AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 16, 1999
REGISTRATION NO. 333-80021
REGISTRATION NOS. 333-80021-01 THROUGH 333-80021-16
- --------------------------------------------------------------------------------
================================================================================
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
SPEEDWAY MOTORSPORTS, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 7948 51-0363307
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification
Number)
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. [ ]
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>
PROSPECTUS
[GRAPHIC OMITTED]
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 July 16, 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 June 18, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<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 JULY 9, 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
-------------------------------------------------------------
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, July 16, 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 July 16, 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 July 16,
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
12
<PAGE>
holds licenses to sponsor nine Winston Cup races, more than any other track
owner except for SMI. Bill France, Jr. 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
13
<PAGE>
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.
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.
14
<PAGE>
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."
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.
15
<PAGE>
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 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;
16
<PAGE>
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."
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.
17
<PAGE>
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.
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.
18
<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 and "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
31
<PAGE>
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."
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.
38
<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 July 16,
1999, or such date and time to which we extend the offer. We will issue $1,000
principal amount of exchange notes in
47
<PAGE>
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 July 16, 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 July 16,
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.
48
<PAGE>
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 July 16, 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
49
<PAGE>
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;
50
<PAGE>
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.
51
<PAGE>
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 $200,000, 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.
52
<PAGE>
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
53
<PAGE>
(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
54
<PAGE>
(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.
55
<PAGE>
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.
56
<PAGE>
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.
57
<PAGE>
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
58
<PAGE>
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
59
<PAGE>
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.
60
<PAGE>
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.
61
<PAGE>
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
62
<PAGE>
(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."
63
<PAGE>
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.
64
<PAGE>
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.
65
<PAGE>
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;
66
<PAGE>
(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;
67
<PAGE>
(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
68
<PAGE>
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
69
<PAGE>
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.
70
<PAGE>
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.
71
<PAGE>
"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
72
<PAGE>
(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
73
<PAGE>
(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
74
<PAGE>
(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.
75
<PAGE>
"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.
76
<PAGE>
"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)
JUNE 18, 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.
(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 16, 1999.
SPEEDWAY MOTORSPORTS, INC.
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
CHIEF FINANCIAL OFFICER, VICE PRESIDENT AND TREASURER
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/ * Chairman, Chief Executive Officer and June 16, 1999
------------------------------------- Director (principal executive officer)
O. BRUTON SMITH
/s/ * President, Chief Operating Officer and June 16, 1999
------------------------------------- Director; President and General
H.A. "HUMPY" WHEELER Manager of LMSC
/s/ WILLIAM R. BROOKS Vice President, Treasurer, Chief June 16, 1999
------------------------------------- Financial Officer and Director
WILLIAM R. BROOKS (principal financial officer and
principal accounting officer)
/s/ * Executive Vice President and Director; June 16, 1999
------------------------------------- President and General Manager of
EDWIN R. CLARK AMS
/s/ * Director June 16, 1999
-------------------------------------
WILLIAM P. BENTON
/s/ * Director June 16, 1999
-------------------------------------
MARK M. GAMBILL
/s/ * Director June 16, 1999
-------------------------------------
JACK F. KEMP
</TABLE>
*By: /s/ WILLIAM R. BROOKS
----------------------------------
WILLIAM R. BROOKS
(ATTORNEY-IN-FACT FOR EACH OF
THE PERSONS INDICATED)
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 16, 1999.
ATLANTA MOTOR SPEEDWAY, INC.
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
VICE PRESIDENT AND TREASURER
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/ * Chairman, Chief Executive Officer and June 16, 1999
------------------------------------- Director (principal executive officer)
O. BRUTON SMITH
/s/ * President June 16, 1999
-------------------------------------
EDWIN R. CLARK
/s/ WILLIAM R. BROOKS Vice President, Treasurer and Director June 16, 1999
------------------------------------- (principal financial officer and
WILLIAM R. BROOKS principal accounting officer)
/s/ * Director June 16, 1999
-------------------------------------
H.A. "HUMPY" WHEELER
</TABLE>
*By: /s/ WILLIAM R. BROOKS
----------------------------------
WILLIAM R. BROOKS
(ATTORNEY-IN-FACT FOR EACH OF
THE PERSONS INDICATED)
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 16, 1999.
BRISTOL MOTOR SPEEDWAY, INC.
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
VICE PRESIDENT AND TREASURER
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/ * Chairman, Chief Executive Officer and June 16, 1999
------------------------------------- Director (principal executive officer)
O. BRUTON SMITH
/s/ * Vice President and Director June 16, 1999
-------------------------------------
H.A. "HUMPY" WHEELER
/s/ WILLIAM R. BROOKS Vice President and Treasurer (principal June 16, 1999
------------------------------------- financial officer and principal
WILLIAM R. BROOKS accounting officer)
</TABLE>
*By: /s/ WILLIAM R. BROOKS
----------------------------------
WILLIAM R. BROOKS
(ATTORNEY-IN-FACT FOR EACH OF
THE PERSONS INDICATED)
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 16, 1999.
CHARLOTTE MOTOR SPEEDWAY, INC.
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
VICE PRESIDENT AND TREASURER
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/ * Chief Executive Officer and Director June 16, 1999
------------------------------------- (principal executive officer)
O. BRUTON SMITH
/s/ * President and Director June 16 , 1999
-------------------------------------
H.A. "HUMPY" WHEELER
/s/ WILLIAM R. BROOKS Vice President and Treasurer June 16, 1999
------------------------------------- (principal financial officer and
WILLIAM R. BROOKS principal accounting officer)
</TABLE>
*By: /s/ WILLIAM R. BROOKS
----------------------------------
WILLIAM R. BROOKS
(ATTORNEY-IN-FACT FOR EACH OF
THE PERSONS INDICATED)
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 16, 1999.
SPR ACQUISITION CORPORATION
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
VICE PRESIDENT AND TREASURER
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/ * Chief Executive Officer and Director June 16, 1999
------------------------------------- (principal executive officer)
O. BRUTON SMITH
/s/ * President and Director June 16, 1999
-------------------------------------
H.A. "HUMPY" WHEELER
/s/ WILLIAM R. BROOKS Vice President, Treasurer and Director June 16, 1999
------------------------------------- (principal financial officer and
WILLIAM R. BROOKS principal accounting officer)
</TABLE>
*By: /s/ WILLIAM R. BROOKS
----------------------------------
WILLIAM R. BROOKS
(ATTORNEY-IN-FACT FOR EACH OF
THE PERSONS INDICATED)
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 16, 1999.
TEXAS MOTOR SPEEDWAY, INC.
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
VICE PRESIDENT AND TREASURER
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/ * President and Director (principal June 16, 1999
------------------------------------- executive officer)
O. BRUTON SMITH
/s/ * Vice President and Director June 16, 1999
-------------------------------------
H.A. "HUMPY" WHEELER
/s/ WILLIAM R. BROOKS Vice President, Treasurer and Director June 16, 1999
------------------------------------- (principal financial officer and
WILLIAM R. BROOKS principal accounting officer)
</TABLE>
*By: /s/ WILLIAM R. BROOKS
----------------------------------
WILLIAM R. BROOKS
(ATTORNEY-IN-FACT FOR EACH OF
THE PERSONS INDICATED)
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 16, 1999.
600 RACING, INC.
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
VICE PRESIDENT AND TREASURER
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/ * Chief Executive Officer and President June 16, 1999
------------------------------------- (principal executive officer)
O. BRUTON SMITH
/s/ WILLIAM R. BROOKS Vice President and Treasurer (principal June 16, 1999
------------------------------------- financial officer and principal
WILLIAM R. BROOKS accounting officer)
/s/ * Director June 16, 1999
-------------------------------------
DAVID STETZER
</TABLE>
*By: /s/ WILLIAM R. BROOKS
----------------------------------
WILLIAM R. BROOKS
(ATTORNEY-IN-FACT FOR EACH OF
THE PERSONS INDICATED)
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 16, 1999.
SONOMA FUNDING CORPORATION
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
VICE PRESIDENT AND TREASURER
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/ * Chief Executive Officer and Director June 16, 1999
------------------------------------- (principal executive officer)
O. BRUTON SMITH
/s/ * President and Director June 16, 1999
-------------------------------------
H.A. "HUMPY" WHEELER
/s/ WILLIAM R. BROOKS Vice President, Treasurer and Director June 16, 1999
------------------------------------- (principal financial officer and
WILLIAM R. BROOKS principal accounting officer)
</TABLE>
*By: /s/ WILLIAM R. BROOKS
----------------------------------
WILLIAM R. BROOKS
(ATTORNEY-IN-FACT FOR EACH OF
THE PERSONS INDICATED)
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 16, 1999.
SPEEDWAY CONSULTING & DESIGN, INC.
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
VICE PRESIDENT AND TREASURER
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/ * President and Director (principal June 16, 1999
------------------------------------- executive officer)
O. BRUTON SMITH
/s/ * Vice President and Director June 16, 1999
-------------------------------------
H.A. "HUMPY" WHEELER
/s/ WILLIAM R. BROOKS Vice President and Treasurer (principal June 16, 1999
------------------------------------- financial officer and principal
WILLIAM R. BROOKS accounting officer)
</TABLE>
*By: /s/ WILLIAM R. BROOKS
----------------------------------
WILLIAM R. BROOKS
(ATTORNEY-IN-FACT FOR EACH OF
THE PERSONS INDICATED)
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 16, 1999.
THE SPEEDWAY CLUB, INC.
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
VICE PRESIDENT AND TREASURER
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/ * Chief Executive Officer and Director June 16, 1999
------------------------------------- (principal executive officer)
O. BRUTON SMITH
/s/ * President and Director June 16, 1999
-------------------------------------
H.A. "HUMPY" WHEELER
/s/ WILLIAM R. BROOKS Vice President and Treasurer (principal June 16, 1999
------------------------------------- financial officer and principal
WILLIAM R. BROOKS accounting officer)
/s/ * Vice President June 16, 1999
-------------------------------------
J. WESLEY HARRIS
</TABLE>
*By: /s/ WILLIAM R. BROOKS
----------------------------------
WILLIAM R. BROOKS
(ATTORNEY-IN-FACT FOR EACH OF
THE PERSONS INDICATED)
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 16, 1999.
INEX CORP.
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
VICE PRESIDENT AND TREASURER
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/ * President and Director June 16, 1999
------------------------------------- (principal executive officer)
JOHN D. MOOSE, JR.
/s/ WILLIAM R. BROOKS Vice President and Treasurer June 16, 1999
------------------------------------- (principal financial officer and
WILLIAM R. BROOKS principal accounting officer)
</TABLE>
*By: /s/ WILLIAM R. BROOKS
----------------------------------
WILLIAM R. BROOKS
(ATTORNEY-IN-FACT FOR EACH OF
THE PERSONS INDICATED)
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 16, 1999.
SPEEDWAY FUNDING CORP.
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
PRESIDENT
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 16, 1999
------------------------------------- executive officer)
WILLIAM R. BROOKS
/s/ * Vice President, Treasurer, Assistant June 16, 1999
------------------------------------- Secretary and Director (principal
RANDALL A. STOREY financial officer and principal
accounting officer)
/s/ * Vice President and Director June 16, 1999
-------------------------------------
VICTORIA L. GARRETT
/s/ * Secretary and Director June 16, 1999
-------------------------------------
DANIEL F. LINDLEY
/s/ * Vice President June 16, 1999
-------------------------------------
JOAN L. DOBRZYNSKI
</TABLE>
*By: /s/ WILLIAM R. BROOKS
----------------------------------
WILLIAM R. BROOKS
(ATTORNEY-IN-FACT FOR EACH OF
THE PERSONS INDICATED)
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 16, 1999.
LAS VEGAS MOTOR SPEEDWAY, LLC
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
VICE PRESIDENT, TREASURER AND MANAGER
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/ * President and Manager (principal June 16, 1999
------------------------------------- executive officer)
O. BRUTON SMITH
/s/ WILLIAM R. BROOKS Vice President, Treasurer and Manager June 16, 1999
------------------------------------- (principal financial officer and
WILLIAM R. BROOKS principal accounting officer)
/s/ * Vice President and Manager June 16, 1999
-------------------------------------
WILLIAM F. RAINES, III
</TABLE>
*By: /s/ WILLIAM R. BROOKS
----------------------------------
WILLIAM R. BROOKS
(ATTORNEY-IN-FACT FOR EACH OF
THE PERSONS INDICATED)
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 16, 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
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/ * Chief Executive Officer and Director June 16, 1999
------------------------------------- (principal executive officer of
O. BRUTON SMITH Speedway Motorsports, Inc. and IMS
Systems Limited Partnership)
/s/ * President and Director June 16, 1999
-------------------------------------
H.A. "HUMPY" WHEELER
/s/ WILLIAM R. BROOKS Vice President, Treasurer and Director June 16, 1999
------------------------------------- (principal financial officer and
WILLIAM R. BROOKS principal accounting officer of
Speedway Motorsports, Inc. and IMS
Systems Limited Partnership)
</TABLE>
*By: /s/ WILLIAM R. BROOKS
----------------------------------
WILLIAM R. BROOKS
(ATTORNEY-IN-FACT FOR EACH OF
THE PERSONS INDICATED)
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 16, 1999.
