to be in such denominations and
registered in such names as the Holders or the underwriter(s), if any,
may request at least two business days prior to any sale of Transfer
Restricted Securities made by such underwriter(s);
(xv) use its best efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be registered with
or approved by such other governmental agencies or authorities, if any,
as may be necessary to enable the seller or sellers thereof or the
underwriter(s), if any, to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in clause (xii)
above;
(xvi) if any fact or event contemplated by clause (c)(iii)(D)
above shall exist or
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have occurred, prepare a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading;
(xvii) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of the Registration
Statement and provide the Trustee under the Indenture with printed
certificates for the Transfer Restricted Securities which are in a form
eligible for deposit with The Depository Trust Company;
(xviii) cooperate and assist in any filings required to be
made with the NASD and in the performance of any due diligence
investigation by any underwriter (including any qualified independent
underwriter) that is required to be retained in accordance with the
rules and regulations of the NASD, and use its reasonable best efforts
to cause such Registration Statement to become effective and approved
by such governmental agencies or authorities as may be necessary to
enable the Holders selling Transfer Restricted Securities to Consummate
the disposition of such Transfer Restricted Securities;
(xix) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158
(which need not be audited) for the twelve-month period (A) commencing
at the end of any fiscal quarter in which Transfer Restricted
Securities are sold to underwriters in a firm or best efforts
Underwritten Offering or (B) if not sold to underwriters in such an
offering, beginning with the first month of the Company's first fiscal
quarter commencing after the effective date of the Registration
Statement;
(xx) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement
required by this Agreement, and, in connection therewith, cooperate
with the Trustee and the Holders of the Securities and New Securities
to effect such changes to the Indenture as may be required for such
Indenture to be so qualified in accordance with the terms of the TIA;
and execute, and use their best efforts to cause the Trustee to execute
all documents that may be required to effect such changes and all other
forms and documents required to be filed with the Commission to enable
such Indenture to be so qualified in a timely manner; and
(xxi) provide promptly to each Holder upon request each
document filed with the Commission pursuant to the requirements of
Section 13 and Section 15 of the Exchange Act.
Each Holder agrees by acquisition of a Transfer Restricted Security
that, upon receipt of any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith
discontinue disposition of Transfer Restricted Securities pursuant
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to the applicable Registration Statement until such Holder's receipt of the
copies of the supplemented or amended Prospectus contemplated by Section
6(c)(xvi) hereof, or until it is advised in writing (the "Advice") by the
Company that the use of the Prospectus may be resumed, and has received copies
of any additional or supplemental filings that are incorporated by reference in
the Prospectus. If so directed by the Company, each Holder will deliver to the
Company (at the Issuers' expense) all copies, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such Transfer
Restricted Securities that was current at the time of receipt of such notice. In
the event the Company shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to Section
6(c)(iii)(D) hereof to and including the date when each selling Holder covered
by such Registration Statement shall have received copies of the supplemented or
amended Prospectus contemplated by Section 6(c)(xvi) hereof or shall have
received the Advice.
SECTION 7. REGISTRATION EXPENSES.
(a) All expenses incident to the Issuers' performance of or compliance
with this Agreement will be borne by the Company or the respective Guarantor,
regardless of whether a Registration Statement becomes effective, including
without limitation: (i) all registration and filing fees and expenses (including
filings made by any Initial Purchaser or Holder with the NASD (and, if
applicable, the fees and expenses of any qualified independent underwriter and
its counsel that may be required by the rules and regulations of the NASD));
(ii) all fees and expenses of compliance with federal securities and state Blue
Sky or securities laws; (iii) all expenses of printing (including printing
certificates for the New Securities to be issued in the Exchange Offer and
printing of Prospectuses), messenger and delivery services and telephone; (iv)
all fees and disbursements of counsel for the Company and, subject to Section
7(b) below, the Holders of Transfer Restricted Securities; (v) all application
and filing fees in connection with listing the Securities and New Securities on
a national securities exchange or automated quotation system; and (vi) all fees
and disbursements of independent certified public accountants of the Issuers
(including the expenses of any special audit and comfort letters required by or
incident to such performance).
The Issuers will bear their internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expenses of any annual audit and the fees and
expenses of any Person, including special experts, retained by any Issuer.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Issuers will reimburse the
Initial Purchasers and the Holders of Transfer Restricted Securities being
tendered in the Exchange Offer and/or resold pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel, who shall be
Latham & Watkins or such other counsel as may be chosen by the Holders of a
majority
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in principal amount of the Transfer Restricted Securities for whose benefit such
Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION.
(a) The Issuers, jointly and severally, agree to indemnify and hold
harmless (i) each Holder and (ii) each person, if any, who controls (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) any Holder
(any of the persons referred to in this clause (ii) being hereinafter referred
to as a controlling person) and (iii) the respective officers, directors,
partners, employees, representatives and agents of any Holder or any controlling
person (any person referred to in clause (i), (ii) or (iii) may hereinafter be
referred to as an "Indemnified Holder"), to the fullest extent lawful, from and
against any and all losses, claims, damages, liabilities, judgments, actions and
expenses (including without limitation and as soon as reasonably practicable,
reimbursement of all reasonable costs of investigating, preparing, pursuing or
defending any claim or action, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, including the reasonable
fees and expenses of counsel to any Indemnified Holder) directly or indirectly
caused by, related to, based upon, arising out of or in connection with any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement or Prospectus (or any amendment or supplement thereto),
or any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or expenses are
caused by an untrue statement or omission or alleged untrue statement or
omission that is made in reliance upon and in conformity with information
relating to any of the Holders furnished in writing to the Company by any of the
Holders expressly for use therein. This indemnity agreement will be in addition
to any liability that the Issuers otherwise may have.
In case any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be brought or asserted against any
of the Indemnified Holders with respect to which indemnity may be sought against
the Issuers, such Indemnified Holder shall promptly notify the Issuers in
writing (PROVIDED, that the failure to give such notice (i) will not relieve the
Issuers from liability under paragraph (a) above unless and only to the extent
it did not otherwise learn of such action and such failure results in the
forfeiture by the indemnifying party of substantial rights and defenses and (ii)
will not, in any event, relieve the indemnifying party from any obligations to
any indemnified party other than the indemnification obligation provided in
paragraph (a) above). Such Indemnified Holder shall have the right to employ its
own counsel in any such action and the fees and expenses of such counsel shall
be paid, as soon as reasonably practicable after they are incurred, by the
Issuers (regardless of whether it is ultimately determined that an Indemnified
Holder is not entitled to indemnification hereunder). The Issuers shall not, in
connection with any one such action or proceeding or separate but substantially
similar or related actions or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel) at any time for the Indemnified Holders, which firm shall be
designated by the Holders. The Issuers shall be liable for any settlement of any
such action or proceeding effected with the
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Issuers' prior written consent, which consent shall not be withheld
unreasonably, and the Issuers agree to indemnify and hold harmless any
Indemnified Holder from and against any loss, claim, damage, liability or
expense by reason of any settlement of any action effected with the written
consent of the Issuers. The Issuers shall not, without the prior written consent
of each Indemnified Holder, settle or compromise or consent to the entry of
judgment in or otherwise seek to terminate any pending or threatened action,
claim, litigation or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not any Indemnified Holder is a
party thereto), unless such settlement, compromise, consent or termination
includes an unconditional release of each Indemnified Holder from all liability
arising out of such action, claim, litigation or proceeding.
(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Issuers, and their respective
directors, officers, and any person controlling (within the meaning of Section
15 of the Act or Section 20 of the Exchange Act) the Issuers, and the respective
officers, directors, partners, employees, representatives and agents of each
such person, to the same extent as the foregoing indemnity from the Issuers to
each of the indemnified Holders, but only with respect to claims and actions
based on information relating to such Holder furnished in writing by such Holder
expressly for use in any Registration Statement. In case any action or
proceeding shall be brought against any of the Issuers or their directors or
officers or any such controlling person and in respect of which indemnity may be
sought against a Holder of Transfer Restricted Securities, such Holder shall
have the rights and duties given the Issuers, and the Issuers or their directors
or officers or such controlling person shall have the rights and duties given to
each Holder by the second paragraph of Section 8(a). In no event shall the
liability of any selling Holder hereunder be greater in amount than the dollar
amount of the proceeds received by such Holder upon the sale of the Transfer
Restricted Securities giving rise to such indemnification obligation.
(c) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party under Section 8(a) or Section 8(b) hereof
(other than by reason of exceptions provided in those Sections) in respect of
any losses, claims, damages, liabilities or expenses referred to therein, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative benefits received by the
Issuers on the one hand and the Holders on the other hand from the sale by the
Company of the Securities or if such allocation is not permitted by applicable
law, the relative fault of the Issuers, on the one hand, and of the Indemnified
Holders, on the other hand, in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative fault of the Issuers,
on the one hand, and of the Indemnified Holder, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Issuers or by the
Indemnified Holder 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
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losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in the second paragraph
of Section 8(a), any legal or other fees or expenses reasonably incurred by such
party in connection with investigating or defending any action or claim.
The Issuers and each Holder of Transfer Restricted Securities agree
that it would not be just and equitable if contribution pursuant to this Section
8(c) were determined by pro rata allocation (even if the Holders were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or expenses referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 8, in no case
shall any Initial Purchaser or any Holder of any Security or New Security be
responsible, in the aggregate, for any amount in excess of the purchase discount
or commission applicable to such Security, or in the case of a New Security,
applicable to the Security that was exchangeable into such New Security, nor
shall any underwriter be responsible for any amount in excess of the
underwriting discount or commission applicable to the securities purchased by
such underwriter under the Registration Statement that resulted in such damages.
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. The Holders' obligations to
contribute pursuant to this Section 8(c) are several in proportion to the
respective principal amount of Securities held by each of the Holders hereunder
and not joint.
SECTION 9. RULE 144A.
The Issuers hereby agree with each Holder, for so long as any Transfer
Restricted Securities remain outstanding as Transfer Restricted Securities, to
make available to any Holder or beneficial owner of Transfer Restricted
Securities in connection with any sale thereof and any prospective purchaser of
such Transfer Restricted Securities from such Holder or beneficial owner, the
information required by Rule 144A(d)(4) under the Act in order to permit resales
of such Transfer Restricted Securities pursuant to Rule 144A.
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS.
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the
terms of such underwriting arrangements.
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SECTION 11. SELECTION OF UNDERWRITERS.
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; PROVIDED, that such investment bankers and managers must be
reasonably satisfactory to the Company.
SECTION 12. MISCELLANEOUS.
(a) Remedies. Each of the Issuers agrees that monetary damages
(including the Liquidated Damages contemplated hereby) would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Agreement and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Each of the Issuers will not, on or
after the date of this Agreement, enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof. Neither the Company
nor any of the Guarantors is subject to or bound by any agreement granting any
registration rights with respect to its securities to any Person. The rights
granted to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Issuers' securities
under any agreement in effect on the date hereof.
(c) Adjustments Affecting the Securities or New Securities. Each of the
Issuers will not take any action, or permit any change to occur, with respect to
the Securities or New Securities that would materially and adversely affect the
ability of the Holders or holders of the Old Notes to Consummate any Exchange
Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given, unless the Issuers have obtained the
written consent of Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof that relates exclusively to the
rights of Holders whose Securities are being tendered pursuant to the Exchange
Offer and that does not affect directly or indirectly the rights of other
Holders whose Securities are not being tendered pursuant to such Exchange Offer
may be given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities being tendered or registered.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telecopier or air courier
guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the
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Indenture, with a copy to the Registrar under the Indenture and to the
Initial Purchasers;
(ii) if to the Initial Purchasers, initially at the address of
the Initial Purchasers set forth in the Purchase Agreement; and
(iii) if to the Issuers, initially at the Company's address
set forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities; PROVIDED, HOWEVER, that
this Agreement shall not inure to the benefit of or be binding upon a successor
or assign of a Holder unless and only to the extent such successor or assign
acquired Transfer Restricted Securities from such Holder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Securities Held by the Issuers. Whenever the consent or approval of
Holders of a specified percentage of principal amount of Securities or New
Securities is required hereunder. Securities or New Securities, as applicable,
held by the Issuers or their Affiliates (other than subsequent Holders of
Securities or New Securities if such subsequent Holders are deemed to be
Affiliates solely by reason of their holdings of such Securities or New
Securities) shall not be
21
<PAGE>
counted in determining whether such consent or approval was given by the Holders
of such required percentage.
(l) Entire Agreement. This Agreement (together with the Purchase
Agreement, the Indenture and the other documents referenced therein) is intended
by the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein (or therein) with respect to the registration rights
granted by the Issuers with respect to the Transfer Restricted Securities. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to such subject matter.
[The remainder of this page is intentionally blank.]
22
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
COMPANY:
SPEEDWAY MOTORSPORTS, INC.,
a Delaware corporation
By: /s/William R. Brooks
---------------------------------
Name: William R. Brooks
Title: Vice President
GUARANTORS:
ATLANTA MOTOR SPEEDWAY, INC.,
a Georgia corporation
By: /s/William R. Brooks
---------------------------------
Name: William R. Brooks
Title: Vice President
BRISTOL MOTOR SPEEDWAY, INC.,
a Tennessee corporation
By: /s/William R. Brooks
---------------------------------
Name: William R. Brooks
Title: Vice President
CHARLOTTE MOTOR SPEEDWAY, INC.,
a North Carolina corporation
By: /s/William R. Brooks
---------------------------------
Name: William R. Brooks
Title: Vice President
SPR ACQUISITION CORPORATION,
a California corporation
By: /s/William R. Brooks
---------------------------------
Name: William R. Brooks
Title: Vice President
23
<PAGE>
TEXAS MOTOR SPEEDWAY, INC.,
a Texas corporation
By: /s/William R. Brooks
---------------------------------
Name: William R. Brooks
Title: Vice President
600 RACING, INC.,
a North Carolina corporation
By: /s/William R. Brooks
---------------------------------
Name: William R. Brooks
Title: Vice President
SPEEDWAY FUNDING CORP.,
a Delaware corporation
By: /s/Joan Dobrzynski
---------------------------------
Name: Joan Dobrzynski
Title: Vice President
SONOMA FUNDING CORPORATION,
a California corporation
By: /s/William R. Brooks
---------------------------------
Name: William R. Brooks
Title: Vice President
SPEEDWAY CONSULTING & DESIGN, INC.,
a North Carolina corporation
By: /s/William R. Brooks
---------------------------------
Name: William R. Brooks
Title: Vice President
THE SPEEDWAY CLUB, INC.,
a North Carolina corporation
By: /s/William R. Brooks
---------------------------------
Name: William R. Brooks
Title: Vice President
24
<PAGE>
INEX CORP.,
a North Carolina corporation
By: /s/William R. Brooks
---------------------------------
Name: William R. Brooks
Title: Vice President
LAS VEGAS MOTOR SPEEDWAY, LLC,
a Nevada limited liability company
By: /s/William R. Brooks
---------------------------------
Name: William R. Brooks
Title: Manager
SMI SYSTEMS, LLC,
a Nevada limited liability company
By: /s/William R. Brooks
---------------------------------
Name: William R. Brooks
Title: Manager
SPEEDWAY SYSTEMS LLC,
a North Carolina limited liability company
By: IMS Systems Limited Partnership, its sole
member
By: Speedway Motorsports, Inc., its general
partner
By: /s/William R. Brooks
---------------------------------
Name: William R. Brooks
Title: Vice President
25
<PAGE>
INITIAL PURCHASERS:
NATIONSBANC MONTGOMERY SECURITIES LLC
By: /s/ Gary R. Wolfe
---------------------------------
Name: Gary R. Wolfe
Title: Managing Director
FIRST UNION CAPITAL MARKETS CORP.
By: /s/ Steve J. Taylor
---------------------------------
Name: Steve J. Taylor
Title:
J.C. BRADFORD & CO., L.L.C.
By: /s/ Bill Wall
---------------------------------
Name: Bill Wall
Title:
26
EXECUTION COPY
SPEEDWAY MOTORSPORTS, INC.
$125,000,000
8 1/2% SENIOR SUBORDINATED NOTES DUE 2007
PURCHASE AGREEMENT
MAY 4, 1999
Nationsbanc Montgomery Securities LLC
First Union Capital Markets Corp.
J.C. Bradford & Co., L.L.C.
c/o Nationsbanc Montgomery Securities LLC
Nationsbank Corporate Center
100 North Tryon Street, NC1-007-07-01
Charlotte, North Carolina 28255
Ladies and Gentlemen:
Speedway Motorsports, Inc., a Delaware corporation ( the "Company"),
proposes to issue and sell to you (the "Initial Purchasers") $125,000,000
principal amount of its 8 1/2% Senior Subordinated Notes due 2007 (the "Notes").
The Notes will be fully and unconditionally guaranteed (the "Guarantees" and
collectively with the Notes, the "Securities"), jointly and severally, on a
senior subordinated basis by each existing and future material domestic
subsidiary (other than Oil-Chem Research Corp. and its subsidiaries) of the
Company (the "Guarantors" and collectively with the Company, the "Issuers"). The
Securities are to be issued under that certain indenture dated as of May 11,
1999 (the "Indenture"), among the Issuers and U.S. Bank Trust National
Association, as trustee (the "Trustee").
The sale of the Securities to the Initial Purchasers will be made
without registration of the Securities under the Securities Act of 1933, as
amended (the "Securities Act"), in reliance upon exemptions from the
registration requirements of the Securities Act. You have advised the Issuers
that the Initial Purchasers will offer and sell the Securities purchased by them
hereunder in accordance with Section 4 hereof as soon as you deem advisable.
In connection with the sale of the Securities, the Issuers have
prepared a preliminary offering memorandum dated April 29, 1999 (the
"Preliminary Memorandum"), and a final
<PAGE>
offering memorandum dated May 4, 1999 (the "Final Memorandum"). Each of the
Preliminary Memorandum and the Final Memorandum sets forth certain information
concerning the Issuers and the Securities. The Issuers hereby confirm that they
have authorized the use of the Preliminary Memorandum and the Final Memorandum,
and any amendment or supplement thereto, in connection with the offer and sale
of the Securities by the Initial Purchasers. Unless stated to the contrary, all
references herein to the Final Memorandum are to the Final Memorandum at the
time of execution and delivery (the "Execution Time") of this Purchase Agreement
(the "Agreement") and are not meant to include any amendment or supplement, or
any information incorporated by reference therein, subsequent to the Execution
Time.
The Initial Purchasers and their direct and indirect transferees will
be entitled to the benefits of the Registration Rights Agreement, substantially
in the form attached hereto as Exhibit B (the "Registration Rights Agreement"),
pursuant to which the Issuers will agree to use their best efforts (i) to
commence an offer to exchange the Securities for debt securities of the Company
and guarantees of the Guarantors (collectively, the "Exchange Securities")
identical in all material respects to the Notes and the Guarantees, respectively
(except that the transfer restrictions pertaining to such Notes and Guarantees
will be eliminated), that have been registered under the Securities Act, or (ii)
to cause a shelf registration statement to become effective under the Securities
Act and to remain effective for the period designated in such Registration
Rights Agreement.
1. REPRESENTATIONS AND WARRANTIES. The Issuers jointly and
severally represent and warrant to each Initial Purchaser as follows:
(a) The Preliminary Memorandum, at the date thereof, did not
contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The Final
Memorandum, at the date hereof, does not, and at the Closing Date (as
defined below) will not (and any amendment or supplement thereto, at
the date thereof and at the Closing Date, will not), contain any untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that the Issuers make no representation or warranty as to the
information contained in or omitted from the Preliminary Memorandum or
the Final Memorandum, or any amendment or supplement thereto, in
reliance upon and in conformity with information furnished in writing
to the Issuers by or on behalf of the Initial Purchasers relating to
the Initial Purchasers specifically for inclusion therein.
(b) Neither the Issuers, nor any of their "Affiliates" (as
defined in Rule 501(b) of Regulation D under the Securities Act
("Regulation D")), nor any person acting on their behalf has, directly
or indirectly, made offers or sales of any security, or solicited
offers to
2
<PAGE>
buy any security (as defined in the Securities Act), under
circumstances that would require the registration of the Securities
under the Securities Act. Neither the Issuers, nor any of their
Affiliates, nor any person acting on their behalf has engaged in any
form of general solicitation or general advertising (within the meaning
of Regulation D) in connection with any offer or sale of the Securities
(other than press releases issued by the Issuers pursuant to Rule 135c
under the Securities Act). The Securities satisfy the eligibility
requirements of Rule 144A(d)(3). The Company is subject to Section 13
of the Exchange Act. The Issuers have been advised by the National
Association of Securities Dealers, Inc., Private Offerings, Resales and
Trading through the Automated Linkages Market ("PORTAL") that the
Securities have been designated PORTAL eligible securities in
accordance with the rules and regulations of the National Association
of Securities Dealers, Inc.
(c) None of the Issuers or any of their respective
subsidiaries is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "Investment Company
Act"), without taking account of any exemption arising out of the
number of holders of any Issuer's or its respective subsidiaries'
securities.
(d) Assuming that the representations, warranties, agreements
and covenants of the Initial Purchasers contained in Section 3 hereof
are true, correct and complete, (i) neither registration under the
Securities Act of the Securities nor qualification of the Indenture
under the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"), is required in connection with the offer and sale of the
Securities to the Initial Purchasers in the manner contemplated by the
Final Memorandum or this Agreement, and (ii) neither registration under
the Securities Act of the Securities nor qualification of the Indenture
under the Trust Indenture Act is required in connection with the
initial resales of the Securities by the Initial Purchasers on the
terms and in the manner set forth in the Final Memorandum.
(e) Since the respective dates as of which information is
given in the Preliminary Memorandum and the Final Memorandum, except as
otherwise stated therein or in any supplement or amendment thereto or
information incorporated by reference therein, (i) there has been no
material adverse change in the condition (financial or otherwise),
earnings, affairs or business prospects of the Company and its
subsidiaries considered as a whole, whether or not arising in the
ordinary course of business, and (ii) there have been no material
transactions entered into by the Company or any Guarantor
(collectively, a "Material Adverse Change").
3
<PAGE>
(f) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware with corporate power and authority to own, lease and
operate its properties and conduct its business as described in the
Preliminary Memorandum and the Final Memorandum. The Company is duly
qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which it owns or leases properties or
in which the conduct of its business requires such qualification,
except to the extent that the failure to be so qualified or be in good
standing would not, singly or in the aggregate, reasonably be expected
to have a material adverse effect on the condition (financial or
otherwise), earnings, affairs or business prospects of the Company and
its subsidiaries considered as a whole (a "Material Adverse Effect").
(g) Each of the Guarantors has been duly incorporated or
organized, as the case may be, and is validly existing as a corporation
or limited liability company, as the case may be, in good standing
under the laws of the jurisdiction of its incorporation or
organization, as the case may be, has corporate or limited liability
company, as the case may be, power and authority to own, lease and
operate its properties and conduct its business as described in the
Preliminary Memorandum and the Final Memorandum and is duly qualified
as a foreign corporation or limited liability company, as the case may
be, to transact business and is in good standing in each jurisdiction
in which it owns or leases properties or in which the conduct of its
business requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not, singly or
in the aggregate, reasonably be expected to have a Material Adverse
Effect.
(h) The authorized and outstanding capital stock of the
Company at December 31, 1998 was as set forth under the caption
"Capitalization" in the Preliminary Memorandum and the Final
Memorandum. All of the outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid
and nonassessable. All of the issued and outstanding capital stock or
limited liability company interests, as the case may be, of each
Guarantor has been duly authorized and validly issued and is fully paid
and nonassessable, and, except as described in the Preliminary
Memorandum and the Final Memorandum, all such capital stock or limited
liability company interests, as the case may be, of each Guarantor is
owned by the Company, directly or through subsidiaries, free and clear
of any mortgage, pledge, lien, encumbrance, claim or equity. The
Guarantors are all of the material subsidiaries of the Company whose
capital stock is owned, directly or through subsidiaries, by the
Company (other than Oil-Chem Research Corp., an Illinois corporation,
and its wholly-owned subsidiaries (collectively, "Oil-Chem")).
(i) This Agreement has been duly authorized, executed and
delivered by each of the Issuers and constitutes the valid and binding
agreement of each of the Issuers.
4
<PAGE>
enforceable against each of the Issuers in accordance with its terms,
except that (i) enforcement thereof may be subject to (A) bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and (B) general principles of equity
(regardless of whether enforceability is considered in a proceeding in
equity or at law) and (ii) the enforceability of any indemnification or
contribution provisions thereof may be limited under applicable
securities laws or the public policies underlying such laws.
(j) The Notes have been duly authorized by the Company, and,
when executed and authenticated in accordance with the provisions of
the Indenture and delivered to and paid for by the Initial Purchasers
in accordance with this Agreement, will constitute the valid and
binding obligations of the Company enforceable against the Company in
accordance with their terms and will be entitled to the benefits of the
Indenture, except that (i) enforcement thereof may be subject to (A)
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws now or hereafter in effect relating
to or affecting creditors' rights generally and (B) general principles
of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law) and (ii) the enforceability of any
indemnification or contribution provisions thereof may be limited under
applicable securities laws or the public policies underlying such laws.
(k) The Guarantees endorsed on the Notes have been duly
authorized by each of the Guarantors and, when the Notes are executed
and authenticated in accordance with the provisions of the Indenture
and delivered to and paid for by the Initial Purchasers in accordance
with this Agreement, the Guarantees will constitute the valid and
binding obligation of each of the Guarantors enforceable against each
of the Guarantors in accordance with their terms and will be entitled
to the benefits of the Indenture, except that (i) enforcement thereof
may be subject to (A) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and (B)
general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law) and (ii) the
enforceability of any indemnification or contribution provisions
thereof may be limited under applicable securities laws or the public
policies underlying such laws.
(l) The Indenture has been duly authorized, executed and
delivered by each of the Issuers and (assuming the due execution and
delivery thereof by the Trustee) is a legally valid and binding
agreement of each of the Issuers, enforceable against each of the
Issuers in accordance with its terms, except that (i) enforcement
thereof may be subject to (A) bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws now or
hereafter in effect relating to or affecting creditors' rights
generally and (B) general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law) and
(ii) the enforceability of any indemnification or
5
<PAGE>
contribution provisions thereof may be limited under applicable
securities laws or the public policies underlying such laws.
(m) The Exchange Securities have been duly authorized, and,
when duly executed, authenticated, issued and delivered, will be
validly issued and outstanding, and will constitute the valid and
binding obligations of each of the Issuers, entitled to the benefits of
the Indenture and enforceable against each of the Issuers in accordance
with their terms, except that (i) enforcement thereof may be subject to
(A) bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws now or hereafter in effect relating
to or affecting creditors' rights generally and (B) general principles
of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law) and (ii) the enforceability of any
indemnification or contribution provisions thereof may be limited under
applicable securities laws or the public policies underlying such laws.
(n) The Registration Rights Agreement has been duly authorized
by each of the Issuers, and, when duly executed and delivered by each
of the Issuers (assuming the due execution and delivery by each of the
Initial Purchasers), will constitute a valid and binding agreement of
each of the Issuers, enforceable against each of the Issuers in
accordance with its terms, except that (i) enforcement thereof may be
subject to (A) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and (B)
general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law) and (ii) the
enforceability of any indemnification or contribution provisions
thereof may be limited under applicable securities laws or the public
policies underlying such laws.
(o) The execution, delivery and performance of this Agreement,
the Indenture, the Registration Rights Agreement and the Securities
(and all other agreements and instruments contemplated thereby) by each
of the Issuers (to the extent each is a party thereto), and the
consummation of the transactions contemplated hereby and thereby and
the issuance and sale of the Securities and Exchange Securities by the
Issuers 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
indenture, mortgage, deed of trust, loan or credit agreement or other
agreement or instrument to which either the Company or any of the
Guarantors is a party or by which the Company or any of the Guarantors
is bound or to which any of the properties or assets of the Company or
any of the Guarantors are subject, nor will such actions result in any
violation of (A) the provisions of the charter or by-laws of the
Company or any of the Guarantors or (B) any statute to which the
Company or any of the Guarantors may be subject or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over the Company or any of the Guarantors or any of their
properties or assets (except to the extent any such conflict, breach,
violation or default singly or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect).
6
<PAGE>
(p) Except for such consents, approvals, authorizations,
registrations or qualifications as may be required under applicable
state securities and Blue Sky laws in connection with the purchase and
distribution of the Securities by the Initial Purchasers or as set
forth in the Registration Rights Agreement, no consent, approval,
authorization or order of, or filing or registration with, any such
court or governmental agency or body is required for the execution,
delivery and performance of this Agreement, the Indenture and the
Registration Rights Agreement by the Issuers, the consummation of the
transactions contemplated hereby and thereby, and the issuance and sale
of the Securities and Exchange Securities by the Issuers. The execution
and delivery of this Agreement, the Securities, the Indenture and the
Registration Rights Agreement will not involve any prohibited
transaction within the meaning of Section 406 of the Employee
Retirement Income Security Act of 1974, as amended, or Section 4975 of
the Internal Revenue Code of 1986, as amended.
(q) Neither the Company nor any of the Guarantors is in breach
or violation of any of the terms or provisions of any material
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Company or any of the Guarantors is a party
or by which the Company or any of the Guarantors is bound or to which
any of the properties or assets of the Company or any of its
subsidiaries are subject, nor is the Company or any of the Guarantors
in violation of the provisions of its respective articles of
incorporation, articles of organization, bylaws or operating agreement,
as the case may be, or any material statute or any material judgment,
order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company, any of the Guarantors or any of
their properties or assets.
(r) This Agreement, the Securities, the Indenture and the
Registration Rights Agreement conform in all material respects to the
descriptions thereof contained in the Final Memorandum, and such
descriptions are accurate in all material respects.
(s) Except as set forth in the Registration Rights Agreement,
there are no contracts, agreements or understandings between the
Company or any of the Guarantors and any person granting such person
the right to require the Company or any of the Guarantors to file a
registration statement under the Securities Act with respect to any
securities owned or to be owned by such person or to require the
Company or any of the Guarantors to include such securities with any
securities being registered pursuant to any registration statement
filed by the Company or any of the Guarantors under the Securities Act.
(t) Except as set forth in the Preliminary Memorandum and the
Final Memorandum or in any supplement or amendment thereto or
information incorporated by reference therein, there is no action, suit
or proceeding before or by any court or governmental agency or body,
domestic or foreign, now pending or, to the knowledge of the Issuers,
threatened against or affecting the Company or any of the Guarantors,
which could
7
<PAGE>
reasonably be expected to result in a Material Adverse Change or,
singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect or materially and adversely affect the offering of the
Securities.
(u) Each of the Company and the Guarantors has good and
indefeasible title in fee simple to all real property and good and
indefeasible title to all personal property owned by it and necessary
in the conduct of the business of the Company or such Guarantor in each
case free and clear of all liens, encumbrances and defects, except (i)
such as are referred to in the Final Memorandum or (ii) such as do not
materially adversely affect the value of such property to the Company
or such Guarantor, and do not interfere with the use made and proposed
to be made of such property by the Company or such Guarantor to an
extent that such interference would, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect. All leases to
which any of the Company or the Guarantors is a party are valid and
binding, no default has occurred or is continuing thereunder which
could, singly or in the aggregate, reasonably be expected to have a
Material Adverse Effect or materially and adversely affect the offering
of the Securities, and the Issuers enjoy peaceful and undisturbed
possession under all such leases to which any of them is a party as
lessee, except with respect to such factors as would not have a
Material Adverse Effect. Each of the Company and the Guarantors
possesses all material certificates, authorizations or permits issued
by the appropriate state, federal or foreign regulatory agencies or
bodies necessary to conduct the business now operated by each of them.
Neither the Company nor any of the Guarantors has received any notice
of proceedings relating to the revocation or modification of any such
certificate, authority or permit which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would,
singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(v) Deloitte and Touche LLP, who have certified certain
financial statements of the Company and its subsidiaries, are
independent public accountants within the meaning of the Securities Act
and the rules and regulations thereunder. The audited and unaudited
consolidated financial statements included in the Preliminary
Memorandum and the Final Memorandum present fairly in all material
respects the financial position of the Company and its subsidiaries, on
a consolidated basis, as at the dates indicated and the results of
their operations and the changes in their consolidated financial
position for the periods specified, and such financial statements have
been prepared in conformity with generally accepted accounting
principles applied on a consistent basis during the periods involved,
except as indicated therein. The Company and each of its subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that: (i) transactions are executed in accordance
with management's general or specific authorizations; (ii) transactions
are recorded as necessary to permit preparation of financial statements
in conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only
in accordance with management's general or specific authorization; and
(iv) the recorded accountability for assets is compared
8
<PAGE>
with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(w) Neither the Company nor any of the Guarantors is now or,
after giving effect to the issuance of the Securities and the
application of the proceeds therefrom, will be (i) insolvent, (ii) left
with unreasonably small capital with which to engage in its anticipated
businesses or (iii) incurring debts beyond its ability to pay such
debts as they become due.
(x) Each of the Company and the Guarantors owns or otherwise
possesses, or can acquire on reasonable terms, the right to use all
material patents, trademarks, service marks, trade names and
copyrights, all applications and registrations for each of the
foregoing, and all other material proprietary rights and confidential
information necessary to the conduct of its respective businesses as
currently conducted. Except as otherwise disclosed in the Final
Memorandum, neither the Company nor any of the Guarantors has received
any notice or is otherwise aware of any infringement of or conflict
with the rights of any third party with respect to any of the foregoing
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would reasonably be expected to have a
Material Adverse Effect.
(y) Except as otherwise disclosed in the Final Memorandum,
each of the Company and the Guarantors is (i) in compliance with any
and all applicable foreign, federal, state and local 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"), (ii) has received all permits,
licenses or other approvals required of it under applicable
Environmental Laws to conduct its respective businesses and (iii) is 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 other approvals or
failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
(aa) Except as described in the Final Memorandum, no labor
problem or disturbance with the employees of the Company or any of the
Guarantors exists or, to the knowledge of the Issuers, is threatened
which, singly or in the aggregate, would reasonably be expected to have
a Material Adverse Effect.
(ab) Each of the Company and the Guarantors is insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the
businesses in which it is engaged. Neither the Company nor any of the
Guarantors has been refused any insurance coverage sought or applied
for. Neither the Company nor any of the Guarantors has any reason to
believe that it will not be able to renew
9
<PAGE>
its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not have a Material Adverse
Effect.
(ac) Neither the Company nor any of the Guarantors, nor, to
any Issuers knowledge, any director, officer, agent, employee or other
person associated with or acting on behalf of the Company or any of the
Guarantors, has used any corporate funds during the last five years for
any unlawful contribution, gift, entertainment or other unlawful
expense relating to political activity, made any unlawful payment to
any foreign or domestic government official or employee from corporate
funds, violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977 or made any bribe, payoff, influence
payment, kickback or other unlawful payment.
(ad) Neither the Company nor any of the Guarantors has taken,
and none of them will take, any action that would cause this Agreement
or the issuance or sale of the Securities and Exchange Securities to
violate Regulation T, U or X of the Board of Governors of the Federal
Reserve System or analogous foreign laws and regulations.
(ae) No Issuer is a "public utility" or a "holding company"
within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
(af) Assuming that Oil-Chem is a Guarantor for purposes of
this Section 1(af) only, the representations and warranties set forth
in Section 1(g), (h), (r), (t), (u), (v), (x), (y), (z), (aa), (ab),
(ac) and (ad) hereof are true and correct with respect to Oil-Chem.
(ag) The Company has not, directly or indirectly, solicited
any offer to buy or offered to sell, and will not, directly or
indirectly, solicit any offer to buy or offer to sell, in the United
States or to any United States citizen or resident, any security which
is or would be integrated with the sale of the Securities in a manner
that would require the Securities to be registered under the Securities
Act. None of the Company, its affiliates (as such term is defined in
Rule 501 under the Securities Act (each, an "Affiliate"), or any person
acting on its or any of their behalf (other than the Initial
Purchasers, as to whom the Company makes no representation or warranty)
has engaged or will engage, in connection with the offering of the
Securities, in any form of general solicitation or general advertising
within the meaning of Rule 502 under the Securities Act. With respect
to those Securities sold in reliance upon Regulation S, none of the
Company, its Affiliates or any person acting on its or their behalf
(other than the Initial Purchasers, as to whom the Company makes no
representation or warranty) has engaged or will engage in any directed
selling efforts within the meaning of Regulation S and each of the
Company and its Affiliates and any person acting on its or their behalf
(other than the Initial Purchasers, as to whom the Company makes no
representation or warranty) has complied and will comply with the
offering restrictions set forth in Regulation S.
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(ah) The Securities are eligible for resale pursuant to Rule
144A and will not be, at the Closing Date, of the same class as
securities listed on a national securities exchange registered under
Section 6 of the Exchange Act or quoted in a U.S. automated interdealer
quotation system.
(ai) The Company, the Guarantors and their respective
affiliates and all persons acting on their behalf (other than the
Initial Purchasers, as to whom the Company and the Guarantors make no
representation) have complied with and will comply with the offering
restrictions requirements of Regulation S in connection with the
offering of the Securities outside the United States and, in connection
therewith, the Offering Memorandum will contain the disclosure required
by Rule 902.
(aj) Each of the Company and the Guarantors is a "reporting
issuer", as defined in Rule 902 under the Securities Act.
2. PURCHASE AND SALE. On the basis of the representations and
warranties contained in, and subject to the terms and conditions of, this
Agreement, the Issuers agree to sell to the Initial Purchasers, and each of the
Initial Purchasers, severally but not jointly, agrees to purchase the aggregate
principal amount of Securities set forth opposite its name as shown in Schedule
1 hereto, at a purchase price equal to 103% of such principal amount thereof.
The Issuers shall not be obligated to deliver any of the Securities to
be delivered, except upon payment for all the Securities to be purchased as
provided herein.