SMI SYSTEMS, LLC
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
VICE PRESIDENT, TREASURER AND MANAGER
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/ * President and Manager (principal June 16, 1999
------------------------------------- executive officer)
O. BRUTON SMITH
/s/ WILLIAM R. BROOKS Vice President, Treasurer and Manager June 16, 1999
------------------------------------- (principal financial officer and
WILLIAM R. BROOKS principal accounting officer)
/s/ * Vice President, Secretary and Manager June 16, 1999
-------------------------------------
RANDALL A. STOREY
</TABLE>
*By: /s/ WILLIAM R. BROOKS
----------------------------------
WILLIAM R. BROOKS
(ATTORNEY-IN-FACT FOR EACH OF
THE PERSONS INDICATED)
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 16, 1999.
SPEEDWAY SCREEN PRINTING, LLC
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
VICE PRESIDENT, TREASURER AND MANAGER
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/ * President and Manager (principal June 16, 1999
------------------------------------- executive officer)
JOSEPH PHELPS
/s/ WILLIAM R. BROOKS Vice President, Treasurer and Manager June 16, 1999
------------------------------------- (principal financial officer and
WILLIAM R. BROOKS principal accounting officer)
/s/ * Vice President and Manager June 16, 1999
-------------------------------------
WILLIAM F. RAINES, III
</TABLE>
*By: /s/ WILLIAM R. BROOKS
----------------------------------
WILLIAM R. BROOKS
(ATTORNEY-IN-FACT FOR EACH OF
THE PERSONS INDICATED)
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 16, 1999.
SPEEDWAY SYSTEMS LLC
By: /s/ WILLIAM R. BROOKS
-------------------------------------
WILLIAM R. BROOKS
VICE PRESIDENT
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/ * President (principal executive officer) June 16, 1999
-------------------------------------
JOSEPH D. PHELPS
/s/ WILLIAM R. BROOKS Vice President of Speedway June 16, 1999
------------------------------------- Motorsports, Inc., general partner of
WILLIAM R. BROOKS SMI Systems Limited Partnership
(manager of Speedway Systems LLC)
and of Speedway Systems LLC
/s/ * Treasurer and Assistant Secretary June 16, 1999
------------------------------------- (principal financial officer and
JENNIFER TURLEY principal accounting officer)
</TABLE>
*By: /s/ WILLIAM R. BROOKS
----------------------------------
WILLIAM R. BROOKS
(ATTORNEY-IN-FACT FOR EACH OF
THE PERSONS INDICATED)
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 (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 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.
EXHIBIT 5.1
June 16, 1999
Board of Directors
Speedway Motorsports, Inc.
U.S. Highway 29 North
P.O. Box 600
Concord, North Carolina 28026
Dear Sirs:
We are acting as counsel to Speedway Motorsports, Inc., a Delaware
corporation (the "Company") and its subsidiaries, as guarantors (the
"Guarantors" and, collectively with the Company, the "Issuers"), in connection
with the preparation, execution, filing and processing with the Securities and
Exchange Commission (the "Commission"), pursuant to the Securities Act of 1933,
as amended (the "Act"), of a Registration Statement (No. 333-80021 and Nos.
333-80021-01 through 333-80021-16) on Form S-4 (as amended through the date
hereof, the "Registration Statement"). This opinion is furnished to you for
filing with the Commission pursuant to Item 601(b)(5) of Regulation S-K
promulgated under the Act.
The Registration Statement covers the proposed offer to exchange (the
"Exchange Offer") by the Company of its $250,000,000 aggregate principal amount
of 82% Senior Subordinated Notes due 2007, Series D (the "Exchange Notes") and
the guarantees (the "Guarantees" and, collectively with the Exchange Notes, the
"Securities") by the Guarantors of the Company's obligations under the Exchange
Notes, for any and all of the Company's $125,000,000 aggregate principal amount
of registered 82% Senior Subordinated Notes due 2007, Series B (the "Series B
Notes") currently outstanding and the guarantees (the "Series B Guarantees") by
the Guarantors of the Company's obligations thereunder and for any and all of
the Company's $125,000,000 aggregate principal amount of unregistered 82% Senior
Subordinated Notes due 2007, Series C (the "Series C Notes," and together with
the Series B Notes, the "Old Notes") currently outstanding and the guarantees by
the Guarantors of the Company's obligations thereunder.
<PAGE>
Board of Directors
Speedway Motorsports, Inc.
June 16, 1999
Page 2
In our representation of the Company and the Guarantors, we have
examined (i) the Registration Statement, (ii) the Company's Certificate of
Incorporation and Bylaws, each as amended to date, (iii) each of the Guarantors'
respective Articles of Incorporation or Organization, as the case may be, and
Bylaws, Operating Agreement or Limited Partnership Agreement, as the case may
be, all as amended to date, (iv) all actions of the Company's Board of Directors
recorded in the Company's minute book, (v) all actions of the Guarantors'
respective Board of Directors, Board of Governors, Managers or General Partners,
as the case may be, recorded in the respective Guarantors' minute books, (vi)
the form of Series B Note, (vii) the form of Series C Note, (viii) the form of
Exchange Note, (ix) the form of Guarantees, (x) the Indenture dated as of August
4, 1997 between the Issuers and First Trust National Association, as Trustee
(the "First Trust Indenture") under which the Series B Notes with the related
guarantees were issued, (xi) the First Supplemental Indenture to the First Trust
Indenture, dated as of April 1, 1999, (xii) the Second Supplemental Indenture to
the First Trust Indenture, dated as of June 1, 1999, (xiii) the Indenture dated
as of May 11, 1999 between the Issuers and U.S. Bank Trust National Association,
as Trustee, (the "U.S. Bank Trust Indenture") under which the Series C Notes
with the related guarantees were issued and the Exchange Notes with the
Guarantees will be issued, (xiv) the First Supplemental Indenture to the U.S.
Bank Trust Indenture, dated as of June 1, 1999, (xv) certificates of good
standing or existence, as the case may be, with respect to the Issuers from the
States of California, Delaware, Georgia, Nevada, North Carolina, Tennessee and
Texas and (xvi) such other documents as we have considered necessary for
purposes of rendering the opinions expressed below.
Based upon the foregoing, we are of the following opinion:
When (a) the U.S. Bank Trust Indenture, under which the Securities will
be issued, has been qualified under the Trust Indenture Act of 1939, as amended,
(b) the Exchange Notes have been executed by the Company and the Guarantees have
been executed by each of the Guarantors and (c) the Securities have been
delivered in exchange for the Old Notes and the related guarantees endorsed
thereon in the manner stated in the Registration Statement and the U.S. Bank
Trust Indenture, the Securities will be validly issued, fully paid and
non-assessable, and will be binding obligations of the Company (in the case of
the Exchange Notes) and the Guarantors (in the case of the Guarantees), except
as may be limited by: (i) the effect of bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws now or hereafter in
effect relating to or affecting the rights or remedies of creditors; (ii) the
effect of general principles of equity, including (without limitation) concepts
of materiality, reasonableness, good faith and fair dealing, regardless of
whether the application of such principles is considered in a proceeding in
equity or at law, and the discretion of the court before which any proceeding
therefor may be brought; and (iii) the unenforcebility under certain
circumstances, as contrary to public policy, under law or court decisions of
provisions providing for the indemnification or exculpation of, or contribution
to, a party.
We express no opinion as to the validity, binding effect or
enforceability of any provision of the Exchange Notes or the Guarantees: (1)
relating to indemnification or contribution; (2) containing any purported
waiver, release, variation, disclaimer, consent or other agreement of similar
effect (all of the foregoing, a "Waiver") by the Company or any Guarantor under
any of such agreements to the
<PAGE>
Board of Directors
Speedway Motorsports, Inc.
June 16, 1999
Page 3
extent limited by provisions of applicable law (including judicial decisions),
or to the extent that such a Waiver applies to a right, claim, duty, defense or
ground for discharge otherwise existing or occurring as a matter of law
(including judicial decisions), except to the extent that such a Waiver is
effective under, and is not prohibited by or void or invalid under provisions of
applicable law (including judicial decisions), or any Waiver in the Guarantee
insofar as it relates to causes or circumstances that would operate as a
discharge or release of, or defense available to the Guarantors thereunder as a
matter of law (including judicial decisions), except to the extent such Waiver
is effective under and is not prohibited by or void or invalid under applicable
law (including judicial decisions); (3) relating to choice of governing law to
the extent that the validity, binding effect or enforceability of any such
provision is to be determined by any court other than a court of the State of
New York or a federal district court sitting in the State of New York and
applying the law of the State of New York; (4) specifying that provisions
thereof may be waived only in writing, to the extent that an oral agreement or
an implied agreement by trade practice or course of conduct has been created
that modifies any provision of such agreement; (5) purporting to give any person
or entity the power to accelerate obligations without any notice to the obligor;
(6) purporting to give any party conclusive rights of determination; (7)
purporting to make specific performance or other equitable remedies available;
(8) relating to reimbursement of legal fees; and (9) purporting to allow for the
payment of liquidated damages by any person, to the extent such liquidated
damages may be determined to be unreasonable.
In addition to the foregoing, our opinions expressed herein are subject
to the following qualifications: (a) provisions in the Guarantees that provide
that the Guarantors' liability thereunder shall not be affected by actions or
failures to act on the part of the holders or the Trustee or by amendments or
waivers of provisions of documents governing the guaranteed obligations might
not be enforceable under circumstances and in the event of actions that change
the essential nature of the terms and conditions of the guaranteed obligations;
(b) we express no opinion as to whether the Guarantee would be deemed by a court
of competent jurisdiction to be within the authorized corporate power of any
Guarantor; and (c) we have assumed consideration that is fair and sufficient to
support the agreements of each Guarantor under the Guarantee has been, and would
be deemed by a court of competent jurisdiction to have been, duly received by
each Guarantor.
The opinions expressed herein are limited to matters governed by the
laws of the States of North Carolina and New York, the General Corporation Law
of the State of Delaware, the Act and the applicable business corporation or
limited liability company laws, as applicable, of the States of Georgia (as to
Atlanta Motor Speedway, Inc.), Tennessee (as to Bristol Motor Speedway, Inc.),
Texas (as to Texas Motor Speedway, Inc.), California (as to SPR Acquisition
Corporation and Sonoma Funding Corporation) and Nevada (as to Las Vegas Motor
Speedway, LLC and SMI Systems, LLC); and with respect to such laws of Georgia,
Tennessee, Texas, California and Nevada, our opinions are based solely on our
reading, as North Carolina lawyers, of unofficial compilations of the corporate
or limited liability company statutes of such states available to us.
<PAGE>
Board of Directors
Speedway Motorsports, Inc.
June 16, 1999
Page 4
We hereby consent to the use of this opinion letter as Exhibit 5.1 to
the Registration Statement and to the use of our name under the heading "Legal
Matters" in related prospectuses. In giving this consent, we do not admit that
we are in the category of persons whose consent is required under Section 7 of
the Act or the rules and regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ Parker, Poe, Adams and Bernstein
EXHIBIT 10.9
SPEEDWAY MOTORSPORTS, INC.
1994 STOCK OPTION PLAN
AMENDED AND RESTATED
MAY 5, 1998
1. PURPOSE OF PLAN. The purpose of the Plan which shall be known as the
Speedway Motorsports, Inc. 1994 Stock Option Plan and is hereinafter referred to
as the "Plan", are (i) to provide incentives for key employees, directors,
consultants and other individuals providing services to Speedway Motorsports,
Inc. (the "Company") and its subsidiaries (within the meaning of Section 424(f)
of the Internal Revenue Code of 1986, as amended (the "Code"), each of which is
referred to herein as a "Subsidiary") by encouraging their ownership of the
common stock, $0.01 par value, of the Company (the "Stock") and (ii) to aid the
Company in retaining such key employees, directors, consultants and other
individuals upon whose efforts the Company's success and future growth depends,
and attracting other such employees, directors, consultants and other
individuals.
2. ADMINISTRATION. The Plan shall be administered by the Compensation
Committee (the "Committee") of the Board of Directors, as hereinafter provided.
For purposes of administration, the Committee, subject to the terms of the Plan,
shall have plenary authority to establish such rules and regulations, to make
such determinations and interpretations, and to take such other administrative
actions, as it deems necessary or advisable. All determinations and
interpretations made by the Committee shall be final, conclusive and binding on
all persons, including Optionees and their legal representatives and
beneficiaries. Notwithstanding the foregoing, in the event that there is no
Compensation Committee, then the powers to be exercised by the Compensation
Committee hereunder shall be exercised by the Board of Directors.
The Committee shall be appointed from time to time by the Board of
Directors and shall consist of not fewer that two of its members. No member of
the Board of Directors who serves on the Committee shall be eligible to
participate in the Plan. The Committee shall hold its meetings at such times and
places as it may determine. A majority of its members shall constitute a quorum.
All determinations of the Committee shall be made by a majority of its
members. Any decision or determination reduced to writing and signed by all
members shall be as effective as if it had been made by a majority vote at a
meeting duly called and held. The Committee may appoint a secretary (who need
not be a member of the Committee). No member of the Committee shall be liable
for any act or omission with respect to his service on the Committee, if he acts
in good faith and in a manner he reasonably believes to be in or not opposed to
the best interests of the Company.
3. STOCK AVAILABLE FOR OPTIONS. There shall be available for options under the
Plan a total of 3,000,000 shares of Stock, subject to any adjustments which may
be made pursuant to Section 5(f) hereof. Shares of Stock used for purposes of
the Plan may be either authorized and unissued shares, or previously issued
shares held in treasury of the, Company, or both. Shares of Stock covered by
options which have terminated or expired prior to exercise or
<PAGE>
which have been tendered as payment upon exercise of other options pursuant to
Section 5(c), shall be available for further option grants hereunder.
4. ELIGIBILITY. Options- under the Plan may be granted to key employees
of the Company or any Subsidiary, including officers or directors of the Company
or any Subsidiary, and to directors, consultants and other individuals providing
services to the Company or any Subsidiary. Options may be granted to eligible
employees whether or not they hold or have held options previously granted under
the Plan or otherwise granted or assumed by the Company. In selecting employees
for options, the Committee may take into consideration any factors it may deem
relevant, including its estimate of the employee's present and potential
contributions to the success of the Company and its Subsidiaries. Service as a
director, officer or consultant of or to the Com any or Subsidiary shall be
considered employment for purposes of the Plan (and the period of such service
shall be considered the period of employment for purposes of Section 5(d) of the
Plan); provided, however, that incentive stock option; may be granted under the
Plan only to an individual who is an 'employee" (as such term is used in Section
422 of the Code) of the Company or any Subsidiary.
5. TERMS AND CONDITIONS OF OPTIONS. The Committee shall, in its
discretion, prescribe the terms and conditions of the options to be granted
hereunder. which terms and conditions need not be the same in each case, subject
to the following:
(a) OPTION PRICE. The price at which each share of Stock
covered by an incentive option granted under the Plan may be purchased shall not
be less than the market value per share of Stock on the date of grant of the
option. In the case of any option intended to be an incentive stock option
granted to an individual owning (directly or by attribution as provided in
Section 424(d) of the Code), on the date of grant, stock possessing more than
10% of the total combined voting power of all classes of stock of the Company or
any Subsidiary (which individual shall hereinafter be referred to as a " 10 %
Stockholder"), the price at which each share of Stock covered by the option my
be purchased shall not be less than I IO % of the market value per share of
Stock on the date of grant of the option. ne date of the grant of an option
shall be the date specified by the Committee in its grant of the option. The
price at which each share of Stock covered by an option granted under the Plan
(but not as an incentive option) may be purchased shall be the price determined
by the Committee, in its absolute discretion, to be suitable to attain the
purposes of this Plan.
(b) OPTION PERIOD. The period for exercise of an option shall
in no event be more than ten years from the date of grant, or in the case of an
option intended to be an incentive stock option granted to a IO % Stockholder,
more than five years from the date of grant. Options may, in the discretion of
the Committee, be made exercisable in installments during the option period. Any
shares not purchased on any applicable installment date may be purchased
thereafter at any time before the expiration of the option period.
<PAGE>
(c) EXERCISE OF OPTIONS. In order to exercise an option, the
Optionee shall deliver to the Company written notice specifying the number of
shares of Stock to be purchased, together with cash or a certified or bank
cashier's check payable to the order of the Company in the full amount of the
purchase price therefor; provided that, for the purpose of assisting an
Optionee to exercise an option, the Company may make loans to the Optionee or
guarantee loans made by third parties to the Optionee, on such terms and
conditions as the Board of Directors may authorize; and provided further that
such purchase price may be paid in shares of Stock, or in nonstatutory options
granted under. the Plan (provided, however, that the purchase price of stock,
acquired under an incentive stock option may not be paid in options), in either
case owned by the Optionee and having a market value on the date of exercise not
less than the aggregate purchase price, or in any combination of cash, Stock and
such options. For purposes of this Section 5(c), the market value per share of
Stock shall be the last sale price regular way on the date of reference, or, in
case no sales take place on such date, the average of the closing high bid and
low asked prices regular way, in either case on the principal national
securities exchange on which the Stock is listed or admitted to trading, or if
the Stock is not listed or admitted to trading on any national securities
exchange, the last sale price reported on the National Market System of the
National Association of Securities Dealers Automated Quotation system ("NASDAQ")
on such date, or the average of the closing high bid and low asked prices of the
Stock in the over-the-counter market reported on NASDAQ on such date, as
furnished to the Committee by any New York Stock Exchange member selected from
time to time by the Committee for such purpose. If there is no bid or asked
price reported on any such,-date, the market value shall be determined by the
Committee in accordance with the regulations promulgated under Section 2031 of
the Code, or by any other appropriate method selected by the Committee. For
purposes of this Section 5(c), the market value of an option granted under the
Plan shall be the market value of the underlying Stock, determined as aforesaid,
less the exercise price of the option. If the Optionee so requests, shares of
Stock purchased upon exercise of an option may be issued in the name of the
Optionee or another person. An Optionee shall have none of the rights of a
stockholder until the shares of Stock are issued to him.
(d) EFFECT OF TERMINATION OF EMPLOYMENT.
(i) An option may not be exercised after the Optionee has
ceased to be in the employ of the Company or any Subsidiary for any reason other
than the Optionee's death, Disability or Involuntary Termination Without Cause.
Any cessation of employment, for purposes of incentive stock options only, shall
include any leave of absence in excess of 90 days unless the Optionee's
reemployment rights are guaranteed by law or by contract. "Cause" shall mean any
act, action or series of acts or actions or any omission, omissions, or series
of omissions which result in, or which have the effect of resulting in, (i) the
commission of a crime by the Optionee involving moral turpitude, which crime has
a material adverse impact on the Company, (ii) gross negligence or willful
misconduct which is continuous and results in material damage to the Company, or
(iii) the continuous, willful failure of the person in question to follow the
reasonable directives of the Board of Directors. "Disability' shall mean the
inability or failure of a person to perform those duties for the Company
traditionally assigned to and performed by such person because of the person's
then-existing physical or mental condition, impairment or incapacity. The f@ct
of disability shall be deter-mined by the Committee, which may consider
<PAGE>
such evidence as it considers desirable under the circumstances, the
determination of which shall be final and binding upon parties. "Involuntary
Termination Without Cause shall mean either (i) the dismissal of, or the request
for the resignation of, a person, by court order, order of any court-appointed
liquidator or trustee of the Company, or the order or request of any creditors'
committee of the Company constituted under the federal bankruptcy laws, provided
that such order or request contains no specific reference to Cause; or (ii) the
dismissal of, or the request for the resignation of, a person, by a duly
constituted corporate officer of the Company, or by the Board, for any reason
other than for Cause.
(ii) - During the three months after the date of the
Optionee's Involuntary Termination Without Cause, the Optionee shall have the
right to exercise the Options granted under the Plan, but only to the extent the
Option was exercisable on the date of the cessation of the Optionee's
employment.
(iii) During the twelve months after Termination of the .e
Optionee's employment with the Company as a result of the Optionee's Disability,
the Optionee shall have the right to exercise the Options granted under the
Plan, but only to the extent the Option was exercisable on the date of the
cessation of the Optionee's employment.
(iv) In the event of the death of the Optionee while
employed or, in the event of the death of the Optionee after cessation of
employment described in subparagraph (ii) or (iii), above, but within the
three-month or twelve-month period described in subparagraph (ii) or (iii),
above, upon the expiration of twelve months following the Optionee's death.
During such extended period, the Option may be exercised by the person or
persons to whom the deceased Optionee's rights under the Option Agreement shall
pass by will or by the laws of descent or distribution, but only to the extent
the Option was exercisable on the date of the cessation of the Optionee's
employment. but only as to any shares exercisable on the date of the Optionee's
employment so terminates. The provisions of the foregoing sentence shall apply
to any outstanding options which are incentive stock options to the extent
permitted by Section 422(d) of the Code and such outstanding options in excess
thereof shall, immediately upon the occurrence of the event described in the
preceding sentence, be treated for all purposes of the Plan as nonstatutory
stock options and shall be immediately exercisable as such as provided in the
foregoing sentence.
In no event shall any option be exercisable beyond the applicable
exercise period provided in Section 5(b) of the Plan. Nothing in the Plan or in
any option granted pursuant to the Plan (in the absence of an express provision
to the contrary) shall confer on any individual any right to continue in the
employ of the Company or any Subsidiary or interfere in any way with the right
of the Company to terminate his employment at any time.
(e) NONTRANSFERABILITY OF OPTIONS. During the lifetime of an
Optionee, options held by such Optionee shall be exercisable only by him. No
option shall be transferable other than by will or the laws of descent and
distribution.
(f) ADJUSTMENTS FOR CHANGE IN STOCK SUBJECT TO PLAN. In the
event of a
<PAGE>
reorganization, recapitalization, stock split, stock dividend, combination of
shares, merger, consolidation, rights offering or any other change in the
corporate structure or shares of the Company, (i) except as provided in clause
(ii) below, the Committee shall make such adjustments, if any, as it deems
appropriate in the number and kind of shares covered by outstanding options, or
in the option price per share, or both, and (ii) the Board of Directors of the
Company shall make such adjustments, if any, as it deems appropriate in the
number and kind of shares covered by outstanding options, or in the option price
per share, or both, with respect to options held by directors of the Company.
(g) ACCELERATION OF EXERCISABILITY OF OPTIONS UPON OCCURRENCE
OF CERTAIN EVENTS In connection with any merger or consolidation in which the
Company is not the surviving corporation and which results in the holders of the
outstanding voting securities of the Company (determined immediately prior to
such merger or consolidation) owning less than a majority of the outstanding
voting securities of the surviving corporation (determined immediately following
such merger or consolidation), or any sale or transfer by the Company of all or
substantially all its assets or any tender offer or exchange offer for or the
acquisition, directly or indirectly, by any person or group of all or a majority
of the then-outstanding voting securities of the Company, all outstanding
options under the Plan shall become exercisable in full, notwithstanding any
other provision of the Plan or of any outstanding options granted thereunder, on
and after (i) the fifteenth day prior to the effective date of such merger,
consolidation, sale, transfer or acquisition or (ii) the date of commencement of
such tender offer or exchange offer, as the case may be. The provisions of the
foregoing sentence shall apply to any outstanding options which are incentive
stock options to the extent permitted by Section 422(d) of the Code and such
outstanding options in excess thereof awl, immediately upon the occurrence of
the event described in clause (i) or (ii) of the foregoing sentence, be treated
for all purposes of the plan as nonstatutory stock options and shall be
immediately exercisable as such as provided in the foregoing sentence.
Notwithstanding the foregoing, in no event shall any option be exercisable after
the date of termination of the exercise period of such option specified in
Sections 5(b) and 5(d).
(h) REGISTRATION, LISTING AND QUALIFICATION OF SHARES OF
STOCK. Each option shall be subject to the requirement that if at any time the
Board of Directors shall determine that the registration, listing or
qualification of shares of Stock covered thereby upon any securities exchange or
under any federal or state law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in connection
with, the granting of such option or the purchase of shares of Stock thereunder,
no such option may be exercised unless and until such registration, listing,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Board of Directors. The Company may require
that any person exercising an option shall make such representations and
agreements and furnish such information as it deems appropriate to assure
compliance with the foregoing or any other applicable legal requirement.
(i) OTHER TERMS AND CONDITIONS. The Committee may impose such
other terms and conditions, not inconsistent with the terms hereof, on the grant
or exercise of options, as it deems advisable.
<PAGE>
(j) RELOAD OPTIONS. If upon the exercise of an option granted
under the Plan (the "Original Option') the Optionee pays the purchase price for
the Original Option pursuant to Section 5(c) in whole or in part in shares of
Stock owned by the Optionee for at least six months, the Company shall grant to
the Optionee on the date of such exercise an additional option under the Plan
(the 'Reload Option') to purchase that number of shares of Stock equal to the
number of shares of Stock so held for at least six months transferred to the
Company in payment of the purchase price in the exercise of the Original Option.
The price at which each share of Stock covered by the Reload Option may be
purchased shall be the market value per share of Stock (as specified in Section
5(c)) on the date of exercise of the Original Option. The Reload Option shall
not be exercisable until one year after the date the Reload Option is granted or
after the expiration date of the Original Option. Upon the payment of the
purchase price for a Reload Option granted hereunder in whole or in part in
shares of Stock held for more than six months pursuant to Section 5(c), the
Optionee is entitled to receive a further Reload Option in accordance with this
Section 50). Shares of Stock covered by a Reload Option shall not reduce the
number of shares of Stock available under the Plan pursuant to-Section 3.
6. ADDITIONAL PROVISIONS APPLICABLE TO INCENTIVE STOCK OPTIONS. The
Committee may, in its discretion, grant options under the Plan to eligible
employees which constitute "incentive stock options" within the meaning of
Section 422 of the Code, provided, however, that (a) the aggregate market value
of the Stock with respect to which incentive stock options are exercisable for
the first time by the Optionee during any calendar year shall not exceed the
limitation set forth in Section 422(d) of the Code and (b) Section 5(d)(ii)
hereof shall not apply to any incentive stock option.
7. AMENDMENT AND TERMINATION. Unless the Plan shall theretofore have
been terminated as hereinafter provided, the Plan shall terminate on, and no
option shall be granted hereunder after, December 21, 2004; provided, however,
that the Board of Directors may at any time prior to that date terminate the
Plan. 'Me Board of Directors may at any time amend the Plan or the term of any
option outstanding under the Plan; provided, however, that, except as
contemplated in Section 5(f), the Board of Directors shall not, without approval
by a majority of the votes cast by the stockholders of the Company at a meeting
of stockholders at which a proposal to amend the Plan is voted upon, (i)
increase the maximum number of shares of Stock for which options may be granted
under the Plan, (ii) change the minimum option price, (iii) extend the period
during which options may be granted or exercised or, (iv) except as otherwise
provided in the Plan, amend the requirements as to the class of employees
eligible to receive options. No termination or amendment of the Plan or any
option outstanding under the Plan may, without the consent of an Optionee,
adversely affect the rights of such Optionee under any option held by such
Optionee.