3. SALE AND RESALE OF THE SECURITIES BY THE INITIAL PURCHASERS. Each of
the Initial Purchasers, severally and not jointly, acknowledges that the
Securities have not been registered under the Securities Act and represents and
warrants to the Issuers that it will offer the Securities to be purchased
hereunder for resale only upon the terms and conditions set forth in this
Agreement and in the Final Memorandum. Each of the Initial Purchasers, severally
and not jointly, represents and warrants to, and agrees with, the Issuers that
such Initial Purchaser (i) will not solicit offers for, or offer or sell, the
Securities by means of any form of general solicitation or general advertising
within the meaning of Regulation D or in any manner involving a public offering
within the meaning of Section 4(2) of the Securities Act and (ii) will solicit
offers for the Securities only from, and will offer, sell or deliver the
Securities, as part of its initial offering, only to the following persons: (A)
persons in the United States whom such Initial Purchaser reasonably believes to
be qualified institutional buyers ("Qualified Institutional Buyers"), as defined
in Rule 144A under the Securities Act, as such rule may be amended from time to
time ("Rule 144A"), or, if any such person is buying for one or more
institutional accounts for which such person is acting as fiduciary or agent,
only when such person has represented to such Initial Purchaser that each such
account is a Qualified Institutional Buyer, to whom notice has been given that
such sale or delivery is being made in reliance on Rule 144A; and (B) non-U.S.
11
<PAGE>
persons outside the United States to whom the offeror or seller reasonably
believes offers and sales of the Securities may be made in reliance upon
Regulation S under the Securities Act, upon the terms and conditions set forth
below.
Each Initial Purchaser agrees that it has not offered or sold and will
not offer or sell the Securities in the United States or to, or for the benefit
or account of, a U.S. Person (other than a distributor), in each case, as
defined in Rule 902 under the Securities Act as part of its distribution at any
time and otherwise until 40 days after the later of the commencement of the
offering of the Securities pursuant hereto and the Closing Date, other than in
accordance with Regulation S of the Securities Act or another exemption from the
registration requirements of the Securities Act. Each Initial Purchaser agrees
that, during such 40-day restricted period, it will not cause any advertisement
with respect to the Securities (including any "tombstone" advertisement) to be
published in any newspaper or periodical or posted in any public place and will
not issue any circular relating to the Securities, except such advertisements as
are permitted by and include the statements required by Regulation S.
Each Initial Purchaser agrees that, at or prior to confirmation of a
sale of Securities by it to any distributor, dealer or person receiving a
selling concession, fee or other remuneration during the 40-day restricted
period referred to in Rule 903 under the Securities Act, it will send to such
distributor, dealer or person receiving a selling concession, fee or other
remuneration a confirmation or notice to substantially the following effect:
"The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and may not be
offered and sold within the United States or to, or for the account or benefit
of, U.S. persons as part of your distribution at any time or otherwise until 40
days after the later of the date the Securities were first offered to persons
other than "distributors" (as defined in Regulation S) in reliance upon
Regulation S and the Closing Date, except in either case in accordance with
Regulation S under the Securities Act (or Rule 144A or to Accredited
Institutions in transactions that are exempt from the registration requirements
of the Securities Act), and in connection with any subsequent sale by you of the
Securities covered hereby in reliance on Regulation S during the period referred
to above to any distributor, dealer or person receiving a selling concession,
fee or other remuneration, you must deliver a notice to substantially the
foregoing effect. Terms used above have the meanings assigned to them in
Regulation S."
Upon original issuance by the Company, and until such time as the same
is no longer required under the applicable requirements of the Securities Act,
the Securities (and all securities issued in exchange therefor or in
substitution thereof, other than the Exchange Securities) shall bear the
following legend:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED
HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE
SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES
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<PAGE>
ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH SECURITY MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANS FERRED, ONLY BY THE INITIAL PURCHASERS TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A UNDER THE SECURITIES ACT, OUTSIDE THE UNITED STATES TO A FOREIGN
PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT, PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
APPLICABLE) OR IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE
COMPANY SO REQUESTS), TO THE COMPANY OR PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN ADDITION, TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A
TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
BY SUBSEQUENT INVESTORS, AS SET FORTH IN THROUGH ABOVE AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY OTHER APPLICABLE JURISDICTION AND THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE SECURITY EVIDENCED HEREBY OF
THE RESALE RESTRICTIONS SET FORTH ABOVE. NO REPRESENTATION CAN BE MADE AS TO THE
AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 FOR RESALE OF THE SECURITY
EVIDENCED HEREBY."
Following the sale of the Securities by the Initial Purchasers to
subsequent purchasers pursuant to the terms hereof, the Initial Purchasers shall
not be liable or responsible to the Company for any losses, damages or
liabilities suffered or incurred by the Company, including any losses, damages
or liabilities under the Securities Act, arising from or relating to any resale
or transfer of any Security.
Each Initial Purchaser severally and not jointly represents and
warrants to, and agrees with, the Company that it is a "qualified institutional
buyer" within the meaning of Rule 144A (a "Qualified Institutional Buyer") and
an "accredited investor" within the meaning of Rule 501 under the Securities Act
(an "Accredited Investor").
4. DELIVERY OF AND PAYMENT FOR THE NOTES. Delivery of and payment (via
wire transfer) for the Securities shall be made at the offices of Parker, Poe,
Adams & Bernstein L.L.P., 2500 Charlotte Plaza, 201 S. College Street,
Charlotte, North Carolina 28244 at 10:00 A.M., Charlotte, North Carolina time,
on May 11, 1999 or at such other date as shall be determined by agreement
between the Initial Purchasers and the Company (such date and time are sometimes
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<PAGE>
referred to as the "Closing Date"). On the Closing Date, the Issuers shall
deliver or cause to be delivered the Securities to the Initial Purchasers for
the account of the Initial Purchasers against payment to or upon the order of
the Company of the purchase price by wire transfer of immediately available
funds. Time shall be of the essence, and delivery at the time and place
specified pursuant to this Agreement is a further condition of the obligation of
the Initial Purchasers hereunder. Upon delivery, the Securities shall be in
definitive fully registered form and registered in the name of Cede & Co., as
nominee of the Depository Trust Company ("DTC"), or such other name or names and
in such denominations as the Initial Purchasers shall request in writing not
less than one business day prior to the Closing Date. For the purpose of
expediting the checking and packaging of the Securities, the Issuers shall make
the Securities available for inspection by the Initial Purchasers at the offices
of Parker, Poe, Adams & Bernstein L.L.P., 2500 Charlotte Plaza, Charlotte, North
Carolina 28244, not later than 2:00 P.M., Charlotte, North Carolina time, on the
business day prior to the Closing Date.
5. FURTHER AGREEMENTS OF THE ISSUERS. The Issuers jointly and severally
agree with each Initial Purchaser as follows:
(a) The Issuers will furnish to the Initial Purchasers,
without charge, as many copies of the Preliminary Memorandum and the
Final Memorandum and any supplements and amendments thereto as they may
reasonably request.
(b) Prior to making any amendment or supplement to the Final
Memorandum, the Issuers shall furnish a copy thereof to the Initial
Purchasers and counsel to the Initial Purchasers and will not effect
any such amendment or supplement to which the Initial Purchasers shall
reasonably object by notice to the Company after a reasonable period to
review.
(c) If, at any time prior to completion of the distribution of
the Securities by the Initial Purchasers, any event shall occur or
condition exist as a result of which it is necessary, in the opinion of
counsel for the Initial Purchasers or counsel for the Issuers, to amend
or supplement the Final Memorandum in order that the Final Memorandum
will not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein
not misleading in light of the circumstances existing at the time it is
delivered to a purchaser, or if it is necessary to amend or supplement
the Final Memorandum to comply with applicable law, the Issuers will
promptly prepare such amendment or supplement as may be necessary to
correct such untrue statement or omission or so that the Final
Memorandum, as so amended or supplemented, will comply with applicable
law and furnish to the Initial Purchasers such number of copies of such
amendment or supplement as they may reasonably request.
(d) So long as any Securities are outstanding and are
"Restricted Securities" within the meaning of Rule 144(a)(3) under the
Securities Act and during any period in which the Issuers are not
subject to Section 13 or 15(d) of the Exchange Act, the Issuers will
furnish to holders of the Securities and prospective purchasers of
Securities designated by
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<PAGE>
such holders, upon request of such holders or such prospective
purchasers, the information, if any, required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act. Such information, at the
date of its provision by the Company to such holders or prospective
purchasers, will not contain any untrue statement of a material fact
or omit to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. This covenant is intended to be for the benefit of the
holders and the prospective purchasers designated by such holders from
time to time of such Restricted Securities.
(e) So long as the Securities and Exchange Securities are
outstanding, the Issuers will furnish to the Initial Purchasers copies
of any annual reports, quarterly reports and current reports filed with
the SEC on Forms 10-K, 10-Q and 8-K, or such other similar forms as may
be designated by the SEC, and such other documents, reports and
information as shall be furnished by the Issuers to the Trustee or to
the holders of the Securities and Exchange Securities pursuant to the
Indenture.
(f) The Issuers will cooperate with the Initial Purchasers and
their counsel to ensure offers and sales of the Securities comply with
applicable securities or Blue Sky laws of such jurisdictions as the
Initial Purchasers reasonably designate and to continue such compliance
in effect so long as reasonably required for the distribution of the
Securities. The Issuers will promptly advise the Initial Purchasers of
the receipt by the Issuers of any notification with respect to any
noncompliance in any jurisdiction or the initiation or threatening of
any proceeding for such purpose. The Issuers will also cooperate with
the Initial Purchasers and their counsel in the determination of the
eligibility for investment of the Securities under the laws of such
jurisdictions as the Initial Purchasers reasonably request.
Notwithstanding the foregoing, the Issuers shall not be obligated to
qualify as a foreign corporation in any jurisdiction in which it is not
so qualified or to file a general consent to service of process or to
subject itself to taxation in respect of doing business in any
jurisdiction in which it is not otherwise subject.
(g) The Issuers will use their best efforts (i) to permit the
Securities to be designated PORTAL securities in accordance with the
rules and regulations adopted by the National Association of Securities
Dealers, Inc. relating to trading in the PORTAL market and (ii) to
permit the Securities to be eligible for clearance and settlement
through DTC.
(h) The Issuers will not, and will cause their Affiliates not
to, sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Securities Act)
in a transaction that could be integrated with the sale of the
Securities in a manner which would require the registration of the
Securities under the Securities Act.
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<PAGE>
(i) Except following the effectiveness of any Registration
Statement (as defined in the Registration Rights Agreement) and except
for such offers as may be made as a result of, or subsequent to, filing
such Registration Statement or amendments thereto prior to the
effectiveness thereof, the Issuers will not, and will cause their
Affiliates not to, solicit any offer to buy or offer to sell the
Securities by means of any form of general solicitation or general
advertising (as those terms are used in Regulation D under the
Securities Act) or in any manner involving a public offering within the
meaning of Section 4(2) of the Securities Act.
(j) The Company will apply the net proceeds from the sale of
the Securities as set forth in the Final Memorandum under the caption
"Use of Proceeds."
(k) The Issuers will take such steps as shall be necessary to
ensure that neither the Company nor any of its subsidiaries shall
become (i) an "investment company" within the meaning of the Investment
Company Act or (ii) a "holding company" or a "subsidiary company" or an
"affiliate" of a holding company within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
(l) The Issuers will not, and will cause their Affiliates not
to, take any actions which would require the registration under the
Securities Act of the Securities (other than pursuant to the
Registration Rights Agreement).
(m) Prior to the consummation of the Exchange Offer (as
defined in the Final Memorandum) or the effectiveness of an applicable
shelf registration statement if, in the reasonable judgment of the
Initial Purchasers, the Initial Purchasers or any of their Affiliates
are required to deliver an offering memorandum in connection with sales
of, or market-making activities with respect to, the Securities, (A)
the Issuers will periodically amend or supplement the Final Memorandum
so that the information contained in the Final Memorandum complies with
the requirements of Rule 144A of the Securities Act, (B) the Issuers
will amend or supplement the Final Memorandum when necessary to reflect
any material changes in the information provided therein so that the
Final Memorandum will not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances existing as of the
date the Final Memorandum is so delivered, not misleading and (C) the
Issuers will provide the Initial Purchasers with copies of each such
amended or supplemented Final Memorandum as the Initial Purchasers may
reasonably request. The Issuers hereby expressly acknowledge that the
indemnification and contribution provisions of Section 8 hereof are
specifically applicable and relate to each offering memorandum,
registration statement, prospectus, amendment or supplement referred to
in this Section 5(m).
(n) The Company agrees that it will not and will cause its
Affiliates not to make any offer or sale of securities of the Company
of any class if, as a result of the doctrine of "integration" referred
to in Rule 502 under the Securities Act, such offer or sale would
render
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<PAGE>
invalid (for the purpose of (i) the sale of the Securities by the
Company to the Initial Purchasers, (ii) the resale of the Securities by
the Initial Purchasers to Subsequent Purchasers or (iii) the resale of
the Securities by such Subsequent Purchasers to others) the exemption
from the registration requirements of the Securities Act provided by
Section 4 thereof or by Rule 144A or by Regulation S thereunder or
otherwise.
(o) Each certificate for a Note will bear the legend contained
in "Notice to Investors" in the Offering Memorandum for the time period
and upon the other terms stated in the Offering Memorandum.
(p) The Company will use its best efforts to cause the
Securities to be eligible for the National Association of Securities
Dealers, Inc. PORTAL market (the "PORTAL market").
(q) The Issuers will use their best efforts to do all things
necessary to satisfy the closing conditions set forth in Section 7
hereof.
6. EXPENSES. The Issuers jointly and severally (without duplication
with respect to the provisions of the Registration Rights Agreement) agree to
pay (a) the costs incident to the authorization, issuance, sale and delivery of
the Securities and Exchange Securities and any issue or stamp taxes payable in
connection therewith, (b) the costs incident to the preparation and printing of
the Preliminary Memorandum, the Final Memorandum and any amendments, supplements
and exhibits thereto, (c) the costs of distributing the Preliminary Memorandum,
the final Memorandum and any amendments or supplements thereto, (d) the fees and
expenses of notice filings with respect to the Securities and Exchange
Securities under applicable securities laws of the several jurisdictions as
provided in Section 5(f) and, if necessary, of preparing a Blue Sky Memorandum
(including related fees and expenses of counsel to the Initial Purchasers), (e)
the cost of printing the Securities and the Exchange Securities, (f) the fees
and expenses of the Trustee and any agent of the Trustee and the fees and
disbursements of any counsel for the Trustee in connection with the Indenture
and the Securities and Exchange Securities, (g) any fees paid to rating agencies
in connection with the rating of the Securities and Exchange Securities, (h) the
costs and expenses of DTC and its nominee, including its book-entry system, (i)
all expenses and listing fees incurred in connection with the application for
quotation of the Securities on the PORTAL market and (j) all other costs and
expenses incident to the performance of the obligations of the Issuers under
this Agreement.
7. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS. The obligations of
the Initial Purchasers to purchase the Securities shall be subject to the
accuracy of the representations and warranties on the part of the Issuers
contained herein at the Execution Time and the Closing Date, to the accuracy of
the statements of the Issuers made in any certificates pursuant to the
provisions hereof, to the performance by the Issuers of their obligations
hereunder and to the following additional conditions:
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(a) The Initial Purchasers shall not have discovered and
disclosed to the Company on or prior to the Closing Date that the Final
Memorandum or any amendment or supplement thereto contains an untrue
statement of a fact which, in the opinion of counsel for the Initial
Purchasers, is material or omits to state a fact which, in the opinion
of such counsel, is material and is necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) The Final Memorandum shall have been printed and copies
distributed to the Initial Purchasers as soon as practicable but in no
event later than on the second business day following the date of this
Agreement or at such later date and time as to which the Initial
Purchasers may agree, and no stop order suspending the qualification or
exemption from qualification of the Securities in any jurisdiction
referred to in Section 5(f) shall have been issued and no proceeding
for that purpose shall have been commenced or shall be pending or
threatened.
(c) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency which would, as of the Closing Date, singly or in
the aggregate, reasonably be expected to have a Material Adverse
Effect; no action, suit or proceeding shall have been commenced and be
pending against or affecting or, to the knowledge of the Company,
threatened against, the Company or any of the Guarantors before any
court or arbitrator or any governmental body, agency or official that,
singly or in the aggregate, if adversely determined, would reasonably
be expected to result in a Material Adverse Effect; and no stop order
shall have been issued by the SEC or any governmental agency of any
jurisdiction referred to in Section 5(f) preventing the use of the
Final Memorandum, or any amendment or supplement thereto, which would
reasonably be expected to have a Material Adverse Effect.
(d) Since the dates as of which information is given in the
Final Memorandum and other than as set forth in the Final Memorandum,
(i) there shall not have been any Material Adverse Change, or any
development that is reasonably likely to result in a Material Adverse
Change, or any material change in the long-term debt, or material
increase in the short-term debt, from that set forth in the Final
Memorandum, (ii) no dividend or distribution of any kind shall have
been declared, paid or made by the Company on any class of its capital
stock and (iii) the Company and its subsidiaries shall not have
incurred any liabilities or obligations, direct or contingent, that are
material, individually or in the aggregate, to the Company and its
subsidiaries, taken as a whole, and that are required to be disclosed
on a balance sheet or notes thereto in accordance with generally
accepted accounting principles and are not disclosed on the latest
balance sheet or notes thereto included in the Final Memorandum.
(e) The Initial Purchasers shall have received a certificate,
dated the Closing Date, signed on behalf of the Company by (i) Mr.
William R. Brooks, Vice President,
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<PAGE>
Treasurer and Chief Financial Officer, and (ii) Mr. Randall A. Storey,
Assistant Secretary, confirming that (A) such officers have
participated in conferences with other officers and representatives of
the Issuers, representatives of the independent public accountants of
the Issuers and representatives of counsel to the Issuers at which the
contents of the Final Memorandum and related matters were discussed and
(B) the matters set forth in paragraphs (b), (c) and (d) of this
Section 7 are true and correct as of the Closing Date.
(f) All corporate proceedings and other legal matters incident
to the authorization, form and validity of this Agreement, the
Securities and Exchange Securities, the Indenture, the Registration
Rights Agreement and the Final Memorandum and all other legal matters
relating to this Agreement, the Securities and Exchange Securities, the
Indenture, the Registration Rights Agreement and the Final Memorandum,
and the transactions contemplated hereby and thereby shall be
satisfactory in all material respects to counsel for the Initial
Purchasers, and the Issuers shall have furnished to such counsel all
documents and information that they may reasonably request to enable
them to pass upon such matters.
Parker, Poe, Adams & Bernstein L.L.P., counsel for the
Issuers, shall have furnished to the Initial Purchasers its written
opinion, addressed to each of the Initial Purchasers and dated the
Closing Date, in form and substance reasonably satisfactory to the
Initial Purchasers, to the effect stated in Exhibit A hereto.
(g) The Initial Purchasers shall have received on the Closing
Date an opinion of Latham & Watkins, counsel for the Initial
Purchasers, dated the Closing Date and addressed to the Initial
Purchasers, in form and substance reasonably satisfactory to the
Initial Purchasers.
(h) The Issuers and the Trustee shall have entered into the
Indenture, and the Initial Purchasers shall have received counterparts,
conformed as executed, thereof.
(i) The Issuers and the Initial Purchasers shall have entered
into the Registration Rights Agreement, and the Initial Purchasers
shall have received counterparts, conformed as executed, thereof.
(j) At the Execution Time and at the Closing Date, Deloitte &
Touche LLP shall have furnished to the Initial Purchasers a customary
"comfort letter," dated the Execution Time and the Closing Date,
respectively, in form and substance satisfactory to the Initial
Purchasers and counsel to the Initial Purchasers, among other things
confirming that they are independent accountants within the meaning of
the Securities Act and the Exchange Act and the applicable rules and
regulations thereunder and Rule 101 of the Code of Professional
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<PAGE>
Conduct of the American Institute of Certified Public Accountants and
otherwise satisfactory in form and substance to the Initial Purchasers
and their counsel.
(k) (i) Neither the Company nor any of its subsidiaries shall
have sustained since the date of the latest audited financial
statements included in the Final Memorandum losses or interferences
with their businesses, taken as a whole, from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Final Memorandum or (ii) since
such date, there shall not have been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any change,
or any development involving a prospective change, in or affecting the
general affairs, management, financial position, stockholders' equity
or results of operations of the Company' or its subsidiaries, taken as
a whole, otherwise than as set forth or contemplated in the Final
Memorandum, the effect of which, in any such case described in clause
(i) or (ii), is, in the reasonable judgment of the Initial Purchasers,
so material and adverse as to make it impracticable or inadvisable to
proceed with the offering or the delivery of the Securities being
delivered on the Closing Date on the terms and in the manner
contemplated herein and in the Final Memorandum.
(l) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred any of the following: (i)
trading (A) in the Company's Common Stock, (B) in securities generally
on the New York Stock Exchange, (C) in securities generally on The
NASDAQ Stock Market's National Market or (D) in the over-the-counter
market shall have been suspended or materially limited, or minimum
prices shall have been established on such exchange by the SEC, or by
such exchange or by any other regulatory body or governmental authority
having jurisdiction; (ii) a banking moratorium shall have been declared
by federal or state authorities; (iii) the United States shall have
become engaged in hostilities, there shall have been an escalation in
hostilities involving the United States or there shall have been a
declaration of a national emergency or war by the United States; or
(iv) there shall have occurred such a material adverse change in
general economic, political or financial conditions (or the effect of
international conditions on the financial markets in the United States
shall be such) as to make it, in the reasonable judgment of the Initial
Purchasers, impracticable or inadvisable to proceed with the offering
or delivery of the Securities being delivered on the Closing Date on
the terms and in the manner contemplated herein and in the Final
Memorandum.
(m) Latham & Watkins shall have been furnished with such
documents, in addition to those set forth above, as they may reasonably
require (i) for the purpose of enabling them to review or pass upon the
matters referred to in this Section 7 and (ii) in order to evidence the
accuracy, completeness or satisfaction in all material respects of any
of the representations, warranties or conditions herein contained.
20
<PAGE>
(n) Subsequent to the Execution Time, there shall not have
been any decrease in the rating of any of the Company's debt securities
by any "nationally recognized statistical rating organization" (as
defined for purposes of Rule 436(g) under the Securities Act) or any
notice given of any intended or potential decrease in any such rating
or of a possible change in any such rating that does not indicate the
direction of the possible change.
(o) Prior to the Closing Date, the Issuers shall have
furnished to the Initial Purchasers such further information,
certificates and documents as the Initial Purchasers may reasonably
request.
(p) At the Closing Date the Securities shall have been
designated for trading on the PORTAL market.
All opinions, letters, evidence and certificates mentioned above or elsewhere in
this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance reasonably satisfactory to counsel for
the Initial Purchasers.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Issuers, jointly and severally, agree to indemnify and
hold harmless each Initial Purchaser, the directors, officers,
employees and agents of each Initial Purchaser and each person who
controls (within the meaning of either the Securities Act or the
Exchange Act) any Initial Purchaser against any and all losses, claims,
damages or liabilities, joint or several, to which they or any of them
may become subject under the Securities Act, the Exchange Act or other
federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in
the Preliminary Memorandum, the Final Memorandum or any information
provided by the Issuers to any holder or prospective purchaser of Notes
pursuant to Section 5(e), or in any amendment thereof or supplement
thereto, or arise out of or are based upon the omission or alleged
omission to state therein 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, and agree to
reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them (except that only one
counsel's fees and expenses shall be covered) in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Issuers will not be liable in any
such case to any Initial Purchaser to the extent that any such loss,
claim, damage or liability arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged
omission made in the Preliminary Memorandum or the Final Memorandum, or
in any amendment thereof or supplement thereto, in reliance upon
21
<PAGE>
and in conformity with written information relating to the Initial
Purchasers furnished to the Issuers by or on behalf of such Initial
Purchaser specifically for inclusion therein; provided further, that
with respect to any such untrue statement or omission made in the
Preliminary Memorandum, the indemnity agreement contained in this
Section 8(a) shall not inure to the benefit of an Initial Purchaser
from whom the person asserting any such losses, claims, damages,
liabilities, judgments, actions or expenses purchased Securities, or
any controlling person of such Initial Purchaser, if a copy of the
Final Memorandum or supplement or amendment thereto was sent or given
by or on behalf of such Initial Purchaser to such person at or prior to
the written confirmation of the sale of Securities to such person and
the Final Memorandum or supplement or amendment thereto would have
cured the defect giving rise to such losses, claims, damages,
liabilities, judgments, actions or expenses, unless such failure to
deliver the Final Memorandum was a result of noncompliance by the
Issuers with Section 5(c) hereof. This indemnity agreement will be in
addition to any liability which the Issuers may otherwise have. Each of
the Issuers acknowledges and agrees that the statements set forth in
the last paragraph of the cover page and under the heading "Plan of
Distribution" in the Preliminary Memorandum and the Final Memorandum
constitute the only information relating to the Initial Purchasers and
furnished in writing by or on behalf of the Initial Purchasers for
inclusion in the Preliminary Memorandum or the Final Memorandum (or any
amendment or supplement thereto).
(b) Each Initial Purchaser, severally and not jointly, agrees
to indemnify and hold harmless the Issuers, their directors, officers,
and each person who controls (within the meaning of either the
Securities Act or the Exchange Act) the Issuers, to the same extent as
the foregoing indemnity from the Issuers to each Initial Purchaser, but
only with reference to written information relating to such Initial
Purchaser furnished to the Issuers by or on behalf of such Initial
Purchaser specifically for inclusion in the Preliminary Memorandum or
the Final Memorandum (or in any amendment or supplement thereto). This
indemnity agreement will be in addition to any liability which any
Initial Purchaser may otherwise have. Each of the Issuers acknowledges
that the statements set forth in the last paragraph of the cover page
and under the heading "Plan of Distribution" in the Preliminary
Memorandum and the Final Memorandum constitute the only information
furnished in writing by or on behalf of the Initial Purchasers for
inclusion in the Preliminary Memorandum or the Final Memorandum (or any
amendment or supplement thereto).
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party
in writing of the commencement thereof, but the failure so to notify
the indemnifying party (i) will not relieve the indemnifying party from
liability under paragraph (a) or (b) above unless and except to the
extent it did not otherwise learn of such action and such failure
results in the forfeiture by the indemnifying party of substantial
rights and defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other
than the indemnification obligation provided in paragraph (a) or (b)
22
<PAGE>
above. The indemnifying party shall be entitled to appoint counsel of
the indemnifying party's choice at the indemnifying party's expense to
represent the indemnified party in any action for which indemnification
is sought (in which case the indemnifying party shall not thereafter be
responsible for the fees and expenses of any separate counsel retained
by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory
to the indemnified party. Notwithstanding the indemnifying party's
election to appoint counsel to represent the indemnified party in an
action, the indemnified party shall have the right to employ separate
counsel (including local counsel), and the indemnifying party shall
bear the reasonable fees, costs and expenses of such separate counsel
(provided that the indemnifying party shall be liable for the cost of
only one such separate counsel for the indemnified parties) if (A) the
use of counsel chosen by the indemnifying party to represent the
indemnified party would, in the opinion of legal counsel to the
indemnified party, present such counsel with a conflict of interest,
(B) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party
and the indemnified party shall have been informed in writing by legal
counsel that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those
available to the indemnifying party, (C) the indemnifying party shall
not have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time after
notice of the institution of such action or (D) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the
expense of the indemnifying party. An indemnifying party will not,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of
which indemnification or contribution may be sought hereunder (whether
or not the indemnified parties are actual or potential parties to such
claim or action), unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 8 is unavailable to or insufficient to hold
harmless an indemnified party for any reason, the Issuers and the
Initial Purchasers agree to contribute to the aggregate losses, claims,
damages and liabilities (including legal or other expenses reasonably
incurred in connection with investigating or defending same)
(collectively "Losses") to which the Issuers and one or more of the
Initial Purchasers may be subject in such proportion as is appropriate
to reflect the relative benefits received by the Issuers and by the
Initial Purchasers from the offering of the Securities; provided,
however, that in no case shall any Initial Purchaser (except as may be
provided in any agreement among the Initial Purchasers relating to the
offering of the Securities) be responsible for any amount in excess of
the purchase discount or commission applicable to the Securities
purchased by such Initial Purchaser hereunder. If the allocation
provided by the immediately preceding sentence is unavailable for any
reason, the Issuers
23
<PAGE>
and the Initial Purchasers shall contribute in such proportion as is
appropriate to reflect not only such relative benefits but also the
relative fault of the Issuers and of the Initial Purchasers in
connection with the statements or omissions which resulted in such
Losses as well as any other relevant equitable considerations. Benefits
received by the Issuers shall be deemed to be equal to the total net
proceeds from the offering (before deducting expenses), and benefits
received by the Initial Purchasers shall be deemed to be equal to the
total purchase discounts and commissions received by the Initial
Purchasers from the Issuers in connection with the purchase of the
Securities hereunder. Relative fault shall be determined by reference
to whether any alleged untrue statement or omission relates to
information provided by the Issuers or the Initial Purchasers. The
Issuers and the Initial Purchasers agree that it would not be just and
equitable if contribution were determined by pro rata allocation or any
other method of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of
this paragraph (d), no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each
person who controls an Initial Purchaser within the meaning of either
the Securities Act or the Exchange Act and each director, officer,
employee and agent of an Initial Purchaser shall have the same rights
to contribution as such Initial Purchaser, and each person who controls
the Issuers within the meaning of either the Securities Act or the
Exchange Act and each partner, officer and director of the Issuers
shall have the same rights to contribution as the Issuers, subject in
each case to the applicable terms and conditions of this paragraph (d).
9. DEFAULT BY AN INITIAL PURCHASER. If any one or more Initial
Purchasers shall fail to purchase and pay for any of the Securities agreed to be
purchased by such Initial Purchaser hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Initial Purchasers shall be obligated severally to take
up and pay for (in the respective proportions which the principal amount of
Securities set forth opposite their names in Schedule 1 hereto bears to the
aggregate principal amount of Securities set forth opposite the names of all the
remaining Initial Purchasers) the Securities which the defaulting Initial
Purchaser or Initial Purchasers agrees but failed to purchase; provided,
however, that in the event that the aggregate principal amount of Securities
which the defaulting Initial Purchaser or Initial Purchasers agreed but failed
to purchase shall exceed 10% of the aggregate principal amount of Securities set
forth in Schedule 1 hereto, the remaining Initial Purchasers shall have the
right to purchase all, but shall not be under any obligation to purchase any, of
the Securities, and if such non-defaulting Initial Purchasers do not purchase
all the Securities, this Agreement will terminate without liability to any
non-defaulting Initial Purchaser or the Issuers. In the event of a default by an
Initial Purchaser as set forth in this Section 9, the Closing Date shall be
postponed for such period, not exceeding seven days, as NationsBanc Montgomery
Securities LLC shall determine in order that the required changes in the Final
Memorandum or in any other documents or arrangements may be effected. Nothing
contained in this Agreement shall relieve any defaulting Initial Purchaser of
its liability, if any, to
24
<PAGE>
the Issuers or any non-defaulting Initial Purchaser for damages
occasioned by its default hereunder.
10. TERMINATION. The obligations of the Initial Purchasers hereunder
may be terminated by the Initial Purchasers by notice given to and received by
the Company prior to delivery of and payment for the Securities if, prior to
that time, any of the events described in Sections 7(m) or 7(n) shall have
occurred or if the Initial Purchasers shall decline to purchase the Securities
for any reason permitted under this Agreement.
11. REIMBURSEMENT OF INITIAL PURCHASERS' EXPENSES. If (a) the Issuers
shall fail to tender the Securities for delivery to the Initial Purchasers
otherwise than for any reason permitted under this Agreement or (b) the Initial
Purchasers shall decline to purchase the Securities for any reason permitted
under this Agreement, the Issuers shall, jointly and severally, reimburse the
Initial Purchasers for the reasonable fees and expenses of their counsel and for
such other out-of-pocket expenses as shall have been incurred by them in
connection with this Agreement and the proposed purchase of the Securities, and
upon demand the Issuers, jointly and severally, shall pay the full amount
thereof to the Initial Purchasers.
12. NOTICES. All statements, requests, notices and agreements hereunder
shall be in writing, and:
(a) if to the Initial Purchasers, shall be delivered or sent
by mail, telex or facsimile transmission to NationsBanc Montgomery
Securities LLC, 100 North Tryon Street, 20th Floor, Charlotte, North
Carolina 28255, Attention: Victor Warnement, Esq. (Fax: 704-386-6453),
with a copy (which shall not constitute notice) to Latham & Watkins,
885 Third Avenue, New York, New York 10022, Attention: Gregory Ezring,
Esq. (Fax: 212-751-4864);
(b) if to the Company, shall be delivered or sent by mail,
telex or facsimile transmission to the address of the Company set forth
in the Final Memorandum, Attention: Marylaurel E. Wilks, Esq. (Fax:
704-455-2547), with a copy (which shall not constitute notice) to
Parker, Poe, Adams & Bernstein L.L.P., 2500 Charlotte Plaza, 201 South
College Street, Charlotte, North Carolina 28244, Attention: Peter J.
Shea, Esq. (Fax: 704-334-4706).
Any such statements, requests, notices or agreements shall take effect at the
time of receipt thereof. The Issuers shall be entitled to act and rely upon any
request, consent, notice or agreement given or made on behalf of the Initial
Purchasers.
13. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of and be binding upon the Initial Purchasers, the Issuers
and their respective successors. This Agreement and the terms and provisions
hereof are for the sole benefit of only those persons, except that (a) the
representations, warranties, indemnities and agreements of the Issuers contained
in this Agreement shall also be deemed to be for the benefit of the person or
persons, if any, who control an Initial Purchaser within the meaning of Section
15 of the Securities Act and (b) the indemnity
25
<PAGE>
agreement of the Initial Purchasers contained in Section 8(b) of this Agreement
shall be deemed to be for the benefit of directors of the Issuers, officers of
the Issuers and any person controlling any of the Issuers within the meaning of
Section 15 of the Securities Act. Nothing in this Agreement is intended or shall
be construed to give any person, other than the persons referred to in this
Section 13, any legal or equitable right, remedy or claim under or in respect of
this Agreement or any provision contained herein. No purchaser of any of the
Securities from any Initial Purchaser shall be deemed a successor or assign
merely by reason of such purchase.
14. SURVIVAL. The respective indemnities, representations, warranties,
covenants and agreements of the Issuers and the Initial Purchasers contained in
this Agreement or made by or of behalf on them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Securities and
shall remain in full force and effect, regardless of any investigation made by
or on behalf of any of them or any person controlling any of them.
15. DEFINITION OF "BUSINESS DAY" For purposes of this Agreement,
"business day" means each Monday, Tuesday, Wednesday, Thursday and Friday that
is not a day on which banking institutions in The City of New York, New York or
The City of Charlotte, North Carolina are authorized or obligated by law,
executive order or regulation to close.
16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE NEW YORK, WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES.
17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
18. HEADINGS. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
[Signature page follows]
26
<PAGE>
If the foregoing correctly sets forth the agreement among the Issuers and the
Initial Purchasers, please indicate your acceptance in the space provided for
that purpose below.
Very truly yours,
COMPANY:
--------
SPEEDWAY MOTORSPORTS, INC.,
a Delaware corporation
By:/s/William R. Brooks
-----------------------
Name: William R. Brooks
Title:Vice President and Chief
Financial Officer
GUARANTORS:
-----------
ATLANTA MOTOR SPEEDWAY, INC.,
a Georgia corporation
By:/s/William R. Brooks
-----------------------
Name: William R. Brooks
Title:Vice President
BRISTOL MOTOR SPEEDWAY, INC.,
a Tennessee corporation
By:/s/William R. Brooks
-----------------------
Name: William R. Brooks
Title:Vice President
<PAGE>
CHARLOTTE MOTOR SPEEDWAY, INC.,
a North Carolina corporation
By:/s/William R. Brooks
-----------------------
Name: William R. Brooks
Title:Vice President
<PAGE>
SPR ACQUISITION CORPORATION,
a California corporation
By:/s/William R. Brooks
-----------------------
Name: William R. Brooks
Title:Vice President
TEXAS MOTOR SPEEDWAY, INC.,
a Texas corporation
By:/s/William R. Brooks
-----------------------
Name: William R. Brooks
Title:Vice President
600 RACING, INC.,
a North Carolina corporation
By:/s/William R. Brooks
-----------------------
Name: William R. Brooks
Title:Vice President
SPEEDWAY FUNDING CORP.,
a Delaware corporation
By:/s/Joan Dobrzynski
-----------------------
Name: Joan Dobrzynski
Title:Vice President
SONOMA FUNDING CORPORATION,
a California corporation
By:/s/William R. Brooks
-----------------------
Name: William R. Brooks
Title:Vice President
<PAGE>
SPEEDWAY CONSULTING & DESIGN, INC.,
a North Carolina corporation
By:/s/William R. Brooks
-----------------------
Name: William R. Brooks
Title:Vice President
THE SPEEDWAY CLUB, INC.,
a North Carolina corporation
By:/s/William R. Brooks
-----------------------
Name: William R. Brooks
Title:Vice President
INEX CORP.,
a North Carolina corporation
By:/s/William R. Brooks
-----------------------
Name: William R. Brooks
Title:Vice President
LAS VEGAS MOTOR SPEEDWAY, LLC,
a Nevada limited liability company
By:/s/William R. Brooks
-----------------------
Name: William R. Brooks
Title:Manager
SMI SYSTEMS, LLC
a Nevada limited liability company
By:/s/William R. Brooks
-----------------------
Name: William R. Brooks
Title:Manager
<PAGE>
SPEEDWAY SYSTEMS LLC
a North Carolina limited liability company
By: IMS Systems Limited Partnership, its sole
manager
By: Speedway Motorsports, Inc., its general
partner
By: /s/William R. Brooks
-----------------------
Name: William R. Brooks
Title:Vice President
<PAGE>
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written:
INITIAL PURCHASERS:
- -------------------
NATIONSBANC MONTGOMERY
SECURITIES LLC
By:/s/Gary R. Wolfe
-------------------
Name: Gary R. Wolfe
Title: Managing Director
FIRST UNION CAPITAL MARKETS CORP.
By:/s/Steven J. Taylor
-------------------
Name: Steven J. Taylor
Title: Senior Director
J.C. BRADFORD & CO., L.L.C.
By:/s/Brad Wall
-------------------
Name: Brad Wall
Title:
32
CREDIT AGREEMENT
among
SPEEDWAY MOTORSPORTS, INC.,
SPEEDWAY FUNDING CORP.,
as Borrowers,
CERTAIN SUBSIDIARIES AND RELATED PARTIES
FROM TIME TO TIME PARTY HERETO,
as Guarantors,
THE SEVERAL LENDERS FROM TIME TO TIME PARTY HERETO,
NATIONSBANK, N.A.,
as Administrative Agent
AND
FIRST UNION NATIONAL BANK,
as Syndication Agent
AND
CREDIT LYONNAIS ATLANTA AGENCY,
as Documentation Agent
AND
BANC OF AMERICA SECURITIES LLC,
as Lead Arranger and Book Manager
DATED AS OF MAY 28, 1999
TABLE OF CONTENTS
<PAGE>
SECTION 1 DEFINITIONS 1
1.1 Definitions.....
1.2 Computation of Time Periods.
1.3 Accounting Terms.
SECTION 2 CREDIT FACILITY
2.1 Revolving Loans.
2.2 Letter of Credit Subfacility.
2.3 Swingline Loan Subfacility.
SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES
3.1 Default Rate...
3.2 Extension and Conversion.
3.3 Prepayments...
3.4 Termination and Reduction of Revolving Commitments.
3.5 Fees................
3.6 Capital Adequacy.
3.7 Inability To Determine Interest Rate.
3.8 Illegality.........
3.9 Requirements of Law.
3.10 Taxes............
3.11 Indemnity.....
3.12 Pro Rata Treatment.
3.13 Sharing of Payments.
3.14 Place and Manner of Payments.
SECTION 4 GUARANTY
4.1 The Guaranty.
4.2 Obligations Unconditional.
4.3 Reinstatement.
4.4 Certain Additional Waivers.
4.5 Remedies.......
4.6 Continuing Guarantee.
SECTION 5 CONDITIONS
5.1 Closing Conditions.
5.2 Conditions to all Extensions of Credit.
SECTION 6 REPRESENTATIONS AND WARRANTIES
6.1 Financial Condition.
6.2 No Change.....
6.3 Organization; Existence; Compliance with Law.
6.4 Power; Authorization; Enforceable Obligations.
6.5 No Legal Bar..
6.6 No Material Litigation.
<PAGE>
6.7 No Default.....
6.8 Ownership of Property; Liens.
6.9 Intellectual Property.
6.10 No Burdensome Restrictions.
6.11 Taxes............
6.12 ERISA..........
6.13 Governmental Regulations, Etc.
6.14 Subsidiaries..
6.15 Purpose of Loans.
6.16 Environmental Matters.
6.17 Solvency......
6.18 No Untrue Statement.
6.19 Year 2000 Compliance.
SECTION 7 AFFIRMATIVE COVENANTS
7.1 Information Covenants.
7.2 Preservation of Existence and Franchises.
7.3 Books and Records.
7.4 Compliance with Law.
7.5 Payment of Taxes and Other Indebtedness.
7.6 Insurance........
7.7 Maintenance of Property.
7.8 Performance of Obligations.
7.9 Use of Proceeds.
7.10 Audits/Inspections.
7.11 Financial Covenants.
7.12 Additional Credit Parties.
7.13 Ownership of Subsidiaries.
SECTION 8 NEGATIVE COVENANTS
8.1 Indebtedness..
8.2 Liens..............
8.3 Nature of Business.
8.4 Consolidation, Merger, Sale or Purchase of Assets, etc.
8.5 Advances, Investments, Loans, etc.
8.6 Restricted Payments.
8.7 Prepayments of Indebtedness, etc.
8.8 Transactions with Affiliates.
8.9 Fiscal Year.....
8.10 Limitation on Restrictions on Dividends and Other
Distributions, etc.
8.11 Issuance and Sale of Subsidiary Stock.
8.12 Sale Leasebacks.
8.13 Capital Expenditures.
8.14 No Further Negative Pledges.
<PAGE>
SECTION 9 EVENTS OF DEFAULT
9.1 Events of Default.
9.2 Acceleration; Remedies.
SECTION 10 AGENCY PROVISIONS
10.1 Appointment.
10.2 Delegation of Duties.
10.3 Exculpatory Provisions.
10.4 Reliance on Communications.
10.5 Notice of Default.
10.6 Non-Reliance on Administrative Agent and Other Lenders.
10.7 Indemnification.
10.8 Administrative Agent in its Individual Capacity.
10.9 Successor Agent.
SECTION 11 MISCELLANEOUS
11.1 Notices.........
11.2 Right of Set-Off.
11.3 Benefit of Agreement.
11.4 No Waiver; Remedies Cumulative.
11.5 Payment of Expenses, etc.
11.6 Amendments, Waivers and Consents.
11.7 Counterparts.
11.8 Headings......
11.9 Survival of Indemnification.
11.10 Governing Law; Submission to Jurisdiction; Venue.
11.11 Severability.
11.12 Entirety......
11.13 Survival of Representations and Warranties.
11.14 Binding Effect; Termination.
11.15 Borrowers' Obligations Joint and Several.
SCHEDULES
Schedule 1.1A Pre-Closing Financial Information
Schedule 1.1B Existing Letters of Credit
Schedule 1.1C Investments
Schedule 1.1D Existing Liens
Schedule 2.1(a) Lenders, Committed Amounts and Commitment
Percentages
Schedule 2.1(b)(i) Form of Notice of Borrowing
Schedule 2.1(e) Form of Revolving Note
Schedule 2.3(e) Form of Swingline Note
Schedule 3.2 Form of Notice of Extension/Conversion
Schedule 5.1(e) Form of Opinion
Schedule 6.2(a) General Disclosure Schedule
<PAGE>
Schedule 6.4 Required Consents, Authorizations, Notices
and Filings
Schedule 6.6 Litigation
Schedule 6.9 Intellectual Property
Schedule 6.11 Taxes
Schedule 6.14 Subsidiaries
Schedule 6.16 Phase I Environmental Site Assessments
Schedule 7.1(c) Form of Officer's Compliance Certificate
Schedule 7.12 Form of Joinder Agreement
Schedule 8.1 Existing Indebtedness
Schedule 11.3(b) Form of Assignment and Acceptance
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (the "Credit Agreement") is entered into as of
May 28, 1999 among SPEEDWAY MOTORSPORTS, INC., a Delaware corporation ("Speedway
Motorsports"), SPEEDWAY FUNDING CORP., a Delaware corporation ("Speedway
Funding") (each a "Borrower", and collectively the "Borrowers"), certain
subsidiaries and related parties identified on the signature pages hereto and
such other subsidiaries and related parties as may from time to time become a
party hereto (the "Guarantors"), the several lenders identified on the signature
page hereto and such other lenders as may from time to time become a party
hereto (the "Lenders"), NATIONSBANK, N.A., as Administrative Agent for the
Lenders (in such capacity, the "Administrative Agent"), FIRST UNION NATIONAL
BANK, as Syndication Agent (in such capacity, the "Syndication Agent"), CREDIT
LYONNAIS ATLANTA AGENCY, as Documentation Agent (in such capacity, the
"Documentation Agent"), and BANC OF AMERICA SECURITIES LLC, as Lead Arranger and
Book Manager for the Lenders, and FIRST SECURITY BANK OF NEVADA, FLEET NATIONAL
BANK, SOUTHTRUST BANK, N.A. and SUNTRUST BANK, ATLANTA, as co-agents.
WHEREAS, the Borrowers and Guarantors have requested that the Lenders
provide $250,000,000 credit facility for the purposes of (i) refinancing
existing indebtedness of the Borrowers, (ii) financing seasonal working capital
needs of Speedway Motorsports and its Subsidiaries, (iii) financing letter of
credit needs of Speedway Motorsports and its Subsidiaries, (iv) financing
general corporate needs of Speedway Motorsports and its Subsidiaries including
capital expenditures, (v) financing permitted investments and (vi) financing the
acquisition of additional motor speedways and related businesses; and
WHEREAS, the Lenders have agreed to make the requested credit facility
available on the terms and conditions hereinafter set forth.
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
<PAGE>
SECTION 1
DEFINITIONS
-----------
1.1 Definitions.
As used in this Credit Agreement, the following terms shall have the
meanings specified below unless the context otherwise requires:
"Additional Credit Party" means each Person that becomes a
Guarantor after the Closing Date by execution of a Joinder Agreement.
"Affiliate" means, with respect to any Person, any other
Person (i) directly or indirectly controlling or controlled by or under
direct or indirect common control with such Person or (ii) directly or
indirectly owning or holding five percent (5%) or more of the equity
interest in such Person. For purposes of this definition, "control"
when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative
to the foregoing.
"Administrative Agent" shall have the meaning assigned to such
term in the heading hereof.
"Agent's Fee Letter" means the letter from the Agent to the
Borrowers dated April 13, 1999;
"Agent's Fees" shall have the meaning assigned to such term in
Section 3.5(c).
"Applicable Percentage" means
for purposes of calculating the applicable interest rate for
any day for any Loan, the applicable Standby Letter of Credit Fee for
any day for purposes of Section 3.5 (b) or the applicable Trade Letter
of Credit Fee for any day for purposes of Section 3.5 (b) or the
applicable Commitment Fee for any day for purposes of Section 3.5(a),
the appropriate applicable percentage set forth below corresponding to
the Consolidated Total Debt Ratio in effect as of the most recent
Calculation Date:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------
Pricing Consolidated Total Applicable Applicable Applicable Applicable Applicable
Level Debt Ratio Percentage Percentage Percentage for Percentage Percentage for
Standby for Trade Commit-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
for
Eurodollar for Base Letter of Letter of ment Fee
Loans Rate Loans Credit Fee Credit Fee
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Less than or equal to 2.50
I to 1.00 0.50% 0% 0.50% 0.125% 0.175%
--------------------------------------------------------------------------------------------------------------------------
Less than or equal to 3.00
to 1.00 but greater than
II 2.50 to 1.00 0.75% 0% 0.75% 0.125% 0.20%
--------------------------------------------------------------------------------------------------------------------------
Less than or equal to 3.50
to 1.00 but greater than
III 3.00 to 1.00 1.00% 0% 1.00% 0.125% 0.225%
--------------------------------------------------------------------------------------------------------------------------
IV Greater than 3.50 to 1.00 1.25% 0% 1.25% 0.125% 0.25%
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
Determination of the appropriate Applicable Percentages shall be made
as of each Calculation Date. The Consolidated Total Debt Ratio in
effect as of a Calculation Date shall establish the Applicable
Percentages for the Loans, the Standby Letter of Credit Fee, the Trade
Letter of Credit Fee and the Commitment Fee that shall be effective as
of the date designated by the Administrative Agent as the Applicable
Percentage Change Date. The Administrative Agent shall determine the
Applicable Percentages as of each Calculation Date and shall promptly
notify the Borrowers and the Lenders of the Applicable Percentages so
determined and of the Applicable Percentage Change Date. Such
determinations by the Administrative Agent of the Applicable
Percentages shall be conclusive absent demonstrable error. The initial
Applicable Percentage[s] shall be based on Pricing Level IV until the
first Applicable Percentage Change Date occurring after the Closing
Date.
"Applicable Percentage Change Date" means, with respect to any
Calculation Date, a date designated by the Administrative Agent that is
not more than five (5) Business Days after receipt by the
Administrative Agent of the Required Financial Information for such
Calculation Date.
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of the
United States Code, as amended, modified, succeeded or replaced from
time to time.
"Base Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest whole multiple of 1/100 of 1%)
equal to the greater of (a) the Federal Funds Rate in effect on such
day plus 1/2 of 1% or (b) the Prime Rate in effect on such day. If for
any reason the Administrative Agent shall have determined (which
determination shall be conclusive absent manifest error) that it is
unable after due inquiry to ascertain the Federal Funds Rate for any
reason, including the inability or failure of the Administrative Agent
to obtain sufficient quotations in accordance
<PAGE>
with the terms hereof, the Base Rate shall be determined without regard
to clause (a) of the first sentence of this definition until the
circumstances giving rise to such inability no longer exist. Any change
in the Base Rate due to a change in the Prime Rate or the Federal Funds
Rate shall be effective on the effective date of such change in the
Prime Rate or the Federal Funds Rate, respectively.
"Base Rate Loan" means any Loan bearing interest at a rate
determined by reference to the Base Rate.
"Borrowers" means the Persons identified as such in the
heading hereof, together with any successors and permitted assigns.
"Borrowers' Obligations" means, without duplication, (i) all
of the obligations of either of the Borrowers to the Lenders and the
Administrative Agent, whenever arising, under this Credit Agreement,
the Notes or any of the other Credit Documents (including, but not
limited to, all interest accruing from and after the commencement of
any case, proceeding or action under any existing or future laws
relating to bankruptcy or insolvency with respect to either of the
Borrowers, regardless of whether such interest is an allowed claim
under the Bankruptcy Code in Title 11 of the United States Code) and
(ii) all obligations owing from either of the Borrowers to any Lender,
or any Affiliate of a Lender, arising under any Hedge Agreements
relating to the Obligations hereunder.
"Business Day" means a day other than a Saturday, Sunday or
other day on which commercial banks in Charlotte, North Carolina are
authorized or required by law to close, except that, when used in
connection with a Eurodollar Loan, such day shall also be a day on
which dealings between banks are carried on in Dollar deposits in
London, England and New York, New York.
"Calculation Date" means the last day of each fiscal quarter
of the Borrowers.
"Capital Lease" means, as applied to any Person, any lease of
any Property (whether real, personal or mixed) by that Person as lessee
which, in accordance with GAAP is or should be accounted for as a
capital lease on the balance sheet of that Person.
"Capital Stock" means (i) in the case of a corporation,
capital stock, (ii) in the case of an association or business entity,
any and all shares, interests, participations, rights or other
equivalents (however designated) of Capital Stock, (iii) in the case of
a partnership, partnership interests (whether general or limited), (iv)
in the case of a limited liability company, membership interests and
(v) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions
of assets of, the issuing Person.
"Cash Consideration" means cash paid to or for the account of
a seller for the
<PAGE>
acquisitions permitted by Section 8.4(c) plus (i) any notes given to
such seller having a maturity date shorter than the Termination Date
and (ii) any Funded Indebtedness assumed in the transaction.
"Cash Equivalents" means (a) securities issued or directly and
fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and
credit of the United States of America is pledged in support thereof)
having maturities of not more than twelve months from the date of
acquisition, (b) Dollar denominated time deposits and certificates of
deposit of (i) any Lender, (ii) any domestic commercial bank of
recognized standing having capital and surplus in excess of
$500,000,000 or (iii) any bank whose short-term commercial paper rating
from S&P is at least A-1 or the equivalent thereof or from Moody's is
at least P-1 or the equivalent thereof (any such bank being an
"Approved Lender"), in each case with maturities of not more than 270
days from the date of acquisition, (c) commercial paper and variable or
fixed rate notes issued by any Approved Lender (or by the parent
company thereof) or any variable rate notes issued by, or guaranteed
by, any domestic corporation whose senior unsecured indebtedness for
borrowed money is rated A-1 (or the equivalent thereof) or better by
S&P or P-1 (or the equivalent thereof) or better by Moody's and
maturing within six months of the date of acquisition, (d) repurchase
agreements with a bank or trust company (including any of the Lenders)
or recognized securities dealer having capital and surplus in excess of
$500,000,000 for direct obligations issued by or fully guaranteed by
the United States of America or any agency or instrumentality thereof
in which the Borrowers shall have a perfected first priority security
interest (subject to no other Liens) and having, on the date of
purchase thereof, a fair market value of at least 100% of the amount of
the repurchase obligations, (e) obligations of any state of the United
States or any political subdivision thereof, the interest with respect
to which is exempt from federal income taxation under Section 103 of
the Code, having a long term rating of at least Aa-3 or AA- by Moody's
or S&P, respectively, and maturing within three years from the date of
acquisition thereof, (f) Investments in municipal or corporate auction
preferred stock (i) rated AAA (or the equivalent thereof) or better by
S&P or Aaa (or the equivalent thereof) or better by Moody's and (ii)
with dividends that reset at least once every 365 days and (g)
Investments, classified in accordance with GAAP as current assets, in
money market investment programs registered under the Investment
Company Act of 1940, as amended, which are administered by reputable
financial institutions having capital of at least $100,000,000 and the
portfolios of which are limited to Investments of the character
described in the foregoing subdivisions (a) through (f).
"Change of Control" means the occurrence of any of the
following events: any Person or two or more Persons (acting as a
"group" within the meaning of Section 13(d)(3) of the Exchange Act),
excluding Persons who are on the Closing Date executive officers or
directors of Speedway Motorsports or Permitted Transferees, shall have
acquired beneficial ownership, directly or indirectly, of, or
<PAGE>
shall have acquired by contract or otherwise, or shall have entered
into a contract or arrangement that, upon consummation, will result in
its or their acquisition of, control over, Voting Stock of either of
the Borrowers (or other securities convertible into such Voting Stock)
representing more than 25% of the combined voting power of all Voting
Stock of such Borrower and shall have filed or shall have become
required to file, a Schedule 13D with the SEC disclosing that it is the
intention of such Person or group to acquire control of either of the
Borrowers. As used herein, "beneficial ownership" shall have the
meaning provided in Rule 13d-3 of the SEC under the Exchange Act. A
Change of Control shall also occur if a majority of the Board of
Directors of either of the Borrowers existing on the Closing Date
changes.
"Closing Date" means the date hereof.
"Code" means the Internal Revenue Code of 1986, as amended,
and any successor thereto, as interpreted by the rules and regulations
issued thereunder, in each case as in effect from time to time.
References to sections of the Code shall be construed also to refer to
any successor sections.
"Commitment" means the LOC Commitment, the Revolving
Commitment, and the Swingline Commitment.
"Commitment Fee" shall have the meaning given such term in
Section 3.5(a).
"Commitment Percentage" mean the Revolving Commitment
Percentage.
"Consolidated Capital Charges Coverage Ratio" means, as of any
Calculation Date, the ratio of (i) Consolidated EBIT for the
four-quarter period ended as of such Calculation Date, to (ii)
Consolidated Interest Expense plus dividends paid on preferred stock
for the four-quarter period ended as of such Calculation Date.
"Consolidated Capital Expenditures" means, for any period, all
capital expenditures of Speedway Motorsports and its Subsidiaries on a
consolidated basis for such period, as determined in accordance with
GAAP.
"Consolidated EBIT" means, for any period, the sum of (i)
Consolidated Net Income for such period, plus (ii) an amount which, in
the determination of Consolidated Net Income for such period, has been
deducted for (A) Consolidated Interest Expense and (B) total federal,
state, local and foreign income, value added and similar taxes all as
determined in accordance with GAAP; provided, however, that
Consolidated EBIT for any fiscal quarter (or portion thereof) ended
prior to the Closing Date shall be the amount indicated for such fiscal
quarter on Schedule 1.1A.
"Consolidated EBITDA" means, for any period, the sum of (i)
Consolidated Net Income for such period, plus (ii) an amount which, in
the determination of Consolidated Net Income for such period, has been
deducted for (A) Consolidated
<PAGE>
Interest Expense, (B) total federal, state, local and foreign income,
value added and similar taxes and (C) depreciation and amortization
expense, all as determined in accordance with GAAP; provided, however,
that Consolidated EBITDA for any fiscal quarter (or portion thereof)
ended prior to the Closing Date shall be the amount indicated for such
fiscal quarter on Schedule 1.1A.
"Consolidated Interest Expense" means, for any period, with
respect to the combined results of Speedway Motorsports and its
Subsidiaries on a consolidated basis and Las Vegas Motor Speedway LLC
on a pro forma basis as if acquired January 1, 1998, gross interest
expense (both expensed and capitalized) for such period, as determined
in accordance with GAAP.
"Consolidated Net Income" means, for any period, with respect
to the combined results of Speedway Motorsports and its Subsidiaries
and Las Vegas Motor Speedway LLC on a pro forma basis as if acquired
January 1, 1998, the gross revenues from operations (including payments
received of interest income) less all operating and non-operating
expenses including taxes on income, all determined in accordance with
GAAP; but excluding as income: (i) net gains on the sale, conversion or
other disposition of capital assets, (ii) net gains on the acquisition,
retirement, sale or other disposition of Capital Stock and other
securities issued by Speedway Motorsports and its Subsidiaries, (iii)
net gains on the collection of proceeds of life insurance policies,
(iv) any write-up of any asset, and (v) any other gain or loss of an
extraordinary nature as determined in accordance with GAAP.
"Consolidated Net Worth" means, as of any date, total
shareholders' equity of Speedway Motorsports and its Subsidiaries less
preferred stock redeemable at the holder's discretion and preferred
stock having a first call of fifteen years or less all on a
consolidated basis as of such date, as determined in accordance with
GAAP.
"Consolidated Total Debt Ratio" means, as of any Calculation
Date, the ratio of (i) Funded Indebtedness of Speedway Motorsports and
its Subsidiaries on a consolidated basis as of such Calculation Date,
to (ii) Consolidated EBITDA for the four-quarter period ended as of
such Calculation Date.
"Controlled Group" means (i) the controlled group of
corporations as defined in Section 414(b) of the Code and the
applicable regulations thereunder, or (ii) the group of trades or
businesses under common control as defined in Section 414(c) of the
Code and the applicable regulations thereunder, of which Speedway
Motorsports or any of its Subsidiaries is a member.
"Credit Documents" means a collective reference to this Credit
Agreement, the Notes, the Pledge Agreement, each Joinder Agreement, the
Hedge Agreements, the Agent's Fee Letter and all other related
agreements and documents issued or delivered hereunder or thereunder or
pursuant hereto or thereto.
<PAGE>
"Credit Party" means any of the Borrowers and the Guarantors.
"Debt Transactions" means, with respect to Speedway
Motorsports or any of its Subsidiaries, any sale, issuance or placement
of Funded Indebtedness, whether or not evidenced by a promissory note
or other written evidence of indebtedness, except for Funded
Indebtedness permitted to be incurred pursuant to Section 8.1.
"Default" means any event, act or condition which, with notice
or lapse of time, or both, would constitute an Event of Default.
"Dollars" and "$" means dollars in lawful currency of the
United States of America.
"Domestic Subsidiary" means, with respect to any Person, any
Subsidiary of such Person which is incorporated or organized under the
laws of any state of the United States or the District of Columbia.
"Effective Date" means the date hereof provided that the
conditions set forth in Section 5.1 shall have been fulfilled (or
waived in the sole discretion of the Lenders).
"Eligible Assignees" means (i) any Lender or any Affiliate or
Subsidiary of a Lender and (ii) any other commercial bank, financial
institution or "accredited investor" (as defined in Regulation D of the
SEC) having total assets in excess of $300,000,000 and which is
reasonably acceptable to the Administrative Agent and the Borrowers,
unless an Event of Default has occurred and is continuing at the time
any assignment is effected in accordance with Section 11.3(b) in which
case only reasonable acceptance of the Administrative Agent is
required.
"Environmental Claim" means any investigation, written notice,
violation, written demand, written allegation, action, suit,
injunction, judgment, order, consent decree, penalty, fine, lien,
proceeding, or written claim whether administrative, judicial, or
private in nature from activities or events taking place during or
prior to the Borrower's or any of its Subsidiaries' ownership or
operation of any real property and arising (a) pursuant to, or in
connection with, an actual or alleged violation of, any Environmental
Law, (b) in connection with any Hazardous Material, (c) from any
assessment, abatement, removal, remedial, corrective, or other response
action required by an Environmental Law or other order of a
Governmental Authority or (d) from any actual or alleged damage,
injury, threat, or harm to health, safety, natural resources, or the
environment.
"Environmental Laws" means any and all lawful and applicable
Federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees, permits, concessions,
grants, franchises, licenses, agreements or other governmental
restrictions relating to the environment or to emissions,
<PAGE>
discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances
or wastes into the environment including, without limitation, ambient
air, surface water, ground water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes.
"Equity Transaction" means any issuance by Speedway
Motorsports or any of its Subsidiaries of (i) shares of its Capital
Stock, (ii) any shares of its Capital Stock pursuant to the exercise of
options or warrants or (iii) any shares of its Capital Stock pursuant
to the conversion of any debt securities to equity; excluding, however,
any shares at any time issued or issuable to any key employees,
directors, consultants and other individuals providing services to
Speedway Motorsports or any of its Subsidiaries pursuant to the 1994
Stock Option Plan of Speedway Motorsports or any other "employee
benefit plan" within the meaning of Rule 405 promulgated by the SEC
under the Securities Act of 1933, as amended.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute thereto, as interpreted by
the rules and regulations thereunder, all as the same may be in effect
from time to time. References to sections of ERISA shall be construed
also to refer to any successor sections.
"ERISA Affiliate" means an entity, whether or not
incorporated, which is under common control with any Credit Party
within the meaning of Section 4001(a)(14) of ERISA, or is a member of a
group which includes Speedway Motorsports or any of its Subsidiaries
and which is treated as a single employer under Sections 414(b), (c),
(m), or (o) of the Code.
"Eurodollar Loan" means any Loan bearing interest at a rate
determined by reference to the Eurodollar Rate.
"Eurodollar Rate" means, for the Interest Period for each
Eurodollar Loan comprising part of the same borrowing (including
conversions, extensions and renewals), a per annum interest rate
determined pursuant to the following formula:
Eurodollar Rate ' Interbank Offered Rate
----------------------
1 - Eurodollar Reserve Percentage
"Eurodollar Reserve Percentage" means for any day, that
percentage (expressed as a decimal) which is in effect from time to
time under Regulation D of the Board of Governors of the Federal
Reserve System (or any successor), as such regulation may be amended
from time to time or any successor regulation, as the
<PAGE>
maximum reserve requirement (including, without limitation, any basic,
supplemental, emergency, special, or marginal reserves) applicable with
respect to Eurocurrency Liabilities as that term is defined in
Regulation D (or against any other category of liabilities that
includes deposits by reference to which the interest rate of Eurodollar
Loans is determined), whether or not Lender has any Eurocurrency
Liabilities subject to such reserve requirement at that time.
Eurodollar Loans shall be deemed to constitute Eurocurrency Liabilities
and as such shall be deemed subject to reserve requirements without
benefits of credits for proration, exceptions or offsets that may be
available from time to time to a Lender. The Eurodollar Rate shall be
adjusted automatically on and as of the effective date of any change in
the Eurodollar Reserve Percentage.
"Event of Default" means such term as defined in Section 9.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and any successor thereto.
"Federal Funds Rate" means, for any day, the rate of interest
per annum (rounded, if necessary, to the nearest whole multiple of
1/100 of 1%) equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by the
Federal Reserve Bank of New York on the Business Day next succeeding
such day, provided that (A) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions
on the next preceding Business Day and (B) if no such rate is so
published on such next succeeding Business Day, the Federal Funds Rate
for such day shall be the average rate quoted to the Administrative
Agent on such day on such transactions as determined by the
Administrative Agent.
"Fees" means all fees payable pursuant to Section 3.5.
"Foreign Subsidiary" means any Subsidiary of either of the
Borrowers that is not a Domestic Subsidiary.
"Funded Indebtedness" means, with respect to any Person,
without duplication, (i) all Indebtedness of such Person for borrowed
money (including all Indebtedness evidenced by the Senior Notes), (ii)
all purchase money Indebtedness of such Person, including without
limitation the principal portion of all obligations of such Person
under Capital Leases, (iii) all Guaranty Obligations of such Person
with respect to Funded Indebtedness of another Person, (iv) the maximum
available amount of all letters of credit or acceptances issued or
created for the account of such Person, (v) all Funded Indebtedness of
another Person secured by a Lien on any Property of such Person,
whether or not such Funded Indebtedness has been assumed and (vi)
preferred stock redeemable at the holder's discretion or preferred
stock having a first call of fifteen years or less. The Funded
Indebtedness of any Person
<PAGE>
(x) shall include the Funded Indebtedness of any partnership or joint
venture in which such Person is a general partner or a joint venturer
and (y) shall not include any Intercompany Indebtedness of such Person.
"GAAP" means generally accepted accounting principles in the
United States applied on a consistent basis and subject to the terms of
Section 1.3 hereof.
"Governmental Authority" means any Federal, state, local or
foreign court or governmental agency, authority, instrumentality or
regulatory body.
"Guarantor" means each of those Persons identified as a
"Guarantor" on the signature pages hereto, and each Additional Credit
Party which may hereafter execute a Joinder Agreement, together with
their successors and permitted assigns.
"Guaranty Obligations" means, with respect to any Person,
without duplication, any obligations of such Person (other than
endorsements in the ordinary course of business of negotiable
instruments for deposit or collection) guaranteeing or intended to
guarantee any Indebtedness of any other Person in any manner, whether
direct or indirect, and including without limitation any obligation,
whether or not contingent, (i) to purchase any such Indebtedness or any
Property constituting security therefor, (ii) to advance or provide
funds or credit support for the payment or purchase of any such
Indebtedness or to maintain working capital, solvency or other balance
sheet condition of such other Person (including without limitation keep
well agreements, maintenance agreements, comfort letters or similar
agreements or arrangements) for the benefit of any holder of
Indebtedness of such other Person, (iii) to lease or purchase Property,
securities or services primarily for the purpose of assuring the holder
of such Indebtedness, or (iv) to otherwise assure or hold harmless the
holder of such Indebtedness against loss in respect thereof. The amount
of any Guaranty Obligation hereunder shall (subject to any limitations
set forth therein) be deemed to be an amount equal to the outstanding
principal amount (or maximum principal amount, if larger) of the
Indebtedness in respect of which such Guaranty Obligation is made.
"Hazardous Materials" means any substance, material or waste
defined or regulated in or under any Environmental Laws.
"Hedge Agreements" mean interest rate swap, cap or collar
agreements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts and other similar
agreements designed to hedge against fluctuations in interest rates or
foreign exchange rates.
"Indebtedness" of any Person means (i) all obligations of such
Person for borrowed money, (ii) all obligations of such Person
evidenced by bonds, debentures, notes or similar instruments, or upon
which interest payments are customarily made, (iii) all obligations of
such Person under conditional sale or other title retention
<PAGE>
agreements relating to Property purchased by such Person (other than
customary reservations or retentions of title under agreements with
suppliers entered into in the ordinary course of business), (iv) all
obligations, including without limitation intercompany items, of such
Person issued or assumed as the deferred purchase price of Property or
services purchased by such Person (other than trade debt incurred in
the ordinary course of business and due within six months of the
incurrence thereof) which under GAAP would appear as liabilities on a
balance sheet of such Person, (v) all obligations of such Person under
take-or-pay or similar arrangements or under commodity futures
contracts, (vi) all Indebtedness of others secured by (or for which the
holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on, or payable out of the
proceeds of production from, Property owned or acquired by such Person,
whether or not the obligations secured thereby have been assumed, (vii)
all Guaranty Obligations of such Person, (viii) the principal portion
of all obligations of such Person under Capital Leases, (ix) all
obligations of such Person in respect of Hedge Agreements and (x) the
maximum amount of all letters of credit issued or bankers' acceptances
facilities created for the account of such Person and, without
duplication, all drafts drawn thereunder (to the extent unreimbursed).
The Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venturer in which such Person is a general partner
or joint venturer.
"Indenture" means that certain Indenture dated as of August 4,
1997 and that certain Indenture dated as of May 11, 1999 among Speedway
Motorsports as issuer, the Guarantors and First Trust National
Association, as trustee, as the same may be modified, supplemented or
amended from time to time.
"Interbank Offered Rate" means, with respect to any Eurodollar
Loan for the Interest Period applicable thereto, the average (rounded
upward to the nearest one-sixteenth (1/16) of one percent) per annum
rate of interest determined by the office of the Administrative Agent
(each such determination to be conclusive and binding) as of two
Business Days prior to the first day of such Interest Period, as the
effective rate at which deposits in immediately available funds in
Dollars are being, have been, or would be offered or quoted by the
Administrative Agent to major banks in the applicable interbank market
for Eurodollar deposits at any time during the Business Day which is
the second Business Day immediately preceding the first day of such
Interest Period, for a term comparable to such Interest Period and in
the amount of the requested Eurodollar Loan. If no such offers or
quotes are generally available for such amount, then the Administrative
Agent shall be entitled to determine the Eurodollar Rate by estimating
in its reasonable judgment the per annum rate (as described above) that
would be applicable if such quote or offers were generally available.
"Intercompany Indebtedness" means any Indebtedness of a Credit
Party which (i) is owing to any other Credit Party and (ii) by its
terms is specifically subordinated in right of payment to the prior
payment of the obligations of the Credit
<PAGE>
Parties under this Credit Agreement and the other Credit Documents on
terms and conditions reasonably satisfactory to the Required Lenders.
"Interest Payment Date" means (i) as to any Base Rate Loan the
last day of each March, June, September and December, the date of
repayment of principal of such Loan and the Termination Date, (ii) as
to Swingline Loans, such dates as to which the Swingline Lender may
agree and (iii) as to any Eurodollar Loan, the last day of each
Interest Period for such Loan and the Termination Date, and in addition
where the applicable Interest Period is more than three months, then
also on the date three months from the beginning of the Interest
Period, and each three months thereafter. If an Interest Payment Date
falls on a date which is not a Business Day, such Interest Payment Date
shall be deemed to be the next succeeding Business Day, except that in
the case of Eurodollar Loans where the next succeeding Business Day
falls in the next succeeding calendar month, then on the next preceding
Business Day.
"Interest Period" means, (i) as to Eurodollar Loans, a period
of one, two, three or six months' duration, as the Borrowers may elect,
commencing in each case, on the date of the borrowing (including
conversions, extensions and renewals) and (ii) as to any Swingline
Loan, a period of such duration, not to exceed 15 days, as the
applicable Borrower may request and the Swingline Lender may agree in
accordance with the provisions of Section 2.3(b)(i), commencing in each
case, on the date of borrowing; provided, however, (A) if any Interest
Period would end on a day which is not a Business Day, such Interest
Period shall be extended to the next succeeding Business Day (except
that in the case of Eurodollar Loans where the next succeeding Business
Day falls in the next succeeding calendar month, then on the next
preceding Business Day), (B) no Interest Period shall extend beyond the
Termination Date, and (C) in the case of Eurodollar Loans, where an
Interest Period begins on a day for which there is no numerically
corresponding day in the calendar month in which the Interest Period is
to end, such Interest Period shall end on the last day of such calendar
month.
"Investment", in any Person, means any loan or advance to such
Person, any purchase or other acquisition of any Capital Stock,
warrants, rights, options, obligations or other securities of such
Person, any capital contribution to such Person or any other investment
in such Person, including, without limitation, any Guaranty Obligation
incurred for the benefit of such Person.
"Issuing Lender" means NationsBank.
"Issuing Lender Fees" shall have the meaning assigned to such
term in Section 3.5(b)(iii).
"Joinder Agreement" means a Joinder Agreement substantially in
the form of Schedule 7.12 hereto, executed and delivered by an
Additional Credit Party in
<PAGE>
accordance with the provisions of Section 7.12.
"Lenders" means each of the Persons identified as a "Lender"
on the signature pages hereto, and each Person which may become a
Lender by way of assignment in accordance with the terms hereof,
together with their successors and permitted assigns.
"Letter of Credit" means (i) any letter of credit issued by
the Issuing Lender for the account of the Borrowers in accordance with
the terms of Section 2.2 and (ii) existing letters of credit issued by
the Issuing Lender for the account of any Credit Party and set forth on
Schedule 1.1B.
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, security interest, encumbrance, lien (statutory or
otherwise), preference, priority or charge of any kind (including any
agreement to give any of the foregoing or any conditional sale or other
title retention agreement, any financing or similar statement or notice
filed under the Uniform Commercial Code as adopted and in effect in the
relevant jurisdiction or other similar recording or notice statute, any
lease in the nature thereof).
"Loan" or "Loans" means the Revolving Loans and the Swingline
Loans.
"LOC Commitment" means the commitment of the Issuing Lender to
issue, and to honor payment obligations under, Letters of Credit
hereunder and with respect to each Lender, the commitment of each
Lender to purchase participation interests in the Letters of Credit up
to such Lender's Revolving Commitment Percentage of LOC Committed
Amount as specified in Schedule 2.1(a), as such amount may be reduced
in accordance with the provisions hereof.
"LOC Committed Amount" shall have the meaning assigned to such
term in Section 2.2.
"LOC Documents" means, with respect to any Letter of Credit,
such Letter of Credit, any amendments thereto, any documents delivered
in connection therewith, any application therefor, and any agreements,
instruments, guarantees or other documents (whether general in
application or applicable only to such Letter of Credit) governing or
providing for (i) the rights and obligations of the parties concerned
or at risk or (ii) any collateral security for such obligations.
"LOC Obligations" means, at any time, the sum of (i) the
maximum amount which is, or at any time thereafter may become,
available to be drawn under Letters of Credit then outstanding,
assuming compliance with all requirements for drawings referred to in
such Letters of Credit plus (ii) the aggregate amount of all drawings
outstanding under Letters of Credit honored by the Issuing Lender but
not theretofore reimbursed.
<PAGE>
"Material Adverse Change" means a material adverse change in
(i) the condition (financial or otherwise), operations, assets or
liabilities of Speedway Motorsports and its Subsidiaries taken as a
whole, (ii) the ability of the Credit Parties taken as a whole to
perform any material obligation under the Credit Documents or (iii) the
material rights and remedies of the Lenders under the Credit Documents.
"Material Adverse Effect" means a material adverse effect on
(i) the condition (financial or otherwise), operations, assets or
liabilities of Speedway Motorsports and its Subsidiaries taken as a
whole, (ii) the ability of the Credit Parties taken as a whole to
perform any material obligation under the Credit Documents or (iii) the
material rights and remedies of the Lenders under the Credit Documents.
"Materials of Environmental Concern" means any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum
products or any hazardous or toxic substances, materials or wastes,
defined or regulated as such in or under any Environmental Laws,
including, without limitation, asbestos, polychlorinated biphenyls and
urea-formaldehyde insulation.
"Moody's" means Moody's Investors Service, Inc., or any
successor or assignee of the business of such company in the business
of rating securities.