8. EFFECTIVENESS OF PLAN. The Plan will not be made effective unless
approved before December 21, 1995 by a majority of the votes cast thereon by the
stockholders of the Company at a meeting of stockholders duly called and held
for such purpose or by unanimous written consent of such stockholders, and no
option granted hereunder shall be exercisable prior to such approval.
<PAGE>
9. WITHHOLDING. It shall be a condition to the obligation of the
Company to issue shares of Stock upon exercise of an option that the Optionee
(or any beneficiary or person entitled to act under Section 5(d) hereof pay to
the Company, upon its demand, such amount as may be requested by the Company for
the purpose of satisfying any other taxes. If the amount requested is not paid,
the Company may refuse to issue such shares of Stock.
10. OTHER ACTIONS. Nothing contained in the Plan shall be construed to
limit the authority of the Company to exercise its corporate rights and powers,
including, but not by way of limitation, the right of the Company to grant or
assume options for proper corporate purposes other than under the Plan with
respect to any employee or other person, firm, corporation or association.
EXHIBIT 10.10
SPEEDWAY MOTORSPORTS, INC.
FORMULA STOCK OPTION PLAN
AMENDED AND RESTATED MAY 5, 1998
ARTICLE 1
PURPOSE; EFFECTIVE DATE; DEFINITIONS
1.1 Purpose. This Speedway Motorsports, Inc. Formula Stock Option Plan
is intended to secure for Speedway Motorsports, Inc. and its stockholders the
benefits of the incentive inherent in common stock ownership by the Independent
Directors of the Company, who are responsible in part of the Company's growth
and financial success, and to afford such persons the opportunity to obtain and
thereafter increase a proprietary interest in the Company on a favorable basis
and thereby share in its success. This Plan is intended to constitute a "formula
plan" meeting the requirements of formula awards under paragraph (c) (2) (ii) of
rule 16b-3 of the Securities Exchange Commission under the Exchange Act and
shall be construed accordingly.
1.2 Effective Date. Subject to ratification of this Plan by the
Company's stockholders as provided in Section 5.9, this Plan shall be effective
on and as of January 1, 1996.
1.3 Definitions. Capitalized terms used in this Plan but nor defined
herein are used herein as defined in the option Agreement. In addition,
throughout this Plan, the following terms shall have the meanings indicated:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" Shall mean the Internal Revenue Code of 1986, as
amended, and the rule and regulations promulgated thereunder.
(c) "Committee" shall mean the Board, constituted as a committee
composed of all Directors other than the Independent Directors.
(d) "Common Stock" shall mean the Common Stock, par value $0.01
per share, of the Company.
(e) "Company" shall mean Speedway Motorsports, Inc., a Delaware
corporation.
(f) "Director" shall mean any member of the Board.
(g) "Exchanged Act" shall mean the Securities Exchange Act of
1934, as amended.
<PAGE>
(h) "Fair Market Value" shall mean, with respect to the Common
Stock on any day, the average closing sales price of a share of Common
Stock for the 10 business days immediately preceding such day for which
a closing price is available from the principal trading market for the
Common Stock. A "business day" is any day, other than a Saturday or
Sunday, on which the relevant market is open for trading.
(i) "Independent Director" shall mean any Director other than a
Director who, at any time of an Option award to such Director
hereunder, is a full-time employee of the Company or a subsidiary of
the Company.
(j) "Option" shall mean an option to purchase shares of Common
Stock awarded to an Independent Director pursuant to this Plan.
(k) "Option Agreement" shall mean an agreement between the
Company and an Independent Director, in substantially the form of Annex
A to this Plan, evidencing the award of an Option.
(l) "Option Shares" shall mean the shares of Common Stock
purchased upon exercise of an Option.
(m) "Plan" shall mean this Speedway Motorsports, Inc. Formula
Stock Option Plan, as the same may be amended from time to time.
ARTICLE 2
COMMITTEE
2.1 Committee Work. This Plan and the Options shall be interpreted,
construed and administered by the Committee in its sole discretion such that the
interpretation, construction and administration by the Committee of any
provision of this Plan or of any Options shall be conclusive and binding on all
parties. A majority of the entire Committee shall constitute a quorum, and the
action of a majority of the members present at any meeting at which a quorum is
present shall be deemed the action of the Committee. In addition, any decisions
or determination reduced to writing and signed by all members of the Committee
shall be fully as effective as if it had been made by a majority vote at a
meeting duly called and held. Subject to the provisions of the Plan and the
Company's bylaws, the Committee may make such additional rules and regulations
for the conduct of its business as it shall deem advisable and shall hold
meeting at such times and places as it may determine.
2.2 Limitation on Receipt of Options by Committee Members. No person,
while a member of the Committee, shall be eligible to receive Options under the
Plan but a member of the Committee may exercise Options granted prior to his or
her becoming a member of the
2
<PAGE>
Committee.
2.3 Good Faith Determinations. No member of the Committee or other
member of the Board shall be liable for any action or determination made in good
faith with respect to this Plan or any Option granted hereunder.
ARTICLE 3
ELIGIBILITY; SHARES SUBJECT TO THE PLAN
3.1 Eligibility. Only Independent Directors shall be eligible to
receive Option awards under this Plan.
3.2 Shares Subject to the Plan. Subject to the provisions of Section
4.2(d)(relating to adjustment for changes in the Common Stock), the maximum
number of shares that may be issued under this Plan shall not exceed in the
aggregate 800,000 shares of Common Stock. Such shares may be authorized and
unissued shares or, in the alternative, authorized and issued shares that have
been reacquired by the Company as treasury stock. If any Option awarded under
this Plan shall for any reason terminate or expire or be surrendered without
having been exercised in full, then the underlying shares not acquired by Option
exercise shall be available for grant hereunder.
ARTICLE 4
FORMULA AWARDS
4.1 Formula. On or before January 31 of each year during the term of
this Plan (commencing after the effective date hereof), each person who is then
an Independent Director shall be awarded an Option to purchase 20,000 shares of
Common Stock, in each case at an exercise price per share equal to the Fair
Market Value per share of Common Stock as of the date of such award. All of the
Option awards referred to in this Section 4.1 shall be made by operation of the
provisions of this Plan and shall require no further action by the Company, the
Board, the Committee or any other person except as specifically provided for
elsewhere in this Plan. Each Options shall be exercisable, in whole or in part,
at any time and from time to time during the Option Period. Each Option shall
terminate on the expiration of its Options Period, if not earlier terminated.
4.2 Other Terms and Conditions. Each Option award under this Plan
shall be evidenced by an option Agreement as established, from time to time, by
the Committee. The Option Agreement need not be identical with one another, but
each one shall include the substance of, and shall be governed by, all of the
following terms and conditions:
3
<PAGE>
(a) Numbers of Shares and Option Exercise Price. Each Option
Agreement shall state the number of shares of Common Stock to which it
pertains and the Option exercise price, all in accordance with this
Plan.
(b) Medium and Time of Payment. Upon exercise of the Option, the
Option exercise price shall be payable in United States dollars, either
in cash (including by check) or in shares of Common Stock owned by the
Optionee or in a combination of cash and Common Stock. If all or any
portion of the Option exercise price is paid in Common Stock, then such
Common Stock shall be valued at its Fair Market Value as of the
Exercise Date.
(c) Minimum Exercise; No Transfers. No less than 100 shares of
Common Stock may be purchased by Option exercise at any one time unless
the number purchased is the total number of shares in respect of which
the Option is then exercisable. No Option shall be assignable or
transferable by an Optionee, and no other person shall acquire any
rights therein, except that, subject to the provisions of Section
4.2(f), the Option may be transferred by will or the laws of descent or
distribution or pursuant to a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder.
(d) Recapitalization. Reorganization. Subject to any action
required by the stockholders of the Company, the maximum number of
shares of Common Stock that may be issued under this Plan pursuant to
Section 3.2, the number of shares of Common Stock covered by each
outstanding Option and the per-share exercise price applicable to each
outstanding Option shall, in each case, be proportionately adjusted for
any increase or decrease in the number of issued shares of Common Stock
resulting from a subdivision or consolidation of shares or the payment
of a stock dividend on the Common Stock or any other increase or
decrease in the number of shares of Common Stock effected without
receipt of consideration by the Company.
Subject to any action required by the stockholders, if the Company is
the surviving corporation in any merger, then each Option outstanding shall
pertain to and apply to the securities or other consideration that a holder of
the number of shares of Common Stock underlying the Option would have been
entitled to receive in the merger. A dissolution, liquidation or consolidation
of the Company or a merger in which the Company is not the surviving
corporation, other than a merger effected solely for the purpose of changing the
Company's domicile, shall cause each outstanding Option not exercised prior to
the effective date of such transaction to terminate. In the case of a merger
effected for the purpose of changing the Company's domicile, each outstanding
Option shall continue in effect in accordance with its terms and shall apply to
the same number of shares of common stock of such surviving corporation as the
number of shares of Common Stock to which it applied immediately prior to such
merger, adjusted for any increase or decrease in the number of outstanding
shares of common stock of the
4
<PAGE>
surviving corporation effected without receipt of consideration.
In the event of a change in the Common Stock as presently constituted,
which change is limited to a change of all of the authorized shares with par
value into the same number of shares with a different par value or without par
value, the shares resulting from any such change shall be deemed to be Common
Stock within the contemplation of this Plan.
The foregoing adjustments shall be made by the Committee, whose
determination shall be conclusive.
Except as expressly provided in this subsection, the Optionee shall have no
rights by reason of (i) any subdivision or consolidation of shares of any class,
(ii) any stock dividend, (iii) any other increase or decrease in the number of
shares of stock or any class, (iv) any dissolution, liquidation, merger or
consolidation or spin-off, split-off or split-up of assets of the Company or
stock of another corporation or (v) any issuance by the Company of shares of
stock of any class or securities convertible into shares of stock of any class.
Moreover, except as expressly provided in this subsection, the occurrence of one
or more of the above-listed events shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number of, or the exercise price
relative to, the shares of Common Stock underlying an Option.
The grant of an Option pursuant to this Plan shall not affect in any way
the right or power of the Company to issue securities of any class, to make
adjustments, reclassifications, reorganizations or changes to, of or in its
capital or business structure, to merge, consolidate, dissolve or liquidate, or
to sell or transfer all or any part of its business or assets.
(e) Rights as a Stockholder. An Optionee or a transferee of an Option
shall have no rights as a stockholder with respect to any shares underlying his
or her Option until the date of the issuance of a stock certificate for those
shares upon payment of the exercise price. No adjustments shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the date such stock certificate is issued, except as expressly provided in
subsection 4.2(d).
(f) Option Termination. Each Option Agreement shall provide that, if the
Optionee's status as an independent Director terminates incidental to conduct
that, in the judgment of the Committee, involves a breach of fiduciary duty by
such Independent Director or other conduct detrimental to the Company, then his
or her Option shall terminate immediately and thereafter be of no force or
effect. Each Option Agreement
5
<PAGE>
also shall provide that, if the Optionee dies or if the Option is
transferred pursuant to a qualified domestic relations order as
provided in Section 4.2(c), prior to the exercise in full of an Option,
then such Option may be exercised not later than the expiration of
twelve months following such death or transfer, as the case may be, by
the person or persons to whom his or her rights under the Option shall
have been transferred by reason thereof (but only to the extent that
such Option was exercisable on the date of such death or transfer).
Notwithstanding anything to the contrary in this subsection, an Option
may not be exercised by anyone after the expiration of its term.
ARTICLE 5
MISCELLANEOUS
5.1 Withholding Taxes. An Independent Director awarded an Option
hereunder shall be deemed conclusively to have authorized the Company to
withhold from the fees, commissions or other compensation of such Independent
Director funds in amounts, or property (including Common Stock) in value, equal
to any federal, state or local income, employment or other withholding taxes
applicable to the income recognized by such Independent Director and
attributable to the Options or Option Shares acquired pursuant to this Plan as,
when and to the extent, if any, required by law; provided, however, that, in
lieu of the withholding of federal, state and local taxes as herein provided,
the Company may require that the Independent Director (or other person
exercising such Option) pay the Company an amount equal to any federal, state
and local withholding taxes on such income at the time such withholding is
required, if it is ever required, or at such other time as shall be satisfactory
to the Company. Nothing in this Section shall be construed to impose on the
Company a duty to withhold, where applicable law does not require such
withholding, or to imply that an Independent Director is an employee or anything
other than an independent contractor with respect to the Company.
5.2 Amendment, Suspension, Discontinuance and Termination of Plan. The
Committee may from time to time amend, suspend or discontinue this Plan or
revise it in any respect whatsoever for the purpose of maintaining or improving
its effectiveness as an incentive device, for the purpose of conforming it to
applicable governmental regulations or to any change in applicable law or
regulations, or for any other purpose permitted by law; provided, however that
no such action by the Committee shall adversely affect any Option theretofore
awarded hereunder without the consent of the holder so affected; provided
further that any amendment to this Plan that would materially increase the
benefits accruing to participants hereunder, materially increase the number of
shares of Common Stock that may be issued upon exercise of Options granted
hereunder or materially modify this Plan's requirements as to eligibility for
participation herein must be approved by the stockholders of the Company; and
provided further that there shall not be amended more than once every six
months, other than to comport with changes in the Code, any of those provisions
of this Plan that permit Directors to receive awards, that state the amount and
price of Options, or of the underlying Common Stock, to be awarded hereunder to
designated. Directors or categories of Directors, that specify the timing of
awards
6
<PAGE>
hereunder or that set forth the formula that determines the amount price and
timing of awards hereunder. This Plan will terminate on the date when all shares
of the Common Stock reserved for issuance under the Plan have been acquired upon
exercise of Options granted hereunder or on such earlier date as the Board may
determine.