"Multiemployer Plan" means a Plan which is a multiemployer
plan as defined in Sections 3(37) or 4001(a)(3) of ERISA.
"Multiple Employer Plan" means a Plan which any Credit Party
or any ERISA Affiliate and at least one employer other than a Credit
Party or any ERISA Affiliate are contributing sponsors.
"NationsBank" means NationsBank, N.A. and its successors.
"Net Proceeds" means proceeds received by Speedway Motorsports
or any of its Subsidiaries from time to time in connection with any
Equity Transaction, net of the actual costs and taxes incurred by such
Person in connection with and attributable to such Equity Transaction.
"Note" or "Notes" means any Revolving Note and/or Swingline
Note.
"Notice of Borrowing" means a written notice of borrowing in
substantially the form of Schedule 2.1(b)(i), as required by Section
2.1(b)(i).
"Notice of Extension/Conversion" means the written notice of
extension or conversion in substantially the form of Schedule 3.2 as
required by Section 3.2.
<PAGE>
"Obligations" means, collectively, the Loans and the LOC
Obligations.
"Operating Lease" means, as applied to any Person, any lease
(including, without limitation, leases which may be terminated by the
lessee at any time) of any Property (whether real, personal or mixed)
which is not a Capital Lease other than any such lease in which that
Person is the lessor.
"Participation Interest" means the purchase by a Lender of a
participation in Letters of Credit as provided in Section 2.2(c) and in
Swingline Loans as provided in Section 2.3(b)(iii) and in Loans as
provided in Section 3.13.
"PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA and any
successor thereof.
"Permitted Investments" means Investments which are either (i)
cash and Cash Equivalents; (ii) accounts receivable created, acquired
or made by any Credit Party in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms;
(iii) Investments consisting of stock, obligations, securities or other
property received by any Credit Party in settlement of accounts
receivable (created in the ordinary course of business) from insolvent
obligors; (iv) Investments existing as of the Closing Date and set
forth in Schedule 1.1C; (v) Guaranty Obligations permitted by Section
8.1, (vi) acquisitions permitted by Section 8.4(c); (vii) loans to
directors, officers, employees, agents, customers or suppliers that do
not exceed an aggregate principal amount of $500,000 at any one time
outstanding for Speedway Motorsports and all of its Subsidiaries taken
together; (viii) Investments received as consideration in connection
with or arising by virtue of any merger, consolidation, sale or other
transfer of assets permitted under Section 8.4; (ix) Intercompany
Indebtedness; (x) Capital Stock or other securities of any Person which
is traded on the New York Stock Exchange, the American Stock Exchange,
the London Stock Exchange, the Paris Bourse or NASDAQ, provided the
aggregate basis at any one time in such Investments does not exceed
$2,500,000 and such investments have not been purchased on margin; (xi)
loans or advances to Persons to the extent necessary to enable them to
pay taxes, fees and other expenses as and when required to maintain
liquor licenses provided such loans or advances (A) are customary in
Speedway Motorsports' business and (B) the aggregate principal amount
outstanding at any one time of such loans or advances does not exceed
$2,000,000; and (xii) loans or advances to any Subsidiary that is not a
Credit Party that do not exceed an aggregate principal amount of
$15,000,000 at any one time outstanding.
"Permitted Liens" means:
(i) Liens in favor of the Administrative
Agent on behalf of the Lenders;
<PAGE>
(ii) Liens (other than Liens created or
imposed under ERISA) for taxes, assessments or governmental
charges or levies not yet due or Liens for taxes being
contested in good faith by appropriate proceedings for which
adequate reserves determined in accordance with GAAP have been
established (and as to which the Property subject to any such
Lien is not yet subject to foreclosure, sale or loss on
account thereof);
(iii) statutory Liens of landlords and Liens
of carriers, warehousemen, mechanics, materialmen and
suppliers and other Liens imposed by law or pursuant to
customary reservations or retentions of title arising in the
ordinary course of business, provided that such Liens secure
only amounts not yet due and payable or, if due and payable,
are being contested in good faith by appropriate proceedings
for which adequate reserves determined in accordance with GAAP
have been established (and as to which the Property subject to
any such Lien is not yet subject to foreclosure, sale or loss
on account thereof);
(iv) Liens (other than Liens created or
imposed under ERISA) incurred or deposits made by the Credit
Parties in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types
of social security, or to secure the performance of tenders,
statutory obligations, bids, leases, government contracts,
performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of
borrowed money);
(v) Liens arising in connection with
attachments or judgments (including judgment or appeal bonds),
provided that the judgments secured shall, within 60 days
after the entry thereof, be discharged within 30 days or the
execution thereof be stayed pending appeal and be discharged
within 30 days after the expiration of any such stay;
(vi) easements, rights-of-way, restrictions
(including zoning restrictions), minor defects or
irregularities in title and other similar charges or
encumbrances not, in any material respect, impairing the use
of the encumbered Property for its intended purposes;
(vii) Liens on Property securing purchase
money Indebtedness (including Capital Leases) to the extent
permitted under Section 8.1(c), provided that any such Lien
attaches to such Property concurrently with or within 90 days
after the acquisition thereof;
(viii) normal and customary rights of setoff
upon deposits of cash in favor of banks or other depository
institutions;
(ix) Liens existing as of the Closing Date
and set forth on
<PAGE>
Schedule 1.1D; and
(x) Liens arising under leases permitted
hereunder (other than Capital Leases).
"Permitted Transferee" means (i) either of the Borrowers, (ii)
Sonic Financial Corporation or any successor thereof (provided at least
51% of the Voting Stock of Sonic Financial Corporation is owned by O.
Bruton Smith, Family Members (as hereinafter defined) or another
Permitted Transferee), (iii) O. Bruton Smith or the spouse or any
lineal descendant of O. Bruton Smith and/or any parent of any such
holder (collectively, the "Family Members"), (iv) the trustee of a
trust (including a voting trust) for the benefit of such holder and/or
Family Members, (v) a corporation in respect of which such holder
and/or Family Members hold beneficial ownership of all shares of
Capital Stock of such corporation, (vi) a partnership in respect of
which such holder and/or Family Members hold beneficial ownership of
all partnership shares of or interests in such partnership, (vii) a
limited liability company in respect of which such holder and/or Family
Members hold beneficial ownership of all memberships in or interests of
such company, (viii) the estate of such holder and/or Family Members or
(ix) any other holder of Capital Stock of Speedway Motorsports who or
which becomes a holder in accordance with clause (iii), (iv), (v),
(vi), (vii) or (viii) hereof; provided, however, that none of the
foregoing will be deemed a Permitted Transferee if the transfer results
in the failure of Speedway Motorsports to meet the criteria for listing
on the New York Stock Exchange.
"Person" means any individual, partnership, joint venture,
firm, corporation, limited liability company, association, trust or
other enterprise (whether or not incorporated) or any Governmental
Authority.
"Plan" means any employee benefit plan (as defined in Section
3(3) of ERISA) which is covered by ERISA and with respect to which any
Credit Party or any of its Subsidiaries or any ERISA Affiliate is (or,
if such plan were terminated at such time, would under Section 4069 of
ERISA be deemed to be) an "employer" within the meaning of Section 3(5)
of ERISA.
"Pledge Agreement" means the pledge agreement dated as of the
Closing Date executed in favor of the Administrative Agent by each of
the Borrowers, as amended, modified, restated or supplemented from time
to time.
"Prime Rate" means the per annum rate of interest established
from time to time by the Administrative Agent at its principal office
in Charlotte, North Carolina as its Prime Rate with each change in the
Prime Rate being effective on the date such change is publicly
announced as effective (it being understood and agreed that the Prime
Rate is a reference rate used by NationsBank in determining interest
rates on certain loans and is not intended to be the lowest rate of
interest charged on any extension of credit by NationsBank to any
debtor).
<PAGE>
"Pro Forma Basis" means, with respect to any transaction, that
such transaction shall be deemed to have occurred as of the first day
of the four fiscal-quarter period ending as of the most recent
Calculation Date preceding the date of such transaction with respect to
which the Administrative Agent has received the Required Financial
Information. As used herein, "transaction" shall include, but not be
limited to, (i) any corporate merger or consolidation as referred to in
Section 8.4(a), (ii) any sale or other disposition of assets as
referred to in Section 8.4(b) or (iii) any acquisition of Capital Stock
or securities or any purchase, lease or other acquisition of Property
as referred to in Section 8.4(c).
"Property" means any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Regulation D, G, T, U, or X" means Regulation D, G, T, U or
X, respectively, of the Board of Governors of the Federal Reserve
System as from time to time in effect and any successor to all or a
portion thereof.
"Reportable Event" means any of the events set forth in
Section 4043(b) of ERISA, other than those events as to which the
post-event notice requirement is waived under subsections .13, .14,
.18, .19 or .20 of PBGC Reg. '2615.
"Required Financial Information" means, with respect to the
applicable Calculation Date, (i) the financial statements of Speedway
Motorsports required to be delivered pursuant to Section 7.1 for the
fiscal period or quarter ending as of such Calculation Date, and (ii)
the certificate of the chief financial officer, chief executive officer
or president of Speedway Motorsports required by Section 7.1 to be
delivered with the financial statements described in clause (i) above.
"Required Lenders" means, at any time, (i) Lenders which are
then in compliance with their obligations hereunder (as determined by
the Administrative Agent) and holding in the aggregate more than fifty
percent (50%) of the Commitments, or (ii) if the Commitments have been
terminated, Lenders having more than fifty percent (50%) of the
aggregate principal amount of the Obligations outstanding (taking into
account in each case Participation Interests or obligation to
participate therein).
"Requirement of Law" means, as to any Person, the certificate
of incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or to
which any of its material property is subject.
"Restricted Payment" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class
of stock of any Credit Party, now or
<PAGE>
hereafter outstanding, (ii) any redemption, retirement, sinking fund or
similar payment, purchase or other acquisition for value, direct or
indirect, of any shares of any class of stock of Speedway Motorsports
or any of its Subsidiaries, now or hereafter outstanding, (iii) any
payment made to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire shares of any class of
stock of Speedway Motorsports or any of its Subsidiaries or (iv) any
payment or prepayment of principal of, premium, if any, or interest on,
redemption, purchase, retirement, defeasance, sinking fund or similar
payment with respect to, any Intercompany Indebtedness.
"Revolving Commitment" means the commitment of each Lender to
make Revolving Loans in an aggregate principal amount at any time
outstanding of up to such Lender's Revolving Commitment Percentage
multiplied by the Revolving Committed Amount (as such Revolving
Committed Amount may be reduced from time to time pursuant to Section
3.4).
"Revolving Commitment Percentage" means, for any Lender, the
percentage identified as its Revolving Commitment as specified in
Schedule 2.1(a).
"Revolving Committed Amount" means, collectively, the
aggregate amount of all the Revolving Commitments as referenced in
Section 2.1(a) and individually, the amount of each Lender's Commitment
as specified in Schedule 2.1(a).
"Revolving Loans" shall have the meaning assigned to such term
in Section 2.1(a).
"Revolving Note" or "Revolving Notes" means the promissory
notes of the Borrowers in favor of each of the Lenders evidencing the
Revolving Loans in substantially the form attached as Schedule 2.1(e),
individually or collectively, as appropriate as such promissory notes
may be amended, modified, supplemented, extended, renewed or replaced
from time to time.
"SEC" means the Securities and Exchange Commission or any
agency or instrumentality of the United States of America succeeding to
the powers and duties thereof.
"Senior Notes" means the senior subordinated notes due 2007 of
Speedway Motorsports in the aggregate original principal amount of
$125,000,000 issued pursuant to the Indenture dated as of August 4,
1997 and in the aggregate original principal amount of $125,000,000
issued pursuant to the Indenture dated as of May 11, 1999.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw Hill, Inc., or any successor or assignee of the business of such
division in the business of rating securities.
<PAGE>
"Single Employer Plan" means any Plan which is covered by
Title IV of ERISA, but which is not a Multiemployer Plan.
"Solvent" or "Solvency" means, with respect to any Person as
of a particular date, that on such date (i) such Person is able to
realize upon its assets and pay its debts and other liabilities,
contingent obligations and other commitments as they mature in the
normal course of business, (ii) such Person does not intend to, and
does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature in their
ordinary course, (iii) such Person is not engaged in a business or a
transaction, and is not about to engage in a business or a transaction,
for which such Person's Property would constitute unreasonably small
capital after giving due consideration to the prevailing practice in
the industry in which such Person is engaged or is to engage, (iv) the
fair value of the Property of such Person is greater than the total
amount of liabilities, including, without limitation, contingent
liabilities, of such Person and (v) the present fair saleable value of
the assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as
they become absolute and matured. In computing the amount of contingent
liabilities at any time, it is intended that such liabilities will be
computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"Speedway Funding" shall have the meaning assigned to such
term in the heading hereof.
"Speedway Motorsports" shall have the meaning assigned to such
term in the heading hereof.
"Standby Letter of Credit Fee" shall have the meaning assigned
to such term in Section 3.5(b)(i).
"Subsidiary" means, as to any Person, (a) any corporation more
than 50% of whose stock of any class or classes having by the terms
thereof ordinary voting power to elect a majority of the directors of
such corporation (irrespective of whether or not at the time, any class
or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time owned by
such Person directly or indirectly through Subsidiaries, and (b) any
partnership, association, joint venture or other entity in which such
Person directly or indirectly through Subsidiaries has more than 50%
equity interest at any time.
"Swingline Commitment" means the commitment of the Swingline
Lender to make Swingline Loans in an aggregate principal amount at any
time outstanding up to the Swingline Committed Amount and the
commitment of the Lenders to purchase participation interests in the
Swingline Loans up to their respective
<PAGE>
Revolving Commitment Percentage of the Swingline Committed Amount as
provided in Section 2.3(b)(iii), as such amounts may be reduced from
time to time in accordance with the provisions hereof.
"Swingline Committed Amount" shall have the meaning assigned
to such term in Section 2.3(a).
"Swingline Lender" means the Administrative Agent.
"Swingline Loan" shall have the meaning assigned to such term
in Section 2.3(a).
"Swingline Note" means the promissory note of the Borrower in
favor of the Swingline Lender in the original principal amount of
$10,000,000, as such promissory note may be amended, modified, restated
or replaced from time to time.
"Termination Date" means May 31, 2004.
"Termination Event" means (i) with respect to any Plan, the
occurrence of a Reportable Event or the substantial cessation of
operations (within the meaning of Section 4062(e) of ERISA); (ii) the
withdrawal of any Credit Party or any of its Subsidiaries or any ERISA
Affiliate from a Multiple Employer Plan during a plan year in which it
was a substantial employer (as such term is defined in Section
4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan;
(iii) the distribution of a notice of intent to terminate or the actual
termination of a Plan pursuant to Section 4041(a)(2) or 4041A of ERISA;
(iv) the institution of proceedings to terminate or the actual
termination of a Plan by the PBGC under Section 4042 of ERISA; (v) any
event or condition which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan; or (vi) the complete or partial withdrawal of any
Credit Party of its Subsidiaries or any ERISA Affiliate from a
Multiemployer Plan.
"Trade Letter of Credit Fee" shall have the meaning assigned
to such term in Section 3.5(b)(ii).
"Voting Stock" means, with respect to any Person, Capital
Stock issued by such Person the holders of which are ordinarily, in the
absence of contingencies, entitled to vote for the election of
directors (or persons performing similar functions) of such Person,
even though the right so to vote has been suspended by the happening of
such a contingency.
1.2 Computation of Time Periods.
For purposes of computation of periods of time hereunder, the word
"from" means "from and including" and the words "to" and "until" each mean "to
but excluding."
<PAGE>
1.3 Accounting Terms.
Except as otherwise expressly provided herein, all accounting terms
used herein shall be interpreted, and all financial statements and certificates
and reports as to financial matters required to be delivered to the Lenders
hereunder shall be prepared, in accordance with GAAP applied on a consistent
basis. All calculations made for the purposes of determining compliance with
this Credit Agreement shall (except as otherwise expressly provided herein) be
made by application of GAAP applied on a basis consistent with the most recent
annual or quarterly financial statements delivered pursuant to Section 7.1
hereof (or, prior to the delivery of the first financial statements pursuant to
Section 7.1 hereof, consistent with the financial statements as at December 31,
1998); provided, however, if (a) Speedway Motorsports shall object in writing to
determining such compliance on such basis at the time of delivery of such
financial statements due to any change in GAAP or the rules promulgated with
respect thereto or (b) the Administrative Agent or the Required Lenders shall so
object in writing within 30 days after delivery of such financial statements,
then such calculations shall be made on a basis consistent with the most recent
financial statements delivered by Speedway Motorsports to the Lenders as to
which no such objection shall have been made.
SECTION 2
CREDIT FACILITY
---------------
2.1 Revolving Loans.
(a) Revolving Commitment. Subject to the terms and conditions
hereof and in reliance upon the representations and warranties set
forth herein, each Lender severally agrees to make revolving credit
loans ("Revolving Loans") to the Borrowers from time to time from the
Closing Date until the Termination Date, or such earlier date as the
Revolving Commitments shall have been terminated as provided herein for
the purposes hereinafter set forth; provided, however, that the sum of
the aggregate principal amount of outstanding Revolving Loans shall not
exceed the Revolving Committed Amount and; provided, further, (i) with
regard to each Lender individually, such Lender's share of outstanding
Loans shall not exceed such Lender's Revolving Commitment Percentage of
the Revolving Committed Amount, (ii) with regard to the Lenders
collectively, the aggregate principal amount of outstanding Obligations
shall not exceed TWO HUNDRED FIFTY MILLION DOLLARS ($250,000,000) (as
such aggregate maximum amount may be reduced from time to time as
provided in Section 3.4, the "Revolving Committed Amount") and (iii)
with regard to the Lenders collectively, the aggregate principal amount
of the Obligations shall not exceed the Revolving Committed Amount.
Revolving Loans may consist of Base Rate Loans or Eurodollar Loans, or
a combination thereof, as the Borrowers may request, and may be repaid
and reborrowed in accordance with the provisions hereof; provided,
however, that no more than six
<PAGE>
Eurodollar Loans shall be outstanding hereunder at any time. For
purposes hereof, Eurodollar Loans with different Interest Periods shall
be considered as separate Eurodollar Loans, even if they begin on the
same date and have the same duration, although borrowings, extensions
and conversions may, in accordance with the provisions hereof, be
combined at the end of existing Interest Periods to constitute a new
Eurodollar Loan with a single Interest Period. Revolving Loans
hereunder may be repaid and reborrowed in accordance with the
provisions hereof.
(b) Revolving Loan Borrowings.
(i) Notice of Borrowing. The Borrowers shall
request a Revolving Loan borrowing by written notice (or
telephone notice promptly confirmed in writing) to the
Administrative Agent not later than 11:00 A.M. (Charlotte,
North Carolina time) on the Business Day prior to the date of
the requested borrowing in the case of Base Rate Loans, and on
the third Business Day prior to the date of the requested
borrowing in the case of Eurodollar Loans. Each such request
for borrowing shall be irrevocable and shall specify (A) that
a Revolving Loan is requested, (B) the date of the requested
borrowing (which shall be a Business Day), (C) the aggregate
principal amount to be borrowed and (D) whether the borrowing
shall be comprised of Base Rate Loans, Eurodollar Loans or a
combination thereof, and if Eurodollar Loans are requested,
the Interest Period(s) therefor. If any such Notice of
Borrowing shall fail to specify (I) an applicable Interest
Period in the case of a Eurodollar Loan, then such notice
shall be deemed to be a request for an Interest Period of one
month, or (II) the type of Revolving Loan requested, then such
notice shall be deemed to be a request for a Base Rate Loan
hereunder. The Administrative Agent shall give notice to each
Lender before 5:00 p.m. (Charlotte, North Carolina time) on
the day of receipt of each Notice of Borrowing specifying the
contents thereof and each such Lender's share of any borrowing
to be made pursuant thereto.
(ii) Minimum Amounts. Each Revolving Loan
borrowing shall be in a minimum aggregate amount of $1,000,000
and integral multiples of $100,000 in excess thereof (or the
remaining amount of the Commitment, if less).
(iii) Advances. Each Lender will make its
Commitment Percentage of each Revolving Loan borrowing
available to the Administrative Agent for the account of the
Borrowers at the office of the Administrative Agent specified
in Schedule 2.1(a), or at such other office as the
Administrative Agent may designate in writing, by 12:00 P.M.
(Charlotte, North Carolina time) on the date specified in the
applicable Notice of Borrowing in Dollars and in funds
immediately available to the Administrative Agent. Such
borrowing will then be made available to the Borrowers by the
Administrative Agent by crediting the account of the
<PAGE>
Borrowers on the books of such office with the aggregate of
the amounts made available to the Administrative Agent by the
Lenders and in like funds as received by the Administrative
Agent.
(c) Repayment. The principal amount of all Revolving Loans
shall be due and payable in full on the Termination Date.
(d) Interest. Subject to the provisions of Section 3.1,
Revolving Loans shall bear interest as follows:
(i) Base Rate Loans. During such periods as
Revolving Loans shall be comprised of Base Rate Loans, the sum
of the Base Rate plus the Applicable Percentage;
(ii) Eurodollar Loans. During such periods
as Revolving Loans shall be comprised of Eurodollar Loans, the
Eurodollar Rate plus the Applicable Percentage.
Interest on Revolving Loans shall be payable in arrears on each
Interest Payment Date.
(e) Revolving Notes. The Revolving Loans made by each Lender
shall be evidenced by a duly executed promissory note of the Borrowers
to each Lender in substantially the form of Schedule 2.1(e).
2.2 Letter of Credit Subfacility.
(a) Issuance. Subject to the terms and conditions hereof and
of the LOC Documents, if any, the Issuing Lender agrees from time to
time to issue such Letters of Credit from the Closing Date until the
Termination Date as the Borrowers may request for their own account or
for the account of another Credit Party as provided herein, and the
Issuing Lender shall issue such Letters of Credit in a form acceptable
to the Issuing Lender; provided, however, that (i) the LOC Obligations
shall not at any time exceed TEN MILLION DOLLARS ($10,000,000) (the
"LOC Committed Amount") and (ii) the sum of the aggregate principal
amount of the Obligations shall not at any time exceed the aggregate
Committed Amount. No Letter of Credit shall (x) have an original expiry
date more than two years from the date of issuance; provided, however,
so long as no Event of Default has occurred and is continuing and
subject to the other terms and conditions to the issuance of Letters of
Credit, such Letters of Credit may provide that the expiry dates of
Letters of Credit shall be extended annually on each anniversary date
of their date of issuance for an additional period not to exceed one
year unless the Administrative Agent has given not less than sixty (60)
days prior notice of its intent not to renew or (y) as originally
issued or as extended, have an expiry date extending beyond the
Termination Date. Each Letter of Credit shall comply with the related
LOC Documents. The issuance and expiry
<PAGE>
date of each Letter of Credit shall be a Business Day.
(b) Notice and Reports. The request for the issuance of a
Letter of Credit shall be submitted by the Borrowers to the Issuing
Lender at least three (3) Business Days prior to the requested date of
issuance. The Issuing Lender will, at least quarterly and more
frequently upon reasonable request, disseminate to each of the Lenders
a detailed report specifying the Letters of Credit which are then
issued and outstanding and any activity with respect thereto which may
have occurred since the date of the prior report, and including
therein, among other things, the beneficiary, the face amount, expiry
date as well as any payment or expirations which may have occurred.
(c) Participation. Each Lender, upon issuance of a Letter of
Credit in accordance with the terms hereof, shall be deemed to have
purchased without recourse a participation from the applicable Issuing
Lender in such Letter of Credit and the obligations arising thereunder
and the related LOC Documents in each case in an amount equal to its
pro rata share of the obligations under such Letter of Credit (based on
the respective Commitment Percentages of the Lenders) and shall
absolutely, unconditionally and irrevocably be obligated to pay to the
Issuing Lender its pro rata share (based upon the Revolving Commitment
Percentage of such Lender) of any unreimbursed drawing under such
Letter of Credit. Without limiting the scope and nature of each
Lender's participation in any Letter of Credit, to the extent that the
Issuing Lender has not been reimbursed for any drawing as required
hereunder or under any such Letter of Credit, each such Lender shall
pay to the Issuing Lender its pro rata share of such unreimbursed
drawing in same day funds pursuant to the provisions of subsection (d)
hereof. The obligation of each Lender to so reimburse the Issuing
Lender shall be absolute and unconditional and shall not be affected by
the occurrence of a Default, an Event of Default or any other
occurrence or event. Any such reimbursement shall not relieve or
otherwise impair the obligation of the Borrowers to reimburse the
Issuing Lender under any Letter of Credit, together with interest as
hereinafter provided.
(d) Reimbursement. In the event of any drawing under any
Letter of Credit, the Issuing Lender will promptly notify the
Borrowers. Unless the Borrowers shall immediately notify the Issuing
Lender that the Borrowers intend to otherwise reimburse the Issuing
Lender for such drawing, the Borrowers shall be deemed to have
requested that the Lenders make a Revolving Loan in the amount of the
drawing as provided in subsection (e) hereof on the related Letter of
Credit, the proceeds of which will be used to satisfy the related
reimbursement obligations. The Borrowers promise to reimburse the
Issuing Lender on the day of drawing under any Letter of Credit (either
with the proceeds of a Revolving Loan obtained hereunder or otherwise)
in same day funds. If the Borrowers shall fail to reimburse the Issuing
Lender as provided hereinabove, the unreimbursed amount of such drawing
shall bear interest at a per annum rate equal to the Base Rate plus the
sum of (i) the Applicable Percentage for Base Rate Loans in effect from
time to time and (ii) two
<PAGE>
percent (2%). The Borrowers' reimbursement obligations hereunder shall
be absolute and unconditional under all circumstances irrespective of
any rights of setoff, counterclaim or defense to payment the Borrowers
may claim or have against the Issuing Lender, the Administrative Agent,
the Lenders, the beneficiary of the Letter of Credit drawn upon or any
other Person, including without limitation any defense based on any
failure of the Borrowers or any other Credit Party to receive
consideration or the legality, validity, regularity or unenforceability
of the Letter of Credit; provided, however, that the Borrowers are not
deemed to have waived such rights by payment. The Issuing Lender will
promptly notify the other Lenders of the amount of any unreimbursed
drawing and each Lender shall promptly pay to the Administrative Agent
for the account of the Issuing Lender, in dollars and in immediately
available funds, the amount of such Lender's pro rata share (based upon
the Revolving Commitment Percentage of such Lender) of such
unreimbursed drawing. Such payment shall be made on the day such notice
is received by such Lender from the Issuing Lender if such notice is
received at or before 2:00 P.M. (Charlotte, North Carolina time), and
otherwise such payment shall be made at or before 12:00 Noon
(Charlotte, North Carolina time) on the Business Day next succeeding
the day such notice is received. If such Lender does not pay such
amount to the Issuing Lender in full upon such request, such Lender
shall, on demand, pay to the Administrative Agent for the account of
the Issuing Lender interest on the unpaid amount during the period from
the date such payment was due until such Lender pays such amount to the
Issuing Lender in full at a rate per annum equal to, if paid within two
(2) Business Days of the date of drawing, the Federal Funds Rate and
thereafter at a rate equal to the Base Rate. Each Lender's obligation
to make such payment to the Issuing Lender, and the right of the
Issuing Lender to receive the same, shall be absolute and
unconditional, shall not be affected by any circumstance whatsoever and
without regard to the termination of this Credit Agreement or the
Commitments hereunder, the existence of a Default or Event of Default
or the acceleration of the obligations of the Borrowers hereunder and
shall be made without any offset, abatement, withholding or reduction
whatsoever. Simultaneously with the making of each such payment by a
Lender to the Issuing Lender, such Lender shall, automatically and
without any further action on the part of the Issuing Lender or such
Lender, acquire a participation in an amount equal to such payment
(excluding the portion of such payment constituting interest owing to
the Issuing Lender) in the related unreimbursed drawing portion of the
LOC Obligation and in the interest thereon and in the related LOC
Documents.
(e) Repayment with Revolving Loans. On any day on which the
Borrowers shall have requested, or been deemed to have requested, a
Revolving Loan advance to reimburse a drawing under a Letter of Credit,
the Administrative Agent shall give notice to the Lenders that a
Revolving Loan advance has been requested or deemed requested by the
Borrowers to be made in connection with a drawing under a Letter of
Credit, in which case a Revolving Loan comprised solely of Base Rate
Loans shall be immediately made to the Borrower by all Lenders
(notwithstanding any termination of the Commitments pursuant to Section
9.2) pro
<PAGE>
rata based on the respective Revolving Commitment Percentages of the
Lenders (determined before giving effect to any termination of the
Commitments pursuant to Section 9.2) and the proceeds thereof shall be
paid directly to the Issuing Lender for application to the respective
LOC Obligations. Each such Lender hereby irrevocably agrees to make its
pro rata share of each such Revolving Loan immediately upon any such
request or deemed request in the amount, in the manner and on the date
specified in the preceding sentence notwithstanding (i) the amount of
such borrowing may not comply with the minimum amount for advances of
Revolving Loans otherwise required hereunder, (ii) whether any
conditions specified in Section 5.2 are then satisfied, (iii) whether a
Default or an Event of Default then exists, (iv) failure for any such
request or deemed request for Revolving Loan to be made by the time
otherwise required hereunder, (v) whether the date of such borrowing is
a date on which Revolving Loans are otherwise permitted to be made
hereunder or (vi) any termination of the Commitments relating thereto
immediately prior to or contemporaneously with such borrowing;
provided, however, in no event shall a Lender be required to make an
advance in excess of such Lender's Committed Amount. In the event that
any Revolving Loan cannot for any reason be made on the date otherwise
required above (including, without limitation, as a result of the
commencement of a proceeding under the Bankruptcy Code with respect to
either of the Borrowers or any other Credit Party), then each such
Lender hereby agrees that it shall, upon written notice of the
unavailability of Revolving Loans and request for participation,
purchase (as of the date such borrowing would otherwise have occurred,
but adjusted for any payments received from the Borrowers on or after
such date and prior to such purchase) from the Issuing Lender such
participation in the outstanding LOC Obligations as shall be necessary
to cause each such Lender to share in such LOC Obligations ratably
(based upon the respective Revolving Commitment Percentages of the
Lenders (determined before giving effect to any termination of the
Commitments pursuant to Section 9.2)), provided that at the time any
purchase of participation pursuant to this sentence is actually made,
the purchasing Lender shall be required to pay to the Issuing Lender,
to the extent not paid to the Issuing Lender by the Borrowers in
accordance with the terms of subsection (d) hereof, interest on the
amount of its unfunded Participation Interest purchased for each day
from and including the day upon which such purchase should otherwise
have occurred to but excluding the date of payment for such
participation, at the rate equal to, if paid within two (2) Business
Days of the date of the Revolving Loan advance, the Federal Funds Rate,
and thereafter at a rate equal to the Base Rate.
(f) Designation of other Credit Parties as Account Parties.
Notwithstanding anything to the contrary set forth in this Credit
Agreement, including without limitation Section 2.2(a) hereof, a Letter
of Credit issued hereunder may contain a statement to the effect that
such Letter of Credit is issued for the account of a Credit Party,
provided that notwithstanding such statement, the Borrowers shall be
the actual account party for all purposes of this Credit Agreement for
such Letter of Credit and such statement shall not affect the
Borrowers' reimbursement obligations hereunder with respect to such
Letter of Credit.
<PAGE>
(g) Renewal, Extension. The renewal or extension of any Letter
of Credit shall, for purposes hereof, be treated in all respects the
same as the issuance of a new Letter of Credit hereunder.
(h) Uniform Customs and Practices. The Issuing Lender may have
the Letters of Credit be subject to The Uniform Customs and Practice
for Documentary Credits, as published as of the date of issue by the
International Chamber of Commerce (the "UCP"), in which case the UCP
may be incorporated therein and deemed in all respects to be a part
thereof.
(i) Indemnification; Nature of Issuing Lender's Duties.
(i) In addition to its other obligations
under this Section 2.2, the Borrowers hereby agree to protect,
indemnify, pay and save the Issuing Lender harmless from and
against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including reasonable
attorneys' fees) that the Issuing Lender may incur or be
subject to as a consequence, direct or indirect, of (A) the
issuance of any Letter of Credit or (B) the failure of the
Issuing Lender to honor a drawing under a Letter of Credit as
a result of any act or omission, whether rightful or wrongful,
of any present or future de jure or de facto government or
Governmental Authority (all such acts or omissions being
herein called "Government Acts").
(ii) As among the Borrowers and the Issuing
Lender, the Borrowers shall assume all risks of the acts,
omissions or misuse of any Letter of Credit by the beneficiary
thereof. The Issuing Lender shall not be responsible: (A) for
the form, validity, sufficiency, accuracy, genuineness or
legal effect of any document submitted by any party in
connection with the application for and issuance of any Letter
of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or
forged; (B) for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign
any Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, that may prove to be
invalid or ineffective for any reason; (C) for errors,
omissions, interruptions or delays in transmission or delivery
of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not they be in cipher; (D) for any loss
or delay in the transmission or otherwise of any document
required in order to make a drawing under a Letter of Credit
or of the proceeds thereof; and (E) for any consequences
arising from causes beyond the control of the Issuing Lender,
including, without limitation, any Government Acts. None of
the above shall affect, impair, or prevent the vesting of the
Issuing Lender's rights or powers hereunder.
(iii) In furtherance and extension and not
in limitation of
<PAGE>
the specific provisions hereinabove set forth, any action
taken or omitted by the Issuing Lender, under or in connection
with any Letter of Credit or the related certificates, if
taken or omitted in good faith, shall not put such Issuing
Lender under any resulting liability to the Borrowers or any
other Credit Party. It is the intention of the parties that
this Credit Agreement shall be construed and applied to
protect and indemnify the Issuing Lender against any and all
risks involved in the issuance of the Letters of Credit, all
of which risks are hereby assumed by the Borrowers (on behalf
of themselves and each of the other Credit Parties),
including, without limitation, any and all Government Acts.
The Issuing Lender shall not, in any way, be liable for any
failure by the Issuing Lender or anyone else to pay any
drawing under any Letter of Credit as a result of any
Government Acts or any other cause beyond the control of the
Issuing Lender.
(iv) Nothing in this subsection (i) is
intended to limit the reimbursement obligations of the
Borrowers contained in subsection (d) above. The obligations
of the Borrowers under this subsection (i) shall survive the
termination of this Credit Agreement. No act or omissions of
any current or prior beneficiary of a Letter of Credit shall
in any way affect or impair the rights of the Issuing Lender
to enforce any right, power or benefit under this Credit
Agreement.
(v) Notwithstanding anything to the contrary
contained in this subsection (i), the Borrowers shall have no
obligation to indemnify the Issuing Lender in respect of any
liability incurred by the Issuing Lender (A) arising solely
out of the gross negligence or willful misconduct of the
Issuing Lender, as determined by a court of competent
jurisdiction, or (B) caused by the Issuing Lender's failure to
pay under any Letter of Credit after presentation to it of a
request strictly complying with the terms and conditions of
such Letter of Credit, as determined by a court of competent
jurisdiction, except insofar as such payment is prohibited by
any law, regulation, court order or decree.
(j) Responsibility of Issuing Lender. It is expressly
understood and agreed that the obligations of the Issuing Lender
hereunder to the Lenders are only those expressly set forth in this
Credit Agreement and that the Issuing Lender shall be entitled to
assume that the conditions precedent set forth in Section 5.2 have been
satisfied unless it shall have acquired actual knowledge that any such
condition precedent has not been satisfied; provided, however, that
nothing set forth in this Section 2.2 shall be deemed to prejudice the
right of any Lender to recover from the Issuing Lender any amounts made
available by such Lender to the Issuing Lender pursuant to this Section
2.2 in the event that it is determined by a court of competent
jurisdiction that (A) the payment with respect to a Letter of Credit
constituted gross negligence or willful misconduct on the part of the
Issuing Lender, or (B) the Issuing Lender failed to pay under any
Letter of Credit after presentation to it of a request
<PAGE>
strictly complying with the terms of such Letter of Credit, except
insofar as such payment is prohibited by any law, regulation, court
order or decree.
(k) Conflict with LOC Documents. In the event of any conflict
between this Credit Agreement and any LOC Document, this Credit
Agreement shall control.
2.3 Swingline Loan Subfacility.
(a) Swingline Commitment. Subject to the terms and conditions
set forth herein, the Swingline Lender, in its individual capacity,
agrees to make certain revolving credit loans to the Borrowers (each a
"Swingline Loan" and, collectively, the "Swingline Loans") at any time
and from time to time, during the period from the Closing Date until
the Termination Date for the purposes hereinafter set forth; provided,
however, (i) the aggregate amount of Swingline Loans outstanding at any
time shall not exceed TEN MILLION DOLLARS ($10,000,000) (the "Swingline
Committed Amount"), and (ii) the sum of the aggregate principal amount
of Obligations outstanding at any time shall not exceed the Revolving
Committed Amount. Swingline Loans hereunder shall be made as Base Rate
Loans in accordance with the provisions of this Section 2.3, and may be
repaid and reborrowed in accordance with the provisions hereof.
(b) Swingline Loan Advances.
(i) Notices; Disbursement. The Borrowers
shall request a Swingline Loan advance hereunder by written
notice (or telephone notice promptly confirmed in writing) to
the Swingline Lender not later than 11:00 A.M. (Charlotte,
North Carolina time) on the Business Day of the requested
Swingline Loan advance. Each such notice shall be irrevocable
and shall specify (A) that a Swingline Loan advance is
requested, (B) the date of the requested Swingline Loan
advance (which shall be a Business Day), (C) the principal
amount of the Swingline Loan advance requested and (D) that
all of the conditions set forth in Section 5.2 are then
satisfied. Each Swingline Loan shall be made as a Base Rate
Loan and shall have such maturity date as the Swingline Lender
and the Borrowers shall agree upon receipt by the Swingline
Lender of any such notice from the Borrowers. The Swingline
Lender shall initiate the transfer of funds representing the
Swingline Loan advance to the Borrowers by 3:00 P.M.
(Charlotte, North Carolina time) on the Business Day of the
requested borrowing.