5.3 Governing Law. This Plan and all rights and obligations hereunder
shall be construed in accordance with and governed by the laws of the State of
North Carolina.
5.4 Designation. This Plan may be referred to in other documents and
instruments as the "Speedway Motorsports, Inc. Formula Stock Option Plan."
5.5 Indemnification of Committee. In addition to such other rights of
indemnification as they may have as Directors or as members of the Committee,
the members of the Committee shall be indemnified by the Company against the
reasonable expenses, including legal fees actually and necessarily incurred in
connection with the defense of any investigation, action, suit or proceeding, or
in connection with any appeal therefrom, to which they or any of them may be a
party by reason of any action taken or failure to act under or in connection
with this Plan or any Option granted hereunder, and against all amounts paid by
them in settlement thereof or paid by them in satisfaction of a judgment in or
dismissal or other discontinuance of any such investigation, action, suit or
proceeding, except in relation to matters as to which it shall be adjudged in
such investigation, action, suit or proceeding that such Committee member acted
in bad faith in the performance of his or her duties, and without reasonable
belief that such performance was in the best interest of the Company.
5.6 Reservation of Shares. The Company shall, at all times during the
term of this Plan and so long as any Option shall be outstanding, reserve and
keep available such number of shares of Common Stock as shall be sufficient to
satisfy the requirements hereof. Notwithstanding the foregoing, the inability of
the Company to obtain, from any regulatory body of appropriate jurisdiction,
authority considered by the Company to be necessary or desirable to the lawful
issuance of any shares of its Common Stock hereunder shall relieve the Company
of any liability in respect of the non-issuance or sale of such Common Stock as
to which such requisite authority shall not have been obtained.
5.7 Application of Funds. The proceeds received by the Company from the
sale of Common Stock upon the exercise of Options will be used for general
corporate purposes.
5.8 No Obligation to Exercise. The award of an Option under this Plan
shall impose no obligation upon the Optionee to exercise that Option.
5.9 Approval of Stockholders. No options awarded pursuant to this Plan
shall be exercisable by an Optionee or enforceable against the Company unless
and until the Plan shall have been ratified by the stockholders of the Company
so as to comply with the requirements of Rule 16b-3 of the Securities and
Exchange Commission.
7
Exhibit 10.11
SPEEDWAY MOTORSPORTS, INC.
EMPLOYEE STOCK PURCHASE PLAN
AMENDED AND RESTATED
AS OF
MAY 5, 1998
ARTICLE I
PURPOSE; DEFINITIONS; CONSTRUCTION
1.1 Purpose of Plan. The purpose of the Plan, which shall be known as the
Speedway Motorsports, Inc. Employee Stock Purchase Plan (the "Plan"), is to
provide employees of Speedway Motorsports, Inc. (the "Company") and its
participating subsidiaries (which hereinafter shall be referred to collectively
with the Company as the "Employer") an opportunity to acquire a proprietary
interest in the Company through the purchase of the common stock, $.01 par
value, of the Company. This Plan is intended to qualify as an "employee stock
purchase plan" within the meaning of Section 423 of the Internal Revenue Code of
1986, as amended (the "Code").
1.2 Definitions. Throughout this Plan, the following terms shall have the
meanings indicated:
(a) "Account" shall mean a memorandum account maintained to record
each Participant's Contributions pending purchase of Company Stock.
(b) "Base Pay" shall mean the Participant's regular cash compensation
(excluding overtime pay, bonuses, shift premiums, commissions, fringe benefits,
other special payments and imputed income) determined without reduction for
Contributions made under this Plan or contributions to any Code Section 401(k)
or Section 125 Plan.
(c) "Board of Directors" shall mean the Board of Directors of the
Company.
(d) "Business Day" shall mean any day other than a Saturday, Sunday
or holiday.
(e) "Cause" shall mean any act, action or series of acts or actions
or any omission, omissions or series of omissions which, in the opinion of the
Committee, result in, or which have the effect of resulting in, (i) the
commission of a crime by the Participant involving
<PAGE>
moral turpitude, which crime has a material adverse impact on the Employer, (ii)
gross negligence or willful misconduct which is continuous and results in
material damage to the Employer, or (iii) the continuous, willful failure of the
person in question to follow the reasonable directives of the Employer.
(f) "Code" shall mean the Internal Revenue Code of 1986, as
amended, any successor revenue laws of the United States, and the rules and
regulations promulgated thereunder.
(g) "Committee" shall mean the Compensation Committee of the
Board of Directors, or in the event that there is no Compensation Committee, the
Board of Directors.
(h) "Company" shall mean Speedway Motorsports, Inc., a company
organized and existing under the laws of the State of Delaware.
(i) "Company Stock" shall mean the common stock, $.Ol par
value, of the Company.
(j) "Contributions" shall mean the after-tax payroll
deductions or other permissible contributions made by Participants to the Plan
pursuant to Article IV.
(k) "Effective Date" shall mean July 1, 1996 or as soon as
administratively practicable thereafter. The Plan's original effective date was
April 1, 1996.
(1) "Employee" shall mean any person who on or after the
Effective Date (i) is employed on a full-time or part-time basis by a
participating Employer, (ii) is regularly scheduled to work more than twenty
hours per week, and (iii) is customarily employed more than five months in any
calendar year. Independent contractors and outside directors shall not be
included in the definition of Employee for purposes of this Plan.
(m) "Employer" shall mean the Company and any of its present
or future subsidiaries (within the meaning of Section 424(f) of the Code) which
the Committee may designate from time to time as participating Employers under
this Plan.
(n) "Exercise Date" shall mean the last Business Day of March,
June, September and December on which the principal trading market for Company
Stock is open for trading, plus any other interim dates during the year which
the Committee designates as Exercise Dates.
(o) "Grant Date" shall mean January I of each year; provided
that, the Effective Date of the plan also shall be a Grant Date.
(p) "Option" shall mean an option to purchase shares of
Company Stock
2
<PAGE>
granted by the Committee to a Participant pursuant to this Plan.
(q) "Participant" shall mean an Employee participating in this
Plan in accordance with Article 111.
(r) "Plan" shall mean this Speedway Motorsports, Inc. Employee
Stock Purchase Plan, as amended from time to time.
1.3 Construction. The masculine gender, where appearing in the Plan,
shall be deemed to include the feminine gender, unless the context clearly
indicates to the contrary. The words "hereof," "herein," "hereunder" and other
similar compounds of the word "here" shall mean and refer to the entire Plan and
not it any particular provision or Section.
ARTICLE II
ADMINISTRATION
2.1 Appointment and Procedure of Committee. The Plan shall be
administered by the compensation Committee of the Board of Directors. The
Committee shall be appointed from time to time by the Board of Directors and
shall consist of not fewer than two of its members. No member of the Board of
Directors who serves on the Committee shall be eligible to participate in the
Plan. The Committee shall hold its meetings at such times and places as it may
determine. A majority of its members shall constitute a quorum. All
determinations of the Committee shall be made by a majority of its members. Any
decision or determination reduced to writing and signed by all members shall be
as effective as if it had been made by a majority vote at a meeting duly called
and held. The Committee may appoint a Secretary (who need not be a member of the
Committee).
2.2 Authority of Committee. The Committee, subject to the terms of the
Plan, shall have plenary authority in its discretion to interpret and construe
the Plan (including, without limitation, any of its terms which are uncertain,
doubtful or disputed); to decide all questions of Employee eligibility
hereunder; to determine the amount, manner and timing of all Options and
purchases of Company Stock hereunder; to establish, amend and rescind rules and
regulations pertaining to the administration of the Plan; and to make
determinations and interpretations and take such other administrative actions as
it deems necessary or advisable for the administration of this Plan. The express
grant in the Plan of any specific power to the Committee shall not be construed
as limiting any power or authority of the Committee. No member of the Committee
shall be liable for any act, determination or omission with respect to his
service on the Committee, if he acts in good faith and in a manner he reasonably
believes to be in or not opposed to the best interest of the Employer. All
expenses of administering this Plan shall be borne by the employer.
3
<PAGE>
ARTICLE III
PARTICIPATION
3.1 Eligibility to Participate. Subject to the restrictions of Section
3.2 below, an Employee shall be eligible to participate in this Plan as of the
first Grant Date coincident with or next following the first anniversary of his
date of employment with the Employer (provided that the Employee is still
employed on such Grant Date). For this purpose, years of employment prior to the
Effective Date will be considered.
3.2 Restrictions on Participation. Notwithstanding the foregoing
Section 3. 1, no Employee shall be eligible to participate in the Plan if such
Employee owns or holds options to purchase (or upon participation in this Plan
would own or hold options to purchase) stock possessing an aggregate of 5% or
more of the total combined voting power or value of all classes of stock of the
Company or any other Employer (as determined in accordance with the rules of
Code Section 424(d) relating to attribution of stock ownership).
3.3 Leave of Absence. For purposes of becoming a participant in the
Plan, a person on a leave of absence shall be deemed to be an Employee for the
first ninety days of such leave of absence and such Employee's employment shall
be deemed to have terminated at the close of business on the ninetieth day of
such leave of absence unless such Employee shall have returned to regular
full-time or part-time employment prior to the close of business on such
ninetieth day. Termination by the Company of any Employee's leave on absence,
other than termination of such leave of absence on return to regular full-time
or part-time employment, shall terminate an Employee's employment for all
purposes of the Plan.
ARTICLE IV
CONTRIBUTIONS
4.1 Payroll Deductions. By written election, made and filed with the
Committee pursuant to the Committee's rules and procedures, a Participant may
elect to designate a whole percentage between one percent and ten percent (or
such higher or lower percentage as may be allowed by the Committee's rules and
procedures) of his Base Pay to be deferred by payroll deduction as a
Contribution to the Plan. Payroll deductions shall commence as soon as
administratively practicable following the filing of such written election with
the Committee. The Committee may develop in its discretion additional rules and
procedures regarding payroll deduction elections.
A Participant may change or revoke his payroll deduction amount by
filing, on such forms and in accordance with such rules and procedures as the
Committee may prescribe in its discretion, a revised written election with the
Committee. Such modification or revocation shall take effect as soon as
administratively practicable after the Committee's receipt of such revised
election. Notwithstanding the foregoing, a Participant may change his payroll
deduction election
4
<PAGE>
only once each calendar quarter, or as otherwise specifically allowed by the
Committee's rules and procedures. If payroll deductions are discontinued,
payroll deductions may not be resumed by the Participant until the payroll
period which begins on or after the following Exercise Date, or as otherwise
specifically allowed by the Committee's rules and procedures. Under no
circumstances may a Participant's payroll deduction election be made, modified
or revoked retroactively.
4.2 Direct Payment. In accordance with such rules and procedures as the
Committee may prescribe in its discretion, in lieu of payroll deductions
pursuant to Section 4. 1, a Participant may elect to make Contributions by
direct cash payment (including by check, subject to the Committee's rules and
procedures) to the Plan rather than by payroll deduction. Such direct payments
must be received by the Plan at least ten Business Days prior to an Exercise
Date in order for such payments to be applied in the exercise of an Option
toward the purchase of Company Stock on such Exercise Date.
4.3 Leave of Absence. If a Participant goes on a leave of absence, such
Participant shall have the right to elect to (a) withdraw from the Plan and
receive a distribution of the balance in his Account pursuant to Section 4.5,
(b) discontinue Contributions to the Plan but remain a Participant in the Plan,
or (c) remain a Participant in the Plan during such leave of absence,
authorizing deductions to be made from payments by the Company to the
Participant during such leave of absence or making direct cash payments to the
Plan pursuant to Section 4.2.
4.4 Contributions to Accounts. A memorandum Account shall be
established by the 4 Committee for each Participant for the purpose of
accounting for Contributions. Contributions shall be credited to Accounts as
soon as administratively practicable following payroll withholding or receipt of
other permissible direct cash payment. Amounts credited to Accounts will not
accrue interest.
4.5 Withdrawal of Contributions from Plan. Prior to the end of a
calendar quarter, a Participant may elect to withdraw the Contributions credited
to his Account for that quarter by filing written notice thereof with the
Committee on such forms and in accordance with such procedures as the Committee
may prescribe. The Participant's Contributions shall be distributed to him as
soon as administratively practicable after the Committee's receipt of his notice
of withdrawal and, if applicable, no further payroll deductions shall be made
from his Base Pay.
4.6 Termination of Employment. Upon termination of a Participant's
employment for any reason, such Participant may no longer make Contributions to
the Plan or be granted Options under the Plan. A Participant's right to exercise
any unexpired Option he holds as of his termination of employment for any reason
unrelated to Cause may continue, if he so elects, until the next Exercise Date
following such termination of employment pursuant to Section 5.5(c)(ii) or
(iii), or he may permanently withdraw from the Plan in accordance with Section
4.5.