(ii) Minimum Amounts. Each Swingline Loan
advance shall be in a minimum principal amount of $500,000 and
in integral multiples of $100,000 in excess thereof.
(iii) Repayment of Swingline Loans. The
principal amount of all Swingline Loans shall be due and
payable on the earlier of (A)
<PAGE>
the end of the applicable Interest Period or (B) the
Termination Date. The Swingline Lender may, at any time, in
its sole discretion, by written notice to the Borrowers,
demand repayment of their Swingline Loans by way of a
Revolving Loan advance, in which case the Borrowers shall be
deemed to have requested a Revolving Loan advance comprised
solely of Base Rate Loans in the amount of such Swingline
Loans; provided, however, that any such demand shall be deemed
to have been given one Business Day prior to the Termination
Date and on the date of the occurrence of any Event of Default
described in Section 9.1 and upon acceleration of the
Indebtedness hereunder and the exercise of remedies in
accordance with the provisions of Section 9.2. Each Lender, if
so directed by the Administrative Agent in writing, hereby
irrevocably agrees to make its pro rata share of each such
Revolving Loan in the amount, in the manner and on the date
specified in the preceding sentence notwithstanding (I) the
amount of such borrowing may not comply with the minimum
amount for advances of Revolving Loans otherwise required
hereunder, (II) whether any conditions specified in Section
5.2 are then satisfied, (III) whether a Default or an Event of
Default then exists, (IV) failure of any such request or
deemed request for Revolving Loan to be made by the time
otherwise required hereunder, (V) whether the date of such
borrowing is a date on which Revolving Loans are otherwise
permitted to be made hereunder or (VI) any termination of the
Commitments relating thereto immediately prior to or
contemporaneously with or after such borrowing. In the event
that any Revolving Loan cannot for any reason be made on the
date otherwise required above (including, without limitation,
as a result of the commencement of a proceeding under the
Bankruptcy Code with respect to the Borrower or any other
Credit Party), then each Lender hereby agrees that it shall
upon written notice of the unavailability of a Revolving Loan
and request for participation purchase (as of the date such
borrowing would otherwise have occurred, but adjusted for any
payments received from the Borrower on or after such date and
prior to such purchase) from the Swingline Lender such
Participation Interests in the outstanding Swingline Loans as
shall be necessary to cause each such Lender to share in such
Swingline Loans ratably based upon its Revolving Commitment
Percentage (determined before giving effect to any termination
of the Commitments pursuant to Section 3.4), provided that all
interest payable on the Swingline Loans shall be for the
account of the Swingline Lender until the date as of which the
respective Participation Interests are purchased.
(c) Interest on Swingline Loans. Subject to the provisions of
Section 3.1, each Swingline Loan shall bear interest at per annum rate
equal to the Base Rate. Interest on Swingline Loans shall be payable in
arrears on each applicable Interest Payment Date (or at such other
times as may be specified herein).
SECTION 3
<PAGE>
OTHER PROVISIONS RELATING TO CREDIT FACILITIES
----------------------------------------------
3.1 Default Rate.
Upon the occurrence, and during the continuance, of an Event of
Default, the principal of and, to the extent permitted by law, interest on the
Loans and any other amounts owing hereunder or under the other Credit Documents
shall bear interest, payable on demand, at a per annum rate 2% greater than the
rate which would otherwise be applicable (or if no rate is applicable, whether
in respect of interest, fees or other amounts, then 2% greater than the Base
Rate).
3.2 Extension and Conversion.
The Borrowers shall have the option on any Business Day, to extend
existing Loans into a subsequent permissible Interest Period or to convert Loans
into Loans of another type; provided, however, that (i) except as provided in
Section 3.8, Eurodollar Loans may be converted into Base Rate Loans only on the
last day of the Interest Period applicable thereto, (ii) Eurodollar Loans may be
extended, and Base Rate Loans may be converted into Eurodollar Loans, only if no
Default or Event of Default is in existence on the date of extension or
conversion, (iii) Loans extended as, or converted into, Eurodollar Loans shall
be subject to the terms of the definition of "Interest Period" set forth in
Section 1.1 and shall be in such minimum amounts as provided in, Section
2.1(b)(ii), (iv) no more than six separate Eurodollar Loans shall be outstanding
hereunder at any time and (v) any request for extension or conversion of a
Eurodollar Loan which shall fail to specify an Interest Period shall be deemed
to be a request for an Interest Period of one month. Each such extension or
conversion shall be effected by the Borrowers by giving a Notice of
Extension/Conversion (or telephone notice promptly confirmed in writing) to the
Administrative Agent prior to 11:00 A.M. (Charlotte, North Carolina time) on the
Business Day of, in the case of the conversion of a Eurodollar Loan into a Base
Rate Loan and on the third Business Day prior to, in the case of the extension
of a Eurodollar Loan as, or conversion of a Base Rate Loan into, a Eurodollar
Loan, the date of the proposed extension or conversion, specifying the date of
the proposed extension or conversion, the Loans to be so extended or converted,
the types of Loans into which such Loans are to be converted and, if
appropriate, the applicable Interest Periods with respect thereto. Each request
for extension or conversion shall constitute a representation and warranty by
the Borrowers of the matters specified in subsections (ii), (iii), (iv) and (v)
of Section 5.2(a). In the event the Borrowers fail to request extension or
conversion of any Eurodollar Loan in accordance with this Section, or any such
conversion or extension is not permitted or required by this Section, then such
Loan shall be automatically converted into a Base Rate Loan at the end of the
Interest Period applicable thereto. The Administrative Agent shall give each
Lender notice as promptly as practicable of any such proposed extension or
conversion affecting any Loan.
3.3 Prepayments.
(a) Voluntary Prepayments. The Borrowers shall have the right
to prepay
<PAGE>
Revolving Loans in whole or in part from time to time without premium
or penalty; provided, however, that (i) Eurodollar Loans may only be
prepaid on three Business Days' prior written notice to the
Administrative Agent specifying the applicable Loans to be prepaid,
(ii) any prepayment of Eurodollar Loans will be subject to Section
3.11; and (iii) each such partial prepayment of Revolving Loans shall
be in a minimum principal amount of $1,000,000 and integral multiples
of $100,000 in excess thereof. Subject to the foregoing terms, amounts
prepaid hereunder shall be applied as the Borrowers may elect;
provided, that if the Borrowers fail to specify a voluntary prepayment
then such prepayment shall be applied first to Base Rate Loans and then
to Eurodollar Loans in direct order of Interest Period maturities.
Voluntary prepayments on the Revolving Loans may be reborrowed in
accordance with the provisions hereof. Such voluntary prepayments shall
not reduce the Revolving Committed Amount.
(b) Mandatory Prepayments.
(i) Overadvance. If at any time (i) the
aggregate principal amount of the Obligations exceeds the
Revolving Committed Amount, (ii) the aggregate amount of LOC
Obligations shall exceed the aggregate LOC Committed Amount,
or (iii) the aggregate amount of Swingline Loans shall exceed
the Swingline Committed Amount, the Borrowers jointly and
severally promise to prepay immediately upon demand the
outstanding principal balance on the Loans or provide cash
collateral in the manner and in an aggregate amount necessary
to eliminate such excess in respect of the LOC Obligations. In
the case of a mandatory prepayment required on account of
subsection (ii) in the foregoing sentence, the amount required
to be paid shall serve to temporarily reduce the Revolving
Committed Amount (for purposes of borrowing availability
hereunder, but not for purposes of computation of fees) by the
amount of the payment required until such time as the
situation shall no longer exist. Payments hereunder shall be
applied first to the Revolving Loans and Swingline Loans and
then to a cash collateral account in respect of the LOC
Obligations.
(ii) Application. All prepayments made
pursuant to this Section 3.3(b) shall be subject to Section
3.11 and shall be applied first to Swingline Loans, then to
Base Rate Loans and then to Eurodollars Loans in direct order
of Interest Period maturities. Prepayments under this Section
3.3(b)(ii) shall permanently reduce the Revolving Committed
Amount.
(c) Notice. The Borrowers will provide notice to the
Administrative Agent of any prepayment by 11:00 A.M. (Charlotte, North
Carolina time) on the date of prepayment. Amounts paid on the Loans
under subsection (a) and (b)(i) hereof may be reborrowed in accordance
with the provisions hereof.
3.4 Termination and Reduction of Revolving Commitments.
<PAGE>
The Borrowers may from time to time permanently reduce or
terminate the aggregate Revolving Committed Amount in whole or in part
(in minimum aggregate amounts of $10,000,000 (or, if less, the full
remaining amount of the Revolving Committed Amount)) upon five Business
Days' prior written notice from the Borrowers to the Administrative
Agent; provided, however, no such termination or reduction shall be
made which would reduce the Revolving Committed Amount to an amount
less than the aggregate principal amount of Revolving Loans
outstanding. The Commitments of the Lenders shall automatically
terminate on the Termination Date. The Administrative Agent shall
promptly notify each of the Lenders of receipt by the Administrative
Agent of any notice from the Borrowers pursuant to this Section 3.4.
3.5 Fees.
(a) Commitment Fee. In consideration of the Revolving
Commitments hereunder, the Borrowers agree to pay the Administrative
Agent for the ratable benefit of the Lenders a commitment fee (the
"Commitment Fee") equal to the Applicable Percentage per annum on the
average daily unused amount of the Revolving Committed Amount for the
applicable period. For the purposes hereof Swingline Loans shall not be
considered usage under the Revolving Commitments. The Commitment Fee
shall be payable (i) quarterly in arrears on the Interest Payment Date
following the last day of each calendar quarter for the immediately
preceding quarter (or portion thereof) beginning with the first such
date to occur after the Closing Date and (ii) on the Termination Date.
(b) Letter of Credit Fees.
(i) Standby Letter of Credit Issuance Fee.
In consideration of the issuance of standby Letters of Credit
hereunder, the Borrowers jointly and severally promise to pay
to the Administrative Agent for the ratable benefit of the
Lenders a fee (the "Standby Letter of Credit Fee") on the
average daily maximum amount available to be drawn under each
such standby Letter of Credit computed at a per annum rate for
each day from the date of issuance to the date of expiration
equal to the Applicable Percentage for Standby Letter of
Credit Fee. The Standby Letter of Credit Fee will be payable
quarterly in arrears on the 15th day of each January, April,
July and October for the immediately preceding fiscal quarter
(or a portion thereof).
(ii) Trade Letter of Credit Drawing Fee. In
consideration of the issuance of trade Letters of Credit
hereunder, the Borrowers jointly and severally promise to pay
to the Administrative Agent for the ratable benefit of the
Lenders a fee (the "Trade Letter of Credit Fee") equal to the
Applicable Percentage for trade Letter of Credit Fee on the
amount of each drawing under any such trade Letter of Credit.
The Trade Letter of Credit
<PAGE>
Fee will be payable on each date of drawing under a trade
Letter of Credit.
(iii) Issuing Lender Fees. In addition to
the Standby Letter of Credit Fee payable pursuant to clause
(i) above and the Trade Letter of Credit Fee payable pursuant
to clause (ii) above, the Borrowers jointly and severally
promise to pay, to the Issuing Lender for its own account
without sharing by the other Lenders the letter of credit
fronting and negotiation fees agreed to by the Borrowers and
the Issuing Lender from time to time and the customary charges
from time to time of the Issuing Lender with respect to the
issuance, amendment, transfer, administration, cancellation
and conversion of, and drawings under, such Letters of Credit
(collectively, the "Issuing Lender Fees").
(c) Administrative Fees. The Borrowers jointly and severally
promise to pay to the Administrative Agent, for its own account and for
the account of NationsBanc Capital Markets, Inc., as applicable, the
annual administrative fee, structuring fee and other fees referred to
in the Administrative Agent's Fee Letter (collectively, the "Agent's
Fees").
(d) Upfront Fees. The Borrowers jointly and severally promise
to pay to the Administrative Agent for the benefit of the Lenders in
immediately available funds on or before the Closing Date an upfront
fee (the "Upfront Fee") as outlined in the letter from the
Administrative Agent to the Lenders dated April 21, 1999.
3.6 Capital Adequacy.
If, after the date hereof, any Lender has determined that the adoption
or the becoming effective of after the Closing Date, or any change in after the
Closing Date, or any change after the Closing Date by any Governmental
Authority, central bank or comparable agency charged with the interpretation or
administration thereof in the interpretation or administration of, any
applicable law, rule or regulation regarding capital adequacy, or compliance by
such Lender with any request or directive after the Closing Date regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on such Lender's capital or assets as a consequence of its
commitments or obligations hereunder to a level below that which such Lender
could have achieved but for such adoption, effectiveness, change or compliance
(taking into consideration such Lender's policies with respect to capital
adequacy), then, upon 10 days' notice, including calculations of the amount due,
from such Lender to the Borrowers, the Borrowers shall be jointly and severally
obligated to pay to such Lender such additional amount or amounts as will
compensate such Lender for such reduction. Each determination by any such Lender
of amounts owing under this Section shall, absent manifest error, be conclusive
and binding on the parties hereto.
3.7 Inability To Determine Interest Rate.
<PAGE>
If prior to the first day of any Interest Period, the Administrative
Agent shall have determined (which determination shall be conclusive and binding
upon the Borrowers) that, by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate for such Interest Period, the Administrative Agent shall give
telecopy or telephonic notice thereof to the Borrowers and the Lenders as soon
as practicable thereafter. If such notice is given (x) any Eurodollar Loans
requested to be made on the first day of such Interest Period shall be made as
Base Rate Loans and (y) any Loans that were to have been converted on the first
day of such Interest Period to or continued as Eurodollar Loans shall be
converted to or continued as Base Rate Loans. Until such notice has been
withdrawn by the Administrative Agent, no further Eurodollar Loans shall be made
or continued as such, nor shall the Borrower have the right to convert Base Rate
Loans to Eurodollar Loans.
3.8 Illegality.
Notwithstanding any other provision herein, if the adoption of or any
change in any Requirement of Law or in the interpretation or application thereof
occurring after the Closing Date shall make it unlawful for any Lender to make
or maintain Eurodollar Loans as contemplated by this Credit Agreement, (a) such
Lender shall promptly give written notice of such circumstances to the Borrowers
and the Administrative Agent (which notice shall be withdrawn whenever such
circumstances no longer exist), (b) the commitment of such Lender hereunder to
make Eurodollar Loans, continue Eurodollar Loans as such and convert Base Rate
Loans to Eurodollar Loans shall forthwith be canceled and, until such time as it
shall no longer be unlawful for such Lender to make or maintain Eurodollar
Loans, such Lender shall then have a commitment only to make a Base Rate Loan
when a Eurodollar Loan is requested and (c) such Lender's Loans then outstanding
as Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans
on the respective last days or the then current Interest Periods with respect to
such Loans or within such earlier period as required by law. If any such
conversion of a Eurodollar Loan occurs on a day which is not the last day of the
then current Interest Period with respect thereto, the Borrowers shall jointly
and severally pay to such Lender such amounts, if any, as may be required
pursuant to Section 3.11.
3.9 Requirements of Law.
If the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof applicable to any Lender, or compliance by
any Lender with any request or directive (whether or not having the force of
law) from any central bank or other Governmental Authority, in each case made
subsequent to the Closing Date (or, if later, the date on which such Lender
becomes a Lender):
(a) shall subject such Lender to any tax of any kind
whatsoever with respect to any Letter of Credit or any Eurodollar Loans
made by it or its obligation to make Eurodollar Loans, or change the
basis of taxation of payments to such Lender in respect thereof (except
for Non-Excluded Taxes covered by Section 3.10
<PAGE>
(including Non-Excluded Taxes imposed solely by reason of any failure
of such Lender to comply with its obligations under Section 3.10(b))
and changes in taxes measured by or imposed upon the overall net
income, or franchise tax (imposed in lieu of such net income tax), of
such Lender or its applicable lending office, branch, or any affiliate
thereof); or
(b) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Eurodollar Rate
hereunder; or
(c) shall impose on such Lender any other condition (excluding
any tax of any kind whatsoever); and the result of any of the foregoing
is to increase the cost to such Lender, by an amount which such Lender
deems to be material, of making, converting into, continuing or
maintaining Eurodollar Loans or to reduce any amount receivable
hereunder in respect thereof;
then, in any such case, upon notice to the Borrowers from such
Lender, through the Administrative Agent, in accordance herewith, the
Borrowers shall be jointly and severally obligated to pay promptly to
such Lender, upon its demand, any additional amounts necessary to
compensate such Lender for such increased cost or reduced amount
receivable, provided that, in any such case, the Borrowers may elect to
convert the Eurodollar Loans made by such Lender hereunder to Base Rate
Loans by giving the Administrative Agent at least one Business Day's
notice of such election, in which case the Borrowers shall be jointly
and severally obligated to pay promptly to such Lender, upon demand,
without duplication, such amounts, if any, as may be required pursuant
to Section 3.11. If any Lender becomes entitled to claim any additional
amounts pursuant to this subsection, it shall provide prompt notice
thereof to the Borrowers through the Administrative Agent, certifying
(x) that one of the events described in this paragraph (a) has occurred
and describing in reasonable detail the nature of such event, (y) as to
the increased cost or reduced amount resulting from such event and (z)
as to the additional amount demanded by such Lender and a reasonably
detailed explanation of the calculation thereof. Such a certificate as
to any additional amounts payable pursuant to this subsection submitted
by such Lender, through the Administrative Agent, to the Borrowers
shall be conclusive and binding on the parties hereto in the absence of
manifest error. This covenant shall survive the termination of this
Credit Agreement and the payment of the Loans and all other amounts
payable hereunder.
3.10 Taxes.
(a) Except as provided below in this subsection, all payments
made by any Borrower under this Credit Agreement shall be made free and
clear of, and without deduction or withholding for or on account of,
any present or future income,
<PAGE>
stamp or other taxes, levies, imposts, duties, charges, fees,
deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any court, or governmental body,
agency or other official, excluding taxes measured by or imposed upon
the overall net income of any Lender or its applicable lending office,
or any branch or affiliate thereof, and all franchise taxes, branch
taxes, taxes on doing business or taxes on the overall capital or net
worth of any Lender or its applicable lending office, or any branch or
affiliate thereof, in each case imposed in lieu of net income taxes,
imposed: (i) by the jurisdiction under the laws of which such Lender,
applicable lending office, branch or affiliate is organized or is
located, or in which its principal executive office is located, or any
nation within which such jurisdiction is located or any political
subdivision thereof; or (ii) by reason of any connection between the
jurisdiction imposing such tax and such Lender, applicable lending
office, branch or affiliate other than a connection arising solely from
such Lender having executed, delivered or performed its obligations, or
received payment under or enforced, this Credit Agreement. If any such
non-excluded taxes, levies, imposts, duties, charges, fees, deductions
or withholdings ("Non-Excluded Taxes") are required to be withheld from
any amounts payable to the Administrative Agent or any Lender
hereunder, (A) the amounts so payable to the Administrative Agent or
such Lender shall be increased to the extent necessary to yield to the
Administrative Agent or such Lender (after payment of all Non-Excluded
Taxes) interest or any such other amounts payable hereunder at the
rates or in the amounts specified in this Credit Agreement, provided,
however, that a Borrower shall be entitled to deduct and withhold any
Non-Excluded Taxes and shall not be required to increase any such
amounts payable to any Lender that is not organized under the laws of
the United States of America or a state thereof if such Lender fails to
comply with the requirements of paragraph (b) of this subsection
whenever any Non-Excluded Taxes are payable by such Borrower, and (B)
as promptly as possible thereafter such Borrower shall send to the
Administrative Agent for its own account or for the account of such
Lender, as the case may be, a certified copy of an original official
receipt received by such Borrower showing payment thereof. If a
Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Administrative
Agent the required receipts or other required documentary evidence,
such Borrower shall indemnify the Administrative Agent and the Lenders
for any incremental taxes, interest or penalties that may become
payable by the Administrative Agent or any Lender as a result of any
such failure. The agreements in this subsection shall survive the
termination of this Credit Agreement and the payment of the Loans and
all other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of the
United States of America or a state thereof shall:
(X) (i) on or before the date of any
payment by the Borrowers under this Credit Agreement
to such Lender, deliver to the Borrowers and the
Administrative Agent (A) two (2) duly completed
copies of United States Internal Revenue Service Form
<PAGE>
1001 or 4224, or successor applicable form, as the
case may be, certifying that it is entitled to
receive payments under this Credit Agreement without
deduction or withholding of any United States federal
income taxes and (B) an Internal Revenue Service Form
W-8 or W-9, or successor applicable form, as the case
may be, certifying that it is entitled to an
exemption from United States backup withholding tax;
(ii) deliver to the Borrowers and the
Administrative Agent two (2) further copies of any
such form or certification on or before the date that
any such form or certification expires or becomes
obsolete and after the occurrence of any event
requiring a change in the most recent form previously
delivered by it to the Borrowers; and
(iii) obtain such extensions of time for
filing and complete such forms or certifications as
may reasonably be requested by the Borrowers or the
Administrative Agent; or
(Y) in the case of any such Lender that is
not a "bank" within the meaning of Section 881(c)(3)(A) of the
Code, (i) represent to the Borrowers (for the benefit of the
Borrowers and the Administrative Agent) that it is not a bank
within the meaning of Section 881(c)(3)(A) of the Code, (ii)
agree to furnish to the Borrowers on or before the date of any
payment by any Borrower, with a copy to the Administrative
Agent two (2) accurate and complete original signed copies of
Internal Revenue Service Form W-8, or successor applicable
form certifying to such Lender's legal entitlement at the date
of such certificate to an exemption from U.S. withholding tax
under the provisions of Section 881(c) of the Code with
respect to payments to be made under this Credit Agreement
(and to deliver to the Borrowers and the Administrative Agent
two (2) further copies of such form on or before the date it
expires or becomes obsolete and after the occurrence of any
event requiring a change in the most recently provided form
and, if necessary, obtain any extensions of time reasonably
requested by the Borrowers or the Administrative Agent for
filing and completing such forms), and (iii) agree, to the
extent legally entitled to do so, upon reasonable request by
the Borrowers, to provide to the Borrowers (for the benefit of
the Borrowers and the Administrative Agent) such other forms
as may be reasonably required in order to establish the legal
entitlement of such Lender to an exemption from withholding
with respect to payments under this Credit Agreement;
unless in any such case any change in treaty, law or regulation has
occurred after the date such Person becomes a Lender hereunder which
renders all such forms inapplicable or which would prevent such Lender
from duly completing and delivering any such form with respect to it
and such Lender so advises the Borrowers
<PAGE>
and the Administrative Agent. Each Person that shall become a Lender or
a participant of a Lender pursuant to subsection 11.3 shall, upon the
effectiveness of the related transfer, be required to provide all of
the forms, certifications and statements required pursuant to this
subsection, provided that in the case of a participant of a Lender the
obligations of such participant of a Lender pursuant to this subsection
(b) shall be determined as if the participant of a Lender were a Lender
except that such participant of a Lender shall furnish all such
required forms, certifications and statements to the Lender from which
the related participation shall have been purchased.
3.11 Indemnity.
The Borrowers jointly and severally promise to indemnify each Lender
and to hold each Lender harmless from any loss or expense which such Lender may
sustain or incur (other than through such Lender's gross negligence or willful
misconduct) as a consequence of (a) default by any Borrower in making a
borrowing of, conversion into or continuation of Eurodollar Loans after the
Borrowers have given a notice requesting the same in accordance with the
provisions of this Credit Agreement, (b) default by any Borrower in making any
prepayment of a Eurodollar Loan after the Borrowers have given a notice thereof
in accordance with the provisions of this Credit Agreement or (c) the making of
a prepayment of Eurodollar Loans on a day which is not the last day of an
Interest Period with respect thereto. Such indemnification may include an amount
equal to the excess, if any, of (i) the amount of interest which would have
accrued on the amount so prepaid, or not so borrowed, converted or continued,
for the period from the date of such prepayment or of such failure to borrow,
convert or continue to the last day of the applicable Interest Period (or, in
the case of a failure to borrow, convert or continue, the Interest Period that
would have commenced on the date of such failure) in each case at the applicable
rate of interest for such Eurodollar Loans provided for herein (excluding,
however, the Applicable Percentage included therein, if any) over (ii) the
amount of interest (as reasonably determined by such Lender and confirmed in
writing to the Borrower) which would have accrued to such Lender on such amount
by placing such amount on deposit for a comparable period with leading banks in
the interbank Eurodollar market. This covenant shall survive the termination of
this Credit Agreement and the payment of the Loans and all other amounts payable
hereunder.
3.12 Pro Rata Treatment.
Except to the extent otherwise provided herein:
(a) Loans. Each Loan, each payment or prepayment of principal
of any Loan (other than Swingline Loans) or reimbursement obligations
arising from drawings under Letters of Credit, each payment of interest
on the Loans or reimbursement obligations arising from drawings under
Letters of Credit, each payment of the Commitment Fee, each payment of
the Standby Letter of Credit Fee, each payment of the Trade Letter of
Credit Fee, each reduction of the Revolving Committed Amount and each
conversion or extension of any Loan (other than
<PAGE>
Swingline Loans), shall be allocated pro rata among the Lenders in
accordance with the respective principal amounts of their outstanding
Loans and Participation Interests.
(b) Advances. Unless the Administrative Agent shall have been
notified in writing by any Lender prior to a borrowing that such Lender
will not make the amount that would constitute its ratable share of
such borrowing available to the Administrative Agent, the
Administrative Agent may assume that such Lender is making such amount
available to the Administrative Agent, and the Administrative Agent
may, in reliance upon such assumption, make available to the applicable
Borrower a corresponding amount. If such amount is not made available
to the Administrative Agent by such Lender within the time period
specified therefor hereunder, such Lender shall pay to the
Administrative Agent, on demand, such amount with interest thereon at a
rate equal to the Federal Funds Rate for the period until such Lender
makes such amount immediately available to the Administrative Agent. A
certificate of the Administrative Agent submitted to any Lender with
respect to any amounts owing under this subsection shall be conclusive
in the absence of manifest error. If such amount is not made available
to the Administrative Agent by such Lender within two Business Days of
the date of the related borrowing, (i) the Administrative Agent shall
notify the Borrower of the failure of such Lender to make such amount
available to the Administrative Agent and the Administrative Agent
shall also be entitled to recover such amount with interest thereon at
the rate per annum applicable to Base Rate Loans hereunder, on demand,
from the Borrower and (ii) then the Borrower may, without waiving any
rights it may have against such Lender, borrow a like amount on an
unsecured basis from any commercial bank for a period ending on the
date upon which such Lender does in fact make such borrowing available,
provided that at the time such borrowing is made and at all times while
such amount is outstanding the Borrower would be permitted to borrow
such amount pursuant to Section 2.1 of this Credit Agreement.
3.13 Sharing of Payments.
The Lenders agree among themselves that, in the event that any Lender
shall obtain payment in respect of any Loan, LOC Obligations or any other
obligation owing to such Lender under this Credit Agreement through the exercise
of a right of setoff, banker's lien or counterclaim, or pursuant to a secured
claim under Section 506 of Title 11 of the United States Code or other security
or interest arising from, or in lieu of, such secured claim, received by such
Lender under any applicable bankruptcy, insolvency or other similar law or
otherwise, or by any other means, in excess of its pro rata share of such
payment as provided for in this Credit Agreement, such Lender shall promptly
notify the Administrative Agent thereof and purchase from the other Lenders a
participation in such Loans, LOC Obligations and other obligations in such
amounts, and make such other adjustments from time to time, as shall be
equitable to the end that all Lenders share such payment in accordance with
their respective ratable shares as provided for in this Credit Agreement. The
Lenders further agree among themselves that if payment to a Lender obtained by
such
<PAGE>
Lender through the exercise of a right of setoff, banker's lien, counterclaim or
other event as aforesaid shall be rescinded or must otherwise be restored, each
Lender which shall have shared the benefit of such payment shall, by repurchase
of a participation theretofore sold, return its share of that benefit (together
with its share of any accrued interest payable with respect thereto) to each
Lender whose payment shall have been rescinded or otherwise restored. The
Borrowers agree that any Lender so purchasing such a participation may, to the
fullest extent permitted by law, exercise all rights of payment, including
setoff, banker's lien or counterclaim, with respect to such participation as
fully as if such Lender were a holder of such Loan, LOC Obligations or other
obligation in the amount of such participation. Except as otherwise expressly
provided in this Credit Agreement, if any Lender or the Administrative Agent
shall fail to remit to the Administrative Agent or any other Lender an amount
payable by such Lender or the Administrative Agent to the Administrative Agent
or such other Lender pursuant to this Credit Agreement on the date when such
amount is due, such payments shall be made together with interest thereon for
each date from the date such amount is due until the date such amount is paid to
the Administrative Agent or such other Lender at a rate per annum equal to the
Federal Funds Rate. If under any applicable bankruptcy, insolvency or other
similar law, any Lender receives a secured claim in lieu of a setoff to which
this Section 3.13 applies, such Lender shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent with
the rights of the Lenders under this Section 3.13 to share in the benefits of
any recovery on such secured claim.
3.14 Place and Manner of Payments.
Except as otherwise specifically provided herein, all payments
hereunder shall be made to the Administrative Agent in dollars in immediately
available funds, without offset, deduction, counterclaim or withholding of any
kind, at its offices at the Administrative Agent's office specified in Schedule
2.1(a) not later than 2:00 P.M. (Charlotte, North Carolina time) on the date
when due. Payments received after such time shall be deemed to have been
received on the next succeeding Business Day. The Administrative Agent may (but
shall not be obligated to) debit the amount of any such payment which is not
made by such time to any ordinary deposit account of the Borrowers maintained
with the Administrative Agent (with notice to the Borrowers). The Borrowers
shall, at the time any Borrower makes any payment under this Credit Agreement,
specify to the Administrative Agent the Loans, LOC Obligations, Fees, interest
or other amounts payable hereunder to which such payment is to be applied (and
in the event that it fails so to specify, or if such application would be
inconsistent with the terms hereof, the Administrative Agent shall distribute
such payment to the Lenders in such manner as the Administrative Agent may
determine to be appropriate in respect of obligations owing by the Borrowers
hereunder, subject to the terms of Section 3.12(a)). The Administrative Agent
will distribute such payments to such Lenders, if any such payment is received
prior to 12:00 Noon (Charlotte, North Carolina time) on a Business Day in like
funds as received prior to the end of such Business Day and otherwise the
Administrative Agent will distribute such payment to such Lenders on the next
succeeding Business Day. Whenever any payment hereunder shall be stated to be
due on a day which is not a Business Day, the due date thereof shall be extended
<PAGE>
to the next succeeding Business Day (subject to accrual of interest and Fees for
the period of such extension), except that in the case of Eurodollar Loans, if
the extension would cause the payment to be made in the next following calendar
month, then such payment shall instead be made on the next preceding Business
Day. Except as expressly provided otherwise herein, all computations of interest
and fees shall be made on the basis of actual number of days elapsed over a year
of 360 days, except that computations of interest on Base Rate Loans (unless the
Base Rate is determined by reference to the Federal Funds Rate) shall be
calculated based on a year of 365 or 366 days, as appropriate. Interest shall
accrue from and include the date of borrowing, but exclude the date of payment.
SECTION 4
GUARANTY
--------
4.1 The Guaranty.
Each of the Guarantors hereby jointly and severally guarantees to each
Lender and the Administrative Agent as hereinafter provided the prompt payment
of the Borrowers' Obligations in full when due (whether at stated maturity, as a
mandatory prepayment, by acceleration or otherwise) strictly in accordance with
the terms thereof. The Guarantors hereby further agree that if any of the
Borrowers' Obligations are not paid in full when due (whether at stated
maturity, as a mandatory prepayment, by acceleration or otherwise), the
Guarantors will, jointly and severally, promptly pay the same, without any
demand or notice whatsoever, and that in the case of any extension of time of
payment or renewal of any of the Borrowers' Obligations, the same will be
promptly paid in full when due (whether at extended maturity, as a mandatory
prepayment, by acceleration or otherwise) in accordance with the terms of such
extension or renewal.
Notwithstanding any provision to the contrary contained herein or in
any other of the Credit Documents, the obligations of each Guarantor hereunder
shall be limited to an aggregate amount equal to the largest amount that would
not render its Guaranty Obligations hereunder subject to avoidance under Section
548 of the Bankruptcy Code or any comparable provisions of any applicable state
law.
4.2 Obligations Unconditional.
The obligations of the Guarantors under Section 4.1 hereof are joint
and several, absolute and unconditional, irrespective of the value, genuineness,
validity, regularity or enforceability of any of the Credit Documents, or any
other agreement or instrument referred to therein, or any substitution, release
or exchange of any other guarantee of or security for any of the Borrowers'
Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever which might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
it being the intent of this Section 4.2 that the obligations of the Guarantors
hereunder shall be absolute and unconditional
<PAGE>
under any and all circumstances. Without limiting the generality of the
foregoing, it is agreed that, to the fullest extent permitted by law, the
occurrence of any one or more of the following shall not alter or impair the
liability of any Guarantor hereunder which shall remain absolute and
unconditional as described above:
(i) at any time or from time to time,
without notice to any Guarantor, the time for any performance
of or compliance with any of the Borrowers' Obligations shall
be extended, or such performance or compliance shall be
waived;
(ii) any of the acts mentioned in any of the
provisions of any of the Credit Documents or any other
agreement or instrument referred to therein shall be done or
omitted;
(iii) the maturity of any of the Borrowers'
Obligations shall be accelerated, or any of the Borrowers'
Obligations shall be modified, supplemented or amended in any
respect, or any right under any of the Credit Documents or any
other agreement or instrument referred to therein shall be
waived or any other guarantee of any of the Borrowers'
Obligations or any security therefor shall be released or
exchanged in whole or in part or otherwise dealt with;
(iv) any Lien granted to, or in favor of,
the Administrative Agent or any Lender or Lenders as security
for any of the Borrowers' Obligations shall fail to attach or
be perfected; or
(v) any of the Borrowers' Obligations shall
be determined to be void or voidable (including, without
limitation, for the benefit of any creditor of any Guarantor)
or shall be subordinated to the claims of any Person
(including, without limitation, any creditor of any
Guarantor).
With respect to its obligations hereunder, each Guarantor hereby expressly
waives diligence, presentment, demand of payment, protest and all notices
whatsoever, and any requirement that the Administrative Agent or any Lender
exhaust any right, power or remedy or proceed against any Person under any of
the Credit Documents or any other agreement or instrument referred to therein,
or against any other Person under any other guarantee of, or security for, any
of the Borrowers' Obligations.
4.3 Reinstatement.
The obligations of the Guarantors under this Section 4 shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Borrowers' Obligations is rescinded
or must be otherwise restored by any holder of any of the Borrowers'
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Guarantor agrees that it will indemnify
<PAGE>
the Administrative Agent and each Lender on demand for all reasonable costs and
expenses (including, without limitation, fees and expenses of counsel) incurred
by the Administrative Agent or such Lender in connection with such rescission or
restoration, including any such costs and expenses incurred in defending against
any claim alleging that such payment constituted a preference, fraudulent
transfer or similar payment under any bankruptcy, insolvency or similar law.
4.4 Certain Additional Waivers.
Without limiting the generality of the provisions of this Section 4,
each Guarantor hereby specifically waives the benefits of N.C. Gen. Stat. " 26-7
through 26-9, inclusive. Each Guarantor further agrees that such Guarantor shall
have no right of recourse to security for the Borrowers' Obligations. Each of
the Guarantors further agrees that it shall have no right of subrogation,
reimbursement or indemnity, nor any right of recourse to security, if any, for
the Borrowers' Obligations so long as any amounts payable to the Administrative
Agent or the Lenders in respect of the Borrowers' Obligations shall remain
outstanding or any of the Commitments shall not have expired or been terminated.
4.5 Remedies.
The Guarantors agree that, to the fullest extent permitted by law, as
between the Guarantors, on the one hand, and the Administrative Agent and the
Lenders, on the other hand, the Borrowers' Obligations may be declared to be
forthwith due and payable as provided in Section 9.2 hereof (and shall be deemed
to have become automatically due and payable in the circumstances provided in
said Section 9.2) for purposes of Section 4.1 hereof notwithstanding any stay,
injunction or other prohibition preventing such declaration (or preventing such
Borrowers' Obligations from becoming automatically due and payable) as against
any other Person and that, in the event of such declaration (or such Borrowers'
Obligations being deemed to have become automatically due and payable), such
Borrowers' Obligations (whether or not due and payable by any other Person)
shall forthwith become due and payable by the Guarantors for purposes of said
Section 4.1.
4.6 Continuing Guarantee.
The guarantee in this Section 4 is a continuing guarantee, and shall
apply to all Borrowers' Obligations whenever arising.
SECTION 5
CONDITIONS
-----------
5.1 Closing Conditions.
The obligation of the Lenders to enter into this Credit Agreement and
to fund the
<PAGE>
initial advance hereunder shall be subject to satisfaction of the following
conditions:
(a) The Administrative Agent shall have received original
counterparts of this Credit Agreement executed by each of the parties
hereto;
(b) The Administrative Agent shall have received an
appropriate original Note for each Lender, executed by each of the
Borrowers;
(c) The Administrative Agent shall have received all stock
certificates evidencing the Capital Stock pledged to the Administrative
Agent pursuant to the Pledge Agreement, together with duly executed in
blank, undated stock powers attached thereto (unless, with respect to
the pledged Capital Stock of any Foreign Subsidiary, such stock powers
are deemed unnecessary by the Administrative Agent in its reasonable
discretion under the law of the jurisdiction of incorporation of such
Person);
(d) The Administrative Agent shall have received all documents
it may reasonably request relating to the existence and good standing
of each of the Credit Parties, the corporate or other necessary
authority for and the validity of the Credit Documents, and any other
matters relevant thereto, all in form and substance reasonably
satisfactory to the Administrative Agent;
(e) The Administrative Agent shall have received an incumbency
certificate for each of the Borrowers certified by a secretary or
assistant secretary to be true and correct as of the Effective Date.