5
<PAGE>
ARTICLE V
OPTIONS
5.1 Company Stock Available for Options. There shall be available for
Options under the Plan an aggregate maximum of 400,000 shares of Company Stock,
subject to any adjustments which may be made pursuant to Section 6.1 of the Plan
in connection with changes in capitalization of the Company. Shares of Company
Stock used for purposes of the Plan may be either authorized and unissued
shares, or previously issued shares held in the treasury of the Company, or
both. Shares of Company Stock covered by Options which have expired prior to
exercise shall be available for further Options granted hereunder.
5.2 Granting of Options. The Plan shall be implemented by annual
offerings of approximately twelve months duration (except for the initial
offering and except as otherwise provided in Section 5.4). On each Grant Date,
all eligible Employees shall be granted an Option to purchase shares of Company
Stock. Prior to each Grant Date, the Committee shall determine the number of
shares of Company Stock available for purchase under each Option to be granted
on such Grant Date; provided that, the same number of shares must be available
under each Option granted on such Grant Date. No Participant may be granted an
Option which permits his rights to purchase stock under this Plan and all other
employee stock purchase plans of the Company or Employer to accrue at a rate
which exceeds $25,000 of the fair market value of such stock (determined at the
time such Option is granted) for each calendar year in which such Option is
outstanding at any time. Furthermore, no Participant may be granted an Option in
any calendar year which permits the Participant to purchase more than 500 shares
of Company Stock, subject to any adjustments which are made pursuant to Section
6.1 (or such higher or lower number as the Committee may establish with respect
to all subsequently granted Options for all Participants in the Plan, subject to
the limitations of Code Section 423).
5.3 Option Price. The purchase price at which shares of Company Stock
may be acquired pursuant to the exercise of all or any portion of an Option
granted under this Plan shall be ninety percent of the lesser of (i) the fair
market value of the Company Stock on the applicable Grant Date, and (ii) the
fair market value of the Company Stock on the applicable Exercise Date. For
purposes of this Section 5.3, the fair market value per share of Company Stock
shall be the closing price on the last Business Day prior to the date of
reference, or in the event that no sales take place on such date, the average of
the closing high bid and low asked prices, in either case on the principal
national securities exchange on which the Company Stock is listed or admitted to
trading, or if the Company Stock is not listed or admitted to trading on any
national securities exchange, the last sale price reported on the National
Market System of the National Association of Securities Dealers Automated
Quotation system ("NASDAQ") on such date, or the average of the closing high bid
and low asked prices of the Company Stock in the over-the-counter market
reported on NASDAQ on such date, as furnished to the Committee by any New York
Stock Exchange member selected from time to time by the Committee for such
purposes. If there is no bid or asked price reported on any such date, the
market value shall be determined by the Committee in accordance with the
regulations promulgated under Code
6
<PAGE>
Section 2031, or by any other appropriate method selected by the Committee.
5.4 Option Period. Each Option granted to a Participant under the Plan
shall expire on the earliest of (a) the last Exercise Date of the calendar year
in which the Option was granted, (b) the Participant's voluntary withdrawal from
the Plan following termination of employment, and (c) the date of the
Participant's termination of employment related to Cause, or the Exercise Date
immediately following the Participant's termination of employment for any reason
unrelated to Cause. In no event will the duration of an Option period exceed
twenty-seven months (or such other applicable period permitted under Code
Section 423(b)(7)) from the date on which such Option is granted.
7
<PAGE>
5.5 Exercise of Options.
(a) Automatic Exercise. Any Option granted to a Participant shall be
exercised automatically on each Exercise Date during the calendar year of the
Option's Grant Date in whole or in part such that the Participant's accumulated
Contributions as of such Exercise Date shall be applied to the purchase of the
maximum number of whole shares of Company Stock that his Contributions will
allow at the applicable Option price (determined in accordance with Section
5.3), limited to the number of shares subject to such Option. In the event that
the number of shares of Company Stock that may be purchased by all Participants
in the Plan exceeds the number of shares then available for issuance under the
Plan, the Committee shall make a pro rata allocation of the available shares in
as uniform a manner as it determines to be practicable and equitable. Any
remaining Contributions in the Participant's Account amounting to less than the
Option price of a whole share of Company Stock shall be carried forward and
applied on the next Exercise Date; provided that, Contributions remaining after
the last Exercise Date of the calendar year may be distributed to the
Participant at his election.
(b) Nontransferability of Options. During a Participant's lifetime,
Options held by such Participant shall be exercisable only by that Participant.
No Option shall be transferable other than by will or the laws of descent and
distribution.
(c) Effect of Termination of Employment.
(i) Termination of Employment Related to Cause. Upon termination
of a Participant's employment related to Cause, the Participant's participation
in the Plan also shall terminate. Any unexpired Option he holds will expire as
of the date of his termination of employment. Remaining contributions credited
to his Account shall be distributed to the Participant as soon as
administratively practicable following termination of employment.
(ii) Termination of Employment Due to Death. In the event of the
death of the Participant while employed, or during the period following his
termination of employment for any reason unrelated to Cause but prior to the
next Exercise Date, the Participant's estate shall have the right to elect by
written notice to the Committee prior to the earlier of the expiration of sixty
days commencing with the date of the Participant's death and the Exercise Date
next following the date of the participant's death:
(A) To withdraw all of the Contributions credited to the
Participant's Account under the Plan, or
(B) To exercise any unexercised Options held by the
Participant as of the date of his death for the purchase of Company Stock on the
Exercise Date next following the date of the Participant's death in accordance
with Section 5.5(a) but only to the extent such Options were exercisable on the
date of the Participant's death, with any remaining Contributions credited to
the Participant's Account being distributed to the Participant's estate as
8
<PAGE>
soon as administratively practicable after such Exercise Date.
In the event that no such written election is timely and property received by
the Committee, all Contributions credited to the Participant's Account shall be
distributed to the Participant's estate. In no event shall any Option be
exercisable beyond the applicable exercise period specified in Section 5.4 of
the Plan.
(iii) Other Termination of Employment. Upon
termination of a Participant's employment for any reason unrelated to Cause or
death, the Participant may at his election:
(A) Withdraw from the Plan pursuant to
Section 4.5 and request the return of the remaining Contributions then credited
to his Account, or
(B) Continue participation in the Plan,
subject to the provisions of Section 4.6, until the Exercise Date next following
his date of termination of employment for the limited purpose of allowing any
unexpired Options he holds as of his termination of employment to be exercised
automatically in accordance with Section 5.5(a) on the Exercise Date next
following his termination of employment but only to the extent such Options were
exercisable on the date of the Participant's termination of employment, with any
remaining Contributions credited to the Participant's Account being distributed
to the Participant as soon as administratively practicable after such Exercise
Date.
(d) Leave of Absence. A Participant on a leave of absence
shall, subject to the election made by such Participant pursuant to Section 4.3,
continue to be a Participant in the Plan so long as such Participant is on
continuous leave of absence. A Participant who has been on leave of absence for
more that ninety days and who therefore is not an Employee for the purpose on
the Plan shall not be entitled to participate in any offering commencing on any
Grant Date following the ninetieth day of such leave of absence. Notwithstanding
any other provisions of the Plan, unless a Participant on a leave of absence
returns to regular full-time or part-time employment with the Employer at the
earlier of (i) the termination of such leave of absence, or (ii) three months
from the ninetieth day of such leave of absence, such Participant's
participation in the Plan shall terminate on whichever of such dates first
occurs.
(e) Delivery of Stock. As soon as administratively practicable
after each Exercise Date, the Company or the Committee will deliver to each
Participant, as applicable, certificates evidencing shares of Company Stock
purchased under this Plan.
(f) Acceleration of Exercisability of Options Upon occurrence
of Certain Events. In connection with any merger or consolidation in which the
Company is not the surviving corporation and which results in the holders of the
outstanding voting securities of the Company (determined immediately prior to
such merger or consolidation) owning less than a majority of the outstanding
voting securities of the surviving corporation (determined immediately following
such merger or consolidation), or any sale or transfer by the Company of
9
<PAGE>
all or substantially all its assets or any tender offer or exchange offer for or
the acquisition, directly or indirectly, by any person or group of all or a
majority of the then-outstanding voting securities of the Company, all
outstanding Options under the Plan shall become exercisable in full,
notwithstanding any other provision of the Plan or of any outstanding Options
granted thereunder, on and after (1) the fifteenth day prior to the effective
date of such merger, consolidation, sale, transfer or acquisition or (ii) the
date of commencement of such tender offer or exchange offer, as the case may be.
Notwithstanding the foregoing, in no event shall any Option be exercisable after
the date of termination of the exercise period of such Option specified in
Section 5.4.
(g) Registration, Listing and Qualification of Share of Stock. Each
Option shall be subject to the requirement that if at any time the Board of
Directors shall determine that the registration, listing or qualification of
shares of Company Stock covered thereby upon any securities exchange or under
any federal or state law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in connection
with, the granting of such option or the purchase of shares of Company Stock
thereunder, no such Option may be exercised unless and until such registration,
listing, qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Board of Directors. The Employer
may require that any person exercising an Option shall make such representations
and agreements and furnish such information as it deems appropriate to assure
compliance with the foregoing or any other applicable legal requirement.
ARTICLE VI
MISCELLANEOUS
6.1 Adjustments Upon Changes in Capitalization. In the event of a
reorganization, stock split, stock dividend, combination of shares, merger,
consolidation, rights offering or any other change in the corporate structure of
shares of the Company, the Committee may make such adjustments to the extent and
in the manner it deems appropriate in the number and/or kind of shares of
Company Stock subject to outstanding Options and in the Option exercise price.
In such event, the Committee also may proportionately adjust the number and/or
kind of shares subject to purchase under Options which may be granted pursuant
to Article IV of this Plan. Any adjustments made pursuant to this Section 6.1
remain subject to the limitations of Code Section 423 (including its $25,000
annual limitations).
6.2 Approval of Shareholders. Within twelve months before or after the
Plan is originally adopted, this Plan must be approved by a majority of the
votes cast thereon by the stockholders of the
10
<PAGE>
Company at a meeting of stockholders duly called and held for such purpose or by
unanimous written consent of such stockholders, and no Option granted hereunder
shall be exercisable prior to such approval.
11
<PAGE>
6.3 Amendment, Suspension and Termination. The Board of Directors may
at any time amend, suspend or terminate this Plan; provided, however, that the
Board of Directors shall not (i) increase the maximum number of shares of
Company Stock for which Op@ions may be granted under the Plan except as provided
in Section 6. 1, (ii) materially modify the requirements as to the class of
employees eligible to receive Options and purchase Company Stock under the Plan,
or (iii) materially increase the benefits accruing to Participants under the
Plan without obtaining approval of the stockholders in the manner described in
Section 6.2. The Plan will continue until terminated by the Board of Directors
or until all of the shares of Company Stock reserved for issuance under the Plan
have been issued, whichever first occurs. No amendment, suspension or
termination of the Plan may, without the consent of the Participants then
holding Options to purchase Company Stock, adversely affect the rights of such
Participants under such Options.
6.4 Intent to Comply With Code Section 423. It is intended that this
Plan qualify as an "employee stock purchase plan" under Code Section 423. The
provisions of this Plan shall be construed so as to extend and limit
participation in a manner consistent with the requirements of that Section of
the Code. In the event of an inconsistency between the Plan and Code Section
423, the Plan shall be interpreted in a manner which complies with the
requirements of Code Section 423 and the regulations thereunder, without further
act or amendment by the Company or the Board of Directors unless otherwise
required pursuant to Section 6.3 of this Plan.
6.5 Equal Rights and Privileges. All Participants granted Options under
this Plan shall have equal rights and privileges within the meaning of Code
Section 423(b)(5) and the regulations thereunder. The provisions applying to one
Option granted on a Grant Date must apply in the same manner to all other
Options granted on such Grant Date.
6.6 Use of Funds. All Contributions received and held by the Employer
under this Plan may be used by the Employer for any corporate purpose and the
Employer shall not be obligated to segregate such Contributions.
6.7 Withholding. It shall be a condition to the obligation of the
Company to issue shares of Company Stock upon exercise of an Option that the
Participant (or his estate pursuant to Section 5.5(c)(ii)) pay to the Company,
upon its demand, such amount as may be requested by the Company for the purpose
of satisfying taxes, including taxes owed by the Participant due to the
disposition of Company Stock by the Participant prior to the expiration of the
holding periods described in Code Section 423 (a).
6.8 Effect of Plan. This Plan shall be binding upon each Participant
and his successors, including, without limitation, such Participant's estate and
the executors, administrators or trustees thereof, heirs and legatees, and any
receiver, trustee in bankruptcy or representative of creditors of such
Participant.
6.9 No Employment Rights. Nothing in this Plan or in any Option granted
pursuant to
12
<PAGE>
the Plan shall be construed as a contract of employment between the Employer and
any employee, or as a right of any employee to continue in the employ of the
Employer, or as a limitation of the right of the Employer to discharge any of
its employees, with or without cause.
6.10 Governing Law. This Plan and all rights and obligations hereunder
shall be construed in accordance with and governed by the laws of the State of
North Carolina, except to the extent such laws are preempted by the laws of the
United States..
6.11 Other Actions. Nothing contained in the Plan shall be construed to
limit the authority of the Company to exercise its corporate rights and powers,
including, but not by way of limitation, the right of the Company to grant or
assume options for proper corporate purposes other than under the Plan with
respect to any employee or other person, firm, corporation or association.