(f) The Administrative Agent shall have received a certificate
executed by the chief financial officer of the Borrowers as of the
Closing Date stating that immediately after giving effect to this
Credit Agreement and the other Credit Documents, (i) no Default or
Event of Default exists and (ii) the representations and warranties set
forth in Section 6 (other than the representation set forth in Section
6.17) are true and correct in all material respects;
(g) The Administrative Agent shall have received a legal
opinion of Parker, Poe, Adams and Bernstein, LLP, counsel for the
Credit Parties, dated as of the Closing Date and substantially in the
form of Schedule 5.1(g);
(h) The Lenders shall have received and approved the (i)
audited consolidated and company-prepared consolidating balance sheet
of Speedway Motorsports and its Subsidiaries as of December 31, 1998
together with related consolidated and consolidating statements of
income and cash flow and (ii) company-prepared consolidated and
consolidating balance sheet of Speedway Motorsports and its
Subsidiaries as of March 31, 1999 together with related consolidated
and consolidating statements of income and cash flow;
<PAGE>
(i) No Material Adverse Change shall have occurred since the
financial statements as of March 31, 1999;
(j) The Administrative Agent shall have received copies of
insurance policies or certificates of insurance of the Credit Parties
evidencing liability and casualty insurance meeting the requirements of
the Credit Documents;
(k) The Administrative Agent shall have received such other
documents, agreements or information which may be reasonably requested
by the Administrative Agent and/or the Required Lenders; and
(l) The Administrative Agent shall have received for its own
account and for the accounts of the Lenders, all fees and expenses
required by this Credit Agreement or any other Credit Document to be
paid on or before the Closing Date.
5.2 Conditions to all Extensions of Credit.
The obligations of each Lender to make, convert or extend any
Loan (including the initial Loans) and to issue or extend, or
participate in, a Letter of Credit are subject to satisfaction of the
following conditions in addition to satisfaction on the Closing Date
(and on the Closing Date only) of the conditions set forth in Section
5.1 and satisfaction on the Effective Date of the conditions set forth
in Section 5.2:
(i) The Borrowers shall have delivered, an
appropriate Notice of Borrowing, Notice of
Extension/Conversion or LOC Documents;
(ii) The representations and warranties set
forth in Section 6 shall be, subject to the limitations set
forth therein, true and correct in all material respects as of
such date (except for those which expressly relate to an
earlier date);
(iii) There shall not have been commenced
against the Borrowers or any Guarantor an involuntary case
under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or any case, proceeding or
other action for the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar
official) of such Person or for any substantial part of its
Property or for the winding up or liquidation of its affairs,
and such involuntary case or other case, proceeding or other
action shall remain undismissed, undischarged or unbonded;
(iv) No Default or Event of Default shall
exist and be continuing either prior to or after giving effect
thereto and
(v) There shall not have occurred any
Material Adverse
<PAGE>
Change since the extension of the last Loan; and
(vi) Immediately after giving effect to the
making of such Loan (and the application of the proceeds
thereof) the sum of Loans outstanding shall not exceed the
Revolving Committed Amount or Swingline Committed Amount, as
applicable.
The delivery of each Notice of Borrowing and each Notice of
Extension/Conversion shall constitute a representation and warranty by the
Borrowers of the correctness of the matters specified in subsections (ii),
(iii), (iv) and (v) and (vi) above.
SECTION 6
REPRESENTATIONS AND WARRANTIES
------------------------------
Each of the Credit Parties hereby represents to the Administrative
Agent and each Lender that:
6.1 Financial Condition.
The audited combined balance sheets, statements of income and
statements of cash flows of Speedway Motorsports for the year ended December 31,
1998 have heretofore been furnished to each Lender. Such financial statements
(including the notes thereto) (i) have been audited by Deloitte & Touche LLP,
(ii) have been prepared in accordance with GAAP consistently applied throughout
the periods covered thereby and (iii) present fairly (on the basis disclosed in
the footnotes to such financial statements) the combined financial condition,
results of operations and cash flows of Speedway Motorsports and its combined
Subsidiaries as of such date and for such periods. The unaudited interim balance
sheets of Speedway Motorsports and its consolidated Subsidiaries as at the end
of, and the related unaudited interim statements of income and of cash flows
for, the fiscal quarter ended March 31, 1999 have heretofore been furnished to
each Lender. Such interim financial statements, for each such quarterly period,
(i) have been prepared in accordance with GAAP consistently applied throughout
the periods covered thereby and (ii) present fairly (on the basis disclosed in
the footnotes to such financial statements) the combined financial condition,
results of operations and cash flows of Speedway Motorsports and its
consolidated Subsidiaries as of such date and for such periods. During the
period from March 31, 1999 to and including the Closing Date, there has been no
sale, transfer or other disposition by it or any of its Subsidiaries of any
material part of the business or property of Speedway Motorsports and its
consolidated Subsidiaries, taken as a whole, and no purchase or other
acquisition by any of them of any business or property (including any Capital
Stock of any other person) material in relation to the combined financial
condition of Speedway Motorsports and its consolidated Subsidiaries, taken as a
whole, in each case which is not reflected in the foregoing financial statements
or in the notes thereto or has not otherwise been disclosed in writing to the
Lenders on or prior to the Closing Date.
<PAGE>
6.2 No Change.
Since December 31, 1998, (a) except as and to the extent disclosed on
Schedule 6.2(a), there has been no development or event relating to or affecting
any of the Credit Parties which has had or would be reasonably expected to have
a Material Adverse Effect and (b) except as permitted under this Credit
Agreement (if this Credit Agreement were to have been in effect from and after
December 31, 1998), no dividends or other distributions have been declared, paid
or made upon the Capital Stock or other equity interest in any Credit Party nor
has any of the Capital Stock or other equity interest in any Credit Party been
redeemed, retired, purchased or otherwise acquired for value by such Credit
Party.
6.3 Organization; Existence; Compliance with Law.
Each of the Credit Parties (a) is duly organized, validly existing and
is in good standing under the laws of the jurisdiction of its incorporation or
organization, (b) has the corporate or other necessary power and authority, and
the legal right, to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently engaged
and (c) is duly qualified as a foreign entity and in good standing under the
laws of each jurisdiction where its ownership, lease or operation of property or
the conduct of its business requires such qualification, other than in such
jurisdictions where the failure to be so qualified and in good standing would
not be reasonably expected to have a Material Adverse Effect, and (d) is in
compliance with all material Requirements of Law.
6.4 Power; Authorization; Enforceable Obligations.
Each of the Credit Parties has the corporate or other necessary power
and authority, and the legal right, to make, deliver and perform the Credit
Documents to which it is a party, and in the case of the Borrowers, to borrow
hereunder, and each of the Borrowers has taken all necessary corporate or other
necessary action to authorize the borrowings on the terms and conditions of this
Credit Agreement, and to authorize the execution, delivery and performance of
the Credit Documents to which each is a party. No consent or authorization of,
filing with, notice to or other similar act by or in respect of, any
Governmental Authority or any other Person is required to be obtained or made by
or on behalf of any Credit Party in connection with the execution, delivery,
performance, validity or enforceability of the Credit Documents to which such
Person is a party, except for consents, authorizations, notices and filings
described in Schedule 6.4, all of which have been obtained or made or have the
status described in such Schedule 6.4. This Credit Agreement has been, and each
other Credit Document to which it is a party will be, duly executed and
delivered on behalf the Credit Parties. This Credit Agreement constitutes, and
each other Credit Document to which it is a party when executed and delivered
will constitute, a legal, valid and binding obligation of such Credit Party,
enforceable against each such Person in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(whether enforcement is sought
<PAGE>
by proceedings in equity or at law).
6.5 No Legal Bar.
Except as previously disclosed in writing to the Lenders on or prior to
the Closing Date, the execution, delivery and performance of the Credit
Documents by the Credit Parties, the borrowings hereunder and the use of the
proceeds of the borrowings hereunder (a) will not violate any Requirement of Law
or contractual obligation of any Credit Party in any respect that would
reasonably be expected to have a Material Adverse Effect, (b) will not result
in, or require, the creation or imposition of any Lien on any of the properties
or revenues of any of the Credit Parties pursuant to any such Requirement of Law
or contractual obligation and (c) will not violate or conflict with any
provision of the articles of incorporation or by-laws of any Credit Party.
6.6 No Material Litigation.
Except as disclosed on Schedule 6.6 hereof, no litigation,
investigation or proceeding of or before any arbitrator or Governmental
Authority is pending or, to the knowledge of the Credit Parties, threatened by
or against any of the Credit Parties or against their respective properties or
revenues which (a) relates to any of the Credit Documents or any of the
transactions contemplated hereby or thereby or (b) would be reasonably expected
to have a Material Adverse Effect.
6.7 No Default.
None of the Credit Parties is in default under or with respect to any
of their contractual obligations in any respect which would be reasonably
expected to have a Material Adverse Effect. No Default or Event of Default has
occurred and is continuing.
6.8 Ownership of Property; Liens.
Each of the Credit Parties has good record and marketable title in fee
simple to, or a valid leasehold interest in, all its material real property, and
good title to, or a valid leasehold interest in, all its other material
property, and none of such property is subject to any Lien, except for Permitted
Liens.
6.9 Intellectual Property.
Each of the Credit Parties owns, or has the legal right to use, all
United States trademarks, tradenames, copyrights, technology, know-how and
processes necessary for each of them to conduct its business as currently
conducted (the "Intellectual Property") except for those the failure to own or
have such legal right to use would not be reasonably expected to have a Material
Adverse Effect. Except as provided on Schedule 6.9, no claim has been asserted
and is pending by any Person challenging or questioning the use of any such
Intellectual Property or the validity or effectiveness of any such Intellectual
Property, nor
<PAGE>
does any Credit Party know of any such claim, and the use of such Intellectual
Property by any Credit Party does not infringe on the rights of any Person,
except for such claims and infringements that in the aggregate would not be
reasonably expected to have a Material Adverse Effect.
6.10 No Burdensome Restrictions.
Except as previously disclosed in writing to the Lenders on or prior to
the Closing Date, no Requirement of Law or contractual obligation of any Credit
Party would be reasonably expected to have a Material Adverse Effect.
6.11 Taxes.
Except as disclosed on Schedule 6.11 hereof, each of the Credit Parties
has filed or caused to be filed all United States federal income tax returns and
all other material tax returns which, to the knowledge of such Credit Party, are
required to be filed and has paid (a) all taxes shown to be due and payable on
said returns or (b) all taxes shown to be due and payable on any assessments of
which it has received notice made against it or any of its property and all
other taxes, fees or other charges imposed on it or any of its property by any
Governmental Authority (other than any (i) taxes, fees or other charges with
respect to which the failure to pay, in the aggregate, would not have a Material
Adverse Effect or (ii) taxes, fees or other charges the amount or validity of
which are currently being contested and with respect to which reserves in
conformity with GAAP have been provided on the books of such Credit Party, as
the case may be; and no tax Lien has been filed, and, to the knowledge of any of
the Credit Parties, no claim is being asserted, with respect to any such tax,
fee or other charge.
6.12 ERISA.
Except as would not result in a Material Adverse Effect:
(a) During the five-year period prior to the date on which
this representation is made or deemed made: (i) no Termination Event
has occurred, and, to the best of the Credit Parties' or any ERISA
Affiliate's knowledge, no event or condition has occurred or exists as
a result of which any Termination Event could reasonably be expected to
occur, with respect to any Plan; (ii) no "accumulated funding
deficiency," as such term is defined in Section 302 of ERISA and
Section 412 of the Code, whether or not waived, has occurred with
respect to any Plan; (iii) each Plan has been maintained, operated, and
funded in compliance with its own terms and in material compliance with
the provisions of ERISA, the Code, and any other applicable federal or
state laws; and (iv) no lien in favor or the PBGC or a Plan has arisen
or is reasonably likely to arise on account of any Plan.
(b) The actuarial present value of all "benefit liabilities"
under each Single Employer Plan (determined within the meaning of
Section 401(a)(2) of the
<PAGE>
Code, utilizing the actuarial assumptions used to fund such Plans),
whether or not vested, did not, as of the last annual valuation date
prior to the date on which this representation is made or deemed made,
exceed the current value of the assets of such Plan allocable to such
accrued liabilities.
(c) Neither any of the Credit Parties nor any ERISA Affiliate
has incurred, or, to the best of the Credit Parties' knowledge, are
reasonably expected to incur, any withdrawal liability under ERISA to
any Multiemployer Plan or Multiple Employer Plan. Neither any of the
Credit Parties nor any ERISA Affiliate has received any notification
that any Multiemployer Plan is in reorganization (within the meaning of
Section 4241 of ERISA), is insolvent (within the meaning of Section
4245 of ERISA), or has been terminated (within the meaning of Title IV
of ERISA), and no Multiemployer Plan is, to the best of the Credit
Parties' knowledge, reasonably expected to be in reorganization,
insolvent, or terminated.
(d) No prohibited transaction (within the meaning of Section
406 of ERISA or Section 4975 of the Code) or breach of fiduciary
responsibility has occurred with respect to a Plan which has subjected
or may subject any Credit Party or any ERISA Affiliate to any liability
under Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of
the Code, or under any agreement or other instrument pursuant to which
any Credit Party or any ERISA Affiliate has agreed or is required to
indemnify any person against any such liability.
6.13 Governmental Regulations, Etc.
(a) No part of the proceeds of the Loans will be used,
directly or indirectly, for the purpose of purchasing or carrying any
"margin stock" within the meaning of Regulation G or Regulation U, or
for the purpose of purchasing or carrying or trading in any securities.
If requested by any Lender or the Administrative Agent, the Borrowers
will furnish to the Administrative Agent and each Lender a statement to
the foregoing effect in conformity with the requirements of FR Form U-1
referred to in said Regulation U. No indebtedness being reduced or
retired out of the proceeds of the Loans was or will be incurred for
the purpose of purchasing or carrying any margin stock within the
meaning of Regulation U or any "margin security" within the meaning of
Regulation T. "Margin stock" within the meaning of Regulation U does
not constitute more than 25% of the value of the consolidated assets of
Speedway Motorsports and its Subsidiaries. None of the transactions
contemplated by this Credit Agreement (including, without limitation,
the direct or indirect use of the proceeds of the Loans) will violate
or result in a violation of the Securities Act of 1933, as amended, or
the Exchange Act or regulations issued pursuant thereto, or Regulation
G, T, U or X.
(b) None of the Credit Parties is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act
or the Investment Company Act of 1940, each as amended. In addition,
none of the Credit Parties is
<PAGE>
(i) an "investment company" registered or required to be registered
under the Investment Company Act of 1940, as amended, and is not
controlled by such a company, or (ii) a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a
"holding company" or of a "subsidiary" of a "holding company", within
the meaning of the Public Utility Holding Company Act of 1935, as
amended.
(c) No director, executive officer or principal shareholder of
any Credit Party is a director, executive officer or principal
shareholder of any Lender. For the purposes hereof the terms
"director", "executive officer" and "principal shareholder" (when used
with reference to any Lender) have the respective meanings assigned
thereto in Regulation O issued by the Board of Governors of the Federal
Reserve System.
(d) Each of the Credit Parties has obtained all material
licenses, permits, franchises or other governmental authorizations
necessary to the ownership of its respective Property and to the
conduct of its business.
(e) Each of the Credit Parties is not in violation of any
applicable statute, regulation or ordinance of the United States of
America, or of any state, city, town, municipality, county or any other
jurisdiction, or of any agency thereof (including without limitation,
federal, state or local environmental laws and regulations, which
violation could reasonably be expected to have a Material Adverse
Effect.
(f) Each of the Credit Parties is current with all material
reports and documents, if any, required to be filed with any state or
federal securities commission or similar agency and is in full
compliance in all material respects with all applicable rules and
regulations of such commissions.
6.14 Subsidiaries.
Schedule 6.14 sets forth all Subsidiaries of Speedway Motorsports at
the Closing Date, the jurisdiction of incorporation of each such Subsidiary and
the direct or indirect ownership interest of Speedway Motorsports therein.
6.15 Purpose of Loans.
The proceeds of the Loans hereunder shall be used solely (i) to
refinance existing indebtedness of the Borrowers, (ii) to finance seasonal
working capital needs of Speedway Motorsports and its Subsidiaries, (iii) to
finance letter of credit needs of Speedway Motorsports and its Subsidiaries,
(iv) to finance general corporate needs of Speedway Motorsports and its
Subsidiaries including capital expenditures, (v) to finance permitted
investments and (vi) to finance the acquisition of additional motor speedways
and related businesses. No proceeds of the Obligations shall be used by any
Subsidiary that is not a Guarantor.
<PAGE>
6.16 Environmental Matters.
Except as set forth in Phase I Environmental Site Assessments
previously delivered to the Lenders and identified on Schedule 6.16:
(a) Each of the facilities and properties owned, leased or
operated by any Credit Party (the "Properties") and all businesses of
any Credit Party at the Properties (the "Businesses") are in compliance
with all applicable Environmental Laws, except where the failure to so
comply would not have a Material Adverse Effect, and, to the best
knowledge of any Credit Party, there are no conditions relating to the
Businesses or Properties that could give rise to liability under any
applicable Environmental Laws, except where such liability would not
have a Material Adverse Effect.
(b) None of the Credit Parties has received any written notice
of, or inquiry from any Governmental Authority regarding, any currently
unresolved material violation, alleged violation, non-compliance,
liability or potential liability regarding environmental matters or
compliance with Environmental Laws with regard to any of the Properties
or the Businesses, nor does any Credit Party have knowledge that any
such notice is being threatened.
(c) Materials of Environmental Concern have not been
transported or disposed of from the Properties, or generated, treated,
stored or disposed of at, on or under any of the Properties or any
other location, in each case by or on behalf of any Credit Party, or to
the knowledge of any Credit Party, by any other Person, in violation
of, or in a manner that would be reasonably likely to give rise to
liability under, any applicable Environmental Law, except where such
liability or the failure to so comply would not have a Material Adverse
Effect.
(d) No judicial proceeding or governmental or administrative
action is pending or, to the knowledge of any Credit Party, threatened,
under any Environmental Law to which any Credit Party is or, to the
knowledge of any Credit Party, will be named as a party, nor are there
any consent decrees or other decrees, consent orders, administrative
orders outstanding under any Environmental Law with respect to any
Credit Party, the Properties or the Businesses.
(e) To the knowledge of any Credit Party, there has been no
release or threat of release of Materials of Environmental Concern at
or from the Properties, related to the operations (including, without
limitation, disposal) of any Credit Party in connection with the
Properties or otherwise in connection with the Businesses, in violation
of or in a manner that would reasonably be expected to give rise to
liability under Environmental Laws, except where such violation or
liability would not have a Material Adverse Effect.
6.17 Solvency.
<PAGE>
Speedway Motorsports on a consolidated basis is Solvent.
6.18 No Untrue Statement.
Neither (a) this Credit Agreement nor any other Credit Document or
certificate or document executed and delivered by or on behalf of either of the
Borrowers or any other Credit Party in accordance with or pursuant to any Credit
Document nor (b) any statement, representation, or warranty provided to the
Administrative Agent in connection with the negotiation or preparation of the
Credit Documents contains any misrepresentation or untrue statement of material
fact or omits to state a material fact necessary, in light of the circumstance
under which it was made, in order to make any such warranty, representation or
statement contained therein not misleading;
6.19 Year 2000 Compliance.
Each Credit Party has (i) initiated a review and assessment of all
areas within its and each of its Subsidiaries' business and operations that
could be adversely affected by the "Year 2000 Problem" (that is, the risk that
computer applications used by such Credit Party or any of its Subsidiaries may
be unable to recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999), (ii) developed a
plan and timeline for addressing the Year 2000 Problem on a timely basis, and
(iii) to date, implemented that plan in accordance with the timetable. Based on
the foregoing, each Credit Party believes that all computer applications that
are material to its and any of its Subsidiaries' business and operations are
reasonably expected on a timely basis to be able to perform properly
date-sensitive functions for all dates before and after January 1, 2000 (that
is, be "Year 2000 compliant"), except to the extent that a failure to do so
could not reasonably be expected to have Material Adverse Effect.
6.20 Subordinate Indebtedness.
Indebtedness represented by the Indenture is subordinate to the Loans.
SECTION 7
AFFIRMATIVE COVENANTS
----------------------
Each Credit Party hereby covenants and agrees that, so long as this
Credit Agreement is in effect or any amounts payable hereunder or under any
other Credit Document shall remain outstanding, and until all of the Commitments
hereunder shall have terminated:
7.1 Information Covenants.
The Borrowers will furnish, or cause to be furnished, to the
Administrative Agent
<PAGE>
and each of the Lenders:
(a) Annual Financial Statements. As soon as available, and in
any event within 120 days after the close of each fiscal year of
Speedway Motorsports and its Subsidiaries, a consolidated and
consolidating balance sheet and income statement of Speedway
Motorsports and its Subsidiaries, as of the end of such fiscal year,
together with related consolidated and consolidating statements of
operations and retained earnings and of cash flows for such fiscal
year, setting forth in comparative form consolidated and consolidating
figures for the preceding fiscal year, all such financial information
described above to be in reasonable form and detail and, as to the
consolidated statements only, audited by independent certified public
accountants of recognized national standing reasonably acceptable to
the Administrative Agent and whose opinion shall be unqualified.
(b) Quarterly Financial Statements. As soon as available, and
in any event within 45 days after the close of each fiscal quarter of
Speedway Motorsports and its Subsidiaries (other than the fourth fiscal
quarter, in which case 120 days after the end thereof) a consolidated
and consolidating balance sheet and income statement of Speedway
Motorsports and its Subsidiaries, as of the end of such fiscal quarter,
together with related consolidated and consolidating statements of
operations and retained earnings and of cash flows for such fiscal
quarter in each case setting forth in comparative form consolidated and
consolidating figures for the corresponding period of the preceding
fiscal year, all such financial information described above to be in
reasonable form and detail and reasonably acceptable to the
Administrative Agent, and accompanied by a certificate of the chief
executive officer, chief financial officer or president of Speedway
Motorsports to the effect that such quarterly financial statements
fairly present in all material respects the financial condition of
Speedway Motorsports and its Subsidiaries and have been prepared in
accordance with GAAP, subject to changes resulting from audit and
normal year-end audit adjustments, including without limitation the
addition of footnotes.
(c) Officer's Certificate. At the time of delivery of the
financial statements provided for in Sections 7.1(a) and 7.1(b) above,
a certificate of the chief executive officer, chief financial officer
or president of Speedway Motorsports substantially in the form of
Schedule 7.1(c), (i) demonstrating compliance with the financial
covenants contained in Section 7.11 by calculation thereof as of the
end of each such fiscal period and (ii) stating that no Default or
Event of Default exists, or if any Default or Event of Default does
exist, specifying the nature and extent thereof and what action the
Borrowers propose to take with respect thereto.
(d) Accountant's Certificate. Within the period for delivery
of the annual financial statements provided in Section 7.1(a), a
certificate of the accountants conducting the annual audit stating that
they have reviewed this Credit Agreement and stating further whether,
in the course of their audit, they have become aware of any Default or
Event of Default and, if any such Default or Event of Default exists,
<PAGE>
specifying the nature and extent thereof.
(e) Auditor's Reports. Promptly upon receipt thereof, a copy
of any other report or "management letter" submitted by independent
accountants to a Credit Party in connection with any annual, interim or
special audit of the books of a Credit Party.
(f) Reports. Promptly upon transmission or receipt thereof,
(a) copies of any filings and registrations with, and reports to or
from, the SEC, or any successor agency, and copies of all financial
statements, proxy statements, notices and reports as a Credit Party
shall send to its shareholders generally or to the holders of any issue
of Indebtedness owed by a Credit Party in their capacity as such
holders and (b) upon the request of the Administrative Agent, all
reports and written information to and from the United States
Environmental Protection Agency, or any state or local agency
responsible for environmental matters, the United States Occupational
Health and Safety Administration, or any state or local agency
responsible for health and safety matters, or any successor agencies or
authorities concerning environmental, health or safety matters.
(g) Notices. Upon a Credit Party obtaining knowledge thereof,
the Borrowers will give written notice to the Administrative Agent
immediately of (a) the occurrence of an event or condition consisting
of a Default or Event of Default, specifying the nature and existence
thereof and what action the Credit Parties propose to take with respect
thereto, and (b) the occurrence of any of the following with respect to
a Credit Party (i) the pendency or commencement of any litigation,
arbitral or governmental proceeding against such Credit Party which if
adversely determined is likely to have a Material Adverse Effect, (ii)
the institution of any proceedings against the Credit Party with
respect to, or the receipt of written notice by such Person of
potential liability or responsibility for violation, or alleged
violation of any federal, state or local law, rule or regulation,
including but not limited to, Environmental Laws, the violation of
which would likely have a Material Adverse Effect or (iii) any notice
or determination concerning the imposition of any withdrawal liability
by a Multiemployer Plan against such Credit Party or any ERISA
affiliate, the determination that a Multiemployer Plan is, or is
expected to be, in reorganization within the meaning of Title IV of
ERISA or the termination of any Plan.
(h) ERISA. Upon any of the Credit Parties or any ERISA
Affiliate obtaining knowledge thereof, the Borrowers will give written
notice to the Administrative Agent promptly (and in any event within
five business days) of: (i) of any event or condition, including, but
not limited to, any Reportable Event, that constitutes, or might
reasonably lead to, a Termination Event; (ii) with respect to any
Multiemployer Plan, the receipt of notice as prescribed in ERISA or
otherwise of any withdrawal liability assessed against the Borrowers or
any ERISA Affiliate, or of a determination that any Multiemployer Plan
is in reorganization or insolvent (both
<PAGE>
within the meaning of Title IV of ERISA); (iii) the failure to make
full payment on or before the due date (including extensions) thereof
of all amounts which any Credit Party or any ERISA Affiliate is
required to contribute to each Plan pursuant to its terms and as
required to meet the minimum funding standard set forth in ERISA and
the Code with respect thereto; or (iv) any change in the funding status
of any Plan that could have a Material Adverse Effect, together, with a
description of any such event or condition or a copy of any such notice
and a statement by the principal financial officer of Speedway
Motorsports briefly setting forth the details regarding such event,
condition, or notice, and the action, if any, which has been or is
being taken or is proposed to be taken by the Credit Parties with
respect thereto. Promptly upon request, the Borrowers shall furnish the
Administrative Agent and each of the Lenders with such additional
information concerning any Plan as may be reasonably requested,
including, but not limited to, copies of each annual report/return
(Form 5500 series), as well as all schedules and attachments thereto
required to filed with the Department of Labor and/or the Internal
Revenue Service pursuant to ERISA and the Code, respectively, for each
"plan year" (within the meaning of Section 3(39) of ERISA).
(i) Other Information. With reasonable promptness upon any
such request, such other information regarding the business, properties
or financial condition of the Credit Parties as the Administrative
Agent or the Required Lenders may reasonably request.
7.2 Preservation of Existence and Franchises.
Each of the Credit Parties will do all things necessary to preserve and
keep in full force and effect its existence, material rights, franchises and
authority.
7.3 Books and Records.
Each of the Credit Parties will keep complete and accurate books and
records of its transactions in accordance with good accounting practices on the
basis of GAAP (including the establishment and maintenance of appropriate
reserves).
7.4 Compliance with Law.
Each of the Credit Parties will comply with all laws, rules,
regulations and orders, and all applicable restrictions imposed by all
Governmental Authorities, applicable to it and its property if noncompliance
with any such law, rule, regulation, order or restriction would have a Material
Adverse Effect.
7.5 Payment of Taxes and Other Indebtedness.
Each of the Credit Parties will pay and discharge (i) all taxes,
assessments and governmental charges or levies imposed upon it, or upon its
income or profits, or upon any
<PAGE>
of its properties, before they shall become delinquent, (ii) all lawful claims
(including claims for labor, materials and supplies) which, if unpaid, might
give rise to a Lien upon any of its properties, and (iii) except as prohibited
hereunder, all of its other Indebtedness as it shall become due; provided,
however, that a Credit Party shall not be required to pay any such tax,
assessment, charge, levy, claim or Indebtedness which is being contested in good
faith by appropriate proceedings and as to which adequate reserves therefor have
been established in accordance with GAAP, unless the failure to make any such
payment (i) would give rise to an immediate right to foreclose on a Lien
securing such amounts or (ii) would have a Material Adverse Effect.
7.6 Insurance.
Each of the Credit Parties will at all times maintain in full force and
effect insurance (including worker's compensation insurance, liability
insurance, casualty insurance, business interruption insurance and property
insurance) in such amounts, covering such risks and liabilities and with such
deductibles or self-insurance retentions as are in accordance with normal
industry practice provided by nationally recognized, financially sound insurance
companies rated not less than A (or the equivalent thereof) by Best's Key Rating
Guide or S&P.
7.7 Maintenance of Property.
Each of the Credit Parties will maintain and preserve its properties
and equipment material to the conduct of its business in good repair, working
order and condition, normal wear and tear excepted, and will make, or cause to
be made, in such properties and equipment from time to time all repairs,
renewals, replacements, extensions, additions, betterments and improvements
thereto as may be needed or proper, to the extent and in the manner customary
for companies in similar businesses.
7.8 Performance of Obligations.
Each of the Credit Parties will perform in all material respects all of
its obligations under the terms of all material agreements, indentures,
mortgages, security agreements or other debt instruments to which it is a party
or by which it is bound.
7.9 Use of Proceeds.
The Borrowers will use the proceeds of the Loans solely for the
purposes set forth in Section 6.15.
7.10 Audits/Inspections.
Upon reasonable notice and during normal business hours, each Credit
Party will permit representatives appointed by the Administrative Agent (and
after the occurrence of an Event of Default, representatives of any Lender),
including, without limitation,
<PAGE>
independent accountants, agents, attorneys, and appraisers to visit and inspect
its property, including its books and records, its accounts receivable and
inventory, its facilities and its other business assets, and to make photocopies
or photographs thereof and to write down and record any information such
representative obtains and shall permit the Administrative Agent or its
representatives to investigate and verify the accuracy of information provided
to the Lenders and to discuss all such matters with the officers, employees and
representatives of such Credit Party.
7.11 Financial Covenants.
(a) Consolidated Net Worth. Consolidated Net Worth at each
Calculation Date shall be no less than the sum of $250,000,000,
increased on a cumulative basis as of the last day of each fiscal
quarter commencing with the last day of fiscal quarter March 31, 1999,
by an amount equal to (i) 50% of Consolidated Net Income (provided such
Consolidated Net Income is greater than zero) for the fiscal quarter
then ended and (ii) 100% of Net Proceeds from an Equity Transaction for
the fiscal quarter then ended.
(b) Consolidated Total Debt Ratio. The Consolidated Total Debt
Ratio at each Calculation Date shall be no greater than (i) 4.25 to 1.0
on March 31, 1999, June 30, 1999, and September 30, 1999; (ii) 4.0 to
1.0 on December 31, 1999, March 31, 2000, June 30, 2000 and September
30, 2000; (iii) 3.75 to 1.0 on December 31, 2000, March 31, 2001, June
30, 2001 and September 30, 2001 and (iv) 3.5 to 1.0 at each Calculation
Date thereafter.
(c) Consolidated Capital Charges Coverage Ratio. The
Consolidated Capital Charges Coverage Ratio at each Calculation Date
shall be no less than (i) 2.0 to 1.0 on March 31, 1999, June 30, 1999
and September 30, 1999; (ii) 2.5 to 1.0 on December 31, 1999, March 31,
2000, June 30, 2000 and September 30, 2000; and (iii) 3.0 to 1.0 at
each Calculation Date thereafter.
7.12 Additional Credit Parties.
As soon as practicable and in any event within 30 days after any Person
becomes a Subsidiary of any Credit Party, the Borrower shall provide the
Administrative Agent with written notice thereof setting forth information in
reasonable detail describing all of the assets of such Person and shall (a) if
such Person is a Domestic Subsidiary of a Credit Party, cause such Person to
execute a Joinder Agreement in substantially the same form as Exhibit 7.12, (b)
cause 100% (if such Person is a Domestic Subsidiary of a Credit Party) or 65%
(if such Person is a direct Foreign Subsidiary of a Credit Party) of the Capital
Stock of such Person to be delivered to the Administrative Agent (together with
undated stock powers signed in blank (unless, with respect to a Foreign
Subsidiary, such stock powers are deemed unnecessary by the Administrative Agent
in its reasonable discretion under the law of the jurisdiction of incorporation
of such Person)) and pledged to the Administrative Agent pursuant to an
appropriate pledge agreement(s) in form acceptable to the Administrative
<PAGE>
Agent and cause such Person to deliver such other documentation as the
Administrative Agent may reasonably request in connection with the foregoing,
including, without limitation, appropriate certified resolutions and other
organizational and authorizing documents of such Person, and favorable opinions
of counsel to such Person all in form, content and scope reasonably satisfactory
to the Administrative Agent.
7.13 Ownership of Subsidiaries.
Except to the extent otherwise provided in Section 8.4(c), Section 8.11
and with respect to North Wilkesboro Speedway, Inc., North Carolina Motor
Speedway, Inc. and Sold USA, Inc., Speedway Motorsports shall directly or
indirectly, own at all times 100% of the Capital Stock of each of its
Subsidiaries.
SECTION 8
NEGATIVE COVENANTS
------------------
Each Credit Party hereby covenants and agrees that, so long as this
Credit Agreement is in effect or any amounts payable hereunder or under any
other Credit Document shall remain outstanding, and until all of the Commitments
hereunder shall have terminated:
8.1 Indebtedness.
None of the Credit Parties will contract, create, incur, assume or
permit to exist any Indebtedness, except:
(a) Indebtedness arising under this Credit Agreement and the
other Credit Documents;
(b) Indebtedness of Speedway Motorsports and any of its
Subsidiaries existing as of the Closing Date and set forth in Schedule
8.1 and any refinancings thereof for the same or less amount;
(c) purchase money Indebtedness (including Capital Leases)
hereafter incurred by Speedway Motorsports and any of its Subsidiaries
to finance the purchase of fixed assets provided (i) such Indebtedness
when incurred shall not exceed the purchase price of the asset(s)
financed; and (ii) no such Indebtedness shall be refinanced for a
principal amount in excess of the principal balance outstanding thereon
at the time of such refinancing;
(d) Indebtedness evidenced by, or any guaranty of, the Senior
Notes;
(e) Indebtedness in respect of Hedge Agreements entered into
with
<PAGE>
Lenders in an aggregate notional amount for all such agreements not to
exceed the Committed Amount;
(f) Intercompany Indebtedness; or
(g) Indebtedness incurred or assumed in any transaction
permitted by Section 8.4 hereof provided (i) such Indebtedness when
incurred or assumed shall not exceed the purchase price of the asset(s)
financed; and (ii) no such incurred or assumed Indebtedness shall be
refinanced for a principal amount in excess of the principal balance
outstanding thereon at the time of such refinancing.
8.2 Liens.
None of the Credit Parties will contract, create, incur, assume or
permit to exist any Lien with respect to any of its Property, except for
Permitted Liens and Liens securing Indebtedness permitted under Sections 8.1(c)
and (g) provided that such Liens relate solely to the specific Property being
acquired.
8.3 Nature of Business.
Neither Speedway Motorsports nor any of its Subsidiaries will
substantively alter the character or conduct of the business conducted by any
such Person as of the Closing Date.
8.4 Consolidation, Merger, Sale or Purchase of Assets, etc.
None of the Credit Parties will:
(a) dissolve, liquidate or wind up its affairs, or enter into
any transaction of merger or consolidation; provided, however, that, so
long as no Default or Event of Default would be directly or indirectly
caused as a result thereof, (i) Speedway Motorsports may merge or
consolidate with any of its Subsidiaries provided Speedway Motorsports
is the surviving corporation or (ii) any Credit Party (other than
Speedway Motorsports) may merge or consolidate with any other Credit
Party (other than the Borrowers);
(b) sell, lease, transfer or otherwise dispose of any Property
other than (i) the sale of inventory in the ordinary course of business
for fair consideration, (ii) the sale or disposition of machinery and
equipment no longer used or useful in the conduct of such Person's
business, (iii) subject to the terms of Section 8.8 and 8.12, other
sales and dispositions provided that (A) after giving effect to such
sale or other disposition, the aggregate book value of assets sold or
otherwise disposed of pursuant to this clause (iii) since the Closing
Date does not exceed $10,000,000 and (B) after giving effect on a Pro
Forma Basis to such sale or other disposition, no Default or Event of
Default would exist hereunder; or
<PAGE>
(c) except as otherwise permitted by Section 8.4(a) or 8.5,
acquire all or any portion of the Capital Stock or securities of any
other Person or purchase, lease or otherwise acquire (in a single
transaction or a series of related transactions) all or any substantial
part of the Property of any other Person provided, however, that, so
long as no Default or Event of Default would be caused as a result
thereof on an actual or Pro Forma Basis, then any Credit Party may (i)
acquire an interest in additional motor speedways, whether by merger,
stock purchase or asset purchase; provided, however, that the aggregate
Cash Consideration paid for such acquisitions in any fiscal year shall
not exceed 25% of the Consolidated Net Worth of Speedway Motorsports at
the immediately preceding fiscal year end, and (ii) consummate other
acquisitions consistent with the nature of the Borrowers' business,
whether by merger, stock purchase or asset purchase; provided, however,
that the Cash Consideration paid for such other acquisitions shall not
exceed $25,000,000 in the aggregate.
8.5 Advances, Investments, Loans, etc.
Except as permitted under Section 8.4(c), none of the Credit Parties
will make Investments in or advances or loans to any Person other than to
another Credit Party, except for Permitted Investments.
8.6 Restricted Payments.
None of the Credit Parties will directly or indirectly declare, order,
make or set apart any sum for or pay any Restricted Payment, except (i) to make
dividends payable solely in the same class of Capital Stock of such Person, (ii)
to make dividends payable to any Credit Party and (iii) as permitted by Section
8.7.