13
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement
No. 333-80021 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 16, 1999
EXHIBIT 99.1
SPEEDWAY MOTORSPORTS, INC.
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
PURSUANT TO THE PROSPECTUS DATED JUNE 18, 1999
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON JULY 16,
1999, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR
TO 5:00 P.M., NEW YORK CITY TIME, ON JULY 16, 1999.
BY MESSENGER, MAIL, OR OVERNIGHT DELIVERY:
U.S. Bank Trust National Association
180 East Fifth Street
Mail Code: SPFT0210
St. Paul, Minnesota 55101
Attention: Specialized Finance
FACSIMILE TRANSMISSION:
(612) 244-1537 (MN)
CONFIRM BY TELEPHONE:
(612) 244-5011 (MN)
Attention: Specialized Finance
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE,
OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE,
WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus, dated June 18,
1999 (the "Prospectus"), of Speedway Motorsports, Inc., a Delaware corporation
(the "Company"), and this Letter of Transmittal (this "Letter"), which together
constitute the offer (the "Exchange Offer") to exchange the Company's
$125,000,000 8 1/2% Senior Subordinated Notes Due 2007, Series B (the "Series B
Notes") and the Company's $125,000,000 8 1/2% Senior Subordinated Notes Due
2007, Series C (the "Series C Notes," and together with the Series B Notes the
"Old Notes") for $250,000,000 in aggregate principal amount of the Company's
8 1/2% Senior Subordinated Notes, Series D (the "Exchange Notes" or "New
Notes").
For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount at maturity equal to that of the
surrendered Old Note. The New Notes will bear interest at a rate equal to
8 1/2% per anum. Interest on the New Notes is payable semiannually, commencing
August 15, 1999, on February 15 and August 15 of each year (each, an "Interest
Payment Date") and shall accrue from the date of original issuance, or from the
most recent Interest Payment Date with respect to the Old Notes to which
interest was paid or for which interest was duly provided. The New Notes will
mature on August 15, 2007.
Subject to certain exceptions, in the event of a Registration Default (as
defined below), holders of Old Notes are entitled to receive Liquidated Damages
of $0.05 per week per $1,000 principal amount of Old Notes held by such holders
(up to a maximum of $0.30 per week per $1,000 principal amount of Old Notes). A
"Registration Default" with respect to the Exchange Offer shall occur if: (i)
the registration statement concerning the exchange offer (the "Exchange Offer
Registration Statement") has not been filed with the Commission on or prior to
the 60th day after May 11, 1999 (the "Closing Date") (ii) the Exchange Offer
Registration Statement has not been declared effective on or prior to the 120th
day after the Closing Date (the "Effectiveness Target Date"), (iii) the Company
fails to consummate the Exchange Offer within 30 business days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement, (iv) the Exchange Offer Registration Statement is declared effective
but thereafter ceases to be effective during the period specified in the
Registration Rights Agreement. Holders of New Notes will not be and, upon
consummation of the Exchange Offer, holders of Old Notes will no longer be,
entitled to (i) the right to receive the Liquidated Damages or (ii) certain
other rights under the Registration Rights Agreement intended for holders of
Old Notes. The Exchange Offer shall be deemed consummated upon the occurrence
of the delivery by the Company to the Registrar under the Indenture of New
Notes in the same aggregate principal amount as the aggregate principal amount
of Old Notes that are tendered by holders thereof pursuant to the Exchange
Offer.
<PAGE>
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, (ii) to extend the Exchange Offer, in which event the
term "Expiration Date" shall mean the latest time and date to which the
Exchange Offer is extended, (iii) if the Commission does not declare the
Registration Statement effective, to terminate the Exchange Offer, by giving
oral or written notice of such delay, extension, or termination to the Exchange
Agent, and (iv) to amend the terms of the Exchange Offer in any manner. If the
Exchange Offer is amended in a manner determined by the Company to constitute a
material change, the Company will promptly disclose such amendments by means of
a prospectus supplement that will be distributed to the registered holders of
the Old Notes. Modifications of the Exchange Offer, including but not limited
to (i) extension of the period during which the Exchange Offer is open and (ii)
satisfaction of the conditions set forth under the caption "The Exchange Offer
- -- Conditions of the Exchange Offer" in the Prospectus, may require that at
least ten business days remain in the Exchange Offer. In order to extend the
Exchange Offer, the Company will notify the Exchange Agent of any extension by
oral or written notice and will make a public announcement thereof, each prior
to 9:00 a.m., New York City time, on the next business day after the previously
scheduled Expiration Date.
This Letter must be completed and delivered by a holder of Old Notes if:
(i) such holder is not a member of the ATOP system ("ATOP") of the Depository
Trust Company (the "Book-Entry Transfer Facility"), (ii) such holder is an ATOP
member but chooses not to use ATOP or (iii) the Old Notes are to be tendered in
accordance with the guaranteed delivery procedures set forth in Instruction 1
to this Letter. Holders of Old Notes whose Notes are not immediately available,
or who are unable to deliver their Notes or confirmation of the book-entry
tender of their Old Notes into the Exchange Agent's account at the Book-Entry
Transfer Facility (a "Book-Entry Confirmation"), as the case may be, and all
other documents required by this Letter to the Exchange Agent on or prior to
the Expiration Date, must tender their Old Notes according to the guaranteed
delivery procedures set forth in "The Exchange Offer -- Guaranteed Delivery
Procedures" section of the Prospectus. See Instruction 1 to this Letter.
Delivery of documents to the Book Entry Transfer Facility does not constitute
delivery to the Exchange Agent.
The undersigned has completed the appropriate boxes below and signed this
Letter to indicate the action the undersigned desires to take with respect to
the Exchange Offer.
List below the Old Notes to which this Letter relates. If the space
provided below is inadequate, the Note numbers and principal amount of Old
Notes should be listed on a separate signed schedule affixed hereto.
<TABLE>
<S> <C> <C> <C>
DESCRIPTION OF OLD 1 2 3
NOTES
NAME(S) AND ADDRESS(ES) OF AGGREGATE PRINCIPAL PRINCIPAL
REGISTERED HOLDER(S) NOTE AMOUNT OF AMOUNT
(PLEASE FILL IN, IF BLANK) NUMBER(S)* OLD NOTE(S) TENDERED**
TOTAL
* Need not be complete if Old Notes are being tendered by book-entry transfer.
** Unless otherwise indicated in this column, a holder will be deemed to have tendered the entire principal amount represented
by
the Old Note indicated in column 2. See Instruction 2. Old Notes tendered hereby must be in denominations of principal amount
of $1,000 and any integral multiple thereof. See Instruction 1.
</TABLE>
2
<PAGE>
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
Account Number Transaction Code Number
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name of Registered Holder(s)
Window Ticket Number (if any)
Date of Execution of Notice of Guaranteed Delivery
Name of Institution which guaranteed delivery
IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:
Account Number Transaction Code Number
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
Address:
3
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount of Old
Notes indicated above. Subject to, and effective upon, the acceptance for
exchange of the Old Notes tendered hereby, the undersigned hereby sells,
assigns and transfers to, or upon the order of, the Company all right, title
and interest in and to such Old Notes as are being tendered hereby.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances
and not subject to any adverse claim when the same are accepted by the Company.
The undersigned hereby further represents that any New Notes acquired in
exchange for Old Notes tendered hereby will have been acquired in the ordinary
course of business of the person receiving such New Notes, whether or not such
person is the undersigned, that neither the holder of such Old Notes nor any
such other person is engaged in, or intends to engage in, a distribution of
such New Notes, or has an arrangement or understanding with any person to
participate in the distribution of such New Notes, and that neither the holder
of such Old Notes nor any such other person is an "affiliate," as defined in
Rule 405 under the Securities Act of 1933, as amended (the "Securities Act"),
of the Company.
The undersigned also acknowledges that this Exchange Offer is being made
based upon the Company's understanding of an interpretation by the staff of the
Securities and Exchange Commission (the "Commission") as set forth in no-action
letters issued to third parties, including Exxon Capital Holdings Corporation,
SEC No-Action Letter (available April 13, 1989), Morgan Stanley & Co.,
Incorporated, SEC No-Action Letter (available June 5, 1991), Mary Kay
Cosmetics, Inc., SEC No-Action Letter (available June 5, 1991), Warnaco, Inc.,
SEC No-Action Letter (available October 11, 1991) and Shearman & Sterling, SEC
No-Action Letter (available July 2, 1993), that the New Notes issued in
exchange for the Old Notes pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by holders thereof (other than a
broker-dealer who acquires such New Notes directly from the Company for resale
pursuant to Rule 144A under the Securities Act or any other available exemption
under the Securities Act or any such holder that is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act), without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary
course of such holders' business and such holders are not engaged in, and do
not intend to engage in, a distribution of such New Notes and have no
arrangement with any person to participate in the distribution of such New
Notes. If a holder of Old Notes is engaged in or intends to engage in a
distribution of the New Notes or has any arrangement or understanding with
respect to the distribution of the New Notes to be acquired pursuant to the
Exchange Offer, which holder could not rely on the applicable interpretations
of the staff of the Commission and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
secondary resale transaction. If the undersigned is a broker-dealer that will
receive New Notes for its own account in exchange for Old Notes, it represents
that the Old Notes to be exchanged for the New Notes were acquired by it as a
result of market-making activities or other trading activities and acknowledges
that it will deliver a prospectus in connection with any resale of such New
Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. This tender may be withdrawn only in accordance
with the procedures set forth in "The Exchange Offer -- Withdrawal Rights"
section of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please deliver the New Notes (and, if applicable,
substitute Notes representing the remaining principal balance of any Old Note
exchanged only in part) in the name of the undersigned or, in the case of a
book-entry delivery of Old Notes, please credit the account indicated above
maintained at the Book-Entry Transfer Facility. Similarly, unless otherwise
indicated under the box entitled "Special Delivery Instructions" below, please
send the New Notes (and, if applicable, substitute Notes representing the
remaining principal balance of any Old Note exchanged only in part) to the
undersigned at the address shown above in the box entitled "Description of Old
Notes."
4
<PAGE>
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS
SET FORTH IN SUCH BOX ABOVE.
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if Notes for Old Notes not exchanged and/or New Notes
are to be issued in the name of and sent to someone other than the
person(s) whose signature(s) appear(s) on this Letter above, or if Old
Notes delivered by book-entry transfer which are not accepted for exchange
are to be returned by credit to an account maintained at the Book-Entry
Transfer Facility other than the account indicated above.
Issue New Notes and/or Old Notes to:
Name(s)
(PLEASE TYPE OR PRINT)
(PLEASE TYPE OR PRINT)
Address
(INCLUDING ZIP CODE)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9)
[ ] Credit unexchanged Old Notes delivered by book-entry transfer to the
Book-Entry Transfer Facility account set forth below.
(Book-Entry Transfer Facility
Account Number, if applicable)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if Notes for Old Notes not exchanged and/or New Notes
are to be sent to someone other than the person(s) whose signature(s)
appear(s) on this Letter above or to such person(s) at an address other
than shown in the box entitled "Description of Old Notes" on this Letter
above.
Mail New Notes and/or Old Notes to:
Name(s)
(PLEASE TYPE OR PRINT)
(PLEASE TYPE OR PRINT)
Address
(INCLUDING ZIP CODE)
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE OLD NOTES AND
ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY), OR A
BOOK-ENTRY CONFIRMATION, AS THE CASE MAY BE, MUST BE RECEIVED BY THE EXCHANGE
AGENT PRIOR TO 5:00 P.M., NEW YORK TIME, ON THE EXPIRATION DATE.
PLEASE READ THIS LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
5
<PAGE>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9)
Dated:
x
x
Signature(s) of Owner
, 1998
, 1998
, 1998
Date
Area Code and Telephone Number:
If a holder is tendering any Old Notes, this Letter must be signed by the
registered holder(s) as the name(s) appear(s) on the Note(s) for the Old Notes
or by any person(s) authorized to become registered holder(s) by endorsements
and documents transmitted herewith. If signature is by a trustee, executor,
administrator, guardian, officer or other person acting in a fiduciary or
representative capacity, please set forth full title. See Instruction 3.
Name(s):
----------------------------------------------------------------------------
(Please Print or Type)
Capacity:
Address:
(Including Zip Code)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by
an Eligible Institution:
(Authorized Signature)
(Title)
(Name and Firm)
Dated: --------------- , 1998
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE 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
SPEEDWAY MOTORSPORTS, INC.
1. DELIVERY OF THIS LETTER AND OLD NOTES; GUARANTEED DELIVERY PROCEDURES.
Certificates for Old Notes as well as a properly completed and duly
executed copy of this Letter (or facsimile thereof) and any other documents
required by this Letter, or a Book Entry Confirmation, as the case may be, must
be received by the Exchange Agent at its address set forth herein on or before
the Expiration Date, or the tendering holder must comply with the guaranteed
delivery procedures set forth below. This Letter must be used: (i) by all
holders who are not ATOP members, (ii) by holders who are ATOP members but
choose not to use ATOP or (iii) if the Old Notes are to be tendered in
accordance with the guaranteed delivery procedures set forth below. Old Notes
tendered hereby must be in denominations of principal amount of $1,000 or any
integral multiple thereof.