8.7 Prepayments of Indebtedness, etc.
None of the Credit Parties will (i) after the issuance thereof, amend
or modify (or permit the amendment or modification of) any of the terms of any
Indebtedness (other than this Credit Agreement) if such amendment or
modification would add or change any terms in a manner adverse to the issuer of
such Indebtedness (unless the consent of the issuer of such Indebtedness has
been obtained) or to the Lenders, or shorten the final maturity or average life
to maturity or require any payment to be made sooner than originally scheduled
or increase the interest rate applicable thereto or change any subordination
provision thereof, (ii)(A) if any Default or Event of Default has occurred and
is continuing or would be directly or indirectly caused as a result thereof,
make (or give any notice with respect thereto) any voluntary or optional payment
or prepayment or redemption or acquisition for value of (including without
limitation, by way of depositing money or securities with the trustee with
respect thereto before due for the purpose of paying when due), refund,
refinance or exchange of any other Indebtedness, or (B) amend, modify or change
its articles of incorporation (or corporate charter or other similar
organizational document) or bylaws (or
<PAGE>
other similar document) where such change would have a Material Adverse Effect.
8.8 Transactions with Affiliates.
Except for Intercompany Indebtedness and Permitted Investments, none of
the Credit Parties will enter into or permit to exist any transaction or series
of transactions with any officer, director, shareholder, Subsidiary or Affiliate
of such Person other than (a) advances of working capital to any Credit Party,
(b) transfers of cash and assets to any Credit Parties, (c) transactions
permitted by Sections 8.4, 8.5 and Section 8.6, (d) normal reimbursement of
expenses of officers and directors, (e) other transactions for goods and
services not to exceed $100,000 at any one time and (f) except as otherwise
specifically limited in this Credit Agreement, other transactions which are
entered into in the ordinary course of such Person's business on terms and
conditions substantially as favorable to such Person as would be obtainable by
it in a comparable arms-length transactions with a Person other than an officer,
director, shareholder, Subsidiary or Affiliate.
8.9 Fiscal Year.
None of the Credit Parties will change its fiscal year.
8.10 Limitation on Restrictions on Dividends and Other Distributions,
etc.
None of the Credit Parties will, directly or indirectly create or
otherwise cause, incur, assume, suffer or permit to exist or become effective
any consensual encumbrance or restriction of any kind on the ability of any such
Person to (a) pay dividends or make any other distribution on any of such
Person's Capital Stock (other than in connection with a transaction permitted by
Section 8.4(c) hereof), (b) subject to subordination provisions, pay any
Indebtedness owed to the Borrowers or any other Credit Party, (c) make loans or
advances to any Credit Party (other than loans or advances by Speedway Funding),
(d) transfer any of its Property to any other Credit Party other than in the
ordinary course of business, or (e) grant Liens to the Administrative Agent for
the benefit of the Lenders.
8.11 Issuance and Sale of Subsidiary Stock.
None of the Credit Parties will, except to qualify directors where
required by applicable law, sell, transfer or otherwise dispose of, any shares
of Capital Stock of any of its Subsidiaries or permit any of its Subsidiaries to
issue, sell or otherwise dispose of any shares of Capital Stock of any of its
Subsidiaries other than the sale of Capital Stock of SoldUSA, Inc.
8.12 Sale Leasebacks.
Other than as provided in Section 8.4(b), none of the Credit Parties
will, directly or indirectly, become or remain liable as lessee or as guarantor
or other surety with respect to any lease, whether an Operating Lease or a
Capital Lease, of any Property (whether real or
<PAGE>
personal or mixed), whether now owned or hereafter acquired, (i) which such
Person has sold or transferred or is to sell or transfer to any other Person or
(ii) which such Person intends to use for substantially the same purpose as any
other Property which has been sold or is to be sold or transferred by such
Person to any other Person in connection with such lease. The Credit Parties
acknowledge that the Purchase Agreement between Texas Motor Speedway, Inc. and
FW Sports Authority, Inc. and the Lease Agreement between FW Sports Authority,
Inc., as lessor, and Texas Motor Speedway, Inc., as lessee, while in form
appearing to be a sale leaseback transaction, is not deemed to be or treated as
a sale leaseback per GAAP.
8.13 Capital Expenditures.
Consolidated Capital Expenditures (exclusive of acquisitions permitted
by Section 8.4(c) and any capital expenditures made in connection with pre-sold
condominium units) for the four quarter period ending March 31, 2000 and each
successive four quarter period thereafter shall not exceed $125,000,000. In no
event shall Consolidated Capital Expenditures (exclusive of acquisitions
permitted by Section 8.4(c) and any capital expenditures made in connection with
pre-sold condominium units) exceed $500,000,000 in the aggregate prior to the
Termination Date.
8.14 No Further Negative Pledges.
Except with respect to prohibitions against other encumbrances on
specific Property encumbered to secure payment of particular Indebtedness (which
Indebtedness relates solely to such specific Property, and improvements and
accretions thereto, and is otherwise permitted hereby), and except as included
in the terms of any Indebtedness permitted by Section 8.1(g) hereof with respect
to prohibiting or restricting the creation or assumption of any Lien upon the
properties or assets acquired with such Indebtedness, none of the Credit Parties
will enter into, assume or become subject to any agreement prohibiting or
otherwise restricting the creation or assumption of any Lien upon its properties
or assets, whether now owned or hereafter acquired, or requiring the grant of
any security for such obligation if security is given for some other obligation.
SECTION 9
EVENTS OF DEFAULT
-----------------
9.1 Events of Default.
An Event of Default shall exist upon the occurrence of any of the
following specified events (each an "Event of Default"):
(a) Payment. Any Credit Party shall
(i) default in the payment when due of any
principal of
<PAGE>
any of the Loans or of any reimbursement obligations arising
from drawings under Letters of Credit, or
(ii) default in the payment when due of any
interest on the Loans or on any reimbursement obligations
arising from drawings under Letters of Credit, or of any Fees
or other amounts owing hereunder, under any of the other
Credit Documents or in connection herewith or therewith; or
(b) Representations. Any representation, warranty or statement
made or deemed to be made by any Credit Party herein, in any of the
other Credit Documents, or in any statement or certificate delivered or
required to be delivered pursuant hereto or thereto shall prove untrue
in any material respect on the date as of which it was deemed to have
been made; or
(c) Covenants. Any Credit Party shall
(i) default in the due performance or
observance of any term, covenant or agreement contained in
Sections 7.2, 7.9, 7.10, 7.11, 7.12 or 8.1 through 8.14,
inclusive, or
(ii) default in the due performance or
observance by it of any term, covenant or agreement (other
than those referred to in subsections (a), (b) or (c)(i) of
this Section 9.1) contained in this Credit Agreement and such
default shall continue unremedied for a period of at least 30
days after the earlier of a responsible officer of a Credit
Party becoming aware of such default or notice thereof by the
Administrative Agent; or
(d) Other Credit Documents.
(i) Any Credit Party shall default in the
due performance or observance of any term, covenant or
agreement in any of the other Credit Documents (subject to
applicable grace or cure periods) if any, or
(ii) any Credit Document shall fail to be in
full force and effect to give the Administrative Agent and/or
the Lenders the liens, rights, powers and privileges purported
to be created thereby; or
(e) Guaranties. The guaranty given by any Guarantor hereunder
(including any Additional Credit Party) or any provision thereof shall
cease to be in full force and effect, or any Guarantor (including any
Additional Credit Party) hereunder or any Person acting by or on behalf
of such Guarantor shall deny or disaffirm such Guarantor's obligations
under such guaranty; or
(f) Bankruptcy, etc. Any Credit Party shall commence a
voluntary case concerning itself under the Bankruptcy Code; or an
involuntary case is commenced
<PAGE>
against any Credit Party under the Bankruptcy Code and the petition is
not dismissed within 60 days, after commencement of the case; or a
custodian (as defined in the Bankruptcy Code) is appointed for, or
takes charge of all or substantially all of the property of any Credit
Party; or any Credit Party commences any other proceeding under any
reorganization, arrangement, adjustment of the debt, relief of
creditors, dissolution, insolvency or similar law of any jurisdiction
whether now or hereafter in effect relating to any Credit Party; or
there is commenced against any Credit Party any such proceeding which
remains undismissed for a period of 60 days; or any Credit Party is
adjudicated insolvent or bankrupt; or any order of relief or other
order approving any such case or proceeding is entered against any
Credit Party; or any Credit Parties suffers appointment of any
custodian or the like for it or for any substantial part of its
property to continue unchanged or unstayed for a period of 60 days; or
any Credit Party makes a general assignment for the benefit of
creditors; or any corporate action is taken by any Credit Party for the
purpose of effecting any of the foregoing; or
(g) Defaults under Other Agreements. With respect to any
Indebtedness (other than Indebtedness outstanding under this Credit
Agreement) in excess of $5,000,000 in the aggregate for all of the
Credit Parties taken as a whole, (i) any Credit Party shall (A) default
in any payment (beyond the applicable grace period with respect
thereto, if any) with respect to any such Indebtedness, or (B) default
in the observance or performance of any covenant or agreement relating
to such Indebtedness or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event or
condition shall occur or condition exist, the effect of which default
or other event or condition is to cause, or permit the holder or
holders of such Indebtedness (or trustee or agent on behalf of such
holders) to cause (determined without regard to whether any notice or
lapse of time is required), any such Indebtedness to become due prior
to its stated maturity; or (ii) any such Indebtedness shall be declared
due and payable, or required to be prepaid other than by a regularly
scheduled required prepayment, prior to the stated maturity thereof; or
(h) Judgments. One or more judgments or decrees shall be
entered against any Credit Party involving a liability of $5,000,000 or
more in the aggregate (to the extent not paid or fully covered by
insurance provided by a carrier who has acknowledged coverage) and any
such judgments or decrees shall not have been vacated, discharged or
stayed or bonded pending appeal within 30 days from the entry thereof;
or
(i) ERISA. Any of the following events or conditions that
result in a Material Adverse Effect: (1) any "accumulated funding
deficiency," as such term is defined in Section 302 of ERISA and
Section 412 of the Code, whether or not waived, shall exist with
respect to any Plan, or any lien shall arise on the assets of any
Credit Party or any ERISA Affiliate in favor of the PBGC or a Plan; (2)
a Termination Event shall occur with respect to a Single Employer Plan,
which is, in
<PAGE>
the reasonable opinion of the Administrative Agent, likely to result in
the termination of such Plan for purposes of Title IV of ERISA; (3) a
Termination Event shall occur with respect to a Multiemployer Plan or
Multiple Employer Plan, which is, in the reasonable opinion of the
Administrative Agent, likely to result in (i) the termination of such
Plan for purposes of Title IV of ERISA, or (ii) any Credit Party or any
ERISA Affiliate incurring any liability in connection with a withdrawal
from, reorganization of (within the meaning of Section 4241 of ERISA),
or insolvency or (within the meaning of Section 4245 of ERISA) such
Plan; or (4) any prohibited transaction (within the meaning of Section
406 of ERISA or Section 4975 of the Code) or breach of fiduciary
responsibility shall occur which may subject any Credit Party or any
ERISA Affiliate to any liability under Sections 406, 409, 502(i), or
502(l) of ERISA or Section 4975 of the Code, or under any agreement or
other instrument pursuant to which any Credit Party or any ERISA
Affiliate has agreed or is required to indemnify any Person against any
such liability; or
(j) Ownership. There shall occur a Change of Control.
9.2 Acceleration; Remedies.
Upon the occurrence of an Event of Default, and at any time thereafter
unless and until such Event of Default has been waived by the Required Lenders
or cured to the satisfaction of the Required Lenders (pursuant to the voting
procedures in Section 11.6), the Administrative Agent shall, upon the request
and direction of the Required Lenders, by written notice to the Credit Parties
take any of the following actions without prejudice to the rights of the
Administrative Agent or any Lender to enforce its claims against the Credit
Parties, except as otherwise specifically provided for herein:
(i) Termination of Commitments. Declare the
Commitments terminated, whereupon the Commitments shall be
immediately terminated.
(ii) Acceleration. Declare the unpaid
principal of and any accrued interest in respect of all Loans,
the LOC Obligations (with accrued interest thereon) and any
and all other indebtedness or obligations of any and every
kind owing by the Borrowers to any of the Lenders hereunder to
be due whereupon the same shall be immediately due and payable
without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrowers. The
Administrative Agent may direct the Borrowers to pay to the
Administrative Agent cash collateral as security for the LOC
Obligations for subsequent drawings under then outstanding
Letters of Credit in an amount equal to the maximum amount
which may be drawn under Letters of Credit then outstanding,
whereupon the same shall immediately become due and payable.
(iii) Enforcement of Rights. Enforce any and
all rights and
<PAGE>
interests created and existing under the Credit Documents and
all rights of set-off.
Notwithstanding the foregoing, if an Event of Default specified in Section
9.1(f) shall occur, then the Commitments shall automatically terminate and all
Loans, all reimbursement obligations arising from drawings under Letters of
Credit, all accrued interest in respect thereof, all accrued and unpaid Fees and
other indebtedness or obligations owing to the Lenders hereunder automatically
shall immediately become due and payable without the giving of any notice or
other action by the Administrative Agent.
SECTION 10
AGENCY PROVISIONS
-----------------
10.1 Appointment.
Each Lender hereby designates and appoints the Administrative Agent to
act as its agent under this Credit Agreement and the other Credit Documents, and
each such Lender hereby authorizes the Administrative Agent as the agent for
such Lender, to take such action on its behalf under the provisions of this
Credit Agreement and the other Credit Documents and to exercise such powers and
perform such duties as are expressly delegated by the terms hereof and of the
other Credit Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere
herein or in the other Credit Documents, the Administrative Agent shall not have
any duties or responsibilities, except those expressly set forth herein and
therein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Credit Agreement or any of the other Credit Documents, or
shall otherwise exist against the Administrative Agent. The provisions of this
Section are solely for the benefit of the Administrative Agent and the Lenders
and none of the Credit Parties shall have any rights as a third party
beneficiary of the provisions hereof. In performing its functions and duties
under this Credit Agreement and the other Credit Documents, the Administrative
Agent shall act solely as agent of the Lenders and does not assume and shall not
be deemed to have assumed any obligation or relationship of agency or trust with
or for any Credit Party.
10.2 Delegation of Duties.
The Administrative Agent may execute any of its duties hereunder or
under the other Credit Documents by or through agents or attorneys-in-fact and
shall be entitled to advice of counsel concerning all matters pertaining to such
duties. The Administrative Agent shall not be responsible for the negligence or
misconduct of any agents or attorneys-in-fact selected by it with reasonable
care.
10.3 Exculpatory Provisions.
<PAGE>
Neither the Administrative Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any
action lawfully taken or omitted to be taken by it or such Person under or in
connection herewith or in connection with any of the other Credit Documents
(except for its or such Person's own gross negligence or willful misconduct), or
(ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by any of the Credit Parties
contained herein or in any of the other Credit Documents or in any certificate,
report, document, financial statement or other written or oral statement
referred to or provided for in, or received by the Administrative Agent under or
in connection herewith or in connection with the other Credit Documents, or
enforceability or sufficiency therefor of any of the other Credit Documents, or
for any failure of any Credit Party to perform its obligations hereunder or
thereunder. The Administrative Agent shall not be responsible to any Lender for
the effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of this Credit Agreement, or any of the other Credit Documents or
for any representations, warranties, recitals or statements made herein or
therein or made by the Borrower or any Credit Party in any written or oral
statement or in any financial or other statements, instruments, reports,
certificates or any other documents in connection herewith or therewith
furnished or made by the Administrative Agent to the Lenders or by or on behalf
of the Credit Parties to the Administrative Agent or any Lender or be required
to ascertain or inquire as to the performance or observance of any of the terms,
conditions, provisions, covenants or agreements contained herein or therein or
as to the use of the proceeds of the Loans or of the existence or possible
existence of any Default or Event of Default or to inspect the properties, books
or records of the Credit Parties.
10.4 Reliance on Communications.
The Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to any of the Credit Parties, independent accountants and
other experts selected by the Administrative Agent with reasonable care). The
Administrative Agent may deem and treat the Lenders as the owner of its
interests hereunder for all purposes unless a written notice of assignment,
negotiation or transfer thereof shall have been filed with the Administrative
Agent in accordance with Section 11.3(b) hereof. The Administrative Agent shall
be fully justified in failing or refusing to take any action under this Credit
Agreement or under any of the other Credit Documents unless it shall first
receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting,
hereunder or under any of the other Credit Documents in accordance with a
request of the Required Lenders (or to the extent specifically provided in
Section 11.6,
<PAGE>
all the Lenders) and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders (including their
successors and assigns).
10.5 Notice of Default.
The Administrative Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default (other than a
payment Default) hereunder unless the Administrative Agent has received notice
from a Lender or a Credit Party referring to the Credit Document, describing
such Default or Event of Default and stating that such notice is a "notice of
default." In the event that the Administrative Agent receives such a notice, the
Administrative Agent shall give prompt notice thereof to the Lenders. The
Administrative Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Lenders.
10.6 Non-Reliance on Administrative Agent and Other Lenders.
Each Lender expressly acknowledges that neither the Administrative
Agent nor any of its officers, directors, employees, agents, attorneys-in-fact
or affiliates has made any representations or warranties to it and that no act
by the Administrative Agent or any of its respective affiliates hereinafter
taken, including any review of the affairs of any Credit Party shall be deemed
to constitute any representation or warranty by the Administrative Agent to any
Lender. Each Lender represents to the Administrative Agent that it has,
independently and without reliance upon the Administrative Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
assets, operations, property, financial and other conditions, prospects and
creditworthiness of the Borrowers and the other Credit Parties and made its own
decision to make its Loans hereunder and enter into this Credit Agreement. Each
Lender also represents that it will, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Credit Agreement, and to make such investigation as it deems necessary to
inform itself as to the business, assets, operations, property, financial and
other conditions, prospects and creditworthiness of the Borrowers and the other
Credit Parties. Except for notices, reports and other documents expressly
required to be furnished to the Lenders by the Administrative Agent hereunder,
the Administrative Agent shall have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, operations,
assets, property, financial or other conditions, prospects or creditworthiness
of the Borrowers and the other Credit Parties which may come into the possession
of the Administrative Agent or any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates.
10.7 Indemnification.
The Lenders agree to indemnify the Administrative Agent in its capacity
as such (to the extent not reimbursed by the Borrowers and without limiting the
obligation of the
<PAGE>
Borrowers to do so), ratably according to their respective Commitments (or if
the Commitments have expired or been terminated, in accordance with the
respective principal amounts of outstanding Loans and Participation Interests of
the Lenders), from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever which may at any time (including without limitation at
any time following the payment of the Borrowers' Obligations) be imposed on,
incurred by or asserted against the Administrative Agent in its capacity as such
in any way relating to or arising out of this Credit Agreement or the other
Credit Documents or any documents contemplated herein or the transactions
contemplated hereby or thereby or any action taken or omitted by the
Administrative Agent under or in connection with any of the foregoing; provided
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the gross negligence or willful
misconduct of the Administrative Agent. If any indemnity furnished to the
Administrative Agent for any purpose shall, in the opinion of the Administrative
Agent, be insufficient or become impaired, the Administrative Agent may call for
additional indemnity and cease, or not commence, to do the acts indemnified
against until such additional indemnity is furnished. The agreements in this
Section shall survive the repayment of the Loans and other obligations under the
Credit Documents and the termination of the Commitments hereunder.
10.8 Administrative Agent in its Individual Capacity.
The Administrative Agent and its affiliates may make loans to, accept
deposits from and generally engage in any kind of business with any Credit Party
as though the Administrative Agent were not Administrative Agent hereunder. With
respect to the Loans made and all Borrowers' Obligations owing to it, the
Administrative Agent shall have the same rights and powers under this Credit
Agreement as any Lender and may exercise the same as though they were not
Administrative Agent, and the terms "Lender" and "Lenders" shall include the
Administrative Agent in its individual capacity.
10.9 Successor Agent.
The Administrative Agent may, at any time, resign upon 20 days' written
notice to the Lenders, and be removed with or without cause by the Required
Lenders upon 30 days' written notice to the Administrative Agent; provided that
prior to the occurrence of an Event of Default, such successor Administrative
Agent shall not be appointed without the consent of the Borrowers, which consent
shall not be unreasonably withheld. Upon any such resignation or removal, the
Required Lenders shall have the right to appoint a successor Administrative
Agent; provided that prior to the occurrence of an Event of Default, such
successor Administrative Agent shall not be appointed without the consent of the
Borrowers which consent shall not be unreasonably withheld. If no successor
Administrative Agent shall have been so appointed by the Required Lenders, and
shall have accepted such appointment, within 30 days after the notice of
resignation or notice of removal, as appropriate, then the retiring
Administrative Agent shall select a successor Administrative Agent provided such
successor is a Lender hereunder or a commercial bank organized under
<PAGE>
the laws of the United States of America or of any State thereof and has a
combined capital and surplus of at least $400,000,000. Upon the acceptance of
any appointment as Administrative Agent hereunder by a successor, such successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations as Administrative Agent, as appropriate, under this Credit Agreement
and the other Credit Documents and the provisions of this Section 10.9 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Administrative Agent under this Credit Agreement.
SECTION 11
MISCELLANEOUS
-------------
11.1 Notices.
Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (i) when
delivered, (ii) when transmitted via telecopy (or other facsimile device) to the
number set out below, (iii) the day following the day on which the same has been
delivered prepaid to a reputable national overnight air courier service, or (iv)
the third Business Day following the day on which the same is sent by certified
or registered mail, postage prepaid, in each case to the respective parties at
the address, in the case of the Borrowers and Guarantors and the Administrative
Agent, set forth below, and in the case of the Lenders, set forth on Schedule
2.1(a), or at such other address as such party may specify by written notice to
the other parties hereto:
if to the Borrowers or the Guarantors:
Speedway Motorsports, Inc.
P.O. Box 18747
Charlotte, North Carolina 28218
Attn: Chief Financial Officer
Telephone: (704) 532-3306
Telecopy: (704) 532-3312
with copies to:
Speedway Motorsports, Inc.
P.O. Box 600
Concord, North Carolina 28026-0600
Attn: Chief Financial Officer
Speedway Funding Corp.
900 N. Market Street
<PAGE>
Suite 200
Wilmington, Delaware 19801
Attn: Victoria L. Garrett, Vice President
if to the Administrative Agent:
NationsBank, N.A.
Independence Center, 15th Floor
NC1-001-15-04
101 N. Tryon Street
Charlotte, North Carolina 28255
Attn: Michael W. Stearns
Telephone: (704) 386-9046
Telecopy: (704) 409-0026
with a copy to:
NationsBank, N.A.
NationsBank Corporate Center
NC1-007-17-09
100 N. Tryon Street
Charlotte, North Carolina 28255
Attn: Sports Finance Group
Telephone: (704) 386-5474
Telecopy: (704) 386-1270
11.2 Right of Set-Off.
In addition to any rights now or hereafter granted under applicable law
or otherwise, and not by way of limitation of any such rights, upon the
occurrence of an Event of Default, each Lender is authorized at any time and
from time to time, without presentment, demand, protest or other notice of any
kind (all of which rights being hereby expressly waived), to set-off and to
appropriate and apply any and all deposits (general or special) and any other
indebtedness at any time held or owing by such Lender (including, without
limitation branches, agencies or Affiliates of such Lender wherever located) to
or for the credit or the account of any Credit Party against obligations and
liabilities of such Credit Party to such Lender hereunder, under the Notes, the
other Credit Documents or otherwise, irrespective of whether such Lender shall
have made any demand hereunder and although such obligations, liabilities or
claims, or any of them, may be contingent or unmatured, and any such set-off
shall be deemed to have been made immediately upon the occurrence of an Event of
Default even though such charge is made or entered on the books of such Lender
subsequent thereto. Each of the Credit Parties hereby agrees that any Person
purchasing a participation in the Loans and Commitments hereunder pursuant to
Section 11.3(c) may exercise all rights of set-off with respect to its
participation interest as fully as if such Person were a Lender hereunder.
<PAGE>
11.3 Benefit of Agreement.
(a) Generally. This Credit Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto; provided that none of the Credit
Parties may assign and transfer any of its interests without prior
written consent of all the Lenders; provided further that the rights of
each Lender to transfer, assign or grant participations in its rights
and/or obligations hereunder shall be limited as set forth in this
Section 11.3, provided however that nothing herein shall prevent or
prohibit any Lender from (i) pledging its Loans hereunder to a Federal
Reserve Bank in support of borrowings made by such Lender from such
Federal Reserve Bank, or (ii) granting assignments or participation in
such Lender's Loans and/or Commitments hereunder to its parent company
and/or to any affiliate of such Lender which is at least 50% owned by
such Lender or its parent company.
(b) Assignments. Each Lender may assign all or a portion of
its rights and obligations hereunder pursuant to an assignment
agreement substantially in the form of Schedule 11.3(b) to one or more
Eligible Assignees, provided that any assignment of a portion of its
rights and obligations hereunder shall be in a minimum aggregate amount
of $10,000,000 of the Commitments and in integral multiples of
$1,000,000 above such amount, that such assignment shall be of a
constant, not varying, percentage of all of the assigning Lender's
rights and obligations under this Credit Agreement. Any assignment
hereunder shall be effective upon delivery to the Administrative Agent
of written notice of the assignment together with a transfer fee of
$3,500 (paid by the assignee) payable to the Administrative Agent for
its own account; provided, however, that no transfer fee will be
required in connection with assignments to an Affiliate or Subsidiary
of a Lender so long as such assignments do not exceed two in any one
year. The assigning Lender will give prompt notice to the
Administrative Agent and the Borrowers of any such assignment. Upon the
effectiveness of any such assignment (and after notice to the Borrowers
as provided herein), the assignee shall become a "Lender" for all
purposes of this Credit Agreement and the other Credit Documents and,
to the extent of such assignment, the assigning Lender shall be
relieved of its obligations hereunder to the extent of the Loans and
Commitment components being assigned. Along such lines, the Borrowers
agree that, upon notice of any such assignment and surrender of the
appropriate Note or Notes, they will promptly provide to the assigning
Lender and to the assignee separate promissory notes in the amount of
their respective interests substantially in the form of the original
Note or Notes (but with notation thereon that it is given in
substitution for and replacement of the original Note or Notes or any
replacement notes thereof).
(c) Participations. Each Lender may sell, transfer, grant or
assign participations in all or any part of such Lender's interests and
obligations hereunder; provided that (i) such selling Lender shall
remain a "Lender" for all purposes under
<PAGE>
this Credit Agreement (such selling Lender's obligations under the
Credit Documents remaining unchanged) and the participant shall not
constitute a Lender hereunder, (ii) no such participant shall have, or
be granted, rights to approve any amendment or waiver relating to this
Credit Agreement or the other Credit Documents except to the extent any
such amendment or waiver would (A) reduce the principal of or rate of
interest on or Fees in respect of any Loans in which the participant is
participating, (B) postpone the date fixed for any payment of principal
(including extension of the Termination Date or the date of any
mandatory prepayment), interest or Fees in which the participant is
participating, or (C) release all or any substantial part of any
collateral or guaranties (except as expressly provided in the Credit
Documents) supporting any of the Loans or Commitments in which the
participant is participating, (iii) sub-participations by the
participant (except to an affiliate, parent company or affiliate of a
parent company of the participant) shall be prohibited and (iv) any
participations of a portion of a Lender's rights and obligations
hereunder shall be in a minimum aggregate amount of $5,000,000 of the
Commitments and in integral multiples of $1,000,000 in excess thereof.
In the case of any such participation, the participant shall not have
any rights under this Credit Agreement or the other Credit Documents
(the participant's rights against the selling Lender in respect of such
participation to be those set forth in the participation agreement with
such Lender creating such participation) and all amounts payable by the
Borrower hereunder shall be determined as if such Lender had not sold
such participation, provided, however, that such participant shall be
entitled to receive additional amounts under Sections 3.6, 3.9, 3.10
and 3.11 on the same basis as if it were a Lender.
11.4 No Waiver; Remedies Cumulative.
No failure or delay on the part of the Administrative Agent or any
Lender in exercising any right, power or privilege hereunder or under any other
Credit Document and no course of dealing between any of the Credit Parties shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder or under any other Credit Document preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege hereunder or thereunder. The rights and remedies provided herein
are cumulative and not exclusive of any rights or remedies which the
Administrative Agent or any Lender would otherwise have. No notice to or demand
on any Credit Party in any case shall entitle the Borrowers or any other Credit
Party to any other or further notice or demand in similar or other circumstances
or constitute a waiver of the rights of the Administrative Agent or the Lenders
to any other or further action in any circumstances without notice or demand.
11.5 Payment of Expenses, etc.
The Borrowers jointly and severally agree to: (i) pay all reasonable
out-of-pocket costs and expenses of the Administrative Agent in connection with
the negotiation, preparation, execution and delivery and administration of this
Credit Agreement and the
<PAGE>
other Credit Documents and the documents and instruments referred to therein
(including, without limitation, the reasonable fees and expenses of Moore & Van
Allen, special counsel to the Administrative Agent) and any amendment, waiver or
consent relating hereto and thereto including, but not limited to, any such
amendments, waivers or consents resulting from or related to any work-out,
renegotiation or restructure relating to the performance by the Credit Parties
under this Credit Agreement and of the Administrative Agent and the Lenders in
connection with enforcement of the Credit Documents and the documents and
instruments referred to therein (including, without limitation, in connection
with any such enforcement, the reasonable fees and disbursements of counsel for
the Administrative Agent and each of the Lenders); (ii) pay and hold each of the
Lenders harmless from and against any and all present and future stamp and other
similar taxes with respect to the foregoing matters and save each of the Lenders
harmless from and against any and all liabilities with respect to or resulting
from any delay or omission (other than to the extent attributable to such
Lender) to pay such taxes; and (iii) indemnify each Lender, its officers,
directors, employees, representatives and agents from and hold each of them
harmless against any and all losses, liabilities, claims, damages or expenses
incurred by any of them as a result of, or arising out of, or in any way related
to, or by reason of any investigation, litigation or other proceeding (whether
or not any Lender is a party thereto) related to the entering into and/or
performance of any Credit Document or the use of proceeds of any Loans
(including other extensions of credit) hereunder or the consummation of any
other transactions contemplated in any Credit Document or any Environmental
Claim (except to the extent such claim arises from the gross negligence or
willful misconduct of any indemnified party), including, without limitation, the
reasonable fees and disbursements of counsel incurred in connection with any
such investigation, litigation or other proceeding (but excluding, any such
losses, liabilities, claims, damages or expenses to the extent incurred by
reason of gross negligence or willful misconduct on the part of the Person to be
indemnified).
11.6 Amendments, Waivers and Consents.
Neither this Credit Agreement nor any other Credit Document nor any of
the terms hereof or thereof may be amended, changed, waived, discharged or
terminated unless such amendment, change, waiver, discharge or termination is in
writing signed by the Required Lenders, provided that no such amendment, change,
waiver, discharge or termination shall, without the consent of each Lender
affected thereby, (i) extend the scheduled maturities (including the final
maturity and any mandatory scheduled prepayments) of any Loan, or any portion
thereof, or reduce the rate or extend the time of payment of interest (other
than as a result of waiving the applicability of any post-default increase in
interest rates) thereon or fees hereunder or reduce the principal amount
thereof, or increase the Commitments of the Lenders over the amount thereof in
effect (it being understood and agreed that a waiver of any Default or Event of
Default shall not constitute a change in the terms of any Commitment of any
Lender), (ii) release any Guarantor from its guaranty obligations hereunder,
(iii) amend, modify or waive any provision of this Section or Section 3.5, 3.11,
3.12, 3.13, 3.14, 5.1, 5,2, 9.1(a), 11.2, 11.3, or 11.9, (iv) reduce any
percentage specified in, or otherwise modify, the definition of Required
Lenders, (v) consent to the assignment or transfer by any Borrower (or
Guarantor) of any of its rights and obligations under (or in
<PAGE>
respect of) this Credit Agreement or (vi) release all or any substantial part of
any collateral. No provision of Section 10 may be amended without the consent of
the Administrative Agent.
Notwithstanding the above, the right to deliver a Payment Blockage
Notice (as defined in the Indenture) shall reside solely with the Administrative
Agent and the Administrative Agent shall deliver such Payment Blockage Notice
only upon the direction of the Required Lenders.
11.7 Counterparts.
This Credit Agreement may be executed in any number of counterparts,
each of which where so executed and delivered shall be an original, but all of
which shall constitute one and the same instrument. It shall not be necessary in
making proof of this Credit Agreement to produce or account for more than one
such counterpart.
11.8 Headings.
The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.
11.9 Survival of Indemnification.
All indemnities set forth herein, including, without limitation, in
Section 3.9, 3.11, 10.7 or 11.5 shall survive the execution and delivery of this
Credit Agreement, the making of the Loans, the repayment of the Loans and other
obligations under the Credit Documents and the termination of the Commitments
hereunder.
11.10 Governing Law; Submission to Jurisdiction; Venue.
(a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER
SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NORTH CAROLINA. Any legal action or proceeding
with respect to this Credit Agreement or any other Credit Document may
be brought in the courts of the State of North Carolina, in Mecklenburg
County, or of the United States for the Western District of North
Carolina, and, by execution and delivery of this Credit Agreement, each
of the Credit Parties hereby irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the
jurisdiction of such courts. Each of the Credit Parties further
irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the mailing
of copies thereof by registered or certified mail, postage prepaid, to
it at the address set out notices pursuant to Section 11.1, such
service to become effective 30 days
<PAGE>
after such mailing. Nothing herein shall affect the right of the
Administrative Agent to serve process in any other manner permitted by
law or to commence legal proceedings or to otherwise proceed against
any Credit Party in any other jurisdiction.
(b) Each of the Credit Parties hereby irrevocably waives any
objection which it may now or hereafter have to the laying of venue of
any of the aforesaid actions or proceedings arising out of or in
connection with this Credit Agreement or any other Credit Document
brought in the courts referred to in subsection (a) hereof and hereby
further irrevocably waives and agrees not to plead or claim in any such
court that any such action or proceeding brought in any such court has
been brought in an inconvenient forum.
11.11 Severability.
If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
11.12 Entirety.
This Credit Agreement together with the other Credit Documents
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and understandings, oral or written, if any, including any
commitment letters or correspondence relating to the Credit Documents or the
transactions contemplated herein and therein.
11.13 Survival of Representations and Warranties.
All representations and warranties made by the Credit Parties herein
shall survive delivery of the Notes and the making of the Loans hereunder.
11.14 Binding Effect; Termination.
(a) This Credit Agreement shall become effective at such time
on or after the Closing Date when it shall have been executed by the
Borrowers, the Guarantors and the Administrative Agent, and the
Administrative Agent shall have received copies hereof (telefaxed or
otherwise) which, when taken together, bear the signatures of each
Lender, and thereafter this Credit Agreement shall be binding upon and
inure to the benefit of the Borrowers, the Guarantors, the
Administrative Agent and each Lender and their respective successors
and assigns.
(b) The term of this Credit Agreement shall remain in effect
until no Loans or any other amounts payable hereunder or under any of
the other Credit Documents shall remain outstanding and until all of
the Commitments hereunder
<PAGE>
shall have expired or been terminated.
11.15 Borrowers' Obligations Joint and Several.
(a) Each of the Borrowers is accepting joint and several liability
hereunder in consideration of the financial accommodation to be provided by the
Lenders under this Credit Agreement, for the mutual benefit, directly and
indirectly, of each of the Borrowers and in consideration of the undertakings of
each of the Borrowers to accept joint and several liability for the obligations
of each of them.
(b) Each of the Borrowers jointly and severally hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor, joint
and several liability with the other Borrower with respect to the payment and
performance of all of the obligations of the Borrowers under the Credit
Documents (the "Credit Obligations"), it being the intention of the parties
hereto that all such Credit Obligations shall be the joint and several
obligations of each of the Borrowers without preferences or distinction among
them.
(c) If and to the extent that either of the Borrowers shall fail to
make any payment with respect to any of the Credit Obligations as and when due
or to perform any of the Credit Obligations in accordance with the terms
thereof, then in each such event, the other Borrower will make such payment with
respect to, or perform, such Credit Obligation.
(d) The obligations of each Borrower under the provisions of this
Section 11.15 constitute full recourse obligations of the Borrowers, enforceable
against the Borrowers to the full extent of their properties and assets,
irrespective of the validity, regularity or enforceability of this Credit
Agreement or any other circumstances whatsoever.
(e) Except as otherwise expressly provided herein, each Borrower hereby
waives notice of acceptance of its joint and several liability, notice of any
Loan made under this Credit Agreement, notice of occurrence of any Event of
Default, or of any demand for any payment under this Credit Agreement, notice of
any action at any time taken or omitted by any Lender under or in respect of any
of the Credit Obligations, any requirement of diligence and, generally, all
demands, notices and other formalities of every kind in connection with this
Credit Agreement. Each Borrower hereby assents to, and waives notice of, any
extension or postponement of the time for the payment of any of the Credit
Obligations, the acceptance of any partial payment thereon, any waiver, consent
or other action or acquiescence by any Lender at any time or times in respect of
any default by either Borrower in the performance or satisfaction of any term,
covenant, condition or provision of this Credit Agreement, any and all other
indulgences whatsoever by any Lender in respect of any of the Credit
Obligations, and the taking, addition, substitution or release, in whole or in
part, at any time or times, of any security for any of the Credit Obligations or
the addition, substitution or release, in whole or in part, of any Borrower.
Without limiting the generality of the foregoing, each Borrower assents to any
other action or delay in acting or failure to act on the part of any Lender,
including, without limitation, any failure strictly or diligently to assert any
right or to pursue any remedy or to comply fully with the applicable laws or
<PAGE>
regulations thereunder which might, but for the provisions of this Section
11.15, afford grounds for terminating, discharging or relieving such Borrower,
in whole or in part, from any of its obligations under this Section 11.15, it
being the intention of each Borrower that, so long as any of the Obligations
remain unsatisfied, the obligations of such Borrower under this Section 11.15
shall not be discharged except by performance and then only to the extent of
such performance. The Credit Obligations of each Borrower under this Section
11.15 shall not be diminished or rendered unenforceable by any winding up,
reorganization, arrangement, liquidation, reconstruction or similar proceeding
with respect to either Borrower or any Lender. The joint and several liability
of the Borrowers hereunder shall continue in full force and effect
notwithstanding any absorption, merger, amalgamation or any other change
whatsoever in the name, membership, constitution or place of formation of either
Borrower or any Lender.
(f) The provisions of this Section 11.15 are made for the benefit of
the Lenders and their respective successors and assigns, and may be enforced by
any such Person from time to time against either of the Borrowers as often as
occasion therefor may arise and without requirement on the part of any Lender
first to marshal any of its claims or to exercise any of its rights against
either of the other Borrowers or to exhaust any remedies available to it against
the other Borrower or to resort to any other source or means of obtaining
payment of any of the Obligations or to elect any other remedy. The provisions
of this Section 11.15 shall remain in effect until all the Obligations shall
have been paid in full or otherwise fully satisfied. If at any time, any
payment, or any part thereof, made in respect of any of the Credit Obligations,
is rescinded or must otherwise be restored or returned by any Lender upon the
insolvency, bankruptcy or reorganization of either of the Borrowers, or
otherwise, the provisions of this Section 11.15 will forthwith be reinstated in
effect, as though such payment had not been made.
(g) Notwithstanding any provision to the contrary contained herein or
in any other of the Credit Documents, to the extent the joint obligations of a
Borrower shall be adjudicated to be invalid or unenforceable for any reason
(including, without limitation, because of any applicable state or federal law
relating to fraudulent conveyances or transfers) then the obligations of each
Borrower hereunder shall be limited to the maximum amount that is permissible
under applicable law (whether federal or state and including, without
limitation, the federal Bankruptcy Code).
Each of the parties hereto has caused a counterpart of this Credit
Agreement to be duly executed and delivered as of the date first above written.
BORROWERS:
SPEEDWAY MOTORSPORTS, INC., a Delaware
corporation
<PAGE>
By: /s/ William R.Brooks
Title: Chief Financial Officer and Vice President
SPEEDWAY FUNDING CORP., a Delaware
corporation
By: /s/ Daniel F. Lindley
Title: Secretary
GUARANTORS:
600 RACING, INC., a North Carolina corporation
By: /s/ William R. Brooks
Title: Vice President
ATLANTA MOTOR SPEEDWAY, INC., a Georgia
corporation
By: /s/ William R. Brooks
Title: Vice President
[SIGNATURES CONTINUE]
BRISTOL MOTOR SPEEDWAY, INC., a Tennessee
corporation
By: /s/ William R. Brooks
Title: Vice President
CHARLOTTE MOTOR SPEEDWAY, INC., a North
<PAGE>
Carolina corporation
By: /s/ William R. Brooks
Title: Vice President
INEX CORP., a North Carolina corporation
By: /s/ William R. Brooks
Title: Vice President
LAS VEGAS MOTOR SPEEDWAY, LLC, a
Nevada limited liability company
By: /s/ William R. Brooks
Title: Manager
SMI SYSTEMS, LLC, a Nevada
limited liability company
By: /s/ William R. Brooks
Title: Manager
SONOMA FUNDING CORPORATION, a
California corporation
By: /s/ William R. Brooks
Title: Vice President
[SIGNATURES CONTINUE]
SPEEDWAY CONSULTING & DESIGN, INC., a
<PAGE>
North Carolina corporation
By: /s/ William R. Brooks
Title: Vice President
SPEEDWAY SYSTEMS LLC, a North Carolina
limited liability company
By: IMS Systems Limited Partnership,
its sole manager
By: Speedway Motorsports, Inc.,
its general partner
By: /s/ William R. Brooks
Title: Vice President
SPR ACQUISITION CORPORATION, a California
corporation
By: /s/ William R. Brooks
Title: Vice President
TEXAS MOTOR SPEEDWAY, INC., a Texas
corporation
By: /s/ William R. Brooks
Title: Vice President
THE SPEEDWAY CLUB, INC., a North Carolina
corporation
By: /s/ William R. Brooks
Title: Vice President
<PAGE>
[SIGNATURES CONTINUE]
SPEEDWAY SCREEN PRINTING, LLC, a
North Carolina limited liability company
By: /s/ William R. Brooks
Title: Manager
IMS SYSTEMS LIMITED PARTNERSHIP, a
North Carolina limited partnership company
By: SPEEDWAY MOTORSPORTS, INC., its general
partner
By: /s/ William R. Brooks
Title: Vice President
LENDERS:
BANK ONE, TEXAS, N.A.
By: /s/ Randall Rapp
Title: Vice President
CREDIT LYONNAIS ATLANTA AGENCY
By: /s/ David M. Cawrse
Title: First Vice President and Manager
FIRST AMERICAN NATIONAL BANK
By: /s/ H. Hope Stewart
Title: Assistant Vice President
FIRST SECURITY BANK OF NEVADA
By: /s/ Cheryl Moss
<PAGE>
Title: Senior Vice President
[SIGNATURES CONTINUE]
FIRST UNION NATIONAL BANK
By: /s/ illegible
Title: Senior Vice President
FLEET NATIONAL BANK
By: /s/ illegible
Title: Vice President
NATIONAL CITY BANK OF KENTUCKY
By: /s/ illegible
Title: Vice President
NATIONSBANK, N.A.
By: /s/ James E. Nash, Jr.
Title: Senior Vice President
SCOTIABANC, INC.
By: /s/ Wiliam E. Zarrett
Title: Senior Relationship Manager
SOUTHTRUST BANK, N.A.
By: /s/ illegible
Title: Group Vice President
[SIGNATURES CONTINUE]
<PAGE>
SUNTRUST BANK, ATLANTA
By: /s/ Shelley M. Browne
Title: Vice President
ADMINISTRATIVE AGENT:
NATIONSBANK, N.A.
By: /s/ James E. Nash, Jr.
Title: Senior Vice President
SYNDICATION AGENT:
FIRST UNION NATIONAL BANK
By: /s/ illegible
Title: Senior Vice President
DOCUMENTATION AGENT:
CREDIT LYONNAIS ATLANTA AGENCY
By: /s/ David M. Cawrse
Title: First Vice President and Manager
LEAD ARRANGER
AND BOOK MANAGER:
BANC OF AMERICA SECURITIES LLC
By: /s/ illegible
Title: Managing Director
[SIGNATURES CONTINUE]
CO-AGENTS:
FIRST SECURITY BANK OF NEVADA
<PAGE>
By: /s/ Cheryl Moss
Title: Senior Vice President
FLEET NATIONAL BANK
By: /s/ illegible
Title: Vice President
SOUTHTRUST BANK, N.A.
By: /s/ illegible
Title: Group Vice President
SUNTRUST BANK, ATLANTA
By: /s/ Shelley M. Browne
Title: Vice President
PLEDGE AGREEMENT
PLEDGE AGREEMENT dated as of May 28, 1999 (as amended and modified, the
"Pledge Agreement" or this "Agreement") by those parties identified as
"Pledgors" on the signature pages hereto and such other parties as may become
Pledgors hereunder after the date hereof (the "Pledgors") in favor of
NATIONSBANK, N.A., as Administrative Agent (in such capacity, the
"Administrative Agent") for the Lenders under the Credit Agreement described
below and any Affiliates of Lenders which are party to any Hedging Agreements.
W I T N E S S E T H
WHEREAS, the Lenders have severally agreed to make loans and extensions
of credit to Speedway Motorsports, Inc., a Delaware corporation ("Speedway
Motorsports"), and Speedway Funding Corp., a Delaware corporation ("Speedway
Funding" -- hereinafter Speedway Motorsports and Speedway Funding may be
referred to collectively as the "Borrowers"), upon the terms and conditions
provided in that Credit Agreement dated as of the date hereof (as amended and
modified, the "Credit Agreement") among the Borrowers, the Guarantors and
Lenders identified therein and NationsBank, N.A., as Administrative Agent;
WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement and the obligation of the Lenders to make their respective loans and
extensions of credit to the Borrowers thereunder that the Pledgors shall have
executed and delivered this Pledge Agreement to the Administrative Agent for the
ratable benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Credit Agreement and to
induce the Lenders to make their respective loans and extensions of credit
thereunder, the Pledgors hereby agree with the Administrative Agent, for the
ratable benefit of the Lenders, as follows:
1. Defined Terms. (a) Unless otherwise defined herein, terms defined in
the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement.
(b) The following terms shall have the following meanings:
"Collateral": the Pledged Stock and all Proceeds thereof.
"Collateral Account": any account established to hold
money Proceeds, maintained under the sole dominion and control of
the Administrative Agent, subject to withdrawal by the
Administrative Agent for the account of the Lenders as provided in
Section 8(a) hereof.
"Issuers": the collective reference to the companies
identified on Schedule 1 hereto as the issuers of the Pledged
Stock; individually, each an "Issuer."
<PAGE>
"Pledged Stock": the shares of capital stock listed on
Schedule 1 hereto, together with all stock certificates, options or
rights of any nature whatsoever that may be issued or granted by any
Issuer to a Pledgor in respect of the Pledged Stock while this
Agreement is in effect.
"Proceeds": all "proceeds" as such term is defined in Section
9-306(1) of the Uniform Commercial Code on the date hereof and, in any
event, shall include, without limitation, all dividends or other income
from the Pledged Stock, collections thereon or distributions with
respect thereto.
"Secured Obligations": the collective reference to the
following:
(a) All unpaid principal of and interest on
(including, without limitation, interest accruing at the then
applicable rate provided in the Credit Agreement after the
maturity of the Loans and other obligations owing under the
Credit Agreement and interest accruing at the then applicable
rate provided in the Credit Agreement after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to either
Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding) the
Loans and all other obligations and liabilities of either
Borrower to the Administrative Agent and the Lenders, whether
direct or indirect, absolute or contingent, due or to become
due, or now existing or hereafter incurred, which may arise
under, out of, or in connection with, the Credit Agreement or
any other Credit Document, in each case whether on account of
principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel to the
Administrative Agent or to the Lenders that are required to be
paid by the Borrower pursuant to the terms of the Credit
Agreement or any other Credit Document); and
(b) the prompt payment, performance and observance by
the Guarantors of all obligations of the Guarantors under the
Credit Agreement and any other Credit Documents to which any
of the Guarantors is a party (including, without limitation,
payment of their guaranty obligations under the Credit
Agreement); and
(c) All liabilities and obligations, now existing or
hereafter arising, owing by either Borrower or any Guarantor
to any Lender or any Affiliate of a Lender arising under Hedge
Agreements to the extent permitted under the Credit Agreement.
"Securities Act": the Securities Act of 1933, as amended.
<PAGE>
"Uniform Commercial Code": the Uniform Commercial
Code from time to time in effect in the State of North
Carolina.
(c) The words "hereof," "herein" and "hereunder" and
words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular
provision of this Agreement, and section and paragraph
references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall
be equally applicable to both the singular and plural forms of
such terms.
2. Pledge; Grant of Security Interest. Each of the Pledgors hereby
delivers to the Administrative Agent, for the ratable benefit of the Lenders,
all the Pledged Stock and hereby grants to the Administrative Agent, for the
ratable benefit of the Lenders, a first security interest in the Collateral, as
collateral security for the prompt and complete payment and performance when due
(whether at the stated maturity, by acceleration or otherwise) of the Secured
Obligations.
3. Stock Powers. Concurrently with the delivery to the Administrative
Agent of each certificate representing one or more shares of Pledged Stock, each
of the Pledgors shall deliver an undated stock power covering such certificate,
duly executed in blank with, if the Administrative Agent so requests, signature
guaranteed.
4. Representations and Warranties. Each Pledgor represents and warrants
that:
(a) The Pledged Stock constitutes (i) 100% of the issued and
outstanding shares of all classes of capital stock of each Domestic
Subsidiary of the Borrowers and (ii) 65% (or such greater percentage
which would not result in material adverse tax consequences) of the
issued and outstanding capital stock entitled to vote (within the
meaning of Treas. Reg. Section 1.956-2(c)(2)) and 100% of the issued
and outstanding capital stock not entitled to vote (within the meaning
of Treas. Reg. Section 1.956-2(c)(2)) of each Foreign Subsidiary of the
Borrowers.
(b) All of the Pledged Stock has been duly and validly issued
and are fully paid and nonassessable.
(c) The Pledgor is the record and beneficial owner of, and has
good and marketable title to, the Pledged Stock of such Pledgor, free
of any and all Liens or options in favor of, or claims of, any other
Person, except the security interests created by this Agreement.
(d) Upon delivery to the Administrative Agent of the stock
certificates evidencing the Pledged Stock, the security interest
created by this Agreement will constitute a valid, perfected first
priority security interest in the Collateral, enforceable in accordance
with its terms against all creditors of the Pledgor and any Persons
purporting to purchase any Collateral from the Pledgor, except as
affected
<PAGE>
by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors'
rights generally, general equitable principles (whether considered in a
proceeding in equity or at law) and an implied covenant of good faith
and fair dealing.
5. Covenants. Each Pledgor covenants and agrees with the Administrative
Agent and the Lenders that, from and after the date of this Agreement until the
Secured Obligations have been satisfied in full and the Commitments have been
terminated:
(a) If the Pledgor shall, as a result of its ownership of the
Pledged Stock, become entitled to receive or shall receive any stock
certificate (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital or any certificate
issued in connection with any reorganization), option or rights,
whether in addition to, in substitution of, as a conversion of, or in
exchange for any shares of the Pledged Stock, or otherwise in respect
thereof, the Pledgor shall accept the same as the agent of the
Administrative Agent and the Lenders, hold the same in trust for the
Administrative Agent and the Lenders and deliver the same forthwith to
the Administrative Agent in the exact form received, duly indorsed by
the Pledgor to the Administrative Agent, if required, together with an
undated stock power covering such certificate duly executed in blank by
the Pledgor and with, if the Administrative Agent so requests,
signature guaranteed, to be held by the Administrative Agent, subject
to the terms hereof, as additional collateral security for the Secured
Obligations. Any sums paid to a Pledgor upon or in respect of the
Pledged Stock upon the liquidation or dissolution of any Issuer shall
be paid over to the Administrative Agent to be held by it hereunder as
additional collateral security for the Secured Obligations, and in case
any distribution of capital shall be made on or in respect of the
Pledged Stock or any property shall be distributed upon or with respect
to the Pledged Stock pursuant to the recapitalization or
reclassification of the capital of the Issuer or pursuant to the
reorganization thereof, the property so distributed shall be delivered
to the Administrative Agent to be held by it hereunder as additional
collateral security for the Secured Obligations. If any sums of money
or property so paid or distributed in respect of the Pledged Stock
shall be received by the Pledgor, the Pledgor shall, until such money
or property is paid or delivered to the Administrative Agent, hold such
money or property in trust for the Lenders, segregated from other funds
of the Pledgor, as additional collateral security for the Secured
Obligations.
(b) Without the prior written consent of the Administrative
Agent, the Pledgor will not (i) vote to enable, or take any other
action to permit, any Issuer to issue any stock or other equity
securities of any nature or to issue any other securities convertible
into or granting the right to purchase or exchange for any stock or
equity securities of any nature of any Issuer, (ii) sell, assign,
transfer, exchange, or otherwise dispose of, or grant any option with
respect to, the Collateral, (iii) create, incur or permit to exist any
Lien or option in favor of, or any claim of any Person
<PAGE>
with respect to, any of the Collateral, or any interest therein, except
for the security interests created by this Agreement or (iv) enter into
any agreement or undertaking restricting the right or ability of the
Pledgor or the Administrative Agent to sell, assign or transfer any of
the Collateral.
(c) The Pledgor shall maintain the security interests created
by this Agreement as first, perfected security interests and shall
defend such security interests against claims and demands of all
Persons whomsoever. At any time and from time to time, upon the written
request of the Administrative Agent, and at the sole expense of the
Pledgor, the Pledgor will promptly and duly execute and deliver such
further instruments and documents and take such further actions as the
Administrative Agent may reasonably request for the purposes of
obtaining or preserving the full benefits of this Agreement and of the
rights and powers herein granted. If any amount payable under or in
connection with any of the Collateral shall be or become evidenced by
any promissory note, other instrument or chattel paper, such promissory
note, instrument or chattel paper shall be immediately delivered to the
Administrative Agent, duly endorsed in a manner satisfactory to the
Administrative Agent, to be held as Collateral pursuant to this
Agreement.
(d) The Pledgor shall pay, and save the Administrative Agent
and the Lenders harmless from, any and all liabilities with respect to,
or resulting from any delay in paying, any and all stamp, excise, sales
or other taxes which may be payable or determined to be payable with
respect to any of the Collateral or in connection with any of the
transactions contemplated by this Agreement, except for any such
liabilities which result from the gross negligence or willful
misconduct of the Administrative Agent.
6. Cash Dividends; Voting Rights. Unless an Event of Default has
occurred and the Administrative Agent has given notice to the Pledgors of the
Administrative Agent's intent to exercise its corresponding rights pursuant to
Section 7 hereof, the Pledgors shall be permitted to receive all cash dividends,
to the extent permitted in the Credit Agreement, in respect of the Pledged Stock
and to exercise all voting and corporate rights with respect to the Pledged
Stock; provided, however, that no vote shall be cast or corporate right
exercised or other action taken which, in the Administrative Agent's reasonable
judgment, would impair the Collateral or which would be inconsistent with or
result in any violation of any provision of the Credit Agreement, this Agreement
or any other Credit Document.
7. Rights of the Lenders and the Administrative Agent. (a) All money
Proceeds received by the Administrative Agent hereunder shall be held by the
Administrative Agent for the benefit of the Lenders in a Collateral Account. All
Proceeds while held by the Administrative Agent in a Collateral Account (or by
the Pledgors in trust for the Administrative Agent and the Lenders) shall
continue to be held as collateral security for all the Secured Obligations and
shall not constitute payment thereof until applied as provided in Section 8(a)
hereof.
<PAGE>
(b) At any time after an Event of Default has occurred and the
Administrative Agent has given notice to the Pledgors of its intent to exercise
the following rights to the Pledgors, (i) the Administrative Agent shall have
the right to receive any and all cash dividends paid in respect of the Pledged
Stock and make application thereof to the Secured Obligations in the order set
forth is Section 3.14(b) of the Credit Agreement, and (ii) all of the Pledged
Stock shall be registered in the name of the Administrative Agent or its
nominee, and the Administrative Agent or its nominee may thereafter exercise (A)
all voting, corporate and other rights pertaining to the Pledged Stock at any
meeting of shareholders of any Issuer or otherwise and (B) any and all rights of
conversion, exchange, subscription and any other rights, privileges or options
pertaining to the Pledged Stock as if it were the absolute owner thereof
(including, without limitation, the right to exchange at its discretion any and
all of the Pledged Stock upon the merger, consolidation, reorganization,
recapitalization or other fundamental change in the corporate structure of any
Issuer, or upon the exercise by any Pledgor or the Administrative Agent of any
right, privilege or option pertaining to the Pledged Stock, and in connection
therewith, the right to deposit and deliver any and all of the Pledged Stock
with any committee, depositary, transfer agent, registrar or other designated
agency upon such terms and conditions as the Administrative Agent may
determine), all without liability except to account for property actually
received by it, but the Administrative Agent shall have no duty to the Pledgors
to exercise any such right, privilege or option and shall not be responsible for
any failure to do so or delay in so doing.
8. Remedies. (a) At any time after an Event of Default has occurred, at
the Administrative Agent's election, the Administrative Agent may apply all or
any part of Proceeds held in any Collateral Account in payment of the Secured
Obligations in the order set forth in Section 3.3(b) of the Credit Agreement.
(b) At any time after an Event of Default has occurred, the
Administrative Agent, on behalf of the Lenders, may exercise, in addition to all
other rights and remedies granted in this Agreement and in any other instrument
or agreement securing, evidencing or relating to the Secured Obligations, all
rights and remedies of a secured party under the Uniform Commercial Code.
Without limiting the generality of the foregoing, the Administrative Agent,
without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon the Pledgors or any other Person (all and each of which
demands, defenses, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, assign, give an
option or options to purchase or otherwise dispose of and deliver the Collateral
or any part thereof (or contract to do any of the foregoing), in one or more
parcels at public or private sale or sales, in the over-the-counter market, at
any exchange, broker's board or office of the Administrative Agent or any Lender
or elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. The Administrative Agent or any Lender shall have
the right upon any such public sale or sales, and, to the extent permitted by
law, upon any such private sale or sales, to purchase the whole or any part of
the Collateral so sold, free of any right or equity of redemption in any
Pledgor, which right or equity of
<PAGE>
redemption is hereby waived and released. The Administrative Agent shall apply
any Proceeds from time to time held by it and the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind incurred in respect
thereof or incidental to the care or safekeeping of any of the Collateral or in
any way relating to the Collateral or the rights of the Administrative Agent and
the Lenders hereunder, including, without limitation, reasonable attorneys' fees
and disbursements of counsel to the Administrative Agent, to the payment in
whole or in part of the Secured Obligations, in the order set forth in Section
3.3(b) of the Credit Agreement, and only after such application and after the
payment by the Administrative Agent of any other amount required by any
provision of law, including, without limitation, Section 9-504(1)(c) of the
Uniform Commercial Code, need the Administrative Agent account for the surplus,
if any, to any Pledgor. To the extent permitted by applicable law, each Pledgor
waives all claims, damages and demands it may acquire against the Administrative
Agent or any Lender arising out of the exercise by them of any rights hereunder.
If any notice of a proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and proper if given at
least 20 days before such sale or other disposition. The Pledgors shall remain
liable for any deficiency if the proceeds of any sale or other disposition of
Collateral are insufficient to pay the Secured Obligations and the fees and
disbursements of any attorneys employed by the Administrative Agent or any
Lender to collect such deficiency.
9. Registration Rights; Private Sales. (a) If the Administrative Agent
shall determine to exercise its right to sell any or all of the Pledged Stock
pursuant to Section 8 hereof, and if in the opinion of the Administrative Agent
it is necessary or advisable to have the Pledged Stock, or that portion thereof
to be sold, registered under the provisions of the Securities Act, the Pledgors
will cause the Issuer thereof to (i) execute and deliver, and cause the
directors and officers of such Issuer to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts as may
be, in the opinion of the Administrative Agent, necessary or advisable to
register the Pledged Stock, or that portion thereof to be sold, under the
provisions of the Securities Act, (ii) to use its best efforts to cause the
registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering of
the Pledged Stock, or that portion thereof to be sold, and (iii) to make all
amendments thereto and/or to the related prospectus which, in the opinion of the
Administrative Agent, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto. Each Pledgor acknowledges
and agrees to cause such Issuer to comply with the provisions of the securities
or "Blue Sky" laws of any and all jurisdiction which the Administrative Agent
shall designate and to make available to its security holders, as soon as
practicable, an earnings statement (which need not be audited) which will
satisfy the provisions of Section 11(a) of the Securities Act.
(b) Each Pledgor recognizes that the Administrative Agent may be unable
to effect a public sale of any or all the Pledged Stock, by reason of certain
prohibitions contained in the Securities Act and applicable state securities
laws or otherwise, and may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers
<PAGE>
which will be obligated to agree, among other things, to acquire such securities
for their own account for investment and not with a view to the distribution or
resale thereof. Each Pledgor agrees that any such private sale may result in
prices and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Administrative
Agent shall be under no obligation to delay a sale of any of the Pledged Stock
for the period of time necessary to permit the Issuer thereof to register such
securities for public sale under the Securities Act, or under applicable state
securities laws, even if such Issuer agrees to do so.
(c) Each Pledgor further agrees to use its best efforts to do or cause
to be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Pledged Stock pursuant to this Section 9(a) valid and
binding and in compliance with any and all other applicable Requirements of Law.
Each Pledgor further agrees that a breach of any of the covenants contained in
this Section 9(a) will cause irreparable injury to the Administrative Agent and
the Lenders, that the Administrative Agent and the Lenders have no adequate
remedy at law in respect of such breach and, as a consequence, that each and
every covenant contained in this Section 9(a) shall be specifically enforceable
against such Pledgor, and such Pledgor hereby waives and agrees not to assert
any defenses against an action for specific performance of such covenants except
for a defense that no Event of Default has occurred.
10. Irrevocable Authorization and Instruction to Issuer. Each Pledgor
hereby authorizes and instructs each Issuer to comply with any instruction
received by it from the Administrative Agent in writing that (a) states that an
Event of Default has occurred and (b) is otherwise in accordance with the terms
of this Agreement, without any other or further instructions from such Pledgor,
and such Pledgor agrees that each Issuer shall be fully protected by the
Pledgors in so complying.
11. Administrative Agent's Appointment as Attorney-in-Fact. (a) Each
Pledgor hereby irrevocably constitutes and appoints the Administrative Agent and
any officer or agent of the Administrative Agent, with full power of
substitution, as its true and lawful attorney-in-fact with fully irrevocable
power and authority in the place and stead of such Pledgor and in the name of
such Pledgor or in the Administrative Agent's own name, from time to time in the
Administrative Agent's discretion, for the purpose of carrying out the terms of
this Agreement, to take any and all appropriate action and to execute any and
all documents and instruments which may be necessary or desirable to accomplish
the purposes of this Agreement, including, without limitation, any financing
statements, endorsements, assignments or other instruments of transfer.
(b) Each Pledgor hereby ratifies all that said attorneys shall lawfully
do or cause to be done pursuant to the power of attorney granted in Section
11(a) hereof. All powers, authorizations and agencies contained in this
Agreement are coupled with an interest and are irrevocable until the Secured
Obligations have been satisfied in full and the Commitments have been
terminated.
<PAGE>
12. Duty of Administrative Agent. The Administrative Agent's sole duty
with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the Uniform Commercial Code
or otherwise, shall be to deal with it in the same manner as the Administrative
Agent deals with similar securities and property for its own account, except
that the Administrative Agent shall have no obligation to invest funds held in
any Collateral Account and may hold the same as demand deposits. Neither the
Administrative Agent, any Lender nor any of their respective directors,
officers, employees or agents shall be liable for failure to demand, collect or
realize upon any of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of any Pledgor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof.
13. Execution of Financing Statements. Pursuant to Section 9-402 of the
Uniform Commercial Code, each Pledgor authorizes the Administrative Agent to
file financing statements with respect to the Collateral without the signature
of such Pledgor in such form and in such filing offices as the Administrative
Agent reasonably determines appropriate to perfect the security interests of the
Administrative Agent under this Agreement. A carbon, photographic or other
reproduction of this Agreement shall be sufficient as a financing statement for
filing in any jurisdiction.
14. Authority of Administrative Agent. Each Pledgor acknowledges that
the rights and responsibilities of the Administrative Agent under this Agreement
with respect to any action taken by the Administrative Agent or the exercise or
non-exercise by the Administrative Agent of any option, voting right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Agreement shall, as between the Administrative Agent and the
Lenders, be governed by the Credit Agreement and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Administrative Agent and such Pledgor, the Administrative Agent shall be
conclusively presumed to be acting as agent for the Lenders with full and valid
authority so to act or refrain from acting, and neither any Pledgor nor any
Issuer shall be under any obligation, or entitlement, to make any inquiry
respecting such authority.
15. Notices. All notices shall be given or made in accordance with
Section 11.1 of the Credit Agreement.
16. Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
17. Amendments in Writing; No Waiver; Cumulative Remedies. (a) None of
the terms or provisions of this Agreement may be waived, amended, supplemented
or otherwise modified except by a written instrument executed by the Pledgors
and the Administrative
<PAGE>
Agent, provided that any provision of this Agreement may be waived by the
Administrative Agent and the Lenders in a letter or agreement executed by the
Administrative Agent or by facsimile transmission from the Administrative Agent.
(b) Neither the Administrative Agent nor any Lender shall by any act
(except by a written instrument pursuant to Section 17(a) hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default or in any
breach of any of the terms and conditions hereof. No failure to exercise, nor
any delay in exercising on the part of the Administrative Agent or any Lender,
any right, power or privilege hereunder shall operate as a waiver thereof. No
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by the Administrative Agent or any Lender of
any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy which the Administrative Agent or such Lender would
otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
18. Section Headings. The section headings used in this Agreement are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
19. Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of the Pledgors and shall inure to the benefit of the
Administrative Agent and the Lenders and their successors and assigns, provided
that the Pledgors may not assign any of their rights or obligations under this
Agreement without the prior written consent of the Administrative Agent and any
such purported assignment without such prior written consent shall be null and
void.
20. Term of Agreement. This Agreement and the security interests
granted hereunder shall remain in full force and effect until the Secured
Obligations have been satisfied in full and the Commitments have been
terminated, at which time the Administrative Agent shall release and terminate
the security interests granted to it hereunder. Upon such release and
termination, (i) the Pledgors shall be entitled to the return, at the Pledgors'
expense, of any and all funds in the Collateral Account and such of the
Collateral held by the Administrative Agent as shall not have been sold or
otherwise applied pursuant to the terms hereof and (ii) the Administrative Agent
shall, at the Pledgors' expense, execute and deliver to the Borrower such UCC
termination statements and other documents as the Borrower shall reasonably
request to evidence such release and termination.
21. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NORTH CAROLINA.
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Pledge Agreement
to be duly executed and delivered as of the date first above written.
PLEDGORS: CHARLOTTE MOTOR SPEEDWAY, INC.,
a North Carolina corporation
By: /s/ William R. Brooks
Name: William R. Brooks
Title: Vice President
SPEEDWAY MOTORSPORTS, INC.,
a Delaware corporation
By: /s/ William R. Brooks
Name: William R. Brooks
Title: Vice President
IMS SYSTEMS LIMITED PARTNERSHIP,
a North Carolina limited partnership
By: Speedway Motorsports, Inc., its general partner
By: /s/ William R. Brooks
Name: William R. Brooks
Title: Vice President
SPEEDWAY SYSTEMS LLC,
a North Carolina limited partnership
By: IMS Systems Limited Partnership, its sole
manager
By: Speedway Motorsports, Inc.,
its general partner
By: /s/ William R. Brooks
Name: William R. Brooks
Title: Vice President
SPR ACQUISITION CORPORATION,
a California corporation
By: /s/ William R. Brooks
<PAGE>
Name: William R. Brooks
Title: Vice President
ADMINISTRATIVE
AGENT: NATIONSBANK, N.A.,
as Administrative Agent
By: /s/ James E. Nash, Jr.
Name: James E. Nash
Title: Senior Vice President
EXHIBIT 12.1
STATEMENT REGARDING COMPUTATION OF RATIOS
SPEEDWAY MOTORSPORTS, INC.
ACTUAL AND PRO FORMA RATIOS OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1994 1995 1996 1997 1998
----------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
ACTUAL RATIOS OF EARNINGS TO FIXED CHARGES
Income (loss) from continuing operations before
income taxes .................................... 18,525 33,290 43,057 64,061 70,017
Less: (Income) loss in operations of equity method
investee ........................................ -- (233) (371) 97 (26)
------ ------ ------ ------ ------
Adjusted income (loss) from continuing operations
before income taxes ............................. 18,525 33,057 42,686 64,158 69,991
Fixed charges, excluding capitalized amounts:
Interest expense ................................ 4,282 917 693 7,745 15,258
Amortization of financing costs ................. 101 24 0 398 1,578
------ ------ ------ ------ ------
Earnings as defined ............................... 22,908 33,998 43,379 72,301 86,827
------ ------ ------ ------ ------
Fixed charges
Interest expense ................................ 4,282 917 693 7,745 15,258
Capitalized interest ............................ -- -- 2,834 5,768 3,846
Amortization of financing costs ................. 101 24 239 748 1,758
------ ------ ------ ------ ------
Fixed charges ..................................... 4,383 941 3,766 14,261 20,862
------ ------ ------ ------ ------
Ratio of earnings to fixed charges(1).............. 5.2 36.1 11.5 5.1 4.2
======= ======= ======= ======= =======
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-----------------------
1998 1999
----------- -----------
<S> <C> <C>
ACTUAL RATIOS OF EARNINGS TO FIXED CHARGES
Income (loss) from continuing operations before
income taxes .................................... (4,851) 3,473
Less: (Income) loss in operations of equity method
investee ........................................ 30 30
------ -----
Adjusted income (loss) from continuing operations
before income taxes ............................. (4,821) 3,503
Fixed charges, excluding capitalized amounts:
Interest expense ................................ 3,408 6,786
Amortization of financing costs ................. 251 2,514
------ -----
Earnings as defined ............................... (1,162) 12,803
------ ------
Fixed charges
Interest expense ................................ 3,408 6,786
Capitalized interest ............................ 905 943
Amortization of financing costs ................. 251 2,514
------ ------
Fixed charges ..................................... 4,564 10,243
------ ------
Ratio of earnings to fixed charges ................ -- 1.2
====== =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
1998 1999
-------------- ----------------
<S> <C> <C>
PRO FORMA RATIO OF EARNINGS TO FIXED CHARGES
Pro forma adjusted income from continuing operations before
income taxes ...................................................... 67,634 5,076
Pro forma fixed charges, excluding capitalized amounts:
Interest expense .................................................. 27,378 7,245
Amortization of financing costs ................................... 1,750 482
Pro forma income as defined ........................................ 96,762 12,803
------ ------
Pro forma fixed charges:
Interest expense .................................................. 27,378 7,245
Capitalized interest .............................................. 6,018 1,023
Amoritzation of financing costs ................................... 1,930 482
------ ------
Pro forma fixed charges ............................................ 35,326 8,750
------ ------
Pro forma ratio of earnings to fixed charges ....................... 2.7 1.5
======= =======
</TABLE>
- ----------
(1) Earnings were insufficient to cover fixed charges by $4.9 million for the
three months ended March 31, 1998.
EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY
NAME OF SUBSIDIARY STATE OF ORGANIZATION
Atlanta Motor Speedway, Inc. Georgia
Bristol Motor Speedway, Inc. Tennessee
Charlotte Motor Speedway, Inc. ("CMS") North Carolina
SPR Acquisition Corporation d/b/a
Sears Point Raceway California
Texas Motor Speedway, Inc. Texas
600 Racing, Inc., a wholly owned
subsidiary of CMS North Carolina
Sonoma Funding Corporation California
Speedway Consulting & Design, Inc,
a wholly owned subsidiary of CMS North Carolina
The Speedway Club, Inc., a wholly owned
subsidiary of CMS North Carolina
INEX Corp., a wholly owned
subsidiary of CMS North Carolina
Speedway Funding Corporation Delaware
Las Vegas Motor Speedway, LLC Nevada
IMS Systems Limited Partnership North Carolina
SMI Systems, LLC North Carolina
Speedway Screen Printing, LLC
d/b/a Wild Man Industries North Carolina
Speedway Systems LLC d/b/a
Finish Line Events North Carolina
<PAGE>
Oil-Chem Research Corporation Illinois
Sold USA Delaware
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Speedway
Motorsports, Inc. on Form S-4 of our report on Speedway Motorsports, Inc. dated
February 23, 1999 and our report on Las Vegas Motor Speedway, Inc. dated
February 12, 1999, appearing in and incorporated by reference in the Prospectus,
which is part of this Registration Statement. We also consent to the reference
to us under the headings "Selected Financial Data" and "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
June 4, 1999
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM T-1
Statement of Eligibility Under the
Trust Indenture Act of 1939 of a Corporation
Designated to Act as Trustee
U. S. BANK TRUST NATIONAL ASSOCIATION
(Exact Name of Trustee as specified in its charter)
United States 41-257700
(State of Incorporation) (I.R.S. Employer
Identification No.)
U. S. Bank Trust Center
180 East Fifth Street
St. Paul, Minnesota 55101
(Address of Principal Executive Offices) (Zip Code)
SPEEDWAY MOTORSPORTS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 51-0363307
(State of Incorporation) (I.R.S. Employer
Identification No.)
U.S. Highway 29 North
P. O. Box 600
Concord, North Carolina 28026-0600
(Address of Principal Executive Offices) (Zip Code)
8 1/2% SENIOR SUBORDINATED NOTES DUE 2007
(Title of the Indenture Securities)
<PAGE>
GENERAL
1. General Information. Furnish the following information as to the
Trustee.
(a) Name and address of each examining or supervising authority to
which it is subject.
Comptroller of the Currency
Washington, DC
(b) Whether it is authorized to exercise corporate trust powers.
Yes
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS. If the obligor or any
underwriter for the obligor is an affiliate of the Trustee, describe
each such affiliation.
None
See Note following Item 16.
Items 3-15 are not applicable because to the best of the Trustee's
knowledge the obligor is not in default under any Indenture for which
the Trustee acts as Trustee.
16. LIST OF EXHIBITS. List below all exhibits filed as a part of this
statement of eligibility and qualification.
1. Copy of Articles of Association.*
2. Copy of Certificate of Authority to Commence Business.*
3. Authorization of the Trustee to exercise corporate trust
powers (included in Exhibits 1 and 2; no separate
instrument).*
4. Copy of existing By-Laws.*
5. Copy of each Indenture referred to in Item 4. N/A
6. The consents of the Trustee required by Section 321(b) of the
Act.
7. Copy of the latest report of condition of the Trustee
published pursuant to law or the requirements of its
supervising or examining authority is incorporated by
reference to Registration Number 333-70709.
* Incorporated by reference to Registration Number 22-27000.
<PAGE>
NOTE
The answers to this statement insofar as such answers relate to what
persons have been underwriters for any securities of the obligors within three
years prior to the date of filing this statement, or what persons are owners of
10% or more of the voting securities of the obligors, or affiliates, are based
upon information furnished to the Trustee by the obligors. While the Trustee has
no reason to doubt the accuracy of any such information, it cannot accept any
responsibility therefor.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, U. S. Bank Trust National Association, an Association organized and
existing under the laws of the United States, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, and its seal to be hereunto affixed and attested, all
in the City of Saint Paul and State of Minnesota on the 3rd day of June, 1999.
U. S. BANK TRUST NATIONAL ASSOCIATION
/s/ Richard H. Prokosch
--------------------------
Richard H. Prokosch
Assistant Vice President
/s/ Harry H. Hall, Jr.
- -----------------------
Harry H. Hall, Jr.
Assistant Secretary
<PAGE>
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939,
the undersigned, U.S. BANK TRUST NATIONAL ASSOCIATION hereby consents that
reports of examination of the undersigned by Federal, State, Territorial or
District authorities may be furnished by such authorities to the Securities and
Exchange Commission upon its request therefor.
Dated: June 3, 1999
U. S. BANK TRUST NATIONAL ASSOCIATION
/s/ Richard H. Prokosch
------------------------
Richard H. Prokosch
Assistant Vice President