Holders whose Old Notes are not immediately available or who cannot
deliver their Notes or a Book-Entry Confirmation, as the case may be, and all
other required documents to the Exchange Agent on or prior to the Expiration
Date, may tender their Old Notes pursuant to the guaranteed delivery procedures
set forth in "The Exchange Offer -- Guaranteed Delivery Procedures" section of
the Prospectus. Pursuant to such procedures, (i) such tender must be made by or
through an Eligible Institution (as defined below) and a Notice of Guaranteed
Delivery in the Form of Exhibit 99.2 to the Registration Statement of which the
Prospectus forms a part, a copy of which may be obtained from the Exchange
Agent (a "Notice of Guaranteed Delivery"), must be signed by such holder, (ii)
on or prior to the Expiration Date, the Exchange Agent must receive from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery), setting
forth the name and address of the holder of Old Notes, the certificate number
or numbers of the tendered Old Notes and the principal amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing that
within four business days after the date of delivery of the Notice of
Guaranteed Delivery, this Letter together with the certificates representing
the tendered Old Notes or a Book-Entry Confirmation, as the case may be, as
well as all other documents required by this Letter will be deposited by the
Eligible Institution with the Exchange Agent, and (iii) the certificates for
all tendered Old Notes or a Book-Entry Confirmation, as the case may be, as
well as all other documents required by this Letter (properly completed and
duly executed), must be received by the Exchange Agent within four business
days after the date of delivery of such Notice of Guaranteed Delivery.
The method of delivery of this Letter, certificates for the Old Notes or a
Book-Entry Confirmation, as the case may be, and all other required documents
is at the election and risk of the tendering holders, but the delivery will be
deemed made only when actually received or confirmed by the Exchange Agent. If
Old Notes are sent by mail, it is recommended that the mailing be made by
registered mail, properly insured, with return receipt requested, and that such
mailing be made sufficiently in advance of the Expiration Date to permit
delivery to the Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date. Instead of delivery by mail, it is recommended that the holder
use an overnight or hand delivery service. In all cases, sufficient time should
be allowed for timely delivery. See "The Exchange Offer" section of the
Prospectus.
2. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS OF OLD NOTES WHO TENDER BY
BOOK-ENTRY TRANSFER).
If less than the entire principal amount of any submitted Note is to be
tendered, the tendering holder(s) should fill in the aggregate principal amount
to be tendered in the box above entitled "Description of Old Notes -- Principal
Amount Tendered." A reissued Note representing the balance of nontendered
principal of any submitted Old Notes will be sent to such tendering holder,
unless otherwise provided in the appropriate box on this Letter, promptly after
the Expiration Date. THE ENTIRE PRINCIPAL AMOUNT OF ANY OLD NOTES DELIVERED TO
THE EXCHANGE AGENT WILL BE DEEMED TO HAVE BEEN TENDERED UNLESS OTHERWISE
INDICATED.
3. SIGNATURES ON THIS LETTER; ASSIGNMENTS AND ENDORSEMENT; GUARANTEE OF
SIGNATURES.
If this Letter is signed by the registered holder of the Old Notes
tendered hereby, the signature must correspond exactly with the name as written
on the face of the Notes without any change whatsoever.
7
<PAGE>
If any tendered Old Notes are owned of record by two or more joint owners,
all such owners must sign this Letter.
If any tendered Old Notes are registered in different names on several
Notes, it will be necessary to complete, sign and submit as many separate
copies of this Letter as there are different registrations of Notes.
When this Letter is signed by the registered holder of the Old Notes
specified herein and tendered hereby, no endorsements of the submitted Notes or
separate instruments of assignment are required. If, however, the New Notes are
to be issued, or any untendered Old Notes are to be reissued, to a person other
than the registered holder, then endorsements of any Notes transmitted hereby
or separate instruments of assignment are required. Signatures on such Notes
must be guaranteed by an Eligible Institution.
If this Letter is signed by a person other than the registered holder of
any Notes specified herein, such Notes must be endorsed or accompanied by
appropriate instruments of assignment, in either case signed exactly as the
name of the registered holder appears on the Notes and the signatures on such
Notes must be guaranteed by an Eligible Institution.
If this Letter or any Notes or instruments of assignment 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, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must
be submitted.
ENDORSEMENTS ON OLD NOTES OR SIGNATURES ON INSTRUMENTS OF ASSIGNMENT
REQUIRED BY THIS INSTRUCTION 3 MUST BE GUARANTEED BY A FIRM WHICH IS A MEMBER
OF A REGISTERED NATIONAL SECURITIES EXCHANGE OR A MEMBER OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC., BY A COMMERCIAL BANK OR TRUST COMPANY
HAVING AN OFFICE OR CORRESPONDENT IN THE UNITED STATES OR BY AN "ELIGIBLE
GUARANTOR" INSTITUTION WITHIN THE MEANING OF RULE 17AD-15 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED (AN "ELIGIBLE INSTITUTION").
SIGNATURES ON THIS LETTER NEED NOT BE GUARANTEED BY AN ELIGIBLE
INSTITUTION, PROVIDED THE OLD NOTES ARE TENDERED: (I) BY A REGISTERED HOLDER OF
OLD NOTES (WHICH TERM, FOR PURPOSES OF THE EXCHANGE OFFER, INCLUDES ANY
PARTICIPANT IN THE BOOK-ENTRY TRANSFER FACILITY SYSTEM WHOSE NAME APPEARS ON A
SECURITY POSITION LISTING AS THE HOLDER OF SUCH OLD NOTES) TENDERED WHO HAS NOT
COMPLETED THE BOX ENTITLED "SPECIAL ISSUANCE INSTRUCTIONS" OR "SPECIAL DELIVERY
INSTRUCTIONS" ON THIS LETTER, OR (II) FOR THE ACCOUNT OF AN ELIGIBLE
INSTITUTION.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders of Old Notes should indicate in the applicable box the
name and address to which New Notes issued pursuant to the Exchange Offer
and/or substitute Notes evidencing Old Notes not exchanged are to be issued or
sent, if different from the name or address of the person signing this Letter.
In the case of issuance in a different name, the employer identification or
social security number of the person named must also be indicated. A holder of
Old Notes tendering Old Notes by book-entry transfer may request that Old Notes
not exchanged be credited to such account maintained at the Book-Entry Transfer
Facility as such holder of Old Notes may designate hereon. If no such
instructions are given, such Old Notes not exchanged will be returned to the
name or address of the person signing this Letter.
5. TAX IDENTIFICATION NUMBER.
Federal income tax law generally requires that a tendering holder whose
Old Notes are accepted for exchange must provide the Company (as payor) with
such Holder's correct Taxpayer Identification Number ("TIN") on Substitute Form
W-9 below, which, in the case of a tendering holder who is an individual, is
his or her social security number. If the Company is not provided with the
current TIN or an adequate basis for an exemption, such tendering holder may be
subject to a $50 penalty imposed by the Internal Revenue Service. In addition,
delivery of New Notes to such tendering holder may be subject to backup
withholding in an amount equal to 31% of all reportable payments made after the
exchange. If withholding results in an overpayment of taxes, a refund may be
obtained.
Exempt holders of Old Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed Guidelines of Certification of
Taxpayer Identification Number on Substitute Form W-9 (the "W-9 Guidelines")
for additional instructions.
8
<PAGE>
To prevent backup withholding, each tendering holder of Old Notes must
provide its correct TIN by completing the "Substitute Form W-9" set forth
below, certifying that the TIN provided is correct (or that such holder is
awaiting a TIN) and that (i) the holder is exempt from backup withholding, (ii)
the holder has not been notified by the Internal Revenue Service that such
holder is subject to a backup withholding as a result of a failure to report
all interest or dividends or (iii) the Internal Revenue Service has notified
the holder that such holder is no longer subject to backup withholding. If the
tendering holder of Old Notes is a nonresident alien or foreign entity not
subject to backup withholding, such holder must give the Company a completed
Form W-8, Notice of Foreign Status. These forms may be obtained from the
Exchange Agent. If the Old Notes are in more than one name or are not in the
name of the actual owner, such holder should consult the W-9 Guidelines for
information on which TIN to report. If such holder does not have a TIN, such
holder should consult the W-9 Guidelines for instructions on applying for a
TIN, check the box in Part 2 of the Substitute Form W-9 and write "applied for"
in lieu of its TIN. Note: checking-this box and writing "applied for" on the
form means that such holder has already applied for a TIN or that such holder
intends to apply for one in the near future. If such holder does not provide
its TIN to the Company within 60 days, backup withholding will begin and
continue until such holder furnishes its TIN to the Company.
6. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the
exchange of Old Notes pursuant to the Exchange Offer. If, however, a transfer
tax is imposed for any reason other than the exchange of Old Notes pursuant to
the Exchange Offer, the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted herewith, the amount of such transfer taxes will be
billed directly to such tendering holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT IS NOT NECESSARY FOR TRANSFER
TAX STAMPS TO BE AFFIXED TO THE OLD NOTES SPECIFIED IN THIS LETTER.
7. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive satisfaction of any or
all conditions enumerated in the Prospectus.
8. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Old Notes, by execution of this Letter,
shall waive any right to receive notice of the acceptance of their Old Notes
for exchange.
Neither the Company, the Exchange Agent nor any other person is obligated
to give notice of any defeat or irregularity with respect to any tender of Old
Notes nor shall any of them incur any liability for failure to give any such
notice.
9. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES.
Any holder whose Old Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above for further
instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus, this Letter and other related documents,
should be directed to the Exchange Agent, at the address and telephone number
indicated above.
9
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
<TABLE>
<S> <C> <C>
PAYOR'S NAME: SPEEDWAY MOTORSPORTS, INC.
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN: ---------------------
TIN IN THE BOX AT RIGHT AND Social Security Number
FORM W-9
CERTIFY BY SIGNING AND OR
Employer Identification Number
DATING BELOW.
Department of the Treasury PART 2 -- TIN Applied for [ ]
==============================================================
Internal Revenue Service
CERTIFICATION: Under penalties of perjury, I certify that:
(1) the number shown on this form is my correct Taxpayer
Identification Number
Payor's Request for Taxpayer
(or I am waiting for a number to be issued to me),
Identification Number ("TIN")
and Certification (2) I am not subject to backup withholding either because: (a)
I am exempt from
backup withholding, or (b) I have not been notified by the
Internal Revenue
Service (the "IRS") that I am subject to backup withholding as
a result of a
failure to report all interest or dividends, or (c) the IRS
has notified me that I
am no longer subject to backup withholding, and
(3) any other information provided on this form is true and
correct.
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) of
the
above certification if you have been notified by the IRS that
you are subject to
backup withholding because of under reporting of interest or
dividends on your tax
return and you have not been notified by the IRS that you are
no longer subject to
backup withholding.
Sign Here |Zr Signature
Date ------------ , 19 ---
Name:
</TABLE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 2 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of the exchange,
thirty-one percent (31%) of all reportable payments made to me thereafter will
be withheld until I provide a number.
Signature
Date
10
EXHIBIT 99.2
SPEEDWAY MOTORSPORTS, INC.
This form or one substantially equivalent hereto must be used to accept
the Exchange Offer of Speedway Motorsports, Inc. (the "Company") made pursuant
to the Prospectus, dated June 18, 1999 (the "Prospectus"), and the enclosed
Letter of Transmittal (the "Letter of Transmittal") if Old Notes are not
immediately available or if time will not permit all documents required by the
Letter of Transmittal to reach the U.S. Bank Trust National Association (the
"Exchange Agent") prior to the Expiration Date of the Exchange Offer. Such form
may be delivered or transmitted by facsimile transmission, mail, overnight or
hand delivery to the Exchange Agent as set forth below. In addition, in order
to utilize the guaranteed delivery procedure to tender Old Notes pursuant to
the Exchange Offer, a completed, signed and dated Letter of Transmittal (or
facsimile thereof) must also be received by the Exchange Agent on or prior to
5:00 P.M., New York City time, on the Expiration Date. Capitalized terms not
defined herein are defined in the Prospectus.
DELIVERY TO: U.S. Bank Trust National Association, Exchange Agent
BY MESSENGER, MAIL, OVERNIGHT DELIVERY:
U.S. Bank Trust National Association
180 East Fifth Street
Mail Code: SPFT0210
St. Paul, Minnesota 55101
Attention: Specialized Finance
FACSIMILE TRANSMISSION:
(612) 244-1537 (MN)
CONFIRM BY TELEPHONE:
(612) 244-5011 (MN)
Specialized Finance
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE,
OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE,
WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Company the principal amount of Old Notes set forth below, pursuant to the
guaranteed delivery procedure described in "The Exchange Offer -- Guaranteed
Delivery Procedures" section of the Prospectus.
Principal Amount of Old Notes Tendered
$
Note Certificate Nos. (if available):
If Old Notes will be delivered by book-entry transfer to The Depositary Trust
Company, provide account number.
Account Number:
Name(s) of Record Holder(s):
Address(es):
Area Code and Telephone Number(s):
Signature(s):
THE ACCOMPANYING GUARANTEE MUST BE COMPLETED.
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office correspondent in the United
States or any "eligible guarantor" institution within the meaning of Rule
17Ad-15 of the Exchange Act of 1934, as amended, hereby guarantees to deliver
to the Exchange Agent, at its address set forth above, the Old Notes described
above, in proper form for transfer, together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, and any other documents required by the Letter of
Transmittal within four business days after the date of execution of this
Notice of Guaranteed Delivery.
Name of Firm:
(Authorized Signature)
Title:
Name:
Date:
Address:
Area Code and
Telephone Number:
